TTM TECHNOLOGIES INC - Quarter Report: 2011 June (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-31285

TTM TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		91-1033443
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2630 South Harbor Boulevard, Santa Ana, California 92704
(Address of principal executive offices)

(714) 327-3000
(Registrant’s telephone number, including area code)

     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 to such filing requirements for the past 90 days. Yes þ No o

     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 þ No o

     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. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

     Number of shares of common stock, $0.001 par value, of registrant outstanding at August 3, 2011: 81,331,886

 

 

TABLE OF CONTENTS

		Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Condensed Balance Sheets as of June 27, 2011 and December 31, 2010			3
Consolidated Condensed Statements of Operations for the quarter and two quarters ended June 27, 2011 and June 28, 2010			4
Consolidated Condensed Statements of Cash Flows for the two quarters ended June 27, 2011 and June 28, 2010			5
Notes to Consolidated Condensed Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			35
Item 4. Controls and Procedures			38
PART II: OTHER INFORMATION
Item 1. Legal Proceedings			38
Item 1A. Risk Factors			38
Item 6. Exhibits			39
SIGNATURES			40
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

TTM TECHNOLOGIES, INC.

Consolidated Condensed Balance Sheets

		June 27,				December 31,
		2011				2010
		(Unaudited)
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	235,898			$	216,078
Available for sale securities			4,354				—
Accounts and notes receivable, net of allowance for bad debts of $1,743 in 2011 and $1,827 in 2010			294,615				287,703
Inventories			141,152				135,385
Prepaid expenses and other current assets			32,639				30,125
Deferred income taxes			7,208				7,208
Total current assets			715,866				676,499
Property, plant and equipment, net of accumulated depreciation of $167,847 in 2011 and $135,565 in 2010			736,548				740,630
Deferred income taxes			19,685				23,733
Goodwill			197,662				197,808
Definite-lived intangibles, net			89,155				97,873
Deposits and other non-current assets			28,071				25,409
		$	1,786,987			$	1,761,952
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt, including current portion of long-term debt, net of discount		$	123,171			$	67,123
Accounts payable			167,062				154,600
Accounts payable due to related parties			47,403				50,374
Accrued salaries, wages and benefits			45,043				51,107
Equipment payable			69,019				59,802
Other accrued expenses			35,462				35,194
Total current liabilities			487,160				418,200
Convertible senior notes, net of discount			148,157				145,283
Long-term debt			255,836				312,995
Deferred income taxes			16,425				12,608
Related party financing obligation			—				20,399
Other long-term liabilities			11,915				19,609
Total long-term liabilities			432,333				510,894
Commitments and contingencies (Note 14) Equity:
Common stock, $0.001 par value; 100,000 shares authorized, 81,332 and 80,262 shares issued and outstanding in 2011 and 2010, respectively			81				80
Additional paid-in capital			531,584				519,051
Retained earnings			200,034				193,814
Accumulated other comprehensive income			27,004				15,310
Total TTM Technologies, Inc. stockholders’ equity			758,703				728,255
Noncontrolling interest			108,791				104,603
Total equity			867,494				832,858
		$	1,786,987			$	1,761,952

See accompanying notes to consolidated condensed financial statements.

TTM TECHNOLOGIES, INC.

Consolidated Condensed Statements of Operations
For the Quarter and Two Quarters Ended June 27, 2011 and June 28, 2010
(Unaudited)
(In thousands, except per share data)

		Quarter Ended								Two Quarters Ended
		June 27,				June 28,				June 27,				June 28,
		2011				2010				2011				2010
Net sales		$	366,117			$	310,248			$	708,918			$	448,467
Cost of goods sold			288,782				253,154				549,657				364,400
Gross profit			77,335				57,094				159,261				84,067
Operating expenses:
Selling and marketing			9,323				9,103				18,356				15,830
General and administrative			24,111				25,349				47,162				34,386
Amortization of definite-lived intangibles			4,321				4,621				8,479				5,412
Restructuring charges			—				399				—				449
Impairment of long-lived assets			48,125				266				48,125				766
Total operating expenses			85,880				39,738				122,122				56,843
Operating income (loss)			(8,545	)			17,356				37,139				27,224
Other income (expense):
Interest expense			(6,684	)			(6,411	)			(12,975	)			(9,192	)
Other, net			3,435				181				4,412				173
Total other expense, net			(3,249	)			(6,230	)			(8,563	)			(9,019	)
Income (loss) before income taxes			(11,794	)			11,126				28,576				18,205
Income tax provision			(8,474	)			(4,386	)			(19,756	)			(6,980	)
Net income (loss)			(20,268	)			6,740				8,820				11,225
Less: Net income attributable to the noncontrolling interest			(635	)			(1,811	)			(2,600	)			(1,811	)
Net income (loss) attributable to TTM Technologies, Inc. stockholders		$	(20,903	)		$	4,929			$	6,220			$	9,414
Earnings (loss) per share attributable to TTM
Technologies, Inc. stockholders:
Basic earnings (loss) per share		$	(0.26	)		$	0.06			$	0.08			$	0.16
Diluted earnings (loss) per share		$	(0.26	)		$	0.06			$	0.08			$	0.16

See accompanying notes to consolidated condensed financial statements.

TTM TECHNOLOGIES, INC.

Consolidated Condensed Statements of Cash Flows
For the Two Quarters Ended June 27, 2011 and June 28, 2010

		Two Quarters Ended
		June 27,				June 28,
		2011				2010
		(Unaudited)
		(In thousands)
Cash flows from operating activities:
Net income		$	8,820			$	11,225
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment			32,521				17,182
Amortization of definite-lived intangible assets			8,538				5,470
Amortization of convertible notes, debt discount and debt issuance costs			3,728				3,159
Non-cash interest imputed on other long-term liabilities and related party financing obligation			628				270
Income tax benefit from restricted stock units released and common stock options exercised			(1,956	)			(436	)
Deferred income taxes			10,155				3,471
Stock-based compensation			3,879				3,006
Impairment of long-lived assets			48,125				766
Realized gain on early payment of related party financing obligation			(1,659	)			—
Net loss on sale of property, plant and equipment and other			269				152
Net unrealized loss on derivative assets and liabilities			697				73
Net realized foreign currency exchange loss			1,280				—
Changes in operating assets and liabilities, net of acquisition:
Accounts and notes receivable, net			(6,464	)			(35,499	)
Inventories			(5,614	)			(1,114	)
Prepaid expenses and other current assets			(1,899	)			(6,180	)
Accounts payable			10,692				14,076
Accrued salaries, wages and benefits and other accrued expenses			(6,885	)			4,129
Net cash provided by operating activities			104,855				19,750
Cash flows from investing activities:
Purchase of property, plant and equipment and equipment deposits			(70,963	)			(18,294	)
Proceeds from sale of property, plant and equipment and assets held for sale			364				3,478
Acquisition, net of cash acquired			—				(28,529	)
Restricted cash used for acquisition			—				120,000
Proceeds from the redemption of short-term investments			—				1,351
Net cash (used in) provided by investing activities			(70,599	)			78,006
Cash flows from financing activities:
Proceeds from revolving loan			20,000				20,014
Repayment of long-term borrowings			(32,120	)			—
Proceeds from long-term borrowings			10,822				387,980
Repayment of assumed long-term debt in acquisition			—				(387,980	)
Settlement of related party financing obligation			(20,528	)			—
Proceeds from exercise of stock options			6,264				197
Excess tax benefits from stock awards exercised or released			1,956				436
Net cash (used in) provided by financing activities			(13,606	)			20,647
Effect of foreign currency exchange rates on cash and cash equivalents			(830	)			436
Net increase in cash and cash equivalents			19,820				118,839
Cash and cash equivalents at beginning of period			216,078				94,347
Cash and cash equivalents at end of period		$	235,898			$	213,186

Supplemental disclosures of noncash investing and financing activities: The Company issued common stock and replacement awards with a fair value of $294,382 in connection with the PCB Subsidiaries acquisition. See Note 2.

At June 27, 2011 and June 28, 2010 accrued purchases of equipment totaled $75,840 and $27,400, respectively.

See accompanying notes to consolidated condensed financial statements.

TTM TECHNOLOGIES, INC.

(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 (PCBs populated with electronic components), which serve as the foundation of sophisticated electronic products. The Company provides advanced technology products and offers a one-stop manufacturing solution to customers from engineering support to prototype development through final volume production. The Company serves a diversified customer base in various markets throughout the world, including manufacturers of networking/communications infrastructure products, personal computers, touch screen tablets and mobile media devices (cellular phones and smart phones). The Company also serves high-end computing, commercial aerospace/defense, and industrial/medical industries. The Company’s customers include both original equipment manufacturers (OEMs) and electronic manufacturing services (EMS) providers.

     The accompanying consolidated condensed financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These consolidated condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented. It is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s most recent Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated condensed financial statements and accompanying notes. Actual results could differ materially from those estimates. The Company uses a 13-week fiscal quarter accounting period with the first quarter ending on the last Monday in March and the fourth quarter always ending on December 31. The second quarters ended June 27, 2011 and June 28, 2010 each contained 91 days. The two quarters ended June 27, 2011 and June 28, 2010 contained 178 and 179 days, respectively.

(2) Acquisition of PCB Subsidiaries

     On the evening of April 8, 2010 (in the morning of April 9, 2010, Hong Kong time), the Company acquired from Meadville Holdings Limited (Meadville), an exempted company incorporated under the laws of the Cayman Islands, and MTG Investment (BVI) Limited (MTG), a company incorporated under the laws of the British Virgin Islands and a wholly owned subsidiary of Meadville, all of the issued and outstanding capital stock of four wholly owned subsidiaries of MTG. These four companies, through their respective subsidiaries, engage in the business of manufacturing and distributing printed circuit boards, including circuit design, quick-turn-around services, and drilling and routing services. Subsequent to the acquisition, these four companies and their subsidiaries (together, the PCB Subsidiaries) are subsidiaries of the Company and represent the Asia Pacific operating segment of the Company.

     The Company purchased the PCB Subsidiaries for a total consideration of $114,034 in cash and 36,334 shares of TTM common stock, of which approximately 26,225 are subject to restrictions. After taking into account the 36,334 shares of TTM common stock issued in the acquisition and based on the number of shares outstanding on April 8, 2010, the date the Company acquired the PCB Subsidiaries, approximately 45% of TTM common stock outstanding was held by Meadville, its shareholders, or their transferees.

     The purchase price of the PCB Subsidiaries was allocated to tangible and intangible assets acquired, liabilities assumed and noncontrolling interests based on their estimated fair value at the date of the acquisition (April 8, 2010). Noncontrolling interests consist of a 29.8% equity interest in one PCB manufacturing subsidiary and a 20.0% equity interest in one other PCB manufacturing subsidiary held by third parties. The fair value was determined by utilizing a combination of income and market comparable approaches. The income approach was used to estimate the total enterprise value of each noncontrolling interest by estimating discounted future cash flows. The market comparable approach indicates the fair value of the noncontrolling interest based on a comparison to comparable enterprises in similar lines of business that are publicly traded or are part of a public or private transaction.

TTM TECHNOLOGIES, INC.

     Bank fees and legal and accounting costs associated with the acquisition of the PCB Subsidiaries of $6,986 and $8,784 for the quarter and two quarters ended June 28, 2010 have been expensed and recorded as general and administrative expense in the consolidated condensed statement of operations in accordance with ASC Topic 805, Business Combinations. There were no bank fees or legal and accounting costs associated with the acquisition of the PCB Subsidiaries for the quarter or two quarters ended June 27, 2011.

     Unaudited pro forma operating results for the Company, assuming the acquisition of the PCB Subsidiaries occurred on January 1, 2010 are as follows:

		For the Quarter				For the Two Quarters
		Ended				Ended
		June 28, 2010				June 28, 2010
		(In thousands, except per share data)
Net sales		$	334,776			$	631,311
Net income		$	9,784			$	15,955
Basic earnings per share		$	0.12			$	0.20
Dilutive earnings per share		$	0.12			$	0.20

The pro forma information is not necessarily indicative of the actual results that would have been achieved had the PCB Subsidiaries acquisition occurred as of January 1, 2010, or the results that may be achieved in future periods.

(3) Long-lived Assets

     Property, plant and equipment, net as of June 27, 2011 and December 31, 2010 consist of the following:

		June 27,				December 31,
		2011				2010
		(In thousands)
Property, plant and equipment, net:
Land and land use rights		$	36,924			$	36,444
Buildings and improvements			209,530				204,850
Machinery and equipment			504,187				477,886
Construction-in-progress			144,974				149,123
Furniture and fixtures			7,215				6,440
Automobiles			1,565				1,452
			904,395				876,195
Less: Accumulated depreciation			(167,847	)			(135,565	)
		$	736,548			$	740,630

      During the quarter ended June 27, 2011, the Company recorded an impairment charge in the amount of $48,125 to reduce the carrying value of certain long-lived assets in the Asia Pacific operating segment. The impairment charge is comprised of $39,850 related to manufacturing equipment held for use at a plant acquired by Meadville in 2007 for which the Company had previously reduced the carrying value of certain of these assets during its purchase price allocation completed in 2010 related to the acquisition of the PCB Subsidiaries. Weaker than expected operating performance at this manufacturing plant in the first six months of 2011 resulting from a downturn in the profitability of the products produced at this manufacturing plant and a reduction in expected future demand for the specific products produced resulted in a triggering event during the quarter ended June 27, 2011. Based on the undiscounted cash flows for this plant, an impairment of the manufacturing assets was indicated. The Company’s asset grouping for the impairment test was the manufacturing plant as the manufacturing equipment at this plant is specific to the products produced with separately identifiable cash flows. In addition, the manufacturing equipment at this plant cannot be used at the Company’s other manufacturing sites. The fair value of these manufacturing assets was determined using a discounted cash flow model over their remaining useful life with the impairment being the difference between the carrying value and fair value of the asset group. The impairment charge is also comprised of $8,275 related to manufacturing equipment that, due to the change in market conditions noted above, has become or is expected to become technologically obsolete. Accordingly, during the quarter ended June 27, 2011, the Company revised its classification of these assets to held for sale or disposal. The fair value of these assets was determined using third party quotes or other estimates of salvage value and the assets’ carrying value was written down to salvage value. The new carrying value of the assets held for sale or disposal is approximately $1,003, which is included in machinery and equipment in property, plant and equipment in the accompanying consolidated condensed balance sheet.

     Additionally, during the quarter and two quarters ended June 28, 2010, the Company reduced the carrying value of the Dallas, Oregon facility, which was classified as an asset held for sale, to record the estimated fair value less costs to sell, resulting in an impairment of $266 and $766, respectively, due to a depressed real estate market in the surrounding Dallas, Oregon region. The Company sold the Dallas, Oregon facility in July 2010.

TTM TECHNOLOGIES, INC.

(4) Accounts and Notes Receivable Factoring and Sales Arrangements

     In the normal course of business, the Company’s foreign subsidiaries utilize accounts receivable factoring arrangements. Under these arrangements, the Company may sell certain of its 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 $20,169 and $16,061 of accounts receivable for the quarters ended June 27, 2011 and June 28, 2010, respectively, and $34,430 and $16,061 for the two quarters ended June 27, 2011 and June 28, 2010, respectively.

     Additionally, the Company’s foreign subsidiaries may also sell certain of their notes receivable at a discount ranging from 1% to 2% of the notes receivable. The Company sold $13,277 and $29,052 of notes receivable for the quarters ended June 27, 2011 and June 28, 2010, respectively, and $39,566 and $29,052 for the two quarters ended June 27, 2011 and June 28, 2010, respectively.

(5) Inventories

     Inventories as of June 27, 2011 and December 31, 2010 consist of the following:

		June 27,				December 31,
		2011				2010
		(In thousands)
Inventories:
Raw materials		$	48,638			$	50,465
Work-in-process			53,427				47,178
Finished goods			39,087				37,742
		$	141,152			$	135,385

     As of June 27, 2011 and December 31, 2010, goodwill by operating segment and the components of definite-lived intangibles were as follows:

Goodwill

		North				Asia
		America				Pacific				Total
		(In thousands)
Balance as of December 31, 2010
Goodwill		$	131,650			$	183,176			$	314,826
Accumulated impairment losses			(117,018	)			—				(117,018	)
			14,632				183,176				197,808
Foreign currency translation adjustment during the two quarters ended June 27, 2011			279				(425	)			(146	)
Balance as of June 27, 2011
Goodwill			131,929			$	182,751				314,680
Accumulated impairment losses			(117,018	)			—				(117,018	)
		$	14,911			$	182,751			$	197,662

     The December 31, 2010 goodwill balance includes foreign currency translation adjustments related to foreign subsidiaries which operate in currencies other than the U.S. Dollar.

TTM TECHNOLOGIES, INC.

Definite-lived Intangibles

																		Weighted
										Foreign				Net				Average
		Gross				Accumulated				Currency				Carrying				Amortization
		Amount				Amortization				Rate Change				Amount				Period
						(In thousands)												(years)
June 27, 2011:
Strategic customer relationships		$	120,427			$	(39,536	)		$	70			$	80,961				9.2
Trade name			10,302				(2,187	)			(27	)			8,088				6.0
Licensing agreements			350				(244	)			—				106				3.0
Order backlog			1,288				(1,286	)			(2	)			—				0.2
		$	132,367			$	(43,253	)		$	41			$	89,155

     All of the definite-lived intangibles are 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 $4,350 and $4,650 for the quarters ended June 27, 2011 and June 28, 2010, respectively, and $8,538 and $5,470 for the two quarters ended June 27, 2011 and June 28, 2010, respectively. Amortization expense related to acquired licensing agreements is classified as cost of goods sold.

     Estimated aggregate amortization for definite-lived intangible assets for the next five years is as follows:

		(In thousands)
Remaining 2011		$	8,925
2012			16,519
2013			15,524
2014			13,947
2015			12,472
		$	67,387

(7) Long-term Debt and Letters of Credit

     The following table summarizes the long-term debt of the Company as of June 27, 2011 and December 31, 2010.

		Average Effective								Average Effective
		Interest Rate								Interest Rate
		as of								as of
		June 27,				June 27,				December 31,				December 31,
		2011				2011				2010				2010
						(In thousands)								(In thousands)
Bank loans, due various dates
through June 2013			3.70	%		$	26,687				3.39	%		$	30,412
Term loan due November 2013			2.19	%			332,500				2.26	%			350,000
Revolving loan			2.44	%			20,000				—				—
Other			6.00	%			18				6.00	%			20
							379,205								380,432
Less: Unamortized discount							(198	)							(314	)
							379,007								380,118
Less: Current maturities							(123,171	)							(67,123	)
Long-term debt, less current maturities						$	255,836							$	312,995

     The maturities of long-term debt through 2013 and thereafter are as follows:

		(In thousands)
Remaining 2011		$	55,002
2012			120,869
2013			203,326
Thereafter			8
		$	379,205

TTM TECHNOLOGIES, INC.

     Bank loans are made up of bank lines of credit in mainland China and are used for working capital and capital investment for the Company’s mainland China facilities. These facilities are denominated in either U.S. Dollars or Chinese Renminbi (RMB), with interest rates tied to either LIBOR or People’s Bank of China rates. These bank loans expire at various dates through June 2013.

     On April 9, 2010, in conjunction with the acquisition of the PCB Subsidiaries, the Company became a party to a credit agreement (Credit Agreement) entered into on November 16, 2009 by certain PCB Subsidiaries. The Credit Agreement consists of a $350,000 senior secured term loan (Term Loan), a $87,500 senior secured revolving loan (Revolving Loan), a $65,000 factoring facility (Factoring Facility), and a $80,000 letters of credit facility (Letters of Credit Facility), all of which mature on November 16, 2013. The Credit Agreement is secured by substantially all of the assets of the PCB Subsidiaries. The Company has fully and unconditionally guaranteed the full and punctual payment of all obligations of the PCB Subsidiaries under the Credit Agreement.

     Borrowings under the Credit Agreement bear interest at a floating rate of LIBOR (term election by Company) plus an applicable interest margin. Borrowings under the Term Loan will bear interest at a rate of LIBOR plus 2.0%, LIBOR plus 2.25% under the Revolving Loan, and LIBOR plus 1.25% under the Factoring Facility. There is no provision, other than an event of default, for these interest margins to increase. At June 27, 2011, the weighted average interest rate on the outstanding borrowings under the Credit Agreement was 2.20%.

     The Company is required to make scheduled payments of the outstanding Term Loan balance beginning in 2011. All and any other outstanding balances under the Credit Agreement are due at the maturity date of November 16, 2013. Borrowings under the Credit Agreement are subject to certain financial and operating covenants that include, among other provisions, limitations on dividends or other distributions, maintaining maximum total leverage ratios and minimum net worth, current assets, and interest coverage ratios at both the Company and PCB Subsidiaries level. The Company is in compliance with the covenants.

     The Company is also required to pay a commitment fee of 0.20% per annum on the unused portion of any loan or facility under the Credit Agreement. For the quarter and two quarters ended June 27, 2011, the Company incurred $77 and $153, respectively, in commitment fees related to unused borrowing availability under the Credit Agreement. As of June 27, 2011, all of the remaining Term Loan was outstanding, $20,000 of the Revolving Loan was outstanding, none of the Factoring Facility was outstanding, and $65,114 of the Letters of Credit Facility was outstanding. Available borrowing capacity under the Revolving Loan and Factoring Facility was $67,500 and $65,000, respectively, at June 27, 2011.

     On April 9, 2010, the Company entered into an interest rate swap arrangement with an initial notional amount of $146,500 for the period beginning April 18, 2011 and ending on April 16, 2013 (see Note 11).

Other Letters of Credit

     In addition to the letters of credit obtained by the PCB Subsidiaries pursuant to the Credit Agreement, the Company maintains several unused letters of credit: a $1,994 standby letter of credit expiring December 31, 2011 associated with its insured workers compensation program; a $1,000 standby letter of credit expiring February 29, 2012 related to the lease of one of its production facilities; and various other letters of credit aggregating to approximately $1,661 related to purchases of machinery and equipment with various expiration dates through July 2011.

(8) Convertible Senior Notes

     In 2008, the Company issued 3.25% Convertible Senior Notes (Convertible Notes) due May 15, 2015 in a public offering for an aggregate principal amount of $175,000. The Convertible 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 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. The liability and equity components of the Convertible Notes are separately accounted for in a manner that reflects the Company’s non-convertible debt borrowing rate when interest costs are recognized.

TTM TECHNOLOGIES, INC.

     The Company has allocated the Convertible Notes offering costs to the liability and equity components in proportion to the allocation of proceeds and accounted for them as debt issuance costs and equity issuance costs, respectively. At June 27, 2011 and December 31, 2010, the following summarizes the liability and equity components of the Convertible Notes:

		June 27,				December 31,
		2011				2010
		(In thousands)
Liability components:
Convertible Notes		$	175,000			$	175,000
Less: Convertible Notes unamortized discount			(26,843	)			(29,717	)
Convertible Notes, net of discount		$	148,157			$	145,283
Equity components:
Additional paid-in capital:
Embedded conversion option — Convertible Notes		$	43,000			$	43,000
Embedded conversion option — Convertible Notes issuance costs			(1,413	)			(1,413	)
		$	41,587			$	41,587

     At June 27, 2011 and December 31, 2010, remaining unamortized debt issuance costs included in other non-current assets were $2,708 and $2,998, respectively. The debt issuance costs and debt discount are being amortized to interest expense over the term of the Convertible Notes using the effective interest rate method. At June 27, 2011, the remaining amortization period for the unamortized Convertible Note discount and debt issuance costs was 3.9 years.

     The components of interest expense resulting from the Convertible Notes for the quarter and two quarters ended June 27, 2011 and June 28, 2010 are as follows:

		For the Quarter Ended								For the Two Quarters Ended
		June 27,				June 28,				June 27,				June 28,
		2011				2010				2011				2010
		(In thousands)
Contractual coupon interest		$	1,422			$	1,422			$	2,844			$	2,844
Amortization of Convertible Notes debt discount			1,452				1,335				2,874				2,644
Amortization of debt issuance costs			147				135				290				266
		$	3,021			$	2,892			$	6,008			$	5,754

     For the quarter and two quarters ended June 27, 2011 and June 28, 2010, the amortization of the Convertible Notes debt discount and debt issuance costs is based on an effective interest rate of 8.37%.

     Conversion

     At any time prior to November 15, 2014, holders may convert their Convertible Notes into cash and, if applicable, into shares of the Company’s common stock based on a conversion rate of 62.6449 shares of the Company’s common stock per $1 principal amount of Convertible Notes, subject to adjustment, under the following circumstances: (1) during any calendar quarter beginning after June 30, 2008 (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 prospectus supplement. As of June 27, 2011, none of the conversion criteria had been met.

     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, regardless of the foregoing circumstances. 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

TTM TECHNOLOGIES, INC.

of a fundamental change as defined in the prospectus supplement, 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 June 27, 2011, 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 13,978.

     Note Repurchase

     The Company is not permitted to redeem the Convertible Notes at any time prior to maturity. In the event of a fundamental change or certain default events, as defined in the prospectus supplement, holders may require the Company to repurchase for cash all or a portion of their Convertible 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 Notes, 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 of $38,257 and was recorded, net of tax, as a reduction of additional paid-in capital, consists of the Company’s option to purchase up to 10,963 shares of common stock at a price of $15.96 per share. This option expires on May 15, 2015 and can only be executed upon the conversion of the above mentioned Convertible Notes. Additionally, the Company sold warrants to purchase 10,963 shares of its common stock at a price of $18.15 per share. The warrants expire ratably beginning August 2015 through February 2016. Proceeds from the sale of warrants of $26,197 were recorded as an addition to additional paid-in capital. The Call Spread Transaction has no effect on the terms of the Convertible Notes and reduces potential dilution by effectively increasing the conversion price of the Convertible Notes to $18.15 per share of the Company’s common stock.

(9) Comprehensive Income (Loss)

     The following table summarizes the components of comprehensive income (loss) for the quarter and two quarters ended June 27, 2011 and June 28, 2010:

		Quarter Ended								Two Quarters Ended
		June 27,				June 28,				June 27,				June 28,
		2011				2010				2011				2010
		(In thousands)
Net income (loss)		$	(20,268	)		$	6,740			$	8,820			$	11,225
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax expense of $174 and $69 for the quarters ended June 27, 2011 and June 28, 2010, respectively, and net of tax of $238 and $69 for the two quarters ended June 27, 2011 and June 28, 2010, respectively.			8,154				2,388				10,968				2,388
Net unrealized gain on available for sale securities			1,648				—				1,648				—
Unrealized gain (loss) on effective cash flow hedges:
Net unrealized gains (losses) on effective cash flow hedges, net of tax (benefit) of $(56) and $380 for the quarters ended June 27, 2011 and June 28, 2010, respectively, and net of tax (benefit) of $(94) and $380 for the two quarters ended June 27, 2011 and June 28, 2010, respectively.			(63	)			(1,924	)			554				(1,924	)
Less: reclassification adjustment for losses realized in net earnings net of tax of $0 for the quarter and two quarters ended June 27, 2011			113				—				113				—
Net			50				(1,924	)			667				(1,924	)
Total other comprehensive income, net of tax			9,852				464				13,283				464
Comprehensive income (loss)			(10,416	)			7,204				22,103				11,689
Comprehensive income attributable to noncontrolling interests			(1,880	)			(2,253	)			(4,189	)			(2,253	)
Comprehensive income (loss) attributable to TTM Technologies, Inc. stockholders		$	(12,296	)		$	4,951			$	17,914			$	9,436

TTM TECHNOLOGIES, INC.

     The following provides a summary of the activity associated with the designated cash flow hedges reflected in accumulated other comprehensive income for the two quarters ended June 27, 2011:

		June 27, 2011
		(in thousands)
Beginning balance as of December 31, 2010, net of tax		$	(3,121	)
Changes in fair value gain, net of tax			554
Reclassification of losses to earnings, net of tax			113
Ending balance as of June 27, 2011, net of tax		$	(2,454	)

     The amounts recorded in accumulated other comprehensive income for the cash flow hedge related to the interest rate swap are reclassified into interest expense during the operative period of the swap, beginning April 18, 2011 and ending on April 16, 2013, and in the same period in which the related interest on the floating-rate debt obligation affects earnings. The Company expects that approximately $2,051 will be reclassified into the statement of operations, net of tax, in the next 12 months.

(10) Income Taxes

     The Company’s effective tax rate was 71.9% and 39.4% for the quarters ended June 27, 2011 and June 28, 2010, respectively and 69.1% and 38.3% for the two quarters ended June 27, 2011 and June 28, 2010, respectively. The Company’s effective tax rate changed primarily due to the impact of an impairment charge, for which a tax benefit was not recorded, partially offset by an increase in total earnings generated in lower-tax jurisdictions resulting from the acquisition of the PCB Subsidiaries. The Company’s effective tax rate will generally differ from the U.S. federal statutory rate of 35% due to favorable tax rates associated with certain earnings from the Company’s operations in lower-tax jurisdictions in China. Certain foreign losses generated are not more than likely to be realizable, and thus, no income tax benefit has been recognized on these losses. The Company’s foreign earnings attributable to the Asia Pacific operating segment will be permanently reinvested in such foreign jurisdictions and, therefore, no deferred tax liabilities for U.S. income taxes on undistributed earnings are recorded.

(11) 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 and People’s Bank of China 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.

     On April 9, 2010, 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, for the period beginning April 18, 2011 and ending on April 16, 2013. The interest rate swap will apply a fixed interest rate against the first interest payments of a portion of the $350,000 Term Loan over the term of the interest rate swap. As part of the Company’s risk management strategy, the Company chose not to hedge its initial year interest payment cash flows of its Term Loan because of low LIBOR rates at inception, which would have initially resulted in locking in a fixed rate higher than LIBOR spot rate at the onset.

     The notional amount of the interest rate swap decreases to zero over its term, consistent with the Company’s risk management objectives. The notional value underlying the hedge at June 27, 2011 was $146,500. Under the terms of the interest rate swap, the Company will pay a fixed rate of 2.50% and will receive floating 1-month LIBOR during the swap period. The Company has designated this interest rate swap as a cash flow hedge.

     At inception, the fair value of the interest rate swap was zero. As of June 27, 2011 and December 31, 2010, the fair value of the swap was recorded as a liability of $3,994 and $3,421, respectively, in other long-term liabilities. The change in the fair value of the interest rate swap is recorded as a component of accumulated other comprehensive income, net of tax, in the Company’s consolidated condensed balance sheet. No ineffectiveness was recognized for the quarter or two quarters ended June 27, 2011. During the quarter and two quarters ended June 27, 2011, the interest rate swap increased interest expense by $664.

TTM TECHNOLOGIES, INC.

     Additionally, the Company, through its acquisition of the PCB Subsidiaries, assumed a long term pay-fixed, receive floating (1-month LIBOR), amortizing interest rate swap arrangement with an initial notional amount of $40,000, for the period beginning October 8, 2008 and ending on July 30, 2012. This interest rate swap applied to the PCB Subsidiaries’ pre-acquisition, long-term borrowings, which were paid-off on the acquisition date. The notional amount of the interest rate swap decreases to zero over its term. The notional value at June 27, 2011 was $34,000. Under the terms of the interest rate swap, the Company will pay a fixed rate of 3.43% and will receive floating 1-month LIBOR during the swap period. As the borrowings attributable to this interest rate swap were paid off upon acquisition, the Company did not designate this interest rate swap as a cash flow hedge. As of June 27, 2011 and December 31, 2010, the fair value of the swap was recorded as a liability of $826 and $1,206, respectively, in other long-term liabilities. The change in the fair value of this interest rate swap is recorded as Other, net in the consolidated condensed 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. Our foreign subsidiaries may at times purchase forward exchange contracts to manage their foreign currency risks in relation to particular purchases or obligations, such as the related party financing obligation arising from the put call option to purchase the remaining 20% of a majority owned subsidiary in 2013, which was settled in early June 2011 when the put call option was settled in cash (see Note 20), and certain purchases of machinery denominated in foreign currencies other than the Company’s foreign functional currency. The notional amount of the foreign exchange contracts at June 27, 2011 and December 31, 2010 was approximately $40,528 and $36,266, respectively. The Company has designated certain of these foreign exchange contracts as cash flow hedges, with the exception of the foreign exchange contracts in relation to the related party financing obligation, which was recently settled in June 2011. In this instance, the hedged item was a recognized liability subject to foreign currency transaction gains and losses and, therefore, changes in the hedged item due to foreign currency exchange rates were recorded in earnings. Therefore, hedge accounting was not applied.

     The fair values of derivative instruments in the consolidated condensed balance sheet are as follows:

						Asset / (Liability) Fair
						Value
		Balance Sheet				June 27,				December 31,
		Location				2011				2010
						(In thousands)
Cash flow derivative instruments designated as hedges:
Foreign exchange contracts		Prepaid expenses and other current assets				$	62			$	—
Foreign exchange contracts		Deposits and other non-current assets					717				9
Foreign exchange contracts		Other accrued expenses					(10	)			(1	)
Foreign exchange contracts		Other long-term liabilities					—				(272	)
Interest rate swap		Other long-term liabilities					(3,994	)			(3,421	)
Cash flow derivative instruments not designated as hedges:
Foreign exchange contracts		Prepaid expenses and other current assets					237				482
Foreign exchange contracts		Deposits and other non-current assets					—				728
Foreign exchange contracts		Other accrued expenses					(5	)			(4	)
Interest rate swap		Other long-term liabilities					(826	)			(1,206	)
						$	(3,819	)		$	(3,685	)

TTM TECHNOLOGIES, INC.

     The following tables provide 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 condensed statement of operations when derivative amounts are reclassified out of accumulated other comprehensive income:

						For the Quarter Ended
						June 27, 2011												June 28, 2010
						Effective Portion								Ineffective Portion				Effective Portion								Ineffective Portion
						Gain/(Loss)												Gain/(Loss)
		Financial				Recognized in Other				Gain/(Loss) Reclassified				Gain/(Loss) Reclassified				Recognized in Other				Gain/(Loss) Reclassified				Gain/(Loss) Recognized
		Statement Caption				Comprehensive Income				into Income				into Income				Comprehensive Income				into Income				into Income
														(In thousands)
Cash flow hedge:
Interest rate swap		Interest expense				$	(338	)		$	(664	)		$	—			$	(2,283	)		$	—			$	—
Foreign currency forward		Other, net					219				—				—				(21	)			—				—
						$	(119	)		$	(664	)		$	—			$	(2,304	)		$	—			$	—

						For the Two Quarters Ended
						June 27, 2011												June 28, 2010
						Effective Portion								Ineffective Portion				Effective Portion								Ineffective Portion
						Gain/(Loss)												Gain/(Loss)
		Financial				Recognized in Other				Gain/(Loss) Reclassified				Gain/(Loss) Reclassified				Recognized in Other				Gain/(Loss) Reclassified				Gain/(Loss) Recognized
		Statement Caption				Comprehensive Income				into Income				into Income				Comprehensive Income				into Income				into Income
														(In thousands)
Cash flow hedge:
Interest rate swap		Interest expense				$	(573	)		$	(664	)		$	—			$	(2,283	)		$	—			$	—
Foreign currency forward		Other, net					1,033				—				—				(21	)			—				—
						$	460			$	(664	)		$	—			$	(2,304	)		$	—			$	—

     The gain (loss) recognized in other, net in the consolidated condensed statement of operations on derivative instruments not designated as hedges is as follows:

		For the Quarter Ended								For the Two Quarters Ended
		June 27,				June 28,				June 27,				June 28,
		2011				2010				2011				2010
						(In thousands)
Derivative instruments not designated as hedges:
Interest rate swap		$	212			$	51			$	378			$	51
Foreign exchange contracts			(139	)			(1,630	)			782				(1,630	)
		$	73			$	(1,579	)		$	1,160			$	(1,579	)

TTM TECHNOLOGIES, INC.

Other Financial Instruments

     The carrying amount and estimated fair value of the Company’s financial instruments at June 27, 2011 and December 31, 2010 were as follows:

		June 27, 2011								December 31, 2010
		Carrying				Fair				Carrying				Fair
		Amount				Value				Amount				Value
						(In thousands)
Available for sale securities		$	4,354			$	4,354			$	—			$	—
Derivative assets, current			299				299				482				482
Derivative liabilities, current			15				15				5				5
Derivative assets, non-current			717				717				737				737
Derivative liabilities, non-current			4,820				4,820				4,899				4,899
Long-term equity investment			—				—				2,714				2,280
Related party financing obligation			—				—				20,399				20,791
Long-term debt			379,007				377,811				380,118				370,812
Convertible senior notes			148,157				214,165				145,283				207,508

     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 both the counterparty and the Company.

     The fair value of equity securities accounted for under the cost method (nonmarketable equity securities) was estimated using market multiples derived from comparable companies. Under that approach, the identification of comparable companies requires significant judgment. Additionally, multiples might lie in ranges with a different multiple for each comparable company. The selection of where the appropriate multiple falls within that range also requires significant judgment, considering both qualitative and quantitative factors.

     The fair value of the related party financing obligation was estimated based on the minimum price of the obligation plus 2.5% interest discounted at the liability’s discount rate based on the Company’s adjusted cost of borrowing.

     The fair value of the long-term debt was estimated based on discounting the par value of the debt over its life for the difference between the debt stated interest rate and current market rates for similar debt at June 27, 2011 and December 31, 2010.

     The fair value of the convertible senior notes was estimated based on quoted market prices of the securities on an active exchange.

     At June 27, 2011 and December 31, 2010, the Company’s financial instruments included cash and cash equivalents, accounts receivable, notes receivable, accounts payable and equipment payables. Due to short-term maturities, the carrying amount of these instruments approximates fair value.

(12) Significant Customers and Concentration of Credit 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 quarter and two quarters ended June 27, 2011 one customer accounted for approximately 10% and 12% of the Company’s net sales, respectively. For the quarter and two quarters ended June 28, 2010, no one customer accounted for 10% or greater of the Company’s net sales. The loss of one or more major customers or a decline in sales to the Company’s major customers would have a material adverse effect on the Company’s financial condition and results of operation.

TTM TECHNOLOGIES, INC.

     The Company also extends credit to its customers, which are concentrated primarily in the computer and networking and communication and aerospace/defense industries, and most of which are located outside the United States. 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.

     As of June 27, 2011 and December 31, 2010, the Company’s 10 largest customers in the aggregate accounted for 48% and 53%, respectively, of total accounts receivable. If one or more of the Company’s significant customers were to become insolvent or were otherwise unable to pay for the manufacturing services provided, it would have a material adverse effect on the Company’s financial condition and results of operations.

(13) 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.

     At June 27, 2011 and December 31, 2010, the following financial assets and liabilities were measured at fair value on a recurring basis using the type of inputs shown:

		June 27,				Fair Value Measurements Using:
		2011				Level 1 Inputs				Level 2 Inputs				Level 3 Inputs
						(In thousands)
Money market funds		$	97,387			$	97,387				—				—
Available for sale securities			4,354				4,354				—				—
Foreign exchange derivative assets			1,016				—			$	1,016				—
Interest rate swap derivative liabilities			4,820				—				4,820				—
Foreign exchange derivative liabilities			15				—				15				—

		December 31,				Fair Value Measurements Using:
		2010				Level 1 Inputs				Level 2 Inputs				Level 3 Inputs
						(In thousands)
Money market funds		$	66,742			$	66,742				—				—
Foreign exchange derivative assets			1,219				—			$	1,219				—
Interest rate swap derivative liabilities			4,627				—				4,627				—
Foreign exchange derivative liabilities			277				—				277				—

     There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the quarter or two quarters ended June 27, 2011.

     The following is a summary of activity for fair value measurements using Level 3 inputs for the two quarters ended June 28, 2010:

		For the Two
		Quarters
		Ended
Fair Value Measurement using Significant Unobservable Inputs (Level 3)		June 28, 2010
		(In thousands)
Beginning balance		$	1,351
Transfers to level 3			—
Settlement			(1,351	)
Changes in fair value included in earnings			—
Ending balance		$	—

     There was no activity for fair value measurement using Level 3 inputs for the quarter or two quarters ended June 27, 2011 or the quarter ended June 28, 2010.

TTM TECHNOLOGIES, INC.

     The changes in fair value included in earnings for the two quarters ended June 28, 2010 have been included in other, net in the consolidated condensed statement of operations.

     The majority of the Company’s non-financial instruments, 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 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.

     For the quarter and two quarters ended June 27, 2011 and for the two quarters ended June 28, 2010, the following non-financial instruments were measured at fair value on a nonrecurring basis using the type of inputs shown:

Fair Value Measurements Using:

Total Losses for

the Quarter and Two

June 27,

Level 1

Level 2

Level 3

Quarters Ended

2011

Inputs

Inputs

Inputs

June 27, 2011

(In thousands)

Long-lived assets

$

19,331

—

$

19,331

—

$

48,125

Fair Value Measurements Using:

Total Losses for

the Two Quarters

June 28,

Level 1

Level 2

Level 3

Ended

2010

Inputs

Inputs

Inputs

June 28, 2010

(In thousands)

Asset held for sale

$

234

—

$

234

—

$

766

     The fair values of long-lived assets held and used and the asset held for sale were primarily determined using appraisals and comparable prices of similar assets, which are considered to be Level 2 inputs.

(14) Commitments and Contingencies

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 ultimate potential 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 at June 27, 2011 and December 31, 2010. However, these amounts are not material to the consolidated condensed financial statements.

Environmental Matters

     The process to manufacture PCBs requires adherence to city, county, state, federal and foreign jurisdiction environmental regulations regarding the storage, use, handling and disposal of chemicals, solid wastes and other hazardous materials as well as air quality standards. Management believes that its facilities comply in all material respects with environmental laws and regulations. The Company has in the past received certain notices of violations and has implemented certain required minor corrective activities. There can be no assurance that violations will not occur in the future.

     The Company is involved in various stages of investigation and cleanup of three sites in Connecticut and one in California related to environmental remediation matters. The ultimate cost of site cleanup for the two Connecticut sites and one California site is difficult to predict given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. The third Connecticut site was investigated under Connecticut’s Land Transfer Act and no contamination above applicable standards was found. The Company concluded that it was probable that it would incur remediation and monitoring costs for these sites of approximately $685 and $558 as of June 27, 2011 and December 31, 2010, respectively, the liability for which is included in other

TTM TECHNOLOGIES, INC.

long-term liabilities. The Company estimates that it will incur the remediation costs over the next 12 to 84 months. This accrual was discounted at 8% per annum to determine the Company’s best estimate of the liability, which the Company estimated as ranging from $839 to $1,274 on an undiscounted basis.

     The liabilities recorded do not take into account any claims for recoveries from insurance or third parties and none are anticipated. These costs are mostly comprised of estimated consulting costs to evaluate potential remediation requirements, completion of the remediation, and monitoring of results achieved. Subject to the imprecision in estimating future environmental remediation costs, the Company does not expect the outcome of the environmental remediation matters, either individually or in the aggregate, to have a material adverse effect on its financial position, results of operations, or cash flows.

(15) Earnings (Loss) 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 quarter and two quarters ended June 27, 2011 and June 28, 2010:

		Quarter Ended								Two Quarters Ended
		June 27,				June 28,				June 27,				June 28,
		2011				2010				2011				2010
		(In thousands, except per share amounts)
Net income (loss) attributable to TTM Technologies, Inc. stockholders		$	(20,903	)		$	4,929			$	6,220			$	9,414
Weighted average shares outstanding			81,309				76,050				81,009				59,954
Dilutive effect of performance-based stock units, restricted stock units and stock options			—				434				916				550
Dilutive effect of assumed conversion of convertible notes outstanding			—				—				470				—
Diluted shares			81,309				76,484				82,395				60,504
Earnings (loss) per share attributable to TTM
Technologies, Inc. stockholders:
Basic		$	(0.26	)		$	0.06			$	0.08			$	0.16
Diluted		$	(0.26	)		$	0.06			$	0.08			$	0.16

     Performance-based stock units, restricted stock units and stock options to purchase 1,714 shares of common stock for the quarter ended June 28, 2010 and 528 and 2,015 shares of common stock for the two quarters ended June 27, 2011 and June 28, 2010, respectively, were not considered in calculating diluted earnings per share because the options’ exercise prices or the total expected proceeds under the treasury stock method for performance-based stock units, restricted stock units or stock options was greater than the average market price of common shares during the period and, therefore, the effect would be anti-dilutive. For the quarter ended June 27, 2011, potential shares of common stock, consisting of stock options to purchase approximately 1,167 shares of common stock at exercise prices ranging from $2.76 to $16.82 per share, 1,338 restricted stock units, and 163 performance-based restricted stock units 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 quarter ended June 27, 2011, the effect of 10,963 shares of common stock related to the Company’s Convertible Notes, the effect of the convertible note hedge to purchase 10,963 shares of common stock and the warrants sold to purchase 10,963 shares of the Company’s common stock were not included in the computation of dilutive earnings per share because the Company incurred a loss from operations and, as a result, the impact would be anti-dilutive.

TTM TECHNOLOGIES, INC.

(16) Stock-Based Compensation

     Stock-based compensation expense is recognized in the accompanying consolidated condensed statements of operations as follows:

		Quarter Ended								Two Quarters Ended
		June 27,				June 28,				June 27,				June 28,
		2011				2010				2011				2010
		(In thousands)
Cost of goods sold		$	254			$	328			$	471			$	655
Selling and marketing			100				109				211				217
General and administrative			1,770				1,158				3,197				2,134
Stock-based compensation expense recognized			2,124				1,595				3,879				3,006
Income tax benefit recognized			(584	)			(412	)			(1,118	)			(890	)
Total stock-based compensation expense after income taxes		$	1,540			$	1,183			$	2,761			$	2,116

     Performance-based Restricted Stock Units

     In 2010, the Company implemented a long-term incentive program for executives that provides for the issuance of performance-based restricted stock units (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 will 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 over the three-year performance period.

     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. For the quarter and two quarters ended June 27, 2011, management determined that vesting of the PRU awards was probable. PRUs activity for the two quarters ended June 27, 2011 was as follows:

		Shares
		(In thousands)
Outstanding target shares at December 31, 2010			55
Granted:
Second tranche of 2010 grant			45
First tranche of 2011 grant			63
Outstanding target shares at June 27, 2011			163

     The fair value for PRUs granted is calculated using the Monte Carlo simulation model, as the TSR modifier contains a market condition. For the quarters and two quarters ended June 27, 2011 and June 28, 2010, the following assumptions were used in determining the fair value:

		June 27,				June 28,
		20111				20102
Weighted-average fair value		$	22.74			$	10.11
Risk-free interest rate			1.0	%			1.3	%
Dividend yield			—				—
Expected volatility			59	%			65	%
Expected term in months			28				33

TTM TECHNOLOGIES, INC.

Restricted Stock Units

     The Company granted 239 restricted stock units during the quarter ended June 27, 2011 and 574 and 377 restricted stock units during the two quarters ended June 27, 2011 and June 28, 2010, respectively. There were no restricted stock units granted for the quarter ended June 28, 2010. The units granted have a weighted-average fair value per unit of $18.35 for the quarter ended June 27, 2011 and $17.74 and $9.14 for the two quarters ended June 27, 2011 and June 28, 2010, respectively. The fair value for restricted stock units granted is based on the closing share price of the Company’s common stock on the date of grant.

Stock Options

     The Company did not grant any stock option awards during the quarter or two quarters ended June 27, 2011 and June 28, 2010.

Foreign Employee Share Awards

     Prior to the acquisition of the PCB Subsidiaries by the Company, there existed an employee share award scheme originally set up by the controlling shareholder of the PCB Subsidiaries to incentivize and reward the PCB Subsidiaries’ employees. In 2008, administration of this scheme was transferred to a small group of employees in order to carry on the objectives of the program. After the close of the acquisition, the unvested Meadville Holdings shares remaining for vesting and/or granting purposes under that scheme were exchanged for the right to earn fractional shares of TTM common stock plus cash equal to the dividend distributed by Meadville Holdings to the holders of Meadville Holdings shares after the acquisition. These remaining grants vest over five tranches. Two tranches vested in the first quarter of 2011 and the remaining three tranches will vest annually thereafter, through 2014. As per ASC Topic 805, Business Combinations, the fair value of the common stock plus cash consideration to be received by the employee, after adjustment for estimated forfeitures, that is attributed to pre-combination service is recognized as purchase consideration. The fair value, after adjustment for estimated forfeitures, that is attributed to post-combination service is recognized as an expense over the remaining vesting period and is included as a component of total stock-based compensation expense. At June 27, 2011 and December 31, 2010, there were approximately 50 and 193 shares in the employee share award grants, respectively.

     The following is a summary of total unrecognized compensation costs as of June 27, 2011:

		Unrecognized				Remaining Weighted
		Stock-Based				Average Recognition
		Compensation Cost				Period
		(In thousands)				(In years)
PRU awards		$	2,436				2.1
RSU awards			12,620				1.6
Stock option awards			639				1.7
Foreign employee share awards			400				1.6
		$	16,095

(17) Distribution of profits

     As stipulated by the relevant laws and regulations of the People’s Republic of China (PRC) applicable to the Company’s subsidiaries in the PRC, 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 the PRC (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 required until the balance reaches 50% of its registered capital. The statutory surplus reserve is used to offset future or past losses. The subsidiaries may, upon a resolution passed by the shareholders, convert the statutory surplus reserve into its capital.

     There were appropriations of approximately $3,295 to the statutory surplus reserve for the quarter and two quarters ended June 27, 2011. There were no appropriations to such reserve for the quarter or two quarters ended June 28, 2010.

TTM TECHNOLOGIES, INC.

(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) 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 and its related European sales support infrastructure; and 2) Asia Pacific, which consists of the PCB Subsidiaries and their seven PCB fabrication plants, which include a substrate facility. Each segment operates predominantly in the same industry with production facilities that produce similar customized products for its customers and use similar means of product distribution in their respective geographic regions.

     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.

		Quarter Ended								Two Quarters Ended
		June 27, 2011				June 28, 2010				June 27, 2011				June 28, 2010
		(In thousands)
Net Sales:
North America		$	142,245			$	138,925			$	284,495			$	277,144
Asia Pacific			226,203				173,073				428,668				173,073
Total sales			368,448				311,998				713,163				450,217
Inter-segment sales			(2,331	)			(1,750	)			(4,245	)			(1,750	)
Total net sales		$	366,117			$	310,248			$	708,918			$	448,467
Operating Segment Income (Loss):
North America		$	13,792			$	6,206			$	30,557			$	16,865
Asia Pacific			(18,016	)			15,771				15,061				15,771
Total operating segment income (loss)			(4,224	)			21,977				45,618				32,636
Amortization of definite-lived intangibles			(4,321	)			(4,621	)			(8,479	)			(5,412	)
Total operating income (loss)			(8,545	)			17,356				37,139				27,224
Total other expense			(3,249	)			(6,230	)			(8,563	)			(9,019	)
Income (loss) before income taxes		$	(11,794	)		$	11,126			$	28,576			$	18,205