10-Q 1 uctt-20220401.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 April 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 May 3, 2022: 45.1 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

 

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)

 

 

April 1,

 

 

December 31,

 

(In millions, except par value)

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

367.0

 

 

$

466.5

 

Accounts receivable, net of allowance for doubtful accounts of $0.7 and $0.3 at
   April 1, 2022 and December 31, 2021, respectively

 

 

279.3

 

 

 

250.1

 

Inventories

 

 

440.3

 

 

 

379.2

 

Prepaid expenses and other current assets

 

 

36.1

 

 

 

41.3

 

Total current assets

 

 

1,122.7

 

 

 

1,137.1

 

Property, plant and equipment, net

 

 

250.1

 

 

 

242.3

 

Goodwill

 

 

268.5

 

 

 

270.0

 

Intangibles assets, net

 

 

237.6

 

 

 

245.7

 

Deferred tax assets, net

 

 

36.6

 

 

 

37.6

 

Operating lease right-of-use assets

 

 

86.8

 

 

 

83.4

 

Other non-current assets

 

 

9.3

 

 

 

9.3

 

Total assets

 

$

2,011.6

 

 

$

2,025.4

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Bank borrowings

 

$

19.5

 

 

$

22.1

 

Accounts payable

 

 

288.1

 

 

 

332.9

 

Accrued compensation and related benefits

 

 

40.8

 

 

 

46.8

 

Operating lease liabilities

 

 

17.3

 

 

 

17.3

 

Other current liabilities

 

 

51.9

 

 

 

50.0

 

Total current liabilities

 

 

417.6

 

 

 

469.1

 

Bank borrowings, net of current portion

 

 

530.9

 

 

 

529.9

 

Deferred tax liabilities

 

 

54.8

 

 

 

54.9

 

Operating lease liabilities

 

 

68.8

 

 

 

65.9

 

Other liabilities

 

 

13.2

 

 

 

12.9

 

Total liabilities

 

 

1,085.3

 

 

 

1,132.7

 

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; 45.0 shares and
   
44.9 shares issued and outstanding at April 1, 2022 and December 31, 2021,
   respectively

 

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

 

520.5

 

 

 

514.9

 

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

 

 

(3.3

)

 

 

(3.3

)

Retained earnings

 

 

365.3

 

 

 

337.4

 

Accumulated other comprehensive gain (loss)

 

 

(3.0

)

 

 

(0.2

)

Total UCT stockholders' equity

 

 

879.6

 

 

 

848.9

 

Noncontrolling interests

 

 

46.7

 

 

 

43.8

 

Total equity

 

 

926.3

 

 

 

892.7

 

Total liabilities and stockholders' equity

 

$

2,011.6

 

 

$

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

 

 

 

April 1,

 

 

March 26,

 

(In millions, except per share amounts)

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

Products

 

$

486.8

 

 

$

345.6

 

Services

 

 

77.3

 

 

 

72.0

 

Total revenues

 

 

564.1

 

 

 

417.6

 

Cost of revenues:

 

 

 

 

 

 

Products

 

 

399.5

 

 

 

283.6

 

Services

 

 

50.9

 

 

 

47.1

 

Total cost of revenues

 

450.4

 

 

 

330.7

 

Gross profit

 

 

113.7

 

 

 

86.9

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

6.8

 

 

4.2

 

Sales and marketing

 

 

13.8

 

 

 

7.6

 

General and administrative

 

 

47.4

 

 

34.7

 

Total operating expenses

 

 

68.0

 

 

46.5

 

Income from operations

 

 

45.7

 

 

 

40.4

 

Interest income

 

 

-

 

 

 

0.1

 

Interest expense

 

 

(6.4

)

 

 

(3.6

)

Other income (expense), net

 

 

-

 

 

 

(4.3

)

Income before provision for income taxes

 

 

39.3

 

 

 

32.6

 

Provision for income taxes

 

 

8.5

 

 

 

7.0

 

Net income

 

 

30.8

 

 

 

25.6

 

Less: Net income attributable to noncontrolling interests

 

 

2.9

 

 

 

0.6

 

Net income attributable to UCT

 

$

27.9

 

 

$

25.0

 

 

 

 

 

 

 

 

Net income per share attributable to UCT common stockholders:

 

Basic

 

$

0.62

 

 

$

0.62

 

Diluted

 

$

0.61

 

 

$

0.60

 

Shares used in computing net income per share:

 

 

 

 

 

 

Basic

 

 

44.9

 

 

 

40.6

 

Diluted

 

 

45.6

 

 

 

41.6

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 4 -


ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 1,

 

 

March 26,

 

(In millions)

 

2022

 

 

2021

 

Net income

 

$

30.8

 

 

$

25.6

 

Other comprehensive gain (loss):

 

 

 

 

 

 

Change in cumulative translation adjustment

 

 

(3.1

)

 

 

(2.8

)

Change in fair value of derivatives

 

 

0.3

 

 

 

(0.7

)

Total other comprehensive gain (loss)

 

 

(2.8

)

 

 

(3.5

)

Other comprehensive income, attributable to
   noncontrolling interests

 

 

2.9

 

 

 

0.6

 

Comprehensive income attributable to UCT

 

$

25.1

 

 

$

21.5

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

 

- 5 -


ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 1,

 

 

March 26,

 

(In millions)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

30.8

 

 

$

25.6

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

9.8

 

 

 

6.5

 

Amortization of intangible assets

 

 

8.1

 

 

 

4.9

 

Stock-based compensation

 

 

5.6

 

 

 

3.5

 

Amortization of debt issuance costs

 

 

1.0

 

 

 

0.4

 

Gain from insurance proceeds

 

 

 

 

 

(7.3

)

Deferred income taxes

 

 

1.4

 

 

 

1.2

 

Change in the fair value of financial instruments and earn-out liability

 

 

0.3

 

 

 

11.6

 

Others

 

 

0.1

 

 

 

0.1

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(29.1

)

 

 

(22.5

)

Inventories

 

 

(61.1

)

 

 

(8.8

)

Prepaid expenses and other current assets

 

 

4.6

 

 

 

3.0

 

Other non-current assets

 

 

 

 

 

(1.0

)

Accounts payable

 

 

(35.9

)

 

 

43.3

 

Accrued compensation and related benefits

 

 

(6.0

)

 

 

(3.6

)

Income taxes payable

 

 

 

 

 

2.8

 

Operating lease assets and liabilities

 

 

(0.5

)

 

 

(0.3

)

Other liabilities

 

 

3.5

 

 

 

6.2

 

Net cash provided by (used in) operating activities

 

 

(67.4

)

 

 

65.6

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(28.4

)

 

 

(6.5

)

Proceeds from sale of equipment, including insurance proceeds

 

 

 

 

 

7.3

 

Net cash provided by (used in) investing activities

 

 

(28.4

)

 

 

0.8

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from bank borrowings

 

 

 

 

 

6.6

 

Principal payments on bank borrowings and finance leases

 

 

(2.6

)

 

 

(8.2

)

Net cash used in financing activities

 

 

(2.6

)

 

 

(1.6

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1.1

)

 

 

(0.8

)

Net increase (decrease) in cash and cash equivalents

 

 

(99.5

)

 

 

64.0

 

Cash and cash equivalents at beginning of period

 

 

466.5

 

 

 

200.3

 

Cash and cash equivalents at end of period

 

$

367.0

 

 

$

264.3

 

Supplemental cash flow information:

 

 

 

 

 

 

Income taxes paid, net of income tax refunds

 

$

5.5

 

 

$

2.7

 

Interest paid

 

$

5.0

 

 

$

4.3

 

Non-cash investing and financing activities:

 

 

 

 

 

 

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

 

$

5.9

 

 

$

3.5

 

 

(See accompanying Notes to Condensed Consolidated Financial Statements)

- 6 -


ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

Three Months Ended

 

 

 

April 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 December 31, 2021

 

 

44.9

 

 

$

0.1

 

 

$

514.9

 

 

 

0.6

 

$

(3.3

)

 

$

337.4

 

 

$

(0.2

)

 

$

848.9

 

 

$

43.8

 

 

$

892.7

 

Issuance under employee stock plans

 

 

0.1

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.6

 

 

 

 

 

 

5.6

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27.9

 

 

 

 

 

 

27.9

 

 

 

2.9

 

 

 

30.8

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2.8

)

 

 

(2.8

)

 

 

 

 

 

(2.8

)

Balance April 1, 2022

 

 

45.0

 

 

$

0.1

 

 

$

520.5

 

 

 

0.6

 

$

(3.3

)

 

$

365.3

 

 

$

(3.0

)

 

$

879.6

 

 

$

46.7

 

 

$

926.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 26, 2021

 

 

 

Common Stock

 

 

 

 

 

Treasury shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Shares

 

Amount

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total
Stockholders’
Equity of UCT

 

 

Noncontrolling
Interests

 

 

Total
Equity

 

Balance December 25, 2020

 

 

40.6

 

 

$

0.1

 

 

$

312.8

 

 

 

0.6

 

$

(3.3

)

 

$

217.9

 

 

$

5.1

 

 

$

532.6

 

 

$

18.6

 

 

$

551.2

 

Stock-based compensation expense

 

 

 

 

 

 

3.5

 

 

 

 

 

 

 

 

 

 

3.5

 

 

 

 

 

3.5

 

Net income

 

 

 

 

 

 

 

 

 

 

 

25.0

 

 

 

 

 

25.0

 

 

 

0.6

 

 

 

25.6

 

Dividend payments to a joint venture shareholder

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.2

)

 

 

(0.2

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(3.5

)

 

 

(3.5

)

 

 

 

 

(3.5

)

Balance March 26, 2021

 

 

40.6

 

 

$

0.1

 

 

$

316.3

 

 

 

0.6

 

$

(3.3

)

 

$

242.9

 

 

$

1.6

 

 

$

557.6

 

 

$

19.0

 

 

$

576.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 7 -


ULTRA CLEAN HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization — Ultra Clean Holdings, Inc., (the “Company” or “UCT”) was incorporated in Delaware in November 2002 and became a publicly traded company on the NASDAQ Global Market in March 2004. Ultra Clean Holdings, Inc. is a leading developer and supplier of critical subsystems, components and parts, and ultra-high purity cleaning and analytical services primarily for the semiconductor industry. UCT offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and part and component manufacturing, as well as tool chamber parts cleaning and coating, and micro-contamination analytical services. The Company has two reportable segments: Products and Services. The Company’s Products business primarily designs, engineers and manufactures production tools, components and parts, and modules and subsystems for the semiconductor and display capital equipment markets. Products include chemical delivery modules, frame assemblies, gas delivery systems, fluid delivery systems, precision robotics, process modules as well as other high-level assemblies. The Company’s Services business provides ultra-high purity parts cleaning, process tool part recoating, surface encapsulation and high sensitivity micro contamination analysis primarily for the semiconductor device makers and wafer fabrication equipment markets. In 2021, the Company completed the acquisition of Ham-Let (Israel-Canada) Ltd. (“Ham-Let” or “Fluid Solutions”), Fluid Solutions engages in the development, manufacturing and marketing of innovative control valves, fittings, and hoses for the control and monitoring of industrial systems in a variety of markets, including the Semiconductor market. These products are primarily used in ultra clean gas delivery systems as well as other systems for the transmission of liquids and gases.