At this time, I would like to welcome everyone to the Ultra Clean Technology fourth quarter financial results conference call. (Operator Instructions) Joining us today is Mr. Jack Sexton, Chief Financial Officer, and Mr. Clarence Granger, Chairman and Chief Executive Officer. I will now turn the call over to Mr. Sexton. Sir, you may begin your conference.

Welcome to our fourth quarter financial results conference call. My name is Jack Sexton, Chief Financial of Ultra Clean Holdings and with me today is our Chairman and Chief Executive Officer, Clarence Granger. A few moments ago we issued a press release reporting financial results for the fourth quarter 2008. The press release can be accessed from the Investor Relations section of Ultra Clean’s website at uct.com. In addition, we have arranged for a taped replay of this call, which may be accessed by phone. This replay will be available approximately one hour after the call’s conclusion and will be accessible for two weeks. The dial-in access number for this replay is 800-642-1687 for domestic callers and 706-645-9291 for international dialers. The pass code is 82608074 for both domestic and international dialers. This call is also being webcast live with a web replay also available for 14 days from the Investor Relations section of our website at uct.com. Together with our recently issued press release, this conference call enables the company to comply with the SEC regulations for fair disclosure. Therefore, investors should accept the contents of this call as the company’s official guidance for the first quarter of fiscal 2009. Investors should note that only the CEO and CFO are authorized to provide company guidance. If at any time after this call we communicate any material changes in guidance, it is our intent that such updates will be done officially via public forum, such as a press release or publicly announced conference call. The matters that we discuss today include forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995 related to matters including our future financial performance, new product orders and shipments, consolidation of activities in the U.S. and expanded production at our China…

Semiconductor capital equipment demand declined even faster than anticipated in the fourth quarter of 2008 with end user demand now limited to next generation technology and maintenance purchases only. Our OEM customers are also focused on reworking their existing subsystem inventory whenever possible to fulfill their limited system orders. In this very challenging market environment, we are focused on decreasing our cost structure while meeting our customers outsourcing needs. Although we achieved our restated guidance for both revenue and non-GAAP EPS, we missed our original EPS guidance for the first time in four years. This miss was due primarily to under absorption of overhead in the declining market. In my commentary, I will focus on the actions we have taken and those we plan to take in order to streamline our operations and reduce costs. During the quarter, we continued to increase our non-semiconductor revenues in the flat panel, solar and medical device markets partially offsetting significantly lower revenues in semiconductor capital equipment. Total non-semi revenues increased by 5% to $19 million or 40% of total revenue in the quarter. We also increased the percentage of revenue from our China operations by two percentage points to 26% of total sales. Finally, we concluded a supply agreement with FEI Company to manage manufacturing services for their North American operations. We expect this agreement will generate incremental revenues of between $10 and $15 million in 2009 and between $20 and $30 million in 2010. I’ll now provide further details on these actions and accomplishments. Due to the severe industry decline and certain year end tax considerations, we accelerated our consolidation plans in the fourth quarter and transferred more U.S. based production to our Hayward, CA manufacturing facility. In conjunction with this, we closed our Portland, OR and Sacramento, CA manufacturing facilities and…

(Operator instructions) Your first question comes from Edwin Mok – Needham & Company. Edwin Mok – Needham & Company: Let me start with just a quick housekeeping, Jack. You talked about tax rate for 35%. I imagine with this guidance you expect losses for the next two quarters. Are you talking about a 35% tax benefit in the upcoming year?

Yes. A 35% tax benefit. Edwin Mok – Needham & Company: And that excludes the cash you're going to collect back from the tax refund I imagine, right?

Yes. That's purely a GAAP tax number. Effective tax rate, you're right, there will be losses in the upcoming quarter, as we've guided to, and we're expecting a tax benefit on those losses. Edwin Mok – Needham & Company: One question I have in terms of your property plan and equipment, I guess, it dropped quite a bit. Is this because of the site restructuring. Is that why it dropped from like $20 million and the end of December quarter to just $9 million in the past quarter?

Edwin, that's a good question. The impairment that we're speaking about is not just not impairment of intangible assets, but in fact we're impairing long lived assets, which include both the goodwill of about $34 million, some level of intangible asset reduction and also a level of fixed asset reductions in asset grouping. So what you see there is the impact of the impairment. Edwin Mok – Needham & Company: Then, Clarence, maybe on the business side a little bit, if we focus on non-semi, you mentioned that intuitive actually declined $1 million in last quarter? I'm curious, have you started shipping the flusher cart assembly in the last quarter? And I thought there's a 20% increase in dollar per system that you will be shipping intuitive. Can I ask why you declined $1 million? It looks like a pretty big number to me.

Sure, it's pretty simple. You're right we didn't ship the flusher carts in the fourth quarter, so we expect to start flusher cart shipments. They had a design issue that wasn't fully rectified in the fourth quarter, so the plan for initial shipments was delayed until the first quarter. We are now starting to ship those in volume and we expect reasonable shipments in volume in the first quarter, although they have seen a little bit of a slowdown, nothing compared to what we've seen in the rest of the industry. Edwin Mok – Needham & Company: Is it fair to say that you believe with the higher dollar per system that you might get improvement in that business in the first quarter?

We expect a slight increase in revenue in intuitive surgical in the first quarter and also for the full year. Edwin Mok – Needham & Company: And on the FEI project, $10 to $15 million it's a great piece of business that you won. Can you provide little more detail there? I understand you guys are basically going to take over some of the manufacturing in U.S. here. Maybe talk about what does that entice, what kind of end markets are those products selling into? And also when will you start to see actually borne shipment? Is it the first quarter or more like sometime in the first half?

So, as you're aware, some of the major products are scanning electron microscope and transmission electron microscopes. We will be doing all of the manufacturing in their North American operations for them, with the exception of the ion beam guns, which they consider proprietary. So they will provide us the ion beam guns as a subassembly. We will make them into a complete turnkey tool, fully tested that we will turn over to them. In terms of volume or revenue when we anticipate to start to see revenue, there will be a very small amount of revenue in Q1. But the system shipments are actually going to start in the latter part of Q2 and ramping to reasonable volume in pretty significant volume in Q3 and Q4. If you can see, we're talking about $10 to $15 million for the year. Their current run rate on these tools is about $5 to $6 million per quarter or in that range. And they're seeing very stable demand so they're one of our two customers that seem to have stable or even increasing demand. Edwin Mok – Needham & Company: For clarification, the $5 to $6 million is once you ramp up to [inaudible].

That is correct. Once we get to Q3 and Q4. Edwin Mok – Needham & Company: And then one last question, just on this $20 to $28 million guidance, can I get some clarification what kind of margins are you guys assuming on that to come to that earnings range? And the second thing is, looks like [inaudible] quite a bit. Do you think that in the coming year, does that guidance based on the assumption that semi capital will be less than half in the coming quarter or how do we look at that?

Edwin, the mid-point of the range of the margin we are expecting is minus 9% on those very, very low volumes and that's just some of the fixed costs which we cannot absorb on such low volume. In terms of the product mix, we expect the non-semi to continue to grow as a percentage of the total. We really haven't guided specifically how much that will be, but it will be in, let's say, several percentage points north of the 40% we ran in Q4.

Edwin, this is Clarence. Just to follow up to that, you implied that we're seeing pretty significant drop in semi greater than 50%. And, yes, that is true from last quarter to this quarter we're seeing a very significant drop off, all from our customers. We haven't lost any market share. This is just simply a function of end user demand. To some extent some of our customers are having us rework some of the systems they have in inventory. We do get higher margins on the stuff where we do rework, but the total revenue is lower. And so, at least for this quarter, we think our customers are going to burn up the rest of their inventory and hopefully start to get the effects of some at least slightly better semiconductor demands. Some of our customers have projected revenue for the year to decline between 35% and 50%. Frankly, right now, that would look real good.

The next question comes from Jenny Noone – JP Morgan. Jenny Noone – JP Morgan: How much revenue in the fourth quarter came from gas panel versus non-gas subsystems?

The split of non-gas versus gas is basically 47% non-gas, 53% gas. Excuse me, I've got that reversed, 53% non-GAAP, 47% GAAP. Jenny Noone – JP Morgan: Okay. Just on your cash flows, despite the downturn, do you think you can still cut costs further to remain cash flow positive throughout 2009? And if not, what kind of quarterly cash burn rate are you comfortable with?

As we indicated, we expect to decrease our cash breakeven, so to be neutral from an operating standpoint on cash at $35 million in revenues per quarter. So from an operating standpoint, we expect a loss of cash in Q1, which will assume will be more than fully offset by the $6.5 million we expect to bring in as a part of our tax refund.

We also, Jenny, just so you know, one of the things that historically happens in our industry is in good times you tend to build up an inventory because your customers are demanding more product from you. And as a consequence your inventory builds up. We still have $40 million worth of inventory. In lean times what happens is we gradually burn down that inventory and turn that into cash. So I would expect over the next year to turn at least $10 million of that inventory that we have into cash. My expectation is that would offset any reductions we have for the year.

Jenny, let me remind you of the non-cash charges we have inherent in our P&O, which is currently about $2.4 million. So you've got to keep that in mind when you’re translating from a GAAP-based loss to a cash-based loss. And assuming this continues to be a tough year for all of 2009, which seems highly likely, then we would get another fairly significant tax refund in the first quarter of 2010. Jenny Noone – JP Morgan: Okay. So for 2009 you'll have $10 million from your inventories to work down, then an additional $6 million in tax refunds, at least that much.

That's roughly our expectation. Jenny Noone – JP Morgan: Okay. Just for 2009, can you remind me how much total in revenue will come from your new mandates? And just kind of what the big pieces are? There's FEI, Intuitive Surgical, is there any others that we haven't discussed yet that maybe you talked about on previous calls?

Those are the ones that are generating revenue right now. There are several others that we won that are associated almost exclusively with the semiconductor industry and also with the solar industry. But unfortunately, virtually all of those, even though we're shipping some of them, the revenues associated with them right now is extremely low. So the ones, as you said, with the medical and FEI are actually, those customers are still actually shipping at the same levels or actually even growing a little bit. Jenny Noone – JP Morgan: Okay. What about the photon dynamics?

Yes. That one's growing also. But again, the flat panel portion of the market is slowing down dramatically. But we've been selected on couple of new products that we previously mentioned there and we are shipping those. Jenny Noone – JP Morgan: Okay. Will any of these guys be greater than 10% customers, do you think?

Well, obviously, Intuitive Surgical is greater than the 10% customer. FEI at our current projected rate will be right around a 10% customer.

Yes. By the time we hit fourth quarter they'll be easily in that 10% customer list.

Our next question comes from John Nelson – State of Wisconsin Investment Board. John Nelson – State of Wisconsin Investment Board: Can you share with us anything significant going on with your competition in the semi-cap equipment spaces that you compete in?

I certainly wouldn't want to talk name-by-name, but what our customers have told us several of our major customers have lists of suppliers that they consider to be at risk. And we have been specifically told by all of our customers that we are not on that at-risk supplier list. And we've been led to believe that some of our competitors might be, which we believe will ultimately lead to our capturing some additional market share. John Nelson – State of Wisconsin Investment Board: Okay. And the other thing is, I wonder if you could just give us your opinions on what kind of signs that you'll be looking for in the semi-cap equipment industry that may signal a bottom?

I guess the biggest thing that's going to be a bottom to me is when my customers stop consuming. I think we'll hit a bottom when my customers run out of inventory. They don't have huge amounts of our inventory because everything we build is customized. But when they get cancellations at the last minute, two or three weeks before they're scheduled to ship their tool is when we ship our subsystem to them. And if they get cancellations inside that two or three week window, then they have a subsystem that they have no customer for. And right now, they're still sending those back to us, and we are reworking them into other usable subsystems for them. And we charge them for that and we make a pretty good margin on that. But the fact that we're still receiving some of those indicates to me that my customers are still getting cancellations. And once they stop getting cancellations is when we'll start to see things level out and eventually go back up.

Our next question comes from Adam Meisel – Aquifer. Adam Meisel – Aquifer Capital: A couple of quick questions, what is the bottom level of semi-cap equipment revenue that you can imagine at a trough here? I would keep moving down, but you said we're sort of at new technology and maintenance. Is that what we're looking at in Q1 in your guidance? Is that sort of a bottom, or is there more to go in terms of wringing out whatever's happening in the industry?

Well there can't be too much more to go. If you think of it, we're talking about, say, mid-range $24 million. Of that, you can assume roughly 40% is outside the gas semiconductor capital equipment industry. So 60% of $25 million is $15 million. That doesn't leave much further down to go. At the peak, we were doing roughly $100 million a quarter in the semiconductor capital equipment industry. So we're now down to 15% of the peak levels in semiconductor capital equipment. Virtually all of the stuff that we're getting now is not for capacity buys. So virtually all the orders we're getting, as we mentioned, are either new technology buys or spares support. So we've got to be close to the bottom. Adam Meisel – Aquifer Capital: And do you have a sense of how long that can stay at that level in terms of equipment wearing out, people needing to make changes? Can you say that for a quarter, for a year, for two, what sort of is realistic, given these plants are still running and producing?

Adam, it’s Clarence again. Well obviously, we're in unprecedented territory, right? So nobody's ever seen anything this bad and several of our customers aren't even making projections. But the ones that are making projections, the worst I've heard is 50% down year-over-year. Frankly we're down far more than 50%. Just for ballpark numbers, we did $266 million in revenue last year. Excluding the Intuitive Surgical or whatever, you just take half of that, it would be $135 million, add on the FEI it'd be another $15 million. So we should be closer to $140 million, $150 million, which would be at least $35 million a quarter. That's why we're targeting breakeven at $35 million a quarter. That's kind of where we think is the low end, other than an abnormal dip. Adam Meisel – Aquifer Capital: And at that $35 million a quarter level, what type of gross margin can you run at?

We're still in the low ranges at $35 million, Adam we're in the 5% gross margin range once we wring out the costs. But that being said, we've got our OpEx down and when you take out the $2.4 million or so in non-cash charges, we're basically even from the standpoint of tax on a pre-tax basis. That's not incorporating any tax benefit.

And frankly right now, that's what we're focused on, Adam. Given the nature of the industry, everything's about cash right now, and we want to make sure that we're at cash neutral that in worst case cash positive ideally. Adam Meisel – Aquifer Capital: And the good news that is getting done here, I presume, is when there’s a turnaround our margins how quickly do they expand on the upside.

Good point, Adam. Once we get this lien and certainly getting down to a position where we can breakeven at $35 million, the incremental revenue on the upside falls through at very high levels. So in the mid to high 20s is what we’d expect that revenue to fall through at into operating profit. Adam Meisel – Aquifer Capital: Last question, Clarence, as you have conversations about new mandates, are there in the pipeline more of the intuitives and FEIs of the world or are you really building backlog of semiconductor guys who eventually will produce a lot of revenue but we’re beholding to the same cycle, and how do you balance that and where do you see things coming over the next few quarters?

I wish I could say there was another FEI in the pipeline we would love to have that happen. We’ve been working on FEI for seven or eight months, so that isn’t a quick turn and it was a very fortunate one for us in that the person running operations at FEI had previous experience with UCT when he was at [AMAT]. In terms of the new opportunities, many of them are in the solar area. But, again, right now that is pretty much dead because people can’t get funding. Once that turns around, I think we’ll see new companies that we’re talking about. And then a lot of the rest of the stuff is new opportunities, additional opportunities with existing customers as they outsource more activity. For example, Applied Materials is in the process of significantly transitioning to Singapore, and as they do so, they are looking to outsource more larger modules and we would anticipate to be a beneficiary of this in the forthcoming year.

(Operator Instructions) Our next question is a follow-up from Edwin Mok – Needham & Company. Edwin Mok – Needham & Company: Clarence, just a quick question on in terms of you mentioned this whole opportunity and I guess a two part question, first is obviously you guys have strong relationship with Applied and it looks like your core revenue actually grew quite a bit in December quarter. Am I correct there? The number I have is $3.7 million just let me know if that’s correct. And the second thing is how do you view that business going through first half ’09, kind of talk about a slowdown in the contracts there. Have you guys started to see that, and do you expect that business to grow in 2009?

Lots of questions there, Edwin. First of all, in the 2008 number, Jack’s got that number.

The fourth quarter number you calculated is correct, Edwin, $3.7 million in the fourth quarter.

And what happened there is we benefited from a significant increase in the gas abatement revenue that we started to receive. The downside on that is it is almost completely dried up in Q1 of ’09, but we would expect that to become a significant number once those solar opportunities again move forward. Does that answer all your questions? Edwin Mok – Needham & Company: Can I ask you, how much was gas abatement roughly in terms of revenue was it 50/50?

No. It was a very high percentage was gas abatement, 90% was gas abatement.

But that won’t be our normal mix. That just happened to be the mix in that quarter. Edwin Mok – Needham & Company: Right. Then maybe that’s the better question, actually, is in terms of normal mix rate, what is the mix of gas abatement versus the [deliver]?

Edwin, the best way to talk about this is to look at in actual SunFab line. So, on a SunFab line you’ve got 28 process modules. On each process module you’ve got a gas delivery system and a gas abatement system and the gas abatement system is slightly more expensive than the gas delivery system but not much. So it’s pretty close to a 50/50, a little bit leaning towards the gas abatement, and we think there’s a lot of additional opportunities for us to pick up more work on each of these solar process modules.

We have no more questions in queue.

Thanks everyone for joining the call and we look forward to seeing you at the next opportunity. Have a great afternoon.

This concludes our conference call for today. You may now disconnect your line.