10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 7, 2020
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form
For the quarterly period ended
Or
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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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.
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).
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.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
Number of shares of common stock, $0.001 par value, of registrant outstanding at May 4, 2020:
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
TTM TECHNOLOGIES, INC.
Consolidated Condensed Balance Sheets
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As of |
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March 30, |
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December 30, |
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2020 |
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2019 |
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(Unaudited) |
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(In thousands, except par value) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Contract assets |
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Inventories |
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Current assets held for sale |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Goodwill |
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Definite-lived intangibles, net |
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Non-current assets held for sale |
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— |
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Deposits and other non-current assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Short-term debt, including current portion of long-term debt |
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$ |
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$ |
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Accounts payable |
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Contract liabilities |
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Accrued salaries, wages and benefits |
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Current liabilities held for sale |
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Other current liabilities |
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Total current liabilities |
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Long-term debt, net of discount and issuance costs |
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Operating lease liabilities |
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Non-current liabilities held for sale |
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— |
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Other long-term liabilities |
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Total long-term liabilities |
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Commitments and contingencies (Note 14) |
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Equity: |
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Common stock, $ shares issued and outstanding as of March 30, 2020 and December 30, 2019, respectively |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total stockholders’ equity |
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$ |
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$ |
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See accompanying notes to consolidated condensed financial statements.
3
TTM TECHNOLOGIES, INC.
Consolidated Condensed Statements of Operations
For the Quarters Ended March 30, 2020 and April 1, 2019
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Quarter Ended |
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March 30, |
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April 1, |
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2020 |
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2019 |
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(Unaudited) |
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(In thousands, except per share data) |
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Net sales |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Selling and marketing |
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General and administrative |
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Research and development |
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Amortization of definite-lived intangibles |
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Total operating expenses |
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Operating income |
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Other expense: |
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Interest expense |
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Other, net |
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Total other expense, net |
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(Loss) income from continuing operations before income taxes |
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Income tax provision |
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Net (loss) income from continuing operations |
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Income (loss) from discontinued operations, net of income taxes |
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Net loss |
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$ |
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$ |
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Loss per share: |
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Basic (loss) earnings per share from continuing operations |
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$ |
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$ |
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Basic earnings (loss) per share from discontinued operations |
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Basic loss per share |
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$ |
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$ |
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Diluted (loss) earnings per share from continuing operations |
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$ |
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$ |
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Diluted earnings (loss) per share from discontinued operations |
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Diluted loss per share |
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$ |
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$ |
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See accompanying notes to consolidated condensed financial statements.
4
TTM TECHNOLOGIES, INC.
Consolidated Condensed Statements of Comprehensive Loss
For the Quarters Ended March 30, 2020 and April 1, 2019
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Quarter Ended |
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March 30, |
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April 1, |
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2020 |
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2019 |
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(Unaudited) |
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(In thousands) |
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Net loss |
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$ |
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$ |
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Other comprehensive loss, net of tax: |
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Foreign currency translation adjustments, net |
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Pension obligation adjustments, net |
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Net unrealized losses on cash flow hedges: |
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Unrealized loss on effective cash flow hedges during the period, net |
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Loss realized in the statement of operations |
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Net |
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( |
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Other comprehensive loss, net of tax |
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( |
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( |
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Comprehensive loss, net of tax |
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$ |
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$ |
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See accompanying notes to consolidated condensed financial statements.
5
TTM TECHNOLOGIES, INC.
Consolidated Condensed Statements of Stockholders’ Equity
For the Quarters Ended March 30, 2020 and April 1, 2019
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Common Stock |
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Additional Paid-In |
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Retained |
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Accumulated Other Comprehensive |
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Total |
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Equity |
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(Unaudited) |
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(In thousands) |
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Balance, December 30, 2019 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Issuance of common stock for performance-based restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance, March 30, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Additional Paid-In |
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Retained |
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Accumulated Other Comprehensive |
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Total |
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Equity |
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(Unaudited) |
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(In thousands) |
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Balance, December 31, 2018 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Redemption of convertible notes, net |
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— |
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— |
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( |
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— |
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— |
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( |
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Issuance of common stock for performance-based restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for restricted stock units |
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( |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance, April 1, 2019 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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See accompanying notes to consolidated condensed financial statements.
6
TTM TECHNOLOGIES, INC.
Consolidated Condensed Statements of Cash Flows
For the Quarters Ended March 30, 2020 and April 1, 2019
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Quarter Ended |
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March 30, 2020 |
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April 1, 2019 |
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(Unaudited) |
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(In thousands) |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation of property, plant and equipment |
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Amortization of definite-lived intangible assets |
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Amortization of debt discount and issuance costs |
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Deferred income taxes |
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( |
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( |
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Stock-based compensation |
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Other |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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Contract assets |
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Inventories |
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( |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Accounts payable |
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( |
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( |
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Contract liabilities |
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( |
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( |
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Accrued salaries, wages and benefits and other current liabilities |
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( |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Refundable deposit related to sale of the Mobility business unit |
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— |
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Purchase of property, plant and equipment and other assets |
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( |
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( |
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Proceeds from sale of property, plant and equipment and other assets |
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— |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Repayment of long-term debt borrowing |
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— |
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( |
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Redemption of convertible notes |
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— |
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( |
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Net cash used in financing activities |
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— |
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( |
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Effect of foreign currency exchange rates on cash and cash equivalents |
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( |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents and restricted cash at beginning of period |
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Cash and cash equivalents and restricted cash at end of period |
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Cash and cash equivalents and restricted cash in assets held for sale |
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( |
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( |
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Cash and cash equivalents as presented on the consolidated condensed balance sheet |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid, net for interest |
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$ |
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$ |
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Cash paid, net for income taxes |
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Net cash provided by operating activities from discontinued operations |
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Net cash provided by (used in) investing activities from discontinued operations |
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( |
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Net cash used in financing activities from discontinued operations |
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— |
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— |
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Supplemental disclosure of noncash investing activities: |
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Property, plant and equipment recorded in accounts payable |
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$ |
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$ |
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Supplemental disclosure of noncash investing activities from discontinued operations: |
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Property, plant and equipment recorded in accounts payable |
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$ |
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$ |
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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 Basis of Presentation
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. 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, 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. 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 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. Due to the coronavirus (COVID-19) global pandemic, the global economy and financial markets have been disrupted and there is a significant amount of uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. 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.
On January 19, 2020, the Company entered into a definitive equity interests purchase agreement with AKMMeadville Electronics (Xiamen) Co., Ltd (the Purchaser) for the sale of the Company’s following subsidiaries, which was completed on April 17, 2020: Shanghai Kaiser Electronics Co., Ltd. (SKE), Shanghai Meadville Electronics Co., Ltd. (SME), Shanghai Meadville Science & Technology Co., Ltd. (SP) and Guangzhou Meadville Electronics Co., Ltd. (GME) (collectively, the Mobility business unit). For all periods presented in the consolidated condensed balance sheet, all assets and liabilities attributable to the Mobility business unit have been aggregated under the captions “Current assets held for sale”, “Non-current assets held for sale”, “Current liabilities held for sale” and “Non-current liabilities held for sale”. For all periods presented in the consolidated condensed statements of operations, all sales, costs, expenses and income taxes attributable to the Mobility business unit have been aggregated under the caption “Income from discontinued operations, net of income taxes”. Prior year results have been recast to conform with the current presentation. Refer to Note 2, Discontinued Operations, for additional information.
Unless otherwise noted, amounts and disclosures throughout these notes to consolidated condensed financial statements relate to continuing operations. 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. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
Reclassifications
Certain prior year amounts in the condensed consolidated financial statements have been reclassified due to the sale of the Company’s Mobility business unit. Refer to Note 2, Discontinued Operations, for further information regarding this sale and the resulting prior year reclassifications. Further, in 2020, the Company began presenting research and development expenses as a separate line item on the consolidated condensed statements of operations to better align with similar presentation made by peers and to provide additional disclosure that is meaningful for investors. The prior year consolidated condensed statements of operations were adjusted to conform with this new presentation. Research and development expense were previously presented within general and administrative expense on the consolidated condensed statements of operations.
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TTM TECHNOLOGIES, INC.
Notes to Consolidated Condensed Financial Statements—(Continued)
Recently Adopted and Issued Accounting Standards
Recently Adopted Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, the Company will be required to use a forward-looking expected loss model that reflects losses that are probable rather than the incurred loss model for recognizing credit losses. The standard became effective for interim and annual periods beginning after December 15, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company adopted this ASU as of December 31, 2019 and it did not have a material impact on its financial statements.
Recently Issued Accounting Standards Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary relief to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative rates. This guidance is effective beginning on March 12, 2020 through December 31, 2022. The guidance on contract modifications can be applied prospectively from any date beginning March 12, 2020 and may also be applied to modifications of existing contracts made earlier in the interim period that includes March 12, 2020. The guidance on hedging can be applied to eligible hedging relationships existing at the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of that interim period. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated condensed financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company has evaluated the new guidance to determine the impact it may have on its consolidated condensed financial statements and related disclosures and the impact is not expected to be material.
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.
(2) Discontinued Operations
On January 19, 2020, the Company entered into a definitive equity interests purchase agreement for the sale of the Company’s Mobility business unit. The sale was completed on April 17, 2020 for a base purchase price of $
As the sale of the Company’s Mobility business unit represents a strategic shift that will have a major effect on the Company’s operations and financial results, in accordance with the provisions of FASB authoritative guidance on the presentation of financial statements, Mobility business unit results are classified as discontinued operations in the consolidated condensed statements of operations for all periods presented. Prior year results have been recast to conform with the current presentation. The Mobility business unit is part of the Company’s PCB reportable segment.
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TTM TECHNOLOGIES, INC.
Notes to Consolidated Condensed Financial Statements—(Continued)
The following table summarizes the results of Mobility operations for each period prior to sale:
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Quarter Ended |
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March 30, |
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April 1, |
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2020 |
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2019 |
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(In thousands, except per share data) |
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Net sales |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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( |
) |
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Operating expenses: |
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Selling and marketing |
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General and administrative |
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Research and development |
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— |
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Amortization of definite-lived intangibles |
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Total operating expenses |
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Operating income (loss) |
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( |
) |
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Other income (expense): |
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Interest expense |
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( |
) |
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( |
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Other, net |
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( |
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Total other income (expense), net |
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( |
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Income (loss) from discontinued operations before income taxes |
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( |
) |
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Income tax (provision) benefit |
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( |
) |
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Income (loss) from discontinued operations, net of income taxes |
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$ |
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$ |
( |
) |
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Earnings (loss) per share from discontinued operations: |
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Basic earnings (loss) per share |
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$ |
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$ |
( |
) |
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Diluted earnings (loss) per share |
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$ |
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$ |
( |
) |
Depreciation expense related to the discontinued operations for the quarter ended March 30, 2020 and April 1, 2019 was $
10
TTM TECHNOLOGIES, INC.
Notes to Consolidated Condensed Financial Statements—(Continued)
Assets being sold and liabilities being assumed by the Purchaser in the sale of the Company’s Mobility business unit include substantially all assets and liabilities, with the exception of certain accounts receivable.
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As of |
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March 30, |
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December 30, |
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2020 |
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2019 |
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(In thousands) |
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Cash and cash equivalents |
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$ |
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$ |
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