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2014 IPC APEX EXPO EMC Management Council
 

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    2014 IPC APEX EXPO EMC Management Council 2014 IPC APEX EXPO EMC Management Council Presentation Transcript

    • THE EMS SOLUTION 2.0: HOW & WHY THE BUSINESS MODEL IS CHANGING Eric Miscoll (817) 251-4929 Eric@CharlieBarnhart.com IPC EMS MANAGEMENT COUNCIL MEETING 2014
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” - Charles Darwin 2
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing TRENDS IMPACTING INDUSTRY 3
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing TRENDS IMPACTING EMS INDUSTRY 1. Demand Cycle has Shortened 2. Risk in the Supply-Chain at Unprecedented Levels 3. EMS/ODM Prices Are Converging 4. Costs in China Are Rising Far Faster Than Predicted 5. Regionalization Is Gaining Momentum 6. Global Capacity Utilization Is Increasing 7. Margin deterioration across sectors 8. Slower Rate of Growth of Electronics Outsourcing 9. Insourcing by OEMs 10. OEMs are reclaiming the supply chain 11. EMS Are Trying to Diversify Their Revenue Stream 4
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing ODM SHIFT • Acer & ASUSTeK: – Computer OEM • HTC: – Smartphone OEM • Inventec & Quanta: – Servers • Pegatron: – Consumer electronics (e.g., tablets) • Wistron: – Cloud computing, after-sales service, medical equipment, and recycling “For the sake of increasing margins, people are eyeing diversification and vertical integration and looking for new cornerstones in this competitive landscape.” - Elton Yang, CFO, Quanta 5
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing Manufacturing costs in China continue to rise with the potential for much larger increases should labor pressures continue to escalate or should the Yuan be allowed to float against global currencies. ESCALATING COSTS IN CHINA 6
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing HISTORICAL LABOR RATES PCBA CY2009 CY2010 CY2011 CY2012 CY2013 Australia $46.50 $42.70 $42.40 $43.20 $43.32 Brazil $26.45 $30.23 $31.00 $31.45 $32.32 Canada $49.12 $41.78 $42.15 $44.17 $43.67 China $10.15 $11.31 $12.45 $13.38 $17.26 E. Europe € $47.30 $50.10 $51.00 $53.76 $55.57 E. Europe non € $26.13 $30.02 $30.40 $32.23 $33.75 India $9.21 $9.91 $9.95 $10.37 $10.79 Israel $35.97 $34.81 $34.89 $34.83 $37.43 Malaysia * * $16.29 $16.88 $17.26 Mexico - Border * * $16.80 $17.51 $18.28 Mexico - Central * * $11.32 $11.99 $12.50 Philippines * * * * $8.98 Singapore $25.15 $26.10 $28.15 $29.20 $29.96 Thailand * * * $19.39 $20.08 Turkey * * * * $16.13 United Kingdom $93.63 $93.11 $92.75 $95.49 $95.49 USA $37.96 $39.30 $39.40 $39.61 $39.78 Vietnam $8.75 $8.80 $8.95 $9.36 $10.11 W. Europe $89.37 $92.16 $90.10 $92.99 $95.81 Historical Cost of Labor/PCBA (EMS only) 7
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing With the exception of large low-mix/high volume projects it is now cheaper, on a landed- cost basis, to utilize low-cost regional versus cross-hemispheric solutions. RETURN TO REGIONALIZATION (Build in the region for the region) 8
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing EXAMPLES OF REGIONALIZATION 9
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing MARGIN DETERIORATION Sector <1$ $1 $5 $10 $25 $50 $100 $250 $500 $750 $1K Mil/Aero -7.0% -5.0% -3.0% -3.0% -2.0% -1.0% -1.5% -1.5% -1.0% -1.0% -1.0% Ind/Med/Auto -4.0% -3.0% -2.0% -2.0% -1.0% -1.0% -0.5% -0.5% 0.0% 0.0% 0.0% Com/Comp/Cons -5.0% -3.0% -1.0% -1.0% -0.5% -0.5% -0.5% 0.0% 0.0% 0.0% -0.2% 10
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing INSOURCING BY OEMS 11
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing BEYOND OUTSOURCING ROADMAP 12
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing IMPACT OF TRENDS 13
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing WHAT DOES THIS MEAN FOR EMS? • Change is already happening • Margins will not return to what they were • If you are not already seeing this or planning for the future, then you better GET BUSY! • Innovative thinking is required 14
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing QUESTION FOR EMS • What percentage of your revenue stream have you converted from commodity services? – E.g., PCBA & Box Build 15
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing EMS THAT ARE CHANGING • Lightspeed MFG: Repair services • CTS Corporation: Components & Sensors • Tepcomp: LED modules • Stadium Group: Displays OEM • Circuitronics Inc.: Prototyping • Foxconn: Components, retail outlets, etc. • Celestica: Supply Chain as a Service • Nam Tai: Property development and mgmt 16
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing OEM-EMS RELATIONSHIP • Change by one party in a relationship impacts the other party, whether desired or not. (e.g., child, partner, supplier) • So as EMS diversify their revenue stream, OEMs will be impacted. – Fewer external options – Higher prices – Lower leverage 17
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing CBA’S ADVICE 18
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing WHAT TO DO? 1. Improve your bottom line 2. Fire or renegotiate unprofitable customers 3. Make “lean” part of your fabric 4. If small (<$100M) stay small 5. Innovate 6. Diversify revenue stream 19
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing MANAGEMENT METRICS • Revenue per Employee – $300K-$350K • Customer Base – Top 5 more than 50%of Revenue – Bottom 5 not less than 5% of Revenue – No customer over 25% of Revenue (>2 years) – No customer under .25% of Revenue 20
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing CLOSING THOUGHT “It is not necessary to change. Survival is not mandatory.” - W. Edwards Deming 21
    • © 2013 Charlie Barnhart & Associates LLC Insights into the world of global electronics manufacturing Thank You. Questions? 22
    • Achieving Operational Excellence for Electronics Manufacturers Speaker: Matthew Littlefield President and Principal Analyst, LNS Research
    • Agenda • About LNS Research • Industry Drivers and Challenges • Operational Excellence Journeys • Operational Excellence Goals & Metrics • Accelerating Success – People • Accelerating Success – Process • Accelerating Success – Technology • Summary / Recommendations • Q&A ©LNS Research 2014
    • ©LNS Research 2014 Manufacturing industry research firm that helps clients innovate and achieve Operational Excellence… People, Processes & Technology Research & Consulting Areas:  Enterprise Quality  Sustainability / Energy Management  Manufacturing Operations Management Differentiators:  Experienced analysts  Primary research – large data sets  Interactive analysis & data visualizations  Deep industry executive contacts  Social media activity About LNS Research - www.lnsresearch.com
    • Global Executive Council  Starbucks – VP of Global Quality and Regulatory Affairs  Onyx Pharmaceutical – VP of Global Quality  Whirlpool – Director of Quality  Lindt Chocolate – VP R&D and Quality  Oriflame – Corporate Quality Lead  Champion Technology – VP Quality and EH&S  Gurwitch Products – VP Research and Quality  Newell Rubbermaid – Director of Quality  Hygia Health Service – VP of Operations  Discount Tire – VP of Quality  Daikin McQuay – Director, Corporate Quality  Bio-Rad Laboratories – Director of Quality Assurance  Owens-Illinois – VP of Global Quality  Harley-Davidson – Director Corporate Quality  Alcoa – Director Corporate Quality  Bridgelux – VP Corporate Quality  Plexus – VP Corporate Quality  Fresenius – VP Corporate Quality  Alent – VP Corporate Quality  Corbian – VP Quality  Kellogs – VP Quality
    • Research Model ©LNS Research 2014
    • Industry Drivers and Challenges ©LNS Research 2013
    • Electronics Industry Overview •Area of Focus •Component Manufacturing, Printed Circuit Boards, and Final Assembly •Competitive Landscape •Global •All sizes: multi-billion dollar companies to small job shops •Market leaders include: Flextronics, Celestica, Sanmina-SCL, Jabil, and Plexus •Customers •Generally large, powerful, and demanding •Regulated and unregulated industries •Medical Device, Aerospace and Defense, Industrial Equipment, etc. ©LNS Research 2012
    • Major Industry Challenges •Shrinking Operating Margins •High competition/market concentration •Pressures for large and small players in U.S., Europe, Mexico, and Asia •Balancing Cost and quality •Complex Supply Chains •Keeping operating margins low •Issues with traceability and quality •Disparate compliance standards •Service and Warranty Management •Quality and traceability issues surface as higher warranty reserves and increased use of service ©LNS Research 2012
    • Major Industry Challenges •Short Product Lifecycles •Rapidly changing consumer demands •Collaboration and integration across the value chain: MOM, CRM, SCM, PLM, and EH&S •Uncertain Demand •Cyclical and economic volatility •Changing consumer tastes/preferences •Sustainability/Regulatory Requirements •Tightening laws/regulations in electronics • Companies are beginning to consider the product lifecycle beyond disposal • Example: EU passed REACH and RoHS to protect environment ©LNS Research 2012
    • Research Demographics 300+ Respondents to LNS Research Manufacturing Survey, 500+ Respondents to Quality Survey ©LNS Research 2014
    • Top Objectives & Challenges ©LNS Research 2014 • The top objectives are customer focused • The top challenges are people & systems related
    • Operational Excellence Journeys ©LNS Research 2014
    • Operational Excellence Journeys
    • Operational Excellence Goals & Metrics ©LNS Research 2013
    • Goals & Metrics - Alignment & Deployment
    • Goals & Metrics - Alignment & Deployment Process 1.) Understand and Articulate Strategy: have a clear and universally understood manufacturing strategy that is in support of the corporate business strategy 2.) Translate Strategy into Specific Goals: turn that strategy into specific goals for business groups and associated supply chains, as well as plants, units, and production lines 3.) Map Goals and Specific Measures for Success: use a cross- functional team to map each detailed translation across the enterprise 4.) Determine Key Performance Indicators: develop a set of manufacturing KPIs to measure progress toward your goals 5.) Establish Communication Procedures for KPIs: make sure the right information is getting to the right people in a timely manner 6.) Set Processes for How to Act on KPI Information: determine best practices for individuals from the shop to top floor to interact with KPIs 7.) Match Performance Incentives to Aligned Goals: reinforce the effectiveness of measuring KPIs by incentivizing progress
    • Categories/Sets of Operational Excellence Metrics
    • Top 28 Manufacturing KPIs within Categories/Sets Improving Customer Experience & Responsiveness: 1. On-Time Delivery to Commit 2. Manufacturing Cycle Time 3. Time to Make Changeovers Improving Quality: 4. Yield 5. Customer Rejects/Return Material Authorizations/Returns 6. Supplier’s Quality Incoming Improving Efficiency: 7. Throughput 8. Capacity Utilization 9. Overall Equipment Effectiveness (OEE) 10. Schedule or Production Attainment Reducing Inventory: 11. WIP Inventory/Turns Ensuring Compliance: 12. Reportable Health and Safety Incidents 13. Reportable Environmental Incidents 14. Number of Non-Compliance Events / Year Reducing Maintenance: 15. Percentage Planned vs. Emergency Maintenance Work Orders 16. Downtime in Proportion to Operating Time Increasing Flexibility & Innovation: 17. Rate of New Product Introduction 18. Engineering Change Order Cycle Time Improve Financial Performance: 19. Total Manufacturing Cost per Unit Excluding Materials 20. Manufacturing Cost as a Percentage of Revenue 21. Net Operating Profit 22. Productivity in Revenue per Employee 23. Average Unit Contribution Margin 24. Return on Assets/Return on Net Assets 25. Energy Cost per Unit 26. Cash-to-Cash Cycle Time 27. EBITDA 28. Customer Fill Rate/On-Time delivery/Perfect Order Percentage
    • Selecting and Implementing the Right Operational Excellence Metrics • Benchmark • Decide / Commit • Choose metrics that directly relate to SMART goals • Ensure that the metrics can be reliably and efficiently produced • Create team-based and role- based metrics • Most people can only optimize their own time/activities around 5-6 metrics • Plan, Do, Check, Act • Reward
    • Accelerating Success - People ©LNS Research 2014
    • Accelerating Success – People: Building Organizational Capabilities
    • Knowledge Management Issues & Opportunities: People, Process & Technology People: • Aging Workforce (10,000 retiring per day in US – Pew Research Center) • Knowledge Capture • Knowledge Transfer • Training & Certification • JIT Information Access • Leveraging SMEs • Team, Partner and Customer Collaboration Process & Technology:
    • Accelerating Success - Process ©LNS Research 2013
    • Accelerating Success - Process
    • Building Manufacturing Process Capabilities • Most companies are using combinations of 2 to 4 programs • Choose the most important programs by industry and issues • Training, certification, widespread engagement, collaboration
    • Accelerating Success - Technology
    • Architectural Approach to Quality Software ©LNS Research 2013
    • Accelerating Success – Technology
    • Accelerating Success – MOM Software
    • Accelerating Success – Real-Time Performance
    • Role-Based OI / EMI Capabilities
    • OI / EMI – Dashboards & Analytics • Functional expectations & opportunities are growing
    • Big Data Analytics • Big Data Analytics is about harnessing a collection of massive amounts of structured and unstructured data from across the enterprise • Exponential explosion of manufacturing data coming from connected devices / IoT – estimated 13.5 Billion manufacturing devices connected by 2022 (Cisco) • Previously unknown interrelationships between data will come to light with new analytics technologies like Hadoop
    • Big Data – Manufacturing Application Examples • Enabling better product/production forecasts that tie to consumer trends • Improving interactions with suppliers based on dynamic sourcing needs • Providing faster customer service and support - harnessing knowledge • Better understanding customer requirements for new products • Better correlations of performance across multiple plants • Better understanding plant performance across multiple metrics • Performing predictive modeling of manufacturing data • Enabling real-time alerts based on analyzing manufacturing data • Correlating manufacturing and business performance information together • Mining combinations of manufacturing and other enterprise data to uncover new improvement and business opportunities
    • Mobile Technologies • Mobile devices and applications have removed the restrictions of required on-site access, enabling workers to access the performance and decision support information applicable to their respective role, including: • Executives • Plant Managers/Supervisors • Plant Operators • Technical/Quality Personnel • Can create an entirely paperless manufacturing environment • Allows information to be shared between suppliers and customers via similar mobile capabilities • 18% currently have Mobile Operations Visualization & Management capabilities • 14% have Mobile Operations Visualization & Management capabilities planned within 1 Year
    • Cloud Adoption for MOM Applications • Cloud / SAAS Adoption Rates More Than Doubling in Manufacturer’s Future Plans • 90% of MOM Vendors Either Have or Are Developing Cloud-based Solutions
    • Cloud Benefits for Manufacturers • Benefits of Cloud versus On-Premise Solutions • Proven in IT applications • Requires less internal IT resources • Automatic software updates • Unlimited capacity upgrades • Built-in disaster recovery • Universal remote access • Easier to aggregate information across plants • Little to no capital expenditures • Lower lifecycle / maintenance costs
    • Top Selection Criteria for MOM Software • Having Sufficient Functionality is Paramount • Cost & Ease of Integration with Existing Applications Come Next
    • Case Studies ©LNS Research 2013
    • • Before Software Supporting Operational Excellence • Heavy documentation requirements = management of (literally) tons of data and paper. • Cumbersome and time-consuming work flows to ensure tracking • Reactionary approach to quality issues, struggles to meet ISO-9001 and AS-9100 requirements • Reliance on nearly 40 stand-along spreadsheets to track all company data but each was a silo of information, lots of redundancies Real-Life Example
    • • After Software Supporting Operational Excellence • Automated electronic workflows and electronic data management. • Efficient, non-redundant process flows • Improved productivity • Exceeding standards for traceability, document management and process controls • 25% cycle time reduction for audits • Eliminated manual processes and duplication of effort • Leaner operations • 32.5% reduction in scrap/waste Case Study: Real-Life Example
    • Market Leaders Create a Holistic SQM Strategy ©LNS Research 2013
    • Summary / Recommendations ©LNS Research 2013
    • Summary / Recommendations • Start or refine your Operational Excellence journey • Ensure alignment with strategy, goals, actions and metrics • Empower people with both team-based and role-based, real-time performance information • Build organizational capabilities for sustainable success • Implement the most important process / programs to accelerate progress • Over time, build a continuous improvement culture • Support process improvements and knowledge management with technology – in particular, MOM software integrated with information in Enterprise and Automation Systems • Investigate and experiment with new technologies – Cloud, Mobile, Big Data Analytics • The appropriate scope of your journey may be at the plant, line of business or enterprise level
    • Summary / Recommendations
    • Thank You!! For More Information - Contact: Matthew Littlefield Principal Analyst – LNS Research matthew.littlefield@lnsresearch.com
    • • Leading OEMs, Distributors, Suppliers & EMSs use SiliconExpert Daily • Our Electronic Component Database of over 250 million components powers our: o Comprehensive software tools o Integrated solutions o Professional services About Us
    • Reactive vs. Proactive Approaches to Obsolescence Management 250 Million+ Orderable Part Numbers Up to 42 Parametric values/product line Risk Analysis & Obsolescence Forecasting Algorithms developed with CALCE Environmental Data tracked: EU & China RoHS, REACH, WEEE compliance & Material Declarations Parametrically-derived cross-references for millions of parts Our Database
    • Identifying the Impacts of SEC Regulations in the Electronics Industry Conflict Minerals
    • • Defined by Dodd-Frank Act Section 1502(e)(4) • Tantalum, Tin, Tungsten, and Gold • A mineral is conflict free if it did not originate in the DRC or surrounding countries Definition of Conflict Minerals Environmental Team Access to this information is quickly becoming imperative as the first report is due on May 31, 2014 for the 2013 calendar year and then annually.
    • Conflict Minerals- Products Top 10 Products with 3TG Parts
    • SiliconExpert Research and Analysis Conflict Minerals Process • Determine the requirements for each supplier within the regulations • Determine due diligence responsibilities of each supplier/OEM • Establish communication with supplier • Determine documentation available and data collection procedures
    • Reactive vs. Proactive Approaches to Obsolescence ManagementSiliconExpert & Conflict Minerals Data Collection Most Up to Date Conflict Mineral Statuses -Over 1,000 suppliers All Documents & Templates -EICC, COC, Conflict Minerals Policy, Responsibility Report, History Search by Supplier or Smelter - Access to smelter & mining information * EICC stands for: Electronic IndustryCitizenship Coalition * COC stands for : certificate of compliance (company statement) Conflict Mineral Module
    • New Module: Conflict Minerals
    • Market Outlook Small & Medium EMS Companies Custer Consulting Group www.custerconsulting.com March 2014 20140303
    • Challenges Financial data on individual, small EMS companies typically not publicly available Markets can be very localized
    • Topics Global & U.S. Economy Electronic Equipment - World overview - Target Domestic Markets Active & Passive Components EMS/ODM Markets - Global - N America Summary & Forecasts
    • Business Conditions After a weak 1H’13 global business conditions improved in the second half of the year 2013 finished strong U.S. economy is currently expanding but there are signs of slower global growth Weaker domestic military market offset by continued growth in instrument & control sectors Encouraging Signs: - Electronic equipment shipments growing in all regions - Leading indicators are generally positive except for China. - Some re-shoring to N America 20140303
    • Global & U.S. Economies
    • Industrial Production – World % Change vs. One Year Earlier Britain + 1.8 Dec Czech Republic + 9.3 Dec France + 0.5 Dec Germany + 2.9 Dec Italy - 0.7 Dec Netherlands + 1.8 Dec Russia - 0.2 Jan Spain + 3.5 Dec Euro Area + 0.5 Dec Canada + 2.6 Nov USA + 2.9 Jan China + 9.7 Dec India - 0.6 Dec Malaysia + 4.8 Dec Singapore + 3.9 Jan S Korea + 2.6 Dec Taiwan - 1.8 Jan Thailand - 6.1 Dec Japan + 7.1 Dec www.economist.com + Eurostat 20140301
    • U.S. Industrial Production Index (2007=100) www.federalreserve.gov/releases/g17/table1_2.htm 60 65 70 75 80 85 90 95 100 105 110 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 7 1 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 IP 20140214
    • U.S. GDP Growth % Change vs. Prior Quarter (2005 $) -10 -8 -6 -4 -2 0 2 4 6 8 10 1/95 3/95 1/96 3/96 1/97 3/97 1/98 3/98 1/99 3/99 1/00 3/00 1/01 3/01 1/02 3/02 1/03 3/03 1/04 3/04 1/05 3/05 1/06 3/06 1/07 3/07 1/08 3/08 1/09 3/09 1/10 3/10 1/11 3/11 1/12 3/12 1/13 3/13 www.bea.gov/national/ 20131221
    • Purchasing Managers Indices (Leading Indicators)
    • Global "Purchasing Managers" Index Diffusion Index, >50 = Growth Markit Economics 30 35 40 45 50 55 60 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PMI 20140303
    • China "Purchasing Managers" Index Diffusion Index, >50 = Growth Markit Economics 20140303 40 45 50 55 60 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PMI
    • U.S "Purchasing Managers" Index ISM Diffusion Index, >50 = Growth ISM 30 35 40 45 50 55 60 65 70 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 PMI ISM Growth >50 20140303
    • PMI Leading Indicator as EMS Forecasting Tool
    • U.S PMI Leading Index vs N American EMS Shipments ISM & IPC 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI Leading Indicator EMS Shipments Zero Growth 20140303 3/12 Growth 1 year Lead
    • Business Cycles
    • Industry Dynamics
    • BUSINESS CYCLE Electronic Equipment, EMS/ODM Companies, Components, Materials & Capital Equipment -6 -4 -2 0 2 4 6 0 30 60 90 120 150 180 210 240 270 300 330 360 Electronic Equipment EMS/ODM Components Raw Materials Capital Equip Expansion ContractionTime -> 20130915 % Growth + - 0
    • U.S. Electronic Equipment, N. American PCBs, Small/Med EMS & PCB Process Equipment $ Shipment Growth20140222 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 PCB Elec Equip PCB Process Equipment Zero Growth Small/Med EMS 3/12 Rate of Change IPC, U.S. Dept of Census & Process Equipment Financial Reports
    • World Electronic Equipment Production
    • World Electronic Equipment Shipments by Region 2013 @ 2012 Exchange Rates Electronic Outlook 10/13 20% 15% 6% 52% 7% N America W Europe Japan Rest of Asia ROW Total Production: $2,002 Billion Final Assembly
    • World Electronic Equipment Production by Type @2012 Exchange Rates Electronic Outlook 10/2013 2012 TOTAL: $1,991 Billion 2.3% 22.0% 13.1% 7.5%26.4% 9.0% 10.1% 9.7% Business Communication Consumer Auto Computer Gov/Military Industrial Instrument 20130101
    • World Electronic Equipment Production By Type20140221 0 100 200 300 400 500 600 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Millions industr+instru gov/mil Computer & Peripherals automotive consumer Telecom/Datacom Business based upon some historical estimates +5.6%
    • Electronic Equipment Suppliers Composite of 141 Public Companies Revenue, Net Income & Inventory Computer 13, Internet 9, Storage 10, Communication 20, SEMI 20, Medical 23, Instruments 11, Military 6, Business & Office 3, Consumer 13, Automotive 11 20140221 -100 0 100 200 300 400 500 600 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory +5.6%
    • Electronic Equipment Suppliers Composite of 141 Public Companies Quarterly Revenue Growth Computer 13, Internet 9, Storage 10, Communication 20, SEMI 20, Medical 23, Instruments 11, Military 6, Business & Office 3 + Media tablets from all vendors, Consumer 13, Automotive 11 20140221 -20 -15 -10 -5 0 5 10 15 20 25 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 %Growth
    • Global Electronic Equipment Shipment Growth 12/12 & 3/12 Rate of Change 141 OEM company sales composite 20140221 0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1.30 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 RateofChange 12/12 3/12 0 Growth
    • Inventory/Sales Ratios Large Component Distributors, Semiconductor, EMS & OEM Companies Custer Consulting Group based upon company financials 20140222 0.15 0.25 0.35 0.45 0.55 0.65 0.75 0.85 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Semiconductor EMS OEM Component Distrib Ratio: Inventories/Sales
    • Regional Electronic Equipment Production
    • European Computer, Electronic & Optical Products Production Eurostat, C26 category, EU 27 countries 20140212 80 85 90 95 100 105 110 115 120 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Index (2010=100), Seasonally Adjusted
    • Japan Electronic Equipment Production by Month 2000 to Present 0 200 400 600 800 1000 1200 1400 1600 1800 2000 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Elec Application Equip Electronic Measuring Instrumentation Communications Equipment Computers & Related Equipment Electronic Business Machines Consumer Electronic Equipment JEITA www.jeita.or.jp/ 20140221 Yen Billion
    • Taiwan/China Electronic Equipment Producers Composite of 101 Manufacturers Consolidated Revenue Taiwan listed companies, often with significant manufacturing in China 20140212 0 100 200 300 400 500 600 700 800 900 1000 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Dec 2013 up 10.3% compared to Dec 2012 and up 1.1% compared to Nov 2013 NT$ Billions
    • U.S. Electronic Equipment Orders & Shipments Computer, Communications, Measurement & Control and Military www.census.gov/indicator/www/m3/ 20140301 14 16 18 20 22 24 26 28 30 32 34 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
    • Regional Electronic Equipment Shipment Growth 20140301 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Taiwan/China Japan USA Europe (EU27) Zero Growth 3/12 Rate of Growth (in local currency) Sources: IPC, JPCA, Taiwan/China composite; Eurostat "wiring devices" for Europe Calendar Year
    • World Electronic Equipment Monthly Shipments Converted @ Constant 2012 Exchange Rates Source: Custer Consulting Group & Electronic Outlook Corp 20140221 0 10 20 30 40 50 60 70 80 90 100 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 USA W Europe Japan Taiwan+China ROA ROW US$ B
    • World Electronic Equipment Monthly Shipments Converted @ Constant 2012 Exchange Rates Source: Custer Consulting Group & Electronic Outlook Corp 20140221 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ROW ROA Taiwan+China Japan W Europe USA % of US$ Total
    • World Electronic Equipment Monthly Shipments Converted @ Fluctuating Exchange Rates Source: Custer Consulting Group & Electronic Outlook Corp 20140301 80 100 120 140 160 180 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 January 2014 up 8.4% vs January 2013 US$ M
    • U.S. Electronic Equipment - Orders, Shipments & Inventories
    • U.S. Electronic Equipment Order & Shipment Growth Computer, Communications, Measurement & Control and Military www.census.gov/indicator/www/m3/ 20140301 0.70 0.80 0.90 1.00 1.10 1.20 1.30 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Shipments Orders Zero Growth 3/12 Rate of Change
    • U.S. Electronic Equipment Orders & Shipments Computer, Communications, Measurement & Control and Military www.census.gov/indicator/www/m3/ 20140301 14 16 18 20 22 24 26 28 30 32 34 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
    • U.S. Electronic Equipment Orders Monthly Data www.census.gov/indicator/www/m3/ 20140301 0 2 4 6 8 10 12 14 16 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Search & Navigation Electromedical, Instr & Control Communication Computer Defense $ Billions (monthly, seasonally adjusted)
    • U.S. Electronic Equipment Orders Monthly Data www.census.gov/indicator/www/m3/ 20140204 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Medical, Measuring & Control Search & Navigation - non Military Communication- non Military Computer & Related Military-Search & Navigation Military-Communications $ Billions (monthly, seasonally adjusted)
    • U.S. Electronic Equipment Inventories Monthly Data www.census.gov/indicator/www/m3/ 20140301 0 2 4 6 8 10 12 14 16 18 20 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Search & Navigation Electromedical, Instr & Control Communication Computer Defense $ Billions (monthly, seasonally adjusted)
    • U.S. Electronic Equipment Inventories vs. Orders www.census.gov/indicator/www/m3/ 20140301 1.00 1.20 1.40 1.60 1.80 2.00 2.20 2.40 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Ratio Inventories/Orders
    • Market Segments Volume (Shift to Low Cost Areas) Personal Computers Mobile Phones Other Consumer Electronics Datacom/Telecom Automotive "Protected" Military Medical Instruments & Controls High IP Content Prototype, Quick Response, Short Run, Need for Local Support
    • Global Electronic Supply Chain Growth 4Q'13 vs. 4Q'12 (Preliminary) 6 -4 -8 3 0 17 -5 7 5 9 -4 32 5 3 6 12 8 8 13 6 4 -10 0 10 20 30 40 Electronic Equipment Military Business & Office Instruments & Controls Medical Communication Internet Computer Data Storage Automotive Consumer SEMI Equip Semiconductors (SIA) Passive Components PCBs Component Distributors Large EMS (excl Foxconn) ODM PCB Process Equipment Materials PCB Laminate % Change 20140302 US$ equivalent at fluctuating exchange; based upon industry composites including acquisitions
    • European Electronic Supply Chain Growth 4Q’13 vs. 4Q’12 0 0 3 -6 -2 10 8 7 6 -2 5 -8 -6 -4 -2 0 2 4 6 8 10 12 Electronic Equipment Office equipment Instruments & Controls Medical electronics Domestic Electric Appliances Motor Vehcles Airplane/Aerospace Semiconductors (SIA in euros) Electronic components & boards Loaded electronic boards Wiring devices % Change 20140212 Euro denominated growth rates; Eurostat, SIA & Custer Consulting Group
    • U.S Electronic Supply Chain Shipment Growth 4Q’13 vs. 4Q’12 0 4 -4 -3 -2 -6 14 6 1 17 0 3 1 3 -10 -5 0 5 10 15 20 Electronic Equipment Electromedical, Measurement & Control Search & Navigation Computer Related Communication Defense Automotive Airplane/Aerospace - non Defense Airplane/Aerospace - Defense Semiconductors to N America Small EMS PCBs Passive components Industrial Production % Change 20140304 Custer Consulting Group
    • Electronic Equipment Markets of Interest
    • Changing Electronic Equipment Markets
    • Smart Connected Device Shipments by Type Gartner 1/14 20140114 2012 2013 2014 2015 Oth Ultramobile (Hybrid & Clamshell) 9 17 40 64 Mobile Phone 1,746 1,804 1,893 1,965 Tablet (ultramobile) 120 180 263 325 PC (Desktop & Notebook) 341 299 278 268 0 500 1,000 1,500 2,000 2,500 3,000 Units (millions)
    • Automotive Electronics
    • World Motor Vehicle Production by Geography 2013 Autos, Trucks & Busses Electronic Outlook 10/13 TOTAL: 86.7 Million Units 18.8% 14.3% 10.6% 24.8% 17.3% 14.3% Vehicles N America W Europe Japan China (PRC) Rest of Asia ROW
    • Automotive Equipment Suppliers Composite of 11 Public Companies Revenue, Net Income & Inventory Autoliv, Borg Warner, Continental AG, Delphi, Federal Mogul, Gentex, Johnson Controls, Lear, TRW Automotive, Valeo, Visteon 20140225 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory +9.4%
    • U.S. Vehicle Shipments 0 5 10 15 20 25 30 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Lt Trucks & Utility Vehicles Heavy Duty Trucks Automobiles www.census.gov/indicator/www/m3 20140204 US$ Billion
    • Aviation, Government & Military Electronics
    • U.S. Aircraft & Parts Shipments 0 2 4 6 8 10 12 14 16 18 20 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Non-Defense Defense www.census.gov/indicator/www/m3 US$ Billion 20140301
    • Military Equipment Composite of 6 Public Companies Revenue, Net Income & Inventory General Dynamics, Harris, Lockheed, Northrop Grumman, Raytheon, Rockwell Collins 20140209 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory - 4.1%
    • Global Military Equipment Shipment Growth 12/12 & 3/12 Rate of Change Industry sector sales composite 20140209 0.85 0.95 1.05 1.15 1.25 1.35 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 RateofChange 12/12 3/12 0 Growth
    • U.S. Defense Capital Goods Orders & Shipments www.census.gov/indicator/www/m3/ 20140301 0 5 10 15 20 25 30 Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
    • U.S. Military Electronics Orders & Shipments Defense Communication & Search & Navigation Equipment www.census.gov/indicator/www/m3/ 20140204 0 1 2 3 4 5 6 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
    • U.S. Government & Military Electronics Production by Type 2013 Electronic Outlook TOTAL: $83.5 Billion 7.0% 7.7% 27.5% 25.7% 0.7% 10.6% 14.4% 0.8% 5.6% Vehicles RADAR GUIDANCE/CONTROL COMM & NAVIGATION ELECTRONIC WARFARE SIMULATION & TRAIN COMPUTER ELECTRO-OPTICAL
    • More Details Available for each Category
    • U.S. Government & Military Electronics Communication & Navigation 2013 Electronic Outlook TOTAL: $23.2 Billion 9% 22% 22%9% 14% 15% 2% 5% 2% Vehicles Telecommunication Radio Communication Microwave communication Comm Checkout & Support Other Communication Airborn Navigation Surface/marine/ground nav. Underwater navigation Nav checkout & support
    • Instruments & Control Equipment
    • U.S. Electromedical, Measurement & Control Equipment Orders & Shipments www.census.gov/indicator/www/m3/ 20140204 4 5 5 6 6 7 7 8 8 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Orders Shipments $ Billions (monthly, seasonally adjusted)
    • U.S. Industrial Electronics Production 2013 Electronic Outlook TOTAL: $69.8 Billion 26.6% 25.1% 9.7% 15.0% 0.6% 11.7% 11.2% Vehicles Controls Production Equipment Production Support/Serv Environmental Systems Appliance Controls Other Ind Elec All Other Note: Similar data available for other electronic equipment sectors
    • U.S. Instrumentation Equipment Production 2013 Electronic Outlook 11/2012 TOTAL: $63.8 Billion 8.0% 4.1% 53.2% 20.7% 1.3% 1.4% 8.2% 3.3% $ Test & Measurement Automatic Tester Medical Analytical Nuclear Instrument Optical & Ultrasonic Avionic Other Note: Similar data available for other electronic equipment sectors
    • Instruments & Control Equipment Composite of 12 Public Companies Revenue, Net Income & Inventory Agilent, Ametek, Emerson, Itron, Keithly, LeCroy, PerkinElmer, Rockwell Automation, Teledyne, ThermoFisher, Varian, Woodward Govenor 20140222 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory 3.4%
    • Rank Company 2011 Sales $M 2011/2010 Growth 1 Danaher (T&M div) 3,391 19.7% 2 Agilent Technologies (EMG div) 3,316 19.1% 3 Teradyne 1,429 -8.8% 4 Rohde & Schwarz 1,300 private 5 Advantest (semiconductor test div) 1,272 52.6% 6 National Instruments 1,024 17.3% 7 Anritsu (T&M div) 882 31.9% 8 Yokogawa (T&M div) 436 -0.7% 9 Aeroflex (ATS div) 348 -1.6% 10 Electro Rent 220 43.1% 11 LeCroy 194 25.7% 12 LTX-Credence 179 -30.3% 13 McRath RentCorp (TRS RenTelco div) 125 16.2% Test & Measurement Equipment Suppliers Public Companies Frost & Sullivan 6/12
    • Danaher Corp. Revenue, Net Income & Inventory CY 20140201 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3Q4 Q1Q2Q3Q4Q1Q2 Q3Q4 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory DHR + 6%
    • Medical Equipment Composite of 23 Public Companies Revenue, Net Income & Inventory Analogic, Bio-Rad Laboratories, Boston Scientific, Bruker, CareFusion, Covidien, Draeger, Guidant, Hill-Rom, Intuitive Surgical, Invacare, Kinetic Concepts, Medtronic, ResMed, St Jude Medical, Smith & Nephew, STERIS, Stryker, Varian Medical, Waters, Zimmer, Zoll 20140222 -5 0 5 10 15 20 25 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Millions Revenue Income Inventory +0.1%
    • U.S. Medical Instrument Production 2013 Electronic Outlook 11/2012 TOTAL: $33.9 Billion 15.2% 4.1% 33.4% 22.5% 1.3% Vehicles Diagnostic Therapeutic Other Medica Instr Radiologic Nuclear Medicine Note: Similar data available for other electronic equipment sectors
    • Medtronic Inc Revenue, Net Income & Inventory CY 20140221 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory MDT + 3%
    • Medical Semiconductor Market Forecast IC Insights 12/13 3.2 3.6 4.0 4.1 4.4 4.9 5.6 6.5 6.8 -5% 14% 10% 5% 7% 12% 15% 16% 4% -0.1 -0.05 0 0.05 0.1 0.15 0.2 0.25 0.3 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 US$ billions 20131222 % Change
    • Communication Equipment
    • Communication Equipment Suppliers Composite of 20 Companies 10 mobile phone makers, 10 other telecom equipment makers plus estimate of other mobile makers Revenue, Net Income & Inventory 3COM, ADC Telecom, Alcatel+Lucent, Ciena, Ericsson, Motorola Solutions,, Nokia, Polycom, TellLabs, Palm ; Apple iPhone, HTC, Huawei Device, LG, Motorola Mobility, Nokia, RIM, Samsung, Sony Mobility, ZTE; Euros & Krona converted at fluctuating exchange; mobile phone volumes from company reports & Gartner Dataquest quarterly unit shipment estimates; historical data included for acquired companies 20140209 -40 -20 0 20 40 60 80 100 120 140 160 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Millions Revenue Income Inventory + 16.8%Preliminary 4Q’13 results; smartphones driving growth
    • U.S. Communication Equipment Orders & Shipments www.census.gov/indicator/www/m3/ 20140301 0 2 4 6 8 10 12 14 16 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
    • Internet Infrastructure
    • "Internet" Equipment Suppliers Composite of 9 Public Companies Revenue, Net Income & Inventory ADTRAN, Cisco Systems, Extreme Networks, Juniper Networks, Mattson Technology, Netgear, Sierra Wireless, Sonus Networks, Sycamore 20140222 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory -4.9% Large Cisco Decline
    • Layer 2/3 Ethernet Switch Vendors 3Q’13 www.idc.com 3Q'13 World Total US$ 5.36 Billion 62.6% 9.4% 3.6% 2.7% 2.0% 19.8% $ Cisco HP Alcatel-Lucent Juniper Dell Others
    • Cisco Systems Revenue, Net Income & Inventory CY 20140214 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory CSCO - 8% $639 M due to Scientific Atlanta acquisition
    • Computers & Related Products
    • U.S. Computers & Related Products Orders & Shipments www.census.gov/indicator/www/m3/ 20140301 0 2 4 6 8 10 12 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 Thousands Orders Shipments $ Billions (monthly, seasonally adjusted)
    • Makeup of Personal Computer Market IC Insights 5/12 20121027 2009 2010 2011 2012 2013 2014 2015 Tablets 1 17 63 110 160 249 341 Netbooks 26 27 15 8 6 5 4 Notebooks 137 167 184 205 225 253 279 Desktops 146 155 154 155 153 156 159 0 100 200 300 400 500 600 700 800 900 1,000 2010-2015 CAGR Tablets + 82.9% Netbooks - 31.7% Notebooks + 10.8% Desktops + 0.5% Units (millions)
    • World Server Shipment Revenue Gartner Dataquest 2/14 & prior reports 0 2 4 6 8 10 12 14 16 18 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 2010 2011 2012 2013 Revenue US$ Billions 20140226 -6.6%
    • World Server Shipments 4Q’13 Gartner Dataquest 2/2014 TOTAL: $13.7 Billion 28.1% 26.5% 15.2% 4.7% 4.2% 21.3% HP IBM Dell Cisco Oracle Others
    • Industrial Robots: Share by Market IFR 1/14 39.7% 20.5% 8.6% 7.2% 3.1% 21.0% Automotive Electronics/Electrical Metals/Machinery Chemical, Rubber & Plastics Food & Beverage Other 159.3 Million Units in 2012
    • Industrial Robots: Sales by Region IFR World Robotics 2013 20140505 2006 2007 2008 2009 2010 2011 2012 Total 111.1 114.4 113.0 60.0 120.6 166.0 159.3 India 0.8 0.9 0.9 0.4 0.8 1.5 1.5 ROW 2.6 2.8 1.7 1.0 3.7 9.2 7.2 Asia Pacific 5.9 4.3 6.8 3.6 8.7 11.1 12.0 China 5.8 6.6 7.9 5.5 15.0 22.6 23.0 S Korea 10.8 10.1 11.6 7.8 23.5 25.5 19.4 N America 17.4 18.7 16.2 8.4 16.4 24.3 26.3 Japan 37.4 36.1 33.1 12.8 21.9 27.9 28.7 Europe 30.4 34.9 34.7 20.5 30.7 43.8 41.2 111.1 114.4 113.0 60.0 120.6 166.0 159.3 0 20 40 60 80 100 120 140 160 180 200 Units (000)
    • Robots: Accelerating Demise of Factory Jobs?
    • Electronic Components
    • Semiconductors
    • World Semiconductor Shipments Monthly US$ SIA 20140303 0 5 10 15 20 25 30 Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 1314 Thousands 3-Month AvgUS$ Billions (3-month average) 2009 recession much sharper but shorter than 2001
    • Total Semiconductor Shipments to an Area Monthly Shipments - Reporting Firms SIA website: www.sia-online.org/ 20140303 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Japan N America Europe Asia-Pac $B (3-month average) SE Asia
    • N American Semiconductor Shipments Monthly & 3-Month Average Shipments SIA website: www.sia-online.org/ 20140303 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Thousands Month 3-Month Avg $ Billions
    • Semiconductor Shipments to N. America vs. U.S Electronic Equipment Production Total $ Semiconductor Shipments from All Countries to N. America www.sia-online.org/ U.S. Electronic Equipment Shipments www.census.gov/indicator/www/m3/ 20140303 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Semiconductors El Equip 3/12 Rate of Change(US$)
    • Semiconductor Fab, Assembly, Packaging,Test & Measurement Equipment
    • Semiconductor Capital Equipment Shipments by Area www.semi.org, www.seaj.or.jp/ 9/13 20130914 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ROW China Taiwan S Korea N America Japan Europe $ Billions
    • Semiconductor Fab, Test & Measurement Composite of 20 Public Companies Revenue, Net Income & Inventory Applied Materials, ASM Intl, ASML, Advantest, KLA Tencor, Novellus, Hitachi Hi Tech, Lam Research, BTU, LTX-Credence, FEI, FSI, Intervac, Kulicke & Soffa, MKS Instruments, Rudolph, Teradyne, Ultratech Stepper, Varian semiconductor, Veeco 20140222 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ Billions @ fluctuating exchange Chart Title Revenue Income Inventory +33%
    • Global Semiconductor & Semiconductor Capital Equipment 3-Month Shipment Growth Rates on $ Basis Sources: SIA; Semiconductor Equipment Association of Japan, www.semi.org, Custer Consulting Group SEMI equipment sector composite growth 20140303 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Semiconductors SEMI Capital Equip Zero Growth 3/12 Rate of Change
    • Passive Components
    • Passive Components Composite of 11 Companies Revenue, Net Income & Inventory AVX, Bel Fuse, Diodes, International Rectifier, Littlefuse, Murata, RF Micro, Rohm, Vishay, TDK, Yageo; Euros, Yen & NT$ converted to US$ at fluctuating exchange rates 20140214 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Billions Revenue Income Inventory +1.8%
    • U.S. Production: "Other" Electronic Components (excludes semiconductors) Orders & Shipments http://www.census.gov/indicator/www/m3/ 20140208 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Thousands Orders Shipments $B (Seasonally Adjusted) Calendar Year
    • PCB Fabrication
    • World PCB Monthly Shipments Converted @ Fluctuating Exchange Rates Source: Custer Consulting Group 20140221 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Thousands ROW Rest of Asia Korea Taiwan/China Japan Europe N America US $ Billions Calendar Year
    • World PCB Shipments (with forecast) Converted @ Fluctuating Exchange Rates 20140222 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Actual Forecast +1.3% -1.1% $ Billions Source: Custer Consulting Group - 2010 base year expanded by monthly growth of N. American, European, Japanese & Taiwan/China monthly PCB shipments Calendar Year Growth calculations: Europe = Eurostat “Wiring Device” Japan & N. America from JPCA & IPC data Taiwan/China:46 rigid & flex company composite Rest of Asia growth = Taiwan/China 44 company composite Includes S Korea data for 2011-2013 +4.9 %
    • 2012 World PCB Production by Region IPC 8/13 5.0% 4.5% 14.7% 42.8% 12.6% 13.4% 6.6% 0.4% N America Europe Japan China/HK Taiwan S Korea Rest of Asia ROW 20130831 Total: $60.0 Billion (US$ M @ Average 2012 Exchange)
    • 2012 World PCB Production by End Market IPC 9/13 20.1% 34.2% 17.8% 3.9% 9.3% 2.5% 4.5% 7.7% PC/Office Communication Consumer Defense/Space Industrial Medical Others Automotive 20131111 Total: $60 Billion
    • Rank Maker Country US$M 1 Nippon Mektron Japan 2,888 2 Unmicron Taiwan 2,383 3 SEMCO Korea 2,002 4 Young Poong Group Korea 2,000 5 Ibiden Japan 1,924 6 Zhen Ding Taiwan 1,512 7 Tripod Taiwan 1,396 8 TTM Technologies USA 1,310 9 Sumitomo Denko PC Japan 1,219 10 Daeduck Group Korea 1,147 11 HannStar Board (GBM) Taiwan 1,112 12 Viasystems Group Inc USA 1,080 13 Nanya PCB Taiwan 1,007 14 Kingboard PCB Group HK/China 935 15 CMK Corp Japan 908 16 Shinko Electric Japan 869 17 Mflex USA 819 18 Kinsus (+Plotek) Taiwan 788 19 Compeq Taiwan 783 20 Meiko Electronics Japan 759 21 TPT (Taiwan Techvest) Taiwan 722 22 AT&S Austria 698 23 Multek USA 650 24 WUS Group Taiwan 644 25 LG Innotek Korea 600 World’s Top PCB Companies - 2012 20131111 Dr Hayao Nakahara, N.T. Information Ltd 9/2013
    • N American Rigid & Flexible PCB Shipments & Orders 20140204 0 50 100 150 200 250 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2008 2009 2010 2011 2012 2013 Shipments Orders 2013/2012 Rigid & Flex PCB Shipment Growth: -1.9% Note: IPC survey captures "market" not domestic production. About 15% of the above represents imported boards resold by N American PCB producers in survey. $M (statistical sample of about 50% of producers) IPC
    • U.S. Electronic Equipment vs. Rigid & Flex PCBs $ Order Growth 20140301 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 PCB Equipment Zero Growth 3/12 Rate of Change IPC & U.S. Dept of Census Inventory builds and excess orders Inventory/order corrections
    • 2012 Vertical Markets for PCBs in N America (US$) WECC 8/2013 26% 15% 11% 11% 32% 2% 11.0% Military/Aerospace Computers Industrial Instrument/Medical Communications Automotive Consumer 20130912 Total: $3.0 Billion
    • EMS & ODM Companies
    • EMS & ODM Estimated Global Revenue vs. Total Available Market 20131119 2009 2010 2011 2012 2013 2014 2015 ODM 227 308 299 270 272 299 320 EMS 75 86 96 116 105 110 115 TAM 1195 1284 1388 1394 1399 1485 1614 1195 1284 1388 1394 1399 1485 1614 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 $ Billions ODM EMS TAM Custer Consulting Group 11/13, TAM = 0.7* Electronic Equipment Production at Fluctuating Exchange
    • 2013/2012 2012 2013 Growth % Hon Hai (Foxconn) Taiwan 141,122 133,349 -6% Flextronics Singapore 24,670 24,197 -2% Jabil Circuit USA 17,462 18,200 +4% Sanmina-SCI USA 6,086 5,872 -4% Celestica Canada 6,507 5,809 -11% Benchmark Elec USA 2,468 2,450 -1% Plexus USA 2,308 2,232 -3% Venture Mfg Singapore 1,912 1,831 -4% Sypris USA 342 331 -3% Total 202,877 182,386 -10% Large Global EMS Providers 20131117 Sources: Company data, 4Q’13 estimated by Custer Local currency converted at fluctuating exchange 2012 vs. 2013 Sales ($M)
    • Large EMS Providers Composite of 9 Public Companies Revenue, Net Income & Inventory Benchmark+Pemstar, Celestica, Flextronics+Solectron, Foxconn, Jabil, Plexus, Sanmina-SCI, Sypris, Venture Mfg -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ Billions @ fluctuating exchange Revenue Income Inventory +7% 20140208 -1% Q1'14/Q1'13 Guidance
    • Large EMS Providers Composite of 8 Public Companies Quarterly Revenue Growth Benchmark+Pemstar, Celestica, Flextronics+Solectron, Jabil, Plexus, Sanmina-SCI, Sypris,Venture Mfg 20140208 -40 -30 -20 -10 0 10 20 30 40 50 60 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Excludes Foxconn
    • Foxconn Electronics (Hon Hai), Taiwan Revenue, Net Income & Inventory CY 20140115 0 200 400 600 800 1000 1200 1400 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 NT$ (Billions) Revenue Income Inventory 2317 +17%
    • Flextronics Revenue, Net Income & Inventory CY 20140201 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 $ Billions Revenue Income Inventory + 17% 5.9-6.3 1/29/14 FLEXFY ends March 31
    • Plexus Corp Revenue, Net Income & Inventory CY 20140126 -100 0 100 200 300 400 500 600 700 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014 $ Millions Revenue Income Inventory + 1% 535-565 1/15/14 PLXSFY ends September
    • Medium Size EMS Providers Composite of 10 Public Companies Revenue, Net Income & Inventory CTS, Keytronic, LaBarge, NamTai, Nortec, Raven, Sigmatron, Sparton, Sypris, Winland 20131127 -200 0 200 400 600 800 1000 1200 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Revenue Income Inventory -6%
    • Nortech Systems Inc Revenue, Net Income & Inventory CY 20131119 -5 0 5 10 15 20 25 30 35 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Thousands Revenue Income Inventory NSYS + 7%
    • Raven Industries Inc Revenue, Net Income & Inventory CY 20131127 0 20 40 60 80 100 120 140 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Thousands Revenue Income Inventory RAVN + 8%
    • Sypris Solutions Revenue, Net Income & Inventory CY 20131119 -150 -100 -50 0 50 100 150 200 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Revenue Income Inventory SYPR - 3%
    • SigmaTron International, Inc Revenue, Net Income & Inventory CY -20 -10 0 10 20 30 40 50 60 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ (Millions) Thousands Revenue Income Inventory 20140126 SGMA + 7%
    • SMTC Revenue, Net Income & Inventory CY 20131119 -100 -50 0 50 100 150 200 250 300 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ (Millions) Revenue Income Inventory - 4% TSE.SMX
    • Sparton Corporation Revenue, Net Income & Inventory CY 20140207 -20 0 20 40 60 80 100 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 19992000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $ Millions Revenue Income Inventory SPA + 28%
    • EMS Inventories/Sales 9 Large & 12 Medium Sized Companies Large: Benchmark+Pemstar, Celestica, Flextronics+Solectron, Foxconn, Jabil, Plexus, Sanmina-SCI, Sypris, Venture Mfg 20140208 0.15 0.25 0.35 0.45 0.55 0.65 0.75 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Large Medium Medium: CTS, Keytronic, LaBarge, NamTai, Nortec, Raven, Sigmatron, Sparton, Sypris, Winland Ratio: Inventories/Sales
    • 2013/2012 2012 2013 Growth % Foxconn (Hon Hai) 136,515 133,238 -2% Pegatron 30,800 32,029 +4% Quanta Computer 33,400 29,666 -11% Compal Electronics 23,567 23,341 -1% Wistron 22,869 21,793 -5% Inventec 15,406 15,537 +8% Asustek Computer 15,237 15,616 +2% Chimei Innolux 16,241 14,244 -12% Lite On Technology 7,266 7,171 -1% Total 301,301 292.635 -3% Large Taiwan ODM Providers 20140110 Source: Company data, NT$ converted at constant avg 2013 exchange (29.672 NT$ = 1US$) Consolidated company sales (to be updated soon to consolidated sales) 2012 vs. 2013 Sales ($M)
    • Taiwan ODM Companies Composite Sales of 11 Large Manufacturers 20140114 0 100 200 300 400 500 600 700 800 900 1,000 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Jan 2014 was 3.8% below Jan 2013 and 25% sequentially below Dec 2013 NT$ (Billions) Asustek Computer, Chei Mei, Compal Electronics, Foxconn, Chimei Innolux , Inventec, Inventec Appliance, Lite On Technology, Mitac International, Pegatron, Quanta Computer, Wistron, Chei Mei Display replacing Chei Mei & Innolux Display 3/10 & later Calendar YearCompany Financial Releases
    • Large ODM Companies Composite of 10 Public Manufacturers Quarterly Revenue Growth Asustek Computer, Compal Electronics, Foxconn, Chimei Innolux, Inventec, Inventec Appliance, Lite On Technology, Mitac International, Pegatron, Quanta Computer, Wistron 20140114 -40 -20 0 20 40 60 80 100 120 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
    • Structure of European EMS Industry 2012 Reed Electronics Research 12/12 13.27 3.39 3.75 5.55 Group 1 Group 2 Group 3 Group 4 20140118 Group 1 Group 2 Group 3 Group 4 Number of Companies Turnover of Each Segment Eur billion 850+ 52 6 19
    • European EMS by Region Reed Electronics Research 1/14 2201401180131020 14.6 14.4 14.7 14.9 15.3 15.8 11.0 11.1 11.3 11.4 11.7 12.0 0 2 4 6 8 10 12 14 16 18 2012A 2013E 2014F 2015F 2016F 2017F CEE, N Africa & Oth W Europe Euro (Billions)
    • Forecasting EMS Sales using Leading Indicators
    • Global EMS & ODM Companies Composite of 53 Public Companies Revenue 0 20 40 60 80 100 120 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ Sales @ fluctuating exchange Millions +3.4% 20140208 US $ Billions
    • IPC Small & Medium N American EMS Company Revenue Index 0 20 40 60 80 100 120 140 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2007 2008 2009 2010 2011 2012 2013 20140208 Index 2010 avg month = 100
    • IPC Small/Medium EMS vs Composite of 53 Public EMS/ODM Companies Revenue 0 5000 10000 15000 20000 0 20 40 60 80 100 120 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 53 Company IPC Small/Medium 20140208 US $ Billions
    • IPC EMS Small & Medium Company N. American Shipments & Bookings Markit Economics & ISM 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI Ship Book Zero Growth 20140303
    • IPC Small & Medium Company EMS vs N. American PCB Shipments Markit Economics & ISM 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI Small/Med EMS PCB Zero Growth 20140303
    • IPC N American Small/Medium EMS vs Composite Sales of 53 Global EMS/ODM Companies Markit Economics & ISM 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PMI IPC N American Small/Medium 53 Company EMS/ODM Zero Growth 20140303
    • U.S Purchasing Managers Leading Index vs IPC EMS shipments & bookings Markit Economics & ISM 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI PMI Leading Indicator EMS Ship EMS book Zero Growth 20140303
    • Global PMI Leading Index vs Composite Sales of 53 Global EMS/ODM Companies Markit Economics & ISM 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 PMI PMI Leading Indicator EMS/ODM Shipments Zero Growth 20140303
    • U.S PMI Leading Index vs N American EMS Shipments ISM & IPC 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI Leading Indicator EMS Shipments Zero Growth 20140303 3/12 Growth 1 year Lead
    • U.S PMI Leading Index vs N American EMS, PCB & Semiconductor Shipments Markit Economics & ISM 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2007 2008 2009 2010 2011 2012 2013 2014 PMI PMI Leading Indicator EMS Ship PCB Ship Zero Growth Semiconductors 20140303
    • Using This Information to Forecast Your Company’s Sales
    • Data Sources • Trade Organizations • IPC, ZVEI, SIA, SEMI • Government Statistics • US Department of Commerce, Eurostat • Published Market Research Studies • Company Financial Reports & Consolidated Sector Data • Leading Indicators • Purchasing Managers Indices, Conference Board CLI • Your Own Company’s Sales
    • Forecasting Your Company Sales • Organize monthly or quarterly sales in spreadsheet • Obtain related industry time series for same time period • Compare industry data and/or leading indicators to your sales using 3/12 growth rates • Determine lead times vs. your data • Forecast your sales based upon lead times • Estimate your market share gains/losses by comparing your company growth to a related industry sector •Custer Consulting Group can assist by providing: • Historical industry data • Help with analysis
    • Forecasts
    • Walt
    • World 2.5 2.5 3.2 3.9 3.7 USA 2.8 1.9 2.7 3.4 3.3 EU -0.4 0.0 1.2 1.5 1.9 Japan 1.4 1.8 1.9 1.6 1.2 Four Tigers 1.9 2.5 3.6 3.9 3.7 China 7.7 7.7 7.9 8.2 7.7 Henderson Ventures 2/2014 www.hendersonventures.com 2012 2013 2014 2015 2016 GDP Growth Constant $ Growth Rates Converted @ Constant Exchange Rates 20140209
    • World 1.0 -2.9 4.7 5.9 5.7 USA -0.9 -3.3 2.7 4.9 5.1 W. Europe -3.4 -4.6 1.6 3.2 3.4 Japan -2.6 -10.3 4.3 4.1 3.2 Four Tigers -1.2 1.8 4.4 5.7 5.4 China 2.6 -2.9 6.2 7.0 6.6 Henderson Ventures 2/2014 www.hendersonventures.com 2012 2013 2014 2015 2016 Electronic Equipment Production Growth Constant $ Growth Rates Converted @ Constant Exchange Rates 20140209
    • World Rigid & Flex PCB Production Converted @ 2012 Exchange Rates except Japan @ 100Y/US$ H Nakahara 2/14 20131111 59.9 59.8 59.8 62.7 64.9 66.6 67.7 0 10 20 30 40 50 60 70 80 2011 2012 2013 2014 2015 2016 2017 Total Other Asia Thailand S Korea Taiwan Japan China Other Europe Germany Americas $ Billion (@2012 exchange rates)
    • N. American Supply Chain Forecast 2014 vs. 2013 0 2 4 6 8 Small/Medium EMS Semiconductors PCBs Electronic Equipment Combined GDP Custer Consulting Group Custer Consulting Group Henderson Ventures HV Henderson Ventures % Change 20140222
    • Key Points Ability to target each end market sector by key companies, size and growth rate Size & growth of each sector of world & U.S. electronic supply chain Leading indicators to forecast domestic and global EMS growth Tools & methodology to forecast your companies growth Likely N American Small/Medium EMS Growth about 3% in 2014
    • Future Presentations Financial data on small EMS companies not publicly available Markets can be very localized Leading indicators appear very promising as forecasting tool Cooperative efforts with individual companies would be welcome More work needs to be done
    • Custer Consulting Group Products Daily News Services (6 days/week) - Global electronics supply chain - Solar/Photovoltaic supply chain Business Outlook - Market charts & data Global market OEMs Components, EMS, ODM, materials & process equip Solar/Photovoltaic - Weekly Market Comments with latest charts 20111007
    • Strictly private & confidential Lincoln International’s Presentation Regarding: The Dynamic EMS Industry March 24, 2013
    • Lincoln International Snapshot Paris Frankfurt Chicago New York Los Angeles London Vienna Madrid Mumbai Tokyo Amsterdam Moscow São Paulo Beijing Americas ▪ Offices in Chicago, Los Angeles and New York ▪ Office in São Paulo Europe ▪ Offices in Amsterdam, Frankfurt, London, Madrid, Milan, Moscow, Paris and Vienna Asia ▪ China – Office in Beijing ▪ India – Office in Mumbai ▪ Japan – Office in Tokyo International Industry-focused Leader  15 offices with nearly 300 bankers in key global economies – half outside the U.S.  Experienced local bankers with deep strategic relationships within each region  14 global industry groups led by experienced senior bankers  Significant transactional experience and deep relationships within each sector  Ranked one of the top two middle market investment banks in the world(1)  Ranked as the #1 investment bank for the sale of private equity owned businesses for 2013  Since 2001 has completed more EMS transactions than any investment bank in the world Milan (1) According to MergerMarket for M&A transactions less than $300 million completed in 2013 (Rothschild was the other top ranked bank)
    • Contents Section 1 General Middle Market M&A Environment 1 Section 2 EMS Industry Financial Metrics 3 Section 3 EMS Industry Merger and Acquisition Activity 8 Section 4 Overview and Traditional Drivers of Buyer Valuation 13 Section 5 Long-Term Strategic Outlook: Eliminating the “E” from EMS 16 Section 6 Conclusion 23 APPENDIX A Officer Bio 2014 - IPC Presentation_v1.4.pptx
    • T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA General Middle Market M&A Environment Section 1
    • 9,035 7,250 10,448 11,836 11,455 10,812 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2008 2009 2010 2011 2012 2013 NumberofDeals  M&A activity has solidly rebounded from great recession levels in 2009  The combination of low interest rates and slow growth creates an ideal environment for M&A  A more robust M&A market is expected in 2014 due to increased M&A activity in the second half of 2013 carrying into 2014, as well as continued strength in M&A activity fundamentals  Middle market M&A ($10-$500M EV) is expected to continue driving the majority of deals in 2014 Middle-Market M&A Overview M&A activity decreased in 2013, but is expected to increase in 2014 Overview Activity Sponsor Activity  Financial sponsors have over $400 billion of equity funds to invest and pressure to deploy this capital  4,000+ portfolio companies currently need to be exited or recapitalized  Continued low interest rates  Leverage multiples have returned to pre-recession levels, allowing sponsors to often out pay strategic buyers for assets Strategic Activity  $2.2+ trillion of cash on hand to fuel acquisitions, offset slow organic growth to meet strategic initiatives  Seeking growth through M&A to counteract the low organic growth environment  Increased cross-border activity due to globalization Yearly M&A Volume (Transaction Size $10M – $500M) Source: Capital IQ Section 1: General Middle Market M&A Environment 2
    • T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA M&A as a Strategic Value Enhancing Tool Section 2
    • Sparton Corporation (NYSE:SPA) Acquisition History November 15th, 2012 June 6th, 2013 August 30thth, 2013 December 11thth, 2013 2014 Sparton acquired Onyx EMS, LLC, a leading EMS provider of complex applications to medical OEMs Sparton acquired Aydin Displays, Inc. to add engineered product content of enhanced flat panel display and touch-screen solutions Sparton acquired Creonix LLC, a leading EMS provider, in order to build out cable and wire harness engineering and manufacturing capabilities Sparton acquired Beckwood Services, Inc. to provide electromechanical controls for the machine tool, analytical instruments and military markets Section 2: M&A as a Strategic Value Enhancing Tool 4 ** Lincoln International involved transaction ** **
    • $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Sparton Corporation (NYSE:SPA) Acquisition History (continued) Announcement of Onyx acquisition Announcement of Creonix acquisition Announcement of Aydin Displays acquisition Announcement of Beckwood Services acquisition $31.6 $12.6 Source: Capital IQ, February 25th, 2014 Share price Section 2: M&A as a Strategic Value Enhancing Tool 5
    • T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA EMS Industry Financial Metrics Section 3
    • 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Q1-03 Q1-04 Q1-05 Q1-06 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 IndexValue Asof3/31/03 Large Mid Small EMS Industry Stock Performance EMS Stock Index  Small and Mid sized EMS public company stocks have greatly outperformed Large EMS company stocks over the last 10 years  Since 2002 Small and Mid sized EMS companies have traded at higher valuations than large EMS companies, prior to that the large companies dominated market valuations  Large EMS companies searching for opportunities to differentiate and increase margin and create shareholder value Note: Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp. 740% 114% (25%) Section 3: EMS Industry Financial Metrics 7
    • (30.0%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13 Large Mid Small EMS Revenue Growth Rates  Small size EMS companies are exhibiting the highest YoY LTM revenue growth rates while Mid and Large (excluding Foxconn) EMS companies are exhibiting declining revenue growth  Small size EMS companies are exhibiting YoY LTM revenue growth rates above their respective historical averages Year-over-Year (YoY) Last Twelve Months (LTM) revenue growth rates Note: Data sourced from Capital IQ as of the last day of each quarter; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp. 7.1% 9.2% 5.4% Averages: 7.9% (2.4%) (13.8%) Section 3: EMS Industry Financial Metrics 8
    • 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13 Large Mid Small EMS EBITDA Margins Over Time  Large and Mid size EMS companies are operating above their historical EBITDA margin averages  Large EMS companies are exhibiting recent margin improvement Note: Data sourced from Capital IQ as of the last day of each quarter; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp. EBITDA Margins 4.8% 6.2% 4.3% Averages: Section 3: EMS Industry Financial Metrics 9
    • 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 MultipleofEBITDA Large Mid Small EMS Company Valuations Enterprise Value / EBITDA Note: Data sourced from Capital IQ as of the last day of each quarter; Enterprise Value is calculated as market cap plus debt, preferred equity and minority interest less cash; Large index: Celestica, Flextronics, Jabil and Sanmina Corp.; Mid index: Benchmark, CTS Corp, Key Tronic Corp., Nam Tai Electronics, Plexus Corp. and Sypris Solutions Inc.; Small index: IEC Electronics Corp., Nortech Systems, Sigma Tron International, SMTC Corp. and Sparton Corp.  EMS company valuations in general have improved over the last year  Small EMS companies are being valued at new historical averages  Large and small size EMS companies are trading above historical averages; Mid size companies are trading right at historic averages 6.7x 6.7x 4.9x Averages: Section 3: EMS Industry Financial Metrics 10
    • T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA EMS Industry Merger and Acquisition Activity Section 4
    • 51 48 24 46 32 29 24 0 10 20 30 40 50 60 2007 2008 2009 2010 2011 2012 2013 #ofTransactions Total EMS Merger and Acquisition Activity M&A activity in the EMS industry has decreased since 2010 Transaction volume  Transaction volume equal with historic lows of 2009  Activity is indicative of buyers becoming more selective  Industry unlikely to bounce back to 2007 levels Section 4: EMS Industry Merger and Acquisition Activity 12
    • 9 9 8 7 2 2 4 5 6 1 0 5 10 2012 2013 #ofTransactions U.S./Canada Europe Asia Cross-Border (High/High) Cross-Border (High/Low) Other EMS Merger and Acquisition Activity – by Geography M&A activity decreased, or remained flat, in all but Cross-Border (High/Low) transactions Transaction volume by geography  Cross-Border M&A activity between high-cost regions has exhibited the most growth with year-over-year transaction volume increasing 25%  Cross Border activity between high-cost and low-cost regions has exhibited the greatest percentage decrease in activity with transaction volume down from six to zero  Transactions between Asian countries have remained flat Section 4: EMS Industry Merger and Acquisition Activity 13
    • 13 15 14 10 3 1 1 15 7 10 77 1 2 1 8 8 3 5 0 2 4 6 8 10 12 14 16 2010 2011 2012 2013 #ofTransactions EMS Consolidations OEM Divestitures Vertical/Horizontal Convergences EMS Divestitures Private Equity Investments EMS Merger and Acquisition Activity – by Type M&A activity in the EMS industry has primarily been concentrated within Consolidations and Convergences Transaction volume by target company category  Consolidations continue to be the main source of M&A activity within the EMS industry  While investment into EMS by private equity is slightly below 2010 levels, Lincoln is currently seeing renewed interest by private equity in EMS Section 4: EMS Industry Merger and Acquisition Activity 14
    • T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA Traditional Drivers of Valuation and Current Buyer Trends Section 5
    • Traditional Drivers of Value Drivers Commentary Margin Growth  Highest EMS valuations occurred when industry growth rates exceeded 20%  individual companies that can achieve double digit growth rates will attract higher valuations  Difficult to sell a business that is in decline  Historically, EMS valuations were not driven by margin due to extraordinary growth rates  As the industry has matured margins have become more important than growth  Average EBITDA margins for high mix providers are 7% - 8%  Premium valuations are given to companies with double digit EBITDA margins Customers and End Markets  Historically, telecommunications and computing were attractive end markets due to their inherent growth rates  Today, medical, military and industrial end markets are valued due to their customers’ higher margin profiles  Automotive, which was highly unflavored, has returned as a more promising end market due to a higher growth rate and a change in auto OEM behavior to allow their supply chain more profitability  Customer diversity is rewarded over customer concentration Section 5: Traditional Drivers of Valuation and Current Buyer Directions 17 Capabilities  Historically automated SMT capability was valued  Today, overall complexity of work, level of integration and box build are what drives value  Any unique capabilities add value (e.g. ruggedization, special software integration, etc.)  Engineering capability is also more valued today Location  Historically, globalization was the main driver of value  Today location is important, but value drivers are more varied (e.g. low cost, proximity to customers, logistics considerations, etc.)
    • Current Buyer Interest Trends Trend Commentary Outside Acquirers Looking in the EMS Industry Tier I Providers Looking Outside Typical EMS Industry for Acquisitions  Tier I providers are reluctant to acquire mid-size and small EMS companies due to industry maturity  Customers who do business with mid-size and small EMS companies typically do not want to do business with Tier Is  The need to increase margins to create shareholder value and meet Wall Street expectations is paramount for Tier Is  Looking outside EMS for higher margin businesses  Looking internally for cost saving opportunities  Increasingly building up engineering and IP content  Manufacturers in contracting industries (e.g. defense) are looking for rapid diversification  Natel Engineering (leading defense hybrid components manufacturer) acquiring EPIC Technologies  Mechanical products manufacturers within an end market looking to expand capabilities into electronics  Duccomun (a mechanical DOD company) acquiring LaBarge  A current maker of mechanical components for automobile applications actively seeking companies with electronics expertise  Companies who dominate a specific niche needing to use acquisitions to achieve external growth  Leading manufacturer of micro-electronics for communication applications seeking acquisitions outside their niche including potential EMS companies Private Equity Investment Trends  Leverage multiples have returned to pre-recession levels, which combined with low interest rates and unvested capital, make private equity more active and competitive buyers  Fragmentation and relatively low multiples make EMS an attractive industry for the PE model Mid-tier Consolidations  Consolidations were the leading type of transaction in 2013 and are expected to repeat in 2014  Need for scale, geographic expansion and market penetration are driving Mid-tier consolidations Section 5: Traditional Drivers of Valuation and Current Buyer Directions 18
    • T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA Long-Term Strategic Outlook: Eliminating the “E” from EMS Section 6
    • Valuation of Large Industrial Conglomerates Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 20 EV / EBITDA Multiples 12.4x 15.2x 12.9x 10.1x 12.7x 9.9x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x Actuant Ametek Danaher Emerson Electric Teledyne Tech. TE Connectivity EBITDA Margins 18.2% 26.0% 21.8% 19.6% 14.2% 19.2% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Actuant Corporation Ametek Danaher Corp. Emerson Electric Co. Teledyne Technologies Inc. TE Connectivity Ltd. EMS Average 5.2% EMS Average 7.5x
    • Long Term Trend: “DMS” Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 21 The 3D vs. Virtual World “There will always be 3D stuff to build” EMS companies will convert into Diversified Manufacturing Services (DMS) companies
    • Jabil: an Emerging DMS Company Section 6: Long-Term Strategic Outlook: Eliminating the “E” from EMS 21  Focusing the company on engineering and manufacturing “3D stuff”  Acquisition of Nypro, a leading plastics manufacturer  Non-electronics account for 30% - 35% of Jabil’s revenue  Divestiture of Jabil Global Services business to focus company on engineering and manufacturing excellence
    • T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MILAN MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA Conclusion Section 7
    • Key Takeaways Heading Into 2014  Expect favorable EMS M&A environment in 2014  Consolidations will continue  Increased activity by private equity  Big EMS companies looking for diversification outside of core EMS business  Outside companies looking into the EMS market Every EMS company should think about a DMS strategy Section 7: Conclusion 25
    • Bios Appendix A T H E O N L Y T R U L Y I N T E R N A T I O N A L , I N T E G R A T E D , I N D E P E N D E N T M I D - M A R K E T A D V I S O R AMSTERDAM BEIJING CHICAGO FRANKFURT LONDON LOS ANGELES MADRID MOSCOW MUMBAI NEW YORK PARIS SÃO PAULO TOKYO VIENNA
    • Jack Calderon Advisory Expertise Jack has extensive experience in advising companies on merger and acquisitions, restructuring, fairness opinions, and other strategic matters. In addition to completing multiple transactions for public company, private equity, and private owner clients, Jack also has experience in cross border advisory work encompassing both Europe and Asia. Jack has led numerous sell-side and buy-side transactions. Jack's advisory work is exclusively focused on the commercial and defense electronics industries. Industry Expertise Jack is an expert in the electronics industry. He spent 20 years in various operating management positions in the industry, beginning with Honeywell and culminating as CEO of publicly traded EFTC (now part of Benchmark). Jack is a frequent speaker at industry events and publishes the quarterly EMS DealReader which tracks all transactions in the electronic manufacturing services (EMS) industry globally, as well as the EMS Stock Index. Jack is a former member of the Board of Directors of the IPC which is the global standards-setting organization for the manufacture of electronic products. In addition to the EMS industry, he focuses on interconnects (circuit boards, flex circuits, and connectors), defense electronic products, specialty systems, and design and product repair service providers. Managing Director Past Affiliations Prior to joining Lincoln International, Jack served as Chairman and Chief Executive Officer of EFTC, a publicly traded electronics manufacturing service provider, now part of Benchmark Electronics (NYSE:BHE). EFTC specialized in manufacturing complex electronics primarily for the aerospace industry. Jack began his career in Honeywell's Aerospace and Defense Group in 1979. In his 20 year operating career, he held a variety of positions with several companies including Program Manager; Vice President of Marketing and Contracts; Vice President of Corporate Development; Vice President and General Manager of Latin American Operations and Chief Executive Officer. Academic Credentials Jack earned a Juris Doctor degree from The American University, and a Bachelor of Arts degree in economics, cum laude, from Case Western Reserve University. Role at Lincoln International Jack leads Lincoln International's Electronics group which includes Electronic Manufacturing Services (EMS), Interconnects, and Defense Electronics. He has extensive operating and transaction experience in defense electronics and electronic manufacturing services. Jack leads deal teams, manages key client relationships and markets the firm's services. Appendix A: Officer Bio 28
    • Chaim Lubin Advisory Expertise Chaim has experience in advising companies on merger and acquisitions, restructuring, fairness opinions, and other strategic matters. His experience includes transactions and advisory services for private equity, Fortune 500, and private company clients. Chaim also has cross-border transaction experience, providing advisory services for transactions involving German, Japanese, and Spanish companies. Industry Expertise Chaim specializes in the electronics and renewable energy industries, though he has also been actively involved with companies in the industrial technology, building products, chemicals, office products, and manufacturing & distribution industries. He has relationships with leaders and active acquirers in the electronics industry as well as with contacts throughout the private equity community. Chaim has a strong understanding of the dynamics in the electronics industry, and a keen sense of what makes companies attractive and how best to position these to potential partners. Vice President Past Affiliations Prior to joining Lincoln International, Chaim worked in public accounting for Feeley and Driscoll, P.C. in Boston. Chaim advised and worked with companies in the technology, construction, healthcare, legal, and manufacturing & distribution industries. Chaim is a licensed CPA. Academic Credentials Chaim earned a Master of Business Administration degree from the Kellogg School of Management at Northwestern University, a Master of Engineering Management from the McCormick School of Engineering and Applied Science at Northwestern University, and a Bachelor of Science degree from Boston University with Honors. Role at Lincoln International Chaim leads or assists in leading deal teams and is active in marketing the services of Lincoln International. Chaim is a key member of the firm's Electronics and Renewable Energy groups and is heavily involved in executing transactions for these groups. Appendix A: Bios 25
    • IPC Validation Services QPL/QML Program Overview Randy Cherry – IPC Director of Validation Services EMS Management Council, PCB Supply Chain Leadership, and BZ2
    • Don’t Let This Happen To You!
    • You Need a Network of Trusted Sources!
    • What is Validation Services? – Series of programs that provide auditing and certification services to companies in the electronics manufacturing industry – They provide a technical in-depth look at the products or processes in accordance with IPC standards and TM-650 test methods – These programs provide verification of conformance to IPC standards through 3rd party testing – Offered to both IPC members and nonmembers
    • What are the Programs? – Qualified Products List (QPL) • Three programs based on J-STD-004, 005, and 006 standards – Solder Flux, Solder Paste, and Solder Alloys – Qualified Manufacturers List (QML) • Two programs based on J-STD-001/610 and the 6010 series of standards including 600 – Acceptability of Soldered Electrical and Electronic Assemblies and Qualification and Performance for Printed Boards (Rigid, Flex, and High Frequency Boards) including Acceptability of Printed Boards
    • These Programs Are Not! – Training Certificate • Having individuals certified to an IPC standard does not mean the facility is certified. • CIS, CIT, and MIT certificates are weighted heavily – ISO audit – Nadcap audit – Paper-Based Audit Program
    • Why is IPC Creating These Programs? – Address members’ needs for verification that companies can build products in accordance with IPC standards – Market research (survey) was conducted with OEM’s, EMS providers, and industry suppliers • 75% of the OEM Manager’s viewed a supplier qualification program as VAUABLE! – IPC Members are looking for Trusted Sources of Supply! – How do we offer Value and Fill the Gap that exists today with current IPC programs?
    • QPL & QML Value Add EMS OEM Products QPL QML
    • Enterprise & Product Level Certification  GAP
    • What are the Program Details? – Validation Services certifies the facility, qualifies the products or processes, and provides a list for industry members to use – Audits are conducted by trained personnel • Certified to IPC standards and have auditing experience – Certification is valid for three (3) years – Validation services only uses IPC approved test laboratories for 3rd party testing – All Proprietary Information is kept Confidential! – Once the program is completed, industry exposure is provided by IPC through several marketing initiatives
    • What are the Program Benefits? – Provides source of competitive advantage among peers – Reduces the customer audit timeline when conducting external quality assurance audits – Certifying facilities to specific IPC standards – Immediate access to a list of Trusted Suppliers – Online access to conformance information by product and facility – Exposure to global electronics supply chain via IPC website – Easy identification of IPC Trusted Suppliers through IPC branded logos and traceability
    • Who is Certified? – Indium Corporation of America • Clinton, N.Y. facility • 1st IPC J-STD-004 QPL Certificate – IEC Electronics Corporation • Newark, N.Y. and Albuquerque, N.M. facilities • 1st IPC J-STD-001/610 QML Certificate
    • Who Do I Contact for More Information? – Randy Cherry - CID CIT • Director of Validation Services • randycherry@ipc.org • +1 847-597-2806 – Tom Baggio • Director of Business Development • tombaggio@ipc.org • +1 847-597-2814 – www.ipc.org/validation
    • Thank You For Your Time
    • The Affordable Care Act—Summary of Employer Requirements
    • Provisions—January 1, 2014  Individual mandate—mandates all Americans, with some exceptions, to maintain a minimum level of health coverage or face a tax  Insurance Exchanges—creates health insurance Exchanges and provides premium tax credits to assist eligible individuals with the purchase of coverage  Medicaid expansion—allows states to expand Medicaid up to 133% of federal poverty level  Employer mandate—mandates employers with 50 or more full-time equivalents to offer coverage to full-time employees and their dependents or pay taxes if an employee obtains Exchange coverage and a premium tax credit (99+ employees delayed until 1/1/2015; 50-99 employees delayed until 1/1/2016)
    • Individual Mandate  The PPACA requires all American citizens and legal residents to purchase qualified health insurance coverage  In 2014, those without insurance will pay the greater of $95 or 1% of household income that exceeds personal exemption for that year  Starting in 2016, the penalties rise—the greater of $695 or 2.5% of income; these penalties apply to EACH family member without coverage  The maximum family penalty is the greater of 2.5% of income or three times the per-adult penalty ($2,085 in 2016)  All penalties are capped at the cost of the lowest-priced conventional plan on the exchanges
    • Individual Mandate  Exemptions to individual mandate  Financial hardship  Religious objections (see for reference IRS Sec. 1402(g)(1))  American Indians  Those without coverage for less than three months  Undocumented immigrants, incarcerated individuals  Those for whom the lowest cost plan options exceeds 8% of an individual’s income, and those with incomes below the tax filing threshold
    • Exchanges & Individual Market  Coverage must be offered on a guarantee-issue basis in all markets and be guarantee renewable  Exclusions based on pre-existing conditions would be prohibited in all markets  Full prohibition on “essential benefit” annual and lifetime limits in all group (including self-funded plans) or individual plans  Premium rating rules are modified community rating with age-rated bands based on a 3 to 1 ratio
    • Exchanges & Individual Market  It creates sliding-scale tax credits for non-Medicaid eligible individuals with incomes up to 400% of FPL (can be up to $90,000 for a family of 4) to buy coverage through the exchange  The requirement that the subsidies are only available through the exchange is significant  It is a particular threat to employer plans due to other provisions that allow employees to opt out of employer sponsored coverage
    • Basic Employer Coverage Rules  Large employers may be subject to an excise tax if—  At least one full-time employee whose household income is between 100% and 400% of the federal poverty level  Receives a premium tax credit for Exchange coverage and an employer either—  Fails to offer coverage to full-time employees and their dependents  Offers coverage to full-time employees that does not meet the law’s affordability or minimum value standards
    • Who is a Large Employer Under the ACA?  Any employer with 50+ full-time equivalents is considered a large employer  IRC §4980H applies to all common law employers, including governmental entities, churches, tax-exempt organizations with at least 50 full-time equivalent employees  Foreign companies with at least 50 full-time equivalent employees performing work in the US with US-source compensation
    • Determining Large Employer Status For Smaller Employers  For each calendar month of the preceding calendar year, employers must—  Count the number of full-time employees (including seasonal employees) who work on average 30 hours per week per month  Calculate the number of full-time equivalent employees by aggregating the number of hours worked by non-full-time employees (including seasonal employees) and dividing by 120  Add the number of full-time employees and full-time equivalents calculated in the previous steps for each of the 12 months in the preceding calendar year  Add the monthly totals and divide by 12. If the average exceeds 50 full- time equivalents, determine whether the seasonal employee exception applies
    • Determining Large Employer Status for Smaller Employers  Seasonal employee exception—IRC §4980H does not apply to employers whose workforce exceeds 50 full-time employees for no more than 120 days or four calendar months during a calendar year if the employees in excess of 50 who were employed during that period were seasonal employees. The 120 days or four calendar months are not required to be consecutive  For purposes of determining large employer status until further guidance is issued, employers may apply a reasonable, good-faith interpretation of the statutory definition of seasonal worker, including a reasonable, good-faith interpretation of the standard set forth under the DOL regulations at 29 CFR 500.20(s)(1)
    • Determining Large Employer Status for Smaller Employers  DOL regulation 29 CF 500.20(s)(1)—Labor is performed on a seasonal basis where, ordinarily, the employment pertains to or is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year. A worker who moves from one seasonal activity to another, while employed in agriculture or performing agricultural labor, is employed on a seasonal basis even though he may continue to be employed during a major portion of the year
    • Who is a Full-Time Employee Under the ACA?  Full-time employee—Defined as an employee who works on average 30 hours per week, per month or 130 hours of service per calendar month  Calculation for hourly and non-hourly employee  Hourly employees—Count actual hours served  Non-hourly employees—Select one of three methodologies that does not understate hours  Count actual hours  Days worked equivalence—Count 8 hours for each day credited with at least one hour of service  Weeks worked equivalence—Count 40 hours of service for each week credited with at least one hour of service
    • Who is a Full-Time Employee Under the ACA?  General rule—Employees who are classified or determined to be full time are eligible for the employer’s health plan after the applicable wait period not to exceed 90 days  Safe harbors—Available for part-time, seasonal, and variable hour employees to determine when they are treated as full-time employees
    • Employer Responsibilities  Employer mandate basics final rule  Employers must offer medical coverage that meets new standards to full-time employees and their dependent children up to age 26. New standards Coverage is “affordable” if employee contributions are less than 9.5% of—  Employee’s W-2 wages  Employee’s monthly wages (hourly rate x 130 hours per month), OR  Federal Poverty Level for a single individual A plan must pay 60% of the costs of covered health services to be considered as providing “minimum value.”
    • Employer Responsibilities Effective for plans beginning in 2015—  50-99 full-time employees—Does not apply  100 or more full-time employees  Employer must offer coverage to 70% of full-time employees
    • Employer Responsibilities Effective for plans beginning in 2016—  50 or more full-time employees  Employer must offer coverage to 95% of full-time employees
    • Employer Responsibilities  Transition Rules—Employer Mandate Delay For employers with 0- 99 full-time employees and equivalents  These employers are not subject to penalties in 2015  Numerous requirements must be met
    • Transition Rules—Employer Mandate Delay For Employers With 50-99 Full-Time Employees  Between 2/9/14 - 12/31/14—Employer cannot reduce size of workforce or employees’ overall hours of service to get below the 99-count threshold Unless for bona fide business reasons  “Coverage Maintenance Period”—Employer cannot eliminate or materially reduce health coverage it offered as of 2/9/14  Employer will have to certify to IRS that it met these requirements
    • Transition Rules— Non-Calendar Year Plans  Basic Requirements for All Three Types of Transitional Relief  Employer must have sponsored a non-calendar year plan as of 12/27/12  After 12/27/12, employer cannot have modified plan year to begin at later date  Employer must continue to sponsor non-calendar year plan in 2015  Plans beginning in 2015 must offer affordable, minimum value coverage
    • No Coverage  If an employer fails to provide its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage”, and  One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction, then  Employer penalty = $2,000 for each of its full-time employees in the workforce (not tax deductible)
    • Unaffordable Coverage  If the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and  One or more full-time employees enroll for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction because  The employee’s share of the premium will not exceed 9.5% of income, or  The actuarial value of the coverage was less than 60%, then  Employer penalty = $3,000 for each full-time employee who receives a tax credit or cost-sharing reduction
    • Other Responsibilities  Notice to current employees and new hires about exchange and subsidies  Existence of exchange, services and how to obtain assistance  Availability of premium assistance  Loss of employer contribution and tax exclusion for contributions  Notice must be provided in coordination with the annual open enrollment period for the Exchange
    • More Employer Responsibilities  The value of employer provided health insurance must be reported on W-2’s  New ten-page summary of benefits MUST be provided to employees for open enrollment of group-sponsored plans  Completion of form 5500 will become more complex  New requirements on claims and appeals are in place
    • Questions?
    • Program Overview March 24, 2014 Supply Chain Risk Management
    • About NetApp  $6 billion (Fortune 500)  Storage & data management  12,000 employees  150+ offices worldwide  Fortune’s Best Companies to Work For
    • Vision “Implement a Supply Chain Risk Management program that anticipates and mitigates exposure across our products and supply network.” 3
    • Incident & Crisis Management (FY13)  Business continuity planning  Crisis management & threat monitoring  Some level of mitigation NetApp’s SCRM Evolution Effectiveness and Impact OrganizationalEngagement Proactive Risk Management (FY14)  Further BCP assessment  BOM, supplier, & tooling assessment  Matured mitigation and enterprise metrics Resiliency Management (FY15+)  SC & HW design for resiliency  Resiliency embedded in processes (NPI & sustaining) 4
    • Elements of SC Risk Management Key Elements of Supply Chain Risk Management • Assess & mitigate risks through upfront sourcing strategies • Anticipate supplier disruption through predictive tools How Risk Enters Supply Chain Iterate • Real time monitoring for rapid response • Quickly assess potential impact • Playbook for decisive execution • “War games” to ensure organizational readiness • Map potential impacts to: – Programs – Customers/bookings pipeline – Enterprise Internal Decisions Component Selection Supplier Selection/Mgmt Tooling Investment External Events Natural Disaster Political Unrest Supplier Failure Supply Base Consolidation Risk Impacts Continuity of Supply Cost Trends 5
    • Risk Monitoring & Resiliency (real-time) Supply Chain Mapping (portal) BOM SUPPLIER Tooling “What is the $ impact, for x disruption, for n weeks?” • Financial alerts • Natural disasters • Disruption at site Site monitoring Internal playbook What-if scenario (snapshot) BOM SUPPLIER Product Assessment (portal) • Financial health • Quality • Delivery • Contracts • BCP “How robust is the product and its supply chain?” BOM risk assessment BCP assessment Financial health TOOLING 6
    • Risk Monitoring Incident Management 7
    • 9/11 Hurricane Katrina Hurricane Ike Global Recession Egyptian/ N. African Conflict Thailand Floods Dot Com Bubble Indonesia Tsunami Political Unrest Chengdu Earthquake EU Volcanic Eruption Japan Crisis 01 130704 1002 03 05 06 08 09 11 12 The “Why”: Disruption Unpredictability India Power Outage 14 Thailand Political Unrest
    • Incident Monitoring  Real-time incident & threat monitoring for NetApp supplier sites – Natural disasters – Geopolitical unrest – Health / pandemic – Man-made disasters – Terrorism, etc.  Redundant tools / team – 24/7 staffed monitoring team (Security group in SVL, RTP, Bangalore) – Automated alert notifications – Scalable, and customizable  Initial coverage: 95% global supplier sites 9
    • Case (Typhoon Usagi Sept-2013) Background: • 9/18/13 category 5 storm tracked by NetApp security group. • 9/19/13 Typhoon alters course and points toward Taiwan. • 9/19/13 NetApp SCM receives warning (2 days in advance). • 9/19/13 NetApp SCM coordinates with EMS to execute mitigation plans. • 9/20/13 EMS arrange for immediate logistics to avoid disruption. NetApp security monitoring NetApp SCM action Result: • EMS was able to ship product prior to transportation lanes being affected, resulting in zero impact to NetApp. 10
    • Resiliency Product Assessments 11
    • Product Resiliency Framework • Align on Risks • Prioritize • Approve • Execute • Improve / Control • Sourcing • Lifecycle • Environmentals • Availability • BCP • Contracts • Financial health • Revenue impact • Performance • Likelihood • Occurrence • Recovery time • Impact 12
    • Resiliency Assessment Philosophy RESILIENCY INDEX HIGH LOW 1 3 5 7 10 COMPONENT/BOM HIGH LOW 1 3 5 7 10 SUPPLIER HIGH LOW 1 3 5 7 10 TOOLING/EQUIPMENT 13
    • Component / BOM Scoring HIGH LOW 1 3 5 7 10 COMPONENT/BOM LIFECYCLE AVAILABILITY SOURCING ENVIRONMENTAL DESIGN / QUALIFICATION • Part lifecycle stage • Program end date • Part lead time • Worldwide channel inventory (6 mos) • Sole, single, multi-sourced • Supplier geo/site • Part compliance (RoHS, REACH, Conflict Minerals) • NetApp design status for part • NetApp qualification status for part example 14
    • Supplier Scoring HIGH LOW 1 3 5 7 10 SUPPLIER FINANCIAL BUSINESS CONTINUITY CONTRACTS PERFORMANCE • Debt, NI, current ratio, WC, equity, Frisk, payment • Monthly trending (2 yr history) • Currently “on file & assessed, on file, not on file” • Assessment for robustness with scoring • Currently “on file, not on file” • Assessment for protection with scoring • Limited to QBR/BBR suppliers (TQRDC) • Expanding to EMS controlled suppliers * *note: EMS controlled supplier performance data may be limited to quality & delivery data example 15
    • Tooling / Equipment Scoring HIGH LOW 1 3 5 7 10 TOOLING/EQUIPMENT RECOVERY TIME LIKELIHOOD OCCURENCE IMPACT TO REVENUE 16
    • Case Background: • Initial assessment for program • Cadence: 3 phases  Pre-pilot • Pilot • RTS • Components assessed: 914 • Component risk: 17 high, 42 med • Suppliers assessed: 65 • Supplier risk: 1 high, 1 med • Developed XX mitigation plans with SCM & Engineering Results: • Engaged with 2 med-high risk suppliers and closely monitoring financial performance • Partnered with EMS to qualify additional sources for single & sole sourced components • Partnered with EMS to secure inventory on highest risk supplier and components 17
    • Backup 18
    • BOM / Component Assessment(example) return 19
    • Supplier Assessment (example) return 20
    • Financial Assessment Current Process  Manual  Z-Score + DnB  As-needed  Reactive  Point in time  Not scalable Future Process  Automated  Multiple elements  Monthly  Predictive  Point in time + trend  Scalable Financial risk assessment team has developed an automated financial dashboard solution 21
    • Dashboard Output 22
    • Process Flow Financial Dashboard Output (w risk levels) Quantitative Risk Level Monitor on Monthly Cadence WatchlistCredit Assessment LOW RISK REPEAT Add to Watchlist YES NO MEDIUM / HIGH RISK REMOVAL 23
    • Supplier Watch list (concept) Financial Watch list 24