10-Q 1 uctt-20220930.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 September 30, 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 November 4, 2022: 45,496,642

 

 


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

 

33

ITEM 4.

 

CONTROLS AND PROCEDURES

 

33

 

 

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

 

34

SIGNATURES

 

35

 

- 2 -


PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

September 30,

 

 

December 31,

 

(In millions, except par value)

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

453.5

 

 

$

466.5

 

Accounts receivable, net of allowance for doubtful accounts of $1.1 and $0.3 at
   September 30, 2022 and December 31, 2021, respectively

 

 

236.0

 

 

 

250.1

 

Inventories

 

 

405.1

 

 

 

379.2

 

Prepaid expenses and other current assets

 

 

41.5

 

 

 

41.3

 

Total current assets

 

 

1,136.1

 

 

 

1,137.1

 

Property, plant and equipment, net

 

 

242.3

 

 

 

242.3

 

Goodwill

 

 

248.8

 

 

 

270.0

 

Intangible assets, net

 

 

194.8

 

 

 

245.7

 

Deferred tax assets, net

 

 

37.3

 

 

 

37.6

 

Operating lease right-of-use assets

 

 

87.2

 

 

 

83.4

 

Other non-current assets

 

 

9.5

 

 

 

9.3

 

Total assets

 

$

1,956.0

 

 

$

2,025.4

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Bank borrowings

 

$

20.1

 

 

$

22.1

 

Accounts payable

 

 

271.3

 

 

 

332.9

 

Accrued compensation and related benefits

 

 

47.5

 

 

 

46.8

 

Operating lease liabilities

 

 

16.1

 

 

 

17.3

 

Other current liabilities

 

 

52.4

 

 

 

50.0

 

Total current liabilities

 

 

407.4

 

 

 

469.1

 

Bank borrowings, net of current portion

 

 

509.2

 

 

 

529.9

 

Deferred tax liabilities

 

 

54.9

 

 

 

54.9

 

Operating lease liabilities

 

 

69.0

 

 

 

65.9

 

Other liabilities

 

 

13.4

 

 

 

12.9

 

Total liabilities

 

 

1,053.9

 

 

 

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 September 30, 2022 and December 31, 2021,
   respectively

 

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

 

526.5

 

 

 

514.9

 

Common shares held in treasury, at cost, 0.6 shares at September 30, 2022 and
   December 31, 2021

 

 

(3.3

)

 

 

(3.3

)

Retained earnings

 

 

349.9

 

 

 

337.4

 

Accumulated other comprehensive loss

 

 

(16.5

)

 

 

(0.2

)

Total UCT stockholders' equity

 

 

856.7

 

 

 

848.9

 

Noncontrolling interests

 

 

45.4

 

 

 

43.8

 

Total equity

 

 

902.1

 

 

 

892.7

 

Total liabilities and stockholders' equity

 

$

1,956.0

 

 

$

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 24,

 

 

September 30,

 

 

September 24,

 

(In millions, except per share amounts)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

556.3

 

 

$

482.0

 

 

$

1,575.2

 

 

$

1,270.1

 

Services

 

 

78.7

 

 

 

71.7

 

 

 

232.7

 

 

 

216.4

 

Total revenues

 

 

635.0

 

 

 

553.7

 

 

 

1,807.9

 

 

 

1,486.5

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

459.3

 

 

 

393.4

 

 

 

1,299.9

 

 

1044.9

 

Services

 

 

51.3

 

 

 

46.2

 

 

 

151.4

 

 

140.7

 

Total cost of revenues

 

 

510.6

 

 

 

439.6

 

 

 

1,451.3

 

 

 

1185.6

 

Gross profit

 

 

124.4

 

 

 

114.1

 

 

 

356.6

 

 

 

300.9

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

7.4

 

 

6.5

 

 

 

21.5

 

 

16.8

 

Sales and marketing

 

 

13.5

 

 

 

13.8

 

 

 

41.2

 

 

34.1

 

General and administrative

 

 

46.4

 

 

43.2

 

 

 

139.9

 

 

127.1

 

Net loss on divestitures

 

 

20.8

 

 

 

-

 

 

 

77.4

 

 

 

-

 

Total operating expenses

 

 

88.1

 

 

 

63.5

 

 

 

280.0

 

 

 

178.0

 

Income from operations

 

 

36.3

 

 

 

50.6

 

 

 

76.6

 

 

122.9

 

Interest income

 

 

0.2

 

 

 

0.1

 

 

 

0.4

 

 

 

0.3

 

Interest expense

 

 

(9.4

)

 

 

(6.9

)

 

 

(23.1

)

 

 

(17.6

)

Other income (expense), net

 

 

(2.1

)

 

 

(1.4

)

 

 

(2.5

)

 

 

(6.4

)

Income before provision for income taxes

 

 

25.0

 

 

 

42.4

 

 

 

51.4

 

 

 

99.2

 

Provision for income taxes

 

 

12.1

 

 

 

8.4

 

 

 

29.4

 

 

 

21.6

 

Net income

 

 

12.9

 

 

 

34.0

 

 

 

22.0

 

 

 

77.6

 

Less: Net income attributable to noncontrolling interests

 

 

3.2

 

 

 

2.1

 

 

 

9.5

 

 

 

3.6

 

Net income attributable to UCT

 

$

9.7

 

 

$

31.9

 

 

$

12.5

 

 

$

74.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to UCT common stockholders:

 

Basic

 

 

0.21

 

 

$

0.71

 

 

$

0.28

 

 

$

1.73

 

Diluted

 

$

0.21

 

 

$

0.70

 

 

$

0.28

 

 

$

1.69

 

Shares used in computing net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

45.4

 

 

 

44.8

 

 

 

45.2

 

 

 

42.8

 

Diluted

 

 

45.6

 

 

 

45.4

 

 

 

45.7

 

 

 

43.7

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 4 -


ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 24,

 

 

September 30,

 

 

September 24,

 

(In millions)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

12.9

 

 

$

34.0

 

 

$

22.0

 

 

$

77.6

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Change in cumulative translation adjustment, net of tax

 

 

(10.5

)

 

 

(3.5

)

 

 

(22.5

)

 

 

(4.1

)

Change in fair value of derivatives, net of tax

 

 

(0.4

)

 

 

(0.2

)

 

 

(1.5

)

 

 

(0.1

)

Total other comprehensive loss

 

 

(10.9

)

 

 

(3.7

)

 

 

(24.0

)

 

 

(4.2

)

Comprehensive income (loss)

 

 

2.0

 

 

 

30.3

 

 

 

(2.0

)

 

 

73.4

 

Comprehensive income (loss), attributable to
   noncontrolling interests

 

 

(4.5

)

 

 

2.1

 

 

 

1.8

 

 

 

3.6

 

Comprehensive income (loss) attributable to UCT

 

$

6.5

 

 

$

28.2

 

 

$

(3.8

)

 

$

69.8

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

 

- 5 -


ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 24,

 

(In millions)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

22.0

 

 

$

77.6

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

29.7

 

 

 

24.0

 

Amortization of intangible assets

 

 

23.1

 

 

 

23.9

 

Stock-based compensation

 

 

14.8

 

 

 

11.5

 

Amortization of debt issuance costs

 

 

2.9

 

 

 

2.4

 

Gain from insurance proceeds

 

 

 

 

 

(7.3

)

Net loss on divestitures

 

 

77.4

 

 

 

 

Deferred income taxes

 

 

0.8

 

 

 

0.8

 

Change in the fair value of financial instruments

 

 

(1.5

)

 

 

13.0

 

Others

 

 

(0.1

)

 

 

0.3

 

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

 

 

 

 

 

 

Accounts receivable

 

 

2.0

 

 

 

(35.4

)

Inventories

 

 

(45.7

)

 

 

(70.5

)

Prepaid expenses and other current assets

 

 

(3.1

)

 

 

(0.8

)

Other non-current assets

 

 

(2.1

)

 

 

(0.3

)

Accounts payable

 

 

(43.9

)

 

 

119.5

 

Accrued compensation and related benefits

 

 

2.1

 

 

 

7.0

 

Income taxes payable

 

 

(2.5

)

 

 

1.0

 

Operating lease assets and liabilities

 

 

(1.4

)

 

 

(0.3

)

Other liabilities

 

 

11.5

 

 

 

3.6

 

Net cash provided by operating activities

 

 

86.0

 

 

 

170.0

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(67.9

)

 

 

(42.7

)

Proceeds from sale of equipment, including insurance proceeds

 

 

0.3

 

 

 

7.6

 

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

 

 

 

 

 

(10.4

)

Divestiture of subsidiaries

 

 

3.4

 

 

 

 

Acquisition of business, net of cash acquired

 

 

 

 

 

(344.8

)

Net cash used in investing activities

 

 

(64.2

)

 

 

(390.3

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from bank borrowings

 

 

4.7

 

 

 

394.7

 

Proceeds from issuance of common stock

 

 

0.7

 

 

 

193.1

 

Principal payments on bank borrowings

 

 

(27.8

)

 

 

(93.9

)

Payments of debt issuance costs

 

 

(0.7

)

 

 

(8.9

)

Payments of dividends to a joint venture shareholder

 

 

(0.2

)

 

 

(0.1

)

Employees' taxes paid upon vesting of restricted stock units

 

 

(3.9

)

 

 

(7.0

)

Net cash provided by (used in) financing activities

 

 

(27.2

)

 

 

477.9

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(7.6

)

 

 

(0.9

)

Net increase (decrease) in cash and cash equivalents

 

 

(13.0

)

 

 

256.7

 

Cash and cash equivalents at beginning of period

 

 

466.5

 

 

 

200.3

 

Cash and cash equivalents at end of period

 

$

453.5

 

 

$

457.0

 

Supplemental cash flow information:

 

 

 

 

 

 

Income taxes paid, net of income tax refunds

 

$

27.7

 

 

$

15.1

 

Interest paid

 

$

20.3

 

 

$

14.4

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Reclassification of common stock purchase obligation liability to noncontrolling interests

 

 

-

 

 

$

16.4

 

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

 

$

6.7

 

 

$

6.3

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 6 -


ULTRA CLEAN HOLDINGS, INC.