29, 2024 from____________to 26462 Corporate Avenue, 94545 (Address of principal executive offices) (Zip Code) Title of each class Name of each exchange on which registered Common stock, par value $0.001 per share UCTT The Nasdaq Stock Market, LLC Large accelerated filer o March 31, December 30, 2023 2022 (In millions, except par value) ASSETS Current assets: Cash and cash equivalents $ 322.1 $ 358.8 Accounts receivable, net of allowance for doubtful accounts of $0.9 and $1.5 at March 31, 2023 and December 30, 2022, respectively 190.3 253.7 Inventories 433.0 443.9 Prepaid expenses and other current assets 35.8 42.4 Total current assets 981.2 1,098.8 Property, plant and equipment, net 289.9 279.6 Goodwill 248.8 248.8 Intangible assets, net 182.0 187.9 Deferred tax assets, net 36.6 36.0 Operating lease right-of-use assets 114.8 99.0 Other non-current assets 12.6 10.8 Total assets $ 1,865.9 $ 1,960.9 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Bank borrowings $ 22.7 $ 20.8 Accounts payable 196.0 253.5 Accrued compensation and related benefits 37.8 52.5 Operating lease liabilities 17.4 17.1 Other current liabilities 39.8 45.3 Total current liabilities 313.7 389.2 Bank borrowings, net of current portion 470.0 493.0 Deferred tax liabilities 52.3 52.2 Operating lease liabilities 95.6 80.3 Other liabilities 9.3 9.2 Total liabilities 940.9 1,023.9 Commitments and contingencies (See Note 9) Equity: UCT stockholders’ equity: Preferred stock — $0.001 par value, 10.0 authorized; none outstanding — — Common stock — $0.001 par value, 90.0 authorized; 46.2 and 45.2 shares issued and 44.8 and 45.2 shares outstanding at March 31, 2023 and December 30, 2022, respectively 0.1 0.1 Additional paid-in capital 534.3 530.8 Common shares held in treasury, at cost, 1.4 and 0.9 shares at March 31, 2023 and December 30, 2022, respectively (29.6 ) (15.4 ) Retained earnings 374.4 377.8 Accumulated other comprehensive loss (8.5 ) (5.4 ) Total UCT stockholders' equity 870.7 887.9 Noncontrolling interests 54.3 49.1 Total equity 925.0 937.0 Total liabilities and equity $ 1,865.9 $ 1,960.9 Three Months Ended March 31, April 1, 2023 2022 (In millions, except per share amounts) Revenues: Product $ 368.6 $ 486.8 Services 64.7 77.3 Total revenues 433.3 564.1 Cost of revenues: Product 315.1 399.5 Services 45.2 50.9 Total cost revenues 360.3 450.4 Gross margin 73.0 113.7 Operating expenses: Research and development 7.1 6.8 Sales and marketing 13.1 13.8 General and administrative 40.4 47.4 Total operating expenses 60.6 68.0 Income from operations 12.4 45.7 Interest income 0.5 — Interest expense (11.8 ) (6.4 ) Other income (expense), net 2.8 — Income before provision for income taxes 3.9 39.3 Provision for income taxes 3.5 8.5 Net income 0.4 30.8 Less: Net income attributable to noncontrolling interests 3.8 2.9 Net income (loss) attributable to UCT $ (3.4 ) $ 27.9 Net income (loss) per share attributable to UCT common stockholders: Basic $ (0.08 ) $ 0.62 Diluted $ (0.08 ) $ 0.61 Shares used in computing net income (loss) per share: Basic 44.8 44.9 Diluted 44.8 45.6 Three Months Ended March 31, April 1, 2023 2022 (In millions) Net income 0.4 30.8 Other comprehensive income (loss): Change in cumulative translation adjustment, net of tax (2.1 ) (3.1 ) Change in pension net actuarial gain, net of tax 0.2 — Change in fair value of derivatives, net of tax 0.2 0.3 Total other comprehensive loss (1.7 ) (2.8 ) Comprehensive income (loss) (1.3 ) 28.0 Comprehensive income, attributable to noncontrolling interests (5.2 ) (2.9 ) Comprehensive income (loss) attributable to UCT (6.5 ) 25.1 Three Months Ended March 31, April 1, 2023 2022 (In millions) Cash flows from operating activities: Net income $ 0.4 $ 30.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8.9 9.8 Amortization of intangible assets 5.8 8.1 Stock-based compensation 3.7 5.6 Amortization of debt issuance costs 1.0 1.0 Loss on the disposal of assets — 0.1 Deferred income taxes (0.6 ) 1.4 Change in the fair value of financial instruments 0.2 0.3 Changes in assets and liabilities: Accounts receivable 63.4 (29.1 ) Inventories 10.9 (61.1 ) Prepaid expenses and other current assets 6.3 4.6 Other non-current assets (1.7 ) — Accounts payable (50.5 ) (35.9 ) Accrued compensation and related benefits (14.7 ) (6.0 ) Income taxes payable (1.6 ) — Operating lease assets and liabilities (0.3 ) (0.5 ) Other liabilities (3.2 ) 3.5 Net cash provided by (used in) operating activities 28.0 (67.4 ) Cash flows from investing activities: Purchases of property, plant and equipment (27.3 ) (28.4 ) Net cash used in investing activities (27.3 ) (28.4 ) Cash flows from financing activities: Principal payments on bank borrowings (22.0 ) (2.6 ) Repurchase of shares (14.2 ) — Net cash used in financing activities (36.2 ) (2.6 ) Effect of exchange rate changes on cash and cash equivalents (1.2 ) (1.1 ) Net decrease in cash and cash equivalents (36.7 ) (99.5 ) Cash and cash equivalents at beginning of period 358.8 466.5 Cash and cash equivalents at end of period 322.1 $ 367.0 Supplemental cash flow information: Income taxes paid, net of income tax refunds $ 5.6 $ 5.5 Interest paid $ 7.4 $ 5.0 Non-cash investing and financing activities: Property, plant and equipment purchased included in accounts payable $ 9.5 $ 5.9 Three Months Ended March 31, 2023 Common Stock Treasury shares Shares Amount Additional Shares Amount Retained Accumulated Total Noncontrolling Total (In millions) Balance December 30, 2022 45.2 $ 0.1 $ 530.8 0.9 $ (15.4 ) $ 377.8 $ (5.4 ) $ 887.9 $ 49.1 $ 937.0 Issuance under employee stock plans 0.1 — (0.2 ) — — — — (0.2 ) — (0.2 ) Repurchase of shares (0.5 ) — — 0.5 (14.2 ) — — (14.2 ) — (14.2 ) Stock-based compensation expense — — 3.7 — — — — 3.7 — 3.7 Net income (loss) — — — — — (3.4 ) — (3.4 ) 3.8 0.4 Other comprehensive income — — — — — — (3.1 ) (3.1 ) 1.4 (1.7 ) Balance March 31, 2023 44.8 $ 0.1 $ 534.3 1.4 $ (29.6 ) $ 374.4 $ (8.5 ) $ 870.7 $ 54.3 $ 925.0 Three Months Ended April 1, 2022 Common Stock Treasury shares Shares Amount Additional Shares Amount Retained Accumulated Total Noncontrolling Total (In millions) Balance December 25, 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 income — — — — — — (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 Basis of Presentation — The unaudited Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q include the accounts of the Company and its majority-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). This financial information reflects all adjustments which are, in the opinion of the Company, normal, recurring and necessary for the fair financial statement presentation for the dates and periods presented. Certain information and footnote disclosures normally included in our annual financial statements, prepared in accordance with GAAP, have been condensed or omitted from the interim financial statements in this Quarterly Report on Form 10-Q. Therefore, these unaudited financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December Fiscal Year — The Company uses a 52-53 week fiscal year ending on the Friday nearest December 31. All references to quarters refer to fiscal quarters and all references to years refer to fiscal years. Three Months Ended March 31, April 1, 2023 2022 Lam Research Corporation 36.7 % 37.2 % Applied Materials, Inc. 19.8 23.1 Total 56.5 % 60.3 % Accounting Standards Recently Adopted condensed consolidated financial statements. Inventories consisted of the following: March 31, December 30, (In millions) 2023 2022 Raw materials $ 215.2 $ 230.4 Work in process 138.4 142.3 Finished goods 79.4 71.2 Total $ 433.0 $ 443.9 Property, plant and equipment, net, consisted of the following: Useful Life March 31, December 30, (In millions) (In years) 2023 2022 Land n/a $ 3.0 $ 3.0 Buildings 50 57.9 58.6 Leasehold improvements * 82.4 81.3 Machinery and equipment 5-10 157.0 152.5 Computer equipment and software 3-10 73.5 68.3 Furniture and fixtures 5 5.3 5.1 379.1 368.8 Accumulated depreciation (154.4 ) (146.0 ) Construction in progress 65.2 56.8 Total $ 289.9 $ 279.6 4. FAIR VALUE Fair Value Measurement at Reporting Date Using Description March 31, 2023 Quoted Prices in Significant Significant (In millions) Prepaid expenses and other current assets: Forward contracts $ 1.3 $ — $ 1.3 $ — Other non-current assets: Plan assets $ 1.7 $ — $ — $ 1.7 Other liabilities: Pension obligation $ 1.5 $ — $ — $ 1.5 Fair Value Measurement at Reporting Date Using Description December 30, 2022 Quoted Prices in Significant Significant (In millions) Prepaid expenses and other current assets: Forward contracts $ 0.3 $ — $ 0.3 $ — Other non-current assets: Plan assets $ 2.2 $ — $ — $ 2.2 Other liabilities: Pension obligation $ 1.6 $ — $ — $ 1.6 The Company measures its contingent earn-out liabilities at fair value on a recurring basis using a Monte Carlo simulation model. The significant unobservable inputs used in the model include the forecasted operating profit of the acquired business during each of calendar years 2024 and 2025. Significant increases or decreases to the forecasted results would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent earn-out liability on the acquisition date is reflected as cash used in financing activities in the consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the acquisition date will be reflected as cash used in operating activities in the consolidated statements of cash flows. For the three months ended March 29, 2024, the Company recorded $1.3 million of loss from change in the fair value of contingent earn-out related to the acquisition of HIS. This loss from change in the fair value was recognized as other income (expense), net in the Condensed Consolidated Statements of Operations. (In millions) Plan assets Pension Obligation As of December 30, 2022 $ 2.2 $ (1.6 ) Benefits, payments and other adjustments (0.5 ) 0.1 As of March 31, 2023 $ 1.7 $ (1.5 ) 5. GOODWILL AND INTANGIBLE ASSETS (In millions) Products Services Total Balance at March 31, 2023 $ 175.3 $ 73.5 $ 248.8 Intangible Assets Details of intangible assets were as follows: As of March 31, 2023 As of December 30, 2022 Gross Gross Useful Life Carrying Accumulated Carrying Carrying Accumulated Carrying (Dollars in millions) (In years) Amount Amortization Value Amount Amortization Value Customer relationships 6 - 10 $ 172.0 $ (85.6 ) $ 86.4 $ 172.0 $ (81.8 ) $ 90.2 Tradename 4 - 6* 32.5 (21.3 ) 11.2 32.5 (20.9 ) 11.6 Intellectual property/knowhow 7 - 15 37.7 (16.3 ) 21.4 37.7 (15.7 ) 22.0 Recipes 20 73.2 (16.8 ) 56.4 73.2 (15.8 ) 57.4 Standard operating procedures 20 8.6 (2.0 ) 6.6 8.6 (1.9 ) 6.7 Total $ 324.0 $ (142.0 ) $ 182.0 $ 324.0 $ (136.1 ) $ 187.9 Amortization (In millions) Expense 2023 (remaining in year) $ 16.6 2024 21.9 2025 19.9 2026 19.0 2027 18.7 Thereafter 76.9 Total $ 173.0 6. BORROWING ARRANGEMENTS Amended Credit Agreement. The increase also reflects the impact of the expiration of a reduced tax rate incentive on a portion of the Company's earnings in certain international subsidiaries and thus the Company is applying the local corporate statutory tax rate on those earnings. The Company is in the process of renewing the international tax incentive and when renewed will make an adjustment to its effective tax rate in that period. Company management continuously evaluates the need for a valuation allowance and, as of March 8. RETIREMENT PLANS Plans As of March (In millions) 2023 $ 0.8 2024 1.2 2025 2.0 2026 1.0 2027 1.1 Thereafter 5.5 Total $ 11.6 non-cancelable operating leases. The following table shows the Company’s stock-based compensation expense included in the Condensed Consolidated Statements of Operations: Three Months Ended March 31, April 1, (In millions) 2023 2022 Cost of revenues (1) $ 0.3 $ 0.5 Research and development 0.1 0.1 Sales and marketing 0.3 0.3 General and administrative 3.0 4.7 Total stock-based compensation $ 3.7 $ 5.6 Aggregate Number of Intrinsic Shares Value Unvested restricted stock units and restricted stock awards at December 30, 2022 1.1 $ 37.6 Granted 0.1 Vested (0.1 ) Forfeited — Unvested restricted stock units and restricted stock awards at March 31, 2023 1.1 $ 35.6 Vested and expected to vest restricted stock units and restricted stock 1.1 $ 35.6 Under the current PSU program, which was effective beginning fiscal 2021, performance goals are set at the time of grant and performance is reviewed at the end of a three-year period. The percentage to be applied to each participant’s target award ranges from zero to Three Months Ended March 31, April 1, 2023 2022 Singapore $ 152.3 $ 210.5 United States 133.8 181.4 Austria 30.5 28.4 South Korea 27.4 41.6 China 23.1 28.6 Taiwan 18.9 20.7 Israel 5.1 6.7 Malaysia 2.7 14.4 Others 39.5 31.8 Total $ 433.3 $ 564.1 Three Months Ended March 31, April 1, (Dollars in millions) 2023 2022 Operating lease cost $ 5.9 $ 5.1 Short-term lease cost 0.5 0.7 Sublease income (0.1 ) - Total lease cost $ 6.3 $ 5.8 Operating cash flows used in operating leases $ 5.7 $ 5.2 Weighted-average remaining lease term – operating leases 9.3 2.0 Weighted-average discount rate – operating leases 5.6 % 5.5 % (In millions) Operating Leases 2023 (remaining in year) $ 17.5 2024 20.1 2025 16.2 2026 12.6 2027 12.2 Thereafter 71.6 Total minimum lease payments 150.2 Less: imputed interest (37.2 ) Lease liability $ 113.0 14. NET The following is a reconciliation of the numerators and denominators used in computing basic and diluted net Three Months Ended March 31, April 1, (In millions, except share amounts) 2023 2022 Numerator: Net income (loss) attributable to UCT $ (3.4 ) $ 27.9 Denominator: Shares used in computation — basic: Weighted average common shares outstanding 44.8 44.9 Shares used in computation — diluted: Weighted average common shares outstanding 44.8 44.9 Dilutive effect of common shares outstanding subject to repurchase — 0.7 Shares used in computing diluted net income (loss) per share 44.8 45.6 Net income (loss) per share attributable to UCT — basic $ (0.08 ) $ 0.62 Net income (loss) per share attributable to UCT — diluted $ (0.08 ) $ 0.61 Segment Product or Services Primary Markets Served Geographic Areas Products Assembly Semiconductor Services Semiconductor Segment Data Three Months Ended March 31, April 1, (In millions) 2023 2022 Revenues: Products $ 368.6 $ 486.8 Services 64.7 77.3 Total segment revenues $ 433.3 $ 564.1 Gross profit: Products $ 53.5 $ 87.3 Services 19.5 26.4 Total segment gross profit $ 73.0 $ 113.7 Operating profit: Products $ 8.7 $ 37.6 Services 3.7 8.1 Total segment operating profit $ 12.4 $ 45.7 March 31, December 30, (In millions) 2023 2022 Assets Products $ 1,577.7 $ 1,650.2 Services 288.2 310.7 Total segment assets $ 1,865.9 $ 1,960.9 Three Months Ended Revenues by Segment March 31, April 1, Percent (Dollars in millions) 2023 2022 Change Products $ 368.6 $ 486.8 (24.3 ) % Services 64.7 77.3 (16.3 ) % Total revenues $ 433.3 $ 564.1 (23.2 ) % Products as a percentage of total revenues 85.1 % 86.3 % Services as a percentage of total revenues 14.9 % 13.7 % Three Months Ended Revenues by Geography March 31, April 1, Percent (Dollars in millions) 2023 2022 Change United States $ 133.8 $ 181.4 (26.2 ) % International 299.5 382.7 (21.7 ) % Total revenues $ 433.3 $ 564.1 (23.2 ) % Unites States as a percentage of total revenues 30.9 % 32.2 % International as a percentage of total revenues 69.1 % 67.8 % Three Months Ended Cost of revenues by Segment March 31, April 1, Percent (Dollars in millions) 2023 2022 Change Products $ 315.1 $ 399.5 (21.1 ) % Services 45.2 50.9 (11.2 ) % Total Cost of revenues $ 360.3 $ 450.4 (20.0 ) % Products cost as a percentage of total Products revenues 85.5 % 82.1 % Services cost as a percentage of total Services revenues 69.9 % 65.8 % of $38.3 million. prior year, driven by lower volumes of service orders, resulting in $3.1 million. Three Months Ended Gross Profit by Segment March 31, April 1, Percent (Dollars in millions) 2023 2022 Change Products $ 53.5 $ 87.3 (38.7 ) % Services 19.5 26.4 (26.1 ) % Gross profit $ 73.0 $ 113.7 (35.8 ) % Gross Margin by Segment Products 14.5 % 17.9 % Services 30.1 % 34.2 % Total Company 16.8 % 20.2 % site efficiencies. Three Months Ended Operating Profit by Segment March 31, April 1, Percent (Dollars in millions) 2023 2022 Change Products $ 8.7 $ 37.6 (76.9 ) % Services 3.7 8.1 (54.3 ) % Operating profit $ 12.4 $ 45.7 (72.9 ) % Operating Margin by Segment Products 2.4 % 7.7 % Services 5.7 % 10.5 % Total Company 2.9 % 8.1 % resulting from reduced customer demand. Three Months Ended March 31, April 1, Percent (Dollars in millions) 2023 2022 Change Research and development $ 7.1 $ 6.8 4.4 % Research and development as a percentage of total revenues 1.6 % 1.2 % Three Months Ended March 31, April 1, Percent (Dollars in millions) 2023 2022 Change Sales and marketing $ 13.1 $ 13.8 -5.1 % Sales and marketing as a percentage of total revenues 3.0 % 2.4 % Three Months Ended March 31, April 1, Percent (Dollars in millions) 2023 2022 Change General and administrative $ 40.4 $ 47.4 -14.8 % General and administrative as a percentage of total revenues 9.3 % 8.4 % Three Months Ended March 31, April 1, Percent (Dollars in millions) 2023 2022 Change Interest income $ 0.5 — n/m Interest expense $ (11.8 ) $ (6.4 ) 84.4 % Other income (expense), net $ 2.8 — n/m the current period. rates. Three Months Ended March 31, April 1, Percent (Dollars in millions) 2023 2022 Change Provision for income taxes $ 3.5 $ 8.5 (58.8 ) % Effective tax rate 89.7 % 21.6 % March 31, December 30, (In millions) 2023 2022 Decrease Total cash and cash equivalents $ 322.1 $ 358.8 $ (36.7 ) Three Months Ended March 31, April 1, (In millions) 2023 2022 Operating activities $ 28.0 $ (67.4 ) Investing activities (27.3 ) (28.4 ) Financing activities (36.2 ) (2.6 ) Effects of exchange rate changes on cash and cash (1.2 ) (1.1 ) Net decrease in cash and cash equivalents $ (36.7 ) $ (99.5 ) March 31, 2023 (Dollars in millions) Amount Weighted- U.S. Term Loan $ 491.0 8.5 % Fluid Solutions Debt Facilities 10.9 5.1 % Debt issuance costs (9.2 ) $ 492.7 Amended Credit Agreement. additional information. operations and cash on hand. 29, 2024. elements. Period Total Number of Shares Purchased Average Price Per Share Total Number of Maximum Number December 31, 2022 — January 27, 2023 389,299 $ 33.12 389,299 $ 125.0 January 28, 2023 — February 24, 2023 — — — $ 125.0 February 25, 2023 — March 31, 2023 43,387 $ 29.67 43,387 $ 123.7 29, 2024: Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. Inline XBRL Taxonomy Extension Schema Document Inline XBRL Taxonomy Calculation Linkbase Document Inline XBRL Taxonomy Definition Linkbase Document Inline XBRL Taxonomy Label Linkbase Document Inline XBRL Taxonomy Extension Presentation Linkbase Document Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) ULTRA CLEAN HOLDINGS, INC. (Registrant) Date: May By: /S/ JAMES P. SCHOLHAMER Name: James P. Scholhamer Title: Chief Executive Officer Date: May By: /S/ SHERI SAVAGE Name: Sheri Savage Title: Chief Financial Officer☒x31, 2023 ☐ofrom to000-50646Delaware 61-1430858 Delaware61-1430858, Hayward,, California(510) TradingSymbol(s)Yesx ☒ No ☐oYesx ☒ No ☐o☒xAccelerated filer ☐oNon-accelerated filer ☐oSmaller reporting company ☐oEmerging growth company ☐o☐☐o No ☒x4, 2023: 44,698,4143, 2024: 44,905,933Page Item 1. 3MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS22292931ITEM 1A.Item 2.31ITEM 2.Item 3.31ITEM 3.Item 4.31ITEM 4.PART II—OTHER INFORMATIONItem 1. 31ITEM 5.Item 1A.31ITEM 6.Item 2.32Item 4. Item 5. Item 6. March 29,
2024December 29,
2023ASSETS Current assets: Cash and cash equivalents $ 293.0 $ 307.0 Accounts receivable, net of allowance for credit losses of $1.8 and $1.0 at March 29, 2024 and December 29, 2023, respectively 194.5 180.8 Inventories 388.1 374.5 Prepaid expenses and other current assets 33.1 30.9 Total current assets 908.7 893.2 Property, plant and equipment, net 329.2 328.3 Goodwill 265.2 265.2 Intangible assets, net 207.6 215.3 Deferred tax assets, net 3.3 3.1 Operating lease right-of-use assets 163.4 151.7 Other non-current assets 10.2 10.9 Total assets $ 1,887.6 $ 1,867.7 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Bank borrowings $ 17.0 $ 17.6 Accounts payable 215.7 192.9 Accrued compensation and related benefits 37.1 47.7 Operating lease liabilities 18.3 18.1 Other current liabilities 41.3 33.7 Total current liabilities 329.4 310.0 Bank borrowings, net of current portion 458.2 461.2 Deferred tax liabilities 18.9 19.0 Operating lease liabilities 153.4 143.0 Other liabilities 38.6 37.3 Total liabilities 998.5 970.5 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; 46.1 and 46.1 shares issued and 44.6 and 44.6 shares outstanding at March 29, 2024 and December 29, 2023, respectively 0.1 0.1 Additional paid-in capital 545.0 541.5 Common shares held in treasury, at cost, 1.5 and 1.5 shares at March 29, 2024 and December 29, 2023, respectively (45.0) (45.0) Retained earnings 337.3 346.7 Accumulated other comprehensive loss (6.5) (4.4) Total UCT stockholders' equity 830.9 838.9 Noncontrolling interests 58.2 58.3 Total equity 889.1 897.2 Total liabilities and equity $ 1,887.6 $ 1,867.7 Three Months Ended March 29,
2024March 31,
2023Revenues: Product $ 418.5 $ 368.6 Services 59.2 64.7 Total revenues 477.7 433.3 Cost of revenues: Product 354.0 315.1 Services 41.1 45.2 Total cost revenues 395.1 360.3 Gross margin 82.6 73.0 Operating expenses: Research and development 7.0 7.1 Sales and marketing 13.7 13.1 General and administrative 44.6 40.4 Total operating expenses 65.3 60.6 Income from operations 17.3 12.4 Interest income 1.4 0.5 Interest expense (12.2) (11.8) Other income (expense), net (3.8) 2.8 Income before provision for income taxes 2.7 3.9 Provision for income taxes 9.9 3.5 Net income (loss) (7.2) 0.4 Less: Net income attributable to noncontrolling interests 2.2 3.8 Net loss attributable to UCT $ (9.4) $ (3.4) Net loss per share attributable to UCT common stockholders: Basic $ (0.21) $ (0.08) Diluted $ (0.21) $ (0.08) Shares used in computing net loss per share: Basic 44.6 44.8 Diluted 44.6 44.8 Three Months Ended March 29,
2024March 31,
2023Net income (loss) $ (7.2) $ 0.4 Other comprehensive income (loss): Change in cumulative translation adjustment, net of tax (4.4) (2.1) Change in pension net actuarial gain, net of tax — 0.2 Change in fair value of derivatives, net of tax — 0.2 Total other comprehensive loss (4.4) (1.7) Comprehensive loss (11.6) (1.3) Comprehensive income (loss), attributable to noncontrolling interests (0.1) 5.2 Comprehensive loss attributable to UCT $ (11.5) $ (6.5)
and other liabilitiesThree Months Ended March 29,
2024March 31,
2023Cash flows from operating activities: Net income (loss) $ (7.2) $ 0.4 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 11.5 8.9 Amortization of intangible assets 7.7 5.8 Stock-based compensation 3.5 3.7 Amortization of debt issuance costs 1.0 1.0 Deferred income taxes (0.7) (0.6) Change in the fair value of financial instruments 1.8 0.2 Changes in assets and liabilities: Accounts receivable (13.7) 63.4 Inventories (13.6) 10.9 Prepaid expenses and other current assets (0.8) 6.3 Other non-current assets 0.7 (1.7) Accounts payable 25.1 (50.5) Accrued compensation and related benefits (10.6) (14.7) Income taxes payable 2.1 (1.6) Operating lease assets and liabilities (1.1) (0.3) Other liabilities 4.1 (3.2) Net cash provided by operating activities 9.8 28.0 Cash flows from investing activities: Purchases of property, plant and equipment (18.0) (27.3) Proceeds from sale of equipment 0.1 — Net cash used in investing activities (17.9) (27.3) Cash flows from financing activities: Principal payments on bank borrowings (4.5) (22.0) Repurchase of shares — (14.2) Net cash used in financing activities (4.5) (36.2) Effect of exchange rate changes on cash and cash equivalents (1.4) (1.2) Net decrease in cash and cash equivalents (14.0) (36.7) Cash and cash equivalents at beginning of period 307.0 358.8 Cash and cash equivalents at end of period $ 293.0 $ 322.1 Supplemental cash flow information: Income taxes paid, net of income tax refunds $ 8.1 $ 5.6 Interest paid $ 11.2 $ 7.4 Non-cash investing and financing activities: Property, plant and equipment purchased included in accounts payable and other liabilities $ 7.3 $ 9.5
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Equity of UCT
Interests
EquityThree Months Ended March 29, 2024 Common Stock Amount Shares (In millions) Balance December 29, 2023 44.6 $ 0.1 $ 541.5 1.5 $ (45.0) $ 346.7 $ (4.4) $ 838.9 $ 58.3 $ 897.2 Stock-based compensation expense — — 3.5 — — — — 3.5 — 3.5 Net income (loss) — — — — — (9.4) — (9.4) 2.2 (7.2) Other comprehensive loss — — — — — — (2.1) (2.1) (2.3) (4.4) Balance March 29, 2024 44.6 $ 0.1 $ 545.0 1.5 $ (45.0) $ 337.3 $ (6.5) $ 830.9 $ 58.2 $ 889.1 Three Months Ended March 31, 2023 Common Stock Amount Shares (In millions) Balance December 31, 2022 45.2 $ 0.1 $ 530.8 0.9 $ (15.4) $ 377.8 $ (5.4) $ 887.9 $ 49.1 $ 937.0 Issuance under employee stock plans 0.1 — (0.2) — — — — (0.2) — (0.2) Repurchase shares (0.5) — — 0.5 (14.2) — — (14.2) — (14.2) Stock-based compensation expense — — 3.7 — — — — 3.7 — 3.7 Net income (loss) — — — — — (3.4) — (3.4) 3.8 0.4 Other comprehensive loss — — — — — — (3.1) (3.1) 1.4 (1.7) Balance March 31, 2023 44.8 $ 0.1 $ 534.3 1.4 $ (29.6) $ 374.4 $ (8.5) $ 870.7 $ 54.3 $ 925.0 Page 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 30, 2022.29, 2023.significant intercompany accounts and transactions have been eliminated upon consolidation.Noncontrolling interests — Noncontrolling interests are recognizedThere were no changes to reflect the portionaccounting policies disclosed in Note 1, Organization and Significant Accounting Polices of the equity of the majority-owned subsidiaries which is not attributable, directly or indirectly, to the controlling stockholder. The Company’s consolidated entities include partially-owned entities, which are Cinos Co., Ltd (“Cinos Korea”), a South Korean company that provides outsourced cleaning and recycling of precision partsAnnual Report on Form 10-K for the semiconductor industry through its operating facilities in South Korea and whose results the Company consolidates, and Cinos Xian Clean Technology, Ltd. (“Cinos China”),year ended December 29, 2023 that had a Chinese entity that is majority owned by Cinos Korea. The interest held by others in Cinos Korea and in Cinos China are presented as noncontrolling interests in the accompanying Condensed Consolidated Financial Statements. The noncontrolling interests will continue to be attributed its share of gains and losses even if that attribution results in a deficit noncontrolling interests' balance. See Note 10 for further discussion.Segments — The Financial Accounting Standards Board’s (“FASB”) guidance regarding disclosure about segments in an enterprise and related information establishes standards for the reporting by public business enterprises of information about reportable segments, products and services, geographic areas, and major customers. The method for determining what information to report is basedmaterial impact on the manner in which management organizes the reportable segments within the Company for making operational decisions and assessments of financial performance. The Company’s chief operating decision-maker is the Chief Executive Officer. The Company operates two reportable segments: Products and Services. The Company has three operating segments as of March 31, 2023 with two operating segments within the Product reportable segment and one operating segment within the Services reportable segment. See Note 15 of the Notes to the Condensed Consolidated Financial Statements.Foreign Currency Translation and Remeasurement— The functional currency of the Products business’ foreign subsidiaries, excluding the subsidiaries of Ham-Let (Israel-Canada) Ltd. (“Ham-Let” or “Fluid Solutions”), is the U.S. Dollar. The functional currency of the Ham-Let subsidiaries in Singapore, United Kingdom, Netherlands, Taiwan and China, is their local currency, except for Israel, which is the U.S. Dollar. The functional currency of the Services division’s foreign subsidiaries is the local currency, except for that of its Singapore, Scotland and Ireland entities, which is the U.S. Dollar.For the Company’s foreign subsidiaries where the local currency is the functional currency, the Company translates the financial statements of these subsidiaries to U.S. Dollars using month-end exchange rates for assets and liabilities, and average exchange rates for revenue, costs and expenses. Translation gains and losses are recorded in accumulated other comprehensive income (“AOCI”) within UCT stockholders’ equity. For the Company’s foreign subsidiaries where the U.S. Dollar is the functional currency and functional currency differs from their local currency, any gains and losses resulting from the remeasurement of the assets and liabilities of these subsidiaries are recorded in other income (expense), net.- 8 -Use of Estimates — The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent liabilities at the date of theCompany's condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions include, but not limited to, inventory valuation, accounting for income taxes, business combinations, valuation of goodwill, intangible assets and long-lived assets. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. However, future events are subject to change and the best estimates and judgments routinely require adjustments. Actual amounts may differ from those estimates.related notes.Cash and Cash Equivalents — The Company considers currency on hand, demand deposits, time deposits, and all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are held in various financial institutions in the United States and internationally.Concentration of Credit Risk — Financial instruments which subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company sells its products and provides services primarily to semiconductor capital equipment manufacturers in the United States. The Company performs credit evaluations of its customers’ financial condition and generally requires no collateral.The Company’s most significant customers (having individually accounted for 10% or more of revenues) and their related revenues as a percentage of total revenues were as follows:Three customers’ accounts receivable balances, Lam Research Corporation, Applied Materials, Inc. and ASM International, Inc., were individually greater than 10% of accounts receivable as of March 31, 2023, in the aggregate approximately 41.5% of accounts receivable. Two customers’ accounts receivable balances, Lam Research Corporation and Applied Materials, Inc., were individually greater than 10% of accounts receivable as of December 30, 2022, in the aggregate approximately 38.5% of total accounts receivable.Fair Value of Measurements — The Company measures its cash equivalents, derivative contracts, pension obligation and common stock purchase obligation (prior to the reclass to non-controlling interests) at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value:Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.Level 2 — Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings.Level 3 — Unobservable inputs that are supported by little or no market activities.Derivative Financial Instruments — The Company uses forward contracts to hedge a portion of, but not all, existing and anticipated foreign currency denominated transactions typically expected to occur within 24 months. The purpose of the hedge is to mitigate the effect of exchange rate fluctuations on certain foreign currency denominated costs and eventual cash flows. The Company recognizes derivative instruments as either assets or liabilities in the accompanying Condensed Consolidated Balance Sheets at fair value. The Company records changes in the fair value of the derivatives in the accompanying Condensed Consolidated Statements of Operations as other income (expense), net, or as a component of AOCI in the accompanying Condensed Consolidated Balance Sheets.Inventories — Inventories are stated at the lower of cost (which approximates actual cost on a first-in, first-out basis) or net realizable value. The Company evaluates the valuation of all inventories, including raw materials, work-in-process, finished goods and spare parts on a periodic basis. Obsolete inventory or inventory in excess of management’s estimated usage is written down to its estimated market value less costs to sell, if less than its cost. Inherent in the estimates of market value are management’s estimates related to economic trends, and future demand for the Company’s products.- 9 -Inventory write downs inherently involve judgments based on assumptions about expected future demand and the impact of market conditions on those assumptions. Although the Company believes that the assumptions it used in estimating inventory write downs are reasonable, significant changes in any one of the assumptions in the future could produce a significantly different result. There can be no assurances that future events and changing market conditions will not result in significant increases in inventory write downs.Property, Plant andEquipment — Property, plant and equipment are stated at cost, or, in the case of equipment under finance leases, the present value of future minimum lease payments at inception of the related lease. The Company also capitalizes interest on borrowings related to eligible capital expenditures. Capitalized interest is added to the cost of the qualified assets and is subject to depreciation. Depreciation and amortization are computed using the straight-line method over the lesser of the estimated useful lives of the assets or the terms of the leases. Useful lives range from three to fifty years. Direct costs incurred to develop software for internal use are capitalized and amortized over an estimated useful life of three to ten years. Costs related to the design or maintenance of internal use software are expensed as incurred. Capitalized internal use software is included in computer equipment and software.Long-lived Assets — The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset group may not be recoverable. The Company assesses the fair value of the assets based on the amount of the undiscounted future cash flows that the assets are expected to generate and recognizes an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset are less than the carrying value of the asset. If the Company identifies an impairment, the Company reduces the carrying value of the group of assets to comparable market values, when available and appropriate, or to its estimated fair value based on a discounted cash flow approach.Leases— The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and reassesses that conclusion if the arrangement is modified. When the Company determines the arrangement is a lease, or contains a lease, at lease inception, it then determines whether the lease is an operating lease or a finance lease. Operating and finance leases with lease terms of greater than one year result in the Company recording a right-of-use (“ROU”) asset and lease liability on its balance sheet. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are initially recognized based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses the implicit interest rate if readily determinable or when the implicit interest rate is not readily determinable, the Company uses its incremental borrowing rate. The incremental borrowing rate is not a commonly quoted rate and is derived through a combination of inputs including the Company’s credit rating and the impact of full collateralization. The incremental borrowing rate is based on the Company’s collateralized borrowing capabilities over a similar term of the lease payments. The Company utilizes the incremental borrowing rate based on bank loan rates at the respective locations for leases where appropriate and the consolidated group bank loan rate where the Company does not have local bank financings. The operating lease ROU asset also includes any lease payments made in advance and is reduced by any lease incentives. Specific lease terms used in computing the ROU assets and lease liabilities may include options to extend or terminate the lease when the Company believes it is reasonably certain that it will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. The Company has elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset. Operating leases are included in operating lease ROU assets, other current liabilities, and long-term operating lease liabilities on the Company’s consolidated balance sheet. The Company’s finance leases at March 31, 2023 and December 30, 2022 were not significant.Goodwill and Indefinite-Lived Intangible Assets — Goodwill and indefinite-lived intangible assets are not amortized, but are reviewed for impairment annually or more frequently if indicators of potential impairment exist. Intangible assets are presented at cost, net of accumulated amortization, and are amortized on either a straight-line method or on an accelerated method over their estimated future discounted cash flows. The Company reviews goodwill and purchased intangible assets with indefinite lives for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable, such as when reductions in demand or significant economic slowdowns in the semiconductor industry are present.Deferred Debt Issuance Costs — Debt issuance costs incurred in connection with obtaining debt financing are deferred and presented as a direct deduction from Bank Borrowings in the accompanying Condensed Consolidated Balance Sheets. Deferred costs are amortized on an effective interest method basis over the contractual term.Defined Benefit Pension Plan — The Company has several noncontributory defined benefit pension plans covering substantially all of the employees of two of its foreign entities upon termination of their employee services. The benefits for these plans are based on expected years of service and average compensation. The net period costs are recognized as employees render the services necessary to earn the postretirement benefits. The Company records annual amounts relating to the pension plan based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current and expected rates of return and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in accumulated other comprehensive gain (loss) and amortized to net periodic cost over future periods using the corridor method. The Company believes that the assumptions utilized in recording its obligations under the plan are reasonable based on its experience and market conditions. For further discussion of the Company’s defined benefit pension plan see Note 8 of the Notes to the Condensed Consolidated Financial Statements.- 10 -Revenue Recognition — Revenue is recognized when the Company satisfies performance obligations as evidenced by the transfer of control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company performs the following five steps to determine when to recognize revenue: (1) identification of the contract(s) with its customers, (2) identification of the performance obligations in the contract, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations in the contract, and (5) recognition of revenue when, or as, a performance obligation is satisfied. The Company infrequently sells certain finished goods inventory on a bill and hold basis. The terms of the bill and hold agreement provide that title to the specified inventory is transferred to the customer prior to shipment and the Company has the right to payment (prior to physical delivery) which results in recorded revenue as determined under the revenue recognition standard.Shipping and Handling Costs—Shipping and handling costs are included as a component of cost of revenues.Research and Development Costs — Research and development costs are expensed as incurred.Stock-Based Compensation Expense — The Company maintains stock-based compensation plans which allow for the issuance of equity-based awards to directors and certain employees. These equity-based awards include restricted stock awards (“RSAs”), performance stock units ("PSUs") and restricted stock units (“RSUs”). The RSAs and RSUs use the closing price of stock price on the day preceding the grant date as a proxy for fair value and compensation expense. The PSUs contain market conditions, and compensation expense is measured using a Monte Carlo simulation model and recognized over the derived service period based on the expected market performance as of the grant date. The Company also maintains an employee stock purchase plan (“ESPP”) that provides for the issuance of shares to all eligible employees of the Company at a discounted price. See Note 11 for further discussion.Income Taxes — The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to realize our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results and incorporate assumptions about the amount of future federal, state, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider recent cumulative income (loss). A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.Income tax positions must meet a more likely than not recognition threshold to be recognized. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within the consolidated statements of income as income tax expense. The Company accounts for Global Intangible Low-Taxed Income as period costs when incurred.Net Income per Share — Basic net income per share is computed by dividing net income by the weighted average number of shares outstanding for the period. Diluted net income per share is calculated by dividing net income by the weighted average number of common shares outstanding and common equivalent shares from dilutive restricted stock using the treasury stock method, except when such shares are anti-dilutive. In accordance with Accounting Standards Codification 718, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of in-the-money stock options and restricted stock units. This results in the assumed buyback of additional shares, thereby reducing the dilutive impact of equity awards.Business Combinations — The Company recognizes assets acquired (including goodwill and identifiable intangible assets), liabilities assumed and noncontrolling interest at fair value on the acquisition date. Subsequent changes to the fair value of such assets acquired and liabilities assumed are recognized in earnings, after the expiration of the measurement period, a period not to exceed 12 months from the acquisition date. Acquisition-related expenses and acquisition-related restructuring costs are recognized in earnings in the period in which they are incurred.20232024 that had a significant impact on the Company’s Condensed Consolidated Financial Statements.StandardStandards Not Yet Adopted- 11 -Although thereseveral other new accounting pronouncements issued bycurrently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The Company is required to adopt this standard in the fiscal year 2024 for the annual reporting ending December 27, 2024, with retrospective disclosure of prior periods presented. The Company expects this ASU to only impact its disclosures with no impact to its results of operations, cash flows and financial condition.does not believe any of these accounting pronouncements had or will have a significant impact on its Condensed Consolidated Financial Statements.2. BUSINESS DIVESTITURESIn 2022, the Company executed the sale of four of its non-semiconductor operating subsidiaries of Fluid Solutions. Each of these entities is reported within the Products reportable segment. The purposeacquired 100% of the divestituresshares of HIS Innovations Group (“HIS”), a privately held company based in Hillsboro, Oregon. HIS is a leading supplier to the semiconductor sub-fab segment including the design, manufacturing, and integration of components, process solutions, and fully integrated sub-systems. The acquisition strengthens the Company's leadership in developing and supplying critical products to the semiconductor industry, and extends our reach into the sub-fab area.remain focused on its core semiconductor business. As a resultbe $73.6 million, which includes initial cash consideration of these divestitures, the Company recorded a net loss of $56.6$46.5 million and $20.8the fair value of potential earn-out payments of approximately $27.1 million. These potential earn-out payments represent up to $70.0 million during the second and the third quarter of fiscal year 2022, respectively. The recorded total net loss of $77.4 million includes the write-off of intangible assets, goodwill and net assets of $27.8 million, $19.7 million and $29.9 million, respectively. Goodwill has been allocated to the divestiturescash consideration that may be payable based on the relativefinancial performance of the acquired business during the fiscal years 2023, 2024, and 2025. The fair value of each componentthe potential earn-out payments was determined utilizing a Monte Carlo simulation model.relationdetermining the final fair value of the net assets acquired at the acquisition date. Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. Thus, the provisional measurements of fair value discussed above are subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. While the Company believes that its respective reporting unit.estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired, liabilities assumed, and the resulting amount of goodwill.(In millions) Amount Cash and cash equivalents $ 0.4 Accounts receivable 5.6 Inventories 11.4 Prepaid expenses and other assets 2.7 Property, plant and equipment 9.3 Purchased intangible assets 51.6 Operating lease right-of-use assets 7.5 Accounts payable (8.1) Accrued compensation and related benefits (0.7) Other current liabilities (0.9) Deferred tax liabilities (12.0) Operating lease liabilities (9.6) Total identifiable net assets $ 57.2 Goodwill $ 16.4 Purchased Useful
LifeIntangible
Assets(In years) (In millions) Customer relationships 7 $ 35.2 IP knowhow 5 11.2 Developed technology 5 4.6 Backlog 1 0.6 Total purchased intangible assets $ 51.6 (In millions) March 29,
2024December 29,
2023Raw materials $ 197.3 $ 197.9 Work in process 123.5 107.2 Finished goods 67.3 69.4 Total $ 388.1 $ 374.5 The inventory write-downs are recorded on the basis of obsolete inventory or specific identified inventory in excess of estimated usage.* Lesser of estimated useful life or remaining lease term(In millions) March 29,
2024December 29,
2023Land $ 8.0 $ 5.6 Buildings 54.6 57.1 Leasehold improvements 128.6 110.8 Machinery and equipment 210.7 207.4 Computer equipment and software 73.1 72.2 Furniture and fixtures 3.8 5.0 478.8 458.1 Accumulated depreciation (181.8) (170.3) Construction in progress 32.2 40.5 Total $ 329.2 $ 328.3 - 12 -
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Active Markets for
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Reporting Date UsingDescription March 29, 2024 (In millions) Other non-current assets: Plan assets $ 1.0 $ — $ — $ 1.0 Other current liabilities: Forward contracts $ 0.6 $ — $ 0.6 $ — Other liabilities: Pension obligation $ 1.6 $ — $ — $ 1.6 Contingent earn-out $ 30.4 $ — $ — $ 30.4 Fair Value Measurement at
Reporting Date UsingDescription December 29, 2023 (In millions) Other non-current assets: Plan assets $ 1.3 $ — $ — $ 1.3 Other current liabilities: Forward contracts $ 0.1 $ — $ 0.1 $ — Other liabilities: Pension obligation $ 1.6 $ — $ — $ 1.6 Contingent earn-out $ 29.1 $ — $ — $ 29.1 31, 2023,29, 2024, the Company's aggregate pension benefit obligations is $10.1was $12.0 million and was exceeded by the fair value of the pension plan assets of $10.3 million, resulting in overfundedwas $11.4 million. The underfunded pension benefit obligations was $0.6 million as of $0.2 million.March 29, 2024. The Company recognizes the overfunded or underfunded status of defined benefit pension plans, measured as the difference between the fair value of the plan assets and the benefit obligation. Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability. Qualitative information about Level 3 fair value measurements is as follows:(Dollars in millions, except rate/multiple)March 31, 2023Valuation
TechniquesUnobservable
InputRate/
MultiplePlan assets, net$0.2Projected unit credit methodDiscount rate4.7% - 5.2%Rate on return4.7% - 4.9%Salary increase rate2.0% - 3.0%Following is a summary of the Level 3 activity:- 13 -period ended March 31, 2023,29, 2024, there were no changes to the Company's reporting units, and the Company did not recognize any impairment charges or additions to goodwill. Details of aggregate goodwill of the Company are as follows:(In millions) Products Services Total Balance at March 29, 2024 $ 191.7 $ 73.5 $ 265.2 indefinite livedfinite-lived intangible assets for impairment whenwhenever events or changes in circumstances indicate theirthe carrying value may not be recoverable and tests definite livedevaluates indefinite-lived intangible assets at leastasset for impairment annually, for impairment.or more frequently if indicators of potential impairment exist. Management considers suchAs of March 29, 2024 As of December 29, 2023 (Dollars in millions) Useful Life
(In years)Gross
Carrying
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ValueGross
Carrying
AmountAccumulated
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ValueCustomer relationships 6 - 10 $ 207.2 $ (102.5) $ 104.7 $ 207.2 $ (97.5) $ 109.7 Recipes 20 73.2 (20.4) 52.8 73.2 (19.5) 53.7 Intellectual property/know-how 7 - 15 48.9 (19.5) 29.4 48.9 (18.4) 30.5 Tradename 4 - 6* 32.5 (22.4) 10.1 32.5 (22.1) 10.4 Standard operating procedures 20 8.6 (2.4) 6.2 8.6 (2.3) 6.3 Developed technology 5 4.6 (0.4) 4.2 4.6 (0.2) 4.4 Backlog 1 0.6 (0.4) 0.2 0.6 (0.3) 0.3 Total $ 375.6 $ (168.0) $ 207.6 $ 375.6 $ (160.3) $ 215.3 $9.0$9.0 million is indefinite and is therefore not amortized but is reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.- 14 -$5.8$7.7 million and $5.8 million for the three months ended March 29, 2024 and March 31, 2023, and $8.1 million for the three months ended April 1, 2022.respectively. Amortization expense related to recipes, standard operating procedures, developed technology and certain intellectual property/know-how is charged to cost of revenues and the remainder is charged to general and administrative expense. As of March 31, 2023,29, 2024, future estimated amortization expense is expected to be as follows:(In millions) Amortization
Expense2024 (remaining in year) 2028 On March 31, 2021, the Company entered into a Second Amendment (the “Second Amendment”), to the credit agreement dated as of August 27, 2018 and amended as of October 1, 2018 (as amended by the Second Amendment, the "Credit Agreement") to, among other things, (i) refinance and reprice $272.8 million of existing term B borrowings that will remain outstanding and (ii) obtain a $355.0 million senior secured incremental term loan B facility ((i) and (ii) collectively the “Term Loan”) which increased the amount of term loan indebtedness outstanding under the Company’s Credit Facilities.The Term Loan has a maturity date of August 27, 2025, with2025. The Company pays monthly interest payments in arrears and quarterly principal payments of 0.625%0.625% of the outstanding principal balance as ofsince March 31, 2021, with the remaining principal paid upon maturity.LIBOR,SOFR, plus the applicable margin. The applicable margin for the Term Loan is equal to a rate per annum to either (i) at any time that the Company’s corporate family rating is Ba3 (with a stable outlook) or higher from Moody’s and BB- (with a stable outlook) or higher from S&P, (x) 3.50%3.50% for such Eurodollar term loans and (y) 2.50%2.50% for such ABR term loans or (ii) at all other times, (x) 3.75%3.75% for such Eurodollar term loans and (y) 2.75%2.75% for such ABR term loans. Interest on the Term Loan is payable on (1) in the case of such ABR term loans, the last day of each calendar quarter and (2) in the case of such Eurodollar term loans, the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period. On2021, the Company elected that the Term Loan outstanding as of March 31, 2021 accrue interest based on the “Eurodollar Rate” for an initial interest period of one month. Pursuant to the Second Amendment to the Credit Agreement, the Credit Facilities contains customary LIBOR replacement provisions in the event LIBOR is discontinued. At March 31, 2023,2024, the Company had an outstanding amount under the Term Loan of $491.0$475.4 million, gross of unamortized debt issuance costs of $9.2$5.5 million. As of March 31, 2023,29, 2024, the interest rate on the outstanding Term Loan was 8.4%9.2%.On August 19, 2022, the Company entered into a Third Amendment (the “Third Amendment”) to the credit agreement dated as of August 27, 2018 and amended as of October 1, 2018 and March 31, 2021 (as amended by the Third Amendment, the “Credit Agreement”) to, among other things, increase the revolving credit facility portion of the Credit Facilities to $150.0 million with several banks and with Barclays Bank as the administrative agent.The revolving credit facility has an available commitment of $150.0 million and a maturity date of February 27, 2025. The Company pays a quarterly commitment fee in arrears equal to 0.25% of the average daily available commitment outstanding. Outstanding letters of credit reduce the availability of the revolving credit facility and, as of March 31, 2023, the Company had $146.5 million, net of $3.5 million of outstanding letters of credit, available under this revolving credit facility.The letter of credit facility has an available commitment of $65.0 million and a maturity date of February 27, 2025. The Company pays a quarterly fee in arrears equal to 2.5% (subject to certain adjustments to the Term Loan) of the dollar equivalent of all outstanding letters of credit, and a fronting fee equal to 0.125% of the undrawn and unexpired amount of each letter of credit. As of March 31, 2023, the Company had $3.5 million of outstanding letters of credit and $61.5 million of available commitments remaining under the letter of credit facility., and a consolidated leverage ratio (as defined in the Credit Agreement) as of the last day of any fiscal quarter of no greater than 3.75 to 1.00.1.00. On July 27, 2023, the Company entered into a Fifth Amendment (“Amended Credit Agreement”) which modified certain covenants described in the Amended Credit Agreement. This modification is applicable only to the revolving credit facility portion of its credit facilities. The Company currently has no revolving loans outstanding under the Credit Agreement. As of March 29, 2024, the Company was in compliance with allthe financial covenants as ofcontained within the quarter ended March 31, 2023.- 15 -5.07.0 million euros (approximately $5.4$7.6 million). As of March 31, 2023,29, 2024, no debt was outstanding under this revolving credit facility.$18.5$11.0 million. As of March 31, 2023,29, 2024, Fluid Solutions had a $10.9$5.3 million outstanding balance under these facilities with average interest rate ranges from 4.9%7.6% to 7.9%7.8%.31, 2023,29, 2024, the Company’s total bank debt was $501.9$475.2 million, net of unamortized debt issuance costs of $9.2$5.5 million. As of March 31, 2023,29, 2024, the Company had $146.5$146.1 million, $5.4$5.7 million, and $7.6$7.6 million available to draw from its credit facilities in the U.S., Israel and Czech Republic, and Israel, respectively.89.7%366.7% and 21.6%89.7% for the three months ended March 29, 2024 and March 31, 2023, and April 1, 2022, respectively. The Company’s income tax provision was $3.5$9.9 million and $8.5$3.5 million for the three months ended March 29, 2024 and March 31, 2023, and April 1, 2022, respectively. The change in respective tax rates reflects, primarily, changes in the geographic mix of worldwide earnings and financial results in jurisdictions which are taxed at different rates and the impact of losses in jurisdictions with full federal and state valuation allowances.31, 2023,29, 2024, concluded that a full valuation allowance on its U.S. federal and state and certain of its foreign deferred tax assets was still appropriate. and April 1, 2022, the Company’s gross liability for unrecognized tax benefits, excluding interest, was $2.7$2.9 million and $1.7$2.7 million, respectively. Increases or decreases to interest and penalties on uncertain tax positions are included in the income tax provision in the Condensed Consolidated Statements of Operations. Although it is possible that some of the unrecognized tax benefits could be settled within the next twelve months, the Company cannot reasonably estimate the outcome at this time.PlanFluid Solutions has aThe Company's entities in Israel do have noncontributory defined benefit pension plans covering itstheir employees in Israel upon their retirement. The benefits for these plans are based on expected years of service and average compensation. The net period costs are recognized as employees render the services necessary to earn the postretirement benefits. The Company records annual amounts relating to the pension plan based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current and expected rates of return and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in accumulated other comprehensive income and amortized to net periodic cost over future periods using the corridor method. The Company believes that the assumptions utilized in recording its obligations under the plans are reasonable based on its experience and market conditions.31, 2023 ,29, 2024, the benefit obligation of the planplans was $10.1$12.0 million and the fair value of the benefit plan assets is $10.3was $11.4 million which are invested in several fixed deposit accounts with financial institutions. As of March 31, 2023,29, 2024, the overfundedunderfunded balance of the plans of $0.2$0.6 million has been recorded by the Company and is included in other assets. liabilities.periodended March 29, 2024 were negligible. During the three months ended March 31, 2023, were $0.2 million. The contributions to the plans by the Company contributed $0.1 million and its subsidiaries during the period ended March 31, 2023 was $0.1 million.recognized $0.2 million in accumulated other comprehensive loss.31, 2023,29, 2024, the Company's future estimated payment obligations for the respective fiscal years are as follows:- 16 -(In millions) 2024 $ 1.1 2025 1.6 2026 2.5 2027 1.4 2028 1.1 Thereafter 10.5 Total $ 18.2 couldcan elect to contribute to the 401(k) Plan, on a pre-tax basis, up to 25%25% of their salary to a maximum of the IRS limit. The Company matches 50.0%50.0% of each employee's contribution, up to a maximum of 6%6% of the employee's eligible earnings. The Company made $0.9$1.0 million and $0.8$0.9 million discretionary employer contributions to the 401(k) Plan for the for the three months period ended March 29, 2024 and March 31, 2023, and April 1, 2022, respectively.Commitmenthad commitments toleases real estate and equipment under various third parties to purchase inventories totaling approximately $528.1 million as of March 31, 2023.Contingency$150.0$150 million of the Company’s common stock over a three-year period. For the three months ended March 31, 2023, approximately 0.5 millionNo shares were repurchased under this program with an aggregate cost of $14.2 million. As offor the three months ended March 31, 2023, 0.8 million shares had been repurchased under the program and they are held in treasury stock. The Company records treasury stock using the cost method. 29, 2024.Services, through its wholly-owned subsidiary in Singapore,100.0%100% basis. The values were calculated based on the pro-rata portion of total Services earnings before interest expense, taxes, depreciation and amortization contributed by each entity., subject to the employee’s continued service with the Company and, in the case of PSUs, subject to achieving certain performance goals and market conditions. The Company also grants common stock to its board members in the form of restricted stock awards (“RSAs”), which vest on the earlier of the next Annual Shareholder Meeting, or 365 days from date of grant.- 17 -Three Months Ended (In millions) March 29,
2024March 31,
2023Cost of revenues (1) $ 0.4 $ 0.3 Research and development 0.1 0.1 Sales and marketing 0.4 0.3 General and administrative 2.6 3.0 Total stock-based compensation $ 3.5 $ 3.7 and April 1, 2022 were immaterial.(In millions) Number of
SharesAggregate
Intrinsic
ValueUnvested restricted stock units and restricted stock awards at December 29, 2023 1.4 $ 46.1 Granted 0.0 Vested (0.1) Forfeited (0.1) Unvested restricted stock units and restricted stock awards at March 29, 2024 1.2 57.0 Vested and expected to vest restricted stock units and restricted stock awards 1.2 $ 56.0 31, 2023,29, 2024, approximately $21.5$19.1 million of unrecognized stock-based compensation cost related to employee and director awards remains to be amortized on a straight-line basis over a weighted average period of 1.451.7 years, and will be adjusted for subsequent changes in future grants. As of March 31, 2023, a total of 25,900 RSAs were outstanding. The total unamortized expense of the Company’s unvested RSAs as of March 31, 202329, 2024 was $0.1$0.1 million.The following table summarizes the Company’s combined RSU, PSU and RSA activity for the three months ended March 31, 2023 (in millions):
awards200%200%, based upon the extent to which the financial performance goals are achieved. If specific performance threshold levels for the financial goals are met on an annual basis, the amount earned for that element will be applied to one-third of the participants’participant’s PSU award granted to determine the number of total units earned.At the end of the three-year performance period, the total units earned, if any, are adjusted by applying two modifiers, each ranging from 25% to (25)% based on (i) the Company’s relative total shareholder return (“TSR”) compounded annual growth rate (“CAGR”) which is based on the Company’s stock price changes relative to a group of peer companies and (ii) the “average annual difference in operating margin” is defined as non-GAAP operating margin divided by total revenue comparing the annual operating plan to actual results.The TSR modifier is intended to ensure that there are limited or no payouts under the PSU program if the Company’s stock performance is significantly below the median TSR. Where the financial goals have been met and where there has been strong relative TSR performance over the three-year performance period, the PSU program may provide substantial rewards to participants with a maximum payout of two times the initial PSU award.For the three months ended March 31, 2023 and April 1, 2022, 1.8 thousand and 55.8 thousand RSUs were granted with a weighted average fair value of $34.08 and $44.91 per share, respectively.- 18 -85%85% of the fair market value of the common stock at the end of the purchase period and is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.periodended March 29, 2024 and March 31, 2023. The Company recorded $0.2 million of expense related to ESPP for the three months ended March 29, 2024. No ESPP related expense was recorded for the three months ended March 31, 2023 and April 1, 2022.2023.we are therefore highly dependent upon a small number of customers. Typical payment terms with our customers range from thirty to sixty days.As of March 31, 2023 and December 30, 2022, an accrualAccruals for unpaid customer rebates of $2.8$1.0 million and $3.8$2.0 million as of March 29, 2024 and December 29, 2023, respectively, was included inwere netted against accounts receivable on the Company’s Condensed Consolidated Balance Sheet.receivable. The Company's disaggregated revenues are apportioned by segments within the Company’s Condensed Consolidated Statement of Operations.area (in millions):area:Three Months Ended Three Months Ended (In millions) (In millions) March 29,
2024March 31,
2023China Malaysia - 19 -Three Months Ended March 29,
2024March 31,
2023Lam Research Corporation 31.4 % 36.7 % Applied Materials, Inc. 22.7 19.8 Total 54.1 % 56.5 % The Company’s leases do not provide an implicit rate, thususes an estimated incremental borrowing ratecommenced a 10-year lease of manufacturing space in determiningAustin, Texas, with a single 7-year renewal option at lease end. Additionally, the present valueCompany’s subsidiary in Czech Republic entered into 8-year lease of additional manufacturing and office space. As a result, $16.8 million additions were made topayments. Renewal options are typically solely at our discretionright-of-use assets and are only included withinto the operating lease obligation and right-of-use asset when we are reasonably certain thatliabilities in the renewal options would be exercised.Company’s Condensed Consolidated Balance Sheet.The components ofExcept as described above, there have been no material changes to the Company's operating lease expense were summarized as follows:Future minimum payments under operating leases as ofcommitments during the three months ended March 31, 2023 were summarized as follows:29, 2024.INCOMELOSS PER SHAREincomeloss per share:Three Months Ended (In millions, except share amounts) March 29,
2024March 31,
2023Numerator: Net loss attributable to UCT $ (9.4) $ (3.4) Denominator: Shares used in computation — basic: Weighted average common shares outstanding 44.6 44.8 Shares used in computation — diluted: Weighted average common shares outstanding 44.6 44.8 Effect of potential dilutive securities: Employee stock plans — — Shares used in computing diluted net loss per share 44.6 44.8 Net loss per share attributable to UCT — basic $ (0.21) $ (0.08) Net loss per share attributable to UCT — diluted $ (0.21) $ (0.08) - 20 -Fluid Solutions)HIS) and two reportable segments (Products and Services). The Products and Fluid SolutionsHIS operating segments have been aggregated into the Products reportable segment based upon consistency of economic characteristics, nature of products, similarity of production process, and class of customers. The Company’s Chief Executive Officer (chief operating decision maker) views and evaluates operations based on the results of each of the reportable segments. The following table describes each segment:
Weldments
Machining
FabricationCleaning
Analytics
CoatingCleaning Coating
AnalyticsAsThree Months Ended (In millions) March 29,
2024March 31,
2023Revenues: Products $ 418.5 $ 368.6 Services 59.2 64.7 Total segment revenues $ 477.7 $ 433.3 Gross margin: Products $ 64.5 $ 53.5 Services 18.1 19.5 Total segment gross margin $ 82.6 $ 73.0 Income from operations: Products $ 14.7 $ 8.7 Services 2.6 3.7 Total segment income from operations $ 17.3 $ 12.4 (In millions) March 29,
2024December 29,
2023Assets Products $ 1,624.6 $ 1,617.5 Services 263.0 250.2 Total segment assets $ 1,887.6 $ 1,867.7 31, 2023, approximately $125.829, 2024, and $165.4 million, $84.3 million, $74.3 million, $54.3 million and $80.8$101.7 million, respectively as of December 29, 2023.Company’s net long-lived assets were located in Asia Pacificterm loan and EMEA, respectively,revolving credit facilities under the Credit Agreement by 30 months; (ii) reduce the interest rate applicable to the term loan facility under the Credit Agreement by 0.25% per annum; and (iii) replace the remaining balances were located inoutstanding amount under the United States. At December 30, 2022, approximately $129.1Term Loan of $475.4 million and $76.2 million of the Company’s net long-lived assets were located in Asia Pacific and EMEA, respectively, and the remaining balances were located in the United States.to $500 million.1, 2022.6, 2024. This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve substantial risks and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding our expectations, beliefs, intentions, strategies, future operations, future financial position, future revenue, projected expenses, gross margins and plans and objectives of management. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “should,” “could,” “can,” “predict,” “potential,” “continue,” “objective,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These forward-looking statements reflect our current views about future events and involve known risks, uncertainties and other factors that may cause our actual results, performance or achievement to be materially different from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the SEC on March 1, 2022.6, 2024. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.long-term,long term, we believe the semiconductor market we serve will continue to grow due to multi-year industry demand from a broad range of drivers, such as new CPUprocessor architectures that enable higher performance servers necessary for cloud, artificial intelligence (“AI”) and Machine Learningmachine learning applications. We also believe that semiconductor original equipment manufacturers (“OEM”) are increasingly relying on partners like UCT to fulfill their expanding capacity requirements. Additionally, our Services business is benefiting as device manufacturers rely on precision cleaning and coating to achieve ever more advanced devices.on-goingongoing basis, we evaluate our estimates and judgments, including those related to inventories, income taxes, business combinations, contingent earn-out liabilities and goodwill, intangible assets and long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis of our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We consider certain accounting policies related to revenue recognition, inventory valuation, accounting for income taxes, business combinations, valuation of goodwill, intangible assets and long-lived assets to be critical policies due to the estimates and judgments involved in each.30, 2022.29, 2023. For further information on our critical and other significant accounting policies and estimates, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 30, 2022,29, 2023, as filed with the SEC.- 22 -20232024 is a 52-week period ending December 29, 2023,27, 2024 and fiscal year 20222023 was a 52-week period ended December 30, 2022.29, 2023. The fiscal quarters ended March 29, 2024 and March 31, 2023 and April 1, 2022 were both 13-week periods.threeThree months ended March 29, 2024 compared to the Three months ended March 31, 2023 compared to the for the three months ended April 1, 2022Total Three Months Ended March 29,
2024March 31,
2023Percent
ChangeProducts $ 418.5 $ 368.6 13.5 % Services 59.2 64.7 (8.5) % Total revenues $ 477.7 $ 433.3 10.2 % Products as a percentage of total revenues 87.6 % 85.1 % Services as a percentage of total revenues 12.4 % 14.9 % and Services revenues decreased inincreased $49.9 million from the three months ended March 31, 2023 compared to the same periodthree months ended March 29, 2024. The increase in the prior year,Products revenues was primarily due to a downturnan increase in customer demand, along with an overall market improvement in the semiconductor industry driven largelyand in part due to the acquisition of HIS in October 2023.Three Months Ended March 29,
2024March 31,
2023Percent
ChangeUnited States $ 141.0 $ 133.8 5.4 % International 336.7 299.5 12.4 % Total revenues $ 477.7 $ 433.3 10.2 % United States as a percentage of total revenues 29.5 % 30.9 % International as a percentage of total revenues 70.5 % 69.1 % macroeconomic and geopolitical factors.On a geographic basis, revenues representarea are categorized based on the customer’s location to which the products that were shipped or services that were performed at our U.S. and international locations. performed.31, 2023, both29, 2024, U.S. and international revenues decreased,increased $7.2 million, compared to the same period in the prior year, primarily as a result of the global semiconductor industry downturn.Costacquisition of RevenuesTotal cost ofHIS in October 2023, whose customers are primarily U.S. based.decreased forincreased $37.2 million in the three months period ended March 31, 202329, 2024, compared to the same period in the prior year, due to lower demand for both Products and Services driven by global semiconductor industry downturn.primarily as a result of market improvement driving higher customer demand.Three Months Ended March 29,
2024March 31,
2023Percent
ChangeProducts $ 354.0 $ 315.1 12.3 % Services 41.1 45.2 (9.1) % Total Cost of revenues $ 395.1 $ 360.3 9.7 % Products cost as a percentage of total Products revenues 84.6 % 85.5 % Services cost as a percentage of total Services revenues 69.4 % 69.9 % decreased $84.4increased $38.9 million for the three months ended March 31, 2023,29, 2024 compared to the same period in the prior year,year. The increase was due to lower volume ofhigher sales volumes driving decreasedincreased material costs and lower direct labor spending. manufacturing overhead and materials (such as chemicals, gases and consumables). Cost of Services revenues decreased $5.7$4.1 million for the three months ended March 31, 2023,29, 2024, respectively, compared to the same periodperiods in the- 23 -decrease indecreased labor related costs (the largest component of Cost of Services) and lower material costs.In both segments, higher costs of revenue as a percent of revenue increased as certain fixed costs remain regardless of volume.ProductsThree Months Ended March 29,
2024March 31,
2023Percent
ChangeProducts $ 64.5 $ 53.5 20.6 % Services 18.1 19.5 (7.2) % Gross profit $ 82.6 $ 73.0 13.2 % Gross Margin by Segment Products 15.4 % 14.5 % Services 30.6 % 30.1 % Total Company 17.3 % 16.8 % Servicesgross margins fluctuate with revenue levels, product mix, material costs, and labor costs.period ended March 31, 2023,29, 2024, compared to the same period in the prior year, primarily due to lower revenue levels. Services gross margin increased for the three months ended March 29, 2024, compared to the same period in the prior year, due to lower factory utilization.Three Months Ended March 29,
2024March 31,
2023Percent
ChangeProducts $ 14.7 $ 8.7 69.0 % Services 2.6 3.7 (29.7) % Operating profit $ 17.3 $ 12.4 39.5 % Operating Margin by Segment Products 3.5 % 2.4 % Services 4.4 % 5.7 % Total Company 3.6 % 2.9 % 31, 2023,29, 2024, compared to the same period in the prior year, primarily due to the lower gross profit which was only partially offset by lower comparative operating expenses.Three Months Ended (Dollars in millions) March 29,
2024March 31,
2023Percent
ChangeResearch and development $ 7.0 $ 7.1 (1.4) % Research and development as a percentage of total revenues 1.5 % 1.6 % increased $0.3 millionwere consistent in the three months period ended March 31, 2023,29, 2024, compared to the same period in the prior year.Three Months Ended (Dollars in millions) March 29,
2024March 31,
2023Percent
ChangeSales and marketing $ 13.7 $ 13.1 4.6 % Sales and marketing as a percentage of total revenues 2.9 % 3.0 % Three Months Ended (Dollars in millions) March 29,
2024March 31,
2023Percent
ChangeGeneral and administrative $ 44.6 $ 40.4 10.4 % General and administrative as a percentage of total revenues 9.3 % 9.3 % dueprimarily driven by increases in amortization of intangible assets acquired through business combinations and in restructuring costs in addition to an increasea combination of other factors, none of which were individually significant. The restructuring costs primarily reflect employee severance costs and facilities consolidation costs to improve efficiencies in employee-related costs.Salesour operational activities and Marketingto reduce redundancies.Salesmarketing expense decreased duringOther Expense, netThree Months Ended (Dollars in millions) March 29,
2024March 31,
2023Percent
ChangeInterest income $ 1.4 $ 0.5 180.0 % Interest expense $ (12.2) $ (11.8) 3.4 % Other expense, net $ (3.8) $ 2.8 (235.7) % period ended March 31, 2023, as compared to the same period in the prior year, due to the reduction in costs related to the divested entities during the second and third quarter of fiscal year 2022.- 24 -General and AdministrativeGeneral and administrative expenses decreased $7.0 million in the three months period ended March 31, 2023,29, 2024 compared to the same period in the prior year, primarily due to a decreasehigher interest income earned on cash and cash equivalent balances attributed to higher interest rates in amortization of intangibles acquired through business combinations, a decrease in costs related to legal proceedings and a decrease in stock-based compensation expense.Interest and Other Income (Expense), netn/m - not meaningful$5.4$0.4 million in the three months ended March 31, 202329, 2024 compared to the same period in the prior year, due primarily to higher interest rates resulting from LIBOR rate changes.income (expense),expense, net, increased $2.8decreased $6.6 million in the three months period ended March 31, 2023,29, 2024, compared to the same period in the prior year, due to the unfavorable foreign exchange transactions and remeasurements asand due to the U.S. dollar strengthened inloss from the current period.change of the fair value of contingent earn-out of $1.3 million.Three Months Ended (Dollars in millions) March 29,
2024March 31,
2023Percent
ChangeProvision for income taxes $ 9.9 $ 3.5 182.9 % Effective tax rate 366.7 % 89.7 % period ended March 31, 202329, 2024 compared to the same period in the prior year is primarily attributable to changes in the geographic mix of worldwide earnings and financial results in jurisdictions which are taxed at different rates and the impact of losses in jurisdictions with full federal and state valuation allowances. The increase also reflects the impact of the expiration of a reduced tax rate incentive on a portion of our earnings in certain international subsidiaries and thus we are applying the local corporate statutory tax rate on those earnings. We are in the process of renewing the international tax incentive; when renewed will make an adjustment to its effective tax rate in that period.31, 2023,29, 2024, concluded that a full valuation allowance on its federal, state and certain of its foreign deferred tax assets remained appropriate.(In millions) March 29,
2024December 29,
2023Total cash and cash equivalents $ 293.0 $ 307.0 $ (14.0)
equivalents- 25 -Three Months Ended (In millions) March 29,
2024March 31,
2023Operating activities $ 9.8 $ 28.0 Investing activities (17.9) (27.3) Financing activities (4.5) (36.2) Effects of exchange rate changes on cash and cash equivalents (1.4) (1.2) Net decrease in cash and cash equivalents $ (14.0) $ (36.7) month periodmonths ended March 31, 2023,29, 2024, we generated cash from operating activities of $28.0$9.8 million compared to cash used of $67.4$28.0 million for the three months ended April 1, 2022.March 31, 2023. The $95.4$18.2 million increasedecrease in net cash from operating activities was driven by a $133.2 favorable$16.4 million unfavorable change in net working capital and by a $7.6 million decrease in net income offset in part by a $7.4$5.8 million decreaseincrease from non-cash items and by a $30.4 million decreaseincluded in net income.31, 202329, 2024 were as follows:o◦decreased $63.4increased $13.7 million primarily due to the timing of shipments and collections and $13.6 million increase in inventories and prepaid expenses decreased $10.9 million and $6.3 million, respectively.o◦decreased $50.5increased $25.1 million, income taxes payable decreased $1.6increased $2.1 million, and accrued compensation and related benefits increased $14.7decreased $10.6 million, primarily due to the timing of payments. and April 1, 2022 consisted primarily of $27.3$18.0 million and $28.4$27.3 million purchases of property, plant and equipment, respectively.31, 2023,29, 2024, cash used in financing activities was $36.2$4.5 million, compared to cash used in financing activities of $2.6$36.2 million in the three months ended April 1, 2022. TheMarch 31, 2023. When compared tofromto $14.2 million cash used in our share repurchase program initiated in the fourth quarter of fiscal year 2022.program.31, 2023,29, 2024, we had cash and cash equivalents of $322.1$293.0 million compared to $358.8$307.0 million as of December 30, 2022.29, 2023. Our cash and cash equivalents, cash generated from operations, and amounts available under our revolving line of credit described below were our principal sources of liquidity as of March 31, 2023.Our subsidiary 29, 2024.For the three months endedAs of March 31, 2023,29, 2024, Fluid Solutions factored $7.3$6.9 million under this arrangement.31, 2023,29, 2024, we have cash of approximately $268.8$204.0 million in our foreign subsidiaries. It is not practicable to determine the tax liability that might be incurred if the undistributed earnings of these foreign subsidiaries were to be distributed. For undistributed earnings of foreign subsidiaries which are not considered indefinitely reinvested, deferred taxes have been accrued.- 26 -
Average
Interest RateOn March 31, 2021, the Company entered into a Second Amendment (the “Second Amendment”), to the credit agreement dated as of August 27, 2018 and amended as of October 1, 2018 (as amended by the Second Amendment, the "Credit Agreement") to, among other things, (i) refinance and reprice $272.8 million of existing term B borrowings that will remain outstanding and (ii) obtain a $355.0 million senior secured incremental term loan B facility ((i) and (ii) collectively the “Term Loan”) with Barclays Bank, which increased the amount of term loan indebtedness outstanding under the Company’s Credit Facilities.The Term Loan has a maturity date of August 27, 2025, with monthly interest payments in arrears, quarterly principal payments of 0.625% of the outstanding principal balance as of March 31, 2021, with the remaining principal paid upon maturity. Under the Credit Facilities, the Company may elect that the Term Loan bear interest at a rate per annum equal to either (a) “ABR” (as defined in the Credit Agreement), plus the applicable margin or (b) the “Eurodollar Rate” (as defined in the Credit Agreement), based on LIBOR, plus the applicable margin. The applicable margin for the Term Loan is equal to a rate per annum to either (i) at any time that the Company’s corporate family rating is Ba3 (with a stable outlook) or higher from Moody’s and BB- (with a stable outlook) or higher from S&P, (x) 3.50% for such Eurodollar term loans and (y) 2.50% for such ABR term loans or (ii) at all other times, (x) 3.75% for such Eurodollar term loans and (y) 2.75% for such ABR term loans. Interest on the Term Loan is payable on (1) in the case of such ABR term loans, the last day of each calendar quarter and (2) in the case of such Eurodollar term loans, the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period. OnMarch 29,
2024(Dollars in millions) U.S. Term Loan $ 475.4 9.2 % Fluid Solutions Debt Facilities 5.3 7.7 % Debt issuance costs (5.5) $ 475.2 2021, the Company elected that the Term Loan outstanding as of March 31, 2021 accrue interest based on the “Eurodollar Rate” for an initial interest period of one month. Pursuant to the Second Amendment to the Credit Agreement, the Credit Facilities contains customary LIBOR replacement provisions in the event LIBOR is discontinued. At March 31, 2023,2024, the Company had an outstanding amount under the Term Loan of $491.0$475.4 million, gross of unamortized debt issuance costs of $9.2$5.5 million. As of March 31, 2023,29, 2024, the interest rate on the outstanding Term Loan was 8.4%9.2%.On August 19, 2022, we entered into a Third Amendment (the “Third Amendment”) to the credit agreement dated as of August 27, 2018 and amended as of October 1, 2018 and March 31, 2021 (as amended by the Third Amendment, the "Credit Agreement") to, among other things, increase the revolving credit facility portion of the Credit Facilities to $150.0 million with several banks and Barclays Bank as administrative agent.The revolving credit facility has an available commitment of $150.0 million and a maturity date of February 27, 2025. The Company pays a quarterly commitment fee in arrears equal to 0.25% of the average daily available commitment outstanding. Outstanding letters of credit reduce the availability of the revolving credit facility and, as31, 2023,29, 2024, the Company had $146.5$146.1 million, net of $3.5$3.9 million of outstanding letters of credit, available under this revolving credit facility.The letter of credit facility has an available commitment of $65.0 million and a maturity date of August 27, 2025. The Company pays a quarterly fee in arrears equal to 2.5% (subject to certain adjustments to the Term Loan) of the dollar equivalent of all outstanding letters of credit, and a fronting fee equal to 0.125% of the undrawn and unexpired amount of each letter of credit. As of March 31, 2023,29, 2024, the Company had $3.5 million of outstanding letters of credit and $61.5 million of available commitments remaining under the letter of credit facility.The Credit Agreement requires the Company to maintain certain financial covenants including a consolidated fixed charge coverage ratio (as defined in the Credit Agreement) as of the last day of any fiscal quarter of at least 1.25 to 1.00, and a consolidated leverage ratio (as defined in the Credit Agreement) as of the last day of any fiscal quarter of no greater than 3.75 to 1.00. The Company was in compliance with allthe financial covenants as ofcontained within the quarter ended March 31, 2023.5.07.0 million euros (approximately $5.47.6 million). As of March 31, 2023,29, 2024, no debt was outstanding under this revolving credit facility.- 27 -$18.5$11.0 million. As of March 31, 2023,29, 2024, Fluid Solutions had $10.9$5.3 million of outstanding debt with average interest rate ranges from 4.9%7.6% to 7.9%7.8%.31, 2023,29, 2024, the Company’s total bank debt was $501.9$475.2 million, net of unamortized debt issuance costs of $9.2$5.5 million. As of March 31, 2023,29, 2024, the Company had $146.5$146.1 million, $5.4$5.7 million and $7.6 million available to draw from our credit facilities in the U.S., Israel and Czech Republic, and Israel, respectively.similar liabilities in inactive markets. The Company’s carrying value approximates fair value for the Company’s long-term debt.$27.3$18.0 million during the three months ended March 31, 202329, 2024 and were primarily attributable to the capital invested in our manufacturing facilities worldwide as well as costs associated with the ongoing design and implementation of our new enterprise resource planning system. The Company’s anticipated capital expenditures for the remainder of 20232024 are expected to be financed primarily from our cash flow generated from operations.$528.1$364.8 million as of March 31, 2023.31, 2023,29, 2024, we have not incurred any significant costs to defend lawsuits or settle claims related to these indemnification arrangements. As a result, we believe the estimated fair value of these arrangements is minimal.30, 2022,29, 2023, for a more complete discussion of the market risks we encounter.underin Rule 13a-15(e) promulgated under the Exchange Act. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon this evaluation, our chief executive officer and our chief financial officer concluded the disclosure controls and procedures were not effective as of March 31, 2023,29, 2024, the end of the period covered by this Quarterly Report on Form 10-Q, due to the material weaknesses in internal control over financial reporting that weredescribed below.30, 2022.Previously Identified Material Weaknesses in Internal Control Over Financial ReportingAs disclosed in our Annual Report on Form 10-K for29, 2023, the fiscal year ended December 30, 2022, we previouslyCompany identified the following material weaknesses in our internal control over financial reporting that continue to exist as of March 29, 2024.(“ITGCs”) overfor certain information systems that are relevant to the preparation of its consolidated financial statements. Specifically, for certain of the Fluid Solutions operating subsidiaries in the Products segment which have not been migrated to the Company’s primary ERP system, the Company did not design and maintain (a) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately, and (b) user access withincontrols to ensure appropriate segregation of duties that adequately restrict user and privileged access to our primary Enterprise Resource Planning (“ERP”) system, our primary revenue system for the Services segment,financial applications and related ERP access controls affecting the independent review of manual journal entry postings.data to appropriate company personnel. Business process controls that dependare dependent on information and data produced by systems affected by the affecteddeficiencies in IT general controls were deemed ineffective because they could have been adversely impacted.that depend onbusiness process controls including, but not limited to appropriate segregation of duties. The business process controls were deemed ineffective because they could have allowed for certain personnel to have incompatible duties allowing for the creation, review, and processing of certain transactions without independent review and authorization which affects substantially all financial statement account balances and disclosures within such subsidiaries;orused within the operation of controls which affects substantially all financial reports generated fromstatement account balances and disclosures; andaffected information systemsreview of cash flow forecasts used in the valuation of certain assets and liabilities acquired in a business combination. Specifically, the control activities related to be accuratecomplete, could be adversely affected.Theseassumptions utilized to develop the cash flow forecasts used in the valuation of acquired intangible assets and contingent earn-out liabilities were not designed at an appropriate level of precision.disclosures.detected. Based on additional procedures and post-closing review, management concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented, in conformity with accounting principles generally accepted in the United States.implementingexecuting and continuesremains committed to implementimplementing measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. TheseThe following remediation actions are ongoingcurrently being implemented and include or are expected to include:in progress:Reviewing all ITGCsengaging an external advisor to identify opportunities to expand and/or automate controls to addressassist with evaluating and documenting the design and operationoperating effectiveness of ITGCs on systems supporting our financial processes.Enhancing training programs addressing ITGCshiring additional personnel to identify and policies,analyze risks of material misstatement, develop internal control activities to support the achievement of the Company’s internal control objectives, and monitor the effective performance of those control objectives;educating control owners concerning the principlescontrols over program changes and requirements of each control, with a focus on those related to user access over IT systems impacting financial reporting.Strengthening policy documentation underlying ITGCs.Implementing an IT management review processdesigning and increasedimplementing effective controls over data used within the frequencyoperation of testing plans to monitor ITGCs with a specific focus on systems supporting our financial reporting processes.Enhancing regular reporting ondesigning and implementing effective controls over the remediation measuresreview of cash flow forecasts utilized in the valuation of acquired intangible assets and contingent earn-out liabilities in a business combination to ensure the Audit Committeeaccuracy of inputs and assumptions applied in the Board of Directors.forecasting process.control deficienciesthe material weaknesses or modify the remediation plans described above. We believe that these actions will remediate the material weaknesses, however the material weaknesses will not be considered remediated until the applicable controls operatehave operated for a sufficient period of time, and management has concluded, through testing, that these controls are designed and operating effectively. While Management believes that the foregoingaforementioned plans will effectively remediate the deficiencies constituting the material weaknesses, and intends the remediation of these material weaknesses to be completed prior to the end of fiscal 2023. However, there is no assurance as to when such remediation will be completed.on the exact timing of the completion of the remediation. As the remediation plans continue to be implemented, management may be required to take additional measures or modify the plan elements described above.- 29 -Except for the remediation efforts discussed above under “Remediation Plan”, there31, 2023,29, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.30, 2022.29, 2023.(a) Recent Sales of Unregistered SecuritiesThe following table sets forth information related to repurchases of our equity securities during31, 2023:29, 2024.
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
(or Approximate
Dollar Value)
of Shares that
May Yet Be
Purchased Under the
Plans or Programs
(In millions)(a) Exhibits31, 2023:Description Exhibit31.1NumberDescription 31.131.2 32.1 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE 104 ��mSecuritiesSecurities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.5, 20235, 2023