8-K
Ultra Clean Holdings, Inc. (UCTT)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
| Date of report (Date of earliest event reported): February 19, 2020 | ||
|---|---|---|
| ULTRA CLEAN HOLDINGS, INC. | ||
| (Exact Name of Registrant<br><br> <br><br><br> <br>as Specified in Charter) | ||
| Delaware | ||
| (State or Other Jurisdiction of Incorporation) | ||
| 000-50646 | 61-1430858 | |
| (Commission File Number) | (IRS Employer Identification No.) | |
| 26462 CORPORATE AVENUE<br><br> <br><br><br> <br>HAYWARD, CA | 94545 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
| Registrant’s telephone number, including area code: (510) 576-4400 | ||
| n/a | ||
| (Former Name or Former Address, if Changed Since Last Report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | TradingSymbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, par value $0.001 per share | UCTT | The NASDAQ Stock Market LLC<br><br> <br><br><br> <br>(NASDAQ Global Select Market) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02 Results of Operations and Financial Condition
On February 19, 2020, Ultra Clean Holdings, Inc. (the “Company”) issued a press release announcing its financial results for its fourth fiscal quarter and fiscal year ended December 27, 2019. A copy of the Company’s press release is attached hereto as Exhibit 99.1.
The information furnished under Item 2.02 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference into the Company’s filings with the SEC under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| ExhibitNo. | Exhibit Description |
|---|---|
| 99.1 | Press Release dated February 19, 2020 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ULTRA CLEAN HOLDINGS, INC. | ||||
|---|---|---|---|---|
| Date: | February 19, 2020 | By: | /s/ Paul Y. Cho | |
| Name: | Paul Y. Cho | |||
| Title: | General Counsel and<br> Corporate Secretary |
Exhibit 99.1
| Press Release | Source: Ultra Clean Holdings, Inc. |
|---|
Ultra Clean Reports Fourth Quarter and Full Year 2019 FinancialResults
HAYWARD, Calif., February 19, 2020 /PRNewswire/ Ultra Clean Holdings, Inc. (Nasdaq: UCTT), today reported its financial results for the fourth quarter and full year ended December 27, 2019.
“UCT’s solid performance resulted in a very strong fourth quarter with revenue growing more than 12 percent and earnings per share increasing more than 57 percent sequentially on increased demand,” said Jim Scholhamer, CEO. “We are excited about the opportunities that lie ahead as the industry ramps to keep pace with technology transitions, and will continue to manage our business with a focus on sustainable and profitable growth.”
“UCT generated $32.0 million of cash from operations in the quarter, bringing the total for the year to a record $121.0 million,” added Sheri Savage, CFO. “We paid down our long-term debt by $50.0 million during the year, significantly reducing our leverage, and ended the quarter with a cash balance of $162.5 million.”
Fourth Quarter 2019 GAAP Financial Results
Total revenue was $286.4 million. SPS contributed $230.2 million and SSB added $56.2 million. Total gross margin was 19.7%, operating margin was 1.6%, and net loss was $10.3 million or $(0.26) per basic share. This compares to total revenue of $254.3 million, gross margin of 18.7%, operating margin of 3.2%, and net income of $0.5 million or $0.01 per basic and diluted share last quarter.
Fourth Quarter 2019 Non-GAAP Financial Results
On a non-GAAP basis, gross margin was 20.1%, operating margin was 8.1%, and net income was $13.2 million or $0.33 per diluted share and $0.40 per diluted share excluding stock-based compensation. This compares to gross margin of 19.2%, operating margin of 5.8%, and net income of $8.5 million or $0.21 per diluted share and $0.28 per diluted share excluding stock-based compensation last quarter.
Full Year 2019 GAAPFinancial Results
Total revenue was $1,066.2 million. SPS contributed $840.9 million and SSB added $225.3 million. Total gross margin was 18.5%, operating margin was 2.8%, and net loss was $9.4 million or $(0.24) per basic share. This compares to total revenue of $1,096.5 million, gross margin of 16.0%, operating margin of 5.5%, and net income of $36.6 million or $0.94 per diluted share in the prior year.
Full Year 2019 Non-GAAP Financial Results
On a non-GAAP basis, gross margin was 19.0%, operating margin was 6.6%, and net income was $36.6 million or $0.91 per diluted share and $1.16 per diluted share excluding stock-based compensation. This compares to gross margin of 16.5%, operating margin of 7.8% and net income of $64.7 million or $1.66 per diluted share and $1.89 per diluted share excluding stock-based compensation in the prior year.
First Quarter 2020 Outlook
Due to limited visibility surrounding the coronavirus situation, the Company has widened its guidance ranges to reflect the heightened uncertainty in the marketplace. The Company expects revenue in the range of $290.0 million to $320.0 million and GAAP diluted net income per share to be between $0.24 and $0.36. The Company expects non-GAAP diluted net income per share to be between $0.40 and $0.52 excluding stock-based compensation. This compares to gross margin of 16.5%, operating margin of 7.8% and net income of $64.7 million or $1.66 per diluted share and $1.89 per diluted share excluding stock-based compensation in the prior year.
Conference Call
The call will take place at 1:45 p.m. PT today and can be accessed by dialing 1-844-826-3034 or 1-412-317-5179. No passcode is required. A replay of the call will be available by dialing 1-877-344-7529 or 1-412-317-0088 and entering the confirmation code 10138300. The Webcast will be available on the Investor Relations section of the Company's website at http://uct.com/investors/events/.
About Ultra Clean Holdings, Inc.
Ultra Clean Holdings, Inc. is a leading developer and supplier of critical subsystems, ultra-high purity cleaning and analytical services primarily for the semiconductor industry. Ultra Clean offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and component manufacturing, and tool chamber parts cleaning and coating, as well as micro-contamination analytical services. Ultra Clean is headquartered in Hayward, California. Additional information is available at www.uct.com.
Use of Non-GAAP Measures
In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), management uses non-GAAP gross margin, non-GAAP operating margin and non-GAAP net income to evaluate the Company's operating and financial results. We believe the presentation of non-GAAP results is useful to investors for analyzing our core business and business trends and comparing performance to prior periods, along with enhancing investors' ability to view the Company's results from management's perspective. The presentation of this additional information should not be considered a substitute for results prepared in accordance with GAAP. Tables presenting reconciliations from GAAP results to non-GAAP results are included at the end of this press release.
The Company currently defines non-GAAP net income as net income (loss) before amortization of intangible assets, restructuring charges, executive transition costs, acquisition costs, fair value adjustments, depreciation adjustments and the tax effects of the foregoing adjustments. In our first quarter of fiscal 2020, we will begin reporting non-GAAP net income under a new definition that excludes the foregoing adjustments, as well as the impact of stock-based compensation.
A reconciliation of our guidance for non-GAAP net income per diluted share for the following quarter is not available due to fluctuations in the geographic mix of our earnings from quarter to quarter, which impacts our tax rate and cannot be reasonably predicted or determined. As a result, such reconciliation is not available without unreasonable efforts and we are unable to determine the probable significance of the unavailable information.
Safe Harbor Statement
The foregoing information contains, or may be deemed to contain, "forward-looking statements" (as defined in the US Private Securities Litigation Reform Act of 1995) which reflect our current views with respect to future events and financial performance. We use words such as "anticipates," “projection,” “outlook,” “forecast,” "believes," "plan," "expect," "future," "intends," "may," "will," "estimates," “see,” "predicts," and similar expressions to identify these forward-looking statements. Forward looking statements included in this press release include our expectations about the semiconductor capital equipment market and outlook. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, the Company’s actual results may differ materially from the results predicted or implied by these forward-looking statements. These risks, uncertainties and other factors also include, among others, those identified in "Risk Factors,” "Management's Discussion and Analysis of Financial Condition and Results of Operations'' and elsewhere in our annual report on Form 10-K for the year ended December 28, 2018 as filed with the Securities and Exchange Commission and subsequently filed quarterly reports on Form 10-Q. Ultra Clean Holdings, Inc. undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise unless required by law.
Contact:
Rhonda Bennetto, Vice President Investor Relations
ULTRA CLEAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS
(Unaudited; in thousands, exceptper share data)
| Three months ended | Twelve months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 27, | December 28, | December 27, | December 28, | |||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Revenues | $ | 286,413 | $ | 257,389 | $ | 1,066,244 | $ | 1,096,523 | ||||
| Cost of goods sold | 230,017 | 211,412 | 869,378 | 920,682 | ||||||||
| Gross profit | 56,396 | 45,977 | 196,866 | 175,841 | ||||||||
| Operating expenses: | ||||||||||||
| Research and development | 3,632 | 4,059 | 14,618 | 13,287 | ||||||||
| Sales and marketing | 5,755 | 5,032 | 22,393 | 16,306 | ||||||||
| General and administrative | 42,505 | 26,676 | 129,942 | 85,544 | ||||||||
| Total operating expenses | 51,892 | 35,767 | 166,953 | 115,137 | ||||||||
| Income from operations | 4,504 | 10,210 | 29,913 | 60,704 | ||||||||
| Interest and other income (expense), net | (12,300 | ) | (5,187 | ) | (27,501 | ) | (8,436 | ) | ||||
| Income (loss) before provision for income taxes | (7,796 | ) | 5,023 | 2,412 | 52,268 | |||||||
| Income tax provision | 1,811 | 5,335 | 10,031 | 15,319 | ||||||||
| Net income (loss) | (9,607 | ) | (312 | ) | (7,619 | ) | 36,949 | |||||
| Net income (loss) attributable to non-controlling interest | 660 | 796 | 1,732 | 353 | ||||||||
| Net income (loss) attributable to Ultra Clean Holdings, Inc. | $ | (10,267 | ) | $ | (1,108 | ) | $ | (9,351 | ) | $ | 36,596 | |
| Net income (loss) per share attributable to Ultra Clean Holdings, Inc. common stockholders: | ||||||||||||
| Basic | $ | (0.26 | ) | $ | (0.03 | ) | $ | (0.24 | ) | $ | 0.95 | |
| Diluted | $ | (0.26 | ) | $ | (0.03 | ) | $ | (0.24 | ) | $ | 0.94 | |
| Shares used in computing net income (loss) per share: | ||||||||||||
| Basic | 39,778 | 39,009 | 39,467 | 38,366 | ||||||||
| Diluted | 39,778 | 39,009 | 39,467 | 38,919 |
ULTRA CLEAN HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCESHEETS
(Unaudited; in thousands)
| December 27,<br> <br><br> <br>2019 | December 28,<br> <br><br> <br>2018 | |||||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 162,531 | $ | 144,145 | ||
| Accounts receivable, net of allowance | 112,694 | 106,956 | ||||
| Inventories | 172,420 | 186,116 | ||||
| Prepaid expenses and other | 19,400 | 25,708 | ||||
| Total current assets | 467,045 | 462,925 | ||||
| Property, plant and equipment, net | 145,272 | 143,459 | ||||
| Goodwill | 171,087 | 150,226 | ||||
| Purchased intangibles, net | 180,318 | 193,507 | ||||
| Deferred tax assets, net | 15,498 | 10,167 | ||||
| Operating lease right-of-use assets | 34,877 | — | ||||
| Other non-current assets | 5,209 | 5,193 | ||||
| Total assets | $ | 1,019,306 | $ | 965,477 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Bank borrowings | $ | 8,842 | $ | 9,671 | ||
| Accounts payable | 133,058 | 99,011 | ||||
| Operating lease liabilities | 13,179 | — | ||||
| Other current liabilities | 55,519 | 30,616 | ||||
| Total current liabilities | 210,598 | 139,298 | ||||
| Bank borrowings, net of current portion | 283,390 | 331,549 | ||||
| Deferred tax liability | 25,183 | 15,834 | ||||
| Operating lease liabilities | 28,828 | — | ||||
| Other long-term liabilities | 18,800 | 27,808 | ||||
| Total liabilities | 566,799 | 514,489 | ||||
| Stockholders’ equity: | ||||||
| Common stock | 297,693 | 287,127 | ||||
| Retained earnings | 140,367 | 149,718 | ||||
| Accumulated other comprehensive loss | (1,334 | ) | (547 | ) | ||
| Ultra Clean Holdings, Inc. stockholders' equity | 436,726 | 436,298 | ||||
| Noncontrolling interest | 15,781 | 14,690 | ||||
| Total stockholders’ equity | 452,507 | 450,988 | ||||
| Total liabilities and stockholders’ equity | $ | 1,019,306 | $ | 965,477 |
ULTRA CLEAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS
(unaudited; in thousands)
| Fiscal Year Ended | ||||||
|---|---|---|---|---|---|---|
| December 27, | December 28, | |||||
| 2019 | 2018 | |||||
| Cash flows from operating activities: | ||||||
| Net income (loss) including noncontrolling interests | $ | (7,619 | ) | $ | 36,949 | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities (excluding assets acquired and liabilities assumed and noncontrolling interests at acquisition): | ||||||
| Depreciation and amortization | 43,360 | 21,907 | ||||
| Stock-based compensation | 12,065 | 10,272 | ||||
| Others | 4,763 | 692 | ||||
| Changes in assets and liabilities: | ||||||
| Accounts receivable | (4,488 | ) | 7,237 | |||
| Inventories | 22,292 | 50,151 | ||||
| Prepaid expenses and other | 3,747 | 2,614 | ||||
| Deferred income taxes | (3,563 | ) | (82 | ) | ||
| Other non-current assets | 12 | (353 | ) | |||
| Accounts payable | 31,017 | (83,195 | ) | |||
| Accrued compensation and related benefits | 9,006 | (2,795 | ) | |||
| Change in operating leases | 7,130 | — | ||||
| Income taxes payable | (2,906 | ) | 798 | |||
| Other liabilities | 6,153 | (2,486 | ) | |||
| Net cash provided by operating activities | 120,969 | 41,709 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property, plant and equipment | (26,312 | ) | (26,152 | ) | ||
| Acquisition of businesses, net of cash acquired | (29,873 | ) | (319,781 | ) | ||
| Proceeds from sale of equipment, including insurance proceeds | 7,002 | — | ||||
| Net cash used for investing activities | (49,183 | ) | (345,933 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from bank borrowings | 41,847 | 387,054 | ||||
| Proceeds from issuance of common stock | 342 | 94,614 | ||||
| Payments on bank borrowings and finance leases | (93,065 | ) | (86,354 | ) | ||
| Debt issuance costs paid | — | (12,144 | ) | |||
| Employees’ taxes paid upon vesting of restricted stock units | (1,841 | ) | (3,095 | ) | ||
| Others | (641 | ) | — | |||
| Net cash provided by (used for) financing activities | (53,358 | ) | 380,075 | |||
| Effect of exchange rate changes on cash and cash equivalents | (42 | ) | (12 | ) | ||
| Net increase in cash and cash equivalents | $ | 18,386 | $ | 75,839 | ||
| Cash and cash equivalents at beginning of period | 144,145 | 68,306 | ||||
| Cash and cash equivalents at end of period | $ | 162,531 | $ | 144,145 |
ULTRA CLEAN HOLDINGS, INC.
REPORTABLE SEGMENTS
GAAP TO NON-GAAP RECONCILIATION
(Unaudited; Dollars in thousands)
| GAAP | Non-GAAP | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three months ended | Three months ended | |||||||||||||||||
| December<br> 27, 2019 | December<br> 27, 2019 | |||||||||||||||||
| SPS | SSB | Consolidated | SPS | SSB | Consolidated | |||||||||||||
| Revenues | $ | 230,206 | $ | 56,207 | $ | 286,413 | $ | 230,206 | $ | 56,207 | $ | 286,413 | ||||||
| Gross profit | $ | 36,885 | $ | 19,511 | $ | 56,396 | $ | 36,906 | $ | 20,534 | $ | 57,440 | ||||||
| Gross margin | 16.0 | % | 34.7 | % | 19.7 | % | 16.0 | % | 36.5 | % | 20.1 | % | ||||||
| Operating profit | $ | 272 | $ | 4,232 | $ | 4,504 | $ | 15,150 | $ | 8,056 | $ | 23,206 | ||||||
| Operating margin | 0.1 | % | 7.5 | % | 1.6 | % | 6.6 | % | 14.3 | % | 8.1 | % | ||||||
| Three months ended | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||||
| December 27, 2019 | ||||||||||||||||||
| SPS | SSB | Consolidated | ||||||||||||||||
| Reconciliation of GAAP Gross profit to Non-GAAP Gross profit (in thousands) | ||||||||||||||||||
| Reported gross profit on a GAAP basis | $ | 36,885 | $ | 19,511 | $ | 56,396 | ||||||||||||
| Amortization of intangible assets (1) | - | 1,023 | 1,023 | |||||||||||||||
| Restructuring charges (2) | 21 | - | 21 | |||||||||||||||
| Non-GAAP gross profit | $ | 36,906 | $ | 20,534 | $ | 57,440 | ||||||||||||
| Reconciliation of GAAP Gross margin to Non-GAAP Gross margin | ||||||||||||||||||
| Reported gross margin on a GAAP basis | 16.0 | % | 34.7 | % | 19.7 | % | ||||||||||||
| Amortization of intangible assets (1) | 0.0 | % | 1.8 | % | 0.4 | % | ||||||||||||
| Restructuring charges (2) | 0.0 | % | - | 0.0 | % | |||||||||||||
| Non-GAAP gross margin | 16.0 | % | 36.5 | % | 20.1 | % | ||||||||||||
| Reconciliation of GAAP Income from operations to Non-GAAP Income from operations (in thousands) | ||||||||||||||||||
| Reported income from operations on a GAAP basis | $ | 272 | $ | 4,232 | $ | 4,504 | ||||||||||||
| Amortization of intangible assets (1) | 1,267 | 3,824 | 5,091 | |||||||||||||||
| Restructuring charges (2) | 13,500 | - | 13,500 | |||||||||||||||
| Acquisition related costs (3) | 111 | - | 111 | |||||||||||||||
| Non-GAAP income from operations | $ | 15,150 | $ | 8,056 | $ | 23,206 | ||||||||||||
| Reconciliation of GAAP Operating margin to Non-GAAP Operating margin | ||||||||||||||||||
| Reported operating margin on a GAAP basis | 0.1 | % | 7.5 | % | 1.6 | % | ||||||||||||
| Amortization of intangible assets (1) | 0.6 | % | 6.8 | % | 1.8 | % | ||||||||||||
| Restructuring charges (2) | 5.9 | % | 0.0 | % | 4.7 | % | ||||||||||||
| Acquisition related costs (3) | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||
| Non-GAAP operating margin | 6.6 | % | 14.3 | % | 8.1 | % | ||||||||||||
| 1 | Amortization of intangible assets related to the Company's<br>acquisitions of AIT, Thermal, FDS, QGT and DMS | |||||||||||||||||
| --- | --- | |||||||||||||||||
| 2 | Represents severance costs and costs related to facility<br>closures | |||||||||||||||||
| --- | --- | |||||||||||||||||
| 3 | Represents costs related to the QGT and DMS acquisitions | |||||||||||||||||
| --- | --- |
ULTRA CLEAN HOLDINGS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAPADJUSTED RESULTS
| Three Months Ended | Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 27, | December 28, | September 27, | December 27, | December 28, | |||||||||||
| 2019 | 2018 | 2019 | 2019 | 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 | $ | (10,267 | ) | $ | (1,108 | ) | $ | 513 | $ | (9,351 | ) | $ | 36,596 | ||
| Amortization of intangible assets (1) | 5,091 | 4,973 | 5,093 | 20,090 | 9,580 | ||||||||||
| Restructuring charges (2) | 13,500 | 832 | 1,393 | 16,615 | 4,821 | ||||||||||
| Acquisition related costs (3) | 111 | 613 | 200 | 3,861 | 10,102 | ||||||||||
| Fair value adjustments (4) | 6,562 | - | 129 | 7,457 | - | ||||||||||
| Depreciation adjustments (5) | - | - | - | (360 | ) | - | |||||||||
| Product transition fees (6) | - | - | - | - | 657 | ||||||||||
| Disposal of business unit (7) | 52 | - | - | 52 | 1,082 | ||||||||||
| Income tax effect of non-GAAP adjustments (8) | (5,266 | ) | (1,101 | ) | (1,567 | ) | (11,261 | ) | (4,501 | ) | |||||
| Income tax effect of valuation allowance (9) | 3,440 | 4,474 | 2,781 | 9,461 | 6,355 | ||||||||||
| Non-GAAP net income attributable to Ultra Clean Holdings, Inc. | $ | 13,223 | $ | 8,683 | $ | 8,542 | $ | 36,564 | $ | 64,692 | |||||
| Reconciliation of GAAP Income from operations to Non-GAAP Income from operations (in thousands) | |||||||||||||||
| Reported income from operations on a GAAP basis | $ | 4,504 | $ | 10,210 | $ | 8,258 | $ | 29,913 | $ | 60,704 | |||||
| Amortization of intangible assets (1) | 5,091 | 4,973 | 5,093 | 20,090 | 9,580 | ||||||||||
| Restructuring charges (2) | 13,500 | 832 | 954 | 15,821 | 4,821 | ||||||||||
| Acquisition related costs (3) | 111 | 613 | 200 | 3,863 | 10,003 | ||||||||||
| Fair value adjustments (4) | - | - | 129 | 895 | - | ||||||||||
| Depreciation adjustments (5) | - | - | - | (360 | ) | - | |||||||||
| Product transition fees (6) | - | - | - | - | 657 | ||||||||||
| Non-GAAP income from operations | $ | 23,206 | $ | 16,628 | $ | 14,634 | $ | 70,222 | $ | 85,765 | |||||
| Reconciliation of GAAP Operating margin to Non-GAAP Operating margin | |||||||||||||||
| Reported operating margin on a GAAP basis | 1.6 | % | 4.0 | % | 3.2 | % | 2.8 | % | 5.5 | % | |||||
| Amortization of intangible assets (1) | 1.8 | % | 1.9 | % | 2.0 | % | 1.8 | % | 0.9 | % | |||||
| Restructuring charges (2) | 4.7 | % | 0.3 | % | 0.4 | % | 1.5 | % | 0.4 | % | |||||
| Acquisition related costs (3) | 0.0 | % | 0.3 | % | 0.1 | % | 0.4 | % | 0.9 | % | |||||
| Fair value adjustments (4) | 0.0 | % | 0.0 | % | 0.1 | % | 0.1 | % | 0.0 | % | |||||
| Depreciation adjustments (5) | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | |||||
| Product transition fees (6) | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.1 | % | |||||
| Non-GAAP operating margin | 8.1 | % | 6.5 | % | 5.8 | % | 6.6 | % | 7.8 | % | |||||
| Reconciliation of GAAP Gross profit to Non-GAAP Gross profit (in thousands) | |||||||||||||||
| Reported gross profit on a GAAP basis | $ | 56,396 | $ | 45,977 | $ | 47,504 | $ | 196,866 | $ | 175,841 | |||||
| Amortization of intangible assets (1) | 1,023 | 1,363 | 1,023 | 4,090 | 1,363 | ||||||||||
| Restructuring charges (2) | 21 | 715 | 154 | 1,041 | 2,849 | ||||||||||
| Fair value adjustments (4) | - | - | 129 | 895 | - | ||||||||||
| Depreciation adjustments (5) | - | - | - | (316 | ) | ||||||||||
| Product transition fees (6) | - | - | - | - | 657 | ||||||||||
| Non-GAAP gross profit | $ | 57,440 | $ | 48,055 | $ | 48,810 | $ | 202,576 | $ | 180,710 | |||||
| Reconciliation of GAAP Gross margin to Non-GAAP Gross margin | |||||||||||||||
| Reported gross margin on a GAAP basis | 19.7 | % | 17.9 | % | 18.7 | % | 18.5 | % | 16.0 | % | |||||
| Amortization of intangible assets (1) | 0.4 | % | 0.5 | % | 0.4 | % | 0.4 | % | 0.1 | % | |||||
| Restructuring charges (2) | 0.0 | % | 0.3 | % | 0.1 | % | 0.1 | % | 0.3 | % | |||||
| Fair value adjustments (4) | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | |||||
| Depreciation adjustments (5) | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | |||||
| Product transition fees (6) | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.1 | % | |||||
| Non-GAAP gross margin | 20.1 | % | 18.7 | % | 19.2 | % | 19.0 | % | 16.5 | % | |||||
| 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 | $ | (12,300 | ) | $ | (5,187 | ) | $ | (3,492 | ) | $ | (27,501 | ) | $ | (8,436 | ) |
| Restructuring charges (2) | - | - | 439 | 795 | 1,082 | ||||||||||
| Acquisition related costs (3) | - | - | - | - | 99 | ||||||||||
| Fair value adjustments (4) | 6,562 | - | - | 6,562 | - | ||||||||||
| Disposal of business unit (7) | 52 | - | - | 52 | - | ||||||||||
| Non-GAAP interest and other income (expense) | $ | (5,686 | ) | $ | (5,187 | ) | $ | (3,053 | ) | $ | (20,092 | ) | $ | (7,255 | ) |
| 1 | Amortization of intangible assets related to the Company's<br>acquisitions of AIT, Thermal, FDS, QGT and DMS | ||||||||||||||
| --- | --- | ||||||||||||||
| 2 | Represents severance costs and costs related to facility<br>closures | ||||||||||||||
| --- | --- | ||||||||||||||
| 3 | Represents costs related to the QGT and DMS acquisitions | ||||||||||||||
| --- | --- | ||||||||||||||
| 4 | Fair value adjustments related to DMS inventory, contingent<br>consideration and purchase obligation | ||||||||||||||
| --- | --- | ||||||||||||||
| 5 | Depreciation adjustments related to QGT's fixed assets | ||||||||||||||
| --- | --- | ||||||||||||||
| 6 | One-time product transition payment | ||||||||||||||
| --- | --- | ||||||||||||||
| 7 | Represents the loss on disposal of the Company's 3D printing<br>operations in Singapore | ||||||||||||||
| --- | --- | ||||||||||||||
| 8 | Tax effect of items (1) through (7) above based on the<br>non-GAAP tax rate shown below | ||||||||||||||
| --- | --- | ||||||||||||||
| 9 | The Company's GAAP tax expense is generally higher than<br>the Company's non-GAAP tax expense, primarily due to losses in the U.S. with full federal and state valuation allowances. The<br>Company's non-GAAP tax rate and resulting non-GAAP tax expense considers the tax implications as if there was no federal or state<br>valuation allowance position in effect. | ||||||||||||||
| --- | --- | ||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| December 27, | December 28, | September 27, | December 27, | December 28, | |||||||||||
| 2019 | 2018 | 2019 | 2019 | 2018 | |||||||||||
| Reconciliation of GAAP Earnings Per Diluted Share to Non-GAAP Earnings Per Diluted Share | |||||||||||||||
| Reported net income (loss) on a GAAP basis | $ | (0.26 | ) | $ | (0.03 | ) | $ | 0.01 | $ | (0.24 | ) | $ | 0.94 | ||
| Amortization of intangible assets | 0.13 | 0.13 | 0.13 | 0.50 | 0.25 | ||||||||||
| Restructuring charges | 0.33 | 0.02 | 0.03 | 0.42 | 0.12 | ||||||||||
| Acquisition related costs | 0.01 | 0.02 | 0.01 | 0.10 | 0.26 | ||||||||||
| Fair value adjustments | 0.16 | - | - | 0.19 | - | ||||||||||
| Depreciation adjustments | - | - | - | (0.01 | ) | - | |||||||||
| Product transition fees | - | - | - | - | 0.02 | ||||||||||
| Disposal of business unit | 0.01 | - | - | - | 0.03 | ||||||||||
| Income tax effect of non-GAAP adjustments | (0.13 | ) | (0.03 | ) | (0.04 | ) | (0.28 | ) | (0.12 | ) | |||||
| Income tax effect of valuation allowance | 0.08 | 0.12 | 0.07 | 0.23 | 0.16 | ||||||||||
| Non-GAAP net income | $ | 0.33 | $ | 0.23 | $ | 0.21 | $ | 0.91 | $ | 1.66 | |||||
| Weighted average number of diluted shares (thousands) on a non-GAAP basis | 40,523 | 39,009 | 39,734 | 40,027 | 38,919 |
ULTRA CLEAN HOLDINGS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAPEFFECTIVE INCOME TAX RATE
| Three Months Ended | Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 27, | December 28, | September 27, | December 27, | December 28, | |||||||||||
| 2019 | 2018 | 2019 | 2019 | 2018 | |||||||||||
| (in thousands, except percentages) | |||||||||||||||
| Provision for income taxes on a GAAP basis | $ | 1,811 | $ | 5,335 | $ | 3,878 | $ | 10,031 | $ | 15,319 | |||||
| Income tax effect of non-GAAP adjustments (1) | 5,266 | 1,101 | 1,567 | 11,261 | 4,501 | ||||||||||
| Income tax effect of valuation allowance (2) | (3,440 | ) | (4,474 | ) | (2,781 | ) | (9,461 | ) | (6,355 | ) | |||||
| Non-GAAP provision for income taxes | $ | 3,637 | $ | 1,962 | $ | 2,664 | $ | 11,831 | $ | 13,465 | |||||
| Income (loss) before income taxes on a GAAP basis | $ | (7,796 | ) | $ | 5,023 | $ | 4,766 | $ | 2,412 | $ | 52,268 | ||||
| Amortization of intangible assets | 5,091 | 4,973 | 5,093 | 20,090 | 9,580 | ||||||||||
| Restructuring charges | 13,500 | 832 | 1,393 | 16,615 | 4,821 | ||||||||||
| Acquisition related costs | 111 | 613 | 200 | 3,861 | 10,102 | ||||||||||
| Fair value adjustments | 6,562 | - | 129 | 7,457 | - | ||||||||||
| Depreciation adjustments | - | - | - | (360 | ) | - | |||||||||
| Product transition fees | - | - | - | - | 657 | ||||||||||
| Disposal of business unit | 52 | - | - | 52 | 1,082 | ||||||||||
| Non-GAAP income before income taxes | $ | 17,520 | $ | 11,441 | $ | 11,581 | $ | 50,127 | $ | 78,510 | |||||
| Effective income tax rate on a GAAP basis | -23.2 | % | 106.2 | % | 81.4 | % | 415.9 | % | 29.3 | % | |||||
| Non-GAAP effective income tax rate | 20.8 | % | 17.2 | % | 23.0 | % | 23.6 | % | 17.2 | % | |||||
| 1 | Tax effect of items (1) through (7) above based on the<br>non-GAAP tax rate | ||||||||||||||
| --- | --- | ||||||||||||||
| 2 | The Company's GAAP tax expense is generally higher than<br>the Company's non-GAAP tax expense, primarily due to losses in the U.S. with full federal and state valuation allowances. The<br>Company's non-GAAP tax rate and resulting non-GAAP tax expense considers the tax implications as if there was no federal or state<br>valuation allowance position in effect. | ||||||||||||||
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