TTM Technologies Inc (TTMI) 2005 Q1 法說會逐字稿

Welcome to this TTM Technologies first-quarter earnings release conference call.

Today's call is being recorded.

For opening remarks and introductions I now turn the call over to Chief Financial Officer, Stacey Peterson.

Please go ahead.

Good afternoon and thanks for joining us this afternoon for our first-quarter 2005 conference call.

Before we get into any detail, let me mention that during the course of this call we will make forward-looking statements subject to known and unknown risk and uncertainties that could cause actual results to differ materially from those expressed (technical difficulty) statements.

Such risks and uncertainties include but are not limited to fluctuations in quarterly and annual operating results, the volatility and cyclicality of the various industries that the Company serves, and other risks described in TTM's most recent registration statement on Forms S-3 and 10-K.

The Company assumes no obligation to update the information provided in the conference call.

Now let me turn the call over to our CEO, Kent Alder.

Thanks, Stacey.

First-quarter net sales were 58.9 million.

While sales were roughly flat sequentially from the fourth quarter of 2004, they increased 2% year-over-year.

Net income for the first quarter of 2005 was $0.11 per diluted share.

This compared with $0.16 per diluted share for the fourth quarter of 2004, and $0.15 in the year-ago period.

Overall while market conditions were relatively stable in the high-tech portion of our business, there has been some weakness in the quick-turn.

Pricing pressure was slightly greater than expected, especially in quick-turn.

There were two specific but temporary factors on the cost side of the equation related to the startup of our expansion at Chippewa Falls and SOX compliance which hurt our performance.

Stacey will elaborate on these later; but in terms of the initial cost factors, we believe these are now behind us.

We continued to add new customers, 27 in the first quarter of 2005.

Our technological and operational capabilities remain strong.

Products with 12 layers or more accounted for 68% of revenues, down slightly from 69% in the fourth quarter of 2004.

Products with 20 layers or more accounted for 41% of revenues, up from 37% in the fourth quarter of 2004.

The average layer count increased to 16.1 compared with 15.6 in the fourth quarter of 2004.

Before I address the percentage of quick-turn business, let me first mention that we have refined our process and improved the accuracy of how we measure quick-turn in Chippewa Falls.

Based on the new methodology, quick-turn represented 21% of sales in the first quarter of 2005, which was flat with 21% in the year-ago period, and 21% in the fourth quarter.

The environment for quick-turn remains competitive.

At least in the short run, there appears to be some excess capacity.

As expected, first-quarter lead times were down from fourth-quarter levels to five to six weeks in Chippewa Falls, three to four weeks in Redmond, and three weeks in Santa Ana.

Overall capacity utilization for the Company was in the low to mid 70s for the quarter.

With the increased capacity at Chippewa Falls, our overall production was up in the first quarter; however, utilization rates at that facility declined to 80% from about 85% in the fourth quarter.

Utilization at Redmond and Santa Ana remained roughly constant with last quarter at approximately 65 and 60% respectively.

As for customer concentration, sales to our five largest OEMs constituted 58% of revenues in the first quarter of 2005, compared with 56% in the fourth quarter.

Our top five customers in alphabetical order were Cisco, General Electric, HP, IBM, and Juniper.

Now before I turn the call over to Stacey, I'd like to thank our outgoing Chairman of the Board, Jeff Goettman, for his outstanding service.

As you probably know, Jeff is managing partner of Thayer Capital Partners, one of TTM's two equity sponsors.

As of November 2004, Thayer exited their position at TTM; and it is their practice to leave the Board once they are no longer invested.

We plan to elect a new Chairman at our Board meeting later this week, and we're excited about the direction TTM is headed.

Now Stacey will provide some additional details of the quarter and discuss the near-term outlook.

Thanks, Kent.

I said at the beginning of the call first-quarter net sales were roughly flat sequentially at 58.9 million.

Total volume increased 3% from the fourth quarter of 2004.

But as Kent mentioned, there was some softness on the pricing front, a little more than anticipated, with the average panel price down 4% sequentially.

Gross margin was 23% in the first quarter of 2005, down from 30% in the year-ago period, and 24.6% in the fourth quarter of 2004.

As we said, pricing continues to be competitive, and there were start up costs at Chippewa Falls as we brought on the newly expanded capacity.

Sales and marketing expense was 3 million, or 5.1% of sales for the first quarter of 2005, virtually unchanged sequentially and from the year-ago period.

General and administration expenses were 3.4 million or 5.8% of sales in the first quarter of 2005.

That was down from 3.5 million in the year-ago period, but up from 3 million in the fourth quarter of 2004.

The sequential increase in G&A was driven primarily by higher Sarbanes-Oxley compliance costs.

Internal costs of compliance including testing and documentation were as expected, but our audit fees in the quarter related to Sarbanes-Oxley were more than expected.

Actually those extra fees amounted to about $0.01 per share on the bottom line.

Fortunately those costs are behind us and we expect audit fees to return to normal levels in the second quarter.

Our balance sheet continued to strengthen even further during the first quarter.

We generated strong cash flow from operations $5.5 million.

As a result we were able to fund net capital expenditures at 2.7 million while expanding our cash and short-term investment position by 3.3 million, to a total of 61.9 million.

Depreciation was 2.2 million.

As for our second-quarter 2005 guidance, as stated in the release, we expect revenues in the 58 to $61 million range, and GAAP diluted earnings per share of $0.10 to $0.12.

In terms of gross margins, we expect them to be in the range of 22 to 24%.

As for expenses, we expect sales and marketing expenses to be approximately 5% of revenues or 3 to 3.1 million; and we expect G&A expenses to be about 3.4 million including amortization of intangibles.

That is 5.6 to 5.9% of sales.

Looking ahead we expect the market to remain relatively stable in the high-tech portion of our business with some pressure on quick-turn.

However Sarbanes-Oxley costs should drop significantly in the second quarter, and the costs associated with the startup of Chippewa Falls are behind us.

With that let's open the call to your questions.

(OPERATOR INSTRUCTIONS) Thomas Hopkins at Bear Stearns.

Just on the pricing pressure.

Was that most of the revenue miss?

I.e., units times average selling price.

Then secondly, where is the competitive pricing pressure coming from?

If you could just give us a little more color on if it's just overall capacity, or if there are some very specific players out there that are key in increasing the pressure.

I think with regards to the pricing pressure we're seeing that mainly around the quick-turn portion of our business.

I still believe there is still more capacity out there, and that seems to be the main issue.

When we look at our quick-turn business, it has recovered some in the month of April; so we are quite positive about the direction that that is headed.

With regards to the volume pushing through our shop, we have some nice volume increases in our Chippewa Falls facility.

As you might expect with the expansion there that has alleviated bottlenecks we experienced in the third quarter.

So the throughput there is moving ahead as expected.

But just looking at some of your competitors, is there any more color at all that you can give us in terms of where some of the pricing pressure may be coming from?

I think, -- I won't be commenting about our competitors; but when we looked at the quarter in general, you had some of the volume going through.

Our quick-turn facility was off a little bit.

So I think with regards to our particular quick-turn situation, I think that that is reflective of TTM's market segment and (indiscernible) along with some of the overcapacity that still exists in the industry.

Can you remind us what types of things, -- I am just looking at your computer customers, and of course it was well documented that things at IBM were soft.

Could you just remind us what areas you would be on with different computer customers?

Would it be more in the PC, more in the server, more in the storage?

What types of products would you be working on with them?

When you look at our quick-turn business, it is across such a wide spectrum of end-market segments that there is nothing that is particular that jumps out in any one market segment.

Tom, just in terms of overall business, we don't really comment on trends at particular customers.

But our high-end computing segment is mostly high-end to highest-end servers that are out there.

We do very little PC business if any at all.

The only PC business we would do is maybe if it's a quick-turn.

So it is not consumer oriented.

It is much more commercial, and very high-end commercial; servers and things like that.

Great, thanks.

Matt Sheerin, Thomas Weisel Partners.

Back to the question on pricing, could you tell us exactly what the pricing (technical difficulty) blended ASP decline was in quick-turn versus the volume?

So we can get a better understanding of how severe it was in the quick-turn.

Matt, we don't break those out separately for competitive reasons.

But I will tell you it was down noticeably more in quick-turn than it was in standard.

On bookings that you're looking at now, are you seeing continued pressure?

Do you expect a continued price erosion?

And if so what ballpark, what range?

I think the pricing pressure, it fluctuates quite the rapidly.

But the pricing pressure is still there, but not to the degree we had in the last part of the last quarter.

So as we look forward, I do not believe pricing will go up; but I am not sure that it will fall off any.

Stacey, do you have something to add to that?

Basically, overall pricing is not going to change too much, we don't think, for the quarter as a Company as a whole.

But we do expect quick-turn pricing to be down.

And maybe it sounds counterintuitive, but it is offset by mix shift, different mix between the plants.

Because, Stacey, your revenue guidance basically flat, but your gross margin flat to down; and you basically had said that your extra added cost in Chippewa Falls are behind you.

So I assume most of that came out of COGS.

So trying to figure out why you would not see gross margin improve as utilization rates and some of the issues in Chippewa are behind you.

Matt, it's a great question.

I'm glad.

You do know our business well.

There are a couple of things that we do have going on in the second quarter.

We have our annual pay increase that goes into effect for a full quarter; that is the biggest component.

This is a much smaller one, but I'll give you the second one.

Our medical renewal (technical difficulty) year in March.

So we only have one month of increased cost in the first quarter; whereas we will have three months in the second quarter.

But once again the biggest portion is the annual wage increase.

Leslie, you have talked in the past, both Kent and Stacey, about your incremental margin contribution being in the 30 to 50% range, I guess depending on where pricing is and overall industry capacity utilization.

You also talked about getting back to the high 20s.

Given that it looks like things have stalled a bit here, can you just talk about short and long-term margin goals?

What is tough about the margin goals today, Matt, is the pricing environment.

I mean things feel okay from the volume side of the equation.

But I think it is really hard to get your hands around pricing.

I think most of our competitors have said that pricing was going to be -- for when they started looking into the second quarter and further -- a little bit down.

So it makes it really tough to make a call on those longer-term margins, because you know how fast price can drive that.

So in terms of us, though, in the controllable factors I do think that the gross margins could come (ph) up, in terms of sequentially as we get more volume through the shops, we become a lot more efficient because of absorption.

So hopefully I answered that question.

Incremental gross margins still remain very high.

When we state this number, we state it right now, from no price increase and no mix shift.

So if everything stays exactly the same with our mix, and at the same time we have got no price increase, those incremental gross margins are still above 50%.

Thank you.

Michael Walker, First Boston.

Just on the quick-turn side of things, I think you said up front that April was trending a little bit better.

Can you confirm that?

And what would be driving that?

Is there a shift in the competitors' supply situation that is causing that to be the case?

Or is it demand related?

Michael, that is true that April has improved over the March, and actually for the entire first quarter.

So we are pretty optimistic about that.

I don't think there is -- it is hard to really pinpoint any specific area where our successes and shortcomings arrive (ph).

But overall we're being very strategic and opportunistic in our sales efforts.

I think that is helping and will continue to help.

But as far as trying to identify anything specifically or any situation with our competitors, we are not going to do that.

But as we look forward I think we are a little more optimistic than we have been during the quarter with regards to our quick-turn situation.

You've said several times that the capacity situation on the quick-turn side is not helping pricing.

Can you talk about the competitor capacity situation on the production side?

You have obviously seen some closures out of Sanmina and Via (ph) systems.

Does that suggest that pricing could continue to get better on the production side over the next quarter or two?

We're not anticipating a major price increase.

We think even with the closures of our competitors we're seeing some benefits from that.

But it's not to the degree that our capacity is going to go up and backlog build to the point where we feel confident that we could raise our pricing.

So I think when you look at our volume side of our business that still seems to be relative competitive.

But I believe with the high-tech segment that we compete in, we are isolated from a lot of the competition, which gives us some pricing power but not enough to be real positive, as we sit here today.

In the December quarter you had your revenues decline about 5%.

Part of that was because you ran out of space in Chippewa Falls and had to turn away some business from two of your larger customers.

My question here is that with the top line having been flat here in March, you are guiding essentially flat, call if for June.

It doesn't look like your seeing that business come back.

I understand it is being offset by price to a certain extent.

But can you give us some confidence that you didn't lose some business for good in December?

That you are going to see that come back here at some point?

Michael, that business did come back.

We talked about the capacity utilization decreasing from 85 to 80% in Chippewa Falls.

But that is not reflected, because our panel and interlayer throughput are up significantly in Chippewa Falls.

So our top line is not down because of Chippewa Falls or lack of those customers returning.

They have come back and we're seeing some good growth there.

It reflects more of the lower or higher mix work and some of the quick-turn work being soft.

One way if you want to prove that to yourself, because you know we can't give you specific data by plant, but if you look at our layer count that is one way to do it.

Because the high mix work -- I mean, I'm sorry, the high layer count work comes from Chippewa Falls.

That is where our capacity constraint was.

And our average layer count goes from 15.6 in the fourth quarter to 16.1, and that is a very big jump in one quarter.

Also remember that some of that work we did not get fully back until February.

So that is one way that you can get to sort of proving to yourself mathematically that it actually did come back.

Remember also there has been a weakness of quick-turn that we talked about and seasonal weakness in Q1 from there too.

Hopefully that is helpful.

That is just one way to double-check it.

Let me add to that another little bullet point.

If you look at our networking end-market segment, that is up 5% to 49% in networking.

That all is reflective of the customer base coming back to the Chippewa Falls facility.

Do have those breakouts with you?

On segment?

Yes.

Yes.

Networking for the quarter was 49%; high-end computing 26%; industrial and medical 14%; computer peripherals 5%; handheld 2; other 3%.

Great, thanks a lot.

Chris Lippincott at KeyBanc.

Just a quick question.

I think in the beginning in your prepared remarks you were talking about your quick-turn calculation being a little bit different than it was in the prior quarter.

I think last quarter you had said that your quick-turn was 26% if I remember quickly.

Can you just go over that?

You are accurate with your number.

Last quarter it was, we had it stated as 26%.

It is particularly related to our Chippewa Falls facility.

We refined that measure to more accurately capture what we mean by true quick-turn.

Let me give you an example.

When we think about quick-turn, 10 days is a pretty arbitrary number, to be perfectly honest.

But what we always were trying to capture is what we consider R&D work; work that may be accelerated to demand reasons.

Occasionally there can be some other orders from customers that will fall in 10 days and less that don't really have those other characteristics.

So we felt that that is not the primary business at Chippewa Falls.

So we felt compelled to change it to this way of calculating it now, to capture the underlying business segment.

So it does seem that on an apples-to-apples basis it was a lot (ph) closer to a flat sequentially?

That is right, because it was 21% in the fourth quarter when we adjusted it.

Then in addition to that, it is 21% in the first quarter.

On the balance sheet, seeing that the inventory jumped that 10 or 11%, yet the revenue was flat, and it looks like the guidance is relatively flat.

I was wondering if you could comment on that.

Sure.

There are two factors in that one.

The first one is, you remember, like because of some of the issues at Chip Falls that inventory had been sort of drawn down over the past couple of quarters.

It popped back up a little bit.

That is probably about half the increase.

And the other is increased work at our Redmond facility also.

So we had more work in the process this quarter at Redmond.

Do you see that coming down?

If so how would you go about drawing down the inventory?

Probably I would expect it to come down a little bit next quarter, but it is really going to depend on the mix of work.

So for example if Chippewa Falls accelerated a little faster than we're expecting, I would expect the inventory level to go up.

So it's mostly mix related.

Yes, and some of that depends on when the customers pull that work out of the inventory.

That is exactly right.

Because we had seen some accelerated pulls, say in the third quarter and even some in the fourth quarter, as people needed the product and we didn't have the capacity.

That was more of a third-quarter dynamic.

In the fourth quarter the dynamic was slightly different.

Remember we were getting those customers back, because we had to kind of turn their allocations away in the fourth quarter.

So there were some more taking -- drawing down the inventory levels maybe a little lower than they should have been.

Hopefully, that is clear.

Yes, I think it gets the direction fairly close.

My last question just based on the bookings, I think last quarter you had 0.88, and you were going into the quarter 1.3, giving the impression it was a fairly strong quarter.

I was wondering if you could talk about what the booking -- what the book-to-bill was in the quarter and where you are right now.

When we went into the last quarter, our just one-month booking rate for that January was 1.33.

We ended up the quarter at 1.07 on a book-to-bill ratio.

It kind of declined through the quarter, but April has come back now to be stronger than the end of the first quarter.

So you are over 1.33 now?

No, we are not at that level.

April is probably around parity, but that is kind of making up for the weak March that we had.

Chris, one other thing just for some clarity.

The 1.3 one-month book-to-bill, that is very unusually high.

And the reason why that was so high is remember, once again, we have these strange dynamics going on with that whole Chippewa Falls expansion.

We started to get a lot of those orders back in that first month of January.

So I don't know if we've ever had a book-to-bill as high as 1.3.

That was an actual 1.3 number, but it was driven by the fact that we were getting market share back.

Does that make sense?

I wouldn't call 1.3 truly reflective of what a normalized book-to-bill would have been at that time.

You're right, Stacey, that included some catch-up in our Chippewa Falls facility from that capacity constraints situation that we experienced in the latter part of last year.

Thanks.

Jim Savage with Wells Fargo.

I have a couple of very simple questions to start with, and then I want to go into one that is a more philosophical question.

First, is there any change in materials pricing that you are seeing at this point?

No, I think the pressure for material cost to increase is pretty much nonexistent now.

So we don't anticipate any material cost increases.

And decreases?

Probably not a lot of decreases either, Matt.

Jim.

Jim, excuse me.

Also in terms of your planned -- what some of your competitors are doing in terms of closures?

Is there any expectation you have there regarding any ability to pick up additional market share with your existing customer base, whether that is closures in Europe or in North America?

I think the closures picked up a lot of our activities, activity on the sales front.

So I don't have a number that would state what percentage or dollar figures that would be, and sometimes those are hard to collect with all that goes on in the marketplace.

But it certainly has been a positive impact on our business, and we would anticipate as we go forward over the next near term continue to be positive.

Also, those don't happen instantaneously.

Because it takes a couple of quarters, because the customers typically -- I mean a competitor will typically announce a closure, but then it gives their customers plenty of time to move the work.

And also time to buy ahead and build inventory if they have to.

Exactly.

You know the dynamic;

I just felt compelled to remind everyone.

You have $62 million in cash and you basically don't have any debt on your books in that situation; and you seem to generate some cash every quarter.

Is there any plan as to what you might want to do with that cash?

Are you looking at making acquisitions?

Are you looking to follow some of your competitors and develop some capacity in Asia?

This is obviously the philosophical question.

We are really pleased we've got $62 million on our balance sheet.

The best thing is that that puts us in a position to execute an acquisition strategy.

I want to talk a little bit about our execution strategy.

I think as you know, looking at the history of TTM, we are very strategic in finding the right acquisition that meets our criteria.

If I just briefly outlined our criteria, first, when we look at acquisitions it has to be a strategic fit, complement our existing facilities, our existing capabilities.

We look at it from a technological standpoint; it's got to fit our business model from technology, technical capabilities.

We look at the cost, not only the cost to acquire but also the cost to integrate.

It's got to meet our objectives there.

Look at the management team culture.

We also look at the future and the opportunity and the synergies that are provided.

So we are very strategic with our acquisition strategy.

With regards to Asia we just apply that strategy on a global basis.

So I think if we continue to execute our acquisition strategy that fits our business model that we can find the right opportunities and be able to have the ideal Company on a global basis.

These are ideal -- these are active, an active strategy both in terms of your North American business and potentially Asian business?

Absolutely.

Are you actively at this point looking to expand into Asia?

Do you think that that is something we should anticipate over the next 12, 18, 24 months?

It is hard to put a timetable on that.

I would refrain from doing that.

But we are looking at our Company and saying, how can we provide a total solution for our customers, and do that with the right technology, the right fit, not take any inappropriate risk, and put -- make sure that the Company can execute and perform.

You add all that up and you look at it from a consolidation play in North America, and from a kind of opportunistic philosophy that we could gain from Asian capability, I think we're in the right position to have the right strategies come and develop the ideal Company on a global basis.

In terms of your competitive position, do you at this point see -- is there any sense that you have that you are at a competitive disadvantage because you are in North America only?

At this point in time, I don't believe with the offerings that we have and the technology and the high-technology segment of the marketplace that we play in, I believe that that segment of the market place is secure, that we are delivering value to our customers, that they are happy with and satisfied with and will continue to be so, be happy and satisfied with.

One other question, this is not, this is back to nuts and bolts.

Are we expecting a tax rate of 37.5% for the rest of the year?

Yes, we are.

Thank you.

Sean Harrison, Longbow Research.

First question just has to deal with the summer seasonality.

I guess I was hoping you could comment on what you typically see during the summer months.

The summer, it slows down a little bit.

One of the reasons are there are fewer production days during the summer, when you get into the holidays and so forth.

So that has an impact.

But it is not a major seasonal slowdown.

The seasonal part of our business seems to happen around the Christmas and January time frame with our quick-turn work.

So the summer months it would be just across both quick-turn and volume, because of the holidays?

Yes, for the most part, yes, that is correct.

Secondly getting back to materials.

I think you had spoken of last quarter trying to reduce the impact of material price hikes in the second half of last year by a half in the first quarter and half that -- halve that number again in the second quarter.

It doesn't sound like that's going to happen at this point in time.

I think that is happening, though.

It's maybe not reflective in the forecast, but that has happened and we're quite pleased with our ability to manage our two major laminate suppliers as well as other suppliers.

So that did happen.

That is already in place.

I think what we talked about last quarter was we expected I think it was a 50 point improvement in the gross margin because of it, or it is kind of offsetting in our general gross margin and then 25 basis points in the second quarter.

That is already built into our guidance.

Okay.

Have you experienced any fuel surcharges?

I'm hearing from a few people that there's some of those out in the marketplace right now, in terms of just receiving materials.

I don't believe so, I'm not aware of any.

I'd have to talk with our purchasing department.

But I do not believe that we have any fuel surcharges.

Nor anticipate any.

Not that I'm aware of.

The last question would be if you could provide, if at all, any additional commentary on the defense contract management agency notice that was put out last week?

Yes, sure, I can just summarize that briefly.

I think as everyone knows we issued a response on April 26 and that was with regards to a problem that was recently detected on some boards that we manufactured two to three years ago, regarding some copper-plating thickness that did not meet the specification.

This was an isolated situation with regards to a particular part number.

The value of that was approximately $200,000.

We are not aware of any board failures.

We've cooperated fully in providing information to our customer and to the government and will continue to work with all parties involved to resolve this issue in a manner that preserves the integrity of the project.

Is there it worst-case dollar scenario?

I am assuming it is greater than the 200,000 initial cost.

I think at this point I believe that is the limit of the liability.

Thanks a lot.

George Burmann, GunnAllen Financial.

First of all congratulations.

I think despite the small miss, your balance sheet of the Company looks in very decent shape.

A couple questions.

If the orders were to pick up, what kind of revenue run rate would you be able to cope with utilizing your current availability?

I mean we have available capacity at all of our facilities; and you look at our capacity utilization at 80 --

60-some percent, yes?

Yes, Santa Ana at 60, Redmond at 65.

So we have got a lot of upside within our existing facilities to handle a significant upturn in the industry.

Okay.

Then last week Sanmina, Solectron, and a couple other companies announced that they are taking fasty (ph) off the market, primarily I guess in Europe but also in the United States.

Would that help you in any way?

Yes, as we mentioned previously we've seen more activity from our sales, and we have already captured a few part numbers from those closures.

And we anticipate that as we move forward we will continue to benefit from those closures.

Great.

Then lastly you had mentioned that you are always on the outlook for possible acquisitions.

With the large cash position on hand, stock price currently let's say towards the low end of what you should be trading for, would you take into consideration if you paid all cash, or cash and stock, or all stock for any possible acquisition?

I think every acquisitions scenario is a little different.

So obviously with the cash that we have it would be preferable to use cash relative to our stock and our existing stock price.

So you are mindful of where the stock price is?

Absolutely.

Great.

Continued success to you.

Aaron Husock, Morgan Stanley.

I was wondering if you could talk about some of your goals for the various working capital metrics like inventory turns, DPOs, and DSOs.

Sure.

You guys have probably seen over the past couple of quarters that the working capital metrics have kind of stretched a bit.

In particular what I would expect is I would expect DSOs to probably stay in the high 50s.

Inventory days probably around 20; and it had dipped pretty low back in 3Q and 4Q.

Remember we talked about that dynamic of customers having to pull down inventory because of the capacity issue at Chip Falls.

I know that might sound kind of odd, but the reason why that happens is we only hold finished goods inventory at Chip Falls.

It really doesn't affect the rest of our customers.

So when we start to have a constraint there, it affects how much inventory people start to drawdown to get the product.

A long way of telling you I would expect it to be around 20; but I would expect the payables days to stay probably around -- I try to make those -- stretch them as long as I can, but we have to have good relationships with our suppliers.

So that will probably be somewhere between -- probably in the mid to high 40s.

Okay.

I think you gave the average price per panel change in the quarter.

Do you have the average price per layer change sequentially?

We do, it was 8%.

Remember that is driven by the mix shift.

As you get the higher layer count, your price per layer goes down if your market conditions are all the same.

Also, I guess kind of with the expansion of Chippewa Falls, can you talk about how your yields are there now, compared to the rest of the Company?

And then when you are going to decide on the potential next phase of that expansion?

When we expanded in Chippewa Falls we had a few issues with yields around the startup, mainly in some clean rooms that we modified.

That was very temporary.

I think we have that under our belt now; and so our deals that we're experiencing now are very similar to where we were at before we moved into the expanded areas there.

I think with the new layout and so forth that we can have some improvement in our yields going forward.

Let's see;

I forgot the second part of the question.

Just when you'll decide on the potential next phase of that expansion.

Running at 80% we have a ways to go before we have to move into the second phase.

I want you to also keep in mind that most of the second phase at this point is fairly incremental.

I mean it's not a lump sum that has to go into place.

It is pretty much an incremental movement from here.

So we can grow and move quite quickly up with the demand as it presents itself.

What we can do is typically add -- what Kent is referring to is we can add one piece of equipment at a time if need be.

It's more related to the bottlenecks that get created by increasing volumes.

It won't be something that we decide all at one time, we are going to order all the equipment and put it in place.

We've got the equipment outlined and earmarked for that, but it would just -- we would probably order it one piece at a time.

Great, thanks a lot.

Jason Gerske (ph) with J.P. Morgan.

A quick one for Stacey.

Do you have any changes to your CapEx expectations for this year?

No, not from what we previously guided.

Kent, if you could talk a little bit about where the new -- what end-market segments the new wins came from this quarter.

And then just generally speaking, where do you see your best current new revenue opportunities over the course of the next couple of quarters?

Our new customers, we added 27 new customers, about 600,000 in sales just for the first quarter.

And 39% of the new customers were in the networking segment; and 37 were industrial and medical.

So when we look out there at where we are going with market segments, I think in the networking segment you'll continue to see a nice growth there.

That is where a lot of the activity happens on a quick-turn basis.

But it is also where our capabilities match up with customer needs on the high-layer count.

Industrial and medical I think we've had a couple good quarters there.

But I think that will flatten out a little bit now that we've captured a few customers.

As we move into the third and fourth quarter that should grow, if a couple things we are working on come to fruition.

I don't see much growth in computer peripherals, handheld, and so forth.

High-end computing has been just a little bit soft for us, so I think there is some upside there because of the softness that we've had in the last -- particularly this quarter.

So I think there is some rebound there.

But a lot of our efforts on the new front will be involved in networking; some industrial and medical a little bit delayed; and then probably towards the end of the year some more high-end computing opportunities.

Great.

Just lastly on pricing pressure.

Is it getting to the point where you're just kind of walking away from some business and just can't make some of this might make sense to you?

Or you are not to that point quite yet?

Well, as you know everything we book are kind of negotiated on an ongoing basis on the quick-turn side of things.

So we always try to provide our customers with the maximum value.

That goes beyond just price, but also with regards to the engineering and support from a customer service and technical level also.

So it's kind of there's some judgment calls in there that we make on an ongoing business, whether we walk away from work or whether we accept it.

But we have walked away from work in the past; and I would suspect that as we continue to negotiate with customers, there will always be a piece that we walk away from.

Great, thanks guys.

(OPERATOR INSTRUCTIONS) Matt Sheerin from Thomas Weisel.

One quick follow up.

If you could talk about Redmond, the utilization rate there continues to be lower than Chippewa.

I know you had some customers in the semi-cap or semi-test area.

That's been a weak area.

But are you doing anything specifically to increase the utilization?

Or are their certain customers sets that you are going after that would be good fit for that facility?

Redmond services mainly the industrial and medical side.

Most of the customers that we have go in Redmond are in the industrial and medical section.

We have 2 to 3 or 400 customers that are in Redmond; kind of a broad base.

So Redmond in the last quarter did quite well.

We were pleased with the progress that Redmond was able to make in the first quarter on an operational basis.

So I think we operated more efficiently in Redmond as we looked at the top line that the marketplace was giving us and adjusted accordingly.

We will continue to drive that top line.

There's nothing out there that is going to be a nice silver bullet roll in here anytime soon.

But the progress that we're making in Redmond we're actually quite pleased with.

Kent, you just mentioned that the computing business was obviously soft and you think that that will come back.

Are you seeing signs that bookings are picking up there?

We are not seeing any signs yet.

We just have some opportunities that take -- that have a rather long run rate to bring into the fold.

So I think that will take place in, say, the third and fourth quarter.

Thank you.

At this time there are no further questions.

Now for closing remarks I will turn the call over to Mr. Kent Alder.

Please go ahead, sir.

I would like to thank everybody for joining us today on the conference call.

We're pleased to answer your questions and to give you a perspective of TTM.

And thank you for your questions and attendance, and we will look forward to talking with you next quarter.

Thanks.

That does conclude today's conference.

Thank you for your participation.