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Ultra Clean Holdings Inc. (UCTT)
Q4 2008 Earnings Call
February 17, 2009 5:00 pm ET
Jack Sexton – Vice President and Chief Financial Officer
Clarence Granger – Chairman and Chief Executive Officer
Edwin Mok – Needham & Company
Jenny Noone – JP Morgan
John Nelson – State of Wisconsin Investment Board
Adam Meisel – Aquifer Capital
Previous Statements by UCTT
» Ultra Clean Holdings Inc. Q3 2009 Earnings Call Transcript
» Ultra Clean Holdings, Inc. F1Q09 Earnings Call Transcript
» Ultra Clean Holdings, Inc. Q3 2008 Earnings Call Transcript
Welcome to our fourth quarter financial results conference call. My name is Jack Sexton, Chief Financial of Ultra Clean Holdings and with me today is our Chairman and Chief Executive Officer, Clarence Granger.
A few moments ago we issued a press release reporting financial results for the fourth quarter 2008. The press release can be accessed from the Investor Relations section of Ultra Clean’s website at uct.com. In addition, we have arranged for a taped replay of this call, which may be accessed by phone. This replay will be available approximately one hour after the call’s conclusion and will be accessible for two weeks.
The dial-in access number for this replay is 800-642-1687 for domestic callers and 706-645-9291 for international dialers. The pass code is 82608074 for both domestic and international dialers. This call is also being webcast live with a web replay also available for 14 days from the Investor Relations section of our website at uct.com.
Together with our recently issued press release, this conference call enables the company to comply with the SEC regulations for fair disclosure. Therefore, investors should accept the contents of this call as the company’s official guidance for the first quarter of fiscal 2009. Investors should note that only the CEO and CFO are authorized to provide company guidance. If at any time after this call we communicate any material changes in guidance, it is our intent that such updates will be done officially via public forum, such as a press release or publicly announced conference call.
The matters that we discuss today include forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995 related to matters including our future financial performance, new product orders and shipments, consolidation of activities in the U.S. and expanded production at our China facilities.
Investors are cautioned that forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission, including our most recent Form 10-K filed for the year end December 28, 2007. The company disclaims any obligation to publicly update or revise any such forward-looking statements or to reflect events or circumstances that occur after this call.
Now here are the fourth quarter results. Revenue for the fourth quarter of 2008 was $47.1 million down 22% from the third quarter revenue of $60.1 million, and a decrease of 49% compared to revenue of $92.8 million in the same period a year ago.
The decrease in demand was due to the continued industry-wide cyclical reduction in demand affecting all semiconductor capital equipment customers, partially offset by growth in our non-semiconductor business. Semiconductor revenues declined $13.3 million or 32% sequentially. Non-semiconductor revenues, including sales within the medical device, flat panel display and solar industries, increased $800,000 or 5% sequentially to $19 million.
Gross margin for the fourth quarter was 0.9% down from 9.1% recorded in the third quarter and a decrease from 12.4% in the same period a year ago. The 820 basis point sequential decline in gross margin breaks down as follows.
Approximately 380 basis points are due to factory absorption variances due to lower volume. Approximately 210 basis points are due to mix related margin declines, which we expect to be temporary. Approximately 110 basis points are due to facility centralization and closure costs, and approximately 80 basis points are due to employee severance charges.
On completion of our annual impairment testing of goodwill and other long lived assets using the methodology prescribed by statement of financial accounting standards numbers 142 and 144, we determined that the company will incur a fourth quarter non-cash charge to goodwill and other long lived assets of approximately $48 million. This charge is net of $7.1 million in tax and relates to the impairment of assets associated with our Sieger acquisition. The earnings per share impact of the charge is $2.26 per share.
Operating expenses, inclusive of the previously described impairment charge, were $62.9 million. Exclusive of this charge, operating expenses were $7.9 million up approximately $100,000 compared to prior quarter. The sequential increase reflects approximately $200,000 in increased year end compliance charges, approximately $300,000 in charges associated with our ERP implementation in China, and approximately $200,000 in employee severance costs offset by approximately $600,000 in reduced employee compensation.
Interest and other net expense of $45,000 was down approximately $200,000 from prior quarter due to higher interest income on government reimbursements offsetting interest expense related to third party debt. This debt was originally put in place in support of the Sieger acquisition.