TTM Technologies, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter ended June 28, 2021; comparisons are with the quarter ended June 29, 2020. Unless noted, amounts are in millions. The filing reports the Mobility business as discontinued operations following its 2020 sale; continuing-operations comparisons are the more useful measure of current performance.
Financial performance
| Metric | Q2 2021 | Q2 2020 | First two quarters 2021 | First two quarters 2020 |
|---|---|---|---|---|
| Net sales | $567.4 | $570.3 | $1,093.8 | $1,067.9 |
| Gross profit / margin | $99.9 / 17.6% | $100.4 / 17.6% | $181.5 / 16.6% | $181.8 / 17.0% |
| Operating income / margin | $40.9 / 7.2% | $23.0 / 4.0% | $60.7 / 5.6% | $39.2 / 3.7% |
| Continuing-operations net income | $28.3 | $9.3 | $25.1 | $6.1 |
| Diluted continuing-operations EPS | $0.26 | $0.09 | $0.23 | $0.06 |
- Q2 sales decreased 0.5%; first-half sales increased 2.4%. PCB revenue rose 3.1% in Q2 and 5.3% for the first half; RF and Specialty Components revenue rose 15.0% and 23.5%, respectively.
- Q2 gross margin was flat year over year, but first-half gross margin declined 0.4 percentage points. Management cited higher material costs, foreign exchange, and COVID-related production and labor inefficiencies. PCB shipment volume increased, while lower average selling prices per square foot, largely from product mix, partly offset growth.
- Operating income improved as general and administrative expense fell, including lower restructuring costs. First-half other expense included a $15.2 million loss from extinguishing the 2025 notes.
- Reported net income was $28.3 million in Q2 2021 versus $181.8 million in Q2 2020, and $25.1 million for the first half versus $180.6 million. The 2020 periods included substantial after-tax discontinued-operations income, principally the Mobility sale gain; these totals are not comparable indicators of continuing performance.
Cash flow, balance sheet and debt
- First-half operating cash flow from continuing operations was $98.1 million, compared with $107.4 million in the prior-year period; management attributed the decrease mainly to working-capital investment.
- Capital spending and other asset purchases were $44.6 million in the first half. Cash and equivalents were $558.3 million at June 28, 2021, up from $451.6 million at year-end. Current assets were $1,404.5 million and current liabilities $554.8 million.
- Debt carrying value, net of discount and issuance costs, was $926.5 million; principal outstanding was $935.9 million. The company issued $500 million of 4.00% notes due 2029 and used proceeds in part to retire $375 million of 2025 notes and repay $40 million drawn on the U.S. ABL. The term loan was $405.9 million and Asia ABL borrowings were $30 million.
- Available borrowing capacity, after outstanding letters of credit, was $137.8 million under the U.S. ABL and $116.5 million under the Asia ABL. The company reported compliance with debt covenants and stated it expects cash, operating cash flow, and borrowing capacity to meet anticipated needs for the next 12 months.
Outlook, commentary and risks
- Management expects 2021 capital expenditures of $80–$90 million. The filing provides no specific revenue or earnings guidance.
- Management described continuing uncertainty from COVID-19 and its potential effects on production, demand, suppliers, and logistics. It also reported rising prices and lead times for copper-clad laminates and other materials, and is pursuing customer price recovery, operating efficiencies, and supplier diversification.
- End-market trends were mixed: automotive and data-center demand supported growth, while networking/communications and medical/industrial/instrumentation were weaker in the PCB business. Asia PCB capacity utilization rose; North America utilization fell, reflecting added capacity and COVID-related inefficiencies.
- Principal disclosed risks include supply constraints and input-cost inflation, customer and end-market concentration, variable demand and capacity utilization, international and currency exposure, substantial indebtedness and covenant restrictions, and continuing pandemic effects. Aerospace and defense represented about 33% of Q2 sales; the ten largest customers represented 40% of Q2 sales.
- The company repurchased 411,000 shares for $6.1 million during the first half under a $100 million authorization; $93.9 million remained available at quarter end. Legal matters were described as ordinary-course matters with no material accrued loss, although outcomes remain uncertain.
Important facts for investors to verify
- Whether higher raw-material costs, supply lead times, and currency effects can be passed through or offset without further margin pressure.
- Whether demand growth in automotive and data-center markets can sustain volume and utilization, particularly as North American capacity expands.
- Cash conversion and working-capital trends, including growth in contract assets and inventory.
- Debt-service capacity, refinancing and interest-rate exposure, and the terms and availability of revolving credit facilities.
- The extent to which repurchases and planned capital spending remain consistent with liquidity needs and management’s stated priorities.