Ladies and gentlemen, good morning. Thank you for standing by and welcome to the Benchmark Electronics first quarter 2008 Earnings Call. (Operator Instructions) At this time I would like to turn the conference over to our host, Chief Financial Officer for Benchmark Electronics, Mr. Don Adam. Please go ahead.

Good morning. Welcome to the Benchmark Electronics conference call to discuss our financial results for the first quarter of 2008. I am Don Adam, Chief Financial Officer of Benchmark Electronics. Today we will begin our call with Cary Fu, our CEO, providing a review of our first quarter and our estimates for Q2. I will then continue with a discussion of our financial metrics for Q1 in greater detail. After our prepared remarks, Gayla, our President, Cary and I will take time for your questions in our Q&A session. We will hold this call to one hour. During this call we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We would like to caution you that those statements reflect our current expectations and that actual events or results may differ materially. We would also like to refer you to Benchmark's periodic reports that are filed from time to time with the Securities and Exchange Commission, including the Company's 8-K and S-4 filings, quarterly filings on Forms 10-Q and our Annual Report on Form 10-K. These documents contain cautionary language and identify important risk factors, which could cause our actual results to differ materially from our projections or forward-looking statements. We undertake no obligation to update those projections or forward-looking statements in the future. Now I will turn the call over to Cary.

Good morning. Our first quarter results show good financial metrics even with the slight topline shortfalls. As expected, we did see trending in our medical shipments, our medical revenues up 11% sequentially. Revenue from telecom, industrial control and test and instrumentation sectors were relatively flat. However, we did see a weakness in the computing sectors. We normally expect a bit of a decline in the computer sector in the first quarter of each year, due to seasonality. But this year, the decline was greater than anticipated. In addition, as you might recall from a prior period, the computer sector normally shows strong orders toward the end of each quarter, but in Q1 2008 we did not see the high level of quarter end shipments requiring from our computer customers. This softer market impacted Benchmark, as our revenue did fall slightly short of our guidance for the quarter with EPS meeting our guidance as well as the Wall Street consensus. We delivered a result in line with our EPS guidance due to a better product mix, the realignment effort we completed in 2007 and our continued focus on efficiency improvements. In Q1, we booked 10 new programs with current estimates of annual revenue of about $116 million to $152 million. This new program opportunity is both from our new and existing customers and from mix of our industry we serve. We anticipated new revenue of 2008 bookings will be benefit in late 2008 and as well as 2009. In addition, we continue to see a strong pipeline of new sales opportunities. Now we expect the second quarter revenue to be in the range of $715 million to $750 million. Our expectations of Q2 revenue are based on following factors; number one, current macro environments; number two, strength in our medical sectors; number three, other new program ramps. The corresponding earning per shares in the range of about $0.35 to $0.41, excluding stock-based compensation expense of $1.4 million and the amortization of intangible about $447,000. Our quarterly earnings per share guidance included the impact of our stock repurchase programs. For the year 2008, we have modified our revenue growth guidance to a range about 2% to 5% in 2008. Again, this growth is expected to come from new program ramps. At the same time, we maintained our earnings per share growth in the range of 15% to 20% due to better product mix, the benefit of our realignment effort 2007 and our continued focus on efficiency improvements. Please keep in mind our full year guidance is based on the current economic environment. Further deterioration of the environment could impact our customer demand and our ability to meet these expectations. At this point in time, I would like to turn the call back to Don to discuss the financial metrics for Q1. Don?

Thank you, Cary. We did complete the first quarter of 2008 with earnings per share of $0.34, which excludes the special items, which was within our guidance range, and $684 million in revenues, which was below our guidance of $700 million to $725 million. Please note that the first quarter results contained two special items. They are as follows; stock-based compensation expenses of $788,000 or $557,000 net of tax; amortization of intangible assets of $447,000 or $285,000 net of tax. To provide a more meaningful comparative analysis, we will present certain financial information excluding these items during this conference call. We will call your attention to the fact that these items are excluded when we do so. In today's press release we have included a reconciliation of our GAAP results to our results excluding these items. Our operating margin for the first quarter was 3.3% excluding the special items noted earlier. This is a decline from the fourth quarter and was impacted by the revenue shortfall. GAAP net income for the first quarter of 2008 was $22.6 million compared to $24.5 million in the first quarter of last year. Excluding these special items, net income was $23.5 million compared to $28 million in the first quarter of last year. Diluted earnings per share for the first quarter were $0.33. Diluted earnings per share excluding the special items were $0.34. Diluted earnings per share for Q1 '07 were $0.39 excluding special items. Interest income was approximately $3.2 million for the quarter. Interest expense was $365,000, and other income, which was primarily foreign currency related, was approximately $1.6 million. Excluding the special items, our effective tax rate was approximately 14% for the first quarter. On a GAAP basis the effective tax rate was 13% for the quarter. Our tax rate has continued…

[Operator Instructions]. And we will go to the line of Amit Daryanani from RBC Capital Markets. Please go ahead.

Just a question on the Q2 guidance, sequentially you guys are still looking for about 6%, 7% growth or so, which I think is in line with normal seasonality. But given all the economic considerations that I think you have highlighted, what gives us conviction that we should be able to hit the number? And specifically, what's built into the computing segment expectations in Q2?

Amit, as I discussed in my opening remarks, our guidance was based on the current market environment and plus the new program ramp we are anticipating. So, there is no reflecting on any improvement at the macro environment at all. All the increase of the revenues comes from the programs we have in process ramping. So we feel pretty comfortable with the guidance we're giving.

So, Cary, I guess underlying your end markets will be flat and the incremental 6%, 7% sales is all from new programs? Is that right?

Yes. The revenue increase guidance for Q2 is based pretty much upon the new program ramps.

All right. Just one of the byproducts, I guess, of tampering down your sales expectations over the years, I would assume your cash flow from operations should do a little bit better. Last quarter you guys talked about $75 million to $100 million. Should we expect that to be the higher end of it? And the flip side is you're almost done with your buyback, any thoughts on doing a second one after this?

Amit, I think on the cash flows what we're expecting for the balance of the year is approximately $75 million. We're about, what, $49 million so far, so the balance of the year another $25 million.

And what about potentially looking to do a follow-on buyback? You still have a fair degree of liquidity on your books.

Yes. As you talk about, we have a significant cash still on hand. Deposit to-date we purchased about $103 million of the stock and our cash position maintain fairly high. We will continue to purchase the stock under the current programs and we will from time to time revisit the programs, either extended or expanded, and that will, of course, will be working with our Board of Directors very closely on the repurchased efforts.

All right. Thanks a lot.

Thanks.

And next we will go to Kevin Kessel's line representing Bear Stearns. Please go ahead.

Good morning, Kevin.

Good morning, guys. I just wanted to get a sense for what the linearity was in the quarter from a revenue point of view. And then, it's pretty uncommon to see you guys come underneath the low end of your revenue guidance range. So maybe you could just help us understand what were the driving factors? I imagine maybe they were towards the end of the quarter that might have caused that from an end market perspective, perhaps.

I think you can see when you look at the breakdown of the composition of revenue by industry to the one industry that was down, as Don indicated, of computing not having the backend pull-through that is normally the situation is really a major factor in Q1. And you also see test and instrumentation was down for the quarter slightly, not as big of a component, but I think that industry, it's not surprising to anyone that that is weak, that it was a little bit weaker than was expected. So, those two items combined and the nature of the support that we have for customers as you'll notice, in today's environment we are doing more final systems integration that allows the pull-through to happen out of hubs, if you will, at the end of the process. So, it was not as backend loaded. I don't have the specific calculation. But suffice it to say, finished goods levels were increased and the final pulls were not there.

And Gayla, do you have any read, generally speaking, from the customers, because I imagine it was somewhat broad, maybe it wasn't as to what the reason was for that? I mean did they actually specifically say their customers are cutting back IT budgets, or did they say it has something to do with just the timing or new product launches or what have you?

I think product transition probably has a significant impact, as well as just the timing of order pull-through in the current environment. But, I don't see any major changes. It's probably just demand timing that was most significant aligned with product transition.

Okay. And then, just from a modeling perspective, in terms of taxes, they came in lower than expected. Should we expect them to remain at 13% at that level on a go-forward basis? And then what about foreign currency exchange gains? I think, Don, you mentioned it was like $1.6 million or something. I mean I guess it's obviously difficult to predict, but what level should we look at or what level is implied in your guidance for other income because it's been so volatile recently?

Yeah. First question, I think the tax rate on a non-GAAP basis, 14% is a good estimate. In terms of the foreign currency, you are right, it's difficult to estimate and we typically don't. It's usually zero when we go into a quarter.

Okay. So it's not interpreted as anything in the guidance, then?

Exactly.

Okay. Thank you very much.

And our next question is from the line of William Stein, Credit Suisse. Please go ahead.

Thank you. Good morning. I'd like to talk about your number one customer in relation to the end market. I think you said 19% of sales would imply down about 16% sequentially, which I think is actually not that bad relative to normal seasonality there. So am I wrong on that, or can I assume that the weakness in that end market was from customers outside of your, I guess…

We don't usually comment on any particular customer at this point in time, and the overall computer sector, as we discussed, did show some weakness and either related to a product transition or current macro environments. And probably, if you look at the -- even early March, we did not anticipate the softening in the computing sectors. Everything is going pretty good until the last couple of weeks, and we did see the pull of the inventory is not there. We just cannot, at this point in time, provide information either the macro environments or the product transitions.

I'm sorry; I missed that last part, Cary. You said you can't…

We cannot.

You can't determine which it is, macro or…

No. At this point in time, we cannot comment on whether this comes from the product transition or the macro environments impact.

That would imply to me that it's not a broad set of customers, right?

Well, no. I guess, said another way, I think your comments, we are not able to delineate between what underlying factors are specifically driving the change, other than when we look out at the overall market. I think, as you look across computing, you see that the hardware side in the first quarter did show softness. I don't know how much of it was in comparison to expectations, but I do think that we see that there was softness in computing, in general, on the hardware side for Q1, beyond just what we saw. Given that, we can't differentiate product transitions, the overall macro environment and determine what's what.

So it would apply to me that it's either one customer or a very small number of customers, is that fair? I mean, if it were across multiple customers in that end market, you'd be pretty fair in saying its demand; right?

No. Because when you really start digging into anything as in doing any root cause analysis, if you ask enough questions you really find out that there's a number of underlying reasons. And in fact, we have several product transitions going on with several customers. So that would be true if you held everything constant and said I only have one product transition going on. But, because of several product transitions going on, you are not able to delineate it. So it's kind of the opposite. We have too many moving parts.

Got it. I think I understand. Thank you. Just one other quick follow-up on that issue. I think we saw inventory days tick up a little bit more than usual in this quarter. Is it the same issue? I mean it sounds like, if you're expecting a higher level of sales even heading into the month of March and they didn't get pulled that would explain inventory build. Is that the right way to think about it?

Yes, it's that. And plus there's the expected growth for the next quarter, but primarily because of the pulls at the end of the quarter.

Great. Thanks a lot, guys.

And we will go to Jim Suva's line representing Citigroup. Please go ahead.

Good morning. This is [Jason Gursky] calling in on behalf of Jim.

Hi, Jason.

Good morning, guys.

Welcome.

Just a quick question on the test and measurement space, is it right to assume that this is a higher margin end market for you than the corporate average? And then tangentially to that, do you think that you have now started to see orders bottom in this space or is kind of your forecasting book continuing to decline there?

I would say to your first question, in all cases it depends on the level, extent and type of services that are offered to a customer and the complexity of the services. So I don't think it's just because you are making item one versus two in any one industry that's the driving force behind margins. As to number two, I don't know that I could call it a bottom specifically. I could tell you after it are done whether it was a bottom or not. But I think we've seen a pretty good decline. I'd have to look more at the customers. I believe the expectation is second half more than second quarter, how about that, that there will be some improvement.

Okay. Fair enough. If you could do two things on the new wins. Talk a little bit about where, end market wise, those might have come from, and then just talk a little bit about the size of the overall quoted pipeline that you're working on now and what kind of end market buckets you are particularly enthusiastic about?

So, on the Q1 wins, as Cary said, we saw it across actually several industries, computing, medical, industrial controls, telecom. Other than test and instrumentation, there was nobody left out in that quarter that we represented across several geos, again. So it was a very good backdrop of opportunities that we're bringing into the pipeline. As to the second question, the revenue opportunities and the new program and new customer win opportunities are looking very good. I think, as Don commented, that's fairly common in an environment like this where you see a bit of softness. You see opportunities seem to accelerate. And in fact, that is what we're seeing, is a good acceleration of opportunities, people looking to gain further benefits from outsourcing. So, I guess that's the silver lining, if you will, of any softness is the opportunities we see increase.

And just maybe a quick follow-up on that, and then I'll hop off here. How is the pricing environment with your competitors as that pipeline, as you suggest, is accelerating? Is the competitive environment stepping up a little bit?

No. I don't think we've seen any major changes in that. That's a common environment we've played in for I don't even know how long. It has been competitive, but I don't see any drastic changes in that at all.

Okay, great. Thank you.

And we'll go to Steven Fox's line with Merrill Lynch. Your line is open.

Hi. Good morning. Just looking at your full year guidance in a little bit more detail, it looks roughly like you're calling for sales to increase by anywhere from $60 million to $140 million and that that would drive a $15 million to $20 million improvement in profits. I could see how extra volumes could get you maybe half the way there. I was wondering if you could walk through how maybe you get the $10 million or so that you need in order to hit the bottomline guidance that you are sticking to.

I guess like we talked about earlier, the probability would be maintained. We maintained the 15% to 20%, EPS guidance and mainly a couple or three things. Number one, the better mix of the product, as we have a new program ramped, and a lot of that has come from medical side. And the second thing is we definitely continue to see the benefit of the realignment effort we've done last year. We talk about early last quarter Benchmark will not take any restructuring charge this year, at this point in time. And number three was other new program ramps, some of which are pretty sizable should give you a pretty good benefit for the margin contribution. So we went through a number of, very close, very thoroughly and by customers, by divisions. At this point in time, we feel very comfortable with the EPS guidance we are giving as well as the operational margin. You have to really look on the volume increased as well as the mix increase, too.

I heard the preamble. I guess I was trying to get a little bit more specifics on where the costs are coming to in order to get that leverage.

Well, I guess it's probably important to note that we've been -- you've seen the diversification of our revenue base, you've seen a number of new programs added. If you look back over any period of time, I think we're at the point where we are also gaining the process improvements, the efficiencies that you would expect when new programs are getting to a steady run rate. At the same time, we're layering on the new programs, which are getting more efficiencies out of the system. So we can speak to it in any number of ways, but the one word you need to put in big, bold letters is efficiencies. That is what drives improvement to the bottom line, time after time. You can get at it from any number of angles, but that is what has gotten us to the point where we feel comfortable with the guidance we're giving.

Okay. This is more of a comment than a question. It would just be helpful from an outsider's perspective to get a little bit more color in terms of the dollars that go into that because on the flip side you mentioned some pressures. And you also have startups accounting for a larger portion of your sales now, which usually is a drag, initially, on margins. So I'm just trying to dissect the numbers a little bit more accurately. That's all.

Yeah. Most of the new program ramps, the ramping was already started last year. So we really started getting benefit of the ramps, not a whole lot of significant -- the startup costs also continue they continue improvement from the programs.

I guess maybe specifically answering your question is what you don't see is all of the costs that are incurred before the revenue stream comes. So by the time the revenue stream comes, you're starting to get greater efficiency already because the costs have been incurred in advance of the revenue stream.

Okay. Now, that's an interesting point. Thank you.

And we will go to Alex Blanton's line with Ingalls & Snyder. Please go ahead.

Good morning, Alex. Alex Blanton - Ingalls & Snyder: Good morning. Just a comment. I went to your web site this morning to look at the press release, and I noticed that you've changed it a bit and developed the same problem that a lot of companies are having on their new websites. The text is grayed out to the point where it's very difficult to read. So I recommend that you look at that. And instead of putting press release headlines in grayed out text that one can't read, at least maybe 22-year old eyes can read it, but not mine, maybe it ought to be in bold?

Well, thank you for saying that. Well, I'm sure there's someone on our line listening and probably has that fixed before we get off. Alex Blanton - Ingalls & Snyder: Okay. The other thing I was wondering is on your new programs that you've announced, I think it was 10 for the first quarter.

Yes. Alex Blanton - Ingalls & Snyder: Could you give us a little more detail on what those are? I think it was mentioned that your margin improvement is going to come from ramps in more profitable business than you've got right now in the medical field. So the new programs you're talking about, are those part of it, the ones that you've won in the first quarter?

Most of the new programs we won in the first quarter will not really have a significant impact on our margin as to what's revenue for 2008. Alex Blanton - Ingalls & Snyder: Okay.

We'll talk about the new program ramp or the program we book and they started ramping last year. Alex Blanton - Ingalls & Snyder: And so, the programs that are ramping this year were booked last year? Well, when were the ones that you booked in the first quarter, when are they going to start ramping? I think you mentioned $116 million to $150 million in revenues?

Yes. And those will be in late 2008 and in early 2009. Alex Blanton - Ingalls & Snyder: And what segments are they in? Can you generalize that?

We have 10 programs and they come from medical side, computing side, industrial controls as well as telecom. Only sector we did not book any new programs for the quarter was in the test and instrumentation side. Alex Blanton - Ingalls & Snyder: Okay. All right. And finally, on these -- the follow-on, are there any programs among those that have an opportunity to get a lot bigger the following year, or all they are all relatively small? Because, if you divide that number by 10, that's an average of like 100 -- like $15 billion a program.

We will have several small programs, and two, three programs are pretty sizable. Alex Blanton - Ingalls & Snyder: No, but do they have the potential to grow, I mean, in the future to be a lot bigger, if you follow me?

Yes, I understand the question. I guess it's very difficult to measure the size of programs, and this is the best estimate, the annual potential revenue for those programs at this point in time, and $116 million to $152 million. That's all we are looking for. Alex Blanton - Ingalls & Snyder: Okay. Thank you.

Thanks.

And we'll go to Sean Hannan with Needham & Company. Please go ahead. Sean Hannan - Needham & Company: Just wanted to follow-up and clarify a point that I think I heard earlier. Specific to your computing space, it sounded like, as you didn't have that pull-through at the end of the quarter, now, as we have looked at the beginning of the second quarter, that order flow pattern has returned to what you would normally see seasonally. Is that correct?

Yes. Sean Hannan - Needham & Company: Okay. All right. So, then, if there's a way to talk across your various end markets, and perhaps -- I don't know if there's a way specifically to focus on computing. But in terms of order flow and/or bookings, are you seeing any types of kind of longer decisions or longer decision process with your customers versus the prior three months?

Well, as you can see, this market is very, very tight. The customers are very focused on what the projections they are giving to us. As we discussed earlier, we are even making some adjustment to the customer estimate and to our best ability, to come up with our projections. Sean Hannan - Needham & Company: So there is uncertainty that you're getting -- that's being communicated from your customers, but is the decision process being elongated?

I wouldn't call it uncertainty that we're seeing from our customers. I think our customers are adjusting demand levels to better align with what they're seeing from their customer base, their inventory levels, the market place. They're adjusting, and so it's an ongoing process in supply chain management where people constantly are looking at their overall environment and adjusting. Sean Hannan - Needham & Company: Okay. That's helpful. And then, let's see, if I can ask, do you still expect about 70 million shares to exit the year, factoring the buyback?

For the quarter we ended up -- weighted average share was $69.5. So as we exit the year, probably $67.5. Sean Hannan - Needham & Company: Okay. Terrific. Thank you.

And our next question is from the line of Yuri Krapivin with Lehman Brothers. Please go ahead.

Good morning.

Good morning.

Good morning.

So your guidance for the full-year still implies a meaningful pickup in the second half of the year over the first half of the year. So is it still all driven by the program ramps and strength of the medical business, or are you assuming some improvement in the macro environment in the second half of the year?

There is no macro improvement back into our projections. All the projections are based on new program ramps and either in-process or to be ramps.

And again, that's aligned with what we see. I don't have points that indicate that we should be factoring in the macro environment improvement overall. I don't see that, and so we align our forecasting and indications to the Street specifically with what we see. I'm not sure if you see something different.

Okay. And then, just going back to your computing segment, obviously you have already commented extensively on that particular segment. But I just want to understand a little bit better -- for the June quarter, what kind of sequential growth are you assuming for your computing segment?

Computing segment typically shows improvement off of Q1. So at any point, wherever Q1 is, you typically see some improvement going into Q2. So we have factored a normal level of increase in Q1 to Q2.

But is it like mid single-digit increase?

We don't typically guide by industry, but I think you can see that there's typically a Q2 improvement, and it's probably not as dramatic this year as you would expect in prior years, again, just based on the current environment overall.

Okay. Great. And then finally, with respect to these auction-rate securities, I guess you can just hold them until the maturity date, and then collect the cash? So what are the maturity dates for your auction rate securities?

Well, they are beyond one year. They are long-term. Again, they are not -- they are not impaired. So from a -- eventually, the market value adjustment is really from a liquidity issue, not a credit quality issue. So I don't have the specific dates in front of me, but they're out there a little way.

Okay. Thank you.

Thank you.

Our next question is from the line of Amit Daryanani with RBC Capital. Please go ahead.

Just a few quick follow-up. I guess, when I look at this quarter's margin of about 3.3% versus Q3 of last year, when you kind of had a comparable run rate, the margin was 2.6%. The 70 basis points delta -- how much of that do you think is driven by mix versus benefits from all the researching you guys have done?

I think it's a combination. I don't know that I have dissected that, either, or Don has dissected it. But I think it is the combination of the mix of business as well as the efficiency improvement. I'm sure our teams would like to, on the operations side, take credit that it's all efficiency improvements. And our sales team would like to say it's all from the new programs ramping. But I think it's a combination, without being able to specifically delineate between the two.

Maybe I'll try it a different way and see this out.

I can count you for that.

Yeah. The last time you guys had -- not the 4% margins; you had a $750 million run rate. Do you need that same kind of run rate to have 4% margins this time around, or is that number going to be a little bit lower? And if so, what's that number?

I think you hit it dead on. Our goal is to lower that bar, to be able to generate greater bottomline delivery and increase shareholder value by lowering the gear ratio, being able to -- or increasing it -- being able to deliver better results without having to have the topline get up above $750 million. So that is our target, and that's what we are aligned to be able to achieve this time.

Do you want to quantify that?

No.

I may have missed this, but cap expense in 2008 -- what should we think about that?

I think we said $40 million last quarter. It's probably in that neighborhood again.

Yes. We're not changing that much on that. Again, Amit, it's a very good question. The market uncertainty -- we started to realize that, and we kind of anticipated it towards the end of 2007. So there's a lot of effort had to be put into try to prepare for this uncertainty. That's why you see the low overhead costs and the focus on efficiency improvements. Of course, the better [market] product mixes come from the new products. But all the other factors had to be working very hard and the -- particularly it's with all the realignment effort we've done last year, which took significant cost out of our overhead pool, which is where you see the benefit today.

Fair enough. Thank you.

We'll take one last question if there is one, Operator?

There are no other participants queuing up.

Okay. Sounds great. Thank everyone for joining us today on our call. We'll be available in the office if there's any follow-up.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using the AT&T Executive Teleconference. You may now disconnect.