TTM Technologies, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended January 2, 2023 (52 weeks). This is an annual filing, not a standalone fourth-quarter report; the filing text does not provide a clear standalone Q4 income statement. FY2021 had 53 weeks, including an estimated $42.2 million of additional revenue and $2.5 million of additional operating income.
Business context and reporting period
TTM manufactures printed circuit boards (PCBs), RF components and assemblies, and engineered systems, serving aerospace and defense, automotive, data center computing, medical/industrial/instrumentation, and networking markets. It reported two segments: PCB and RF&S Components. Telephonics was acquired in June 2022 for $298.3 million and, after integration, was included in the PCB segment. The company had approximately 17,800 employees and about 1,500 customers.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $2,495.0 million | $2,248.7 million |
| Gross profit / margin | $458.0 million / 18.4% | $372.0 million / 16.5% |
| Operating income / margin | $210.4 million / 8.4% | $126.0 million / 5.6% |
| Net income from continuing operations | $94.6 million | $54.4 million |
| Diluted EPS | $0.91 | $0.50 |
| Operating cash flow | $272.9 million | $176.6 million |
| Capital expenditures | $97.4 million | $82.4 million |
Cash and cash equivalents were $402.7 million at year-end, down from $537.7 million. Investing cash outflow was $395.5 million, principally reflecting the Telephonics acquisition and capital spending; financing cash outflow was $11.3 million. Total debt was $935.9 million principal ($929.4 million net of discount and issuance costs), comprising $500.0 million of 4.0% notes due 2029, a $405.9 million term loan due September 2024, and $30.0 million of Asia ABL borrowings. The term loan and Asia ABL were floating-rate; the company reported 53.4% of debt at fixed rates. It prepaid $50.0 million of term-loan principal after year-end.
At January 2, 2023, current assets were $1,493.1 million and current liabilities were $761.3 million. The filing reported $134.1 million and $115.0 million of available borrowing capacity under the U.S. and Asia ABL facilities, respectively, after letters of credit. The company said cash on hand, operating cash flow, and debt availability should cover anticipated needs for the next 12 months.
Material changes versus the prior comparable period
- Revenue rose 11.0% year over year. PCB sales increased 11.5%, including $125.9 million from Telephonics; RF&S Components sales declined 2.5%.
- PCB average price per square foot increased 15.4%, mainly from mix, pricing, and premium revenue, while PCB shipment volume fell 5.6%.
- Gross margin improved by 1.9 percentage points, reflecting product mix and pricing gains, partly offset by higher labor costs. PCB capacity utilization declined to 81% in Asia and 43% in North America, from 86% and 51%, respectively.
- Operating income benefited from a $51.8 million gain on the Chinese government’s expropriation of the former Shanghai E-MS property. The $69.2 million compensation receivable was scheduled to be paid in installments through December 2023.
- Income tax expense increased to $88.3 million from $15.6 million, principally due to a larger valuation allowance on U.S. deferred tax assets, higher pretax income, and the Shanghai property gain.
- FY2022 includes Telephonics only from its June 27 acquisition date; the filing’s unaudited pro forma FY2022 sales, assuming acquisition at the start of FY2021, were $2,602.1 million.
Outlook, commentary, risks, and unusual items
- Management planned FY2023 capital expenditures of $140–$160 million. A new highly automated PCB facility in Penang, Malaysia, was expected to begin operations in late 2023; projected investment was approximately $130 million through 2025. Customer deposits and long-term agreements were expected to support over 70% of planned capacity.
- In February 2023, TTM announced planned closures of PCB operations in Anaheim, Santa Clara, and Hong Kong. It expected $22–$28 million in restructuring, impairment, and disposal costs, about 80% cash, primarily through year-end 2023.
- Management cited ongoing supply constraints, higher material and labor costs, North American hiring challenges, and potential recessionary conditions. It described supplier diversification, operating efficiency measures, and quotation adjustments as responses.
- Key exposures include economic and customer-demand volatility, concentrated customers (the five largest OEM customers represented 33% of sales), EMS-provider pricing leverage, international operations and trade tensions, China operating and regulatory risks, labor availability, and dependence on government and defense programs (35% of sales).
- Floating-rate debt creates interest risk; management estimated that a 100-basis-point rate change would alter annual interest cost by approximately $4.4 million. The term loan and Asia ABL mature in 2024, creating refinancing and repayment considerations.
- Other notable items: goodwill and definite-lived intangible assets totaled approximately $1,048.5 million, and annual testing found no goodwill impairment in 2022. The company had $20.2 million of outstanding defense-related offset commitments, some extending through 2028. No material loss was accrued for known legal matters. The auditor issued unqualified opinions on the financial statements and internal control; Telephonics, representing 5.8% of assets and 5.0% of sales, was excluded from management’s internal-control assessment.
Important facts for investors to verify
- Whether the reported margin and earnings improvement is sustainable after excluding the $51.8 million property-sale gain and acquisition-related effects.
- Cash conversion and working-capital trends, including collection of the $69.2 million property-sale receivable and the substantial contract-asset balance of $335.8 million.
- Progress integrating Telephonics, final purchase-price allocation, and its contribution to segment performance and cash generation.
- Execution, customer loading, and returns on the Penang investment, alongside the costs and operating impact of the announced facility closures.
- Plans and available financing to address 2024 term-loan and Asia ABL maturities, as well as exposure to variable rates and debt covenants.
- Developments in supply constraints, capacity utilization, labor costs, major-customer concentration, and defense-program funding.