Welcome everyone to FormFactor’s third quarter 2013 earnings conference call. On today’s call are Executive Chairman and Chief Executive Officer, Tom St. Dennis; President, Mike Slessor and Chief Financial Officer, Mike Ludwig. Before we begin, let me remind you that the company will be discussing GAAP P&L results and some key non-GAAP results to supplement understanding of the company’s financials. The schedule that provides GAAP to non-GAAP reconciliation is available in the press release issued today and also on the Investors section of FormFactor’s website. Also, a reminder for everyone, that today’s discussion contains forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include but are not limited to financial and business performance projections, statements regarding macroeconomic condition and business momentum, statements regarding seasonal business trends, statements regarding our ability to favorably resolve component delivery delays and product issues, statements regarding the ability of semiconductor companies to restore damaged manufacturing facilities, the demand for our products and technologies and our ability to introduce new products, statements regarding operational synergies between the FormFactor’s and MicroProbe product groups, and statements contained words like expects, anticipates, believe, possibly, should and the assumptions upon which such statements are based. These forward-looking statements are based on current information and expectations that are inherently subject to change and involve a number of risks and uncertainties. FormFactor’s actual results could differ materially from those projected in our forward-looking statements. The company assumes no obligation to update the information provided during today’s call. To revise any forward-looking statements or to update the recent actual results could differ materially from those anticipated and forward-looking statements. For more information, please refer to the Risk Factor discussions in the company’s Form 10-K for the fiscal year 2012 as filed with the SEC, subsequent SEC filings and in the press releases issued today. With that, we will now turn the call over to CEO, Tom St. Dennis. Please go ahead.

Good afternoon. We moved our Q3 earnings call to this morning from our previously scheduled time next Wednesday due to a miss in guidance. While we are within guidance for revenue, operating expenses and cash generation in Q3, we are below our guidance on gross margin. Additionally, we now see our fourth quarter revenue coming in below current analysts expectations. Mike Ludwig will provide an explanation of the items that impacted our Q3 gross margin in a few moments. The first I would like to explain the main issues we had in Q3 and what’s impacting our Q4 revenue. During the third quarter, we experienced component delivery delays and product issues that impacted deliveries to a DRAM customer and to our revenue in the quarter. The delivery delays are related to one key supplier that missed critical component deliveries on several cards. We weren’t able to make up the lost time in the rest of the manufacturing process and as a result we were late to deliver on several probe cards during the quarter. We also experienced delivery delays due to a manufacturing problem on two new designs. As a result of these delays our customer withheld certain orders from us until we provide sufficient data that our supplier issue and our manufacturing processes have been corrected. Recently we had a series of meetings with our customer to review our actions and progress to resolve these issues and based on the progress we have made, they release their next product design to us. We expect this will result in increase business in Q1 and return to normal level of business by Q2 of next year. In early September, SK Hynix experienced a significant fire at their facility in Wuxi, China. This had a small impact on our Q3 revenue, but…

Thanks, Tom and good morning everyone. When we brought FormFactor and MicroProbe together in late 2012, we communicated in one of our primary objectives with a disruption free integration of the MicroProbe SoC business. This objective was designed to ensure continued delivery of a sustainable, profitable and growing revenue contribution from MicroProbe’s leading share position in the $400 million advance SoC probe card market without suggesting that business to the risk of broad post merger integration. Despite significant headwinds in the PC-based part of our business, as you have heard in Tom’s comments and will hear in Mike Ludwig’s Q3 revenue breakdown, we have continued to grow this SoC business. And in whole, we believe we have accomplished our initial integration objective. Given this milestone along with a clear recognition that the Q3 results and Q4 guidance of the combined FormFactor businesses do not meet our collective performance expectations, we believe it is now time to take the next step in bringing these businesses together. Our advance probe cards market leadership position offers a scale and breadth that are unmatched in the industry. And as we have shown through our combined history, most recently in the SoC copper pillar adoption that Tom mentioned that leadership position provides a strong platform for profitable growth. Although I do not yet have a detailed prescription for how we will achieve consistent overall company profitability from our combined SoC, DRAM and flash businesses that is our primary objective. With our team, products, technology and customer base, I am confident this next milestone is within our reach.

Thanks Mike. Before handing it over to Mike Ludwig, I want to emphasize that the impact to our margin revenue will be short-term. Our product and supply chains are actually in better shape today than they were at the beginning of the third quarter. With the progress we are making in the SoC and DRAM markets, as well as the opportunity to open up the NAND Flash market, I am very optimistic about the company’s outlook going into 2014. With that I will turn it over to Mike Ludwig.

Thank you, Tom and good morning. Revenues for Q3 were $67.6 million, an increase of $4.9 million or 80% compared in Q2, 2013. Revenues for the third quarter increased in DRAM in SoC markets, but decreased in the Flash market. SoC revenues in Q3 were $31.7 million, an increase of $4.2 million or 15% from Q2. Revenues from probe cards, mobile processors and PC applications increased in Q3 as is revenues from industrial automotive applications. The reported revenues for DRAM products were $28.8 million, an increase of 8% or $2.1 million from our second quarter. The increased result is primarily from stronger mobile DRAM demand. Q3 revenues from mobile device of probe cards increased to $19.6 million or 68% of our DRAM probe card revenues compared to $15 million or 56% of our DRAM probe card revenues in Q2. Despite the continued strong DRAM pricing environment throughout the third quarter, demand for our commodity DRAM probe cards contracted by $2.5 million compared to the second quarter. Flash revenues were $7.1 million for the third quarter, a decrease of $1.4 million or 17% from the second quarter. NOR Flash revenues decreased by $3.3 million in the third quarter to $1.9 million, while NAND Flash revenues increased by $1.9 million to $5.2 million in the quarter. Third quarter GAAP gross margin was $12.5 million or 18.5% of revenues compared to $16.4 million or 26% of revenues for the second quarter of 2013. GAAP expenses in Q3 included $0.5 million for stock-based compensation and $3.2 million for the amortization of intangibles. On a non-GAAP basis gross margin for the third quarter was $16.3 million or 24% of revenues compared to $20.5 million or 32.6% of revenues for the second quarter. While we outperformed the communicated financial model in Q2 for non-GAAP gross margin,…

Thank you. (Operator Instructions). And Our first question comes from Vernon Essi from Needham & Company. Please go ahead.

Hello Vernon. Vernon Essi - Needham & Company: Sorry about that. Yeah, it’s a sort of a disappointing situation I want to start off by congratulating you Mike on your promotion. But switching gears I suppose to the other Mike wanted to dive in a little bit more on the gross margin situation. I guess I am trying to reconcile the fact that obviously you have the DRAM revenue come in quite nicely actually for the quarter, I realized it seems like things are going downward but I am trying to reconcile the magnitude of the warranty and service issues coupled with sounds like some residual E&O on these delivery issues in the quarter. And can you give us an understanding of the timing and what piece of that falling into the third quarter versus the fourth quarter? And then I have got a follow you question on that.

Yeah. So let me give you maybe a little more color on the gross margin picture, as we talked about there were probably four or so key events there right, probably the most significant was the I guess the rate of decline with respect to the demand, particularly as we ended the quarter in September. And the fact is that obviously it’s carrying into Q4 and I would suggest that that probably has maybe the most significant impact relative to how we guided and certainly as the demand falls out that precipitously it’s just we just can’t absorb all of the manufacturing cost. So I would say that was probably the most significant and followed by the fact that we did have good DRAM revenues but we did have a high volume specific design that came in at a very low margin from one particular customer and the customer mix there in the DRAM was not favorable as it’s been in the past quarters. And then we get into the issues Vernon that you had specifically asked about which was the execution issues causing warranty and service expenses and that increased our costs by slightly over $1 million in Q3 versus Q2 and then the excess inventory and additional inventory write off caused and other approximately $1.5 versus Q2. So those are probably the foremost significant areas that were impacted from gross margin. Vernon Essi - Needham & Company: Okay. And then shifting into the next quarter guide, are we looking at more and more into an E&O charges on top of that whereas it’s just a function of utilization, obviously revenue’s going down here, but I am wondering two if you are also taking on core mix or lower mix DRAM is well in that calculus?

Yeah. I would say that guidance is the below margin guidance is really predicated primarily on the fact that the factory given the factory will have under utilization given the decline in demand and that’s probably the biggest component of the decline in the margin guide. As it relates to warranty, I would say, no, we don’t expect, that’s certainly as we prepare our warranty expense and reserve we should not have covered all this known issues. So I think we have done that, so we are not expecting to see another quarter, like the one we just experienced. As Tom said I think we've got some other execution issues taken care of are in the process of getting those results. So I would not expect to see similar warranty and service costs in Q4. E&O, again always the challenges we as the demand strengths, because our calculation is based on a looking out expected demand over six months so as is that declines it certainly puts a little more pressure on the E&O, but I don't expect that we'll have any more pressure on E&O in the fourth quarter versus the third quarter, this what I can tell. Vernon Essi - Needham & Company: Okay. And then, just my final question here and I'll move on and let someone else ask. But the DRAM front, you talked about the Elpida fire, didn't seem like it was such a big order of magnitude perhaps a month or so ago. I guess what's changed on that going into the fourth quarter? And then also, obviously, DRAM seems to be I means it's going through a seasonal soft spot, but at least as it relates to your guide, it seems like it's going to be down quite dramatically on a sequential basis. Can you just discuss the puts and takes there on that guidance?

Vernie, the SK Hynix fire as opposed to the Elpida fire. Vernon Essi - Needham & Company: Yeah. I'm sorry about that. My mistake.

If you read the news reports on it, people have sized the impact that it took down about 12% or 13% of the total DRAM wafer starts in the industry. So it was their larger factory and they seem to be working through it and I think intend to have it back on line by the end of the quarter. But that in itself took out quite a bit of the overall capacity and if you look at our 10-Qs and all, you can see that SK Hynix is certainly an important customer for us. With regards to kind of overall DRAM environment, the pricing has been up, particularly the spot pricing and I think contract pricing for the commodity DRAM. But a lot of that -- and of course I think the demand for the commodity DRAM has been declining as the PC market has been going through, it’s a kind of year-over-year declines which looks like importantly Gardner now I guess it’s over 10% is what they are forecasting for this year. So the prices are being held up because the supply has been constrained. So the customers are really, the DRAM manufacturers, our customers have really cutback on their supply to make sure that the pricing environment holds up which has and then of course this fire has had only helped that. You can see on a quarter-over-quarter basis, mobile DRAM business has grown and I think that’s a positive sign for what’s happening. And as I said we're working to finalize the qualification at the one remaining customer, we have not been supplying. So I think that aspect of it is, is positive. And as I said I think it’s a short-term impact and that, pretty much all the articles that you read would expect that SK Hynix would be back in the Q1 timeframe, be back in that factoring going forward. So I think as they get their manufacturing facilities back in place that will be positive for us and eliminate that whole creativity. Vernon Essi - Needham & Company: Okay. Got it thanks a lot.

Thank you. And our next question comes from Sarini Sandarjan from Summit Research. Please go ahead.

Hi Mike, congratulations on your promotion and also there is a question for everybody. What is the kind of distribution of DRAM to NAND to SoC revenue do you expect in Q4? That's my first question.

Yeah. I think we’ll expect SoC to be, I would say greater than 50% of the revenues in Q4. We would expect DRAM to then be probably maybe 2x of what we think NAND is going to be, so, but SoC will be higher than 50% of the mix in Q4.

Okay. And then following of if you look at Q1 on later assuming your manufacturing issues get fixed and Hynix returns to a normal production scenario what kind of revenues could be possible? I mean I not asking for guidance, but something around $73 to $75 million should theoretically be possible, correct?

We’re not going to give Q1 guidance at this point, Sarini. If you take a look at the impact for this quarter as I said was $6 to $7 million, we expect that in Q1 timeframe we have some incremental DRAM revenues from our qualification activity. So I think that would be positive to it. Q1 is a seasonally down quarter relatively to Q2 and Q3 which seems to be seasonally up quarters and it depends on different years. The Q1 to Q4 revenues are I would say similar, they vary somewhat with Q1 being up perhaps a little bit more the time over Q4, but I guess for all intent and purposes it should be considered flat relative to Q4. So we expect that as the factors come back online and as I said we’ve resolved the manufacturing issues at this point and so on a going forward basis we’ve got that taking care of within supply chain as well as in our own product area. But so as those come back and you should expect to see the revenues pick up incrementally relative to this quarter by the six or seven plus some other DRAM plus whatever the kind of seasonal aspect of it.

Okay, thank you very much.

Thank you. (Operator Instructions) And our next question comes from Tom Diffely from D.A. Davidson. Please go ahead.

Yeah. Good morning. First is I guess one more question on the manufacturing delays or issues was there something new or unusual about the probe cards you were designing at that point or is it simply just designed as you have done many times before just ran into some other issues?

There were some unique assets on the two designs that really ended up being in kind of a design space for the overall color that made a particularly trouble and to get through manufacturing. So we have delays that ran five to ten days to deal with that. So that’s a kind of order of magnitude of delays but those are significant and timeframe that people were ramping for product launch support and everything else in the late August, September timeframe.

Okay. So is that really just kind of normal winning curve type of situations where when you start to seek designs and perhaps go in another direction, obviously takes a little bit longer than just the other smaller window this time?

Yeah. It was a design that was a little bit in the corner I think of our performance space if you will and when we got that and did that we realized that there were some interactions through the whole architecture of the probe card that caused it to be particularly difficult to assemble. So work our way through it, it’s a good lesson learned. We needed to do some follow up for the customers so we had some higher warranty expense in that, but learn from it and now I know how avoid that problem going forward.

Okay. And then the progress you are making with your large non-customer, is that technology driven or is that really just if they wanted to diversify it to another supplier?

I think it's probably best way one could have answer that one, but we're certainly getting qualified as an additional supplier to them. I think first and foremost, we're also working on their leading edge production design. So it's through their most advance products.

Okay. And then just in general, have you seen anything changes in the competitive environment? Has pricing become more of an issue of late?

No, in some parts of Taiwan, I would say it's been a little bit more aggressive there, but in the rest of the market, I would say that it's been, it's followed the trends that we have seen over the last couple of years without a significant difference to it.

Okay. And then you mentioned that you come up with or how you had started on a NAND design, a low-cost NAND design. What was the timeframe for potential first articles or revenue?

We haven't given any guidance on that, I think we'll standby unit we get through some real customer experience on it. The important thing is that I think we've got an architecture that's substantially different than what we have in the DRAM space that is designed in such a way that it meets all of the NAND Flash requirements including what their intrinsic cost is that part of the market has high volume probe cards, but they are very simple in their nature if you will. So they don't require a particularly high-end technology, they do require real keen focus on what the total cost is to make sure you can drive a good profitable business out of it. And that’s really where I think the innovation has come for us is how to combine some man’s capability with architecture’s that’s very, very cost effective. So we've got to get it out to a customer and have them provoke some production products with it and validate everything that we think it is, is what they would agree with. So as I said, we're looking, we've been talking to the major NAND manufacturers and have generated a good deal of interest in and it looks like we should be able to conclude an evaluation agreement with them this quarter and subsequent to that then we’ll provide them with some cards to evaluate. Once they get that done and I think that that takes, typically it’s going to take them 90 to 120 days to go through an evaluation of the things there. And then if that is successful then we would look to put that kind of a product into production and start to move forward with it. So it will be kind of second half of ‘14 timeframe when we would start to see revenues if we get to a successful evaluation.

Okay. And finally when you look at the SoC market, this is a situation where the PC market is just flatter or even just down a little bit next year. Would you expect for our probe card refresh cycle as the chips move to smaller nodes?

Yes. As we've discussed in the past, it’s true in all our markets, but it especially drives the SoC market. A design refresh, essentially demands are refreshed at the probe card fleet. So we have seen significant design activity in the PC market this year. It’s just the follow-on demand driven by wafer starts, it’s been a little bit muted obviously because the end market PC demand is down significantly. We still expect a significant sort of design refresh cycle to continue to drive our business as our key PC customer shrink nodes on their stated road maps and plans.

Okay. Thank you.

Thank you. And our next question comes from Sarini Sandarjan from Summit. Please go ahead.

Hi. Thanks for taking my follow-up. Just wanted to know what is the size of a NAND probe card market that you hope to penetrate, number one? And number two, is there going to be a make versus buy decision on that if your, probe card that you are making does not end up being successful? Thank you.

Well, the NAND Flash market size estimates are on an order of $250 million a year. We do serve a portion of the market today that includes both NAND Flash and NOR Flash into that the predominant portion of the market comes from NAND Flash. Today we have about a 13% share of that total market with a roughly even split between the market or the revenue in between NAND Flash and NOR Flash. But a large portion of that market really isn’t available to us because of the intrinsic cost and the product that we have that’s essentially a strip down DRAM probe card. So going about this and looking at it from what the market requires in terms of performance which is substantially less than DRAM and then also what the cost requirements are, as well as what is into a new product architecture. And we intent to see this through to a successful conclusion, all of the preliminary data on it from a kind of a technical parametric basis as best as we can test it in-house look promising, but we’ve really got to put into a customer environment and see how that come out of it. And I think we will stay focused on that as the best opportunity going forward.

Okay, thank you.

Thank you. (Operator Instructions) And our next question comes from Patrick Ho from Stifel Nicolaus. Please go ahead.

Thank you very much. I apologize if this has been asked, I got on the call a little bit late. But Tom, can you give a little bit of color because it look like a perfect storm happened during the quarter with all these issues that weaken your margins. Can you give a little bit color of I guess the timing and when you guys recognize or was it too late in the quarter to make the changes or were these changes going to have, were they going to be couple of quarters where if they were to be resolved? And just give a little bit of color of I guess the various pieces and the events that led to this?

Yeah let me speak to that, Patrick a little bit. So if you have to look at the sort of what happened in the production cycle for the company, it was certainly very strong in the June, July, August timeframe and then really start to fell off pretty precipitously in September. So I would say it was pretty late in the quarter before we really have those signals from that perspective. And then again as I look at the warranty and the service cost issue, again related to primarily not completely related to the one customer where we actually have some execution challenges and what not because those cards were delivered relatively as I say in mid quarter what not, we understood that we were going to have some warranty and service issues around those pretty late in the quarter as well. And to some extend even as we got into our close process in early October, we kind of discovered that. So a lot of that was discovered late. So were wasn’t really time to give really much more of the head up on that. And some of the excess and obsolete, we probably knew some of that again may be mid to late in the quarter as well. So that would be my sense, I don’t know Tom if you have any other comments you want to make with respect to when we understood, should challenges and what not.

Well, I think Mike’s covered calendar timing there on it, but the other impact of, as far as we said for SK Hynix was we really didn’t have a big impact on revenue in the quarter, it occurred in the September timeframe, but it certainly changed the look going into Q4, which slowed down manufacturing activity also late in the month, which would have been building for the October, November kind of delivery. So that also impacted on margin side, just how much of that and overhead and all that we observed.

Right. That's helpful. Just going back to the withheld orders from the customer you cited in your prepared remarks, this is just something that, are these orders I guess coming back at some future point or are they potentially lost because of the execution issue you had? And if they are lost, how do you gain that customer trust back and get back into their order queue?

Yeah. Well as I said we've had a series of meetings and discussions and we have even done a joint supplier review of the one supplier that was so problematic. And as I said that has been corrected and resolved. And frankly the kind of lessons learned in that from the supply chain standpoint and at the supplier is actually in a stronger and better position. So, I think from that standpoint things have actually improved on that. We also went through a number of other reviews on the issues around the product, the cost, the delay and what had impacted that. And after all of that activity as I said the customer released the next design to us and committed that we get back to our normal business engagement if you will. But that’s all that activity has happened over the last three or four weeks. So from that time it was period of kind of September and October where we were working through all those things and getting to a successful conclusion. So I'd say at this point in time we're kind of back in the game again, it’s a matter of ramping that back up. In terms of regaining the trust which is a key part of it, an event like this certainly concerns a customer. Interestingly enough or maybe an important element of it is it was isolated to them, our on-time delivery and performance elsewhere and even in many parts of what the products that that we’ve delivered to them was very good but it was around couple of specific design that were problematic and then that coupled with the supply chain problem that we had was, it was a bit of a perfect storm as you said, I mean it certainly was a perfect storm within that one customer. At this point in time I think we've satisfied them that we've taken a corrective action but also a preventative action going forward and have begun to engage now on the next generation product design, and we’ll build from there.

Great. Final question from me in terms of from the commentary you mentioned above the NAND Flash and some of the low cost designs that you have out there. In times they really were on the OpEx line for the core. Mike maybe if you can give a little bit of color on a going forward basis are some of these new designs and developments on the NAND side of thing, is that built into your R&D already?

Yes.

Okay. So there is no incremental changes I have seen to go up……

Because of some of these new product designs.

No, we don’t anticipate increased R&D expenses. I’d say we don’t anticipate increased OpEx expenses, there could always be a slight change one quarter to the next with respect to R&D versus SG&A. But generally speaking we don’t see an increase and the mix would be pretty much in a pretty tight range.

Great. Thank you very much.

Thank you. And I am not showing any further questions. Ladies and gentlemen this concludes the FormFactor’s third quarter conference call. Thank you for your participation. Everyone have a great day.