Ultra Clean Reports First Quarter 2018 Financial Results

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)

Three months ended

March 30, 

March 31, 

2018

2017

Sales

$

314,842

$

204,594

Cost of goods sold

266,038

167,099

Gross profit

48,804

37,495

Operating expenses:

  Research and development

3,029

2,906

  Sales and marketing

3,805

3,051

  General and administrative

15,062

11,765

    Total operating expenses

21,896

17,722

Income from operations

26,908

19,773

Interest and other income (expense), net

326

(938)

Income before provision for income taxes

27,234

18,835

Income tax provision

2,493

4,494

Net income

$

24,741

$

14,341

Net income per share:

  Basic

$

0.67

$

0.43

  Diluted

$

0.66

$

0.42

Shares used in computing net income per share:

  Basic

36,723

33,061

  Diluted

37,491

33,865

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

March 30,

December 29,

2018

2017

ASSETS

Current assets:

  Cash and cash equivalents

$

162,365

$

68,306

  Accounts receivable, net of allowance

83,660

90,213

  Inventory

261,798

236,840

  Other current assets

13,225

12,089

    Total current assets

521,048

407,448

Equipment and leasehold improvements, net

36,839

32,246

Goodwill

85,248

85,248

Purchased intangibles, net

30,489

31,587

Deferred tax asset, net

5,032

4,951

Other non-current assets

2,181

1,932

Total assets

$

680,837

$

563,412

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Bank borrowings

$

54,779

$

12,381

  Accounts payable

169,592

173,521

  Other current liabilities

21,121

21,445

    Total current liabilities

245,492

207,347

Bank borrowings, net of current portion

-

39,893

Deferred tax liability

10,017

9,981

Other long-term liabilities

5,792

5,886

    Total liabilities

261,301

263,107

Stockholders' equity:

  Common stock

280,367

185,336

  Retained earnings

137,863

113,122

  Accumulated other comprehensive income

1,306

1,847

    Total stockholders' equity

419,536

300,305

Total liabilities and stockholders' equity

$

680,837

$

563,412

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)

Three Months Ended

March 30,

March 31,

2018

2017

Cash flows from operating activities:

Net income

$

24,741

$

14,341

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

Depreciation and amortization

2,452

2,483

Stock-based compensation

2,563

1,382

Change in the fair value of financial instruments

(856)

310

Others

52

—

Changes in assets and liabilities:

Accounts receivable

6,839

(20,078)

Inventories

(24,660)

(19,068)

Prepaid expenses and other

(1,089)

246

Deferred income taxes

(46)

(58)

Other non-current assets

(255)

(245)

Accounts payable

(4,214)

23,793

Accrued compensation and related benefits

187

2,908

Income taxes payable

(2,358)

2,149

Other liabilities

1,723

981

Net cash provided by operating activities

5,079

9,144

Cash flows from investing activities:

Purchases of equipment and leasehold improvements

(5,911)

(2,784)

Net cash used for investing activities

(5,911)

(2,784)

Cash flows from financing activities:

Proceeds from bank borrowings

10,222

1,000

Proceeds from issuance of common stock

94,330

1,383

Principal payments on bank borrowings

(7,873)

(4,697)

Employees' taxes paid upon vesting of restricted stock units

(1,862)

(1,582)

Net cash provided by (used for) financing activities

94,817

(3,896)

Effect of exchange rate changes on cash and cash equivalents

74

6

Net increase in cash and cash equivalents

$

94,059

$

2,470

Cash and cash equivalents at beginning of period

68,306

52,465

Cash and cash equivalents at end of period

$

162,365

$

54,935

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

Three Months Ended

March 30,

March 31,

December 29, 

2018

2017

2017

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

Reported net income on a GAAP basis

$

24,741

$

14,341

$

20,849

Amortization of intangible assets (1)

1,098

1,231

1,745

Restructuring charges (2)

874

-

-

Consulting fees (3)

150

-

-

Income tax effect of non-GAAP adjustments (4)

(262)

(256)

(229)

Income tax effect of valuation allowance (5)

(873)

576

(2,096)

Non-GAAP net income

$

25,728

$

15,892

$

20,269

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

Reported income from operations on a GAAP basis

$

26,908

$

19,773

$

21,957

Amortization of intangible assets (1)

1,098

1,231

1,745

Restructuring charges (2)

874

-

-

Consulting fees (3)

150

-

-

Non-GAAP income from operations

$

29,030

$

21,004

$

23,702

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis

8.5%

9.7%

8.8%

Amortization of intangible assets (1)

0.4%

0.6%

0.7%

Restructuring charges (2)

0.3%

-

-

Consulting fees (3)

0.0%

-

-

Non-GAAP operating margin

9.2%

10.3%

9.5%

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

Reported gross profit on a GAAP basis

$

48,804

$

37,495

$

44,067

Restructuring charges (2)

787

-

-

Consulting fees (3)

150

-

-

Non-GAAP gross profit

$

49,741

$

37,495

$

44,067

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis

15.5%

18.3%

17.7%

Restructuring charges (2)

0.2%

-

-

Consulting fees (3)

0.1%

-

-

Non-GAAP gross margin

15.8%

18.3%

17.7%

1

Amortization of intangible assets related to the Company's acquisitions of AIT, Marchi and Miconex 

2

Reserve for severance and other costs related to the closure of the Company's machining operations in China

3

One time consulting fees related to the expansion of the Company's operations in Singapore

4

Tax effect of items (1) through (3) above based on the non-gaap tax rate shown below

5

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 30,

March 31,

December 29, 

2018

2017

2017

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

Reported net income on a GAAP basis

$

0.66

$

0.42

$

0.60

Amortization of intangible assets

0.03

0.04

0.05

Restructuring charges

0.02

-

-

Consulting fees

0.01

-

-

Income tax effect of non-GAAP adjustments

(0.01)

(0.01)

(0.01)

Income tax effect of valuation allowance

(0.02)

0.02

(0.05)

Non-GAAP net income

$

0.69

$

0.47

$

0.59

Weighted average number of diluted shares (thousands)

37,491

33,865

34,500

ULTRA CLEAN HOLDINGS, INC.

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

Three Months Ended

March 30,

March 31,

December 29, 

2018

2017

2017

(in thousands, except percentages)

Provision for income taxes on a GAAP basis

$

2,493

$

4,494

$

730

Income tax effect of non-GAAP adjustments (1)

262

256

229

Income tax effect of valuation allowance (2)

873

(576)

2,096

Non-GAAP provision for income taxes

$

3,628

$

4,174

$

3,055

Income before income taxes on a GAAP basis

$

27,234

$

18,835

$

21,579

Amortization of intangible assets

1,098

1,231

1,745

Restructuring charges

874

-

-

Consulting fees

150

-

-

Non-GAAP income before income taxes

$

29,356

$

20,066

$

23,324

Effective income tax rate on a GAAP basis

9.2%

23.9%

3.4%

Non-GAAP effective income tax rate

12.4%

20.8%

13.1%

1

Tax effect of items (1) through (2) 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.