TTMI

TTM Technologies, Inc. (TTMI)

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TTM Technologies, Inc. (TTMI)

Q3 2009 Earnings Call

November 4, 2009 4:30 PM ET

Executives

Kenton K. Alder - President, Chief Executive Officer, Director

Steven W. Richards - Chief Financial Officer, Executive Vice President, Secretary

Analysts

Amit Daryanani – RBC Capital Markets

Shawn Harrison – Longbow Research

Amitabh Passi – UBS

Matt Sheerin – Thomas Weisel Partners

Jiwon Lee – Sidoti & Co.

Presentation

Operator

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the TTM Technologies third quarter 2009 financial results conference call. Here in today’s presentation all parties will be in a listen only mode. Following the presentation the conference will be open for questions. (Operator’s instructions) This conference is being recorded today, November 4, 2009. I would now like to turn the conference over to Mr. Kent Alder, CEO, go ahead, sir.

Kenton K. Alder

Okay. And thank you very much. And good afternoon, thanks for joining us for our 2009 third quarter conference call. Joining me on today’s call is TTM’s CFO, Steve Richards. I’ll begin with the review of the business and then Steve will review our financial performance and then we’ll open the call for your questions.

But 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, fluctuation in quarterly and annual operating results, the volatility and cyclicality of various industries that the company serves and the impact of the current economic crisis and other risks described in TTM’s most recent SEC filing.

The company assumes no obligation to update the information provided in this conference call. We will also present non-GAAP financial information in this call. For a reconciliation of our non-GAAP financial information to the equivalent majors under GAAP, please refer to our press release which we filed with the SEC and is posted on our website.

Okay. Today we announced our results for the third quarter of fiscal 2009. For the first time in five quarter we realized improvement in our printed circuit board manufacturing segment sales due to growth with our commercial customers, primarily in the computing and networking communications and markets.

Our revenue of $139.1 million and EPS of 0.13 excluded nonrecurring charges were line with our guidance. And we continue to generate cash and improve margins through discipline operational management.

We increased our cash by $11.3 million to a total cash position of $200.7 million. And although consolidated sales decreased by $4.5 million, our gross margin improved to 19.3% excluding the inventory write down related to the Hayward and Los Angles facility closures.

In September we announced that we were closing our underutilized Hayward, California and Los Angeles California facilities. And shifting production to other TTM plants to increase utilization and productivity in those facilities.

We are currently on schedule to cease operations at the Los Angeles facility during the current quarter and at the Hayward facility in the first quarter of 2010. We have retained the majority of our customers at these facilities as planned. And are on target to meet the approximately 14 million in annual cost savings projected earlier. We will begin to realize these cost savings in the first quarter of 2010.

Now let me provide a quick overview of the third quarter. Our printed circuit board manufacturing segment recorded third quarter net sales of $123.2 million, compared with $122.6 million in the second quarter. The increase was mainly due to strength in the network and communications and computing end markets.

Third quarter operating segment loss was $1.9 million compared with income of $10.7 million in the second quarter. The third quarter operating loss reflected nonrecurring charges of $14 million. Primarily associated with the closure of the Los Angeles facility and further impairment of our Dallas, Oregon building.

Excluding the nonrecurring charges, operating segment income for the printed circuit board manufacturing segment was $12.1 million. On a sequential basis, the average price per panel decreased 5% due to slightly lower sales in our aerospace and defense end market. And also with changes in our product mix. Overall market pricing continues to be steady. Panel production increased by 3% sequentially due to increased orders in our network and communication end market.

For the backplane assembly segment, third quarter net sales were $24 million compared to $21.9 million in the second quarter. Third quarter operating segment loss was $2.6 million compared with operating segment income of $2.3 million in the second quarter.

The third quarter operating loss included nonrecurring charges of $3.1 million associated with the closure of the Hayward facility. Excluding these charges, third quarter operating income for the backplane assembly segment was $0.5 million.

Now, moving on to our four end markets. We experienced increased sales with our network and communication customers and our printed circuit board manufacturing segment and decreased sales in our backplane assembly segment. The printed circuit board increase are a positive indication that the demand pictures is improving in our commercial customer base. With the expectation of one large Asian OEM sales declines in the backplane assembly were across the board.

For TTM as a whole, network and communication end market declined to 35% of sales from 36% in the second quarter. The aerospace and defense end market decreased from 45% in the second quarter to 44% in the third quarter due to timing issues on a few programs. Overall, our broad base of defense business continues to be strong.

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