TTM Throws the Book at Us

TTM Technologies (Nasdaq: TTMI  ) reported a middling-to-average third quarter, but then dressed it up in some fancy, unusual metrics.

Sales increased by $1 million from the second quarter at the quick-delivery circuit board manufacturer, for a grand total of $163 million. Last year, the third quarter saw a $0.9 million revenue drop from the preceding period. I'd call that in line with seasonal patterns. Operating income was relatively flat as compared to Q3 2006, and up $2 million from this year's second quarter. Decent, but hardly exciting.

And then, front and center in the "highlights" section of the earnings release, TTM showed off a 1.23 book-to-bill ratio, which measures orders taken (book) and bills sent out for products that were shipped (bill). That's like saving a kitten from slight discomfort, turning left, and then playing a perfect Rach 3 blindfolded.

Book-to-bill is a common measure in the semiconductor industry. Any score above 1 points to coming sequential revenue growth. For some perspective on how great a 1.23 ratio is, the PCB industry saw a 1.08 book-to-bill ratio in September and called it a smashing success. "Based on this indicator and seasonal trends, we expect sales to strengthen in the last quarter of this year," said Denny McGuirk, president of electronics industry association IPC. The semiconductor equipment industry is facing down a 0.81 ratio, the lowest number in four years, and analysts practically panic over Texas Instruments (NYSE: TXN  ) reporting a 0.99 BTB figure when Analog Devices (NYSE: ADI  ) says its ratio was "above one" for the latest quarter.

So that's why TTM's book-to-bill report sticks out like a sore thumb. Yes, it's a great report on a metric that applies to TTM's sector. But in PCB manufacturing, that's all it is -- a sector measure rarely touted by individual companies. Jabil Circuit (NYSE: JBL  ) , Flextronics (Nasdaq: FLEX  ) , and Sanmina-SCI (Nasdaq: SANM  ) hardly mentioned it in their latest reports or conference calls.

I'd let this slide for almost anyone else. But TTM's management has always kept its reporting straightforward and transparently honest, so it's a red flag when I see this kind of spin. Lighten up, guys -- everyone has a boring quarter once in a while.

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