Analyst Conference Summary

conference date: November 4, 2010 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2010 (third quarter)

Forward-looking statements

Overview: First quarter after Meadville merger shows strong revenue and profit growth.

Basic data (GAAP) :

Revenues were $357.8 million, up 15% sequentially from $310.2 million and up 157% from $139.1 million in the year-earlier quarter.

Net income was $32.1 million, up by a factor of 4.8 sequentially from $6.7 million and up from negative $4.9 million year-earlier.

EPS (earnings per share) were $0.36, up 6x sequentially from $0.06 and up from negative $0.11 year-earlier.

Guidance:

Q4 revenues from $351 to $367 million. GAAP EPS $0.28 to $0.35. Non-GAAP EPS $0.35 to $0.42.

Conference Highlights:

Record revenue and profitability exceeded guidance. Integration with Meadville is progressing faster than planned. All facilities have solid backlogs and high levels of capacity utilization. Our confidence in long-term growth has increased.

Non-GAAP net income was $35.0 million, up 75% sequentially. EPS $0.43. 22.5% gross margin, up 200 basis points. Prices increased sequentially.

Meadville holdings combination added $0.15 GAAP EPS.

Increase net income partly due to Q2 Meadville-related charges of $14.6 million.

$1.8 million gain on foreign exchange included in GAAP net income. Also estimated tax rate decreased, resulting in a $9.4 million income tax benefit.

EBITDA was $62.1 million, almost double Q2 result and 17.4% of net sales..

Cash and equivalents ended at $164.3 million, down $49 million sequentially. $68.5 million of debt was paid in quarter. Accounts and notes receivable $299.8 million, inventories $133.4 million. Debt and long term liabilities $962 million. $14 million depreciation.

North America segment sales were $148.3 million, up from $138.9 million in Q2. $17.1 million non-GAAP segment income.

Asia Pacific segment $211.5 million, up from $173.1 million in Q2. Margin 23.2%. $32.2 million non-GAAP segment income.

Networking & communications was 36% of sales up from 32% in Q2. Internet and wireless infrastructure drove growth.

Computing, storage, and peripherals were 21% of revenue vs. 25% in Q2, and showed weak revenues due to a component shortage at one customer.

Aerospace 17% revenue, down from 19% in Q2, but on dollar basis increased sequentially.

Cell 11%, up from 10% of sales. Strong smart phone demand in China is driving growth.

Medical industrial end market revenue was 9% of total, flat from 9% in Q2, but dollar amount grew.

Other segment was 6% of sales, up from 5% of sales in Q2.

Top five customers were: Apple, Cisco, Ericsson, Huaway, and IBM, but none were over 10%. Lead times are healthy.

Cost of goods sold was $277.5 million. Gross profit $80.3 million. Operating expenses were $34.6 million, comprising: $9.1 million selling and marketing; $21.9 million general and administrative; and $3.7 million amortization of intangibles. Leaving GAAP operating income of $45.7 million. Interest expense was $6.5 million. Other expense $2.4 million. Income tax benefit was $9.4 million.

$0.4 million Meadville transaction costs in Q3; none expected in Q4.

Q&A:

The computing downdraft due to just one customer? Just one customer. It was not broad based issues in the supply chain.

Are computers seasonally down in Q4? We caught up with the component shortage already. We typically see a little bit of seasonality in Q4, but I think we will be okay.

Tablets? Our strategy is around advanced technology, which fits with the Asia Pacific strategy that services smartphones, touch pads, etc. We are investing in that technology to support our customers. We are seeing a lot of opportunities with changing designs.

Capacity expansion and cap ex? About $4 million cap ex in Q4 in America and $38 million in Asia Pacific. We will spend more in America going forward. In Asia by the end of the year capacity will be up by about 10%. Then another 8% to 10% in Q1. We try to match capacity expansion to demand expansion.

Cross selling to North American customers? That is going slower than we anticipated, but we are going about it in a methodical way.

Prices were up mainly due to a mix of higher technology products. We may see some increases in commodity prices going forward, but we are adept at managing such increases.

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