TTM Technologies Inc (TTMI) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen.

Thank you for standing by.

Welcome to the TTM Technologies second quarter 2011 earnings call.

During today's presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be opened for questions.

(Operator Instructions)

This conference is being recorded today, Thursday, the 4th of August, 2011.

At this time, Diane Weiglin will introduce TTM's disclosure statement.

Please go ahead.

During the course of this call, the Company will make forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Such risks and uncertainties include, but are not limited to, fluctuations in quarterly and annual operating results, the volatility and cyclicality of various industries that the Company serves and other risks described in TTM's most recent SEC filings.

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

The Company also will present non-GAAP financial information in this call.

For a reconciliation of TTM's non-GAAP financial information to the equivalent measures under GAAP, please refer to the Company's press release, which was filed with the SEC and which is posted on TTM's website.

I would now like to turn the call over to Mr.

Kent Alder, President and Chief Executive Officer.

Please go ahead, Kent.

Okay.

Thanks, Diane.

Good afternoon, everyone, and thanks for joining us for our second quarter conference call.

Joining me on today's call are TTM's CFO, Steve Richards, and Canice Chung, CEO of the Asia Pacific region.

I'll begin with a review of our business, Steve will follow with a discussion of our financial performance, and then we'll open the call to your questions.

I'd like to begin with a review of the highlights for the second quarter.

Net sales were $366.1 million.

GAAP net income, excluding the effect of the impairment charge, was $25.7 million or $0.31 per diluted share.

Non-GAAP net income was $32.9 million or $0.40 per diluted share.

Gross margin was 21.1%, and we'll provide more color on the gross margin as we move through the presentation.

During the second quarter, our sequential revenue growth of approximately 7% was driven by our Asia Pacific operations, while our North American operations maintained normalized levels of business.

Overall, sales were up about 9% compared to the second quarter of 2010 pro forma sales of $334.8 million.

Continued solid demand for our advanced technology products drove our financial performance during the quarter.

Our advanced HDI products continued to represent a growing part of our overall product mix.

However, during the quarter we faced higher cost of goods sold as a result of labor rate increases, which typically occur during the second quarter, higher material prices and limited pricing concessions.

All of these changes had a significant impact on our gross margin.

However, we do not expect changes of this magnitude to reoccur in 2011.

As noted in our earnings press release, our results for the second quarter included an asset impairment charge of $48.1 million, this non-cash asset impairment charge primarily linked to used equipment that was acquired in 2007 from Aspocomp, a Finnish printed circuit board manufacturer.

While we previously had reduced the carrying value of some of these assets in 2010 during the purchase accounting, the cash flow of this facility was not meeting our expectations, which led us to record an additional impairment in the second quarter.

Demand for our services related to this equipment has migrated to more advanced technology than the equipment set was designed for.

And despite the challenging global economic backdrop, we continued to experience relatively stable capacity utilization in Asia Pacific, and we are managing product mix to improve the utilization balance in each of these facilities.

In North America, we are closely managing capacity to maximize the efficiency in our operations.

I'd now like to quickly comment on the results of our operating segments for the second quarter, and then Steve will add more detail later in the call.

Asia Pacific had sales of $226.2 million in the second quarter, compared to $202.5 million in the first quarter.

This increase was primarily due to increased sales in the networking end market.

Gross margins for Asia Pacific segment was 21.7% in the second quarter, compared to 25.1% in the first quarter.

About one-third of the decline in gross margins was due to higher labor costs, another third was due to higher material costs, such as laminate, and a third was due to some price concessions in the computing end market.

The North America segment recorded second quarter sales of $142.2 million, which was approximately flat with the first quarter.

Gross margin for this segment was 19.9%, compared to 21.9% in the first quarter.

The decline in gross margin was primarily due to product mix changes towards higher material cost products in both our printed circuit board and backplane assembly operations.

On a year-over-year basis, second quarter sales in Asia Pacific increased from $197.7 million pro forma to $226.2 million, an increase of approximately 14%.

In North America, sales increased from $138.9 million to $142.3 million, an increase of approximately 2%.

Now, moving on to our end markets, networking and communications is our largest end market.

Sales in this end market were 38% of second-quarter sales, compared to 34% in the first quarter.

We benefited from the increasing global demand for wider bandwidth and higher Internet speeds, in part due to the increasing adoption of smartphones and touchpad tablets.

Sales to this end market increased primarily because of sales gains with European customers.

We anticipate that we will continue to benefit from the demand for increasing Internet infrastructure to support growing bandwidth requirements, and we expect sales in this end market to be higher in the third quarter.

Computing, storage and peripherals is our second largest end market.

Sales in this end market represented 23% of sales versus 27% in the first quarter.

Even though we shipped greater volume of products in the second quarter, sales to this end market were down sequentially due to some price concessions.

We expect sales in this end market to be up -- or flat to up slightly in the third quarter.

We experienced a sequential increase in sales in aerospace and defense end market, which represented 17% of sales in the second quarter, up 1% from the first quarter.

Following the stronger than anticipated sales in the second quarter, we expect to return to more normalized levels in this end market in the third quarter.

In the cell phone end market, sales increased sequentially on a dollar basis and remained flat as a percentage of total sales at 9%.

The increase in sales mainly reflects the transition of our mix to include more smartphones.

We expect this end market to be flat in the third quarter.

The medical, industrial and instrumentation end market represented 7% of sales in the second quarter, compared to 8% in the first quarter.

On a dollar basis, sales were up slightly reflecting continued stability in both of our operating segments.

We expect this end market to be relatively stable in the third quarter.

The other end market represented 6% of sales in the second quarter, unchanged from the first quarter.

Based on an advanced HDI opportunity in consumer products, we expect the other end market to increase in the third quarter.

Our top-5 customers accounted for 33% of sales in the second quarter.

We had 1 customer that represented 10% of sales.

In alphabetical order, our top-5 OEM customers remain unchanged.

They were Apple, Cisco, Ericsson, Huawei, and ZTE.

Lead times remained at 4 to 6 weeks, which reflects normal lead times in Asia Pacific and North America.

We continue to believe our ongoing strategy to shift our product mix to more advanced technology products will enable us to mitigate cost increases over time.

A product mix shift has resulted in a steady increase in our ASPs in Asia Pacific, which has continually risen for the last 5 quarters.

Prices in Asia Pacific increased 6% sequentially in the second quarter, mainly due to an improved product mix in our rigid PCB business, as well as greater square feet production of HDI products.

Pricing in North America also increased by approximately 3%, as we increased our advanced technology product mix in North America.

In summary, despite the high -- despite the pricing and cost challenges in the second quarter, our results demonstrate our solid long-term high-technology focus strategy and our ability to execute on an ongoing basis.

We believe the advantages of our geographic and end-market diversification uniquely position TTM.

In addition to driving growth long term, we believe our diversification also mitigates risk and enhances our ability to fulfill our customer needs.

Now, I'll turn the call over to Steve, who will review our financial performance for the quarter.

Thanks, Kent, and good afternoon, everyone.

Second quarter net sales of $366.1 million increased $23.3 million or 6.8% from first quarter net sales of $342.8 million.

Gross margin for the second quarter of 21.1% decreased from first quarter gross margin of 23.9%.

Selling and marketing expense was $9.3 million in the second quarter, compared to $9 million in the first quarter.

As a percentage of net sales, selling and marketing expense in the second quarter was 2.5%, down from 2.6% in the prior quarter.

Second quarter G&A expense increased to $24.1 million or 6.6% of net sales from the first quarter G&A expense of $23.1 million or 6.7% of net sales.

Amortization of intangibles was $4.3 million in the second quarter, compared to $4.2 million in the first quarter.

As Kent stated earlier, in the second quarter we recorded an impairment charge of $48.1 million as part of operating expenses.

Operating loss for the second quarter was $8.5 million, compared to operating income of $45.7 million for the first quarter.

Excluding the impairment charge, operating income would have been $39.6 million in the second quarter.

The Asia Pacific segment's second quarter operating loss, before amortization of intangibles, was $18 million, compared to operating income of $33.1 million in the first quarter.

Excluding the impairment charge, the Asia Pacific segment's operating income would have been $30.1 million in the second quarter.

The North America segment's operating income for the second quarter, before amortization of intangibles, was $13.8 million, compared to $16.8 million in the first quarter.

Interest expense increased to $6.7 million in the second quarter from $6.3 million in the first quarter.

As part of other net, we recorded a $1.7 million gain on the settlement of the Aspocomp transaction.

As you'll recall, during the second quarter we settled the liability to purchase the remaining 20% stake in one of our Chinese joint ventures at a discount.

Our effective tax rate in the second quarter was significantly impacted by the impairment charge, only a small portion of which is deductible for tax purposes.

Excluding the impairment charge, our effective tax rate would have been 25.3% in the second quarter, compared to 27.9% in the first quarter.

The decrease in this effective tax rate was primarily due to a shift in mix toward our plants in Asia that carried lower tax rates.

The net loss attributable to stockholders in the second quarter was $20.9 million or $0.26 per basic share, compared to first quarter net income of $27.1 million or $0.33 per diluted share.

The asset impairment charge negatively impacted net income attributable to stockholders by $46.6 million or $0.57 per basic share.

Excluding the asset impairment charge, GAAP EPS for the second quarter was $0.31 per diluted share.

Second quarter non-GAAP net income attributable to stockholders was $32.9 million or $0.40 per diluted share.

This compares to first quarter non-GAAP net income attributable to stockholders of $33.3 million or $0.40 per diluted share.

Non-GAAP net income attributable to stockholders adds back amortization of intangibles, stock-based compensation expense, non-cash interest expense, asset impairment restructuring and other charges, as well as the income tax effects related to the expenses.

Adjusted EBITDA for the second quarter was $54.2 million or 17.5% of net sales, compared to first quarter EBITDA of $66.5 million or 19.4% of net sales.

Cash and cash equivalents at the end of the second quarter totaled $235.9 million, an increase of $33.6 million [returning] $2.3 million at the end of the first quarter.

Net debt was $314 million at the end of the second quarter, down from $321 million in the first quarter.

Cash flow from operations in the second quarter was approximately $67 million.

Capital expenditures for the second quarter were approximately $44 million.

This reflects about $41 million for Asia Pacific and $3 million for North America.

Depreciation for the second quarter was $16.8 million.

In the third quarter, we expect revenue to increase by about 5% in Asia Pacific, while we anticipate a slight decline in revenue in North America.

Overall, we expect third quarter revenues to be in the range of $365 million to $385 million.

We expect GAAP earnings attributable to stockholders in the range from $0.24 to $0.33 per diluted share and non-GAAP earnings attributable to stockholders in the range from $0.32 to $0.41 per diluted share.

This is based on a diluted share count for the third quarter of approximately 83 million shares.

Our third quarter gross margin is expected to be in the range of 20% to 22%.

While we expect some leverage benefit in Asia Pacific, the decline in revenue in North America will hinder our ability to expand overall margins.

We expect that SG&A expense will be about 9% of revenue in the third quarter.

We will record amortization of intangible expense of about $4.3 million.

We expect our blended tax rate to be approximately 24% in the third quarter.

Before we turn to your questions, we would like to mention that we will be hosting an Analyst Day in New York City at the NASDAQ MarketSite on September 29th.

If you would like more information on this event, please e-mail us at investor@ttmtech.com.

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

We will now begin the Q&A session.

(Operator Instructions)

Shawn Harrison, Longbow Research.

I just wanted to, I guess, drill in a little bit more on the gross margin.

I know last quarter's call there was some expectation that you would begin to see some price recovery, as well as, I guess, a mix tailwind heading into the back half of the year that would negate both the labor inflation as well as the cost inflation.

I guess the wildcard this quarter was some price concessions to the customer.

So, maybe if you could just talk about how we see gross margins moving beyond the third quarter, where pricing is moving in your favor and how you get back to kind of the more of the gross margin levels you had been targeting?

Yes, and thanks, Shawn.

That's a very good question, and it's right.

We did hope to have some higher gross margins, and the price concessions did impact our ability to overcome some of the increase in labor and materials.

But, just kind of at a high level, in gross margins in Asia Pacific, they decreased this quarter because we had the labor increase right at the beginning of the quarter, we had some material increases, and then the customer price negotiation.

The impact to our gross margin was probably -- pretty close to about equal between those three; a third, a third, a third.

And now, as we go forward into the third quarter, we're going to see a higher mix of HDI work and a higher mix of some of the technology on the rigid side, and we'll have some leverage in there because we have some higher revenue.

So, we'll have some increase in our gross margins, which I think Steve has quantified in our projection.

In North America, we had some pressure on our gross margins in the quarter.

That was probably more directly related to product mix, as some of our product that we ship had a higher material content.

I mean, we had some higher material costs in there, but basically it was related to some higher mix material content, along with backplanes and also in printed circuit boards.

As we go forward, though, we'll look at gross margins in North America continuing to come under pressure.

And I guess the reason for that is we've lost -- or we have on hold, in a pause mode, some programs that have some higher profitability of fast growth, and so they won't be available to us in the coming quarter.

And so, there's just some timing issues there with the product mix that we have.

So, overall, you've got a couple of things going, a couple of moving parts going the -- I guess, against us, but I think if our strategy, and as we continue to move up the technology scale -- and we don't think we'll have these headwinds in the -- for the rest of this year, certainly not to the degree we've had.

So, we'll see our gross margins continue to go up, mostly in Asia Pacific, and then -- well, we've got a little bit of work to do in North America.

The customer price concessions in Asia Pacific, was that a one-time event or is that something that you'll be facing kind of now on an annual basis?

Well, customer negotiations take place on an ongoing basis, but in this particular situation it was kind of a one-time event that took place.

We'll have some more negotiations take place.

Some of our customers do it on an annual basis, some do it quarterly, but this is a one-time kind of event that we don't anticipate happening again.

Okay.

And then, in North America, the programs on hold, would that be tied to kind of your largest end market in North America?

It's somewhere probably on the aerospace and defense is what we're talking about.

I mean, aerospace and defense in the second quarter, we had a pretty reasonably good quarter.

I think we shipped over $60 million for the quarter, and we were $55 million in the first quarter, so we're up about $5 million shipment in the second quarter.

And in the third quarter, we'll be back to that normalized $55 million level.

I mean, aerospace and defense for us in 2011 will be down maybe 5% or 6% from where we were in 2010, and when you consider some of our products were related to some of the wars, the Iraq and Afghanistan war, the rest of our business at this point in time is holding pretty steady.

Now, we'll certainly keep an eye on what's going on in Washington, and they've got some budget cuts.

I don't -- I would be foolish to think we'll be totally not impacted by that, but we'll continue to watch that and see where it goes.

But, we're on a broad base of programs.

We have a large number of customers, so I think we're well positioned to weather that storm as well as anyone.

And we're not sure what that storm is yet, but I think we're in pretty good shape there.

Matt Sheerin, Stifel Nicolaus.

Just a few questions.

So, on the commentary that the computing, storage and peripheral segment was down, it looks like it was down high-single digits sequentially.

But, I think, Kent, that you said that units were up, but that it was all an issue of lower pricing.

If that's the case, it sounds like pricing was down significantly.

So, could you maybe slice and dice that area?

I know you do tablets, you do servers, you do peripherals, etc., but you can drill down a little bit within that segment and tell us what's going on?

Yes, in the computing segment, we went from 27% down to 23%, and most of the price concessions were very targeted.

I mean, it wasn't across the board, but it impacted our advanced HDI work.

And so, the mix of work came in a little heavier on some of the lower priced advanced HDI work, and some of the -- I guess the more complex advanced HDI work for which we get a higher ASP was negotiated down.

So, the challenge that we have now is to work on the yields, work on our operations, become more productive on some of that, and -- which is what we're doing.

So, it was basically along with the product mix, along with price concessions, and mainly in the HDI area.

And maybe Canice, if you want -- if you've got some comments to add a little more color to Matt's question, go ahead.

I think Kent's mentioned about a one-time concession.

It's all linked and related to, I think, about the global economy.

I think because of the slightly shaken markets in the Asia Pacific that allow for surplus capacity, slightly for that quarter, allows people to be coming to ask for extra concessions on the prices.

Okay, but if you look into the absolute values in the square footage, we are indeed shipping even more.

And also, partly why we can afford a higher concession in the pricing is because of the high margin of that product categories of their wireless HDI there.

So, all in all, I'm trying to say is that, yes, there's a extra of the price cut, but we expect when the economy come into more normalized that the capacity will no -- won't be having surplus, that the price cut will come back to normal.

Yes, and I think -- and Matt, the other -- one other thing.

When you look at the percentages, like 27% to 23%, I mean, you're up in networking, so you're up in some of the other end markets, so the percentage kind of gets a little bit -- looks a little bit worse than it actually is.

And I'll say, too, that we had hoped that the seasonality would be coming to an end.

I mean, normally, we'd start to see some increase in orders in July, which we've seen, but not seen what seasonality normally is.

It looks like that's kind of pushed out a little bit, and that's pretty much related to the macro global environment that we're living in today.

Okay.

Well, I was just under the impression that the advanced HDI, with your capacity, was relatively full, which would imply that you would have some leverage with customers.

But, now you're telling me it sounds like that there's capacity out there and that there's increased price competition, and just to keep the business you have to cut prices.

I think the situation, Matt, is that it -- the advanced HDI, there's certainly less competitors, fewer competitors, but there's still a little more capacity than what we anticipated.

Now, having said, I think you need to look at where we're at in this product lifecycle, too, because as our customers introduce new products, and they go through a ramp phase, I mean, they -- that's where capacity becomes pretty constrained, and that's where I think we have the opportunity to focus on delivery and customer satisfaction, and price kind of takes a back seat.

But, then there's still -- you're in between those ramps and that product introduction, and now you have a little more price pressure.

I think that's where we're at in this product cycle.

As we go into new product launches, that -- as they launch that, that eats up a lot of capacity in the industry.

And it's clearly different than just a total conventional board where there's a lot of capacity.

I mean, there is a major difference, but you're -- to answer your question directly, we had hoped that we would have a little more leverage on pricing than it ended up having.

Okay.

And sorry to keep harping on this, but what was the magnitude of the price cuts?

Are we talking about a single-digit kind of price cuts?

It was more than that.

It was more than that?

Okay.

And then, your guidance for flat top and computing, you just said that there -- it looks like orders were slower to develop in July.

Is that across servers and other computing?

And also, what's your take on tablets?

I know you've been strong there.

How does that look for you?

Yes, I mean, we're not losing any ground.

I think we're capturing market share with our customers on tablets and advanced HDI products.

And networking will continue to grow.

I mean, if you just look at our end markets, I mean, we're going to be strong in networking, computing is flat to up, and then we've got some advanced HDI-type products in our other category with some customers that we think will be good.

So, aerospace and defense will go to that normalized level; that's down a little bit.

And then, of course, cell phone and medical will be flat to up slightly.

Okay, and just my last quick question.

Could you tell us who that 10% customer is?

It's our largest customer.

Right.

So, it's a key manufacturer of high tech computing and touchpad tablet devices.

Computing and touchpad tablets?

Yes.

Amitabh Passi, UBS.

I apologize for this Kent; I don't want to keep harping on this, but it is rather perplexing.

Your largest customer, I think, is almost 50% of computing, storage and peripherals.

That segment, when they reported results, didn't seem like they were seeing any macroeconomic pressure, so really just trying to understand why these pricing concessions are coming into play because just given the size and the magnitude and the traction of this customer, I think, kind of on Matt's point, just a little perplexing in terms of why pricing concessions are being offered.

Well, with all of our customers, we try to provide them value added and put ourselves in a position with our advanced technology that we can have our ASPs go up and maximize our profitability.

But, from a customers' standpoint, they're looking at the other side of things, just like we look at our suppliers.

And basically, it ends up to be a little more of a supply-demand type equation.

And when you're in between product ramps, there's not enough demand to meet supply.

I mean, we've expanded.

Our -- some of our competitors have expanded.

And as you get in between product cycles, there's some price pressure and you want to keep your facilities up and running.

And so, that's kind of where we're at.

I mean, customers will always look to get the best opportunity or the best deal that they can, and we hope that we can provide them that.

And I'll go back to say it again.

And it might not feel like this or seem like it, given our current situation, but there are not as many advanced HDI-type competitors out there that can do what we can do, but there are enough that there are some advantages where a customer has some price leverage on us and our ability to negotiate.

Okay, so maybe just to follow up on that.

Hypothetically speaking, should this customer introduce a new product in the fourth quarter or latter part of this year, would that have a favorable impact on your prices?

Yes.

I mean, and just at a high level, when you're introducing a product and you're bringing a product to market, the important thing is to get that product to market and capture as much market share as you can and get that first-mover advantage.

And so, delivery, quality, all of those things come into play a little more than price.

And as that product matures, then you go through a series of negotiations as a means to stabilize.

So, that's why we like to see a lot of products that are constantly changing, that are being revised and innovated because that gives us the opportunity to sell other services rather than just a product.

I mean, one of the strengths we have is we have this flexible manufacturing capability where we can flex up and meet additional demands from customers, and we can provide a lot of different products.

So, as they introduce -- as customers, in general, introduce new products, you'll find that, as a general rule, we can get higher margins on those products in that early product lifecycle.

And then, just one more from me.

Networking, again, sales are up almost 20% sequentially, kind of back to the 4Q levels, 4Q '10 levels.

And it seemed like in 4Q, you had some order pull in.

Just trying to better understand this robust level; what exactly drove that?

Any concerns that we might have seen some pull ins?

Maybe you could just shed some light.

In that end market, that's pretty solid demand.

It's not pull ins, push outs; there's nothing going on in that end market other than just good solid growth.

I think you're seeing a lot of demand for the -- like I mentioned, the wider bandwidth, faster speeds.

You've got a lot of devices, smartphones, coming on line.

You've got the touchpad tablets, and those devices are creating additional demand for the Internet infrastructure, both in the wireless and in the wireline.

So, the networking growth is just per -- shows pretty good solid demand.

And, I mean, when you look at all of our end markets, with the exception of aerospace and defense, going into the third quarter, I think we'll be up in all of our end markets, certainly up more in networking.

But, on a raw dollar basis, we should be up in all of our end markets.

Percentages will vary because some will be up more than others, if that makes sense.

Yes, okay.

I'll hop back in the queue.

(Operator Instructions)

Shawn Harrison, Longbow Research.

A few follow ups.

Given that it seems maybe within your Asia business you're seeing a delay in seasonality, just commentary on what is typical seasonal growth or, I guess, what would you expect to be typical seasonal growth for the December quarter out of Asia, and then I have another follow up.

Okay, Shawn, you know what?

I'm going to let -- since Canice has been over there more years than I have.

Canice, do you want to address that question from Shawn?

Normally, in the Asia Pacific, we should be able to see pickup in the July and August timeframe.

But, unfortunately, because of the tightened monitor supplies in China that impact the local economy of China, we see, as well as we talk to the customers there, a lot of them indicating that the pickup will be delayed by at least 1 or 2 months.

And then, they will try to catch up a lot more in the last 4 months of the year.

So, in fact, it runs in line.

We saw the booking exceptionally strong starting from the September month, which is slightly delayed by almost one-and-a-half months versus that of the last year's sentiments or the usual sentiments.

Okay.

And so, I guess that -- with the -- I think the December quarter last year was maybe up a few percent sequentially.

Maybe it could be better than that this year because of the delayed seasonality, that would be the thinking?

Go ahead, Canice.

Yes.

I think it's still premature to conclude anything, but I think we should be confident that Q4 should definitely be better than Q3.

Okay.

My second question is what were the book-to-bill ratios by region?

In the quarter, we ended in North America at a 0.96, Asia Pacific was 0.99, the IPC was 0.98, so TTM overall was 0.98.

I think if you slice that a little bit, you've got aerospace and defense where we had a pretty strong shipment, which impacted our book to bill in a little bit of a negative way.

On the conventional side, we were more along a 1 ratio.

So, that's a significant improvement from the fourth quarter, where we were, I think, in the 80s.

And then, in July, if you go into July, we continue to march on at just under 1, probably 0.97 to 0.98, somewhere in there, in July.

Okay.

And then, I'm going to beat this into the ground, unfortunately, but the gross margin -- I understand the pricing issue now.

It sounds pretty well, but it also seems that even ex we take out that price discount that maybe you were a little bit delayed in seeing some of the price recovery that you would have liked to have seen in the second quarter.

Is that a correct statement, and is it -- are we going to see it now in the third and fourth quarter?

Mainly speaking about Asia, but it just seems like even without the pricing discount it was delayed a bit.

Yes, I think, like Canice was saying, the top line didn't come on as fast as we had thought, so -- I mean, when you look at the prices on the HDI, our advanced HDI, were definitely not as high as they were before we made some price concessions.

However, they're still very attractive work for us, and so our ongoing strategy to invest and become -- and move that percentage up is a pretty solid strategy.

I mean, we're going to look at how we invest and make sure we do it on a timely basis and match our investments with the marketplace.

But, the issue we had in the second quarter with all these price increases is that it seemed to happen in a sizeable nature with our labor that went up 18%, and that's a big chunk.

And we had hoped that the top line would grow faster to overcome some of this.

I mean, and I think we stated that in the last quarter and hoped that that would happen, and the top line -- because, I think, of macro conditions more than anything with customers being a little more conservative and tightening their belts on inventory and so forth delayed the growth in our top line.

And here we are in July, and we're still not seeing what we normally see in July, and customers are saying it'd be -- to the latter part of August, September timeframe before we really start to see some nice ramps.

Amitabh Passi.

HDI sales as a percent of total sales?

40%.

Pardon me?

He said HDI sales as a percent -- it was 40%.

40%?

Yes, 40%.

40% of Asia Pacific.

Sorry, yes, on -- 40% of our Asia Pacific sales, so basically steady with Q1.

Got it.

And then, any color on just how order patterns progressed throughout the quarter, and then what you might have been seeing in the month of July relative to kind of the latter part of the quarter?

I think the order patterns throughout the quarter were pretty constant.

We didn't have, like, a big month of June and a low month of April and so forth.

It seemed -- you know, normal relative fluctuations.

We started out July, I think, in a little bit of a lower mode, and then we had some -- a couple of weeks there where it was pretty challenging, and then, most recently, we're back, so I guess you could -- if you wanted to put a term to that, you'd probably call it streaky, so -- but, when you add all the streaks up, it's still relatively respectable given some of the macro conditions that are taking place here.

Got it.

And then, I think last quarter you talked about adding a pretty key OEM to your cellular phone business.

Can you just give us an update on how that's progressing, and then any new customer additions this quarter?

Yes, I think on the -- that customer, I think we're in a little bit more of an extended process.

So, I mean, we do have some orders going in, but that, again, is part of the macro thing, so that's a little bit extended.

But, we do have some opportunities with our HDI work in -- down to the other category, so we think that will happen, and that's -- or that is happening.

So, if that continues on the path that we think, that will be some nice growth in our HDI -- advanced HDI work.

And we've talked a lot about advanced HDI in the past, and I think that's a solid growth technology that we are focused on and that we'll continue to expand and perform well.

But, in that process of talking about that, I think maybe we haven't emphasized enough about our technology in our conventional side because we continue to move up the technology in layer counts in Asia Pacific and move up the complexity ladder in our advanced HDI work -- in our conventional work also.

So, we're not only seeing prices -- ASPs go up because of more square foot going through our advanced HDI; our ASPs are going up because we're moving up on the conventional side also.

So, part of our increase here in ASPs is conventional and part of our increase in gross margins will be because we're moving up the technology scale in all areas of our business.

Great.

And final one for me, Steve, any change to your CapEx guidance?

I think it was kind of from that $130 million to $140 million range for the year.

Yes, we're still on target for that, a little bit less in North America.

We've talked about $20 million in North America.

It's probably more like $12 million to $15 million now.

We're still -- but, on that overall total, because we're still going to spend $115 million to $125 million in Asia overall for CapEx this year.

I think the plan is still in place.

We're looking at the timing.

There's still long lead times on some of that equipment, so we have to make sure we bring that equipment on at the right time so we have capacity available for our customers, so when they do ramp we're able to handle that.

And at the same time, we don't want to bring it on prematurely, so we are scrutinizing the timing of the CapEx on an almost a weekly basis here to make sure that we execute in bringing that on at the right time.

Mr.

Alder, there are no further questions in the queue.

Please proceed.

Okay, I just thank everyone for joining us today.

I know with the market being down, it's kind of a tough day for everyone here, but we appreciate your interest.

Hopefully, you can join us for our Analyst Day September the 29th.

And then, we'll look forward to talking to you again next quarter.

So, thank you, everyone.

Ladies and gentlemen, this concludes the TTM Technologies second quarter 2011 earnings call.

You may now disconnect.

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