SANMINA-SCI CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	April 1,			October 1,
	2006			2005
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	625,206		$	1,068,053
Short-term investments	—			57,281
Accounts receivable, net	1,434,055			1,477,401
Inventories	1,159,351			1,015,035
Prepaid expenses and other current assets	134,612			129,387
Total current assets	3,353,224			3,747,157
Property, plant and equipment, net	630,157			662,101
Goodwill	1,668,082			1,689,198
Other intangible assets, net	33,450			35,907
Other non-current assets	82,844			81,874
Restricted cash	3,078			25,538
Total assets	$	5,770,835		$	6,241,775

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	523,683		$	1,439
Accounts payable	1,402,136			1,559,172
Accrued liabilities	273,952			366,920
Accrued payroll and related benefits	151,541			146,687
Total current liabilities	2,351,312			2,074,218
Long-term liabilities:
Long-term debt, net of current portion	978,768			1,644,666
Other	131,322			143,873
Total long-term liabilities	1,110,090			1,788,539
Commitments and contingencies
Stockholders’ equity:
Preferred stock	—			—
Common stock	5,512			5,457
Treasury stock	(187,897		)	(188,519		)
Additional paid-in capital	5,755,236			5,745,125
Accumulated other comprehensive income	35,301			36,886
Accumulated deficit	(3,298,719		)	(3,219,931		)
Total stockholders’ equity	2,309,433			2,379,018
Total liabilities and stockholders’ equity	$	5,770,835		$	6,241,775

See accompanying notes.

SANMINA-SCI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Six Months Ended
	April 1, 2006			April 2, 2005			April 1, 2006			April 2, 2005
	(Unaudited)
	(In thousands, except per share data)

Net sales	$	2,668,418		$	2,885,402		$	5,530,215		$	6,138,108
Cost of sales	2,503,810			2,735,235			5,195,927			5,810,974
Gross profit	164,608			150,167			334,288			327,134
Operating expenses:
Selling, general and administrative	86,890			87,253			175,600			174,676
Research and development	10,434			7,278			19,351			14,768
Amortization of intangible assets	2,071			2,071			4,304			4,101
Restructuring costs	20,593			57,636			56,221			78,061
Goodwill impairment	—			600,000			—			600,000
Total operating expenses	119,988			754,238			255,476			871,606

Operating income (loss)	44,620			(604,071		)	78,812			(544,472		)
Interest income	5,091			5,778			11,016			9,285
Interest expense	(32,989		)	(41,535		)	(67,237		)	(71,591		)
Loss on extinguishment of debt	(112,166		)	—			(112,166		)	—
Other expense, net	(1,417		)	(5,254		)	(363		)	(4,984		)
Interest and other expense, net	(141,481		)	(41,011		)	(168,750		)	(67,290		)

Loss before income taxes and cumulative effect of accounting change	(96,861		)	(645,082		)	(89,938		)	(611,762		)
Provision for (benefit from) income taxes	6,559			390,426			(6,398		)	399,380
Loss before cumulative effect of accounting change	(103,420		)	(1,035,508		)	(83,540		)	(1,011,142		)
Cumulative effect of accounting change, net of tax	—			—			4,752			—
Net loss	$	(103,420	)	$	(1,035,508	)	$	(78,788	)	$	(1,011,142	)

Net loss per share before cumulative effect of accounting change:
Basic	$	(0.20	)	$	(1.99	)	$	(0.16	)	$	(1.95	)
Diluted	$	(0.20	)	$	(1.99	)	$	(0.16	)	$	(1.95	)

Net loss per share:
Basic	$	(0.20	)	$	(1.99	)	$	(0.15	)	$	(1.95	)
Diluted	$	(0.20	)	$	(1.99	)	$	(0.15	)	$	(1.95	)

Weighted average shares used in computing per share amounts:
Basic	525,256			519,700			524,784			519,453
Diluted	525,256			519,700			524,784			519,453

See accompanying notes.

SANMINA-SCI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	April 1, 2006			April 2, 2005
	(Unaudited)
	(In thousands)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss	$	(78,788	)	$	(1,011,142	)
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Restructuring non-cash costs	21,069			6,999
Depreciation and amortization	71,601			95,138
Recovery of provision for doubtful accounts	(571		)	(3,036		)
Stock-based compensation	2,810			5,102
Cumulative effect of accounting change, net of tax	(4,752		)	—
Gain on disposal of property, plant and equipment	(902		)	(1,016		)
Proceeds from sale of accounts receivable	694,772			—
Deferred tax asset valuation allowance	—			379,239
Goodwill impairment	—			600,000
Loss on extinguishment of debt	112,166			6,127
Other, net	701			438
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(654,203		)	104,886
Inventories	(129,113		)	122,420
Prepaid expenses and other current and non-current assets	4,346			(16,153		)
Income tax accounts	(21,666		)	10,032
Restricted cash	—			(24		)
Accounts payable and accrued liabilities	(172,903		)	(125,046		)
Cash provided by (used in) operating activities	(155,433		)	173,964
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of short-term investments	(17,755		)	(27,917		)
Proceeds from maturities and sale of short-term investments	74,796			25,926
Purchases of long-term investments	(748		)	(765		)
Purchases of property, plant and equipment	(70,101		)	(31,137		)
Proceeds from sale of property, plant and equipment	7,426			24,875
Cash paid for businesses acquired, net of cash acquired	(44,644		)	(83,033		)
Cash used in investing activities	(51,026		)	(92,051		)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Change in restricted cash	22,460			—
Payments of long-term debt	(750,929		)	(12,148		)
Payments of long-term liabilities	—			(2,750		)
Payments of notes and credit facilities	(455		)	(14,506		)
Proceeds from long-term debt, net of issuance cost	587,123			403,307
Repurchase of convertible notes	(543		)	(398,726		)
Interest rate swap termination associated with debt extinguishment	(29,785		)	—
Redemption premium associated with debt extinguishment	(70,751		)	—
Proceeds from sale of common stock	12,109			10,363
Cash used in financing activities	(230,771		)	(14,460		)
Effect of exchange rate changes	(5,617		)	(4,069		)
Increase (decrease) in cash and cash equivalents	(442,847		)	63,384
Cash and cash equivalents at beginning of period	1,068,053			1,069,447
Cash and cash equivalents at end of period	$	625,206		$	1,132,831
Supplemental disclosures of cash flow information:
Cash paid during the quarter
Interest	$	71,749		$	42,735
Income taxes	$	25,407		$	12,104

See accompanying notes.

SANMINA-SCI CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The accompanying condensed consolidated financial statements of Sanmina-SCI Corporation (“Sanmina-SCI”, “we”, “our”, “the Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules or regulations. The interim financial statements are unaudited, but reflect all normal recurring adjustments and non-recurring adjustments that are, in the opinion of management, necessary for a fair presentation.

We operate on a 52 or 53 week fiscal year that ends on the Saturday nearest September 30. Fiscal year 2006 and 2005 are 52 week fiscal years in which each quarter was comprised of 13 weeks. All general references to years relate to fiscal years unless otherwise noted.

The results of operations for the six months ended April 1, 2006, are not necessarily indicative of the results that may be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended October 1, 2005, included in Sanmina-SCI’s Annual Report on Form 10-K.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Cash and cash equivalents and long-term debt decreased by approximately $25.5 million at April 2, 2005, due to the reclassification of certain overdraft facilities to cash. As a result, payments of notes and credit facilities in the Condensed Consolidated Statements of Cash Flows decreased by approximately $11.5 million for the six months ended April 2, 2005.

In addition, we have reclassified certain other prior balances to conform to the current period’s presentation.

Recent Accounting Pronouncements.

In March 2005, the Financial Accounting Standards Board (“FASB”) issued Financial Accounting Standards Board Interpretation (“FIN”) 47 as an interpretation of SFAS No. 143 “Accounting for Asset Retirement Obligations.” This interpretation clarifies that the term conditional asset retirement obligation as used in SFAS No. 143 refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. This interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. We do not anticipate that the adoption of this standard will have a material impact on our financial position or results of operations.

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140”, an amendment to FASB Statements No. 133, “Accounting for Derivative Instruments And Hedging Activities”, and No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial

If compensation expense for the Company’s various equity compensation plans had been determined based upon estimated fair values at the grant dates in accordance with SFAS No. 123, the Company’s pro forma net loss, and basic and diluted loss per common share for stock options granted prior to the adoption of SFAS No. 123R would have been as follows (in thousands, except for per share data):

	Three Months Ended			Six Months Ended
	April 2, 2005			April 2, 2005
	(in thousands, except per share data)
Net loss:
As reported	$	(1,035,508	)	$	(1,011,142	)
Stock-based employee compensation expense included in reported net loss, net of tax	1,433			3,163
Stock-based employee compensation expense determined under fair value method, net of tax	(13,552		)	(29,164		)
Pro forma	$	(1,047,627	)	$	(1,037,143	)
Basic earnings per share:
As reported	$	(1.99	)	$	(1.95	)
Pro forma	$	(2.02	)	$	(2.00	)
Diluted earnings per share:
As reported	$	(1.99	)	$	(1.95	)
Pro forma	$	(2.02	)	$	(2.00	)

Total stock compensation expense for the three and six months ended April 1, 2006 and April 2, 2005, respectively, are represented by expense categories in the table below:

	Three Months Ended					Six Months Ended
	April 1,			April 2,		April 1,		April 2,
	2006			2005		2006		2005
	(In thousands)					(In thousands)
Cost of sales	$	0.2		$	0.6	$	1.6	$	1.5
Selling, general & administrative	(1.4		)	1.7		1.0		3.2
Research & development	0.1			—		0.2		—
	$	(1.1	)	$	2.3	$	2.8	$	4.7

The reversal of compensation expense for the three months ended April 1, 2006 was due to a change in the estimated forfeiture rate of the restricted shares.

Stock Options

Our stock option plans provide our employees the right to purchase common stock at the fair market value of such shares on the grant date. New hire options cliff vest 20% at the end of year one and then vest ratably each month, thereafter, for the remaining four years. Merit options vest ratably each month over a five-year period. The contract term of the options is ten years.

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions noted in the following table. The expected life of options is based on observed historical exercise patterns. The expected volatility is an equally weighted blend of implied volatilities from traded options on our stock having a life of more than one year and historical volatility over the expected life of the options. The risk free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield reflects that we have not paid any dividends and have no intention to pay dividends in the foreseeable future.

The assumptions used for the three and six months ended April 1, 2006 and April 2, 2005 are presented below:

	Three Months Ended				Six Months Ended
	April 1,		April 2,		April 1,		April 2,
	2006		2005		2006		2005
Volatility	60	%	75	%	57	%	75	%
Risk-free interest rate	4.55	%	4.13	%	4.45	%	4.13	%
Dividend yield	0	%	0	%	0	%	0	%
Expected life of options	5.7 years		4.4 years		5.6 years		4.4 years

We recorded approximately $711,000 and $1.3 million of compensation expense related to stock options for the three and six months ended April 1, 2006, respectively, in accordance with SFAS No. 123R. A summary of stock option activity under the plans for the three and six months ended April 1, 2006 is presented as follows:

Summary Details for Plan Share Options

	Number of Shares		Weighted- Average Exercise Price ($)	Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value of In-The-Money Options ($)
Outstanding , October 1, 2005	57,238,066		8.98
Granted	2,289,700		4.12
Exercised	(1,809,700	)	3.10
Cancelled/Forfeited/Expired	(1,905,146	)	7.71
Outstanding, December 31, 2005	55,812,920		9.01	6.66
Exercisable, December 31, 2005	50,124,650		9.42	6.60
Outstanding, December 31, 2005	55,812,920		9.01	6.66
Granted	646,300		4.13
Exercised	(364,300	)	3.50
Cancelled/Forfeited/Expired	(4,691,479	)	9.55
Outstanding, April 1, 2006	51,403,441		8.94	6.46	894,566

Vested and expected to vest, April 1, 2006	50,683,933		9.01	6.42	830,562
Exercisable, April 1, 2006	47,171,040		9.37	6.25	518,067

The weighted-average grant date fair value of stock options granted during the three and six months ended April 1, 2006, was $2.41 and $2.22, respectively. The weighted-average grant date fair value of stock options granted during the three and six months ended April 2, 2005, was $3.56 and $4.19, respectively. The total intrinsic value of stock options exercised during the three and six months ended April 1, 2006 was $0.2 million and $2.6 million, respectively. The total intrinsic value of stock options exercised during the three and six months ended April 2, 2005 was $1.6 million and $3.4 million, respectively. The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value of in-the-money options based on the Company’s closing stock price of $4.10 as of April 1, 2006, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options exercisable as of April 1, 2006 was 3.1 million and the weighted average exercise price was $3.93.

At April 1, 2006, an aggregate of 94.9 million shares were authorized for future issuance under our stock plans, which covers stock options, employee stock purchase plans, and restricted stock awards. A total of 34.8 million shares of common stock were available for grant under our stock option plans as of April 1, 2006. Awards that expire or are cancelled without delivery of shares generally become available for issuance under the plans.

As of April 1, 2006, there was $8.5 million of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of 3.6 years.

Employee Stock Purchase Plan

In fiscal 2003, the Board of Directors and stockholders of the Company approved the 2003 Employee Stock Purchase Plan (the “2003 ESPP”). The maximum number of shares of common stock available for issuance under the 2003

ESPP is nine million shares. On February 27, 2006 an additional six million shares were reserved under the 2003 Employee Stock Purchase Plan, (refer to Item. 4 Submission of Matters a 9 Vote of Security Holders). Under the 2003 ESPP, employees may purchase, on a periodic basis, a limited number of shares of common stock through payroll deductions over a six-month period. The per share purchase price is 85% of the fair market value of the stock at the beginning or end of the offering period, whichever is lower.

We have treated the Employee Stock Purchase Plan as a compensatory plan and have recorded compensation expense of approximately $0.6 million and $1.9 million for the three and six months ended April 1, 2006 in accordance with SFAS 123R.

The assumptions used for the three and six month periods ended April 1, 2006 and April 2, 2005 are presented below:

	Three Months Ended				Six Months Ended
	April 1, 2006		April 2, 2005		April 1, 2006		April 2, 2005
Volatility	50	%	75	%	51	%	75	%
Risk-free interest rate	4.59	%	4.13	%	4.48	%	4.13	%
Dividend yield	0	%	0	%	0	%	0	%
Expected life	0.5 years		0.5 years		0.5 years		0.5 years

Restricted Stock Awards

We grant awards of restricted stock to executive officers, directors and certain management employees. These awards cliff vest at various periods ranging from one to four years.

Compensation expense computed under the fair value method for the three and six months ended April 1, 2006, was $(2.4) and $(0.5) million, respectively. The reversal of compensation expense for the three and six months ended April 1, 2006 was due to a change in estimated forfeiture rate. Compensation expense computed under the intrinsic value method for the three and six months ended April 2, 2005 is being amortized over the vesting period and was approximately $2.3 million and $4.7 million, respectively.

The weighted-average grant date fair value of the restricted stock options granted in the three and six month periods ended April 1, 2006 was $4.07 and $4.13, respectively. The weighted-average grant date fair value of the restricted stock options granted in the three and six month periods ended April 2, 2005 was $5.47 and $6.38, respectively. At April 1, 2006, unrecognized cost related to restricted stock awards totaled approximately $15.5 million. These costs are expected to be recognized over a weighted average period of 1.6 years.

A one-time, non-cash benefit of approximately $4.8 million for estimated future forfeitures of restricted stock previously expensed was recorded as of the SFAS No. 123R implementation date as a one-time benefit and reported as a cumulative effect of accounting change, net of tax. Pursuant to Accounting Principles Board Opinion No. 25 (“APB 25”), stock compensation expense was not reduced for estimated future forfeitures, but instead was reversed upon actual forfeiture.

A summary of the status of the Company’s nonvested restricted shares for the three and six month periods ended April 1, 2006 are presented below:

	Number of Shares		Weighted Average Grant-Date Fair Value ($)
Nonvested at October 1, 2005	3,845,292		9.82
Granted	50,000		4.37
Vested	—		—
Forfeited	(528,000	)	10.44
Nonvested at December 31, 2005	3,367,292		9.64

Granted	181,198		4.07
Vested	—		—
Forfeited	(217,500	)	9.22
Nonvested at April 1, 2006	3,330,990		9.36

Performance Restricted Share Plan

During the three month period ended December 31, 2005, the Company’s Compensation Committee approved the issuance of approximately 2.5 million performance restricted units at a weighted-average grant date fair value of $4.02 per unit to selected executives and other key employees. The units are automatically exchanged for vested shares when certain performance targets are met.

The Company did not record any compensation expense for the three and six month periods ended April 1, 2006, respectively as the Company had not met the performance probability level required. The total unrecognized compensation expense to be recognized over the three years would be approximately $10 million, assuming the performance targets are achieved.

Note 3. Debt

8.125% Senior Subordinated Notes. On February 15, 2006, the Company issued $600 million aggregate principal amount of 8.125% Senior Subordinated Notes due 2016 (“the 8.125% Notes”). Interest is payable on the 8.125% Notes on March 1 and September 1 of each year, beginning on September 1, 2006. The maturity date of the 8.125% Notes is March 1, 2016. Debt issuance costs of $12.9 million are included in prepaid expenses and other current assets and other non-current assets and amortized over the life of the debt as interest expense.

The 8.125% Notes are unsecured and will be subordinated in right of payment to all of the Company’s existing and future senior debt. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated unsecured basis by substantially all of the Company’s domestic restricted subsidiaries (the “Guarantors”) for so long as those subsidiaries guarantee any of the Company’s other debt (other than the 6.75% Senior Subordinate Notes due March 1, 2013 of the Company, unregistered senior debt and debt under the company’s senior secured credit facility). In the event that all of the 10.375% Notes are repurchased or redeemed, the guarantees by the Guarantors under the Notes could be released. Notwithstanding the foregoing, Sanmina-SCI USA, Inc., a Delaware corporation, will continue to guarantee the 8.125% Notes and the 6.75% Senior Subordinated Notes for so long as it guarantees the 3% Convertible Subordinated Notes.

The Company may redeem the 8.125% Notes, in whole or in part, at any time prior to March 1, 2011, at a redemption price that is equal to the sum of (1) the amount of the 8.125% Notes to be redeemed, (2) accrued and unpaid interest on those 8.125% Notes and (3) a make-whole premium calculated in the manner specified in the Indenture. The Company may redeem the 8.125% Notes, in whole or in part, beginning on March 1, 2011, at redemption prices ranging from 100% to 104.063% of the principal amount of the 8.125% Notes, plus accrued and unpaid interest to, but excluding, the redemption date, with the actual redemption price to be determined based on the date of redemption. At any time prior to March 1, 2009, the Company may redeem up to 35% of the 8.125% Notes with the proceeds of certain equity offerings at a redemption price equal to 108.125% of the principal amount of the 8.125% Notes, plus accrued and unpaid interest to, but excluding, the redemption date.

Following a change of control, as defined in the Indenture, the Company will be required to make an offer to repurchase all or any portion of the 8.125% Notes at a purchase price of 101% of the principal amount, plus accrued and unpaid interest to, but excluding, the date of repurchase.

The 8.125% Notes Indenture includes covenants that limit the ability of the Company and its restricted subsidiaries to, among other things: incur additional debt, make investments and other restricted payments, pay dividends on capital stock, or redeem or repurchase capital stock or subordinated obligations; create specified liens; sell assets; create or permit restrictions on the ability of the Company’s restricted subsidiaries to pay dividends or make other distributions to us; engage in transactions with affiliates; incur layered debt; and consolidate or merge with or into other companies or sell all or substantially all of the Company’s assets. The restrictive covenants are subject to a number of important exceptions and qualifications set forth in the Indenture.

The 8.125% Notes Indenture provides for customary events of default, including:

• payment defaults

• breaches of covenants

• certain payment defaults at final maturity

• acceleration of other indebtedness

• failure to pay certain judgments

• certain events of bankruptcy, insolvency and reorganization

• certain instances in which a guarantee ceases to be in full force and effect

If any event of default occurs and is continuing, subject to certain exceptions, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 8.125% Notes may declare all the 8.125% Notes to be due and payable immediately, together with any accrued and unpaid interest, if any, to the acceleration date. In the case of an event of default resulting from certain events of bankruptcy, insolvency or reorganization, such amounts with respect to the 8.125% Notes will be due and payable immediately without any declaration or other act on the part of the trustee or the holders of the 8.125% Notes.

10.375% Senior Secured Notes due 2010. On February 28, 2006, the Company completed an Offer to Purchase and Consent Solicitation (the “Offer to Purchase”) for any or all of its $750 million 10.375% Notes at a total consideration of $1,103.17 for each $1,000 principal amount. The total consideration amount represents the present value of the remaining scheduled payments of principal and interest on the 10.375% Notes due in January 15, 2007 (which is the earliest redemption date for the 10.375% Notes) determined using a discount factor equal to the yield on the Price Determination Date of February 13, 2006 of the 3% U.S. Treasury Notes due December 31, 2006 plus 50 basis points, and includes a consent fee plus accrued and unpaid interest. In conjunction with the offer, the Company solicited consents to proposed amendments to the indenture governing the 10.375% Notes, which eliminated substantially all of the restrictive covenants and certain events of default in the indenture. The Company offered a consent payment (which is included in the total consideration described above) of $30.00 per $1,000 principal amount of 10.375% Notes to holders who validly tendered their 10.375% Notes and delivered their consents prior to the Consent Payment Deadline of February 13, 2006. Holders who tendered their 10.375% Notes after the Consent Payment Deadline but prior to the expiration date received total consideration referred to above, less the consent payment.

The Company redeemed approximately $721.7 million in aggregate principal amount of the 10.375% Notes pursuant to the Company’s Offer to Purchase and used all of the net proceeds of $588 million from the issuance of the 8.125% Notes, together with approximately $239.2 million cash on hand (including a release of $22.5 million in restricted cash associated with the interest rate swap related to the 10.375% Senior Secured Notes) to repurchase the 10.375% Notes.

On February 16, 2006, the Company called for a full redemption on March 20, 2006, (the “Redemption Date”) of all the remaining outstanding 10.375% Notes. The aggregate principal amount outstanding was approximately $28.3 million. The total consideration amount of $1,108.56 for each $1,000 principal amount was calculated based on the principal amount of the Notes, plus accrued and unpaid interest to but excluding the redemption date, plus the make-whole premium amounting to approximately $31.3 million. The 10.375% Notes were redeemed in full on March 20, 2006, and no further interest was accrued.

The Company recorded a loss of approximately $112.2 million from the early extinguishment of the $750 million 10.375% Notes which is comprised of approximately $70.8 million of redemption premium, $26.6 million related to interest rate swap termination (net of $3.2 million unamortized gain from previously terminated swaps), $13.9 million unamortized finance fees relating to the 10.375% Notes and $0.9 million of tender expenses. The loss on debt extinguishment is included as part of interest and other expense, net in the accompanying Condensed Consolidated Statement of Operations.

Senior Credit Facility. We have up to $500 million available for borrowings under our senior secured credit facility which includes up to $150 million for letters of credit. We entered into an Amended and Restated Credit and Guaranty Agreement, dated as of December 16, 2005, among us, certain of our subsidiaries, as guarantors, and the lenders that are parties thereto from time to time (the “Restated Credit Agreement”). The Restated Credit Agreement amended and restated our Credit and Guaranty Agreement, dated as of October 26, 2004 (the “Original Credit Agreement”) among other things, to:

• Extend the maturity date from October 26, 2007 to December 16, 2008;

• Amend the leverage ratio;

• Permit us and the guarantors to sell domestic receivables pursuant to factoring or similar arrangements if certain conditions are met; and

• Revise the collateral release provisions.

At any time the aggregate face amount of domestic receivables sold by us and the guarantors together with any outstanding amounts exceeds the thresholds set forth in the Restated Credit Agreement, the revolving credit commitments for purposes of making loans and issuing letters of credit will be zero. The Restated Credit Agreement provides for the release of

the security interests in our and the guarantors’ accounts receivable at such time as specified conditions are met, including that we have paid at least 85% of the original principal amount of our 10.375% Senior Subordinated Notes, the liens granted there under have been released and our credit ratings meet specified thresholds. The Restated Credit Agreement provides for the collateral (other than stock pledges and other collateral we request not to be released) to be released at such time as specified conditions are met, including that we have paid at least 85% of the principal amount of the SCI Systems 3% Convertible Subordinated Notes due 2007 and our credit ratings meet specified thresholds. If following the release of any portion of the collateral pursuant to the provisions of the credit agreement described above, our credit ratings fall below specified thresholds, then we are required to take such actions as are necessary to grant and perfect a security interest in the assets and properties that would at that time comprise the collateral if the relevant collateral documents were still in effect.

There are currently no loans outstanding under the senior secured credit facility as of April 1, 2006.

The Company was in compliance with the covenants under its debt and credit facilities as of April 1, 2006.

Note 4. Inventories

The components of inventories, net of provisions, are as follows:

	As of
	April 1, 2006		October 1, 2005
	(In thousands)
Raw materials	$	802,479	$	654,384
Work-in-process	226,423		242,659
Finished goods	130,449		117,992
	$	1,159,351	$	1,015,035

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs”, an amendment of ARB No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) should be recognized as current period charges, and that fixed production overheads should be allocated to inventory based on normal capacity of production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of SFAS No. 151 did not have a significant impact on our results of operations or financial position.

Note 5. Goodwill and Other Intangible Assets

During fiscal 2005 year end, we realigned our reporting structure based on different types of manufacturing services offered to our customers. As a result, our operating segments changed (refer to footnote 13 of the Notes to Condensed Consolidated Financial Statements). Pursuant to SFAS No. 142 “Goodwill and Other Intangible Assets”, the change in operating segments resulted in the identification of two new reportable units. In the previous fiscal year, our reporting units were based on geographical locations (domestic and international). We conducted a relative fair value analysis of the two new reporting units (Personal Computing and Electronic Manufacturing Services) as of April 1, 2006 using an income and market approach. As a result of the analysis, management concluded that $89 million and $1,579 million of goodwill were attributable to the Personal Computing and Electronic Manufacturing Services reporting units, respectively.

On a consolidated basis, goodwill decreased from $1,689 million as of October 1, 2005 to $1,668 million as a result of adjustments to goodwill of $40 million, offset by additions to goodwill of $19 million.

Adjustments to goodwill primarily represent a one-time favorable income tax adjustment relating to the conclusion of our U.S. tax audits with the Congressional Joint Committee on Taxation (refer to footnote 12 of the Notes to Condensed Consolidated Financial Statements) during the first quarter of fiscal 2006. The conclusion of the tax audits resulted in a benefit of $27.9 million to the income tax provision and in addition, $36.1 million was recorded as an adjustment to goodwill for pre-merger tax items associated with SCI Systems, a subsidiary of the Company.

The additions to consolidated goodwill are primarily due to contingent earnouts and two insignificant acquisitions during the current period. The Company is in the process of completing the purchase accounting for the two acquisitions. Upon completion of the purchase accounting, the Company will adjust the Electronic Manufacturing Services goodwill accordingly.

The gross and net carrying values of other intangible assets at April 1, 2006 and October 1, 2005 are as follows (in

thousands):

	As of April 1, 2006							As of October 1, 2005
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Other intangible assets	$	61,850	$	(28,400	)	$	33,450	$	59,977	$	(24,070	)	$	35,907

Intangible asset amortization expense was $2.1 million for the three month periods ended April 1, 2006 and April 2, 2005. Intangible asset amortization expense for the six month periods ended April 1, 2006 and April 2, 2005, was approximately $4.3 million and $4.1 million, respectively.

Estimated annual amortization expense for other intangible assets at April 1, 2006 is as follows:

Fiscal Years:	(In thousands)
2006 (remainder)	$	4,382
2007	8,771
2008	8,771
2009	3,950
2010	2,295
2011	1,837
Thereafter	3,444
	$	33,450

Note 6. Comprehensive Income

SFAS No. 130, “Reporting Comprehensive Income”, establishes standards for the reporting of comprehensive income and its components. SFAS No. 130 requires companies to report “comprehensive income” that includes unrealized holding gains and losses and other items that have previously been excluded from net income and reflected instead in stockholders’ equity.

The components of other comprehensive loss for the three and six month periods ended April 1, 2006 and April 2, 2005 were as follows:

	Three Months Ended						Six Months Ended
	April 1, 2006			April 2, 2005			April 1, 2006			April 2, 2005
	(In thousands)
Net loss	$	(103,420	)	$	(1,035,508	)	$	(78,788	)	$	(1,011,142	)
Other comprehensive income (loss):
Foreign currency translation adjustment	9,708			(6,387		)	(1,339		)	10,969
Unrealized holding losses on investments	(7		)	(393		)	(240		)	(94		)
Minimum pension liability	(22		)	(125		)	(6		)	(51		)
Comprehensive loss	$	(93,741	)	$	(1,042,413	)	$	(80,373	)	$	(1,000,318	)

Accumulated other comprehensive income, net of tax as applicable, consists of the following:

	As of
	April 1, 2006			October 1, 2005
	(In thousands)
Foreign currency translation adjustment	$	44,892		$	46,231
Unrealized holding gains on investments and derivative financial instruments	—			240
Minimum pension liability	(9,591		)	(9,585		)
Total accumulated other comprehensive income	$	35,301		$	36,886

Note 7. Earnings Per Share

Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share includes dilutive common stock equivalents, using the treasury stock

method, and assumes that the convertible debt instruments were converted into common stock upon issuance, if dilutive. The compensation cost will be recognized under SFAS No. 123R only for awards that are expected to vest (determined by applying the pre-vesting forfeiture rate assumption), all options or shares outstanding that have not been forfeited would be included in diluted earnings per share. The amount of stock-based compensation cost in the numerator includes a forfeiture rate assumption while the number of shares in the denominator does not.

Basic and diluted net loss per common share for the three and six months ended April 1, 2006, were not materially impacted by the implementation of SFAS No. 123R.

The following table sets forth the calculation of basic and diluted loss per share:

	Three Months Ended						Six Months Ended
	April 1, 2006			April 2, 2005			April 1, 2006			April 2, 2005
	(In thousands, except per share data)
Numerator:
Loss before cumulative effect of accounting change	$	(103,420	)	$	(1,035,508	)	$	(83,540	)	$	(1,011,142	)
Cumulative effect of accounting change, net of tax	—			—			4,752			—
Net loss	$	(103,420	)	$	(1,035,508	)	$	(78,788	)	$	(1,011,142	)

Denominator:
Weighted average number of shares—basic	525,256			519,700			524,784			519,453
Effect of dilutive potential common shares	—			—			—			—
Weighted average number of shares—diluted	525,256			519,700			524,784			519,453

Net loss per share before cumulative effect of accounting change
—basic	$	(0.20	)	$	(1.99	)	$	(0.16	)	$	(1.95	)
—diluted	$	(0.20	)	$	(1.99	)	$	(0.16	)	$	(1.95	)
Net loss per share
—basic	$	(0.20	)	$	(1.99	)	$	(0.15	)	$	(1.95	)
—diluted	$	(0.20	)	$	(1.99	)	$	(0.15	)	$	(1.95	)

The following table summarizes the weighted average dilutive securities that were excluded from the above computation of diluted net loss per share because their inclusion would have an anti-dilutive effect:

	Three Months Ended		Six Months Ended
	April 1, 2006	April 2, 2005	April 1, 2006	April 2, 2005
Employee stock options	52,976,191	47,891,616	53,914,608	48,182,650
Restricted stock	1,679,402	3,861,111	1,843,633	2,264,917
Shares issuable upon conversion of 4% notes	—	2,646,282	3,134	5,030,676
Shares issuable upon conversion of 3% notes	12,697,848	12,697,848	12,697,848	12,697,848
Total anti-dilutive shares	67,353,441	67,096,857	68,459,223	68,176,091

After-tax interest expense of $2.7 million and $10.5 million related to the Zero Coupon Convertible Subordinated Debentures and 3% Convertible Subordinated Notes for the three months ended April 1, 2006 and April 2, 2005, respectively, were not included in the computation of diluted loss per share because to do so would be anti-dilutive. After-tax interest expense of $5.4 million and $18.4 million for the six months ended April 1, 2006 and April 2, 2005, respectively, were not included in the computation of diluted loss per share because to do so would be anti-dilutive. In addition, the related share equivalents on conversion of the debt were not included as to do so would be anti-dilutive.

Note 8. Derivative Instruments and Hedging Activities

We enter into short-term foreign currency forward contracts to hedge only those currency exposures associated with

certain assets and liabilities denominated in foreign currencies. These contracts typically have maturities of three months or less. At April 1, 2006 and October 1, 2005, we had open forward contracts to exchange various foreign currencies for U.S. dollars in the aggregate notional amount of $439.6 million and $519.9 million, respectively. The net unrealized loss on the contracts at April 1, 2006 is not material and is recorded in accrued liabilities on the Condensed Consolidated Balance Sheets. Market value gains and losses on forward exchange contracts are recognized in the Condensed Consolidated Statement of Operations as offsets to the exchange gains and losses on the hedged transactions. The impact of these foreign exchange contracts was not material to the results of operations for the three and six months ended April 1, 2006.

We also utilized foreign currency forward and option contracts to hedge certain forecasted foreign currency sales and cost of sales referred to as cash flow hedges and these contracts typically expire within 12 months. Gains and losses on these contracts related to the effective portion of the hedges are recorded in other comprehensive income until the forecasted transactions occur. When the contracts expire, any amounts recorded in accumulated comprehensive income are reclassified to earnings. Gains and losses related to the ineffective portion of the hedges are immediately recognized on the Condensed Consolidated Statement of Operations. At April 1, 2006, we had forward and option contracts related to cash flow hedges in various foreign currencies in the aggregate notional amount of $60.6 million. The net unrealized loss on the contracts at April 1, 2006 is not material and is recorded in accrued liabilities on the Condensed Consolidated Balance Sheets. The impact of the foreign currency forward and option contracts was not material to the results of operations for the three and six months ended April 1, 2006.

We entered into interest rate swaps to hedge our mix of short-term and long-term interest rate exposures resulting from certain of our outstanding debt obligations. The swaps were designated as fair value hedges under SFAS No. 133. Management believes that the interest rate swaps meet the criteria established by SFAS No. 133 for short cut accounting; therefore, no portion of the interest swaps are treated as ineffective. At April 1, 2006 and October 1, 2005, $22.7 million and $32.7 million, respectively, have been recorded in other long-term liabilities to record the fair value of the interest rate swap transactions, with a corresponding decrease to the carrying values of the 10.375% and 6.75% Notes, respectively on the Condensed Consolidated Balance Sheet.

Additionally, approximately, $26.6 million of costs related to interest rate swap termination (net of $3.2 million gain from previously terminated swaps) were recorded related to the extinguishment of the 10.375% Senior Secured Notes during the three months ended April 1, 2006. The interest rate swap termination costs are included as part of the $112.2 million from the early extinguishment of debt (refer to footnote 3 of the Notes to Condensed Consolidated Financial Statements).

Our foreign exchange forward and option contracts expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We minimize such risk by limiting our counterparties to major financial institutions. We do not expect material losses as a result of default by counterparties.

Note 9. Sale of Accounts Receivable

Certain of the Company’s subsidiaries have entered into agreements that permit them to sell specified accounts receivable. The purchase price for receivable sold under these Agreements is equal to 100% of its face amount less a discount charge (based on LIBOR plus a spread) for the period from the date the receivable is sold to its collection date. These agreements provide for a commitment fee based on the unused portion of the facility. Accounts receivable sales under these Agreements were $346.6 million and $694.8 million for the three and six month periods ended April 1, 2006. The sold receivables are subject to certain limited recourse provisions. As of April 1, 2006, $197.7 million of sold accounts receivable remain subject to certain recourse provisions. We have not experienced any credit losses under these recourse provisions.

Note 10. Commitments and Contingencies

Environmental Matters. Primarily as a result of certain of our acquisitions, we have exposures associated with environmental contamination at certain facilities. These exposures include ongoing investigation and remediation activities at a number of sites.

We use an environmental consultant to assist in evaluating the environmental costs of the companies that we acquire as well as those associated with our ongoing operations, site contamination issues and historical disposal activities in order to establish appropriate accruals in our financial statements. As of April 1, 2006 and October 1, 2005, we had accrued $11.8 million and $13.5 million, respectively, for such environmental liabilities, which are recorded as other long-term liabilities in the Condensed Consolidated Balance Sheets.

Warranty Reserve. The following tables summarize the warranty reserve balance:

Balance as of							Balance as of
October 1,		Additions to		Accrual			April 1,
2005		Accrual		Utilized			2006
(in thousands)
$	20,867	$	7,199	$	(6,706	)	$	21,360

Balance as of							Balance as of
October 2,		Additions to		Accrual			April 2,
2004		Accrual		Utilized			2005
(in thousands)
$	15,827	$	9,362	$	(8,802	)	$	16,387

Litigation and other contingencies. From time to time, we are a party to litigation and other contingencies, including examinations by taxing authorities, which arise in the ordinary course of business. We believe that the resolution of such litigation and other contingencies will not materially harm our business, financial condition or results of operations.

Note 11. Restructuring Costs

Costs associated with restructuring activities initiated on or after January 1, 2003, other than those activities related to purchase business combinations, are accounted for in accordance with SFAS No. 146 and SFAS No. 112, where applicable. Accordingly, costs associated with such plans are recorded as restructuring costs in the Condensed Consolidated Statements of Operations when a liability is incurred. Restructuring costs are recorded when probable and estimable. Accrued restructuring costs are included in “accrued liabilities” in the Condensed Consolidated Balance Sheets. Below is a summary of the activity related to restructuring costs recorded pursuant to SFAS No. 146 and SFAS No. 112 through the second quarter of fiscal year 2006:

	Employee Termination Benefits			Lease and Contract Termination Costs			Other Restructuring Costs			Impairment of Fixed Assets			Total
	(In thousands)
	Cash			Cash			Cash			Non-Cash
Balance at September 27, 2003	$	3,870		$	1,462		$	—		$	—		$	5,332
Charges to operations	59,076			11,186			18,890			18,079			107,231
Charges utilized	(45,618		)	(9,677		)	(18,848		)	(18,079		)	(92,222		)
Reversal of accrual	(1,832		)	(1,384		)	—			—			(3,216		)
Balance at October 2, 2004	15,496			1,587			42			—			17,125
Charges to operations	84,651			14,070			6,404			6,932			112,057
Charges utilized	(64,823		)	(12,533		)	(6,446		)	(6,932		)	(90,734		)
Reversal of accrual	(2,508		)	—			—			—			(2,508		)
Balance at October 1, 2005	32,816			3,124			—			—			35,940
Charges to operations	16,364			792			2,704			15,324			35,184
Charges utilized	(12,233		)	(108		)	(2,704		)	(15,324		)	(30,369		)
Reversal of accrual	(331		)	—			—			—			(331		)
Balance at December 31, 2005	36,616			3,808			—			—			40,424
Charges to operations	11,882			329			2,660			5,483			20,354
Charges utilized	(8,306		)	(1,090		)	(2,660		)	(5,483		)	(17,539		)
Reversal of accrual	(242		)	—			—			—			(242		)
Balance at April 1, 2006	$	39,950		$	3,047		$	—		$	—		$	42,997

During the three month period ended April 1, 2006, we recorded restructuring charges of approximately $20.1 million (net of $242,000 reversal of accrual) related to our phase 3 restructuring plan. These charges included employee termination benefits of approximately $11.9 million, lease and contract termination costs of approximately $329,000, other restructuring costs of approximately $2.7 million incurred primarily to prepare facilities for closure, and impairment of fixed assets of approximately $5.5 million pursuant to SFAS No. 144, “Impairment of Long-Lived Assets”, mainly consisting of manufacturing equipment. These facilities have been reclassified as assets held-for-sale and included in Prepaid Expenses and Other Current Assets in our Condensed Consolidated Balance Sheets. The employee termination benefits were related to

involuntary termination of employees, the majority of which were involved in manufacturing activities. Approximately $8.3 million of employee termination benefits were utilized and 1,506 employees were terminated during the three months ended April 1, 2006 pursuant to this restructuring plan. We also utilized $1.1 million of lease and contract termination costs and $2.7 million of the other restructuring costs during the three month period ended April 1, 2006. In addition, we reversed $242,000 of employee termination benefits due to completion of our restructuring plan in plants located in Canada and Europe.

During the six month period ended April 1, 2006, we recorded restructuring charges of approximately $55.0 million (net of $573,000 reversal of accrual) related to our phase 3 restructuring plan. These charges included employee termination benefits of approximately $28.2 million, lease and contract termination costs of approximately $1.1 million, other restructuring costs of approximately $5.4 million, incurred primarily to prepare facilities for closure, and impairment of fixed assets of approximately $20.8 million pursuant to SFAS No. 144, “Impairment of Long-Lived Assets”, mainly consisting of a building complex. These facilities have been reclassified as assets held-for-sale and included in Prepaid Expenses and Other Current Assets in our Condensed Consolidated Balance Sheets. The employee termination benefits were related to involuntary termination of employees, the majority of which were involved in manufacturing activities. Approximately $20.5 million of employee termination benefits were utilized and 3,269 employees were terminated during the six months ended April 1, 2006 pursuant to this restructuring plan. We also utilized $1.2 million of lease and contract termination costs and $5.4 million of the other restructuring costs during the six month period ended April 1, 2006. In addition, we reversed $573,000 of employee termination benefits due to completion of our restructuring plan in plants located in Canada and Europe.

During the first quarter of 2006, the Company announced the closure of one plant in Europe. No provision has been recognized at April 1, 2006 as the costs were not estimable pursuant to SFAS No. 112.

In fiscal 2005, we recorded charges of approximately $109.5 million (net of $2.5 million reversal of accrual) related to restructuring activities pursuant to SFAS No. 146 and SFAS No. 112, of which $106.5 million related to our phase 3 restructuring plan and $3.0 million related to our phase two restructuring plan. These charges included employee termination benefits of approximately $84.7 million, lease and contract termination costs of approximately $14.1 million, other restructuring costs of approximately $6.4 million, incurred primarily to prepare facilities for closure, and impairment of fixed assets of approximately $6.9 million consisting of excess facilities and equipment to be disposed of. The employee termination benefits were related to the involuntary termination of employees, the majority of which were involved in manufacturing activities. Approximately $64.8 million of employee termination benefits were utilized and a total of approximately 11,800 employees were terminated in fiscal 2005. We also utilized $12.5 million of lease and contract termination costs and $6.4 million of the other restructuring costs in fiscal 2005. We incurred charges to operations of $6.9 million in fiscal 2005 for the impairment of excess fixed assets at the vacated facilities, all of which were utilized as of October 1, 2005. We reversed approximately $2.5 million of accrued employee termination benefits. The reversal of the accrual was a result of the changes in estimates and economic circumstances.

In fiscal 2004, we recorded restructuring charges of approximately $107.2 million related to restructuring activities initiated after January 1, 2003. With the exception of $7.8 million of restructuring charges associated with our phase 3 restructuring plan announced in July 2004, these restructuring charges were incurred in connection with our phase two restructuring plan announced in October 2002. These charges included employee termination benefits of approximately $59.0 million, lease and contract termination costs of approximately $11.2 million, other restructuring costs of approximately $18.9 million, primarily costs incurred to prepare facilities for closure, and impairment of fixed assets of $18.1 million consisting of excess facilities and equipment to be disposed of. The employee termination benefits were related to the involuntary termination of approximately 2,000 employees, the majority of which were involved in manufacturing activities. Approximately $45.6 million of employee termination benefits were utilized during fiscal 2004 for the termination of approximately 1,900 employees. We also utilized $9.7 million of lease and contract termination costs and $18.8 million of the other restructuring costs during fiscal 2004. In fiscal 2004, we reversed approximately $1.8 million of accrued employee termination benefits and approximately $1.4 million of accrued lease costs due to revisions of estimates.

Costs associated with restructuring activities initiated prior to January 1, 2003, other than those activities related to purchase business combinations, are accounted for in accordance with EITF 94-3 and SFAS No. 112, where applicable. Accordingly, costs associated with such plans are recorded as restructuring costs in the Condensed Consolidated Statements of Operations generally at the commitment date. The accrued restructuring costs are included in “accrued liabilities” in the Condensed Consolidated Balance Sheets. Below is a summary of the activity related to restructuring costs recorded pursuant to EITF 94-3 and SFAS No. 112 through the second quarter of fiscal year 2006:

	Employee Severance and Related Expenses			Facilities Shutdown and Consolidation Costs			Write-off Impaired or Redundant Fixed Assets			Total
	(In thousands)
	Cash			Cash			Non-Cash
Balance at September 27, 2003	$	9,739		$	14,490		$	—		$	24,229
Charges to operations	4,071			35,730			3,500			43,301
Charges utilized	(5,533		)	(28,279		)	(3,500		)	(37,312		)
Reversal of accrual	(7,050		)	(7,016		)	—			(14,066		)
Balance at October 2, 2004	1,227			14,925			—			16,152
Charges to operations	2,285			2,522			4,107			8,914
Charges utilized	(3,010		)	(7,890		)	(4,107		)	(15,007		)
Balance at October 1, 2005	502			9,557			—			10,059
Charges to operations	—			514			261			775
Charges utilized	—			(1,261		)	(261		)	(1,522		)
Balance at December 31, 2005	502			8,810			—			9,312
Charges to operations	—			481			—			481
Charges utilized	(47		)	(646		)	—			(693		)
Balance at April 1, 2006	$	455		$	8,645		$	—		$	9,100

The following sections separately present the charges to the restructuring liability and charges utilized that are set forth in the above table on an aggregate basis.

Fiscal 2002 Plans

September 2002 Restructuring. During the three month period ended April 1, 2006, we utilized approximately $120,000 of accrued costs related to the shutdown of facilities. During the six month period ended April 1, 2006, we utilized approximately $595,000 of accrued costs related to the shutdown of facilities. Approximately $27,000 was charged to operations and utilized due to the write-off of impaired fixed assets. There were no employees terminated during the six month period ended April 1, 2006 pursuant to this restructuring plan.

In fiscal 2005, we recorded charges to operations of approximately $203,000 and utilized $216,000 for employee severance expenses. There was no reduction of work force during fiscal 2005 pursuant to this restructuring plan. In fiscal 2005, we also recorded charges to operations of approximately $544,000 and utilized approximately $2.7 million for non-cancelable lease payments, lease termination costs and related costs for the shutdown of facilities. In addition, $800,000 was charged to operations and utilized due to the impairment of fixed assets to be disposed of. The closing of the plants discussed above as well as employee terminations and other related activities have been completed, however, the leases of the related facilities expire in 2009; therefore, the remaining accrual will be reduced over time as the lease payments, net of sublease income, are incurred.

In fiscal 2004, we recorded charges to operations of approximately $1.9 million and utilized $2.6 million for employee severance expenses. Approximately 10 employees were terminated during fiscal 2004. In fiscal 2004, we also recorded charges to operations of approximately $26.7 million and utilized approximately $16.1 million for non-cancelable lease payments, lease termination costs and related costs for the shutdown of facilities. In addition, in fiscal 2004 we reversed approximately $3.6 million of accrued employee severance due to lower than anticipated payments at various plants and approximately $5.8 million of accrued facilities shutdown costs due to a change in use of the facilities or greater sublease income than anticipated. We also incurred and utilized charges to operations of $3.7 million related to the impairment of buildings and leasehold improvements at permanently vacated facilities in fiscal 2004.

October 2001 Restructuring. During the three month period ended April 1, 2006, we charged to operations and utilized approximately $149,000 related to shutdown of facilities and utilized approximately $39,000 of accrued employees termination benefits. There were no significant activities incurred in the first quarter of fiscal year 2006.

In fiscal 2005, we recorded charges to operations of approximately $2.0 million for employee severance costs, of which $1.9 million was related to the settlement of a pension plan. We also recorded approximately $82,000 for non-cancelable lease payments and other costs related to the shutdown of facilities. We utilized accrued severance charges of approximately $2.7 million and accrued facilities shutdown related charges of $811,000 in fiscal 2005. In addition, we

incurred and utilized charges of $633,000 in fiscal 2005 related to write-offs of fixed assets consisting of excess equipment and leasehold improvements to facilities that were permanently vacated. Manufacturing activities at the facilities affected by this plan ceased in fiscal year 2003 or prior; however, final payments of accrued costs may not occur until later periods.

In fiscal 2004, we recorded charges to operations of approximately $1.1 million for employee severance costs and approximately $4.8 million for non-cancelable lease payments and other costs related to the shutdown of facilities. We utilized accrued severance charges of approximately $2.5 million and accrued facilities shutdown related charges of $3.7 million during fiscal 2004. In fiscal 2004, we reversed approximately $1.3 million of accrued severance and approximately $530,000 of accrued lease costs due to lower than expected payments at various sites. Approximately 5,400 employees were associated with these plant closures and we had terminated all employees affected under this plan.

Fiscal 2001 Plans

July 2001 Restructuring. During the three month period ended April 1, 2006, we recorded approximately $293,000 and utilized approximately $385,000 of accrued costs related to the shutdown of facilities. During the six month period ended April 1, 2006, we recorded approximately $954,000 and utilized approximately $1.2 million of accrued costs related to the shutdown of facilities. We also recorded charges to operations and fully utilized $234,000 for write-off of impaired fixed assets.

In fiscal 2005, we recorded approximately $43,000 and utilized approximately $100,000 of accrued severance. In addition, we recorded approximately $1.9 million and utilized approximately $3.5 million of accrued costs related to the shutdown of facilities. We also incurred and utilized $2.7 million for the impairment of fixed assets to be disposed of. Manufacturing activities at the plants affected by this plan had ceased by the fourth quarter of fiscal 2002. However, the leases of the related facilities expire between 2005 and 2010, therefore, the remaining accrual will be reduced over time as the lease payments, net of sublease income, are made.

In fiscal 2004, we recorded approximately $4.1 million and utilized approximately $7.7 million of accrued costs related to the shutdown of facilities. In addition, we recorded charges to operations of approximately $1.1 million, utilized $164,000 and reversed approximately $2.1 million of accrued severance due to lower than anticipated payments in fiscal 2004.

Cost associated with restructuring activities related to purchase business combinations are accounted for in accordance with EITF 95-3. Below is a summary of the activity related to restructuring costs recorded pursuant to EITF 95-3 through the second quarter of fiscal year 2006:

	Employee Severance and Related Expenses			Facilities Shutdown and Consolidation Costs			Write-off Impaired or Redundant Fixed Assets			Total
	(In thousands)
	Cash			Cash			Non-Cash
Balance at September 27, 2003	$	12,052		$	13,612		$	—		$	25,664
Additions to restructuring accrual	10,858			—			6,024			16,882
Accrual utilized	(20,826		)	(11,434		)	(6,024		)	(38,284		)
Balance at October 2, 2004	2,084			2,178			—			4,262
Accrued utilized	(773		)	(393		)	—			(1,166		)
Balance at October 1, 2005	1,311			1,785			—			3,096
Accrued utilized	(25		)	(1,623		)	—			(1,648		)
Balance at December 31, 2005	1,286			162			—			1,448
Additions to restructuring accrual	—			—			—			—
Accrual utilized	—			(9		)	—			(9		)
Balance at April 1, 2006	$	1,286		$	153		$	—		$	1,439

The following sections separately present the charges to the restructuring liability and charges utilized that are set forth in the above table on an aggregate basis.

Other Acquisition Related Restructuring Actions. In fiscal 2004, we utilized $6.6 million of accrued severance to terminate 60 employees. In addition, we recorded charges to the restructuring liability of $10.9 million, and utilized $10.8 million, related to employee terminations. The charges were related to the elimination of approximately 340 employees. We also recorded and utilized charges to the restructuring liability of approximately $6.0 million related to

excess machinery and equipment to be disposed of.

SCI Acquisition Restructuring. There were no significant activities incurred during the three month period ended April 1, 2006. During the six month period ended April 1, 2006, we utilized $25,000 related to employee severance and utilized $1.6 million of accrued facility costs due to expiration of leases.

In fiscal 2005, we utilized $731,000 related to employee severance and utilized $393,000 due to facilities shutdown. In fiscal 2004, we utilized a total of approximately $11.4 million of facilities related accruals and $3.4 million of accrued severance.

At the end of fiscal 2005, we realigned our reporting structure based on different types of manufacturing services offered to our customers. As a result, our operating segments have changed resulting in the identification of two new reportable segments (Electronic Manufacturing Services and Personal Computing). The following table summarizes the total restructuring costs incurred with respect to our reported segments for the three and six month periods ended April 1, 2006 (in thousands):

	Three Months ended April 1, 2006		Six Months ended April 1, 2006
Personal Computing	$	13,905	$	34,606
Electronic Manufacturing Services	6,688		21,615
Total	$	20,593	$	56,221

Cash	$	15,109	$	35,152
Non-cash	5,484		21,069
Total	$	20,593	$	56,221

The Company expects the remaining costs associated with phase 3 to cost approximately $65 to $75 million, to be incurred by the Electronic Manufacturing Services segment. Of this amount, greater than 90% will be in cash over the next three quarters.

The cumulative restructuring costs per segment have not been disclosed as it is impractical.

Note 12. Income Taxes

For the three and six months ended April 1, 2006, the Company recorded an income tax expense of $6.6 million and an income tax benefit of $6.4 million, respectively. The income tax benefit for the six months ended April 1, 2006 included a one-time favorable income tax adjustment of $27.9 million relating to previously accrued income taxes that were reversed as a result of a settlement reached with the U.S. Internal Revenue Service. The settlement was in relation to certain U.S. tax audits. Notification of approval of the settlement by the Congressional Joint Committee on Taxation was received following the filing of the Company’s Annual Report on Form 10-K for fiscal 2005. The total adjustment to previously accrued income taxes was $64.0 million of which $27.9 million was recorded as an income tax benefit to earnings. The remaining $36.1 million was recorded as an adjustment to goodwill for pre-merger tax items associated with SCI Systems, a subsidiary of the Company.

Note 13. Business Segment, Geographic and Customer Information

SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information”, establishes standards for reporting information about operating segments, products and services, geographic areas of operations and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance.

During fiscal 2005 year end, we realigned our reporting structure based on different types of manufacturing services offered to our customers. As a result, our operating segments have changed resulting in the identification of two new reportable segments (Electronic Manufacturing Services and Personal Computing). Prior to the fourth quarter of fiscal 2005, we reported our segment information based on geographical locations (domestic and international). As required by SFAS No. 131, the prior year information in this footnote has been restated to conform to the current year’s presentation.

The following table presents information about reportable segments for the following fiscal years:

	Three Months Ended				Six Months Ended
	April 1, 2006		April 2, 2005 (restated)		April 1, 2006		April 2, 2005 (restated)
	(In thousands)

Net sales:
Electronic Manufacturing Services	$	1,923,421	$	1,957,150	$	3,834,810	$	3,935,773
Personal Computing	744,997		928,252		1,695,405		2,202,335
Total net sales	$	2,668,418	$	2,885,402	$	5,530,215	$	6,138,108

Gross profit:
Electronic Manufacturing Services	$	151,347	$	134,512	$	301,396	$	279,177
Personal Computing	13,261		15,655		32,892		47,957
Total gross profit	$	164,608	$	150,167	$	334,288	$	327,134

For the three months ended April 1, 2006, two customers accounted for 11.5% and 10.1%, respectively, of total consolidated revenues. For the six months ended April 1, 2006, two customers accounted for 13.3% and 11.0%, respectively, of total consolidated revenues. For the quarters ended April 1, 2006 and April 2, 2005, there were no inter-segment sales between Electronic Manufacturing Services and Personal Computing.

The following summarizes financial information by geographic segment:

	Three Months Ended				Six Months Ended
	April 1, 2006		April 2, 2005		April 1, 2006		April 2, 2005
	(In thousands)
Net sales:
Domestic	$	692,849	$	689,561	$	1,416,150	$	1,423,661
International	1,975,569		2,195,841		4,114,065		4,714,447
Total net sales	$	2,668,418	$	2,885,402	$	5,530,215	$	6,138,108

	Three Months Ended				Six Months Ended
	April 1, 2006		April 2, 2005		April 1, 2006		April 2, 2005
	(In thousands)
Gross Profit:
Domestic	$	56,617	$	35,728	$	110,037	$	83,936
International	107,991		114,439		224,251		243,198
Total gross profit	$	164,608	$	150,167	$	334,288	$	327,134

Note 14. Supplemental Guarantors Condensed Consolidating Financial Information

On February 15, 2006, Sanmina-SCI issued $600.0 million of 8.125% Notes as part of a refinancing transaction for the redemption of the $750 million 10.375% Notes. The full redemption of the 10.375% Notes could result in the release of the guarantees of the notes guarantors (including the guarantees for the 6.75% and 8.125% Senior Subordinated Notes). Notwithstanding the foregoing, Sanmina-SCI USA, Inc., a Delaware corporation, will continue to guarantee the 8.125% Notes and the 6.75% Senior Subordinated Notes for so long as it guarantees the 3% Convertible Subordinated Notes.

The condensed consolidating financial statements are presented below and should be read in connection with our consolidated financial statements. Separate financial statements of the Guarantors are not presented because (i) the Guarantors are wholly-owned and have fully and unconditionally guaranteed the 10.375% Notes, 6.75% Notes and 8.125%

CONDENSED CONSOLIDATING BALANCE SHEET

As of April 1, 2006

	Sanmina-SCI		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Eliminations			Consolidated Total
	(In thousands)
ASSETS:
Current assets:
Cash and cash equivalents	$	5,477	$	26,011	$	593,718	$	—		$	625,206
Short-term investments	—		—		—		—			—
Accounts receivable, net	—		369,265		1,064,790		—			1,434,055
Accounts receivable—intercompany	—		62,856		—		(62,856		)	—
Inventories	—		429,390		729,961		—			1,159,351
Prepaid expenses and other current assets	4,819		27,824		101,969		—			134,612
Total current assets	10,296		915,346		2,490,438		(62,856		)	3,353,224
Property, plant and equipment, net	—		218,272		411,885		—			630,157
Goodwill	—		585,892		1,082,190		—			1,668,082
Other intangible assets, net	—		29,597		3,853		—			33,450
Intercompany accounts	730,457		215,830		—		(946,287		)	—
Investment in subsidiaries	2,549,164		1,612,656		—		(4,161,820		)	—
Other non-current assets	28,613		34,581		19,650		—			82,844
Restricted cash	3,078		—		—		—			3,078
Total assets	$	3,321,608	$	3,612,174	$	4,008,016	$	(5,170,963	)	$	5,770,835

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Current portion of long-term debt	$	—	$	523,449	$	234	$	—		$	523,683
Accounts payable	74		522,058		880,004		—			1,402,136
Accounts payable—intercompany	—		—		62,856		(62,856		)	—
Accrued liabilities	12,101		111,754		150,097		—			273,952
Accrued payroll and related benefits	—		71,513		80,028		—			151,541
Total current liabilities	12,175		1,228,774		1,173,219		(62,856		)	2,351,312
Long-term liabilities:
Long-term debt, net of current portion	977,301		—		1,467		—			978,768
Intercompany accounts non-current	—		—		946,287		(946,287		)	—
Other	22,699		64,260		44,363		—			131,322
Total long-term liabilities	1,000,000		64,260		992,117		(946,287		)	1,110,090
Stockholders’ equity:
Common stock	5,512		70,558		337,115		(407,673		)	5,512
Other stockholders’ equity accounts	2,303,921		2,248,582		1,505,565		(3,754,147		)	2,303,921
Total stockholders’ equity	2,309,433		2,319,140		1,842,680		(4,161,820		)	2,309,433
Total liabilities and stockholders’ equity	$	3,321,608	$	3,612,174	$	4,008,016	$	(5,170,963	)	$	5,770,835

CONDENSED CONSOLIDATING BALANCE SHEET

As of October 1, 2005

	Sanmina-SCI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Consolidating Eliminations			Consolidated Total
	(In thousands)
ASSETS:
Current assets:
Cash and cash equivalents	$	95,408		$	214,776		$	757,869	$	—		$	1,068,053
Short-term investments	57,281			—			—		—			57,281
Accounts receivable, net	—			321,429			1,155,972		—			1,477,401
Accounts receivable—intercompany	—			27,477			—		(27,477		)	—
Inventories	—			404,280			610,755		—			1,015,035
Prepaid expenses and other current assets	6,727			33,427			89,233		—			129,387
Total current assets	159,416			1,001,389			2,613,829		(27,477		)	3,747,157
Property, plant and equipment, net	—			219,177			442,924		—			662,101
Goodwill	—			620,081			1,069,117		—			1,689,198
Other intangible assets, net	214			31,546			4,147		—			35,907
Intercompany accounts	851,648			215,515			—		(1,067,163		)	—
Investment in subsidiaries	2,492,408			1,534,381			—		(4,026,789		)	—
Other non-current assets	29,257			35,354			17,263		—			81,874
Restricted cash	25,538			—			—		—			25,538
Total assets	$	3,558,481	(A)	$	3,657,443	(A)	$	4,147,280	$	(5,121,429	)	$	6,241,775

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Current portion of long-term debt	$	830		$	—		$	609	$	—		$	1,439
Accounts payable	—			588,634			970,538		—			1,559,172
Accounts payable—intercompany	—			—			27,477		(27,477		)	—
Accrued liabilities	25,402			168,947			172,571		—			366,920
Accrued payroll and related benefits	—			67,930			78,757		—			146,687
Total current liabilities	26,232			825,511			1,249,952		(27,477		)	2,074,218
Long-term liabilities:
Long-term debt, net of current portion	1,120,542			522,572			1,552		—			1,644,666
Intercompany accounts non-current	—			—			1,067,163		(1,067,163		)	—
Other	32,689			68,202			42,982		—			143,873
Total long-term liabilities	1,153,231			590,774			1,111,697		(1,067,163		)	1,788,539
Stockholders’ equity:
Common stock	5,457			70,558			337,115		(407,673		)	5,457
Other stockholders’ equity accounts	2,373,561			2,170,600			1,448,516		(3,619,116		)	2,373,561
Total stockholders’ equity	2,379,018			2,241,158			1,785,631		(4,026,789		)	2,379,018
Total liabilities and stockholders’ equity	$	3,558,481	(B)	$	3,657,443	(B)	$	4,147,280	$	(5,121,429	)	$	6,241,775

(A) Reflects a decrease of $349.2 million in total assets for the parent and increase of $285.7 million for the guarantor subsidiaries.

(B) Reflects a decrease of $349.2 million in total liabilities for the parent and increase of $149.8 million in total liabilities and $135.9 million in total stockholders’ equity for the guarantor subsidiaries.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended April 1, 2006

	Sanmina-SCI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations			Consolidated Total
	(In thousands)
Net sales	$	—		$	727,610		$	2,066,259		$	(125,451	)	$	2,668,418
Cost of sales	226			670,767			1,958,268			(125,451		)	2,503,810
Gross profit	(226		)	56,843			107,991			—			164,608

Operating expenses:
Selling, general and administrative and research and development	(1,319		)	42,832			55,811			—			97,324
Amortization of intangible assets	—			1,939			132			—			2,071
Restructuring costs	—			4,573			16,020			—			20,593
Total operating expenses	(1,319		)	49,344			71,963			—			119,988
Operating income (loss)	1,093			7,499			36,028			—			44,620
Interest income	1,779			397			2,915			—			5,091
Interest expense	(26,815		)	(4,775		)	(1,399		)	—			(32,989		)
Intercompany income (expense), net	12,679			(3,742		)	(8,937		)	—			—
Loss on extinguishment of debt	(112,166		)	—			—						(112,166		)
Other expense, net	(261		)	(6,755		)	5,599			—			(1,417		)
Interest and other expense, net	(124,784		)	(14,875		)	(1,822		)	—			(141,481		)

Income (loss) before income taxes, and equity in income (loss) of subsidiaries	(123,691		)	(7,376		)	34,206			—			(96,861		)
Provision for income taxes	—			2,720			3,839			—			6,559
Equity in income (loss) of subsidiaries	20,271			(11,627		)	—			(8,644		)	—
Net income (loss)	$	(103,420	)	$	(21,723	)	$	30,367		$	(8,644	)	$	(103,420	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended April 2, 2005

	Sanmina-SCI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations			Consolidated Total
	(In thousands)
Net sales	$	190,584		$	853,819		$	2,269,023		$	(428,024	)	$	2,885,402
Cost of sales	175,367			833,308			2,154,584			(428,024		)	2,735,235
Gross profit	15,217			20,511			114,439			—			150,167

Operating expenses:
Selling, general and administrative and research and development	5,496			26,284			62,751			—			94,531
Amortization of intangible assets	889			1,182			—			—			2,071
Goodwill impairment	15,000			585,000			—			—			600,000
Restructuring costs	9,679			1,970			45,987			—			57,636
Total operating expenses	31,064			614,436			108,738			—			754,238
Operating income (loss)	(15,847		)	(593,925		)	5,701						(604,071		)

Interest income	2,996			298			2,484			—			5,778
Interest expense	(34,809		)	(4,507		)	(2,219		)	—			(41,535		)
Intercompany income (expense), net	14,144			(7,759		)	(6,385		)	—			—
Other income (expense), net	(3,595		)	(6,770		)	5,111			—			(5,254		)
Other expense, net	(21,264		)	(18,738		)	(1,009		)	—			(41,011		)

Income (loss) before income taxes and equity in income (loss) of subsidiaries	(37,111		)	(612,663		)	4,692			—			(645,082		)
Provision for income taxes	173,432			159,216			57,778			—			390,426
Equity in income (loss) of subsidiaries	(824,965		)	60,910			—			764,055			—
Net income (loss)	$	(1,035,508	)	$	(710,969	)	$	(53,086	)	$	764,055		$	(1,035,508	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended April 1, 2006

	Sanmina-SCI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations			Consolidated Total
	(In thousands)
Net sales	$	—		$	1,494,632		$	4,304,404		$	(268,821	)	$	5,530,215
Cost of sales	1,619			1,382,976			4,080,153			(268,821		)	5,195,927
Gross profit	(1,619		)	111,656			224,251			—			334,288

Operating expenses:
Selling, general and administrative and research and development	1,191			102,272			91,488			—			194,951
Amortization of intangible assets	214			3,819			271			—			4,304
Restructuring costs	—			7,769			48,452			—			56,221
Total operating expenses	1,405			113,860			140,211			—			255,476
Operating income (loss)	(3,024		)	(2,204		)	84,040			—			78,812
Interest income	4,502			1,202			5,312			—			11,016
Interest expense	(56,085		)	(9,300		)	(1,852		)	—			(67,237		)
Intercompany income (expense), net	25,657			(7,395		)	(18,262		)	—			—
Loss on extinguishment of debt	(112,166		)	—			—						(112,166		)
Other income (expense), net	(261		)	(873		)	771			—			(363		)
Other expense, net	(138,353		)	(16,366		)	(14,031		)	—			(168,750		)

Income (loss) before income taxes, cumulative effect of accounting changes and equity in income (loss) of subsidiaries	(141,377		)	(18,570		)	70,009			—			(89,938		)
Provision for (benefit from) income taxes	—			(23,092		)	16,694			—			(6,398		)
Income (loss) before cumulative effect of accounting changes and equity in income (loss) of subsidiaries	(141,377		)	4,522			53,315			—			(83,540		)
Cumulative effect of accounting changes, net of tax	4,752			—			—			—			4,752
Equity in income (loss) of subsidiaries	57,837			66,449			—			(124,286		)	—
Net income (loss)	$	(78,788	)(C)	$	70,971	(C)	$	53,315		$	(124,286	)	$	(78,788	)

(C) Reflects an increase of $33.1 million in net income for the guarantor subsidiaries for the three months ended December 31, 2005. On a consolidated basis, there is no change to the consolidated net income as there is a corresponding increase in consolidating eliminations.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended April 2, 2005

	Sanmina-SCI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations			Consolidated Total
	(In thousands)
Net sales	$	387,293		$	1,866,214		$	4,866,433		$	(981,832	)	$	6,138,108
Cost of sales	370,129			1,799,442			4,623,235			(981,832		)	5,810,974
Gross profit	17,164			66,772			243,198			—			327,134

Operating expenses:
Selling, general and administrative and research and development	11,888			61,541			116,015			—			189,444
Amortization of intangible assets	1,736			2,365			—			—			4,101
Goodwill impairment	15,000			585,000			—			—			600,000
Restructuring costs	17,255			6,469			54,337			—			78,061
Total operating expenses	45,879			655,375			170,352			—			871,606
Operating income (loss)	(28,715		)	(588,603		)	72,846						(544,472		)

Interest income	4,305			419			4,561			—			9,285
Interest expense	(59,015		)	(9,012		)	(3,564		)	—			(71,591		)
Intercompany income (expense), net	28,277			(15,547		)	(12,730		)	—			—
Other income (expense), net	(12,565		)	2,441			5,140			—			(4,984		)
Other expense, net	(38,998		)	(21,699		)	(6,593		)	—			(67,290		)

Income (loss) before income taxes and equity in income (loss) of subsidiaries	(67,713		)	(610,302		)	66,253			—			(611,762		)
Provision for income taxes	161,533			160,134			77,713			—			399,380
Equity in income (loss) of subsidiaries	(781,896		)	120,974			—			660,922			—
Net income (loss)	$	(1,011,142	)	$	(649,462	)	$	(11,460	)	$	660,922		$	(1,011,142	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended April 1, 2006

	Sanmina-SCI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations		Consolidated Total
	(In thousands)
Cash provided by (used in) operating activities	$	(36,732	)	$	(132,827	)	$	14,126		$	—	$	(155,433	)
Cash flows provided by (used in) investing activities:
Purchases of short-term investments	(17,755		)	—			—			—		(17,755		)
Proceeds from maturities and sales of short-term investments	74,796			—			—			—		74,796
Purchases of long term investments	(848		)	100			—			—		(748		)
Purchases of property, plant and equipment				(11,082		)	(59,019		)	—		(70,101		)
Proceeds from sale of property, plant and equipment				1,796			5,630			—		7,426
Cash paid for businesses acquired, net				(6,367		)	(38,277		)	—		(44,644		)
Cash provided by (used in) investing activities	56,193			(15,553		)	(91,666		)	—		(51,026		)
Cash flows provided by (used in) financing activities:
Change in restricted cash	22,460			—			—			—		22,460
Payments of long term debt	(750,929		)	—			—			—		(750,929		)
Payments of notes and credit facilities	—			—			(455		)	—		(455		)
Repurchase of convertible notes	(543		)	—			—			—		(543		)
Proceeds from long-term debt, net of issuance cost	587,123			—			—			—		587,123
Interest rate swap termination associated with debt extinguishment	(29,785		)	—			—			—		(29,785		)
Redemption premium associated with debt extinguishment	(70,751		)	—			—			—		(70,751		)
Proceeds from sale of common stock	12,109			—			—			—		12,109
Intercompany	120,925			(40,385		)	(80,540		)	—		—
Cash provided by (used in) financing activities	(109,391		)	(40,385		)	(80,995		)	—		(230,771		)
Effect of exchange rate changes							(5,617		)			(5,617		)
Increase (decrease) in cash and cash equivalents	(89,930		)(D)	(188,765		)(D)	(164,152		)	—		(442,847		)
Cash and cash equivalents at beginning of period	95,408			214,776			757,869			—		1,068,053
Cash and cash equivalents at end of period	$	5,478		$	26,011		$	593,717		$	—	$	625,206

(D) Reflects a decrease of $86.9 million and an increase of $86.9 million in change of cash for the parent and the guarantor subsidiaries, respectively, for the three months ended December 31, 2005.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended April 2, 2005

	Sanmina-SCI			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Eliminations		Consolidated Total
	(In thousands)
Cash provided by (used in) operating activities	$	301,583		$	(323,663	)	$	196,044		$	—	$	173,964
Cash flows provided by (used in) investing activities:
Purchases of short-term investments	(27,917		)	—			—			—		(27,917		)
Proceeds from maturities and sales of short-term investments	25,926			—			—			—		25,926
Purchases of long term investments	(765		)	—			—			—		(765		)
Purchases of property, plant and equipment	(5,084		)	(4,393		)	(21,660		)	—		(31,137		)
Proceeds from sale of property, plant and equipment	6,062			8,371			10,442			—		24,875
Cash paid for businesses acquired, net	(4,710		)	(3,401		)	(74,922		)	—		(83,033		)
Cash provided by (used in) investing activities	(6,488		)	577			(86,140		)	—		(92,051		)
Cash flows provided by (used in) financing activities:
Repurchase of convertible notes	(398,726		)	—			—			—		(398,726		)
Payments of long-term debt	—			—			(12,148		)	—		(12,148		)
Payment of long-term liabilities	(675		)	(1,446		)	(629		)	—		(2,750		)
Payments from notes and credit facilities, net	—			(463		)	(14,043		)	—		(14,506		)
Proceeds from long-term debt, net of issuance costs	389,609			—			13,698			—		403,307
Proceeds from sale of common stock	10,363			—			—			—		10,363
Intercompany	(221,104		)	304,132			(83,028		)	—		—
Cash provided by (used in) financing activities	(220,533		)	302,223			(96,150		)	—		(14,460		)
Effect of exchange rate changes	—			—			(4,069		)	—		(4,069		)
Increase (decrease) in cash and cash equivalents	74,562			(20,863		)	9,685			—		63,384
Cash and cash equivalents at beginning of period	448,464			68,963			552,020			—		1,069,447
Cash and cash equivalents at end of period	$	523,026		$	48,100		$	561,705		$	—	$	1,132,831

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenues or results of operations, gross margin or operating margin, expenses, earnings or losses from operations, synergies or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning developments, performance or industry ranking; any statements regarding future economic conditions or performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue” and similar expressions identify forward-looking statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks, uncertainties and changes in condition, significance, value and effect. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission.

Overview

We are a leading independent global provider of customized, integrated electronics manufacturing services, or EMS. Our revenue is generated from sales of our services primarily to original equipment manufacturers, or OEMs, in the communications, enterprise computing and storage, personal and business computing, multimedia, medical, industrial and semiconductor capital equipment, defense and aerospace and automotive industries. We also generate sales from our original design manufacturing, or ODM, products where we design and develop servers and storage systems targeted to major OEMs. Our engineering services mainly focus on high-end products and we provide end-to-end design capacities for printed circuit board design, backplane design, enclosure design, full system and final system design.

A relatively small number of customers historically have been responsible for a significant portion of our net sales. We expect this trend to continue. Sales to our ten largest customers accounted for 60.9% and 62.5% of our net sales for the three and six months ended April 1, 2006, respectively, and two customers each accounted for 10% or more of our net sales during those periods. Sales to our ten largest customers accounted for 66.2% and 67.3% of our net sales for the three and six months ended April 2, 2005, respectively, and one customer accounted for 10% or more of our net sales during the six months ended April 2, 2005.

During the six month periods ended April 1, 2006 and April 2, 2005, 74.4% and 76.8% respectively, of our consolidated net sales were derived from non-U.S. operations. Consolidated net sales from international operations during the three month periods ended April 1, 2006 and April 2, 2005, represented 74.0% and 76.1%, respectively. We expect that a significant majority of the Company’s revenue will continue to be derived from our non-U.S. Operations.

Historically, we have had substantial recurring sales from existing customers. We have also expanded our customer base through acquisitions. We typically enter into supply agreements with our major OEM customers. These agreements generally have terms ranging from three to five years and cover the manufacturing of a range of products. Under these agreements, a customer typically agrees to purchase its requirements for particular products in particular geographic areas from us. These agreements generally do not obligate the customer to purchase minimum quantities of products. In some circumstances our supply agreements with customers provide for cost reduction objectives during the term of the agreement.

We have experienced fluctuations in gross margins in the past and may continue to in the future. Fluctuations in our gross margins may be caused by a number of factors, including pricing, changes in product mix, competitive pressures and transition of manufacturing to lower cost locations.

Recent Accounting Pronouncements

In March 2005, the FASB issued FIN 47 as an interpretation of SFAS No. 143, “Accounting for Asset Retirement Obligations”. This interpretation clarifies that the term conditional asset retirement obligation as used in SFAS No. 143, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. This interpretation also clarifies when an entity would have sufficient

information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. We do not anticipate that the adoption of this standard will have a material impact on our financial position or results of operations.

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140”, an amendment to FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. We do not expect the adoption of SFAS No. 155 to have a material impact on our results of operations or financial position.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets”, an amendment of SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS No. 156 requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and permits an entity to subsequently measure those servicing assets and servicing liabilities at fair value. SFAS No. 156 is effective for fiscal years beginning after September 15, 2006. We do not expect the adoption of SFAS No. 156 to have a material impact on our results of operations or financial position.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate the process used to develop estimates for certain reserves and contingent liabilities, including those related to product returns, accounts receivable, inventories, investments, intangible assets, income taxes, warranty obligations, restructuring, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates.

For a complete description of our key critical accounting policies and estimates, refer to our 2005 Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 29, 2005.

Summary Results of Operations

Net sales decreased by 7.5% to $2.7 billion for the three months ended April 1, 2006, from $2.9 billion for the three months ended April 2, 2005. Net sales decreased by 9.9% to $5.5 billion for the six months ended April 1, 2006, from $6.1 billion for the six months ended April 2, 2005. Approximately $182 million and $506 million of the decline in sales in the three and six months ended April 1, 2006, respectively, were due to decreased demand from existing customers in our personal computing business. The remaining decreases in sales for the three and six months ended April 1, 2006 were primarily due to a decline in revenue of $93 million and $166 million, respectively, from our enclosure business, offset by increases in other areas of our business.

Gross margin increased from 5.2% in the second quarter of fiscal 2005 to 6.2% in the second quarter of fiscal 2006 and increased from 5.3% for the six months ended April 2, 2005 to 6.0% for the six months ended April 1, 2006. The increase in gross margin was primarily attributable to changes in product mix. We expect gross margins to continue to fluctuate based on overall production and shipment volumes, changes in the mix of products demanded by our major customers and production efficiencies.

The following table sets forth, for the periods indicated, key operating results (in thousands):

	Three Months Ended				Six Months Ended
	April 1, 2006		April 2, 2005		April 1, 2006		April 2, 2005
	(In thousands)
Net sales	$	2,668,418	$	2,885,402	$	5,530,215	$	6,138,108
Gross profit	$	164,608	$	150,167	$	334,288	$	327,134

Key performance measures

The following table sets forth, for the periods indicated, certain key performance measures that management utilizes to assess operating results:

	Three Months Ended
	April 1, 2006	December 31, 2005	April 2, 2005
Days sales outstanding(1)	48	51	53
Inventory turns(2)	8.6	9.6	11.4
Accounts payable days(3)	51	55	50
Cash cycle days(4)	40	33	35

(1) Days sales outstanding is calculated as the ratio of ending accounts receivable, net, for the quarter divided by average daily net sales for the quarter.

(2) Inventory turns are calculated as the ratio of four times our cost of sales for the quarter divided by inventory at period end.

(3) Accounts payable days is calculated as the ratio of 365 days divided by accounts payable turns, in which accounts payable turns is calculated as the ratio of four times our cost of sales for the quarter divided by accounts payable at period end.

(4) Cash cycle days is calculated as the ratio of 365 days divided by inventory turns plus days sales outstanding minus accounts payable days.

Results of Operations

The following table sets forth, for the three and six months ended April 1, 2006 and April 2, 2005, certain items in the Condensed Consolidated Statement of Operations expressed as a percentage of net sales. The table and the discussion below should be read in conjunction with the condensed consolidated financial statements and the notes thereto, which appear elsewhere in this report.

	Three Months Ended				Six Months Ended
	April 1, 2006		April 2, 2005		April 1, 2006		April 2, 2005
Net sales	100	%	100	%	100	%	100.0	%
Cost of sales	93.8		94.8		94.0		94.7
Gross margin	6.2		5.2		6.0		5.3
Operating expenses:
Selling, general and administrative	3.3		3.0		3.2		2.8
Research and development	0.4		0.2		0.3		0.2
Amortization of intangible assets	0.1		0.1		0.1		0.1
Restructuring costs	0.7		2.0		1.0		1.3
Goodwill impairment	—		20.8		—		9.8
Total operating expenses	4.5		26.1		4.6		14.2
Operating income (loss)	1.7		(20.9	)	1.4		(8.9	)
Interest income	0.2		0.2		0.2		0.2
Interest expense	(1.2	)	(1.4	)	(1.2	)	(1.2	)
Loss on extinguishment of debt	(4.2	)	—		(2.0	)	—
Other expense, net	(0.1	)	(0.2	)	—		(0.1	)
Interest and other expense, net	(5.3	)	(1.4	)	(3.0	)	(1.1	)
Loss before income taxes and cumulative effect of accounting changes	(3.6	)	(22.3	)	(1.6	)	(10.0	)
Provision for (benefit from) income taxes	0.3		13.5		(0.1	)	6.5
Loss before cumulative effect of accounting change	(3.9	)	(35.8	)	(1.5	)	(16.5	)
Cumulative effect of accounting change, net of tax	—		—		(0.1	)	—
Net loss	(3.9	)%	(35.8	)%	(1.4	)%	(16.5	)%

Net Sales

Net sales decreased by 7.5% to $2.7 billion for the three months ended April 1, 2006, from $2.9 billion for the three months ended April 2, 2005. Net sales decreased by 9.9% to $5.5 billion for the six months ended April 1, 2006, from $6.1 billion for the six months ended April 2, 2005. Approximately $182 million and $506 million of the decline in sales in the three and six months ended April 1, 2006, respectively, were due to decreased demand from existing customers in our personal computing business. The remaining decreases in sales for the three and six months ended April 1, 2006 were primarily due to a decline in revenue of $93 million and $166 million, respectively, from our enclosures business, offset by increases in other areas of our business.

Gross Margin

Operating Expenses

Selling, general and administrative expenses

Selling, general and administrative expenses decreased from $87.3 million in the second quarter of fiscal 2005 to $86.9 million in the second quarter of fiscal 2006. Selling, general and administrative expenses increased as a percentage of

net sales, from 3.0% in the second quarter of fiscal 2005 to 3.3% in the second quarter of fiscal 2006. For the six months ended April 1, 2006, selling, general and administrative expenses increased to $175.6 million from $174.7 million for the six months ended April 2, 2005. Selling, general and administrative expenses increased as a percentage of net sales, from 2.8% for the first six months of fiscal 2005 to 3.2% for the first six months of fiscal 2006. The decrease in selling, general and administrative expenses in the second quarter of fiscal 2006 as compared to the second quarter of fiscal 2005 was primarily attributable to reduction in professional fees due to completion of our evaluation of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002. The increase in selling, general and administrative expenses for the six months ended April 1, 2006 as compared to the six months ended April 2, 2005 was primarily attributable to expenses we incurred in connection with the implementation of new internal controls and completion of our evaluation of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002. The increase in selling, general, and administrative expenses as a percentage of net sales for both three and six months ended April 1, 2006 was primarily attributable to the decrease in sales in the same period.

Research and Development

Research and development expenses increased from $7.3 million in the second quarter of fiscal 2005 to $10.4 million in the second quarter of fiscal 2006. Research and development increased as a percentage of net sales, from 0.2% in the second quarter of fiscal 2005 to 0.4% in the second quarter of fiscal 2006. For the six months ended April 2, 2005, research and development expenses increased from $14.8 million to $19.4 million for the six months ended April 1, 2006. Research and development expenses increased as a percentage of net sales, from 0.2% for the first six months of fiscal 2005 to 0.3% for the six months of fiscal 2006. The increase in research and development expenses is due to our continued investment in original design products as well as $643,000 of research and development expenses associated with the Eurologic acquisition during the second quarter.

Restructuring costs

Costs associated with restructuring activities initiated on or after January 1, 2003, other than those activities related to purchase business combinations, are accounted for in accordance with SFAS No. 146 and SFAS No. 112 where applicable. Accordingly, costs associated with such plans are recorded as restructuring costs in the Condensed Consolidated Statements of Operations when a liability is incurred. Restructuring costs are recorded when probable and estimable. Accrued restructuring costs are included in “accrued liabilities” in the Condensed Consolidated Balance Sheets. Below is a summary of the activity related to restructuring costs recorded pursuant to SFAS No. 146 and SFAS No. 112 through the second quarter of fiscal year 2006:

	Employee Termination Benefits			Lease and Contract Termination Costs			Other Restructuring Costs			Impairment of Fixed Assets			Total
	(In thousands)
	Cash			Cash			Cash			Non-Cash
Balance at September 27, 2003	$	3,870		$	1,462		$	—		$	—		$	5,332
Charges to operations	59,076			11,186			18,890			18,079			107,231
Charges utilized	(45,618		)	(9,677		)	(18,848		)	(18,079		)	(92,222		)
Reversal of accrual	(1,832		)	(1,384		)	—			—			(3,216		)
Balance at October 2, 2004	15,496			1,587			42			—			17,125
Charges to operations	84,651			14,070			6,404			6,932			112,057
Charges utilized	(64,823		)	(12,533		)	(6,446		)	(6,932		)	(90,734		)
Reversal of accrual	(2,508		)	—			—			—			(2,508		)
Balance at October 1, 2005	32,816			3,124			—			—			35,940
Charges to operations	16,364			792			2,704			15,324			35,184
Charges utilized	(12,233		)	(108		)	(2,704		)	(15,324		)	(30,369		)
Reversal of accrual	(331		)	—			—			—			(331		)
Balance at December 31, 2005	36,616			3,808			—			—			40,424
Charges to operations	11,882			329			2,660			5,483			20,354
Charges utilized	(8,306		)	(1,090		)	(2,660		)	(5,483		)	(17,539		)
Reversal of accrual	(242		)	—			—			—			(242		)
Balance at April 1, 2006	$	39,950		$	3,047		$	—		$	—		$	42,997

termination benefits of approximately $11.9 million, lease and contract termination costs of approximately $329,000, other restructuring costs of approximately $2.7 million, incurred primarily to prepare facilities for closure, and impairment of fixed assets of approximately $5.5 million pursuant to SFAS No. 144, “Impairment of Long-Lived Assets”, mainly consisting of manufacturing equipment. These facilities have been reclassified as assets held for sale and included in Prepaid Expenses and Other Current Assets in our Condensed Consolidated Balance Sheets. The employee termination benefits were related to involuntary termination of employees, the majority of which were involved in manufacturing activities. Approximately $8.3 million of employee termination benefits were utilized and 1,506 employees were terminated during the three months ended April 1, 2006 pursuant to this restructuring plan. We also utilized $1.1 million of lease and contract termination costs and $2.7 million of the other restructuring costs during the three month period ended April 1, 2006. In addition, we reversed $242,000 of employee termination benefits due to completion of our restructuring plan in plants located in Canada and Europe.

During the six month period ended April 1, 2006, we recorded restructuring charges of approximately $55.0 million (net of $573,000 reversal of accrual) related to our phase 3 restructuring plan. These charges included employee termination benefits of approximately $28.2 million, lease and contract termination costs of approximately $1.1 million, other restructuring costs of approximately $5.4 million, incurred primarily to prepare facilities for closure, and impairment of fixed assets of approximately $20.8 million pursuant to SFAS No. 144, “Impairment of Long-Lived Assets”, mainly consisting of a building complex. These facilities have been reclassified as assets held for sale and included in Prepaid Expenses and Other Current Assets in our Condensed Consolidated Balance Sheets. The employee termination benefits were related to involuntary termination of employees, the majority of which were involved in manufacturing activities. Approximately $20.5 million of employee termination benefits were utilized and 3,269 employees were terminated during the six months ended April 1, 2006 pursuant to this restructuring plan. We also utilized $1.2 million of lease and contract termination costs and $5.4 million of the other restructuring costs during the six month period ended April 1, 2006. In addition, we reversed $573,000 of employee termination benefits due to completion of our restructuring plan in plants located in Canada and Europe.

During the first quarter of 2006, the Company announced the closure of one plant in Europe. No provision has been recognized at April 1, 2006 as the costs were not estimable, pursuant to SFAS No. 112.

In fiscal 2005, we recorded charges of approximately $109.5 million (net of $2.5 million reversal of accrual) related to restructuring activities pursuant to SFAS No. 146 and SFAS No. 112, of which $106.5 million related to our phase 3 restructuring plan and $3.0 million related to our phase 2 restructuring plan. These charges included employee termination benefits of approximately $84.7 million, lease and contract termination costs of approximately $14.1 million, other restructuring costs of approximately $6.4 million, incurred primarily to prepare facilities for closure, and impairment of fixed assets of approximately $6.9 million consisting of excess facilities and equipment to be disposed of. The employee termination benefits were related to the involuntary termination of employees, the majority of which were involved in manufacturing activities. Approximately $64.8 million of employee termination benefits were utilized and total of approximately 11,800 employees were terminated in fiscal 2005. We also utilized $12.5 million of lease and contract termination costs and $6.4 million of the other restructuring costs in fiscal 2005. We incurred charges to operations of $6.9 million in fiscal 2005 for the impairment of excess fixed assets at the vacated facilities, all of which were utilized as of October 1, 2005. We reversed approximately $2.5 million of accrued employee termination benefits. The reversal of the accrual was a result of the changes in estimates and economic circumstances.

In fiscal 2004, we recorded restructuring charges of approximately $107.2 million related to restructuring activities initiated after January 1, 2003. With the exception of $7.8 million of restructuring charges associated with our phase 3 restructuring plan announced in July 2004, these restructuring charges were incurred in connection with our phase 2 restructuring plan announced in October 2002. These charges included employee termination benefits of approximately $59.0 million, lease and contract termination costs of approximately $11.2 million, other restructuring costs of approximately $18.9 million, primarily costs incurred to prepare facilities for closure, and impairment of fixed assets of $18.1 million consisting of excess facilities and equipment to be disposed of. The employee termination benefits were related to the involuntarily termination of approximately 2,000 employees, the majority of which were involved in manufacturing activities. Approximately $45.6 million of employee termination benefits were utilized during fiscal 2004 for the termination of approximately 1,900 employees. We also utilized $9.7 million of lease and contract termination costs and $18.8 million of the other restructuring costs during fiscal 2004. In fiscal 2004, we reversed approximately $1.8 million of accrued employee termination benefits and approximately $1.4 million of accrued lease costs due to revisions of estimates.

of Operations generally at the commitment date. The accrued restructuring costs are included in “accrued liabilities” in the Condensed Consolidated Balance Sheets. Below is a summary of the activity related to restructuring costs recorded pursuant to EITF 94-3 and SFAS No. 112 through the second quarter of fiscal year 2006:

	Employee Severance and Related Expenses			Facilities Shutdown and Consolidation Costs			Write-off Impaired or Redundant Fixed Assets			Total
	(In thousands)
	Cash			Cash			Non-Cash
Balance at September 27, 2003	$	9,739		$	14,490		$	—		$	24,229
Charges to operations	4,071			35,730			3,500			43,301
Charges utilized	(5,533		)	(28,279		)	(3,500		)	(37,312		)
Reversal of accrual	(7,050		)	(7,016		)	—			(14,066		)
Balance at October 2, 2004	1,227			14,925			—			16,152
Charges to operations	2,285			2,522			4,107			8,914
Charges utilized	(3,010		)	(7,890		)	(4,107		)	(15,007		)
Balance at October 1, 2005	502			9,557			—			10,059
Charges to operations	—			514			261			775
Charges utilized	—			(1,261		)	(261		)	(1,522		)
Balance at December 31, 2005	502			8,810			—			9,312
Charges to operations	—			481			—			481
Charges utilized	(47		)	(646		)	—			(693		)
Balance at April 1, 2006	$	455		$	8,645		$	—		$	9,100

The following sections separately present the charges to the restructuring liability and charges utilized that are set forth in the above table on an aggregate basis.

Fiscal 2002 Plans

lease payments and other costs related to the shutdown of facilities. We utilized accrued severance charges of approximately $2.7 million and accrued facilities shutdown related charges of $811,000 in fiscal 2005. In addition, we incurred and utilized charges of $633,000 in fiscal 2005 related to write-offs of fixed assets consisting of excess equipment and leasehold improvements to facilities that were permanently vacated. Manufacturing activities at the facilities affected by this plan ceased in fiscal year 2003 or prior; however, final payments of accrued costs may not occur until later periods.

Fiscal 2001 Plans

	Employee Severance and Related Expenses			Facilities Shutdown and Consolidation Costs			Write-off Impaired or Redundant Fixed Assets			Total
	(In thousands)
	Cash			Cash			Non-Cash
Balance at September 27, 2003	$	12,052		$	13,612		$	—		$	25,664
Additions to restructuring accrual	10,858			—			6,024			16,882
Accrual utilized	(20,826		)	(11,434		)	(6,024		)	(38,284		)
Balance at October 2, 2004	2,084			2,178			—			4,262
Accrued utilized	(773		)	(393		)	—			(1,166		)
Balance at October 1, 2005	1,311			1,785			—			3,096
Accrued utilized	(25		)	(1,623		)	—			(1,648		)
Balance at December 31, 2005	1,286			162			—			1,448
Additions to restructuring accrual	—			—			—			—
Accrual utilized	—			(9		)	—			(9		)
Balance at April 1, 2006	$	1,286		$	153		$	—		$	1,439

The following sections separately present the charges to the restructuring liability and charges utilized that are set forth in the above table on an aggregate basis.

$10.8 million, related to employee terminations. The charges were related to the elimination of approximately 340 employees. We also recorded and utilized charges to the restructuring liability of approximately $6.0 million related to excess machinery and equipment to be disposed of.

	Three Months ended April 1, 2006		Six Months ended April 1, 2006
Personal Computing	$	13,905	$	34,606
Electronic Manufacturing Services	6,688		21,615
Total	$	20,593	$	56,221

Cash	$	15,109	$	35,152
Non-cash	5,484		21,069
Total	$	20,593	$	56,221

Ongoing Restructuring Activities. As of April 1, 2006, we had incurred approximately $169.8 million of restructuring cost under our phase 3 restructuring plan. As initially planned, we incurred approximately 82% of the charges as cash charges and approximately 18% as non-cash charges. The Company expects the remaining costs associated with phase 3 to cost approximately $65 to $75 million, to be incurred by our Electronic Manufacturing Services segment. Of this amount, greater than 90% will be in cash over the next three quarters. As a result of our phase 3 restructuring plan, we expect to achieve reductions in non-cash and cash costs, including depreciation, payroll and related benefits, and rent expense.

The cumulative restructuring costs per segment have not been disclosed as it is impractical.

We continue to rationalize manufacturing facilities and headcount to more efficiently scale capacity to current market and operating conditions. The closing of plants as well as employee terminations and other related activities under our phase 3 restructuring plan will be substantially completed at the end of fiscal year 2006. However, the leases of the related facilities are unexpired; therefore, the remaining accrual will be reduced over time as the lease payments, net of sublease income, are made.

We plan to fund cash restructuring costs with cash flows generated by operating activities.

Interest Expense

Interest expense decreased $8.5 million to $33.0 million in the second quarter of fiscal 2006 from $41.5 million in the second quarter of fiscal 2005. Interest expense decreased $4.4 million to $67.2 million for the six months ended April 1, 2006 from $71.6 million for the six months ended April 2, 2005. The decrease in interest expense is primarily attributable to the repurchases of the Zero Coupon Convertible Subordinated Debentures Due 2020 (the “Zero Coupon Debentures”) on March 25, 2005 and September 12, 2005 and the redemption of all $750 million aggregate principal amount of its outstanding 10.375% Senior Secured Notes due 2010 (the “10.375% Notes”), offset by an increase in average interest rates and an increase in interest expense from the issuance of the 6.75% Notes and 8.125% Notes.

The interest expense savings from the extinguishment of the 10.375% Notes is expected to be approximately $36 million a year. Net of foregone interest income on cash used to extinguish the debt, we will save approximately $26 million per year.

The expected decrease in interest expense for future periods is anticipated to be partially reduced by the higher interest rates on our interest rate swap transactions on our 6.75% Notes. We entered into interest rate swap transactions with independent third parties to effectively convert the fixed interest rate on our 6.75% Notes to a variable rate. Under the terms of this swap agreement, we pay an independent third party an interest rate equal to the six-month LIBOR rate plus a spread ranging from 2.214% to 2.250%. In exchange, we receive a fixed rate of 6.75%.

Loss on Extinguishment of Debt

On February 15, 2006, we issued $600 million aggregate principal amount of our 8.125% Notes. In connection with the debt issuance, we also made a cash tender offer for the redemption of all of our $750 million aggregate principal amount of its outstanding 10.375% Senior Subordinated Notes. The 10.375% notes, which had been previously been swapped to floating, would cost the Company approximately $80 million in annual interest expense. In the process of evaluating our capital structure and other alternatives, we concluded on a net present value basis that our best economic strategy was to tender for the 10.375% Notes. The refinancing will result in interest expense savings of approximately $36 million per year; will be cash flow positive by approximately $26 million per year, net of forgone interest income on cash used; will be positive on a net present value basis over the long-term and extend our debt maturities, by way of issuance of the 8.125% Notes. The refinancing will also be accretive to future earnings by approximately $0.05 per share per annum.

The 10.375% Notes were redeemed in full. As a result of the 10.375% Notes redemption, we recorded a loss on extinguishment of debt of approximately $112.2 million during the quarter ended April 1, 2006. The loss is comprised of $70.8 million of redemption premium, $26.6 million related to interest rate swap termination costs (net of $3.2 million unamortized gain from previously terminated swaps), $13.9 million in unamortized finance fees relating to the 10.375% Notes and $0.9 million of tender expenses. The tender offer was financed by net proceeds from the 8.125% Notes offering together with approximately $263.8 million of cash from our existing cash.

Other Expense, net

Other expense, net, was $1.4 million and $5.3 million for the three month period ended April 1, 2006 and April 2, 2005, respectively. Other expense, net, was $363,000 and $5.0 million for the six month period ended April 1, 2006 and April 2, 2005, respectively. The following table summarizes the major component of other expense, net:

	Three Months Ended						Six Months Ended
	April 1, 2006			April 2, 2005			April 1, 2006			April 2, 2005
	(In thousands)

Foreign exchange losses	$	(1,970	)	$	(4,069	)	$	(2,359	)	$	(4,584	)
Other, net	553			(1,185		)	1,996			(400		)
Other expense, net	$	(1,417	)	$	(5,254	)	$	(363	)	$	(4,984	)

The reduction of the other expense, net, from $5.3 million for the three months ended April 2, 2005 to $1.4 million for the three months ended April 1, 2006 was mainly attributable to the increased effectiveness of hedging of our foreign currency exposures. The reduction of the other expense, net, from $5.0 million for the six months ended April 2, 2005 to $0.4 million for the six months ended April 1, 2006, was also due to the reason discussed above.

Provision for Income Taxes

For the three and six months ended April 1, 2006, the Company recorded an income tax expense of $6.6 million and an income tax benefit of $6.4 million, respectively. For the three and six months ended April 1, 2006, the effective tax rates were (7)% and 7%, respectively. The income tax benefit for the six months ended April 1, 2006 included a one-time favorable income tax adjustment of $27.9 million relating to previously accrued income taxes that were reversed as a result of a settlement reached with the U.S. Internal Revenue Service. The settlement was in relation to certain U.S. tax audits. Notification of approval of the settlement by the Congressional Joint Committee on Taxation was received following the filing of the Company’s Annual Report on Form 10-K for fiscal 2005. The total adjustment to previously accrued income taxes was $64.0 million of which $27.9 million was recorded as an income tax benefit to earnings. The remaining $36.1 million was recorded as an adjustment to goodwill for pre-merger tax items associated with SCI Systems, a subsidiary of the Company.

For the three and six months ended April 2, 2005, the effective tax rate was (61)% and (65)%, respectively. The significant negative effective rate in fiscal 2005 is due primarily to the recording of a valuation allowance against certain

deferred tax assets in the second quarter of fiscal 2005, the majority of which relate to US operations, resulting in the unique situation of a tax provision on the forecasted annual taxable net loss.

Cumulative Effect of Accounting Change, Net of Tax

Cumulative effect of accounting change, net of tax, is a benefit of $4.8 million which resulted from adoption of SFAS No. 123R. This benefit is a result of the forfeiture rate pursuant to SFAS 123R being lower than the actual rate applied pursuant to SFAS 123.

Liquidity and Capital Resources

	Six Months Ended
	April 1, 2006			April 2, 2005
	(Unaudited)
	(In thousands)
Net cash provided by (used in):
Continuing operations
Operating activities	$	(155,433	)	$	173,964
Investing activities	(51,026		)	(92,051		)
Financing activities	(230,771		)	(14,460		)
Effect of exchange rate changes	(5,617		)	(4,069		)
Increase (decrease) in cash and cash equivalents	$	(442,847	)	$	63,384

Cash, cash equivalents, and short-term investments were $625 million at April 1, 2006, a decrease of $443 million from $1.1 billion at October 1, 2005.

Net cash used in operating activities was $155.4 million for the six months ended April 1, 2006. Net cash used for operating activities during the first half of fiscal 2006 was primarily due to an increase in inventory in anticipation of increased demand by our customers in the next quarter and a decrease in accounts payable and accrued liabilities due to payments made to vendors of approximately $173 million. Additionally, the $112.2 million loss due to the extinguishment of the 10.375% Notes contributed to the decrease. Working capital was $1.0 billion and $1.7 billion as of April 1, 2006 and October 1, 2005, respectively.

Net cash used in investing activities was $51.0 million for the six months ended April 1, 2006. Net cash used for investing activities during the first half of fiscal 2006 was primarily due to the purchase of approximately $70 million of additional property, plant and equipment in lower cost regions and payments of approximately $45 million for businesses acquired during the period, offset by approximately $75 million proceeds from the sales and maturity of our short-term investments.

Net cash used in financing activities was $230.8 million for the six months ended April 1, 2006. Net cash used in financing activities during the first half of fiscal 2006 primarily related to the redemption of our 10.375% Senior Secured Notes of $851.5 million partially offset by proceeds from issuance of our 8.125% Notes due 2016 (net of issuance costs) of $587 million, receipt of $22.5 million in restricted cash associated with the termination of the interest rate swap related to the 10.375% Senior Secured Notes and proceeds of $12.1 million from the employee stock purchase plan and exercise of common stock options by our employees.

We have up to $500 million available for borrowings under our senior secured credit facility, with a $150 million letter of credit sub-limit. On December 16, 2005, we entered into an Amended and Restated Credit and Guaranty Agreement which amended and restated our Credit and Guaranty Agreement, dated as of October 26, 2004 (the “Original Credit Agreement”) among other things, to:

• Extend the maturity date from October 26, 2007 to December 16, 2008;

• Amend the leverage ratio;

• Permit us and the guarantors to sell domestic receivables pursuant to factoring or similar arrangements if certain conditions are met; and

• Revise the collateral release provisions.

Certain of the Company’s subsidiaries have entered into agreements that permit them to sell specified accounts receivable. The purchase price for receivables sold under these Agreements is equal to 100% of its face amount less a discount charge (based on LIBOR plus a spread) for the period from the date the receivable is sold to its collection date. These agreements provide for a commitment fee based on the unused portion of the facility. Accounts receivable sales under these Agreements were $694.8 million for the six month period ended April 1, 2006, and none in the comparable period in fiscal year 2005. The sold receivables are subject to certain limited recourse provisions. As of April 1, 2006, $197.7 million of sold accounts receivable remain subject to certain recourse provisions. We have not experienced any credit losses under these recourse provisions.

Interest on the 8.125% Notes is payable on March 1 and September 1 of each year, beginning on September 1, 2006. The maturity date of the 8.125% Notes is March 1, 2016. Debt issuance costs of $12.9 million are included in other assets and amortized over the life of the debt as interest expense.

The 8.125% Notes Indenture provides for customary events of default, including:

• payment defaults;

• breaches of covenants;

• certain payment defaults at final maturity;

• acceleration of other indebtedness;

• failure to pay certain judgments;

• certain events of bankruptcy, insolvency and reorganization;

• certain instances in which a guarantee ceases to be in full force and effect.

On February 28, 2006, the Company completed an Offer to Purchase and Consent Solicitation (the “Offer to Purchase”) for any or all of its $750 million 10.375% Notes at a total consideration of $1,103.17 for each $1,000 principal amount. The total consideration amount represents the present value of the remaining scheduled payments of principal and interest on the 10.375% Notes due in January 15, 2007 (which is the earliest redemption date for the 10.375% Notes) determined using a discount factor equal to the yield on the Price Determination Date of February 13, 2006 of the 3% U.S. Treasury Note due December 31, 2006 plus 50 basis points, and includes a consent fee plus accrued and unpaid interest. In conjunction with the offer, the Company solicited consents to proposed amendments to the indenture governing the 10.375% Notes, which eliminated substantially all of the restrictive covenants and certain events of default in the indenture. The Company offered a consent payment (which is included in the total consideration described above) of $30.00 per $1,000 principal amount of 10.375% Notes to holders who validly tendered their 10.375% Notes and delivered their consents prior to the Consent Payment Deadline of February 13, 2006. Holders who tendered their 10.375% Notes after the Consent Payment Deadline but prior to the expiration date received total consideration referred to above, less the consent payment.

On February 16, 2006, the Company called for a full redemption on March 20, 2006, (the “Redemption Date”) of all the remaining outstanding 10.375% Notes. The aggregate principal amount outstanding was approximately $28.3 million. The total consideration amount of $1,108.56 for each $1,000 principal amount was calculated based on the principal amount of the Notes, plus accrued and unpaid interest to but excluding the redemption date, plus the make-whole premium amounting to approximately $31.3 million. The 10.375% Notes was redeemed in full on March 20, 2006 and no further interest was accrued.

There are currently no loans outstanding under the senior secured credit facility as of April 1, 2006.

Our future needs for financial resources include increases in working capital to support anticipated sales growth, investments in manufacturing facilities and equipment, and repayments of outstanding indebtedness. We have evaluated and will continue to evaluate possible business acquisitions within the parameters of the restrictions set forth in the agreements governing certain of our debt obligations. These possible business acquisitions could require substantial cash payments. Additionally, we anticipate incurring additional expenditures in connection with the integration of our recently acquired businesses and our restructuring activities.

We believe that our existing cash resources, together with cash generated from operations, will be sufficient to meet our working capital requirements for the remainder of fiscal 2006. Should demand for our electronics manufacturing services decrease over the remainder of fiscal 2006, the available cash provided by operations could be negatively impacted. We may seek to raise additional capital through the issuance of either debt or equity securities. Our senior secured credit facility and the indentures governing our 8.125% Notes and our 6.75% Notes include covenants that, among other things, limit in certain respects us from incurring debt, making investments and other restricted payments, paying dividends on capital stock, redeeming capital stock or subordinated obligations and creating liens. In addition to existing collateral and covenant

requirements, future debt financing may require us to pledge assets as collateral and comply with financial ratios and covenants. Equity financing may result in dilution to stockholders.

Our 3% Notes in the aggregate principal amount of $525 million are due on March 15, 2007. These notes were originally issued by SCI Systems, Inc. prior to our acquisition of SCI. Under the terms of our revolving credit facility, we would not be able to borrow funds to repay the 3% Notes as this facility cannot be used to fund debt repayment. Accordingly, we expect that we will likely seek to refinance all or a portion of the principal amount of the 3% Notes. We believe, based on our recent experience in completing capital markets transactions, that we would be able to raise the capital necessary to retire the 3% Notes on commercially reasonable terms, however we cannot assure you that this will be the case. In the event we are unable to retire the 3% Notes at maturity, our financial condition would be materially and adversely affected and our stock price would likely decline.

In regards to restructuring, the Company anticipates that the remaining costs associated with our phase 3 restructuring to be approximately $65 to $75 million, which will be incurred by our Electronic Manufacturing Services segment. Of this amount, greater than 90% will be in cash over the next three quarters.

Risk Factors Affecting Operating Results

We are exposed to general market conditions in the electronics industry which could have a material adverse impact on our business, operating results and financial condition.

As a result of the downturn in the electronics industry, demand for our manufacturing services declined significantly during our 2001, 2002, and 2003 fiscal years. The decrease in demand for manufacturing services by OEMs resulted primarily from reduced capital spending by communications service providers. Consequently, our operating results were adversely affected as a result of the deterioration in the communications market and the other markets that we serve. Although we have begun to see evidence of a recovery in several markets that we serve, if capital spending in these markets does not continue to improve, or improves at a slower pace than we anticipate, our revenue and profitability will be adversely affected. In addition, even as many of these markets begin to recover, OEMs are likely to continue to be highly sensitive to costs and will likely continue to place pressure on EMS companies to minimize costs. This will likely result in continued significant price competition among EMS companies, and this competition will likely continue to affect our results of operations. In addition, OEM customers are increasingly requiring us and other EMS companies to move production of their products to lower-cost locations and away from high cost locations such as the United States and Western Europe. As a result, we have had to close facilities in the U.S. and Europe and incur costs for facilities closure, employee severance and related items. These trends are likely to continue, and we may therefore need to close additional facilities and incur related closure costs in future fiscal periods.

We cannot accurately predict future levels of demand for our customers’ electronics products. As a result of this uncertainty, we cannot accurately predict if the improvement in the electronics industry will continue. Consequently, our past operating results, earnings and cash flows may not be indicative of our future operating results, earnings and cash flows. In particular, if the economic recovery in the electronics industry does not demonstrate sustained momentum, and if price competition for EMS services continues to be intense, our operating results may be adversely affected.

If demand for our higher-end, higher margin manufacturing services does not improve, our future gross margins and operating results may be lower than expected.

Before the economic downturn in the communications sector and before our merger with SCI Systems, Inc., sales of our services to OEMs in the communications sector accounted for a substantially greater portion of our net sales and earnings than in recent periods. As a result of reduced sales to OEMs in the communications sector, our gross margins have declined because the services that we provided to these OEMs often were more complex, thereby generating higher margins than those that we provided to OEMs in other sectors of the electronics industry. For example, a substantial portion of our net sales are currently derived from sales of personal computers. Margins on personal computers are typically lower than margins that we have historically realized on communication products. OEMs are continuing to seek price decreases from us and other EMS companies and competition for this business remains intense. Although the electronics industry has begun to show indications of a recovery, pricing pressure on EMS companies continues to be strong and there continues to be intense price competition for EMS services. This price competition has affected, and could continue to adversely affect, our gross margins. If demand for our higher-end, higher margin manufacturing services does not improve in the future, our gross margins and operating results in future periods may be adversely affected.

Our operating results are subject to significant uncertainties.

Our operating results are subject to significant uncertainties, including the following:

• economic conditions in the electronics industry;

• the timing of orders from major customers and the accuracy of their forecasts;

• the timing of expenditures in anticipation of increased sales, customer product delivery requirements and shortages of components or labor;

• the mix of products ordered by and shipped to major customers, as high volume and low complexity manufacturing services typically have lower gross margins than more complex and lower volume services;

• the degree to which we are able to utilize our available manufacturing capacity;

• our ability to effectively plan production and manage our inventory and fixed assets;

• customer insolvencies resulting in bad debt exposures that are in excess of our accounts receivable reserves;

• our ability to efficiently move manufacturing activities to lower cost regions without adversely affecting customer relationships and while controlling facilities closure and employee severance costs;

• pricing and other competitive pressures;

• seasonality in customers’ product requirements;

• fluctuations in component prices;

• political and economic developments in countries in which we have operations;

• component shortages, which could cause us to be unable to meet customer delivery schedules; and

• new product development by our customers.

A portion of our operating expenses is relatively fixed in nature, and planned expenditures are based, in part, on anticipated orders, which are difficult to estimate. If we do not receive anticipated orders as expected, our operating results will be adversely impacted. Moreover, our ability to reduce our costs as a result of current or future restructuring efforts may be limited because consolidation of operations can be costly and a lengthy process to complete.

If in a future fiscal period, we identified a material weakness in our internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our securities; we will also likely continue to incur substantial expenditures in connection with the Sarbanes-Oxley Section 404 process.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting in their annual reports on Form 10-K that contains an assessment by management of the effectiveness of the company’s internal control over financial reporting. In addition, the independent registered public accounting firm auditing the company’s financial statements must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. We are subject to these requirements beginning in our 2005 fiscal year. Although this process did not identify any material weaknesses in our internal controls over financial reporting at October 1, 2005, in the future, we will need to continue to evaluate, and upgrade and enhance, our internal controls. For a discussion of changes undertaken to remediate a previously identified material weakness and adjustments recorded to our financial statements as a result of this remediation, see “Item 9A. Controls and Procedures” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quarterly Results (Unaudited)” contained in the Annual Report on Form 10-K incorporated by reference herein. In addition, because of inherent limitations, our internal control over

financial reporting may not prevent or detect misstatements, errors or omissions, and any projections of any evaluation of effectiveness of internal controls to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate. If we fail to maintain the adequacy of our internal controls, including any failure to implement or difficulty in implementing required new or improved controls, our business and results of operations could be harmed, the results of operations we report could be subject to adjustments, we could fail to be able to provide reasonable assurance as to our financial results or the effectiveness of our internal controls or meet our reporting obligations and there could be a material adverse effect on the price of our securities.

In addition, during fiscal 2005, we expended significant resources in connection with the Section 404 process. In future periods, we will likely continue to expend substantial amounts in connection with the Section 404 process and with ongoing evaluation of, and improvements and enhancements to, our internal control over financial reporting. These expenditures may make it difficult for us to control or reduce the growth of our selling, general and administrative expenses, which could adversely affect our results of operations and the price of our securities.

Adverse changes in the key end markets we target could harm our business.

We are dependent on the communications, computing and storage, multimedia, industrial and semiconductor systems, defense and aerospace, medical and automotive sectors of the electronics industry. Adverse changes in the end markets that we serve can reduce demand from our customers in those end markets and make customers in these end markets more price sensitive, either of which could adversely affect our business and results of operations. For example, in calendar year 2001, the communications equipment industry was afflicted by a significant downturn, which caused a substantial reduction in demand for our services from these customers. In addition, the declining financial performance of these customers made them more price sensitive which resulted in increased competition and pricing pressures on us. Future developments of this nature in end markets we serve, particularly in those markets which account for more significant portions of our revenues, could harm our business and our results of operations.

An adverse change in the interest rates for our borrowings could adversely affect our financial condition.

Interest to be paid by us on any borrowings under any of our credit facilities and other long-term debt obligations may be at interest rates that fluctuate based upon changes in various base interest rates. Recently, interest rates have trended upwards in major global financial markets. These interest rate trends have resulted in increases in the base rates upon which our interest rates are determined. Continued increases in interest rates could have a material adverse effect on our financial position, results of operations and cash flows, particularly if such increases are substantial. In addition, interest rate trends could affect global economic conditions.

We generally do not obtain long-term volume purchase commitments from customers, and, therefore, cancellations, reductions in production quantities and delays in production by our customers could adversely affect our operating results.

We generally do not obtain firm, long-term purchase commitments from our customers. Customers may cancel their orders, reduce production quantities or delay production for a number of reasons. In the event our customers experience significant decreases in demand for their products and services, our customers may cancel orders, delay the delivery of some of the products that we manufacture or place purchase orders for fewer products than we previously anticipated. Even when our customers are contractually obligated to purchase products from us, we may be unable or, for other business reasons, choose not to enforce our contractual rights. Cancellations, reductions or delays of orders by customers would:

• adversely affect our operating results by reducing the volumes of products that we manufacture for our customers;

• delay or eliminate recoupment of our expenditures for inventory purchased in preparation for customer orders; and

• lower our asset utilization, which would result in lower gross margins.

In addition, customers may require that we transfer the manufacture of their products from one facility to another to achieve cost reductions and other objectives. These transfers may result in increased costs to us due to resulting facility downtime or less than optimal utilization of our manufacturing capacity. These transfers may also require us to close or reduce operations at certain facilities, particularly those in high cost locations, and as a result we could incur increased costs

for facilities closure, employee severance and related matters.

We rely on a small number of customers for a substantial portion of our net sales, and declines in sales to these customers could adversely affect our operating results.

Sales to our ten largest customers accounted for 62.5% of our net sales during the first half of fiscal 2006 and sales to two customers accounted for more than 10% of our net sales for that period. We depend on the continued growth, viability and financial stability of our customers, substantially all of which operate in an environment characterized by rapid technological change, short product life cycles, consolidation, and pricing and margin pressures. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our revenue. Consolidation among our customers may further concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on a small number of customers. In addition, a significant reduction in sales to any of our large customers or significant pricing and margin pressures exerted by a key customer would adversely affect our operating results. In the past, some of our large customers have significantly reduced or delayed the volume of manufacturing services ordered from us as a result of changes in their business, consolidations or divestitures or for other reasons. In particular, certain of our customers have from time to time entered into manufacturing divestiture transactions with other EMS companies, and such transactions could adversely affect our revenues with these customers. We cannot assure you that present or future large customers will not terminate their manufacturing arrangements with us or significantly change, reduce or delay the amount of manufacturing services ordered from us, any of which would adversely affect our operating results.

If our business declines or improves at a slower pace than we anticipate, we may further restructure our operations, which may adversely affect our financial condition and operating results.

We have incurred approximately $169.8 million of restructuring costs associated with this plan. As initially planned, we incurred approximately 82% of the charges as cash charges and approximately 18% as non-cash charges. We anticipate incurring additional restructuring charges in fiscal 2006 under our phase 3 restructuring plan. The projected costs to complete our phase 3 restructuring plan is approximately $65 million to $75 million. On October 12, 2005, we announced the restructuring of several European entities. We cannot be certain as to the actual amount of these restructuring charges or the timing of their recognition for financial reporting purposes. We may need to take additional restructuring charges in the future if our business declines or improves at a slower pace than we anticipate or if the expected benefits of recently completed and currently planned restructuring activities do not materialize. These benefits may not materialize if we incur unanticipated costs in closing facilities or transitioning operations from closed facilities to other facilities or if customers cancel orders as a result of facility closures. If we are unsuccessful in implementing our restructuring plans, we may experience disruptions in our operations and higher ongoing costs, which may adversely affect our operating results.

We are implementing our original design manufacturer, or ODM, strategy, which we expect will be a critical element of our future growth and profitability, and we may encounter difficulties in growing this business.

We are implementing a strategy of offering original design manufacturer, or ODM, products and product platforms. ODM products and product platforms are either substantially finished products or product platforms that contain the electronics critical to the functionality of a finished product, such as a personal computer motherboard and chassis. By developing ODM products, we can increase the level of proprietary technology content we provide to our customers and our technologies can be designed into our customers’ products. We began our ODM efforts in the area of server technology with our acquisition of Newisys and are now moving into other end markets. We may encounter unforeseen difficulties in connection with our ODM strategy including difficulties in identifying and targeting ODM opportunities, difficulties in achieving development timelines and difficulties in hiring and retaining qualified engineering and technical personnel. These or other factors could slow or impair our ODM initiatives, which would adversely affect our growth and profitability.

We are subject to intense competition in the EMS industry, and our business may be adversely affected by these competitive pressures.

The EMS industry is highly competitive. We compete on a worldwide basis to provide electronics manufacturing services to OEMs in the communications, personal and business computing, enterprise computing and storage, multimedia, industrial and semiconductor capital equipment, defense and aerospace, medical and automotive industries. Our competitors include major global EMS providers such as Celestica, Inc., Flextronics International Ltd., Hon Hai (FoxConn), Jabil Circuit, Inc., and Solectron Corporation, as well as other EMS companies that often have a regional or product, service or industry specific focus. Some of these companies have greater manufacturing and financial resources than we do. We also face competition from current and potential OEM customers, who may elect to manufacture their own products internally rather than outsource the manufacturing to EMS providers.

In addition to EMS companies, we also compete, with respect to certain of the EMS services we provide, with original design manufacturers, or ODMs. These companies, many of which are based in Asia, design products and product platforms that are then sold to OEMs, system integrators and others who configure and resell them to end users. To date, ODM penetration has been greatest in the personal computer, including both desktop and notebook computers, and server markets. However, the trend towards the use of ODM product platforms is moving into other segments of the electronics industry, including multimedia and other products. As we implement our ODM strategies, the extent to which we compete with both established and emerging ODMs in multiple end-customer markets is likely to increase.

We expect competition to intensify further as more companies enter markets in which we operate and the OEMs we serve continue to consolidate. To remain competitive, we must continue to provide technologically advanced manufacturing services, high quality service, flexible and reliable delivery schedules, and competitive prices. Our failure to compete effectively could adversely affect our business and results of operations.

Consolidation in the electronics industry may adversely affect our business.

In the current economic climate, consolidation in the electronics industry may increase as companies combine to achieve further economies of scale and other synergies. Consolidation in the electronics industry could result in an increase in excess manufacturing capacity as companies seek to divest manufacturing operations or eliminate duplicative product lines. Excess manufacturing capacity has increased, and may continue to increase, pricing and competitive pressures for the EMS industry as a whole and for us in particular. Consolidation could also result in an increasing number of very large electronics companies offering products in multiple sectors of the electronics industry. The significant purchasing power and market power of these large companies could increase pricing and competitive pressures for us. If one of our customers is acquired by another company that does not rely on us to provide services and has its own production facilities or relies on another provider of similar services, we may lose that customer’s business. Any of the foregoing results of industry consolidation could adversely affect our business.

Our failure to comply with applicable environmental laws could adversely affect our business.

We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous substances and wastes in the ordinary course of our manufacturing operations. We also are subject to laws and regulations governing the recyclability of products, the materials that may be included in products, and the obligations of a manufacturer to dispose of these products after end users have finished using them. If we violate environmental laws, we may be held liable for damages and the costs of remedial actions and may be subject to revocation of permits necessary to conduct our businesses. We cannot assure you that we will not violate environmental laws and regulations in the future as a result of our inability to obtain permits, human error, equipment failure or other causes. Any permit revocations could require us to cease or limit production at one or more of our facilities, which could adversely affect our business, financial condition and operating results. Although we estimate our potential liability with respect to violations or alleged violations and reserve for such liability, we cannot assure you that any accruals will be sufficient to cover the actual costs that we incur as a result of these violations or alleged violations. Our failure to comply with applicable environmental laws and regulations could limit our ability to expand facilities or could require us to acquire costly equipment or to incur other significant expenses to comply with these laws and regulations.

Over the years, environmental laws have become, and in the future may become, more stringent, imposing greater compliance costs and increasing risks and penalties associated with violations. We operate in several environmentally sensitive locations and are subject to potentially conflicting and changing regulatory agendas of political, business and environmental groups. Changes in or restrictions on discharge limits, emissions levels, permitting requirements and material storage or handling could require a higher than anticipated level of operating expenses and capital investment or, depending on the severity of the impact of the foregoing factors, costly plant relocation.

In addition, the electronics industry will become subject to the European Union’s Restrictions of Hazardous Substances, or RoHS, and Waste Electrical and Electronic Equipment, or WEEE, directives which took effect beginning in 2005 and continuing in 2006. Parallel initiatives are being proposed in other jurisdictions, including several states in the United States and the Peoples’ Republic of China. RoHS prohibits the use of lead, mercury and certain other specified substances in electronics products and WEEE requires industry OEMs to assume responsibility for the collection, recycling and management of waste electronic products and components. We are in the process of making our manufacturing process RoHs compliant. In the case of WEEE, the compliance responsibility rests primarily with OEMs rather than with EMS companies. However, OEMs may turn to EMS companies for assistance in meeting their WEEE obligations. In the event we are not able to make our manufacturing obligations fully RoHS compliant by the applicable deadlines, we could be unable to certify

compliance to our customers and could incur substantial costs, including fines and penalties, as well as liability to our customers. In addition, we may incur costs related to inventories containing restricted substances that are not consumed by the RoHS effective dates.

We are potentially liable for contamination of our current and former facilities, including those of the companies we have acquired, which could adversely affect our business and operating results in the future.

We are potentially liable for contamination at our current and former facilities, including those of the companies we have acquired. These liabilities include ongoing investigation and remediation activities at a number of sites. Currently, we are unable to anticipate whether any third-party claims will be brought against us for this contamination. We cannot assure you that third-party claims will not arise and will not result in material liability to us. In addition, there are several sites that are known to have groundwater contamination caused by a third party, and that third party has provided indemnity to us for the liability. Although we do not currently expect to incur liability for clean-up costs or expenses at any of these sites, we cannot assure you that we will not incur such liability or that any such liability would not be material to our business and operating results in the future.

Our 3% convertible subordinated notes, or 3% Notes, in the aggregate principal amount of $525 million, are due on March 15, 2007, and the maturity of these 3% Notes could affect our liquidity.

Our key personnel are critical to our business, and we cannot assure you that they will remain with us.

Our success depends upon the continued service of our executive officers and other key personnel. Generally, these employees are not bound by employment or non-competition agreements. We cannot assure you that we will retain our officers and key employees, particularly our highly skilled design, process and test engineers involved in the manufacture of existing products and development of new products and processes. The competition for these employees is intense. In addition, if Jure Sola, our chairman and chief executive officer, or one or more of our other executive officers or key employees, were to join a competitor or otherwise compete directly or indirectly with us or otherwise be unavailable to us, our business, operating results and financial condition could be adversely affected.

Unanticipated changes in our tax rates or in our assessment of the realizability of our deferred tax assets or exposure to additional income tax liabilities could affect our operating results and financial condition.

We are subject to income taxes in both the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. Our effective tax rates could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws as well as other factors. For example, as a result of our continuous migration of certain operating activities from high-cost to low-cost regions, we determined during the second fiscal quarter of 2005 that it was more likely than not that certain of our deferred tax assets primarily relating to our U.S. operations would not be realized. As a result of this analysis, during the second quarter of fiscal 2005, we recorded an increase in our deferred tax asset valuation allowance of $379.2 million in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109). Our tax determinations are regularly subject to audit by tax authorities and developments in those audits could adversely affect our income tax provision. Although we believe that our tax estimates are reasonable, the final determination of tax audits or tax disputes may be different from what is reflected in our historical income tax provisions which could affect our operating results.

During the second quarter of fiscal 2005, we recorded a goodwill impairment loss of $600 million, and there can be no assurance that it will not be necessary to record additional goodwill impairment or long-lived asset impairment charges in the future.

During the quarter ended April 2, 2005, we recorded a goodwill impairment loss of $600 million. The factors that led us to record a write-off of our deferred tax assets, which primarily related to U.S. operations, coupled with the recent decline in the market price of our common stock, led us to record this goodwill impairment loss. In particular, the shift of operations from U.S. facilities and other facilities in high cost locations to facilities in lower-cost locations has resulted in restructuring charges and a decline in sales with respect to our U.S. operations. In the event that the results of operations do not stabilize or improve, or the market price of our common stock declines further or does not rise, we could be required to record additional goodwill impairment or other long-lived asset impairment charges during fiscal 2006 or in future fiscal periods. Although these goodwill impairment charges are of a non-cash nature, they do adversely affect our results of operations in the periods in which such charges are recorded.

We are subject to risks arising from our international operations.

We conduct our international operations primarily in Asia, Latin America, Canada and Europe and we continue to consider additional opportunities to make foreign acquisitions and construct new foreign facilities. We generated 74.4% of our net sales from non-U.S. operations during the six months ended April 1, 2006, and a significant portion of our manufacturing material was provided by international suppliers during this period. During fiscal 2005, we generated 76.2% of our net sales from non-U.S. operations. As a result of our international operations, we are affected by economic and political conditions in foreign countries, including:

• the imposition of government controls;

• export license requirements;

• political and economic instability;

• trade restrictions;

• changes in tariffs;

• labor unrest and difficulties in staffing;

• coordinating communications among and managing international operations;

• fluctuations in currency exchange rates;

• increases in duty and/or income tax rates;

• earnings repatriation restrictions;

• difficulties in obtaining export licenses;

• misappropriation of intellectual property; and

• constraints on our ability to maintain or increase prices.

To respond to competitive pressures and customer requirements, we may further expand internationally in lower cost locations, particularly in Asia, Eastern Europe and Latin America. As we pursue continued expansion in these locations, we may incur additional capital expenditures. In addition, the cost structure in certain countries that are now viewed as low-cost may increase as economies develop or as such countries join multinational economic communities or organizations. For example, Hungary, in which we have operations, is in the process of joining the European Union, and it is possible that costs in Hungary could therefore increase. As a result, we may need to continue to seek out new locations with lower costs and the employee and infrastructure base to support electronics manufacturing. We cannot assure you that we will realize the anticipated strategic benefits of our international operations or that our international operations will contribute positively to, and not adversely affect, our business and operating results.

In addition, during fiscal 2004 and fiscal 2005, the decline in the value of the U.S. dollar as compared to the Euro and many other currencies has resulted in foreign exchange losses. To date, these losses have not been material to our results of operations. However, continued fluctuations in the value of the U.S. dollar as compared to the Euro and other currencies in which we transact business could adversely affect our operating results.

We are subject to risks of currency fluctuations and related hedging operations.

A portion of our business is conducted in currencies other than the U.S. dollar. Changes in exchange rates among other currencies and the U.S. dollar will affect our cost of sales, operating margins and revenues. We cannot predict the impact of future exchange rate fluctuations. In addition, certain of our subsidiaries that have non-U.S. dollar functional currencies transact business in U.S. dollars. We use financial instruments, primarily short-term foreign currency forward contracts, to hedge U.S. dollar and other currency commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations. If these hedging activities are not successful or we change or reduce these hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates.

We may not be successful in implementing strategic transactions, including business acquisitions, and we may encounter difficulties in completing and integrating acquired businesses or in realizing anticipated benefits of strategic transactions, which could adversely affect our operating results.

We seek to undertake strategic transactions that give us the opportunity to access new customers and new end-customer markets, to obtain new manufacturing and service capabilities and technologies, to enter new geographic manufacturing locations markets, to lower our manufacturing costs and improve the margins on our product mix, and to further develop existing customer relationships. In addition, we will continue to pursue OEM divestiture transactions. Strategic transactions may involve difficulties, including the following:

• integrating acquired operations and businesses;

• allocating management resources;

• scaling up production and coordinating management of operations at new sites;

• managing and integrating operations in geographically dispersed locations;

• maintaining customer, supplier or other favorable business relationships of acquired operations and terminating unfavorable relationships;

• integrating the acquired company’s systems into our management information systems;

• addressing unforeseen liabilities of acquired businesses;

• lack of experience operating in the geographic market or industry sector of the business acquired;

• improving and expanding our management information systems to accommodate expanded operations; and

• losing key employees of acquired operations.

Any of these factors could prevent us from realizing the anticipated benefits of a strategic transaction, and our failure to realize these benefits could adversely affect our business and operating results. In addition, we may not be successful in identifying future strategic opportunities or in consummating any strategic transactions that we pursue on favorable terms, if at all. Although our goal is to improve our business and maximize stockholder value, any transactions that we complete may impair stockholder or debtholder value or otherwise adversely affect our business and the market price of our stock. Moreover, any such transaction may require us to incur related charges, and may pose significant integration challenges and/or management and business disruptions, any of which could harm our operating results and business.

If we are unable to protect our intellectual property or infringe or are alleged to infringe upon intellectual property of others, our operating results may be adversely affected.

We rely on a combination of copyright, patent, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. As ODM services assume a greater degree of importance to our business, the extent to which we rely on intellectual property rights will increase. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology. Our inability to protect our intellectual property rights could diminish or eliminate the competitive advantages that we derive from our proprietary technology.

We may become involved in litigation in the future to protect our intellectual property or because others may allege that we infringe on their intellectual property. The likelihood of any such claims may increase as we increase the ODM aspects of our business. These claims and any resulting lawsuits could subject us to significant liability for damages and invalidate our proprietary rights. In addition, these lawsuits, regardless of their merits, likely would be time consuming and expensive to resolve and would divert management’s time and attention. Any potential intellectual property litigation alleging our infringement of a third-party’s intellectual property also could force us or our customers to:

• stop producing products that use the challenged intellectual property;

• obtain from the owner of the infringed intellectual property a license to sell the relevant technology at an additional cost, which license may not be available on reasonable terms, or at all; and

• redesign those products or services that use the infringed technology.

Any costs we incur from having to take any of these actions could be substantial.

We and the customers we serve are vulnerable to technological changes in the electronics industry.

Our customers are primarily OEMs in the communications, high-end computing, personal computing, aerospace and defense, medical, industrial controls and multimedia sectors. These industry sectors, and the electronics industry as a whole, are subject to rapid technological change and product obsolescence. If our customers are unable to develop products that keep pace with the changing technological environment, our customers’ products could become obsolete, and the demand for our services could decline significantly. In addition, our customers may discontinue or modify products containing components that we manufacture, or develop products requiring new manufacturing processes. If we are unable to offer technologically advanced, easily adaptable and cost effective manufacturing services in response to changing customer requirements, demand for our services will decline. If our customers terminate their purchase orders with us or do not select us to manufacture their new products, our operating results could be adversely affected.

We may experience component shortages, which could cause us to delay shipments to customers and reduce our revenue and operating results.

In the past from time to time, a number of components purchased by us and incorporated into assemblies and subassemblies produced by us have been subject to shortages. These components include application-specific integrated circuits, capacitors and connectors. As our business begins to improve following the economic downturn, we may experience component shortages from time to time. Unanticipated component shortages have prevented us from making scheduled shipments to customers in the past and may do so in the future. Our inability to make scheduled shipments could cause us to experience a shortfall in revenue, increase our costs and adversely affect our relationship with the affected customer and our reputation generally as a reliable service provider. Component shortages may also increase our cost of goods sold because we may be required to pay higher prices for components in short supply and redesign or reconfigure products to accommodate substitute components. In addition, we may purchase components in advance of our requirements for those components as a result of a threatened or anticipated shortage. In this event, we will incur additional inventory carrying costs, for which we may not be compensated, and have a heightened risk of exposure to inventory obsolescence. As a result, component shortages could adversely affect our operating results for a particular period due to the resulting revenue shortfall and increased manufacturing or component costs.

If we manufacture or design defective products, or if our manufacturing processes do not comply with applicable statutory and regulatory requirements, demand for our services may decline and we may be subject to liability claims.

We manufacture products to our customers’ specifications, and, in some cases, our manufacturing processes and facilities may need to comply with applicable statutory and regulatory requirements. For example, medical devices that we manufacture, as well as the facilities and manufacturing processes that we use to produce them, are regulated by the Food and Drug Administration. In addition, our customers’ products and the manufacturing processes that we use to produce them often are highly complex. As a result, products that we manufacture or design may at times contain design or manufacturing defects, and our manufacturing processes may be subject to errors or not in compliance with applicable statutory and regulatory requirements. In addition, we are also involved in product and component design, and as we seek to grow our original design manufacturer business, this activity as well as the risk of design defects will increase. Defects in the products we manufacture or design may result in delayed shipments to customers or reduced or cancelled customer orders. If these defects or deficiencies are significant, our business reputation may also be damaged. The failure of the products that we manufacture or design or of our manufacturing processes and facilities to comply with applicable statutory and regulatory

requirements may subject us to legal fines or penalties and, in some cases, require us to shut down or incur considerable expense to correct a manufacturing program or facility. In addition, these defects may result in liability claims against us. The magnitude of such claims may increase as we expand our medical, automotive, and aerospace and defense manufacturing services because defects in medical devices, automotive components, and aerospace and defense systems could seriously harm users of these products. Even if our customers are responsible for the defects, they may not, or may not have the resources to, assume responsibility for any costs or liabilities arising from these defects.

Recently enacted changes in the securities laws and regulations have increased, and are likely to continue to increase, our costs.

The Sarbanes-Oxley Act of 2002 that became law in July 2002 has required changes in some of our corporate governance, securities disclosure and compliance practices. In response to the requirements of that Act, the Securities and Exchange Commission and the NASDAQ National Market have promulgated new rules on a variety of subjects. Compliance with these new rules, particularly Section 404 of The Sarbanes-Oxley Act of 2002 regarding management’s assessment of our internal control over financial reporting, has increased our legal and financial and accounting costs, and we expect these increased costs to continue indefinitely. We also expect these developments to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be forced to accept reduced coverage or incur substantially higher costs to obtain coverage. Likewise, these developments may make it more difficult for us to attract and retain qualified members of our board of directors or qualified executive officers.

We are subject to risks associated with natural disasters and global events.

We conduct a significant portion of our activities including manufacturing, administration and data processing at facilities located in the State of California and other seismically active areas that have experienced major earthquakes in the past, as well as other natural disasters. Our insurance coverage with respect to natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may not be adequate or continue to be available at commercially reasonable rates and terms. In the event of a major earthquake or other disaster affecting one or more of our facilities, it could significantly disrupt our operations, delay or prevent product manufacture and shipment for the time required to transfer production, repair, rebuild or replace the affected manufacturing facilities. This time frame could be lengthy, and result in significant expenses for repair and related costs. In addition, concerns about terrorism or an outbreak of epidemic diseases such as avian influenza or severe acute respiratory syndrome, or SARS, could have a negative effect on travel and our business operations, and result in adverse consequences on our business and results of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposures to market risk for changes in interest rates relate primarily to our investment portfolio and certain debt obligations. Currently, we do not use derivative financial instruments in our investment portfolio. We invest in high quality credit issuers and, by policy, limit the amount of principal exposure to any one issuer. As stated in our policy, we seek to ensure the safety and preservation of our invested principal funds by limiting default and market risk.

We seek to mitigate default risk by investing in high quality credit securities and by positioning our investment portfolio to respond to a significant reduction in credit rating of any investment issuer, guarantor or depository. We seek to mitigate market risk by limiting the principal and investment term of funds held with any one issuer and by investing funds in marketable securities with active secondary or resale markets.

The table below presents carrying amounts and related average interest rates by year of maturity for our investment portfolio as of April 1, 2006:

	2006			2007	Total
	(In thousands, except percentages)
Cash equivalents and short-term investments	$	2,476		—	$	2,476
Average interest rate	4.63		%	—	4.63		%

We have issued the 6.75% Notes with a principal balance of $400.0 million due in 2013. We entered into interest rate swap transactions with independent third parties to effectively convert the fixed interest rate to a variable rate. The swap

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are a party to certain legal proceedings that have arisen in the ordinary course of our business. We believe that the resolution of these proceedings will not have a material adverse effect on our business, financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

On February 27, 2006, Sanmina-SCI held its 2006 Annual Meeting of Stockholders. The matters voted upon at the meeting for shareholders of record as of January 11, 2006 and the vote with respect to each such matter are set forth below:

1. To elect directors of Sanmina-SCI Corporation:

	For	Withheld
Neil R. Bonke	397,846,015	47,453,659
Alain Couder	430,847,602	14,452,072
Mario M. Rosati	393,729,613	51,570,061
A. Eugene Sapp, Jr	409,633,899	35,665,775
Wayne Shortridge	417,952,611	27,347,063
Peter J. Simone	433,341,326	11,958,348
Jure Sola	408,837,836	36,461,838
Jacquelyn M. Ward	420,371,265	24,928,409

2. To amend Sanmina-SCI’s 2003 Employee Stock Purchase Plan to increase the number of shares reserved for issuance under such plan by 6,000,000 shares to a new total of 15,000,000 shares.

For: 303,729,340

Against: 18,636,884

Abstain: 122,933,450

3. To approve appointment of KPMG LLP as the independent public accountants of Sanmina-SCI for the fiscal year ending September 30, 2006.

For: 439,422,407

Against: 2,932,337

Abstain: 2,944,930

Item 6. Exhibits

(a) Exhibits

Refer to item (c) below.

Exhibit Number		Description
31.1		Certification of the Principal Executive Officer pursuant toSection 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended April 1, 2006

or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

Delaware		77-0228183
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

2700 N. First St., San Jose, CA		95134
(Address of principal executive offices)		(Zip Code)

	SANMINA-SCI CORPORATION
	(Registrant)

	By:	/s/ JURE SOLA
		Jure Sola
		Chief Executive Officer

Date: May 11, 2006

	By:	/s/ DAVID L. WHITE
		David L. White
		Executive Vice President and Chief Financial Officer

Date: May 11, 2006

	PART I FINANCIAL INFORMATION	Page
Item 1.	Interim Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 4.	Controls and Procedures	55
	PART II OTHER INFORMATION	56
Item 1.	Legal Proceedings	56
Item 4.	Submission of Matters to a Vote of Security Holders	56
Item 6.	Exhibits	56
Signatures		57