CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)

Six months ended

June 28, 

June 29, 

June 28, 

June 29, 

2018

2019

2018

Revenues

$

265,367

$

290,213

$

525,508

$

605,055

Cost of goods sold

217,198

244,148

432,542

510,186

Gross profit

48,169

46,065

92,966

94,869

Operating expenses:

  Research and development

3,921

2,915

7,352

5,944

  Sales and marketing

5,366

3,630

10,761

7,435

  General and administrative

29,911

16,856

57,702

31,918

    Total operating expenses

39,198

23,401

75,815

45,297

Income from operations

8,971

22,664

17,151

49,572

  Interest and other income (expense), net

(6,390)

(809)

(11,709)

(483)

Income before provision for income taxes

2,581

21,855

5,442

49,089

  Income tax provision

2,835

2,895

4,342

5,388

Net income 

(254)

18,960

1,100

43,701

Net income attributable to non-controlling interest

(52)

-

697

-

Net income attributable to Ultra Clean Holdings, Inc. 

$

$

18,960

$

403

$

43,701

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

  Basic

$

(0.01)

$

0.49

$

0.01

$

1.16

  Diluted

$

(0.01)

$

0.48

$

0.01

$

1.14

Shares used in computing net income per share:

  Basic

39,399

38,802

39,261

37,763

  Diluted

39,399

39,297

39,556

38,418

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

June 28,

December 28,

2019

2018

ASSETS

Current assets:

  Cash and cash equivalents

$

168,128

$

144,145

  Accounts receivable, net of allowance

98,306

106,956

  Inventory

164,055

186,116

  Other current assets

24,102

25,708

    Total current assets

454,591

462,925

Equipment and leasehold improvements, net

144,505

143,459

Goodwill

166,654

150,226

Purchased intangibles, net

190,500

193,507

Deferred tax assets, net

12,244

10,167

Operating lease right-of-use assets

34,721

—

Other non-current assets

5,743

5,193

Total assets

$

1,008,958

$

965,477

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Bank borrowings

$

7,203

$

9,671

  Accounts payable

97,288

99,011

  Operating lease liabilities

11,295

—

  Other current liabilities

39,183

30,616

    Total current liabilities

154,969

139,298

Bank borrowings, net of current portion

330,895

331,549

Deferred tax liability

21,449

15,834

Operating lease liabilities

25,656

—

Other long-term liabilities

21,501

27,808

    Total liabilities

554,470

514,489

Stockholders' equity:

  Common stock

291,635

287,127

  Retained earnings

150,121

149,718

  Accumulated other comprehensive loss

(2,655)

(547)

  Ultra Clean Holdings, Inc. stockholders' equity

439,101

436,298

  Noncontrolling interest

15,387

14,690

    Total stockholders' equity

454,488

450,988

Total liabilities and stockholders' equity

$

1,008,958

$

965,477

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)

Six Months Ended

June 28,

June 29,

2019

2018

Cash flows from operating activities:

Net income including noncontrolling interests

$    1,100

$  43,701

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

Depreciation and amortization

21,225

5,188

Stock-based compensation

5,777

4,920

Others

(222)

(27)

Changes in assets and liabilities:

Accounts receivable

10,001

(8,758)

Inventories

32,362

7,766

Prepaid expenses and other

3,705

(3,558)

Deferred income taxes

(2,077)

(113)

Other non-current assets

(566)

(313)

Accounts payable

(4,704)

(59,490)

Accrued compensation and related benefits

3,358

(1,332)

Income taxes payable

(2,206)

(3,933)

Other liabilities

264

3,903

Net cash provided by (used for) operating activities

68,017

Cash flows from investing activities:

Purchases of equipment and leasehold improvements

(6,750)

(9,666)

Acquisition of DMS

(29,873)

—

Proceeds from sale of equipment

458

—

Net cash used for investing activities

(36,165)

(9,666)

Cash flows from financing activities:

Proceeds from bank borrowings

28,112

21,886

Proceeds from issuance of common stock

125

94,454

Payments on bank borrowings and finance leases

(32,389)

(19,148)

Employees' taxes paid upon vesting of restricted stock units

(1,394)

(2,618)

Net cash provided by (used for) financing activities

(5,546)

94,574

Effect of exchange rate changes on cash and cash equivalents

(2,323)

(22)

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

144,145

68,306

Cash and cash equivalents at end of period

$168,128

$141,146

ULTRA CLEAN HOLDINGS, INC.

REPORTABLE SEGMENTS

GAAP TO NON-GAAP RECONCILIATION 

(Unaudited; Dollars in thousands)

GAAP

Non-GAAP

Three months ended

Three months ended

June 28, 2019

June 28, 2019

SPS

SSB

Consolidated

SPS

SSB

Consolidated

Revenues

$  210,390

$  54,977

$     265,367

$ 210,390

$ 54,977

$     265,367

Gross profit

$    29,316

$  18,853

$       48,169

$   30,432

$ 19,560

$       49,992

Gross margin

13.9%

34.3%

18.2%

14.5%

35.6%

18.8%

Operating profit

$     6,368

$   2,603

$         8,971

$   10,324

$   6,066

$       16,390

Operating margin

3.0%

4.7%

3.4%

4.9%

11.0%

6.2%

Three months ended

June 28, 2019

SPS

SSB

Consolidated

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

Reported gross profit on a GAAP basis

$   29,316

$ 18,853

$       48,169

Amortization of intangible assets (1)

-

1,023

1,023

Restructuring charges (2)

350

-

350

Fair value adjustments (5)

766

-

766

Depreciation adjustments (6)

-

(316)

Non-GAAP gross profit

$   30,432

$ 19,560

$       49,992

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis

13.9%

34.3%

18.2%

Amortization of intangible assets (1)

0.0%

1.9%

0.4%

Restructuring charges (2)

0.2%

-

0.1%

Fair value adjustments (5)

0.4%

-

0.2%

Depreciation adjustments (6)

0.0%

-0.6%

-0.1%

Non-GAAP gross margin

14.5%

35.6%

18.8%

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

Reported income from operations on a GAAP basis

$     6,368

$   2,603

$         8,971

Amortization of intangible assets (1)

1,230

3,823

5,053

Restructuring charges (2)

367

-

367

Executive transition costs (3)

382

-

382

Acquisition costs (4)

1,211

-

1,211

Fair value adjustments (5)

766

-

766

Depreciation adjustments (6)

-

(360)

(360)

Non-GAAP income from operations

$   10,324

$   6,066

$       16,390

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis

3.0%

4.7%

3.4%

Amortization of intangible assets (1)

0.6%

7.0%

1.9%

Restructuring charges (2)

0.2%

0.0%

0.1%

Executive transition costs (3)

0.2%

0.0%

0.1%

Acquisition costs (4)

0.6%

0.0%

0.5%

Fair value adjustments (5)

0.4%

0.0%

0.3%

Depreciation adjustments (6)

0.0%

-0.7%

-0.1%

Non-GAAP operating margin

4.9%

11.0%

6.2%

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

2    Represents severance costs and cost related to facility closures

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

4    Represents costs related to the QGT and DMS acquisitions

5    Fair value adjustment related to DMS' sold inventories

6    Depreciation adjustments related to QGT's fixed assets

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

Three Months Ended

June 28,

June 29,

March 29,

2019

2018

2019

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

$     (202)

$ 18,960

$        605

Amortization of intangible assets (1)

5,053

1,098

4,854

Restructuring charges (2)

392

-

947

Executive transition costs (3)

382

1,400

-

Acquisition costs (4)

1,211

-

2,339

Fair value adjustments (5)

766

-

-

Depreciation adjustments (6)

(360)

-

-

Income tax effect of non-GAAP adjustments (7)

(1,407)

(296)

(1,563)

Income tax effect of valuation allowance (8)

2,344

303

958

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

$   8,179

$ 21,465

$    8,140

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

Reported income from operations on a GAAP basis

$   8,971

$ 22,664

$    8,180

Amortization of intangible assets (1)

5,053

1,098

4,854

Restructuring charges (2)

367

-

617

Executive transition costs (3)

382

1,400

-

Acquisition costs (4)

1,211

-

2,339

Fair value adjustments (5)

766

-

-

Depreciation adjustments (6)

(360)

-

-

Non-GAAP income from operations

$ 16,390

$ 25,162

$  15,990

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis

3.4%

7.8%

3.1%

Amortization of intangible assets (1)

1.9%

0.4%

1.9%

Restructuring charges (2)

0.1%

0.0%

0.2%

Executive transition costs (3)

0.1%

0.5%

0.0%

Acquisition costs (4)

0.5%

0.0%

0.9%

Fair value adjustments (5)

0.3%

0.0%

0.0%

Depreciation adjustments (6)

-0.1%

0.0%

0.0%

Non-GAAP operating margin

6.2%

8.7%

6.1%

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

Reported gross profit on a GAAP basis

$ 48,169

$ 46,065

$  44,797

Amortization of intangible assets (1)

1,023

-

1,023

Restructuring charges (2)

350

-

515

Fair value adjustments (5)

766

-

-

Depreciation adjustments (6)

(316)

Non-GAAP gross profit

$ 49,992

$ 46,065

$  46,335

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis

18.2%

15.9%

17.2%

Amortization of intangible assets (1)

0.4%

0.0%

0.4%

Restructuring charges (2)

0.1%

0.0%

0.2%

Fair value adjustments (5)

0.2%

0.0%

0.0%

Depreciation adjustments (6)

-0.1%

0.0%

0.0%

Non-GAAP gross margin

18.8%

15.9%

17.8%

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

$  (6,390)

$     (809)

$   (5,319)

Restructuring charges (2)

(25)

-

(330)

Non-GAAP interest and other income (expense)

$     (809)

$   (5,649)

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

2    Represents severance costs and cost related to facility closures

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

4    Represents costs related to the QGT and DMS acquisitions

5    Fair value adjustment related to DMS' sold inventories

6    Depreciation adjustments related to QGT's fixed assets

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

8    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

June 28,

June 29,

March 29,

2019

2018

2019

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

Reported net income (loss) on a GAAP basis

$    (0.01)

$      0.48

$       0.02

Amortization of intangible assets

0.13

0.03

0.12

Restructuring charges

0.01

-

0.03

Executive transition costs

0.01

0.04

-

Acquisition costs

0.03

-

0.06

Fair value adjustments

0.02

-

-

Depreciation adjustments

(0.01)

-

-

Income tax effect of non-GAAP adjustments

(0.03)

(0.01)

(0.04)

Income tax effect of valuation allowance

0.06

0.01

0.02

Non-GAAP net income

$      0.21

$      0.55

$       0.21

Weighted average number of diluted shares (thousands) on a non-gaap basis

39,734

39,297

39,448

ULTRA CLEAN HOLDINGS, INC.

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

Three Months Ended

June 28,

June 29,

March 29,

2019

2018

2019

(in thousands, except percentages)

Provision for income taxes on a GAAP basis

$   2,835

$   2,895

$    1,507

Income tax effect of non-GAAP adjustments (1)

1,407

296

1,563

Income tax effect of valuation allowance (2)

(303)

(958)

Non-GAAP provision for income taxes

$   1,898

$   2,888

$    2,112

Income (loss) before income taxes on a GAAP basis

$   2,581

$ 21,855

$    2,861

Amortization of intangible assets

5,053

1,098

4,854

Restructuring charges

392

-

947

Executive transition costs

382

1,400

-

Acquisition costs

1,211

-

2,339

Fair value adjustments

766

-

-

Depreciation adjustments

(360)

-

-

Non-GAAP income before income taxes

$ 10,025

$ 24,353

$  11,001

Effective income tax rate on a GAAP basis

109.8%

13.2%

52.7%

Non-GAAP effective income tax rate

18.9%

11.9%

19.2%

1   Tax effect of items (1) through (4) 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.