Attached files

file filename
8-K/A - FORM 8-K/A - Ultra Clean Holdings, Inc.dp32863_8ka.htm
EX-23.1 - EXHIBIT 23.1 - Ultra Clean Holdings, Inc.dp32863_ex2301.htm
EX-99.1 - EXHIBIT 99.1 - Ultra Clean Holdings, Inc.dp32863_ex9901.htm
Exhibit 99.2

 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
     
The following unaudited pro forma condensed combined balance sheet as of June 29, 2012 and the unaudited pro forma condensed combined statements of income for the year ended December 30, 2011 and the six months ended June 29, 2012 are based on the historical financial statements of Ultra Clean and AIT after giving effect to Ultra Clean’s acquisition of AIT using the acquisition method of accounting and applying the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.
     
The unaudited pro forma condensed combined balance sheet combines Ultra Clean’s historical condensed consolidated balance sheet as of June 29, 2012 and AIT’s historical condensed consolidated balance sheet as of July 2, 2012, giving effect to the acquisition as if it had occurred on June 29, 2012. The unaudited pro forma condensed combined statement of income for the year ended December 30, 2011 combines Ultra Clean’s historical consolidated statement of income for the year then ended with AIT’s historical consolidated statement of income for the year ended December 31, 2011. The unaudited pro forma condensed combined statement of income for the six months ended June 29, 2012 combines Ultra Clean’s historical condensed consolidated statement of income for the six months ended June 29, 2012 with AIT’s historical condensed consolidated statement of income for the six months ended July 2, 2012. The unaudited pro forma condensed combined statements of income give effect to the merger as if it had occurred on January 1, 2011.
     
The acquisition has been accounted for under the acquisition method of accounting in accordance with Financial Accounting Standard ASC 805, Business Combinations. Under the acquisition method of accounting, the total estimated purchase price, calculated as described in Note 1 to these unaudited pro forma condensed combined financial information, is allocated to the net tangible and intangible assets of AIT acquired in connection with the acquisition, based on their estimated fair values. Management has made a preliminary allocation of the estimated acquisition price to the net tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates. These preliminary estimates and assumptions are subject to change during the measurement period (up to the time it takes to gather the necessary information and no longer than one year from the acquisition date). The final determination of the values of assets and liabilities and the integration costs may result in actual values, assets, liabilities and expenses that are different from those set forth in the unaudited pro forma condensed combined financial information.
 
The unaudited pro forma condensed combined financial information has been prepared by management for illustrative purposes only and are not necessarily indicative of the condensed consolidated financial position or results of income in future periods or the results that actually would have been realized had Ultra Clean and AIT been a combined company during the specified periods. The unaudited pro forma condensed combined financial information does not reflect any operating efficiencies and/or cost savings that we may achieve with respect to the combined companies, or any liabilities that may result from integration activities. The pro forma adjustments are based on the information available at the time of the preparation of this document. The unaudited pro forma condensed combined financial information, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, Ultra Clean’s historical consolidated financial statements included in its Annual Report on Form 10-K, for its year ended December 30, 2011 and in its Form 10-Q for its three and six month periods ended June 29, 2012, and AIT’s historical consolidated financial statements for the year ended December 31, 2011, and six months ended July 2, 2012, which are included as Exhibits 99.1 to this Form 8-K.
 
 
 
 

 
 
 
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(In Thousands)
 
 
   
June 29, 2012
   
July 2, 2012
                   
   
Ultra Clean
   
AIT
   
Pro forma
Adjustments
         
Pro forma
Combined
 
    (unaudited)     (unaudited)                    
ASSETS
                             
Current assets:
                             
   Cash
  $ 51,137     $ 875     $ (875 )     6     $ 50,688  
                    $ (1,295 )     8, 9          
                    $ (75,325 )     7          
                    $ (3,674 )     3          
                    $ 79,845       4          
   Accounts receivable, net
    41,942       16,717       242       8       58,901  
   Inventory
    44,451       23,879       (1,405     8       66,925  
   Other current assets
    6,364       187       401       8,9       6,952  
      Total current assets
    143,894       41,658       (2,086 )             183,466  
                                         
Equipment and leasehold improvements, net
    8,762       2,426       (545 )     8       10,643  
Goodwill
    -       -       57,274       1       57,274  
Intangible assets
    8,987       4,144       18,356       2       31,487  
Other non-current assets
    5,177       113       1,223       9       6,513  
      Total assets
  $ 166,820     $ 48,341     $ 74,222             $ 289,383  
                                         
LIABILITIES & STOCKHOLDERS EQUITY
                                       
Current liabilities:
                                       
Bank borrowings
  $ 2,736     $ 7,845     $ (10,581 )     3     $ -  
                    $ 69,845       4     $ 69,845  
Accounts payable
    25,797       13,657       -               39,454  
Accrued compensation and related benefits
    3,924       2,109       6       8       6,039  
Accrued liabilities, related party
    -       375       -               375  
Other current liabilities
    3,159       434       2,996       8,9       6,589  
      Total current liabilities
    35,616       24,420       62,266               122,302  
                                         
Long-term debt
    938       27,635       (28,573 )     3       -  
                      10,000       4       10,000  
Deferred rent and other liabilities
    1,990       100       42       8       2,132  
      Total liabilities
    38,544       52,155       43,735               134,434  
                                         
Commitments and contingencies
                                 
Stockholders Equity:
                                       
Common stock
    111,369               29,565       7       140,934  
Common shares held in treasury
    (3,337 )             -               (3,337 )
Accumulated comprensive loss
    (123 )                             (123 )
Retained earnings
    20,367       (3,814 )     3,814       6       20,367  
      -       -       (2,892 )     9       (2,892 )
Total stockholders' equity
    128,276       (3,814 )     30,487               154,949  
Total liabilities and stockholders' equity
  $ 166,820     $ 48,341     $ 74,222             $ 289,383  
 
 
See notes to unaudited pro forma combined financial information

 
 
 

 
 
 
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(In Thousands)
 
 
   
For the Year Ended
                   
   
December 30,
   
December 31,
                   
   
2011
   
2011
                   
   
Ultra Clean
   
AIT
   
Pro forma
Adjustments
         
Pro forma
Combined
 
                                       
Sales
  $ 452,639     $ 169,898     $ -           $ 622,537  
                                       
Cost of goods sold
     393,647       138,252       -             531,899  
                                       
Gross profit
    58,992       31,646       -             90,638  
                                       
Operating expenses:
                                     
Research and development
    5,556       -       -             5,556  
Sales and marketing
    7,257       -       -             7,257  
General and administrative
    22,633       10,823       -             33,456  
Related party expenses
    -       1,173       -             1,173  
Amortization of acquired intangibles
    -       2,161       (2,161 )     13       3,712  
       -       -       3,712       10       -  
        Total operating expenses
    35,446       14,157       1,551               51,154  
                                         
Income from operations
    23,546       17,489       (1,551 )             39,484  
                                         
Interest and other income (expense), net
    (1,106 )     (3,468 )     (3,036 )     11       (4,142 )
       -       -       3,468       14       -  
                                         
Income before income taxes
    22,440       14,021       (1,119 )             35,342  
                                         
Income tax provision (benefit)
    (1,294 )             4,903       12       3,609  
                                         
Net income
  $ 23,734     $ 14,021     $ (6,022 )           $ 31,733  
                                         
Net income per share:
                                       
Basic
  $ 1.05                             $ 1.17  
Diluted
  $ 1.01                             $ 1.14  
                                         
Shares used in computing net income per share:
                                       
Basic
    22,689       -       4,500               27,189  
Diluted
    23,437       -       4,500               27,937  

 
See notes to unaudited pro forma combined financial information
 
 
 
 

 
 
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(In Thousands)
 
 
   
For the Six Months Ended
                   
   
June 29,
   
July 2,
                   
   
2012
   
2012
                   
   
Ultra Clean
   
AIT
   
Pro forma
Adjustments
         
Pro forma
Combined
 
    (unaudited)     (unaudited)                        
                                       
Sales
  $ 212,514     $ 66,845     $ -           $ 279,359  
                                       
Cost of goods sold
    182,600       53,437       -             236,037  
                                       
Gross profit
    29,914       13,408       -             43,322  
                                       
Operating expenses:
                                     
Research and development
    2,694       -       -             2,694  
Sales and marketing
    3,410       -       -             3,410  
General and administrative
    12,627       5,338       -             17,965  
Related party expenses
    -       843       -             843  
Amortization of acquired intangibles
    -       1,081       (1,081 )     13       1,856  
       -        -        1,856       10       -  
        Total operating expenses
    18,731       7,262       775               26,768  
                                         
Income from operations
    11,183       6,146       (775 )             16,554  
                                         
Interest and other income (expense), net
    (119 )     (5,048 )     (1,530 )     11       (1,651 )
       -       -       5,046       14       -  
                                         
Income before income taxes
    11,064       1,098       2,741               14,903  
                                         
Income tax provision
    2,481       -       2,027       12       4,508  
                                         
Net income
  $ 8,583     $ 1,098     $ 714             $ 10,395  
                                         
Net income per share:
                                       
Basic
  $ 0.37                             $ 0.37  
Diluted
  $ 0.36                             $ 0.37  
                                         
Shares used in computing net income per share:
                                       
Basic
    23,289       -       4,500               27,789  
Diluted
    23,893       -       4,500               28,393  
 
See notes to unaudited pro forma combined financial information
 

 
 

 
 
NOTES TO UNAUDITED PRO FORMA
 CONDENSED COMBINED FINANCIAL INFORMATION

 
1. Acquisition of American Integration Technologies, LLC

On July 3, 2012, the Company completed the acquisition of AIT, a privately-held company based in Chandler, Arizona. The total acquisition price was approximately $104.9 million, and was comprised of cash consideration of $75.3 million and common stock of $29.6 million.  The Company financed the cash portion of the merger, and repaid existing indebtedness, by borrowing a total of $79.8 million under a new senior secured credit facility, of which $40.0 million represents borrowings under a term loan and $39.8 million represents borrowings under a revolving credit facility. The unaudited pro forma condensed combined financial information gives effect to the issuance of approximately 4.5 million shares of Ultra Clean common stock at a price per share of $6.57 on July 3, 2012.

2. Preliminary Acquisition Price Allocation

Under the acquisition method of accounting, the total estimated acquisition price as shown in the table below is allocated to AIT’s net tangible and intangible assets based on their preliminary estimated fair values as of July 3, 2012, the closing date. The preliminary estimated acquisition price was based on various factors as described in the introduction to the unaudited pro forma condensed combined financial information. The allocation of the purchase price is preliminary pending the completion of various analyses and the finalization of estimates. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible assets and liabilities acquired, the valuation of intangible assets acquired, including amortization methodology, income and non-income based taxes and residual goodwill. During the measurement period, we expect to continue to obtain information to assist us in determining the final fair value of the net assets acquired at the acquisition date during the measurement period. Our preliminary purchase price allocation for AIT is as follows (in thousands):
 
     
Preliminary
Estimated
     
Useful Life
Net tangible assets acquired
$25,116
   
Identifiable intangible assets:
     
Customer contracts and relationships
19,000
 
6 years
Trade name
1,900
 
6 years
Intellectual Property/Know-How
1,600
 
7 years
Goodwill
57,274
 
-
       
Total preliminary estimated acquisition price
$104,890
   
 
A preliminary estimate of $25.1 million has been allocated to net tangible assets acquired. This estimate reflects adjustments of acquired assets and liabilities to fair value. A preliminary estimate of $22.5 million has been allocated to amortizable intangible assets acquired. The amortization related to the amortizable intangible assets is reflected as pro forma adjustments to the unaudited pro forma condensed combined statements of income. For purposes of this Form 8K/A, a straight line amortization was used, however, the Company is still in the process of assessing the appropriate methodology to use.

Identifiable intangible assets. Acquired customer contracts and relationships represent existing contracts that relate to underlying customer relationships. Trade name represents the fair values of brand and name recognition.  Intellectual Property/Know-How consists of assets that contain specialized knowledge related to manufacturing processes that have reached technological feasibly.
 
Goodwill. Approximately $57.3 million has been allocated to goodwill. Goodwill represents the excess of the acquisition price over the fair value of the underlying net tangible and intangible assets. In accordance with the ASC 350, Goodwill and Other Intangible Assets, goodwill will be tested for impairment at least annually (more frequently if indicators are present). In the event that the management of the
 
 
 
 

 
 
 
combined company determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made.
 
 
 
 
 

 

 
3. Preliminary Pro Forma Adjustments
 
The pro forma adjustments included in the unaudited pro forma condensed combined financial information are as follows:
 
1
To record preliminary goodwill related to the acquisition
2
To eliminate the pre-existing intangible asset of AIT of $4.1 million and record the fair value of Ultra Clean’s new identifiable intangible assets of $22.5 million
3
To record the extinguishment of all pre-existing debt of both UCT and AIT in connection with the AIT acquisition
4
To record debt of $79.8 million used to finance the acquisition
6
To eliminate AIT’s pre-existing cash and retained loss
7
To record the purchase price paid in cash of $75.3 million and the fair value of Ultra Clean shares issued in the transaction of $29.6 million
8
To adjust the fair value of acquired tangible assets and liabilities to their fair value
9
To record preliminary acquisition related prepayments and accruals
10
To record the preliminary estimated net intangible amortization associated with the acquired intangible assets over the preliminary estimated useful life
11
To record interest expense related to the issuance of new debt
12
To record income tax expense based on AIT’s pretax income plus proforma adjustments at an estimated rate of 38%
13
To eliminate AIT's amortizatin of pre-existing intangibles
14
To eliminate AIT interest expense on pre-existing debt
 
 
4. Pro Forma Net Income Per Share

The pro forma basic and diluted net income per share are based on the number of Ultra Clean shares used in computing basic and diluted net income per share.  These amounts have been adjusted to reflect the common stock of Ultra Clean issued in connection with the acquisition of AIT as if the stock had been issued at the beginning of each of the periods presented.
 
   
Weighted Average Common Shares Outstanding
 
   
Six Months Ended
   
Year Ended
 
   
June 29, 2012
   
December 30, 2011
 
             
Basic weighted average common shares outstanding, as reported     23,289       22,689  
Estimated dilutive effect of common stock issued in connection with the acquisition of AIT     4,500       4,500  
      27,789       27,189  
                 
Diluted weighted average common shares outstanding, as reported     23,893       23,437  
Estimated dilutive effect of common stock issued in connection with the acquisition of AIT     4,500       4,500  
      28,393       27,937