This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements that involve a number of risks and uncertainties. These forward-looking statements include, but are not limited to, statements and predictions as to our expectations regarding our revenues, net sales, sales, full year net sales growth, net income, operating expenses, research and development expenses, earnings, operations, gross margins, including without limitation, our targeted gross margin range, achievement of margins within or outside of such range and factors that could affect gross margins, yields, anticipated cash needs and uses of cash, capital requirements and capital expenditures, payment terms, expected tax rates, results of audits of us in China and the U.S., needs for additional financing, use of working capital, the benefits and risks of our China operations, anticipated growth strategies, ability to attract customers and diversify our customer base, including without limitation the relative size of each customer to us, sources of net sales, anticipated trends and challenges in our business and the markets in which we operate, trends regarding the use of flex in smartphones, feature phones, tablets and other consumer electronic devices, the adequacy and expansion of our facilities, capability, capacity and equipment, the impact of economic and industry conditions on our customers and our business, current and upcoming programs and product mix and the learning curves associated with our programs, market opportunities and the utilizations of flex and flex assemblies, customer demand, our competitive position, critical accounting policies and the impact of recent accounting pronouncements. Additional forward-looking statements include, but are not limited to, statements pertaining to other financial items, plans, strategies or objectives of management for future operations, our financial condition or prospects, and any other statement that is not historical fact, including any statement which is preceded by the word "may," "might," "will," "intend," "should," "could," "can," "would," "expect," "believe," "anticipate," "estimate," "predict," "aim," "potential," "plan," or similar words. For all of the foregoing forward-looking statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. Actual events or results may differ materially from our expectations. Important factors that could cause actual results to differ materially from those stated or implied by our forward-looking statements include, but are not limited to, the impact of changes in demand for our products, our success with new and current customers, our ability to develop and deliver new technologies, our ability to diversify our customer base, our effectiveness in managing manufacturing processes and costs and expansion of our operations, the degree to which we are able to utilize available manufacturing capacity, achieve expected yields and obtain expected gross margins, the impact of competition, the economy and technological advances, and the risks set forth below under "Item 1A. - Risk Factors." These forward-looking statements represent our judgment as of the date hereof. We disclaim any intent or obligation to update these forward-looking statements.

Overview

We are a global provider of high-quality, technologically advanced flexible printed circuits and value-added component assembly solutions to the electronics industry. We believe that we are one of a limited number of manufacturers that provide a seamless, integrated flexible printed circuit and assembly solution from design and application engineering and prototyping through high-volume fabrication, component assembly and testing. We target our solutions within the electronics market and, in particular, we focus on applications where flexible printed circuits are the enabling technology in achieving a desired size, shape, weight or functionality of the device. Current applications for our products include mobile phones, smartphones, tablets, consumer products, portable bar code scanners, computer/data storage and medical devices. We provide our solutions to original equipment manufacturers ("OEMs") such as Apple, Inc. and Research In Motion Limited and to electronic manufacturing services ("EMS") providers such as Foxconn Electronics, Inc., Jabil Circuit, Inc., and Flextronics International Ltd. Our business model, and the way we approach the markets which we serve, is based on value added engineering and providing technology solutions to our customers facilitating the miniaturization of portable electronics. We currently rely on a core mobility end-market for nearly all of our revenue. We believe this dynamic market offers fewer, but larger, opportunities than other electronic markets do, and changes in market leadership can occur with little to no warning. Through early supplier involvement with customers, we look to assist in the development of new designs and processes for the manufacturing of their products and, through value added component assembly of components on flex, seek to provide a higher level of product within their supply chain structure. This approach is relatively unique and may or may not always fit with the operating practices of all OEMs. Our ability to add to our customer base may have a direct impact on the relative percentage of each customer's revenue to total revenues during any reporting period.

We typically have numerous programs in production at any particular time, the life cycle for which is typically around one year. The programs' prices are subject to intense negotiation and are determined on a program by program basis, dependent on a wide variety of factors, including without limitation, expected volumes, assumed yields, material costs, actual yields, and the amount of third party components within the program. Our profitability is dependent upon how we perform against our targets and the assumptions on which we base our prices for each particular program. Our volumes, margins and yields also vary from program to program and, given various factors and assumptions on which we base our prices, are not necessarily indicative of our profitability. In fact, some lower-priced programs have higher margins while other higher-priced programs have lower margins. Given that the programs in production vary from period to period and the pricing and margins between programs vary widely, volumes are not necessarily indicative of our performance. For example, we could experience an increase in volumes for a particular program during a particular period, but depending on that program's margins and yields and the other programs in production during that period, those higher volumes may or may not result in an increase in overall profitability.

Critical Accounting Policies

Information with respect to our critical accounting policies which we believe have the most significant effect on our reported results and require subjective or complex judgments of management are contained on pages 28-30 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended September 30, 2011.

Comparison of the Three Months Ended June 30, 2012 and 2011

The following table sets forth our Statement of Operations data expressed as a
percentage of net sales for the periods indicated:



                                                       Three
                                                    Months Ended
                                                      June 30,
                                                 2012         2011
                 Net sales                        100.0 %      100.0 %
                 Cost of sales                     90.8         87.8

                 Gross profit                       9.2         12.2
                 Operating expenses:
                 Research and development           1.1          1.2
                 Sales and marketing                3.4          2.9
                 General and administrative         2.5          2.0
                 Impairment and restructuring      (0.5 )        0.5

                 Total operating expenses           6.5          6.6

                 Operating income                   2.7          5.6
                 Other income (expense), net:
                 Interest income                    0.2          0.1
                 Interest expense                  (0.1 )       (0.1 )
                 Other income (expense), net        0.0          0.1

                 Income before income taxes         2.8          5.7
                 Provision for income taxes        (0.6 )       (1.1 )

                 Net income                         2.2 %        4.6 %

Net Sales. Net sales decreased to $170.0 million for the three months ended June 30, 2012, from $191.8 million for the three months ended June 30, 2011. The decrease of $21.8 million, or 11.4%, was primarily due to decreased net sales into our smartphones sector, partially offset by increased net sales into our tablets sector, as further quantified below.

Net sales into our smartphones sector decreased to $88.5 million for the three months ended June 30, 2012, from $137.4 million for the three months ended June 30, 2011. The decrease of $48.9 million, or 35.6%, was primarily due to lower sales volumes to one major customer. For the three months ended June 30, 2012 and 2011, our smartphones sector accounted for approximately 52% and 72% of total net sales, respectively.

Net sales into our tablets sector increased to $70.6 million for the three months ended June 30, 2012, from $44.4 million for the three months ended June 30, 2011. The increase of $26.2 million, or 59.0%, was due to higher unit sales volume of approximately 174% coupled with higher flex content per unit of 91%. For the three months ended June 30, 2012 and 2011, sales into our tablets sector accounted for approximately 41% and 23% of total net sales, respectively.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales increased to 90.8% for the three months ended June 30, 2012, versus 87.8% for the three months ended June 30, 2011. The increase in cost of sales as a percentage of net sales of 3.0% was primarily attributable to an increase of 180 basis points as a result of higher capacity related costs for plant and equipment additions, an increase of 80 basis points due to the appreciating Chinese Renminbi ("RMB"), an increase of 40 basis points due to maintaining extra headcount required for increased production during our fourth fiscal quarter of 2012 and an increase of 35 basis points due to increased labor rates in China. These increases were partially offset by a decrease of 35 basis points primarily from lower material costs. Gross profit decreased to $15.7 million for the three months ended June 30, 2012, versus $23.3 million for the three months ended June 30, 2011, or 32.6%. As a percentage of net sales, gross profit decreased to 9.2% for the three months ended June 30, 2012 from 12.2% for the three months ended June 30, 2011.

Research and Development. Research and development expense decreased by $0.5 million to $1.9 million for the three months ended June 30, 2012, from $2.4 million for the three months ended June 30, 2011. The decrease was primarily due to our decision to realign our global research and development activities in California and to move certain research and development activities to China, where labor costs are lower. As a percentage of net sales, research and development expense decreased to 1.1% for the three months ended June 30, 2012 versus 1.2% for the three months ended June 30, 2011.

Sales and Marketing. Sales and marketing expense increased by $0.2 million to $5.7 million for the three months ended June 30, 2012, from $5.5 million in the comparable period of the prior year, an increase of 3.6%. The increase was primarily attributable to costs associated with the establishment of a new customer support office in Korea. As a percentage of net sales, sales and marketing expense increased to 3.4% for the three months ended June 30, 2012 versus 2.9% for the three months ended June 30, 2011.

General and Administrative. General and administrative expense increased to $4.2 million for the three months ended June 30, 2012, from $3.8 million for the three months ended June 30, 2011. The increase of $0.4 million, or 10.5%, was primarily due to the prior year reversal of $1.0 million from performance-based equity awards that were, during the third fiscal quarter of 2011, deemed not to meet our defined Probability Threshold for the defined performance objectives, partially offset by gains on sale of machinery and equipment in China of $0.6 million during the third fiscal quarter of 2012. As a percentage of net sales, general and administrative expense increased to 2.5% for the three months ended June 30, 2012 versus 2.0% for the three months ended June 30, 2011.

Impairment and Restructuring. Impairment and restructuring was a gain of $0.7 million for the three months ended June 30, 2012 which consisted primarily of a gain on sale of our previously impaired property in Arizona.

Other Income (Expense), Net. Other income, net, decreased to $0.1 million for the three months ended June 30, 2012 from other income, net, of $0.3 million for the three months ended June 30, 2011, a decrease of $0.2 million. The decrease in other income, net, was primarily the result of net losses from our forward contracts that were used in an effort to mitigate the risk of unfavorable movements of the U.S. dollar, partially offset by foreign exchange gains due to the movement of the U.S. dollar versus the RMB and other foreign currencies.

Income Taxes. The effective tax rate for three months ended June 30, 2012 and 2011 was 20.5% and 19.7%, respectively. We expect future tax rates to vary if current tax regulations change.

Comparison of the Nine Months Ended June 30, 2012 and 2011

The following table sets forth our Statement of Operations data expressed as a
percentage of net sales for the periods indicated:



                                                        Nine
                                                    Months Ended
                                                      June 30,
                                                 2012         2011
                 Net sales                        100.0 %      100.0 %
                 Cost of sales                     88.5         86.6

                 Gross profit                      11.5         13.4
                 Operating expenses:
                 Research and development           1.0          1.2
                 Sales and marketing                3.0          3.0
                 General and administrative         2.5          2.1
                 Impairment and restructuring      (0.4 )        0.2

                 Total operating expenses           6.1          6.5

                 Operating income                   5.4          6.9
                 Other income (expense), net:
                 Interest income                    0.2          0.1
                 Interest expense                  (0.1 )         -
                 Other income (expense), net        0.3           -

                 Income before income taxes         5.8          7.0
                 Provision for income taxes        (1.0 )       (1.4 )

                 Net income                         4.8 %        5.6 %

Net Sales. Net sales decreased to $617.3 million for the nine months ended June 30, 2012, from $640.1 million for the nine months ended June 30, 2011. The decrease of $22.8 million, or 3.6%, was primarily due to decreased net sales into our smartphones sector, partially offset by increased net sales into our tablets sector, as further quantified below.

Net sales into our smartphones sector decreased to $431.2 million for the nine months ended June 30, 2012, from $545.0 million for the nine months ended June 30, 2011. The decrease of $113.8 million, or 20.9%, was primarily due to lower sales volumes to one major customer. For the nine months ended June 30, 2012 and 2011, our smartphones sector accounted for approximately 70% and 85% of total net sales, respectively.

Net sales into our tablets sector increased to $165.5 million for the nine months ended June 30, 2012, from $64.4 million for the nine months ended June 30, 2011. The increase of $101.1 million, or 157.0%, was due to higher flex content per unit of approximately 231%, coupled with higher unit sales volume of approximately 112%. For the nine months ended June 30, 2012 and 2011, sales into our tablets sector accounted for approximately 27% and 10% of total net sales, respectively.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales increased to 88.5% for the nine months ended June 30, 2012, versus 86.6% for the nine months ended June 30, 2011. The increase in cost of sales as a percentage of net sales of 1.9% primarily attributable to an increase of 130 basis points as a result of higher capacity related costs for plant and equipment additions, an increase of 110 basis points due to the appreciating RMB, an increase of 10 basis points due to maintaining extra headcount required for increased production during our fourth fiscal quarter of 2012 and an increase of 40 basis points due to increased labor rates in China. These increases were partially offset by a decrease of 100 basis points primarily from lower material costs. Gross profit decreased to $70.9 million for the nine months ended June 30, 2012, versus $85.5 million for the nine months ended June 30, 2011, or 17.1%. As a percentage of net sales, gross profit decreased to 11.5% for the nine months ended June 30, 2012 from 13.4% for the nine months ended June 30, 2011.

Research and Development. Research and development expense decreased by $1.8 million to $6.2 million for the nine months ended June 30, 2012, from $8.0 million for the nine months ended June 30, 2011. The decrease was primarily due to our decision to realign our global research and development activities in California and to move certain research and development activities to China, where labor costs are lower. As a percentage of net sales, research and development expense decreased to 1.0% versus 1.2% in the comparable period of the prior year.

Sales and Marketing. Sales and marketing expense decreased by $0.7 million to $18.6 million for the nine months ended June 30, 2012, from $19.3 million in the comparable period of the prior year, a decrease of 3.6%. The decrease was primarily attributable to decreased variable selling costs associated with our customer mix and volume, partially offset by costs associated with the establishment of a new customer support office in Korea. As a percentage of net sales, sales and marketing expense was 3.0% for the nine month period in both the current and prior year.

General and Administrative. General and administrative expense increased to $15.3 million, or 2.5% as a percentage of net sales, for the nine months ended June 30, 2012, as compared to $13.5 million or 2.1% as a percentage of net sales, for the nine months ended June 30, 2011. The increase of $1.8 million, or 13.3%, was primarily due to the prior year reversal of $1.0 million of performance-based equity awards that were deemed, during the third quarter of fiscal 2011, not to meet our defined Probability Threshold for the defined performance objectives, coupled with increased technical services fees related to our information technology migration to Singapore of $0.8 million.

Impairment and Restructuring. Impairment and restructuring was a gain of $2.5 million for the nine months ended June 30, 2012, which consisted primarily of a gain on sale of our previously impaired properties in Arizona and California.

Other Income (Expense), Net. Other income, net, increased to $1.9 million for the nine months ended June 30, 2012, from other income, net, of $0.3 million for the nine months ended June 30, 2011, an increase of $1.6 million. The increase in other income, net, was primarily the result of net gains from our forward contracts that were used in an effort to mitigate the risk of unfavorable movements of the U.S. dollar, coupled with foreign exchange gains due to the movement of the U.S. dollar versus the RMB and other foreign currencies.

Income Taxes. The effective tax rate for nine months ended June 30, 2012 and 2011 was 17.4% and 20.2%, respectively. The decrease in the effective tax rate was primarily a result of international operations that favorably affected our consolidated tax rate. We expect future tax rates to vary if current tax regulations change.

Guidance

Net Sales. For our fourth quarter of fiscal 2012, we expect net sales to range between $180 million and $210 million, based on the projected product mix and sales volume.

Cost of Sales and Gross Profit. For our fourth quarter of fiscal 2012, we expect gross margin to range between 9.0% and 11.0% based on the projected product mix and sales volume.

Operating Expenses. We expect operating expenses to be approximately $13 million during the fourth fiscal quarter of 2012.

Income Taxes. We expect the effective tax rate, on average, to be in the high teens on an annual basis.

Capital Expenditures. For fiscal 2012, we are anticipating approximately $85 million in capital expenditures reflecting normal equipment replacement, further investments in automation and capacity expansion in certain of our China facilities.

These projections are subject to substantial uncertainty. See Item 1A of Part I, "Risk Factors."

Liquidity and Capital Resources

Our principal sources of liquidity have been cash provided by operations and our ability to borrow under our various credit facilities. Our principal uses of cash have been to finance working capital, facility expansions, stock repurchases and other capital expenditures. We anticipate these uses will continue to be our principal uses of cash in the future. Global financial and credit markets have been volatile in recent years, and future adverse conditions of these markets could negatively affect our ability to secure funds or raise capital at a reasonable cost, if needed.

It is our policy to carefully monitor the state of our business, cash requirements and capital structure. We believe that funds generated from our operations and available from our borrowing facilities will be sufficient to fund current business operations as well as anticipated growth over at least the next twelve months, without the need to repatriate earnings.

Changes in the principal components of operating cash flows during our nine months ended June 30, 2012 were as follows:

• Our net accounts receivable balance decreased to $109.0 million as of June 30, 2012 from $150.5 million as of September 30, 2011, or 27.6%, primarily the result of reduced net sales when compared to the fourth fiscal quarter of the prior year, coupled with improved collection efforts during the second and third fiscal quarters of 2012. Days sales outstanding on a quarterly basis at September 30, 2011 decreased 13 days to 58 days at June 30, 2012. Our net inventory balance remained relatively unchanged at $87.3 million as of June 30, 2012 versus $87.2 million as of September 30, 2011. Days in inventory on a quarterly basis at June 30, 2012 increased 6 days to 51 days from 45 days at September 30, 2011. Our accounts payable balance decreased to $138.0 million as of June 30, 2012 from $162.8 million as of September 30, 2011, a decrease of 15.2%. The decrease in accounts payable was primarily the result of lower production volumes when compared to the fourth fiscal quarter of the prior year. Days payable on a quarterly basis decreased 4 days from 85 days at September 30, 2011 to 81 days at June 30, 2012.

• Depreciation and amortization expense was $40.1 million for the nine months ended June 30, 2012, versus $33.7 million for the comparable period of the prior year, primarily due to an increased fixed asset base in manufacturing operations at our facilities in China.

Our principal investing and financing activities during the nine months ended June 30, 2012 were as follows:

• Net cash used in investing activities was $43.2 million for the nine months ended June 30, 2012. Capital expenditures included cash payments of $54.6 million of capital equipment and other assets, which were primarily related to our manufacturing capacity expansion in China. Proceeds from sales of equipment and assets held for sale of $11.5 million was primarily due to cash proceeds of $7.5 million and $1.9 million from the sale of our corporate headquarters previously located in Anaheim, California and our former Aurora Optical facility in Arizona, respectively.

• Net cash used in financing activities was approximately $9.7 million for the nine months ended June 30, 2012 and consisted primarily of repurchases of common stock of $8.8 million and $1.1 million of cash used to net share settle equity awards. Our loans payable and borrowings outstanding against our credit facilities were $0 at June 30, 2012 and September 30, 2011.