TTM Technologies, Inc. (TTMI) Q3 2015 Earnings Report, Transcript and Summary

Good day, everyone and welcome to the TTM Technologies Inc., third quarter 2015 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, today's call is being recorded and I would be standing by should you need any assistance. It is now my pleasure to turn the conference over to Mr. Tony Righetti. Please go ahead, sir.

Thank you, operator. Before we get started, I would like to remind everyone that today's call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to TTM’s future business outlook. Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties, including the factors explained in our most recent Annual Report on Form 10-K, and our other filings with the Securities and Exchange Commission. These forward-looking statements are based on management's expectations and assumptions as of the date of this presentation. TTM does not undertake any obligation to publicly update or revise any of these statements, whether as a result of new information, future events or other circumstances, except as required by law. Please refer to the full disclosures regarding the risks that may affect TTM, which may be found in the reports on Form 10-K, 10-Q, 8-K, the registration statement on Form S-4 and the company's other SEC filings. We will also discuss on this call, certain non-GAAP financial measures, such as adjusted EBITDA. Such measures should not be considered as a substitute for the measures prepared and presented in accordance with GAAP and we direct you to the reconciliation of non-GAAP to GAAP measures included in the company's press release, which was filed with the SEC and is available on TTM's website at www.ttm.com. I would now like to turn the call over to Tom Edman, TTM's Chief Executive Officer. Please go ahead, Tom.

Thank you, Tony. Good afternoon and thank you for joining us for our third quarter 2015 conference call. I'll begin with a review of our business, which for the first time, includes a full quarter of contribution from our acquisition of Viasystems. Then, I will provide a brief update on the integration of Viasystems business into TTM. Todd Schull, our CFO will follow with a discussion of our Q3 financial performance and provide Q4 guidance. We will then open the call to your questions. Some of the highlights from Q3 include our net sales of $652 million; non-GAAP net income attributable to stockholders of $23.8 million or $0.24 per diluted share, non-GAAP operating margin of 6.9% and adjusted EBITDA of $87.6 million or 13.4% of net sales. Our operational teams delivered strong third quarter performance in our first full quarter since the Viasystems acquisition. Revenue was within our guidance range and our non-GAAP earnings exceeded our guidance range and the consensus analyst expectations. Our third quarter revenues were driven by consistent demand from the majority of our end markets with demand growth in the computing and aerospace and defense end markets. Operationally, yield performance improved in several of our larger facilities in China and we were particularly encouraged by the yields as we ramp new products for the cellular phone end market. We remain encouraged by the ramping activities of our cellular phone customer base in Q4 as well. During the quarter, our advanced technology work, which includes HDI, rigid flex and substrate accounted for approximately 34% of our company's revenue. This compares to approximately 33% in Q2. We are continuing to seek opportunities to leverage our advanced technology capabilities. One of our key focus areas has been the automotive market, where we have identified opportunities in infotainment applications for advanced technology and are presently pursuing key qualifications with our customer base. We are also seeing increasing requirements for complex RF signal boards used for collision avoidance and other autonomous driving features. Capacity utilization in Asia Pacific was 90% in Q3, compared to 83% in Q2. Our combined overall capacity utilization in North America was 53% in both Q3 and Q2. Now moving onto our end markets, until we establish new baselines for our end markets, we will provide the percentage of total revenue for the current quarter and the percentage of total pro forma sales for comparable periods. The pro forma results assume that TTM acquired Viasystems on April 1st, 2014. Networking communications remained our largest end market as sales accounted for 25% of revenue during the quarter. This compares to pro forma sales in Q2 of 25% and 27% in the same period one year ago. We continued to see solid demand from our networking customers, which was offset by demand softness from telecom customers. We expect sales in this end market to decrease moderately and represent 23% of total sales in Q4. For the full year of 2015, we expect pro forma revenue in this end market to decline approximately 10%. Automotive end market sales represented 17% of total sales during the third quarter compared to pro forma sales of 18% in Q2 and 17% in the year ago period. We experienced a typical seasonal low in bookings during the third quarter this year, but have since seen the demand bounce back in October. We expect sales growth in our automotive market to resume modestly and become 18% of total sales in Q4. The cellular phone end market accounted for 16% of revenue in the third quarter, compared to pro forma sales of 16% in Q2 and 13% in the same period one year ago. PCB demand remained robust at our major customer as we smoothly transitioned to a new product, which helped to offset the marginally lighter sales to our other Asia-based cellular phone customers. As a result, we expect sales to increase to 18% of our total sales in the fourth quarter. For the full year, pro forma revenue from this end market is expected to be very strong, up 43% approximately compared to 2014. The aerospace, defense end market represented 14% of total sales and continued to grow on both a sequential and year-on-year basis. On a pro forma basis, Q2 sales and sales from a year ago reached 13% of our total sales. Our book to bill ratio remained positive for the third consecutive quarter, as we continue to benefit from focused development engagement and wins on targeted commercial aerospace and defense programs. Total aerospace and defense related backlog stands at $188 million, reflecting our long-term and strategic approach to this end market. We expect sales in Q4 from this segment to represent about 14% of our total sales. The medical industrial instrumentation end market contributed 14% of total sales in the third quarter compared to pro forma total sales in Q2 of 15% and 16% in the same period one year ago. Softening sales in the energy, medical and industrial areas led to modestly lower sales in the third quarter. We expect sales for this end market to represent approximately 13% of fourth quarter sales. Sales in the computing storage peripherals end market represented 12% of total sales in the third quarter compared to pro forma total sales of 11% in Q2 and 12% in the same period one year ago. PCB demand for laptops, ultra laptops and tablets were a bright spot in this end market. In the fourth quarter, we expect sales in computing to be flat and represent approximately 12% of sales. As with our end markets, we will also be reporting our customer metrics on a pro forma basis until we have a full year of history. Our top five customers contributed 35% of total sales in the third quarter of 2015 compared with 33% in the second quarter. Our top five OEM customers during the quarter in alphabetical order were Apple, Autolease, Bosch, Cisco and Huawei. Our largest customer accounted for 17% of sales in the third quarter. At the end of Q3, our 90-day backlog, which is subject to cancellations, was $380.8 million compared to $407.3 million at the end of Q2. Book to bill for PCBs was 1.10 for the three months ending September 30. In summary, we are pleased with our third quarter financial results and with the overall execution of our integration plan to date. We completed the acquisition of Viasystems less than five months ago and our integration results are tracking on plan. We are now positioned as one of the largest and most diversified global PCB manufacturers in the world with a broad technical skillset and the ability to support our expanded and diversified customer base throughout their product life cycles from R&D through production. Shortly after the quarter closed, we announced plans to transfer production from our Milpitas, California and Cleveland, Ohio facilities into nearby facilities in the Silicon Valley and in Ohio and to close our electromechanical solutions facility in Juarez, Mexico. Since this announcement, we have been working with our customers and our employees to obtain necessary qualifications and to ensure the smooth transfer of production into other facilities in our footprint. We remain on track to end production at these facilities in the first quarter of 2016. I would like to again thank our employees for continuing to focus on meeting our customer demands, even as we make these difficult changes. Our entire organization remains focused also on optimizing efficiencies and trimming expenses as we bring Viasystems and TTM together, while we share operational best practices across our global footprint with the goal of overall cost reductions, sharing of capital equipment and other resources and improving manufacturing processes in all of our factories. We remain on schedule to achieve our annualized synergy goal to implement at least $55 million in savings by the end of the second quarter of 2016. As we look forward at the fourth quarter and into 2016, we will be keeping a close eye on the macroeconomic situation. We have been pleased to see ongoing strength in the cellular phone market as evidenced by expected revenue in the second half of 2015, which we believe will exceed the extremely strong demand picture of the second half of 2014. We also believe we will see our pro forma automotive revenue grow by more than 9% year-on-year in 2015. The choppy demand environment related to industrial and the networking telecom market is of more concern to TTM. We do believe that we are bumping along the bottom of the telecom cycle, which should improve in 2016, but the degree of this improvement and the effect of the overall economic situation on our business is something we will watch very closely in the next several months. The Viasystems acquisition has improved our positions in the right diverse markets with an optimal global footprint and with the technical capabilities to support our customers and to weather exactly this type of market climate. I have confidence that this diversification combined with continued execution on our integration plans will position us very well for 2016. Now, Todd will review our financial performance for the third quarter.

Thanks, Tom and good afternoon, everyone. For the third quarter, net sales were $652 million, compared to net sales of $345.3 million in the third quarter of 2014 and compared to second quarter net sales of $445.4 million. The year-over-year increase in revenue is driven by a 7% increase in organic revenue and a full quarter contribution of sales from the Viasystems acquisition of approximately $283 million. GAAP operating income for the third quarter was $23.6 million compared to a GAAP operating income of $12.3 million in the third quarter of 2014 and compared to an operating loss in the second quarter of $7.1 million. On a GAAP basis, our net loss for the third quarter of 2015 was $2.2 million or $0.02 per share. This compares to GAAP net income of $7.7 million or $0.09 per diluted share in the third quarter of last year and a GAAP net loss of $36.6 million or $0.41 per share in the second quarter of 2015. Our GAAP results in the third quarter were impacted by approximately $12.3 million of expenses related to the acquisition of Viasystems. The remainder of my comments will focus on our non-GAAP financial performance. Our non-GAAP performance excludes restructuring, impairment and early extinguishment of debt related costs, acquisition related costs, purchase accounting impacts, certain non-cash expense items and other unusual or infrequent items as well as the associated tax impact on these items. Additionally, we exclude nonoperational changes in our tax expense such as impacts of retroactive changes in the tax law and non-cash discrete items. We present non-GAAP financial information to enable investors to see the company through the eyes of management and to provide better insight into the company's ongoing financial performance. Gross margin in the third quarter was 15.0% compared to 14.3% in the third quarter of last year and 15.5% in the second quarter. The year-over-year improvement was due primarily to the improved performance at one of our advanced technology plants, as last year's results were significantly impacted by a power outage. Additionally, we benefited from a favorable mix of business at our networking communications facility in the United States. These improvements were partially offset by the inclusion of the results of our recently acquired operations, which have lower gross margins than our existing business. The sequential gross margin decrease was also due to this factor. We expect to eliminate the gross margin differential between our legacy business and the newly acquired operations once our synergy plan is fully implemented. Selling and marketing expense was $17.3 million in the third quarter or 2.7% of net sales compared to $8.8 million or 2.5% of net sales in the same quarter a year ago and $12 million or 2.7% of net sales in the second quarter. The increase in the amount of sales and marketing expense was due to the inclusion of Viasystems for the full quarter in the third quarter. Third quarter G&A expense was $35.3 million or 5.4% of net sales, compared to $22.6 million or 6.5% of net sales in the same quarter a year ago and $27.6 million or 6.2% of net sales in the previous quarter. The increase in the amount of G&A expense was again due to the inclusion of Viasystems for a full quarter in the third quarter. The decrease in G&A as a percentage of revenue reflects the leverage gain from the acquisition. Interest expense increased $16.2 million in the third quarter from $9.5 million in the second quarter due to a full quarter of financing cost associated with the acquisition. We recorded $4.1 million or $0.03 per share of foreign exchange gain and other income net in the third quarter, compared to a net gain of $0.6 million in the second quarter. The increase was due to foreign exchange gains resulting from the devaluation of the Chinese currency in August. Our effective tax rate in the third quarter was 27%, unchanged from the second quarter. Third quarter net income was $23.8 million or $0.24 per diluted share, including approximately $0.04 of dilution from the acquisition. This compares to third quarter 2014 net income of $11 million or $0.13 per diluted share and second quarter net income of $14.9 million or $0.17 per diluted share. Adjusted EBITDA for the third quarter was $87.6 million or 13.4% of net sales compared to third quarter 2014 adjusted EBITDA of $43.6 million or 12.6% of net sales. In the second quarter, adjusted EBITDA was $57.9 million or 13.4% of net sales. Our Q3 results include approximately $2.7 million of synergy benefits, $0.7 million better than forecasted. Moving on to our segment performance, with the acquisition of Viasystems, we changed how we manage our business and now report our results in two different segments, PCB and electromechanical solutions. The PCB segment had net sales of $602.4 million in the third quarter, up from $328 million in Q3 of 2014 and $417 million in the second quarter. The year-over-year increase in revenue was driven by a 7% increase in organic revenue and the full quarter contribution of sales from the Viasystems acquisition. Gross margin in this segment was 15.6% in the third quarter compared to 14.6% in the same quarter a year ago and 16.1% in the second quarter. The changes in gross margin were due to the reasons that I mentioned earlier. The PCB segment third quarter operating income was $61.5 million compared to $21.7 million in the same quarter last year and $38.7 million in the second quarter. The electromechanical solutions segment had net sales of $49.6 million in the third quarter, up from $17.3 million in the third quarter of 2014 and $28.4 million in the second quarter. The revenue increases were due to the full quarter contribution of sales from the Viasystems acquisition. Gross margin for this segment was 6.5% in the third quarter compared to 8.4% in the same quarter a year ago and 5.9% in the second quarter. The year-over-year decline was due primarily to an unfavorable change in the mix of our revenue and the inclusion of the results of our recently acquired operations. The electromechanical solutions segment’s third quarter operating income was $0.6 million, compared to operating income of $0.6 million in the same quarter last year and $0.4 million in the second quarter. Corporate SG&A expense not directly associated with the PCB or electro-mechanical solutions segments was $17.1 million in the third quarter of 2015, $4.4 million in the same quarter a year ago and $9.9 million in the second quarter of this year. Again, the increases were due to the inclusion of Viasystems for the full quarter in the third quarter. Cash and cash equivalents, including restricted cash, at the end of the third quarter totaled $150.1 million, a decrease of approximately $21 million from the second quarter. Adjusted cash flow from operations which excludes non-GAAP adjustments was $21.3 million while we incurred capital expenditures in the third quarter of approximately $30.3 million, and increased working capital by $9.7 million. Our cash cycle days improved slightly to 52 days. Capital expenditures on a cash basis are expected to be approximately $120 million for 2015 while new procurements for all of 2015 are expected to approximate $80 million. Net debt was $1.1 billion at the end of the third quarter, essentially flat on a sequential basis and depreciation for the third quarter was $40.1 million. Now I would like to turn our guidance for the fourth quarter. In the fourth quarter, we expect revenue to be in the range of $640 million to $680 million. As a reference point, our fourth quarter revenue last year was $390.9 million and on a pro forma basis, Q4 revenue last year was $698.9 million. We expect non-GAAP earnings to range from $0.21 to $0.27 per diluted share. Included in this forecast are projected operating losses of $2.6 million or $0.02 per share related to the three plants that we announced would be closed over the course of the next six months. The EPS forecast is based on the diluted share count of approximately 100 million shares. This compares to $0.28 per diluted share reported in Q4 of 2014 which was based on a diluted share count of approximately 84 million shares. Using the midpoint of our Q4 guidance, EPS for the full year of 2015 is expected to be $0.78. We expect that SG&A expense will be about 8.2% of revenue in the fourth quarter. We expect interest expense to total about $15.9 million and we estimate our effective tax rate to be between 25% and 29%. We are on track to realize our goal of implementing $55 million of annualized synergies by the end of the second quarter of 2016. As of the end of the third quarter of this year we have implemented approximately $18 million of synergy actions. We expect to implement an additional 20% to 25% of the $55 million of targeted synergies in the fourth quarter and the balance to be implemented more or less evenly over the first two quarters of 2016. The P&L impact of the synergy actions taken was approximately $2.7 million in the third quarter and is estimated to be approximately $4.5 million in the fourth quarter. Thereafter, the P&L impact each quarter will approximate 25% of the synergies implemented with one quarter lag. Against these targets, we announced on September 29, the closing of three plants that will deliver approximately $16.5 million of synergies. Thus far to-date we have implemented or announced specific actions totaling approximately $34.5 million. As a part of the process to acquire Viasystems, we are required to fair value the acquired assets and liabilities, often referred to as purchase accounting. This process takes time and is not yet complete. However, we have recorded preliminary adjustments to the acquired assets and liabilities. These adjustments are just preliminary and could change in the future. The P&L impact of these adjustments is not included in the guidance provided above. The four major impacts of purchase accounting to-date are, first, inventory, which was marked up by $14 million. Approximately $7 million of this increase flowed through our P&L in June and the remainder flowed through our P&L in the third quarter. The second one, property, plant and equipment increased by approximately $65 million. All of this increase relates to land and buildings. The increased depreciation expense resulting from this adjustment was $1.2 million in the third quarter and is estimated to be $1.1 million per quarter going forward. The third item, intangible assets increased by approximately $151 million reflecting primarily the value of customer relationships. This asset will be amortized over several years. The increased amortization resulting from this was $4.5 million in the third quarter and we estimate it to be approximately $4.9 million in the fourth quarter. Finally, goodwill increased $351 million. As this asset is not amortized, there is no future P&L impact forecasted. In addition to the purchase accounting impacts noted above, we offer the following information. We expect to record during the fourth quarter amortization of intangibles of about $1.9 million, stock-based compensation expense of about $2.6 million, non-cash interest expense of approximately $4.9 million and we estimate depreciation expense will be approximately $40 million. That concludes our prepared remarks and now we would like to open the line for questions. Operator?

[Operator Instructions] And we'll go first to Matt Sheerin with Stifel. Please go ahead.

Yes, thanks, and good afternoon, guys. First question just regarding your outlook on telecom networking, any sense of whether particularly the build-out and the LTE build-out in China where we’ve seen a pause, any sense if that’s bottomed out here, any signs that bookings may pick up in Q1 or sometime in early next year?

So, yeah, thanks, Matt, this is Tom. I will take that one. The situation as I do think we're at this point bumping along the bottom of the cycle. There are indications if you talk to as – as we talk to our customers and we hear what they are hearing from their customers, generally the carriers in China that there is an expectation that now that they are through their restructuring on the service providers in China that we would start to see an increase or that they would start to see an increase in base station orders. I don't think that will happen in Q4, but it's an indication that we could start to see that demand early next year. At this point I think it’s everyone is in a wait-and-see mode, but at least the service providers in China are starting to indicate some optimism going into 2016.

Okay. And I mean right now in terms of, I know that the costs you are taking out related to the Viasystems acquisition, but are you looking at any additional cost-cutting actions if you don't see business return in that or are you just expecting a sort of a question of when and not if?

So the plants and the facilities that we have that service that market generally are servicing a broad set of customers. So this is a portion of the market that they service. They will -- generally it’s high layer conventional boards. So you'll see demand coming out of the networking space into those plants, also some industrial demand and then some other high layer account demand. So they're working to fill or to increase their utilization rates with other product in the meantime. So at this point we're always, as you know, we are always adjusting our direct labor in the facilities and doing our best to efficiently produce product in the facilities that we have. That includes high layer account conventional work, but and then as you also know, we are working very aggressively on overall cost reduction as we come together as a company. Those efforts are going to continue as well. So we will be continuing to make adjustments with our overall business climate and focus there versus just looking at one particular market.

Okay. And in the automotive you talked about the cross-selling opportunities on the infotainment side, and I know that is a fairly long sales cycle of getting qualified, so when do you actually – are we looking at couple of years out or next year, when you do expect to see --?

It's generally a couple of years out that your building your qualifying for parts that are used and in a model year that’s three years out, so generally you start to see demand two years out. So we're started, we’re really seeding volume opportunities for not 2016 but 2017 there in those new opportunities on automotive. As you know, of course Viasystems had existing capacity for the automotive market. So that volume we expect to continue, we expect that to continue to grow as we go forward. And then, the RF radar board that I mentioned that actually comes out of the legacy Viasystems footprint as well. So, we've been working for several years on seeding volume requirements there and are now starting to see the volume materialize. And hopefully that gives you better flavor.

Yeah absolutely, okay alright that's it from me. Thank a lot guys.

And we’ll go next to Prabh Gowrisankaran with Canaccord. Please go ahead.

Hi, thanks to take my question. Couple of quick questions, one just based on the guide on your pro forma for 2014 looks like it’s down what 5%, 6% in Q4, is that mostly networking telecom because you talked about smartphones being up 43% year-on-year and automotive up 9%, if you can provide more color that would be helpful?

Yeah, definitely if you look Q4 against Q4, and again we're talking about expectations, we would see that coming from, yes from the telecom networking, space networking communication, we would also be seeing that come from medical, industrial, instrumentation area and I commented a little bit on the energy side also. If you look at overall industrial area feeling some of the weight of it I think, the macroeconomic softness is out there.

Another question I had was just on in terms of the smartphones up 43%, is it new product cycle, are you starting to expand beyond your largest customer and are you picking up new products at different customers?

Yeah, so we've been on a pretty long-term effort to grow beyond just our largest customer, we have a strong and developing position with other customers, I’ll just say in Greater China and in fact I’ve seen building demand there over time. Q3 was a little bit of weaker quarter there but if you looked at the last three, four quarters, we’ve seen good growth in the Greater China region for cellular phone demand. We are expecting to you know we’re going to continue those efforts as we go forward as an important part of diversifying our cell phone exposure.

Last question I had was just on utilization, in terms of you had high 93% in APAC, do you see it going higher than that in Q4 with smartphone is expected to grow? And the second part of it was North America utilization, does it go down, does it get repurpose once you shut down Via, can you get up beyond the 60% level?

Okay, so on the Asia side, what we would expect to see and what we typically do see in the fourth quarter is a climb in the utilization rates. And we would expect that particularly in advanced technologies space for this fourth quarter as well. On the North America side, as you know we’re still in operation at the plants that we will be closing and when those plants close, we would expect an uptick in utilization in North America, it will be relative minor about 2% to 3%, but we would see an uptick in utilization rates there. That gets us closer to do that 60% and then of course the aerospace and defense strength we've been seeing as those bookings flow into revenue, we’d also expect that to help us on the utilization side.

Okay great, thanks for taking my questions.

[Operator Instructions] will go next to Sean Hannan with Needham & Company. Please go ahead.

Yeah hi, thanks for taking questions here actually, a lot of my primary questions have been asked. Let me see if I can take maybe a different angle on some of them. So, maybe a high-level question here, so now that you had some time under your belt with the assistance and equation, can you talk at a broader level on the cross-sell, obviously addressing aspect of that in the automotive but any incremental momentum or signs of encouragement in terms of customers looking at improving qualification, design and [indiscernible] averages say with your programs?

So, I'll give you, let me just give you a few broad examples where are definitely seeing interest in the medical industrial instrumentation market for what we call cross sell efforts. A lot of this is coming out of the legacy TTM side of the business because legacy TTM really had, we had a North American facility servicing that market. In general, our Asian facilities we’re servicing only volume, high-volume portions of the market, it’s a very diverse set of customers as you can imagine and we as legacy TTM really didn't have a solution in Asia to service that market. With Via coming on board, we’re bringing an end of the footprint our plant in Guiyang, which is in southern China, a facility that it’s a really mix low-volume targeted facility, fits in perfectly as a base for us to offshore volume requirements from that customer base. So we're finding a number of you know our customers excited about the opportunity as of course we’re dealing with this situation industrial, where there is a little bit of weight on the demand side but balance against that we're seeing a lot of interest from the customer base and that opportunity in Asia. So that's been a real positive. Networking communications area which is very interesting, you think with the strength of legacy TTM in that market that we’d be very well known by the customer base, generally that's the case but there are certain customers that had been very loyal and focused on supply from the legacy Via footprint, who are now seeing with legacy TTM coming into that footprint, an opportunity to use our Chippewa Falls, Wisconsin facility for some of their advanced -- more advanced technology and prototyping requirements. So we're starting to see a nice move of legacy Via customers into our Chippewa Falls facility in the networking, comm area, and at the same time we're offloading some of our Chippewa Falls business because that facility is pretty full into late – some of the footprint North America that legacy Via brings to TTM. So those are just a couple of areas in addition to automotive where we’re seeing interest and I’d only add that in the QTA space, the combination is terrific. The QTA capabilities that Via brings us with our San Jose facility in particular and Toronto, are just providing – our sales force is very excited about bringing QTA opportunities into those facilities. So if you look at the macroeconomic environment, there is always some challenges, but on the other side, we're seeing great excitement that I think we’ll feed into the long-term growth for the overall business from our customer base.

That’s great color and very encouraging. So thanks for all that detail. Last question here, Todd, you just touched a few times on some of the softness that you're seeing within the combined new industrial medical energy, is there a way perhaps to elaborate little bit more on that in terms of the differentiation of the demand softness that you would see one versus another what you’re explicitly experiencing today and how that is integrated into your guidance for fourth quarter? Thanks.

Sure. I think we have seen softness in a number of customers, not all of the customers of course in a very diverse space. But primarily, so the first to sort of it was in the energy space affecting our North Jackson, Ohio facility, which has been a facility that serviced primarily energy in the last several years and that has had a very strong impact on their business. We’ve seen impact also on our electro-mechanical or EM solutions business from the energy side, primarily alternative energy side impacting that business. And then beyond that, if you just look at some of the general industrial customers who have been ordering from both our North America and then also our Asia footprint, I mentioned Ju Yang [ph] facility in particular. That customer base has just been struggling, it’s hard to pin down exactly why except that -- I would say that it’s generally tied to demand that there are weakness in demand that they are seeing in emerging markets and in industrial applications and that’s slowed them down, primarily equipment providers there and as well as in the instrumentation space where again you got equipment providers that are feeling some of that weakness. So hopefully that gives you a feel for it. I think the energy first to hit and then gradually we've seen certainly this quarter and what we're forecasting into the fourth quarter just a general weakness from the other industrial and instrumentation customers, particularly in equipment.

Very helpful. Thanks folks.

Okay, thank you.

[Operator Instructions] It appears we have no further questions at this time.

Okay. Well, this is Tom Edman, I’ll just wrap by reiterating a few of the critical messages here. We did have a very strong third quarter at TTM. I really would like to thank our employees for delivering on that first quarter combined operations in such a successful manner. Secondly, as we go forward, we have a strategic direction as an integrated company to build on our technology leadership, build on the cross-selling examples and other examples that our company is pulling together and continue to deliver on synergies and our synergy plan. So we leave in summary that TTM's position is very well. We're in the right market and we’re ready for 2016 as we head into that year. Thank you all and thank you for listening.