What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-06 · 286 added, 174 removed, 549 unchanged (46% of the section changed)

2 unchanged sentences

Consolidated Condensed Balance Sheets

As of September 28, 2020 and December 30, 2019

September 28,

(In thousands, except par value)

1 unchanged sentence

Cash and cash equivalents

Restricted cash

Accounts receivable, net

1 unchanged sentence

Current assets held for sale

Receivable from Purchaser of the Mobility business unit

Prepaid expenses and other current assets

5 unchanged sentences

Deposits and other non-current assets

LIABILITIES AND EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

14 unchanged sentences

300,000 shares authorized, 106,742 and 105,510

shares issued and outstanding as of June 29, 2020 and December 30, 2019,

shares issued and outstanding as of September 28, 2020 and December 30, 2019,

Additional paid-in capital

2 unchanged sentences

Total stockholders’ equity

Total liabilities and stockholders' equity

See accompanying notes to consolidated condensed financial statements.

1 unchanged sentence

Consolidated Condensed Statements of Operations

For the Quarter and Two Quarters Ended June 29, 2020 and July 1, 2019

For the Quarter and Three Quarters Ended September 28, 2020 and September 30, 2019

Quarter Ended

Two Quarters Ended

Three Quarters Ended

September 28,

September 30,

September 28,

September 30,

(In thousands, except per share data)

5 unchanged sentences

Amortization of definite-lived intangibles

Impairment of goodwill

Total operating expenses

Operating income

Operating (loss) income

Other (expense) income:

1 unchanged sentence

Total other expense, net

Income from continuing operations before income taxes

(Loss) income from continuing operations before income taxes

Income tax benefit (provision)

Net income from continuing operations

Net (loss) income from continuing operations

Income (loss) from discontinued operations, net of income taxes

Earnings per share:

Basic earnings per share from continuing operations

Net (loss) income

(Loss) earnings per share:

Basic (loss) earnings per share from continuing operations

Basic earnings (loss) per share from discontinued operations

Basic earnings per share

Diluted earnings per share from continuing operations

Basic (loss) earnings per share

Diluted (loss) earnings per share from continuing operations

Diluted earnings (loss) per share from discontinued operations

Diluted earnings per share

Diluted (loss) earnings per share

See accompanying notes to consolidated condensed financial statements.

TTM TECHNOLOGIES, INC.

Consolidated Condensed Statements of Comprehensive Income (Loss)

For the Quarter and Two Quarters Ended June 29, 2020 and July 1, 2019

Consolidated Condensed Statements of Comprehensive (Loss) Income

For the Quarter and Three Quarters Ended September 28, 2020 and September 30, 2019

Quarter Ended

Two Quarters Ended

Three Quarters Ended

September 28,

September 30,

September 28,

September 30,

(In thousands)

Net (loss) income

Other comprehensive income (loss), net of tax:

Pension obligation adjustments, net

Reclassification adjustment for foreign currency translation

Derecognition of foreign currency translation adjustments

7 unchanged sentences

Loss realized in the statement of operations, net

Other comprehensive loss, net of tax

Comprehensive income (loss), net of tax

Other comprehensive income (loss), net of tax

Comprehensive (loss) income, net of tax

See accompanying notes to consolidated condensed financial statements.

1 unchanged sentence

Consolidated Condensed Statements of Stockholders’ Equity

For the Two Quarters Ended June 29, 2020 and July 1, 2019

For the Three Quarters Ended September 28, 2020

Comprehensive

15 unchanged sentences

Balance, June 29, 2020

Other comprehensive income

Exercise of stock options

Issuance of common stock for

restricted stock units

Stock-based compensation

Balance, September 28, 2020

See accompanying notes to consolidated condensed financial statements.

TTM TECHNOLOGIES, INC.

Consolidated Condensed Statements of Stockholders’ Equity

For the Three Quarters Ended September 30, 2019

Comprehensive

16 unchanged sentences

Balance, July 1, 2019

Other comprehensive loss

Issuance of common stock for

restricted stock units

Stock-based compensation

Balance, September 30, 2019

See accompanying notes to consolidated condensed financial statements.

1 unchanged sentence

Consolidated Condensed Statements of Cash Flows

For the Two Quarters Ended June 29, 2020 and July 1, 2019

Two Quarters Ended

June 29, 2020

For the Three Quarters Ended September 28, 2020 and September 30, 2019

Three Quarters Ended

September 28, 2020

September 30, 2019

(In thousands)

6 unchanged sentences

Stock-based compensation

Impairment of goodwill

Gain on sale of the Mobility business unit

5 unchanged sentences

Contract liabilities

Accrued salaries, wages and benefits and other current liabilities

Accrued salaries, wages and benefits

Other current liabilities

Net cash provided by operating activities

6 unchanged sentences

Repayment of long-term debt borrowing

Proceeds from exercise of stock options

Payment of debt issuance costs

1 unchanged sentence

Net cash used in financing activities

Effect of foreign currency exchange rates on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Cash and cash equivalents in assets held for sale

Cash and cash equivalents as presented on the consolidated condensed balance sheet

Effect of foreign currency exchange rates on cash, cash equivalents, and restricted cash

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Cash, cash equivalents, and restricted cash in assets held for sale

Cash, cash equivalents, and restricted cash as presented on the consolidated condensed balance sheet

Supplemental cash flow information:

36 unchanged sentences

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”.

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 (loss) from discontinued operations, net of income taxes”.

Prior year results have been recast to conform with the current presentation.

6 unchanged sentences

Refer to Note 2, Discontinued Operations , for further information regarding this sale and the resulting prior year reclassifications.

During the quarter ended September 28, 2020, the Company’s RF and Specialty Components (RF&S Components) operating segment met the quantitative threshold for separate presentation of a reportable segment.

In prior periods, the Company had two reportable segments:

PCB and E-M Solutions.

The RF&S Components reportable segment was previously aggregated with the PCB reportable segment.

As a result, certain prior year amounts and prior quarters within the current year have been reclassified to conform with this new presentation.

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

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.

1 unchanged sentence

Research and development expense were previously presented within general and administrative expense on the consolidated condensed statements of operations.

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

Immaterial Correction of Error

During the quarter ended September 28, 2020, the Company paid for certain transaction costs related to the sale of the Mobility business unit totaling $ 11,043 .

This should have been recorded as an expense, which would have reduced the gain on sale of Mobility business unit, during the quarter ended June 29, 2020.

The Company overstated both the income from discontinued operations, net of income taxes and net income by $ 11,043 , both basic earnings per share from discontinued operations and basic earnings per share of $ 0.10 and $ 0.11 in the quarter and two quarters ended June 29, 2020, respectively, and both diluted earnings per share from discontinued operations and diluted earnings per share of $ 0.10 in the quarter and two quarters ended June 29, 2020.

Further, total current liabilities were understated by $ 11,043 and retained earnings were overstated by $ 11,043 as of June 29, 2020.

Management concluded that this error was not material to the consolidated condensed financial statements for the quarter and two quarters ended June 29, 2020.

Prior period amounts have been revised to correct the error.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

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 became effective beginning on March 12, 2020 and will remain in effect 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 included March 12, 2020.

The guidance on hedging can be applied to eligible hedging relationships existing at the beginning of the interim period that included March 12, 2020 and to new eligible hedging relationships entered into after the beginning of that interim period.

The Company adopted this ASU and it did not have a material impact on its financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

5 unchanged sentences

Recently Issued Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

This guidance is effective beginning on March 12, 2020 through December 31, 2022.

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):

15 unchanged sentences

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 .

The base purchase price does not include certain accounts receivable of the divested business, which were estimated to total approximately $ 95,000 .

Subsequently, the final purchase price was $ 569,246 after customary purchase price adjustments, which did not include approximately $ 83,000 accounts receivable of the divested business.

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.

1 unchanged sentence

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.

There was no material impact on the Company’s 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.

There was no material impact on the Company’s 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.

2 unchanged sentences

Quarter Ended

Two Quarters Ended

Three Quarters Ended

September 28,

September 30,

September 28,

September 30,

(In thousands, except per share data)

13 unchanged sentences

before income taxes

Income tax (provision) benefit

Income tax benefit (provision)

Income (loss) from discontinued operations,

3 unchanged sentences

Diluted earnings (loss) per share

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.

There was no depreciation expense related to the discontinued operations for the quarter ended September 28, 2020 and depreciation expense for the quarter ended September 30, 2019 was $ 18,704 .

Depreciation expense related to the discontinued operations for the three quarters ended September 28, 2020 and September 30, 2019 was $ 21,382 and $ 54,645 , respectively.

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.

During the quarter and three quarters ended September 2 8 , 2020, the Company’s income tax expense related to the discontinued operations was impacted by a net discrete tax benefit of $ 20,021 and a net discrete tax expense of $ 46,686 , respectively .

As a result of the sale of the Mobility business unit, the discrete income tax benefit during the quarter ended September 28, 2020 is due to recognition of additional Internal Revenue Code (IRC) Section 250 deduction and foreign tax credit benefits.

The net income tax expense for the three quarters ended September 28, 2020 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.

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) :

21 unchanged sentences

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 .

Costs directly incurred as a result of the sale of the Company’s Mobility business unit, including legal fees, professional fees, and other costs.

Costs directly incurred as a result of the sale of the Company’s Mobility business unit, including bank fees, legal fees, professional fees, and other costs.

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.

10 unchanged sentences

Quarter Ended

Two Quarters Ended

June 29, 2020

Three Quarters Ended

September 28, 2020

September 30, 2019

September 28, 2020

September 30, 2019

(In thousands)

3 unchanged sentences

Supplemental cash flow information related to leases was as follows:

Two Quarters Ended

June 29, 2020

Three Quarters Ended

September 28, 2020

September 30, 2019

(In thousands)

4 unchanged sentences

Supplemental balance sheet information related to leases was as follows:

June 29, 2020

September 28, 2020

December 30, 2019

4 unchanged sentences

Total operating lease liabilities

June 29, 2020

September 28, 2020

December 30, 2019

9 unchanged sentences

Notes to Consolidated Condensed Financial Statements—(Continued)

As of June 29, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations for long-term contracts was $ 19,172 .

As of September 28, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations for long-term contracts was $ 19,606 .

The Company expects to recognize revenue on approximately 86 % 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.

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 three quarters ended September 28, 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 and three quarters ended September 30, 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

Quarter Ended September 28, 2020

Quarter Ended September 30, 2019

RF&S Components

E-M Solutions

RF&S Components

E-M Solutions

2 unchanged sentences

Cellular Phone

Computing/Storage/Peripherals

Medical/Industrial/Instrumentation

Computing/Storage/

Medical/Industrial/

Instrumentation

Networking/Communications

Two Quarters Ended June 29, 2020

Two Quarters Ended July 1, 2019

Three Quarters Ended September 28, 2020

Three Quarters Ended September 30, 2019

RF&S Components

E-M Solutions

RF&S Components

E-M Solutions

2 unchanged sentences

Cellular Phone

Computing/Storage/Peripherals

Medical/Industrial/Instrumentation

Networking/Communications

Computing/Storage/

Medical/Industrial/

Instrumentation

Communications

TTM TECHNOLOGIES, INC.

1 unchanged sentence

(5) Composition of Certain Consolidated Condensed Financial Statement Captions

June 29, 2020

September 28, 2020

December 30, 2019

10 unchanged sentences

Accumulated depreciation

As of June 29, 2020 and December 30, 2019, goodwill was as follows:

Other current liabilities:

Income taxes payable

Sales return and allowances

Restructuring

As of September 28, 2020 and December 30, 2019, goodwill by reportable segment was as follows:

RF&S Components

(In thousands)

Balance as of December 30, 2019 and June 29, 2020

Balance as of December 30, 2019

Accumulated impairment loss

Goodwill related to the Mobility business unit

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

Impairment loss during the three quarters ended September 28, 2020

Balance as of September 28, 2020

Accumulated impairment loss

The Company evaluates its goodwill on an annual basis during its fourth fiscal quarter and at other times when events or changes in circumstances – such as significant adverse changes in the business climate or operating results or changes in management strategy, coupled with a decline in the market price of its stock and market capitalization – indicate that there may be a potential impairment.

During the third quarter of 2020, the Company determined that there was a permanent loss of a key customer in the RF&S Components reporting unit that coupled with the impact of COVID-19, resulted in lower than anticipated results and continued decline in sales.

The Company considered these factors to be indicators of potential impairment requiring the Company to test the related goodwill for impairment.

As of September 28, 2020, the Company completed a quantitative goodwill impairment analysis related to its RF&S Components reporting unit by comparing the fair value of the reporting unit with its carrying amount.

The Company determined the fair value of the reporting unit by using both a discounted cash flow (DCF) and a market approach.

Under the market

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

approach, the Company used revenue and earnings multiples based on comparable industry multiples to estimate the fair value of the reporting unit.

Under the DCF approach, the Company estimated the future cash flows, as well as selected a risk-adjusted discount rate to measure the present value of the anticipated cash flows.

When determining future cash flow estimates, the Company considered historical results adjusted to reflect current and anticipated future operating conditions.

The Company estimated cash flows for the reporting unit over a discrete period and a terminal period (considering expected long-term growth rates and trends).

Based on its analysis, the Company determined that the fair value of the RF&S Components reporting unit was less than its carrying value and recorded a non-cash goodwill impairment charge of $ 69,200 during the quarter ended September 28, 2020.

If the Company’s future cash flow projections and other fair value assumptions for its reporting unit change, the Company may be subject to potential additional impairment in subsequent quarters.

Estimating the fair value of the reporting unit requires the Company to make assumptions and estimates in such areas as future economic conditions, industry-specific conditions, product pricing, and necessary capital expenditures.

The use of different assumptions or estimates for future cash flows, discount rates, or terminal growth rates could produce substantially different estimates of the fair value of the reporting unit.

(7) Definite-lived Intangibles

As of June 29, 2020 and December 30, 2019, the components of definite-lived intangibles were as follows:

As of September 28, 2020 and December 30, 2019, the components of definite-lived intangibles were as follows:

(In thousands)

June 29, 2020

September 28, 2020

Customer relationships

3 unchanged sentences

Customer relationships

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.

Amortization expense was $ 11,510 and $ 10,680 for the quarters ended September 28, 2020 and September 30, 2019, respectively, and $ 33,400 and $ 39,784 for the three quarters ended September 28, 2020 and September 30, 2019, respectively.

For the quarter and three quarters ended September 28, 2020, $ 1,384 and $ 4,151 , respectively, of amortization expense is included in cost of goods sold.

For the quarter and three quarters ended September 30, 2019, $ 1,180 and $ 3,539 , 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:

1 unchanged sentence

Remaining 2020

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

(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:

The following table summarizes the long-term debt of the Company as of September 28, 2020 and December 30, 2019:

Interest Rate as of

June 29, 2020

September 28, 2020

Interest Rate as of

12 unchanged sentences

Long-term debt, less current maturities

As of September 28, 2020, the Company’s restricted cash balance of $ 249,975 consisted of a specific deposit account to be used for principal payment on the Convertible Senior Notes due December 2020.

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 .

The Company used a portion of the cash proceeds to repay $ 400,000 of the Term Loan during the quarter ended September 28, 2020 and plans to use the remaining cash proceeds for reinvestment.

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.

4 unchanged sentences

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.

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 September 28 , 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 September 28, 2020

As of December 30, 2019

8 unchanged sentences

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.

Remaining unamortized debt issuance costs for the ABL Revolving Loans of $ 2,084 and $ 2,511 as of September 28 , 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.

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

As of September 28 , 2020 , the remaining weighted average amortization period for all unamortized debt discount and debt issuance costs was 3.6 years.

(9) Income Taxes

2 unchanged sentences

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.

During the quarter and three quarters ended September 28, 2020, the Company’s effective tax rate was impacted by a net discrete benefit of $ 1,072 and $ 5,890 , respectively.

This is related mainly to release of uncertain tax positions due to the expiration of the statute of limitation in foreign jurisdictions, change in the estimated tax benefits in the United States for GILTI and in Hong Kong related to unrealized foreign exchange gain and loss, netted against (i) an increase of valuation allowance and withholding tax expense related to the announced closure of two of the Company’s 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.

10 unchanged sentences

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.

As of September 28, 2020, the fair value of the interest rate swap was recorded as a liability in the amount of $ 17,461 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.

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

No ineffectiveness was recognized for the quarter and three quarters ended September 28, 2020 and September 30, 2019.

The interest rate swap increased interest expense by $ 2,707 and $ 602 for the quarters ended September 28, 2020 and September 30, 2019, respectively, and $ 6,224 and $ 1,308 for the three quarters ended September 28, 2020 and September 30, 2019, respectively.

Foreign Exchange Contracts

1 unchanged sentence

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 notional amount of the foreign exchange contracts as of September 28, 2020 and December 30, 2019 was approximately $ 1,968 (Japanese Yen (JPY) 209.0 million) and $ 1,994 (JPY 215.8 million), respectively.

The Company has designated certain of these foreign exchange contracts as cash flow hedges.

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

The fair values of derivative instruments in the consolidated condensed balance sheets are as follows:

1 unchanged sentence

Balance Sheet Location

June 29, 2020

September 28, 2020

December 30, 2019

8 unchanged sentences

Other current liabilities

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

Quarter Ended September 28, 2020

Quarter Ended September 30, 2019

Loss Recognized

6 unchanged sentences

Interest expense

Two Quarters Ended June 29, 2020

Two Quarters Ended July 1, 2019

Three Quarters Ended September 28, 2020

Three Quarters Ended September 30, 2019

Loss Recognized

6 unchanged sentences

Interest expense

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

The following table provides a summary of the activity associated with the designated cash flow hedges reflected in accumulated other comprehensive loss for the three quarters ended September 30, 2020 and September 30, 2019:

Three Quarters Ended

September 28,

September 30,

(In thousands)

9 unchanged sentences

(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:

The following provides a summary of the components of accumulated other comprehensive loss, net of tax, as of September 28, 2020 and December 30, 2019:

(Losses) Gains

1 unchanged sentence

Ending balance as of December 30, 2019

Other comprehensive (loss) income

Other comprehensive income (loss)

before reclassifications

1 unchanged sentence

other comprehensive loss

Reclassification adjustment for

foreign currency translation

Derecognition of foreign currency

5 unchanged sentences

Other comprehensive (loss) income

Ending balance as of June 29, 2020

Ending balance as of September 28, 2020

(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.

Some 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.

2 unchanged sentences

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.

For the quarter and three quarters ended September 28, 2020, one customer accounted for approximately 13 % and 10 % of the Company’s net sales, respectively.

There were no other customers that accounted for 10% or more of net sales for the quarter and three quarters ended September 28, 2020.

There were no customers that accounted for 10% or more of net sales for the quarter and three quarters ended September 30, 2019.

(13) Fair Value Measures

1 unchanged sentence

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:

June 29, 2020

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

The carrying amount and estimated fair value of the Company’s financial instruments as of September 28, 2020 and December 30, 2019 were as follows:

September 28, 2020

December 30, 2019

7 unchanged sentences

ABL Revolving Loans

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 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 September 28, 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.

As of September 28, 2020 and December 30, 2019, the Company’s other financial instruments also included cash and cash equivalents, restricted cash, 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 Company’s cash, cash equivalents, and restricted cash as of September 28, 2020 consisted of $ 429,470 held in the U.S., with the remaining $ 233,815 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.

As of September 28, 2020, the Company’s goodwill balance related to its RF&S Components reporting unit of $ 108,000 was measured at fair value on a nonrecurring basis.

The Company recorded a non-cash goodwill impairment charge of $ 69,200 during the quarter and three quarters ended September 28, 2020.

The fair value of goodwill was determined using both a DCF and a market approach, which are considered Level 3 inputs.

(14) Commitments and Contingencies

3 unchanged sentences

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.

The Company has accrued amounts for its loss contingencies which are probable and estimable as of September 28, 2020 and December 30, 2019.

However, these amounts are not material to the consolidated condensed financial statements of the Company.

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

(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

Three Quarters Ended

September 28, 2020

September 30, 2019

September 28, 2020

September 30, 2019

(In thousands, except per share amounts)

Basic earnings:

Basic earnings

Diluted earnings:

Interest expense from Convertible Senior Notes, net of tax

Diluted earnings

Net (loss) income from continuing operations

Basic weighted average shares

1 unchanged sentence

restricted stock units and stock options

Dilutive effect of assumed conversion of

Convertible Senior Notes outstanding

Diluted shares

Earnings per share:

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.

(Loss) earnings per share:

For the quarter and three quarters ended September 28, 2020, potential shares of common stock, consisting of stock options to purchase approximately 80 shares of common stock at exercise prices ranging from $ 11.83 to $ 16.60 per share, 3,187 restricted stock units (RSUs), and 216 performance-based restricted stock units (PRUs) were not included in the computation of diluted earnings per share because the Company incurred a net loss and as a result, the impact would be anti-dilutive.

PRUs, RSUs and stock options to purchase 407 and 862 shares of common stock for the quarter and three quarters ended September 30, 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 September 30, 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 three quarters and, as a result, the impact would be anti-dilutive.

Outstanding warrants for the quarter and three quarters ended September 28, 2020 and September 30, 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 or because the Company incurred a net loss.

During the quarter ended September 28, 2020, the Company calculated the dilutive effect of Convertible Senior Notes using the treasury stock method because the Company now has the intent and ability to settle the Convertible Senior Notes in cash.

This change in policy from the if-converted method to treasury stock method is applied on a prospective basis.

For the quarter and three quarters ended September 28, 2020, the effect of shares of common stock related to the Company’s Convertible Senior Notes, based on the treasury stock method, were not included in the computation of dilutive earnings per share as the impact would be anti-dilutive.

For the quarter and three quarters ended September 30, 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

1 unchanged sentence

Quarter Ended

Two Quarters Ended

Three Quarters Ended

September 28,

September 30,

September 28,

September 30,

(In thousands)

5 unchanged sentences

Stock-based compensation expense recognized

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

Summary of Unrecognized Compensation Costs

The following is a summary of total unrecognized compensation costs as of June 29, 2020:

The following is a summary of total unrecognized compensation costs as of September 28, 2020:

Unrecognized Stock-Based Compensation Cost

5 unchanged sentences

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:

During the quarter ended September 28, 2020, the Company’s RF&S Components operating segment met the quantitative threshold for separate presentation of a reportable segment.

In prior periods, the Company had two reportable segments:

PCB and E-M Solutions.

The RF&S Components reportable segment was previously aggregated with the PCB reportable segment.

As a result, certain prior year amounts have been reclassified to conform with this new presentation.

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.

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.

2 unchanged sentences

Quarter Ended

Two Quarters Ended

June 29, 2020

Three Quarters Ended

September 28, 2020

September 30, 2019

September 28, 2020

September 30, 2019

(In thousands)

RF&S Components

E-M Solutions

Total net sales

Operating Segment Income (Loss):

Operating Segment (Loss) Income:

RF&S Components

E-M Solutions

1 unchanged sentence

Amortization of definite-lived intangibles (1)

Total operating income

Total operating (loss) income

Total other expense

Income before income taxes

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.

(Loss) income before income taxes

Amortization of definite-lived intangibles primarily relates to the PCB and RF&S Components reportable segments.

For the quarter and three quarters ended September 28, 2020, $ 1,384 and $ 4,151 , respectively, of amortization expense is included in cost of goods sold.

For the quarter and three quarters ended September 30, 2019, $ 1,180 and $ 3,539 , respectively, of amortization expense is included in cost of goods sold.

During the quarter and three quarters ended September 28, 2020, the Company recorded an impairment charge for goodwill of $ 69,200 related to its RF&S Components reportable segment.

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.

TTM TECHNOLOGIES, INC.

Notes to Consolidated Condensed Financial Statements—(Continued)

The Company markets and sells its products in approximately 53 countries.

Other than in the United States and China, the Company does not conduct business in any country in which its net sales in that country exceed 10 % of the Company’s total net sales.

Net sales are as follows:

Quarter Ended

Three Quarters Ended

September 28, 2020

September 30, 2019

September 28, 2020

September 30, 2019

(In thousands)

United States

Total net sales

Net sales are attributed to countries by country invoiced.

(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.

In the normal course of business, the Company’s foreign subsidiaries purchase laminate and prepreg from related parties in which a significant shareholder of the Company holds an equity interest.

The Company’s foreign subsidiaries purchased laminate and prepreg from these related parties in the amount of $ 5,760 and $ 7,151 for the quarters ended September 28, 2020 and September 30, 2019, respectively, and $ 17,527 and $ 22,847 for the three quarters ended September 28, 2020 and September 30, 2019, respectively.

As of September 28, 2020 and December 30, 2019, the Company’s consolidated condensed balance sheets included $ 6,786 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 E-M Solutions 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.

2 unchanged sentences

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.

As of September 28, 2020, the Company has incurred approximately $ 14,671 of restructuring charges and $ 5,694 of accelerated depreciation expense 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.

1 unchanged sentence

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

September 28, 2020 and September 30, 2019:

Quarter Ended September 28, 2020

Three Quarters Ended September 28, 2020

(In thousands)

1 unchanged sentence

E-M Solutions

Quarter Ended July 1, 2019

Two Quarters Ended July 1, 2019

Quarter Ended September 30, 2019

Three Quarters Ended September 30, 2019

(In thousands)

Reportable Segment:

E-M Solutions

RF&S Components

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:

The below table shows the utilization of the accrued restructuring costs during the three quarters ended September 28, 2020:

(In thousands)

1 unchanged sentence

Charged to expense

Accrued as of June 29, 2020

(20) Subsequent Event

Subsequent to June 29, 2020, the Company made a $ 400,000 debt principal prepayment for its Term Loan.

Accrued as of September 28, 2020

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements