TTM TECHNOLOGIES INC 10-Q

Item 1. Financial Statements (unaudited) TTM TECHNOLOGIES, INC. Consolidated Condensed Balance Sheets As of June 29, December 30, 2020 2019 (Unaudited) (In thousands, except par value) ASSETS Current assets: Cash and cash equivalents $ 694,668 $ 379,818 Accounts receivable, net 414,329 503,598 Contract assets 287,281 254,600 Inventories 122,847 113,753 Current assets held for sale — 67,572 Receivable from Purchaser of the Mobility business unit 314,585 — Prepaid expenses and other current assets 38,202 23,343 Total current assets 1,871,912 1,342,684 Property, plant and equipment, net 660,866 678,201 Operating lease right-of-use assets 21,993 22,173 Goodwill 706,524 706,524 Definite-lived intangibles, net 303,790 325,680 Non-current assets held for sale — 425,597 Deposits and other non-current assets 29,586 60,074 $ 3,594,671 $ 3,560,933 LIABILITIES AND EQUITY Current liabilities: Short-term debt, including current portion of long-term debt $ 649,975 $ 249,975 Accounts payable 351,819 329,866 Contract liabilities 3,140 3,838 Accrued salaries, wages and benefits 79,424 85,114 Current liabilities held for sale — 185,391 Other current liabilities 113,099 92,482 Total current liabilities 1,197,457 946,666 Long-term debt, net of discount and issuance costs 832,834 1,225,962 Operating lease liabilities 15,015 15,413 Non-current liabilities held for sale — 1,530 Other long-term liabilities 103,800 92,325 Total long-term liabilities 951,649 1,335,230 Commitments and contingencies (Note 14) Equity: Common stock, $ 0.001 par value; 300,000 shares authorized, 106,701 and 105,510 shares issued and outstanding as of June 29, 2020 and December 30, 2019, respectively 107 106 Additional paid-in capital 822,189 814,708 Retained earnings 665,945 474,309 Accumulated other comprehensive loss ( 42,676 ) ( 10,086 ) Total stockholders’ equity 1,445,565 1,279,037 $ 3,594,671 $ 3,560,933 See accompanying notes to consolidated condensed financial statements. 3 TTM TECHNOLOGIES, INC. Consolidated Condensed Statements of Operations For the Quarter and Two Quarters Ended June 29, 2020 and July 1, 2019 Quarter Ended Two Quarters Ended June 29, July 1, June 29, July 1, 2020 2019 2020 2019 (Unaudited) (In thousands, except per share data) Net sales $ 570,298 $ 526,877 $ 1,067,944 $ 1,063,322 Cost of goods sold 469,868 434,029 886,172 871,648 Gross profit 100,430 92,848 181,772 191,674 Operating expenses: Selling and marketing 15,969 16,898 32,138 34,458 General and administrative 46,723 31,869 81,390 62,151 Research and development 5,181 4,496 9,943 9,212 Amortization of definite-lived intangibles 9,561 10,593 19,123 26,745 Total operating expenses 77,434 63,856 142,594 132,566 Operating income 22,996 28,992 39,178 59,108 Other (expense) income: Interest expense ( 18,572 ) ( 20,553 ) ( 38,353 ) ( 41,688 ) Other, net 455 3,007 2,957 2,650 Total other expense, net ( 18,117 ) ( 17,546 ) ( 35,396 ) ( 39,038 ) Income from continuing operations before income taxes 4,879 11,446 3,782 20,070 Income tax benefit (provision) 4,467 1,047 2,344 ( 1,339 ) Net income from continuing operations 9,346 12,493 6,126 18,731 Income (loss) from discontinued operations, net of income taxes 183,464 ( 9,069 ) 185,510 ( 18,559 ) Net income $ 192,810 $ 3,424 $ 191,636 $ 172 Earnings per share: Basic earnings per share from continuing operations $ 0.09 $ 0.12 $ 0.06 $ 0.18 Basic earnings (loss) per share from discontinued operations 1.72 ( 0.09 ) 1.75 ( 0.18 ) Basic earnings per share $ 1.81 $ 0.03 1.81 $ — Diluted earnings per share from continuing operations $ 0.09 $ 0.12 $ 0.06 $ 0.18 Diluted earnings (loss) per share from discontinued operations 1.70 ( 0.09 ) 1.72 ( 0.18 ) Diluted earnings per share $ 1.79 $ 0.03 1.78 $ — See accompanying notes to consolidated condensed financial statements. 4 TTM TECHNOLOGIES, INC. Consolidated Condensed Statements of Comprehensive Income (Loss) For the Quarter and Two Quarters Ended June 29, 2020 and July 1, 2019 Quarter Ended Two Quarters Ended June 29, July 1, June 29, July 1, 2020 2019 2020 2019 (Unaudited) (In thousands) Net income $ 192,810 $ 3,424 $ 191,636 $ 172 Other comprehensive income (loss), net of tax: Pension obligation adjustments, net ( 6 ) — 21 19 Derecognition of foreign currency translation adjustments due to sale of Mobility business unit ( 27,341 ) — ( 27,341 ) — Foreign currency translation adjustments, net 96 ( 601 ) ( 271 ) 29 Derecognition of unrealized losses on cash flow hedge due to sale of Mobility business unit 384 — 384 — Net unrealized losses on cash flow hedges: Unrealized loss on effective cash flow hedges during the period, net ( 1,994 ) ( 4,503 ) ( 8,012 ) ( 6,331 ) Loss realized in the statement of operations, net 1,769 296 2,629 574 Net ( 225 ) ( 4,207 ) ( 5,383 ) ( 5,757 ) Other comprehensive loss, net of tax ( 27,092 ) ( 4,808 ) ( 32,590 ) ( 5,709 ) Comprehensive income (loss), net of tax $ 165,718 $ ( 1,384 ) $ 159,046 $ ( 5,537 ) See accompanying notes to consolidated condensed financial statements. 5 TTM TECHNOLOGIES, INC. Consolidated Condensed Statements of Stockholders’ Equity For the Two Quarters Ended June 29, 2020 and July 1, 2019 Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Total Stockholders' Shares Amount Capital Earnings Loss Equity (Unaudited) (In thousands) Balance, December 30, 2019 105,510 $ 106 $ 814,708 $ 474,309 $ ( 10,086 ) $ 1,279,037 Net loss — — — ( 1,174 ) — ( 1,174 ) Other comprehensive loss — — — — ( 5,498 ) ( 5,498 ) Issuance of common stock for performance-based restricted stock units 187 — — — — — Issuance of common stock for restricted stock units 520 — — — — — Stock-based compensation — — 4,835 — — 4,835 Balance, March 30, 2020 106,217 $ 106 $ 819,543 $ 473,135 $ ( 15,584 ) $ 1,277,200 Net income — — — 192,810 — 192,810 Other comprehensive loss — — — — ( 27,092 ) ( 27,092 ) Issuance of common stock for restricted stock units 484 1 ( 1 ) — — — Stock-based compensation — — 2,647 — — 2,647 Balance, June 29, 2020 106,701 $ 107 $ 822,189 $ 665,945 $ ( 42,676 ) $ 1,445,565 Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Total Stockholders' Shares Amount Capital Earnings Loss Equity (Unaudited) (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 Net income — — — 3,424 — 3,424 Other comprehensive loss — — — — ( 4,808 ) ( 4,808 ) Issuance of common stock for restricted stock units 70 — — — — — Stock-based compensation — — 3,602 — — 3,602 Balance, July 1, 2019 105,491 $ 105 $ 805,421 $ 433,180 $ ( 9,629 ) $ 1,229,077 See accompanying notes to consolidated condensed financial statements. 6 TTM TECHNOLOGIES, INC. Consolidated Condensed Statements of Cash Flows For the Two Quarters Ended June 29, 2020 and July 1, 2019 Two Quarters Ended June 29, 2020 July 1, 2019 (Unaudited) (In thousands) Cash flows from operating activities: Net income $ 191,636 $ 172 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 71,503 82,837 Amortization of definite-lived intangible assets 22,699 30,452 Amortization of debt discount and issuance costs 7,157 7,313 Deferred income taxes 34,206 ( 2,228 ) Stock-based compensation 7,482 7,528 Gain on sale of the Mobility business unit ( 248,863 ) — Other 157 ( 8,785 ) Changes in operating assets and liabilities: Accounts receivable, net 89,323 40,425 Contract assets ( 39,118 ) 26,670 Inventories ( 6,470 ) ( 12,772 ) Prepaid expenses and other current assets ( 14,574 ) ( 8,934 ) Accounts payable 24,183 ( 10,659 ) Contract liabilities ( 698 ) ( 834 ) Accrued salaries, wages and benefits and other current liabilities 8,286 ( 28,138 ) Net cash provided by operating activities 146,909 123,047 Cash flows from investing activities: Proceeds from sale of the Mobility business unit, net of cash disposed 202,752 — Purchase of property, plant and equipment and other assets ( 54,899 ) ( 69,099 ) Proceeds from sale of property, plant and equipment and other assets 78 5,912 Net cash provided by (used in) investing activities 147,931 ( 63,187 ) Cash flows from financing activities: Repayment of long-term debt borrowing — ( 30,000 ) Payment of debt issuance costs — ( 1,532 ) Redemption of convertible notes — ( 10 ) Net cash used in financing activities — ( 31,542 ) Effect of foreign currency exchange rates on cash and cash equivalents ( 326 ) ( 212 ) Net increase in cash and cash equivalents 294,514 28,106 Cash and cash equivalents at beginning of period 400,154 256,360 Cash and cash equivalents at end of period 694,668 284,466 Cash and cash equivalents in assets held for sale — ( 18,133 ) Cash and cash equivalents as presented on the consolidated condensed balance sheet $ 694,668 $ 266,333 Supplemental cash flow information: Cash paid, net for interest $ 32,814 $ 39,739 Cash paid, net for income taxes 11,678 13,119 Net cash provided by operating activities from discontinued operations 39,462 2,768 Net cash provided by (used in) investing activities from discontinued operations 193,202 ( 13,003 ) Net cash used in financing activities from discontinued operations — — Supplemental disclosure of noncash investing activities: Property, plant and equipment recorded in accounts payable $ 38,223 $ 61,475 Supplemental disclosure of noncash investing activities from discontinued operations: Property, plant and equipment recorded in accounts payable $ — $ 9,635 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 advanced PCBs and backplane assemblies as well as a global designer and manufacturer of high-frequency 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, computing, 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). Prior to the closing of the sale of the Company’s Mobility business unit, 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, income taxes and gain on sale 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 consolidated condensed 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. 8 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 its consolidated condensed financial statements and related disclosures. 9 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (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 $ 550,000 , subject to customary purchase price adjustments. The base purchase price does not include certain accounts receivable of the divested business, which are estimated to total approximately $ 95,000 . On April 18, 2020, the Company also entered into a Transition Services Agreement (TSA) with the Purchaser pursuant to which the Purchaser is receiving certain services (the Services) to enable it to operate the Mobility business unit after the closing of the sale of the Mobility business unit. The Services include finance and accounting, human resources, legal and compliance, sales, information technology, and other corporate support services. Under the TSA, the Services are being provided at cost for a period of up to 24 months. The Company does not anticipate this will have a material impact on its consolidated condensed financial statements. Further, on June 29, 2020, the Company entered into a Sales Force Agreement with the Purchaser pursuant to which the Company’s sales representatives will assist the Purchaser in selling PCBs manufactured by the Purchaser to certain customers for a commission for a period up to April 17, 2021. The Company does not anticipate this will have a material impact on its consolidated condensed financial statements. 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 following table summarizes the results of Mobility operations for each period prior to sale: Quarter Ended Two Quarters Ended June 29, July 1, June 29, July 1, 2020 2019 2020 2019 (In thousands, except per share data) Net sales $ 30,777 $ 106,161 $ 143,951 $ 189,916 Cost of goods sold 28,375 114,394 136,800 208,290 Gross profit 2,402 ( 8,233 ) 7,151 ( 18,374 ) Operating expenses: Selling and marketing 285 969 1,461 2,310 General and administrative 1,007 2,272 2,317 2,742 Research and development — — 147 — Amortization of definite-lived intangibles 134 674 809 1,348 Total operating expenses 1,426 3,915 4,734 6,400 Operating income (loss) 976 ( 12,148 ) 2,417 ( 24,774 ) Other (expense) income: Interest expense — ( 318 ) ( 223 ) ( 871 ) Gain on sale of the Mobility business unit 248,863 — 248,863 — Other, net ( 411 ) 1,614 1,160 1,441 Total other income, net 248,452 1,296 249,800 570 Income (loss) from discontinued operations before income taxes 249,428 ( 10,852 ) 252,217 ( 24,204 ) Income tax (provision) benefit ( 65,964 ) 1,783 ( 66,707 ) 5,645 Income (loss) from discontinued operations, net of income taxes $ 183,464 $ ( 9,069 ) $ 185,510 $ ( 18,559 ) Earnings (loss) per share from discontinued operations: Basic earnings (loss) per share $ 1.72 $ ( 0.09 ) $ 1.75 $ ( 0.18 ) Diluted earnings (loss) per share $ 1.70 $ ( 0.09 ) $ 1.72 $ ( 0.18 ) Depreciation expense related to the discontinued operations for the quarters ended June 29, 2020 and July 1, 2019 was $ 3,117 and $ 17,866 , respectively, and $ 21,382 and $ 35,941 for the two quarters ended June 29, 2020 and July 1, 2019, respectively. 10 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) During the quarter and two quarters ended June 29, 2020, the Company’s income tax expense related to the discontinued operations was impacted by a net discrete expense of $ 65,774 . As a result of the sale of the Mobility business unit, the discrete income tax expense is related mainly to (i) China withholding tax related to gain on sale, (ii) U.S. income tax related to Global Intangible Low Taxed Income (GILTI) inclusion net of IRC Section 250 deduction and foreign tax credits, and offset by (iii) release of U.S. FIN 48 uncertain tax positions. Proceeds from the sale of the Company’s Mobility business unit have been presented in the consolidated condensed statements of cash flows within net cash provided by investing activities from discontinued operations. As of June 29, 2020, the Company’s consolidated condensed balance sheet included $ 314,585 of receivable from Purchaser of the Mobility business unit. Subsequent to June 29, 2020, the Company received the remaining portion of the proceeds. The following is a reconciliation of the gain recorded for the sale of the Company’s Mobility business unit (in thousands) : Net proceeds from the sale of the Mobility business unit (1) $ 567,585 Mobility business unit assets: Cash and cash equivalents 12,513 Restricted cash 35,412 Accounts receivable, net 12 Contract assets 40,072 Inventories 5,642 Prepaid expenses and other current assets 4,593 Property, plant and equipment, net 328,648 Goodwill 68,267 Definite-lived intangibles, net 5,520 Deposits and other non-current assets 6,291 Total Mobility business unit assets 506,970 Mobility business unit liabilities: Accounts payable 142,636 Accrued salaries, wages and benefits 9,392 Other current liabilities 11,283 Other long-term liabilities 303 Total Mobility business unit liabilities 163,614 Derecognition of foreign currency translation adjustments and unrealized losses on cash flow hedges recorded in accumulated other comprehensive loss 26,957 Other transaction costs incurred as part of the sale of the Mobility business unit (2) 2,323 Gain on sale of the Mobility business unit before income taxes $ 248,863 (1) Net proceeds from the sale of the Mobility business unit are net of customary purchase price adjustments. As of June 29, 2020, the Company received a portion of the proceeds amounting to $ 253,000 . (2) Costs directly incurred as a result of the sale of the Company’s Mobility business unit, including legal fees, professional fees, and other costs. (3) 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 certain leases consist of variable payments based on equipment usage. These variable payments are not included in the measurement of the right-of-use (ROU) asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. 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 Two Quarters Ended June 29, 2020 July 1, 2019 June 29, 2020 July 1, 2019 (In thousands) Operating lease cost $ 2,227 $ 2,132 $ 4,708 $ 4,164 Variable lease cost 137 102 243 261 Short-term lease cost 169 144 398 185 Supplemental cash flow information related to leases was as follows: Two Quarters Ended June 29, 2020 July 1, 2019 (In thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 4,342 $ 4,164 Right-of-use assets obtained in exchange for new lease obligations: Operating leases 3,205 12,896 Supplemental balance sheet information related to leases was as follows: As of June 29, 2020 December 30, 2019 (In thousands) Operating lease right-of-use assets $ 21,993 $ 22,173 Other current liabilities 7,641 7,111 Operating lease liabilities 15,015 15,413 Total operating lease liabilities $ 22,656 $ 22,524 As of June 29, 2020 December 30, 2019 Weighted average remaining lease term 4.1 years 4.4 years Weighted average discount rate 3.76 % 3.92 % Maturities of operating lease liabilities were as follows (1) : (In thousands) Less than one year $ 8,339 1 - 2 years 6,111 2 - 3 years 3,413 3 - 4 years 2,540 4 - 5 years 1,725 Thereafter 2,415 Total lease payments 24,543 Less imputed interest ( 1,887 ) Total $ 22,656 (1) Excludes $ 851 of legally binding minimum lease payments for leases signed but not yet commenced. 12 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (4) Revenues As of June 29, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations for long-term contracts was $ 19,172 . The Company expects to recognize revenue on approximately 83 % 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. Revenue from products and services transferred to customers over time and at a point in time accounted for 98 % and 2 %, respectively, of the Company’s revenue for the quarter and two quarters ended June 29, 2020. 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 July 1, 2019, and 96 % and 4 %, respectively, of the Company’s revenue for the two quarters ended July 1, 2019. The following tables represent a disaggregation of revenue by principal end markets with the reportable segments: Quarter Ended June 29, 2020 Quarter Ended July 1, 2019 PCB E-M Solutions Total PCB E-M Solutions Total End Markets (In thousands) Aerospace and Defense $ 188,620 $ 20 $ 188,640 $ 174,810 $ 362 $ 175,172 Automotive 58,100 11,462 69,562 73,049 23,993 97,042 Cellular Phone — — — — — — Computing/Storage/Peripherals 71,864 36 71,900 56,482 — 56,482 Medical/Industrial/Instrumentation 114,105 3,187 117,292 82,453 9,641 92,094 Networking/Communications 73,595 36,267 109,862 74,485 25,926 100,411 Other 13,783 ( 741 ) 13,042 5,681 ( 5 ) 5,676 Total $ 520,067 $ 50,231 $ 570,298 $ 466,960 $ 59,917 $ 526,877 Two Quarters Ended June 29, 2020 Two Quarters Ended July 1, 2019 PCB E-M Solutions Total PCB E-M Solutions Total End Markets (In thousands) Aerospace and Defense $ 373,071 $ 20 $ 373,091 $ 339,607 $ 366 $ 339,973 Automotive 119,521 18,925 138,446 154,642 43,758 198,400 Cellular Phone 1,164 — 1,164 — — — Computing/Storage/Peripherals 130,146 140 130,286 114,328 189 114,517 Medical/Industrial/Instrumentation 202,329 6,945 209,274 164,635 17,808 182,443 Networking/Communications 134,493 55,244 189,737 158,508 49,265 207,773 Other 26,773 ( 827 ) 25,946 20,307 ( 91 ) 20,216 Total $ 987,497 $ 80,447 $ 1,067,944 $ 952,027 $ 111,295 $ 1,063,322 13 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (5) Composition of Certain Consolidated Condensed Financial Statement Captions As of June 29, 2020 December 30, 2019 (In thousands) Inventories: Raw materials $ 111,382 $ 97,660 Work-in-process 8,795 10,898 Finished goods 2,670 5,195 $ 122,847 $ 113,753 Property, plant and equipment, net: Land and land use rights $ 62,009 $ 62,009 Buildings and improvements 393,322 381,980 Machinery and equipment 820,570 777,916 Furniture and fixtures and other 10,625 10,329 Construction-in-progress 33,363 58,195 1,319,889 1,290,429 Less: Accumulated depreciation ( 659,023 ) ( 612,228 ) $ 660,866 $ 678,201 (6) Goodwill As of June 29, 2020 and December 30, 2019, goodwill was as follows: Total (In thousands) Balance as of December 30, 2019 and June 29, 2020 Goodwill $ 946,191 Accumulated impairment loss ( 171,400 ) Goodwill related to the Mobility business unit ( 68,267 ) $ 706,524 All goodwill relates to the Company’s PCB reportable segment. (7) Definite-lived Intangibles As of June 29, 2020 and December 30, 2019, the components of definite-lived intangibles were as follows: Gross Amount Accumulated Amortization Net Carrying Amount Weighted Average Amortization Period (In thousands) (In years) June 29, 2020 Customer relationships $ 397,500 $ ( 130,426 ) $ 267,074 11.0 Technology 47,650 ( 10,934 ) 36,716 9.5 $ 445,150 $ ( 141,360 ) $ 303,790 December 30, 2019 Customer relationships $ 396,270 $ ( 111,272 ) $ 284,998 11.0 Technology 39,500 ( 8,064 ) 31,436 9.4 Acquired intangibles from acquisition in 2019 Customer relationships 1,230 ( 31 ) 1,199 5.0 Technology 8,150 ( 103 ) 8,047 10.0 $ 445,150 $ ( 119,470 ) $ 325,680 14 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) Definite-lived intangibles are generally amortized using the straight-line method of amortization over the estimated useful life. Amortization expense was $ 10,945 and $ 11,773 for the quarters ended June 29, 2020 and July 1, 2019, respectively, and $ 21,890 and $ 29,104 for the two quarters ended June 29, 2020 and July 1, 2019, respectively. For the quarter and two quarters ended June 29, 2020, $ 1,384 and $ 2,767 , respectively, of amortization expense is included in cost of goods sold. For the quarter and two quarters ended July 1, 2019, $ 1,180 and $ 2,359 , respectively, of amortization expense is included in cost of goods sold. Estimated aggregate amortization for definite-lived intangible assets for the next five years and thereafter is as follows: (In thousands) Remaining 2020 $ 21,891 2021 41,344 2022 38,793 2023 36,838 2024 29,812 Thereafter 135,112 $ 303,790 (8) Long-term Debt and Letters of Credit The following table summarizes the long-term debt of the Company as of June 29, 2020 and December 30, 2019: Interest Rate as of June 29, 2020 Principal Outstanding as of June 29, 2020 Interest Rate as of December 30, 2019 Principal Outstanding as of December 30, 2019 (In thousands) Term Loan due September 2024 2.67 % $ 805,879 4.28 % $ 805,879 Senior Notes due October 2025 5.63 375,000 5.63 375,000 Convertible Senior Notes due December 2020 1.75 249,975 1.75 249,975 U.S. ABL Revolving Loan due June 2024 1.42 40,000 3.03 40,000 Asia ABL Revolving Loan due June 2024 1.57 30,000 3.18 30,000 1,500,854 1,500,854 Less: Long-term debt unamortized discount ( 6,627 ) ( 11,943 ) Long-term debt unamortized debt issuance costs ( 11,418 ) ( 12,974 ) 1,482,809 1,475,937 Less: current maturities ( 649,975 ) ( 249,975 ) Long-term debt, less current maturities $ 832,834 $ 1,225,962 The Company has twelve months to reinvest the cash proceeds received from the sale of the Mobility business unit. If the proceeds are not reinvested, the Company is required to use the proceeds to prepay the Term Loan. The Company plans to use the cash proceeds for debt repayment and reinvestment. As of June 29, 2020, the Term Loan had an outstanding balance of $ 805,879 , of which $ 400,000 is included in short-term debt. Subsequent to June 29, 2020, the Company made a debt principal prepayment for the Term Loan of $ 400,000 . Permitted investments, as defined in the Term Loan Credit Agreement, include extensions of trade credit in the ordinary course of business, investments in cash and cash equivalents, permitted acquisitions, investments in assets useful in the business of the Company and its restricted subsidiaries, investments in joint ventures and unrestricted subsidiaries among others. Debt Covenants Borrowings under the Term Loan and Senior Notes are subject to certain affirmative and negative covenants, including limitations on indebtedness, corporate transactions, investments and dispositions, and share payments. Under the occurrence of certain events, the U.S. Asset-Based Lending Credit Agreement (U.S. ABL) and Asia Asset-Based Lending Credit Agreement (Asia ABL) (collectively, the ABL Revolving Loans), are subject to various financial and operational covenants, including maintaining minimum fixed charge coverage ratios. 15 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) Debt Issuance and Debt Discount As of June 29 , 2020 and December 30, 2019, remaining unamortized debt discount and debt issuance costs for the Term Loan Facility, Senior Notes and Convertible Senior Notes are as follows: As of June 29, 2020 As of December 30, 2019 Debt Issuance Costs Debt Discount Effective Interest Rate Debt Issuance Costs Debt Discount Effective Interest Rate (In thousands, except interest rates) Term Loan due September 2024 $ 6,013 $ 1,819 4.66 % $ 6,663 $ 2,016 4.66 % Senior Notes due October 2025 4,923 — 5.92 5,316 — 5.92 Convertible Senior Notes 482 4,808 6.48 995 9,927 6.48 $ 11,418 $ 6,627 $ 12,974 $ 11,943 The above debt discount and debt issuance costs are recorded as a reduction of the debt and are amortized into interest expense using an effective interest rate over the duration of the debt. Remaining unamortized debt issuance costs for the ABL Revolving Loans of $ 2,226 and $ 2,511 as of June 29 , 2020 and December 30, 2019, respectively, are included in other non-current assets and are amortized to interest expense over the duration of the ABL Revolving Loans using the straight-line method of amortization. As of June 29 , 2020 , the remaining weighted average amortization period for all unamortized debt discount and debt issuance costs was 3.5 years. (9) Income Taxes The Company’s effective tax rate is impacted by tax rates in China and Hong Kong, the U.S. federal income tax rate, apportioned state income tax rates, generation of credits and deductions available to the Company as well as changes in valuation allowances and certain non-deductible items. Additionally, no tax benefit was recorded on the losses incurred in certain foreign jurisdictions as a result of corresponding increases in the valuation allowances in these jurisdictions. During the quarter and two quarters ended June 29, 2020, the Company’s effective tax rate was impacted by a net discrete benefit of $ 6,871 and $ 4,818 , respectively. This is related mainly to release of uncertain tax positions due to the expiration of the statute of limitation in foreign jurisdictions netted against (i) an increase of valuation allowance and withholding tax expense related to the announced closure of two of the E-M Solutions plants, (ii) retroactive approval of the Company’s renewal application for High and New Tax Enterprise status for two of the Company’s manufacturing subsidiaries in China (including the impact on the respective Company’s deferred tax assets) and (iii) by the accrued interest expense on existing uncertain tax positions. The Company has various foreign subsidiaries formed or acquired to conduct or support its business outside the United States. The Company expects its earnings attributable to most foreign subsidiaries may be repatriated back to the U.S. and so a deferred tax liability has been recorded for foreign withholding and the estimated federal/state tax impact. For those other companies with earnings currently being reinvested outside of the U.S., no deferred tax liabilities on undistributed earnings are recorded. (10) Financial Instruments Derivatives Interest Rate Swaps The Company’s business is exposed to interest rate risk resulting from fluctuations in interest rates on certain LIBOR-based variable rate debt. Increases in interest rates would increase interest expenses relating to the outstanding variable rate borrowings and increase the cost of debt. Fluctuations in interest rates can also lead to significant fluctuations in the fair value of the debt obligations. On May 15, 2018, the Company entered into a four-year pay-fixed, receive floating (1-month LIBOR), interest rate swap arrangement with a notional amount of $ 400,000 for the period beginning June 1, 2018 and ending on June 1, 2022 . Under the terms of the interest rate swap, the Company pays a fixed rate of 2.84 % against the first interest payments of a portion of its LIBOR-based debt and receives floating 1-month LIBOR during the swap period. At inception, the Company designated the interest rate swap as a cash flow hedge and the fair value of the interest rate swap was zero . As of June 29, 2020, the fair value of the interest rate swap was recorded as a liability in the amount of $ 19,582 and included as a component of other long-term liabilities. The change in the fair value of the interest rate swap is recorded as a component of accumulated other comprehensive loss, net of tax. No ineffectiveness was recognized for the quarter and two quarters ended June 29, 2020 and July 1, 2019. The interest rate swap increased interest expense by $ 2,342 and $ 367 for the quarters ended June 29, 2020 and July 1, 2019, respectively, and $ 3,517 and $ 706 for the two quarters ended June 29, 2020 and July 1, 2019, respectively. 16 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) Foreign Exchange Contracts The Company enters into foreign currency forward contracts to mitigate the impact of changes in foreign currency exchange rates and to reduce the volatility of purchases and other obligations generated in currencies other than its functional currencies. The Company’s foreign subsidiaries may at times purchase forward exchange contracts to manage their foreign currency risks in relation to certain purchases of machinery denominated in foreign currencies other than the Company’s functional currencies. The notional amount of the foreign exchange contracts as of June 29, 2020 and December 30, 2019 was approximately $ 1,361 and $ 1,994 , respectively. The Company has designated certain of these foreign exchange contracts as cash flow hedges. The fair values of derivative instruments in the consolidated condensed balance sheets are as follows: Asset/(Liability) Fair Value Balance Sheet Location June 29, 2020 December 30, 2019 (In thousands) Cash flow derivative instruments designated as hedges: Interest rate swap Other long-term liabilities $ ( 19,582 ) $ ( 12,067 ) Cash flow derivative instruments not designated as hedges: Foreign exchange contracts Prepaid expenses and other current assets 1 1 Foreign exchange contracts Other current liabilities ( 4 ) ( 3 ) The following table provides information about the amounts recorded in accumulated other comprehensive loss related to derivatives designated as cash flow hedges, as well as the amounts recorded in each caption in the consolidated condensed statements of operations when derivative amounts are reclassified out of accumulated other comprehensive loss for the quarter and two quarters ended June 29, 2020 and July 1, 2019: Quarter Ended June 29, 2020 Quarter Ended July 1, 2019 Financial Statement Caption Loss Recognized in Other Comprehensive Loss Loss Reclassified into Income Loss Recognized in Other Comprehensive Loss Loss Reclassified into Income (In thousands) Cash flow hedge: Interest rate swap Interest expense $ ( 2,583 ) $ ( 2,342 ) $ ( 6,077 ) $ ( 367 ) Two Quarters Ended June 29, 2020 Two Quarters Ended July 1, 2019 Financial Statement Caption Loss Recognized in Other Comprehensive Loss Loss Reclassified into Income Loss Recognized in Other Comprehensive Loss Loss Reclassified into Income (In thousands) Cash flow hedge: Interest rate swap Interest expense $ ( 11,032 ) $ ( 3,517 ) $ ( 8,663 ) $ ( 706 ) The following table provides a summary of the activity associated with the designated cash flow hedges reflected in accumulated other comprehensive loss for the two quarters ended June 29, 2020 and July 1, 2019: Two Quarters Ended June 29, July 1, 2020 2019 (In thousands) Beginning balance, net of tax $ ( 9,617 ) $ ( 4,214 ) Changes in fair value loss, net of tax ( 8,012 ) ( 6,331 ) Reclassification to earnings, net of tax 2,629 574 Derecognition of unrealized losses on cash flow hedge due to sale of Mobility business unit 384 — Ending balance, net of tax $ ( 14,616 ) $ ( 9,971 ) Based on the current yield curve, the Company expects that losses of approximately $ 7,588 of the accumulated other comprehensive loss will be reclassified into the statement of operations, net of tax, in the next twelve months. 17 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (11) Accumulated Other Comprehensive Loss The following provides a summary of the components of accumulated other comprehensive loss, net of tax, as of June 29, 2020 and December 30, 2019: Foreign Currency Translation Pension Obligation (Losses) Gains on Cash Flow Hedges Total (In thousands) Ending balance as of December 30, 2019 $ 1,115 $ ( 1,584 ) $ ( 9,617 ) $ ( 10,086 ) Other comprehensive (loss) income before reclassifications ( 271 ) 21 ( 8,012 ) ( 8,262 ) Amounts reclassified from accumulated other comprehensive loss — — 2,629 2,629 Derecognition of foreign currency translation adjustments due to sale of Mobility business unit ( 27,341 ) — — ( 27,341 ) Derecognition of unrealized losses on cash flow hedge due to sale of Mobility business unit — — 384 384 Other comprehensive (loss) income ( 27,612 ) 21 ( 4,999 ) ( 32,590 ) Ending balance as of June 29, 2020 $ ( 26,497 ) $ ( 1,563 ) $ ( 14,616 ) $ ( 42,676 ) (12) Significant Customers and Concentration of Credit Risk In the normal course of business, the Company extends credit to its customers. Most customers to which the Company extends credit are located outside the United States. The Company performs ongoing credit evaluations of customers, does not require collateral, and considers the credit risk profile of the entity from which the receivable is due in further evaluating collection risk. The Company’s customers include both OEMs and EMS companies. The Company’s OEM customers often direct a significant portion of their purchases through EMS companies. While the Company’s customers include both OEM and EMS providers, the Company measures customer concentration based on OEM companies, as they are the ultimate end customers. For the quarter ended June 29, 2020, one customer accounted for approximately 11 % of the Company’s net sales. There were no other customers that accounted for 10% or more of net sales for the quarter ended June 29, 2020. There were no customers that accounted for 10% or more of net sales for the quarter ended July 1, 2019 and two quarters ended June 29, 2020 and July 1, 2019. (13) Fair Value Measures The Company measures at fair value its financial and non-financial assets by using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability. The carrying amount and estimated fair value of the Company’s financial instruments as of June 29, 2020 and December 30, 2019 were as follows: As of As of June 29, 2020 December 30, 2019 Carrying Amount Fair Value Carrying Amount Fair Value (In thousands) Derivative assets, current $ 1 $ 1 $ 1 $ 1 Derivative liabilities, current 4 4 3 3 Derivative liabilities, non-current 19,582 19,582 12,067 12,067 Term Loan due September 2024 798,047 765,585 797,200 808,901 Senior Notes due October 2025 370,077 373,448 369,684 390,143 Convertible Senior Notes due December 2020 244,685 306,994 239,053 391,686 ABL Revolving Loans 70,000 70,000 70,000 70,000 18 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) The fair value of the derivative instruments was determined using pricing models developed based on the LIBOR swap rate, foreign currency exchange rates, and other observable market data, including quoted market prices, as appropriate using Level 2 inputs. The values were adjusted to reflect non-performance risk of both the counterparty and the Company, as necessary. The fair value of the long-term debt was estimated based on quoted market prices or discounting the debt over its life using current market rates for similar debt as of June 29, 2020 and December 30, 2019, which are considered Level 2 inputs. The fair value of the Convertible Senior Notes was estimated based on quoted market prices of the securities on an active exchange, which are considered Level 2 inputs. As of June 29, 2020 and December 30, 2019, the Company’s other financial instruments also included cash and cash equivalents, accounts receivable, and accounts payable. Due to short-term maturities, the carrying amount of these instruments approximates fair value. The Company’s cash and cash equivalents as of June 29, 2020 consisted of $ 305,263 held in the U.S., with the remaining $ 389,405 held by foreign subsidiaries. The majority of the Company’s non-financial assets and liabilities, which include goodwill, intangible assets, inventories, and property, plant and equipment, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur (or are tested at least annually in the case of goodwill) such that a non-financial instrument is required to be evaluated for impairment, based upon a comparison of the non-financial instrument’s fair value to its carrying value, an impairment is recorded to reduce the carrying value to the fair value, if the carrying value exceeds the fair value. (14) Commitments and Contingencies Legal Matters The Company is subject to various legal matters, which it considers normal for its business activities. While the Company currently believes that the amount of any reasonably possible loss for known matters would not be material to the Company’s financial condition, the outcome of these actions is inherently difficult to predict. In the event of an adverse outcome, the ultimate potential loss could have a material adverse effect on the Company’s financial condition or results of operations in a particular period. The Company has accrued amounts for its loss contingencies which are probable and estimable as of June 29, 2020 and December 30, 2019. However, these amounts are not material to the consolidated condensed financial statements of the Company. (15) Earnings Per Share The following is a reconciliation of the numerator and denominator used to calculate basic earnings per share and diluted earnings per share from continuing operations for the quarter and two quarters ended June 29, 2020 and July 1, 2019: Quarter Ended Two Quarters Ended June 29, 2020 July 1, 2019 June 29, 2020 July 1, 2019 (In thousands, except per share amounts) Basic earnings: Basic earnings $ 9,346 $ 12,493 $ 6,126 $ 18,731 Diluted earnings: Net income $ 9,346 $ 12,493 $ 6,126 $ 18,731 Interest expense from Convertible Senior Notes, net of tax — 2,780 — — Diluted earnings $ 9,346 $ 15,273 $ 6,126 $ 18,731 Basic weighted average shares 106,295 105,470 105,990 104,893 Dilutive effect of performance-based restricted stock units, restricted stock units and stock options 1,190 637 1,441 967 Dilutive effect of assumed conversion of Convertible Senior Notes outstanding — 25,938 — — Diluted shares 107,485 132,045 107,431 105,860 Earnings per share: Basic $ 0.09 $ 0.12 $ 0.06 $ 0.18 Diluted $ 0.09 $ 0.12 $ 0.06 $ 0.18 19 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) PRUs, RSUs, and stock options to purchase 1,162 and 1,089 shares of common stock for the quarters ended June 29, 2020 and July 1, 2019, respectively, and 750 and 1,089 shares of common stock for the two quarters ended June 29, 2020 and July 1, 2019, respectively, were not included in the computation of diluted earnings per share. The PRUs were not included in the computation of diluted earnings per share because the performance conditions had not been met at June 29, 2020 and July 1, 2019, and for RSUs and stock options, the options’ exercise prices or the total expected proceeds under the treasury stock method was greater than the average market price of common shares during the applicable quarter and two quarters and, as a result, the impact would be anti-dilutive. Outstanding warrants for the quarter and two quarters ended June 29, 2020 and July 1, 2019, to purchase common stock were not included in the computation of dilutive earnings per share because the strike price of the warrants to purchase the Company’s common stock were greater than the average market price of common shares during the applicable quarter, and therefore, the effect would be anti-dilutive. For the quarter and two quarters ended June 29, 2020 and for the two quarters ended July 1, 2019, the effect of shares of common stock related to the Company’s Convertible Senior Notes, based on the if-converted method, were not included in the computation of dilutive earnings per share as the impact would be anti-dilutive. (16) Stock-Based Compensation Stock-based compensation expense is recognized in the accompanying consolidated condensed statements of operations as follows: Quarter Ended Two Quarters Ended June 29, July 1, June 29, July 1, 2020 2019 2020 2019 (In thousands) (In thousands) Cost of goods sold $ 620 $ 569 $ 1,470 $ 1,273 Selling and marketing 291 383 742 834 General and administrative 1,690 2,611 5,167 5,332 Research and development 46 39 103 89 Stock-based compensation expense recognized $ 2,647 $ 3,602 $ 7,482 $ 7,528 Summary of Unrecognized Compensation Costs The following is a summary of total unrecognized compensation costs as of June 29, 2020: Unrecognized Stock-Based Compensation Cost Remaining Weighted Average Recognition Period (In thousands) (In years) RSU awards $ 28,531 1.7 PRU awards 1,760 1.1 Stock options 184 1.4 $ 30,475 (17) Segment Information The reportable segments shown below are the Company’s segments for which separate financial information is available and upon which operating results are evaluated by the chief operating decision maker to assess performance and to allocate resources. The Company has two reportable segments: PCB and E-M Solutions. The PCB reportable segment is comprised of multiple operating segments. Factors considered to determine whether operating segments can be aggregated into reportable segments included similarity regarding economic characteristics, products, production processes, type or classes of customers, distribution methods, and regulatory environments. 20 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) The Company, including the chief operating decision maker, evaluates segment performance based on reportable segment income, which is operating income before amortization of intangibles. Interest expense and interest income are not presented by segment since they are not included in the measure of segment profitability reviewed by the chief operating decision maker. All inter-segment transactions have been eliminated. Quarter Ended Two Quarters Ended June 29, 2020 July 1, 2019 June 29, 2020 July 1, 2019 (In thousands) Net Sales: PCB $ 520,067 $ 466,960 $ 987,497 $ 952,027 E-M Solutions 50,231 59,917 80,447 111,295 Total net sales $ 570,298 $ 526,877 $ 1,067,944 $ 1,063,322 Operating Segment Income (Loss): PCB $ 80,056 $ 62,463 $ 141,682 $ 132,957 E-M Solutions ( 15,577 ) 863 ( 19,906 ) 2,042 Corporate ( 30,538 ) ( 22,561 ) ( 60,708 ) ( 46,787 ) Total operating segment income 33,941 40,765 61,068 88,212 Amortization of definite-lived intangibles (1) ( 10,945 ) ( 11,773 ) ( 21,890 ) ( 29,104 ) Total operating income 22,996 28,992 39,178 59,108 Total other expense ( 18,117 ) ( 17,546 ) ( 35,396 ) ( 39,038 ) Income before income taxes $ 4,879 $ 11,446 $ 3,782 $ 20,070 (1) Amortization of definite-lived intangibles relates to the PCB reportable segment. For the quarter and two quarters ended June 29, 2020, $ 1,384 and $ 2,767 , respectively, of amortization expense is included in cost of goods sold. For the quarter and two quarters ended July 1, 2019, $ 1,180 and $ 2,359 , respectively, of amortization expense is included in cost of goods sold. The Corporate category primarily includes operating expenses that are not included in the segment operating performance measures. Corporate consists primarily of corporate governance functions such as finance, accounting, information technology, facilities and human resources personnel, as well as global sales and marketing personnel, research and development costs, and acquisition and integration costs associated with acquisitions. (18) Related Party Transactions In the normal course of business, the Company’s foreign subsidiaries purchase laminate and prepreg from related parties in which a former member of the Board of Directors of the Company holds an equity interest. The Company’s foreign subsidiaries purchased laminate and prepreg from these related parties in the amount of $ 5,986 and $ 8,193 for the quarters ended June 29, 2020 and July 1, 2019, respectively, and $ 11,767 and $ 15,696 for the two quarters ended June 29, 2020 and July 1, 2019, respectively. As of June 29, 2020 and December 30, 2019, the Company’s consolidated condensed balance sheets included $ 7,601 and $ 9,220 , respectively, in accounts payable due to related parties for purchases of laminate and prepreg and such balances are included as a component of accounts payable on the consolidated condensed balance sheets. (19) Restructuring Charges On April 29, 2020, the Company announced the restructuring of its E-M Solutions business unit. The E-MS business unit consists of three Chinese manufacturing facilities with two being in Shanghai (SH BPA and SH E-MS) and one in Shenzhen (SZ). The Company will discontinue operations at the SH E-MS and SZ facilities while integrating the SH BPA facility into its PCB operations. The restructuring is another step in advancing the Company’s stated strategy of increasing its focus on differentiated higher margin products that more fully leverage the Company’s early engagement capabilities and industry leading engineering-based technology solutions. The closure of the SH E-MS and SZ facilities will not be immediate as the Company has obligations to fulfill with customers. The Company anticipates phasing out production over the remainder of 2020. As of June 29, 2020, the Company has incurred approximately $ 13,414 of restructuring charges since the April 29, 2020 announcement. The Company estimates that it will incur total charges related to restructuring of its E-M Solutions business unit of approximately $ 18,500 and accelerated depreciation expense of approximately $ 8,000 . In connection with the restructuring of its E-M Solutions business unit and other global realignment restructuring efforts, the Company recognized employee separation, contract termination and other costs during the quarter and two quarters ended June 29, 2020 and July 1, 2019. Contract termination and other costs primarily represented plant closure costs. 21 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) The below table summarizes such restructuring costs by reportable segment, which are included as a component of general and administrative expenses in the consolidated condensed statements of operations, for the quarter and two quarters ended June 29, 2020 and July 1, 2019: Quarter Ended June 29, 2020 Two Quarters Ended June 29, 2020 Employee Separation/ Severance Contract Termination and Other Costs Total Employee Separation/ Severance Contract Termination and Other Costs Total (In thousands) Reportable Segment: PCB $ ( 8 ) $ 1 $ ( 7 ) $ ( 8 ) $ 14 $ 6 E-M Solutions 13,085 292 13,377 13,394 291 13,685 Corporate — 44 44 — 51 51 $ 13,077 $ 337 $ 13,414 $ 13,386 $ 356 $ 13,742 Quarter Ended July 1, 2019 Two Quarters Ended July 1, 2019 Employee Separation/ Severance Contract Termination and Other Costs Total Employee Separation/ Severance Contract Termination and Other Costs Total (In thousands) Reportable Segment: PCB $ 2,564 $ — $ 2,564 $ 2,988 $ — $ 2,988 E-M Solutions — — — — — — Corporate 160 8 168 160 16 176 $ 2,724 $ 8 $ 2,732 $ 3,148 $ 16 $ 3,164 Accrued restructuring costs are included as a component of other current liabilities in the consolidated condensed balance sheet. The below table shows the utilization of the accrued restructuring costs during the two quarters ended June 29, 2020: Employee Separation/ Severance Contract Termination and Other Costs Total (In thousands) Accrued as of December 30, 2019 $ 260 $ 242 $ 502 Charged to expense 13,386 356 13,742 Amount paid ( 2,130 ) ( 358 ) ( 2,488 ) Accrued as of June 29, 2020 $ 11,516 $ 240 $ 11,756 (20) Subsequent Event Subsequent to June 29, 2020, the Company made a $ 400,000 debt principal prepayment for its Term Loan. 22