Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 9, 2019

10-Q: Quarterly report pursuant to Section 13 or 15(d)

Published on May 9, 2019

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

Form 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 1, 2019

Commission File Number: 0-31285

 

TTM TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

 

91-1033443

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1665 Scenic Avenue Suite 250, Costa Mesa, California 92626

(Address of principal executive offices)

(714) 327-3000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  

 

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

  

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

TTMI

Nasdaq Global Market Select

 

Number of shares of common stock, $0.001 par value, of registrant outstanding at May 6, 2019: 105,461,294

 

 

 

 

 


TABLE OF CONTENTS

 

 

 

Page

PART I: FINANCIAL INFORMATION

 

3

Item 1. Financial Statements (unaudited)

 

3

Consolidated Condensed Balance Sheets as of April 1, 2019 and December 31, 2018

 

3

Consolidated Condensed Statements of Operations for the quarters ended April 1, 2019 and April 2, 2018

 

4

Consolidated Condensed Statements of Comprehensive (Loss) Income for the quarters ended April 1, 2019 and April 2, 2018

 

5

Consolidated Condensed Statements of Stockholders’ Equity for the quarters ended April 1, 2019 and April 2, 2018

 

6

Consolidated Condensed Statements of Statements of Cash Flows for the quarters ended April 1, 2019 and April 2, 2018

 

7

Notes to Consolidated Condensed Financial Statements

 

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

30

Item 4. Controls and Procedures

 

32

PART II: OTHER INFORMATION

 

33

Item 1. Legal Proceedings

 

33

Item 1A. Risk Factors

 

33

Item 6. Exhibits

 

51

SIGNATURES

 

52

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

TTM TECHNOLOGIES, INC.

Consolidated Condensed Balance Sheets

 

 

 

As of

 

 

 

April 1,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

(In thousands, except par value)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

235,219

 

 

$

256,360

 

Accounts receivable, net

 

 

516,828

 

 

 

523,165

 

Contract assets

 

 

263,073

 

 

 

287,741

 

Inventories

 

 

114,800

 

 

 

109,377

 

Prepaid expenses and other current assets

 

 

39,629

 

 

 

30,271

 

Total current assets

 

 

1,169,549

 

 

 

1,206,914

 

Property, plant and equipment, net

 

 

1,037,696

 

 

 

1,052,024

 

Operating lease right-of-use assets

 

 

21,631

 

 

 

 

Goodwill

 

 

767,045

 

 

 

767,045

 

Definite-lived intangibles, net

 

 

357,918

 

 

 

375,923

 

Deposits and other non-current assets

 

 

60,446

 

 

 

55,597

 

 

 

$

3,414,285

 

 

$

3,457,503

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Short-term debt, including current portion of long-term debt

 

$

 

 

$

30,000

 

Accounts payable

 

 

424,291

 

 

 

431,288

 

Contract liabilities

 

 

2,387

 

 

 

3,220

 

Accrued salaries, wages and benefits

 

 

79,018

 

 

 

94,950

 

Other

 

 

102,036

 

 

 

113,756

 

Total current liabilities

 

 

607,732

 

 

 

673,214

 

Long-term debt, net of discount and issuance costs

 

 

1,466,010

 

 

 

1,462,425

 

Operating lease liabilities

 

 

14,598

 

 

 

 

Other long-term liabilities

 

 

99,086

 

 

 

94,777

 

Total long-term liabilities

 

 

1,579,694

 

 

 

1,557,202

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000 shares authorized,

   105,421 and 103,687 shares issued and outstanding at

   April 1, 2019 and December 31, 2018, respectively

 

 

105

 

 

 

104

 

Additional paid-in capital

 

 

801,819

 

 

 

797,895

 

Retained earnings

 

 

429,756

 

 

 

433,008

 

Accumulated other comprehensive loss

 

 

(4,821

)

 

 

(3,920

)

Total stockholders’ equity

 

 

1,226,859

 

 

 

1,227,087

 

 

 

$

3,414,285

 

 

$

3,457,503

 

 

See accompanying notes to consolidated condensed financial statements.

 

3


 

TTM TECHNOLOGIES, INC.

Consolidated Condensed Statements of Operations

For the Quarters Ended April 1, 2019 and April 2, 2018

 

 

 

Quarter Ended

 

 

 

April 1,

 

 

April 2,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

(In thousands, except per share data)

 

Net sales

 

$

620,200

 

 

$

663,582

 

Cost of goods sold

 

 

531,515

 

 

 

574,904

 

Gross profit

 

 

88,685

 

 

 

88,678

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

 

18,901

 

 

 

17,628

 

General and administrative

 

 

35,468

 

 

 

35,188

 

Amortization of definite-lived intangibles

 

 

16,826

 

 

 

5,861

 

Total operating expenses

 

 

71,195

 

 

 

58,677

 

Operating income

 

 

17,490

 

 

 

30,001

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(21,688

)

 

 

(13,747

)

Other, net

 

 

(530

)

 

 

(1,107

)

Total other expense, net

 

 

(22,218

)

 

 

(14,854

)

(Loss) income before income taxes

 

 

(4,728

)

 

 

15,147

 

Income tax benefit (provision)

 

 

1,476

 

 

 

(5,050

)

Net (loss) income

 

$

(3,252

)

 

$

10,097

 

 

 

 

 

 

 

 

 

 

(Loss) earnings per share:

 

 

 

 

 

 

 

 

Basic (loss) earnings per share

 

$

(0.03

)

 

$

0.10

 

Diluted (loss) earnings per share

 

$

(0.03

)

 

$

0.09

 

 

See accompanying notes to consolidated condensed financial statements.

 

4


 

TTM TECHNOLOGIES, INC.

Consolidated Condensed Statements of Comprehensive (Loss) Income

For the Quarters Ended April 1, 2019 and April 2, 2018

 

 

 

Quarter Ended

 

 

 

April 1,

 

 

April 2,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

(In thousands)

 

Net (loss) income

 

$

(3,252

)

 

$

10,097

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net

 

 

630

 

 

 

622

 

Pension obligation adjustments, net

 

 

19

 

 

 

 

Net unrealized gains (losses) on cash flow hedges:

 

 

 

 

 

 

 

 

Unrealized loss on effective cash flow hedges during the period, net

 

 

(1,828

)

 

 

(6

)

Loss realized in the statement of operations

 

 

278

 

 

 

41

 

Net

 

 

(1,550

)

 

 

35

 

Other comprehensive (loss) income, net of tax

 

 

(901

)

 

 

657

 

Comprehensive (loss) income, net of tax

 

$

(4,153

)

 

$

10,754

 

 

See accompanying notes to consolidated condensed financial statements.


5


 

TTM TECHNOLOGIES, INC.

Consolidated Condensed Statements of Stockholders’ Equity

For the Quarters Ended April 1, 2019 and April 2, 2018

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

 

 

(In thousands)

 

Balance, December 31, 2018

 

 

103,687

 

 

$

104

 

 

$

797,895

 

 

$

433,008

 

 

$

(3,920

)

 

$

1,227,087

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,252

)

 

 

 

 

 

(3,252

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(901

)

 

 

(901

)

Redemption of convertible

   notes, net

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Issuance of common stock for

   performance-based

   restricted stock units

 

 

694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for

   restricted stock units

 

 

1,040

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,926

 

 

 

 

 

 

 

 

 

3,926

 

Balance, April 1, 2019

 

 

105,421

 

 

$

105

 

 

$

801,819

 

 

$

429,756

 

 

$

(4,821

)

 

$

1,226,859

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income

 

 

Equity

 

 

 

(In thousands)

 

Balance, January 1, 2018

 

 

101,820

 

 

$

102

 

 

$

777,025

 

 

$

230,850

 

 

$

3,403

 

 

$

1,011,380

 

New revenue standard adjustment

 

 

 

 

 

 

 

 

 

 

 

28,574

 

 

 

 

 

 

28,574

 

Net income

 

 

 

 

 

 

 

 

 

 

 

10,097

 

 

 

 

 

 

10,097

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

657

 

 

 

657

 

Issuance of common stock for

   performance-based

   restricted stock units

 

 

521

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for

   restricted stock units

 

 

1,104

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,622

 

 

 

 

 

 

 

 

 

3,622

 

Balance, April 2, 2018

 

 

103,445

 

 

$

103

 

 

$

780,646

 

 

$

269,521

 

 

$

4,060

 

 

$

1,054,330

 

 

See accompanying notes to consolidated condensed financial statements.

6


 

TTM TECHNOLOGIES, INC.

Consolidated Condensed Statements of Cash Flows

For the Quarters Ended April 1, 2019 and April 2, 2018

 

 

 

Quarter ended

 

 

 

April 1,

 

 

April 2,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(3,252

)

 

$

10,097

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

41,602

 

 

 

39,775

 

Amortization of definite-lived intangible assets

 

 

18,005

 

 

 

5,861

 

Amortization of debt discount and issuance costs

 

 

3,845

 

 

 

3,029

 

Deferred income taxes

 

 

(1,262

)

 

 

 

Stock-based compensation

 

 

3,926

 

 

 

3,622

 

Other

 

 

(4,346

)

 

 

(439

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

6,337

 

 

 

(12,840

)

Contract assets

 

 

24,668

 

 

 

(14,368

)

Inventories

 

 

(5,423

)

 

 

(11,104

)

Prepaid expenses and other current assets

 

 

(8,599

)

 

 

1,015

 

Accounts payable

 

 

(5,976

)

 

 

8,657

 

Contract liabilities

 

 

(833

)

 

 

 

Accrued salaries, wages and benefits and other current liabilities

 

 

(31,768

)

 

 

(47,566

)

Net cash provided by (used in) operating activities

 

 

36,924

 

 

 

(14,261

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment and equipment deposits

 

 

(33,483

)

 

 

(42,192

)

Proceeds from sale of property, plant and equipment and other assets

 

 

5,037

 

 

 

53

 

Net cash used in investing activities

 

 

(28,446

)

 

 

(42,139

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayment of long-term debt borrowing

 

 

(30,000

)

 

 

(875

)

Redemption of convertible notes

 

 

(10

)

 

 

 

Net cash used in financing activities

 

 

(30,010

)

 

 

(875

)

Effect of foreign currency exchange rates on cash and cash equivalents

 

 

391

 

 

 

525

 

Net decrease in cash and cash equivalents

 

 

(21,141

)

 

 

(56,750

)

Cash and cash equivalents at beginning of period

 

 

256,360

 

 

 

409,326

 

Cash and cash equivalents at end of period

 

$

235,219

 

 

$

352,576

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid, net for interest

 

$

25,840

 

 

$

15,310

 

Cash paid, net for income taxes

 

 

9,575

 

 

 

14,493

 

Noncash transactions:

 

 

 

 

 

 

 

 

Property, plant and equipment recorded in accounts payable

 

$

48,148

 

 

$

65,927

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated condensed financial statements.

 

 

7


TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

(Dollars and shares in thousands, except per share data)

(1) Nature of Operations and Summary of Significant Accounting Policies

TTM Technologies, Inc. (the Company or TTM) is a leading global printed circuit board (PCB) manufacturer, focusing on quick-turn and volume production of technologically complex PCBs, backplane assemblies and electro-mechanical solutions (E-M Solutions) as well as a global designer and manufacturer of radio-frequency (RF) and microwave components and assemblies. The Company provides time-to-market and volume production of advanced technology products and offers a one-stop design, engineering and manufacturing solution to customers from engineering support to prototype development through final mass production. This one-stop design and manufacturing solution enables the Company to align technology developments with the diverse needs of the Company’s customers and to enable them to reduce the time required to develop new products and bring them to market.

The Company serves a diversified customer base in various markets throughout the world, including aerospace and defense, automotive components, smartphones and touchscreen tablets, high-end computing, medical, industrial and instrumentation related products, as well as networking/communications infrastructure products. The Company’s customers include both original equipment manufacturers (OEMs) and electronic manufacturing services (EMS) providers.

The accompanying consolidated condensed financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. These consolidated condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented. It is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s most recent Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated condensed financial statements and accompanying notes. Actual results could differ materially from those estimates. The Company uses a 13-week fiscal quarter accounting period with the fourth quarter ending on the Monday nearest December 31.

Reclassifications

Certain amounts in the prior period consolidated condensed financial statement have been reclassified to conform to the presentation of the current period consolidated condensed financial statement. These reclassifications had no effect on the previously reported net income. An adjustment has been made to combine the statutory surplus reserve with retained earnings on the consolidated condensed balance sheet and the consolidated statement of stockholders’ equity.

Summary of Significant Accounting Policies

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets, other current liabilities, and operating lease liabilities on the consolidated condensed balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components and accounts for the lease and non-lease components as a single lease component.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, Leases (Topic 842) which supersedes the existing lease recognition requirements in the current accounting standard for leases. The core principal of the new standard is that an entity should recognize ROU assets and lease liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures.

8


TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

 

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides additional guidance to Topic 842 including providing preparers an additional optional retrospective adoption method which allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings. ASU 2018-11 also provides lessors a practical expedient to not separate lease from non-lease components, in certain situations.

The Company adopted the new lease standard as of January 1, 2019 and utilized the retrospective cumulative effect adjustment transition method with a cumulative effect adjustment being recorded as of the adoption date. Therefore, comparative information has not been adjusted and continues to be reported under previous U.S. GAAP guidance for the consolidated balance sheet at December 31, 2018 and the consolidated condensed statement of operations for the quarter ended April 2, 2018. The Company implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The Company elected certain available practical expedients including the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. Additionally, the Company elected an accounting policy to not record ROU assets and lease liabilities for leases with an initial term of twelve months or less on its consolidated condensed balance sheet.

The cumulative effect of the changes made to the Company’s January 1, 2019 consolidated condensed balance sheet for the adoption of the new lease standard was as follows:

 

 

 

Balance at December 31, 2018

 

 

New Lease Standard Adjustment

 

 

Balance at January 1, 2019

 

 

 

(In thousands)

 

Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

$

 

 

$

16,894

 

 

$

16,894

 

Deposits and other non-current assets

 

 

55,597

 

 

 

(548

)

 

 

55,049

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

 

113,756

 

 

 

2,545

 

 

 

116,301

 

Operating lease liabilities

 

 

 

 

 

14,356

 

 

 

14,356

 

Other long-term liabilities

 

 

94,777

 

 

 

(555

)

 

 

94,222

 

 

The adoption of the new accounting guidance did not have a material impact to the consolidated condensed statement of operations or the consolidated condensed statement of cash flows for the quarter ended April 1, 2019. See Note 4 for further details.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payments. This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The effective date for the standard is for interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, but no earlier than the Company's adoption date of Topic 606. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company adopted ASU 2018-07 on January 1, 2019. The adoption did not have a material impact on the consolidated condensed financial statements or related disclosures.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. ASU 2017-12 also amends the guidance surrounding the recognition of the value of hedged instruments to include the entire change in value, rather than just the effective portion, in other comprehensive income and recognized in earnings at the same time that the hedged item affects earnings for cash flow and net investment hedges. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2017-12 on January 1, 2019. The adoption did not have a material impact on the consolidated condensed financial statements or related disclosures.

Recently Issued Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20)—Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this update change the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. It eliminates requirements for certain disclosures that are no longer considered cost beneficial and requires new disclosures that the FASB considers pertinent. The guidance is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company does not anticipate the adoption will have a material impact on the consolidated condensed financial statements and related disclosures.

9


TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

 

 

(2) Revenues

As of April 1, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations for long-term contracts was $20,601. The Company expects to recognize revenue on approximately 85% of the remaining performance obligations for the Company’s long-term contracts over the next twelve months with the remaining amount recognized thereafter. The remaining performance obligations for the Company’s short-term contracts are expected to be recognized within one year or less.

Revenue from products and services transferred to customers over time and at a point in time accounted for 97% and 3%, respectively of the Company’s revenue for the quarter ended April 1, 2019.

The following tables represent a disaggregation of revenue by principal end markets with the reportable segments:

 

 

 

Quarter ended April 1, 2019

 

 

 

PCB

 

 

E-M Solutions

 

 

Total

 

End Markets

 

(In thousands)

 

Aerospace and Defense

 

$

165,068

 

 

$

4

 

 

$

165,072

 

Automotive

 

 

85,813

 

 

 

19,765

 

 

 

105,578

 

Cellular Phone

 

 

43,084

 

 

 

 

 

 

43,084

 

Computing/Storage/Peripherals

 

 

80,892

 

 

 

189

 

 

 

81,081

 

Medical/Industrial/Instrumentation

 

 

87,670

 

 

 

8,167

 

 

 

95,837

 

Networking/Communications

 

 

88,063

 

 

 

23,339

 

 

 

111,402

 

Other

 

 

18,232

 

 

 

(86

)

 

 

18,146

 

Total

 

$

568,822

 

 

$

51,378

 

 

$

620,200

 

 

 

 

Quarter ended April 2, 2018

 

 

 

PCB

 

 

E-M Solutions

 

 

Total

 

End Markets

 

(In thousands)

 

Aerospace and Defense

 

$

122,676

 

 

$

89

 

 

$

122,765

 

Automotive

 

 

116,292

 

 

 

19,310

 

 

 

135,602

 

Cellular Phone

 

 

104,860

 

 

 

 

 

 

104,860

 

Computing/Storage/Peripherals

 

 

88,542

 

 

 

305

 

 

 

88,847

 

Medical/Industrial/Instrumentation

 

 

93,634

 

 

 

7,523

 

 

 

101,157

 

Networking/Communications

 

 

81,937

 

 

 

19,473

 

 

 

101,410

 

Other

 

 

8,490

 

 

 

451

 

 

 

8,941

 

Total

 

$

616,431

 

 

$

47,151

 

 

$

663,582

 

 

(3) Acquisition of Anaren Inc.

On April 18, 2018, the Company acquired all of the equity interests of Anaren for a total consideration of $787,911. Anaren was a leading provider of mission-critical RF solutions, microelectronics, and microwave components and assemblies for the wireless infrastructure and aerospace and defense electronics markets.

Bank fees and legal, accounting, and other professional service costs associated with the acquisition of Anaren of $203 and $3,973 for the quarters ended April 1, 2019 and April 2, 2018, respectively, have been expensed and recorded as general and administrative expense in the consolidated condensed statements of operations.

The following summarizes the components of the purchase price:

 

 

 

(In thousands)

 

Cash consideration

 

$

596,396

 

Cash purchased

 

 

12,911

 

 

 

 

609,307

 

Debt assumed

 

 

178,604

 

Total consideration

 

$

787,911

 

 

10


TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

 

The purchase price of the Anaren acquisition was allocated to tangible and intangible assets acquired, and liabilities assumed based on the fair value at the date of the acquisition, April 18, 2018. The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill. The fair value assigned to identifiable intangible assets acquired was based on estimates and assumptions made by management at the time of the acquisition. The Company finalized the allocation of the purchase price during the fourth quarter of 2018.

The fair values assigned are based on reasonable methods applicable to the nature of the assets acquired and liabilities assumed. The following summarizes the final estimated fair values of net assets acquired:

 

 

 

(In thousands)

 

Cash

 

$

12,911

 

Trade and notes receivables

 

 

32,457

 

Contract assets

 

 

23,585

 

Inventories

 

 

56,619

 

Other current assets

 

 

1,373

 

Property, plant and equipment

 

 

45,115

 

Identifiable intangible assets

 

 

336,000

 

Other assets

 

 

300

 

Goodwill

 

 

394,474

 

Trade accounts payable

 

 

(14,623

)

Contract liabilities

 

 

(7,778

)

Other current liabilities

 

 

(7,616

)

Long-term debt

 

 

(178,604

)

Non-current deferred tax liabilities

 

 

(76,470

)

Other liabilities

 

 

(8,436

)

Total

 

$

609,307

 

 

Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. The goodwill acquired in the acquisition is not deductible for income tax purposes.

Pro forma Financial Information

The unaudited pro forma financial information below gives effect to this acquisition as if it had occurred at the beginning of fiscal 2018, or January 2, 2018. The pro forma financial information presented includes the effects of adjustments related to the amortization of acquired identifiable intangible assets and acquired inventory, depreciation of acquired fixed assets, and other non-recurring transactions costs directly associated with the acquisitions such as legal, accounting and banking fees.

The pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the actual results that would have been achieved had the acquisition occurred at the beginning of the earliest period presented, or the results that may be achieved in future periods.

 

 

 

Quarter Ended

 

 

 

April 1,

 

 

April 2,

 

 

 

2019

 

 

2018

 

 

 

(In thousands)

 

Net sales

 

$

620,200

 

 

$

726,844

 

Net (loss) income

 

 

(3,252

)

 

 

12,526

 

Basic (loss) earnings per share

 

$

(0.03

)

 

$

0.12

 

Dilutive (loss) earnings per share

 

$

(0.03

)

 

$

0.12

 

 

(4) Leases

The Company leases some of its manufacturing and assembly plants, sales offices and equipment under non-cancellable operating leases that expire at various dates through 2049. The majority of the Company’s lease arrangements are comprised of fixed payments and a limited number of leases consist of variable payments based on equipment usage. Certain leases contain renewal provisions at the Company’s option. Most of the leases require the Company to pay for certain other costs such as property taxes and maintenance. Certain leases also contain rent escalation clauses (step rents) that require additional rental amounts in the later years of the term. Rent expense for leases with step rents is recognized on a straight-line basis over the minimum lease term. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.

11


TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

 

The components of lease expense were as follows:

 

 

Quarter Ended

April 1, 2019

 

 

(In thousands)

 

Operating lease cost

$

2,231

 

Variable lease cost

 

191

 

Short-term lease cost

 

151

 

 

Supplemental cash flow information related to leases was as follows:

 

 

Quarter Ended

April 1, 2019

 

 

(In thousands)

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

Operating cash flows from operating leases

$

1,870

 

Right-of-use assets obtained in exchange for new lease obligations:

 

 

 

Operating leases

 

6,789

 

 

Supplemental balance sheet information related to leases was as follows:

 

 

As of

April 1, 2019

 

 

(In thousands)

 

Operating lease right-of-use assets

$

21,631

 

Other current liabilities

 

7,405

 

Operating lease liabilities

 

14,598

 

Total operating lease liabilities

$

22,003

 

 

Weighted average remaining lease term

3.8 years

 

Weighted average discount rate

 

4.10

%

 

Maturities of operating lease liabilities were as follows1:

 

 

 

(In thousands)

 

Less than one year

 

$

8,131

 

1 - 2 years

 

 

6,246

 

2 - 3 years

 

 

4,869

 

3 - 4 years

 

 

1,731

 

4 - 5 years

 

 

1,300

 

Thereafter

 

 

1,539

 

Total lease payments

 

 

23,816

 

Less imputed interest

 

 

(1,813

)

Total

 

$

22,003

 

 

 

 

 

 

1 Excludes $4,313 of legally binding minimum lease payments for leases signed but not yet commenced.

 

 

 

Operating Leases Pre-Topic 842 Adoption

The Company leases some of its manufacturing and assembly plants, sales offices and equipment under noncancellable operating leases that expire at various dates through 2049. Certain real property leases contain renewal provisions at the Company’s option. Most of the leases require the Company to pay for certain other costs such as property taxes and maintenance. Certain leases also contain rent escalation clauses (step rents) that require additional rental amounts in the later years of the term. Rent expense for leases with step rents is recognized on a straight-line basis over the minimum lease term.

12


TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

 

The following is a schedule of future minimum lease payments as of December 31, 2018:

 

 

 

Operating Leases

 

 

 

(In thousands)

 

2019

 

$

7,282

 

2020

 

 

4,701

 

2021

 

 

3,406

 

2022

 

 

2,408

 

2023

 

 

2,172

 

Thereafter

 

 

4,172

 

Total minimum lease payments

 

$

24,141

 

 

(5) Composition of Certain Consolidated Condensed Financial Statement Captions

 

 

 

As of

 

 

 

April 1, 2019

 

 

December 31, 2018

 

 

 

(in thousands)

 

Inventories:

 

 

 

 

 

 

 

 

Raw materials

 

$

101,002

 

 

$

97,600

 

Work-in-process

 

 

11,623

 

 

 

10,299

 

Finished goods

 

 

2,175

 

 

 

1,478

 

 

 

$

114,800

 

 

$

109,377

 

Property, plant and equipment, net:

 

 

 

 

 

 

 

 

Land and land use rights

 

$

74,850

 

 

$

75,431

 

Buildings and improvements

 

 

536,038

 

 

 

534,122

 

Machinery and equipment

 

 

1,381,549

 

 

 

1,357,035

 

Construction-in-progress, furniture and fixtures and other

 

 

40,446

 

 

 

42,713

 

 

 

 

2,032,883

 

 

 

2,009,301

 

Less: Accumulated depreciation

 

 

(995,187

)

 

 

(957,277

)

 

 

$

1,037,696

 

 

$

1,052,024

 

 

(6) Goodwill

As of April 1, 2019 and December 31, 2018, goodwill was as follows:

 

 

 

Total

 

 

 

(In thousands)

 

Balance as of April 1, 2019 and December 31, 2018

 

 

 

 

Goodwill

 

$

938,445

 

Accumulated impairment losses

 

 

(171,400

)

 

 

$

767,045

 

 

 

 

 

 

All goodwill relates to the Company’s PCB reportable segment.

13


TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

 

(7) Definite-lived Intangibles

As of April 1, 2019 and December 31, 2018, the components of definite-lived intangibles were as follows:

 

 

 

Gross

Amount

 

 

Accumulated Amortization

 

 

Net

Carrying

Amount

 

Weighted

Average

Amortization

Period

 

 

 

(In thousands)

 

(years)

 

April 1, 2019