Quarter Ended
                                                   March 30,        March 31,
        End Markets(1)                                2009            2008
        Networking/Communications                          33 %             42 %
        Aerospace/Defense                                  45               34
        Computing/Storage/Peripherals                      12               12
        Medical/Industrial/Instrumentation/Other           10               12

        Total                                             100 %            100 %

(1) Sales to EMS companies are classified by the end markets of their OEM customers.

For PCBs, we measure the time sensitivity of our products by tracking the quick-turn percentage of our work. We define quick-turn orders as those with delivery times of 10 days or less, which typically captures research and development, prototype, and new product introduction work, in addition to unexpected short-term demand among our customers. Generally, we quote prices after we receive the design specifications and the time and volume requirements from our customers. Our quick-turn services command a premium price as compared to standard lead-time products. Quick-turn orders decreased from approximately 12% of PCB revenue in the first quarter of 2008 to 10% of PCB revenue in the first quarter of 2009 due to higher demand for our standard lead-time and high technology production services. We also deliver a large percentage of compressed lead-time work with lead times of 11 to 20 days. We receive a premium price for this work as well. Purchase orders may be cancelled prior to shipment. We charge customers a fee, based on percentage completed, if an order is cancelled once it has entered production.
We derive revenues primarily from the sale of printed circuit boards and backplane assemblies using customer-supplied engineering and design plans. We recognize revenues when persuasive evidence of a sales arrangement exists, the sales terms are fixed and determinable, title and risk of loss have transferred, and collectibility is reasonably assured - generally when products are shipped to the customer. Net sales consist of gross sales less an allowance for returns, which typically has been less than 2% of gross sales. We provide our customers a limited right of return for defective printed circuit boards and backplane assemblies. We record an estimated amount for sales returns and allowances at the time of sale based on historical information.

Cost of goods sold consists of materials, labor, outside services, and overhead expenses incurred in the manufacture and testing of our products as well as stock-based compensation expense. Many factors affect our gross margin, including capacity utilization, product mix, production volume, and yield. We do not participate in any significant long-term contracts with suppliers, and we believe there are a number of potential suppliers for the raw materials we use. Selling and marketing expenses consist primarily of salaries and commissions paid to our internal sales force and independent sales representatives, salaries paid to our sales support staff, stock-based compensation expense as well as costs associated with marketing materials and trade shows. We generally pay higher commissions to our independent sales representatives for quick-turn work, which generally has a higher gross profit component than standard lead-time work.
General and administrative costs primarily include the salaries for executive, finance, accounting, information technology, facilities and human resources personnel, as well as insurance expenses, expenses for accounting and legal assistance, incentive compensation expense, stock-based compensation expense, and bad debt expense.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated condensed financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management has discussed the development, selection and disclosure of these estimates with the audit committee of our board of directors. Actual results may differ from these estimates under different assumptions or conditions.
Accounting policies for which significant judgments and estimates are made include asset valuation related to bad debts and inventory obsolescence; sales returns and allowances; impairment of long-lived assets, including goodwill and intangible assets; realizability of deferred tax assets; and determining stock-based compensation expense, self-insured reserves, asset retirement obligations and environmental liabilities. Allowance for Doubtful Accounts
We provide customary credit terms to our customers and generally do not require collateral. We perform ongoing credit evaluations of the financial condition of our customers and maintain an allowance for doubtful accounts based upon historical collections experience and expected collectibility of accounts. Our actual bad debts may differ from our estimates. Inventories
In assessing the realization of inventories, we are required to make judgments as to future demand requirements and compare these with current and committed inventory levels. Provision is made to reduce excess and obsolete inventories to their estimated net realizable value. Our inventory requirements may change based on our projected customer demand, market conditions, technological and product life cycle changes, longer or shorter than expected usage periods, and other factors that could affect the valuation of our inventories. We maintain certain finished goods inventories near certain key customer locations in accordance with agreements with those customers. Although this inventory is typically supported by valid purchase orders, should these customers ultimately not purchase these inventories, our results of operations and financial condition would be adversely affected.
Revenue Recognition
We derive revenues primarily from the sale of printed circuit boards and backplane assemblies using customer-supplied engineering and design plans and recognize revenues when persuasive evidence of a sales arrangement exists, the sales terms are fixed and determinable, title and risk of loss have transferred, and collectibility is reasonably assured - generally when products are shipped to the customer. We provide our customers a limited right of return for defective printed circuit boards and backplane assemblies. We accrue an estimated amount for sales returns and allowances at the time of sale based on historical information. To the extent actual experience varies from our historical experience, revisions to these allowances may be required.

Long-lived Assets
We have significant long-lived tangible and intangible assets consisting of property, plant and equipment, assets held for sale, definite-lived intangibles, and goodwill. We review these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. In addition, we perform an impairment test related to goodwill at least annually. Our goodwill and intangibles are largely attributable to our acquisitions of other businesses. We have two reporting units, which are also our operating segments, and both contained goodwill prior to our 2008 annual impairment testing.
During the fourth quarter 2008, we performed our annual impairment assessment of goodwill, which requires the use of a fair-value based analysis. We determined the fair value of our operating segments based on discounted cash flows and market approach analyses and considered factors such as a weakening economy, reduced expectations for future cash flows coupled with a decline in the market price of our stock and market capitalization for a sustained period, as indicators for potential goodwill impairment. In conjunction with our annual assessment of goodwill, we also assessed other long-lived assets, specifically definite-lived intangibles and property, plant and equipment, for potential impairment given similar impairment indicators. The completion of our impairment assessment determined that the carrying value of our goodwill and certain long-lived assets at production facilities exceeded their fair value. As a result, charges were recorded to adjust goodwill and long-lived assets to their fair value as of December 31, 2008. There were no events or changes in circumstances in the first quarter of 2009 to indicate that the carrying amount of such assets may not be recoverable, with the exception of assets related to the closure of our Redmond, Washington production facility. We recorded an additional impairment of certain long-lived assets for our Redmond, Washington production facility in the amount of $0.3 million as of March 30, 2009. We use an estimate of the future undiscounted net cash flows in measuring whether our long-lived tangible assets and definite-lived intangible assets are recoverable. If forecasts and assumptions used to support the realizability of our goodwill and other long-lived assets change in the future, significant impairment charges could result that would adversely affect our results of operations and financial condition.
Income Taxes
Deferred income tax assets are reviewed for recoverability, and valuation allowances are provided, when necessary, to reduce deferred tax assets to the amounts expected to be realized. At March 30, 2009 and December 31, 2008, we had net deferred income tax assets of $38.4 million and $39.8 million, respectively, and no valuation allowance. Should our expectations of taxable income change in future periods, it may be necessary to establish a valuation allowance, which could affect our results of operations in the period such a determination is made. In addition, we record income tax provision or benefit during interim periods at a rate that is based on expected results for the full year. If we reestablish a valuation allowance subsequent to March 30, 2009, and then determine that it is more likely than not that some or all of our deferred income tax assets would be realizable in an amount greater than what already is recorded, we would reverse all or a portion of valuation allowance in the period the determination is made. If future changes in market conditions cause actual results for the year to be more or less favorable than those expected, adjustments to the effective income tax rate could be required. Share-Based Awards
We account for stock-based compensation under the provisions of Statement of Financial Accounting Standards No. 123R, Share-Based Payments, (SFAS 123R). Under the fair value recognition provisions of SFAS 123R, we recognize stock-based compensation net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest over the requisite service period of the award using a straight-line method.
We estimate the value of share-based restricted stock unit awards on the date of grant using the closing share price. We estimate the value of share-based option awards on the date of grant using the Black-Scholes option pricing model. Calculating the fair value of share-based option payment awards requires the input of highly subjective assumptions, including the expected term of the share-based payment awards and expected stock price volatility. The expected term represents the average time that options that vest are expected to be outstanding. The expected volatility rates are estimated based on a weighted average of the historical volatilities of our common stock. The assumptions used in calculating the fair value of share-based payment awards represent our best estimates, but these estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. For the quarters ended March 30, 2009 and March 31, 2008, share-based compensation expense was $1.1 million and $0.7 million, respectively, net of tax. At March 30, 2009, total unrecognized estimated compensation expense related to non-vested stock options was $2.0 million, which is expected to be recognized over a weighted-average period of 0.7 years. At March 30, 2009, $6.8 million of total unrecognized compensation cost related to restricted stock units is expected to be recognized over a weighted-average period of 1.0 year.

Self Insurance
We are self-insured for group health insurance and worker's compensation benefits provided to our employees, and we purchase insurance to protect against claims at the individual and aggregate level. The insurance carrier adjudicates and processes employee claims and is paid a fee for these services. We reimburse our insurance carriers for paid claims subject to variable monthly limitations. We estimate our exposure for claims incurred but not paid at the end of each reporting period and use historical information supplied by our insurance carriers and brokers on an annual basis to estimate our liability for these claims. This liability is subject to an aggregate stop-loss that ranges between $100,000 and $250,000 per individual. Our actual claims experience may differ from our estimates.
Asset Retirement Obligations and Environmental Liabilities We establish liabilities for the costs of asset retirement obligations when a legal or contractual obligation exists to dispose of or restore an asset upon its retirement and the timing and cost of such work can be reasonably estimated. We record such liabilities only when such timing and costs are reasonably determinable. In addition, we accrue an estimate of the costs of environmental remediation for work at identified sites where an assessment has indicated it is probable that cleanup costs are or will be required and may be reasonably estimated. In making these estimates, we consider information that is currently available, existing technology, enacted laws and regulations, and our estimates of the timing of the required remedial actions, and we discount these estimates at 8%. We also are required to estimate the amount of any probable recoveries, including insurance recoveries.
Results of Operations
First Quarter 2009 Compared to the First Quarter 2008 There were 89 and 91 days in the first quarters of 2009 and 2008, respectively. The following table sets forth statement of operations data expressed as a percentage of net sales for the periods indicated:

                                                           Quarter Ended
                                                     March 30,       March 31,
                                                       2009            2008
       Net sales                                          100.0 %         100.0 %
       Cost of goods sold                                  83.7            78.4

       Gross profit                                        16.3            21.6

       Operating (income) expenses:
       Selling and marketing                                4.8             4.4
       General and administrative                           5.6             4.7
       Amortization of definite-lived intangibles           0.6             0.6
       Restructuring charges                                1.7               -
       Impairment of long-lived assets                      0.2               -
       Metal reclamation                                      -            (2.1 )

       Total operating expenses                            12.9             7.6

       Operating income                                     3.4            14.0
       Other income (expense):
       Interest expense                                    (1.8 )          (1.1 )
       Interest income                                      0.1             0.1
       Other, net                                          (0.1 )           0.1

       Total other expense, net                            (1.8 )          (0.9 )

       Income before income taxes                           1.6            13.1
       Income tax provision                                (0.6 )          (4.9 )

       Net income                                           1.0 %           8.2 %

The Company has two reportable segments: PCB Manufacturing and Backplane Assembly. These reportable segments are managed separately because they distribute and manufacture distinct products with different production processes. PCB Manufacturing fabricates printed circuit boards. Backplane Assembly is a contract manufacturing business that specializes in assembling backplanes into sub-assemblies and other complete electronic devices. PCB Manufacturing customers are either EMS or OEM companies, while Backplane Assembly customers are usually OEMs. Our Backplane Assembly segment includes our Hayward, California and Shanghai, China plants and our Ireland sales and distribution infrastructure. Our PCB Manufacturing segment is composed of eight domestic PCB fabrication plants, and a facility which provides follow on value-added services primarily for one of the PCB Manufacturing plants. The following table compares net sales by reportable segment for the quarter ended March 30, 2009, and March 31, 2008:

                                               Quarter Ended
                                         March 30,      March 31,
                                            2009           2008
                                              (In thousands)
                   Net sales:
                   PCB Manufacturing     $  132,277     $  148,705
                   Backplane Assembly        24,908         32,570

                   Total sales              157,185        181,275
                   Inter-company sales       (8,188 )       (7,204 )

                   Total net sales       $  148,997     $  174,071

Net Sales
Net sales decreased $25.1 million, or 14.4%, from $174.1 million in the first quarter 2008 to $149.0 million in the first quarter 2009 due to reduced demand across nearly all production facilities resulting from a downturn in the global economy and the shutdown of our Redmond, Washington production facility. The $25.1 million revenue decline reflects lower demand mainly in our commercial end markets in both our Backplane Assembly operations and our PCB Manufacturing facilities. PCB volume declined approximately 26% due to reduced demand while prices rose approximately 17% due to a shift in production mix toward more high technology production. Our quick-turn production, which we measure as orders placed and shipped within 10 days, decreased from 12% of PCB sales in the first quarter 2008 to 10% of PCB sales in the first quarter 2009. The increasingly complex nature of our quick-turn work requires more time to manufacture, thereby extending some of these orders beyond the 10-day delivery window. Cost of Goods Sold
Cost of goods sold decreased $11.8 million, or 8.6%, from $136.5 million for the first quarter 2008 to $124.7 million for the first quarter 2009 due primarily to the decline in PCB volume discussed above. The decrease in cost of goods sold was mostly driven by lower direct material costs associated with lower production volume. As a percentage of net sales, cost of goods sold increased from 78.4% for the first quarter 2008 to 83.7% for the first quarter 2009, primarily due to lower absorption of fixed costs on lower revenue and costs related to the shutdown of our Redmond, Washington facility. Gross Profit
As a result of the foregoing, gross profit decreased $13.3 million, or 35.4%, from $37.6 million for the first quarter 2008 to $24.3 million for the first quarter 2009. Our gross margin decreased from 21.6% in the first quarter 2008 to 16.3% in the first quarter 2009. The decrease in our gross margin was due to lower fixed cost absorption and costs related to the shutdown of our Redmond, Washington facility.
Selling and Marketing Expenses
Selling and marketing expenses decreased $0.5 million, or 6.5%, from $7.7 million for the first quarter 2008 to $7.2 million for the first quarter 2009, primarily due to reduced commissions and travel expenses. As a percentage of net sales, selling and marketing expenses were 4.8% in the first quarter 2009 as compared to 4.4% in the first quarter 2008. The increase in selling and marketing expense as a percentage of sales was primarily a result of lower absorption of fixed selling costs and higher commission rates due to the higher complexity of product sold.

General and Administrative Expenses
General and administrative expenses increased $0.2 million from $8.2 million, or 4.7% of net sales, for the first quarter 2008 to $8.4 million, or 5.6% of net sales, for the first quarter 2009. The increase in expenses as a percentage of net sales resulted primarily from higher accounting and stock based compensation expense offset by lower incentive compensation expense. Professional fees were higher in the first quarter 2009 due to the timing of year-end expenses. Amortization of Definite-lived Intangibles Amortization expense related to definite-lived intangibles remained consistent at $0.9 million for both the first quarters of 2009 and 2008. The amortization expense primarily relates to the strategic customer relationship intangibles acquired in the PCG acquisition in October 2006. Restructuring Charges
Restructuring charges recorded in the first quarter 2009 related to separation costs associated with the lay-off of approximately 510 employees, of which 370 employees are related to the closure of the Redmond, Washington production facility and 140 employees are related to other U.S. facilities. We expect to incur minimal additional separation or other exit costs related to this restructuring in the second quarter of 2009. Impairment of Long-lived Assets
Impairment of long-lived assets in the first quarter 2009 related to the closure of the Redmond, Washington production facility. We do not expect to incur any additional impairment charges related to this closure. Metal Reclamation
During the first quarter 2008, we recognized $3.7 million of income related to a pricing reconciliation of metal reclamation activity attributable to a single vendor. As a result of the pricing reconciliation, we discovered that the vendor had inaccurately compensated us for gold reclamations over the last several years. While pricing reconciliations of this nature occur periodically, we do not expect to recognize a similar amount in future periods. Other Income (Expense)
Other expense increased $1.1 million from $1.6 million in the first quarter 2008 to $2.7 million in the first quarter 2009. The increase is primarily the result of the implementation of Financial Accounting Standards Board Staff Position APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), (FSP APB 14-1). The implementation of FSP APB 14-1 increased our convertible senior notes (Convertible Notes) interest expense by approximately $1.1 million, or $0.7 million net of tax. Convertible Notes were issued in May 2008. Income Tax Provision
The provision for income taxes decreased $7.6 million from $8.5 million for the first quarter 2008 to $0.9 million for the first quarter 2009 due to lower pretax income. Our effective tax rate was 38.2% in the first quarter 2009 and 37.2% in the first quarter 2008. Our effective tax rate is primarily impacted by the federal income tax rate, apportioned state income tax rates, utilization of other credits and deductions available to us, and certain non-deductible items. Liquidity and Capital Resources
Our principal sources of liquidity have been cash provided by operations, the issuance of Convertible Notes, and exercises of employee stock options. Our principal uses of cash have been to meet debt service requirements, finance capital expenditures, and fund working capital requirements. We anticipate that servicing debt, funding working capital requirements, financing capital expenditures, and potential acquisitions will continue to be the principal demands on our cash in the future.