TTM TECHNOLOGIES INC 10-Q

Item 1. Financial Statements (unaudited) TTM TECHNOLOGIES, INC. Consolidated Condensed Balance Sheets As of March 29, 2021 and December 28, 2020 As of March 29, December 28, 2021 2020 (Unaudited) (In thousands, except par value) ASSETS Current assets: Cash and cash equivalents $ 539,648 $ 451,565 Accounts receivable, net 366,768 381,105 Contract assets 271,702 273,256 Inventories 121,124 115,651 Prepaid expenses and other current assets 33,397 27,181 Total current assets 1,332,639 1,248,758 Property, plant and equipment, net 651,194 650,435 Operating lease right-of-use assets 21,383 24,340 Goodwill 637,324 637,324 Definite-lived intangibles, net 270,402 281,307 Deposits and other non-current assets 52,886 53,780 Total assets $ 2,965,828 $ 2,895,944 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 336,739 $ 327,102 Contract liabilities 3,486 4,254 Accrued salaries, wages and benefits 82,201 97,268 Other current liabilities 86,728 89,422 Total current liabilities 509,154 518,046 Long-term debt, net of discount and issuance costs 926,128 842,853 Operating lease liabilities 15,658 17,211 Other long-term liabilities 72,421 73,825 Total long-term liabilities 1,014,207 933,889 Commitments and contingencies (Note 14) Equity: Common stock, $ 0.001 par value; 300,000 shares authorized, 107,113 and 106,770 shares issued and outstanding as of March 29, 2021 and December 28, 2020, respectively 107 107 Additional paid-in capital 830,835 830,971 Retained earnings 648,652 651,844 Accumulated other comprehensive loss ( 37,127 ) ( 38,913 ) Total stockholders’ equity 1,442,467 1,444,009 Total liabilities and stockholders' equity $ 2,965,828 $ 2,895,944 See accompanying notes to consolidated condensed financial statements. 3 TTM TECHNOLOGIES, INC. Consolidated Condensed Statements of Operations For the Quarters Ended March 29, 2021 and March 30, 2020 Quarter Ended March 29, March 30, 2021 2020 (Unaudited) (In thousands, except per share data) Net sales $ 526,432 $ 497,646 Cost of goods sold 444,832 416,304 Gross profit 81,600 81,342 Operating expenses: Selling and marketing 16,282 16,169 General and administrative 31,527 34,667 Research and development 4,470 4,762 Amortization of definite-lived intangibles 9,521 9,562 Total operating expenses 61,800 65,160 Operating income 19,800 16,182 Other (expense) income: Interest expense ( 11,389 ) ( 19,781 ) Loss on extinguishment of debt ( 15,217 ) — Other, net 2,507 2,502 Total other expense, net ( 24,099 ) ( 17,279 ) Loss from continuing operations before income taxes ( 4,299 ) ( 1,097 ) Income tax benefit (provision) 1,107 ( 2,123 ) Net loss from continuing operations ( 3,192 ) ( 3,220 ) Income from discontinued operations, net of income taxes — 2,046 Net loss $ ( 3,192 ) $ ( 1,174 ) (Loss) earnings per share: Basic loss per share from continuing operations $ ( 0.03 ) $ ( 0.03 ) Basic earnings per share from discontinued operations — 0.02 Basic loss per share $ ( 0.03 ) $ ( 0.01 ) Diluted loss per share from continuing operations $ ( 0.03 ) $ ( 0.03 ) Diluted earnings per share from discontinued operations — 0.02 Diluted loss per share $ ( 0.03 ) $ ( 0.01 ) See accompanying notes to consolidated condensed financial statements. 4 TTM TECHNOLOGIES, INC. Consolidated Condensed Statements of Comprehensive Loss For the Quarters Ended March 29, 2021 and March 30, 2020 Quarter Ended March 29, March 30, 2021 2020 (Unaudited) (In thousands) Net loss $ ( 3,192 ) $ ( 1,174 ) Other comprehensive income (loss), net of tax: Pension obligation adjustments, net — 27 Foreign currency translation adjustments, net ( 3 ) ( 367 ) Net unrealized losses on cash flow hedges: Unrealized loss on effective cash flow hedges during the period, net ( 263 ) ( 6,018 ) Loss realized in the statement of operations, net 2,052 860 Net 1,789 ( 5,158 ) Other comprehensive income (loss), net of tax 1,786 ( 5,498 ) Comprehensive loss, net of tax $ ( 1,406 ) $ ( 6,672 ) See accompanying notes to consolidated condensed financial statements. 5 TTM TECHNOLOGIES, INC. Consolidated Condensed Statements of Stockholders’ Equity For the Quarters Ended March 29, 2021 and March 30, 2020 Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Total Stockholders' Shares Amount Capital Earnings Loss Equity (Unaudited) (In thousands) Balance, December 28, 2020 106,770 $ 107 $ 830,971 $ 651,844 $ ( 38,913 ) $ 1,444,009 Net loss — — — ( 3,192 ) — ( 3,192 ) Other comprehensive income — — — — 1,786 1,786 Issuance of common stock for performance-based restricted stock units 135 — — — — — Issuance of common stock for restricted stock units 203 — — — — — Fair value of warrants reclassified to warrant liabilities — — ( 4,345 ) — — ( 4,345 ) Issuance of common stock from warrant exercises 5 — — — — — Stock-based compensation — — 4,209 — — 4,209 Balance, March 29, 2021 107,113 $ 107 $ 830,835 $ 648,652 $ ( 37,127 ) $ 1,442,467 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 See accompanying notes to consolidated condensed financial statements. 6 TTM TECHNOLOGIES, INC. Consolidated Condensed Statements of Cash Flows For the Quarters Ended March 29, 2021 and March 30, 2020 Quarter Ended March 29, 2021 March 30, 2020 (Unaudited) (In thousands) Cash flows from operating activities: Net loss $ ( 3,192 ) $ ( 1,174 ) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 21,476 42,632 Amortization of definite-lived intangible assets 10,905 11,620 Amortization of debt discount and issuance costs 537 3,552 Loss on extinguishment of debt 15,217 — Deferred income taxes 683 ( 353 ) Stock-based compensation 4,209 4,835 Other ( 534 ) 876 Changes in operating assets and liabilities: Accounts receivable, net 14,337 45,019 Contract assets 1,554 1,572 Inventories ( 5,473 ) ( 7,573 ) Prepaid expenses and other current assets ( 6,495 ) ( 5,959 ) Accounts payable 10,885 ( 52,791 ) Contract liabilities ( 768 ) ( 262 ) Accrued salaries, wages and benefits ( 15,067 ) ( 16,382 ) Other current liabilities ( 7,129 ) 2,301 Net cash provided by operating activities 41,145 27,913 Cash flows from investing activities: Refundable deposit related to sale of the Mobility business unit — 35,342 Purchase of property, plant and equipment and other assets ( 21,797 ) ( 32,451 ) Proceeds from sale of property, plant and equipment and other assets 831 — Net cash (used in) provided by investing activities ( 20,966 ) 2,891 Cash flows from financing activities: Proceeds from long-term debt borrowing 500,000 — Repayment of long-term debt borrowings ( 425,838 ) — Payment of debt issuance costs ( 4,773 ) — Other ( 1,309 ) — Net cash provided by financing activities 68,080 — Effect of foreign currency exchange rates on cash and cash equivalents ( 176 ) ( 521 ) Net increase in cash and cash equivalents 88,083 30,283 Cash and cash equivalents at beginning of period 451,565 400,154 Cash and cash equivalents at end of period 539,648 430,437 Cash and cash equivalents in assets held for sale — ( 68,445 ) Cash and cash equivalents as presented on the consolidated condensed balance sheet $ 539,648 $ 361,992 Supplemental cash flow information: Cash paid, net for interest $ 15,244 $ 10,455 Cash paid, net for income taxes 713 4,367 Net cash provided by operating activities from discontinued operations — 21,286 Net cash provided by investing activities from discontinued operations — 26,823 Net cash used in financing activities from discontinued operations — — Supplemental disclosure of noncash investing and financing activities: Property, plant and equipment recorded in accounts payable $ 28,960 $ 46,784 Issuance of common stock for warrant settlement 68 — Supplemental disclosure of noncash investing activities from discontinued operations: Property, plant and equipment recorded in accounts payable $ — $ 6,673 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, engineering and manufacturing solution allows 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, data center 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). 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”. 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 The Company currently has two reportable segments: PCB and RF and Specialty Components (RF&S Components). In fiscal 2020, subsequent to the quarter ended March 30, 2020, RF&S Components was added as a reportable segment. As a result, the Company had three reportable segments as of December 28, 2020: PCB, RF&S Components, and E-M Solutions. On April 29, 2020, the Company announced the restructuring of its E-M Solutions business unit. In prior periods, the Company’s E-M Solutions business unit consisted of three Chinese manufacturing facilities with two being in Shanghai (SH BPA and SH E-MS) and one in Shenzhen (SZ). The Company closed the SH E-MS and SZ facilities at the end of 2020 and integrated the SH BPA facility into its PCB operations. As of March 29, 2021, E-M Solutions no longer meets the criteria for segment reporting. As a result of the addition of the RF&S Components reportable segment and the restructuring of the E-M Solutions business unit, certain prior year amounts have been reclassified to conform to this new presentation. Recently Adopted and Issued Accounting Standards Recently Adopted Accounting Standards In December 2019, the Financial Accounting Standards Board (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. 8 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) 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 adopted this ASU as of December 29, 2020 and it did not have a material impact on its consolidated condensed financial statements and related disclosures. (2) Discontinued Operations On January 19, 2020, the Company entered into a definitive equity interests purchase agreement for the sale of the Company’s Mobility business unit. The sale was completed on April 17, 2020 for a base purchase price of $ 550,000 , subject to customary purchase price adjustments. 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 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. In addition, the Company entered into a Manufacturing Supply Agreement with the Purchaser pursuant to which the Purchaser will supply products to a few customers of the Company. 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 assist the Purchaser in selling PCBs manufactured by the Purchaser to certain customers for a commission for a period up to April 17, 2021. 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. 9 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) The following table summarizes the results of Mobility operations for the quarter ended March 30, 2020 prior to sale: Quarter Ended March 30, 2020 (In thousands) Net sales $ 113,174 Cost of goods sold 108,425 Gross profit 4,749 Operating expenses: Selling and marketing 1,176 General and administrative 1,310 Research and development 147 Amortization of definite-lived intangibles 675 Total operating expenses 3,308 Operating income 1,441 Other (expense) income: Interest expense ( 223 ) Other, net 1,571 Total other income, net 1,348 Income from discontinued operations before income taxes 2,789 Income tax provision ( 743 ) Income from discontinued operations, net of income taxes $ 2,046 Earnings per share from discontinued operations: Basic earnings per share $ 0.02 Diluted earnings per share $ 0.02 Depreciation expense related to the discontinued operations for the quarter ended March 30, 2020 was $ 18,265 . (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. The components of lease expense were as follows: Quarter Ended March 29, 2021 March 30, 2020 (In thousands) Operating lease cost $ 2,208 $ 2,481 Variable lease cost 234 106 Short-term lease cost 54 229 10 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) Supplemental cash flow information related to leases was as follows: Quarter Ended March 29, 2021 March 30, 2020 (In thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,159 $ 2,171 Right-of-use assets obtained in exchange for new lease obligations: Operating leases 284 1,876 Supplemental balance sheet information related to leases was as follows: As of March 29, 2021 December 28, 2020 (In thousands) Operating lease right-of-use assets $ 21,383 $ 24,340 Other current liabilities 6,609 8,144 Operating lease liabilities 15,658 17,211 Total operating lease liabilities $ 22,267 $ 25,355 As of March 29, 2021 December 28, 2020 Weighted average remaining lease term 4.4 years 4.2 years Weighted average discount rate 3.29 % 3.31 % Maturities of operating lease liabilities were as follows (1) : (In thousands) Less than one year $ 7,214 1 - 2 years 5,015 2 - 3 years 4,309 3 - 4 years 3,370 4 - 5 years 2,123 Thereafter 1,902 Total lease payments 23,933 Less imputed interest ( 1,666 ) Total $ 22,267 (1) Excludes $ 851 of legally binding minimum lease payments for leases signed but not yet commenced. (4) Revenues As of March 29, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations for long-term contracts was $ 12,850 . The Company expects to recognize revenue on approximately 100 % of the remaining performance obligations for the Company’s long-term contracts over the next twelve months . 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 both the quarters ended March 29, 2021 and March 30, 2020. 11 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) The following tables represent a disaggregation of revenue by principal end markets with the reportable segments: Quarter Ended March 29, 2021 PCB RF&S Components Other (1) Total End Markets (In thousands) Aerospace and Defense $ 186,539 $ 6 $ — $ 186,545 Automotive 91,792 — 3,642 95,434 Data Center Computing (2) 71,759 432 — 72,191 Medical/Industrial/Instrumentation 90,770 1,081 25 91,876 Networking/Communications 66,938 10,653 1 77,592 Other 2,688 518 ( 412 ) 2,794 Total $ 510,486 $ 12,690 $ 3,256 $ 526,432 Quarter Ended March 30, 2020 PCB RF&S Components Other (1) Total End Markets (In thousands) Aerospace and Defense $ 184,414 $ — $ — $ 184,414 Automotive 61,858 — 7,013 68,871 Cellular Phone 2,775 — — 2,775 Data Center Computing (2) 58,114 203 54 58,371 Medical/Industrial/Instrumentation 90,468 794 3,320 94,582 Networking/Communications 70,433 8,067 4,195 82,695 Other 5,940 377 ( 379 ) 5,938 Total $ 474,002 $ 9,441 $ 14,203 $ 497,646 (1) Other represents SH E-MS and SZ results. (2) In the current period, the Computing/Storage/Peripherals end market was renamed to Data Center Computing to better reflect the customer mix and growth prospects. There was no change to the customers included in this end market. 12 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (5) Composition of Certain Consolidated Condensed Financial Statement Captions As of March 29, 2021 December 28, 2020 (In thousands) Inventories: Raw materials $ 108,271 $ 103,890 Work-in-process 9,259 7,841 Finished goods 3,594 3,920 $ 121,124 $ 115,651 Property, plant and equipment, net: Land and land use rights $ 62,061 $ 61,781 Buildings and improvements 402,361 398,540 Machinery and equipment 840,249 832,723 Furniture and fixtures and other 10,198 10,304 Construction-in-progress 36,911 33,191 1,351,780 1,336,539 Less: Accumulated depreciation ( 700,586 ) ( 686,104 ) $ 651,194 $ 650,435 Other current liabilities: Sales returns and allowances $ 12,669 $ 13,015 Income taxes payable 5,553 2,428 Warrant liabilities 4,070 — Restructuring 3,184 7,382 Interest 3,051 7,157 Other 58,201 59,440 $ 86,728 $ 89,422 Other long-term liabilities: Deferred income taxes $ 23,782 $ 23,704 Derivative liabilities 12,579 14,968 Defined benefit pension plan liability 9,605 9,986 Other 26,455 25,167 $ 72,421 $ 73,825 (6) Goodwill As of March 29, 2021 and December 28, 2020, goodwill by reportable segment was as follows: PCB RF&S Components Total (In thousands) Balance as of December 28, 2020 and March 29, 2021 Goodwill $ 700,724 $ 177,200 $ 877,924 Accumulated impairment losses ( 171,400 ) ( 69,200 ) ( 240,600 ) $ 529,324 $ 108,000 $ 637,324 13 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (7) Definite-lived Intangibles As of March 29, 2021 and December 28, 2020, the components of definite-lived intangibles were as follows: Gross Amount Accumulated Amortization Net Carrying Amount Weighted Average Amortization Period (In thousands) (In years) March 29, 2021 Customer relationships $ 397,500 $ ( 159,663 ) $ 237,837 10.9 Technology 47,650 ( 15,085 ) 32,565 9.5 $ 445,150 $ ( 174,748 ) $ 270,402 December 28, 2020 Customer relationships $ 397,500 $ ( 150,142 ) $ 247,358 10.9 Technology 47,650 ( 13,701 ) 33,949 9.5 $ 445,150 $ ( 163,843 ) $ 281,307 Definite-lived intangibles are amortized using the straight-line method of amortization over the useful life. Amortization expense was $ 10,905 and $ 10,945 for the quarters ended March 29, 2021 and March 30, 2020, respectively. For the quarters ended March 29, 2021 and March 30, 2020, $ 1,384 and $ 1,383 , 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 2021 $ 30,274 2022 38,631 2023 36,713 2024 29,713 2025 25,397 Thereafter 109,674 $ 270,402 (8) Long-term Debt and Letters of Credit The following table summarizes the long-term debt of the Company as of March 29, 2021 and December 28, 2020: Interest Rate as of March 29, 2021 Principal Outstanding as of March 29, 2021 Interest Rate as of December 28, 2020 Principal Outstanding as of December 28, 2020 (In thousands) Senior Notes due March 2029 4.00 % $ 500,000 — % $ — Term Loan due September 2024 2.61 405,879 2.65 405,879 Senior Notes due October 2025 — — 5.63 375,000 U.S. ABL Revolving Loan due June 2024 — — 1.40 40,000 Asia ABL Revolving Loan due June 2024 1.51 30,000 1.55 30,000 935,879 850,879 Less: Long-term debt unamortized discount ( 763 ) ( 814 ) Long-term debt unamortized debt issuance costs ( 8,988 ) ( 7,212 ) 926,128 842,853 Less: current maturities — — Long-term debt, less current maturities $ 926,128 $ 842,853 The Company has twelve months from September 3, 2020 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 used a portion of the cash proceeds to repay $ 400,000 of the Term Loan during the year ended December 28, 2020 and plans to use 14 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) 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 . Senior Notes due 2029 On March 10, 2021, the Company issued $ 500,000 of Senior Notes due 2029, which are included in long-term debt and bear interest at a rate of 4.0 % per annum. Interest is payable semiannually in arrears on March 1 and September 1 of each year beginning September 1, 2021. The Senior Notes due 2029 will mature on March 1, 2029 . The Company used a portion of the net proceeds from the issuance of the Senior Notes due 2029 during the quarter ended March 29, 2021 to: (i) fund the early retirement of $ 375,000 Senior Notes due 2025, (ii) fund the repayment of $ 40,000 outstanding under the U.S. Asset-Based Lending Credit Agreement (U.S. ABL) Revolving credit facility (but not terminate the commitments thereunder), and (iii) pay related premiums, fees and expenses. The Company intends to use the remaining net proceeds for general corporate purposes. Asset-Based Lending Agreements As of March 29, 2021, letters of credit in the amount of $ 10,753 were outstanding under the U.S. ABL and $ 11,721 were outstanding under the Asia ABL with various expiration dates through July 2021 . Available borrowing capacity under the U.S. ABL and the Asia ABL was $ 139,247 and $ 108,279 , respectively, which considers letters of credit outstanding as of March 29, 2021. Debt Covenants Borrowings under the Term Loan and Senior Notes due 2029 are subject to certain affirmative and negative covenants, including limitations on indebtedness, corporate transactions, investments, dispositions, and share payments. Under the occurrence of certain events, the U.S. ABL and Asia Asset-Based Lending Credit Agreement (Asia ABL) (collectively, the ABL Revolving Loans), are subject to various financial covenants, including leverage and fixed charge coverage ratios. Debt Issuance and Debt Discount As of March 29 , 2021 and December 28, 2020, remaining unamortized debt discount and debt issuance costs for the Senior Notes due 2029, Term Loan Facility and Senior Notes due 2025 are as follows: As of March 29, 2021 As of December 28, 2020 Debt Issuance Costs Debt Discount Effective Interest Rate Debt Issuance Costs Debt Discount Effective Interest Rate (In thousands, except interest rates) Senior Notes due March 2029 $ 6,462 $ — 4.19 % $ — $ — — % Term Loan due September 2024 2,526 763 4.66 2,695 814 4.66 Senior Notes due October 2025 — — — 4,517 — 5.92 $ 8,988 $ 763 $ 7,212 $ 814 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 $ 1,778 and $ 1,919 as of March 29 , 2021 and December 28, 2020, 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 March 29 , 2021 , the remaining weighted average amortization period for all unamortized debt discount and debt issuance costs was 5.9 years. Loss on Extinguishment of Debt During the quarter ended March 29, 2021, the Company recognized losses of $ 15,217 associated with the premium paid on extinguishment of debt and the write-off of the remaining unamortized debt issuance costs as a result of the repayment of the remaining outstanding balance of the Senior Notes due 2025. 15 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (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 ended March 29, 2021, the Company’s effective tax rate was impacted by a net discrete benefit of $ 383 . This benefit resulted from the 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 amounts, partially offset by tax expense on stock based compensation releases and 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 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 March 29, 2021, the fair value of the interest rate swap was recorded as a liability in the amount of $ 12,579 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 quarters ended March 29, 2021 and March 30, 2020. The interest rate swap increased interest expense by $ 2,740 and $ 1,175 for the quarters ended March 29, 2021 and March 30, 2020, respectively. 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 March 29, 2021 and December 28, 2020 was approximately $ 1,852 (Japanese Yen (JPY) 196.3 million) and $ 1,181 (JPY 125.0 million), 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 March 29, 2021 December 28, 2020 (In thousands) Cash flow derivative instruments designated as hedges: Interest rate swap Other long-term liabilities $ ( 12,579 ) $ ( 14,968 ) Cash flow derivative instruments not designated as hedges: Foreign exchange contracts Prepaid expenses and other current assets — 28 Foreign exchange contracts Other current liabilities 56 — 16 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) 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 quarters ended March 29, 2021 and March 30, 2020: Quarter Ended March 29, 2021 Quarter Ended March 30, 2020 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 $ ( 351 ) $ ( 2,740 ) $ ( 8,449 ) $ ( 1,175 ) The following table provides a summary of the activity associated with the designated cash flow hedges reflected in accumulated other comprehensive loss for the quarters ended March 29, 2021 and March 30, 2020: Quarter Ended March 29, March 30, 2021 2020 (In thousands) Beginning balance, net of tax $ ( 11,231 ) $ ( 9,617 ) Changes in fair value loss, net of tax ( 263 ) ( 6,018 ) Reclassification to earnings 2,052 860 Ending balance, net of tax $ ( 9,442 ) $ ( 14,775 ) Based on the current yield curve, the Company expects that losses of approximately $ 8,092 of the accumulated other comprehensive loss will be reclassified into the statement of operations, net of tax, in the next twelve months. (11) Accumulated Other Comprehensive Loss The following provides a summary of the components of accumulated other comprehensive loss, net of tax, as of March 29, 2021 and December 28, 2020: Foreign Currency Translation Pension Obligation (Losses) Gains on Cash Flow Hedges Total (In thousands) Ending balance as of December 28, 2020 $ ( 24,827 ) $ ( 2,855 ) $ ( 11,231 ) $ ( 38,913 ) Other comprehensive loss before reclassifications ( 3 ) — ( 263 ) ( 266 ) Amounts reclassified from accumulated other comprehensive loss — — 2,052 2,052 Other comprehensive (loss) income ( 3 ) — 1,789 1,786 Ending balance as of March 29, 2021 $ ( 24,830 ) $ ( 2,855 ) $ ( 9,442 ) $ ( 37,127 ) (12) Significant Customers and Concentration of Credit Risk In the normal course of business, the Company extends credit to its customers. 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. 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 March 29, 2021, other than one customer that accounted for approximately 13 % of the Company’s net sales, there were no other customers that accounted for 10% or more of net sales. For the quarter ended March 30, 2020, there were no customers that accounted for 10% or more of net sales. 17 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (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 March 29, 2021 and December 28, 2020 were as follows: As of As of March 29, 2021 December 28, 2020 Carrying Amount Fair Value Carrying Amount Fair Value (In thousands) Derivative assets, current $ — $ — $ 28 $ 28 Derivative liabilities, current 56 56 — — Derivative liabilities, non-current 12,579 12,579 14,968 14,968 Warrant liabilities, current 4,070 4,070 — — Senior Notes due March 2029 493,538 493,425 — — Term Loan due September 2024 402,590 406,387 402,370 407,909 Senior Notes due October 2025 — — 370,483 383,974 ABL Revolving Loans 30,000 30,000 70,000 70,000 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 warrant liabilities was valued using the Black-Scholes model with the following weighted-average assumptions: expected term of 0.25 years, expected volatility of 35 %, risk-free interest rate of 0.032 %, and expected dividend yield of 0 %. The inputs used in the warrant valuation are considered Level 3 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 March 29, 2021 and December 28, 2020, which are considered Level 2 inputs. As of March 29, 2021 and December 28, 2020, the Company’s other financial instruments 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 March 29, 2021 consisted of $ 305,841 held in the U.S., with the remaining $ 233,807 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 March 29, 2021 and December 28, 2020. However, these amounts are not material to the consolidated condensed financial statements of the Company. 18 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (15) Loss 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 quarters ended March 29, 2021 and March 30, 2020: Quarter Ended March 29, 2021 March 30, 2020 (In thousands, except per share amounts) Net loss from continuing operations $ ( 3,192 ) $ ( 3,220 ) Basic weighted average shares 106,825 105,686 Dilutive effect of performance-based restricted stock units, restricted stock units and stock options — — Diluted shares 106,825 105,686 Loss per share: Basic $ ( 0.03 ) $ ( 0.03 ) Diluted $ ( 0.03 ) $ ( 0.03 ) For the quarter ended March 29, 2021, potential shares of common stock, consisting of stock options to purchase approximately 60 shares of common stock at exercise prices ranging from $ 11.83 to $ 16.60 per share, 2,897 restricted stock units (RSUs), and 289 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. For the quarter ended March 30, 2020, potential shares of common stock, consisting of stock options to purchase approximately 100 shares of common stock at exercise prices ranging from $ 9.54 to $ 16.60 per share, 2,459 RSUs, and 216 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. Outstanding warrants for the quarters ended March 29, 2021 and March 30, 2020, 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 was greater than the average market price of common shares during the applicable quarter and because the Company incurred a net loss, and therefore, the effect 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 March 29, March 30, 2021 2020 (In thousands) Cost of goods sold $ 1,165 $ 850 Selling and marketing 646 451 General and administrative 2,355 3,477 Research and development 43 57 Stock-based compensation expense recognized $ 4,209 $ 4,835 Summary of Unrecognized Compensation Costs The following is a summary of total unrecognized compensation costs as of March 29, 2021: Unrecognized Stock-Based Compensation Cost Remaining Weighted Average Recognition Period (In thousands) (In years) RSU awards $ 17,102 1.4 PRU awards 3,974 1.4 Stock options 110 1.1 $ 21,186 19 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) (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. In fiscal 2020, subsequent to the quarter ended March 30, 2020, RF&S Components was added as a reportable segment. As a result, the Company had three reportable segments as of December 28, 2020: PCB, RF&S Components, and E-M Solutions. On April 29, 2020, the Company announced the restructuring of its E-M Solutions business unit. In prior periods, the Company’s E-M Solutions business unit consisted of three Chinese manufacturing facilities with two being in Shanghai (SH BPA and SH E-MS) and one in Shenzhen (SZ). The Company closed the SH E-MS and SZ facilities at the end of 2020 and integrated the SH BPA facility into its PCB operations. As of March 29, 2021, E-M Solutions no longer meets the criteria for segment reporting. As a result of the addition of the RF&S Components reportable segment and the restructuring of the E-M Solutions business unit, certain prior year amounts have been reclassified to conform to this new presentation. 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 March 29, 2021 March 30, 2020 (In thousands) Net Sales: PCB $ 510,486 $ 474,002 RF&S Components 12,690 9,441 Other (1) 3,256 14,203 Total net sales $ 526,432 $ 497,646 Operating Segment Loss: PCB $ 57,232 $ 60,238 RF&S Components 3,862 1,908 Corporate and Other (1) ( 30,389 ) ( 35,019 ) Total operating segment income 30,705 27,127 Amortization of definite-lived intangibles (2) ( 10,905 ) ( 10,945 ) Total operating income 19,800 16,182 Total other expense ( 24,099 ) ( 17,279 ) Loss before income taxes $ ( 4,299 ) $ ( 1,097 ) As of March 29, 2021 December 28, 2020 (In thousands) Segment Assets: PCB $ 1,549,531 $ 1,529,102 RF&S Components 225,233 227,990 Corporate and Other (1) 1,191,064 1,138,852 Total assets $ 2,965,828 $ 2,895,944 (1) Other represents SH E-MS and SZ results. (2) Amortization of definite-lived intangibles primarily relates to the PCB and RF&S Components reportable segments. For the quarters ended March 29, 2021 and March 30, 2020, $ 1,384 and $ 1,383 , 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 and divestitures. 20 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) The Company markets and sells its products in approximately 46 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 March 29, 2021 March 30, 2020 (In thousands) Net Sales: United States $ 268,467 $ 262,279 China 81,709 74,929 Other 176,256 160,438 Total net sales $ 526,432 $ 497,646 Net sales are attributed to countries by country invoiced. (18) Restructuring Charges On April 29, 2020, the Company announced the restructuring of its E-M Solutions business unit. The E-M Solutions business unit consisted of three Chinese manufacturing facilities with two being in Shanghai (SH BPA and SH E-MS) and one in Shenzhen (SZ). The Company ceased 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 Company closed the SH E-MS and SZ facilities at the end of 2020. As of March 29, 2021, the Company has incurred approximately $ 19,272 of restructuring charges and $ 6,702 of accelerated depreciation expense since the April 29, 2020 announcement. 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 quarters ended March 29, 2021 and March 30, 2020. Contract termination and other costs primarily represented plant closure costs. 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 quarters ended March 29, 2021 and March 30, 2020: Quarter Ended March 29, 2021 Employee Separation/ Severance Contract Termination and Other Costs Total (In thousands) Reportable Segment: PCB $ 342 $ 12 $ 354 Corporate and Other (1) 359 2,519 2,878 $ 701 $ 2,531 $ 3,232 Quarter Ended March 30, 2020 Employee Separation/ Severance Contract Termination and Other Costs Total (In thousands) Reportable Segment: PCB $ — $ 13 $ 13 Corporate and Other (1) 309 6 315 $ 309 $ 19 $ 328 (1) Other represents SH E-MS and SZ results. 21 TTM TECHNOLOGIES, INC. Notes to Consolidated Condensed Financial Statements—(Continued) 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 quarter ended March 29, 2021: Employee Separation/ Severance Contract Termination and Other Costs Total (In thousands) Accrued as of December 28, 2020 $ 7,063 $ 319 $ 7,382 Charged to expense 701 2,531 3,232 Amount paid ( 4,629 ) ( 2,801 ) ( 7,430 ) Accrued as of March 29, 2021 $ 3,135 $ 49 $ 3,184 22