TTM Technologies, Inc. (TTMI)
Q4 2008 Earnings Call Transcript
February 10, 2009 4:30 pm ET
Kenton K. Alder – President & Chief Executive Officer
Steven W. Richards – Executive Vice President & Chief Financial Officer
Shawn Harrison – Longbow Research
Steven Fox - Bank of America – Merrill Lynch
Matthew Sheerin – Thomas Weisel Partners
Amitabh Passi – UBS
Jiwon Lee – Sidoti & Co.
Richard Kugele – Needham & Co.
Previous Statements by TTMI
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Okay. Thank you. And good afternoon, and thanks for joining us for our 2008 fourth quarter conference call. Joining me on today’s call is TTM’s CFO, Steve Richards. Before we get into any details, let me mention that during the course of this call, we will make 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 in various industries that the company serves, and the impact of the current economic crisis, and other risks described in TTM's most recent SEC filings. The company assumes no obligation to update the information provided in this conference call. Also you will note, in our press release issued today that we provide GAAP and non-GAAP financial information, specifically with reference to EBITDA, the reconciliation between GAAP and non-GAAP information is provided in the press release.
Now as you know, because of the global market conditions, we made the difficult decision to close our Redmond, Washington facility. Shifting production from the underutilized Redmond facility to TTM's other plants will increase utilization and productivity in those facilities. Equally as important we have improved TTM's overall cost structure and strengthened our competitive position. We also reduced headcount at four other facilities by approximately 140 employees. While we are committed to continually evaluating our cost structure, we currently have no additional restructuring plans.
Now let me provide a quick overview of the fourth quarter. Despite the challenging business environment, I’m pleased to report that we again delivered solid financial performance in the quarter. We generated significant cash, exceeded our revenue guidance and excluding impairment charges came in at the high-end of guidance for both gross margins and earnings per share. The Aerospace/Defense end market continue to be a major source of strength.
On a segment basis, Printed Circuit Board Manufacturing recorded fourth quarter net sales of $144.2 million compared with $148 million in the third quarter. Fourth quarter operating segment income and this is excluding impairment charges of $120.6 million, was $13.1 million compared with income of $14.3 million in the third quarter. Including the impairment charges, our operating loss in this segment was $107.5 million. Steve will discuss the details in his remarks.
On a sequential basis, average price per panel increased roughly 3%, due primarily to a higher tech and product mix. Panel production declined by approximately 6% sequentially due to softer orders from our commercial customers.
With the Backplane Assembly segment, fourth quarter net sales were $31.1 million, compared with $29.3 million in the third quarter. Fourth quarter operating segment income and again this is excluding an impairment charge of $2.7 million, was $2.3 million compared to $2.1 million in the third quarter. Including the impairment charge, our operating loss in the segment was $0.4 million. For the full year 2008, net sales were $681 million, an increase of $11.5 million, or 1.7% over 2007 net sales of $669.5 million.
Now let’s look at our four end markets. The main driver this quarter continued to be aerospace and defense. Together with network and communications, these two end markets again accounted for more than three quarters of our net sales. Aerospace and defense increased from 39% of net sale in the third quarter, to 40% in the fourth quarter based on continued strength with the majority of our customers in this end market.
In our Printed Circuit Board Manufacturing segment, the aerospace and defense end market represents approximately half of our sales. Net working communications at 37% of net sales was down from 39% in the third quarter due primarily to softer sales from the key networking customer in the printed circuit board segment. In our printed circuit board manufacturing segment, network and communications represents 27% of sales. The computing storage and peripheral end market increased to 12% of net sales and medical/ industrial instrumentation remains steady with the prior quarter at 11% of net sales.
In the computing end market, we saw renewed demand for high-end server from two well-established customers and we also had improved sales in storage equipment. And our top five customers comprised 30% of fourth net sales and represented a strategic mix of commercial and aerospace defense customers. No OEM customer represented more than 10% of sales for the quarter. In alphabetic order, our top five OEM customers in the fourth quarter were Cisco, ITT, Juniper, Northrop Grumman and Raytheon.