Business Context and Reporting Period
Company: TTM Technologies, Inc. (TTM) acquired Honeywell Advanced Circuits, Inc. (HAC), a printed circuit board manufacturer specializing in high layer counts and specialty materials.
Transaction Date: December 26, 2002
Reporting Period: The filing includes combined financial statements for HAC for the nine months ended September 30, 2002, and the years ended December 31, 2001 and 2000.
Key Customers: Cisco Systems, Sun Microsystems, IBM, Celestica, and Solectron.
Key Financial Metrics (HAC)
Note: All figures in thousands of dollars unless otherwise noted.
| Metric | 9 Months Ended Sept 30, 2002 | Year Ended Dec 31, 2001 | Year Ended Dec 31, 2000 |
|---|---|---|---|
| Total Sales | $103,928 | $232,180 | $352,036 |
| Net Income/(Loss) | $(152,376) | $(92,624) | $84 |
| Operating Loss | $(112,795) | $(82,194) | $4,541 (Income) |
| Cash Flow from Operations | $(43,041) | $(33,860) | $45,270 |
| Total Assets (Sept 30, 2002) | $85,922 | N/A | |
| Total Liabilities (Sept 30, 2002) | $63,147 | N/A |
Acquisition Cost: Purchase price of $1; total cost approximately $2 million including fees and expenses.
Material Changes and Unusual Items
- Restructuring and Exit Charges: Significant charges were recorded in 2002 ($67,957) and 2001 ($36,405) due to facility shutdowns (St. Louis Park, Hopkins, Minnetonka, Roseville, Buffalo) and workforce reductions.
- 2002 Charges: Included $48,870 in asset impairment charges and $13,308 in severance for 867 employees.
- 2001 Charges: Included $23,543 in asset impairment and $10,159 in severance for 879 employees.
- Goodwill Impairment: Upon adoption of SFAS No. 142 on January 1, 2002, HAC recorded a one-time cumulative effect charge of $35,920 to write off all goodwill.
- Revenue Decline: Sales dropped significantly from $352 million in 2000 to $104 million in the first nine months of 2002, reflecting market conditions and restructuring.
- Customer Concentration: Five customers accounted for 81.3% of sales in the first nine months of 2002.
Guidance, Outlook, and Risks
- Pro Forma Information: TTM stated it is impracticable to provide pro forma financial information at the time of filing; it will be filed by amendment within 60 days.
- Going Concern: The financial statements were prepared assuming a going concern, noting that HAC has experienced recurring losses and cash outflows, relying on significant funding from Honeywell until the sale.
- Subsequent Events: In November 2002, HAC recorded an additional $2,955 charge for the involuntary termination of approximately 200 employees.
- Contingencies: HAC is subject to various lawsuits and claims regarding product liability and environmental regulations. While amounts cannot be estimated, they could be material.
- Lease Obligations: Future minimum lease payments under operating leases total $3,589 through 2006.
Investor Verification Checklist
- Verify the final pro forma financial statements once filed by TTM to assess the impact of the acquisition on TTM's consolidated results.
- Confirm the status of the $15,000 repayment agreement with Cisco Systems regarding the capacity prepayment.
- Monitor the completion of the 2002 restructuring plan, specifically the remaining severance payments and facility closures.
- Review the valuation of the $10.6 million in assets held for sale to ensure fair value less selling costs is accurate.
- Assess the impact of the $87.3 million net operating loss carryforward and the full valuation allowance placed against deferred tax assets.