Overview

We are one of the leading providers of worldwide electronic manufacturing services and solutions. We provide comprehensive electronics design, production, product management and aftermarket services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries. We currently depend, and expect to continue to depend, upon a relatively small number of customers for a significant percentage of our net revenue. Based on net revenue for the three months ended November 30, 2008 our largest customers currently include Cisco Systems, Inc., EchoStar Corporation, Hewlett-Packard Company, International Business Machines Corporation, Network Appliance Inc., Nokia Corporation, Nokia Siemens Networks S.p.A., Option NV, Research in Motion Limited and Royal Philips Electronics.

We offer our customers electronics design, production, product management and aftermarket solutions that are responsive to their manufacturing needs. Our business units are capable of providing our customers with varying combinations of the following services:

• integrated design and engineering;

• component selection, sourcing and procurement;

• automated assembly;

• design and implementation of product testing;

• parallel global production;

• enclosure services;

• systems assembly, direct order fulfillment and configure to order; and

• aftermarket services.

We currently conduct our operations in facilities that are located in Austria, Belgium, Brazil, China, England, France, Germany, Hungary, India, Ireland, Italy, Japan, Malaysia, Mexico, The Netherlands, Poland, Scotland, Singapore, Taiwan, Ukraine, Vietnam and the U.S. Our global manufacturing production sites allow our customers to manufacture products in parallel in what we believe are the most efficient marketplaces for their products. Our services allow customers to improve supply-chain management, reduce inventory obsolescence, lower transportation costs and reduce product fulfillment time. We have identified our global presence as a key to assessing our business performance.

We manage our business based on divisions. Our operating segments consist of three segments - Consumer, Electronic Manufacturing Services ("EMS") and Aftermarket Services ("AMS"). We believe that these divisions provide cost-effective solutions for our customers by grouping business units with similar needs together into divisions, each with full accountability for design, operations, supply chain management and delivery. Our Consumer division has dedicated resources designed to meet the particular needs of the consumer products industry and focuses on cell phones and mobile products, televisions, set-top boxes and peripheral products such as printers. Our EMS division focuses on the traditional and emerging electronic manufacturing services business sectors, including automotive, computing, defense and aerospace, industrial, medical, networking, storage and telecommunications businesses. Our AMS division provides warranty and repair services to customers in a broad range of industries, including certain of our manufacturing customers.

The industry in which we operate is composed of companies that provide a range of manufacturing and design services to companies that utilize electronics components. The industry experienced rapid change and growth through the 1990's as an increasing number of companies chose to outsource an increasing portion, and, in some cases, all of their manufacturing requirements. In mid-2001, the industry's revenue declined as a result of significant cut-backs in customer production requirements, which was consistent with the overall global economic downturn at the time. In response to this industry and global economic downturn, we implemented restructuring programs to reduce our cost structure and further align our manufacturing capacity with the geographic production demands of our customers. Industry revenues generally began to stabilize in 2003 and companies continue to turn to outsourcing versus internal manufacturing. In addition, the number of industries serviced, as well as the market penetration in certain industries, by electronic manufacturing service providers has increased over the past several years. We believe further growth opportunities exist for the industry to penetrate the worldwide electronics markets. The U.S., Europe and certain countries in Asia, however, have recently started experiencing a period of declining gross domestic product. These economic conditions have had a negative impact on our results of operations due to reduced customer demand and are expected to continue to have a negative impact on our operations over the next several fiscal quarters and possibly beyond.

Summary of Results

Net revenues for the first quarter of fiscal year 2009 improved slightly compared to the first quarter of fiscal year 2008 due to increases in the peripheral, telecom, mobility, and instrumentation and medical product sectors. These increases were largely offset by decreases in the display, networking and computing and storage product sectors due to a weakening macro-economic environment.

During the fourth quarter of fiscal year 2006, our Board of Directors approved a restructuring plan (the "2006 Restructuring Plan") to better align our manufacturing capacity in certain higher cost geographies and to properly size our manufacturing sites with perceived current market conditions. Based on the analysis completed to date, we currently expect to recognize approximately $250.0 million in restructuring and impairment charges as a result of the 2006 Restructuring Plan. The restructuring charges include pre-tax employee severance and benefit costs, contract termination costs and other related restructuring costs. The impairment charges include pre-tax fixed asset impairment costs, as well as valuation allowances against net deferred tax assets. We have substantially completed our restructuring activities under the 2006 Restructuring Plan and currently expect to recognize the remaining costs over the remainder of fiscal year 2009 with certain contract termination costs to be incurred through fiscal year 2011. This information will be subject to the finalization of the timetables for the transitional functions, consultation with employees and their representatives, as well as the statutory severance requirements of the particular legal jurisdictions impacted. For further discussion of this restructuring program and the restructuring and impairment costs recognized, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Restructuring and Impairment Charges" and Note 7 - "Restructuring and Impairment Charges" to the Condensed Consolidated Financial Statements. See also "Risk Factors - We face risks arising from the restructuring of our operations."

The following table sets forth, for the three-month periods indicated, certain key operating results and other financial information (in thousands, except per share data).

                                                     Three months ended
                                               November 30,       November 30,
                                                   2008               2007
        Net revenue                           $    3,382,509     $    3,367,947
        Gross profit                          $      223,713     $      239,714
        Operating (loss)/income               $     (239,960 )   $       98,910
        Net (loss)/income                     $     (275,857 )   $       62,001
        (Loss)/earnings per share - basic     $        (1.34 )   $         0.30
        (Loss)/earnings per share - diluted   $        (1.34 )   $         0.30
        Cash dividend per share - declared    $         0.07     $         0.07

Key Performance Indicators

Management regularly reviews financial and non-financial performance indicators
to assess the Company's operating results. The following table sets forth, for
the quarterly periods indicated, certain of management's key financial
performance indicators.



                                                     Three months ended
                                     November 30,   August 31,   May 31,   February 29,
                                         2008          2008       2008         2008
 Sales cycle                              24 days      20 days   21 days        23 days
 Inventory turns                          8 turns      8 turns   8 turns        8 turns
 Days in trade accounts receivable        44 days      40 days   39 days        39 days
 Days in inventory                        46 days      45 days   47 days        47 days
 Days in accounts payable                 66 days      65 days   65 days        63 days

The sales cycle is calculated as the sum of days in trade accounts receivable and days in inventory, less the days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter is a direct result of changes in these indicators. During the three months ended November 30, 2008, days in trade accounts receivable increased four days to 44 days from the prior sequential quarter as a result of consumer sector seasonal demand, the launch of new product volumes late in the quarter, and the reduction in the sale of receivables under our North American securitization program. Days in

inventory increased one day to 46 days from the prior sequential quarter primarily due to the launch of a new customer and a decline in customer demand during the first quarter of fiscal year 2009 due to the weakened macro-economic environment. Inventory turns remained consistent at eight turns during the three months ended November 30, 2008, as compared to the prior sequential quarter. During the three months ended November 30, 2008, days in accounts payable increased one day to 66 days as compared to 65 days in the prior sequential quarter, as a result of the timing of purchases and cash payments during the quarter.

Critical Accounting Policies and Estimates

The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S. ("U.S. GAAP") requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements. For further discussion of our significant accounting policies, refer to Note 1 - "Description of Business and Summary of Significant Accounting Policies" to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 31, 2008.

Revenue Recognition

We derive revenue principally from the product sales of electronic equipment built to customer specifications. We also derive revenue to a lesser extent from aftermarket services, design services and excess inventory sales. Revenue from product sales and excess inventory sales is generally recognized, net of estimated product return costs, when goods are shipped; title and risk of ownership have passed; the price to the buyer is fixed or determinable; and recoverability is reasonably assured. Aftermarket service related revenue is recognized upon completion of the services. Design service related revenue is generally recognized upon completion and acceptance by the respective customer. We assume no significant obligations after product shipment.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts related to receivables not expected to be collected from our customers. This allowance is based on management's assessment of specific customer balances, considering the age of receivables and financial stability of the customer. If there is an adverse change in the financial condition and circumstances of our customers, or if actual defaults are higher than provided for, an addition to the allowance may be necessary.

Inventory Valuation

We purchase inventory based on forecasted demand and record inventory at the lower of cost or market. Management regularly assesses inventory valuation based on current and forecasted usage and other lower of cost or market considerations. If actual market conditions or our customers' product demands are less favorable than those projected, additional valuation adjustments may be necessary.

Long-Lived Assets

We review property, plant and equipment and amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property, plant and equipment is measured by comparing its carrying value to the undiscounted projected cash flows that the asset(s) are expected to generate. If the carrying amount of an asset is not recoverable, we recognize an impairment loss based on the excess of the carrying amount of the long-lived asset over its respective fair value, which is generally determined as the present value of estimated future cash flows or at the appraised value. The impairment analysis is based on significant assumptions of future results made by management, including revenue and cash flow projections. Circumstances that may lead to impairment of property, plant and equipment include unforeseen decreases in future performance or industry demand and the restructuring of our operations resulting from a change in our business strategy. For further discussion of our current restructuring program, refer to Note 7 - "Restructuring and Impairment Charges" to the Condensed Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Restructuring and Impairment Charges."

We have recorded intangible assets, including goodwill, in connection with business acquisitions. Estimated useful lives of amortizable intangible assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows. The allocation of amortizable intangible assets impacts the amounts allocable to goodwill.

In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), we perform a goodwill impairment analysis using the two-step method on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability of goodwill is measured at the reporting unit level, which we have determined to be consistent with our operating segments by comparing the reporting unit's carrying amount, including goodwill, to the fair market value of the reporting unit. We consistently determine the fair market value of our reporting units based on an average weighting of both projected discounted future results and the use of comparative market multiples. The use of comparative market multiples (the market approach) compares us to other comparable companies based on valuation multiples to arrive at a fair value. We regularly compare our company and our divisions to our competitors and we believe the judgments used to arrive at these comparable companies are reasonable. The use of projected discounted future results (discounted cash flow approach) is based on assumptions that are consistent with our estimates of future growth and the strategic plan used to manage the underlying business and also includes a probability-weighted expectation as to our future cash flows. Factors requiring significant judgment include assumptions related to future growth rates, discount factors, and tax rates, amongst other considerations. Changes in economic and operating conditions that occur after the annual impairment analysis or an interim impairment analysis, and that impact these assumptions, may result in a future goodwill impairment charge.

We completed our annual impairment analysis during the fourth quarter of fiscal year 2008 and determined that no impairment existed as of the date of that analysis. However, during the fiscal quarter ended November 30, 2008, based upon a combination of factors, including a significant and sustained decline in our market capitalization below our carrying value, the deteriorating macro-economic environment which resulted in a significant decline in customer demand during the second half of the first quarter of fiscal year 2009 for both the first quarter of fiscal year 2009 as well as the remainder of the fiscal year, and illiquidity in the overall credit markets, we concluded that sufficient indicators existed to require us to perform an interim goodwill impairment analysis at November 30, 2008. Furthermore, the average closing price of the Company's common stock on the New York Stock Exchange ("NYSE") in the first quarter of fiscal year 2009 was $8.89 compared to an average of $15.78 in the fourth quarter of fiscal year 2008, a decline of approximately 77% and at November 30, 2008 the closing price of the Company's common stock was $6.58 compared to $16.67 at August 31, 2008. Accordingly, we performed an interim first step of our goodwill impairment test for each of our reporting units and determined that the carrying value of the Consumer reporting unit exceeded its fair value, indicating a potential goodwill impairment existed. Having determined that the goodwill of the Consumer reporting unit was potentially impaired, we began performing the second step of the goodwill impairment analysis which involves calculating the implied fair value of our goodwill by allocating the fair value of the reporting unit to all of our assets and liabilities other than goodwill (including both recognized and unrecognized intangible assets) and comparing the residual amount to the carrying value of goodwill. As of the date of the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2008, we determined that goodwill related to the Consumer reporting unit was impaired and recorded a preliminary non-cash goodwill impairment charge of $317.7 million. After recognition of the goodwill impairment charge, $84.4 million of goodwill remained with the Consumer reporting unit. We recorded this charge based on a preliminary assessment and will continue to evaluate the valuations of tangible and intangible assets and the allocation of fair value to all of the Consumer reporting unit's assets and liabilities other than goodwill.

The income tax expense associated with the goodwill impairment was $4.4 million. This includes a tax benefit of $30.6 million for the write-off of tax deductible goodwill and income tax expense of $35.0 million resulting from the recognition of a valuation allowance against a deferred tax asset, which related primarily to net operating losses that we now believe will not be realized. The recognition of the valuation allowance was primarily attributable to the same conditions that caused the goodwill impairment as referenced above.

We currently expect to finalize our goodwill impairment analysis during the fiscal quarter ended February 28, 2009. There could be material adjustments to the goodwill impairment charge in the Consumer reporting unit upon completion of the goodwill impairment analysis. Any adjustments to our preliminary estimates as a result of completion of this evaluation are currently expected to be recorded in our condensed consolidated financial statements for the fiscal quarter ended February 28, 2009.

The non-cash goodwill impairment charge of $317.7 million did not impact our cash balance or debt covenant compliance.

As a result of performing the interim first step of our goodwill impairment analysis for both the EMS and AMS reporting units, we determined that the fair value for each of the respective units exceeds its carrying value and therefore there was no impairment. Furthermore, we also performed a sensitivity analysis on our estimated fair value using the income approach for the EMS and AMS reporting units given the amount of goodwill recorded in these reporting units. At November 30, 2008, there was $638.3 million and $23.3 million of goodwill recorded in the EMS and AMS reporting units, respectively. Significant assumptions used in our fair value estimate are discount rates and market multiples. We noted that an increase in the discount rate of approximately 20% for EMS and 64% for AMS would have resulted in the need for us to have performed the second step of the goodwill impairment analysis. In addition, a decrease in market multiples of approximately 7% for EMS and 20% for AMS would have resulted in the need for us to have performed the second step of the goodwill impairment analysis. If we experience a further significant decline in our stock price and market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business climate or slower growth rates, we may need to perform an interim impairment analysis under SFAS 142 in future periods, in addition to our annual impairment test, any of which may result in future goodwill impairment charges to the EMS and/or AMS reporting units. Additionally, there are no assurances that valuation multiples will not decline, discount rates will not increase, or earnings or projected earnings and cash flows of our reporting units will not decline. It is reasonably possible that such changes may occur.

The impairment evaluation for indefinite lived intangible assets, which for us is our trademark, is conducted during the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that an asset may be impaired. As a result of the impairment indicators described above, during the fiscal quarter ended November 30, 2008, we evaluated our trademark for impairment by comparing the discounted estimates of future revenue projections to its carrying value and determined that there was no impairment. Significant judgments inherent in this analysis included assumptions regarding appropriate revenue growth rates, discount rates and royalty rates.

We review long-lived assets, including our intangible assets subject to amortization which, for us are our contractual agreements, customer relationships and intellectual property, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset group to the future undiscounted net cash flows expected to be generated by those assets. If such assets are considered to be impaired, the impairment charge recognized is the amount by which the carrying amounts of the assets exceeds the fair value of the assets. As a result of the impairment indicators described above, during the fiscal quarter ended November 30, 2008, we tested our long-lived assets for impairment and determined that there was no impairment.

Restructuring and Impairment Charges

We have recognized restructuring and impairment charges related to reductions in workforce, re-sizing and closure of facilities, and the transition of production from certain facilities into other new and existing facilities. These charges were recorded pursuant to formal plans developed and approved by management. The recognition of restructuring and impairment charges requires that we make certain judgments and estimates regarding the nature, timing and amount of costs associated with these plans. The estimates of future liabilities may change, requiring additional restructuring and impairment charges or the reduction of liabilities already recorded. At the end of each reporting period, we evaluate the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in accordance with the restructuring programs. For further discussion of our restructuring programs, refer to Note 7 - "Restructuring and Impairment Charges" to the Condensed Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Restructuring and Impairment Charges."

Retirement Benefits

We have pension and postretirement benefit costs and liabilities, which are developed from actuarial valuations. Actuarial valuations require management to make certain judgments and estimates of discount rates, compensation rate increases and return on plan assets. We evaluate these assumptions on a regular basis taking into consideration current market conditions and historical market data. The discount rate is used to state expected future cash flows at a present value on the measurement date. This rate represents the market rate for high-quality fixed income investments. A lower discount rate increases the present value of benefit obligations and increases pension expense. When considering the expected long-term rate of return on pension plan assets, we take into account current and expected asset allocations, as well as historical and expected returns on plan assets. Other assumptions include demographic factors such as retirement, mortality and turnover. For further discussion of our pension and postretirement benefits, refer to Note 10 - "Retirement Benefits" to the Condensed Consolidated Financial Statements.

Income Taxes

We estimate our income tax provision in each of the jurisdictions in which we operate, a process that includes estimating exposures related to examinations by taxing authorities. We must also make judgments regarding the ability to realize the deferred tax assets. The carrying value of our net deferred tax assets is based on our belief that it is more likely than not that we will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax assets that we do not believe meet the "more likely than not" criteria established by Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109"). Our judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws or other factors. If our assumptions and consequently our estimates change in the future, the valuation allowances we have established may be increased or decreased, resulting in a respective increase or decrease in either income tax expense or goodwill.

In June of 2006, the Financial Accounting Standards Board (the "FASB") issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 ("FIN 48"), which clarifies the accounting for uncertainty in income taxes in an enterprise's financial statements in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, . . .