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What changed in Ultra Clean Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ultra Clean Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+165 added−169 removedSource: 10-K (2024-03-06) vs 10-K (2023-02-28)

Top changes in Ultra Clean Holdings, Inc.'s 2023 10-K

165 paragraphs added · 169 removed · 137 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

33 edited+5 added−10 removed91 unchanged
Biggest changeIncluded in these services are tool part process optimization solutions that can lower the total cost of ownership for our customers. 6 • Micro-contamination analysis : UCT also offers micro-contamination analysis of tool parts, wafers and depositions, chemicals, cleanroom materials, deionized water and airborne molecular contamination and provides analytical verification of process tool chamber part cleaning effectiveness.
Biggest changeIncluded in these services are tool part process optimization solutions that can lower the total cost of ownership for our customers. • Micro-contamination analysis : UCT also offers micro-contamination analysis of tool parts, wafers and depositions, chemicals, cleanroom materials, deionized water and airborne molecular contamination and provides analytical verification of process tool chamber part cleaning effectiveness. 6 Customers We sell our products and services primarily to customers in the semiconductor capital equipment and semiconductor integrated device manufacturing industries, and we also sell to the display, consumer, medical, energy, industrial, and research equipment industries.
We work closely with our customers to identify and anticipate changes and trends in next-generation equipment and partner with them on process application requirements for gas 7 and liquid delivery systems and other critical subsystems. These development efforts are designed to meet specific customer requirements in the areas of subsystem design, materials, component selection and functionality.
We work closely with our customers to identify and anticipate changes and trends in next-generation equipment and partner with them on process application requirements for gas and liquid delivery systems and other critical subsystems. These development efforts are designed to meet specific customer requirements in the areas of subsystem design, materials, component selection and functionality.
The primary competitive factors in our industry are quality, meeting customer timeline requirements, price, technology, design-to-delivery cycle time, customer qualification approvals, and the development of product recipes for cleaning and analytics and historical customer relationships. We anticipate that increased competitive pressures will cause intensified price-based competition and we may have to reduce the prices of our products.
The primary competitive factors in our industry are quality, meeting customer timeline requirements, price, technology, design-to-delivery cycle time, customer qualification approvals, and the development of product recipes for cleaning and analytics and 8 historical customer relationships. We anticipate that increased competitive pressures will cause intensified price-based competition and we may have to reduce the prices of our products.
He previously served in various roles of increasing responsibility at KPMG LLP and its international partner firms from October 2003 to May 2014. Mr. Harding holds a B.A. in Business Administration with concentrations in Accounting and Finance from Pacific University and completed the Executive Leadership and Innovation Program at the Babson Graduate School of Business. 11 Jamie J.
He previously served in various roles of increasing responsibility at KPMG LLP and its international partner firms from October 2003 to May 2014. Mr. Harding holds a B.A. in Business Administration with concentrations in Accounting and Finance from Pacific University and completed the Executive Leadership and Innovation Program at the Babson Graduate School of Business. Jamie J.
We design and manufacture heaters, sensors, and controllers for precise temperature control. These products are complementary to our gas delivery systems products. 4 • Parts cleaning and coating and analytical verification : Through our Services business, we offer integrated device manufacturers (“IDM”) customers validated, ultra-high purity process tool chamber parts cleaning and coating services.
We design and manufacture heaters, sensors, and controllers for precise temperature control. These products are complementary to our gas delivery systems products. 4 • Parts cleaning and coating and analytical verification : Through our Services business, we offer integrated device manufacturers (“IDM”) validated, ultra-high purity process tool chamber parts cleaning and coating services.
The ultimate goal is to foster an atmosphere of acceptance, inclusion, trust and of mutual respect for all. To reach that goal, UCT provides mandatory practical and continuous education to all employees on behavioral expectations. We believe that UCT’s success depends on our ability to attract, develop and retain key personnel.
The goal is to foster an atmosphere of acceptance, inclusion, trust and of mutual respect for all. To reach that goal, UCT provides mandatory practical and continuous education to all employees on behavioral expectations. We believe that UCT’s success depends on our ability to attract, develop and retain key personnel.
Our Customer Business Management organization includes technical sales support for order placement, spare parts quotes, production status updates as well as service and maintenance contracts and analysis business. We have a technical relationship representatives located at most of our facilities.
Our Customer Business Management organization includes technical sales support for order placement, spare parts quotes, production status updates as well as service and maintenance contracts and analysis business. We have technical relationship representatives located at most of our facilities.
Bentinck served as Vice President and General Manager of the Logic & Memories Technology Group for AIXTRON Inc., a manufacturer of systems and equipment to the semiconductor industry, from April 2014 to November 2017. From August 2006 to March 2014, Mr.
Bentinck served as Vice President 11 and General Manager of the Logic & Memories Technology Group for AIXTRON Inc., a manufacturer of systems and equipment to the semiconductor industry, from April 2014 to November 2017. From August 2006 to March 2014, Mr.
We provide our OEM customers a broad outsourced solution for the development, design, component sourcing and cleaning, prototyping, engineering, and manufacturing and testing of advanced systems.
We provide our customers a broad outsourced solution for the development, design, component sourcing and cleaning, prototyping, engineering, and manufacturing and testing of advanced systems.
Because our engineers work closely with our customers’ engineers and understand the fabrication, assembly and testing of their products, we often can improve their design for manufacturability, thereby reducing their cost and improving their, quality and consistency. • Testing capabilities . We utilize our technical expertise to test and characterize key gas delivery products.
Because our engineers work closely with our customers’ engineers and understand the fabrication, assembly and testing of their products, we often can improve their design for manufacturability, implement automation, thereby reducing their cost and improving their, quality and consistency. • Testing capabilities . We utilize our technical expertise to test and characterize key gas delivery products.
Process modules include several smaller subsystems such as the frame assembly, top-plate assembly and gas and chemical delivery modules, as well as the chamber and electronic, pneumatic and mechanical subsystems. • Other high-level assemblies: Other high-level assemblies refer to large subsystems used in semiconductor manufacturing, display, medical, energy, industrial and research industries.
Process modules include several smaller subsystems such as the frame assembly, top-plate assembly and gas and chemical delivery modules, as well as the chamber and electronic, pneumatic and mechanical subsystems. • Other high-level assemblies: Other high-level assemblies refer to large subsystems used in semiconductor manufacturing and sub-fab, display, medical, energy, industrial and research industries.
Scholhamer worked for Applied Films Corporation as Vice President of Operations, Engineering and Research Development in the company’s German office from September 2002 to July 2006 and as Vice President of Thin Film Coating Division and Thin Film Equipment Division in the company’s Colorado office from July 2000 to September 2002. Mr.
Scholhamer worked for Applied Films Corporation as COO/CTO and Vice President of Operations, Engineering and Research Development in the company’s German office from September 2002 to July 2006 and as Vice President of Thin Film Coating Division and Thin Film Equipment Division in the company’s Colorado office from July 2000 to September 2002. Mr.
Our two largest revenue customers in fiscal years 2022, 2021 and 2020 were Applied Materials, Inc. and Lam Research Corporation, each of which accounted for more than 10% of our total revenues in those three years.
Our two largest revenue customers in fiscal years 2023, 2022 and 2021 were Applied Materials, Inc. and Lam Research Corporation, each of which accounted for more than 10% of our total revenues in those three years.
Cho brings over a decade of experience in various legal disciplines, including IP and commercial litigations, joint venture projects, and commercial transaction work. Most recently, from April 2016 to October 2019, Mr.
Cho brings over a decade of experience in various legal disciplines, including IP and commercial litigation, joint venture projects, and commercial transaction work. Most recently, from April 2016 to October 2019, Mr.
Our experience with the demanding requirements in semiconductor equipment manufacturing has enabled us to become a leading developer and supplier of critical modules and subsystems. These assemblies include gas and fluid delivery solutions, wafer transport systems, mechatronic assemblies, and process modules. • Improved design-to-delivery cycle times .
Our experience with the demanding requirements in semiconductor equipment manufacturing has enabled us to become a leading developer and supplier of critical modules and subsystems. These assemblies include gas and fluid delivery solutions, wafer transport systems, mechatronic assemblies, process modules, and sub-fab process equipment support racks. • Improved design-to-delivery cycle times .
Scholhamer joined Applied Materials, Inc. in 2006, where, prior to his most recent position, he served as Vice President of Operations-Energy, for the Environmental and Display Products Division from July 2006 to December 2008 and Corporate Vice President and General Manager of the Display Business Group from December 2008 to February 2011. Prior to that, Mr.
Scholhamer joined Applied Materials, Inc. in 2006, where, prior to his most recent position, he served as Vice President of Operations Display and Solar Products Division from July 2006 to December 2008 and Corporate Vice President and General Manager of the Display Business Group from December 2008 to February 2011. Prior to that, Mr.
Our products include precision robotic solutions, gas delivery systems, a variety of industrial and automation production equipment products, and subsystems that include wafer cleaning modules, chemical delivery modules, top-plate assemblies, frame assemblies, and process modules.
Our products include precision robotic solutions, gas delivery systems, sub-fab process equipment support racks, a variety of industrial and automation production equipment products, and subsystems that include wafer cleaning modules, chemical delivery modules, top-plate assemblies, frame assemblies, and process modules.
Positively 9 involving employees and giving back to communities is central to UCT’s culture. Supported by the Company, UCT employees contribute directly to the community with their time and resources. In 2022, UCT organized and conducted 24 events designed to give back and support its communities.
Positively involving employees and giving back to communities is central to UCT’s culture. Supported by the Company, UCT employees contribute directly to the community with their time and resources. In 2023, UCT organized and conducted 31 events designed to give back and support its communities.
As a group, our respective year’s top two customers accounted for 62.7%, 64.0% and 67.1% of the Company’s revenues for fiscal years 2022, 2021 and 2020, respectively. Approximately 92.2% of our total revenues for the fiscal year 2022 came from multiple segments of the semiconductor industry, which include IDM, Foundry, OEM, and sub-tier suppliers.
As a group, our respective year’s top two customers accounted for 57.4%, 62.7% and 64.0% of the Company’s revenues for fiscal years 2023, 2022 and 2021, respectively. Approximately 93.2% of our total revenues for the fiscal year 2023 came from multiple segments of the semiconductor industry, which include IDM, Foundry, OEM, and sub-tier suppliers.
This website address is intended to be an inactive textual reference only; none of the information contained on our website is part of this report or is incorporated by reference herein. Executive Officers Set forth below is information concerning our executive officers as of February 28, 2023. Name Age Position James P.
This website address is intended to be an inactive textual reference only; none of the information contained on our website is part of this report or is incorporated by reference herein. 10 Executive Officers Set forth below is information concerning our executive officers as of March 6, 2024. Name Age Position James P.
These figures include 3,555 employees in Asia Pacific and 1,700 employees in EMEA. None of our employees are represented by a labor union and we have not experienced any work stoppages. UCT believes that its employees are its most important assets.
These figures include 2,993 employees in Asia Pacific and 1,535 employees in EMEA. None of our employees are represented by a labor union and we have not experienced any work stoppages. 9 UCT believes that its employees are its most important assets.
Savage also served as Manager, Business Process Risk Accounting, at Arthur Anderson LLP, the former accounting firm, from May 1996 to October 1999. Ms. Savage holds a B.S. in Managerial Economics from the University of California, Davis. 10 Vijayan S. Chinnasami has served as our Chief Operating Officer since April 2019. Prior to joining the Company, Mr.
Savage also served as Manager, Business Process Risk Accounting, at Arthur Anderson LLP, the former accounting firm, from May 1996 to October 1999. Ms. Savage holds a B.S. in Managerial Economics from the University of California, Davis. Jeff McKibben has served as our Chief Information Officer since August 2021. Prior to joining UCT, Mr.
We also believe that semiconductor original equipment manufacturers (“OEM”) are increasingly relying on partners like UCT to fulfill their expanding capacity requirements. Additionally, we believe that we will continue to benefit as device manufacturers rely on precision cleaning and coating to manufacture ever more complex devices. On March 31, 2021, we completed the acquisition of Ham-Let (Israel-Canada) Ltd.
We also believe that semiconductor original equipment manufacturers (“OEM”) are increasingly relying on partners like UCT to fulfill their expanding capacity requirements. Additionally, we believe that we will continue to benefit as device manufacturers rely on precision cleaning and coating to manufacture ever more complex devices.
In addition, we expect to face new competitors as we enter new markets or otherwise expand our products and service offerings. 8 Governmental Regulation and Environmental Matters Our operations are subject to federal, state and local regulatory requirements and foreign laws relating to environmental, waste management and health and safety matters, including measures relating to the release, use, storage, treatment, transportation, discharge, disposal and remediation of contaminants, hazardous substances and waste, as well as practices and procedures applicable to the construction and operation of our UCT facilities.
Governmental Regulation and Environmental Matters Our operations are subject to federal, state and local regulatory requirements and foreign laws relating to environmental, waste management and health and safety matters, including measures relating to the release, use, storage, treatment, transportation, discharge, disposal and remediation of contaminants, hazardous substances and waste, as well as practices and procedures applicable to the construction and operation of our UCT facilities.
We utilize our weldment and frame fabrication capabilities together with highly specialized engineering, global supply chain management, and assembly capabilities to produce high performance products that are customized to meet the needs of our customers and their customers.
We utilize our weldment and frame fabrication capabilities together with highly specialized engineering, global supply chain management, and assembly capabilities to produce high performance products that are customized to meet the needs of equipment suppliers and chipmakers. We enable our customers to minimize their overall number of suppliers, simplify their supply chain and reduce their inventories. • Parts and components.
In fiscal 2022, approximately 342,863 shares were repurchased under this program with an aggregate cost of $12.1 million and an average price of $35.31 per share. Our international revenues represented 61.4%, 65.1% and 58.4% of total revenues for fiscal years ended 2022, 2021 and 2020, respectively.
In fiscal years 2023 and 2022, approximately 1.1 million and 0.3 million shares were repurchased under this program with an aggregate cost of $29.4 million and $12.1 million and an average price of $29.16 and $35.31 per share, respectively. 3 Our international revenues represented 69.6%, 68.9% and 65.1% of total revenues for fiscal years ended 2023, 2022 and 2021, respectively.
Palfrey 55 Senior Vice President, Global Human Resources Paul Y. Cho 45 General Counsel and Corporate Secretary James P. Scholhamer joined the Company as Chief Executive Officer and a member of our Board of Directors in January 2015. Prior to joining Ultra Clean, Mr.
Cho 46 General Counsel and Corporate Secretary James P. Scholhamer joined the Company as Chief Executive Officer and a member of our Board of Directors in January 2015. Prior to joining Ultra Clean, Mr.
Scholhamer 56 Chief Executive Officer and Director Sheri Savage 52 Chief Financial Officer Vijay S. Chinnasami 57 Chief Operating Officer Jeff McKibben 60 Chief Information Officer Chris Cook 54 President, Products Business William C. Bentinck 61 President, Services Business Brian E. Harding 42 Senior Vice President, Chief Accounting Officer Jamie J.
Scholhamer 57 Chief Executive Officer and Director Sheri Savage 53 Chief Financial Officer Jeff McKibben 61 Chief Information Officer Chris Cook 55 President, Products Business William C. Bentinck 62 President, Services Business Brian E. Harding 43 Senior Vice President, Chief Accounting Officer Jamie J. Palfrey 56 Senior Vice President, Global Human Resources Paul Y.
In addition, we have developed an overall infrastructure to provide our customers with service and support 24 hours a day, seven days a week. Our dedicated global field service engineers provide customer support through the performance of on-site installation, servicing and repair.
In addition, we have developed an overall infrastructure to provide our customers with service and support 24 hours a day, seven days a week.
UCT expanded its global footprint into Penang, Malaysia where production began in December 2021 and continued to ramp throughout 2022. Several of UCT’s cleaning and analytic facilities are also in low-cost regions, strategically close to our customers, adding to our competitive advantage. • Provide production flexibility to respond rapidly to demand changes.
Several of UCT’s facilities are also in low-cost regions, strategically close to our customers, adding to our competitive advantage. • Provide production flexibility to respond rapidly to demand changes.
Technology Development We engage in ongoing technology development efforts to remain a leader for gas delivery systems and to further develop our expertise in other critical subsystems.
Our dedicated global field service engineers provide customer support through the performance of on-site installation, servicing and repair. 7 Technology Development We engage in ongoing technology development efforts to remain a leader for gas delivery systems and to further develop our expertise in other critical subsystems.
Employees and Human Capital As of December 30, 2022, we had 7,765 employees, of which 1,205 were temporary. Of our total employees, there were 126 in engineering, 24 in technology development, 378 in sales and support, 5,245 in direct manufacturing, 1,255 in indirect manufacturing and 540 in administrative and executive functions.
Employees and Human Capital As of December 29, 2023, we had 6,657 employees, of which 527 were temporary. Of our total employees, there were 124 in engineering, 21 in technology development, 386 in sales and support, 4,252 in direct manufacturing, 1,221 in indirect manufacturing and 653 in administrative and executive functions.
During April 2021, we completed an underwritten public offering of 3.7 million shares of our common stock, for which we received net proceeds of $192.8 million, after deducting the underwriting discounts and offering expenses. 3 In 2022, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $150.0 million of the Company’s common stock over a three-year period.
The acquisition strengthens our leadership in developing and supplying critical products to the semiconductor industry, and extends our reach into the sub-fab area. In 2022, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $150.0 million of the Company’s common stock over a three-year period.
Removed
(“Ham-Let” or “Fluid Solutions”), a public company organized under the laws of the State of Israel (not a U.S. registrant), pursuant to an Agreement and Plan of Merger, for approximately $362.9 million.
Added
On October 25, 2023, we acquired 100% of the shares 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.
Removed
Ham-Let engages in the development, manufacturing and marketing of innovative control valves, fittings, and hoses for the control and monitoring of industrial systems in a variety of markets, including the Semiconductor market. These products are primarily used in ultra clean gas delivery systems as well as other systems for the transmission of liquids and gases.
Added
The purchase price was comprised of initial cash consideration of $46.5 million, subject to customary post-closing adjustments, and up to $70.0 million of additional cash consideration that may be payable subject to the performance of the acquired business during the remainder of fiscal years 2023, 2024, and 2025.
Removed
The Company’s primary reason for this acquisition was to broaden UCT’s relevance to the semiconductor equipment market and to provide access to a new set of customers in the semiconductor fab infrastructure market. Ham-Let operations are conducted and reported under our products segment.
Added
We continue to strengthen our vertically integrated business model by investing in our operations or acquiring companies along the semiconductor supply chain to increase our capabilities, improve our cost structure, and enhance control, efficiency, and quality across our global operations.
Removed
We enable our customers to minimize their overall number of suppliers, simplify their supply chain and reduce their inventories. • Parts and components.
Added
By deepening our integration capabilities, we aim to streamline processes, reduce dependencies, and fortify our position as a leading solutions and service provider in the semiconductor ecosystem. 5 Products We design, develop, prototype, manufacture and test subsystems, primarily for the semiconductor equipment market.
Removed
We continue to invest in our operations to meet customer quality and delivery targets. We have expanded welding operations at several of our manufacturing sites, added parts and components business through acquisitions, developed/built in-house powder coating capability, and purchased new manufacturing tools.
Added
In addition, we expect to face new competitors as we enter new markets or otherwise expand our products and service offerings.
Removed
In addition to organic growth, we continue to manage/foster key strategic partnerships to efficiently meet production needs and customer demands. 5 Products We design, develop, prototype, manufacture and test subsystems, primarily for the semiconductor equipment market.
Removed
Customers We sell our products and services primarily to customers in the semiconductor capital equipment and semiconductor integrated device manufacturing industries, and we also sell to the display, consumer, medical, energy, industrial, and research equipment industries.
Removed
Chinnasami served as the Senior Vice President of EMS Operations at Jabil Inc. from March 2017 to March 2019, as Chief Executive Officer of CaliBurger (Malaysia) from January 2015 to January 2017 and as Chief Executive Officer of Advanced Optronic Devices (Malaysia) from January 2014 to January 2017. Prior to that, Mr.
Removed
Chinnasami served in various capacities with SunEdison International, Inc. (formerly MEMC Electronic Materials, Inc.), including most recently as Senior Vice President, Solar Materials, from May 2010 to August 2014, where his responsibilities included the executive management of the polysilicon, wafer, cell and module businesses. Mr.
Removed
Chinnasami’s previous roles have also included Senior Vice President, Industrial Business Unit at Johnson Electric Health Hong Kong and Vice President and General Manager, Consumer Segment of Flextronics International, Ltd. Mr. Chinnasami holds a B.S. in Production Engineering from Swinburne University of Technology. Jeff McKibben has served as our Chief Information Officer since August 2021. Prior to joining UCT, Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

39 edited+8 added−4 removed150 unchanged
Biggest changeChanges in the timing or terms of a small number of transactions could disproportionately affect our operating results in any particular quarter. Moreover, our operating results in one or more future quarters may fail to meet our guidance or the expectations of securities analysts or investors.
Biggest changeAs a result of the foregoing, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful and that these comparisons may not be an accurate indicator of our future performance. Changes in the timing or terms of a small number of transactions could disproportionately affect our operating results in any particular quarter.
Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software attacks, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data (our own or that of third parties).
Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software attacks, attempts to gain unauthorized access to systems and data, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data (our own or that of third parties).
Among the factors that could affect our stock price are: • quarterly variations in our operating results; • our ability to successfully introduce new products and services and manage new product transitions; • changes in revenue or earnings estimates or publication of research reports by analysts; • speculation in the press or investment community; • strategic actions by us, our customers or our competitors, such as acquisitions or restructurings; • announcements relating to any of our key customers, significant suppliers or the semiconductor manufacturing and capital equipment industry generally; • the effects of war and terrorist attacks; • domestic and international economic or political factors unrelated to our performance; and, • the results of our operations not meeting our guidance or analysts’ expectations.
Among the factors that could affect our stock price are: • quarterly variations in our operating results; • our ability to successfully introduce new products and services and manage new product transitions; 25 • changes in revenue or earnings estimates or publication of research reports by analysts; • speculation in the press or investment community; • strategic actions by us, our customers or our competitors, such as acquisitions or restructurings; • announcements relating to any of our key customers, significant suppliers or the semiconductor manufacturing and capital equipment industry generally; • the effects of war and terrorist attacks; • domestic and international economic or political factors unrelated to our performance; and, • the results of our operations not meeting our guidance or analysts’ expectations.
Should the new ERP system not be implemented successfully throughout all our business units on time and within budget, or if the system does not perform in a satisfactory manner, it could be disruptive and adversely affect our operations, including our ability to: (i) report accurate, timely and consistent financial results; (ii) purchase supplies, components and raw materials from our suppliers; and (iii) deliver products and services to customers on a timely basis and to collect our receivables from them.
Should the ERP system not be implemented successfully throughout all our business units on time and within budget, or if the system does not perform in a satisfactory manner, it could be disruptive and adversely affect our operations, including our ability to: (i) report accurate, timely and consistent financial results; (ii) purchase supplies, components and raw materials from our suppliers; and (iii) deliver products and services to customers on a timely basis and to collect our receivables from them.
Our facilities may experience catastrophic losses caused by natural disasters or other causalities, such as earthquakes, storms, floods, fires, public health epidemic, labor disruptions, power outages, terrorist attacks or 21 political unrest, the occurrence of any one of which could disrupt our operations, delay production and shipments, and result in large repair expenses.
Our facilities may experience catastrophic losses caused by natural disasters or other causalities, such as earthquakes, storms, floods, fires, public health epidemic, labor disruptions, power outages, terrorist attacks or political unrest, the occurrence of any one of which could disrupt our operations, delay production and shipments, and result in large repair expenses.
In connection with our Services business, we face a number of risks associated with customer parts being held on our premises, including the risk of mishandling or damaging, customer parts, any of which could be materially harmful for our business. 19 The results of our operations, financial position and cash flows may suffer if we do not effectively manage our inventory.
In connection with our Services business, we face a number of risks associated with customer parts being held on our premises, including the risk of mishandling or damaging, customer parts, any of which could be materially harmful for our business. The results of our operations, financial position and cash flows may suffer if we do not effectively manage our inventory.
We are continuing the implementation of a new company-wide ERP system. This process has been and continues to be complex and time-consuming and we expect to incur additional capital outlays and expenses. This ERP system will replace many of our existing operating and financial systems, which is a major undertaking from a financial management and personnel perspective.
We are continuing the implementation of a company-wide ERP system. This process has been and continues to be complex and time-consuming and we expect to incur additional capital outlays and expenses. This ERP system will replace many of our existing operating and financial systems, which has been and is a major undertaking from a financial management and personnel perspective.
The stock markets in general, and the markets for technology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. 25 Changes in tax rates or tax assets and liabilities could affect results of operations.
The stock markets in general, and the markets for technology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. Changes in tax rates or tax assets and liabilities could affect results of operations.
We have facilities in areas with above average seismic activity, such as our facilities in Hayward, California, and our Taiwan facilities in Hsinchu and Tainan. We also have experienced fires and extended power outages at our facilities, such as the fire that occurred at a Korean plant operated by our joint venture, Cinos Korea, in 2018.
We have facilities in areas with above average seismic activity, such as our facilities in Hayward, California, and our Taiwan facilities in Hsinchu and Tainan. We also have experienced fires 21 and extended power outages at our facilities, such as the fire that occurred at a Korean plant operated by our joint venture, Cinos Korea, in 2018.
Any damage to or failure of our systems could result in interruptions in our ability to manufacture or deliver products or services, or adversely impact our ability to accurately and timely report our financial results. Interruptions could reduce our sales and profits, and our systems could be perceived as unreliable.
Any damage to or failure of our systems could result in interruptions in our ability to manufacture or 20 deliver products or services, or adversely impact our ability to accurately and timely report our financial results. Interruptions could reduce our sales and profits, and our systems could be perceived as unreliable.
Under the supervision of our Chief Information Security Officer, we have adopted certain measures to combat potential cyberattacks and information espionage, including implementation of certain forensic tools to detect nefarious activities within our system.
Under the supervision of our Chief Information Officer and Chief Information Security Officer, we have adopted certain measures to combat potential cyberattacks and information espionage, including implementation of certain security tools to detect nefarious activities within our system.
As long as our indebtedness remains 23 outstanding, the restrictive covenants and mandatory prepayment provisions could impair our ability to expand or pursue our business strategies or obtain additional funding.
As long as our indebtedness remains outstanding, the restrictive covenants and mandatory prepayment provisions could impair our ability to expand or pursue our business strategies or obtain additional funding.
If we are unable to remediate the material weaknesses, our ability to record, process and reporting financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the Securities and Exchange Commission, could be adversely affected and could reduce the market’s confidence in our financial statements and harm our stock price.
If we are unable to remediate the material weaknesses, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the Securities and Exchange Commission, could be adversely affected and could reduce the market’s confidence in our financial statements and harm our stock price.
The introduction of new products and processes is inherently risky because it is difficult to foresee the adoption of new standards, coordinate our technical personnel and strategic relationships and win acceptance of new products by our customers, and ultimately not be able to recoup design and development expenditures.
The introduction of new products and processes is inherently risky because it is difficult to foresee the adoption of new standards, coordinate our technical personnel and strategic relationships and win acceptance of new products by our customers. We may ultimately not be able to recoup design and development expenditures.
Our quarterly revenue and operating results, including our gross margin, have fluctuated significantly in the past, and we expect them to continue to fluctuate in the future for a variety of reasons, which may include: • the cyclical nature of the industries we serve that frequently oscillates between downturns and growths; • changes in the timing and size, or cancellation or postponement, of orders by our customers; • strategic decisions by our customers to terminate their outsourcing relationship with us or give market share to our competitors, which may result from decreased demand for our customers’ products by end customers; • strategic consolidation by our customers; • pricing pressure from either our competitors or our customers; • disruptions or delays in the manufacturing of our products or in the supply of components or raw materials; • introduction of new products or services; • delays in production ramp-up, low yields or other problems experienced at our manufacturing facilities; • changes in design-to-delivery cycle times; • inability to reduce our costs quickly, commensurate with reductions in our prices or in response to decreased demand; • changes in our product and/or service mix; • write-offs of excess or obsolete inventory; • one-time expenses or charges associated with failed acquisition negotiations or completed acquisitions; • inability to control our operating costs consistent with target levels; • announcements by our competitors of new products, services or technological innovations; and • geographic mix of customer orders or worldwide earnings. 24 As a result of the foregoing, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful and that these comparisons may not be an accurate indicator of our future performance.
Our quarterly revenue and operating results, including our gross margin, have fluctuated significantly in the past, and we expect them to continue to fluctuate in the future for a variety of reasons, which may include: • the cyclical nature of the industries we serve that frequently oscillates between downturns and growths; • changes in the timing and size, or cancellation or postponement, of orders by our customers; • strategic decisions by our customers to terminate their outsourcing relationship with us or give market share to our competitors, which may result from decreased demand for our customers’ products by end customers; • strategic consolidation by our customers; • pricing pressure from either our competitors or our customers; • disruptions or delays in the manufacturing of our products or in the supply of components or raw materials; • introduction of new products or services; • delays in production ramp-up, low yields or other problems experienced at our manufacturing facilities; • changes in design-to-delivery cycle times; • inability to reduce our costs quickly, commensurate with reductions in our prices or in response to decreased demand; 24 • changes in our product and/or service mix; • write-offs of excess or obsolete inventory; • one-time expenses or charges associated with failed acquisition negotiations or completed acquisitions; • inability to control our operating costs consistent with target levels; • announcements by our competitors of new products, services or technological innovations; and • geographic mix of customer orders or worldwide earnings.
Our most recent disclosure was filed on Form SD on May 27, 2022, noting that we could not yet determine whether the conflict minerals we source were, directly or indirectly, used to finance or benefit armed groups in the Democratic Republic of Congo and its adjoining countries.
Our most recent disclosure was filed on Form SD on May 19, 2023, noting that we could not yet determine whether the conflict minerals we source were, directly or indirectly, used to finance or benefit armed groups in the Democratic Republic of Congo and its adjoining countries.
From time to time, we may seek to expand our business through investments in joint ventures with complementary businesses, technologies, services or products, in both new and existing market categories and geographic regions. Our investments in joint ventures are subject to a number of risks, including many of the same risks described above for our acquisition activities.
From time to time, we may seek to expand our business through investments in joint ventures with complementary businesses, technologies, services or products, in both new and existing market categories and geographic regions. Our investments in joint ventures are subject to a number of risks, including many of the same risks that we encounter in our acquisition activities.
We are exposed to political, economic, legal and other risks associated with operating in Asia and EMEA, including: • foreign currency exchange fluctuations; • political, civil, public health and economic instability; • restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments, import/export restrictions and quotas, and customs duties and tariffs; • uncertainty regarding social, political and trade policies in the United States and abroad; • timing and availability of export licenses; • disruptions due to China’s developing domestic infrastructure, including transportation and energy; • difficulties in developing relationships with local suppliers, attracting new international customers, conducting due diligence with respect to business partners in certain international markets, collecting accounts receivables, and staffing and managing distant international subsidiaries and branch operations; • the burden of complying with foreign and international laws and treaties; 15 • legal systems potentially subject to undue influence or corruption; and • potentially adverse tax consequences, including restrictions on the repatriation of earnings to the United States.
We are exposed to political, economic, legal and other risks associated with operating in Asia and EMEA, including: • foreign currency exchange fluctuations; • political, civil, public health and economic instability; • restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments, import/export restrictions and quotas, and customs duties and tariffs; • uncertainty regarding social, political and trade policies in the United States and abroad; • timing and availability of export licenses; • disruptions due to China’s developing domestic infrastructure, including transportation and energy; • difficulties in developing relationships with local suppliers, attracting new international customers, conducting due diligence with respect to business partners in certain international markets, collecting accounts receivables, and staffing and managing distant international subsidiaries and branch operations; • the burden of complying with foreign and international laws and treaties; • legal systems potentially subject to undue influence or corruption; and • potentially adverse tax consequences, including restrictions on the repatriation of earnings to the United States. 15 Negative or uncertain global conditions could prevent us from accurately forecasting demand for our products and services.
Problems with our products may: • cause delays in product introductions and shipments for us or our customers; • result in increased costs and diversion of development resources (for design modifications and others); • cause us to incur increased charges due to unusable inventory; • result in liability for the unintended release of hazardous materials through the defective products, which can cause serious injury or death; • create indemnification and warranty claims for rework, replacement or other damages, which can be significant if our products have already been installed in a fabrication facility; • decrease market acceptance of, or customer satisfaction with, our products; and • result in lower yields for semiconductor manufacturers. 20 Our business may be adversely affected by IT disruptions, including by impairing our ability to effectively deliver our products or services, which could cause us to lose customers.
Problems with our products may: • cause delays in product introductions and shipments for us or our customers; • result in increased costs and diversion of development resources (for design modifications and others); • cause us to incur increased charges due to unusable inventory; • result in liability for the unintended release of hazardous materials through the defective products, which can cause serious injury or death; • create indemnification and warranty claims for rework, replacement or other damages, which can be significant if our products have already been installed in a fabrication facility; • decrease market acceptance of, or customer satisfaction with, our products; and • result in lower yields for semiconductor manufacturers.
We have established and, as circumstances may require, intend to expand our operations globally, which exposes us to risks associated with operating in foreign countries. We generated approximately 61.4% and 65.1% of our revenues in international markets for fiscal years 2022 and 2021, respectively. Depending on market conditions, we intend to further expand our operations in Asia Pacific and EMEA.
We have established and, as circumstances may require, intend to expand our operations globally, which exposes us to risks associated with operating in foreign countries. We generated approximately 69.6% and 68.9% of our revenues in international markets for fiscal years 2023 and 2022, respectively. Depending on market conditions, we intend to further expand our operations in Asia Pacific and EMEA.
We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations.
We are subject to examinations of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations.
Our annual and quarterly tax rates could be affected by numerous factors, including changes in the applicable tax laws, amount and composition of pre-tax income in countries with different tax rates, and valuation of our deferred tax assets and liabilities. We are subject to examinations of our income tax returns by domestic and foreign tax authorities.
Our annual and quarterly tax rates could be affected by numerous factors, including changes in the applicable tax laws, amount and composition of pre-tax income in countries with different tax rates, and valuation of our deferred tax assets and liabilities.
Our top two customers accounted for 62.7%, 64.0% and 67.1% of our revenues for fiscal years 2022, 2021 and 2020, respectively.
Our top two customers accounted for 57.4%, 62.7% and 64.0% of our revenues for fiscal years 2023, 2022 and 2021, respectively.
We made capital expenditures of approximately $100.1 million and $59.3 million for fiscal years 2022 and 2021, respectively, which are primarily related to investments in our manufacturing facilities in the United States, Malaysia, China, Singapore and South Korea and to our ERP system implementation.
We made capital expenditures of approximately $75.8 million and $100.1 million for fiscal years 2023 and 2022, respectively, which are primarily related to investments in our manufacturing facilities in the United States, Ireland and Malaysia and to our ERP system implementation.
Negative or uncertain global conditions could prevent us from accurately forecasting demand for our products and services. In addition, a shift in the mix of orders from our customers away from low-cost markets to higher cost markets could adversely affect our operating margins. Our operations in Asia Pacific and EMEA are subject to U.S. regulations governing equipment export.
In addition, a shift in the mix of orders from our customers away from low-cost markets to higher cost markets could adversely affect our operating margins. Our operations in Asia Pacific and EMEA are subject to U.S. regulations governing equipment export.
Consolidation among our customers, or a decision by any one or more of our customers to outsource all or most manufacturing, assembly, cleaning, coating and analytical services work to a single equipment manufacturer, may 13 further concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on an even smaller number of customers.
Consolidation among our customers, or a decision by any one or more of our customers to outsource all or most manufacturing, assembly, cleaning, coating and analytical services work to a single equipment manufacturer, may further concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on an even smaller number of customers. 13 Our customers also exert a significant amount of negotiating leverage over us, which may force us to accept lower operating margins, increased liability risks or changes in our operations in order to retain their business.
The carrying amount of our fixed assets in Asia Pacific and EMEA were $129.1 million and $76.2 million, respectively as of December 30, 2022, and $129.0 million and $53.4 million, respectively as of December 31, 2021.
The carrying amount of our fixed assets in Asia Pacific and EMEA were $132.6 million and $80.1 million, respectively as of December 29, 2023, and $129.1 million and $76.2 million, respectively as of December 30, 2022.
As of December 30, 2022, we have gross debt of $524.0 million. Such debt is composed of a $515.0 million term loan outstanding under our credit agreement with Barclays Bank and $9.0 million under credit facilities at Ham-Let less unamortized debt costs of $10.2 million.
As of December 29, 2023, we have gross debt of $485.3 million. Such debt is composed of a $479.3 million term loan outstanding under our credit agreement with Barclays Bank and $6.0 million under credit facilities at Fluid Solutions less unamortized debt costs of $6.5 million.
To the extent these teams or key individuals are not retained through the implementation process, the success of our implementation could be compromised and the expected benefits of the ERP system may not be realized. 18 We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls which, if not remediated, could adversely affect the accuracy, reliability, and timeliness of our financial reports, our reputation, business operations, and stock price.
Finally, even once implemented in a business unit we may not realize the anticipated efficiencies and we may incur additional expenses and efforts post-implementation. 18 We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls which, if not remediated, could adversely affect the accuracy, reliability, and timeliness of our financial reports, our reputation, business operations, and stock price.
Demand shifts in these industries are rapid and difficult to predict, and we may not be able to anticipate or respond quickly enough to changes in demand. In the fourth quarter of 2022, we experienced a decline in customer demand that resulted in a change in revenue guidance.
Demand shifts in these industries are rapid and difficult to predict, and we may not be able to anticipate or respond quickly enough to changes in demand.
We also often face long lead times from our suppliers, which may be longer than the lead times provided to us by our customers. If we underestimate customer demand or if such demand exceeds our manufacturing capacity or available raw materials, we may lose sales opportunities and market share and potentially damage our relationships with customers.
If we underestimate customer demand or if such demand exceeds our manufacturing capacity or available raw materials, we may lose sales opportunities and market share and potentially damage our relationships with customers.
We had $248.8 million of goodwill recorded on our Consolidated Balance Sheet as of December 30, 2022. Goodwill represents the excess of cost over the fair market value of net tangible and finite lived, identifiable intangible assets acquired in business combinations.
Goodwill represents the excess of cost over the fair market value of net tangible and finite lived, identifiable intangible assets acquired in business combinations.
Based on our evaluation under the COSO framework as further described under “Item 9A – Controls and Procedures," our management concluded that we did not maintain effective internal control over financial reporting as of December 30, 2022 due to material weaknesses attributable to the design and effectiveness of information technology general controls for our primary Enterprise Resource Planning (ERP) system and ERP access controls affecting the independent review of manual journal entry postings.
Based on our evaluation under the COSO framework as further described under “Item 9A – Controls and Procedures," our management concluded that we did not maintain effective internal control over financial reporting as of December 29, 2023 due to material weaknesses.
If we are unable to meet our debt obligations as they come due, we could be forced to restructure or refinance such obligations, seek additional equity financing, incur additional debt or sell assets, which we may not be able to do on satisfactory terms, if at all.
If we are unable to meet our debt obligations as they come due, we could be forced to restructure or refinance such obligations, seek additional equity financing, incur additional debt or sell assets, which we may not be able to do on satisfactory terms, if at all. 23 Our credit agreement contains certain covenants that restrict our ability to take certain actions, including incurring additional debt, providing guarantees, creating liens, making certain investments, engaging in transactions with affiliates and engaging in certain mergers and acquisitions.
Historically, the industries we serve (in particular the semiconductor capital equipment industry) have been highly cyclical, which makes accurately forecasting customers’ product needs difficult. Although we seek to maintain sufficient inventory of materials to guard against interruptions in supply and meet our customers’ needs, we may experience shortages of certain key materials, particularly in times of high industry demand.
Although we seek to maintain sufficient inventory of materials to guard against interruptions in supply and meet our customers’ needs, we may experience shortages of certain key materials, particularly in times of high industry demand. We also often face long lead times from our suppliers, which may be longer than the lead times provided to us by our customers.
In particular, at the closing of the QGT acquisition, we indirectly became a party to QGT’s joint venture with Cinos Co., Ltd. (“Cinos Korea”) in South Korea and Cinos Xi’an in China, which was our first experience with a joint venture.
In particular, we participate in a joint venture with Cinos Co., Ltd. (“Cinos Korea”) in South Korea and Cinos Xi’an in China.
If this occurs, we would expect to experience an immediate and significant decline in the trading price of our common stock. If we were required to impair all or part of our goodwill and/or our acquired intangible assets, our net income and net worth could be materially adversely affected.
If we were required to impair all or part of our goodwill and/or our acquired intangible assets, our net income and net worth could be materially adversely affected. We had $265.2 million of goodwill recorded on our Consolidated Balance Sheet as of December 29, 2023.
Inventory is one of the largest assets on our balance sheet, representing 22.6% of our total assets as of December 30, 2022. Effective management of raw materials, work-in-process and finished goods is imperative to keep inventory costs down and maintain or improve gross margins, all the while meeting changing customer requirements.
Effective management of raw materials, work-in-process and finished goods is imperative to keep inventory costs down and maintain or improve gross margins, all the while meeting changing customer requirements. 19 Historically, the industries we serve (in particular the semiconductor capital equipment industry) have been highly cyclical, which makes accurately forecasting customers’ product needs difficult.
We have teams leading the implementation of the ERP system at most of our locations.
We have teams leading the implementation of the ERP system at most of our locations. To the extent these teams or key individuals are not retained through the implementation process, the success of our implementation could be compromised and the expected benefits of the ERP system may not be realized.
Removed
Our customers also exert a significant amount of negotiating leverage over us, which may force us to accept lower operating margins, increased liability risks or changes in our operations in order to retain their business.
Added
Inventory is one of the largest assets on our balance sheet, representing 20.1% of our total assets as of December 29, 2023.
Removed
In 2022, the management has devoted significant amount of time and resources to integrate Ham-Let, focusing on: the maintenance of customers and other important relationships; the consolidation of IT, finance, HR, and other general and administrative infrastructures; the coordination of our sales and marketing efforts to effectively position our combined capabilities; and streamlining of businesses by divesting certain non-semiconductor businesses.
Added
Our business may be adversely affected by IT disruptions, including by impairing our ability to effectively deliver our products or services, which could cause us to lose customers.
Removed
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Added
Moreover, our operating results in one or more future quarters may fail to meet our guidance or the expectations of securities analysts or investors. If this occurs, we would expect to experience an immediate and significant decline in the trading price of our common stock.
Removed
Our credit agreement contains certain covenants that restrict our ability to take certain actions, including incurring additional debt, providing guarantees, creating liens, making certain investments, engaging in transactions with affiliates and engaging in certain mergers and acquisitions.
Added
We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value. We have a stock repurchase program under which we are authorized to repurchase our common stock. Our repurchase program may be suspended or terminated at any time.
Added
Even if our stock repurchase program is fully implemented, it may not enhance long-term stockholder value. Also, the amount, timing, and execution of our stock repurchase programs may fluctuate based on our priorities for the use of cash for other purposes and because of changes in cash flows, tax laws, and the market price of our common stock.
Added
In addition, due to economic and political conditions, tax laws and tax rates for income taxes in various jurisdictions may be subject to significant changes.
Added
For example, the Organization for Economic Co-Operation and Development (the “OECD”) continues to advance proposals for modernizing international tax rules, including the introduction of a framework to implement a global minimum corporate tax of 15%, referred to as Pillar Two.
Added
While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation and other countries are in the process of introducing legislation to implement Pillar Two. It is possible that such measures, if adopted, may adversely affect our provision for income taxes.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeItem 2. P roperties UCT’s headquarters is located in Hayward, California. This facility provides administrative, sales and support, engineering and technology development and manufacturing operations. This lease expires in 2027. The Company has manufacturing and engineering facilities in California, Texas, Arizona, Israel, China, Malaysia, Singapore, United Kingdom, Philippines and Czech Republic.
Biggest changeItem 2. P roperties UCT’s headquarters is located in Hayward, California. This facility provides administrative, sales and support, engineering and technology development and manufacturing operations. This lease expires in 2027. The Company has manufacturing and engineering facilities in California, Texas, Arizona, Israel, Oregon, China, Malaysia, Singapore, United Kingdom, Philippines and Czech Republic.
The Company has parts cleaning, analytics and engineering facilities in Colorado, Arizona, California, Oregon, Maine, Texas, Ireland, Israel, Taiwan, South Korea, Singapore and China. These facilities have leases that expire on various dates through 2042 and are subject to periodic changes. We also own buildings and land that are located in South Korea, China and the United Kingdom.
The Company has parts cleaning, analytics and engineering facilities in Colorado, Arizona, California, Oregon, Maine, Texas, Ireland, Israel, Taiwan, South Korea, Singapore and China. These facilities have leases that expire on various dates through 2038 and are subject to periodic changes. We also own buildings and land that are located in South Korea, China and the United Kingdom.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−3 removed2 unchanged
Biggest changeStock Performance Graph The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
Biggest changePeriod Total Number of Shares Purchased Average Price Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (In millions) 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 April 1, 2023 — April 28, 2023 159,180 $ 28.67 159,180 $ 119.1 April 29, 2023 — May 26, 2023 177,683 $ 27.84 177,683 $ 114.2 May 27, 2023 — June 30, 2023 — — — $ 114.2 July 1, 2023 — July 28, 2023 — — — $ 114.2 July 29, 2023 — August 25, 2023 — — — $ 114.2 August 26, 2023 — September 29, 2023 — — — $ 114.2 September 30, 2023 — October 27, 2023 176,606 $ 23.90 176,606 $ 110.0 October 28, 2023 — November 24, 2023 62,762 $ 24.04 62,762 $ 108.5 November 25, 2023 — December 29, 2023 — — — $ 108.5 Stock Price Performance Graph The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters, and Issuer Purchases of Equity Securities Stock Exchange Listing Our common stock has been traded on the NASDAQ Global Market under the symbol “UCTT” since March 25, 2004. As of February 23, 2023, there were six holders of record of UCTT common stock.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters, and Issuer Purchases of Equity Securities Stock Exchange Listing Our common stock has been traded on the NASDAQ Global Market under the symbol “UCTT” since March 25, 2004. As of February 20, 2024, there were six holders of record of UCTT common stock.
Issuer Purchases of Equity Securities On October 20, 2022, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $150.0 million of the Company’s common stock over a three-year period.
Repurchases of Common Stock On October 20, 2022, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $150.0 million of the Company’s common stock over a three-year period.
The following stock performance graph compares the cumulative total stockholder returns during the period from December 29, 2017 to December 30, 2022, of our common stock to the NASDAQ Composite Index and the RDG Semiconductor Composite Index. The comparison assumes $100 was invested on December 29, 2017, in our common stock and in each of the foregoing indices.
The following stock performance graph compares the cumulative total stockholder returns during the period from December 28, 2018 to December 29, 2023, of our common stock to the NASDAQ Composite Index and the RDG Semiconductor Composite Index. The comparison assumes $100 was invested on December 28, 2018, in our common stock and in each of the foregoing indices.
In fiscal 2022, pursuant to a trading plan designed to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, approximately 342,863 shares were repurchased under this program with an aggregate cost of $12.1 million and an average price of $35.31 per share.
In fiscal 2023, pursuant to a trading plan designed to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, approximately 1.1 million shares were repurchased under this program with an aggregate cost of $29.4 million and an average price of $29.16 per share.
The stock performance shown on the following graph represents historical stock performance and is not necessarily indicative of future stock price performance. 28 The following table sets forth for the periods indicated the high and low sales prices per share of our common stock as reported by the NASDAQ Global Market: High Low Fiscal year 2021 First quarter $ 59.42 $ 29.92 Second quarter $ 65.33 $ 44.18 Third quarter $ 56.24 $ 39.00 Fourth quarter $ 60.84 $ 40.97 Fiscal year 2022 First quarter $ 60.49 $ 37.72 Second quarter $ 41.41 $ 26.61 Third quarter $ 36.23 $ 25.19 Fourth quarter $ 39.10 $ 23.32 Recent Sales of Unregistered Sales of Equity Securities None.
The stock performance shown on the following graph represents historical stock performance and is not necessarily indicative of future stock price performance. 29 The following table sets forth for the periods indicated the high and low sales prices per share of our common stock as reported by the NASDAQ Global Market: High Low Fiscal year 2022 First quarter $ 60.49 $ 37.72 Second quarter $ 41.41 $ 26.61 Third quarter $ 36.23 $ 25.19 Fourth quarter $ 39.10 $ 23.32 Fiscal year 2023 First quarter $ 38.84 $ 29.01 Second quarter $ 39.15 $ 26.59 Third quarter $ 40.80 $ 28.04 Fourth quarter $ 35.54 $ 22.15
Removed
Period Total Number of Shares Purchased Average Price Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (In millions) December 5 - December 30, 2022 342,863 $ 35.31 342,863 $ 137.9 Subsequent to 2022 fiscal year-end, through the date of filing of this report, we repurchased an additional 389,299 common stocks at an aggregate purchase price of $12.9 million.
Removed
Approximately $125.0 million remained available under the Company's share repurchase program as of February 28, 2023.
Removed
Purchase of Equity Securities by the Issuer and Affiliated Purchasers None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

53 edited+15 added−15 removed49 unchanged
Biggest changeThe $164.4 million decrease was driven by a decrease of $76.0 million in net income and decrease of $169.0 million in the net change from operating assets and liabilities partially offset by the increase of $80.6 million in non-cash items. • The major contributors to the net change in operating assets and liabilities, net of effects of acquisition and business dispositions, in fiscal year 2022 were as follows: o Accounts receivable increased $15.7 million primarily due to the increase in revenues and the timing of collections. o Inventories increased $84.4 million as a result of inventory receipts in excess of consumption.
Biggest changeThe $88.7 million increase in net cash from operating activities was driven by a $264.6 million favorable change in net working capital offset in part by a decrease of $72.6 million in net income and by a decrease of $103.3 million from non-cash items. • The major contributors to the net change in operating assets and liabilities, net of effects of acquisition, in fiscal year 2023 were as follows: o Accounts receivable decreased $78.5 million primarily due to timing of shipments and collections, inventories and prepaid expenses decreased $80.8 million and $12.5 million, respectively. o Accounts payable decreased $61.5 million, income taxes payable decreased $5.2 million, accrued compensation and related benefits decreased $5.6 million and other liabilities decreased $7.9 million, primarily due to the timing of payments. • Cash used in investing activities was $119.7 million in fiscal year 2023 compared to $96.2 million in fiscal year 2022.
It is possible that changes in such circumstances, or in the variables associated with the judgments, assumptions and estimates used in assessing fair value, would require us to record a non-cash impairment charge. Results of Operations Fiscal Year Our fiscal year is the 52 or 53 week period ending on the Friday nearest December 31.
It is possible that changes in such circumstances, or in the variables associated with the judgments, assumptions and estimates used in assessing fair value, would require us to record a non-cash impairment charge. 33 Results of Operations Fiscal Year Our fiscal year is the 52 or 53 week period ending on the Friday nearest December 31.
Critical Accounting Estimates Our Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure at the date of our Consolidated Financial Statements.
Critical Accounting Policies and Estimates Our Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure at the date of our Consolidated Financial Statements.
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.
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 SOFR, plus the applicable margin.
If changes occur in the assumptions underlying our tax planning strategies or in the scheduling of the reversal of our deferred tax liabilities, the valuation allowance may need to be adjusted in the future. The Company remitted earnings from one of its subsidiaries in Singapore in 2022.
If changes occur in the assumptions underlying our tax planning strategies or in the scheduling of the reversal of our deferred tax liabilities, the valuation allowance may need to be adjusted in the future. The Company remitted earnings from one of its subsidiaries in Singapore in 2023.
The fair value of our long-term debt was based on Level 2 inputs, and fair value was determined using quoted prices for similar liabilities in inactive markets.
The fair value of our long-term debt was based on Level 2 inputs, and fair value was determined using quoted prices for similar liabilities in inactive markets. The carrying value of our long-term debt approximates fair value.
GAAP suggest that we review our recent cumulative income/loss as well as determine our ability to generate sufficient future taxable 31 income to realize our net deferred tax assets.
GAAP suggest that we review our recent cumulative income/loss as well as determine our ability to generate sufficient future taxable 32 income to realize our net deferred tax assets.
Our potential liability arising out of intellectual property infringement claims by any third party is generally uncapped. As of December 30, 2022, we have not incurred 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.
Our potential liability arising out of intellectual property infringement claims by any third party is generally uncapped. As of December 29, 2023, we have not incurred 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.
In fiscal year 2022, we factored $6.5 million under this arrangement. We anticipate that our existing cash and cash equivalents balance and operating cash flow will be sufficient to service our indebtedness and meet our working capital requirements and technology development projects for at least the next twelve months.
In fiscal year 2023, we factored $7.5 million under this arrangement. We anticipate that our existing cash and cash equivalents balance and operating cash flow will be sufficient to service our indebtedness and meet our working capital requirements and technology development projects for at least the next twelve months.
We may engage third-party valuation firms to assist management in reviewing management’s identification and determination of the fair values of acquired intangible assets such as customer relationships and tradenames. Such valuations require management to make significant estimates and assumptions. Management makes estimates of fair value based upon assumptions believed to be reasonable.
We may engage third-party valuation firms to assist management in reviewing management’s identification and determination of the fair values of acquired intangible assets. Such valuations require management to make significant estimates and assumptions. Management makes estimates of fair value based upon assumptions believed to be reasonable.
Our cash and cash equivalents, cash generated from operations and borrowings under our term loan described below, were our principal sources of liquidity as of December 30, 2022. We have an existing factoring arrangement with a financial institution in which a portion of its accounts receivable are sold on a nonrecourse basis.
Our cash and cash equivalents, cash generated from operations and borrowings under our term loan described below, were our principal sources of liquidity as of December 29, 2023. 38 We have an existing factoring arrangement with a financial institution in which a portion of its accounts receivable are sold on a nonrecourse basis.
Sales and Marketing Year Ended December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 Sales and marketing $ 54.4 12.9 % $ 48.2 92.0 % $ 25.1 Sales and marketing as a percentage of total revenues 2.3 % 2.3 % 1.8 % Sales and marketing expenses consist primarily of salaries and commissions paid to our sales employees, salaries paid to our engineers who partner with sales and service employees to help determine the components and configuration requirements for new products and other costs related to the sales of our products.
Sales and Marketing Year Ended December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 Change 2021 Sales and marketing $ 51.8 (4.8 ) % $ 54.4 12.9 % $ 48.2 Sales and marketing as a percentage of total revenues 3.0 % 2.3 % 2.3 % Sales and marketing expenses consist primarily of salaries and commissions paid to our sales employees, salaries paid to our engineers who partner with sales and service employees to help determine the components and configuration requirements for new products and other costs related to the sales of our products.
On an on-going basis, we evaluate our estimates and judgments, including those related to inventories, income taxes, business combinations and goodwill, intangible assets and long-lived assets.
On an on-going 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.
Our ability to realize deferred tax assets depends on our ability to generate sufficient future taxable income. In assessing our future taxable income, we have considered all sources of future taxable income available to realize our deferred tax assets, including the taxable income from future reversal of existing temporary differences, carry forwards, and tax-planning strategies.
In assessing our future taxable income, we have considered all sources of future taxable income available to realize our deferred tax assets, including the taxable income from future reversal of existing temporary differences, carry forwards, and tax-planning strategies.
If recovery is not more likely than not, we must increase our provision for taxes by recording a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be recoverable.
We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not more likely than not, we must increase our provision for taxes by recording a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be recoverable.
Cash Flows Year Ended December 30, December 31, December 25, (In millions) 2022 2021 2020 Operating activities $ 47.2 $ 211.6 $ 97.3 Investing activities (96.2 ) (404.8 ) (29.8 ) Financing activities (56.0 ) 460.8 (31.1 ) Effects of exchange rate changes on cash and cash equivalents (2.7 ) (1.4 ) 1.4 Net increase (decrease) in cash and cash equivalents $ (107.7 ) $ 266.2 $ 37.8 Our primary cash inflows and outflows were as follows: • We generated net cash from operating activities of $47.2 million in fiscal year 2022, compared to $211.6 million in fiscal year 2021.
Cash Flows Year Ended December 29, December 30, December 31, (In millions) 2023 2022 2021 Operating activities $ 135.9 $ 47.2 $ 211.6 Investing activities (119.7 ) (96.2 ) (404.8 ) Financing activities (69.9 ) (56.0 ) 460.8 Effects of exchange rate changes on cash and cash equivalents 1.9 (2.7 ) (1.4 ) Net increase (decrease) in cash and cash equivalents $ (51.8 ) $ (107.7 ) $ 266.2 37 Our primary cash inflows and outflows were as follows: • We generated net cash from operating activities of $135.9 million in fiscal year 2023, compared to $47.2 million in fiscal year 2022.
During fiscal year 2022, net cash provided by financing activities primarily consisted of debt repayment of $39.7 million and $12.1 million of shares repurchased.
During fiscal year 2023, net cash provided by financing activities primarily consisted of debt repayment of $38.6 million and $29.4 million of shares repurchased. During fiscal year 2022, net cash provided by financing activities primarily consisted of debt repayment of $39.7 million and $12.1 million of shares repurchased.
As of December 30, 2022, we maintained full valuation allowances on our U.S. federal and state and certain of our foreign deferred tax assets in the amount of $53.1 million as we believe it is more likely than not that these deferred tax assets will not be realized.
As of December 29, 2023, we maintained full valuation allowances on our U.S. federal and state and certain of our foreign deferred tax assets in the amount of $57.9 million as we believe it is more likely than not that these deferred tax assets will not be realized.
We believe we have sufficient capital to fund our working capital needs, satisfy our debt obligations, maintain our existing capital equipment, purchase new capital equipment and make strategic acquisitions from time to time. As of December 30, 2022, we had cash and cash equivalents of $358.8 million compared to $466.5 million as of December 31, 2021.
We believe we have sufficient capital to fund our working capital needs, satisfy our debt obligations, maintain our existing capital equipment, purchase new capital equipment and make strategic acquisitions from time to time. As of December 29, 2023, we had cash and cash equivalents of $307.0 million compared to $358.8 million as of December 30, 2022.
Research and Development Year Ended December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 Research and development $ 28.5 16.3 % $ 24.5 65.5 % $ 14.8 Research and development as a percentage of total revenues 1.2 % 1.2 % 1.1 % 34 Research and development expenses consist primarily of activities related to new component testing and evaluation, test equipment and fixture development, product design, the advancement of cleaning and coating and analytical processes, and other product-development activities.
Research and Development Year Ended December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 Change 2021 Research and development $ 28.3 (0.7 ) % $ 28.5 16.3 % $ 24.5 Research and development as a percentage of total revenues 1.6 % 1.2 % 1.2 % 35 Research and development expenses consist primarily of activities related to new component testing and evaluation, test equipment and fixture development, product design, the advancement of cleaning and coating and analytical processes, and other product-development activities.
Outstanding letters of credit reduce the availability of the revolving credit facility and, as of December 30, 2022, the Company had $146.6 million, net of $3.4 million of outstanding letters of credit, available under this revolving credit facility. The letter of credit facility has an available commitment of $50.0 million and a maturity date of August 27, 2025.
Outstanding letters of credit reduce the availability of the revolving credit facility and, as of December 29, 2023, the Company had $146.1 million, net of $3.9 million of outstanding letters of credit, available under this revolving credit facility. The letter of credit facility has an available commitment of $50.0 million and a maturity date of August 27, 2025.
During fiscal year 2022, net cash used for investing activities primarily consisted of $100.1 million related to purchases of property, plant and equipment.
During fiscal year 2023, net cash used for investing activities primarily consisted of $75.8 million related to purchases of property, plant and equipment and $46.1 million related to an acquisition.
In August 2018, the Company borrowed $350.0 million under the Term Loan. 37 On March 31, 2021, the Company entered into a Second Amendment (the “Second Amendment”) to the Credit Agreement to, among other things, (i) refinance and reprice $272.8 million of existing Term Loan 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.
Term Loan $ 479.3 8.8 % $ 515.0 5.5 % Fluid Solutions Debt Facilities 6.0 9.4 % 9.0 4.2 % Debt issuance costs (6.5 ) (10.2 ) $ 478.8 $ 513.8 On March 31, 2021, the Company entered into a Second Amendment (the “Second Amendment”) to the Credit Agreement to, among other things, (i) refinance and reprice $272.8 million of existing Term Loan 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 results of operations for 2021, and the discussion below reflect nine months of activity resulting from the acquisition of Ham-Let. 32 A discussion regarding our financial condition and results of operations for fiscal 2021, compared to fiscal 2020, can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 1, 2022, which is available on the SEC’s website at www.sec.gov and our Investor Relations website at www.uct.com/investors.
A discussion regarding our financial condition and results of operations for fiscal 2022, compared to fiscal 2021, can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022, filed with the SEC on February 28, 2023, which is available on the SEC’s website at www.sec.gov and our Investor Relations website at www.uct.com/investors.
Fiscal years 2022 and 2020, each contained 52 weeks . Fiscal year 2021, contained 53 weeks. A discussion regarding our financial condition and results of operations for fiscal 2022, compared to fiscal 2021, is presented below.
Fiscal years 2023 and 2022, each contained 52 weeks . Fiscal year 2021, contained 53 weeks. A discussion regarding our financial condition and results of operations for fiscal 2023, compared to fiscal 2022, is presented below. The results of operations for 2023, and the discussion below reflect two months of activity resulting from the acquisition of HIS.
Liquidity and Capital Resources Cash and cash Equivalents The following table summarizes our cash and cash equivalents: Year Ended December 30, December 31, (In millions) 2022 2021 Decrease Total cash and cash equivalents $ 358.8 $ 466.5 $ (107.7 ) The decrease in cash and cash equivalents in fiscal year 2022, compared to fiscal year 2021, was primarily due to the cash provided by operating activities of $47.2 million offset by the cash used in financing activities of $56.0 million and $96.2 million used in investing activities.
Liquidity and Capital Resources Cash and cash Equivalents The following table summarizes our cash and cash equivalents: Year Ended December 29, December 30, (In millions) 2023 2022 Decrease Total cash and cash equivalents $ 307.0 $ 358.8 $ (51.8 ) The decrease in cash and cash equivalents in fiscal year 2023, compared to fiscal year 2022, was primarily due to cash used in investing activities of $119.7 million and $69.9 million cash used in financing activities offset by the cash provided by operating activities of $135.9 million.
Operating profit and operating margin of Services decreased in fiscal year 2022 compared to fiscal year 2021, due to lower gross profit.
Operating profit and operating margin of Services decreased in fiscal year 2023 compared to fiscal year 2022, due to lower gross profit resulting from reduced customer demand.
As of December 30, 2022, the Company’s total bank debt was $513.8 million, net of unamortized debt issuance costs of $10.2 million. As of December 30, 2022, we had $146.6 million, $5.3 million and $9.5 million available to draw from our credit facilities in the U.S., Czech Republic and Israel, respectively.
As of December 29, 2023, the Company’s total bank debt was $478.8 million, net of unamortized debt issuance costs of $6.5 million. As of December 29, 2023, the Company had $146.1 million, $12.5 million and $7.8 million available to draw from our credit facilities in the U.S., Israel and Czech Republic, respectively.
These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Goodwill, Intangibles Assets, and Long-lived Assets Goodwill is measured as the excess of the cost of an acquisition over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed.
Goodwill, Intangibles Assets, and Long-lived Assets Goodwill is measured as the excess of the cost of an acquisition over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed.
At December 30, 2022, the Company had an outstanding amount under the Term Loan of $515.0 million, gross of unamortized debt issuance costs of $10.2 million. As of December 30, 2022, the interest rate on the outstanding Term Loan was 7.8%.
At December 29, 2023, the Company had an outstanding amount under the Term Loan of $479.3 million, gross of unamortized debt issuance costs of $6.5 million. As of December 29, 2023, the interest rate on the outstanding Term Loan was 9.2%.
During fiscal year 2021, net cash used for investing activities primarily consisted of $353.2 million related to an acquisition and $59.3 million for purchases of property, plant and equipment. • Cash used in financing activities was $56.0 million in fiscal year 2022 compared to cash provided in financing activities of $460.8 million in fiscal year 2021.
During fiscal year 2022, net cash used for investing activities primarily consisted of $100.1 million for purchases of property, plant and equipment. • Cash used in financing activities was $69.9 million in fiscal year 2023 compared to $56.0 million in fiscal year 2022.
Cost of Revenues Year Ended Cost of revenues by Segment December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 Products $ 1,712.3 15.8 % $ 1,478.7 58.2 % $ 934.7 Services 197.0 2.1 % 192.9 12.1 % 172.1 Total Cost of revenues $ 1,909.3 14.2 % $ 1,671.6 51.0 % $ 1,106.8 Products cost as a percentage of total Products revenues 82.5 % 82.0 % 82.6 % Services cost as a percentage of total Services revenues 65.8 % 64.8 % 64.4 % Total cost of revenues increased $237.7 million in fiscal year 2022 over fiscal year 2021, due to higher demand for Products and higher labor costs for Services.
Cost of Revenues Year Ended Cost of revenues by Segment December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 Change 2021 Products $ 1,290.5 (24.6 ) % $ 1,712.3 15.8 % $ 1,478.7 Services 166.7 (15.4 ) % 197.0 2.1 % 192.9 Total Cost of revenues $ 1,457.2 (23.7 ) % $ 1,909.3 14.2 % $ 1,671.6 Products cost as a percentage of total Products revenues 85.9 % 82.5 % 82.0 % Services cost as a percentage of total Services revenues 71.6 % 65.8 % 64.8 % 34 Total cost of revenues decreased $452.1 million in fiscal year 2023 over fiscal year 2022, due to lower demand for both Products and Services driven by reduced spending within the semiconductor industry globally.
We consider certain accounting policies related to revenue recognition, inventory valuation, accounting for income taxes, business combinations, 30 valuation of goodwill, intangible assets and long-lived assets to be critical policies due to the estimates and judgments involved in each.
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. 31 Revenue Recognition Our revenues for fiscal years 2023, 2022 and 2021, were highly concentrated with a small number of OEM customers in the semiconductor capital equipment industry.
Interest and Other Income (Expense), net Year Ended December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 Interest income $ 0.9 125.0 % $ 0.4 (55.6 ) % $ 0.9 Interest expense $ (33.9 ) 40.1 % $ (24.2 ) 43.2 % $ (16.9 ) Other income (expense), net $ 0.9 (111.8 ) % $ (7.6 ) 33.3 % $ (5.7 ) Interest expense increased $9.7 million in fiscal year 2022 over fiscal year 2021 due to a higher average debt balance and higher interest rates on our variable rate debt due to rising LIBOR rates in 2022.
Interest and Other Income (Expense), net Year Ended December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 Change 2021 Interest income $ 4.1 355.6 % $ 0.9 125.0 % $ 0.4 Interest expense $ (48.8 ) 44.0 % $ (33.9 ) 40.1 % $ (24.2 ) Other income (expense), net $ (1.8 ) (300.0 ) % $ 0.9 (111.8 ) % $ (7.6 ) Interest income increased $3.2 million in fiscal year 2023 over fiscal year 2022 due to higher interest income earned on cash and cash equivalent balances attributed to higher interest rates in the current period.
Gross Margin Year Ended Gross Profit by Segment December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 Products $ 362.4 11.4 % $ 325.2 65.5 % $ 196.5 Services 102.6 (2.1 ) % 104.8 10.0 % 95.3 Gross profit $ 465.0 8.1 % $ 430.0 47.4 % $ 291.8 Gross Margin by Segment Products 17.5 % 18.0 % 17.4 % Services 34.2 % 35.2 % 33.5 % Total Company 19.6 % 20.5 % 20.9 % Products and Services gross margin decreased in fiscal year 2022 over fiscal year 2021, due to higher labor and overhead costs.
Gross Margin Year Ended Gross Profit by Segment December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 Change 2021 Products $ 211.1 (41.8 ) % $ 362.4 11.4 % $ 325.2 Services 66.2 (35.5 ) % 102.6 (2.1 ) % 104.8 Gross profit $ 277.3 (40.4 ) % $ 465.0 8.1 % $ 430.0 Gross Margin by Segment Products 14.1 % 17.5 % 18.0 % Services 28.4 % 34.2 % 33.5 % Total Company 16.0 % 19.6 % 20.5 % Gross profit and gross margins fluctuate with revenue levels, product mix, material costs, and labor costs.
Operating Margin Year Ended Operating Profit by Segment December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 Products $ 90.4 (41.4 ) % $ 154.3 58.7 % $ 97.2 Services 30.0 (4.4 ) % 31.4 29.8 % 24.2 Operating profit $ 120.4 (35.2 ) % $ 185.7 53.0 % $ 121.4 Operating Margin by Segment Products 4.4 % 8.6 % 8.6 % Services 10.0 % 10.5 % 33.5 % Total Company 5.1 % 8.8 % 8.7 % Operating profit and operating margin of Products decreased in fiscal year 2022 compared to fiscal year 2021, primarily due to the $77.4 million net loss recorded from the divestiture of subsidiaries partially offset by the higher demand and the inclusion of Fluid Solutions gross profit for the full twelve months in fiscal year 2022 as compared to nine months in fiscal year 2021.
Operating Margin Year Ended Operating Profit by Segment December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 Change 2021 Products $ 29.9 (66.9 ) % $ 90.4 (41.4 ) % $ 154.3 Services 5.3 (82.3 ) % 30.0 (4.4 ) % 31.4 Operating profit $ 35.2 (70.8 ) % $ 120.4 (35.2 ) % $ 185.7 Operating Margin by Segment Products 2.0 % 4.4 % 8.6 % Services 2.3 % 10.0 % 10.5 % Total Company 2.0 % 5.1 % 8.8 % Operating profit and operating margin of Products decreased in fiscal year 2023 compared to fiscal year 2022, primarily due to decreases in business volumes and customer demands offset partially by the absence of net loss on divestitures.
The Company was in compliance with all financial covenants during the year ended December 30, 2022. Fluid Solutions has credit facilities with various financial institutions that provides borrowings of up to $18.5 million. As of December 31, 2021, Fluid Solutions had $9.0 million of outstanding debt with interest rate of 4.2%.
As of December 29, 2023, the Company had no outstanding amount under this revolving credit facility. Fluid Solutions has credit facilities with various financial institutions in Israel that provides borrowings of up to $18.5 million. As of December 30, 2022, Fluid Solutions had $6.0 million of outstanding debt with interest rate ranges from 7.6% to 8.4%.
Discussion of Results of Operations Revenues Year Ended Revenues by Segment December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 Products $ 2,074.7 15.0 % $ 1,803.9 59.5 % $ 1,131.2 Services 299.6 0.6 % 297.7 11.3 % 267.4 Total revenues $ 2,374.3 13.0 % $ 2,101.6 50.3 % $ 1,398.6 Products as a percentage of total revenues 87.4 % 85.8 % 80.9 % Services as a percentage of total revenues 12.6 % 14.2 % 19.1 % Total Products revenue increased $270.8 million in fiscal year 2022 over fiscal year 2021, primarily due to an increase in customer demand in the semiconductor industry, in particular, the wafer fabrication equipment industry and in part due to the inclusion of Fluid Solutions for the full twelve month period in 2022.
Discussion of Results of Operations Revenues Year Ended Revenues by Segment December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 Change 2021 Products $ 1,501.6 (27.6 ) % $ 2,074.7 15.0 % $ 1,803.9 Services 232.9 (22.3 ) % 299.6 0.6 % 297.7 Total revenues $ 1,734.5 (26.9 ) % $ 2,374.3 13.0 % $ 2,101.6 Products as a percentage of total revenues 86.6 % 87.4 % 85.8 % Services as a percentage of total revenues 13.4 % 12.6 % 14.2 % Total Products and Services revenues decreased $639.8 million in fiscal year 2023 over fiscal year 2022, primarily due to weaker demand in the semiconductor industry driven largely by macroeconomic and geopolitical factors.
The Company also concluded that some of its foreign 35 deferred tax assets acquired as part of the QGT and Ham-Let acquisitions required a valuation allowance. As of December 30, 2022, the total U.S. and foreign valuation allowances for deferred tax assets were $43.4 million and $9.7 million, respectively.
For the year ended December 29, 2023, the Company concluded that a full valuation allowance against its U.S. federal and state net deferred tax assets continues to be necessary. The Company also concluded that some of its foreign deferred tax assets acquired as part of the QGT and Ham-Let acquisitions required a valuation allowance.
Fluid Delivery Systems (“FDS”) has a credit agreement with a local bank in the Czech Republic that provides for a revolving credit facility in the aggregate of up to 5.0 million euros (approximately $5.3 million). As of December 30, 2022, the Company had no outstanding amount under this revolving credit facility.
The Company was in compliance with all financial covenants during the year ended December 29, 2023. The Company has a credit agreement with a local bank in the Czech Republic that provides for a revolving credit facility in the aggregate of up to 7.0 million euros (approximately $7.8 million).
No assurance can be given that additional financing will be available or that, if available, such financing can be obtained on terms favorable to our stockholders and us.
No assurance can be given that additional financing will be available or that, if available, such financing can be obtained on terms favorable to our stockholders and us. As of December 29, 2023, we had undistributed earnings of approximately $491.0 million from our foreign subsidiaries that are indefinitely invested outside of the U.S.
Cost of Products revenues consists of purchased materials, direct labor and manufacturing overhead. Cost of products revenues increased $233.6 million for fiscal 2022 compared to fiscal 2021.
Cost of Products revenues consists of purchased materials, direct labor and manufacturing overhead. Cost of products revenues decreased $421.8 million for fiscal 2023 compared to fiscal 2022, due to lower volume of sales driving decreased material costs, lower direct labor spending, unfavorable absorption of overhead costs and lower freight costs.
Borrowing Arrangements December 30, December 31, 2022 2021 (Dollars in millions) Amount Weighted- Average Interest Rate Amount Weighted- Average Interest Rate U.S.
As of December 29, 2023, we have cash of approximately $228.0 million in our foreign subsidiaries. Borrowing Arrangements December 29, December 30, 2023 2022 (Dollars in millions) Amount Weighted- Average Interest Rate Amount Weighted- Average Interest Rate U.S.
For fiscal years 2022, 2021 and 2020, we wrote down inventories of $5.0 million, $6.1 million, and $3.4 million, respectively. Accounting for Income Taxes The determination of our tax provision is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region and is subject to judgments and estimates.
Accounting for Income Taxes The determination of our tax provision is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region and is subject to judgments and estimates. Management carefully monitors the changes in many factors and adjusts the effective tax rate as required.
Provision for Income Taxes Year Ended December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 Provision for income taxes $ 37.9 35.8 % $ 27.9 44.6 % $ 19.3 Effective tax rate 42.9 % 18.1 % 19.3 % The change in respective tax rates reflects, primarily, changes in the geographic distribution of our worldwide earnings.
Other income (expense), net, decreased $2.7 million in fiscal year 2023 over fiscal year 2022, due to the loss from the change of the fair value of contingent earn-out of $2.0 million. 36 Provision for Income Taxes Year Ended December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 Change 2021 Provision for income taxes $ 10.9 (71.2 ) % $ 37.9 35.8 % $ 27.9 Effective tax rate (96.5 ) % 42.9 % 18.1 % The change in tax rates in fiscal year 2023 reflects, primarily, the changes in the geographic distribution of our worldwide earnings and the changes in our net deferred tax asset realization assessment as a result of taxable temporary differences assumed in connection with the HIS acquisition.
General and Administrative Year Ended December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 General and administrative $ 184.3 7.4 % $ 171.6 31.5 % $ 130.5 General and administrative as a percentage of total revenues 7.8 % 8.2 % 9.3 % General and administrative expenses increased $12.7 million in fiscal year 2022 over fiscal year 2021, due to the inclusion of Fluid Solutions’ general and administrative activities for the full twelve months in fiscal year 2022 and higher personnel-related expenses driven by higher headcount.
General and Administrative Year Ended December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 Change 2021 General and administrative $ 162.0 (12.1 ) % $ 184.3 7.4 % $ 171.6 General and administrative as a percentage of total revenues 9.3 % 7.8 % 8.2 % General and administrative expenses decreased $22.3 million in fiscal year 2023 over fiscal year 2022, primarily driven by decreases in stock-based compensation expense of $7.1 million, in other employee related costs of $4.5 million, in amortization of intangible assets acquired through business combinations of $6.1 million, in spending for certain third party professional services of $3.7 million and in depreciation expense of $3.5 million partially offset by increases in acquisition and restructuring related costs of $6.0 million.
Year Ended Revenues by Geography December 30, Percent December 31, Percent December 25, (Dollars in millions) 2022 Change 2021 Change 2020 United States $ 915.3 24.6 % $ 734.4 26.3 % $ 581.6 International 1,459.0 6.7 % 1,367.2 67.3 % 817.0 Total revenues $ 2,374.3 13.0 % $ 2,101.6 50.3 % $ 1,398.6 Unites States as a percentage of total revenues 38.6 % 34.9 % 41.6 % International as a percentage of total revenues 61.4 % 65.1 % 58.4 % On a geographic basis, revenue represents products were shipped or services performed in our U.S. and international locations.
Year Ended Revenues by Geography December 29, Percent December 30, Percent December 31, (Dollars in millions) 2023 Change 2022 (1) Change 2021 United States $ 526.8 (28.6 ) % $ 738.0 0.5 % $ 734.4 International 1,207.7 (26.2 ) % 1,636.3 19.7 % 1,367.2 Total revenues $ 1,734.5 (26.9 ) % $ 2,374.3 13.0 % $ 2,101.6 Unites States as a percentage of total revenues 30.4 % 31.1 % 34.9 % International as a percentage of total revenues 69.6 % 68.9 % 65.1 % (1) Subsequent to the original issuance of the Company’s 2022 Consolidated Financial Statements, management identified an immaterial disclosure error related to revenues shipped locally and internationally.
The increases were due to higher volume of sales driving increased material costs, as well as higher direct labor spending and overhead costs and in part due to the inclusion of Fluid Solutions for the full twelve months in fiscal year 2022 as compared to nine months in fiscal year 2021. 33 Cost of Services revenues consists of direct labor, manufacturing overhead and materials (such as chemicals, gases and consumables).
Cost of Services revenues consists of direct labor, manufacturing overhead and materials (such as chemicals, gases and consumables). Cost of services revenues decreased $30.3 million in fiscal 2023 compared to the prior year driven by lower volumes of service orders, resulting in decrease in labor costs (the largest component of Cost of Services) and lower material costs.
Sales and marketing expenses increased $6.2 million in fiscal year 2022 over fiscal year 2021, due to the inclusion of Fluid Solutions’ sales and marketing activities for the full twelve months and an increase in personnel-related costs driven by higher headcount.
Sales and marketing expenses decreased $2.6 million in fiscal year 2023 over fiscal year 2022, due to the decreases in compensation costs and related employee benefits and in spending for certain third party professional services.
As of December 30, 2022, the Company had $3.4 million of outstanding letters of credit and $46.6 million of available commitments remaining under the letter of credit facility.
As of December 29, 2023, the Company had $3.9 million of outstanding letters of credit and $46.1 million of available commitments remaining under the letter of credit facility. 39 On June 29, 2023, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement to replace the LIBOR-based reference interest rate option with a reference interest option based upon Term SOFR under the Credit Agreement.
For fiscal year 2022, our effective tax rate was higher than the federal statutory rate of 21.0% primarily due to an increase in the valuation allowance. For the year ended December 30, 2022, the Company concluded that a full valuation allowance against its U.S. federal and state deferred tax assets continues to be necessary.
For fiscal year 2023, our effective tax rate differs from 21.0% primarily due to the valuation allowance in the U.S. and earnings in our foreign subsidiaries subject to local statutory tax rates.
Both U.S. and foreign revenues increased in absolute terms in fiscal 2022 over fiscal 2021, due to an overall global increase in semiconductor and general industry demand.
Both U.S. and foreign revenues decreased in fiscal 2023 over fiscal 2022, primarily as a result of the global slowdown in semiconductor industry resulting in less demand for our products and services.
Total Services revenues were relatively flat in fiscal year 2022 compared to fiscal year 2021.
Research and development expenses were generally consistent in fiscal year 2023 compared to fiscal year 2022.
Removed
Revenue Recognition Our revenues for fiscal years 2022, 2021 and 2020, were highly concentrated with a small number of OEM customers in the semiconductor capital equipment industry.
Added
These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Certain of our acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement of future operating income thresholds.
Removed
Management carefully monitors the changes in many factors and adjusts the effective tax rate as required. We must assess the likelihood that we will be able to recover our deferred tax assets.
Added
The fair values of these earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates.
Removed
Cost of services revenues increased $4.1 million in fiscal 2022 compared to the prior year driven by an increase in labor costs.
Added
Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present value calculation are reported in other income (expense). Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.
Removed
Research and development expenses increased $4.0 million in fiscal year 2022 compared to fiscal year 2021, primarily due to an increase in personnel-related expenses associated with an overall increase in headcount.
Added
See Note 13 to the Notes to Consolidated Financial Statements for more information on the impact of this correction. Revenues by geographic area are categorized based on the customer’s location to which the products were shipped or services were performed.
Removed
Other income (expense), net, increased $8.5 million in fiscal year 2022 over fiscal year 2021 primarily due to the absence of loss from the change in the fair value of forward contracts in conjunction with the acquisition of Ham-Let.
Added
In both segments, costs of revenue as a percent of revenue increased as certain fixed costs remain regardless of volume.
Removed
This was driven by customer demand below forecast. o Accounts payable decreased $68.4 million primarily due to the increases in inventories and the timing of payments. 36 • Cash used in investing activities was $96.2 million in fiscal year 2022 compared to $404.8 million in fiscal year 2021.
Added
Products and Services gross profit and gross margin decreased in fiscal year 2023 over fiscal year 2022, primarily due to lower revenue levels and lower factory utilization.
Removed
During fiscal year 2021, net cash provided by financing activities primarily consisted of new borrowings of $415.2 million, proceeds from issuance of common stock of $193.6 million, partially offset with repayment on debt and debt issuance costs of $140.7 million and $7.3 million of taxes paid upon the vesting of restricted stock units.
Added
These restructuring costs primarily reflect employee severance costs and facilities consolidation costs to improve efficiencies in our operational activities and to reduce redundancies. Net Loss on Divestitures In 2022, the Company sold four of its non-semiconductor operating subsidiaries of Fluid Solutions.
Removed
In 2017, we determined that a portion of the current year and future year earnings of one of our China subsidiaries may be distributed in the future and, accordingly, we provided for the related withholding taxes in our Consolidated Financial Statements.
Added
As a result of these divestitures, the Company recorded a net loss of $77.4 million for the twelve months ended December 30, 2022.
Removed
As of December 30, 2022, we had undistributed earnings of approximately $512.0 million from our foreign subsidiaries that are indefinitely invested outside of the U.S. As of December 30, 2022, we have cash of approximately $266.9 million in our foreign subsidiaries.
Added
Interest expense increased $14.9 million in fiscal year 2023 over fiscal year 2022 due to a higher interest rates.
Removed
Term Loan $ 515.0 5.5 % $ 555.1 3.9 % Fluid Solutions Debt Facilities 9.0 4.2 % 8.9 1.0 % Cinos China Credit Facilities — — 1.4 4.1 % Debt issuance costs (10.2 ) (13.4 ) $ 513.8 $ 552.0 In August 2018, the Company entered into a Credit Agreement with Barclays Bank that provided a Term Loan, a Revolving Credit Facility and a Letter of Credit Facility (the “Credit Facility”).
Added
As of December 29, 2023, the total U.S. and foreign valuation allowances for deferred tax assets were $49.8 million and $8.1 million, respectively. Our ability to realize deferred tax assets depends on our ability to generate sufficient future taxable income.
Removed
UCT and certain of its subsidiaries have agreed to secure all of their obligations under the Credit Facility by granting a first priority lien in substantially all of their respective personal property assets (subject to certain exceptions and limitations).
Added
On July 27, 2023, the Company entered into a Fifth Amendment (“Amended Credit Agreement”) to provide the Company with certain relief under the consolidated fixed charge coverage ratio and consolidated total gross leverage ratio maintenance covenants described in the Credit Agreement (the “Financial Covenant Adjustments”), which are applicable only to the revolving credit facility portion of its credit facilities.
Removed
On March 29, 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.
Added
The Financial Covenant Adjustments are effective during the period commencing with the fiscal period ended June 30, 2023, through to the fiscal period ending December 31, 2024, subject to certain anti-cash hoarding and minimum liquidity requirements during such period.
Removed
In 2020, Cinos China amended its existing credit agreement with a local bank that provides a term loan of RMB 10.0 million (approximately $1.4 million) which matured on September 23, 2022.
Added
At the election of the Company, and subject to demonstrating compliance with certain financial ratio tests, the Financial Covenant Adjustments may terminate earlier than December 31, 2024.
Removed
The carrying value of our long-term debt approximates fair value. 38 Capital Expenditures Capital expenditures were $100.1 million for the year ended December 30, 2022, primarily attributable to the capacity expansion of our Ireland, Malaysia, Israel and certain U.S. facilities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed8 unchanged
Biggest changeWe believe the net accounts receivable balances from our two largest customers (38.5% as of December 30, 2022) do not represent a significant credit risk, based on cash flow forecasts, balance sheet analysis, and past collection experience. For more information about the customers that represent our accounts receivable balance, see Note 1, Organization and Significant Accounting Policies.
Biggest changeWe believe the net accounts receivable balances from our two largest customers (26.8% as of December 29, 2023) do not represent a significant credit risk, based on cash flow forecasts, balance sheet analysis, and past collection experience. For more information about the customers that represent our accounts receivable balance, see Note 1, Organization and Significant Accounting Policies.
However, we do not expect foreign currency exchange rate fluctuations to have a material effect on our results of operations. 39 We use derivative instruments, such as foreign currency exchange contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates.
However, we do not expect foreign currency exchange rate fluctuations to have a material effect on our results of operations. 41 We use derivative instruments, such as foreign currency exchange contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates.
A hypothetical 100 basis points increase in our borrowing rates at the end of fiscal 2022, would result in approximately $4.0 million annual increase in interest expense on this existing principal balance. 40
A hypothetical 100 basis points increase in our borrowing rates at the end of fiscal 2023, would result in approximately $4.4 million annual increase in interest expense on this existing principal balance. 42
Our Credit Facility is comprised of a Term B loan and a revolving credit agreement with interest rates as described under Note 7 of Notes to the Consolidated Financial Statements. At the end of fiscal 2022, the Term B loan had a balance of $515.0 million.
Our Credit Facility is comprised of a Term B loan and a revolving credit agreement with interest rates as described under Note 7 of Notes to the Consolidated Financial Statements. At the end of fiscal 2023, the Term B loan had a balance of $479.3 million.

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