Ultra Clean Results in Line With Guidance in a Difficult Market

Solar and Medical Device Revenue Partially Offsets Impact of Semi-Equipment Downturn 


HAYWARD, Calif., July 28  /PRNewswire-FirstCall/ -- Ultra Clean Holdings, Inc. (NASDAQ:UCTT), a leading developer and supplier of critical subsystems for the semiconductor capital equipment, flat panel, solar, and medical device industries, today reported its financial results for the second quarter of 2008. Revenue for the second quarter of 2008 was $67.4 million, a decrease of 27% from the first quarter of 2008 and a decrease of 36% from the same period a year ago. The company recorded a net loss of $162,000 or $0.01 per diluted share, during the second quarter of 2008, compared to net income of $1.9 million or $0.09 per diluted share, for the first quarter of 2008 and net income of $5.1 million, or $0.23 per diluted share, for the same period a year ago. Gross margin for the second quarter of 2008 was 11.2%, compared to 13.1% for the first quarter of 2008, and 15.1% for the same period a year ago.

Clarence Granger, Ultra Clean's Chairman and Chief Executive Officer commented: "We view the current challenging business environment as an opportunity to increase our market share and to realize the operational efficiencies made possible by consolidation of our Silicon Valley based assembly operations into a single facility in Hayward, CA. For the quarter, we met our guidance range for revenue and earnings per share by focusing on activities to reduce costs, while continuing to increase our non-semiconductor businesses. Solar, flat panel, and medical device revenues grew by 18% sequentially to 22% of total revenues and we received follow-on awards in the solar and flat panel markets. By streamlining our operations and continuing to increase our activity in these adjacent markets, we lessened the impact of this cyclical decline in semiconductor capital equipment demand and positioned ourselves for enhanced levels of profitability when the industry cycle returns to growth."

Cash at the end of the second quarter of 2008 was $32.6 million, an increase of $7.6 million from $25.0 million at the end of the first quarter of 2008, and an increase of $12.7 million from $19.9 million at the end of the second quarter of 2007. Third party debt at the end of the second quarter was $20.5 million, a decrease of $900,000 from $21.4 million at the end of the first quarter of 2008 and a decrease of $8.3 million from $28.9 million at the end of the second quarter of 2007.

Ultra Clean also announced that its Board of Directors has authorized the repurchase of up to $10 million shares of the company common stock.  The share repurchase is expected to commence at the end of July 2008.

Granger continued, "I am pleased to announce that, during the quarter, we secured significant follow-on awards from two key customers. We have been contracted to design and build a next-generation solar tool gas-abatement module. Deliveries are expected to commence in 2009. We also have been awarded the contract for production of Photon Dynamics' (NASDAQ:PHTN) turn-key, Gen-8, flat panel display test systems. The products for both customers will be manufactured in our Shanghai, China facilities and delivered directly to the customers in Asia. Incremental revenue from these two awards is estimated to be $1 million in 2008 and $6-$8 million in 2009. These new wins reflect further progress toward our stated objectives: to grow faster than the semiconductor capital equipment industry, in part by increasing the portion of our revenue derived from the adjacent markets of the solar, flat panel and medical device industries, and to continue to expand our presence in Asia."

Commenting on Ultra Clean's corporate outlook, Granger noted, "While we remain very confident in our strategic direction, we remain cautious about the near term outlook, due to continued declines in semiconductor capital equipment demand, partially offset by our growth in non-semiconductor markets. We expect that revenue for the third quarter of 2008 will be in the range of $60 million to $66 million, and loss per share will be in the range of $0.03 to $0.10 per share, on a GAAP basis, inclusive of an expected $0.01 per share charge for amortization of intangibles, and a $0.03 per share charge related to SFAS 123(R)."

Ultra Clean will conduct a conference call today, Monday, July 28, 2008, beginning at 2:00 p.m. PDT at 888-561-5097 (domestic) and 706-679-7569 (international). A replay of the webcast will be available for fourteen days following the conference call at 800/642-1687 (domestic) and 706/645-9291 (international). The confirmation number for the live broadcast and replays is 55630779 (all callers). The conference call will also be webcast live and be available for fourteen days on our website.

About Ultra Clean Holdings, Inc.

Ultra Clean Holdings, Inc. is a developer and supplier of critical subsystems for the semiconductor capital equipment, flat panel, solar and medical device industries. Ultra Clean offers its customers an integrated outsourced solution for gas delivery systems and other subassemblies, improved design-to-delivery cycle times, component neutral design and manufacturing and component testing capabilities. Ultra Clean's customers are primarily original equipment manufacturers for the semiconductor capital equipment, flat panel, solar and medical device industries. Ultra Clean is headquartered in Hayward, California. Additional information is available at http://www.uct.com/.

Safe Harbor Statement

The foregoing information contains, or may be deemed to contain, "forward-looking statements" (as defined in the U.S. Private Securities Litigation Reform Act of 1995) which reflect our current views with respect to future events and financial performance. We use words such as "anticipates," "believes," "plan," "expect," "future," "intends," "may," "will," "should," "estimates," "predicts," "potential," "continue" and similar expressions to identify these forward-looking statements. Forward looking statements included in the press release include estimates made with respect to our third quarter revenue and diluted earnings per share. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, our actual results may differ materially from the results predicted or implied by these forward-looking statements. These risks, uncertainties and other factors include, among others, those identified in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in our annual report on Form 10-K for the year ended December 28 2007 and quarterly report on Form 10-Q for the quarter ended March 28, 2008, filed with the Securities and Exchange Commission. Ultra Clean Holdings, Inc. undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information future developments or otherwise.

                        Ultra Clean Holdings, Inc.
             Condensed Consolidated Statements of Operations
             (Unaudited; in thousands, except per share data)

                                     For the three           For the six
                                     months ended           months ended
                                    June 27,  June 29,    June 27,  June 29,
                                       2008     2007         2008      2007
  Sales                             $67,364    $104,722  $159,721  $215,514

  Cost of goods sold                 59,842      88,906   140,139   182,941

  Gross profit                        7,522      15,816    19,582    32,573

  Operating expenses:
    Research and development            606         785     1,391     1,627
    Sales and marketing               1,327       1,336     2,960     2,759
    General and administrative        6,252       6,182    12,882    12,779
          Total operating expenses    8,185       8,303    17,233    17,165

  Income (loss) from operations        (663)      7,513     2,349    15,408

  Interest and other income
   (expense), net                      (246)       (459)     (590)     (990)

  Income (loss) before income taxes    (909)      7,054     1,759    14,418

  Income tax provision (benefit)       (747)      1,958        32     4,137

  Net income (loss)                   $(162)     $5,096    $1,727   $10,281

  Net income (loss) per share:
    Basic                            $(0.01)      $0.24     $0.08     $0.49
    Diluted                          $(0.01)      $0.23     $0.08     $0.47

  Shares used in computing
   net income (loss) per share:
    Basic                            21,643      21,236    21,604    21,188
    Diluted                          21,643      22,045    22,126    22,012



                          Ultra Clean Holdings, Inc.
                    Condensed Consolidated Balance Sheets
                          (Unaudited; in thousands)

                                                June 27,       December 28,
                 ASSETS                           2008            2007

  Current assets:
    Cash and cash equivalents                   $32,571           $33,447
    Accounts receivable                          26,638            34,845
    Inventory                                    43,634            49,342
    Other current assets                          8,794             7,707
     Total current assets                       111,637           125,341

  Equipment and leasehold
   improvements, net                             20,479            14,095
  Goodwill                                       34,196            34,196
  Other intangible assets                        20,087            20,762
  Other non-current assets                          548               633
  Total assets                                 $186,947          $195,027

   LIABILITIES & STOCKHOLDERS' EQUITY
  Current liabilities
    Bank borrowings                              $3,400            $3,575
    Accounts payable                             22,559            36,817
    Other current liabilities                     3,589             4,451
      Total current liabilities                  29,548            44,843

  Bank debt and other long-term
   liabilities                                   23,308            20,696
      Total liabilities                          52,856            65,539

  Stockholders' equity
    Common stock                                 91,968            89,092
    Retained earnings                            42,123            40,396
    Total stockholders' equity                  134,091           129,488
  Total liabilities and
   stockholders' equity                        $186,947          $195,027


DATASOURCE: Ultra Clean Holdings, Inc.



CONTACT:  Jack Sexton, CFO of Ultra Clean Holdings, Inc.,

[phone]



Web site:  http://www.uct.com/ 

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