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
2
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
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
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
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
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
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 |
|
|
|
|
|
|
|
|
|
|
|||||