TTM Technologies, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended January 3, 2022. This is an annual report, not a standalone fourth-quarter filing. FY2021 comprised 53 weeks; management estimates the extra week added $42.2 million of revenue and $2.5 million of operating income.
Business context
TTM manufactures printed circuit boards (PCBs), backplane assemblies, and radio-frequency (RF) and microwave components. It reports two segments: PCB and RF & Specialty Components. The company served approximately 1,600 customers across aerospace and defense, automotive, data center computing, medical/industrial/instrumentation, and networking/communications. It had approximately 16,100 employees and generated 56% of sales from non-U.S. operations.
Key financial results
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $2,248.7 million | $2,105.3 million |
| Gross profit / margin | $372.0 million / 16.5% | $359.0 million / 17.0% |
| Operating income / margin | $126.0 million / 5.6% | $28.1 million / 1.3% |
| Income (loss) from continuing operations | $54.4 million | ($16.4 million) |
| Net income | $54.4 million | $177.5 million |
| Basic / diluted EPS | $0.51 / $0.50 | $1.67 / $1.67 |
| Cash from operating activities, continuing operations | $176.6 million | $247.7 million |
| Capital expenditures | $82.0 million | $103.3 million |
FY2020 net income included $193.9 million from discontinued operations, principally the gain on sale of the Mobility business; it is not directly comparable with FY2021 continuing-operations earnings. FY2021 operating income also included the estimated $2.5 million benefit from the extra fiscal week.
Liquidity and debt: At January 3, 2022, cash and cash equivalents were $537.7 million, including $201.8 million held by foreign subsidiaries. Debt carrying value was $927.8 million (principal outstanding of $935.9 million), implying approximately $390.1 million of net debt using carrying value. Available borrowing capacity was $140.8 million under the U.S. ABL and $116.8 million under the Asia ABL; the company reported compliance with debt covenants. Total assets were $3.03 billion and stockholders’ equity was $1.46 billion.
Segments: PCB sales rose 10.4% to $2,186.9 million; segment income was $262.4 million versus $266.3 million. RF & Specialty Components sales increased 31.2% to $58.6 million, with segment income of $22.0 million versus a $56.7 million loss. Segment income is a company-defined measure before amortization of intangibles.
Material changes versus FY2020
- Total sales increased 6.8%, led by PCB shipment volume growth of 24.3%; lower average price per square foot (down 11.9%) partially offset volume growth.
- PCB gross margin fell to 16.3% from 18.1%, reflecting higher raw-material costs, unfavorable foreign exchange, production inefficiencies, and labor constraints. RF segment gross margin improved to 52.6% from 45.9% as sales increased.
- Operating income improved substantially as FY2021 had no goodwill impairment, compared with a $69.2 million impairment in FY2020, and restructuring charges declined to $4.2 million from $16.8 million.
- Interest expense declined to $45.5 million from $73.2 million, but FY2021 included a $15.2 million loss on extinguishment of debt after retiring the 2025 notes.
- Operating cash flow from continuing operations declined to $176.6 million from $247.7 million, primarily due to increased working-capital investment and the prior-year collection of Mobility-related receivables.
- Automotive, data center computing, and medical/industrial/instrumentation demand increased; aerospace and defense and networking/communications demand declined. Sales to the five largest OEM customers rose to 30% of net sales from 29%; one customer represented 10%.
Outlook, commentary, risks, and unusual items
- Management forecast FY2022 capital expenditures of $90 million to $110 million and said cash, operating cash flow, and borrowing access should cover anticipated needs for the next 12 months. The filing provides no clear numerical revenue or earnings guidance.
- Management expected supply-chain constraints and inflationary pressures to continue into 2022, and cited challenges hiring and retaining North American labor. Mitigation actions included supplier diversification, efficiency efforts, and quotation adjustments.
- Key risks include copper and other material costs, supply availability, labor shortages and wage inflation, COVID-19 disruption, tariffs and international operations, China power restrictions, customer concentration, and competitive pricing. The company also noted exposure to interest-rate changes and the transition away from LIBOR.
- FY2021 included $15.2 million of debt-extinguishment losses and $4.2 million of restructuring charges. Goodwill was $637.3 million; management’s annual qualitative test found no impairment. Legal matters were described as ordinary-course matters, with no material accrual reported.
- The company repurchased 4.7 million shares for $64.7 million in FY2021, with $35.4 million remaining under the $100 million authorization. It has not paid cash dividends and does not anticipate doing so in the foreseeable future.
Important facts for investors to verify
- Whether FY2022 sales growth and margins can withstand continued raw-material inflation, labor pressures, and the lower PCB average selling price.
- How much reported FY2021 performance reflects the additional fiscal week, and whether the 2020 discontinued-operations gain is being separated in comparisons.
- Working-capital trends, especially contract assets, which increased to $324.9 million from $273.3 million, and their conversion to billed receivables and cash.
- Debt maturities, refinancing or repayment plans for the $435.9 million scheduled in 2024, and the effect of LIBOR transition on floating-rate borrowings.
- Customer concentration, ABL availability, foreign-held cash accessibility, and the assumptions supporting the carrying value of goodwill and intangible assets.