Analyst Conference Summary

conference date: November 4, 2009 @ 1:30 PM Pacific Time
for quarter ending: September 28, 2009 (third quarter)

Forward-looking statements

Overview: Some sequential weakening at a time when other electronic technology companies are beginning to show strength. GAAP numbers impacted by a $10.2 million impairment charge and $2.5 million restructuring charge.

Basic data (GAAP) :

Revenues were $139.1 million, down 4% sequentially from $144.5 million, and down % from $169.0 million year-earlier.

Net income was negative $4.9 million, down sequentially from $5.9 million, and down from $8.8 million year-earlier.

EPS (earnings per share) were negative $0.11, down sequentially from positive $0.14, and down from positive $0.20 year-earlier.

Guidance:

For Q4 2009 revenue range of $140 to $148 million with GAAP EPS $0.11 to $0.16 and non-GAAP EPS $0.18 to $0.23.

Conference Highlights:

PCB (Printed Circuit Board) sales increased due to commercial demand growth; first increase in this segment in 5 quarters. Quarter's GAAP numbers were impacted by a $10.2 million impairment charge and $2.5 million restructuring charge. These were relating to two facilities.

Gross margin was down to 17.4% from 18.7% largely due to a $2.6 million inventory write-down.

GAAP operating loss was $5.4 million, but excluding non-recurring charges non-GAAP operating income was $11.7 million.

Non-GAAP net income was $7.8 million, down sequentially from $8.7 million. Non-GAAP EPS was $0.18, down from $0.20.

EBITDA was $10.7 million, with a 7.7% margin. That was down sequentially from $18.3 million.

PCB Manufacturing segment revenue was $123.2 million, up slightly sequentially from $122.6 million. Network, communications, and computer end markets were sources of strength. Average price per panel decreased 5% due to product mix, but there was a 3% increase in panel units. Defense was strong within aerospace/defense segment. Medical/industrial/instrumentation was flat.

Backplane Assembly segment revenue was $24.0 million, down sequentially from $29.1 million. Sales declines were across the board excepting one large Asian OEM.

Cash and equivalents increase $11.3 million in the quarter to $200.7 million. $14.4 million cash flow from operations. There were $138.6 million in convertible senior notes outstanding. $3.3 million in capital expenditures.

Cost of good sold was $114.9 million, leaving gross profit of $24.2 million. Operating expense of $29.6 million included $6.5 million for selling and marketing, $9.4 million for general and administrative, $0.9 million amortization, $2.5 million restructuring, and $10.3 million impairment of assets. Leaving an operating loss of $5.4 million. Interest expense was $2.7 million. Income tax provision $3.2 million.

$1.5 million stock based compensation expense.

Los Angeles facility will close in Q4, Hayward facility in Q1 2010. Most customers of these facilities have been retained.

Cisco, Huawei, Juniper, Northrup Grummon, and Raytheon were the largest customers. Together they represented 35% of sales.

1.04 PCB book-to-bill ratio at end of quarter, up to 1.09 by end of October.

Q&A:

End market expectations leading to guidance? Aerospace and Defense expected to be strong because of pipeline activity, but aerospace down. Computers slightly down. Medical and industrial flat. Communications and networking should show the most increase, including in backplane segment.

Component shortages? They did not affect us. The shortages are mainly in semiconductors, which usually don't affect us.

Asian strategy? No change.

Stock based compensation guidance? Should be real stable, about $1.6 million per quarter.

Quick turn demand and pricing? We do 10 to 11% almost every quarter, but we saw more activity in Q3. Only pricing issue was because of mix; on comparable technology it has been stable.

We feel like the lowpoint of the recession is behind us.

Timing of savings from closures, restructuring? Will appear in cost of goods sold, and should begin to appear in first quarter. In Q2 should see a full quarter's allocation of the $14 million annual savings.

Strategic alternatives costs, one time or ongoing? In non-GAAP we are trying to show you how we performed in compared to other quarters. We saw a spike in the category in Q3, but expect a similar amount in Q4. We have been more active lately on the merger and acquisition front.

Major customer in China should be one of the strengths in Q4, returning to about the run rate for Q2.

Copper pricing, laminate? Yes, some laminate increase due to copper increase, but it is part of our forecast.

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