TTM Technologies(US:TTMI)2022-08-10 20:07Financial Performance - Total net sales increased by $58.2 million, or 10.3%, to $625.6 million for Q2 2022 compared to $567.4 million for Q2 2021, driven primarily by a $55.9 million increase in PCB segment sales [107]. - PCB segment net sales rose by $55.9 million, or 10.1%, to $609.4 million for Q2 2022, attributed to strong growth in commercial end markets and an 18.6% increase in average price per square foot [107]. - Gross margin improved to 18.7% for Q2 2022 from 17.6% in Q2 2021, with PCB segment gross margin increasing to 19.6% from 17.4% [109]. - Operating income for Q2 2022 was 5.9%, down from 7.2% in Q2 2021, while total operating expenses increased to 12.8% from 10.4% [106]. - Overall gross margin increased to 17.2% for the first two quarters of 2022 from 16.6% for the first two quarters of 2021, driven by price increases and improved product mix [110]. Customer Concentration - Sales to the ten largest customers accounted for 41% of net sales for the quarter ended July 4, 2022, compared to 43% for the same quarter in 2021 [95]. Acquisitions and Investments - The company completed the acquisition of Gritel Holding Co., Inc. and ISC Farmingdale Corp. for $299.2 million in cash on June 27, 2022 [89]. - Cash flow from operating activities was $115.3 million for the first two quarters of 2022, an increase from $98.1 million in the same period in 2021, primarily due to a $20.0 million rise in net income [123]. - Net cash used in investing activities was approximately $349.0 million for the first two quarters of 2022, mainly for the acquisition of Telephonics [124]. - Additional purchase obligations from the Telephonics acquisition amounted to $121.1 million, with $109.3 million expected to be settled within one year [133]. Capital Expenditures - A new highly automated PCB manufacturing facility is under construction in Penang, Malaysia, with a total capital expenditure of approximately $130.0 million expected from 2022 to 2025 [90]. - The company expects total capital expenditures for 2022 to be in the range of $110.0 million to $130.0 million [127]. Debt and Financial Obligations - As of July 4, 2022, the company had $928.6 million of outstanding debt, including $494.9 million of Senior Notes due March 2029 [130]. - The total long-term debt as of July 4, 2022, was $935.879 million, with a fair value of $851.574 million [149]. - As of July 4, 2022, approximately 53.4% of the company's total debt was based on fixed rates, with an annual interest cost change of $4.4 million for a 100 basis point change in variable rates [142]. Supply Chain and Labor Challenges - The company continues to face supply chain constraints and inflationary pressures, impacting production and costs [93]. - Labor challenges in North America persist, affecting the ability to attract and retain skilled workers, which may adversely impact business operations [94]. Commodity and Currency Risks - The company is experiencing increasing prices and lead times for copper clad laminates (CCLs), a key raw material, which may negatively affect profitability [148]. - The company is exposed to commodity price risks, particularly for raw materials like copper, which are seeing limited supply and increased prices [148]. - The company may consider the use of derivatives in the future to manage foreign currency risks, particularly related to the Renminbi (RMB) [146]. - The company does not engage in hedging to manage foreign currency risk, except for certain equipment purchases, but may utilize commodity forward purchase contracts more frequently in the future [148]. - The transition from LIBOR to SOFR is expected to be complicated, with potential increased volatility during the transition period [144]. Operating Metrics - Capacity utilization for Asia PCB facilities was 86% for the first two quarters of 2022, up from 84% for the same period in 2021, while North America PCB facilities decreased to 44% from 52% [111]. - Selling and marketing expenses increased by $4.9 million to $35.8 million for the first two quarters of 2022, representing 2.9% of net sales compared to 2.8% in the prior year [113]. - General and administrative expenses rose by $19.0 million to $81.8 million for the first two quarters of 2022, accounting for 6.8% of net sales, influenced by acquisition costs and increased labor expenses [115]. Taxation - The effective tax rate is influenced by tax rates in China and Hong Kong, with a net deferred income tax liability of approximately $20.7 million as of July 4, 2022 [121]. Foreign Exchange Contracts - The notional amount of foreign exchange contracts as of July 4, 2022, was approximately $1.6 million (EUR 1.4 million), with no contracts reported as of January 3, 2022 [147].