2 0 1 4 A N N U A L R E P O R T
GLO BAL PRESE NC E
LOCAL KNOWLEDG E
LETTER TO OUR SHAREHOLDERS
DEAR SHAREHOLDERS,
2014 represented a transformative year for TTM Technologies.
While we faced challenging market conditions in the first two
quarters, we finished the year with two quarters of strong year-
over-year profitability gains. More importantly, we took another
major strategic step forward with the announcement of our
pending acquisition of Viasystems Group, Inc. Viasystems will
bring TTM meaningful strength in the automotive end market and
will complement our position in other end markets, enabling us to
continue to broaden our product portfolio to address an increasingly
diverse set of end markets. We look forward to welcoming the
employees of Viasystems to the TTM family later in 2015.
While we announced the transformative Viasystems acquisition
in September, we kept our focus and maintained our unwavering
commitment to improving operating efficiency throughout the
year. At TTM, we continue to focus on disciplined operational
execution as we pursue our mission of “industry leading growth
and profitability with an unwavering value system built upon
honesty, integrity, performance and clear communication.”
Overall, the first and second quarters were particularly challenging
due in large part to soft demand in the cellular phone market. As the
year progressed, however, our cellular phone business shifted into
high gear, thereby allowing us to increase the revenue contribution
from our advanced technology work which includes advanced High
Density Interconnect (HDI), rigid-flex and substrate. We exited the
year with advanced technology work accounting for approximately
51 percent of the company’s total fourth quarter revenue, up from
49 percent at the end of 2013. Despite the demands of this second
half surge in advanced technology work, our customer satisfaction
remained at a high level due to our success in delivering quality
product, on time during this critical period.
While our sales remained relatively flat in 2014, we saw a marked
shift in several of our end markets:
(cid:114) The networking/communications end market represented 33
percent of sales which was roughly flat with the prior year despite
the loss of approximately $47.2 million of revenue related to the
divestiture of our SYE facility in 2013. Breaking down this end
market, the telecommunications area enjoyed strong growth during
the year driven by base station demand tied to the initial phases
of the 4G roll-out in China. Networking, by contrast, was softer
after a strong 2013 year, as slowing emerging market demand
impacted our customers. Operationally, we continued to focus
on improving our prototyping and pilot production capabilities
for advanced high layer count conventional printed circuit boards
(PCBs) with the addition of a new plating line in our Chippewa
Falls, Wisconsin facility and the successful transfer of volume
production requirements to our plant in Dongguan, China.
(cid:114) We made substantial progress in our cellular phone end market,
which grew over 10 percent from 2013 and represented 23
percent of our sales in 2014. We achieved this sales growth
despite market headwinds in the first half of the year due to lower
follow-on sales after the 2013 holiday season. As we moved into
the second half of the year, we were encouraged by a significant
improvement in demand for the most recent generation of 4G
enabled smartphones which allowed us to finish 2014 with strong
third and fourth quarter performance.
(cid:114) The computing end market continued to be a challenging area
for TTM. We saw revenue dip by 32 percent from 2013 and
this end market represented 13 percent of 2014 sales as customer
allocation strategies tilted our advanced technology capacity
away from tablets and toward smartphones. In addition, we
deliberately moved away from less profitable commodity server
requirements for conventional PCBs in favor of more profitable
networking and communications requirements.
(cid:114) The medical, industrial, instrumentation (MII) end market
continues to be an area of promise for both conventional and
advanced technology PCBs. We increased our MII sales by
12 percent, representing 9 percent of 2014 revenue as a result
of strong performance in the medical and semiconductor test
equipment sectors.
(cid:114) Finally, our “other” end market category was 6 percent of sales
compared to 5 percent in 2013. We increased sales in the
automotive sector by 5 percent over the prior year. With the
pending Viasystems acquisition, we expect further growth in this
area as we combine Viasystems’ established position in the core
automotive applications related to engine controls, sensors and
safety systems with TTM’s advanced technology capabilities.
In terms of overall execution, we made progress on several of the
critical 2014 initiatives which we outlined to investors at the
beginning of the year. Our teams did an excellent job of sharing best
practices across our global footprint, particularly in the networking
and communications end market where our Dongguan facility
benefited from multiple critical qualifications and demonstrated
strong yield performance with assistance from our global
development team. We also made progress in our prototyping
process with a goal of improving our time-to-ramp and yield for
new products. As a result of this initiative, we experienced lower
scrap rates at several key facilities that led to important qualifications
with a strategic smartphone customer. Finally, we were able to
make substantial progress in expanding our advanced technologies
into a more diverse set of markets with the goal of ensuring a more
consistent utilization level in our Asia Pacific facilities throughout the
year. In 2014, approximately 35 percent of our advanced technology
revenue was generated from end markets other than cellular phone
and computing, an increase of 6 percent from the prior year.
2014 FINANCIAL RESULTS
Net sales for fiscal year 2014 decreased to $1.33 billion from $1.37
billion in fiscal year 2013. Non-GAAP gross margin was 14.8 percent
compared to 16.0 percent in 2013.1 Adjusted EBITDA for fiscal year
2014 was $166.0 million, or 12.5 percent of net sales, compared to
$181.3 million, or 13.3 percent of net sales, for fiscal year 2013. Our
operating performance in 2014 was impacted by challenging industry
conditions in the first half of 2014 and a power outage in the third
quarter, both of which are not expected to repeat in 2015.
We maintained our solid balance sheet, with cash and cash equivalents
at the end of 2014 totaling $279 million. We increased our cash
flow from operations during 2014, generating $131 million in total
adjusted operating cash flow for the year compared to $99 million
in 2013.2 We invested a total of $109 million in 2014 in capital
spending while new purchases were approximately $70 million.
Similarly, in 2015 we expect our cash capital expenditures will be
approximately $100 million with new purchases of approximately
$70 million, indicating future cash capital expenditures will decline
as much of our advanced technology infrastructure is now in place.
THE VIASYSTEMS ACQUISITION
In September of 2014, we announced the definitive agreement to
acquire Viasystems. We are very excited about the potential strategic
and financial benefits of this combination. Over the last several years
we have been focused on leveraging our global footprint, expanding
the end markets we serve and diversifying our customer base. When
the opportunity to combine with Viasystems emerged, we saw a clear
path to accelerate our strategy to diversify our business and reduce
the impact of seasonality while bringing new growth opportunities to
our advanced technology facilities. We believe that this combination
will create an industry leader with the ability to deliver expanded
capabilities from a broad global footprint to reach more customers
and end markets.
Subject to regulatory approval, we expect to close the acquisition
in the first half of 2015. Once complete, we will begin to move
forward on four key strategic components of the acquisition.
First, the combination will reinforce our position as one of the
largest and most diversified global PCB manufacturers with a broad
technical skillset and the ability to support our customers’ product
lifecycles from R&D through production anywhere in the world.
The combined company will have substantial resources to invest in
systems and infrastructure to support our large and growing global
customer base.
Second, TTM’s market position and customer base will become
even more diverse as a result of this combination. In particular, we
expect sales from the automotive segment, already an area which
has been increasing for TTM, to gain further momentum due to
Viasystems’ established position in the core automotive applications
related to engine controls, sensors and safety systems. We are looking
forward to combining TTM’s advanced technology capabilities
with Viasystems’ market access to improve our positioning in this
growth market. Furthermore, Viasystems will bring complementary
businesses to TTM in the MII, networking/communications and
aerospace and defense end markets. This diverse market exposure
will aid in reducing the impact of seasonality inherent to the
cellular phone end market.
Third, we expect that this combination will be accretive to TTM’s
non-GAAP earnings per share in the first year following the closing
as we combine over $55 million in annual run rate synergies with the
already strong cash flow and earnings generation capability of the
combined company.
Finally, we are tremendously excited about the management and
technical depth of the combined company. This additional depth
will position us to better service our customers around the globe
through our combined footprint.
2015 OUTLOOK
Heading into 2015, we are enthusiastic about the opportunities to
grow the business. The following are the key areas that we will be
focused on in 2015:
(cid:114) First and foremost, we will be working with the Viasystems
management team to plan for a successful “day one” after closing
our transaction, which will allow the combined company to
deliver earnings accretion to our investors in the first year while
achieving critical integration milestones.
(cid:114) Second, we will continue to focus on expanding the sales of our
advanced technology capabilities into opportunities beyond
the cellular phone and computing end markets, particularly in
automotive, networking/communications and MII.
(cid:114) Finally, we will continue to improve our operational performance
through the sharing of best practices across our footprint with a
focus on improving scrap rates, on-time delivery and reducing costs.
In closing, we wish to thank our many dedicated employees for their
hard work this past year. We also greatly appreciate our shareholders,
customers and suppliers for their ongoing commitment, loyalty and
support. We remain committed to our core values of being customer-
driven, profit-focused, cost-disciplined and growth-oriented.
Thomas T. Edman
President and Chief Executive Officer
Robert E. Klatell
Chairman of the Board
1 A reconciliation of the non-GAAP financial measures to their related GAAP financial measures can be found in the Company’s fourth quarter and year end press release dated February 4, 2015.
2 Adjusted cash flow from operations adds back to cash flow from operations disbursements associated with the repurchase of our 2015 convertible notes of $27.7 million in 2013 and $1.3 million in 2014.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2014
Commission file number 0-31285
TTM TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
1665 Scenic Avenue Suite 250,
Costa Mesa, California
(Address of Principal Executive Offices)
91-1033443
(I.R.S. Employer
Identification No.)
92626
(Zip Code)
(714) 327-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, $0.001 par value
Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ‘ No Í
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes ‘ No Í
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
the past
90 days. Yes Í No ‘
to such filing requirements
for
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes Í No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Í
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ‘
Accelerated filer Í Non-accelerated filer ‘ Smaller reporting company ‘
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant
Act). Yes ‘ No Í
is a shell company (as defined in Rule 12b-2 of the
The aggregate market value of Common Stock held by non-affiliates of the registrant (based on the closing price
of the registrant’s Common Stock as reported on the Nasdaq Global Select Market on June 30, 2014, the last business
day of the most recently completed second fiscal quarter), was $450,468,386. For purposes of this computation, all
officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates of the registrant. Such
determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in
fact, affiliates of the registrant.
As of February 23, 2015, there were outstanding 83,624,804 shares of the registrant’s Common Stock, $0.001 par
value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 2015 Annual Meeting of Stockholders are
incorporated by reference into Part III of this report. Such Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
TTM TECHNOLOGIES, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
ITEM 1.
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1B. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2.
ITEM 3.
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 4. MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
ITEM 9.
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9B. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . . . . . . .
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
ITEM 14.
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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15
36
37
38
38
39
41
43
56
58
59
59
60
60
60
60
60
60
61
66
67
2
PART I
Statement Regarding Forward-Looking Statements
This report on Form 10-K contains forward-looking statements regarding future events or our future
financial and operational performance. Forward-looking statements include statements regarding markets for
our products; trends in net sales, gross profits and estimated expense levels; liquidity and anticipated cash needs
and availability; and any statement that contains the words “anticipate,” “believe,” “plan,” “forecast,”
“foresee,” “estimate,” “project,” “expect,” “seek,” “target,” “intend,” “goal” and other similar expressions.
The forward-looking statements included in this report reflect our current expectations and beliefs, and we do
not undertake publicly to update or revise these statements, even if experience or future changes make it clear
that any projected results expressed in this annual report or future quarterly reports to stockholders, press
releases or company statements will not be realized. In addition, the inclusion of any statement in this report
does not constitute an admission by us that the events or circumstances described in such statement are material.
Furthermore, we wish to caution and advise readers that these statements are based on assumptions that may not
materialize and may involve risks and uncertainties, many of which are beyond our control, that could cause
actual events or performance to differ materially from those contained or implied in these forward-looking
statements. These risks and uncertainties include the business and economic risks described in “Item 1A — Risk
Factors”.
Unless otherwise indicated or unless the context requires otherwise, all references in this document to
“TTM,” “our company,” “we,” “us,” “our,” and similar names refer to TTM Technologies, Inc. and its
subsidiaries.
ITEM 1. BUSINESS
General
We are a leading global provider of time-critical and technologically complex printed circuit board (PCB)
products and backplane assemblies (i.e., PCBs populated with electronic components), which serve as the
foundation of sophisticated electronic products. We are the largest PCB manufacturer in North America and one
of the largest PCB manufacturers in the world, in each case based on revenue, according to the 2012 and 2013
rankings from N.T. Information LTD (NTI), respectively. In 2014 we generated $1.3 billion in net sales and
ended the year with 16,857 employees worldwide. We operate a total of 13 specialized facilities in the United
States and the People’s Republic of China (China). We focus on providing time-to-market and advanced
technology products and offer a one-stop manufacturing solution to our customers from engineering support to
prototype development through final volume production. This one-stop manufacturing solution allows us to align
technology development with the diverse needs of our customers and to enable them to reduce the time required
to develop new products and bring them to market. We serve a diversified customer base consisting of
approximately 1,000 customers in various markets throughout the world, including manufacturers of networking/
communications infrastructure products, smartphones, and touchscreen tablets, as well as the aerospace and
defense, high-end computing, and industrial/medical industries. Our customers include both original equipment
manufacturers (OEMs) and electronic manufacturing services (EMS) providers.
We manage our worldwide operations based on two geographic operating segments: (1) Asia Pacific, which
consists of five PCB fabrication plants, and (2) North America, which consists of seven domestic PCB
fabrication plants, including a facility that provides follow-on value-added services primarily for one of the PCB
fabrication plants, and one backplane assembly plant in Shanghai, China, which is managed in conjunction with
our U.S. operations. Each segment operates predominantly in the same industry with production facilities that
produce customized products for our customers and use similar means of product distribution.
Acquisition of Viasystems Group, Inc.
On September 21, 2014, TTM, Viasystems Group, Inc. (Viasystems), and Vector Acquisition Corp. (Merger
Sub) entered into an Agreement and Plan of Merger (the Merger Agreement) under which, subject to the
satisfaction of certain conditions, we expect to acquire all outstanding shares of Viasystems (the Merger) for a
combined consideration of $11.33 in cash and 0.706 shares of TTM common stock per outstanding share of
3
Viasystems common stock, which based on the closing market price on December 31, 2014 was valued at $16.65
per share of Viasystems common stock, or approximately $361.7 million. The total purchase price of the
transaction, including debt assumed, is approximately $992.5 million, which is based on the closing market price
on December 31, 2014 and is subject to change prior to the consummation of the Merger.
Viasystems is a worldwide provider of complex multi-layer rigid, flexible, and rigid-flex PCBs and electro-
mechanical solutions (E-M Solutions). Viasystems’ products are found in a wide variety of commercial products,
including automotive engine controls, hybrid converters, automotive electronics for navigation, safety, and
entertainment,
telecommunications switching equipment, data networking equipment, computer storage
equipment, semiconductor test equipment, wind and solar energy applications, off-shore drilling equipment,
communications applications, flight control systems, and complex industrial, medical, and other technical
instruments. Viasystems’ E-M Solutions services can be bundled with its PCBs to provide an integrated solution
to customers. Viasystems operates 15 manufacturing facilities worldwide: eight in the United States, five in
China, one in Canada, and one in Mexico. Viasystems serves a diversified customer base of over 1,000 customers
in various markets throughout the world.
The Merger Agreement provides that Viasystems is entitled to receive a reverse breakup fee of $40 million
from us in the event that the Merger Agreement is terminated following specific conditions.
Since the public announcement on September 22, 2014 of the execution of the Merger Agreement, TTM,
Viasystems, Merger Sub, and the members of the Viasystems board of directors (the Viasystems Board) have
been named as defendants in two putative class action complaints challenging the Merger. The first lawsuit, filed
in the Circuit Court of St. Louis County, Missouri on September 30, 2014 (the Missouri Lawsuit), and the second
lawsuit, filed in the Court of Chancery of the State of Delaware on October 13, 2014 (the Delaware Lawsuit and,
together with the Missouri Lawsuit, the Lawsuits), generally allege that the Merger fails to properly value
Viasystems, that the individual defendants breached their fiduciary duties in approving the Merger Agreement,
and that those breaches were aided and abetted by TTM, Merger Sub, and Viasystems. On January 6, 2015, the
parties to the Missouri Lawsuit entered into a Memorandum of Understanding (MOU) with respect to a proposed
settlement that will terminate both Lawsuits upon entry of the final judgment. The parties are in the process of
negotiating this settlement agreement. Pursuant to the MOU, the settlement agreement will provide for payment
of attorneys’ fees and reimbursement of expenses, and releases of all claims and relief sought in both Lawsuits.
For additional information, see “Item 3. Legal Proceedings.”
Industry Overview
PCBs are manufactured in panels from sheets of laminated material. Each panel is typically subdivided into
multiple PCBs, each consisting of a pattern of electrical circuitry etched from copper to provide an electrical
connection between the components mounted to it. PCBs serve as the foundation for virtually all electronic
products, ranging from consumer electronics products (such as cameras, smartphones, and touchscreen tablets) to
high-end commercial electronic equipment (such as medical instruments, data communications equipment and
servers) and aerospace and defense electronic systems.
Traditionally, consumer electronics products utilized commodity-type PCBs with lower layer counts, less
complexity, and larger production runs. However, recent advances in consumer electronics products are driving a
transition to more complex PCBs. High-end commercial equipment and aerospace and defense products typically
require customized, multilayer PCBs using advanced technologies. Most high-end commercial and aerospace and
defense end markets have low volume requirements that demand a highly flexible manufacturing environment.
In recent years, the demand for smaller sized electronic devices with more features and functionality has
been increasing. Products designed to offer faster data transmission, thinner and more lightweight packaging, and
reduced power consumption generally require increasingly complex PCBs to meet these criteria. By using High
Density Interconnect (HDI) technology, circuit densities can be increased, thereby providing for smaller products
with higher packaging densities. Furthermore, flexible circuits technology, which includes flexible circuits, rigid-
flex circuits, flex assemblies, and substrate PCBs, can be found in small and lightweight end products, such as
smartphones and touchscreen tablets and increasingly in other end markets such as automotive, medical, and
aerospace and defense. We collectively refer to these new technologies as “advanced technologies,” and they
have growth rates higher than conventional technologies.
4
According to estimates in a November 2014 report by Prismark Partners LLC (Prismark Partners),
worldwide demand for PCBs was approximately $57.5 billion in 2014, and worldwide PCB revenue is expected
to increase at a rate of 2.7% in 2015. Of the worldwide demand for production in 2014, the Americas accounted
for approximately 5% (approximately $3 billion), China accounted for approximately 46% (approximately
$26.3 billion), and the rest of the world accounted for approximately 49% (approximately $28.2 billion),
according to estimates by Prismark Partners. While Prismark Partners expects long-term growth to occur in all
PCB technologies, they forecast more robust growth in the HDI, flex and substrate segments. This growth
expectation stems from the increase in the number of applications that can utilize, and in many cases require,
smaller, denser interconnects.
The PCB manufacturing business is highly fragmented. According to a report by NTI, a PCB industry
research firm, there were approximately 2,800 PCB manufacturers worldwide at the end of the first half of 2014,
with the top 20 companies representing approximately 45% of the global market (by revenue) in 2013. As a
result of global economic trends, the number of PCB producers operating in China has increased significantly
since 2000. This corresponds with a significant decline in the number of North American and European PCB
producers during the same time period.
Industry Trends
We believe that several trends are impacting the PCB manufacturing industry. These trends include:
Shorter electronic product life cycles. Rapid advances in technology have shortened the life cycles of
complex commercial electronic products, placing greater pressure on OEMs to quickly bring new products to
market. The accelerated time-to-market and ramp-to-volume needs of OEMs for high-end commercial equipment
create opportunities for PCB manufacturers that can offer engineering support in the prototype stage and
manufacturing scalability throughout the production life cycle.
Increasing complexity of electronic products. OEMs continue to design higher performance electronic
products which take advantage of advances in semiconductor technology. In turn, this requires technologically
complex PCBs that can accommodate higher speeds and component densities, including HDI, flexible, and
substrate PCBs. These complex PCBs can require very high layer counts, miniaturized circuit connections,
advanced manufacturing processes and materials, and high-mix production capabilities, which involve
processing small lots in a flexible manufacturing environment.
Increasing concentration of global PCB production in Asia.
In recent years, many electronics
manufacturers have moved their commercial production to Asia to take advantage of its large and relatively
lower cost labor pool and well-developed electronics infrastructure. In particular, the trend has favored China,
which is expected to have the largest PCB market in terms of revenue in 2015 according to NTI. In addition,
China has emerged as a global production center for cellular phones, smartphones,
touchscreen tablets,
computers and computer peripherals, and high-end consumer electronics. According to Prismark Partners,
approximately 91% of the world’s PCB production for 2014 was forecast to come from Asia, in part due to
proximity to the region’s expansive electronic manufacturing operations. We believe that the expected continued
concentration of consumer electronic production in China should result in additional commercial market share
potential for PCB manufacturers with a strong presence and reputation in China.
Decreased reliance on multiple PCB manufacturers by commercial OEMs. Commercial OEMs
traditionally have relied on multiple PCB manufacturers to provide different services as an electronic product
progresses through its life cycle. The physical transfer of a product among different PCB manufacturers often
results in increased costs and inefficiencies due to potentially incompatible technologies and manufacturing
processes, which results in production delays. In addition, commercial OEMs generally find it easier and less
costly to manage fewer PCB manufacturers. As a result, commercial OEMs are reducing the number of PCB
manufacturers and backplane assembly service providers on which they rely, presenting an opportunity for those
that can offer one-stop manufacturing capabilities — from prototype to volume production.
5
Our Strategy
Our goal is to be the leading global provider of time-critical, one-stop manufacturing services for highly
complex PCBs. Our core strategy includes the following elements:
Maintain our customer-driven culture. Our customer-oriented culture is designed to achieve
extraordinary service, competitive differentiation, and superior execution. Our customer-oriented strategies
include engaging in co-development of new products, capturing new technology products for next generation
equipment, and continuing to invest in and enhance our broad offering of PCB technologies. Our ability to
anticipate and meet customers’ needs is critical to retaining existing customers and attracting leading companies
as new customers.
Drive operational efficiency and productivity. We are constantly focused on improving our operational
execution to increase efficiency, productivity and yields. We strongly believe in the benefits of sharing best
practices across our extensive manufacturing footprint and rely on stringent goals for throughput, quality and
customer satisfaction to measure our effectiveness. The fast paced nature of our business requires a disciplined
approach to manufacturing that is rooted in continuous improvement.
Accelerate customer and end market diversification through strategic mergers and acquisitions. TTM
has a history of successful acquisitions that have been key to our growth and profitability. We continuously look
for strategic opportunities that could facilitate our efforts to diversify into other growing end markets including
automotive and medical/industrial/instrumentation end markets. As discussed above, our proposed acquisition of
Viasystems would contribute to our ongoing diversification efforts.
Expand advanced technologies to differentiate our operations. With rising requirements for faster data
transmission, shrinking features (i.e., lightweight and thin), and lower power consumption, many PCB designs
have migrated to more complex HDI PCBs from conventional multi-layer PCB technologies. This is especially
true for PCBs used in portable devices such as smartphones and touchscreen tablets and is an increasing trend in
other end markets, such as automotive, networking/communications, industrial, and aerospace and defense. We
intend to continue to address the growing demand for complex PCBs by delivering time critical and highly
complex solutions to our customers. We manufacture PCBs with layer counts in excess of 30 layers, and we
believe that our HDI, flex, rigid-flex, substrate, and other high technology capabilities provide an attractive
market position for our company. As a leading manufacturer, we intend to continue to invest in advanced
technologies and the use of best practices across our global footprint in order to further reduce our delivery times,
improve quality, increase yields, and decrease costs.
Address customer needs in all stages of the product life cycle. By providing a one-stop solution, we work
to service our customers’ needs from the earliest stages of product development through volume production. We
believe that by servicing our customers early in the development process, we are able to demonstrate our
capabilities and establish an incumbent position early in the product development cycle, which translates into
additional opportunities as our customers move into volume production. Our expertise is enhanced by our ability
to deliver highly complex PCBs to customers in significantly compressed lead times. This rapid delivery service
enables OEMs to develop sophisticated electronic products more quickly and reduce their time to market.
Deliver strong financial performance and delever the balance sheet. Our strategy is to be a company that
delivers industry-leading financial performance. We expect to achieve this by servicing our customers’ needs in
higher-growth end markets — meeting their product needs in a cost-efficient and effective manner. We believe
that this strategy will allow us to generate strong cash flows which will enable us to reduce financial leverage
while at the same time providing us with the financial flexibility to continue to invest in our business.
Products and Services
We offer a wide range of PCB products, including HDI PCBs, conventional PCBs, flexible PCBs, rigid-flex
PCBs, backplane assemblies, and IC substrates. We also offer certain value-added services to support our
customers’ needs. These include design for manufacturability (DFM) support during new product introduction
stages; PCB layout design; simulation and testing services; QTA production; and drilling and routing services.
By providing these value-added services to customers, we are able to provide our customers with a “one-stop”
manufacturing solution, which enhances our relationships with our customers.
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Conventional PCBs
A conventional PCB is a board containing a pattern of conducting material, such as copper, which becomes
an electrical circuit when electrical components are attached to it. It is the basic platform used to interconnect
electronic components and can be found in most electronic products, including computers and computer
peripherals, communications equipment, cellular phones, high-end consumer electronics, automotive components
and medical and industrial equipment. Conventional PCBs are more product-specific than other electronic
components because generally they are unique for a specific electronic device or appliance. Conventional PCBs
can be classified as single-sided, double-sided and multi-layer boards.
A multi-layer PCB can accommodate more complex circuitry than a double-sided PCB. It has more than
two copper circuit layers with pieces of laminate bonded by resin between layers. Multi-layer PCBs require more
sophisticated production techniques compared to single and double-sided PCBs, as, among other things, they
require high precision manufacturing and more stringent product quality. The number of layers comprising a
PCB generally increases with the complexity of the end product. For example, a simple consumer device such as
a garage door controller may use a single-sided or double-sided PCB, while a high-end network router or
computer server may use a PCB with 20 layers or more.
High density interconnect or HDI PCBs
Our North America and Asia Pacific operating segments produce HDI PCBs, which are PCBs with higher
interconnect density per unit area requiring more sophisticated technology and manufacturing processes for their
production than conventional PCB products. HDI PCBs are boards with high-density characteristics including
micro-sized holes, or microvias (diameter at or less than 0.15 mm), fine lines (circuit line width and spacing at or
less than 0.075 mm) and can be constructed with thin high performance materials, thereby enabling more
interconnection functions per unit area. HDI PCBs generally are manufactured using a sequential build-up
process in which circuitry is formed in the PCB one layer at a time through successive drilling, plating and
lamination cycles. In general, a board’s complexity is a function of interconnect and circuit density, layer count,
laminate material type and surface finishes. As electronic devices have become smaller and more portable with
higher functionality, demand for advanced HDI PCB products has increased dramatically. We define advanced
HDI PCBs as those having more than one layer of microvia interconnection structure.
Flexible PCBs
Flexible PCBs are printed circuits produced on a flexible laminate, allowing it to be folded or bent to fit the
available space or allow relative movement. We manufacture circuits on flexible substrates that can be installed
in three-dimensional applications for electronic packaging systems. Use of flexible circuitry can enable improved
reliability, improved electrical performance, reduced weight and reduced assembly costs when compared with
traditional wire harness or ribbon cable packaging. Flexible PCBs can provide flexible electronic connectivity of
an electrical device’s apparatus such as printer heads, cameras, camcorders, TVs, mobile handsets, and
touchscreen tablets. For some of our flexible PCB customers we also assemble components onto the flexible
PCBs we manufacture.
Rigid-flex PCBs
Rigid-flex circuitry provides a simple means to integrate multiple PCB assemblies and other elements such
as display,
input or storage devices without wires, cables or connectors, replacing them with thin, light
composites that integrate wiring in ultra-thin, flexible ribbons between sections. In rigid-flex packaging, a
flexible circuit substrate provides a backbone of wiring with rigid multilayer circuit sections built up as modules
where needed.
Since the ribbons can be bent or folded, rigid-flex provides a means to compactly package electronics in
three dimensions with dynamic or static bending functions as required, enabling miniaturization and thinness of
product design. The simplicity of rigid-flex integration also generally reduces the number of parts required,
which can improve reliability. The increasing popularity of mobile electronics coupled with the design trend of
developing increasingly thinner, lighter and more feature-rich products is expected to further drive growth in the
rigid-flex and flex sector, where these PCBs are the backbone of miniaturization.
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Rigid-flex technology is essential to a broad range of applications including aerospace, industrial and
transportation systems requiring high reliability; hand-held and wearable electronics such as mobile phones,
video cameras and music players where thinness and mechanical articulation are essential; and ultra-miniaturized
products such as headsets, medical
implants and semiconductor packaging where size and reliability are
paramount.
Backplane assemblies
A backplane is an interconnecting device that has circuitry and connectors into which PCBs or other
additional electronic devices can be plugged. In a computer, these may be referred to as a “motherboard”. The
manufacture of backplane assemblies involves mounting various electronic components to large PCBs.
Components include, but are not limited to, connectors, capacitors, resistors, diodes, integrated circuits, hardware
and a variety of other parts. We can assemble backplanes and sub-systems and provide full system integration of
backplane assemblies, cabling, power, thermal, and other complex electromechanical parts into chassis and other
enclosures. In addition to assembly services, we provide inspection and testing services such as automated
optical inspection (AOI) and X-ray inspection to ensure that all components have been properly placed and
electrical circuits are complete. Our focus is to provide backplane and sub-system assembly products primarily as
an extension of our commercial and aerospace and defense PCB offerings.
IC substrates
IC substrates are mounts that are used to connect very small ICs (integrated circuits or semiconductors) to
comparatively larger PCBs for assembly into electronic end products such as memory modules, cellular phones,
digital cameras, automotive GPS and engine controls. IC substrates, also known as IC carriers, are highly
miniaturized circuits manufactured by a process largely similar to that for PCBs but requiring the use of ultra-
thin materials and including micron-scale features, as they must bridge the gap between sub-micron IC features
and millimeter scale PCBs. Consequently, IC substrates are generally manufactured in a semiconductor-grade
clean room environment to ensure products are free of defects and contamination.
IC substrates are a basic component of IC packages which, combined with other electronic components in
an assembly, control functions of an electronic appliance. IC packages can be broadly divided into single chip
modules (or SCMs) and multi-chip modules (or MCMs), with the former containing one IC chip, and the latter
containing multiple chips and other electronic components.
Quick turnaround services
We refer to our rapid delivery services as “quick turnaround” or “QTA”, because we provide custom-
fabricated PCBs to our customers within as little as 24 hours to ten days. As a result of our ability to rapidly and
reliably respond to the critical time requirements of our customers, we generally receive premium pricing for our
QTA services as compared to standard lead time prices.
• Prototype production.
In the design, testing, and launch phase of a new electronic product’s life cycle,
our customers typically require limited quantities of PCBs in a very short period of time. We satisfy this
need by manufacturing prototype PCBs in small quantities, with delivery times ranging from as little as
24 hours to ten days.
• Ramp-to-volume production. After a product has successfully completed the prototype phase, our
customers introduce the product to the market and require larger quantities of PCBs in a short period of
time. This transition stage between low-volume prototype production and volume production is known as
ramp-to-volume. Our ramp-to-volume services typically include manufacturing up to a few hundred PCBs
per order with delivery times ranging from five to 15 days.
RF and microwave circuits
We have the ability to produce and test specialized circuits used in radio-frequency or microwave emission
and collection applications. These products are typically used for radar, transmit/receive antennas and similar
wireless applications. Markets for these products include defense, avionics, satellite, and commercial. The
8
manufacture of these products requires advanced materials, equipment, and methods that are highly specialized
and distinct from conventional printed circuit manufacturing techniques. We also offer specialized radio-
frequency assembly and test services.
Thermal management
Increased component density on circuit boards often requires improved thermal dissipation to reduce
operating temperatures. We have the ability to produce printed circuits with heavy copper cores. In addition, we
produce printed circuit boards with electrically passive heat sinks laminated externally on a circuit board or
between two circuit boards, as well as printed circuit boards with electrically active thermal cores.
Manufacturing Technologies
The market for our products is characterized by rapidly evolving technology. In recent years, the trend in the
electronic products industry has been to increase the speed, complexity, and performance of components while
reducing their size. We believe our technological capabilities allow us to address the needs of manufacturers to
bring complicated electronic products to market faster.
To manufacture PCBs, we generally receive circuit designs directly from our customers in the form of
computer data files, which we review to ensure data accuracy and product manufacturability. Processing these
computer files with computer aided manufacturing (CAM) technology, we generate images of the circuit patterns
that we then physically develop on individual layers, using advanced photographic processes. Through a variety
of plating and etching processes, we selectively add and remove conductive materials to form horizontal layers of
thin circuitry, which are separated by electrical insulating material. A multilayer circuit board is produced by
laminating together multiple layers of circuitry, using intense heat and pressure under vacuum. Vertical
connections between layers are achieved by drilling and plating through small holes, called vias. Vias are made
by highly specialized drilling equipment capable of achieving extremely fine tolerances with high accuracy. We
specialize in high layer count PCBs with extremely fine geometries and tolerances. Because of the tolerances
involved, we employ clean rooms in certain manufacturing processes where tiny particles might otherwise create
defects on the circuit patterns. We also use automated optical inspection systems and electrical testing systems to
ensure consistent quality of the circuits we produce.
We believe that our highly specialized equipment and advanced manufacturing processes enable us to
reliably produce PCBs with the following characteristics:
• High layer count. Manufacturing PCBs with a large number of layers is difficult to accomplish due to the
accumulation of manufacturing tolerances and registration systems required. In our North America operating
segment, we regularly manufacture PCBs with more than 30 layers on a quick-turn and volume basis.
Approximately 64% of our 2014 North America PCB revenue involved the manufacture of PCBs with at least
12 layers or more, compared to 66% in 2013. Printed circuit boards with at least 20 layers or more represented
36% of North America PCB revenue in both 2014 and 2013. Approximately 25% and 24% of our 2014 and
2013 Asia Pacific net sales, respectively, involved the manufacture of PCBs with at least 12 layers or more.
• Blind and buried vias. Vias are drilled holes that provide electrical connectivity between layers of
circuitry in a PCB. Blind vias connect the surface layer of the PCB to an internal layer and terminate at the
internal layer. Buried vias are holes that do not reach either surface of the PCB but allow inner layers to be
interconnected. Products with blind and buried vias can be made thinner, smaller, lighter and with higher
component density and more functionality than products with traditional vias.
• Microvias. HDI technology utilizes microvias, which are small vias with diameters generally less than
0.005 inches after plating. Advanced HDI products may also require the microvias to be fully filled using
a specialized plating process so that additional microvia structures can be stacked on top to form more
complex interconnections. These microvias consume much less space on the layers they interconnect,
thereby providing for greater wiring densities and flexibility, and also providing closer spacing of
components and their attachment pads. The fabrication of PCBs with microvias requires specialized
equipment, such as laser drills, and highly developed process knowledge. Applications such as handheld
wireless devices employ microvias to obtain a higher degree of functionality from a given surface area.
Total HDI PCBs represented approximately 41% of our Asia Pacific net sales in both 2014 and 2013.
9
• Embedded passives. Embedded passive technology involves embedding either the capacitive or resistive
elements inside the PCB, which allows for removal of passive components from the surface of the PCB
and thereby leaves more surface area for active components. Use of this technology provides greater
surface area for surface-mounted ICs and better signal performance, as well as increased functionality of
products with higher component density.
• Fine line traces and spaces. Traces are the connecting copper lines between the different components of
the PCB, and spaces are the distances between traces. The smaller the traces and the tighter the spaces, the
higher the density on the PCB and the greater the expertise required to achieve a desired final yield on an
order. We are able to manufacture PCBs with traces and spaces less than 0.002 inches.
• High aspect ratios. The aspect ratio is the ratio between the thickness of the PCB and the diameter of a
drilled hole. As the aspect ratio increases, it becomes difficult to reliably form, electroplate and finish all
the holes on a PCB. In production, we are able to provide aspect ratios of up to 30:1.
• Thin core processing. A core is the basic inner-layer building block material from which PCBs are
constructed. A core consists of a flat sheet of material comprised of glass-reinforced resin with copper foil
laminated on either side. The thickness of inner-layer cores is typically determined by the overall
thickness of the PCB and the number of layers required. The demand for thinner cores derives from the
requirements for thinner PCBs, higher layer counts and various electrical parameters. Core thickness in
our PCBs ranges from as little as 0.002 inches up to 0.062 inches.
• Advanced hole fill process. Our advanced hole fill processes provide designers the opportunity to
increase the density of component placements by reducing the surface area required to place many types
of components. In traditional design, components are routed from their surface interfaces through via
connections in order to access power and ground connections and the internal circuitry used to connect to
other discrete components. Our advanced hole fill processes provide methods to allow for vias to be
placed inside their respective surface mount pads by filling the vias with a thermoset epoxy and plating
flat copper surface mount pads directly over the filled hole.
• Advanced materials. We manufacture circuit boards using a wide variety of advanced insulating
materials. These high-performance materials offer electrical, thermal, and long-term reliability advantages
over conventional materials but are more difficult to manufacture. We are certified by Underwriters
Laboratories to manufacture PCBs using many types and combinations of these specialty materials. This
wide offering allows us to manufacture complex boards for niche and high-end commercial and aerospace
and defense markets.
Customers and Markets
Our customers
include both OEMs and EMS companies
that primarily serve the networking/
communications, cellular phone, computing, aerospace and defense, and medical/industrial/instrumentation end
markets of the electronics industry. Included in the end markets that our OEM and EMS customers serve is the
U.S. government. As a result, we are a supplier, primarily as a subcontractor, to the U.S. government.
The following table shows the percentage of our net sales in each of the principal end markets we served for
the periods indicated:
End Markets(1)
Aerospace and Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cellular Phone(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computing/Storage/Peripherals(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical/Industrial/Instrumentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Networking/Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
2012
16% 15% 15%
20
23
20
13
8
9
32
33
5
6
16
23
9
31
6
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100% 100%
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(1) Sales to EMS companies are classified by the end markets of their OEM customers.
(2) Smartphones are included in the Cellular Phone end market,
touchscreen tablets are included in the
Computing/Storage/Peripherals end market and other mobile devices such as e-readers are included in the
Other end market.
Sales attributable to our five largest OEM customers, which can vary from year to year, collectively
accounted for 44%, 41%, and 33%, of our net sales in 2014, 2013 and 2012, respectively. Our five largest OEM
customers in 2014 were, in alphabetical order, Apple Inc., Cisco Systems, Inc., Ericsson, Huawei Technology
Co. Ltd., and Juniper Networks, Inc. For the year ended December 29, 2014, Apple accounted for 21% of our net
sales. Sales attributed to OEMs include sales made through EMS providers. Sales to EMS providers comprised
approximately 39%, 38% and 40% of our net sales in 2014, 2013 and 2012, respectively. Although our
contractual relationships are with the EMS companies, we typically negotiate price and volume requirements
directly with the OEMs. In addition, we are on the approved vendor lists of several of our EMS providers. This
positions us to participate in business that is awarded at the discretion of the EMS provider. Our five largest EMS
customers in 2014 were, in alphabetical order, Celestica, Inc., Flextronics International Ltd., Hon Hai Precision
Industry Co., Ltd., Jabil Circuit, Inc., and Plexus Corp.
During 2014, 2013 and 2012, our net sales by country invoiced were as follows:
Country
2014
2013
2012
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43% 42% 36%
29
27
29
30
32
32
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100% 100%
Net sales to other countries, individually, for the years ended 2014, 2013 and 2012, did not exceed 10% of
total net sales.
Our marketing strategy focuses on building long-term relationships with our customers’ engineering and
new product introduction personnel early in the product development phase, frequently through strategic account
management teams. As the product moves from the prototype stage through ramp-to-volume and volume
production, we shift our focus to the customers’ procurement departments in order to capture sales at each point
in the product’s life cycle.
Our staff of engineers, sales support personnel, and managers assists our sales representatives in advising
customers with respect to manufacturing feasibility, design review, and technological capabilities through direct
communication and visits. We combine our sales efforts with customer service at each facility to better serve our
customers. Each large customer is typically assigned an account manager to coordinate all of the company’s
services across all of our facilities. Additionally, the largest and most strategic customers are also supported by
selected program management and engineering resources. Our sales force is comprised of direct sales personnel,
complemented by commission-based independent representatives.
Our domestic U.S. footprint comprises most of our North America operating segment and its seven PCB
fabrication plants in California, Connecticut, Utah and Wisconsin, which include a facility that provides follow-
on value-added assembly services primarily to our Connecticut PCB fabrication plant; and primary customer
inventory hubs in Connecticut, New York, Texas and Wisconsin.
Our international footprint includes our Asia Pacific operating segment and its five PCB fabrication plants
in Hong Kong, Dongguan, Guangzhou and Shanghai, China; a backplane and sub-system assembly operation in
Shanghai, China that is part of our North America operating segment; and customer inventory hubs in France,
Poland, Hong Kong, China, Mexico, Malaysia and Thailand. Our international sales force services customers
throughout North America, Europe, Asia, and the Middle East. We believe our international reach enables us to
access new customers and allows us to better serve existing customers.
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For information about net sales,
total assets and capital
expenditures of each of our segments, and geographical segment information, including net sales to customers
and long-lived assets, see Note 18 of the Notes to Consolidated Financial Statements.
income before income taxes, depreciation,
Suppliers
The primary raw materials we use in PCB manufacturing include copper-clad laminate; chemical solutions
such as copper and gold for plating operations; photographic film; carbide drill bits; and plastic for testing
fixtures. Although we have preferred suppliers for some raw materials used in the manufacture of PCBs, most of
our raw materials are generally readily available in the open market from numerous other potential suppliers.
The primary raw materials we use in backplane assembly are manufactured components such as PCBs,
connectors, capacitors, resistors, diodes, integrated circuits and formed sheet metal, many of which are custom
made and controlled by our customers’ approved vendors. These components for backplane assemblies in some
cases have limited or sole sources of supply. For example, in some instances our customers will require us to use
a specific component from a particular supplier or require us to use a component provided by the customer itself,
in which case we may have a single or limited number of suppliers for these specific components.
We typically use just-in-time procurement practices to maintain our raw materials inventory at low levels
and work closely with our suppliers to obtain technologically advanced raw materials. In addition, we
periodically seek alternative supply sources to ensure that we are receiving competitive pricing and service.
Adequate amounts of all raw materials have been available in the past, and we believe this availability will
continue into the foreseeable future.
Competition
Despite industry consolidation,
the PCB industry remains fragmented and characterized by intense
competition. Our principal PCB and substrate competitors include Unimicron Technology Corp., IBIDEN Co.,
Ltd., Compeq Manufacturing Co., Ltd., Tripod Technology Corp., ISU Petasys Co., Ltd., Viasystems Group,
Inc., Sanmina Corporation, Multek Corporation, Wus Printed Circuit Co., Ltd., and AT & S Austria
Technologie & Systemtechnik AG. Our principal backplane assembly competitors include Amphenol Corp,
Sanmina Corporation, TT Electronics PLC, and Viasystems Group, Inc.
We believe we compete favorably based on the following competitive factors:
• status as a top global PCB manufacturer;
• capability and flexibility to produce technologically complex products;
• ability to offer a one-stop manufacturing solution;
• specialized and integrated manufacturing facilities;
• ability to offer time-to-market capabilities;
• leading edge aerospace and defense capabilities;
• flexibility to manufacture low volume, high-mix products;
• consistent high-quality product; and
• outstanding customer service.
In addition, we believe our continuous evaluation and early adoption of new manufacturing and production
technologies give us a competitive advantage. We believe that our ability to manufacture PCBs using advanced
technologies, including our HDI and substrate capabilities, provides us with a competitive advantage over
manufacturers that do not possess this advanced technological expertise. Our future success will depend in large
part on our ability to maintain and enhance our manufacturing capabilities and production technologies.
Seasonality
Our Asia Pacific operating segment experiences revenue fluctuations, caused in part by seasonal patterns in
the computer and cellular phone industry, which together have become a significant portion of the end markets
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that we serve. This seasonality typically results in higher net sales in the third and fourth quarters due to end
customer demand in the fourth quarter for consumer electronics products. Seasonal fluctuations also include the
Chinese New Year holidays in the first quarter, which typically results in lower net sales. We attribute this
decline to shutdowns of our customers’ manufacturing facilities surrounding the Chinese New Year public
holidays, which normally occur in January or February of each year.
Backlog
Backlog consists of purchase orders received, including, in some instances, demand agreements released for
production under customer contracts. We obtain firm purchase orders from our customers for all products.
However, for some of these purchase orders, customers do not make firm schedules for delivery more than
90 days in advance. Therefore, we measure backlog as orders with deliveries scheduled over the next 90 days. At
December 29, 2014, total backlog was $201.0 million, compared with $175.0 million at the end of 2013.
Substantially all backlog at December 29, 2014 is expected to be converted to sales in 2015. Additionally, we
typically experience a higher amount of backlog in the second half of the year due to increased end customer
demand for consumer electronics products in the fourth quarter, which is consistent with our seasonal patterns as
discussed above.
Intellectual Property
We believe our business depends on the effectiveness of our fabrication techniques and our ability to
continue to improve our manufacturing processes. We have limited patent or trade secret protection for our
manufacturing processes. We rely on the collective experience of our employees in the manufacturing process to
ensure that we continuously evaluate and adopt the new technologies available in our industry. In addition, we
depend on training, recruiting, and retaining our employees, who are required to have sufficient know-how to
operate advanced equipment and to conduct complicated manufacturing processes.
National Security Matters
A portion of our business consists of manufacturing defense and defense-related items for various
departments and agencies of the U.S. government, including the U.S. Department of Defense, or the DoD, which
requires that we maintain facility security clearances under the National Industrial Security Program Operating
Manual, or NISPOM. The NISPOM requires that a corporation maintaining a facility security clearance take
steps to mitigate foreign ownership, control or influence, referred to as “FOCI.” Pursuant to these laws and
regulations, effective October 2010, we entered into a Special Security Agreement with the DoD; Su Sih (BVI)
Limited, or Su Sih (a significant foreign owner of our capital stock); and Mr. Tang Hsiang Chien (as the
beneficial owner of Su Sih). The purpose of the Special Security Agreement is to deny Mr. Tang, Su Sih, and
other persons affiliated with our Asia Pacific operating segment, from unauthorized access to classified and
controlled unclassified information and influence over our business or management in a manner that could result
in the compromise of classified information or could adversely affect the performance of classified contracts.
Other Governmental Regulations
Our operations, particularly those in North America, are subject to a broad range of regulatory requirements
relating to export control, environmental compliance, waste management, and health and safety matters. In
particular, we are subject to the following:
• U.S. Department of State regulations, including the Arms Export Control Act (AECA) and International
Traffic In Arms Regulations (ITAR) located at 22 CFR Parts 120-130;
• U.S. Department of Commerce regulations, including the Export Administration Regulations (EAR)
located at 15 CFR Parts 730-744;
• Office of Foreign Asset Control (OFAC) regulations located at 31 CFR Parts 500-599;
• U.S. Occupational Safety and Health Administration (OSHA), and state OSHA and Department of Labor
laws pertaining to health and safety in the workplace;
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• U.S. Environmental Protection Agency regulations pertaining to air emissions; wastewater discharges; and
the use, storage, discharge, and disposal of hazardous chemicals used in the manufacturing processes; the
reporting of chemical releases to the environment; and the reporting of chemicals manufactured in by-
products that are beneficially recycled,
• Department of Homeland Security regulations regarding the storage of certain chemicals of interest;
• corresponding state laws and regulations, including site investigation and remediation;
• corresponding U.S. county and city agencies;
• corresponding regulations and agencies in China for our Chinese facilities;
• material content directives and laws that ban or restrict certain hazardous substances in products sold in
member states of the European Union, China, other countries, and jurisdictions;
• SEC rules that require reporting of the use of certain metals from “conflict minerals” originating in the
Democratic Republic of the Congo and the 9 countries surrounding it pursuant to Section 1502 of the
Dodd-Frank Act; and
• reporting requirements of the California Transparency in Supply Chains Act of 2010 that requires
reporting on efforts to eradicate slavery and human trafficking in retailers’ and manufacturers’ supply
chains.
The process to manufacture PCBs requires adherence to city, county, state,
federal and foreign
environmental regulations regarding the storage, use, handling and disposal of chemicals, solid wastes and other
hazardous materials, as well as compliance with air quality standards and chemical use reporting. We believe that
our facilities in the United States comply in all material respects with applicable environmental laws and
regulations. In China, governmental authorities are taking various steps to tighten the rules and regulations
governing environmental issues. An update to Chinese environmental waste water law was issued in late 2012,
but allows for an interim period in which plants subject to such law may install equipment that meets the new
regulatory regime. Our plants in China are not yet in full compliance with the current environmental regulations.
We believe we have developed plans acceptable to the Chinese government, and we are in the process of
implementing these plans. We do not anticipate any immediate risk of government fines or temporary closure of
Chinese plants. We have established and enacted an investment plan related to the efforts to come into full
compliance with the new regulations. There can be no assurance that violations will not occur in the future.
Employees
As of December 29, 2014, we had 16,857 employees. Of our employees, 15,635 were involved in
manufacturing and engineering, 221 worked in sales and marketing, and 1,001 worked in accounting, systems
and other support capacities. None of our U.S. employees are represented by unions. In China, approximately
12,180 employees are members of the All-China Federation of Trade Unions and accordingly are considered to
be represented by a labor union. We have not experienced any labor problems resulting in a work stoppage,
except for a work stoppage associated with the announcement of the closure of our Suzhou, China facility in
2013, and we believe that we have good relations with our employees.
Availability of Reports Filed with the Securities and Exchange Commission
We are a Delaware corporation founded in 1998, with our principal executive offices located at 1665 Scenic
Avenue, Suite 250, Costa Mesa, CA 92626. Our telephone number is (714) 327-3000. Our website address is
www.ttmtech.com. Information included on our website is not incorporated into this report. Our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are
available without charge on our website at www.ttmtech.com/investors/investor_sec.aspx, as soon as reasonably
practicable after they are filed electronically with the Securities and Exchange Commission (SEC). Copies are
also available without charge by (i) telephonic request by calling our Investor Relations Department at (714) 327-
3000, (ii) e-mail request
to investor@ttmtech.com, or (iii) a written request to TTM Technologies, Inc.,
Attention: Investor Relations, 1665 Scenic Avenue, Suite 250, Costa Mesa, CA 92626.
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ITEM 1A. RISK FACTORS.
An investment in our common stock involves a high degree of risk. You should carefully consider the
factors described below, in addition to those discussed elsewhere in this report, in analyzing an investment in our
common stock. If any of the events described below occurs, our business, financial condition, and results of
operations would likely suffer, the trading price of our common stock could fall, and you could lose all or part of
the money you paid for our common stock. The risk factors described below are not the only ones we face. Risks
and uncertainties not known to us currently, or that may appear immaterial, also may have a material adverse
effect on our business, financial condition, and results of operations.
In addition, the following risk factors and uncertainties could cause our actual results to differ materially
from those projected in our forward-looking statements, whether made in this annual report or future quarterly
reports to stockholders, press releases, or oral statements, whether in presentations, responses to questions, or
otherwise.
Risks Related to our Business
Our acquisition strategy involves numerous risks.
On September 21, 2014, we entered into the Merger Agreement with Viasystems and Merger Sub, pursuant
to which Merger Sub will merge with and into Viasystems, with Viasystems surviving the Merger as a wholly
owned subsidiary of our company. This transaction and any other acquisitions we may pursue in the future
involve numerous risks. As part of our business strategy, we expect that we will continue to grow by pursuing
acquisitions of businesses, technologies, assets, or product lines that complement or expand our business. Risks
related to an acquisition may include:
• the potential inability to successfully integrate acquired operations and businesses or to realize anticipated
synergies, economies of scale, or other expected value;
• diversion of management’s attention from normal daily operations of our existing business to focus on
integration of the newly acquired business;
• unforeseen expenses associated with the integration of the newly acquired business;
• difficulties in managing production and coordinating operations at new sites;
• the potential loss of key employees of acquired operations;
• the potential inability to retain existing customers of acquired companies when we desire to do so;
• insufficient revenues to offset increased expenses associated with acquisitions;
• the potential decrease in overall gross margins associated with acquiring a business with a different
product mix;
• the inability to identify certain unrecorded liabilities;
• the potential need to restructure, modify, or terminate customer relationships of the acquired company;
• an increased concentration of business from existing or new customers; and
• the potential inability to identify assets best suited to our business plan.
Acquisitions may cause us to:
• enter lines of business and/or markets in which we have limited or no prior experience;
• issue debt and be required to abide by stringent loan covenants;
• assume liabilities; record goodwill and indefinite-lived intangible assets that will be subject to impairment
testing and potential periodic impairment charges;
15
• become subject
certifications;
to litigation and environmental
issues, which include product material content
• incur unanticipated costs;
• incur large and immediate write-offs; and
• incur substantial transaction-related costs, whether or not a proposed acquisition is consummated.
Acquisitions of high technology companies are inherently risky, and no assurance can be given that our
recent or future acquisitions will be successful and will not harm our business, operating results, or financial
condition. Failure to manage and successfully integrate acquisitions we make could harm our business and
operating results in a material way. Even when an acquired company has already developed and marketed
products, product enhancements may not be made in a timely fashion. In addition, unforeseen issues might arise
with respect to such products after the acquisition.
We are subject to risks of currency fluctuations.
A portion of our cash and other current assets is held in currencies other than the U.S. dollar. As of
December 29, 2014, we had an aggregate of approximately $207.4 million in current assets denominated in
Chinese Renminbi (RMB) and the Hong Kong Dollar (HKD). Changes in exchange rates among other currencies
and the U.S. dollar will affect the value of these assets as translated to U.S. dollars in our balance sheet. To the
extent that we ultimately decide to repatriate some portion of these funds to the United States, the actual value
transferred could be impacted by movements in exchange rates. Any such type of movement could negatively
impact the amount of cash available to fund operations or to repay debt. Significant inflation or disproportionate
changes in foreign exchange rates could occur as a result of general economic conditions, acts of war or
terrorism, changes in governmental monetary or tax policy, or changes in local interest rates. The impact of
future exchange rate fluctuations between the U.S. dollar and the RMB and the U.S. dollar and the HKD cannot
be predicted. To the extent that we may have outstanding indebtedness denominated in the U.S. dollar or in the
HKD, the depreciation of the RMB against the U.S. dollar or the HKD will have an adverse impact on our
business, financial condition, and results of operations (including the cost of servicing, and the value in our
balance sheet of, the U.S. dollar and HKD-denominated indebtedness). Further, China’s government imposes
controls over the convertibility of RMB into foreign currencies, which subjects us to further currency exchange
risk.
Products we manufacture may contain design or manufacturing defects, which could result in reduced
demand for our services and liability claims against us.
We manufacture products to our customers’ specifications, which are highly complex and may contain
design or manufacturing errors or failures, despite our quality control and quality assurance efforts. Defects in the
products we manufacture, whether caused by a design, manufacturing, or materials failure or error, may result in
delayed shipments, customer dissatisfaction, a reduction or cancellation of purchase orders, or liability claims
against us. If these defects occur either in large quantities or too frequently, our business reputation may be
impaired. Since our products are used in products that are integral to our customers’ businesses, errors, defects,
or other performance problems could result in financial or other damages to our customers beyond the cost of the
PCB, for which we may be liable. Although our invoices and sales arrangements generally contain provisions
designed to limit our exposure to product liability and related claims, existing or future laws or unfavorable
judicial decisions could negate these limitation of liability provisions. Over the last two years, we have incurred
charges, after giving effect to indemnity payments from one of our suppliers, in excess of $8.0 million, relating to
a product warranty claim with one of our customers. See “— We depend upon a relatively small number of OEM
customers for a large portion of our sales, and a decline in sales to major customers could materially adversely
affect our business, financial condition, and results of operations.”
In addition, after the consummation of the Merger, we expect to manufacture products for a range of
automotive customers. If any of our products are or are alleged to be defective, we may be required to participate
in a recall of such products. As suppliers become more integral to the vehicle design process and assume more of
16
the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contributions
when faced with product liability claims or recalls. In addition, vehicle manufacturers, which have traditionally
borne the costs associated with warranty programs offered on their vehicles, are increasingly requiring suppliers
to guarantee or warrant their products and may seek to hold us responsible for some or all of the costs related to
the repair and replacement of parts supplied by us to the vehicle manufacturer.
Product liability litigation against us, even if unsuccessful, is time consuming and costly to defend.
Although we maintain technology errors and omissions insurance, we cannot assure investors that we will
continue to be able to purchase such insurance coverage in the future on terms that are satisfactory to us, if at all,
or that insurance will cover the specific defect issues that arise.
We are heavily dependent upon the worldwide electronics industry, which is characterized by economic
cycles and fluctuations in product demand. A downturn in the electronics industry or prolonged global
economic crisis could result in decreased demand for our manufacturing services and materially adversely
affect our business, financial condition and results of operations.
A majority of our revenue is generated from the electronics industry, which is characterized by intense
competition, relatively short product life cycles, and significant fluctuations in product demand. The industry is
subject to economic cycles and recessionary periods. Due to the uncertainty in the end markets served by most of
our customers, we have a low level of visibility with respect to future financial results. Consequently, our past
operating results, earnings, and cash flows may not be indicative of our future operating results, earnings, and
cash flows.
We depend upon a relatively small number of OEM customers for a large portion of our sales, and a decline
in sales to major customers would materially adversely affect our business, financial condition, and results
of operations.
A small number of customers is responsible for a significant portion of our sales. Our five largest OEM
customers accounted for approximately 44%, 41%, and 33% of our net sales for the years ended December 29,
2014, December 30, 2013, and December 31, 2012, respectively, and one customer represented 21% of our sales
for the fiscal year ended December 29, 2014. Sales attributed to OEMs include both direct sales as well as sales
that the OEMs place through EMS providers. Our customer concentration could fluctuate, depending on future
customer requirements, which will depend in large part on market conditions in the electronics industry segments
in which our customers participate. The loss of one or more significant customers or a decline in sales to our
significant customers would materially adversely affect our business, financial condition, and results of
operations. In addition, we generate significant accounts receivable in connection with providing manufacturing
services to our customers. If one or more of our significant customers were to become insolvent or were
otherwise unable to pay for the manufacturing services provided by us, our business, financial condition, and
results of operations would be materially adversely affected.
In addition, during industry downturns, we may need to reduce prices to limit the level of order losses, and
we may be unable to collect payments from our customers. There can be no assurance that key customers would
not cancel orders, that they would continue to place orders with us in the future at the same levels as experienced
by us in prior periods, that they would be able to meet their payment obligations, or that the end-products which
use our products would be successful. This concentration of customer base may materially adversely affect our
business, financial condition, and results of operations due to the loss or cancellation of business from any of
these key customers, significant changes in scheduled deliveries to any of these customers, or decreases in the
prices of the products sold to any of these customers.
If we are unable to maintain satisfactory capacity utilization rates, our business, financial condition, and
results of operations would be materially adversely affected.
Given the high fixed costs of our operations, decreases in capacity utilization rates can have a significant
effect on our business. Accordingly, our ability to maintain or enhance gross margins would continue to depend,
in part, on maintaining satisfactory capacity utilization rates. In turn, our ability to maintain satisfactory capacity
utilization would depend on the demand for our products, the volume of orders we receive, and our ability to
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offer products that meet our customers’ requirements at competitive prices. If current or future production
capacity fails to match current or future customer demands, our facilities would be underutilized, our sales may
not fully cover our fixed overhead expenses, and we would be less likely to achieve expected gross margins. If
forecasts and assumptions used to support the realizability of our long-lived assets change in the future,
impairment charges could result that would materially adversely affect our business, financial
significant
condition, and results of operations.
In addition, we generally schedule our quick turnaround production facilities at less than full capacity to
retain our ability to respond to unexpected additional quick-turn orders. However, if these orders are not
received, we may forego some production and could experience continued excess capacity. If we conclude we
have significant, long-term excess capacity, we may decide to permanently close one or more of our facilities and
lay off some of our employees. Closures or lay-offs could result in our recording restructuring charges such as
severance, other exit costs, and asset impairments as well as potentially causing disruptions in our ability to
supply customers.
Our results of operations are often subject to demand fluctuations and seasonality. With a high level of
fixed operating costs, even small revenue shortfalls would decrease our gross margins.
Our results of operations fluctuate for a variety of reasons, including:
• timing of orders from and shipments to major customers;
• the levels at which we utilize our manufacturing capacity;
• price competition;
• changes in our mix of revenues generated from quick-turn versus standard delivery time services;
• expenditures, charges or write-offs, including those related to acquisitions, facility restructurings, or asset
impairments; and
• expenses relating to expanding existing manufacturing facilities.
A significant portion of our operating expenses is relatively fixed in nature, and planned expenditures are
based in part on anticipated orders. Accordingly, unexpected revenue shortfalls may decrease our gross margins.
In addition, we have experienced sales fluctuations due to seasonal patterns in the capital budgeting and
purchasing cycles, as well as inventory management practices of our customers and the end markets we serve. In
particular, the seasonality of the computer and cellular phone industries and quick-turn ordering patterns affect
the overall PCB industry. These seasonal trends have caused fluctuations in our operating results in the past and
may continue to do so in the future. Results of operations in any period should not be considered indicative of the
results to be expected for any future period. In addition, our future quarterly operating results may fluctuate and
may not meet the expectations of securities analysts or investors.
Our results can be adversely affected by rising labor costs.
There is uncertainty with respect to rising labor costs, particularly within China, where we have most of our
manufacturing facilities. In recent periods there have been regular and significant increases in the minimum wage
payable in various provinces of China. In addition, we have experienced very high employee turnover in our
manufacturing facilities in China, generally after the Chinese New Year, and we are experiencing ongoing
difficulty in recruiting employees for these facilities. Furthermore, labor disputes and strikes based partly on
wages have in the past slowed or stopped production by certain manufacturers in China. In some cases,
employers have responded by significantly increasing the wages of workers at such plants. Any increase in labor
costs due to minimum wage laws or customer requirements about scheduling and overtime that we are unable to
recover in our pricing to our customers could materially adversely affect our operating results. In addition, the
high turnover rate and our difficulty in recruiting and retaining qualified employees and the other labor trends we
are noting in China could result in a potential for defects in our products or production disruptions or delays or
the inability to ramp production to meet increased customer orders, resulting in order cancellation or imposition
of customer penalties if we are unable to timely deliver products.
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To respond to competitive pressures and customer requirements, we may further expand internationally in
lower cost locations. If we pursue such expansions, we may be required to make additional capital expenditures.
In addition, the cost structure in certain countries that are now considered to be favorable may increase as
economies develop or as such countries join multinational economic communities or organizations, causing local
wages to rise. As a result, we may need to continue to seek new locations with lower costs and the employee and
infrastructure base to support PCB manufacturing. We cannot assure investors that we will realize the anticipated
strategic benefits of our international operations or that our international operations will contribute positively to
our operating results.
In our North America operating segment, rising health care costs pose a significant labor-related risk. We
work with our insurance brokers and carriers to control the cost of health care for our employees. However, there
can be no assurance that our efforts will succeed, especially given recent and pending changes in government
oversight of health care.
Employee strikes and other labor-related disruptions may adversely affect our operations.
Our business is labor intensive, utilizing large numbers of engineering and manufacturing personnel. As of
December 29, 2014, approximately 12,180 of our employees were represented by unions, which accounted for
approximately 72% of our work force. These unionized employees are all based in China, where we have
significant manufacturing facilities. Strikes or labor disputes with our unionized employees may adversely affect
our ability to conduct our business. If we are unable to reach agreement with any of our unionized work groups
on future negotiations regarding the terms of their collective bargaining agreements, we may be subject to work
interruptions or stoppages. Any of these events could be disruptive to our operations and could result in negative
publicity, loss of contracts, and a decrease in revenues. We may also become subject to additional collective
bargaining agreements in the future if more employees or segments of our workforce become unionized,
including any of our employees in the United States. We have not experienced any labor problems resulting in a
work stoppage, except for a brief work stoppage associated with the announcement of the closure of our Suzhou,
China facility in September 2013.
We serve customers and have manufacturing facilities outside the United States and are subject to the risks
characteristic of international operations.
We have significant manufacturing operations in Asia, and sales offices located in Asia and Europe, and we
continue to consider additional opportunities to make foreign investments and construct new foreign facilities.
For the year ended December 29, 2014, we generated 67% of our net sales from non-U.S. operations, and a
significant portion of our manufacturing material was provided by international suppliers during this period. As a
result, we are subject to risks relating to significant international operations, including but not limited to:
• managing international operations;
• imposition of governmental controls;
• unstable regulatory environments;
• compliance with employment laws;
• implementation of disclosure controls, internal controls, financial reporting systems, and governance
standards to comply with U.S. accounting and securities laws and regulations;
• limitations on imports or exports of our product offerings;
• fluctuations in the value of local currencies;
• inflation or changes in political and economic conditions;
• labor unrest, rising wages, difficulties in staffing and geographical labor shortages;
• government or political unrest;
• longer payment cycles;
• language and communication barriers as well as time zone differences;
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• cultural differences;
• increases in duties and taxation levied on our products;
• other potentially adverse tax consequences;
• imposition of restrictions on currency conversion or the transfer of funds;
• travel restrictions;
• expropriation of private enterprises; and
• the potential reversal of current favorable policies encouraging foreign investment and trade.
Our operations in China subject us to risks and uncertainties relating to the laws and regulations of China.
Under its current leadership, the government of China has been pursuing economic reform policies,
including the encouragement of foreign trade and investment and greater economic decentralization. No
assurance can be given, however, that the government of China will continue to pursue such policies, that such
policies will be successful if pursued, or that such policies will not be significantly altered from time to time.
Despite progress in developing its legal system, China does not have a comprehensive and highly developed
system of laws, particularly with respect to foreign investment activities and foreign trade. Enforcement of
existing and future laws and contracts is uncertain, and implementation and interpretation thereof may be
inconsistent. As the Chinese legal system develops, the promulgation of new laws, changes to existing laws and
the preemption of local regulations by national laws may adversely affect foreign investors. Further, any
litigation in China may be protracted and may result in substantial costs and diversion of resources and
management attention. In addition, though changes in government policies and rules are timely published or
communicated,
the duration of any grace period before which full
implementation and compliance will be required. As a result, we may operate our business in violation of new
rules and policies before full compliance can be achieved. These uncertainties could limit the legal protections
available to us.
there is usually no indication of
We depend on the U.S. government for a substantial portion of our business, which involves unique risks.
Changes in government defense spending or regulations could have a material adverse effect on our
business, financial condition, and results of operations.
A significant portion of our revenues is derived from products and services ultimately sold to the U.S.
government by our OEM and EMS customers and is therefore affected by, among other things, the federal budget
process. We are a supplier, primarily as a subcontractor, to the U.S. government and its agencies as well as
foreign governments and agencies. The contracts between our direct customers and the government end user are
subject to political and budgetary constraints and processes, changes in short-range and long-range strategic
plans, the timing of contract awards, the congressional budget authorization and appropriation processes, the
government’s ability to terminate contracts for convenience or for default, as well as other risks, such as
contractor suspension or debarment in the event of certain violations of legal and regulatory requirements.
For the year ended December 29, 2014, aerospace and defense sales accounted for approximately 16% of
our total net sales. The substantial majority of these sales are related to both U.S. and foreign military and
defense programs. While we do not sell any significant volume of products directly to the U.S. government, we
are a supplier to the U.S. government and its agencies as well as foreign governments and agencies.
Consequently, our sales are affected by changes in the defense budgets of the U.S. and foreign governments and
may be affected by federal budget sequestration measures. On December 26, 2013, President Obama signed the
Bipartisan Budget Act of 2013 (the “BBA”) into law, which reduced the Department of Defense (DoD) budget
uncertainty for fiscal years 2014 and 2015 by increasing Budget Control Act of 2011 spending caps and lowering
sequester cuts to the DoD base budget by $22 billion for fiscal year 2014 and $9 billion for fiscal year 2015.
Additionally, Congress also increased the 2014 Overseas Contingency Operations budget by $6 billion more than
the amount included in the 2014 Proposed Budget Request. Declines in the DoD budgets reduce funding for
some of our revenue arrangements and generally will have a negative impact on our sales, results of operations,
and cash flows.
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The domestic and international threat of terrorist activity, emerging nuclear states and conventional military
threats have led to an increase in demand for defense products and services and homeland security solutions in
the recent past. The U.S. government, however, is facing unprecedented budgeting constraints and the U.S.
defense budget is currently declining as a result of budgetary pressures and the wind down of the conflicts in Iraq
and Afghanistan. The termination or failure to fund one or more significant contracts by the U.S. government
could have a material adverse effect on our business, financial condition, and results of operations.
Additionally,
the federal government
is currently in the process of reviewing and revising the U.S.
Munitions List. Such changes could reduce or eliminate restrictions that currently apply to some of the products
we produce. If these regulations or others are changed in a manner that reduces restrictions on products being
manufactured overseas, we would likely face an increase in the number of competitors and increased price
competition from overseas manufacturers, who are restricted by the current export laws from manufacturing
products for U.S. defense systems.
We are subject to the requirements of the National Industrial Security Program Operating Manual for our
facility security clearance, which is a prerequisite to our ability to perform on classified contracts for the
U.S. government.
A facility security clearance is required in order to be awarded and perform on classified contracts for the
DoD and certain other agencies of the U.S. government. As a cleared entity, we must comply with the
requirements of the National Industrial Security Program Operating Manual (NISPOM), and any other applicable
U.S. government industrial security regulations. Further, due to the fact that a significant portion of our voting
equity is owned by a non-U.S. entity, we are required to be governed by and operate in accordance with the terms
and requirements of the Special Security Agreement (the “SSA”). See “Business — National Security Matters.”
If we were to violate the terms and requirements of the SSA, the NISPOM, or any other applicable U.S.
government industrial security regulations (which may apply to us under the terms of classified contracts), we
could lose our security clearance. We cannot be certain that we will be able to maintain our security clearance. If
for some reason our security clearance is invalidated or terminated, we may not be able to continue to perform on
classified contracts and would not be able to enter into new classified contracts, which could adversely affect our
revenues.
We rely on the telecommunications industry for a significant portion of sales. Accordingly, the economic
volatility in this industry has had, and may continue to have, a material adverse effect on our ability to
forecast demand and production and to meet desired sales levels.
A large percentage of TTM’s business is conducted with customers who are in the telecommunications
industry and, after the consummation of the Merger, a large percentage of our business after giving effect to the
Merger is expected to continue to be conducted with such customers. This industry is characterized by intense
competition, relatively short product life cycles, and significant fluctuations in product demand. This industry is
heavily dependent on the end markets it serves and therefore can be affected by the demand patterns of those
markets. If the volatility in this industry continues, it would have a material adverse effect on our business,
financial condition, and results of operations.
Competition in the PCB market is intense, and we could lose market share if we are unable to maintain our
current competitive position in end markets using our quick-turn, high technology, and high-mix
manufacturing services.
The PCB industry is intensely competitive, highly fragmented, and rapidly changing. We expect
competition to continue, which could result in price reductions, reduced gross margins, and loss of market share.
Our principal PCB and substrate competitors include Unimicron Technology Corp., IBIDEN Co., Ltd., Compeq
Manufacturing Co., Ltd., Tripod Technology Corp., ISU Petasys Co., Ltd., Viasystems Group, Inc., Sanmina
Corporation, Multek Corporation, Wus Printed Circuit Co., Ltd., and AT&S Austria Technologie &
Systemtechnik AG. Our principal backplane assembly competitors include Amphenol Corp, Sanmina
Corporation, Viasystems Group, Inc., and TT Electronics PLC. In addition, we increasingly compete on an
international basis, and new and emerging technologies may result in new competitors entering our markets.
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Some of our competitors and potential competitors have advantages over us, including:
• greater financial and manufacturing resources that can be devoted to the development, production, and
sale of their products;
• more established and broader sales and marketing channels;
• more manufacturing facilities worldwide, some of which are closer in proximity to OEMs;
• manufacturing facilities that are located in countries with lower production costs;
• lower capacity utilization, which in peak market conditions can result in shorter lead times to customers;
• ability to add additional capacity faster or more efficiently;
• preferred vendor status with existing and potential customers;
• greater name recognition; and
• larger customer bases.
In addition, these competitors may respond more quickly to new or emerging technologies, or adapt more
quickly to changes in customer requirements, than we do. We must continually develop improved manufacturing
processes to meet our customers’ needs for complex products, and our manufacturing process technology is
generally not subject to significant proprietary protection. During recessionary periods in the electronics industry,
our strategy of providing quick-turn services, an integrated manufacturing solution, and responsive customer
service may take on reduced importance to our customers. As a result, we may need to compete more on the
basis of price, which would cause our gross margins to decline.
If we are unable to respond to rapid technological change and process development, we may not be able to
compete effectively.
The market for our manufacturing services is characterized by rapidly changing technology and continual
implementation of new production processes. The future success of our business will depend in large part upon
our ability to maintain and enhance our technological capabilities, to manufacture products that meet changing
customer needs, and to successfully anticipate or respond to technological changes on a cost-effective and timely
basis. We expect that the investment necessary to maintain our technological position will increase as customers
make demands for products and services requiring more advanced technology on a quicker turnaround basis. For
example, in 2015 we expect to continue to make significant capital expenditures to expand our HDI and other
advanced manufacturing capabilities. We may not be able to obtain access to additional sources of funds in order
to respond to technological changes as quickly as our competitors.
In addition,
the PCB industry could encounter competition from new or revised manufacturing and
production technologies that render existing manufacturing and production technology less competitive or
obsolete. We may not respond effectively to the technological requirements of the changing market. If we need
new technologies and equipment to remain competitive, the development, acquisition, and implementation of
those technologies and equipment will require us to make significant capital investments.
An increase in the cost of raw materials could have a material adverse effect on our business, financial
condition, and results of operations and reduce our gross margins.
To manufacture PCBs, we use raw materials such as laminated layers of fiberglass, copper foil, chemical
solutions, gold, and other commodity products, which we order from our suppliers. In the case of backplane
assemblies, components include connectors, sheet metal, capacitors, resistors and diodes, many of which are
custom made and controlled by our customers’ approved vendors. If raw material and component prices increase,
it may reduce our gross margins.
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If we are unable to provide our customers with high-end technology, high-quality products, and responsive
service, or if we are unable to deliver our products to our customers in a timely manner, our business,
financial condition, and results of operations may be materially adversely affected.
In order to maintain our existing customer base and obtain business from new customers, we must
demonstrate our ability to produce our products at the level of technology, quality, responsiveness of service,
timeliness of delivery, and cost that our customers require. If our products are of substandard quality, if they are
not delivered on time, if we are not responsive to our customers’ demands, or if we cannot meet our customers’
technological requirements, our reputation as a reliable supplier of our products would likely be damaged. If we
are unable to meet anticipated product and service standards, we may be unable to obtain new contracts or keep
our existing customers, and this would have a material adverse effect on our business, financial condition, and
results of operations.
We are subject to risks for the use of certain metals from “conflict minerals” originating in the Democratic
Republic of the Congo.
During the third quarter of 2012, the SEC adopted rules implementing the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank). These rules impose diligence and disclosure requirements regarding
the use of “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries as required
by Dodd-Frank. While these new rules continue to be the subject of ongoing litigation and, as a result,
uncertainty, we submitted a conflict minerals report on Form SD with the SEC on May 30, 2014. Compliance
with these rules is likely to result in additional costs and expenses, including costs and expenses incurred for due
diligence to determine and verify the sources of any conflict minerals used in our products, in addition to the
costs and expenses of remediation and other changes to products, processes, or sources of supply as a
consequence of such verification efforts. These rules may also affect the sourcing and availability of minerals
used in the manufacture of our PCBs, as there may be only a limited number of suppliers offering “conflict free”
minerals that can be used in our products. There can be no assurance that we will be able to obtain such minerals
in sufficient quantities or at competitive prices. Also, since our supply chain is complex, we may, at a minimum,
face reputational challenges with our customers, stockholders, and other stakeholders if we are unable to
sufficiently verify the origins of the minerals used in our products. We may also encounter customers who
require that all of the components of our products be certified as conflict free. If we are not able to meet customer
requirements, such customers may choose to disqualify us as a supplier, which could impact our sales and the
value of portions of our inventory.
Unanticipated changes in our tax rates or in our assessment of the realizability of our deferred income tax
assets or exposure to additional income tax liabilities could affect our operating results and financial
condition.
We are subject to income taxes in the United States and various foreign jurisdictions. Significant judgment
is required in determining our provision for income taxes and, in the ordinary course of business, there are many
transactions and calculations in which the ultimate tax determination is uncertain. Our effective tax rates could be
materially adversely affected by changes in the mix of earnings in countries and states with differing statutory tax
rates, changes in the valuation of deferred income tax assets and liabilities, changes in tax laws, as well as other
factors. Our tax determinations are regularly subject to audit by tax authorities, and developments in those audits
could adversely affect our income tax provision. Although we believe that our tax estimates are reasonable, the
final determination of tax audits or tax disputes may be different from what is reflected in our historical income
tax provisions, which could materially adversely affect our business, financial condition, and results of
operations.
If our net earnings do not remain at or above recent levels, or we are not able to predict with a reasonable
degree of probability that they will continue, we may have to record a valuation allowance against our net
deferred income tax assets.
As of December 29, 2014, TTM had net deferred income tax assets of approximately $2.9 million. Based on
our forecast for future taxable earnings, we believe we will utilize the deferred income tax assets in future
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periods. However, if our estimates of future earnings decline, we may have to increase our valuation allowance
against our net deferred income tax assets, resulting in a higher income tax provision, which would reduce our
cash flows. Additionally, the ability to utilize deferred income tax assets is dependent upon the generation of
taxable income in the specific tax jurisdictions that have deferred income tax assets.
If events or circumstances occur in our business that indicate that our goodwill and definite-lived
intangibles may not be recoverable, we could have impairment charges that would negatively affect our
earnings.
As of December 29, 2014, our consolidated balance sheet reflected $31.4 million of goodwill and definite-
lived intangible assets, which amount will significantly increase after the application of purchase accounting to
the Merger. We periodically evaluate whether events and circumstances have occurred, such that the potential for
reduced expectations for future cash flows coupled with further decline in the market price of our stock and
market capitalization may indicate that the remaining balance of goodwill and definite-lived intangible assets
may not be recoverable. If factors indicate that assets are impaired, we would be required to reduce the carrying
value of our goodwill and definite-lived intangible assets, which could harm our results during the periods in
which such a reduction is recognized. For example, for the year ended December 31, 2012 our assessment of
goodwill impairment indicated that the carrying value of goodwill for our Asia Pacific reporting unit, in our Asia
Pacific operating segment, was in excess of fair value, and therefore we recognized an impairment charge of
$171.4 million.
We will perform our fiscal year 2015 annual impairment test during our fourth fiscal quarter. Given the
recent volatility of our market capitalization, it is reasonably possible that we could record an impairment charge
by fiscal year end when we conduct our annual impairment test. Our goodwill and definite-lived intangible assets
may increase in future periods if we consummate other acquisitions. Amortization and impairment of these
additional intangibles would, in turn, reduce our earnings.
Damage to our manufacturing facilities due to fire, natural disaster, or other events could materially
adversely affect our business, financial condition, and results of operations.
The destruction or closure of any of our facilities for a significant period of time as a result of fire,
explosion, blizzard, act of war or terrorism, flood, tornado, earthquake, lightning, other natural disasters, an
outbreak of epidemics such as Ebola or severe acute respiratory syndrome, required maintenance, or other events
could harm us financially, increasing our costs of doing business and limiting our ability to deliver our
manufacturing services on a timely basis.
Our insurance coverage with respect to damages to our facilities or our customers’ products caused by
natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may not be adequate
or continue to be available at commercially reasonable rates and terms.
In the event one or more of our facilities is closed on a temporary or permanent basis as a result of a natural
disaster, required maintenance or other event, or in the event that an outbreak of a serious epidemic results in
quarantines, temporary closures of offices or manufacturing facilities, travel restrictions or the temporary or
permanent loss of key personnel, our operations could be significantly disrupted. Such events could delay or
prevent product manufacturing and shipment for the time required to transfer production or repair, rebuild or
replace the affected manufacturing facilities. This time frame could be lengthy and result in significant expenses
for repair and related costs. While we have in place disaster recovery plans, there can be no assurance that such
plans will be sufficient to allow our operations to continue in the event of every natural or man-made disaster,
pandemic, required repair or other extraordinary event. Any extended inability to continue our operations at
unaffected facilities following such an event would reduce our revenue and potentially damage our reputation as
a reliable supplier.
We face constant pricing pressure from our customers and competitors, which may decrease our profit
margins.
Competition in the PCB market is intense, and we expect that competition will continue to increase, thereby
creating a highly aggressive pricing environment. We and some of our competitors have in the past reduced
24
average selling prices. In addition, competitors may reduce their average selling prices faster than our ability to
reduce costs, which can also accelerate the rate of decline of our selling prices. When prices decline, we may also
be required to write down the value of our inventory.
The effects of such pricing pressures on our business may be exacerbated by inflationary pressures that
affect our costs of supply. When we are unable to extract comparable concessions from our suppliers on prices
they charge us, this in turn reduces gross profit if we are unable to raise prices. Further, uncertainty or adverse
changes in the economy could also lead to a significant decline in demand for our products and pressure to
reduce our prices. As a result of the recent global economic downturn, many businesses have taken a more
conservative stance in ordering inventory. Any decrease in demand for our products, coupled with pressure from
the market and our customers to decrease our prices, would materially adversely affect our business, financial
condition, and results of operations.
The pricing pressure we face on our products requires us to introduce new and more advanced technology
products to maintain average selling prices or reduce any declines in average selling prices. As we shift
production to more advanced, higher density PCBs, we tend to make significant investments in plants and other
capital equipment and incur higher costs of production, which may not be recovered.
The prominence of EMS companies as our customers could reduce our gross margins, potential sales, and
customers.
Sales to EMS companies represented approximately 39%, 38% and 40% of our net sales for the years ended
December 29, 2014, December 30, 2013 and December 31, 2012, respectively. Sales to EMS providers include
sales directed by OEMs as well as orders placed with us at the EMS providers’ discretion. EMS providers source
on a global basis to a greater extent than OEMs. The growth of EMS providers increases the purchasing power of
such providers and has in the past, and could in the future, result in increased price competition or the loss of
existing OEM customers. In addition, some EMS providers, including some of our customers, have the ability to
directly manufacture PCBs and create backplane assemblies. If a significant number of our other EMS customers
were to acquire these abilities, our customer base might shrink, and our sales might decline substantially.
Moreover, if any of our OEM customers outsource the production of PCBs and creation of backplane assemblies
to these EMS providers, our business, results of operations, and financial condition may be harmed.
If we are unable to manage our growth effectively, our business, financial condition, and results of
operations could be materially adversely affected.
We have experienced, and expect to continue to experience, growth in the scope and complexity of our
operations. This growth may strain our managerial, financial, manufacturing, and other resources. In order to
manage our growth, we may be required to continue to implement additional operating and financial controls and
hire and train additional personnel. There can be no assurance that we will be able to do so in the future, and
failure to do so could jeopardize our expansion plans and seriously harm our operations. In addition, growth in
our capacity could result in reduced capacity utilization and a corresponding decrease in gross margins.
Our international sales are subject to laws and regulations relating to corrupt practices, trade, and export
controls and economic sanctions. Any non-compliance could have a material adverse effect on our
business, financial condition, and results of operations.
TTM operates on a global basis and is subject to anti-corruption, anti-bribery, and anti-kickback laws and
regulations, including restrictions imposed by the Foreign Corrupt Practices Act (the “FCPA”). The FCPA and
similar anti-corruption, anti-bribery, and anti-kickback laws in other jurisdictions generally prohibit companies
and their intermediaries and agents from making improper payments to government officials or any other persons
for the purpose of obtaining or retaining business. We operate and sell our products in many parts of the world
that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance
with anti-corruption, anti-bribery, and anti-kickback laws may conflict with local customs and practices. We also,
from time to time, undertake business ventures with state-owned companies or enterprises.
25
TTM’s global business operations must also comply with all applicable domestic and foreign export control
laws, including ITAR, and EAR. Some items manufactured by us are controlled for export by the U.S.
Department of Commerce’s Bureau of Industry and Security under EAR.
We train our employees concerning anti-corruption, anti-bribery, and anti-kickback laws and compliance
with international regulations regarding trades and exports, and we have policies in place that prohibit employees
from making improper payments. We cannot provide assurances that our internal controls and procedures will
guarantee compliance by our employees or third parties with whom we work. If we are found to be liable for
violations of the FCPA or similar anti-corruption, anti-bribery, or anti-kickback laws in international jurisdictions
or for violations of ITAR, EAR, or other similar regulations regarding trades and exports, either due to our own
acts or out of inadvertence, or due to the inadvertence of others, we could suffer criminal or civil fines or
penalties or other repercussions, including reputational harm, which could have a material adverse effect on our
business, financial condition, and results of operations.
TTM’s global business operations also must be conducted in compliance with applicable economic
sanctions laws and regulations, such as laws administered by the U.S. Department of the Treasury’s OFAC, the
U.S. State Department, and the U.S. Department of Commerce. We must comply with all applicable economic
sanctions laws and regulations of the U.S. and other countries. Violations of these laws or regulations could
result in significant additional sanctions including criminal or civil fines or penalties, more onerous compliance
requirements, more extensive debarments from export privileges, or loss of authorizations needed to conduct
aspects of our international business.
In certain countries, TTM may engage third-party agents or intermediaries, such as customs agents, to act on
each of their behalves, and if these third-party agents or intermediaries violate applicable laws, their actions may
result in criminal or civil fines or penalties or other sanctions being assessed against TTM. We take certain
measures designed to ensure our compliance with U.S. export and economic sanctions laws, anti-corruption laws
and regulations, and export control laws. However, it is possible that some of our products were sold or will be
sold to distributors or other parties, without our knowledge or consent, in violation of applicable law. There can
be no assurances that we will be in compliance in the future. Any such violation could result in significant
criminal or civil fines, penalties, or other sanctions and repercussions, including reputational harm, that could
have a material adverse effect on our business, financial condition, and results of operations.
Our failure to comply with the requirements of environmental laws could result in litigation, fines,
revocation of permits necessary to our manufacturing processes, or debarment from our participation in
federal government contracts.
Our operations are regulated under a number of federal, state, local, and foreign environmental and safety
laws and regulations that govern, among other things, the discharge of hazardous materials into the air and water,
as well as the handling, storage, and disposal of such materials. These laws and regulations include the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Superfund Amendment and
Reauthorization Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic
Substances Control Act, and the Federal Motor Carrier Safety Improvement Act, as well as analogous state,
local, and foreign laws. Compliance with these environmental laws is a major consideration for us because our
manufacturing processes use and generate materials classified as hazardous. Because we use hazardous materials
and generate hazardous wastes in our manufacturing processes, we may be subject to potential financial liability
for costs associated with the investigation and remediation of our own sites, or sites at which we have arranged
for the disposal of hazardous wastes, if such sites become contaminated. Even if we fully comply with applicable
environmental laws and are not directly at fault for the contamination, we may still be liable. The wastes we
generate include spent ammoniacal and cupric etching solutions, metal stripping solutions, waste acid solutions,
waste alkaline cleaners, waste oil, and waste waters that contain heavy metals such as copper, tin, lead, nickel,
gold, silver, cyanide, and fluoride, and both filter cake and spent ion exchange resins from equipment used for
on-site waste treatment.
Environmental law violations, including with respect to the failure to maintain required environmental
permits, could subject us to fines, penalties, and other sanctions, including the revocation of our effluent
26
discharge permits, which could require us to cease or limit production at one or more of our facilities, and harm
our business, results of operations, and financial condition. Even if we ultimately prevail, environmental lawsuits
against us would be time consuming and costly to defend.
Environmental laws have generally become more stringent and this trend may continue over time, imposing
greater compliance costs and increasing risks and penalties associated with violation. We operate in
environmentally sensitive locations, and we are subject to potentially conflicting and changing regulatory
agendas of political, business, and environmental groups. Changes or restrictions on discharge limits, emissions
levels, material storage, handling, or disposal might require a high level of unplanned capital investment or
relocation to another global location where prohibitive regulations do not exist. It is possible that environmental
compliance costs and penalties from new or existing regulations may materially adversely affect our business,
financial condition, and results of operations.
We are increasingly required to certify compliance with various material content restrictions in our products
based on laws of various jurisdictions or territories such as the Restriction of Hazardous Substances (RoHS) and
Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) directives in the European Union
and China’s RoHS legislation. Similar laws have been adopted in other jurisdictions and may become
increasingly prevalent. In addition, we must also certify as to the non-applicability of the EU’s Waste Electrical
and Electronic Equipment directive for certain products that we manufacture. The REACH directive requires the
identification of Substances of Very High Concern (SVHCs) periodically. We must survey our supply chain and
certify to the non-presence or presence of SVHCs to our customers. As with other types of product certifications
that we routinely provide, we may incur liability and pay damages if our products do not conform to our
certifications.
We are also subject to a variety of environmental laws and regulations in China, which impose limitations
on the discharge of pollutants into the air and water and establish standards for the treatment, storage, and
disposal of solid and hazardous wastes. The manufacturing of our products generates gaseous chemical wastes,
liquid wastes, waste water, and other industrial wastes from various stages of the manufacturing process.
Production sites in China are subject to regulation and periodic monitoring by the relevant environmental
protection authorities. Environmental claims or the failure to comply with current or future regulations could
result in the assessment of damages or imposition of fines against us, suspension of production, or cessation of
operations.
The process to manufacture PCBs requires adherence to city, county, state,
federal, and foreign
environmental regulations regarding the storage, use, handling, and disposal of chemicals, solid wastes, and other
hazardous materials, as well as compliance with air quality standards and chemical use reporting. In China,
governmental authorities have adopted new rules and regulations governing environmental issues. An update to
Chinese environmental waste water law was issued in late 2012, but allows for an interim period in which plants
subject to such law may install equipment that meets the new regulatory regime. Our plants in China are not yet
in full compliance with the newly adopted environmental regulations. There can be no assurance that violations
will not occur in the future.
Employee theft or fraud could result in loss.
Certain of our employees have access to, or signature authority with respect to, bank accounts or other
company assets, which could expose us to fraud or theft. In addition, certain employees have access to certain
precious metals used in connection with our manufacturing and key information technology (IT) infrastructure
and to customer and other information that is commercially valuable. Should any employee, for any reason, steal
any such precious metals (which has occurred from time to time), compromise our IT systems, or misappropriate
customer or other information, we could incur losses, including losses relating to claims by our customers against
us, and the willingness of customers to do business with us may be damaged and, in the case of our defense
business, we could be debarred from future participation in government programs. Any such losses may not be
fully covered by insurance.
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Because we sell on a purchase order basis, we are subject to uncertainties and variability in demand by our
customers that could decrease revenues and harm our operating results.
Although we have long-term contracts with many customers, those contracts generally do not contain
volume commitments. We generally sell to customers on a purchase order basis. Our quick-turn orders are
subject to particularly short lead times. Consequently, our sales are subject to short-term variability in demand by
our customers. Customers submitting purchase orders may cancel, reduce, or delay their orders for a variety of
reasons, subject to negotiations. The level and timing of orders placed by our customers may vary due to:
• customer attempts to manage inventory;
• changes in customers’ manufacturing strategies, such as a decision by a customer to either diversify or
consolidate the number of PCB manufacturers or backplane assembly service providers used or to
manufacture or assemble its own products internally;
• variation in demand for our customers’ products; and
• changes in new product introductions.
We have periodically experienced terminations, reductions, and delays in our customers’ orders. Further
terminations, reductions, or delays in our customers’ orders could materially adversely affect our business,
financial condition, and results of operations.
Increasingly, our customers are requesting that we enter into supply agreements with them that have
restrictive terms and conditions. These agreements typically include provisions that increase our financial
exposure, which could result in significant costs to us.
Increasingly, our customers are requesting that we enter into supply agreements with them. These
agreements typically do not include volume commitments, but do include provisions that generally serve to
increase our exposure for product liability and limited sales returns, which could result in higher costs to us as a
result of such claims. In addition, these agreements typically contain provisions that seek to limit our operational
and pricing flexibility and extend payment terms, which could materially adversely affect our cash flow,
business, financial condition, and results of operations.
Our business has benefited from OEMs deciding to outsource their PCB manufacturing and backplane
assembly needs to us. If OEMs choose to provide these services in-house or select other providers, our
business could suffer.
Our future revenue growth partially depends on new outsourcing opportunities from OEMs. Current and
prospective customers continuously evaluate our performance against other providers. They also evaluate the
potential benefits of manufacturing their products themselves. To the extent that outsourcing opportunities are
not available either due to OEM decisions to produce these products themselves or to use other providers, our
financial results and future growth could be materially adversely affected.
Consolidation among our customers could adversely affect our business.
Recently, some of our large customers have consolidated, and further consolidation of customers may occur.
Depending on which organization becomes the controller of
the supply chain function following the
consolidation, we may not be retained as a preferred or approved supplier. In addition, product duplication could
result in the termination of a product line that we currently support. While there is potential for increasing our
position with the combined customer, there does exist the potential for decreased revenue if we are not retained
as a continuing supplier. We also face the risk of increased pricing pressure from the combined customer because
of its increased market share.
We are exposed to the credit risk of some of our customers and to credit exposures in weakened markets.
Most of our sales are on an “open credit” basis, with standard industry payment terms. We monitor
individual customer payment capability in granting such open credit arrangements, seek to limit such open credit
28
to amounts we believe the customers can pay, and maintain reserves we believe are adequate to cover exposure
for doubtful accounts. During periods of economic downturn in the electronics industry and the global economy,
our exposure to credit risks from our customers increases. Although we have programs in place to monitor and
mitigate the associated risks, such programs may not be effective in reducing our credit risks.
Our five largest OEM customers accounted for approximately 44%, 41% and 33% of our net sales for the
years ended December 29, 2014, December 30, 2013, and December 31, 2012, respectively. Additionally, our
OEM customers often direct a significant portion of their purchases through a relatively limited number of EMS
companies. Sales to EMS companies represented approximately 39%, 38%, and 40% of our net sales for the
years ended December 29, 2014, December 30, 2013, and December 31, 2012, respectively. Our contractual
relationship is often with the EMS companies, who are obligated to pay us for our products. Because we expect
our OEM customers to continue to direct our sales to EMS companies, we expect to continue to be subject to this
credit risk with a limited number of EMS customers. If one or more of our significant customers were to become
insolvent or were otherwise unable to pay us, our business, financial condition, and results of operations would
be materially adversely affected.
We rely on suppliers for the timely delivery of raw materials and components used in manufacturing our
PCBs and backplane assemblies. If a raw material supplier fails to satisfy our product quality standards, it
could harm our customer relationships.
Although we have preferred suppliers for most of our raw materials, the materials we use are generally
readily available in the open market, and other potential suppliers exist. The components for backplane
assemblies in some cases have limited or sole sources of supply. Consolidations and restructuring in our supplier
base may result in adverse materials pricing due to reduction in competition among our suppliers. Furthermore, if
a raw material or component supplier fails to satisfy our product quality standards, including standards relating to
“conflict minerals” (discussed above in a separate risk factor), it could harm our customer relationships.
Suppliers may from time to time extend lead times, limit supplies, or increase prices, due to capacity constraints
or other factors, which could harm our ability to deliver our products on a timely basis.
We may need additional capital in the future to fund investments in our operations, refinance our
indebtedness and to maintain and grow our business, and such capital may not be available on acceptable
terms, or at all.
Our business is capital-intensive, and our ability to increase revenue, profit, and cash flow depends upon
continued capital spending. If we are unable to fund our capital requirements as currently planned, however, it
would have a material adverse effect on our business, financial condition, and results of operations. If we do not
achieve our expected operating results, we would need to reallocate our sources and uses of operating cash flows.
This may include borrowing additional funds to service debt payments, which may impair our ability to make
investments in our business. Looking ahead at long-term needs, we may need to raise additional funds for a
number of purposes, including:
• to fund capital equipment purchases to increase production capacity, upgrade and expand our
technological capabilities and replace aging equipment or introduce new products;
• to refinance our existing indebtedness;
• to fund our operations beyond 2015;
• to fund working capital requirements for future growth that we may experience;
• to enhance or expand the range of services we offer;
• to increase our sales and marketing activities; or
• to respond to competitive pressures or perceived opportunities, such as investment, acquisition and
international expansion activities.
Should we need to raise funds through incurring additional debt, we may become subject to covenants even
more restrictive than those contained in our current debt instruments. There can be no assurance that additional
29
capital would be available on a timely basis, on favorable terms, or at all. If such funds are not available to us
when required or on acceptable terms, our business, financial condition, and results of operations could be
materially adversely affected.
Our Asia Pacific operations could be materially adversely affected by a shortage of utilities or a
discontinuation of priority supply status offered for such utilities.
The manufacturing of PCBs requires significant quantities of electricity and water. Our Asia Pacific
operations have historically purchased substantially all of the electrical power for their manufacturing plants in
China from local power plants. Because China’s economy has recently been in a state of growth, the strain on the
nation’s power plants is increasing, which has led to continuing power outages in various parts of the country.
There may be times when our operations in China may be unable to obtain adequate sources of electricity to meet
production requirements. Additionally, we do not generally maintain any back-up power generation facilities for
our operations, so if we were to lose power at any of our facilities, we would be required to cease operations until
power was restored. Any stoppage of power could materially adversely affect our ability to meet our customers’
orders in a timely manner, thus potentially resulting in a loss of business and increased costs of manufacturing. In
addition, the sudden cessation of power supply could damage our equipment, resulting in the need for costly
repairs or maintenance as well as damage to products in production, resulting in an increase in scrapped products.
For example, in the third quarter of 2014, one of our principal plants was affected by a 5 day unexpected power
outage, which increased our manufacturing costs. Similarly, the sudden cessation of the water supply to Chinese
facilities could adversely affect our ability to fulfill orders in a timely manner, potentially resulting in a loss of
business and under-utilization of capacity. Various regions in China have in the past experienced shortages of
both electricity and water and unexpected interruptions of power supply. From time to time, the Chinese
government
rations electrical power, which can lead to unscheduled production interruptions in our
manufacturing facilities. There can be no assurance that our required utilities would not in the future experience
material interruptions, which could have a material adverse effect on our business, financial condition, and
results of operations.
Outages, computer viruses, break-ins, and similar events could disrupt our operations, and breaches of our
security systems may cause us to incur significant legal and financial exposure.
including worldwide financial reporting,
We rely on information technology networks and systems, some of which are owned and operated by third
parties, to process, transmit, and store electronic information. In particular, we depend on our information
technology infrastructure for a variety of functions,
inventory
management, procurement, invoicing, and email communications. Any of these systems may be susceptible to
outages due to fire, floods, power loss, telecommunications failures, terrorist attacks, and similar events. Despite
the implementation of network security measures, our systems and those of third parties on which we rely may
also be vulnerable to computer viruses, break-ins, and similar disruptions. If we or our vendors are unable to
prevent such outages and breaches, our operations could be disrupted. If unauthorized parties gain access to our
information systems or such information is used in an unauthorized manner, misdirected, lost, or stolen during
transmission, any theft or misuse of such information could result in, among other things, unfavorable publicity,
governmental inquiry and oversight, difficulty in marketing our services, allegations by our customers that we
have not performed our contractual obligations, litigation by affected parties, and possible financial obligations
for damages related to the theft or misuse of such information, any of which could have a material adverse effect
on our business, financial condition, and results of operations.
Our business may suffer if any of our key senior executives discontinues employment with us or if we are
unable to recruit and retain highly skilled engineering and sales staff.
Our future success depends to a large extent on the services of our key managerial employees. We may not
be able to retain our executive officers and key personnel or attract additional qualified management in the
future. We can make no assurances that future changes in executive management will not have a material adverse
effect on our business, financial condition or results of operations. Our business also depends on our continuing
ability to recruit, train, and retain highly qualified employees, particularly engineering and sales and marketing
30
personnel. The competition for these employees is intense, and the loss of these employees could harm our
business. Further, our ability to successfully integrate acquired companies depends in part on our ability to retain
key management and existing employees at the time of the acquisition.
Our manufacturing processes depend on the collective industry experience of our employees. If a
significant number of these employees were to leave us, it could limit our ability to compete effectively and
could harm our financial results.
We have limited patent or trade secret protection for our manufacturing processes. We rely on the collective
experience of our employees involved in our manufacturing processes to ensure we continuously evaluate and
adopt new technologies in our industry. Although we are not dependent on any one employee or a small number
of employees, if a significant number of our employees involved in our manufacturing processes were to leave
our employment, and we were not able to replace these people with new employees with comparable experience,
our manufacturing processes might suffer as we might be unable to keep up with innovations in the industry. As
a result, we may lose our ability to continue to compete effectively. For example, we have experienced a
significant amount of employee attrition each year, which has negatively impacted our yield, costs of production,
and service times.
We may be exposed to intellectual property infringement claims by third parties that could be costly to
defend, could divert management’s attention and resources, and if successful, could result in liability.
We rely on a combination of copyright, patent, trademark and trade secret laws, confidentiality procedures,
contractual provisions, and other measures to protect our proprietary information. All of these measures afford
only limited protection. These measures may be invalidated, circumvented, or challenged, and others may
develop technologies or processes that are similar or superior to our technology. We may not have the controls
and procedures in place that are needed to adequately protect proprietary information. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy our products or obtain or use information
that we regard as proprietary, which could materially adversely affect our business, financial condition, and
results of operations.
Furthermore, there is a risk that we may infringe on the intellectual property rights of others. As is the case
with many other companies in the PCB industry, we from time to time receive communications from third parties
asserting patent rights to our products and enter into discussions with such third parties. Irrespective of the
validity or the successful assertion of such claims, we could incur costs in either defending or settling any
intellectual property disputes alleging infringement. If any claims are brought against the customers for such
infringement, whether or not these have merit, we could be required to expend significant resources in defending
such claims. In the event we are subject to any infringement claims, we may be required to spend a significant
amount of money to develop non-infringing alternatives or obtain licenses. We may not be successful in
developing such alternatives or in obtaining such licenses on reasonable terms or at all, which could disrupt the
production processes, damage our reputation, and materially adversely affect our business, financial condition,
and results of operations.
Our business and operations could be materially adversely affected by climate change initiatives.
Our manufacturing processes require that we purchase significant quantities of energy from third parties,
which results in the generation of greenhouse gases, either directly on-site or indirectly at electric utilities. Both
domestic and international legislation to address climate change by reducing greenhouse gas emissions could
create increases in energy costs and price volatility. Considerable international attention is now focused on
development of an international policy framework to guide international action to address climate change.
Proposed and existing legislative efforts to control or limit greenhouse gas emissions could affect our energy
sources and supply choices as well as increase the cost of energy and raw materials that are derived from sources
that generate greenhouse gas emissions.
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Risks Related to the Merger
Legal proceedings in connection with the Merger, the outcomes of which are uncertain, could delay or
prevent the completion of the Merger.
Since the public announcement of the Merger Agreement on September 22, 2014, Viasystems, TTM,
Merger Sub, and the members of the Viasystems Board have been named as defendants in two putative class
action complaints challenging the Merger. The first lawsuit, filed in the Circuit Court of St. Louis County,
Missouri, and the second lawsuit, filed in the Court of Chancery of the State of Delaware, generally allege,
among other things, that the Merger fails to properly value Viasystems, that the individual defendants breached
their fiduciary duties in approving the Merger Agreement and that those breaches were aided and abetted by
TTM, Merger Sub, and Viasystems. The Lawsuits seek, among other things, injunctive relief to enjoin the
defendants from completing the Merger on the agreed-upon terms, rescinding, to the extent already implemented,
the Merger Agreement or any of the terms therein, costs and disbursements, and attorneys’ and experts’ fees and
costs, as well as other equitable relief as the court deems proper.
One of the conditions to the Merger is that no temporary restraining order, preliminary or permanent
injunction, or other order (as defined in the Merger Agreement) issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; nor shall there
rule, regulation, or order enacted, entered, or enforced that prevents or prohibits the
be any statute,
consummation of the Merger. Consequently, if the plaintiffs secure injunctive or other relief prohibiting,
delaying, or otherwise adversely affecting the defendants’ ability to consummate the Merger,
then such
injunctive or other relief may prevent the Merger from becoming effective within the expected time frame or at
all. If consummation of the Merger is prevented or delayed, it could result in substantial costs to TTM and
Viasystems. In addition, TTM and Viasystems could incur significant costs in connection with the Lawsuits,
including costs associated with the indemnification of Viasystems’ directors and officers. For additional
information, see “Item 3. Legal Proceedings.”
TTM’s business relationships may be subject to disruption due to uncertainty associated with the Merger.
Parties with which TTM does business may experience uncertainty associated with the proposed Merger,
including with respect to current or future business relationships with TTM or the combined company. TTM’s
business relationships may be subject to disruption, as customers, distributors, suppliers, vendors, and others may
attempt to negotiate changes in existing business relationships or consider entering into business relationships
with parties other than TTM or the combined company. These disruptions could have a material adverse effect on
the businesses, financial condition, or results of operations of the combined company, including a material
adverse effect on TTM’s ability to realize the anticipated benefits of the Merger. The risk and adverse effect of
such disruptions could be exacerbated by a delay in consummating the Merger or termination of the Merger
Agreement.
We may be unable to realize anticipated cost savings or may incur additional costs.
We have identified at least $55 million in annualized cost savings, which are expected to be implemented
within the first 12 months following consummation of the Merger. Approximately 40% of the identified cost
savings relate to selling, general, and administrative labor
including rationalizing
overlapping functional areas; approximately 36% of the identified cost savings relate to non-labor selling,
general, and administrative costs, including service provider contract rationalization with the goal of increasing
overhead efficiencies and avoiding duplicative efforts; and approximately 24% of the identified cost savings
relates to plant operating efficiencies. Our estimates of costs to achieve these cost savings do not include non-
cash restructuring costs relating to potential plant optimizations or any write-downs of long-lived assets or
intangible assets, as we have not conducted our review of the operations of the combined company, and any such
non-cash amounts may be material. To realize the anticipated cost savings, we expect to incur cash expenses of
approximately $26 million in 2015, including approximately $9.9 million in change-in-control related payments
noted below.
related efficiencies,
In addition, we expect to incur a number of non-recurring costs associated with combining the operations of
the two companies. Most of these non-recurring costs will be comprised of transaction and regulatory costs
related to the Merger, including fees paid to financial and legal advisors related to the Merger and related
32
to incur total merger-related costs of
financing arrangements, and employment-related costs. We expect
approximately $27.8 million, of which $6.0 million has been incurred during the year ended December 29, 2014
and consists primarily of investment bank fees, legal fees, and other professional fees, approximately $76.4
million in premiums, accrued interest, and other costs to refinance the debt of Viasystems, and approximately
$33.3 million of debt issuance costs. In addition, pursuant to change-in-control provisions in Viasystems’
employment agreements with certain executives, such executives may be entitled to receive change-in-control
related payments in an amount equal to approximately $9.9 million upon a termination of employment.
While our management believes these cost savings are achievable, our ability to achieve such estimated cost
savings in the timeframe described is subject to various assumptions by management, which may or may not be
realized, as well as the incurrence of other costs in our operations that offset all or a portion of such cost savings.
As a consequence, we may not be able to realize all of these cost savings within the time frame expected or at all.
In addition, TTM may incur additional and/or unexpected costs in order to realize these cost savings. See “—
The integration of Viasystems may present significant challenges to TTM, and although TTM expects the Merger
with Viasystems will result in cost savings, synergies, and other benefits to TTM, TTM may not realize those
benefits because of difficulties related to integration, the realization of synergies, and other challenges.”
The integration of Viasystems may present significant challenges to TTM, and although TTM expects the
Merger with Viasystems will result in cost savings, synergies, and other benefits to TTM, TTM may not
realize those benefits because of difficulties related to integration, the realization of synergies, and other
challenges.
TTM and Viasystems have operated and, until consummation of the Merger, will continue to operate,
independently, and there can be no assurances that their businesses can be integrated successfully. It is possible
that the integration process could result in the loss of key TTM or Viasystems employees, the loss of customers,
the disruption of either company’s or both companies’ ongoing businesses or other unexpected integration issues,
higher than expected integration costs and an overall post-completion integration process that takes longer than
originally anticipated. Specifically, the following issues and potential risks, among others, must be addressed in
integrating the operations of Viasystems and TTM in order to realize the anticipated benefits of the Merger so the
combined company performs as expected:
• failure to implement the business plan for the combined company;
• combining the businesses of TTM and Viasystems and meeting the capital requirements of the combined
company in a manner that permits the combined company to achieve the cost savings or revenue synergies
anticipated to result from the Merger, the failure of which would result in the anticipated benefits of the
Merger not being realized in the time frame currently anticipated or at all;
• satisfying the requirements of our customers and meeting their expectations while we integrate operations,
transition production and reduce footprint;
• harmonizing the companies’ operating practices, employee development and compensation programs,
internal controls, and other policies, procedures, and processes;
• costs, including legal and settlement costs, associated with TTM’s and Viasystems’ legal proceedings, and
other costs, including legal and settlement costs, associated with the combined company’s other loss
contingencies, in each case whether known or unknown and whether relating to past, present or future
facts, events, circumstances, or occurrences, any of which could be materially adverse to the business,
results of operations, assets, or financial condition of TTM or Viasystems and, following the Merger, the
financial position, results of operations, and liquidity of the combined company and the ability of the
combined company to achieve expected benefits of the Merger;
• potential deterioration in the financial performance of TTM and Viasystems, including any potential
deviation in results of operations from historical levels;
• difficulties in the assimilation and retention of employees;
• demands on management related to the increase in the size of our company after the Merger;
33
• the diversion of management’s attention from the management of daily operations to the integration of
operations;
• unanticipated changes in applicable laws and regulations;
• the imposition of divestiture requirements or a required exit from business lines to obtain regulatory
approvals;
• difficulties and risks in the integration of departments and systems (including accounting, health
information and management information systems), technologies (including software), books and records
and procedures, as well as in maintaining uniform standards and controls (including internal control over
financial reporting and related procedures and policies); and
• other unanticipated issues, expenses, or liabilities that could materially adversely affect our ability to
realize any expected synergies on a timely basis, or at all.
If we cannot successfully integrate Viasystems, we may experience material negative consequences to our
business, financial condition, or results of operations. Successful integration of TTM and Viasystems will depend
on our ability to manage these operations, to realize opportunities for revenue growth and to eliminate redundant
and excess costs. Because of difficulties in combining the two companies, we may not be able to achieve the
benefits that we expect to achieve as a result of the Merger.
The Merger may be consummated on different terms from those contained in the Merger Agreement.
Prior to the consummation of the Merger, the parties may, by their mutual agreement, amend or alter the
terms of the Merger Agreement, including with respect to, among other things, the Merger Consideration to be
received by Viasystems stockholders, assets to be acquired, or any covenants or agreements with respect to the
parties’ respective operations during the pendency thereof, except that no amendment may be made without
further stockholder approval which, by law or in accordance with the rules of the Nasdaq Global Market, requires
further approval by Viasystems’ stockholders. Any such amendments or alterations may have negative
consequences, including reducing the cash available for TTM’s operations or to meet obligations or restricting or
limiting our assets or operations. Under certain circumstances, Viasystems stockholders may be permitted or
required to adopt any such amendments, which could delay the consummation of the Merger and subject us to
additional expense.
The consummation of the Merger is subject to antitrust and other regulatory approvals, and any delay in
the consummation of the Merger may substantially reduce the benefits that TTM expects to obtain from the
Merger.
Satisfying the conditions to, and consummation of, the Merger may take longer than, and could cost more
than, TTM expects. TTM cannot predict whether or when the conditions to the Merger will be satisfied, and
satisfying the conditions to the Merger, including obtaining antitrust, the Committee on Foreign Investment in
the United States, and other regulatory approvals, could delay the effective time of the Merger for a significant
period of time or prevent it from occurring. Any delay in consummating the Merger or any additional conditions
imposed in order to consummate the Merger, including divestitures required to obtain the approvals of antitrust
authorities, may not only materially adversely affect the cost savings and other benefits that TTM expects to
achieve if the Merger and the integration of the companies’ respective businesses are completed within the
expected timeframe, but also may result in the sale of business lines that generate certain of our net sales,
operating income and cash flows.
Efforts may be made by regulatory authorities or private parties to rescind the Merger, place restrictions on
the business of the combined company, or require divestitures to gain the approval of regulatory authorities
with respect to the Merger.
The consummation of the Merger is conditioned upon the expiration or termination of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) waiting period and the receipt of
certain other approvals, including foreign approvals under the applicable antitrust and competition laws of China,
34
Germany and Estonia. As of the date of this report, we have received the required antitrust approvals under the
applicable antitrust and competition laws of China, Germany and Estonia. We have not yet received the
necessary approval from the Committee on Foreign Investment in the United States. Additionally, we received a
second request for additional information and documentary material (the “Second Request”) from the Antitrust
Division of the U.S. Department of Justice, Federal Trade Commission (the “FTC”) on December 4, 2014, which
extends the waiting period under the HSR Act until 30 days after we have substantially complied with the FTC’s
Second Request, unless the waiting period is extended voluntarily by us or terminated earlier by the FTC. We
intend to cooperate fully with the FTC in complying with the Second Request.
Notwithstanding the expiration of the statutory waiting periods or an extension thereto and receipt of
clearance of the Merger from the applicable regulatory authorities, at any time after consummation of the Merger
the FTC, or any state or foreign regulatory authority, could take action under antitrust laws as it deems necessary
or desirable in the public interest, including seeking to rescind the Merger or the divestiture of shares purchased
or particular assets held by the combined company, in addition to other restrictions. Moreover, a competitor,
customer or other third party could initiate a private action under antitrust laws challenging the Merger after it
has been consummated. There can be no assurance that a challenge to the Merger on antitrust grounds after the
consummation of the Merger will not be made or, if this challenge is made, what the result will be.
If the challenging party is successful, the Merger may be rescinded or we may be subject to requirements,
limitations or costs, required to make divestitures or have restrictions placed on the conduct of the combined
company’s business. If we agree to any material requirements, limitations, costs, divestitures or restrictions, these
requirements,
limitations, costs, divestitures or restrictions could adversely affect our ability to integrate
Viasystems’ operations with TTM’s operations and/or reduce the anticipated benefits of the Merger. This could
have a material adverse effect on the combined company’s business and results of operations.
Additionally, while the Merger is conditioned on the satisfaction of applicable regulatory requirements, it is
not conditioned on the absence of any changes to the business of TTM, Viasystems, and the combined company
that may be necessitated by such regulatory authorities to obtain approvals.
As a result of the Merger, TTM’s goodwill, indefinite-lived intangible assets, and other intangible assets in
its consolidated balance sheet will increase. If its goodwill, indefinite-lived intangible assets, or other
intangible assets become impaired in the future, TTM would be required to record a material, non-cash
charge to earnings, which would also reduce its stockholders’ equity.
Under U.S. GAAP, goodwill and indefinite-lived intangible assets are reviewed for impairment on an annual
basis (or more frequently if events or circumstances indicate that their carrying value may not be recoverable)
and other intangible assets are similarly reviewed for impairment if events or circumstances indicate that their
carrying value may not be recoverable. If TTM’s goodwill, indefinite-lived intangible assets, or other intangible
assets are determined to be impaired in the future, TTM will be required to record a non-cash charge to earnings
during the period in which the impairment is determined, and any such charges may be material. In the past,
TTM has experienced impairments of goodwill, definite-lived intangibles and long-lived assets due to weaker
than expected operating results or changes in market conditions that were different than those anticipated and
impacted the fair value of such assets. See “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
Risks Related to the Combined Company following the Merger
Failure to achieve expected benefits of the Merger and to integrate Viasystems’ operations with TTM’s
could materially adversely affect us following the completion of the Merger.
Although we expect to realize strategic, operational, and financial benefits as a result of the Merger, we
cannot be certain whether, and to what extent, such benefits will be achieved in the future. In particular, the
success of the Merger will depend on achieving efficiencies and cost savings, and no assurances can be given that
we will be able to do so. For example, costs associated with Viasystems’ legal proceedings and other loss
contingencies may be greater than expected. In addition, in order to obtain the benefits of the Merger, we must
integrate Viasystems’ operations. Such integration may be complex and the failure to do so quickly and
effectively may negatively affect earnings.
35
TTM may be unable to hire and retain sufficient qualified personnel, and the loss of any of TTM’s key
executive officers could adversely affect TTM.
TTM believes that its future success will depend in large part on its ability to attract and retain highly
skilled, knowledgeable, sophisticated, and qualified managerial and professional personnel, including, following
the Merger, key employees of Viasystems. Key employees of TTM or Viasystems may depart for a variety of
reasons, including because of issues relating to the difficulty of integration or accelerated retirement as a result of
amounts received in connection with the Merger. If key employees of TTM or Viasystems depart, the integration
of the companies may be more difficult and the combined company’s business following the Merger may be
harmed. Furthermore, TTM may have to incur significant costs in identifying, hiring and retaining replacements
for departing employees and may lose significant expertise and talent relating to the businesses of TTM or
Viasystems, and TTM’s ability to realize the anticipated benefits of the Merger may be adversely affected. In
addition, there could be disruptions to or distractions for the workforce and management associated with
integrating employees into TTM. Accordingly, no assurance can be given that TTM will be able to attract or
retain key employees of TTM and Viasystems to the same extent that those companies have been able to attract
or retain their own employees in the past.
The combined company may require additional capital in the future, which may not be available to it on
satisfactory terms, if at all.
After consummation of the Merger, we will require liquidity to fund our operations and make capital
expenditures, as well as interest and principal payments on our debt. To the extent that the funds generated by the
combined company’s ongoing operations are insufficient to cover our liquidity requirements, we may need to
raise additional funds through financings. If the combined company cannot obtain adequate capital or sources of
credit on favorable terms, or at all, its business, operating results and financial condition could be adversely
affected. Any future equity or debt financing may not be available on terms that are favorable to the combined
company, if at all.
After the consummation of the Merger, the combined company will rely on the automotive industry for a
significant portion of sales.
A significant portion of Viasystems’ historical sales has been to customers within the automotive industry.
If there was a destabilization of the automotive industry or a market shift away from automotive customers, there
may be a material adverse effect on the combined company’s business, financial condition, and results of
operations.
After the consummation of the Merger, failure to meet the quality control standards of automotive
customers may cause us to lose existing, or prevent us from gaining new, automotive customers.
After the consummation of the Merger, we expect to serve numerous automotive customers. For safety
reasons, automotive customers have strict quality standards that generally exceed the quality requirements of
other customers. After the consummation of the Merger, a significant portion of our PCB products are expected
to be sold to customers in the automotive industry, and if such products do not meet these quality standards, our
business, financial condition, and results of operations may be materially adversely affected. These automotive
customers may require long periods of time to evaluate whether the combined company’s manufacturing
processes and facilities meet their quality standards. If we were to lose automotive customers due to quality
control issues, we might not be able to regain those customers or gain new automotive customers for long periods
of time, which could have a material adverse effect on our business, financial condition, and results of
operations. Moreover, we may be required under our contracts with automotive industry customers to indemnify
them for the cost of warranties and recalls relating to our products. See “— Products we manufacture may
contain design or manufacturing defects, which could result in reduced demand for our services and liability
claims against us.”
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
36
ITEM 2. PROPERTIES
The following table describes our principal manufacturing facilities and our drilling and tooling process
facility.
U.S. Locations(1)
Chippewa Falls, WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Logan, UT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
San Diego, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costa Mesa, CA(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Santa Ana, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Santa Clara, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stafford, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stafford Springs, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Locations(3)
Hong Kong (OPCM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dongguan, China (DMC)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Guangzhou, China (GME) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shanghai, China(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shanghai, China (SME) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shanghai, China (SMST/SP) . . . . . . . . . . . . . . . . . . . . . . . . .
Shanghai, China (SKE)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Suzhou, China (MAS)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased
Square Feet
Owned
Square Feet
Total
Square Feet
—
—
38,739
11,775
—
18,304
21,251
9,000
99,069
86,982
—
—
85,745
—
—
3,294
—
281,000
129,300
—
—
82,550
49,115
136,000
110,328
788,293
281,000
129,300
38,739
11,775
82,550
67,419
157,251
119,328
887,362
—
1,322,803
968,028
—
416,761
521,257
135,207
1,114,665
86,982
1,322,803
968,028
85,745
416,761
521,257
138,501
1,114,665
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
176,021
4,478,721
4,654,742
We maintain our properties in good operating condition. We believe that our properties are suitable and
adequate for us to operate at present levels, and the productive capacity and extent of utilization of the facilities
are appropriate for our existing real estate requirements.
(1) Locations pertain to our North America operating segment
(2) Location of our headquarters and not a manufacturing facility
(3) Foreign locations represent the following subsidiaries:
• OPC Manufacturing Limited (OPCM)
• Dongguan Meadville Circuits Limited (DMC)
• Guangzhou Meadville Electronics Co., Ltd. (GME)
• Shanghai Meadville Electronics Co., Ltd. (SME)
• Shanghai Meadville Science & Technology Co., Ltd. (SMST/SP)
• Shanghai Kaiser Electronics Co., Ltd. (SKE)
• Meadville Aspocomp (Suzhou) Electronics Co., Ltd. (MAS)
(4) Drilling and tooling process facility
(5) Facility shutdown, manufacturing ceased during third quarter 2013, and sold in February 2015.
37
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become a party to various legal proceedings arising in the ordinary course of our
business. There can be no assurance that we will prevail in any such litigation. We believe that the amount of any
reasonably possible or probable loss for known matters would not be material to our financial statements;
however, 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 our financial condition, results of operations, or
cash flows in a particular period.
Since the public announcement on September 22, 2014 of the execution of the Merger Agreement,
Viasystems, TTM, Merger Sub, and the members of the Viasystems Board have been named as defendants in
two putative class action complaints challenging the Merger. The Missouri Lawsuit, filed in the Circuit Court of
St. Louis County, Missouri on September 30, 2014, and the Delaware Lawsuit, filed in the Court of Chancery of
the State of Delaware on October 13, 2014, generally allege that the Merger fails to properly value Viasystems,
that the individual defendants breached their fiduciary duties in approving the Merger Agreement, and that those
breaches were aided and abetted by TTM, Merger Sub, and Viasystems.
The Delaware Lawsuit specifically alleges, among other allegations, that (1) the Viasystems Board breached
its fiduciary duties by: (a) agreeing to the Merger for grossly inadequate consideration, (b) agreeing to lock up
the Merger with deal protection devices that prevent other bidders from making a successful competing offer for
Viasystems, and (c) participating in a transaction where the loyalties of the Viasystems Board and management
are divided; (2) the voting agreements entered into between TTM and certain of Viasystems’ significant
stockholders prevent Viasystems stockholders from providing a meaningful vote on the proposal to adopt the
Merger; and (3) that those breaches of fiduciary duties were aided and abetted by TTM, Merger Sub, and
Viasystems. Further, the Missouri Lawsuit specifically alleges, among other allegations, that (1) the proposed
Merger is unfair and the consideration to be paid in connection with the Merger is inadequate; (2) the Viasystems
Board and Viasystems’ management have a conflict of interest due to the cash pool bonus and change in control
payments to be made to certain executive officers and key employees if the Merger is consummated; and (3) the
Merger Agreement contains impermissible deal protection devices.
The Lawsuits seek injunctive relief to enjoin the defendants from completing the Merger on the agreed-upon
terms, rescinding, to the extent already implemented, the Merger Agreement or any of the terms therein, costs
and disbursements and attorneys’ and experts’ fees and costs, as well as other equitable relief as the respective
court deems proper. The Delaware Lawsuit also seeks: (1) in the event the Merger is consummated prior to the
entry of the court’s final judgment, rescissory damages as an alternative to rescission, and (2) an accounting by
all defendants to the plaintiff and other members of the class for all damages caused by the defendants and for all
profits and any special benefits obtained as a result of their alleged breaches of their fiduciary duties.
On January 6, 2015, the parties to the Missouri Lawsuit entered into a Memorandum of Understanding
(MOU) with respect
that will terminate both Lawsuits upon entry of the final
judgment. The parties are in the process of negotiating this settlement agreement. Pursuant to the MOU, the
settlement agreement will provide for payment of attorneys’ fees and reimbursement of expenses, and releases of
all claims and relief sought in both Lawsuits.
to a proposed settlement
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
38
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Historical Trading Price
Our common stock has been listed on the Nasdaq Global Select Market under the symbol “TTMI” since
September 21, 2000. The following table sets forth the quarterly high and low sales prices of our common stock
as reported on the Nasdaq Global Select Market for the periods indicated.
2014:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013:
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High
Low
$ 8.75
$ 8.49
$ 8.44
$ 7.73
$ 9.56
$ 8.75
$10.53
$10.91
$7.33
$7.24
$6.72
$5.59
$7.28
$6.53
$8.68
$7.51
As of February 23, 2015, there were approximately 282 holders of record of our common stock. The closing
sale price of our common stock on the Nasdaq Global Select Market on February 23, 2015 was $8.54.
Dividend Policy
TTM Technologies, Inc. has not declared or paid any dividends since 2000 and does not anticipate paying
any cash dividends in the foreseeable future. TTM Technologies, Inc. presently intends to retain any future
earnings to service debt and to finance future operations and the expansion of its business. In addition, the Credit
Agreement contains restrictions and limitations on the declaration and payment of dividends and distributions by
the Asia Pacific operating segment.
39
STOCK PRICE PERFORMANCE GRAPH
The performance graph below compares, for the period from December 31, 2009 to December 29, 2014, the
cumulative total stockholder return on our common stock against the cumulative total return of:
• the NASDAQ Composite Index; and
• the Dow Jones U.S. Electrical Components & Equipment Index.
The graph assumes $100 was invested in our common stock on December 31, 2009, and an investment in
NASDAQ Composite Index and the Dow Jones US Electrical Components & Equipment Index. The stock
performance shown on the graph below represents historical stock performance and is not necessarily indicative
of future stock performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among TTM Technologies, Inc., The NASDAQ Composite Index and
The Dow Jones US Electrical Components & Equipment Index
$250
$200
$150
$100
$50
$0
12/31/09
12/31/10
12/31/11
12/31/12
12/30/13
12/29/14
TTM Technologies, Inc.
NASDAQ Composite
Dow Jones US Electrical Components & Equipment
* $100 invested on December 31, 2009 in stock or index, including reinvestment of dividends.
12/31/09 12/31/10 12/31/11 12/31/12 12/30/13 12/29/14
TTM Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 129.40 95.06 79.71 74.50 65.48
NASDAQ Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00 117.61 118.70 139.00 196.83 223.74
Dow Jones US Electrical Components & Equipment . . . 100.00 128.64 115.26 141.22 195.26 210.76
The performance graph above shall not be deemed “filed” for purposes of Section 18 of the Exchange Act,
or otherwise subject
to the liability of that section. The performance graph above will not be deemed
incorporated by reference into any filing of our company under the Securities Act of 1933, as amended, or the
Exchange Act.
40
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial data presented below are derived from our consolidated financial
statements. The selected financial data should be read in conjunction with “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the
notes thereto included elsewhere in this report.
Year Ended
December 29,
2014(1)
December 30,
2013(1)
December 31,
2012
December 31,
2011
December 31,
2010(2)
(In thousands, except per share data)
Consolidated Statement of Operations Data:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,325,717 $1,368,215 $1,348,668 $1,428,639 $1,179,671
925,266
1,131,028
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . .
1,150,372
1,123,669
1,127,326
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . .
194,689
217,843
224,999
301,313
254,405
Operating expenses:
Selling and marketing . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . .
Amortization of definite-lived intangibles . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . .
Impairment of goodwill and definite-lived
intangibles . . . . . . . . . . . . . . . . . . . . . . . . .
36,919
100,999
8,387
—
—
1,845
37,149
105,924
9,332
(17,917)
3,445
10,782
—
—
Total operating expenses . . . . . . . . . . . . . .
148,150
148,715
35,957
98,005
14,637
—
—
18,082
36,891
92,682
17,311
—
—
48,125
200,335
367,016
15,184
210,193
Operating income (loss) . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other expense, net . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . .
Income tax provision . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net (income) loss attributable to the non-
controlling interest . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to TTM
Technologies, Inc. stockholders . . . . . . . . . . . $
Earnings (loss) per common share attributable
to TTM Technologies, Inc. stockholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average common shares:
46,539
69,128
(142,017)
91,120
(23,830)
(506)
88
(24,248)
22,291
(7,598)
(24,031)
(10,743)
5,418
(29,356)
39,772
(15,879)
(25,784)
(5,527)
4,956
(26,355)
(168,372)
(12,728)
(26,504)
—
8,616
(17,888)
73,232
(26,005)
14,693
23,893
(181,100)
47,227
79,899
—
(2,016)
6,505
(5,359)
(8,368)
14,693 $
21,877 $ (174,595) $
41,868 $
71,531
0.18 $
0.18 $
0.27 $
0.26 $
(2.13) $
(2.13) $
0.52 $
0.51 $
1.02
1.01
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,238
83,941
82,506
83,132
81,800
81,800
81,176
81,944
70,220
70,819
Other Financial Data:
Depreciation of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
95,349 $
92,120 $
84,286 $
69,698 $
48,747
(1) Beginning in 2013, we operate on a 52 or 53 week year ending on the Monday nearest December 31. Fiscal
2014 and 2013 were 52 weeks and ended on December 29, 2014 and December 30, 2013, respectively. Prior
to 2013, our fiscal year always ended on December 31.
(2) Our results for the year ended December 31, 2010 include 267 days of activity of the Asia Pacific operating
segment, which we acquired on April 8, 2010.
41
34,345
79,668
13,678
—
389
766
—
128,846
125,559
(22,255)
—
5,333
(16,922)
108,637
(28,738)
As of
December 29,
2014
December 30,
2013
December 31,
2012
December 31,
2011
December 31,
2010
(In thousands)
Consolidated Balance Sheet Data:
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 302,111 $ 346,988 $ 395,732 $ 234,394 $ 258,299
1,761,952
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,601,289
145,283
228,883
Convertible senior notes . . . . . . . . . . . . . . . . . . . . . . .
380,118
273,804
Long-term debt, including current maturities . . . . . . .
728,255
715,464
TTM Technologies, Inc. stockholders’ equity . . . . . .
1,673,575
203,735
370,008
705,295
1,676,962
157,533
400,012
653,947
1,749,069
151,153
338,247
808,917
Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
December 31,
2011
December 31,
2010
(In thousands)
Supplemental Data:
Adjusted EBITDA(1)
Net cash provided by operating activities . . . . . . . . . .
Net cash (used in) provided by investing activities . . .
Net cash (used in) provided by financing activities . .
. . . . . . . . . . . . . . . . . . . . . . . . . $ 166,044 $ 181,293 $ 190,592 $ 258,245 $ 218,096
125,819
32,956
(35,368)
129,810
(108,571)
(77,141)
182,565
(136,444)
45,068
179,345
(140,617)
(55,215)
71,388
(35,689)
12,985
(1) “EBITDA” means earnings before interest expense, income taxes, depreciation and amortization. Adjusted
EBITDA means earnings before interest expense,
income taxes, depreciation, amortization, stock-based
compensation, gain on sale of assets, acquisition-related costs, and impairments, restructuring and other charges.
This is a non-GAAP financial measurement used by us to enhance the understanding of our operating results.
Adjusted EBITDA is a key measure we use to evaluate our operations. We provide our adjusted EBITDA because
we believe that investors and securities analysts will find adjusted EBITDA to be a useful measure for evaluating
our operating performance and comparing our operating performance with that of similar companies that have
different capital structures and for evaluating our ability to meet our future debt service, capital expenditures, and
working capital requirements. However, adjusted EBITDA should not be considered as an alternative to cash flows
from operating activities as a measure of liquidity or as an alternative to net income as a measure of operating
results in accordance with accounting principles generally accepted in the United States. The following provides a
reconciliation of adjusted EBITDA to the financial information in our consolidated statement of operations.
December 29,
2014
December 30,
2013
December 31,
2012
December 31,
2011
December 31,
2010
Year Ended
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 14,693
Add back items:
Income tax provision . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . .
Depreciation of property, plant and
7,598
23,830
$ 23,893
(In thousands)
$(181,100) $ 47,227
$ 79,899
15,879
24,031
12,728
25,784
26,005
26,504
28,738
22,255
equipment . . . . . . . . . . . . . . . . . . . . . . . .
95,349
92,120
84,286
69,698
48,747
Amortization of definite-lived
intangibles . . . . . . . . . . . . . . . . . . . . . . . .
8,387
9,332
14,684
17,427
13,795
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . .
Acquisition-related costs . . . . . . . . . . . . . .
Impairments, restructuring, and other
149,857
7,800
165,255
8,985
— (17,917)
—
5,981
(43,618)
10,266
—
—
186,861
8,075
—
—
193,434
6,913
—
9,170
charges . . . . . . . . . . . . . . . . . . . . . . . . . .
2,406
24,970
223,944
63,309
8,579
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . $166,044
$181,293
$ 190,592
$258,245
$218,096
42
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This financial review presents our operating results for each of our three most recent fiscal years and our
financial condition at December 29, 2014. Except for historical information contained herein, the following
discussion contains forward-looking statements which are subject to known and unknown risks, uncertainties and
other factors that may cause our actual results to differ materially from those expressed or implied by such
forward-looking statements. We discuss such risks, uncertainties and other factors throughout this report and
specifically under Item 1A of Part I of this report, Risk Factors. In addition, the following discussion should be
read in connection with the information presented in our consolidated financial statements and the related notes
to our consolidated financial statements.
OVERVIEW AND RECENT DEVELOPMENTS
We are a leading global provider of time-critical and technologically complex printed circuit board products
and backplane assemblies (i.e., PCBs populated with electronic components), which serve as the foundation of
sophisticated electronic products. We focus on providing time-to-market and advanced technology products and
offer a one-stop manufacturing solution to our customers from engineering support to prototype development
through final volume production. This one-stop manufacturing solution allows us to align technology
development with the diverse needs of our customers and to enable them to reduce the time required to develop
new products and bring them to market. We serve a diversified customer base consisting of approximately 1,000
customers in various markets throughout the world, including manufacturers of networking/communications
infrastructure products, smartphones and touchscreen tablets, as well as the aerospace and defense, high-end
computing, and industrial/medical industries. Our customers include both original equipment manufacturers and
electronic manufacturing services providers.
On September 21, 2014, TTM, Viasystems, and Merger Sub entered into the Merger Agreement under
which, subject to the satisfaction of certain conditions, we expect to acquire all outstanding shares of Viasystems
for a combined consideration of $11.33 in cash and 0.706 shares of TTM common stock per outstanding share of
Viasystems common stock, which based on the closing market price on December 31, 2014 was valued at $16.65
per share of Viasystems common stock, or approximately $361.7 million. The total purchase price of the
transaction, including debt assumed, is approximately $992.5 million, which was based on the closing market
price on December 31, 2014 and is subject to change prior to the consummation of the Merger.
Concurrently with the execution of the Merger Agreement, we obtained a debt financing commitment in an
aggregate amount of $1,115 million in connection with financing the transactions contemplated by the Merger
Agreement. Assuming consummation of the Merger, we intend to use the aggregate proceeds of such financing
arrangements to finance the Merger, to refinance certain existing indebtedness of Viasystems, to refinance certain
of our existing indebtedness, and to pay the fees and expenses incurred in connection with the Merger. We are in
the process of finalizing the specific financing arrangements.
Our Asia Pacific operating segment experiences revenue fluctuations, caused in part by seasonal patterns in
the touchscreen tablet and cellular phone industries, which together have become a significant portion of the end
markets we serve. This seasonality typically results in higher net sales in the third and fourth quarters due to end
customer demand to meet fourth quarter sales of consumer electronics products and lower sales in the first and
second quarters. Lower sales in the first and second quarters can present utilization challenges for us which
negatively impact gross margin. Additionally, our labor costs in China have increased significantly over the past
several years as a result of mandated increases in the minimum wage and other competitive dynamics, and we
operate in a priced competitive industry. The impact of these items, if not offset by yield and productivity
improvements and other cost efficiencies, may reduce our gross margins in the future.
During the year ended December 29, 2014, we experienced a decline in gross and operating margins in our
Asia Pacific operating segment resulting from the underutilization of certain advanced technology production
facilities and an unexpected power outage. We experienced underutilization in the first and second quarters of
2014 caused by an increase in capacity to service an expected higher level of business which did not materialize.
Additionally, in the third quarter of 2014, we experienced a 5 day production shut down due to an unexpected
43
power outage at one of our advanced technology production facilities which negatively impacted our productivity
and yield improvement efforts as we were launching new products and significantly ramping for increased
volumes. Although we believe these to be unique challenges, we may experience similar challenges in the future
which could negatively impact gross margins.
While our customers include both OEMs and EMS providers, we measure customers based on OEM
companies as they are the ultimate end customers. Sales to our 5 largest customers accounted for 44%, 41% and
33% of our net sales in 2014, 2013 and 2012, respectively. We sell to OEMs both directly and indirectly through
EMS providers.
The following table shows the percentage of our net sales attributable to each of the principal end markets
we served for the periods indicated:
End Markets(1)(2)
Aerospace and Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cellular Phone(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computing/Storage/Peripherals(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical/Industrial/Instrumentation/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Networking/Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
2012
16% 15% 15%
20
23
20
13
8
9
32
33
5
6
16
23
9
31
6
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100% 100%
(1) Sales to EMS companies are classified by the end markets of their OEM customers.
(2) Certain reclassifications of prior year end market percentages have been made to conform to the current year
presentation. Beginning in the first quarter of 2013, we reclassified substrate PCBs, which were included in
the Other end market, into the end markets that the substrate PCBs are sold into — predominantly Cellular
Phone.
(3) Smartphones are included in the Cellular Phone end market,
touchscreen tablets are included in the
Computing/Storage/Peripherals end market and other mobile devices such as e-readers are included in the
Other end market.
Purchase orders may be cancelled prior to shipment. We charge customers a fee, based on percentage
completed, if an order is cancelled once it has entered production. We derive revenues primarily from the sale of
PCBs and backplane assemblies using customer-supplied engineering and design plans. We recognize revenues
when persuasive evidence of a sales arrangement exists, the sales terms are fixed or determinable, title and risk of
loss have transferred, and collectability is reasonably assured — generally when products are shipped to the
customer. Net sales consist of gross sales less an allowance for returns, which typically have been less than 3%
of gross sales. We provide our customers a limited right of return for defective PCBs and backplane assemblies.
We record an estimate for sales returns and allowances at the time of sale based on historical results.
Cost of goods sold consists of materials, labor, outside services, and overhead expenses incurred in the
manufacture and testing of our products. Many factors affect our gross margin, including capacity utilization,
product mix, production volume, and yield. We generally do not participate in any significant long-term contracts
with suppliers, and we believe there are a number of potential suppliers for the raw materials we use.
Selling and marketing expenses consist primarily of salaries, labor related benefits, and commissions paid to
our internal sales force, independent sales representatives, and our sales support staff, as well as costs associated
with marketing materials and trade shows.
General and administrative costs primarily include the salaries for executive, finance, accounting,
information technology, facilities and human resources personnel, discretionary meals for employees in Asia, as
well as insurance expenses, expenses for accounting and legal assistance, incentive compensation expense, and
gains or losses on the sale or disposal of property, plant and equipment.
44
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements included in this report have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation of these financial
statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,
net sales and expenses, and related disclosure of contingent assets and liabilities.
A critical accounting policy is defined as one that is both material to the presentation of our consolidated
financial statements and requires us to make judgments that could have a material effect on our financial
condition or results of operations. These policies require us to make assumptions about matters that are highly
uncertain at the time of the estimate. Different estimates we could reasonably have used, or changes in the
estimates that are reasonably likely to occur, or could have a material effect on our financial condition or results
of operations.
We base our estimates on historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Management has discussed the
development, selection and disclosure of these estimates with the audit committee of our board of directors.
Actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting policies include asset valuation related to bad debts and inventory; sales returns and
allowances; impairment of long-lived assets, including goodwill and intangible assets; derivative instruments and
hedging activities; realizability of deferred tax assets; and determining self-insurance reserves.
Allowance for Doubtful Accounts
We provide customary credit terms to our customers and generally do not require collateral. We perform
ongoing credit evaluations of the financial condition of our customers and maintain an allowance for doubtful
accounts based upon historical collections experience and judgments as to expected collectability of accounts.
Our actual bad debts may differ from our estimates.
Inventories
In assessing the realizability of inventories, we are required to make judgments as to future demand
requirements and compare these with current and committed inventory levels. When the market value of
inventory is less than the carrying value, the inventory cost is written down to its estimated net realizable value,
thereby establishing a new cost basis. Our inventory requirements may change based on our projected customer
demand, market conditions, technological and product life cycle changes, longer or shorter than expected usage
periods, and other factors that could affect the valuation of our inventories. We maintain certain finished goods
inventories near certain key customer locations in accordance with agreements with those customers. Although
this inventory is typically supported by valid purchase orders, should these customers ultimately not purchase
these inventories, our results of operations and financial condition would be adversely affected.
Sales Returns and Allowances
We derive revenues primarily from the sale of PCBs and backplane assemblies using customer-supplied
engineering and design plans. We recognize revenue when persuasive evidence of a sales arrangement exists, the
sales terms are fixed or determinable, title and risk of loss have transferred, and collectability is reasonably
assured — generally when products are shipped to the customer. We provide our customers a limited right of
return for defective PCBs and backplane assemblies. We accrue an estimate for sales returns and allowances at
the time of sale using our judgment based on historical results and anticipated returns as a result of current period
sales. To the extent actual experience varies from our historical experience, revisions to these allowances may be
required.
Long-lived Assets
We have significant long-lived tangible and intangible assets consisting of property, plant and equipment,
definite-lived intangibles, and goodwill. We review these assets for impairment whenever events or changes in
45
circumstances indicate that the carrying amount of such assets may not be recoverable. In addition, we perform
an impairment test related to goodwill at least annually. As necessary, we make judgments regarding future cash
flow forecasts in the assessment of impairment.
During the fourth quarter of each year, and when events and circumstances warrant an evaluation, we
perform an impairment assessment of goodwill, which may require the use of a fair-value based analysis. We
determine the fair value of our reporting units based on discounted cash flows and market approach analyses as
considered necessary. We consider factors such as the state of the economy and reduced expectations for future
cash flows coupled with a decline in our market capitalization for a sustained period as indicators for potential
goodwill impairment. If the reporting unit’s carrying amount exceeds its estimated fair value, a second step must
be performed to measure the amount of the goodwill impairment loss, if any. The second step compares the
implied fair value of the reporting unit’s goodwill, determined in the same manner as the amount of goodwill
recognized in a business combination, with the carrying amount of such goodwill. If the carrying amount of the
reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an
amount equal to that excess. For the year ended December 31, 2012 our assessment of goodwill impairment
indicated that the carrying value of goodwill for our Asia Pacific reporting unit, in our Asia Pacific operating
segment, was in excess of fair value, and therefore goodwill was impaired. See Note 4 to our consolidated
financial statements.
We periodically evaluate whether events and circumstances have occurred, such that the potential for
reduced expectations for future cash flows coupled with a further decline in the market price of our stock and
market capitalization may indicate that the remaining balance of goodwill and definite-lived intangible assets
may not be recoverable. If factors indicate that assets are impaired, we would be required to reduce the carrying
value of our goodwill and definite-lived intangible assets which may result in an impairment charge.
We also assess other long-lived assets, specifically definite-lived intangibles and property, plant and
equipment, for potential impairment given similar impairment indicators. When indicators of impairment exist
related to our long-lived tangible assets and definite-lived intangible assets, we use an estimate of the
undiscounted net cash flows and comparison to like-kind assets, as appropriate, in measuring whether the
carrying amount of the assets is recoverable. Measurement of the amount of impairment, if any, is based upon the
difference between the asset’s carrying value and estimated fair value. Fair value is determined through various
valuation techniques, including cost-based, market and income approaches as considered necessary, which
involve judgments related to future cash flows and the application of the appropriate valuation model. During the
years ended 2014, 2013 and 2012, we recorded impairment charges to reduce the carrying value of certain long-
lived assets in the Asia Pacific operating segment. See Notes 4 and 5 to our consolidated financial statements.
Assets Held for Sale — We classify assets to be sold as assets held for sale when (i) we have approved and
commit to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active
program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is
probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value,
and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Assets
classified as held for sale are recorded at the lower of the carrying amount or fair value less the cost to sell.
Assets Held for Use — If a decision to dispose of an asset or a business is made and the held for sale criteria
are not met, it is considered held for use. Assets of the business are evaluated for recoverability in the following
to
order: (i) assets other than goodwill, property and intangibles; (ii) property and intangibles subject
amortization; and (iii) goodwill. In evaluating the recoverability of property and intangible assets subject to
amortization, in a held for use business, the carrying value is first compared to the sum of the undiscounted cash
flows expected to result from the use and eventual disposition. If the carrying value exceeds the undiscounted
expected cash flows, then a fair value analysis is performed. An impairment charge is recognized if the carrying
value exceeds the fair value.
Derivative Instruments and Hedging Activities
As a matter of policy, we use derivatives for risk management purposes, and we do not use derivatives for
speculative purposes. Derivatives are typically entered into as hedges of changes in interest rates, currency
exchange rates, and other risks.
46
When we determine to designate a derivative instrument as a cash flow hedge, we formally document the
hedging relationship and its risk management objective and strategy for undertaking the hedge, the hedging
instrument, the hedged item, the nature of the risk being hedged, how the hedging instrument’s effectiveness in
offsetting the hedged risk will be assessed, and a description of the method of measuring ineffectiveness. We also
formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivative that is used in
hedging transactions is highly effective in offsetting changes in cash flows of hedged items.
Derivative financial instruments are recognized as either assets or liabilities on the consolidated balance
sheet with measurement at fair value. Fair value of the derivative instruments is determined using pricing models
developed based on the underlying swap interest rate, foreign currency exchange rates, and other observable
market data as appropriate. The values are also adjusted to reflect nonperformance risk of the counterparty and
our company, as necessary. For derivatives that are designated as a cash flow hedge, changes in the fair value of
the derivative are recognized in accumulated other comprehensive income, to the extent the derivative is
effective at offsetting the changes in cash flow being hedged until the hedged item affects earnings. To the extent
there is any hedge ineffectiveness, changes in fair value relating to the ineffective portion are immediately
recognized in earnings. Changes in the fair value of derivatives that are not designated as hedges are recorded in
earnings each period.
Income Taxes
Deferred income tax assets are reviewed for recoverability, and valuation allowances are provided, when
necessary, to reduce deferred income tax assets to the amounts that are more likely than not to be realized based
on our estimate of future taxable income. Should our expectations of taxable income change in future periods, it
may be necessary to establish a valuation allowance, which could affect our results of operations in the period
such a determination is made. We record income tax provision or benefit during interim periods at a rate that is
based on expected results for the full year. If future changes in market conditions cause actual results for the year
to be more or less favorable than those expected, adjustments to the effective income tax rate could be required.
In addition, we are subject to income taxes in the United States and foreign jurisdictions. Significant
judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our
business, there are many transactions for which the ultimate tax determination is uncertain. Additionally, our
calculations of income taxes are based on our interpretations of applicable tax laws in the jurisdictions in which
we file.
Self Insurance
We are primarily self-insured in North America for group health insurance and worker’s compensation
benefits provided to our U.S. employees, and we purchase insurance to protect against annual claims at the
individual and aggregate level. We estimate our exposure for claims incurred but not reported at the end of each
reporting period. We use our judgment using our historical claim data and information and analysis provided by
actuarial and claim advisors, our insurance carriers and brokers on an annual basis to estimate our liability for
these claims. This liability is subject to individual insured stop-loss coverage of $300,000 per individual for
group health insurance and $250,000 for worker’s compensation benefits. Our actual claims experience may
differ from our estimates.
47
RESULTS OF OPERATIONS
The following table sets forth the relationship of various items to net sales in our consolidated statement of
operations:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0%
85.3
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.7
100.0%
84.1
15.9
100.0%
83.3
16.7
Operating expenses:
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of definite-lived intangibles . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill and definite-lived intangibles . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss)
Other income (expense):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt
. . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . .
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
Less: Net (income) loss attributable to non-controlling
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.8
7.6
0.7
—
—
0.1
—
11.2
3.5
(1.8)
—
—
(1.8)
1.7
(0.6)
1.1
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
2.7
7.7
0.7
(1.3)
0.3
0.8
—
10.9
5.0
(1.7)
(0.8)
0.4
(2.1)
2.9
(1.2)
1.7
(0.1)
2.7
7.3
1.1
—
—
1.3
14.8
27.2
(10.5)
(1.9)
(0.4)
0.3
(2.0)
(12.5)
(0.9)
(13.4)
0.5
Net income (loss) attributable to TTM Technologies, Inc.
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.1%
1.6%
(12.9)%
We manage our worldwide operations based on two geographic operating segments: 1) Asia Pacific, which
consists of five PCB fabrication plants and 2) North America, which consists of seven domestic PCB fabrication
plants, including a facility that provides follow-on value-added services primarily for one of the PCB fabrication
plants, and one backplane assembly plant in Shanghai, China, which is managed in conjunction with our U.S.
operations. Each segment operates predominantly in the same industry with production facilities that produce
customized products for their customers and use similar means of product distribution.
48
The following table compares net sales by reportable segment for the years ended 2014, 2013 and 2012:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
(In thousands)
Net Sales:
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 811,107
516,670
$ 850,322
520,802
$ 842,443
509,426
Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inter-segment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,327,777
(2,060)
1,371,124
(2,909)
1,351,869
(3,201)
Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,325,717
$1,368,215
$1,348,668
Net Sales
Total net sales decreased $42.5 million, or 3.1%, from $1,368.2 million for the year ended December 30,
2013 to $1,325.7 million for the year ended December 29, 2014. Net sales for the Asia Pacific segment,
excluding inter-segment sales, decreased $38.4 million, or 4.5%, from $847.4 million in the year ended
December 30, 2013 to $809.0 million for the year ended December 29, 2014. This decrease was primarily due to
the absence of net sales resulting from the sale of a controlling equity interest in a subsidiary in the second
quarter of 2013, combined with lower demand in our Computing/Storage/Peripherals and Cellular Phone end
markets in the first and second quarters of 2014. This decrease was partially offset by higher demand in our
Cellular Phone end market in the second half of 2014. The overall decline in demand resulted in a 12% decrease
in PCB shipments from the year December 30, 2013, and was partially offset by a 9% increase in the average
PCB selling price, which was driven by product mix shift. Net sales for the North America segment decreased
$4.1 million, or 0.8%, from $520.8 million for the year ended December 30, 2013 to $516.7 million for the year
ended December 29, 2014. This decrease was primarily due to lower demand for PCB products in our
Networking/Communications and Computing/Storage/Peripherals end markets, partially offset by an increase in
demand for backplane assemblies predominantly in our Networking/Communications end market.
Total net sales increased $19.5 million, or 1.4%, from $1,348.7 million for the year ended December 31,
2012 to $1,368.2 million for the year ended December 30, 2013. Net sales for the Asia Pacific segment,
excluding inter-segment sales,
increased $8.2 million, or 1.0%, from $839.2 million for the year ended
December 31, 2012 to $847.4 million in the year ended December 30, 2013. This increase was primarily due to
new customer programs in our Cellular Phone end market and an increase in average PCB selling price of 12%,
which was driven by increased layer count and a product mix shift towards products utilizing advanced
technology PCBs. The increase in net sales was partially offset by a specific product warranty claim amounting
to $8.0 million, lower demand in our Computing/Storage/Peripherals end market, and a 10% decrease in the
volume of PCB shipments from the year ended December 31, 2012. Net sales for the North America segment
increased $11.4 million, or 2.2%, from $509.4 million for the year ended December 31, 2012 to $520.8 million
for the year ended December 30, 2013. This increase was primarily due to higher demand in our Networking/
Communications and Aerospace and Defense end markets partially offset by a decrease in our Computing/
Storage/Peripherals and Medical/Industrial/Instrumentation end markets. Average PCB selling price increased
11% due to greater advanced technology product mix and higher quick-turn work. This increase was partially
offset by a 9% decline in PCB sales volume.
The inter-segment sales are sales from the Asia Pacific operating segment to the North America operating
segment.
Gross Margin
Overall gross margin decreased from 15.9% for the year ended December 30, 2013 to 14.7% for the year
ended December 29, 2014. Gross margin for the Asia Pacific segment decreased from 15.5% for the year ended
December 30, 2013 to 14.4% for the year ended December 29, 2014, primarily due to the underutilization of
certain advanced technology production facilities and an unexpected power outage. Our Asia Pacific segment
49
experienced underutilization in the first and second quarters of 2014 caused by an increase in capacity to service
an expected higher level of business which did not materialize. Additionally, in the third quarter of 2014, our
Asia Pacific segment experienced a 5 day production shut down due to an unexpected power outage at one of our
advanced technology production facilities which negatively impacted our productivity and yield improvement
efforts as we were launching new products and significantly ramping for increased volumes. Gross margin for the
North America segment decreased from 16.6% for the year ended December 30, 2013 to 15.1% for the year
ended December 29, 2014, primarily due to a mix shift toward lower margin assembly products and lower cost
absorption due to lower production volumes at certain PCB fabrication plants.
Overall gross margin decreased from 16.7% for the year ended December 31, 2012 to 15.9% for the year
ended December 30, 2013. Gross margin for the Asia Pacific segment decreased from 15.8% for the year ended
December 31, 2012 to 15.5% for the year ended December 30, 2013 primarily due to a specific product warranty
claim amounting to $8.0 million, increased equipment related expenses, and higher labor costs. Gross margin for
the North America segment decreased from 18.2% for the year ended December 31, 2012 to 16.6% for the year
ended December 30, 2013, primarily due to higher direct material content,
labor costs and incentive
compensation expense.
Selling and Marketing Expenses
Selling and marketing expenses decreased $0.2 million, or 0.5%, from $37.1 million for the year ended
December 30, 2013 to $36.9 million for the year ended December 29, 2014. As a percentage of net sales, selling
and marketing expenses were 2.7% and 2.8% for the years ended December 30, 2013 and December 29, 2014,
respectively. The decrease in selling and marketing expenses for the year ended December 29, 2014, was
primarily due to reduced commissions and lower travel expenses over the comparable periods of the prior year.
Additionally, the increase in selling and marketing expense as a percentage of net sales for the year ended
December 29, 2014 was primarily due to lower net sales.
Selling and marketing expenses increased $1.1 million, or 3.1%, from $36.0 million for the year ended
December 31, 2012 to $37.1 million for the year ended December 30, 2013. The increase in selling and
marketing expenses was primarily due to an increase in labor costs and stock-based compensation expense. As a
percentage of net sales, selling and marketing expenses were 2.7% for both of the years ended December 31,
2012 and December 30, 2013.
General and Administrative Expenses
General and administrative expenses decreased $4.9 million from $105.9 million, or 7.7% of net sales, for
the year ended December 30, 2013 to $101.0 million, or 7.6% of net sales, for the year ended December 29,
2014. The decrease in general and administrative expense for the year ended December 29, 2014 is primarily due
to costs savings resulting from the sale of our controlling equity interest in a subsidiary in the Asia Pacific
operating segment and lower incentive compensation expense, offset by the $6.0 million of acquisition-related
costs recorded in the third and fourth quarters of 2014.
General and administrative expenses increased $7.9 million from $98.0 million, or 7.3% of net sales, for the
year ended December 31, 2012 to $105.9 million, or 7.7% of net sales, for the year ended December 30, 2013.
The increase in expense primarily relates to an increase in incentive compensation expense as well as increased
labor costs, partially offset by lower stock-based compensation expense.
Impairment of Long-Lived Assets and Restructuring Charges
For the year ended December 29, 2014 and December 30, 2013, in conjunction with the shutdown of the
Suzhou, China facility, we recorded charges of $1.8 million and $10.8 million, respectively, primarily arising
from the impairment of certain machinery and equipment. Additionally, in conjunction with the shutdown, we
recorded restructuring charges of $3.4 million during the year ended December 30, 2013, consisting of separation
costs associated with the layoff of 774 employees.
During the year ended December 31, 2012, we recorded an impairment charge in the Asia Pacific operating
segment in the amount of $18.1 million. This impairment charge related specifically to two real estate assets for
which there was expected underutilization and limited market demand.
50
If forecasts and assumptions used to support the realizability of our long-lived assets change in the future,
significant impairment charges could result that would adversely affect our results of operations and financial
condition.
Impairment of Goodwill and Definite-lived Intangibles
During the year ended December 31, 2012, we performed an interim evaluation of goodwill and definite-
lived intangibles as we believed there were impairment triggering events and circumstances that warranted an
evaluation. These circumstances included continued decreases in operating profit due to softer revenues and
shifts in product mix when compared with projected results. These factors led to weaker than expected
performance for the year ended December 31, 2012. As a result, we recorded a charge for the impairment of
goodwill and definite-lived intangibles in the amount of $200.3 million for the year ended December 31, 2012,
consisting of charges of $171.4 million for goodwill and $28.9 million for definite-lived intangibles.
Other Income (Expense)
Other expense, net decreased $5.2 million from $29.4 million for the year ended December 30, 2013 to
$24.2 million for year ended December 29, 2014. The decrease in other expense, net was primarily due to the
absence of a $10.7 million loss on the extinguishment of debt related to repurchase of a portion of convertible
senior notes due 2015 for the year ended December 30, 2013, offset by an increase in foreign currency
transaction and derivative losses of $5.5 million, which includes a $3.6 million foreign currency transaction and
derivative loss recognized in the first quarter of 2014 primarily due to the rapid depreciation of the RMB against
the U.S. Dollar.
Other expense, net increased $3.0 million from $26.4 million for year ended December 31, 2012 to $29.4
million for the year ended December 30, 2013. The increase in other expense, net was primarily due to a $5.2
million increase in the loss on extinguishment of debt related to repurchase of a significant portion of convertible
senior notes due 2015 during the year ended December 30, 2013, combined with the absence of a $0.8 million
realized gain on the sale of securities in 2012, offset by a decrease in interest expense by $1.8 million and a $1.3
million increase in foreign currency transaction and derivative gains. The decrease in interest expense is
primarily the result of the absence of the interest expense recognized from an interest rate swap that expired in
April 2013.
Income Taxes
Our effective tax rate for the years ended December 29, 2014 and December 30, 2013 was 34.1% and
39.9%, respectively. The provision for income taxes decreased $8.3 million from an income tax expense of $15.9
million for the year ended December 30, 2013 to $7.6 million for the year ended December 29, 2014. The
decrease in our provision for income taxes was primarily due to losses incurred for the first three quarters of
2014 compared to income in the same period of the prior year, combined with (i) a $1.5 million discrete tax
benefit recorded in the first quarter of 2014 resulting from the retroactive approval of the high technology
enterprise status for a subsidiary within the Asia Pacific operating segment, (ii) a $0.7 million discrete tax benefit
recorded in the third quarter of 2014 resulting from the research and development deduction at a Chinese
subsidiary within the Asia Pacific operating segment, and (iii) the absence of local withholding taxes of
approximately $4.9 million related to the sale of a controlling equity interest in a subsidiary in the second quarter
of 2013.
Our effective tax rate is primarily impacted by tax rates in China and Hong Kong, the U.S. federal income
tax rate, apportioned state income tax rates, generation of other credits and deductions available to us, and certain
non-deductible items. Certain foreign losses generated are not more likely than not to be realizable, and thus no
income tax benefit has been recognized on these losses. As of December 29, 2014 and December 30, 2013, we
had net deferred income tax assets of approximately $2.9 million and $5.4 million, respectively. As of the end of
2014, based on our forecast for future taxable earnings, we believe it is more likely than not that we will utilize
the deferred income tax assets in future periods.
The provision for income taxes increased $3.2 million from $12.7 million for the year ended December 31,
2012 to $15.9 million for the year ended December 30, 2013. Our effective tax rate was (7.6)% for the year
51
ended December 31, 2012 and 39.9% for the year ended December 30, 2013. During the year ended
December 30, 2013, our tax rate was impacted by several discrete items including the impairment of property,
plant, and equipment related to the Suzhou, China plant shutdown, which resulted in no related tax benefit in
2013; enacted state law that changed the carryforward period of certain state tax credits resulting in the recording
of a valuation allowance in the amount of approximately $2.9 million against net deferred tax assets in 2013;
release of the valuation allowance of $1.5 million for a foreign subsidiary; increase in deferred tax liabilities of
$3.8 million as certain events occurred that will cause a limitation on our ability to utilize foreign tax credits
upon the future repatriation of foreign undistributed earnings of our backplane assembly facility in Shanghai,
China; and local withholding taxes of $4.9 million from the gain on the sale of our controlling interest in our
SYE operation in China.
Liquidity and Capital Resources
Our principal sources of liquidity have been cash provided by operations, the issuance of convertible senior
notes, and term and revolving debt. Our principal uses of cash have been to finance capital expenditures, meet
debt service requirements, fund working capital requirements, finance acquisitions, and refinance existing debt.
We anticipate that financing acquisitions, servicing debt, financing capital expenditures, and funding working
capital requirements, will continue to be the principal demands on our cash in the future.
As of December 29, 2014, we had net working capital of approximately $302.1 million compared to $347.0
million as of December 30, 2013. This decrease in working capital is primarily attributable to the payment of
debt obligations and the reclassification of our convertible notes due in 2015 from long-term to current.
As of December 29, 2014, we had cash and cash equivalents of approximately $279.0 million, of which
approximately $82.1 million was held by our foreign subsidiaries. Of the cash and cash equivalents held by our foreign
subsidiaries as of December 29, 2014, $79.1 million was located in Asia and $3.0 million was located in Europe. Cash
and cash equivalents located in our Asia Pacific operating segment are expected to be used in local operations. Cash
and cash equivalents located in our backplane assembly facility in Shanghai, China, as well as in Europe, which are
managed in conjunction with our U.S. operations, totaled approximately $13.2 million and are available for repatriation
and a deferred tax liability for U.S. income taxes on undistributed earnings has been recorded.
Our 2015 capital expenditure plan is expected to total approximately $100 million (of which approximately
$80 million relates to our Asia Pacific operating segment). The expenditures will fund capital equipment
purchases to increase production capacity, especially for advanced technology manufacturing, comply with
increased environmental regulations, replace aging equipment, and expand our technological capabilities. While
our cash capital expenditures are expected to be approximately $100 million in 2015, we expect new capital
expenditure purchases in 2015 to approximate $70 million.
Credit Agreement and Chinese Revolver
We are party to a facility agreement (the Credit Agreement) consisting of a $370.0 million senior secured
Term Loan (the Term Loan), a $90.0 million senior secured Revolving Loan (the Revolving Loan) and a secured
$80.0 million Letters of Credit Facility (the Letters of Credit Facility). The Term Loan and Letters of Credit
Facility will mature on September 14, 2016, and the Revolving Loan will mature on March 14, 2016. The Credit
Agreement is secured by substantially all of the assets of our Asia Pacific operating segment and is senior to all
of our other debt, including the convertible senior notes. We have fully and unconditionally guaranteed the full
and timely payment of all Credit Agreement related obligations of the Asia Pacific operating segment.
Borrowings under the Credit Agreement bear interest at a floating rate of LIBOR plus an interest margin of
2.38%. At December 29, 2014, the weighted average interest rate on the outstanding borrowings under the Credit
Agreement was 2.55%.
Borrowings under the Credit Agreement are subject to certain financial and operating covenants that include
maintaining maximum total leverage ratios and minimum net worth, current ratio, and interest coverage ratios for
both us and our Asia Pacific operating segment. In addition, our Credit Agreement includes a covenant that the
Principal Shareholders (as defined in the Shareholders Agreement dated April 9, 2010 as amended on
September 14, 2012) will not reduce their shareholding below 15 percent of TTM’s issued shares. At
December 29, 2014, we were in compliance with the covenants.
52
We are required to pay a commitment fee of 0.50% per annum on any unused portion of the loans and letters
of credit facility granted under the Credit Agreement. We incurred $0.6 million for the year ended December 29,
2014 in commitment fees. As of December 29, 2014, the outstanding amount of the Term Loan was $273.8
million, of which $96.2 million is due for repayment through September 2015 and is included as short-term debt,
with the remaining $177.6 million included as long-term debt. None of the Revolving Loan associated with the
Credit Agreement was outstanding at December 29, 2014. Available borrowing capacity under the Revolving
Loan was $90.0 million as of December 29, 2014.
We have an $80.0 million Letters of Credit Facility under the Credit Agreement. As of December 29, 2014,
letters of credit in the amount of $35.4 million were outstanding under our Credit Agreement, and other standby
letters of credit were outstanding in the amount of $4.3 million. The other outstanding standby letters of credit
expire between December 31, 2015 and February 28, 2016.
We are party to a revolving loan credit facility with a lender in China, (the Chinese Revolver). Under this
arrangement, the lender has made available to us approximately $36.9 million in unsecured borrowing with all
terms of the borrowing to be negotiated at the time the Chinese Revolver is drawn upon. There are no
commitment fees on the unused portion of the Chinese Revolver and this arrangement expires in December 2015.
As of December 29, 2014, the Chinese Revolver had not been drawn upon.
Convertible Senior Notes due 2020
On December 20, 2013, we issued 1.75% convertible senior notes due December 15, 2020, in a public
offering for an aggregate principal amount of $220.0 million. The convertible senior notes bear interest at a rate
of 1.75% per annum. Interest is payable semiannually in arrears on June 15 and December 15 of each year. The
convertible senior notes are senior unsecured obligations and rank equally to our future unsecured senior
indebtedness and senior in right of payment to any of our future subordinated indebtedness. Offering expenses
are being amortized to interest expense over the term of the convertible senior notes.
Additionally, in January 2014, we closed the sale of an additional $30.0 million aggregate principal amount
of our 1.75% convertible senior notes due 2020 (the Additional Notes). The Additional Notes were sold pursuant
to the exercise of an over-allotment option granted by us in the underwriting agreement related to the offer and
sale of $220.0 million aggregate principal amount of our 1.75% convertible senior notes due 2020.
Conversion: At any time prior to March 15, 2020, holders may convert their convertible senior notes into
cash and, if applicable, into shares of our common stock based on a conversion rate of 103.7613 shares of our
common stock per $1,000 principal amount of convertible senior notes, subject to adjustment, under the
following circumstances: (1) during any calendar quarter beginning after March 31, 2014 (and only during such
calendar quarter), if the last reported sale price of our common stock for at least 20 trading days during the 30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater
than or equal to 130% of the applicable conversion price on each applicable trading day of such preceding
calendar quarter; (2) during the five business day period after any 10 consecutive trading day period in which the
trading price per note for each day of that 10 consecutive trading day period was less than 98% of the product of
the last reported sale price of our common stock and the conversion rate on such day; or (3) upon the occurrence
of specified corporate transactions described in the indenture governing the notes. As of December 29, 2014,
none of the conversion criteria had been met.
On or after March 15, 2020 until the close of business on the third scheduled trading day preceding the
maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances. Upon
conversion, for each $1,000 principal amount of notes, we will pay shares of our common stock, cash or a
combination of cash and shares of our common stock at our election, if applicable, based on a daily conversion
value calculated on a proportionate basis for each day of the 80 trading day observation period. All conversions
occurring on the same date or on or after March 15, 2020 shall be settled using the same settlement method.
Additionally, in the event of a fundamental change as defined in the indenture governing the notes, or other
conversion rate adjustments such as share splits or combinations, other distributions of shares, cash or other
assets to stockholders, including self-tender transactions (Other Conversion Rate Adjustments), the conversion
rate may be modified to adjust
the number of shares per $1,000 principal amount of the notes. As of
December 29, 2014, none of the criteria for a fundamental change or a conversion rate adjustment had been met.
53
The maximum number of shares issuable upon conversion, including the effect of a fundamental change and
subject to Other Conversion Rate Adjustments, would be 32.4 million.
Note Repurchase: We are not permitted to redeem the convertible senior notes at any time prior to
maturity. In the event of a fundamental change or certain default events, as defined in the indenture governing the
notes, holders may require us to repurchase for cash all or a portion of their convertible senior notes at a price
equal to 100% of the principal amount, plus any accrued and unpaid interest.
Convertible Note Hedge and Warrant Transaction:
In connection with the issuance of the convertible
senior notes due 2020 in both December 2013 and January 2014, we entered into a convertible note hedge and
warrant transaction (the Call Spread Transaction), with respect to our common stock. The convertible note hedge,
which cost an aggregate $66.3 million and was recorded, net of tax, as a reduction of additional paid-in capital,
consists of our option to purchase up to 25.9 million common stock shares at a price of $9.64 per share. The
hedge expires on December 15, 2020 and can only be executed upon the conversion of the above mentioned
convertible senior notes due 2020. Additionally, we sold warrants in both December 2013 and January 2014 to
purchase 25.9 million shares of our common stock at a price of $14.26 per share. The warrants expire ratably
from March 2021 through January 2022. The aggregate proceeds from the sale of warrants of $33.8 million were
recorded as an addition to additional paid-in capital. The 2020 Call Spread Transaction has no effect on the terms
of the convertible senior notes due 2020 and reduces potential dilution by effectively increasing the conversion
price of the convertible senior notes due 2020 to $14.26 per share of our common stock.
Convertible Senior Notes due 2015
In May 2008, we issued $175.0 million of convertible senior notes. The convertible senior notes bear
interest at a rate of 3.25% per annum. Interest is payable semiannually in arrears on May 15 and November 15 of
each year. The convertible senior notes are senior unsecured obligations and rank equally to our future unsecured
senior indebtedness and senior in right of payment to any of our future subordinated indebtedness. Offering
expenses are being amortized to interest expense over the term of the convertible senior notes.
In December 2013, we repurchased $136.1 million principal amount of notes at approximately 103.4% of
their principal amount. Additionally, in January 2014, we repurchased $6.5 million principal amount of notes at
approximately 103.4% of their principal amount. The repurchases were accounted for as extinguishments of debt
and, accordingly, we recognized losses of approximately $10.7 million for the year ended December 30, 2013
and $0.5 million for the year ended December 29, 2014, respectively, primarily associated with the premium paid
to repurchase the convertible senior notes and the recognition of certain remaining unamortized debt discount
and issuance costs.
Financing Commitment and Current Liquidity Needs
Concurrently with the execution of the Merger Agreement, we obtained a debt financing commitment in an
aggregate amount of $1,115 million in connection with financing the transactions contemplated by the Merger
Agreement. Assuming consummation of the Merger, we intend to use the aggregate proceeds of such financing
arrangements to finance the Merger, to refinance certain existing indebtedness of Viasystems, to refinance certain
of our existing indebtedness, and to pay the fees and expenses incurred in connection with the Merger. We are in
the process of finalizing the specific financing arrangements.
Based on our current level of operations, we believe that cash generated from operations, cash on hand and
cash available from borrowings under our existing credit arrangements will be adequate to meet our currently
anticipated capital expenditure, debt service, and working capital needs for the next 12 months. However,
assuming consummation of the Merger, we will enter into new borrowing arrangements to fund the Merger, fund
our business operations, or refinance existing debt.
Prior to the Merger, our principal sources of liquidity have been cash provided by operations, the issuance of
convertible senior notes, and term and revolving debt. Following the Merger, we expect that our principal sources
of liquidity will continue to be our existing cash and cash equivalents, cash flow from operations, as well as from
funds available from financing arrangements entered into in connection with the Merger. We expect that
servicing debt, funding working capital requirements, financing capital expenditures, and financing acquisitions
will continue to be the principal demands on our cash.
54
Contractual Obligations and Commitments
The following table provides information on our contractual obligations as of December 29, 2014:
Contractual Obligations(1)
Total
Less Than
1 Year
1 - 3 Years
4 - 5 Years
Long-term debt obligations . . . . . .
Convertible debt obligations . . . . . .
Interest on debt obligations . . . . . .
Foreign currency forward contract
liabilities . . . . . . . . . . . . . . . . . . .
Equipment payables . . . . . . . . . . . .
Purchase obligations . . . . . . . . . . . .
Operating lease commitments . . . .
$273,804
282,395
35,146
$ 96,204
32,395
10,616
(In thousands)
$177,600
—
11,405
5,062
47,212
19,389
5,624
5,062
47,212
17,121
2,104
—
—
2,268
2,418
$ —
—
8,750
—
—
—
1,011
After
5 Years
$
—
250,000
4,375
—
—
—
91
Total contractual obligations . . . . .
$668,632
$210,714
$193,691
$9,761
$254,466
(1) Unrecognized uncertain tax benefits of $2.4 million are not included in the table above as the settlement
timing is uncertain.
Off Balance Sheet Arrangements
We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As
a result, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had
engaged in these relationships.
Seasonality
As a result of the product and customer mix of our Asia Pacific operating segment, our revenue is subject to
seasonal fluctuations. These fluctuations include seasonal patterns in the computer and cellular phone industries,
which together have become a significant portion of the end markets we serve. This seasonality typically results
in higher net sales in the third and fourth quarters due to end customer demand to meet fourth quarter sales of
consumer electronics products. Seasonal fluctuations also include the Chinese New Year holidays in the first
quarter, which typically results in lower net sales. We attribute this decline to shutdowns of our customers’
manufacturing facilities surrounding the Chinese New Year public holidays, which normally occur in January or
February of each year.
Recently Issued Accounting Standards
In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
No. (ASU) 2014-15 Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern,
which provides guidance on determining when and how to disclose going concern uncertainties in the financial
statements. The new standard requires management to perform interim and annual assessments of an entity’s
ability to continue as a going concern. The update is effective for annual periods ending after December 15,
2016, and interim periods thereafter. Early adoption is permitted. The impact on our financial statements of
adopting ASU 2014-15 is currently being assessed by management.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an
entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or
services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP
when it becomes effective. The new standard is effective for us at the beginning of fiscal year 2017. Early
application is not permitted. The standard permits the use of either the retrospective or cumulative effect
55
transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial
statements and related disclosures. We have not yet selected a transition method nor have we determined the
effect of the standard on our ongoing financial reporting.
In July 2013, the FASB issued an update that would require an unrecognized tax benefit, or a portion of an
unrecognized benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net
operating loss carryforward, a similar tax loss, or a tax credit carryforward. This update is effective for interim
and annual periods beginning after December 15, 2013, with early adoption permitted. Our adoption of this
updated standard in 2014 did not have a material impact on our financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business operations we are exposed to risks associated with fluctuations in interest
rates and foreign currency exchange rates. We address these risks through controlled risk management that
includes the use of derivative financial instruments to economically hedge or reduce these exposures. We do not
enter into derivative financial instruments for trading or speculative purposes.
We have not experienced any losses to date on any derivative financial instruments due to counterparty
credit risk.
To ensure the adequacy and effectiveness of our interest rate and foreign exchange hedge positions, we
continually monitor our interest rate swap positions and foreign exchange forward positions, both on a stand-
alone basis and in conjunction with their underlying interest rate and foreign currency exposures, from an
accounting and economic perspective. However, given the inherent limitations of forecasting and the anticipatory
nature of the exposures intended to be hedged, we cannot assure that such programs will offset more than a
portion of the adverse financial impact resulting from unfavorable movements in either interest or foreign
exchange rates. In addition, the timing of the accounting for recognition of gains and losses related to mark-to-
market instruments for any given period may not coincide with the timing of gains and losses related to the
underlying economic exposures and, therefore, may adversely affect our consolidated operating results and
financial position.
Interest rate risk
Our business is exposed to interest rate risk resulting from fluctuations in interest rates. Our interest expense
is more sensitive to fluctuations in the general level of LIBOR interest rates than to changes in rates in other
markets. Increases in interest rates would increase interest expenses relating to the outstanding variable rate
borrowings of certain foreign subsidiaries and increase the cost of debt. Fluctuations in interest rates can also
lead to significant fluctuations in the fair value of the debt obligations.
We entered into a two-year pay-fixed, receive floating (1-month LIBOR), amortizing interest rate swap
arrangement with an initial notional amount of $146.5 million, which expired on April 16, 2013. We had
designated this interest rate swap as a cash flow hedge and, during the year ended December 31, 2012, the
interest rate swap increased interest expense by $1.9 million. For the year ended December 30, 2013, we did not
designate this interest rate swap as a cash flow hedge as the borrowings attributable to this interest rate swap
were paid in full during 2012. The change in the fair value of this interest rate swap during the year ended
December 30, 2013 was recorded as other, net in the consolidated statement of operations.
As of December 29, 2014, approximately 50.8% of our long term debt was based on fixed rates. Based on
our borrowings as of December 29, 2014, an assumed 100 basis point change in variable rates would cause our
annual interest cost to change by $2.7 million.
56
Debt Instruments
The table below presents information about certain of our debt instruments as of December 29, 2014 and
December 30, 2013.
As of December 29, 2014
2015
2016
2017
2018
2019 Thereafter
Total
(In thousands)
Fair Market
Value
Weighted
Average
Interest Rate
US$ Variable Rate . . . $ 96,200 $177,600 —
— —
US$ Fixed Rate . . . . .
32,399
Total . . . . . . . . . . . . . . $128,599 $177,600 —
—
—
—
—
— $250,000 282,399
— $273,800 $273,816
274,510
2.55%
1.92%
— $250,000 $556,199 $548,326
2014
2015
2016
2017
2018 Thereafter
Total
Fair Market
Value
Weighted
Average
Interest Rate
As of December 30, 2013
US$ Variable Rate . . . $96,200 $ 96,200 $177,600 —
— —
US$ Fixed Rate . . . . .
38,913
4
(In thousands)
—
— $220,000 258,917
— $370,000 $369,394
277,018
2.55%
1.98%
Total . . . . . . . . . . . . . . $96,204 $135,113 $177,600 —
— $220,000 $628,917 $646,412
Foreign currency risks
In the normal course of business we are exposed to risks associated with fluctuations in foreign currency
exchange rates associated with transactions that are denominated in currencies other than our functional
currencies, as well as the effects of translating amounts denominated in a foreign currency to the U.S. Dollar as a
normal part of our financial reporting process. Our Asia Pacific operations utilize the Renminbi (RMB) and the
Hong Kong Dollar (HKD) as the functional currencies, which results in recognition of translation adjustments
included as a component of other comprehensive income. Our foreign exchange exposure results primarily from
employee-related and other costs of running operations in foreign countries, foreign currency denominated
purchases and translation of balance sheet accounts denominated in foreign currencies. Our primary foreign
exchange exposure is to the RMB. For the year ended December 29, 2014, our consolidated condensed statement
of operations includes a net unrealized foreign exchange gain of approximately $2.4 million, which includes a net
unrealized foreign exchange loss of $3.6 million from the first quarter of 2014, primarily due to the rapid
depreciation of the RMB against the U.S. Dollar.
We enter 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 the
functional currencies. Our 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 our
foreign functional currency. The notional amount of the foreign exchange contracts as of December 29, 2014 and
December 30, 2013 was approximately $29.1 million and $47.0 million, respectively. We have designated certain of
these foreign exchange contracts as cash flow hedges. To ensure the adequacy and effectiveness of our foreign
exchange hedge positions, we continually monitor our foreign exchange forward positions, both on a stand-alone
basis and in conjunction with their underlying foreign currency exposures, from an accounting and economic
perspective. However, given the inherent limitations of forecasting and the anticipatory nature of the exposures
intended to be hedged, we cannot assure that such programs will offset more than a portion of the adverse financial
impact resulting from unfavorable movements in foreign exchange rates. In addition, the timing of the accounting
for recognition of gains and losses related to mark-to-market instruments for any given period may not coincide
with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely
affect our consolidated operating results and financial position.
We do not engage in hedging to manage foreign currency risk related to revenue and expenses denominated
in RMB and HKD, nor do we currently use derivative instruments to reduce exposure to foreign currency risk for
57
a majority of our loans due from our foreign subsidiaries. However, we may consider the use of derivatives in the
future. In general, our Chinese customers pay us in RMB, which partially mitigates this foreign currency
exchange risk. Additionally, loans due from our foreign subsidiaries are, in some cases, denominated in
currencies other than the RMB, thus providing a natural economic hedge, partially mitigating our RMB foreign
currency exposure.
The table below presents information about certain of the foreign currency forward contracts as of
December 29, 2014 and December 30, 2013:
As of December 29, 2014
As of December 30, 2013
Receive foreign currency/pay USD
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese Yen . . . . . . . . . . . . . . . . . . . . .
Average Contract
Rate or Strike
Amount
1.35
0.01
Notional
Amount
(In thousands
in USD)
$ 1,233
27,909
$29,142
Estimated fair value, net liability . . . . .
$ (5,062)
Average Contract
Rate or Strike
Amount
1.30
0.01
Notional
Amount
(In thousands
in USD)
$10,987
36,013
$47,000
$ (2,281)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to our consolidated financial statements, the notes thereto, and the report thereon,
commencing on page 67 of this report, which consolidated financial statements, notes and report are incorporated
herein by reference.
We operate on a 52 or 53 week year ending on the Monday nearest December 31. Fiscal 2014 and 2013
were 52 weeks and ended December 29, 2014 and December 30, 2013, respectively, and each quarter of both
Fiscal 2014 and 2013 contained 91 days.
Year Ended December 29, 2014:(1)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to TTM
Technologies, Inc. stockholders . . . . . . . . . . . . .
Earnings (loss) per share attributable to TTM
Technologies, Inc. stockholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 30, 2013:(2)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
Net income (loss) attributable to TTM
Technologies, Inc. stockholders . . . . . . . . . . . . .
Earnings (loss) per share attributable to TTM
Technologies, Inc. stockholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In thousands, except per share data)
$291,895
38,506
(5,654)
(3,799)
$297,635
38,600
(2,596)
(3,104)
$345,275
49,108
8,037
7,658
$390,912
68,475
22,504
13,938
(3,799)
(3,104)
7,658
13,938
$
$
(0.05)
(0.05)
$
$
(0.04)
(0.04)
$
$
0.09
0.09
$
$
0.17
0.17
$325,392
50,730
7,377
6,593
$338,021
48,457
23,057
13,712
$338,691
48,439
(4,343)
(7,708)
$366,111
70,217
13,681
11,296
5,152
13,137
(7,708)
11,296
$
$
0.06
0.06
$
$
0.16
0.16
$
$
(0.09)
(0.09)
$
$
0.14
0.14
(1) Includes a $0.5 million loss on extinguishment of debt in the first quarter and a $1.8 long-lived asset
impairment charge in the second quarter.
(2) Includes a $17.9 million gain on sale of assets in the second quarter, long-lived asset impairment charge of
$10.8 million and restructuring charges of $3.4 million in the third quarter, and a $10.7 million loss on
extinguishment of debt in the fourth quarter.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), has evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period
covered by this Report. Based on this evaluation, our CEO and CFO have concluded that, as of December 29,
2014, such disclosure controls and procedures were effective to provide reasonable assurance that information we
are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and
communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions
regarding required disclosures.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) to provide reasonable assurance regarding
the reliability of our financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles (GAAP). Under the supervision of and with the
participation of our CEO and CFO, management conducted an assessment of the effectiveness of our internal
control over financial reporting as of December 29, 2014 based on the criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in
1992. Based on this assessment, management concluded that our internal control over financial reporting was
effective as of December 29, 2014.
The effectiveness of the Company’s internal control over financial reporting as of December 29, 2014 has
been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which
appears under the heading “Report of Independent Registered Public Accounting Firm” on page 69 of this
Report.
Inherent Limitations on Effectiveness of Controls
limitations,
A control system, no matter how well designed and operated, can provide only reasonable, not absolute,
assurance that the control system’s objectives will be met. The design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further,
because of the inherent
internal control over financial reporting may not prevent or detect
misstatements due to error or fraud. These inherent limitations include the realities that judgments in decision-
making can be faulty and that breakdowns can occur because of simple error or mistake. Controls also can be
circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of controls is based in part on certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future
periods are subject to risks that controls may become inadequate because of changes in conditions, or that the
degree of compliance with policies or procedures may deteriorate.
59
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the quarter ended December 29, 2014 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement
to be filed pursuant to Regulation 14A of the Exchange Act for our 2015 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement
to be filed pursuant to Regulation 14A of the Exchange Act for our 2015 Annual Meeting of Stockholders.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement
to be filed pursuant to Regulation 14A of the Exchange Act for our 2015 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement
to be filed pursuant to Regulation 14A of the Exchange Act for our 2015 Annual Meeting of Stockholders.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement
to be filed pursuant to Regulation 14A of the Exchange Act for our 2015 Annual Meeting of Stockholders.
60
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
PART IV
Financial Statements are listed in the Index to Consolidated Financial Statements on page 67 of this
Report.
(b) Exhibits
Exhibit
Number
2.1
2.2**
Exhibits
English translation of Equity Interest Transfer Agreement in relation to Dongguan Meadville Circuits
Limited, dated March 13, 2013, by and between Shengyi Technology Co., Ltd. and the Registrant(1)
English translation of Equity Interest Transfer Agreement in relation to Dongguan Shengyi
Electronics Ltd., dated March 13, 2013, by and between Shengyi Technology Co., Ltd. and the
Registrant(1)
2.3**
Agreement and Plan of Merger, by and among the Registrant, Viasystems Group, Inc. and Vector
Acquisition Corp., dated September 21, 2014(2)
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
10.1
Registrant’s Certificate of Incorporation, as amended June 3, 2011(3)
Registrant’s Fourth Amended and Restated Bylaws(4)
Indenture, dated as of May 14, 2008, between the Registrant and American Stock Transfer &
Trust Company(5)
First Supplemental Indenture, dated as of May 14, 2008, between the Registrant and American Stock
Transfer & Trust Company(5)
Form of Registrant’s common stock certificate(6)
Sell-Down Registration Rights Agreement, dated December 23, 2009, by and among Meadville
Holdings Limited, MTG Investment (BVI) Limited, and the Registrant(7)
Registration Rights Agreement, dated as of April 9, 2010, by and among Tang Hsiang Chien, Su Sih
(BVI) Limited, and the Registrant(8)
Shareholders Agreement, dated as of April 9, 2010, by and among Meadville Holdings Limited;
Su Sih (BVI) Limited; Tang Hsiang Chien; Tang Chung Yen, Tom; Tang Ying Ming, Mai; and the
Registrant(8)
First Amendment to Shareholders Agreement, dated September 14, 2012, by and among Tang
Hsiang Chien; Su Sih (BVI) Limited; Tang Chung Yen, Tom; Tang Ying Ming, Mai; and the
Registrant(9)
Indenture, dated as of December 20, 2013, between the Registrant and American Stock Transfer &
Trust Company, LLC(10)
Registration Rights Agreement Memorandum of Understanding, by and among the Registrant, Hicks,
Muse, Tate & Furst Equity Fund III, L.P., HM3 Coinvestors, L.P., HMTF Equity Fund IV (1999),
L.P., HMTF Private Equity Fund IV (1999), L.P., Hicks, Muse PG-IV (1999), C.V., HM 4-P (1999)
Coinvestors, L.P., HM 4-EQ (1999) Coinvestors, L.P., GSC Recovery II, L.P., and GSC Recovery
IIA, L.P., dated September 21, 2014(2)
Addendum to Registration Rights Agreement, by and among the Registrant, Su Sih (BVI) Limited,
and Tang Hsiang Chien, dated September 21, 2014(2)
Call Option Transaction Confirmation, dated as of May 8, 2008, between the Registrant and
JPMorgan Chase Bank, National Association(5)
61
Exhibit
Number
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9‡
10.10‡
10.11‡
10.12‡
10.13‡
10.14‡
10.15
10.16
Exhibits
Warrant Transaction Confirmation, dated as of May 8, 2008, between the Registrant and JPMorgan
Chase Bank, National Association(5)
Call Option Transaction Confirmation, dated as of May 8, 2008, between the Registrant and UBS
AG(5)
Warrant Transaction Confirmation, dated as of May 8, 2008, between the Registrant and UBS AG(5)
Call Option Transaction Confirmation, dated as of May 16, 2008, between the Registrant and
JPMorgan Chase Bank, National Association(11)
Warrant Transaction Confirmation, dated as of May 16, 2008, between the Registrant and JPMorgan
Chase Bank, National Association(11)
Call Option Transaction Confirmation, dated as of May 16, 2008, between the Registrant and UBS
AG(11)
Warrant Transaction Confirmation, dated as of May 16, 2008, between the Registrant and UBS
AG(11)
2006 Incentive Compensation Plan(12)
Form of Stock Option Agreement pursuant to 2006 Incentive Compensation Plan(12)
Form of Restricted Stock Unit Award Grant Notice pursuant to 2006 Incentive Compensation
Plan(12)
Form of Performance-Based RSU Grant Notice and Award Agreement pursuant to 2006 Incentive
Compensation Plan and schedule of signatories(13)
TTM Technologies, Inc. 2014 Incentive Compensation Plan(14)
TTM Technologies, Inc. Form of Restricted Stock Unit Award Grant Notice pursuant to TTM
Technologies, Inc. 2014 Incentive Compensation Plan(14)
Form of Director and Officer Indemnification Agreement, dated December 10, 2014(15)
Stock Purchase Agreement, dated November 16, 2009, by and among Meadville Holdings Limited,
MTG Investment (BVI) Limited, the Registrant, TTM Technologies International, Inc., and TTM
Hong Kong Limited (now known as TTM Technologies (Asia Pacific) Limited)(16)
10.17‡
Form of Executive Change in Control Severance Agreement and schedule of agreements(17)
10.18
10.19
10.20
10.21
Credit Agreement, dated November 16, 2009, as amended and restated on March 30, 2010 and as
further amended on August 3, 2010 and July 22, 2011, respectively, by and among certain PCB
Subsidiaries, the Registrant, the Lenders, and the other parties named therein(18)
Waiver and Amendment Letter with The Hongkong and Shanghai Banking Corporation Limited,
dated August 3, 2010(19)
Special Security Agreement by and among Tang Hsiang Chien, Su Sih (BVI) Limited, the Registrant
and the United States Department of Defense, dated October 19, 2010(20)
Amendment Letter with The Hongkong and Shanghai Banking Corporation Limited, dated July 22,
2011(21)
10.22‡
Executive and Director Deferred Compensation Plan(22)
10.23
Facility Agreement, dated September 14, 2012, by and among the PCB Subsidiaries, the lenders, and
the other parties named therein(9)
62
Exhibit
Number
10.24‡
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
12.1*
21.1*
23.1*
23.2*
Exhibits
Equity Awards Amendment Agreement, dated April 24, 2013 by and between the Registrant and
Kent Alder(23)
Call Option Transaction Confirmation, dated as of December 16, 2013, between the Registrant and
JPMorgan Chase Bank, National Association, London Branch(10)
Warrant Transaction Confirmation, dated as of December 16, 2013, between the Registrant and
JPMorgan Chase Bank, National Association, London Branch(10)
Call Option Transaction Confirmation, dated as of December 16, 2013, between the Registrant and
RBC Capital Markets, LLC(10)
Warrant Transaction Confirmation, dated as of December 16, 2013, between the Registrant and RBC
Capital Markets, LLC(10)
Call Option Transaction Confirmation, dated as of December 16, 2013, between the Registrant and
Deutsche Bank AG, London Branch(10)
Warrant Transaction Confirmation, dated as of December 16, 2013, between the Registrant and
Deutsche Bank AG, London Branch(10)
Call Option Transaction Confirmation, dated as of January 9, 2014, between the Registrant and
JPMorgan Chase Bank, National Association, London Branch(24)
Warrant Transaction Confirmation, dated as of January 9, 2014, between the Registrant and
JPMorgan Chase Bank, National Association, London Branch(24)
Call Option Transaction Confirmation, dated as of January 9, 2014, between the Registrant and RBC
Capital Markets, LLC(24)
Warrant Transaction Confirmation, dated as of January 9, 2014, between the Registrant and RBC
Capital Markets, LLC(24)
Call Option Transaction Confirmation, dated as of January 9, 2014, between the Registrant and
Deutsche Bank AG, London Branch(24)
Warrant Transaction Confirmation, dated as of January 9, 2014, between the Registrant and Deutsche
Bank AG, London Branch(24)
Voting Agreement, by and among the Company, Hicks, Muse, Tate & Furst Equity Fund III, L.P.,
HM3 Coinvestors, L.P., HMTF Equity Fund IV (1999), L.P., HMTF Private Equity Fund IV (1999),
L.P., Hicks, Muse PG-IV (1999), C.V., HM 4-P (1999) Coinvestors, L.P., and HM 4-EQ (1999)
Coinvestors, L.P., dated September 21, 2014(2)
Voting Agreement, by and among the Company, GSC Recovery II, L.P., and GSC Recovery IIA,
L.P., dated September 21, 2014(2)
Commitment Letter, by and among the Company, JPMorgan Chase Bank, N.A., J.P. Morgan
Securities LLC and Barclays Bank PLC, dated September 21, 2014(2)
Amended and Restated Commitment Letter, by and among the Registrant, JPMorgan Chase Bank,
N.A., J.P. Morgan Securities LLC, Barclays Bank PLC, and The Royal Bank of Scotland plc, dated
October 23, 2014(25)
Statement of Computation of Ratio of Earnings to Fixed Charges
Subsidiaries of the Registrant
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm
Consent of KPMG LLP, independent registered public accounting firm
63
Exhibit
Number
31.1*
31.2*
32.1*
32.2*
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Exhibits
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
(1) Incorporated by reference to the Registrant’s Form 10-Q as filed with the Securities and Exchange
Commission (the “Commission”) on May 7, 2013.
(2) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on September 22,
2014.
(3) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on June 6, 2011.
(4) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on March 2, 2011.
(5) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on May 14, 2008.
(6) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on August 30, 2005.
(7) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on December 23,
2009.
(8) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on April 13, 2010.
(9) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on September 19,
2012.
(10) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on December 20,
2013.
(11) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on May 22, 2008.
(12) Incorporated by reference to the Registrant’s Form 10-K as filed with the Commission on March 16, 2007.
(13) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on March 30, 2010.
(14) Incorporated by reference to the Registrant’s Form S-8 as filed with the Commission on August 13, 2014.
(15) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on December 15,
2014.
(16) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on November 16,
2009.
(17) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on August 5, 2014.
(18) Incorporated by reference to the Registrant’s Form 8-K/A as filed with the Commission on August 5, 2010.
(19) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on August 5, 2010.
(20) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on October 22, 2010.
(21) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on July 27, 2011.
(22) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on September 19,
2011.
(23) Incorporated by reference to the Registrant’s Form 10-Q as filed with the Commission on August 6, 2013.
64
(24) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on January 14, 2014.
(25) Incorporated by reference to the Registrant’s Form 8-K as filed with the Commission on October 27, 2014.
‡ Management contract or Compensation Plan
*
Filed herewith
** The appendices to this exhibit have been omitted in reliance on Item 601(b)(2) of Regulation S-K and will
be furnished supplementally to the SEC upon request.
(c) Financial Statement Schedules.
None.
65
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
TTM TECHNOLOGIES, INC.
By:
/s/ Thomas T. Edman
Thomas T. Edman
President and Chief Executive Officer
Date: February 27, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Thomas T. Edman
Thomas T. Edman
/s/ Todd B. Schull
Todd B. Schull
/s/ Robert E. Klatell
Robert E. Klatell
/s/ Kenton K. Alder
Kenton K. Alder
/s/ James K. Bass
James K. Bass
/s/ Philip G. Franklin
Philip G. Franklin
/s/ Ronald W. Iverson
Ronald W. Iverson
/s/ John G. Mayer
John G. Mayer
/s/ Tang Chung Yen, Tom
Tang Chung Yen, Tom
/s/ Dov S. Zakheim
Dov S. Zakheim
President, Chief Executive Officer and
Director (Principal Executive Officer)
February 27, 2015
Executive Vice President, Chief Financial
Officer, Treasurer and Secretary (Principal
Financial Officer and Principal
Accounting Officer)
February 27, 2015
Chairman of the Board
February 27, 2015
Director
February 27, 2015
Director
February 27, 2015
Director
February 27, 2015
Director
February 27, 2015
Director
February 27, 2015
Director
February 27, 2015
Director
February 27, 2015
66
TTM TECHNOLOGIES, INC.
Index to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 29, 2014 and December 30, 2013 . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 29, 2014, December 30, 2013 and
68
71
December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 29, 2014,
December 30, 2013 and December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity the Years Ended December 29, 2014, December 30, 2013
and December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 29, 2014, December 30, 2013 and
December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73
74
75
76
67
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
TTM Technologies, Inc.:
We have audited the accompanying consolidated balance sheet of TTM Technologies, Inc. and subsidiaries
as of December 29, 2014, and the related consolidated statements of operations, comprehensive income,
stockholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of TTM Technologies, Inc. and subsidiaries as of December 29, 2014, and the results of
their operations and their cash flows for the year then ended in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), TTM Technologies, Inc.’s internal control over financial reporting as of December 29, 2014,
based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2015,
expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Irvine, California
February 27, 2015
68
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
TTM Technologies, Inc.:
We have audited TTM Technologies, Inc.’s internal control over financial reporting as of December 29,
2014, based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). TTM Technologies, Inc.’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on
Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, TTM Technologies, Inc. maintained, in all material respects, effective internal control over
financial reporting as of December 29, 2014, based on criteria established in Internal Control — Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheet of TTM Technologies, Inc. and subsidiaries as of December 29,
2014, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and
cash flows for the year then ended, and our report dated February 27, 2015, expressed an unqualified opinion on
those consolidated financial statements.
Irvine, California
February 27, 2015
/s/ KPMG LLP
69
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of TTM Technologies, Inc.
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of
operations, comprehensive income (loss), stockholders’ equity, and cash flows present fairly, in all material
respects, the financial position of TTM Technologies, Inc. and its subsidiaries at December 30, 2013 and
December 31, 2012, and the results of their operations and their cash flows for each of the two years in the period
ended December 30, 2013 in conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our audit. We conducted our audit of these
statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Irvine, California
February 21, 2014
70
TTM TECHNOLOGIES, INC.
Consolidated Balance Sheets
As of
December 29,
2014
December 30,
2013
(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 279,042
307,933
4,934
145,187
21,031
39,996
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net
Goodwill and definite-lived intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
798,123
754,718
31,361
17,087
$ 330,554
277,070
13,312
138,145
2,656
43,254
804,991
810,672
39,781
18,131
$1,601,289
$1,673,575
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt, including current portion of long-term debt . . . . . . . . . . . . . . . . .
Convertible senior notes, net of discount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes, net of discount
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 13)
Equity:
Common stock, $0.001 par value; 200,000 shares authorized, 83,345 and
82,655 shares issued and outstanding in 2014 and 2013, respectively . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statutory surplus reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96,204
31,841
217,326
17,950
43,497
47,212
41,982
496,012
197,042
177,600
15,171
389,813
83
586,709
76,421
21,236
31,015
715,464
$
96,204
—
192,357
19,547
50,040
59,936
39,919
458,003
203,735
273,804
32,738
510,277
83
576,644
64,272
18,692
45,604
705,295
$1,601,289
$1,673,575
See accompanying notes to consolidated financial statements.
71
TTM TECHNOLOGIES, INC.
Consolidated Statements of Operations
Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands, except per share amounts)
$1,368,215
1,150,372
$1,325,717
1,131,028
$1,348,668
1,123,669
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
194,689
217,843
224,999
Operating expenses:
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of definite-lived intangibles . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill and definite-lived intangibles . . . . . . . . . . . .
36,919
100,999
8,387
—
—
1,845
—
37,149
105,924
9,332
(17,917)
3,445
10,782
—
35,957
98,005
14,637
—
—
18,082
200,335
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
148,150
148,715
367,016
Operating income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,539
69,128
(142,017)
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(23,830)
(506)
88
(24,031)
(10,743)
5,418
(25,784)
(5,527)
4,956
Total other expense, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(24,248)
(29,356)
(26,355)
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
Less: Net (income) loss attributable to the non-controlling interest . . . .
22,291
(7,598)
14,693
—
39,772
(15,879)
23,893
(2,016)
(168,372)
(12,728)
(181,100)
6,505
Net income (loss) attributable to TTM Technologies, Inc.
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
14,693
$
21,877
$ (174,595)
Earnings (loss) per share attributable to TTM Technologies, Inc.
stockholders:
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average shares used in computing per share amounts:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.18
0.18
$
$
0.27
0.26
$
$
(2.13)
(2.13)
83,238
83,941
82,506
83,132
81,800
81,800
See accompanying notes to consolidated financial statements.
72
TTM TECHNOLOGIES, INC.
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)
Other comprehensive income, net of tax:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
$ 14,693
(In thousands)
$ 23,893
$(181,100)
Foreign currency translation adjustment, net
. . . . . . . . . . . . . . . . . . .
Less: reclassification into earnings, net of tax . . . . . . . . . . . . . . . .
(14,841)
—
16,172
(14,266)
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(14,841)
1,906
Net unrealized gains (losses) on cash flow hedges:
Unrealized gain (loss) on effective cash flow hedges during the
year, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: reclassification into earnings, net of tax . . . . . . . . . . . . . . . .
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on available for sale securities:
Unrealized loss on available for sale securities during the year . . .
Less: losses (gains) realized into earnings . . . . . . . . . . . . . . . . . . .
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
146
189
(20)
83
63
Other comprehensive (loss) income, net of tax . . . . . . . . . . . . . . . . . . . .
(14,589)
(1,726)
128
(1,598)
(105)
53
(52)
256
8,140
—
8,140
2,405
842
3,247
(186)
(912)
(1,098)
10,289
Comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . .
104
24,149
(170,811)
Less: comprehensive income (loss) attributable to the non-controlling
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
3,417
(5,369)
Comprehensive income (loss) attributable to TTM Technologies, Inc.
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
104
$ 20,732
$(165,442)
See accompanying notes to consolidated financial statements.
73
TTM TECHNOLOGIES, INC.
Consolidated Statements of Stockholders’ Equity
Common Stock
Shares Amount
Additional
Paid-In
Capital
Retained
Earnings
Statutory
Surplus
Reserve
Accumulated
Other
Comprehensive
Income (Loss)
Total TTM
Technologies, Inc
Stockholders’
Equity
Non-controlling
Interest
Total
Equity
$535,558 $ 228,661 $ 7,021
—
— (174,595)
—
—
—
(In thousands)
$ 37,596
—
9,153
$ 808,917
(174,595)
9,153
$113,753
(6,505)
1,136
$ 922,670
(181,100)
10,289
Balance, December 31, 2011 . . . . 81,339
Net loss . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . .
Dividends paid to non-controlling
. . . . . . . . .
interest shareholder
$81
— —
— —
— —
—
—
—
Transfer to statutory surplus
reserve . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . .
Excess tax benefits from stock
awards exercised or released . .
Issuance of common stock for
restricted stock units . . . . . . . . .
Stock-based compensation . . . . . .
— —
15 —
— (8,145)
—
94
8,145
—
— —
112
583
1
— —
(1)
10,266
—
—
—
—
—
—
Balance, December 31, 2012 . . . . 81,937
Net income . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . .
Transfer to statutory surplus
82
— —
— —
reserve . . . . . . . . . . . . . . . . . . .
— —
546,029
45,921
— 21,877
—
—
15,166
—
—
46,749
—
(1,145)
— (3,526)
3,526
Sale of controlling equity
interest
. . . . . . . . . . . . . . . . . . .
Purchase of non-controlling
equity interest . . . . . . . . . . . . . .
Issuance and repurchase of
convertible senior notes . . . . . .
Purchase of convertible senior
note hedge, net of tax benefit of
$20,413 . . . . . . . . . . . . . . . . . . .
Issuance of warrants related to
convertible senior notes . . . . . .
Exercise of stock options . . . . . . .
Tax shortfall from stock awards
exercised or released . . . . . . . .
Issuance of common stock for
performance-based restricted
stock units . . . . . . . . . . . . . . . . .
Issuance of common stock for
restricted stock units . . . . . . . . .
Stock-based compensation . . . . . .
— —
— —
—
(71)
— —
30,310
— — (37,909)
— —
47 —
29,722
323
— —
(744)
104 —
—
1
567
— —
(1)
8,985
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance, December 30, 2013 . . . . 82,655
Net income . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . .
Transfer to statutory surplus
83
— —
— —
reserve . . . . . . . . . . . . . . . . . . .
— —
576,644
64,272
— 14,693
—
—
18,692
—
—
45,604
—
(14,589)
— (2,544)
2,544
Issuance and repurchase of
convertible senior notes . . . . . .
Purchase of convertible senior
note hedge, net of tax benefit of
$2,964 . . . . . . . . . . . . . . . . . . . .
Issuance of warrants related to
convertible senior notes . . . . . .
Tax shortfall from stock awards
exercised or released . . . . . . . .
Issuance of common stock for
performance-based restricted
stock units . . . . . . . . . . . . . . . . .
Issuance of common stock for
restricted stock units . . . . . . . . .
Stock-based compensation . . . . . .
— —
4,216
— —
(4,989)
— —
4,053
— —
(1,015)
90 —
600 —
— —
—
—
7,800
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
94
112
—
10,266
653,947
21,877
(1,145)
—
—
(9,501)
(9,501)
—
—
—
—
—
98,883
2,016
1,401
—
94
112
—
10,266
752,830
23,893
256
—
—
(73,013)
(73,013)
(71)
(29,287)
(29,358)
30,310
(37,909)
29,722
323
(744)
—
—
8,985
705,295
14,693
(14,589)
—
4,216
(4,989)
4,053
(1,015)
—
—
7,800
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
30,310
(37,909)
29,722
323
(744)
—
—
8,985
705,295
14,693
(14,589)
—
4,216
(4,989)
4,053
(1,015)
—
—
7,800
Balance, December 29, 2014 . . . . 83,345
$83
$586,709 $ 76,421 $21,236
$ 31,015
$ 715,464
$
— $ 715,464
See accompanying notes to consolidated financial statements.
74
TTM TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
(In thousands)
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
$ 14,693
$ 23,893
$(181,100)
Depreciation of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of definite-lived intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of convertible senior notes discount, debt discount and debt issuance
costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit from restricted stock units released and common stock options
exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill and definite-lived intangibles . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of accreted interest on convertible senior notes . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, net of disposition:
Accounts and notes receivable, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued salaries, wages and benefits and other accrued expenses . . . . . . . . . . . . .
95,349
8,387
10,165
—
2,018
7,800
506
—
1,845
—
1,882
(1,324)
(22,485)
(7,113)
2,292
23,937
(8,142)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
129,810
Cash flows from investing activities:
Purchase of property, plant and equipment and equipment deposits . . . . . . . . . . . . . . . .
Proceeds from sale of property, plant and equipment and other assets . . . . . . . . . . . . . .
Proceeds from the sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(109,624)
1,053
—
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(108,571)
Cash flows from financing activities:
Proceeds from the issuance of convertible senior notes . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of convertible senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of convertible senior note hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (repayment) borrowings of revolving loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for purchase of non-controlling interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to non-controlling interest shareholder . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from stock awards exercised or released . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency exchange rates on cash and cash equivalents . . . . . . . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year
30,000
(96,204)
(5,411)
(1,626)
(7,953)
4,053
—
—
—
—
—
—
(77,141)
4,390
(51,512)
330,554
92,120
9,332
8,466
—
8,116
8,985
10,743
(17,917)
10,782
—
518
(27,663)
(96,394)
(9,332)
(10,347)
35,362
24,724
71,388
(103,347)
511
67,147
(35,689)
220,000
—
(113,055)
(6,325)
(58,322)
29,722
(30,000)
(29,358)
—
—
323
—
12,985
(3,563)
45,121
285,433
84,286
14,684
7,893
(622)
78
10,266
5,527
—
18,082
200,335
924
—
(20,927)
(16,581)
(5,679)
65,923
(524)
182,565
(139,550)
3,106
—
(136,444)
—
(442,180)
—
(7,787)
—
—
30,000
—
473,823
(9,501)
91
622
45,068
(1,808)
89,381
196,052
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 279,042
$ 330,554
$ 285,433
Supplemental cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid, net for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 14,072
297
Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment recorded in equipment and accounts payable . . . . . . . . .
Notes receivable utilized to purchase property, plant and equipment . . . . . . . . . . . . . . .
$ 49,144
—
$ 16,647
6,065
$ 80,063
—
$ 19,476
15,520
$ 59,402
5,293
See accompanying notes to consolidated financial statements.
75
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(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 provider of time-critical and
technologically complex printed circuit board (PCB) products and backplane assemblies (i.e., PCBs populated
with electronic components), which serve as the foundation of sophisticated electronic products. The Company
provides time-to-market and advanced technology products and offers a one-stop manufacturing solution to
customers from engineering support to prototype development through final volume production. This one-stop
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.
Additionally, the Company serves a diversified customer base in various markets throughout the world,
including manufacturers of networking/communications infrastructure products,
touchscreen tablets and
smartphones, as well as the aerospace and defense, high-end computing, and industrial/medical industries. The
Company’s customers include both original equipment manufacturers (OEMs) and electronic manufacturing
services (EMS) providers.
Beginning 2013,
the Company operates on a 52 or 53 week year ending on the Monday nearest
December 31. Fiscal 2014 and fiscal 2013 were 52 weeks and ended on December 29, 2014, and December 30,
2013, respectively. Prior to 2013, the Company’s fiscal year always ended on December 31. All references to
years relate to fiscal years unless otherwise noted.
Acquisition of Viasystems Group, Inc.
On September 21, 2014, TTM, Viasystems Group, Inc. (Viasystems), and Vector Acquisition Corp. (Merger
Sub) entered into an Agreement and Plan of Merger (the Merger Agreement) under which, subject to the
satisfaction of certain conditions, TTM expects to acquire all outstanding shares of Viasystems (the Merger) for a
combined consideration of $11.33 in cash and 0.706 shares of TTM common stock per outstanding share of
Viasystems common stock, which based on the closing market price on December 31, 2014 was valued at $16.65
per share of Viasystems common stock, or approximately $361.7 million. The total purchase price of the
transaction, including debt assumed, is approximately $992.5 million, which was based on the closing market
price on December 31, 2014 and is subject to change prior to the consummation of the Merger.
Concurrently with the execution of the Merger Agreement,
the Company obtained a debt financing
commitment
in an aggregate amount of $1,115 million in connection with financing the transactions
contemplated by the Merger Agreement. Assuming consummation of the Merger, the Company intends to use the
aggregate proceeds of such financing arrangements to finance the Merger,
to refinance certain existing
indebtedness of Viasystems, to refinance certain of the Company’s existing indebtedness, and to pay the fees and
expenses incurred in connection with the Merger. The Company is in the process of finalizing the specific
financing arrangements.
Viasystems is a worldwide provider of complex multi-layer rigid, flexible, and rigid-flex PCBs and
electro-mechanical solutions (E-M Solutions). Viasystems’ products are found in a wide variety of commercial
products, including automotive engine controls, hybrid converters, automotive electronics for navigation, safety,
and entertainment, telecommunications switching equipment, data networking equipment, computer storage
equipment, semiconductor test equipment, wind and solar energy applications, off-shore drilling equipment,
communications applications, flight control systems, and complex industrial, medical, and other technical
instruments. Viasystems’ E-M Solutions services can be bundled with its PCBs to provide an integrated solution
to customers. Viasystems operates 15 manufacturing facilities worldwide: eight in the United States, five in
China, one each in Canada and Mexico. Viasystems serves a diversified customer base of over 1,000 customers
in various markets throughout the world.
76
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The Merger Agreement provides that Viasystems is entitled to receive a reverse breakup fee of $40 million
from TTM in the event that the Merger Agreement is terminated following specific conditions.
Since the public announcement on September 22, 2014 of the execution of the Merger Agreement, TTM,
Viasystems, Merger Sub, and the members of the Viasystems board of directors (the Viasystems Board) have
been named as defendants in two putative class action complaints challenging the Merger. See Note 13 to these
Consolidated Financial Statements for additional information.
Bank fees and legal accounting and other professional service costs associated with the acquisition of
Viasystems of $5,981 for the year ended December 29, 2014 have been expensed and recorded as general and
administrative expense in the consolidated statement of operations.
(2) Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses during the reporting period. Such
estimates include the sales return reserve; accounts receivable; inventories; goodwill; intangible assets and other
long-lived assets; self insurance reserves; derivative instruments and hedging activities; environmental liabilities;
legal contingencies; income taxes; and others. These estimates and assumptions are based on management’s best
estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using
historical experience and other factors, including the economic environment, which management believes to be
reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and
circumstances dictate. Unpredictable spending by OEM and EMS companies has also increased the uncertainty
inherent in such estimates and assumptions. As future events and their effects cannot be determined with
precision, actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of TTM Technologies, Inc. and its subsidiaries.
All intercompany accounts and transactions have been eliminated in consolidation.
Foreign Currency Translation and Transactions
The functional currency of certain of the Company’s subsidiaries is either the Chinese Renminbi (RMB) or
the Hong Kong Dollar. Accordingly, assets and liabilities are translated into U.S. dollars using period-end
exchange rates. Sales and expenses are translated at the average exchange rates in effect during the period. The
resulting translation gains or losses are recorded as a component of accumulated other comprehensive income in
the consolidated statement of stockholders’ equity and the consolidated statement of comprehensive income. Net
gains resulting from foreign currency remeasurements and transactions are included in income as a component of
other, net in the consolidated statements of operations and totaled $2,378, $6,113, and $3,581 for the years ended
2014, 2013 and 2012, respectively.
Cash Equivalents
The Company considers highly liquid investments with insignificant interest rate risk and original maturities
to the Company of three months or less to be cash equivalents. Cash equivalents consist primarily of interest-
bearing bank accounts and money market funds.
The Company considers highly liquid investments with an effective maturity to the Company of more than
three months and less than one year to be short-term investments.
77
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Accounts Receivable, Allowance for Doubtful Accounts and Factoring Arrangements
Accounts Receivable
Accounts receivable are reflected at estimated net realizable value, do not bear interest and do not generally
require collateral. The Company performs credit evaluations of its customers and adjusts credit limits based upon
payment history and the customer’s current creditworthiness. The Company maintains an allowance for doubtful
accounts based upon a variety of factors. The Company reviews all open accounts and provides specific reserves
for customer collection issues when it believes the loss is probable, considering such factors as the length of time
receivables are past due, the financial condition of the customer, and historical experience. The Company also
records a reserve for all customers, excluding those that have been specifically reserved for, based upon
evaluation of historical losses.
Additionally, in the normal course of business, the Company’s foreign subsidiaries may utilize accounts
receivable factoring arrangements. Under these arrangements, the Company’s foreign subsidiaries may sell
certain of their accounts receivable to financial institutions, which are accounted for as a sale, at a discount
ranging from 1% to 2% of the accounts receivable. In all arrangements there is no recourse against the Company
for its customers’ failure to pay. The Company sold $3,941 of accounts receivable for the year ended 2012. The
Company did not sell any accounts receivable for the years ended 2014 or 2013.
Allowance for Doubtful Accounts
The following summarizes the activity in the Company’s allowance for doubtful accounts for the years
ended 2014, 2013 and 2012:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . .
Additions charged to (reversals of) expense . . . . . . . . . . .
Sale of a majority owned subsidiary . . . . . . . . . . . . . . . . .
Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency exchange rates . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$518
214
—
(34)
(2)
$696
(In thousands)
$1,680
(157)
(459)
(554)
8
$ 518
$1,294
648
—
(275)
13
$1,680
Inventories
Inventories are stated at the lower of cost (determined on a first-in, first-out and weighted average basis) or
market. Assessments to value the inventory at the lower of the actual cost to purchase and / or manufacture the
inventory, or the current estimated market value of the inventory, are based upon assumptions about future
demand and market conditions. As a result of the Company’s assessments, when the market value of inventory is
less than the carrying value, the inventory cost is written down to the market value and the write down is
recorded as a charge to cost of goods sold.
78
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Property, Plant and Equipment, Net
Property, plant and equipment are recorded at cost. Depreciation expense is computed using the straight-line
method over the estimated useful lives of the assets. Assets recorded under leasehold improvements are
amortized using the straight-line method over the lesser of their useful lives or the related lease term. The
Company uses the following estimated useful lives:
Land use rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50-99 years
7-40 years
3-12 years
3-7 years
Upon retirement or other disposition of property, plant and equipment, the cost and related accumulated
depreciation are removed from the accounts. The resulting gain or loss is included in the determination of
operating income in the period incurred. Depreciation and amortization expense on property, plant and
equipment was $95,349, $92,120 and $84,286, for the years ended 2014, 2013 and 2012, respectively.
The Company capitalizes interest on borrowings during the active construction period of major capital
projects. Capitalized interest is amortized over the average useful lives of such assets, which primarily consist of
buildings and machinery and equipment. The Company capitalized interest costs of $551, $1,125 and $1,774
during the years ended 2014, 2013 and 2012, respectively, in connection with various capital projects.
Major renewals and betterments are capitalized and depreciated over their estimated useful lives while
minor expenditures for maintenance and repairs are included in operating income as incurred.
Goodwill
Goodwill represents the excess of purchase price of an acquisition over the fair value of net assets acquired.
Goodwill is not amortized but instead is assessed for impairment, at a reporting unit level, annually and when
events and circumstances warrant an evaluation. The Company evaluates goodwill on an annual basis, as of the
end of the fourth quarter, and whenever events and changes in circumstances indicate that there may be a
potential impairment. In making this assessment, management relies on a number of factors, including expected
future operating results, business plans, economic projections, anticipated future cash flows, business trends and
market conditions.
The Company has two operating segments consisting of three reporting units. See Note 4 for information
regarding the impairment of goodwill for the year ended 2012.
Intangible Assets
Intangible assets include customer relationships, trade name and licensing agreements, which are being
amortized over their estimated useful lives using straight-line and accelerated methods. The estimated useful
lives of such intangibles range from 3 years to 15 years. Amortization expense related to acquired licensing
agreements is classified as a component of cost of goods sold. Also see discussion below of impairment of long-
lived assets, which includes definite-lived intangible assets.
Impairment of Long-lived Assets
Long-lived tangible assets, including property, plant and equipment, assets held for sale, and definite-lived
intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying value of the asset or asset groups may not be recoverable. The Company regularly evaluates whether
events or circumstances have occurred that indicate possible impairment and relies on a number of factors,
79
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
including expected future operating results, business plans, economic projections, and anticipated future cash
flows. The Company uses an estimate of the future undiscounted net cash flows and comparisons to like-kind
assets, as appropriate, of the related asset or asset group over the remaining life in measuring whether the assets
are recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the
asset’s carrying value and estimated fair value. Fair value is determined through various valuation techniques,
including cost-based, market and income approaches as considered necessary. See Notes 4 and 5 for information
regarding the impairment of definite-lived intangibles and long-lived assets during the years ended 2014, 2013
and 2012.
The Company classifies assets to be sold as assets held for sale when (i) Company management has
approved and commits to a plan to sell the asset, (ii) the asset is available for immediate sale in its present
condition and is ready for sale, (iii) an active program to locate a buyer and other actions required to sell the asset
have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price
that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan
will be made or that the plan will be withdrawn. Assets classified as held for sale are recorded at the lower of the
carrying amount or fair value less the cost to sell and are a component of prepaid expenses and other current
assets in the consolidated balance sheets.
The Company classifies assets held for use when a decision to dispose of an asset or a business is made and
the held for sale criteria are not met. Assets of the business are evaluated for recoverability in the following
order: (i) assets other than goodwill, property and intangibles; (ii) property and intangibles subject
to
amortization; and (iii) goodwill. In evaluating the recoverability of property and intangible assets subject to
amortization, in a held for use business, the carrying value is first compared to the sum of the undiscounted cash
flows expected to result from the use and eventual disposition. If the carrying value exceeds the undiscounted
expected cash flows, then a fair value analysis is performed. An impairment charge is recognized if the carrying
value exceeds the fair value.
Revenue Recognition
The Company derives its revenue primarily from the sale of PCBs using customer supplied engineering and
design plans and recognizes revenue when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales
terms are fixed or determinable, (iii) title and risk of loss have transferred, and (iv) collectability is reasonably
assured — generally when products are shipped to the customer, except in situations in which title passes upon
receipt of the products by the customer. In this case, revenues are recognized upon notification that customer
receipt has occurred. The Company does not have customer acceptance provisions, but it does provide its
customers a limited right of return for defective PCBs. The Company accrues an estimated amount for sales
returns and allowances related to defective PCBs at the time of sale based on its ability to estimate sales returns
and allowances using current and historical information. The reserve for sales returns and allowances is included
as a reduction to revenue and accounts receivable, net. Shipping and handling fees and related freight costs and
supplies associated with shipping products to customers are included as a component of cost of goods sold.
Incremental warranty costs that are not related to sales returns are recorded in cost of goods sold.
80
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The following summarizes the activity in the Company’s allowance for sales returns and allowances for the
years ended 2014, 2013 and 2012:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . .
Additions charged to expense . . . . . . . . . . . . . . . . . . . . . .
Sale of a majority owned subsidiary . . . . . . . . . . . . . . . . .
Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency exchange rates . . . . . . . . . . . .
$ 6,028
38,440
—
(37,578)
—
(In thousands)
$ 9,320
33,154
(347)
(36,104)
5
$ 6,279
24,798
—
(21,764)
7
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,890
$ 6,028
$ 9,320
Stock-Based Compensation
The Company recognizes stock-based compensation expense in its consolidated financial statements for its
incentive compensation plan awards.
The incentive compensation plan awards include performance-based restricted stock units, restricted stock
units, and stock options and the associated compensation expense is based on the grant date fair value of the
awards, net of estimated forfeitures, as well as an assessment of probability of the performance-based awards
vesting. Compensation expense for the incentive compensation plan awards is recognized on a straight line basis
over the vesting period of the awards. The fair value of performance-based restricted stock units is estimated on
the grant date using a Monte Carlo simulation model based on the underlying common stock closing price as of
the date of grant, the expected term, stock price volatility, and risk-free interest rates. The fair value of restricted
stock units is measured on the grant date based on the quoted closing market price of the Company’s common
stock. The fair value of the stock options is estimated on the grant date using the Black-Scholes option pricing
model based on the underlying common stock closing price as of the date of grant, the expected term, stock price
volatility, and risk-free interest rates.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets or liabilities
are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax basis and operating loss and tax credit
carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be settled or realized. The
effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. Deferred income tax assets are reviewed for recoverability, and the Company
records a valuation allowance to reduce its deferred income tax assets when it is more likely than not that all or
some portion of the deferred income tax assets will not be realized.
The Company has various foreign subsidiaries formed or acquired to conduct or support its business outside
the United States. The Company does not provide for U.S. income taxes on undistributed earnings for its Asia
Pacific operating segment as management expects the foreign earnings will be indefinitely reinvested in such
foreign jurisdictions. For certain subsidiaries within the Asia Pacific operating segment, indefinite investment of
undistributed earnings has not been asserted between the respective subsidiaries and their foreign parent entity
and therefore, a deferred tax liability for the foreign tax impacts has been recorded on the undistributed earnings
of these subsidiaries. For the Company’s backplane assembly plant in Shanghai, China, which is managed in
conjunction with the Company’s U.S. operations, earnings are expected to be repatriated and therefore the
Company has provided U.S. income taxes on these undistributed earnings.
81
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The Company recognizes the effect of income tax positions only if those positions are more likely than not
of being sustained. Recognized income tax positions are measured at the largest amount that is greater than
50 percent likely to be realized. Changes in recognition or measurement are reflected in the period in which the
change in judgment occurs. Estimated interest and penalties related to underpayment of income taxes are
recorded as a component of income tax provision in the consolidated statement of operations.
Self Insurance
The Company is primarily self insured in North America for group health insurance and workers
compensation benefits provided to U.S. employees. The Company also purchases stop loss insurance to protect
against annual claims per individual and at an aggregate level. The individual insured stop loss on the Company’s
self insurance is $300 per individual for group health insurance and $250 per individual for worker’s
compensation benefits. Self insurance liabilities are estimated for claims incurred but not paid based on
judgment, using the Company’s historical claim data and information and analysis provided by actuarial and
claim advisors, the Company’s insurance carrier and brokers. The Company has accrued $5,032 and $4,609 for
self insurance liabilities as of December 29, 2014 and December 30, 2013, respectively, and these amounts are
reflected within accrued salaries, wages and benefits in the consolidated balance sheets.
Group health insurance and workers compensation benefits for the Company’s Asia Pacific operating
segment are fully insured.
Convertible Debt
The accounting standards for convertible debt instruments that may be fully or partially settled in cash upon
conversion require the debt and equity components to be separately accounted for in a manner that reflects the
Company’s nonconvertible borrowing rate when interest expense is recognized in subsequent periods. The
amount recorded as debt is based on the fair value of the debt component as a standalone instrument, determined
using an average interest rate for similar nonconvertible debt issued by entities with credit ratings comparable to
the Company’s at the time of issuance. The difference between the debt recorded at inception and its principal
amount is to be accreted to principal through interest expense through the estimated life of the note.
Derivative Instruments and Hedging Activities
Derivative financial instruments are recognized as either assets or liabilities in the consolidated balance
sheets at their respective fair values. As a matter of policy, the Company uses derivatives for risk management
purposes. The Company does not use derivatives for speculative purposes.
Derivatives are typically entered into as hedges for changes in interest rates, currency exchange rates, and
other risks. When the Company determines to designate a derivative instrument as a cash flow hedge, the
Company formally documents the hedging relationship and its risk management objective and strategy for
undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged, how the
hedging instrument’s effectiveness in offsetting the hedged risk will be assessed, and a description of the method
of measuring ineffectiveness. The Company also formally assesses, both at the hedge’s inception and on an
ongoing basis, whether the derivative that is used in hedging transactions is highly effective in offsetting changes
in cash flows of hedged items.
Fair value of the derivative instruments is determined using pricing models developed based on the
underlying swap interest rate, foreign currency exchange rates, and other observable market data as appropriate.
The values are also adjusted to reflect nonperformance risk of the counterparty and the Company, as necessary.
For derivatives that are designated as a cash flow hedge, changes in the fair value of the derivative are recognized
in accumulated other comprehensive income, to the extent the derivative is effective at offsetting the changes in
cash flow being hedged until the hedged item affects earnings. To the extent there is any hedge ineffectiveness,
changes in fair value relating to the ineffective portion are immediately recognized in earnings. Changes in the
fair value of derivatives that are not designated as hedges are recorded in earnings each period.
82
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Value Added and Sales Tax Collected from Customers
As a part of the Company’s normal course of business, value added and sales taxes are collected from
customers. Such taxes collected are remitted, in a timely manner, to the appropriate governmental tax authority
on behalf of the customer. The Company’s policy is to present revenue and costs, net of value added and sales
taxes.
Fair Value Measures
The Company measures at fair value certain of its financial and non-financial assets and liabilities 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 levels of the fair value hierarchy are:
Level 1 — Quoted market prices in active markets for identical assets or liabilities;
Level 2 — Significant other observable inputs (e.g., quoted prices for similar items in active markets,
quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that
are observable, such as interest rate and yield curves, and market-corroborated inputs); and
Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting
unit to develop its own assumptions.
Environmental Accrual
Accruals for estimated costs for environmental obligations generally are recognized no later than the date
when the Company identifies what cleanup measures,
if any, are likely to be required to address the
environmental condition. Included in such obligations are the estimated direct costs to investigate and address the
conditions, and the associated engineering, legal and consulting costs. In making these estimates, the Company
considers information that is currently available, existing technology, enacted laws and regulations, and its
estimates of the timing of the required remedial actions. Such accruals are initially measured on a discounted
basis — and are adjusted as further information becomes available or circumstances change — and are accreted
to the payable amount over time.
Earnings Per Share
Basic earnings per common share excludes dilution and is computed by dividing net income attributable to
TTM Technologies, Inc. stockholders by the weighted average number of common shares outstanding during the
period. Diluted earnings per common share reflect the potential dilution that could occur if stock options or other
common stock equivalents were exercised or converted into common stock. The dilutive effect of stock options
or other common stock equivalents is calculated using the treasury stock method.
Comprehensive Income
Comprehensive income includes changes to equity accounts that were not the result of transactions with
stockholders. Comprehensive income is comprised of net income (loss), changes in the cumulative foreign
currency translation adjustments and realized and unrealized gains or losses on hedged derivative instruments
and available for sale securities.
Loss Contingencies
The Company establishes an accrual for an estimated loss contingency when it is both probable that an asset
has been impaired or that a liability has been incurred and the amount of the loss can be reasonably estimated.
Any legal fees expected to be incurred in connection with a contingency are expensed as incurred.
83
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Recently Adopted and Issued Accounting Standards
In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
No. (ASU) 2014-15 Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern,
which provides guidance on determining when and how to disclose going concern uncertainties in the financial
statements. The new standard requires management to perform interim and annual assessments of an entity’s
ability to continue as a going concern. The update is effective for annual periods ending after December 15,
2016, and interim periods thereafter. Early adoption is permitted. The impact on the Company’s financial
statements of adopting ASU 2014-15 is currently being assessed by management.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an
entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or
services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it
becomes effective. The new standard is effective for the Company at the beginning of fiscal year 2017. Early
application is not permitted. The standard permits the use of either the retrospective or cumulative effect
transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated
financial statements and related disclosures. The Company has not yet selected a transition method nor has it
determined the effect of the standard on its ongoing financial reporting.
In July 2013, the FASB issued an update that would require an unrecognized tax benefit, or a portion of an
unrecognized benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net
operating loss carryforward, a similar tax loss, or a tax credit carryforward. This update is effective for interim
and annual periods beginning after December 15, 2013, with early adoption permitted. The Company adopted the
amendment at the beginning of 2014, and its adoption did not have a material impact on its financial statements.
84
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
(3) Composition of Certain Consolidated Financial Statement Captions
As of
December 29,
2014
December 30,
2013
(In thousands)
Inventories:
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
44,477
57,544
43,166
$
42,533
48,338
47,274
$ 145,187
$ 138,145
Property, plant and equipment, net:
Land and land use rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
31,093
247,404
854,829
31,850
11,677
$
35,585
252,998
822,279
32,494
11,538
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,176,853
(422,135)
1,154,894
(344,222)
$ 754,718
$ 810,672
Other accrued expenses:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued subcontractor charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued repair and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
$
581
5,062
4,923
3,796
1,970
5,006
20,644
$
1,096
1,650
7,159
2,836
2,475
5,994
18,709
$
41,982
$
39,919
85
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
(4) Goodwill and Definite-lived Intangibles
Goodwill
As of December 29, 2014 and December 30, 2013 goodwill was as follows:
Total
(In thousands)
Balance as of December 31, 2012
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 183,520
(171,400)
Impairment losses during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment during the year . . . . . . . . . . . . . . . . . . . . . . .
12,120
—
—
Balance as of December 30, 2013
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
183,520
(171,400)
Impairment losses during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment during the year . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 29, 2014
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,120
—
(9)
183,511
(171,400)
$ 12,111
Goodwill balances include foreign currency translation adjustments related to foreign subsidiaries which
operate in currencies other than the U.S. Dollar. All of the Company’s remaining goodwill is included as a
component of the Asia Pacific operating segment, which is also a reporting unit.
During the fourth quarter of 2014, the Company performed the required annual goodwill impairment
analysis, which was based on a combination of the income approach utilizing discounted cash flow analysis and
the market approach, and concluded that the Asia Pacific reporting unit’s goodwill was not impaired. The excess
of fair value over carrying value of the Asia Pacific reporting unit’s equity as of December 29, 2014, the annual
testing date, was approximately 28.2% of carrying value.
The key variables that drive the projected cash flow of the reporting unit are estimated revenue growth rates,
levels of profitability, the terminal value growth rate assumption, and the weighted average cost of capital
(WACC) rate applied. These assumptions are subject to uncertainty, including the ability to increase revenue and
improve profitability levels. For the remaining $12,111 of Asia Pacific reporting unit goodwill as of
December 29, 2014, a decline in future performance and cash flow or a small change in other key assumptions,
including increases to its WACC, may result in the recognition of a goodwill impairment charge. For example,
keeping all other variables constant, a 330 basis point increase in the WACC applied would require that the
Company perform the second step of the goodwill impairment test. In addition, keeping all other variables
constant, a more than 663 basis point decrease in terminal value growth rates would require that the Company
perform the second step of the goodwill impairment test.
The Company will continue to evaluate its goodwill on an annual basis during its fourth fiscal quarter and
whenever events or changes in circumstances — such as significant adverse changes in business climate or
86
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
operating results, changes in management strategy, coupled with a decline in the market price of our stock and
market capitalization — indicate that there may be a potential impairment. If factors indicate that assets are
impaired, we would be required to reduce the carrying value of our goodwill and definite-lived intangible assets,
which may result in an impairment charge.
During an interim period of 2012, the Company performed an evaluation of goodwill as the Company
believed there were impairment triggering events and circumstances which warranted an evaluation. Given the
triggering events and circumstances, the Company performed step one of the impairment test for goodwill and
determined that the fair value of the Asia Pacific operating segment, which was based on a combination of
discounted cash flow analysis and market approach, was lower than the carrying value.
The failure of step one of the goodwill impairment test triggered a step two impairment analysis. As a result
of that analysis, an impairment charge of $171,400 for goodwill was recognized during the year ended 2012.
Definite-lived Intangibles
As of December 29, 2014 and December 30, 2013, the components of definite-lived intangibles were as
follows:
Gross
Amount
Accumulated
Amortization
Accumulated
Impairment
(In thousands)
Foreign
Currency
Translation
Adjustment
Net
Carrying
Amount
Weighted
Average
Amortization
Period
(years)
December 29, 2014:
Strategic customer
relationships . . . . . . . . $120,427
10,302
Trade name . . . . . . . . . .
$(74,486)
(8,520)
$(28,935)
—
$130,729
$(83,006)
$(28,935)
December 30, 2013:
Strategic customer
relationships . . . . . . . . $120,427
10,302
Trade name . . . . . . . . . .
$(67,895)
(6,719)
$(28,935)
—
$130,729
$(74,614)
$(28,935)
$445
17
$462
$463
18
$481
$17,451
1,799
$19,250
$24,060
3,601
$27,661
9.2
6.0
9.2
6.0
The December 29, 2014 and December 30, 2013 definite-lived intangible balances include foreign currency
translation adjustments related to foreign subsidiaries which operate in currencies other than the U.S. Dollar.
In conjunction with interim evaluation of goodwill in 2012, the Company also performed an evaluation of
definite-lived intangibles as the Company believed there were impairment triggering events and circumstances
which warranted an evaluation. Based on the undiscounted cash flows for the Asia Pacific operating segment, the
Company determined that the carrying amounts were not recoverable. In performing the impairment test for
definite-lived intangibles,
the Company recorded a charge in the amount of $28,935 for the year ended
December 31, 2012 to reduce the carrying value of strategic customer relationships in the Asia Pacific operating
segment to fair value, which was determined using the discounted cash flow method.
Definite-lived intangibles are generally amortized using the straight line method of amortization over the
useful life, with the exception of the strategic customer relationship intangibles, which are amortized using an
accelerated method of amortization based on estimated cash flows. Amortization expense was $8,387, $9,332
and, $14,684 for the years ended 2014, 2013 and 2012, respectively. Amortization expense related to acquired
licensing agreements is classified as cost of goods sold.
87
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Estimated aggregate amortization for definite-lived intangible assets for the next five years is as follows:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 7,487
4,124
3,901
3,738
—
$19,250
(5)
Impairment and Restructuring Charges
Closure of Suzhou, China Facility
The Company announced its plan to cease manufacturing at its Suzhou, China facility in 2013. As a result,
the Company determined that certain long-lived assets were impaired and as such, recorded charges of $1,845
and $10,782 for the years ended December 29, 2014 and December 30, 2013, respectively, primarily related to
machinery and equipment held for sale.
Additionally, as a result of the shutdown, the Company laid-off 774 employees at this site and recorded
$3,445 in employee separation costs for the year ended December 30, 2013. These costs were classified as
restructuring charges in the consolidated statement of operations. As of December 29, 2014, substantially all
employees had been separated.
During the fourth quarter of 2014, the Company commenced the process of selling the Suzhou, China
facility and therefore, the Company reclassified its remaining assets, consisting primarily of property plant and
equipment, to assets held for sale, for which the current carrying value approximates fair value less costs to sell
at December 29, 2014. Subsequent to December 29, 2014, the Company sold this facility for approximately
$21,300.
The Suzhou, China manufacturing facility is included in the Asia Pacific reporting unit and operating
segment.
Other Impairment
During the year ended December 31, 2012, in conjunction with the evaluation of goodwill and definite-lived
intangibles described in Note 4, the Company recorded a charge for the impairment of long-lived assets in the
amount of $18,082, specifically for two real estate assets related to the Asia Pacific reporting unit, which is also
the Asia Pacific operating segment. The long-lived asset impairment charge was incurred to reduce the carrying
value of these two real estate assets to their fair value due to current and expected underutilization and limited
market demand.
88
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
(6) Long-term Debt and Letters of Credit
The following table summarizes the long-term debt of the Company as of December 29, 2014 and
December 30, 2013:
Average Effective
Interest Rate
as of December 29,
2014
December 29,
2014
Average Effective
Interest Rate
as of December 30,
2013
December 30,
2013
(In thousands)
Term loan due September 2016 . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.55%
6.00%
Less: current maturities . . . . . . . . . . . . . . .
Long-term debt, less current maturities . .
The maturities of long-term debt through 2016 are as follows:
2.55%
6.00%
$273,800
4
273,804
(96,204)
$177,600
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$370,000
8
370,008
(96,204)
$273,804
(In thousands)
$ 96,204
177,600
$273,804
Credit Agreement
On September 14, 2012, the Company became a party to a facility agreement (Credit Agreement) with a
syndicate of eight banks led by The Hongkong and Shanghai Banking Corporation Limited as Facility Agent.
The Credit Agreement consists of a $370,000 senior secured term loan (Term Loan), a $90,000 senior secured
revolving loan (Revolving Loan), and a secured $80,000 letters of credit facility (Letters of Credit Facility). The
Term Loan and Letters of Credit Facility will mature on September 14, 2016. The Revolving Loan will mature
on March 14, 2016. The Credit Agreement is secured by substantially all of the assets of the Company’s Asia
Pacific operating segment and is senior to all other debt, including the convertible senior notes. See Note 7. The
Company has fully and unconditionally guaranteed the full and timely payment of all Credit Agreement related
obligations of its Asia Pacific operating segment.
Borrowings under the Credit Agreement bear interest at a floating rate of LIBOR plus an applicable interest
margin of 2.38%. There is no provision, other than an event of default, for these interest margins to increase. At
December 29, 2014,
the weighted average interest rate on the outstanding borrowings under the Credit
Agreement was 2.55%.
The Company is required to make scheduled payments of the outstanding Term Loan balance, while the
Revolving Loan is due on March 14, 2016. Any other outstanding balances under the Credit Agreement are due
at the maturity date of September 14, 2016. Borrowings under the Credit Agreement are subject to certain
financial and operating covenants that include maintaining maximum total leverage ratios and minimum net
worth, current ratio, and interest coverage ratios at both the Company and at the Asia Pacific operating segment
level. In addition, the Company’s Credit Agreement includes a covenant that the Principal Shareholders (as
defined in the Shareholders Agreement dated April 9, 2010 as amended on September 14, 2012) will not reduce
their shareholding below 15 percent of TTM’s issued shares. At December 29, 2014, the Company was in
compliance with the covenants under the Credit Agreement.
89
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
As of December 29, 2014 and December 30, 2013, the remaining unamortized debt issuance costs included
in other non-current assets was $1,123 and $1,937 and is amortized to interest expense over the term of the Credit
Agreement using the effective interest rate method. At December 29, 2014, the remaining amortization period for
the unamortized debt issuance costs was 1.5 years.
The Company is also required to pay a commitment fee of 0.50% per annum on any unused portion of the
loan and letters of credit facility granted under the Credit Agreement. The Company incurred commitment fees
related to unused borrowing availability of $600, $442 and $305 for the years ended 2014, 2013 and, 2012,
respectively. As of December 29, 2014, the outstanding amount of the Term Loan under the Credit Agreement
was $273,800, of which $96,200 is due for repayment through September 2015 and is included as short-term
debt, with the remaining $177,600 included as long-term debt. None of the Revolving Loan associated with the
Credit Agreement was outstanding as of December 29, 2014. Available borrowing capacity under the Revolving
Loan was $90,000 at December 29, 2014.
Other Credit Facility
Additionally, the Company is party to a revolving loan credit facility (Chinese Revolver) with a lender in
the People’s Republic of China (China). Under this arrangement, the lender has made available to the Company
approximately $36,900 in unsecured borrowing with all terms of the borrowing to be negotiated at the time the
Chinese Revolver is drawn upon. There are no commitment fees on the unused portion of the Chinese Revolver
and this arrangement expires in December 2015. As of December 29, 2014, the Chinese Revolver had not been
drawn upon.
Letters of Credit
The Company has an $80,000 Letters of Credit Facility under the Credit Agreement, as mentioned above.
As of December 29, 2014, letters of credit in the amount of $35,422 were outstanding under this Credit
Agreement. The Company has other standby letters of credit outstanding in the amount of $4,257, which expire
between December 31, 2015 and February 28, 2016.
Loss on Extinguishment of Debt
The Company became a party to its current Credit Agreement during the year ended December 31, 2012 in
order to refinance and pay in full the outstanding loans borrowed under an existing 2009 credit agreement. Given
the substantial modification in terms of the Credit Agreement,
the refinancing was accounted for as an
extinguishment of debt. As a result, the Company recognized $5,527 as a loss on the extinguishment of debt for
the year ended December 31, 2012 resulting from certain remaining unamortized debt issuance costs associated
with the terminated 2009 credit agreement and certain additional lender fees paid in connection with the Credit
Agreement.
(7) Convertible Senior Notes
As of December 29, 2014 and December 30, 2013, the following summarizes the liability and equity
components of the convertible senior notes:
As of December 29, 2014
As of December 30, 2013
Principal
Unamortized
Discount
Net
Carrying
Amount
Principal
Unamortized
Discount
Net
Carrying
Amount
(in thousands)
Liability components:
Convertible Senior Notes due 2020 . . . . . . . . . $250,000 $(52,958) $197,042 $220,000 $(52,833) $167,167
36,568
Convertible Senior Notes due 2015 . . . . . . . . .
(2,341)
38,909
32,395
31,841
(554)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $282,395 $(53,512) $228,883 $258,909 $(55,174) $203,735
90
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
As of December 29, 2014
As of December 30, 2013
Embedded
conversion
option —
Convertible
Senior
Notes
Issuance
Costs
Embedded
conversion
option —
Convertible
Senior
Notes
Total
Embedded
conversion
option —
Convertible
Senior
Notes
Issuance
Costs
Embedded
conversion
option —
Convertible
Senior
Notes
Total
(in thousands)
Equity components:
Additional paid-in capital:
Convertible Senior Notes due 2020 . . . . . . . . . $ 60,227
39,781
Convertible Senior Notes due 2015 . . . . . . . . .
$(1,916) $58,311
38,368
(1,413)
$53,000
39,928
$(1,644) $51,356
38,515
(1,413)
$100,008
$(3,329) $96,679
$92,928
$(3,057) $89,871
The components of interest expense resulting from the convertible senior notes for the years ended 2014,
2013 and 2012 are as follows:
Contractual coupon interest
Convertible Senior Notes due 2020 . . . . . . . . . . . . . . . . .
Convertible Senior Notes due 2015 . . . . . . . . . . . . . . . . .
Amortization of debt discount
Convertible Senior Notes due 2020 . . . . . . . . . . . . . . . . .
Convertible Senior Notes due 2015 . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs
Convertible Senior Notes due 2020 . . . . . . . . . . . . . . . . .
Convertible Senior Notes due 2015 . . . . . . . . . . . . . . . . .
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
(In thousands)
$4,367
1,053
$5,420
$7,102
1,395
$8,497
$ 712
141
$ 853
$ 107
5,559
$5,666
$ 167
6,780
$6,947
$
16
684
$ 700
—
$5,688
$5,688
—
$6,380
$6,380
—
$ 644
$ 644
As of December 29, 2014 and December 30, 2013, remaining unamortized debt issuance costs included in
other non-current assets were $5,363 and $5,399, respectively. The debt issuance costs and debt discount are
being amortized to interest expense over the term of the convertible senior notes using the effective interest rate
method. At December 29, 2014, the remaining weighted average amortization period for the unamortized senior
convertible note discount and debt issuance costs was 5.9 years.
For the years ended 2014, 2013 and 2012, the amortization of the convertible senior notes due 2015 debt
discount and debt issuance costs is based on an effective interest rate of 8.37%. For the years ended 2014 and
2013, the amortization of the convertible senior notes due 2020 debt discount and debt issuance costs is based on
an effective interest rate of 6.48%.
91
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Convertible Senior Notes due 2020
In December 2013, the Company issued 1.75% convertible senior notes due December 15, 2020, in a public
offering for an aggregate principal amount of $220,000. The convertible senior notes bear interest at a rate of
1.75% per annum. Interest is payable semiannually in arrears on June 15 and December 15 of each year. The
convertible senior notes are senior unsecured obligations and rank equally to the Company’s future unsecured
senior indebtedness and senior in right of payment to any of the Company’s future subordinated indebtedness.
In January 2014, the Company closed the sale of an additional $30,000 aggregate principal amount of its
1.75% convertible senior notes due 2020 (Additional Notes). The Additional Notes were sold pursuant to the
exercise of an over-allotment option granted by the Company in the underwriting agreement related to the offer
and sale of $220,000 aggregate principal amount of its 1.75% convertible senior notes due 2020.
if applicable,
Conversion: At any time prior to March 15, 2020, holders may convert their convertible senior notes into
into shares of the Company’s common stock based on a conversion rate of
cash and,
103.7613 shares of the Company’s common stock per $1 principal amount of convertible senior notes, subject to
adjustment, under the following circumstances: (1) during any calendar quarter beginning after March 31, 2014
(and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading
days during the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar
quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day of such
preceding calendar quarter; (2) during the five business day period after any 10 consecutive trading day period in
which the trading price per note for each day of that 10 consecutive trading day period was less than 98% of the
product of the last reported sale price of the Company’s common stock and the conversion rate on such day; or
(3) upon the occurrence of specified corporate transactions described in the indenture governing the notes. As of
December 29, 2014, none of the conversion criteria had been met.
On or after March 15, 2020 until the close of business on the third scheduled trading day preceding the
maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances. Upon
conversion, for each $1 principal amount of notes, the Company will pay shares of our common stock, cash or a
combination of cash and shares of our common stock at its election, if applicable, based on a daily conversion
value calculated on a proportionate basis for each day of the 80 trading day observation period. All conversions
occurring on the same date or on or after March 15, 2020 shall be settled using the same settlement method.
Additionally, in the event of a fundamental change as defined in the indenture governing the notes, or other
conversion rate adjustments such as share splits or combinations, other distributions of shares, cash or other
assets to stockholders, including self-tender transactions (Other Conversion Rate Adjustments), the conversion
rate may be modified to adjust the number of shares per $1 principal amount of the notes. As of December 29,
2014, none of the criteria for a fundamental change or a conversion rate adjustment had been met.
The maximum number of shares issuable upon conversion, including the effect of a fundamental change and
subject to Other Conversion Rate Adjustments, would be 32,425.
Note Repurchase: The Company is not permitted to redeem the convertible senior notes at any time prior
to maturity. In the event of a fundamental change or certain default events, as defined in the indenture governing
the notes, holders may require the Company to repurchase for cash all or a portion of their convertible senior
notes at a price equal to 100% of the principal amount, plus any accrued and unpaid interest.
Convertible Note Hedge and Warrant Transaction:
In connection with the issuance of the convertible
senior notes due 2020 in both December 2013 and January 2014, the Company entered into a convertible note
hedge and warrant transaction (Call Spread Transaction), with respect to the Company’s common stock. The
convertible note hedge, which cost an aggregate $66,275 and was recorded, net of tax, as a reduction of
additional paid-in capital, consists of the Company’s option to purchase up to 25,940 common stock shares at a
price of $9.64 per share. The hedge expires on December 15, 2020 and can only be executed upon the conversion
of the above mentioned convertible senior notes due 2020. Additionally, the Company sold warrants in both
92
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
December 2013 and January 2014 to purchase 25,940 shares of its common stock at a price of $14.26 per share.
The warrants expire ratably from March 2021 through January 2022. The aggregate proceeds from the sale of
warrants of $33,775 were recorded as an addition to additional paid-in capital. The 2020 Call Spread Transaction
has no effect on the terms of the convertible senior notes due 2020 and reduces potential dilution by effectively
increasing the conversion price of the convertible senior notes due 2020 to $14.26 per share of the Company’s
common stock.
Convertible Senior Notes due 2015
In May 2008, the Company issued 3.25% convertible senior notes due May 15, 2015, in a public offering
for an aggregate principal amount of $175,000. The convertible senior notes bear interest at a rate of 3.25% per
annum. Interest is payable semiannually in arrears on May 15 and November 15 of each year. The convertible
senior notes are senior unsecured obligations and rank equally to the Company’s future unsecured senior
indebtedness and senior in right of payment to any of the Company’s future subordinated indebtedness.
Note Repurchase:
In December 2013, the Company repurchased $136,091 of notes at approximately
103.4% of their principal amount. Additionally, in January 2014, the Company repurchased $6,541 of notes at
approximately 103.4% of their principal amount. The repurchases were accounted for as extinguishments of debt
and, accordingly, the Company recognized losses of approximately $506 for the year ended December 29, 2014
and $10,743 for the year ended December 30, 2013, primarily associated with the premium paid to repurchase
the convertible senior notes and the recognition of related unamortized debt discount and issuance costs.
The Company is not permitted to redeem the convertible senior notes at any time prior to maturity. In the
event of a fundamental change or certain default events, as defined in the indenture governing the notes, holders
may require the Company to repurchase for cash all or a portion of their convertible senior notes at a price equal
to 100% of the principal amount, plus any accrued and unpaid interest.
Conversion: On or after November 15, 2014, until the close of business on the third scheduled trading day
preceding the maturity date, holders may convert their notes at any time. Upon conversion, for each $1 principal
amount of notes, the Company will pay cash for the lesser of the conversion value or $1 and shares of our
common stock, if any, based on a daily conversion value calculated on a proportionate basis for each day of the
60 trading day observation period. Additionally, in the event of a fundamental change as defined in the indenture
governing the notes, or other conversion rate adjustments such as share splits or combinations, other distributions
of shares, cash or other assets to stockholders, including self-tender transactions (Other Conversion Rate
Adjustments), the conversion rate may be modified to adjust the number of shares per $1 principal amount of the
notes. As of December 29, 2014, holders may convert their notes at any time; however none of the criteria for a
fundamental change or a conversion rate adjustment had been met.
The maximum number of shares issuable upon conversion, including the effect of a fundamental change and
subject to Other Conversion Rate Adjustments, would be 2,587.
(8)
Income Taxes
The components of income before income taxes for the years ended 2014, 2013 and 2012 are:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (3,201)
25,492
(In thousands)
$ (2,247)
42,019
$ 20,827
(189,199)
Income (loss) before income taxes . . . . . . . . . . . . . . . . . .
$22,291
$39,772
$(168,372)
93
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The Company expects its foreign earnings attributable to the Asia Pacific operating segment will be
indefinitely reinvested in such foreign jurisdictions and, therefore, no deferred tax liabilities for U.S. income
taxes on undistributed earnings are recorded. The undistributed earnings of the foreign subsidiaries amounted to
approximately $263,200. The determination of unrecognized deferred tax liability related to these undistributed
earnings is not practicable. Foreign earnings attributable to certain manufacturing subsidiaries within the Asia
Pacific operating segment may be repatriated to the parent holding company located in Hong Kong, and
therefore, a deferred tax liability of approximately $3,486 for the foreign tax impacts has been recorded on the
undistributed earnings of these subsidiaries.
Foreign earnings attributable to the Company’s backplane assembly facility in Shanghai, China, which is
managed in conjunction with the Company’s U.S. operations, will be repatriated to the Company and therefore a
deferred tax liability of $5,302 for U.S. income taxes on undistributed earnings has been recorded.
The components of income tax provision for the years ended 2014, 2013 and 2012 are:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
(In thousands)
Current (provision) benefit:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,717
(216)
(5,385)
$ 6,684
643
(14,466)
$ (2,124)
(479)
(10,164)
Total current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,884)
(7,139)
(12,767)
Deferred (provision) benefit:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(829)
133
(3,018)
(3,714)
(5,038)
(5,337)
1,635
(8,740)
(3,105)
(515)
3,659
39
Total provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(7,598)
$(15,879)
$(12,728)
The following is a reconciliation between the statutory federal income tax rates and the Company’s effective
income tax rates for the years ended 2014, 2013, and 2012, which are derived by dividing the income tax
(provision) benefit by the income (loss) before income taxes:
Statutory federal income tax rate . . . . . . . . . . . . . .
State income taxes, net of federal benefit and state
tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax differential on foreign earnings . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . .
Federal research and development credits . . . . . . .
Loss on extinguishment of debt
. . . . . . . . . . . . . . .
Nondeductible goodwill impairment . . . . . . . . . . . .
Domestic production activities deduction . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
(34.0)%
(34.0)%
(34.0)%
(0.4)
(28.0)
23.9
4.6
—
—
—
(0.2)
2.2
(9.5)
(6.0)
6.0
2.6
—
—
(1.2)
0.2
2.7
4.9
—
—
34.6
(0.2)
(0.6)
Total provision for income taxes . . . . . . . . . . . . . . .
(34.1)%
(39.9)%
7.6%
94
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The
significant components of the net deferred income tax assets as of December 29, 2014 and December 30, 2013
are as follows:
Deferred income tax assets:
Goodwill and intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State tax credit carryforwards, net of federal benefit . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original issue discount on convertible senior notes . . . . . . . . . . . . . . .
Other deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities:
Discount on convertible senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on currency translation . . . . . . . . . . . . . . . . . . . . . . . .
Repatriation of foreign earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment basis differences . . . . . . . . . . . . . . . . . .
As of
December 29,
2014
December 30,
2013
(In thousands)
$ 11,071
11,415
26,644
6,101
3,624
22,029
3,804
84,688
(38,839)
45,849
(19,315)
(2,979)
(8,823)
(11,819)
$ 13,216
10,203
22,004
6,317
4,093
22,425
2,539
80,797
(44,160)
36,637
(19,940)
(3,132)
(7,241)
(903)
Net deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,913
$ 5,421
Deferred income tax assets (liabilities), net:
Current deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 10,147
(7,234)
$ 8,767
(3,346)
At December 29, 2014 the Company’s foreign and multiple state net operating loss carryforwards for
income tax purposes were approximately $107,151 and $7,884, respectively. If not utilized, the foreign and state
net operating loss carryforwards will begin to expire in 2015 and 2018, respectively. At December 29, 2014, the
Company’s state tax credit carryforwards were approximately $10,106 of which $2,221 has no expiration date.
A valuation allowance is provided when it is more likely than not that all or some portion of the deferred
income tax assets will not be realized. Certain subsidiaries within the Asia Pacific operating segment continue to
have net operating loss carryforwards in various tax jurisdictions that the Company has determined are not more
likely than not to be utilized. Additionally, there are certain subsidiaries within the Asia Pacific operating
segment that continue to generate losses that are not more likely than not to be utilized. Based on historical
performance and future expectations of these subsidiaries, the Company does not anticipate sufficient taxable
income to utilize these net operating loss carryforwards. As a result, a full valuation allowance has been recorded
for these subsidiaries at December 29, 2014. Additionally, the State of California has limited the carryforward
period of certain credits to 10 years instead of indefinite. The Company has determined that it is not more likely
than not to fully utilize certain state credits, and as such has recorded a valuation allowance. For the remaining
net deferred income tax asset, management has determined that it is more likely than not that the results of future
operations will generate sufficient taxable income to realize the net deferred tax asset.
95
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The following summarizes the activity in the Company’s valuation allowance for the years ended 2014,
2013 and 2012:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . .
Additions charged to expense . . . . . . . . . . . . . . . . . . . . . .
Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 44,160
6,458
(11,779)
(In thousands)
$41,790
6,763
(4,393)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 38,839
$44,160
$33,583
8,207
—
$41,790
Certain entities within the Asia Pacific operating segment operated under the high technology enterprise
(HNTE) and tax holidays in China, which were effective for the years ended 2014, 2013 and 2012. The HNTE
and tax holidays decreased Chinese taxes by $1,877, $3,187 and $4,694, which increased both basic and dilutive
earnings per share by $0.02, $0.04 and $0.06, for the years ended 2014, 2013 and 2012, respectively. The
Company will continue to file for the favorable reduced rates related to HNTE for the foreseeable future.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, exclusive of accrued
interest and penalties, is as follows:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . .
Lapse of statute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
$
2,298
(In thousands)
$ 2,424
$
887
220
286
—
(363)
322
—
(448)
—
49
1,488
—
—
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,441
$ 2,298
$ 2,424
As of December 29, 2014 and December 30, 2013, the Company recorded unrecognized tax benefits of $31
and $576, respectively, as well as interest and penalties of $22 and $40, respectively, to other long-term
liabilities. The Company has also recorded unrecognized tax benefits of $1,385 and $982 against certain deferred
tax assets as of December 29, 2014 and December 30, 2013, respectively. Additionally, $1,025 of unrecognized
tax benefit is recorded to current liabilities. The amount of unrecognized tax benefits that would, if recognized,
reduce the Company’s effective income tax rate in any future periods is $2,441. The Company expects its
unrecognized tax benefits to decrease by $1,035 over the next 12 months due to expiring statutes.
The Company and its subsidiaries are subject to U.S. federal, state, local, and/or foreign income tax, and in
the normal course of business its income tax returns are subject to examination by the relevant taxing authorities.
As of December 29, 2014, the 2009-2014 tax years remain subject to examination in the U.S. federal tax, various
state tax and foreign tax jurisdictions. As of December 29, 2014, the Company was not under any income tax
audit.
96
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
(9) Financial Instruments
Derivatives
Interest Rate Swaps
The Company’s business is exposed to interest rate risk resulting from fluctuations in interest rates on
certain variable rate LIBOR debt. Increases in interest rates would increase interest expenses relating to the
outstanding variable rate borrowings of certain foreign subsidiaries and increase the cost of debt. Fluctuations in
interest rates can also lead to significant fluctuations in the fair value of the debt obligations.
The Company entered into a two-year pay-fixed, receive floating (1-month LIBOR), amortizing interest rate
swap arrangement with an initial notional amount of $146,500, which expired on April 16, 2013. The Company
had designated this interest rate swap as a cash flow hedge and, during the year ended 2012, the interest rate
swap increased interest expense by $1,908. For the year ended 2013, the Company did not designate this interest
rate swap as a cash flow hedge as the borrowings attributable to this interest rate swap were paid in full during
the third quarter of 2012. The change in the fair value of this interest rate swap during the year ended
December 30, 2013 was recorded as other, net in the consolidated statement of operations.
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 the functional currencies. The Company’s foreign subsidiaries may at times purchase forward
exchange contracts to manage its foreign currency risks in relation to certain purchases of machinery
denominated in foreign currencies other than the Company’s foreign functional currency. The notional amount of
the foreign exchange contracts as of December 29, 2014 and December 30, 2013 was approximately $29,142 and
$47,000, respectively. The Company has designated certain of these foreign exchange contracts as cash flow
hedges.
The fair values of derivative instruments in the consolidated balance sheet are as follows:
Balance Sheet Location
Asset / (Liability) Fair Value
as of
December 29,
2014
December 30,
2013
(In thousands)
Cash flow derivative instruments
designated as hedges:
Foreign exchange contracts . . . . . . . . . . . Other accrued expenses
Foreign exchange contracts . . . . . . . . . . . Deposits and other non-current assets
$
(12)
—
$ (751)
10
Cash flow derivative instruments not
designated as hedges:
Foreign exchange contracts . . . . . . . . . . . Prepaid expenses and other current assets
Foreign exchange contracts . . . . . . . . . . . Other accrued expenses
Foreign exchange contracts . . . . . . . . . . . Other long-term liabilities
—
(5,050)
—
647
(899)
(1,288)
$(5,062)
$(2,281)
97
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The following table provides information about the amounts recorded in accumulated other comprehensive
income related to derivatives designated as cash flow hedges, as well as the amounts recorded in each caption in the
consolidated statement of operations when derivative amounts are reclassified out of accumulated other comprehensive
income for the years ended 2014, 2013 and 2012:
December 29, 2014
For the Year Ended
December 30, 2013
December 31, 2012
Effective
Portion
Ineffective
Portion
Effective
Portion
Ineffective
Portion
Effective
Portion
Financial
Statement
Caption
Gain/(Loss)
Recognized in
Other
Comprehensive
Income
Gain/(Loss)
Reclassified
into
Income
Gain/
(Loss)
Recognized
into
Income
Gain/(Loss)
Recognized in
Other
Comprehensive
Income
Gain/(Loss)
Reclassified
into
Income
Gain/
(Loss)
Recognized
into
Income
Gain/(Loss)
Recognized in
Other
Comprehensive
Income
Gain/(Loss)
Reclassified
into
Income
Ineffective
Portion
Gain/
(Loss)
Recognized
into
Income
(In thousands)
Cash flow hedge:
Interest rate
swap . . . . . . . . . Interest expense
Interest rate
swap . . . . . . . . . Other, net
Foreign currency
forward . . . . . . .
Depreciation
expense
—
—
$43
$43
—
—
$(146)
$(146)
—
—
—
—
—
—
—
—
$(1,726)
$(1,726)
$(128)
$(128)
—
—
—
—
$1,563
$(1,908)
—
—
— $(1,158)
1,096
$2,659
—
—
$(1,908)
$(1,158)
The following provides a summary of the activity associated with the designated cash flow hedges reflected in
accumulated other comprehensive income for the years ended 2014, 2013 and 2012:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
Beginning balance, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in fair value gain (loss), net of tax . . . . . . . . . . . . . . . .
Reclassification to earnings, net of tax . . . . . . . . . . . . . . . . . . . .
$(1,613)
43
146
Ending balance, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,424)
(In thousands)
(15)
$
(1,726)
128
$(1,613)
$(3,262)
2,405
842
$
(15)
The Company expects that approximately $170 of the accumulated other comprehensive income will be
reclassified into the statement of operations, net of tax, in the next 12 months.
The net gain (loss) recognized in other, net in the consolidated statement of operations on derivative instruments
not designated as hedges is as follows for the years 2014, 2013 and 2012:
Derivative instruments not designated as hedges:
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 29,
2014
For the Year Ended
December 30,
2013
(In thousands)
December 31,
2012
$(3,579)
—
$(3,579)
$(2,381)
620
$(1,761)
$(239)
(306)
$(545)
98
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
(10) Accumulated Other Comprehensive Income
The following provides a summary of the components of accumulated other comprehensive income, net of
tax as of December 29, 2014, December 30, 2013 and December 31, 2012:
Foreign
Currency
Translation
Gains (Losses)
on Cash Flow
Hedges
Unrealized
Gains (Losses)
on Available
for Sale
Securities
Ending balance at December 31, 2012 . . . . . . . . . . . . . . . . .
$ 46,775
$
Other comprehensive income (loss) before
(In thousands)
(15)
$ (11)
Total
$ 46,749
reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,771
(1,726)
(105)
12,940
Amounts reclassified from accumulated other
comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . .
(14,266)
128
53
(14,085)
Net year to date period other comprehensive income
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
505
Ending balance at December 30, 2013 . . . . . . . . . . . . . . . . .
47,280
Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(14,841)
Amounts reclassified from accumulated other
comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . .
—
Net year to date period other comprehensive income
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(14,841)
(1,598)
(1,613)
(52)
(63)
(1,145)
45,604
43
146
189
(20)
(14,818)
83
63
229
(14,589)
Ending balance at December 29, 2014 . . . . . . . . . . . . . . . . .
$ 32,439
$(1,424)
$ —
$ 31,015
Foreign currency translation gains, summarized above, are reported net of tax of $2,979, $3,132, and $2,959
as of December 29, 2014, December 30, 2013 and December 31, 2012, respectively.
The following provides a summary of reclassifications out of accumulated other comprehensive income, net
of tax for the year ended December 29, 2014 and December 30, 2013:
Amount Reclassified from
Accumulated Other Comprehensive
Income
For the Year Ended
Details about Accumulated Other
Comprehensive Income
Components
Statement of Operations Location
December 29,
2014
December 30,
2013
Loss on cash flow hedges . . . . . . . . . . Depreciation expense, net of tax
$146
Loss on available for sale
securities . . . . . . . . . . . . . . . . . . . . . Other, net, net of tax
$ 83
$
$
128
53
Gain on foreign currency
translation . . . . . . . . . . . . . . . . . . . . Gain on sale of assets, net of tax
$ —
$(14,266)
(11) Significant Customers and Concentration of Credit Risk
In the normal course of business, the Company extends credit to its customers, which are concentrated
primarily in the computer and networking, communications and aerospace and defense industries. Most
customers to which the Company extends credit are located outside the United States, with the exception of
99
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
certain customers in the aerospace and defense industries. 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 years ended 2014, 2013 and 2012, one customer accounted for approximately 21%, 20% and 14%,
respectively, of the Company’s net sales. There were no other customers that accounted for 10% or more of net
sales for the years ended 2014, 2013 and 2012.
(12) 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 December 29,
2014 and December 30, 2013 were as follows:
As of December 29, 2014
As of December 30, 2013
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Available for sale securities . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Derivative assets, current
Derivative assets, non-current . . . . . . . . . . . . . . . . .
Derivative liabilities, current . . . . . . . . . . . . . . . . . .
Derivative liabilities, non-current . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt
Convertible senior notes due 2015 . . . . . . . . . . . . .
Convertible senior notes due 2020 . . . . . . . . . . . . .
$
—
—
—
5,062
—
273,804
31,841
197,042
$
(In thousands)
— $
—
—
5,062
—
273,820
32,631
241,875
148
647
10
1,650
1,288
370,008
36,568
167,167
$
148
647
10
1,650
1,288
369,402
39,960
237,050
The fair value of available for sale securities was determined using quoted market prices for the securities
on an active exchange.
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. The values were adjusted to reflect nonperformance risk of the counterparty and the
Company, as necessary.
The fair value of the long-term debt was estimated based on discounting the debt over its life using current
market rates for similar debt as of December 29, 2014 and December 30, 2013, which are considered Level 1
inputs.
The fair value of the convertible senior notes was estimated based on quoted market prices of the securities
on an active exchange, which are considered Level 1 inputs.
As of December 29, 2014 and December 30, 2013, the Company’s other financial instruments also included
cash and cash equivalents, accounts receivable, accounts payable and equipment payables. Due to short-term
maturities, the carrying amount of these instruments approximates fair value.
100
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
As of December 29, 2014 and December 30, 2013, the following financial assets and liabilities were
measured at fair value on a recurring basis using the type of inputs shown:
Fair Value Measurements Using:
As of
December 29,
2014
Level 1 Inputs
Level 2 Inputs Level 3 Inputs
Money market funds . . . . . . . . . . . . . .
Foreign exchange derivative
$129,012
$129,012
—
(In thousands)
liabilities . . . . . . . . . . . . . . . . . . . . . .
5,062
—
$5,062
—
—
Fair Value Measurements Using:
As of
December 30,
2013
Level 1 Inputs
Level 2 Inputs Level 3 Inputs
Money market funds . . . . . . . . . . . . . .
Available for sale securities . . . . . . . . .
Foreign exchange derivative assets . . .
Foreign exchange derivative
(In thousands)
$ 23,838
148
657
$ 23,838
148
—
—
—
$ 657
liabilities . . . . . . . . . . . . . . . . . . . . . .
2,938
—
2,938
—
—
—
—
There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the years
ended 2014 and 2013.
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 for 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.
101
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
For the years ended 2014, 2013 and 2012,
the following assets were measured at fair value on a
nonrecurring basis using the type of inputs shown:
Fair Value Measurements Using:
December 29,
2014
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
(In thousands)
Total Losses for
the Year Ended
December 29, 2014
Assets held for sale . . . . . . . . . .
$21,031
— $21,031
—
$
1,845
Fair Value Measurements Using:
December 30,
2013
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
(In thousands)
Total Losses for
the Year Ended
December 30, 2013
Assets held for sale . . . . . . . . . .
$ 2,519
— $ 2,519
—
$ 10,782
Goodwill . . . . . . . . . . . . . . . . . .
Definite-lived intangible
assets . . . . . . . . . . . . . . . . . . .
Long-lived assets . . . . . . . . . . .
Fair Value Measurements Using:
December 31,
2012
Level 1
Inputs
Level 2
Inputs
Level 3
Inputs
(In thousands)
Total Losses for
the Year Ended
December 31, 2012
$12,120
—
— $12,120
$171,400
36,984
38,100
—
— $38,100
— 36,984
—
28,935
18,082
$218,417
The fair values of long-lived assets held and used and the assets held for sale were primarily determined
using appraisals and comparable prices of similar assets, which are considered to be Level 2 inputs.
The fair value of goodwill and definite-lived intangible assets were determined using a combination of the
income approach and the market approach as considered necessary, which are considered to be Level 3 inputs.
(13) Commitments and Contingencies
Operating Leases
The Company leases some of its manufacturing and assembly plants, a sales office and equipment under
noncancellable operating leases that expire at various dates through 2020. Certain real property 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.
102
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The following is a schedule of future minimum lease payments as of December 29, 2014:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
Operating Leases
(In thousands)
$2,104
1,454
964
681
330
91
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,624
Total rent expense for the years ended 2014, 2013, and 2012 was approximately $3,731, $3,364 and $3,101,
respectively.
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 or probable 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 December 29, 2014 and December 30, 2013.
However, these amounts are not material to the consolidated financial statements of the Company.
Class Action Complaints related to Viasystems Acquisition
Since the public announcement on September 22, 2014 of the execution of the Merger Agreement,
Viasystems, TTM, Merger Sub, and the members of the Viasystems Board have been named as defendants in
two putative class action complaints challenging the Merger. The first lawsuit, filed in the Circuit Court of St.
Louis County, Missouri on September 30, 2014 (the Missouri Lawsuit), and the second lawsuit, filed in the Court
of Chancery of the State of Delaware on October 13, 2014 (the Delaware Lawsuit and, together with the Missouri
Lawsuit, the Lawsuits), generally allege that the Merger fails to properly value Viasystems, that the individual
defendants breached their fiduciary duties in approving the Merger Agreement, and that those breaches were
aided and abetted by TTM, Merger Sub, and Viasystems.
The Delaware Lawsuit specifically alleges, among other allegations, that (1) the Viasystems Board breached
its fiduciary duties by: (a) agreeing to the Merger for grossly inadequate consideration, (b) agreeing to lock up
the Merger with deal protection devices that prevent other bidders from making a successful competing offer for
Viasystems, and (c) participating in a transaction where the loyalties of the Viasystems Board and management
are divided; (2) the voting agreements entered into between the Company and certain of Viasystems’ significant
stockholders prevent Viasystems stockholders from providing a meaningful vote on the proposal to adopt the
Merger; and (3) that those breaches of fiduciary duties were aided and abetted by TTM, Merger Sub, and
Viasystems. Further, the Missouri Lawsuit specifically alleges, among other allegations, that (1) the proposed
Merger is unfair and the consideration to be paid in connection with the Merger is inadequate; (2) the Viasystems
Board and Viasystems’ management have a conflict of interest due to the cash pool bonus and change in control
payments to be made to certain executive officers and key employees if the Merger is consummated; and (3) the
Merger Agreement contains impermissible deal protection devices.
The Lawsuits seek injunctive relief to enjoin the defendants from completing the Merger on the agreed-upon
terms, rescinding, to the extent already implemented, the Merger Agreement or any of the terms therein, costs
and disbursements and attorneys’ and experts’ fees and costs, as well as other equitable relief as the respective
103
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
court deems proper. The Delaware Lawsuit also seeks: (1) in the event the Merger is consummated prior to the
entry of the court’s final judgment, rescissory damages as an alternative to rescission, and (2) an accounting by
all defendants to the plaintiff and other members of the class for all damages caused by the defendants and for all
profits and any special benefits obtained as a result of their alleged breaches of their fiduciary duties.
On January 6, 2015, the parties to the Missouri Lawsuit entered into a Memorandum of Understanding
(MOU) with respect
that will terminate both Lawsuits upon entry of the final
judgment. The parties are in the process of negotiating this settlement agreement. Pursuant to the MOU, the
settlement agreement will provide for payment of attorneys’ fees and reimbursement of expenses, and releases of
all claims and relief sought in both Lawsuits.
to a proposed settlement
Environmental Matters
The process to manufacture PCBs requires adherence to city, county, state,
federal and foreign
environmental regulations regarding the storage, use, handling and disposal of chemicals, solid wastes and other
hazardous materials, as well as compliance with air quality standards and chemical use reporting. The Company
believes that its facilities in the United States comply in all material respects with applicable environmental laws
and regulations. In China, governmental authorities have adopted new rules and regulations governing
environmental issues. An update to Chinese environmental waste water law was issued in late 2012, but allows
for an interim period in which plants subject to such law may install equipment that meets the new regulatory
regime. The Company’s plants in China are not yet in full compliance with the newly adopted environmental
regulations. The Company believes it has developed plans acceptable to the Chinese government and is in the
process of implementing these plans. The Company does not anticipate any immediate risk of government fines
or temporary closure of its Chinese plants. The Company has established and enacted an investment plan related
to the efforts to come into full compliance with the new regulations. The 2015 capital expenditure costs expected
for these plans are included in the Company’s capital expenditure projections.
(14) Stock-Based Compensation
Incentive Compensation Plan
The Company maintains the 2014 Incentive Compensation Plan (the Plan), which allows for the issuance of
up to 5,288 shares through its expiration date of February 2024.
The Plan provides for the grant of incentive stock options and nonqualified stock options to the Company’s
key employees, non-employee directors and consultants. Other types of awards such as performance-based
restricted stock units (PRUs), restricted stock units (RSUs), and stock appreciation rights are also permitted. The
exercise price for options and awards is determined by the compensation committee of the board of directors and,
for options intended to qualify as incentive stock options, may not be less than the fair market value as
determined by the closing stock price at the date of the grant. Each option and award shall vest and expire as
determined by the compensation committee of the board of directors, with options, PRUs and RSUs generally
vesting over three years for employees and one year for non-employee directors. Options, PRUs and RSUs do not
have voting rights. Options expire no later than ten years from the grant date. All grants provide for accelerated
vesting if there is a change in control, as defined in the Plan. Upon the exercise of outstanding stock options or
vesting of RSUs and PRUs, the Company’s practice is to issue new registered shares that are reserved for
issuance under the Plan.
As of December 29, 2014, 275 PRUs, 1,687 RSUs and 511 stock options were outstanding under the Plan.
Included in the 1,687 RSUs outstanding as of December 29, 2014 are 251 vested but not yet released RSUs
associated with non-employee directors. These RSUs vest over one year with release of the underlying shares of
common stock deferred until retirement from the board of directors, (or until one year after retirement in the case
of certain prior grants).
104
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Performance-based Restricted Stock Units
The Company maintains a long-term incentive program for executives that provides for the issuance of
PRUs, representing hypothetical shares of the Company’s common stock that may be issued. Under the PRU
program, a target number of PRUs is awarded at the beginning of each three-year performance period. The
number of shares of common stock released at the end of the performance period may range from zero to 2.4
times the target number depending on performance during the period. The performance metrics of the PRU
program are based on (a) annual financial targets, which are based on revenue and EBITDA (earnings before
interest, tax, depreciation, and amortization expense), each equally weighted, and (b) an overall modifier based
on the Company’s total stockholder return (TSR) relative to the S&P SmallCap 600 for PRUs granted in 2012,
and, for PRUs granted in 2013 and 2014, a group of peer companies selected by the Company’s compensation
committee, over the three-year performance period.
Under the PRU program, financial goals are set at the beginning of each fiscal year and performance is
reviewed at the end of that year. The percentage to be applied to each participant’s target award ranges from zero
to 160% based upon the extent to which the annual financial performance goals are achieved. If specific
performance threshold levels for the annual financial goals are met, the amount earned for that element will be
applied to one-third of the participants’ PRU award to determine the number of units earned.
At the end of the three-year performance period, the total units earned, if any, are adjusted by applying a
modifier, ranging from zero to 150% based on the Company’s TSR based on stock price changes relative to the
TSR of S&P SmallCap 600 companies or a group of peer companies selected by the Company’s compensation
committee, as appropriate, for the same three-year period.
The TSR modifier is intended to ensure that there are limited or no payouts under the PRU program if the
Company’s stock performance is significantly below the median TSR of S&P SmallCap 600 companies or a
group of peer companies selected by the Company’s compensation committee, as appropriate, over the three-year
performance period. Where the annual financial goals have been met and where there has been strong relative
TSR performance over the three-year performance period, the PRU program may provide substantial rewards to
participants with a maximum payout of 2.4 times the initial PRU award. However, even if all of the annual
financial metric goals are achieved in each of the three years, there will be no payouts if the Company’s stock
performance is below that of the 20th percentile of S&P SmallCap 600 companies or of the group of peer
companies selected by the Company’s compensation committee, as appropriate.
Recipients of PRU awards generally must remain employed by the Company on a continuous basis through
the end of the three-year performance period in order to receive any amount of the PRUs covered by that award.
In events such as death, disability or retirement, the recipient may be entitled to pro-rata amounts of PRUs as
defined in the Plan. Target shares subject to PRU awards do not have voting rights of common stock until earned
and issued following the end of the three-year performance period.
105
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The Company records stock-based compensation expense for PRU awards granted based on management’s
periodic assessment of the probability of the PRU awards vesting. As of December 29, 2014, management
determined that vesting of the PRU awards was probable. PRU activity for the year ended December 29, 2014
was as follows:
Outstanding target shares at December 30, 2013 . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in units due to annual financial target performance
achievement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding target shares at December 29, 2014 . . . . . . . . . . . . . . . . . . . . .
Shares
(In thousands)
353
258
(90)
(29)
(217)
275
Weighted
Average
Fair Value
$10.23
5.80
13.17
7.32
6.90
$ 8.03
The fair value of PRUs granted is calculated using a Monte Carlo simulation model, as the TSR modifier
contains a market condition. For the years ended 2014, 2013 and 2012, the following assumptions were used in
determining the fair value:
Weighted-average fair value . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term in months . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Year Ended
December 29,
2014(1)
December 30,
2013(2)
December 31,
2012(3)
$5.80
$6.79
$12.51
0.4%
—
41%
23
0.3%
—
49%
25
0.3%
—
55%
23
(1) Reflects the weighted-averages for the third year of the three-year performance period applicable to PRUs
granted in 2012, the second year of the three-year performance period applicable to PRUs granted in 2013
and the first year of the three-year performance period applicable to PRUs granted in 2014.
(2) Reflects the weighted-averages for the third year of the three-year performance period applicable to PRUs
granted in 2011, second year of the three-year performance period applicable to PRUs granted in 2012 and
for the first year of the three-year performance period applicable to PRUs granted in 2013.
(3) Reflects the weighted-averages for the third year of the three-year performance period applicable to PRUs
granted in 2010, second year of the three-year performance period applicable to PRUs granted in 2011 and
for the first year of the three-year performance period applicable to PRUs granted in 2012.
The expected term of the PRUs reflects the performance period for the PRUs granted. Expected volatility is
calculated using the Company’s historical stock price. The risk-free interest rate for the expected term of PRUs is
based on the U.S Treasury yield curve in effect at the time of grant.
106
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Restricted Stock Units
RSU activity for the year ended December 29, 2014 was as follows:
Non-vested RSUs outstanding at December 30, 2013 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested RSUs outstanding at December 29, 2014 . . . . . . . . . . . . . . . .
Vested and expected to vest at December 29, 2014 . . . . . . . . . . . . . . . . . .
Weighted
Average
Grant-Date
Fair Value
$10.22
7.98
11.27
8.69
$ 8.54
$ 8.83
Shares
(In thousands)
1,327
845
(638)
(98)
1,436
1,627
The fair value of the Company’s RSUs is determined based upon the closing common stock price on the
grant date. The fair value per unit of RSUs granted was $7.98, $8.17 and $11.89 for the years 2014, 2013 and
2012, respectively. The total fair value of RSUs vested for the years 2014, 2013 and 2012 was $7,195, $7,878
and $6,467, respectively.
Stock Options
The Company did not grant any stock option awards during the years ended 2014, 2013 or 2012. Option
activity under the Plan for the year ended December 29, 2014 was as follows:
Outstanding at December 30, 2013 . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/expired . . . . . . . . . . . . . . . . .
Options
(In thousands)
597
—
—
(86)
Outstanding at December 29, 2014 . . .
511
Vested and expected to vest at
December 29, 2014 . . . . . . . . . . . . .
Exercisable at December 29, 2014 . . . .
511
511
Weighted-
Average
Exercise Price
$11.34
—
—
10.14
$11.54
$11.54
$11.54
Weighted-
Average
Remaining
Contractual
Term
(In years)
3.2
Aggregate
Intrinsic
Value
(In thousands)
2.3
2.3
2.3
$38
$38
$38
The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference
between Company’s closing stock price on the last trading day of the 2014 fiscal year and the exercise price,
multiplied by the number of in-the-money options) that would have been received by the option holders had all
option holders exercised their options on December 29, 2014. This amount changes based on the fair market
value of the Company’s stock. The total intrinsic value of options exercised for the years ended 2013 and 2012
was $117 and $58, respectively. There were no options exercised in 2014. The total fair value of the options
vested for the years ended 2014, 2013 and 2012 was $110, $143 and $325, respectively.
107
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Stock-based Compensation Expense and Unrecognized Compensation Costs
For the years ended 2014, 2013 and 2012, the amounts recognized in the consolidated financial statements
with respect to the stock-based compensation plan are as follows:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense recognized . . . . . . . .
Income tax benefit recognized . . . . . . . . . . . . . . . . . . . . .
$
866
1,109
5,825
7,800
(2,018)
(In thousands)
$ 1,059
1,308
6,618
8,985
(2,274)
$ 1,094
471
8,701
10,266
(2,482)
Total stock-based compensation expense after income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,782
$ 6,711
$ 7,784
The Company may become entitled to a deduction in its tax returns upon the future exercise of incentive
stock options under certain circumstances; however, the value of this deduction will be recorded as an increase to
additional paid-in capital and not as an income tax benefit. For the years ended 2014 and 2013, a net tax shortfall
of $1,015 and $744, respectively, related to fully vested stock option awards exercised and vested RSUs was
recorded as a decrease to additional paid-in capital. For the year ended 2012, a net tax benefit of $112, related to
fully vested stock option awards exercised and vested restricted stock units was recorded as an increase to
additional paid-in capital.
The following is a summary of total unrecognized compensation costs as of December 29, 2014:
PRU awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RSU awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized
Stock-Based
Compensation Cost
Remaining Weighted
Average Recognition
Period
(In thousands)
$1,011
6,527
$7,538
(In years)
1.36
1.28
(15) Employee Benefit and Deferred Compensation Plans
The Company has three separate retirement benefit plans: one in North America and two in Asia Pacific. In
North America, the Company has a 401(k) savings plan (the Savings Plan) in which eligible full-time employees
can participate and contribute a percentage of compensation subject to the maximum allowed by the Internal
Revenue Service. The Savings Plan provides for a partial match by the employer of the first 5% of employee
contributions (100% of the first 3% and 50% of the following 2% of employee contributions). In Asia Pacific, the
Company contributes to either separate trust-administered funds or various government-sponsored pension plans
on a mandatory basis. For all retirement plans, the Company has no further payment obligation once the required
contributions have been made. The Company recorded contributions to retirement benefit plans of $18,953,
$14,987 and $14,452 during the years ended 2014, 2013, 2012, respectively.
The Company also maintains a deferred compensation plan (the Compensation Plan). The Compensation
Plan is an unfunded, nonqualified deferred compensation plan and is limited to selected employees, including our
named executive officers and our directors. The Compensation Plan allows participants to defer up to 100% of
their annual bonus and between 5% and 100% of their annual director fees. Amounts deferred under the
108
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
Compensation Plan will be credited to accounts maintained by the Company for each participant and will be
credited or debited with the participant’s proportionate share of any gains or losses attributable to the
performance of investment options selected by the participant.
(16) Preferred Stock
The board of directors has the authority, without action by stockholders, to designate and issue preferred
stock in one or more series. The board of directors may also designate the rights, preferences and privileges of
each series of preferred stock, any or all of which may be superior to the rights of the common stock. As of
December 29, 2014, no shares of preferred stock were outstanding.
(17) Distribution of profits
As stipulated by the relevant laws and regulations of China applicable to the Company’s subsidiaries in
China, each of such subsidiaries is required to make appropriations from its net income as determined in
accordance with accounting principles and the relevant financial regulations of China (PRC GAAP) to a non-
distributable reserve, also referred to as statutory surplus reserve. The appropriations to the statutory surplus
reserve are required to be made at not less than 10% of the profit after tax as determined under PRC GAAP and
are required until the balance reaches 50% of its registered capital. The statutory surplus reserve is used to offset
future or past losses. These Chinese subsidiaries may, upon a resolution passed by their respective shareholders,
convert the statutory surplus reserve into capital.
There were appropriations of approximately $2,544, $3,526 and $8,145 to the statutory surplus reserve of
the Company’s Chinese subsidiaries for the years ended 2014, 2013 and 2012, respectively.
(18) Segment Information
The operating segments reported 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. The Company manages its worldwide operations based on two
geographic operating segments: 1) Asia Pacific, which consists of five PCB fabrication plants, and 2) North
America, which consists of seven domestic PCB fabrication plants, including a facility that provides follow-on
value-added services primarily for one of the PCB fabrication plants, and one backplane assembly plant in
Shanghai, China, which is managed in conjunction with the Company’s U.S. operations. Each segment operates
predominantly in the same industry with production facilities that produce customized products for its customers
and use similar means of product distribution.
109
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The Company evaluates segment performance based on operating 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. Reportable segment assets exclude short-term
investments, which are managed centrally.
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
(In thousands)
Net Sales:
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 811,107
516,670
$ 850,322
520,802
$ 842,443
509,426
Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inter-segment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,327,777
(2,060)
1,371,124
(2,909)
1,351,869
(3,201)
Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,325,717
$1,368,215
$1,348,668
Operating Segment Income (Loss):
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating segment income (loss) . . . . . . . . . . .
Amortization of definite-lived intangibles . . . . . . . . . .
Total operating income (loss) . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Total other expense, net
Income (loss) before income taxes . . . . . . . . . . . . . . . .
Depreciation Expense:
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total depreciation expense . . . . . . . . . . . . . . . . . . . .
Capital Expenditures:
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total capital expenditures . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
$
39,239
15,687
54,926
(8,387)
46,539
(24,248)
22,291
78,925
16,424
95,349
$
$
$
$
53,317
25,143
78,460
(9,332)
69,128
(29,356)
$ (165,183)
37,803
(127,380)
(14,637)
(142,017)
(26,355)
39,772
$ (168,372)
75,374
16,746
92,120
$
$
67,790
16,496
84,286
51,236
25,546
$ 106,300
21,971
$ 142,424
18,130
76,782
$ 128,271
$ 160,554
December 29,
2014
As of
December 30,
2013
(In thousands)
December 31,
2012
Segment Assets:
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated corporate assets . . . . . . . . . . . . . . . . . . . . . . .
$1,098,496
502,793
—
$1,134,325
539,102
148
$1,207,206
469,366
390
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,601,289
$1,673,575
$1,676,962
110
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
The Company accounts for inter-segment sales and transfers as if the sale or transfer were to third parties: at
arms length and consistent with the Company’s revenue recognition policy. The inter-segment sales are sales
from the Asia Pacific operating segment to the North America operating segment.
During the years ended 2014, 2013 and 2012, the Company recorded impairment charges of $1,845,
$10,782 and $18,082, respectively, for the impairment of long-lived assets related to its Asia Pacific operating
segment. During the year ended December 31, 2012, the Company recorded an impairment charge for goodwill
and definite-lived intangibles of $200,335 related to its Asia Pacific operating segment.
See Note 4 for additional information regarding the impairment of goodwill and definite-lived intangibles
and Note 5 for additional information regarding the impairment of long-lived assets.
The Company markets and sells its products in approximately 41 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 and long-lived assets are as follows:
2014
2013
2012
Net Sales
Long-Lived
Assets
Net Sales
Long-Lived
Assets
Net Sales
Long-Lived
Assets
(In thousands)
United States . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
$ 568,796
352,385
404,536
$103,340
682,739
—
$ 571,046
391,905
405,264
$ 95,672
754,781
—
$ 489,566
431,157
427,945
$ 93,080
789,702
—
Total
. . . . . . . . . . . . . . . . . . . . . . .
$1,325,717
$786,079
$1,368,215
$850,453
$1,348,668
$882,782
Net sales are attributed to countries by country invoiced.
(19) Earnings Per Share
The following is a reconciliation of the numerator and denominator used to calculate basic earnings (loss)
per share and diluted earnings (loss) per share for the years ended 2014, 2013 and 2012:
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
(In thousands, except per share
amounts)
Net income (loss) attributable to TTM Technologies, Inc.
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,693
$21,877
$(174,595)
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect of performance-based stock units, restricted stock units
and stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,238
82,506
81,800
703
626
—
Diluted shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,941
83,132
81,800
Earnings (loss) per share attributable to TTM Technologies, Inc.
stockholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.18
0.18
$
$
0.27
0.26
$
$
(2.13)
(2.13)
111
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
For the years ended December 29, 2014 and December 30, 2013, PRUs, RSUs and stock options to purchase
1,233 and 1,751 shares of common stock, respectively, were not considered in calculating diluted earnings per
share because the options’ exercise prices or the total assumed proceeds under the treasury stock method for
PRUs, RSUs or stock options was greater than the average market price of common shares during the applicable
year and, therefore, the effect would be anti-dilutive.
For the year ended December 31, 2012, potential shares of common stock, consisting of stock options to
purchase approximately 1,151 shares of common stock at exercise prices ranging from $4.69 to $16.82 per share,
1,362 RSUs, and 267 PRUs were not included in the computation of diluted earnings per share because the
Company incurred a net loss from operations and, as a result, the impact would be anti-dilutive.
Additionally, for the years ended December 29, 2014, December 30, 2013, and December 31, 2012, the
effect of shares of common stock related to the Company’s convertible senior notes and warrants to purchase
common stock were not included in the computation of dilutive earnings per share because the conversion price
of the convertible senior notes and the strike price of the warrants to purchase the Company’s common stock
were greater than the average market price of common shares during the applicable year, and therefore, the effect
would be anti-dilutive and were as follows:
Common stock related to convertible senior notes . . . . . .
27,970
(In thousands)
25,265
Warrants to purchase common stock . . . . . . . . . . . . . . . .
28,020
23,654
10,963
10,963
For the Year Ended
December 29,
2014
December 30,
2013
December 31,
2012
(20) Non-controlling Interest Holdings
On June 17, 2013, the Company completed the sale of its 70.2% controlling equity interest in Dongguan
Shengyi Electronics Ltd. (SYE) to its noncontrolling partner, Shengyi Technology Co. Ltd. (Sytech), for
702,000,000 Chinese RMB or $114,495. The Company recognized a gain on the sale of SYE of $17,917 in 2013.
Consideration net of cash sold was $67,147.
Additionally, the Company acquired Sytech’s 20.0% noncontrolling equity interest in Dongguan Meadville
Circuits Ltd. (DMC) for 180,000,000 Chinese RMB or $29,358 in 2013. The Company recorded a decrease to
additional paid-in capital for the difference between the purchase price and the carrying value of the
noncontrolling interest of $71.
(21) Related Party Transactions
In the normal course of business, the Company’s foreign subsidiaries purchase laminate and prepreg from
related parties in which a significant shareholder of the Company holds an equity interest. For the years ended
2014, 2013 and 2012, the Company’s foreign subsidiaries purchased $47,446, $62,648 and $90,603, respectively,
of laminate and prepreg from these related parties.
As mentioned above in Note 20, the Company completed its sale of SYE during 2013. Sales to SYE for
years ended December 29, 2014 and December 30, 2013 were $24,120 and $29,616, respectively. Additionally,
purchases from SYE for the year ended December 29, 2014 were approximately $1,671. There were no
purchases from SYE for year ended December 30, 2013.
112
TTM TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements — (Continued)
As of December 29, 2014 and December 30, 2013, the Company’s consolidated balance sheet included
$17,950 and $19,547, respectively, in accounts payable due to, and $4,934 and $13,312, respectively, in accounts
receivable due from a related party for the purchase of laminate and prepreg, and sales of PCBs to SYE,
respectively, as mentioned above.
(22) Dividend
During the year ended December 31, 2012, one of the Company’s majority-owned foreign subsidiaries
declared a dividend in the amount of approximately $47,600, which included $9,501 paid to its non-controlling
interest shareholder during the year ended December 31, 2012.
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BOARD MEMBERS
STOCKHOLDER INFORMATION
CHAIRMAN
Robert E. Klatell 2,3,4
Retired
Kenton K. Alder 4
Retired
James K. Bass 2,4
Retired
Thomas T. Edman 4
President and Chief Executive Officer, TTM Technologies
Philip G. Franklin 1,4
Chief Financial Officer, Littelfuse, Inc.
Lt. General Ronald W. Iverson 2,4
Retired
John G. Mayer 1,3,4
Retired
Tang Chung Yen, Tom
Managing Director – Asia Pacific Region, TTM Technologies
Dr. Dov S. Zakheim 1,3,4
Senior Advisor, Center for Strategic and International Studies
¹ Audit Committee member
² Compensation Committee member
³ Nominating and Corporate Governance Committee member
4 Government Security Committee member
EXECUTIVE OFFICERS
Thomas T. Edman
President and Chief Executive Officer
Chung Tai Keung, Canice
Executive Vice President and President, Asia Pacific Business Unit
Todd B. Schull
Executive Vice President and Chief Financial Officer
Stockholder Meeting
The annual meeting of stockholders will be held at the Corporate
Office located at 1665 Scenic Ave. Suite 250, Costa Mesa, CA at
1:30 p.m. Pacific Time on Thursday, May 14, 2015.
Investor Relations Contacts
CORPORATE
Todd B. Schull
Executive Vice President and Chief Financial Officer
Tel: +1-714-327-3000
ASIA PACIFIC
Audrey Sim
Vice President, Investor Relations and Marketing
Tel: +852-2660-4287
Stock Listing
TTM’s common stock is traded on the NASDAQ Global Select
Market under the symbol “TTMI”.
Stock Transfer Agent
AMERICAN STOCK TRANSFER AND TRUST COMPANY
6201 15th Avenue
Brooklyn, NY 11219
Tel: 800-937-5449 U.S. and Canada Shareholders
Tel: +1-718-921-8124 International Shareholders
Email: info@amstock.com
www.amstock.com
Douglas L. Soder
Executive Vice President and President, North America Business Unit
SAFE HARBOR STATEMENT
HEADQUARTERS
1665 Scenic Avenue
Suite 250
Costa Mesa, CA 92626
Tel: +1-714-327-3000
This annual report contains forward-looking statements subject
to known and unknown risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by such statements. Such risks and uncertainties include, but are
not limited to, fluctuations in quarterly and annual operating
results, the volatility and cyclicality of various industries that the
company serves and other risks described in TTM’s most recent
SEC filings.
WEBSITE
www.ttmtech.com
Global Presence Local Knowledge
1665 Scenic Avenue, Suite 250
Costa Mesa, CA 92626
+1-714-327-3000