Ladies and gentlemen, thank you for standing by, and welcome to TTM Technologies First Quarter 2013 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded, May 2, 2013. I would now like to turn the conference over to Diane Weiglin, Executive Assistant with TTM Technologies. Please go ahead.

During the course of this call, the company will make forward-looking statements that relate to future events or performance. These statements reflect the company's current expectations, and the company does not undertake to update or revise these forward-looking statements even if experience or future changes make it clear that any projected results, expressed or implied, in this or other company statements will not be realized. Furthermore, we wish to caution you that these statements involve risks and uncertainties, many of which are beyond the company's control, which could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include, but are not limited to, the company's dependence upon the electronics industry, general market and economic conditions, including interest rates, currency exchange rates and general market and economic conditions, including interest rates, currency exchange rates and consumer spending, demand for the company's products, changing trends in the markets the company serves, market pressures on prices of the company's products, changes of market mix, the company's ability to consummate the DMC and SYE transactions and realize the expected capacity utilization and margin benefits therefrom, contemplated significant capital expenditures and related financing requirements, the company's dependence upon a small number of customers, the unpredictability of and potential fluctuation in future revenues and operating results, competition in the labor markets in which the company operates, and other risk factors set forth in the company's most-recent SEC filings. 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 Kent Alder, TTM's Chief Executive Officer. Please go ahead, Kent.

Okay, thank you, Diane. Good afternoon, and thanks for joining us for our First Quarter 2013 Conference Call. I'm joined on the call today by Todd Schull, our new CFO. Todd joined the company in late February, and I'd like to welcome Todd to his first TTM conference call. As in our previous calls, we will begin with a review of our business, and then Todd will follow with a discussion of our financial performance, then we'll open the call to your questions. Okay, let's start with a few highlights from the first quarter. Net sales were $325.4 million. Gross margin was 15.6%. Non-GAAP net income was $10.7 million, or $0.13 per diluted share. GAAP net income was $5.2 million, or $0.06 per diluted share. For the first quarter, revenue was near the high end of guidance, and our earnings per share was above guidance. While we experienced normal seasonality during the quarter, we were pleased to achieve year-over-year revenue growth, with increased sales in our cell phone and networking end markets. We were also encouraged to see an improvement in our aerospace and defense end market, both sequentially and year-over-year, despite current defense budget challenges. Overall, we maintained relatively high levels of advanced technology work by serving multiple co-programs for our handheld devices. Our advanced technology group of products, which include HDI, substrate, rigid-flex and flex assembly, accounted for approximately 51% of our Asia-Pacific segment's revenues in the first quarter. This compares to approximately 60% in the fourth quarter. The sequential decline reflects normal seasonality for touchpad tablets and smartphone sales. I'd now like to quickly comment on the results of our operating segments for the first quarter. Todd will add more details later in the call. The Asia-Pacific segment had sales of $202.6 million in the first quarter,…

Thanks, Kent. And good afternoon, everyone. Before I jump into numbers, let me just say how pleased and excited I am to be part of the TTM team. I believe TTM has an excellent future and I'm looking forward to working to help make that future a reality. I'm also looking forward to meeting and working with the investment community. Onto the numbers. First quarter net sales of $325.4 million decreased $56.3 million, or 15%, from the fourth quarter due to seasonality. Please note also that Q1 was a standard 13-week quarter, whereas Q4 was a 14-week quarter. The 1 less week during Q1 as compared to Q4, negatively impacted our revenue results and favorably impacted our expenses. Gross margin was 15.6% for the first quarter compared to 16.1% in the fourth quarter, reflecting primarily lower utilization of our operations. Selling and marketing expense for the quarter was $9.2 million compared to $9.6 million in the fourth quarter. As a percentage of net sales, selling and marketing expense in the first quarter was 2.8%, up from 2.5% in the prior quarter, primarily due to lower revenue levels in the current quarter. First quarter G&A expense was $26.6 million, or 8.2% of net sales, compared to $28.7 million, or 7.5% of net sales, in the fourth quarter. The increase in G&A expense as a percentage of revenue was also due to the lower revenue levels in the current quarter. Amortization of intangibles was $2.3 million in the first quarter compared to $2.5 million in the fourth quarter. Operating income for the first quarter was $12.7 million compared to operating income for the prior quarter of $20.7 million. The Asia-Pacific segment's first quarter operating income, before amortization of intangibles, was $11.1 million compared to operating income of $17.6 million in the fourth…

[Operator Instructions] And our first question comes from the line of Shawn Harrison with Longbow Research.

Just a clarification. The substrate business, what was the quarterly revenue run rate?

Shawn, we can look at that in an annualized basis. It continues to go up. And one of the reasons in our substrate business that had been classified in our other category, mainly because it wasn't significant. As we continue to invest in that business, it continues to go up. That's why we're going to reclassify that back up into the cell phone category. The revenue for that for the last quarter was about $13 million.

Okay. And then my second question is somewhat interrelated. I guess, getting into the kind of a view on the back half of the year, it seems as if most of this is Asia related. And so that goes into the second aspect of the question is, is that all Asia related? And if it is, what are you looking at with North America? The EBIT margins this quarter were about 3% or, I guess, the lowest we've seen in a number of quarters. So if you don't get the revenue growth, what is occurring in North America?

Yes, let me dissect that question. You're right on the second half of the year with most of the increase being in Asia-Pacific. And if you just focus on Asia-Pacific segment, historically, we've invoiced about 55%, 56% of our revenue in the second half of the year, and that's all driven by the seasonality in the computer and the cell phone end markets, with touchpad tablets and smartphones. Our North America business, we think that will be solid for the rest of the year, it won't have the same increase, but it -- we're optimistic that it will continue to grow. I think, for the next quarter, we got that forecasted for about a 3%, 4% increase. In Asia-Pacific, on a comparable basis, we're up about 1% in the second quarter. And in the second half the year then towards the second -- toward the end of the second quarter. That's when the orders will start to come in as we get new product introductions from our smartphone customers and touchpad tablets. As far as margin goes, Shawn, I think we had just some -- well, the challenge we had in North America this quarter was, and I mentioned this earlier, the unevenness of the orders, it has maintained 2 of our facilities. And while our capacity utilization rates stayed constant, at about 65%, it varied between our facilities. And we have one of our facilities now that the lead time is extending out and the backlog has built and we're actually hiring people, and that's a facility that services the networking end market. And we have another facility where the orders come very irregularly, if you will, where we might work overtime for a couple of weeks and then we're looking at some idle capacity. So it was a challenge this quarter, as some of our facilities ramped and other facilities had a very uneven order flow.

How much of the Chippewa Falls recovery, Kent, is the markets versus the commentary that you made about taking share?

Well, it's both, Shawn. There's some overall improvement in the networking market from a broad range of customers. And then another big part of that was some wins from existing customers as we captured market share.

Our next question comes from the line of Rich Kugele with Needham & Company. Richard Kugele - Needham & Company, LLC, Research Division: So just a couple of questions for me. One, on the gross margin side, you did talk about how much the labor rates went up. Is it solely because of labor that the gross margin -- or that the -- if you take the low end of the revenue range, that's why the EPS would be so low versus this quarter? I'm just trying to figure out the sensitivity on the guide and if the gross margin and the labor rates is a primary factor.

Rich, I'll go ahead and take that one. If you look at our forecast or guidance that we're offering for the second quarter, the margin deterioration you see is being dominated by the wage increases that we commented on. We also get fluctuations in the material mix in terms of material content and as that varies, it's basically a mix issue for us, depending on the products that we're making in a given period of time, and that's also providing a little bit of a headwind for us. But not withstanding those negatives were actually not down -- not forecasting of a decline that large. We are offsetting some of that to efforts, I think, productivity and efficiency initiatives that we've got within the company, and we're actually expecting to mitigate a significant element of both of those headwind issues, if you will, in the second quarter. Richard Kugele - Needham & Company, LLC, Research Division: Okay. That's helpful. And then actually, in terms of the debt of the portion that's moved to current, what is your intention for that? Do you think you can just refinance it or pay it off? Or what do you think is the best course at this point?

It's a little premature to speak to that. I think our expectations at this stage, if I was to get pinned down, would be to pay it off in due course. But it -- we will look at our overall capital strategy as we go forward here and determine what's the best use of our cash, which is really -- you look at organic growth, you look at M&A opportunities, you look at paying down your debt, and we have to weigh those alternatives at any point in time to figure out what's going to be the most attractive use for our cash at that time. Richard Kugele - Needham & Company, LLC, Research Division: Okay. And then just lastly, Kent, you had mentioned that at least -- I guess one of the facilities here in the States working on the networking gear is actually seeing extended lead times. I can't remember the last time that's happened. It's been, I guess, a couple of years. Do you think that the customers are starting to feel better about the orders that they can place? Or are they just concerned about inventory levels? Have they given you any second-level commentary as to why?

Yes. I mean, that's a good question, Shawn (sic) [Rich]. I mean, it's generally about all of the above. I mean, there are various reasons depending on the customer's particular situation. I think there is overall a tone of more optimism. It's not a gigantic step function in optimism. But clearly, there is some nice, positive, I guess, momentum here that customers are getting a little more confident about the future, willing to place orders, maybe rebuild inventories to some degree. We won some market share. I think that's helping and will continue to -- I think the position we are in and some of the opportunities we have with customers, I think, we'll continue to ramp with that networking end market, particularly because of the segments we serve within that end market.

[Operator Instructions] And our next question comes from the line of Jiwon Lee with Sidoti & Company. Jiwon Lee - Sidoti & Company, LLC: I just wanted to ask about the potential margin improvement you might be expecting in the second half given the transactions you did and also given some of the revenue ramp that you're expecting from the Asian side.

Yes. I mean, that's a good question, Jiwon. Let me just talk kind of at a high level about that for a minute here and then maybe we can synthesize that down into, I don't know -- quantify that some. But the SYE transaction, that's going to benefit us in a number of ways. First of all, it will eliminate some of our conventional capacity, which kind of matches what we're doing within the marketplace. We don't need the conventional capacity that we have right now, so that will improve our capacity utilization, and that translates into some improved gross margins. Over time, I think through our modeling, we anticipate that, that will improve our gross margins about 1% in Asia-Pacific. That transaction also enables us to get in line with our strategy as we move forward with more advanced technology-type products. It also simplifies our organization structure. We're able to focus on facilities that we own 100%. And when you look at the second half of the year, we have, over the years, structured our company through some of the challenges that we've had as we saw some labor trust increase and some other cost rise so that I think we're better positioned now than we have been in the future (sic) [past] when the revenue comes to us. So there's a lot of leverage in our model. Clearly, we need revenue to overcome some of the fixed cost. And in Asia-Pacific, we go up generally 25% to 30% over what we did in the first half of the year. So that will be a real positive for us. And in North America, when you look at all our business there, we've got some more coming to us from the networking end market. On the aerospace and defense side, I mean, we're doing well there, even with the sequestration and some of the budget talks or challenges that we're having. I think if we had that resolved, there are some aerospace and defense orders that are kind of on the sidelines that if they had a little more clarity, I think we could boost our work there. So we've got some things working for us to our advantage that we haven't had in the past. I don't know how to start to quantify all those things. It's a little dangerous to start quantifying, but a lot of good things are happening. And, Todd, did you have anything to add to that?

Well, maybe we can probably just provide a little bit of guidance on the SYE transaction that Kent alluded to, which is a strategic step that we're taking to improve our margins here as we go forward. We'd like to give you a little bit of information. So as Kent indicated in his earlier comments, we're now targeting to complete that transaction in the July time frame. So if -- for purposes of the second quarter guidance, it really doesn't have an impact. As you start to look at the rest of the year, a couple of things. We'll have a slight decline in the revenue, we'll have a reduction in our revenue related to this specific transaction, and that will be in the neighborhood of $20 million to $25 million per quarter. For the SYE plant, that will move off and will no longer be consolidated in our results. Secondly, the profit related to that plant, the percentage, if you will, the portion of that profit that we do not recognize, will be beneficial to us. That is a nominally, modestly profitable, breakeven-type of a situation. So there's not a big negative hit there. And for the other plant where we're acquiring the minority interest, we'll actually pick up some profit that we're -- for the ratio or portion of the ownership that we don’t presently have. So when you net those 2 things out, as Kent commented earlier, we expect to see an uptick in our margins in the Asia-Pacific segment of approximately 1% once that transaction is completed. And then on the cash flow side, as we tried to give some indication earlier, we would expect to realize net after all the -- we sell our interest, we buy the other interest, there's also some intercompany debt that needs to be liquidated and some taxes associated with the transaction. When you net all those things out, we would expect to realize approximately $40 million of cash benefit to the company. So that's a rough picture in terms of the economics of the transaction. Jiwon Lee - Sidoti & Company, LLC: Okay. That's very fair. And I just wanted to make sure that I understand the fairly wide EPS range you're seeing for the second quarter. So that's mainly a function of the mix and the materials that's also associated with that mix? Did I get that right?

Yes. I mean, there's -- Jiwon, I think we're more stable now than we kind of have been in prior quarters. I mean, you looked at our revenue or our gross margins -- I mean, I think that's been fairly constant in the 15.5%, 16% levels. So I think it was just a precautionary measure maybe to have that a little wider than we maybe could have, but it's probably in line with what we've done in the past, too, with a $0.06, $0.05 or $0.06 range. There's -- I wouldn't read anything into that one way or the other. We've got a lot of good things working for us. I think our mix will improve too when you talk about the mix of advanced HDI rigid-flex substrate. I think that will continue to work in our favor as we go forward. The other thing that I want to mention that I probably overlooked on my earlier comments is we're also looking at, within our facilities, how do we better load our facilities? And how will we better have our capacity aligned within our facilities so we become more efficient? So there are some opportunities we have there that we're still in the process of researching. But we have quite a few things in the positive side of our business.

Our next question comes from the line of Shawn Harrison with Longbow Research.

Just to follow up, with copper prices up so significantly, what would be the earliest that you could potentially maybe see a little bit of giveback on laminate, particularly within Asia?

Yes. I think on the copper prices, certainly, the price of copper is going in our favor, and that probably kicks in sometime in the middle to the end of the second quarter. We have some contracts and so forth. So it'll probably kick in this second -- in the second half of the second quarter.

Okay. And then just as a follow-up, where are lead times right now that you're seeing in Chippewa Falls versus maybe where they were in the back half of last year?

Yes, they've extended out. I think we ran at about 3 to 4 weeks last year for the most -- most of the time. And we're at 6 to 8 weeks on those products. Lead times, overall, we're somewhere 4 to 8 weeks in North America, about 3 to 4 weeks in Asia-Pacific with 8 weeks of -- at our networking facility.

I'm showing no further questions in the queue at this time. Mr. Alder, I'd like to turn the conference back to you for any closing remarks.

Okay. I'd like to thank everybody for joining us today. We appreciate the questions. If you have follow-up questions, feel free to call myself. Todd is also ready to go with questions. And we'll look forward to meeting you again next quarter. Thank you, everyone.

Ladies and gentlemen, this concludes our conference for today. If you'd like to listen to a replay of today's conference, please dial 1 (800) 406-7325 or (303) 590-3030 and enter the access code of 4614159 followed by the pound sign. Thank you for your participation. You may now disconnect.