10-Q 1 uctt-20230929.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 29, 2023

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 3, 2023: 44,830,779

 

 


 

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, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

 

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)

 

September 29,

 

 

December 30,

 

 

2023

 

 

2022

 

(In millions, except par value)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

342.0

 

 

$

358.8

 

Accounts receivable, net of allowance for credit losses of $1.1 and $1.5 at September 29, 2023 and December 30, 2022, respectively

 

170.5

 

 

 

253.7

 

Inventories

 

378.3

 

 

 

443.9

 

Prepaid expenses and other current assets

 

35.0

 

 

 

42.4

 

Total current assets

 

925.8

 

 

 

1,098.8

 

Property, plant and equipment, net

 

308.9

 

 

 

279.6

 

Goodwill

 

248.8

 

 

 

248.8

 

Intangible assets, net

 

170.9

 

 

 

187.9

 

Deferred tax assets, net

 

36.5

 

 

 

36.0

 

Operating lease right-of-use assets

 

144.5

 

 

 

99.0

 

Other non-current assets

 

10.1

 

 

 

10.8

 

Total assets

$

1,845.5

 

 

$

1,960.9

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Bank borrowings

$

17.6

 

 

$

20.8

 

Accounts payable

 

187.5

 

 

 

253.5

 

Accrued compensation and related benefits

 

40.8

 

 

 

52.5

 

Operating lease liabilities

 

16.5

 

 

 

17.1

 

Other current liabilities

 

31.2

 

 

 

45.3

 

Total current liabilities

 

293.6

 

 

 

389.2

 

Bank borrowings, net of current portion

 

464.1

 

 

 

493.0

 

Deferred tax liabilities

 

52.5

 

 

 

52.2

 

Operating lease liabilities

 

131.0

 

 

 

80.3

 

Other liabilities

 

9.2

 

 

 

9.2

 

Total liabilities

 

950.4

 

 

 

1,023.9

 

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; 46.5 and 45.2 shares issued and 44.8 and 45.2 shares outstanding at September 29, 2023 and December 30, 2022, respectively

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

537.3

 

 

 

530.8

 

Common shares held in treasury, at cost, 1.7 and 0.9 shares at September 29, 2023 and December 30, 2022, respectively

 

(39.1

)

 

 

(15.4

)

Retained earnings

 

350.5

 

 

 

377.8

 

Accumulated other comprehensive loss

 

(10.8

)

 

 

(5.4

)

Total UCT stockholders' equity

 

838.0

 

 

 

887.9

 

Noncontrolling interests

 

57.1

 

 

 

49.1

 

Total equity

 

895.1

 

 

 

937.0

 

Total liabilities and equity

$

1,845.5

 

 

$

1,960.9

 

(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 29,

 

 

September 30,

 

 

September 29,

 

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(In millions, except per share amounts)

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Product

$

380.9

 

 

$

556.3

 

 

$

1,112.0

 

 

$

1,575.2

 

Services

 

54.1

 

 

 

78.7

 

 

 

177.8

 

 

 

232.7

 

Total revenues

 

435.0

 

 

 

635.0

 

 

 

1,289.8

 

 

 

1,807.9

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

Product

 

329.3

 

 

 

459.3

 

 

 

955.5

 

 

 

1299.9

 

Services

 

40.5

 

 

 

51.3

 

 

 

128.0

 

 

 

151.4

 

Total cost revenues

 

369.8

 

 

 

510.6

 

 

 

1,083.5

 

 

 

1,451.3

 

Gross margin

 

65.2

 

 

 

124.4

 

 

 

206.3

 

 

 

356.6

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

7.4

 

 

 

7.4

 

 

21.7

 

 

 

21.5

 

Sales and marketing

 

12.8

 

 

 

13.5

 

 

 

38.6

 

 

 

41.2

 

General and administrative

 

39.3

 

 

 

46.4

 

 

 

115.3

 

 

 

139.9

 

Net loss on divestitures

 

 

 

20.8

 

 

 

 

 

77.4

 

Total operating expenses

 

59.5

 

 

 

88.1

 

 

 

175.6

 

 

 

280.0

 

Income from operations

 

5.7

 

 

 

36.3

 

 

 

30.7

 

 

 

76.6

 

Interest income

 

1.2

 

 

 

0.2

 

 

 

2.5

 

 

 

0.4

 

Interest expense

 

(12.3

)

 

 

(9.4

)

 

 

(35.9

)

 

 

(23.1

)

Other expense, net

 

(2.1

)

 

 

(2.1

)

 

 

(0.8

)

 

 

(2.5

)

Income (loss) before provision for income taxes

 

(7.5

)

 

 

25.0

 

 

 

(3.5

)

 

 

51.4

 

Provision for income taxes

 

5.3

 

 

 

12.1

 

 

 

17.1

 

 

 

29.4

 

Net income (loss)

 

(12.8

)

 

 

12.9

 

 

 

(20.6

)

 

 

22.0

 

Less: Net income attributable to noncontrolling interests

 

1.7

 

 

 

3.2

 

 

 

6.7

 

 

 

9.5

 

Net income (loss) attributable to UCT

$

(14.5

)

 

$

9.7

 

 

$

(27.3

)

 

$

12.5

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Basic

$

(0.32

)

 

$

0.21

 

 

$

(0.61

)

 

$

0.28

 

Diluted

$

(0.32

)

 

$

0.21

 

 

$

(0.61

)

 

$

0.28

 

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

 

 

 

 

 

 

 

 

 

 

 

Basic

 

44.8

 

 

 

45.4

 

 

 

44.8

 

 

 

45.2

 

Diluted

 

44.8

 

 

 

45.6

 

 

 

44.8

 

 

 

45.7

 

(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 29,

 

 

September 30,

 

 

September 29,

 

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(In millions)

 

 

 

 

Net income (loss)

$

(12.8

)

 

$

12.9

 

 

$

(20.6

)

 

$

22.0

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Change in cumulative translation adjustment, net of tax

 

(2.1

)

 

 

(10.5

)

 

 

(3.8

)

 

 

(22.5

)

Change in pension net actuarial gain, net of tax

 

(0.2

)

 

 

 

 

 

(0.4

)

 

 

 

Change in fair value of derivatives, net of tax

 

 

 

(0.4

)

 

 

0.2

 

 

 

(1.5

)

Total other comprehensive loss

 

(2.3

)

 

 

(10.9

)

 

 

(4.0

)

 

 

(24.0

)

Comprehensive income (loss)

 

(15.1

)

 

 

2.0

 

 

 

(24.6

)

 

 

(2.0

)

Comprehensive income (loss), attributable to noncontrolling interests

 

0.6

 

 

 

(4.5

)

 

 

8.0

 

 

 

1.8

 

Comprehensive loss (income) attributable to UCT

 

(15.7

)

 

 

6.5

 

 

 

(32.6

)

 

 

(3.8

)

(See accompanying Notes to Condensed Consolidated Financial Statements)

 

- 5 -


 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Nine Months Ended

 

 

September 29,

 

 

September 30,

 

 

2023

 

 

2022

 

(In millions)

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

$

(20.6

)

 

$

22.0

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

27.9

 

 

 

29.7

 

Amortization of intangible assets

 

16.9

 

 

 

23.1

 

Stock-based compensation

 

8.7

 

 

 

14.8

 

Amortization of debt issuance costs

 

2.9

 

 

 

2.9

 

Gain on sale of property, plant and equipment

 

(1.1

)

 

 

(0.1

)

Deferred income taxes

 

0.1

 

 

 

0.8

 

Change in the fair value of financial instruments

 

(0.3

)

 

 

(1.5

)

Net loss on divestitures

 

 

 

 

77.4

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

83.2

 

 

 

2.0

 

Inventories

 

65.6

 

 

 

(45.7

)

Prepaid expenses and other current assets

 

7.5

 

 

 

(3.1

)

Other non-current assets

 

0.8

 

 

 

(2.1

)

Accounts payable

 

(61.2

)

 

 

(43.9

)

Accrued compensation and related benefits

 

(11.8

)

 

 

2.1

 

Income taxes payable

 

(8.9

)

 

 

(2.5

)

Operating lease assets and liabilities

 

(3.7

)

 

 

(1.4

)

Other liabilities

 

(5.4

)

 

 

11.5

 

Net cash provided by operating activities

 

100.6

 

 

 

86.0

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property, plant and equipment

 

(59.2

)

 

 

(67.9

)

Proceeds from sale of property, plant and equipment

 

2.3

 

 

 

0.3

 

Divestiture of subsidiaries

 

 

 

 

3.4

 

Net cash used in investing activities

 

(56.9

)

 

 

(64.2

)

Cash flows from financing activities:

 

 

 

 

 

Principal payments on bank borrowings

 

(34.7

)

 

 

(27.8

)

Repurchase of shares

 

(23.7

)

 

 

 

Employees' taxes paid upon vesting of restricted stock units

 

(2.2

)

 

 

(3.9

)

Payments of debt issuance costs

 

(0.3

)

 

 

(0.7

)

Payments of dividends to a joint venture shareholder

 

(0.1

)

 

 

(0.2

)

Proceeds from bank borrowings

 

 

 

 

4.7

 

Proceeds from issuance of common stock

 

 

 

 

0.7

 

Net cash used in financing activities

 

(61.0

)

 

 

(27.2

)

Effect of exchange rate changes on cash and cash equivalents

 

0.5

 

 

 

(7.6

)

Net decrease in cash and cash equivalents

 

(16.8

)

 

 

(13.0

)

Cash and cash equivalents at beginning of period

 

358.8

 

 

 

466.5

 

Cash and cash equivalents at end of period

 

342.0

 

 

$

453.5

 

Supplemental cash flow information:

 

 

 

 

 

Income taxes paid, net of income tax refunds

$

26.7

 

 

$

27.7

 

Interest paid

$

33.0

 

 

$

20.3

 

Non-cash investing and financing activities:

 

 

 

 

 

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

$

12.0

 

 

$

6.7

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 6 -


 

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

Three Months Ended

 

 

 

September 29, 2023

 

 

 

Common Stock

 

 

 

 

 

Treasury shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Shares

 

 

Amount

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total
Stockholders’
Equity of UCT

 

 

Noncontrolling
Interests

 

 

Total
Equity

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2023

 

 

44.8

 

 

$

0.1

 

 

$

533.3

 

 

 

1.7

 

 

$

(39.1

)

 

$

365.0

 

 

$

(9.5

)

 

$

849.8

 

 

$

56.4

 

 

$

906.2

 

Stock-based compensation expense

 

 

 

 

 

 

4.0

 

 

 

 

 

 

 

 

 

 

 

4.0

 

 

 

 

 

4.0

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

(14.5

)

 

 

 

 

(14.5

)

 

 

1.7

 

 

 

(12.8

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.3

)

 

 

(1.3

)

 

 

(1.0

)

 

 

(2.3

)

Balance September 29, 2023

 

 

44.8

 

 

$

0.1

 

 

$

537.3

 

 

 

1.7

 

 

$

(39.1

)

 

$

350.5

 

 

$

(10.8

)

 

$

838.0

 

 

$

57.1

 

 

$

895.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 29, 2023

 

 

 

Common Stock

 

 

 

 

 

Treasury shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Shares

 

 

Amount

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total
Stockholders’
Equity of UCT

 

 

Noncontrolling
Interests

 

 

Total
Equity

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 30, 2022

 

 

45.2

 

 

$

0.1

 

 

$

530.8

 

 

 

0.9

 

 

$

(15.4

)

 

$

377.8

 

 

$

(5.4

)

 

$

887.9

 

 

$

49.1

 

 

$

937.0

 

Issuance under employee stock plans

 

 

0.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees' taxes paid upon vesting of restricted stock units

 

 

(0.1

)

 

 

 

 

(2.2

)