Ultra Clean Earnings 2020-09-25

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

uctt-10q_20200925.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 September 25, 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 October 23, 2020: 40.5 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	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	35
ITEM 1A.	RISK FACTORS	35
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	35
ITEM 4.	MINE SAFETY DISCLOSURES	35
ITEM 5.	OTHER INFORMATION	36
ITEM 6.	EXHIBITS	36
SIGNATURES		37

- 2 -

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 25,			December 27,
(In millions, except par value)	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	176.1		$	162.5
Accounts receivable, net of allowance for doubtful accounts of $0.3 at September 25, 2020 and December 27, 2019		145.5			112.7
Inventories		175.3			172.4
Prepaid expenses and other current assets		17.2			19.4
Total current assets		514.1			467.0
Property, plant and equipment, net		150.5			145.3
Goodwill		171.1			171.1
Intangibles assets, net		165.5			180.3
Deferred tax assets, net		15.8			15.5
Operating lease right-of-use assets		38.1			34.9
Other non-current assets		5.2			5.2
Total assets	$	1,060.3		$	1,019.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank borrowings	$	7.5		$	8.8
Accounts payable		111.4			133.1
Accrued compensation and related benefits		30.8			24.8
Operating lease liabilities		12.1			13.2
Other current liabilities		33.5			30.7
Total current liabilities		195.3			210.6
Bank borrowings, net of current portion		272.6			283.4
Deferred tax liabilities		25.2			25.2
Operating lease liabilities		31.2			28.8
Other liabilities		17.5			18.8
Total liabilities		541.8			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; 40.5 shares and 39.9 shares issued and outstanding at September 25, 2020 and December 27, 2019, respectively		0.1			0.1
Additional paid-in capital		309.2			300.9
Common shares held in treasury, at cost, 0.6 shares at September 25, 2020 and December 27, 2019		(3.3	)		(3.3	)
Retained earnings		195.4			140.3
Accumulated other comprehensive loss		(1.3	)		(1.3	)
Total UCT stockholders' equity		500.1			436.7
Noncontrolling interests		18.4			15.8
Total equity		518.5			452.5
Total liabilities and equity	$	1,060.3		$	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						Nine Months Ended
	September 25,			September 27,			September 25,			September 27,
(In millions, except per share amounts)	2020			2019			2020			2019
Revenues:
Product	$	294.4		$	200.0		$	831.7		$	610.6
Services		68.9			54.3			197.3			169.2
Total revenues		363.3			254.3			1,029.0			779.8
Cost of revenues:
Product		243.6			170.1			687.6		525.7
Services	45.1				36.7		127.2			113.6
Total cost of revenues	288.7				206.8		814.8			639.3
Gross profit		74.6			47.5			214.2			140.5
Operating expenses:
Research and development	3.5			3.6			10.7			10.9
Sales and marketing		6.0		5.9			17.7			16.7
General and administrative		30.2		29.7				97.5		87.4
Total operating expenses		39.7		39.2				125.9			115.0
Income from operations		34.9			8.3			88.3		25.5
Interest income		0.2			-			0.7			0.4
Interest expense		(4.1	)		(6.6	)		(13.1	)		(19.9	)
Other income (expense), net		(1.1	)		3.1			(3.2	)		4.2
Income before provision for income taxes		29.9			4.8			72.7			10.2
Provision for income taxes		4.8		3.9				15.0		8.2
Net income		25.1			0.9			57.7			2.0
Less: Net income attributable to noncontrolling interests		0.7			0.4			2.6			1.1
Net income attributable to UCT	$	24.4		$	0.5		$	55.1		$	0.9

Net income per share attributable to UCT common stockholders:
Basic	$	0.60		$	0.01		$	1.37		$	0.02
Diluted	$	0.59		$	0.01		$	1.35		$	0.02
Shares used in computing net income per share:
Basic		40.4			39.5			40.1			39.4
Diluted		41.1			40.0			40.9			39.7

(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 25,		September 27,			September 25,		September 27,
(In millions)	2020		2019			2020		2019
Net income	$	25.1	$	0.9		$	57.7	$	2.0
Other comprehensive income (loss):
Change in cumulative translation adjustment		2.0		(1.6	)		—		(3.8	)
Change in fair value of derivatives	—			(0.1	)		—		-
Total other comprehensive income (loss)		2.0		(1.7	)		—		(3.8	)
Other comprehensive income, attributable to noncontrolling interests	0.7			0.4			2.6		1.1
Comprehensive income (loss) attributable to UCT	$	26.4	$	(1.2	)	$	55.1	$	(2.9	)

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 5 -

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	September 25,			September 27,
(In millions)	2020			2019
Cash flows from operating activities:
Net income	$	57.7		$	2.0
Adjustments to reconcile net income to net cash provided by operating activities (excluding assets acquired and liabilities assumed):
Depreciation and amortization		18.8			15.8
Amortization of intangible assets		14.8			15.0
Stock-based compensation		9.5			9.1
Amortization of debt issuance costs		1.4			1.3
Gain on the disposal of assets		(1.4	)		—
Gain from insurance proceeds		(0.6	)		—
Deferred income taxes		(0.3	)		(2.1	)
Change in the fair value of financial instruments and earn-out liability		4.4			(3.7	)
Changes in assets and liabilities:
Accounts receivable		(32.7	)		(2.4	)
Inventories		(2.9	)		42.5
Prepaid expenses and other current assets		0.3			2.0
Other non-current assets		—			(0.8	)
Accounts payable		(21.9	)		(0.3	)
Accrued compensation and related benefits		5.9			8.8
Income taxes payable		3.2			(1.4	)
Operating lease assets and liabilities		(0.8	)		—
Other liabilities		(2.5	)		3.3
Net cash provided by operating activities		52.9			89.1
Cash flows from investing activities:
Purchases of property, plant and equipment		(26.5	)		(12.7	)
Proceeds from sale of property and equipment, including insurance proceeds		6.6			2.7
Acquisition of Dynamic Manufacturing Solutions, LLC		—			(29.8	)
Net cash used in investing activities		(19.9	)		(39.8	)
Cash flows from financing activities:
Proceeds from bank borrowings		69.7			34.8
Proceeds from issuance of common stock		0.3			0.1
Principal payments on bank borrowings and finance leases		(85.7	)		(64.5	)
Payment of contingent earn-out		(1.4	)		—
Taxes paid related to net share settlement of equity awards		(1.5	)		(1.7	)
Net cash used in financing activities		(18.6	)		(31.3	)
Effect of exchange rate changes on cash and cash equivalents		(0.8	)		(3.4	)
Net increase in cash and cash equivalents		13.6			14.6
Cash and cash equivalents at beginning of period		162.5			144.1
Cash and cash equivalents at end of period		176.1		$	158.7
Supplemental cash flow information:
Income taxes paid, net of income tax refunds	$	8.5		$	12.2
Interest paid	$	12.9		$	16.4
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	$	2.7		$	4.6
Business interruption insurance proceeds receivable		—		$	1.0

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 6 -

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Three Months Ended

September 25, 2020

Common Stock

Treasury shares

(In millions)

Amount

Additional

Paid-in

Capital

Amount

Retained

Earnings

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	2020-09-25	Filed 2020-11-04
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
8-K	2020-07-29
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_6.htm
EX-31.2	uctt-ex312_8.htm
EX-32.1	uctt-ex321_7.htm

UCTT 10Q Quarterly Report

Ultra Clean Earnings 2020-09-25