Ultra Clean Reports First Quarter 2019 Financial Results

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)

March 29, 

March 30, 

2018

Revenues

$

260,141

$

314,842

Cost of goods sold

215,344

266,038

Gross profit

44,797

48,804

Operating expenses:

  Research and development

3,431

3,029

  Sales and marketing

5,395

3,805

  General and administrative

27,791

15,062

    Total operating expenses

36,617

21,896

Income from operations

8,180

26,908

  Interest and other income (expense), net

326

Income before provision for income taxes

2,861

27,234

  Income tax provision

1,507

2,493

Net income 

1,354

24,741

Net income attributable to non-controlling interest

749

-

Net income attributable to Ultra Clean Holdings, Inc. 

$

605

$

24,741

Net income per share attributable to Ultra Clean Holdings, Inc. common stockholders:

  Basic

$

0.02

$

0.67

  Diluted

$

0.02

$

0.66

Shares used in computing net income per share:

  Basic

39,122

36,723

  Diluted

39,448

37,491

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

March 29,

December 28,

2019

2018

ASSETS

Current assets:

  Cash and cash equivalents

$

154,774

$

144,145

  Accounts receivable, net of allowance

110,971

106,956

  Inventory

180,299

186,116

  Other current assets

28,056

25,708

    Total current assets

474,100

462,925

Equipment and leasehold improvements, net

141,082

143,459

Goodwill

150,226

150,226

Purchased intangibles, net

188,653

193,507

Deferred tax assets, net

10,201

10,167

Operating lease right-of-use assets

32,892

—

Other non-current assets

6,091

5,193

Total assets

$

1,003,245

$

965,477

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Bank borrowings

$

9,686

$

9,671

  Accounts payable

99,204

99,011

  Operating lease liabilities

10,554

—

  Other current liabilities

37,249

30,616

    Total current liabilities

156,693

139,298

Bank borrowings, net of current portion

329,810

331,549

Deferred tax liability

15,834

15,834

Operating lease liabilities

25,132

—

Other long-term liabilities

22,247

27,808

    Total liabilities

549,716

514,489

Stockholders' equity:

  Common stock

289,190

287,127

  Retained earnings

150,323

149,718

  Accumulated other comprehensive loss

(1,423)

(547)

  Ultra Clean Holdings, Inc. stockholders' equity

438,090

436,298

  Noncontrolling interest

15,439

14,690

    Total stockholders' equity

453,529

450,988

Total liabilities and stockholders' equity

$

1,003,245

$

965,477

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)

Three Months Ended

March 29,

March 30,

2019

2018

Cash flows from operating activities:

Net income including noncontrolling interests

$    1,354

$  24,741

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

12,157

2,452

Stock-based compensation

2,913

2,563

Others

(1,225)

(804)

Changes in assets and liabilities:

Accounts receivable

(4,182)

6,839

Inventories

5,579

(24,660)

Prepaid expenses and other

(2,430)

(1,089)

Deferred income taxes

(37)

(46)

Other non-current assets

(943)

(255)

Accounts payable

(626)

(4,214)

Accrued compensation and related benefits

3,087

187

Income taxes payable

1,266

(2,358)

Other liabilities

1,185

1,723

Net cash provided by operating activities

18,098

5,079

Cash flows from investing activities:

Purchases of equipment and leasehold improvements

(4,844)

(5,911)

Proceeds from sale of equipment

646

—

Net cash used for investing activities

(5,911)

Cash flows from financing activities:

Proceeds from bank borrowings

6,587

10,222

Proceeds from issuance of common stock

—

94,330

Payments on bank borrowings and finance leases

(8,863)

(7,873)

Employees' taxes paid upon vesting of restricted stock units

(850)

(1,862)

Net cash provided by (used for) financing activities

(3,126)

94,817

Effect of exchange rate changes on cash and cash equivalents

74

Net increase in cash and cash equivalents

$  10,629

$  94,059

Cash and cash equivalents at beginning of period

144,145

68,306

Cash and cash equivalents at end of period

$154,774

$162,365

ULTRA CLEAN HOLDINGS, INC.

REPORTABLE SEGMENTS

GAAP TO NON-GAAP RECONCILIATION 

(Unaudited; Dollars in thousands)

GAAP

Non-GAAP

Three months ended

Three months ended

March 29, 2019

March 29, 2019

SPS

SSB

Consolidated

SPS

SSB

Consolidated

Revenues

$  200,245

$  59,896

$     260,141

$  200,245

$   59,896

$     260,141

Gross profit

$    25,681

$  19,116

$       44,797

$    26,196

$   20,139

$       46,335

Gross margin

12.8%

31.9%

17.2%

13.1%

33.6%

17.8%

Operating profit

$      4,324

$    3,856

$         8,180

$      8,312

$     7,678

$       15,990

Operating margin

2.2%

6.4%

3.1%

4.2%

12.8%

6.1%

Three months ended

March 29, 2019

SPS

SSB

Consolidated

Reconciliation of GAAP Gross profit to Non-GAAP Gross profit (in thousands)

Reported gross profit on a GAAP basis

$   25,681

$  19,116

$       44,797

Amortization of intangible assets (1)

-

1,023

1,023

Restructuring charges (2)

515

-

515

Non-GAAP gross profit

$   26,196

$  20,139

$       46,335

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis

12.8%

31.9%

17.2%

Amortization of intangible assets (1)

0.0%

1.7%

0.4%

Restructuring charges (2)

0.3%

-

0.2%

Non-GAAP gross margin

13.1%

33.6%

17.8%

Reconciliation of GAAP Income from operations to Non-GAAP Income from operations (in thousands)

Reported income from operations on a GAAP basis

$     4,324

$   3,856

$         8,180

Amortization of intangible assets (1)

1,032

3,822

4,854

Restructuring charges (2)

617

-

617

Acquisition costs (3)

2,339

-

2,339

Non-GAAP income from operations

$     8,312

$   7,678

$       15,990

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis

2.2%

6.4%

3.1%

Amortization of intangible assets (1)

0.5%

6.4%

1.9%

Restructuring charges (2)

0.3%

0.0%

0.2%

Acquisition costs (3)

1.2%

0.0%

0.9%

Non-GAAP operating margin

4.2%

12.8%

6.1%

1    Amortization of intangible assets related to the Company's acquisitions of AIT, Thermal, FDS and QGT

2    Represents severance costs and cost related to facilities closed during the quarter

3    Represents costs related to the QGT and DMS acquisitions

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

Three Months Ended

March 29,

March 30,

December 28,

2019

2018

2018

Reconciliation of GAAP Net Income (loss) to Non-GAAP Net Income (in thousands)

Reported net income (loss) attributable to Ultra Clean Holdings, Inc. on a GAAP basis

$        605

$  24,741

Amortization of intangible assets (1)

4,854

1,098

4,973

Restructuring charges (2)

947

1,024

297

Executive transition costs (3)

-

-

418

Acquisition costs (4)

2,339

-

613

Facility lease early exit costs (5)

-

-

117

Income tax effect of non-GAAP adjustments (6)

(1,563)

(262)

(1,101)

Income tax effect of valuation allowance (7)

958

(873)

4,474

Non-GAAP net income attributable to Ultra Clean Holdings, Inc.

$    8,140

$  25,728

$          8,683

Reconciliation of GAAP Income from operations to Non-GAAP Income from operations (in thousands)

Reported income from operations on a GAAP basis

$    8,180

$  26,908

$        10,210

Amortization of intangible assets (1)

4,854

1,098

4,973

Restructuring charges (2)

617

1,024

297

Executive transition costs (3)

-

-

418

Acquisition costs (4)

2,339

-

613

Facility lease early exit costs (5)

-

-

117

Non-GAAP income from operations

$  15,990

$  29,030

$        16,628

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis

3.1%

8.5%

4.0%

Amortization of intangible assets (1)

1.9%

0.4%

1.9%

Restructuring charges (2)

0.2%

0.3%

0.1%

Executive transition costs (3)

0.0%

0.0%

0.2%

Acquisition costs (4)

0.9%

0.0%

0.3%

Facility lease early exit costs (5)

0.0%

0.0%

0.0%

Non-GAAP operating margin

6.1%

9.2%

6.5%

Reconciliation of GAAP Gross profit to Non-GAAP Gross profit (in thousands)

Reported gross profit on a GAAP basis

$  44,797

$  48,804

$        45,977

Amortization of intangible assets (1)

1,023

-

1,363

Restructuring charges (2)

515

937

297

Executive transition costs (3)

-

-

418

Non-GAAP gross profit

$  46,335

$  49,741

$        48,055

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis

17.2%

15.5%

17.9%

Amortization of intangible assets (1)

0.4%

0.0%

0.5%

Restructuring charges (2)

0.2%

0.3%

0.1%

Executive transition costs (3)

0.0%

0.0%

0.2%

Non-GAAP gross margin

17.8%

15.8%

18.7%

Reconciliation of GAAP Interest and other income (expense) to Non-GAAP Interest and other income (expense) (in thousands)

Reported interest and other income (expense) on a GAAP basis

$   (5,319)

$        326

$         (5,187)

Restructuring charges (2)

(330)

-

-

Non-GAAP interest and other income (expense)

$        326

$         (5,187)

1    Amortization of intangible assets related to the Company's acquisitions of AIT, Thermal, FDS and QGT

2    Represents severance costs and cost related to facilities closed during the quarter

3    Represents termination benefits paid to a former executive of the Company

4    Represents costs related to the QGT and DMS acquisitions

5    Represents lease related costs due to the early exit of a facility

6    Tax effect of items (1) through (5) above based on the non-GAAP tax rate shown below

7    The Company's GAAP tax expense is generally higher than the Company's non-GAAP tax expense, primarily due to losses in the U.S. with full federal and state valuation allowances. The Company's non-GAAP tax rate and resulting non-GAAP tax expense considers the tax implications as if there was no federal or state valuation allowance position in effect. 

Three Months Ended

March 29,

March 30,

December 28,

2019

2018

2018

Reconciliation of GAAP Earnings Per Diluted Share to Non-GAAP Earnings Per Diluted Share

Reported net income (loss) on a GAAP basis

$       0.02

$       0.66

(0.03)

Amortization of intangible assets

0.12

0.03

0.13

Restructuring charges

0.03

0.03

0.01

Executive transition costs

-

-

0.01

Acquisition costs

0.06

-

0.02

Facility lease early exit costs

-

-

0.00

Income tax effect of non-GAAP adjustments

(0.04)

(0.01)

(0.03)

Income tax effect of valuation allowance

0.02

(0.02)

0.12

Non-GAAP net income

$       0.21

$       0.69

$             0.23

Weighted average number of diluted shares (thousands)

39,448

37,491

39,009

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE

Three Months Ended

March 29,

March 30,

December 28,

2019

2018

2018

(in thousands, except percentages)

Provision for income taxes on a GAAP basis

$    1,507

$    2,493

$          5,335

Income tax effect of non-GAAP adjustments (1)

1,563

262

1,101

Income tax effect of valuation allowance (2)

(958)

873

(4,474)

Non-GAAP provision for income taxes

$    2,112

$          1,962

Income (loss) before income taxes on a GAAP basis

$    2,861

$  27,234

$          5,023

Amortization of intangible assets

4,854

1,098

4,973

Restructuring charges

947

1,024

297

Executive transition costs

-

-

418

Acquisition costs

2,339

-

613

Facility lease early exit costs

-

-

117

Non-GAAP income before income taxes

$  11,001

$  29,356

$        11,441

Effective income tax rate on a GAAP basis

52.7

%

9.2

%

106.2

%

Non-GAAP effective income tax rate

19.2

%

12.4

%

17.2

%

1    Tax effect of items (1) through (5) above based on the non-GAAP tax rate

2   The Company's GAAP tax expense is generally higher than the Company's non-GAAP tax expense, primarily due to losses in the U.S. with full federal and state valuation allowances. The Company's non-GAAP tax rate and resulting non-GAAP tax expense considers the tax implications as if there was no federal or state valuation allowance position in effect.