Ultra Clean Holdings, Inc. (UCTT)
Q3 2008 Earnings Call Transcript
October 27, 2008, 5:00 pm ET
Jack Sexton – VP and CFO
Clarence Granger – Chairman and CEO
Edwin Mok – Needham & Company
Jay Deahna – JP Morgan
Elaine Clay [ph] – Piper Jaffray
Jenny Noone [ph] – JP Morgan
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. Q4 2008 Earnings Call Transcript
After the speaker's remarks, there will be a question and answer session. (Operator instructions) Joining us today is Mr. Jack Sexton, Chief Financial Officer, and Mr. Clarence Granger, Chairman and Chief Executive Officer.
I will now turn the call over to Mr. Sexton. Sir, you may begin your conference.
Thank you, Marcello. Good afternoon and Welcome to our third quarter financial results conference call. My name is Jack Sexton, Chief Financial Officer 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 third quarter of 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 888-642-1687 for domestic callers and 706-645-9291 for international dialers. The pass code is 68499647 for both domestic and international callers. 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 fourth quarter of fiscal 2008. 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.
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 ended 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 third quarter results.
Revenue for the third quarter of 2008 was $60.1 million, down 11% from the second quarter revenue of $67.4 million, and a decrease of 37% compared to revenue of $95.5 million in the same period a year ago. The sequential decrease 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's revenues declined $10.5 million or 20% sequentially. Non-semiconductor revenues, including sales within the medical device, flat panel display, and solar industries increased $3.2 million or 21% sequentially, with increases in all markets. Total third quarter revenue was at the low end of our guided range of $60 million to $66 million.
Gross margin for the third quarter was 9.1%, down from 11.2% recorded in the second quarter, and a decrease from 14% in the same period a year ago. The 210 basis point sequential reduction in gross margin is primarily due to the impact of lower volume on factory utilization, and a reduction in the number of factory and office shutdown days taken in the period, from 16 days in the second quarter to 8 days taken during the third quarter. We expect to take 13 shutdown days in the fourth quarter of this year.
Operating expenses in the third quarter was $7.8 million, down approximately $400,000 compared to the prior quarter. The sequential decrease reflects reduced salaries, outside services and rent expense, offset by the impact of fewer office shutdown days taken during the third quarter. Our most recent staff reduction was conducted in early October 2008, bringing the year day reduction in the U. S. staff to 22%. Moving expenses related to our centralization activities were approximately $300,000, flat with the prior quarter. The Silicon Valley phase of our consolidation plan is now complete, on schedule and on budget. We expect to incur approximately $200,000 in further moving costs in the fourth quarter of this year, pertaining to the consolidation of activities currently outside Silicon Valley.
Interest and other net expense of $236,000 were down slightly from prior quarter to the lower interest charges on reduced debt. This debt was originally put in place in support of the Sieger acquisition. This in turn resulted in a pretax loss of $2.5 million, partially offset by a tax benefit of $616,000, which included a variable Fen-48 adjustment of $265,000. The 24% tax rate for the period was slightly unfavorable to the 29% rate used in establishing our loss per share guidance. We continue to model 29% effective tax rate on a go-forward basis.