Good afternoon. My name is Letasha, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter Mid-Quarter Update Conference call. [Operator Instructions] Joining us today is Mr. Casey Eichler, Chief Financial Officer; and Mr. Clarence Granger, Chairman and Chief Executive Officer. I will now turn the call over to Mr. Eichler. Sir, begin your conference.

Thank you, and welcome to our third quarter mid-quarter update conference call. I'm Casey Eichler, Ultra Clean's Chief Financial Officer, and with me today is Clarence Granger, Ultra Clean's Chairman and Chief Executive Officer. A few moments ago, we issued a press release providing a mid-quarter update for our third quarter ending September 28, 2012. The press release can be accessed from the Investor Relations section of Ultra Clean's website, along with the information for the tape delay and replay of the live webcast at uct.com. Together with our recent issued press release, this conference call enables the company to comply with the SEC Regulation for Fair Disclosure. Therefore, investors should accept the contents of this call as the company's official updated guidance for the third quarter of fiscal 2012. 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 change 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 we are about to 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 and industry growth. Investors are cautioned that forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission. The company disclaims any obligation to publicly update or revise any such forward-looking statements or to reflect events or circumstances that occur after this call. Now, here's Clarence with the third quarter update.

Thanks, Casey. In our second quarter earnings conference call, based upon input from customers, it appeared likely that there would be a decline in demand within the semiconductor capital equipment industry in the second half of 2012. At the time, we anticipated a decline of revenue in Q3 of approximately 20% on a combined basis and stated that almost all of the revenue decline would occur on the UCT side of our business, with AIT's business remaining relatively flat. Our combined revenue guidance for the third quarter was $107 million to $112 million, and our earnings guidance was $0.10 to $0.14. Today, we updated our revenue guidance for the third quarter to range between $96 million and $101 million. While we are disappointed that the decline is larger than originally anticipated, it accurately reflects our current view of the semiconductor capital equipment market and is consistent with the public statements of our customers. In addition, we also announced today that one of our larger semiconductor equipment customers has decided to insource a portion of their gas panel business in the future. While this decision will not impact the third quarter and will not have a material impact on our revenue in the second half of 2012, it could have a negative quarterly impact of 7% to 9% on total revenue by the end of 2013. This news and the current market environment create challenges for us in the short term, but we are prepared to address these challenges as we have done in the past. We have demonstrated the ability to scale our business to meet current market requirements, while investing in developing new business opportunities with existing and new customers. Recently, we have talked about our opportunity with the next generation surgical robot from Intuitive Surgical, which provide significant revenue upside in 2013 as it continues to gain acceptance in the market. We are also seeing improvement in the high-brightness LED market and see additional opportunities in that market for UCT. Separately, we announced that we had been awarded new business from the Nano Surfaces division of Bruker Corporation. We continue to work on several new business opportunities that we will be talking about later this year. Finally, the merger with Advanced Integration Technologies is on track and provides additional leverage for business opportunities with new and existing customers, which we expect to provide exciting growth opportunities in 2013 and beyond. In summary, while we are currently seeing industry-wide reductions in demand during Q3, we are very familiar with this type of slowdown and we'll take appropriate actions to deal with it quickly. We continue to be excited about the value creation opportunity for UCT and are focused on navigating the short-term business environment while building the foundation for our long-term success. With that, operator, we would now like to open the call for questions.

[Operator Instructions] And your first question comes from the line of Krishna Shankar.

Yes, this is Krishna Shanker with Roth Capital Partners. Clarence and Casey, is the revenue weakness here in Q3 attributable to just one of your larger equipment customer, or is this broad-based weakness across several semi-equipment customers?

It's virtually all of our semi-equipment customers, Krishna. This is Clarence. AIT actually has some semi customers that haven't been affected as much. But on the UCT side, our major front-end semiconductor capital equipment customers are all seeing a very significant decline, greater decline than we had originally projected.

And you also say in the press release that you expect your orders to sort of flatten out or bottom in Q4.

Yes, that's -- again, this is based on guidance that we’ve received from our customers. They are optimistic that we are getting close to a bottom, and that we should start to see some recovery in Q4, although it's difficult to quantify at this point in time.

And the partial insourcing at one of your major customer, the 7% to 9% revenue decline, is that sort of for all of calendar year 2013, or by Q4 2013, you will see a revenue decline of 7% to 9%?

It's by Q4. I think the best way is to assume that it's probably a linear transition between now and Q4 of next year so that's our expectation. And obviously, that 7% to 9% of that particular product family -- I mean, that -- from -- through that particular product family, our goal will be to bring in new revenue from new business opportunities to offset that.

And your next question comes from the line of Edwin Mok.

So first question I have is I think I may be reading too much into your press release, but you said that you could be flattish or flattening in the fourth quarter, but count the timing and manager’s harder to gauge. You sounded more cautious than for some of your customers talking about which is 4Q recovery. Is it just incrementally that things has gotten worse over the last few weeks since you guys did your earnings call, or is there something else that’s gone?

Yes, Edwin, again this is Clarence. No, nothings gotten -- well, things have declined since our last earnings call. That's why we're giving this update. But our guidance is not intended to be significantly different from what you're hearing from our customers. It should be a fairly direct reflection of what they're seeing. So if they do see business improving in Q4, then we would see it improving in Q4. We actually precede them by a few weeks because we have to supply them subsystems before they ship their systems. So if it does improve for them in Q4, it will improve for us in Q4.

Maybe asked differently, does your customer sounds a little bit more cautious in terms of placing orders at this juncture because of maybe either uncertainty of their end-customer ordering, or uncertainty in some of the build plans from the chip makers?

I don't think they've gotten incrementally worse in the last 1.5 weeks, but they did get worse from the time of our last earnings call.

Great, that was very helpful. And then on the customer that has decided to do some insourcing, sorry I got cut off while you started that commentary. So if you had talked about on a previous answer, I’m sorry about that. But just curious if it's possible for you to disclose the customer, and was that to do with some of the M&A activity that the customer is doing?

I don't know if it's related to M&A that the customer is doing. I do not believe so. I can't name the customer at this time but we will discuss it more fully in our quarterly call.

But is it fair to say that, given that it will impact your revenue by 7% to 9%? After that impact, is that customer still a large customer of yours?

Yes.

So it's fair to say it's probably one of your top 2 customers that you guys have highlighted previously, right? So that's very...

I think we’ve help you enough, Edwin.

One last question I have, right? I guess it's more longer term, right? Obviously discussion about insourcing is always a little bit concerning for investor, especially your core technology which is gas panel manufacturing, just curious why this customer has in-house gas panel production capability. And that do you see this as a trend that could be starting at other customers at all?

Well, obviously, that's a concern of ours. We haven't seen this at any other customer, so I don't think we're looking at a long-term trend here. I think this particular customer believes they have some unique capabilities that enable them to do this in certain specific areas. But I do not believe it's a long-term trend.

I see. Is it -- is this customer building up new capability in gas panel production, or is it something that they already had? And do you see that as maybe causes the issue that -- maybe one of the driver for them to do that?

They've had this capability for a while; they're expanding it a little bit and obviously, cost is always a factor. But also, I think, the general industry slowdown is probably a factor as well.

I see, great. One last question and I’ll go away. So in terms of kind of the model beyond the change in the revenue outlook, right, in terms of your cost structure, any kind of change that you guys planning, more shutdown for the second half or anything like that?

Well, as Clarence -- this is Casey. As Clarence commented, we've faced kind of a general slowdown like this many times in the past. And there's always, as you know, Edwin, a series of cost cutting measures you go through to try to right-size your business for the downturn, knowing, of course, that things are going to come back. And so I wouldn't say there's anything unusual that we're doing this quarter other than the normal type of things that we do when we see a slowdown. The only thing that, from a cost perspective, which I didn't guide to on our earnings call, nor am I changing that approach here, is, as you know, because of AIT and the acquisition, we'll have a series of onetime charges, et cetera, that we’ll call out in our call, but that's really separate from the market environment.

[Operator Instructions] And your next question comes from the line of Dick Ryan.

Say, just a clarification. I wasn't sure if I got your answer or not. But on the decline of business, is that still solely on the UCT side or did you say it was -- you were starting to see it on AIT business?

Yes, Dick, this is Clarence. Actually, we did not answer that question, but it is almost exclusively on the UCT side of the business that we're seeing the decline. AIT has some customers that are -- where they're involved in some very new generation products that are not experiencing that same level of decline and so they're not being impacted as severely.

Okay. And on the loss of business, was this a contract that was coming up for renewal where the decision was made or...

This was a contract that was coming up for renewal. So yes, that's...

Does this impact your ability? One of the strategies is to kind of move upstream and do more in subsystems. Does this kind of impact that effort at all?

No, it does not. We have -- with this customer, we have other larger subsystem business as well.

Okay. And one last one on the -- you said the linearity of this business phasing out, is it just -- can you kind of talk about 2013, how that might impact the quarters?

Well, it's hard for -- we're still having dialogue related to that. But as we mentioned in the prepared remarks, we don't expect it to have much of an impact in the third and fourth quarter of 2012 and so you could probably estimate that the decline is going to occur linearly throughout 2013.

And we have no further questions at this time, sir.

All right. Well, I appreciated everybody dialing in today, and look forward to talking to everybody out in the future. Thank you very much.

This concludes today's call. You may now disconnect.