TTM Technologies, Inc. Reports Second Quarter 2007 Results
Printed Circuit Group Acquisition Continues to be Accretive for Second Consecutive Quarter
SANTA ANA, Calif., July 31 /PRNewswire-FirstCall/ -- TTM Technologies, Inc. (Nasdaq: TTMI), North America's largest printed circuit board manufacturer, today reported results for the second quarter of 2007, ended July 2, 2007.
Highlights
-- The acquired Printed Circuit Group (PCG) continued to be accretive for
the second consecutive quarter.
-- The Company paid down $30 million in debt associated with the PCG
acquisition ahead of schedule.
-- Orders from a key networking customer returned to healthy levels at
the end of May, and the aerospace/defense sector remained strong.
Second Quarter 2007 Financial Results
Second quarter 2007 net sales of $162.0 million declined $14.9 million, or 8.4 percent, from the first quarter of 2007 due primarily to the closure of the company's Dallas, Oregon, facility in April. Compared to the second quarter of 2006, sales increased $85.3 million, or 111 percent, due to the inclusion of the Printed Circuit Group, which TTM acquired from Tyco International Ltd. on October 27, 2006.
Gross margins were 18.2 percent for the second quarter of 2007, compared with 19.6 percent in the first quarter of 2007 and 30.0 percent for the second quarter of 2006. On a year-over-year basis, gross margins were affected by the inclusion of PCG's backplane assembly operations, which carry a lower gross margin than printed circuit board manufacturing.
Selling and marketing expense for the second quarter of 2007 was $7.6 million, representing 4.7 percent of sales. This compares to $7.6 million, or 4.3 percent of sales, in the first quarter of 2007, and $3.5 million, or 4.5 percent of sales, in the year-ago period.
General and administrative expense, including amortization of intangibles, was $8.9 million in the second quarter of 2007, compared to $9.4 million in the first quarter of 2007 and $4.0 million in the year-ago period. As a percent of sales, general and administrative expense was 5.5 percent in the second quarter of 2007 compared to 5.3 percent in the first quarter and 5.2 percent in the year-ago period.
TTM posted operating income of $13.1 million for the second quarter of 2007 compared to $17.8 million for the first quarter of 2007 and $15.6 million for the second quarter of 2006.
Net income for the second quarter of 2007 was $6.0 million, or $0.14 per diluted share, compared with $8.5 million, or $0.20 per diluted share, for the first quarter of 2007 and $10.6 million, or $0.25 per diluted share, for the second quarter of 2006.
EBITDA (earnings before interest, taxes, depreciation and amortization) for the second quarter of 2007 was $20.1 million, compared with $25.5 million for the first quarter of 2007 and $19.4 million for the second quarter of 2006. (A reconciliation of this non-GAAP measure is provided after the GAAP financial statements below.)
PCB quick-turn business represented approximately 17 percent of net sales in the second quarter of 2007, which was unchanged from the first quarter of 2007 (excluding production from the Dallas, Oregon, facility, which was closed on April 6, 2007). In the second quarter of 2006, PCB quick-turn business represented approximately 20 percent of net sales. The year-over-year decline was primarily due to PCG's limited quick-turn capacity.
"As we expected, a number of factors resulted in lower revenues and earnings in the second quarter of 2007," said Kent Alder, President and CEO of TTM. "The closure of the Dallas facility reduced second quarter 2007 revenues by $11 million. A temporary slowdown in orders from a key networking customer -- as they adjusted inventory levels in their supply chain -- also negatively affected second quarter results. However, the customer's orders returned to a healthy level at the end of May. In addition, we had some short-term issues related to operating efficiency and the timing of customer orders at a couple of our plants."
"The benefits from the acquisition of the Printed Circuit Group continue to exceed our expectations," added Alder. "At the time of the purchase, we said the combination would be accretive to earnings within the first year. In fact, it was accretive in its first full quarter -- the first quarter of 2007. It was accretive again in the second quarter of 2007, and we expect it to remain so going forward."
The Company noted that financial results for the second quarter may be subject to change pending the resolution of certain accounting matters relating to the acquisition of PCG. Should results for the second quarter change from those established in this press release, the Company expects that revised numbers would be issued when it files its Quarterly Report on Form 10- Q on or about August 13, 2007.
Segment Information
As a result of the PCG acquisition, TTM now has two reportable operating segments: PCB Manufacturing and Commercial Assembly. For the PCB Manufacturing segment, net sales (before inter-segment sales) were $138.6 million in the second quarter of 2007, compared with $152.1 million in the first quarter of 2007. Operating segment income (before amortization of intangibles) was $12.0 million in the second quarter of 2007, compared with $16.4 million in the first quarter of 2007.
For the Commercial Assembly segment, net sales (before inter-segment sales) were $32.2 million in the second quarter of 2007, compared with $33.7 million in the first quarter of 2007. Operating segment income (before amortization of intangibles) was $2.1 million, compared with $2.4 million in the first quarter of 2007.
Balance Sheet
The $226 million purchase price for the PCG acquisition was financed with a $200 million, 6-year term loan and $26 million from cash on the balance sheet. In the second quarter of 2007, TTM paid down $30 million of debt, reducing the debt balance to $120 million at the end of the quarter. In July, TTM repaid an additional $11 million, bringing the current debt balance to $109 million. Cash and short-term investments at the end of the second quarter of 2007 totaled $26.1 million, compared with $45.4 million at the end of the first quarter of 2007.
Third Quarter Forecast
For the third quarter of 2007, TTM estimates revenues in a range of $160 million to $168 million and earnings in a range of $0.14 to $0.20 per diluted share. This estimate includes approximately $3 million in revenue from customers of the former Dallas, Oregon, plant. "We expect to benefit from renewed strength with our networking customers," concluded Alder. "Additionally, the military sector remains very healthy. The high end computing market, however, remains soft. And we continue to experience competitive pressures and pockets of weakness, particularly in our assembly and high mix businesses."
To Access the Live Web Cast/Conference Call
The company will conduct a conference call to discuss its first-quarter performance and outlook today at 4:30 p.m. Eastern/1:30 p.m. Pacific time. To listen to the live web cast on the Internet, log on to the company's website at http://www.ttmtech.com. To access the live conference call, dial 800-946-0742.
To Access a Replay of the Web Cast
A replay of the conference call will be available until Tuesday, August 7, on the company's Web site, http://www.ttmtech.com.
Safe Harbor Statement
This release contains forward-looking statements that relate to future events or performance. These statements reflect the company's current expectations, and the company does not undertake to update or revise these forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied in this or other company statements will not be realized. Furthermore, readers are cautioned that these statements involve risks and uncertainties, many of which are beyond the company's control, which could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include, but are not limited to, the company's dependence upon the electronics industry, the company's dependence upon a small number of customers, general economic conditions and specific conditions in the markets TTM addresses, the unpredictability of and potential fluctuation in future revenues and operating results, the risks and uncertainties associated with the integration of the recently acquired PCG business, increased competition from low-cost foreign manufacturers and other "Risk Factors" set forth in the company's most recent SEC filings.
About TTM
TTM Technologies, Inc. is North America's largest printed circuit board manufacturer, focusing on quick-turn and technologically advanced PCBs and the backplane and sub-system assembly business. TTM stands for time-to-market, representing how the company's time-critical, one-stop manufacturing services enable customers to shorten the time required to develop new products and bring them to market. Additional information can be found at http://www.ttmtech.com.
TTM TECHNOLOGIES, INC.
Selected Unaudited Financial Information
(In thousands, except per share data)
Second First First Two
Quarter Quarter Fiscal Quarters
2007 2006 2007 2007 2006
CONSOLIDATED STATEMENTS
OF OPERATIONS
Net sales $162,016 $76,683 $176,897 $338,913 $149,371
Cost of goods sold 132,465 53,714 142,176 274,641 106,199
Gross profit 29,551 22,969 34,721 64,272 43,172
Operating expenses:
Selling and marketing 7,551 3,454 7,560 15,111 6,813
General and
administrative 7,890 3,663 8,342 16,232 7,247
Amortization of
intangibles 1,046 301 1,025 2,071 601
Total operating
expenses 16,487 7,418 16,927 33,414 14,661
Operating income 13,064 15,551 17,794 30,858 28,511
Interest expense (3,608) (45) (5,098) (8,706) (106)
Interest income and
other, net 235 1,118 759 994 2,095
Income before income
taxes 9,691 16,624 13,455 23,146 30,500
Income tax provision (3,654) (6,068) (4,990) (8,644) (11,133)
Net income $6,037 $10,556 $8,465 $14,502 $19,367
Earnings per common share:
Basic $0.14 $0.25 $0.20 $0.34 $0.47
Diluted $0.14 $0.25 $0.20 $0.34 $0.46
Weighted average common
shares:
Basic 42,199 41,694 42,149 42,174 41,566
Diluted 42,496 42,512 42,398 42,447 42,242
SELECTED BALANCE SHEET DATA
July 2, December 31,
2007 2006
Cash and short-term investments $26,131 $70,656
Accounts receivable, net 110,367 125,435
Inventories, net 64,585 67,020
Total current assets 209,689 271,748
Net property, plant and equipment 127,843 150,837
Other assets 162,928 151,113
Total assets 500,460 573,698
Current portion long-term liabilities $50,000 $60,705
Accounts Payable 45,402 49,276
Current liabilities 123,107 144,343
Long-term liabilities 72,253 142,040
Stockholders' equity 305,100 287,315
Total liabilities and stockholders'
equity 500,460 573,698
SUPPLEMENTAL DATA
Second First First Two
Quarter Quarter Fiscal Quarters
2007 2006 2007 2007 2006
EBITDA $20,113 $19,443 $25,468 $45,581 $36,121
EBITA $14,373 $16,998 $19,608 $33,981 $31,265
Gross margin 18.2 % 30.0 % 19.6 % 19.0 % 28.9 %
EBITDA margin 12.4 25.4 14.4 13.4 24.2
Operating margin 8.1 20.3 10.1 9.1 19.1
End Market
Breakdown:
Second Quarter
2007 2006
Networking/Communications 42% 42%
Aerospace/Defense 30 11
Computing/Storage/Peripherals 15 35
Medical/Industrial/
Instrumentation/Other 13 12
Stock-based
Compensation:
Second Quarter First Quarter
2007 2006 2007
Amount included in:
Cost of goods sold $255 $103 $187
Selling and marketing 48 29 50
General and administrative 581 202 423
Total stock- based
compensation expense $884 $334 $660
Operating Segment
Data:
Second First
Quarter Quarter
Net sales: 2007 2007
PCB Manufacturing 138,651 152,151
Commercial Assembly 32,164 33,657
Total Sales 170,815 185,808
Inter-Segment Sales (8,799) (8,911)
Total Net Sales $162,016 $176,897
Operating Segment Income:
PCB Manufacturing 12,052 16,397
Commercial Assembly 2,086 2,452
Total Op Segment Income 14,138 18,849
Amortization of Intangible (1,074) (1,055)
Total Op Income 13,064 17,794
Total Other Income
(Expense) (3,373) (4,339)
Income Before Income Taxes $9,691 $13,455
RECONCILIATIONS*
Second First First Two
Quarter Quarter Fiscal Quarters
2007 2006 2007 2007 2006
EBITA/EBITDA
reconciliation:
Net income $6,037 $10,556 $8,465 $14,502 $19,367
Add back items:
Income taxes 3,654 6,068 4,990 8,644 11,133
Interest expense 3,608 45 5,098 8,706 106
Amortization of
intangibles 1,074 329 1,055 2,129 659
EBITA 14,373 16,998 19,608 33,981 31,265
Depreciation expense 5,740 2,445 5,860 11,600 4,856
EBITDA $20,113 $19,443 $25,468 $45,581 $36,121
* This information provides a reconciliation of EBITA/EBITDA to the
financial information in our consolidated statements of operations.
"EBITDA" means earnings before interest expense, income taxes,
depreciation and amortization. "EBITA" means earnings before interest
expense, income taxes and amortization. We present EBITDA / EBITA to
enhance the understanding of our operating results. EBITDA / EBITA is a
key measure we use to evaluate our operations. In addition, we provide
our EBITDA / EBITA because we believe that investors and securities
analysts will find EBITDA / EBITA to be a useful measure for evaluating
our operating performance and comparing our operating performance with
that of similar companies that have different capital structures and for
evaluating our ability to meet our future debt service, capital
expenditures, and working capital requirements. However, EBITDA / EBITA
should not be considered as an alternative to cash flows from operating
activities as a measure of liquidity or as an alternative to net income as
a measure of operating results in accordance with accounting principles
generally accepted in the United States of America.
SOURCE TTM Technologies, Inc.
Released July 31, 2007