PCD INC, 10-K, 1999-03-26

PCD INC
10-K, 1999-03-26
ELECTRONIC CONNECTORS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------
FORM 10-K
---------

(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 1998

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

For the transition period from __________ to__________

Commission File Number 0-27744

PCD INC.
(Exact Name of Registrant as Specified in its Charter)

Massachusetts 04-2604950
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)

2 Technology Drive
Centennial Park
Peabody, Massachusetts 01960-7977
(Address of Principal Executive Offices, Including Zip Code)

Registrant's telephone number, including area code: (978)532-8800

Securities registered pursuant to Section 12(b) of the act: None
Securities registered pursuant to Section 12(g) of the act:
Common Stock, $0.01 par value

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of March 9, 1999, the aggregate market value of the
registrant's Common Stock held by non-affiliates of the
registrant was approximately $81,082,254, based upon the closing
sales price on the Nasdaq Stock Market for that date As of March
9, 1999, the number of issued and outstanding shares of the
registrant's Common Stock, par value $.01 per share, was
8,441,182.

DOCUMENTS INCORPORATED BY REFERENCE

Certain of the information called for by Parts I through IV of
this report on Form 10-K is incorporated by reference from
certain portions of the Proxy Statement of the registrant to be
filed pursuant to Regulation 14A and to be sent to stockholders
in connection with the Annual Meeting of Stockholders to be held
on May 7, 1999. Such Proxy Statement, except for the parts
therein that have been specifically incorporated herein by
reference, shall not be deemed "filed" as part of this report on
Form 10-K.

<PAGE>
PART I

ITEM 1. BUSINESS

As used herein, the terms "Company" and "PCD," unless
otherwise indicated or the context otherwise requires, refer to
PCD Inc. and its subsidiaries. However, all financial
information for periods ended before December 26, 1997, unless
otherwise indicated or the context otherwise requires, is for PCD
Inc. and its subsidiaries, excluding Wells Electronics.

GENERAL

PCD Inc. (the "Company") designs, manufactures and markets
electronic connectors for use in integrated circuit ("IC")
package interconnect applications, industrial equipment and
avionics. Electronic connectors, which enable an electrical
current or signal to pass from one element to another within an
electronic system, range from minute individual connections
within an IC to rugged, multiple lead connectors that couple
various types of electrical/electronic equipment. Electronic
connectors are used in virtually all electronic systems,
including data communications, telecommunications, computers and
computer peripherals, industrial controls, automotive, avionics
and test and measurement instrumentation. The electronic
connector market is both large and broad. Bishop & Associates, a
leading electronic connector industry market research firm,
estimates the total 1998 worldwide market at $23.4 billion with
more than 2,000 manufacturers.

The Company markets over 6,800 electronic connector products
in three product categories, each targeting a specific market.
These product categories are IC package interconnects, industrial
interconnects and avionics terminal blocks and sockets. IC
PACKAGE INTERCONNECTS are specially designed electro-mechanical
devices that connect ICs to printed circuit boards during the
various stages of the IC's production and application in
electronic systems. These stages are test, burn-in and
production. INDUSTRIAL INTERCONNECTS are used in industrial
equipment systems both internally, as input/output ("I/O")
connectors to link the rugged electrical environment of operating
equipment to the electronic environment of controllers and
sensors, and externally, to facilitate the interface between
discrete factory wiring and cabling for standard computer
interconnects. AVIONICS TERMINAL BLOCKS AND SOCKETS perform

<PAGE>
similar functions as industrial connectors, but are designed and
built to operate in the harsher environment and meet the more
critical performance requirements of avionics applications.
Representative customers of the Company include Bombardier Inc.,
Micron Technology, Inc., Rockwell International Corp. (through
its subsidiary, the Allen-Bradley Company) and Advance Micro
Devices, Inc.

The Company believes it is benefiting from three trends
affecting the electronics industry: (i) the increasing complexity
of ICs and corresponding evolution of IC package designs, which
favor growth in PCD's IC package interconnect market; (ii) the
global nature of semiconductor manufacturers, which requires
suppliers with global design, manufacturing and marketing
capabilities; and (iii) the use of increasingly complex
electronic controllers and sensors in industrial and avionics
applications, which creates opportunities in PCD's industrial
equipment and avionics markets.

The Company's goal is to identify and expand into selected
electronic connector markets where it can establish a position of
leadership. The Company intends to increase its presence in the
markets in which it participates through internal investment in
product development and potential strategic acquisitions. To
enhance the above goal, the Company is undertaking a program to
strengthen the balance sheet by reducing the level of bank debt
outstanding.

The Company was incorporated in Massachusetts on November 9,
1976 under the name Precision Connector Designs, Inc. In February
1996, the Company changed its name to PCD Inc.

Market Overview

The electrical and electronic systems which utilize connectors
have become increasingly widespread and complex, in part as a
result of the increased automation of business systems and
manufacturing equipment. Consequently, the electronic connector
industry has grown in size and electronic connectors have become
more sophisticated. Demand for smaller yet more powerful products
has resulted in continued improvements in electronic systems in
general and electronic connectors in particular. Product cycles
continue to shorten and, as time to market becomes increasingly
important, equipment manufacturers seek to reduce inventory and
contend with pressures to keep up with new product innovations.
The growing demand for electronic connector complexity, coupled
<PAGE>
with reduced product development cycles and delivery lead times,
creates a need for closer cooperation between connector suppliers
and equipment manufacturers, often leading to new connector
requirements and market opportunities.

The electronic connector market is both large and broad.
Bishop & Associates estimates the total 1998 worldwide market at
$23.4 billion. This market is highly fragmented with over 2,000
manufacturers. While many of these companies produce connectors
which are relatively standard and often produced in large
quantities, a substantial portion of the industry is comprised of
companies which produce both proprietary and standard products in
relatively low volumes for specialized applications. Fleck
Research has identified over 1,100 separate electronic connector
product lines presently offered in the marketplace.

PCD focuses its products and sales efforts in the selected key
markets listed below.

IC PACKAGE INTERCONNECT MARKET. In the fabrication and use of
ICs, there are four stages in which sockets may be used: test,
burn-in and production. It is the Company's objective to provide
a total solution for selected IC packages encompassing these
three stages. By providing a total solution, the Company believes
it will be able to forge closer customer relationships and gain
acceptance by new customers.

TEST - Test sockets are used primarily in semiconductor
foundries. After silicon wafers have been cut into individual
chips and packaged, certain electrical tests are performed to
detect packaging defects and to grade/sort the chips based on
various performance characteristics. Test sockets are
designed for specific packages and must withstand hundreds of
thousands of rapid insertions and withdrawals while offering
high reliability. Because of their intensive use, test
sockets have a relatively short useful life.

BURN-IN - Most leading-edge microprocessors, logic and memory
ICs undergo an extensive reliability screening and stress
testing procedure known as burn-in. The burn-in process
screens for early failures by operating the IC at elevated
voltages and temperatures, usually at 125(degree symbol)C
(257(degree symbol)F), for periods typically ranging from
12 to 48 hours. During burn in, the IC is secured in a
socket, an electro-mechanical interconnect, which is a
permanent fixture on the burn-in printed circuit board. The
<PAGE>
socket is designed to permit easy insertion and removal of
the IC before and after burn-in Further, these sockets must
be able to withstand up to 10,000 insertions and withdrawals
under extreme thermal cycle conditions.

PRODUCTION - Production sockets provide an electro-mechanical
interface between the printed circuit board and the IC
package. Printed circuit boards form the backbone of all
electronic systems. The use of sockets allows a detachable
interconnection between the IC and printed circuit board and
benefits both the systems manufacturer and end consumer.
Sockets provide flexibility in production by allowing
manufacturers to produce the printed circuit board with
unpopulated sockets, then populate the board with ICs at a
later date. Sockets also make upgrading easier and more
flexible for the consumer by allowing for the replacement of
a chip on a printed circuit board without disturbing or
damaging other elements of the board.

The worldwide semiconductor market has grown in five of the
last eight years and is projected by IC Insights, Inc., a leading
research company in the semiconductor field, to grow at a
compound annual growth rate over the next five years in excess of
15%.

INDUSTRIAL INTERCONNECT MARKET. The industrial interconnect
market is comprised of a broad range of control, measurement and
manufacturing equipment. Terminal blocks are most commonly used
in this equipment to provide an electrical link between discrete
functions, such as monitoring and measuring, and controlling
devices, such as programmable logic controllers ("PLCs"), stand-
alone PCs and single function controllers. The use of terminal
blocks has increased as electronic controllers and sensors in the
industrial environment have evolved to control more complex,
multi-function activities. In addition to increasing in number,
these controllers and their connectors are becoming smaller and
are being configured in increasing variations.

Increased sophistication in industrial and process control
equipment has led to a demand for flexible, modular
interconnection and interface products. Control systems are used
to facilitate the interface of discrete factory wiring and cable
systems with standard computer interconnects. These interface
systems allow industrial customers to reduce installation time
and decrease cabinet space, thereby improving their overall
system costs.
<PAGE>
AVIONICS MARKET. The avionics market requires a diverse range
of electronic connectors that are designed and manufactured
specifically for avionics applications. Over the last few years,
commercial aircraft applications have represented an increasingly
important part of this market. The Company participates in
selected areas of the avionics market with terminal blocks and
sockets that perform similar functions as its industrial
connectors but are designed to operate in the harsher environment
and meet the more critical performance requirements of avionics
applications.

The Boeing Company estimates that total worldwide demand for
new airplanes over the next decade will be 7,600 aircraft. The
Boeing world fleet is projected to grow from 12,300 airplanes at
the end of 1998 to 17,700 airplanes in 2007. Over the next ten
years, more than 7,600 new commercial jets - 7,425 passenger
airplanes and 175 new freighters - are forecast to enter service
worldwide. The majority of these airplanes will meet industry
demand for growth, while the remainder will replace the 2,200
airplanes that are projected to be removed from service. Many of
these airplanes are expected to be removed form service due to
the International Civil Aviation Organization ("ICAO")
requirement in the United States that all airplanes comply with
the ICAO Stage 3 noise standard as of December 31, 1999. Of the
2,200 airplanes projected to be removed between 1998 and 2007,
three out of four are expected to be removed during the next five
years.

STRATEGY

BE THE KEY SUPPLIER IN SELECTED NICHE MARKETS: The electronic
connector industry services a variety of different industries
with connectors that are often unique to particular
applications within a given industry. The Company actively
identifies and pursues those markets which have the following
characteristics: demand for electronic connectors with
relatively high engineering content, high degree of customer
interface, changing technology, significant growth
opportunities and a market size appropriate to the Company's
<PAGE>
resources. Presently, the Company focuses on the IC package,
industrial and avionics interconnect markets. In each of
these markets for the products that the Company offers, it
holds a market position of either first or second or has a
strategic plan to attain that position. There can be no
assurance that the Company, however, will attain or maintain
these positions.

GROW THROUGH INTERNAL PRODUCT DEVELOPMENT AND ACQUISITION:
The Company is committed to grow the sales revenue at a rate
that is higher than the connector industry projected growth
rate. To accomplish this, the Company invests heavily in new
product development. Over the last three years the Company
has spent on average 5.3% of net sales on new product
tooling. For 1998, 59% of sales were generated from products
that were introduced in the last five years. It is the
Company's strategy to continually expand the range of
products that it offers in its existing markets. The Company
has been active in making acquisitions and intends to remain
so in the future. The Company views acquisitions as either
providing the entree into a new connector market that the
Company has selected or strategically expanding the product
offering of an existing served market.

STRENGTHEN THE BALANCE SHEET: The acquisition of Wells
Electronics, Inc. in December of 1997 resulted in the Company
taking on approximately $108 million of debt. The public
stock offering of 2,300,000 shares of common stock in April
and May of 1998 raised approximately $42 million, and the
Company generated an additional $6.5 million of free cash
flow in 1998. The combination of the cash raised from the
public offering and the free cash flow, along with existing
cash balances, reduced the debt to $55.7 million as of
December 31, 1998 and improved the total debt-to-equity ratio
to 1.08 to 1.00. Strengthening the balance sheet will
provide the Company the flexibility it needs in the area of
acquisitions and product development.

PRODUCTS AND APPLICATIONS

The Company markets over 6,800 electronic connector products
in three product categories, each targeting a specific market.
These product categories are: IC package interconnects,
industrial interconnects and avionics terminal blocks and
sockets. The products offered within each product category can be

<PAGE>
characterized as proprietary, application-specific or industry
standard, as described below.

PROPRIETARY connectors are unique Company designs that are
introduced and sold to a broad market rather than a single
customer.

APPLICATION-SPECIFIC INTERCONNECTS are products which are
designed and developed for a specific application, typically
for one customer. These products can be subsequently
developed into proprietary product lines.

INDUSTRY STANDARD connectors are normally produced in
accordance with a relatively detailed industry or military
design and performance specification and sold to the broad
market to which that specification relates.

IC PACKAGE INTERCONNECTS

ICs (which before being packaged are frequently referred
to as dies) are generally encased in a plastic or ceramic
package to protect the device and facilitate its connection
with other system components. The IC package industry offers
a wide variety of evolving package designs. New package
designs are driven by the need to accommodate the increasing
complexity and higher lead count ICs. Each unique IC package
configuration requires a socket that corresponds to the
package's specific characteristics.

ICs are constantly increasing in functionality while
generally decreasing in unit cost. This leads to an increase
in IC product application, thereby driving IC unit growth.
This unit growth and the proliferation of sizes and packages
drive the demand for IC sockets. A further driver of unit
growth is the establishment new foundries, as well as the
reconfiguration of existing foundries. According to IC
Insights, Inc., unit demand for major package types is
expected to increase at a compound annual growth rate of 7%
from 1998 to 2003.

SMALL OUTLINE PACKAGE SOCKETS: The SO is a plastic,
rectangular package with leads on two sides, running along
either pair of opposite edges. With lead counts from 8 to 64
leads, the SO houses simple logic, memory and linear dies.
Devices tend to transition to the QFP above this lead count.
The small size, low price and surface mount design of the SO
<PAGE>
makes it a highly desirable package. The Company currently
produces 170 distinct sockets to accommodate a variety of SO
packages.

QUAD FLAT PACK SOCKETS: The QFP is a plastic package with
leads on four sides. It is used for high lead count surface
mount applications and is characterized by lead counts
typically ranging between 40 and 208 leads. The QFP is
currently a predominant and rapidly growing technology for
packaging of leading edge ICs used in microprocessor,
communication and memory applications. The Company currently
produces over 37 distinct sockets to accommodate a wide
variety of QFP packages.

PIN GRID ARRAY SOCKETS: The PGA is a square or rectangular
through-hole device that affects routing through all layers
of the printed circuit board. The pins are generally placed
on the package before insertion of the die. The
differentiating feature of the PGA is that the contacts are
placed in an array over the bottom of the packaged device,
rather than protruding from the sides of the device in a
perimeter pattern, as with the QFP. As a result, the PGA
offers greater lead density and smaller overall profile. This
makes the PGA ideal for devices with high lead counts, in
excess of 208, the upper range in which the QFP becomes
difficult to handle.

BALL GRID ARRAY SOCKETS: Similar to the PGA, the BGA uses an
underlying substrate, rather than a lead frame, for die
attachment. The die is then encapsulated and solder balls are
attached to the underside of the substrate. The solder balls
ultimately attach the package to the printed circuit board.
The die is placed in the package prior to the attachment of
the solder balls to ensure a flat surface for the die during
processing. In some cases, the packaged BGA is referred to as
the BGA Chip-Scale Package ("BGA/CSP") because the package is
only slightly larger (i.e. less than 20% larger) than the die
itself. Whereas the PGA contacts the printed circuit board at
all layers using through-hole connection, the BGA contacts
the printed circuit board only at the surface. This allows
the BGA to achieve a lower profile, lighter weight and
smaller area on the printed circuit board due to surface
mounting.

<PAGE>
INDUSTRIAL INTERCONNECTS

The Company's product areas in this market are industrial
terminal blocks and interface modules. Terminal blocks are most
commonly used in industrial equipment to provide an electrical
link between discrete functions, such as monitoring and
measuring, and a controlling device. Interface modules facilitate
the interface between discrete factory wiring and cabling for
standard computer interconnects. The Company's industrial
interconnects are targeted at the industrial and process control
markets and affiliated markets and applications such as
environmental control systems, food and beverage preparation,
motor controls, machine tools, robotics, instrumentation and test
equipment.

TERMINAL BLOCKS: Terminal blocks are used in applications
where I/O power or signal wires are fed into a PLC or similar
(and often simpler) control system, and a connector is
required to interface between the electrical environment of
relatively heavy wires and the electronic environment of
controllers and sensors. The Company's terminal blocks
connect to and capture the wires in screw-clamp terminations,
and interface with printed circuit boards in a variety of
manners. The Company concentrates on four major product lines
within this market: pluggable terminal blocks, fixed mount
terminal blocks, edgecard terminal blocks, and application
specific terminal blocks. Application-specific terminal
blocks are developed for customers who are of strategic
importance to the Company, represent significant potential
volume and are recognized market leaders.

INTERFACE MODULES: Interface modules are interconnect
devices that incorporate terminal blocks, high density
connectors and often additional electronic components and are
used to form the interconnection between a system I/O card
and field equipment. Often these interconnections require
several discrete wire and standard computer connector
interconnects. The interface module simplifies the
interconnection by incorporating both the discrete wire and
standard computer interconnects into a rail mounted printed
circuit board assembly consisting of terminal blocks,
additional connectors and possibly other electronic devices.
Interface modules are typically application-specific and may
contain electronic components for signal conditioning, fusing
and various other electronic requirements.

<PAGE>
AVIONICS TERMINAL BLOCKS AND SOCKETS

Avionics terminal blocks perform similar functions as
industrial terminal blocks, linking discrete wires that are
individually terminated to a connector. However, avionics
terminal blocks are designed to withstand the harsher environment
and far more critical operating requirements to which they are
subject. The primary differences are that: contacts are gold
plated; wires are terminated by the crimped (metal deformation)
technique rather than screw clamps; and individual wires are
installed and removed from the connector through use of spring-
actuated locking devices. The avionics connectors are normally
completely environmentally sealed through use of a silicone
elastomer sealing grommet or are designed to operate in a sealed
compartment.

The Company concentrates on three major product lines in the
avionics market:

RELAY SOCKETS: Relay sockets are used throughout aircraft as
a means to facilitate installation, repair and maintenance of
electro-mechanical relays which are utilized for a wide variety
of control purposes ranging from main control circuits to landing
gear.

JUNCTION MODULES: Junction modules are environmentally
sealed, airborne terminal blocks.

APPLICATION-SPECIFIC AVIONICS CONNECTORS: Application
specific junction modules have been developed in conjunction
with Boeing Commercial Aircraft for use on the 737-747-757
767 series of commercial aircraft and the C17 aircraft.
Application-specific relay sockets are marketed to Boeing
subcontractors for the 777 commercial aircraft program and
the C17 aircraft.

PRODUCT DEVELOPMENT

Currently, the Company markets over 6,800 products in a wide
variety of product lines. The Company seeks to broaden its
product lines and to expand its technical capabilities in order
to meet its customers' anticipated needs. The Company's product
development strategy is to introduce new products into markets
where the Company has already established a leadership position
and to develop next generation products for other markets in
which the Company wishes to participate.
<PAGE>
The Company's current product development projects in the IC
package interconnect market target new package device designs
such as BGA, TSOP (thin, small outline package) and CSP (chip
scale package) burn-in, test and BGA production packages. The
Company believes, based on industry trends, that BGA will become
the preferred package for high-lead count IC packages (in excess
of 300 leads). The Company also believes, based on industry
trends, that TSOP and CSP will be the preferred package for high-
volume, high-density small outline IC devices.

SALES AND MARKETING

The Company distributes its products through a combination of
its own dedicated direct sales forces, a worldwide network of
manufacturers representatives and authorized distributors. The
Company maintains separate sales forces for the IC package
interconnect markets and for the industrial equipment and
avionics markets. For the IC package interconnect markets, the
Company employs a global direct sales force with offices in
England, Germany, Japan, and the United States, augmented with
sales representatives in smaller markets. For the industrial
equipment and avionics markets, the Company generally uses its
direct sales forces and manufacturer representatives for large
customers, new product introductions and application-specific
products and uses its authorized distributors for smaller and
medium-sized customers of standard and proprietary products. The
Company's sales and marketing program is focused on achieving and
maintaining close working relationships with its customers early
in the design phase of the customer's own product development.

CUSTOMERS

In 1998, products of the Company were sold to over 1,000
customers in a wide range of industries and applications. The top
five customers of the Company in 1998 accounted for 43.5% of net
sales. Micron Technology, Inc. accounted for 15.8% of net sales
of the Company in 1998 and Advanced Micro Devices, Inc. accounted
for 12.7% of net sales of the Company in 1998. Altera
Corporation accounted for 14.5% and 17.4% of net sales of the
Company in 1997 and 1996, respectively, and TNT Distributors,
Inc. accounted for 12.7% of net sales of the Company in 1997.
Sales to customers located outside the United States, either
directly or through U.S. and foreign distributors, accounted for
approximately 18.8%, 35.8% and 22.1% of the net sales of the
Company in the years ended 1998, 1997 and 1996, respectively.

<PAGE>
Examples of end users of the Company's products, by category,
are presented below:
<TABLE>
<CAPTION>

Product Categories Representative Customers
- ------------------ -------------------------------------------
<S> <C>
IC Package Interconnects............... Advanced Micro Devices, Inc.
Cyrex/National Semiconductor, Inc.
International Business Machines Corporation
Micron Technology, Inc.
Motorola, Inc.

Industrial Interconnects............... Giddings & Lewis, Inc.
Groupe Schneider (Modicon, Inc./Square D
Co./Telemecanique)
Parker Hannifin Corporation
Rockwell International Corp. (Allen-Bradley
Company)
Vickers Inc.

Avionics Terminal Blocks and Sockets Bell Helicopter Textron Inc.
The Boeing Company
Bombardier Inc.
(Canadair/deHavilland/Learjet Inc.)
British Aerospace Ltd.
Empresa Brasileira de Aeronautica S/A (Embraer)
</TABLE>

MANUFACTURING AND ENGINEERING

The Company is vertically integrated from the initial concept
stage through final design and manufacturing with regard to the
key production processes which the Company believes are critical
to product performance and service. These processes include
precision stamping, plastic injection molding and automated
assembly. The Company believes that this vertical integration
allows the Company to respond to customers quickly, control
quality and reduce the time to market for new product
development.

The Company seeks to reduce costs in its manufacturing
fabrication and assembly operations through formalized cost
savings programs. Complementary programs are dedicated to
maximizing the return on capital investments and reducing
overhead expense.

The Company believes it is a leader in delivery responsiveness
in its target markets. The introduction of just-in-time ("JIT")
manufacturing, inventory control techniques and quick-change, in-
house production tooling have substantially reduced delivery lead
times. Production cells operate under a JIT pull system, with
customer orders assembled as received. PCD carries minimal
finished goods inventory. An additional advantage of JIT

<PAGE>
manufacturing is the almost complete elimination of rework. Shop
floor orders are relatively small and are not handled in bulk,
and problems are resolved as they occur, rather than continuing
through an extended production run.

Wells-CTI KK, our Japanese subsidiary, subcontracts all of its
product manufacturing and assembly operations to Japanese
vendors. The Company subcontracts a portion of its labor-
intensive product assembly to a U.S.-based subcontractor with a
manufacturing facility in Mexico. The Company is not
contractually obligated to do business with any subcontractor,
could substitute other subcontractors without significant
additional cost or delay, and could perform assembly itself if
the need were to arise.

INTELLECTUAL PROPERTY

The Company seeks to use a combination of patents and other
means to establish and protect its intellectual property rights
in various products. The Company intends to vigorously defend its
intellectual property rights against infringement or
misappropriation. Due to the nature of its products, the Company
believes that intellectual property protection is less
significant than the Company's ability to further develop,
enhance and modify its current products. The Company believes
that its products do not infringe on the intellectual property
rights of others. However, many of the Company's competitors have
obtained or developed, and may be expected to obtain or develop
in the future, patents or other proprietary rights that cover or
affect products that perform functions similar to those performed
by products offered by the Company. There can be no assurance
that, in the future, the Company's products will not be held to
infringe patent claims of its competitors, or that the Company is
aware of all patents containing claims that may pose a risk of
infringement by its products. See "Risk Factors - Patent
Litigation."

COMPETITION

The markets in which PCD operates are highly competitive, and
the Company faces competition from a number of different
manufacturers. The Company has experienced significant price
pressure with respect to certain products, including its TSOP and
QFP products. The principal competitive factors affecting the
market for the Company's products include design, responsiveness,

<PAGE>
quality, price, reputation and reliability. The Company believes
that it competes favorably on these factors.

Generally, the electronic connector industry is competitive
and fragmented, with over 1,200 manufacturers worldwide.
Competition in the IC package interconnect market, however, is
highly concentrated among a small number of significant
competitors. Competition among manufacturers of application-
specific connectors in the industrial terminal blocks market
depends greatly on the customer, market and specific nature of
the requirement. Competition is fragmented in the avionics
market, but there are fewer competitors due to the demanding
nature of the military and customer specifications which control
much of the markets and the cost and time required to tool and
qualify military standard parts. In each of the markets in which
the Company participates, the Company's significant competitors
are much larger and have substantially broader product lines and
greater financial resources than the Company. There can be no
assurance that the Company will compete successfully, and any
failure to compete successfully could have a material adverse
effect on the financial condition, results of operations and
business of the Company.

BACKLOG

The Company defines its backlog as orders that are scheduled
for delivery within the next 12 months. The Company estimates
that its backlog of unfilled orders was approximately $8.4
million at December 31, 1998 and $11.9 million at December 31,
1997. The level and timing of orders placed by the Company's
customers vary due to customer attempts to manage inventory,
changes in manufacturing strategy and variations in demand for
customer products due to, among other things, introductions of
new products, product life cycles, competitive conditions or
general economic conditions. The Company generally does not
obtain long-term purchase orders or commitments but instead seeks
to work closely with its customers to anticipate the volume of
future orders. Based on anticipated future volumes, the Company
makes other significant decisions regarding the level of business
it will accept, the timing of production and the levels and
utilization of personnel and other resources. A variety of
conditions, both specific to the individual customer and
generally affecting the customer's industry, may cause customers
to cancel, reduce or delay purchase orders that were either
previously made or anticipated. Generally, customers may cancel,
reduce or delay purchase orders and commitments without penalty.
<PAGE>
For these reasons, backlog may not be indicative of future demand
or results of operations.

ENVIRONMENTAL

The Company is subject to a wide range of environmental laws
and regulations relating to the use, storage, discharge and
disposal of hazardous chemicals used during its manufacturing
process. A failure by the Company to comply with present or
future laws and regulations could subject it to future
liabilities or the suspension of production. Such laws and
regulations could also restrict the Company's ability to expand
its facilities or could require the Company to acquire costly
equipment or incur other significant expenses.

EMPLOYEES

As of December 31, 1998, the Company had 336 employees and 10
contract workers. The Company's 346 employees and contract
workers include 277 in manufacturing and engineering, 35 in sales
and marketing and 34 in administration. Of the Company's U.S.
employees, 62 are represented by the International Brotherhood of
Electrical Workers, Local 1392. The Company believes that its
relations with its employees and its union are good. The current
collective bargaining agreement expires on February 18, 2000.

RECENT DEVELOPMENTS

SUBSIDIARY ACTIVITIES

On July 31, 1998, the Company's wholly-owned subsidiary, CTi
Technologies, Inc. was merged into Wells Electronics, Inc. and
concurrently Wells Electronics, Inc. changed its name to Wells-
CTI, Inc.

In August 1998, the Company initiated the process of closing
its Singapore subsidiary, Wells-Pte Ltd., and the Korean branch
of its Japanese subsidiary, Wells-CTI KK. The Company expects to
complete the closure of these operations in the first half of
1999.

FORWARD LOOKING INFORMATION

Statements in this report concerning the future revenues,
profitability, financial resources, product mix, market demand,
product development and other statements in this report
<PAGE>
concerning the future results of operations, financial condition
and business of PCD Inc. are "forward-looking" statements as
defined in the Securities Act of 1933 and Securities Exchange Act
of 1934. Investors are cautioned that the Company's actual
results in the future may differ materially from those projected
in the forward-looking statements due to risks and uncertainties
that exist in the Company's operations and business environment,
including:

DEPENDENCE ON IC PACKAGE INTERCONNECT AND SEMICONDUCTOR
INDUSTRIES. The Company's semiconductor or integrated circuit
("IC") package interconnect sockets are used by producers and
testers of ICs and original equipment manufacturers ("OEMs"). For
the year ended December 31, 1998, the Company derived 71.7% of
its net sales from these products. The Company's future success
will depend in substantial part on the vitality of the
semiconductor and the related IC package interconnect industries.
The Company's acquisition of Wells Electronics, Inc. ("Wells") in
December 1997, a supplier of IC package interconnects,
significantly increased the Company's dependence on the IC
package interconnect industry. Historically, the IC package
interconnect industry has been driven by both the technology
requirements and unit demands of the semiconductor industry.
Depressed general economic conditions and cyclical downturns in
the semiconductor industry have had an adverse economic effect on
the IC package interconnect market. In addition, the product
cycle of existing IC package designs and the timing of new IC
package development and introduction can affect the demand for IC
package interconnect sockets. Reduced demand for semiconductors
and their related packages would have a material adverse effect
on the financial condition, results of operations and business of
the Company.

Dependence on Principal Customers. Micron Technology, Inc.
("Micron"), a provider of DRAMs, SRAMs and other semiconductor
components, was the largest customer of the Company in 1998.
Micron accounted for 15.8% of the net sales of the Company for
the year ended December 31, 1998. Advanced Micro Devices, Inc.
("AMD"), a provider of integrated circuits for the global
personal and networked computer, accounted for 12.7% of the net
sales of the Company for the year ended December 31, 1998. Altera
Corporation ("Altera"), a provider of high performance, high
density programmable logic devices, had been the largest customer
of the Company from 1994 to 1997. Altera accounted for 14.5% and
17.4% of the net sales of the Company for the years ended
December 31, 1997 and 1996, respectively. Sales to TNT
<PAGE>
Distributors, Inc. ("TNT"), a semiconductor equipment
distributor, accounted for 12.7% of net sales for the years ended
December 31, 1997, respectively. The Company does not have
written agreements with any of its customers, including Altera,
AMD, Micron or TNT, and therefore, no customer has any minimum
purchase obligations. Accordingly, there can be no assurance that
any of the Company's customers will purchase the Company's
products beyond those covered by released purchase orders. The
loss of, or significant decrease in, business from Altera, AMD,
Micron or TNT, for any reason, would have a material adverse
effect on the financial condition, results of operations and
business of the Company.

ACQUISITIONS AND INDEBTEDNESS. The Company may from time to
time pursue the acquisition of companies, assets, products or
technologies. The Company has limited experience in integrating
acquired companies or technologies into its operations.
Therefore, there can be no assurance that the Company will
operate other acquired businesses profitably in the future.
Acquisitions involve a number of operating risks that could
materially adversely affect the Company's operating results,
including the diversion of management's attention to assimilate
the operations, products and personnel of the acquired companies,
the amortization of acquired intangible assets and the potential
loss of key employees of the acquired companies. There can be no
assurance that the Company will be able to manage acquisitions
successfully or that the Company will be able to integrate the
operations, products or personnel gained through any such
acquisitions without a material adverse effect on the financial
condition, results of operations and business of the Company.
Accordingly, operating expenses associated with acquired
businesses may have a material adverse effect on the financial
condition, results of operations and business of the Company.

The Company incurred substantial indebtedness in connection
with the Wells acquisition and, subject to compliance with the
terms of the Senior Credit Facility, may incur additional
indebtedness in connection with future acquisitions. The
incurrence of substantial amounts of debt could increase the risk
of the Company's operations. If the Company's cash flow and
existing working capital are not sufficient to fund its general
working capital requirements or to service its indebtedness, the
Company would have to raise additional funds through the sale of
its equity securities, the refinancing of all or part of its
indebtedness or the sale of assets or subsidiaries. There can be
no assurance that any of these sources of funds would be
<PAGE>
available in amounts sufficient for the Company to meet its
obligations, if at all. The cost of debt financing may also
impair the ability of the Company to maintain adequate working
capital or to make future acquisitions. In addition, the issuance
of additional shares of Common Stock in connection with
acquisitions could be dilutive to existing investors.

International Sales and Operations. Sales to customers
located outside the United States, either directly or through
U.S. and foreign distributors, accounted for approximately 21.9%,
35.8% and 22.1% of the net sales of the Company in the years
ended December 31, 1998, 1997 and 1996, respectively.
International revenues are subject to a number of risks,
including: longer accounts receivable payment cycles; exchange
rate fluctuations; difficulty in enforcing agreements and
intellectual property rights and in collecting accounts
receivable; tariffs and other restrictions on foreign trade;
withholding and other tax consequences; economic and political
instability; and the burdens of complying with a wide variety of
foreign laws. Sales made to foreign customers or foreign
distributors may be denominated in either U.S. dollars or in the
currencies of the countries where sales are made. The Company has
not to date sought to hedge the risks associated with
fluctuations in foreign exchange rates and does not currently
plan to do so. The Company's foreign sales and operations are
also affected by general economic conditions in its international
markets. A prolonged economic downturn in its foreign markets
could have a material adverse effect on the Company's business.
The Company has an operating subsidiary in Japan, and sales or
technical support operations in England, and Germany. Recent and
continuing volatility in the Asian economies and financial and
currencies markets may have a material adverse effect on the
Company's current and planned sales and operations in that
region, particularly with respect to the Company's IC package
interconnect business. In addition, the laws of certain countries
do not protect the Company's products and intellectual property
rights to the same extent as do the laws of the United States.
There can be no assurance that the factors described above will
not have an adverse effect on the Company's future international
revenues and, consequently, on the financial condition, results
of operations and business of the Company.

RESTRICTIVE COVENANTS UNDER SENIOR CREDIT FACILITY. The
agreement governing the Senior Credit Facility contains numerous
financial and operating covenants. There can be no assurance that
the Company will be able to maintain compliance with these
<PAGE>
covenants, and failure to meet such covenants would result in an
event of default under the Senior Credit Facility. Among these
covenants are restrictions that the Company (i) must maintain
John L. Dwight, Jr. as chief executive officer of the Company or
obtain the consent of the lenders under the Senior Credit
Facility to any replacement of Mr. Dwight; (ii) may not, without
the prior consent of such lenders, acquire the assets of or
ownership interests in, or merge with, other companies; and (iii)
may not, without the prior consent of such lenders, pay cash
dividends.

FLUCTUATIONS IN OPERATING RESULTS. The variability of the
level and timing of orders from, and shipments to, major
customers may result in significant fluctuations in the Company's
quarterly results of operations. The Company generally does not
obtain long-term purchase orders or commitments but instead seeks
to work closely with its customers to anticipate the volume of
future orders. Generally, customers may cancel, reduce or delay
purchase orders and commitments without penalty. Cancellations,
reductions or delays in orders by a customer or groups of
customers could have a material adverse effect on the financial
condition, results of operations and business of the Company. In
addition to the variability resulting from the short-term nature
of its customers' commitments, other factors have contributed,
and may in the future contribute, to such fluctuations. These
factors may include, among other things, customers' and
competitors' announcement and introduction of new products or new
generations of products, evolutions in the life cycles of
customers' products, timing of expenditures in anticipation of
future orders, effectiveness in managing manufacturing processes,
changes in cost and availability of labor and components, shifts
in the Company's product mix and changes or anticipated changes
in economic conditions. In addition, it is not uncommon in the
electronic connector industry for results of operations to
display a seasonal pattern of declining revenues in the third
quarter of the calendar year. Although the Company's results of
operations did not display this pattern in 1998 and 1997, it did
occur in 1996 and is likely to occur in the future. Because the
Company's operating expenses are based on anticipated revenue
levels and a high percentage of the Company's operating expenses
are relatively fixed, any unanticipated shortfall in revenue in a
quarter may have a material adverse impact on the Company's
results of operations for the quarter. Results of operations for
any period should not be considered indicative of the results to
be anticipated for any future period.

<PAGE>
TECHNOLOGICAL EVOLUTION. The rapid technological evolution of
the electronics industry requires the Company to anticipate and
respond rapidly to changes in industry standards and customer
needs and to develop and introduce new and enhanced products on a
timely and cost-effective basis. In particular, the Company must
target its development of IC package interconnect sockets based
on which next-generation IC package designs the Company expects
to be successful. The Company must manage transitions from
products using present technology to those that utilize next-
generation technology in order to maintain or increase sales and
profitability, minimize disruptions in customer orders and avoid
excess inventory of products that are less responsive to customer
demand. Any failure of the Company to respond effectively to
changes in industry standards and customer needs, develop and
introduce new products and manage product transitions would have
a material adverse effect on the financial condition, results of
operations and business of the Company.

MANAGEMENT OF GROWTH. THE Company has grown rapidly in recent
years. Such growth could place a significant strain on the
Company's management, operations and other resources. The
Company's ability to manage its growth will require it to
continue to invest in its operational, financial and management
information systems, and to attract, retain, motivate and
effectively manage its employees. The inability of the Company's
management to manage growth effectively would have a material
adverse effect on the financial condition, results of operations
and business of the Company.

PROPRIETARY TECHNOLOGY AND PRODUCT PROTECTION. The Company's
success depends in part on its ability to maintain the
proprietary and confidential aspects of its products as they are
released. The Company seeks to use a combination of patents and
other means to establish and protect its proprietary rights.
There can be no assurance, however, that the precautions taken by
the Company will be adequate to protect the Company's technology.
In addition, many of the Company's competitors have obtained or
developed, and may be expected to obtain or develop in the
future, patents or other proprietary rights that cover or affect
products that perform functions similar to those performed by
products offered by the Company. There can be no assurance that,
in the future, the Company's products will not be held to
infringe patent claims of its competitors, or that the Company is
aware of all patents containing claims that may pose a risk of
infringement by its products. The inability of the Company for

<PAGE>
any reason to protect existing technology or otherwise acquire
such technology could prevent distribution of the Company's
products, having a material adverse effect on the financial
condition, results of operations and business of the Company.

PATENT LITIGATION. On August 21, 1995, a predecessor ("CTi")
of the Company's wholly-owned subsidiary, Wells-CTI, Inc.
("Wells-CTI"), filed an action in the United States District
Court for the District of Arizona against Wayne K Pfaff, an
individual residing in Texas ("Pfaff") alleging and seeking a
declaratory judgment that two United States patents issued to
Pfaff and relating to certain burn-in sockets for "leadless" IC
packages (the "Pfaff Leadless Patent") and ball grid array
("BGA") IC packages (the "Pfaff BGA Patent") are invalid and are
not infringed by CTi, the products of which include burn-in
sockets for certain "leaded" packages (including Quad Flat Paks)
and BGA packages.

In other litigation between Wells-CTI and Pfaff concernng the
Pfaff Leadless Patent, the United States Supreme Court has
affirmed the decision of the United States Court of Appeals for
the Federal Circuit finding that all of the individual
descriptions of the invention covered by the Pfaff Leadless
Patent which were at issue in that case are invalid. Pfaff then
agreed not to sue CTi or Wells-CTI for infringement of the Pfaff
Leadless Patent, including infringement based upon claims not
adjudicated in that litigation. The litigation between Wells-CTI
and Pfaff and CTi and Pfaff relating to the Pfaff Leadless Patent
is thus concluded. However, issues concerning the Pfaff BGA
Patent will remain to be resolved in the District of Arizona
litigation.

The Company believes, based on the advice of counsel, that CTi
has meritorious positions of noninfringement and invalidity with
respect to the Pfaff BGA Patent issues raised in the District of
Arizona litigation and, as necessary, will vigorously litigate
its position. There can be no assurance, however, that the
Company, CTi or Wells-CTI will prevail in any pending or future
litigation, and a final court determination that CTi or Wells-CTI
has infringed the Pfaff BGA Patent could have a material adverse
effect on the Company. Such adverse effect could include,
without limitation, the requirement that CTi or Wells-CTI pay
substantial damages for past infringement and an injunction
against the manufacture or sale in the United States of such
products as are found to be infringing.

<PAGE>
COMPETITION. The electronic connector industry is highly
competitive and fragmented, with more than 1,200 manufacturers
worldwide. The Company believes that competition in its targeted
segments is primarily based on design, responsiveness, quality,
price, reputation and reliability. The Company has experienced
significant price pressure with respect to certain products,
including its thin, small outline package ("TSOP") and quad-flat
pack ("QFP") products. The Company's significant competitors are
much larger and have substantially broader product lines and
greater financial resources than the Company. There can be no
assurance that the Company will compete successfully, and any
failure to compete successfully would have a material adverse
effect on the financial condition, results of operations and
business of the Company.

CONCENTRATION OF OWNERSHIP. The current officers, directors
and Emerson Electric Co. ("Emerson"), the Company's largest
stockholder, beneficially own approximately 39.3% of the
outstanding shares of the Common Stock of the Company based on
the number of shares of Common Stock outstanding as of December
31, 1998. Accordingly, such persons, if they act together, can
exert substantial control over the Company through their ability
to influence the election of directors and all other matters that
require action by the Company's stockholders. Such persons could
prevent or delay a change in control of the Company which may be
favored by a majority of the remaining stockholders. Such
ability to prevent or delay such a change in control of the
Company also may have an adverse effect on the market price of
the Company's Common Stock.

DEPENDENCE ON KEY PERSONNEL. The Company is largely dependent
upon the skills and efforts of John L. Dwight, Jr., its Chairman
of the Board, President and Chief Executive Officer, Richard J.
Mullin, its Vice President and President, Wells - CTI Division,
Michael S. Cantor, Vice President and General Manager,
Industrial/Avionics Division, Jeffrey A. Farnsworth, its Vice
President and General Manager, Wells - CTI Phoenix, and other
officers and key employees. The Company does not have employment
agreements with any of its officers or key employees providing
for their employment for any specific term or noncompetition
agreements prohibiting them from competing with the Company after
termination of their employment. The loss of key personnel or the
inability to hire or retain qualified personnel could have a
material adverse effect on the financial condition, results of
operations and business of the Company.

<PAGE>
DEPENDENCE UPON INDEPENDENT DISTRIBUTORS. Sales through
independent distributors accounted for 21.9%, 38.7% and 28.1% of
the net sales of the Company for the years ended December 31,
1998, 1997 and 1996, respectively. The Company's agreements with
its independent distributors are nonexclusive and may be
terminated by either party upon 30 days written notice, provided
that if the Company terminates the agreement with an independent
distributor, the Company will be obligated to purchase certain of
such distributor's pre-designated unsold inventory shipped by the
Company within an agreed-upon period prior to the effective date
of such termination. The Company's distributors are not within
the control of the Company, are not obligated to purchase
products from the Company, and may also sell other lines of
products. There can be no assurance that these distributors will
continue their current relationships with the Company or that
they will not give higher priority to the sale of other products,
which could include products of competitors. A reduction in sales
efforts or discontinuance of sales of the Company's products by
its distributors could lead to reduced sales and could materially
adversely affect the Company's financial condition, results of
operations and business. The Company grants to certain of its
distributors limited inventory return and stock rotation rights.
If the Company's distributors were to increase their general
levels of inventory of the Company's products, the Company could
face an increased risk of product returns from its distributors.
There can be no assurance that the Company's historical return
rate will remain at a low level in the future or that such
product returns will not have a material adverse effect on the
Company's financial condition, results of operations and
business.

YEAR 2000 COMPLIANCE AND COSTS. The "Year 2000 Issue" is the
result of computer programs that were written using two digits
rather than four to define the applicable year. If the Company's
computer programs with date-sensitive functions are not Year 2000
compliant, they may interpret a date using "00" in the year field
as the Year 1900 rather than the Year 2000. This
misinterpretation could result in a system failure or
miscalculations causing disruptions of operations, including,
among other things, an interruption of design or manufacturing
functions or an inability to process transactions, send invoices
or engage in similar normal business activities until the problem
is corrected.

<PAGE>
The Company has identified its Year 2000 risk in three
categories: internal information technology ("IT") systems;
internal non-IT systems, including embedded technology such as
microcontrollers; and external noncompliance by customers and
suppliers.

INTERNAL IT SYSTEMS. The Company utilizes a significant
number of information technology systems across its entire
organization, including applications used in manufacturing,
product development, financial business systems and various
administrative functions. During 1997 and 1998, the Company
reviewed the Year 2000 issue that encompassed operating and
administrative areas of the Company. The Company found that,
with the exception of the South Bend, Indiana location of
Wells-CTI ("Wells-CTI South Bend"), its information
technology systems will be able to manage and manipulate all
material data involving the transition from the year 1999 to
the year 2000 without functional or data abnormality and
without inaccurate results related to such data. During the
past year, Wells-CTI South Bend has completed the
modifications and testing of its information technology
systems, and the Company believes that the Wells-CTI South
Bend location is now Year 2000 compliant. The cost of the
modifications and testing at Wells-CTI South Bend was
approximately $90,000. The Company does not have a
contingency plan in place for Year 2000 failures of its
internal IT systems. If the Company has not achieved or does
not timely achieve Year 2000 compliance for its major IT
systems, the Year 2000 Issue could have a material adverse
effect on the financial condition, results of operations and
business of the Company.

Independent of the Year 2000 Issue and in order to improve
access to business information through common, integrated
computing systems across the Company, PCD began a worldwide
information technology systems replacement project with
systems that use programs from Oracle Corporation. The
Company is in the implementation phase for this system and is
expected to be complete by December 31, 1999.

INTERNAL NON-IT SYSTEMS, INCLUDING EMBEDDED TECHNOLOGY. The
Company is in the data-gathering phase with regard to non-IT
systems including embedded technology such as
microcontrollers. PCD is currently gathering data to assess
the impact of the Year 2000 on its non-IT systems such as
design, manufacturing, testing and security, with Year 2000
<PAGE>
compliance targeted for April 30, 1999. The Company does not
at this time have sufficient data to estimate the cost of
achieving Year 2000 compliance for its non-IT systems. If the
Company is unable to achieve Year 2000 compliance for its
major non-IT systems, the Year 2000 Issue could have a
material adverse effect on the financial condition, results
of operations and business of the Company. The Company does
not currently have a contingency plan in place for Year 2000
failures of its internal non-IT systems and embedded
technology.

EXTERNAL NONCOMPLIANCE BY CUSTOMERS AND SUPPLIERS. The
Company is in the process of identifying and contacting its
material suppliers, service providers and contractors to
determine the extent of the Company's vulnerability to those
third parties' failure to remedy their own Year 2000 issues.
PCD expects to complete its assessment of that vulnerability
by April 30, 1999. To the extent that responses to Year 2000
readiness inquiries are unsatisfactory, the Company intends
to change suppliers, service providers or contractors to
those who have demonstrated Year 2000 readiness, but the
Company cannot assure that it will be successful in finding
such alternative suppliers, service providers and
contractors. The Company does not currently have any formal
information concerning the Year 2000 compliance status of its
customers but has received indications that most of its
customers are working on Year 2000 compliance. If any of the
Company's significant customers and suppliers do not
successfully and timely achieve Year 2000 compliance, and the
Company is unable to replace them with new customers or
alternative suppliers, the Company's financial condition,
results of operations and business could be materially
adversely affected.

The Company's ability to achieve Year 2000 compliance, the
level of incremental costs associated with compliance and the
timing of compliance, could be adversely impacted by, among
other things, the availability and cost of programming and
testing resources, vendors' ability to modify proprietary
software, and unanticipated problems identified in the
ongoing compliance review.

PRODUCT LIABILITY. The Company's products provide electrical
connections between various electrical and electronic components.
Any failure by the Company's products could result in claims

<PAGE>
against the Company. Except with respect to avionics products,
the Company does not maintain insurance to protect against
possible claims associated with the use of its products. A
successful claim brought against the Company could have a
material adverse effect on the financial condition, results of
operations and business of the Company. Even unsuccessful claims
could result in the Company's expenditure of funds in litigation
and management time and resources. There can be no assurance that
the Company will not be subject to product liability claims.

ENVIRONMENTAL COMPLIANCE. The Company is subject to a wide
range of environmental laws and regulations relating to the use,
storage, discharge and disposal of hazardous chemicals used
during its manufacturing process. A failure by the Company at any
time to comply with environmental laws and regulations could
subject it to liabilities or the suspension of production. Such
laws and regulations could also restrict the Company's ability to
expand its facilities or could require the Company to acquire
costly equipment or incur other significant expenses.

POSSIBLE VOLATILITY OF STOCK PRICE. The stock market
historically has experienced volatility which has affected the
market price of securities of many companies and which has
sometimes been unrelated to the operating performance of such
companies. The trading price of the Common Stock could also be
subject to significant fluctuations in response to variations in
quarterly results of operations, announcements of new products by
the Company or its competitors, other developments or disputes
with respect to proprietary rights, general trends in the
industry, overall market conditions and other factors. In
addition, there can be no assurance that an active trading market
for the Common Stock will be sustained.

POTENTIAL EFFECT OF ANTI-TAKEOVER PROVISIONS. The Company's
Board of Directors has the authority without action by the
Company's stockholders to fix the rights and preferences of and
to issue shares of the Company's Preferred Stock, which may have
the effect of delaying, deterring or preventing a change in
control of the Company. At present the Company has no plans to
issue any shares of Preferred Stock. The Company's Board of
Directors also has the authority without action by the Company's
stockholders to impose various procedural and other requirements
that could make it more difficult for stockholders to effect
certain corporate actions. In addition, the classification of the
Company's Board of Directors and certain provisions of

<PAGE>
Massachusetts law applicable or potentially applicable to the
Company, could have the effect of delaying, deterring or
preventing a change in control of the Company. These statutory
provisions include a requirement that directors of publicly-held
Massachusetts corporations may only be removed for "cause," as
well as a provision not currently applicable to the Company that
any stockholder who acquires beneficial ownership of 20% or more
of the outstanding voting stock of a corporation may not vote
such stock unless the stockholders of the corporation so
authorize.

ITEM 2. PROPERTIES

PCD, headquartered in Peabody, Massachusetts, operates leased
production facilities in Peabody, Massachusetts (60,000 square
feet), Phoenix, Arizona (24,000 square feet), South Bend, Indiana
(50,000 square feet), Yokohama, Japan (6,600 square feet) and
Harrisburg (Swatara), Pennsylvania (7,000 square feet). The
Peabody facility is responsible for assembly, manufacturing
automation development and quality assurance functions relating
to industrial terminal blocks and avionics terminal blocks. The
Phoenix facility is responsible for assembly and quality
assurance functions relating to burn-in, development and
production sockets, as well as related product design and
development. The South Bend and Yokohama facilities are
responsible for design, assembly, manufacturing automation
development and quality assurance for burn-in sockets. Stamping
and molding fabrication of components for both Peabody and
Phoenix are handled at the Peabody facility. The Harrisburg
(Swatara) facility handles stamping for production in South Bend.
The Company also maintains distribution and technical sales
support facilities in Northhampton, England; and Regensburg,
Germany. The Company believes that its facilities are adequate
for its operations for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

<PAGE>
burn-in sockets for "leadless" IC packages (the "Pfaff Leadless
Patent") and ball grid array ("BGA") IC packages (the "Pfaff BGA
Patent") are invalid and are not infringed by CTi, the products
of which include burn-in sockets for certain "leaded" packages
(including Quad Flat Paks) and BGA packages.

In other litigation between Wells-CTI and Pfaff concerning the
Pfaff Leadless Patent, the United States Supreme Court has
affirmed the decision of the United States Court of Appeals for
the Federal Circuit finding that all of the individual
descriptions of the invention covered by the Pfaff Leadless
Patent which were at issue in that case are invalid. Pfaff then
agreed not to sue CTi or Wells-CTI for infringement of the Pfaff
Leadless Patent, including infringement based upon claims not
adjudicated in that litigation. The litigation between Wells-CTI
and Pfaff and CTi and Pfaff relating to the Pfaff Leadless Patent
is thus concluded. However, issues concerning the Pfaff BGA
Patent will remain to be resolved in the District of Arizona
litigation.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders in the
fourth quarter of 1998.

<PAGE>
PART II

ITEM 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS

(a) The Company's Common Stock is traded on the Nasdaq
National Market of the Nasdaq Stock Market, Inc. The following
table sets forth the reported high and low sale prices for the
Common Stock, under the symbol "PCDI," for the periods indicated:

High Low
1998
First Quarter.......................... $24 1/4 $19 3/4
Second Quarter......................... 23 16 3/4
Third Quarter.......................... 18 3/4 10 1/2
Fourth Quarter......................... 14 3/4 11

1997
First Quarter.......................... 17 3/4 13
Second Quarter......................... 17 5/8 14
Third Quarter.......................... 25 16
Fourth Quarter......................... 26 1/2 19 1/2

On March 9, 1999, the last reported sale price for the Common
Stock on the Nasdaq National Market was $14.75 per share. As of
January 31, 1999, there were approximately 1,200 holders of
record of Common Stock.

The Company has never declared or paid any cash dividends on
the Common Stock. The Company currently intends to retain future
earnings, if any, to fund the development and growth of its
business and does not anticipate paying any cash dividends on the
Common Stock in the foreseeable future. The Board of Directors of
the Company intends to review this policy from time to time,
after taking into account various factors such as the Company's
financial condition, results of operation, current and
anticipated cash needs and plans for expansion. The Senior Credit
Facility contains a covenant that prohibits the Company from
paying cash dividends.

<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

The following table contains certain selected consolidated
financial data for PCD and its subsidiaries. The selected
consolidated financial data for each of the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 have been derived
from the Company's Consolidated Financial Statements, which have
been audited by PricewaterhouseCoopers LLP, independent public
accountants. The selected consolidated financial data should be
read in conjunction with the Consolidated Financial Statements
and the Notes thereto of the Company and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

Year Ended December 31,
1998 (1) 1997 (2) 1996 1995 1994
(in thousands, except per share amounts)
Consolidated Statement
of Operations Data:
<S> <C> <C> <C> <C> <C>
Net sales....................... $64,391 $ 29,796 $26,857 $25,616 $15,850
Gross profit.................... 37,060 14,676 12,400 12,139 6,016
Write-off of acquired in-process
research and development...... - (44,438) - - -
Income (loss) from operations... 17,679 (35,578) 6,955 6,472 2,157
Interest income (expense), net.. (8,813) 940 725 112 23
Net income (loss) before
extraordinary item............. 5,191 (22,836) 4,785 3,863 1,301
Extraordinary item, net of
income tax benefit of $567..... (888) - - - -
Net income (loss)............... $ 4,303 $(22,836) $ 4,785 $ 3,863 $ 1,301
======= ======== ======= ======= =======
Net income (loss) per share
before extraordinary item:
Basic.......................... $ 0.69 $ (3.83) $ 0.87 $ 0.85 $ 0.29
======= ======== ======= ======= =======
Diluted........................ $ 0.57 $ (3.83) $ 0.76 $ 0.75 $ 0.29
======= ======== ======= ======= =======

Net income (loss) per share:
Basic.......................... $ 0.64 $ (3.83) $ 0.87 $ 0.85 $ 0.29
======= ======== ======= ======= =======
Diluted........................ $ 0.53 $ (3.83) $ 0.76 $ 0.75 $ 0.29
======= ======== ======= ======= =======
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
December 31,
1998 1997 1996 1995 1994
(in thousands)
Consolidated Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Working capital (deficit)....... $(11,839) $(12,632) $23,054 $ 7,671 $5,089
Total assets.................... 119,104 126,592 32,456 15,929 10,783
Total debt...................... 55,700 105,903 - - -
Stockholders' equity............ 57,277 8,995 28,706 12,812 8,774
- ----------
</TABLE>

(1) Net loss for the year ended December 31, 1998 includes a
non-recurring charge relating to the Wells acquisition for
the valuation of the Emerson Warrant and an extraordinary
charge relating to the write off of the valuation of the
Emerson Warrant and the prepayment penalty associated with
the Debenture (for the meaning of capitalized terms, see
"Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital
Resources"). Before deducting for the non-recurring and
extraordinary charges, net income per share - basic was $0.89
(based on a weighted average number of shares outstanding of
7,486,915), and net income per share - diluted was $0.81
(based on a weighted average number of common and common
equivalent shares outstanding of 8,167,525).

(2) Net loss for the year ended December 31, 1997 includes a
non-recurring write-off relating to the Wells acquisition for
acquired in-process research and development. Before
deducting the write-off, net income per share - basic was
$1.04 (based on a weighted average number of shares
outstanding of 5,954,657), and net income per share - diluted
was $0.94 (based on a weighted average number of common and
common equivalent shares outstanding of 6,634,125).

<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used herein, the terms "Company" and "PCD," unless
otherwise indicated or the context otherwise requires, refer to
PCD Inc. and its subsidiaries. However, all financial information
for periods ended before December 26, 1997, unless otherwise
indicated or the context otherwise requires, is for PCD Inc. and
its subsidiaries, excluding Wells Electronics, Inc.

In 1998, net sales of the Company of $64.4 million grew from
$29.8 million in 1997. This growth represents the additional
sales from the Wells Electronics acquisition, as well as strong
sales increase in avionics product lines. The Company realized
approximately 58.6% of its net sales in 1998 from products
introduced in the last five years. The Company distributes its
products through a combination of its own dedicated direct sales
force, a worldwide network of manufacturers representatives and
authorized distributors. Sales to customers located outside the
United States, either directly or through U. S. and foreign
distributors, accounted for approximately 21.9%, 35.8% and 22.1%
of the net sales of the Company in the years ended December 31,
1998, 1997 and 1996, respectively.

The following table sets forth the relative percentages of the
total net sales of the Company attributable to each of the
Company's product categories for the periods indicated.

Product Categories 1998 1997 1996
- ------------------ ------ ------ ------
IC package interconnects........... 71.7% 42.3% 37.6%
Industrial interconnects........... 11.4 24.5 22.5
Avionic terminal blocks and sockets 16.9 33.2 39.9
Total......................... 100.0% 100.0% 100.0%

RESULTS OF OPERATIONS

The following table sets forth certain items from the
Company's Consolidated Statements of Operations as (1) a
percentage of net sales and (2) the percentage period-to-period
change in dollar amounts of such items for the periods indicated.
The information for 1998 excludes the non-recurring and
extraordinary charges related to the Wells acquisition and, in
1997, excludes the effect of the non-recurring charge for <PAGE>
<PAGE>
purchased in-process research and development. The table and the
discussion below should be read in conjunction with the
Consolidated Financial Statements and Notes thereto.

<TABLE>
<CAPTION>
Year Ended December 31, Period-to-Period Change
----------------------- ---------------------------
1998 1997 1996 1998 vs. 1997 1997 vs. 1996
------ ------ ------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue.................. 100.0% 100.0% 100.0% 116.1% 10.8%
Gross profit............. 57.6 49.3 46.2 152.5 18.4
Income from operations... 27.5 29.7 25.9 99.5 27.4
before non-recurring and
extraordinary charges
Interest/other income
(expense), net.......... (10.1) 3.2 2.7 (789.9) 29.7
Net income............... 10.3 20.9 17.8 6.5 30.0
</TABLE>

YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997

NET SALES. Net sales increased 116.1% to $64.4 million for
1998, from $29.8 million for 1997. Net sales in the
Industrial/Avionic product lines increased 5.9%, to $18.2
million. The avionics portion of the industrial/avionic business
segment showed the largest increase, with an overall 10% growth
from 1997. The IC package interconnect product lines grew more
than 250% to $46.2 million from $12.6 million, which is the
direct result of the acquisition of Wells Electronics. Wells-CTI,
represents the merger of Wells Electronics and CTi Technologies,
Inc. and encompasses the entire IC package interconnect business
segment. Sales to customers located outside the United States,
either directly or through U.S. and foreign distributors, were
21.9% of net sales for 1998, compared to 35.8% of net sales in
1997.

GROSS PROFIT. Gross profit increased 152.5% to $37.1 million
for 1998, from $14.7 million for 1997. As a percentage of net
sales, gross margin increased to 57.6% for 1998 from 49.3% for
1997. The increase in gross margin was attributable to the shift
in product mix to the higher margin IC package interconnects,
primarily due to the Wells acquisition. The results are also
favorably impacted by the Company's continuous cost improvements
program, which concentrates on cost reduction programs associated
with the direct cost of the product.

<PAGE>
OPERATING EXPENSES. Operating expenses include selling,
general and administrative expenses and costs of product
development. Operating expenses increased 233.2% to $19.4
million, or 30.1% of net sales, for 1998, from $5.8 million, or
19.5% of net sales, excluding a write-off of acquired in-process
research and development from the Wells acquisition, for 1997.
The dollar increase in operating expenses reflects both the
additional amortization of goodwill of $4.2 million and expenses
of the newly acquired subsidiary.

INTEREST AND OTHER INCOME (EXPENSE), NET. Net interest expense
was $10.3 million compared to net interest income in 1997 of
$940,000. The net interest expense represents a combination of
three elements: the valuation of the Emerson Warrant for 150,000
shares of PCD Common Stock of $2.9 million; the prepayment
penalty on the Debenture of $812,500; and the interest expense on
the Senior Credit Facility of $6.6 million. See "Liquidity and
Capital Resources."

PROVISION FOR INCOME TAXES. The effective income tax rates for
1998 and 1997 were 41.9% and 34.1%, respectively. The increase in
the effective income tax rate was due to the application of the
effective tax rates for each of the state and foreign tax
jurisdictions in which the Company operates. Specifically,
Wells-CTI KK, the Japanese subsidiary of Wells-CTI, had an
effective tax rate of 50.6% for 1998.

YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996

NET SALES. Net sales increased 10.8% to $29.8 million for
1997, from $26.9 million for 1996. This change in net sales
reflected increased market penetration of the Company's IC
package interconnects and industrial interconnects. The greatest
portion of this growth was derived from higher sales volume of
the IC package sockets, particularly the ball grid array ("BGA")
burn-in sockets. Sales of this product family, which was
introduced in the fourth quarter of 1996, grew to approximately
$1.6 million in 1997 from $163,000 in 1996. The industrial
interconnect line was also favorably impacted by new product
introductions. Sales of the high-density terminal block line,
which was introduced in late 1995, grew to approximately $765,000
in 1997 from $223,000 in 1996. Sales to customers located outside
the United States, either directly or through U.S. and foreign
distributors, were 35.8% of net sales in 1997, compared with
22.1% of net sales in 1996.

<PAGE>
GROSS PROFIT. Gross profit increased 18.4% to $14.7 million
for 1997, from $12.4 million for 1996. As a percentage of net
sales, gross margin increased to 49.3% for 1997 from 46.2% for
1996. The increase in gross margin was attributable to a shift in
product mix back to IC packaging interconnects from industrial
interconnects and avionics terminal blocks and sockets, higher
sales volume and cost improvements resulting from the Company's
continuous cost reduction program.

OPERATING EXPENSES. Operating expenses include selling,
general and administrative expenses and costs of product
development. Operating expenses, excluding a write-off of
acquired in-process research and development from the Wells
acquisition, were $5.8 million, or 19.5% of net sales, for 1997,
compared to $5.4 million, or 20.3% of net sales, for 1996. This
dollar increase in operating expenses reflects the costs
associated with the start-up of the Control Systems Interconnect
division in the third quarter of 1997 as well as the costs
associated with the advertising campaign to promote the
production BGA Z-Lok(TM) product family.

WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT.
The non-recurring write-off of approximately $44.4 million of
acquired in-process research and development was recorded in
connection with the Wells acquisition. The remaining goodwill and
purchased intangibles will be amortized over 6 to 20 years, which
will increase operating expenses by approximately $4.2 million
per year.

INTEREST AND OTHER INCOME (EXPENSE), NET. Interest and other
income increased to $1.2 million in 1997 from $734,000 in 1996.
This increase was attributable to the higher balances of cash and
cash equivalents during 1997. Interest expense increased to
approximately $227,000 in 1997, reflecting the debt incurred in
connection with the Wells acquisition.

PROVISION FOR INCOME TAXES. The effective tax rate for 1997
was approximately 34.1%, compared to 37.7% in 1996. The decrease
in the effective tax rate for 1997 resulted primarily from the
write-off of acquired in-process research and development
relating to the Wells acquisition. Before taking into
consideration the write-off of acquired in-process research and
development, the Company's effective tax rate was 36.5%.

<PAGE>
INCOMPLETE TECHNOLOGY UPDATE

The acquired in-process research and development ("IPR&D")
which was expensed in 1997 in connection with the Wells
acquisition related to in-process burn-in socket designs and
manufacturing process for various next generation high density IC
package types. More specifically, there were six projects for
dual-sided surface mount ("SO") packages, six for chip scale
packages ("CSP"), three for lan grid array ("LGA"), two for ball
grid array ("BGA"), two for test sockets and one for a
miscellaneous package. Of the six SO projects, four remain active
and two were abandoned in 1998. Of the six CSP projects, three
remain active, two were postponed and one was abandoned in 1998.
Of the three LGA projects, one remains active and two were
abandoned in 1998. Of the two BGA projects, both were abandoned
in 1998. Of the two test socket projects and the one
miscellaneous package project, one remains active and two were
abandoned in 1998. Regarding the active projects as a whole, an
additional $1.0 million in capital costs were expended in 1998.
For the active projects as a whole, net sales of $150,000 were
generated in 1998. Failure to successfully develop the IPR&D
projects would negatively impact the Company's future performance
and its ability to compete in the burn-in socket market.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities in 1998 was $12.0
million, compared to $8.1 million in 1997. These funds were
sufficient to meet increased working capital as well as capital
expenditures of approximately $5.8 million. The Company currently
anticipates that its capital expenditures for 1999 will be
approximately $6.4 million, which consists primarily of purchased
tooling and equipment required to support the Company's business.
The amount of these anticipated capital expenditures will
frequently change based on future changes in business plans and
conditions of the Company and changes in economic conditions.

In December 1997, the Company obtained a Senior Credit
Facility for $90 million from Fleet National Bank and other
lenders (the "Senior Credit Facility") to finance in part the
Wells acquisition. The Senior Credit Facility is secured by all
of the assets of the Company. In conjunction with the Senior
Credit Facility, PCD and Wells-CTI (formerly Wells Electronics,
Inc.) each entered into a stock pledge agreement with Fleet and
the other lenders pledging all or substantially all of the stock
of the subsidiaries of PCD and Wells-CTI. Each of PCD, Wells-CTI
<PAGE>
and certain of their subsidiaries also entered into a security
agreement and certain other collateral or conditional assignments
of assets with Fleet and other lenders. In August 1998, the
Company renegotiated the Senior Credit Facility. As a result, the
interest rate premium of 50 basis points charged on approximately
$40 million of the Senior Credit Facility was eliminated.
According to its terms, the re-negotiated Senior Credit Facility
will terminate on or before December 31, 2003. At December 31,
1998 and 1997, borrowings of $55.7 million and $83.0 million were
outstanding under the Senior Credit Facility at a weighted
average interest rate of 7.60% and 8.96%, respectively.

The agreement governing the Senior Credit Facility contains
numerous financial and operating covenants. Among these covenants
are restrictions that the Company (i) must maintain John L.
Dwight, Jr. as chief executive officer of the Company or obtain
the consent of the lenders under the Senior Credit Facility to
any replacement of Mr. Dwight; (ii) may not, without the prior
consent of such lender, acquire the assets of or ownership
interest in, or merge with other companies; and (iii) may not,
without the prior consent of such lenders, pay cash dividends.
The Senior Credit Facility also requires the Company to maintain
certain financial covenants, including minimum fixed charge
coverage ratio, as defined, minimum quick ratio, as defined;
maximum ratio of total senior debt to EBITDA, maximum ratio of
total indebtedness for borrowed money to EBITDA, minimum interest
coverage ratio, maximum capital expenditures, as defined, during
the terms of the Senior Credit Facility.

In December 1997, the Company entered into a Subordinated
Debenture and Warrant Purchase Agreement ("Purchase Agreement")
with Emerson Electric Co. ("Emerson"), the Company's largest
stockholder. Pursuant to the Purchase Agreement, the Company
issued to Emerson a Subordinated Debenture ("Debenture") with a
principal amount of $25 million at an annual rate of interest of
10% and a Common Stock Purchase Warrant (the "Emerson Warrant")
for the purchase of up to 525,000 shares of PCD Common Stock at a
purchase price of $1.00 per share. In April of 1998, the Company
paid the principal, interest and prepayment penalty of 3.25%, or
$812,500, in full, resulting in an extraordinary charge to income
of $888,000, net of taxes, in the second quarter of 1998.
Accordingly, 375,000 shares of the Emerson Warrant terminated by
the terms thereof, leaving the Emerson Warrant only exercisable
for 150,000 shares of PCD Common Stock. The Emerson Warrant
expires on December 31, 2000.

<PAGE>
The Company believes its existing working capital and
borrowing capacity, coupled with the funds generated from the
Company's operations, will be sufficient to fund its anticipated
working capital, capital expenditure and debt payment
requirements through 1999. Because the Company's capital
requirements cannot be predicted with certainty, there can be no
assurance that any additional financing will be available on
terms satisfactory to the Company or not disadvantageous to the
Company's stockholders.

INFLATION AND COSTS

The cost of the Company's products is influenced by the cost
of a wide variety of raw materials, including precious metals
such as gold used in plating, copper and brass used for contacts,
and plastic material used in molding connector components. In the
past, increases in the cost of raw materials, labor and services
have been offset by price increases, productivity improvements
and cost saving programs. There can be no assurance, however,
that the Company will be able to similarly offset such cost
increases in the future.

IMPACT OF YEAR 2000

The "Year 2000 Issue" is the result of computer programs that
were written using two digits rather than four to define the
applicable year. If the Company's computer programs with date-
sensitive functions are not Year 2000 compliant, they may
interpret a date using "00" in the year field as the Year 1900
rather than the Year 2000. This misinterpretation could result in
a system failure or miscalculations causing disruptions of
operations, including, among other things, an interruption of
design or manufacturing functions or an inability to process
transactions, send invoices or engage in similar normal business
activities until the problem is corrected.

The Company has identified its Year 2000 risk in three
categories: internal information technology ("IT") systems;
internal non-IT systems, including embedded technology such as
microcontrollers; and external noncompliance by customers and
suppliers.

INTERNAL IT SYSTEMS. The Company utilizes a significant number
of information technology systems across its entire organization,
including applications used in manufacturing, product
development, financial business systems and various
<PAGE>
administrative functions. During 1997 and 1998, the Company
reviewed the Year 2000 issue that encompassed operating and
administrative areas of the Company. The Company found that, with
the exception of the South Bend, Indiana location of Wells-CTI
("Wells-CTI South Bend"), its information technology systems will
be able to manage and manipulate all material data involving the
transition from the year 1999 to the year 2000 without functional
or data abnormality and without inaccurate results related to
such data. During the past year, Wells-CTI South Bend has
completed the modifications and testing of its information
technology systems, and the Company believes that the Wells-CTI
South Bend location is now Year 2000 compliant. The cost of the
modifications and testing at Wells-CTI South Bend was
approximately $90,000. The Company does not have a contingency
plan in place for Year 2000 failures of its internal IT systems.
If the Company has not achieved or does not timely achieve Year
2000 compliance for its major IT systems, the Year 2000 Issue
could have a material adverse effect on the financial condition,
results of operations and business of the Company.

Independent of the Year 2000 Issue and in order to improve
access to business information through common, integrated
computing systems across the Company, PCD began a worldwide
information technology systems replacement project with systems
that use programs from Oracle Corporation. The Company is in the
implementation phase for this system and is expected to be
complete by December 31, 1999.

INTERNAL NON-IT SYSTEMS, INCLUDING EMBEDDED TECHNOLOGY. The
Company is in the data-gathering phase with regard to non-IT
systems including embedded technology such as microcontrollers.
PCD is currently gathering data to assess the impact of the Year
2000 on its non-IT systems such as design, manufacturing, testing
and security, with Year 2000 compliance targeted for April 30,
1999. The Company does not at this time have sufficient data to
estimate the cost of achieving Year 2000 compliance for its non-
IT systems. The Company does not currently have a contingency
plan in place for Year 2000 failures of its internal non-IT
systems and embedded technology. If the Company is unable to
achieve Year 2000 compliance for its major non-IT systems, the
Year 2000 Issue could have a material adverse effect on the
financial condition, results of operations and business of the
Company.

EXTERNAL NONCOMPLIANCE BY CUSTOMERS AND SUPPLIERS. The Company
is in the process of identifying and contacting its material

<PAGE>
suppliers, service providers and contractors to determine the
extent of the Company's vulnerability to those third parties'
failure to remedy their own Year 2000 issues. PCD expects to
complete its assessment of that vulnerability by April 30, 1999.
To the extent that responses to Year 2000 readiness inquiries are
unsatisfactory, the Company intends to change suppliers, service
providers or contractors to those who have demonstrated Year 2000
readiness, but the Company cannot assure that it will be
successful in finding such alternative suppliers, service
providers and contractors. The Company does not currently have
any formal information concerning the Year 2000 compliance status
of its customers but has received indications that most of its
customers are working on Year 2000 compliance. If any of the
Company's significant customers and suppliers do not successfully
and timely achieve Year 2000 compliance, and the Company is
unable to replace them with new customers or alternative
suppliers, the Company's financial condition, results of
operations and business could be materially adversely affected.

The above discussion of the Company's efforts, and
management's expectations, relating to Year 2000 compliance
contains forward-looking statements within the meaning of the
Securities Exchange Act of 1934. See "Forward Looking
Information." The Company's ability to achieve Year 2000
compliance, the level of incremental costs associated with
compliance and the timing of compliance, could be adversely
impacted by, among other things, the availability and cost of
programming and testing resources, vendors' ability to modify
proprietary software, and unanticipated problems identified in
the ongoing compliance review.

ITEM 7A. MARKET RISK AND SECURITY ANALYSIS

INTEREST RATE RISK

PCD is exposed to fluctuations in interest rates in
connection with its variable rate term loan. In order to
minimize the effect of changes in interest rates on earnings, PCD
entered into an interest rate swap that fixed the interest rate
on a notional amount of its variable rate term loan. See
"Management's Discussion and Analysis of Operations - Liquidity
and Capital Resources." Under the swap agreement, PCD pays a
fixed rate of 5.72% on a notional amount of $35,000,000 and
receives LIBOR. The potential increase in the fair value of its
term loan when adjusting for the interest rate swap paying at a
fixed rate would result from a hypothetical 10% decrease in
interest rates was not material

<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of PCD Inc.

In our opinion, the accompanying consolidated balance sheets
and the related consolidated statements of operations, cash
flows and stockholders' equity present fairly, in all material
respects, the financial position of PCD Inc. and its subsidiaries
at December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are
the responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.

PricewaterhouseCoopers LLP

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
January 29, 199

<PAGE>
<TABLE>
<CAPTION>
PCD INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

December 31,
--------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 852 $ 3,990
Accounts receivable - trade (less allowance for
uncollectible accounts of $319 in 1998 and $205 in 1997) 5,851 6,804
Inventory................................................ 5,042 4,796
Prepaid expenses and other current assets................ 643 1,135
-------- --------
Total current assets 12,388 16,725
Equipment and improvements, net........................... 18,127 15,843
Deferred tax asset........................................ 14,192 15,335
Goodwill.................................................. 58,592 61,718
Intangible assets......................................... 12,456 13,539
Debt financing fees....................................... 1,531 1,800
Other assets.............................................. 1,818 1,632
-------- --------
Total assets.................................... $119,104 $126,592
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt.......................................... $ 9,700 $ 13,000
Current portion of long-term debt........................ 8,400 4,700
Accounts payable - trade................................. 3,146 4,213
Accrued liabilities...................................... 2,981 7,444
-------- --------
Total current liabilities....................... 24,227 29,357
Long-term debt, net of current portion.................... 37,600 65,300
Subordinated debenture - related party.................... - 22,903
Minority interest......................................... - 37
-------- --------
Total liabilities............................... 61,827 117,597
Commitments and contingencies (Notes 9, 10 and 12)........ - -
Stockholders' equity:
Preferred stock - $0.10 par value; 1,000,000 shares
authorized; no shares issued............................. - -
Common stock - $0.01 par value; 25,000,000 shares
authorized, 8,439,682 and 6,020,182 shares issued
and outstanding in 1998 and 1997, respectively.......... 84 60
Additional paid-in capital................................ 61,674 17,904
Accumulated deficit....................................... (4,627) (8,930)
Accumulated other comprehensive income -
cumulative translation adjustment........................ 146 -
Deferred compensation..................................... - (39)
-------- --------
Total stockholders' equity...................... 57,277 8,995
-------- --------
Total liabilities and stockholders' equity...... $119,104 $126,592
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements

<PAGE>
<TABLE>
<CAPTION>
PCD INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales....................................... $64,391 $ 29,796 $26,857
Cost of sales................................... 27,331 15,120 14,457
------- -------- -------
Gross profit.................................. 37,060 14,676 12,400
Operating expenses.............................. 15,172 5,816 5,445
Amortization.................................... 4,209 - -
Acquired in-process research and development.... - 44,438 -
------- -------- -------
Income (loss) from operations................. 17,679 (35,578) 6,955
Interest and other income....................... 421 1,167 734
Interest expense................................ (9,234) (227) (9)
------- -------- -------
Income (loss) before income taxes............. 8,866 (34,638) 7,680
Provision for (benefit) income taxes............ 3,675 (11,802) 2,895
------- -------- -------
Net income (loss) before extraordinary item..... 5,191 (22,836) 4,785
Extraordinary item, net of
income tax benefit of $567 (Note 4)........... (888) - -
------- -------- -------
Net income (loss)............................. 4,303 (22,836) 4,785
======= ======== =======

Basic earnings (loss) per share:
Income (loss) before extraordinary item....... $ 0.69 $ (3.83) $ 0.87
Extraordinary item............................ (0.12) - -
------- -------- -------
Net income (loss).......................... $ 0.57 $ (3.83) $ 0.87
======= ======== =======

Diluted earnings (loss) per share:
Income (loss) before extraordinary item....... $ 0.64 $ (3.83) $ 0.76
Extraordinary item......................... (0.11) - -
------- -------- -------
Net income (loss).......................... $ 0.53 $ (3.83) $ 0.76
======= ======== =======

Weighted average number of common and common
equivalent shares outstanding:
Basic...................................... 7,487 5,955 5,478
======= ======== =======
Diluted 8,168 5,955 6,292
======= ======== =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.

<PAGE>

PCD INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Retained Other Treasury Stock Total
---------------- Paid-in Earnings Comprehensive Deferred -------------- Stockholders'
Shares Par Value Capital (Deficit) Income Compensation Shares Amount Equity
------ --------- ---------- --------- ------------- ------------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 4,987,032 $ 50 $ 4,124 $ 9,121 - $ (155) 390,000 $ (328) $12,812
Public stock offering, net 1,100,000 11 10,490 10,501
Exercise of stock options 157,701 2 192 194
Retired treasury shares (390,000) (4) (324) (390,000) 328
Tax benefit from stock
options exercised 356 356
Amortization of deferred
compensation 58 58
Net income 4,785 4,785
--------- ----- ------- -------- ----- -------- -------- ------ -------
Balance, December 31, 1996 5,854,733 59 14,838 13,906 - (97) 28,706
Exercise of stock options 165,449 1 262 263
Tax benefit from stock
options exercised 673 673
Amortization of deferred
compensation 58 58
Issuance of stock warrant 2,131 2,131
Net (loss) (22,836) (22,836)
--------- ----- ------- -------- ----- -------- -------- ------ -------
Balance, December 31, 1997 6,020,182 60 17,904 (8,930) - (39) 8,995
Public stock offering, net 2,300,000 23 42,439 42,462
Exercise of stock options 119,500 1 149 150
Other comprehensive income $ 146 146
Tax benefit from stock
options exercised 357 357
Valuation of stock warrant 820 820
Purchase of stock warrant 5 5
Amortization of deferred
compensation 39 39
Net income 4,303 4,303
--------- ----- ------- -------- ----- -------- -------- ------ -------
Balance, December 31, 1998 8,439,682 $ 84 $61,674 $ (4,627) $ 146 $57,277
========= ===== ======= ======== ===== =======

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

<PAGE>
PCD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $ 4,303 $(22,836) $4,785
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Acquired in-process research and development.. - 44,438 -
Depreciation.................................. 3,472 1,530 1,389
Amortization of warrant....................... 2,917 34 -
Amortization of goodwill and intangible assets 4,209 - -
Loss (gain) on disposal of equipment and
improvements................................. 9 (4) 107
Allowance for uncollectible accounts.......... - - 40
Amortization of deferred compensation......... 39 58 58
Tax benefit from stock options exercised...... 357 673 356
Provision for deferred taxes.................. 1,143 (15,253) (80)
Changes in operating assets and liabilities,
net of acquisition of Wells Electronics, Inc.:
Accounts receivable 1,262 888 (54)
Inventory................................... (93) (539) 259
Prepaid expenses and other current assets... 949 (68) 310
Other assets................................ (100) (1,830) (25)
Accounts payable............................ (1,448) 479 (59)
Accrued liabilities......................... (4,972) 516 692
------- -------- -------
Total adjustments.......................... 7,744 30,922 2,993
------- -------- -------
Net cash provided by operating activities.. 12,047 8,086 7,778
Cash flows from investing activities:
Equipment and improvements expenditures (5,827) (2,531) (1,902)
Acquisition of Wells Electronics, Inc.,
net of cash acquired of $827................... - (130,357) -
------- -------- -------
Net cash used in investing activities (5,827) (132,888) (1,902)
Cash flows from financing activities:
Proceeds from issuance of short-term debt - 13,000 -
Payments for short-term debt.................... (3,300) - -
Proceeds from issuance of long-term debt........ - 70,000 -
Payments for long-term debt..................... (24,000) - -
Proceeds from issuance of subordinated debenture
and Warrant.................................... - 25,000 -
Payments for subordinated debenture (25,000) - -
Amortization of debt financing fees............. 269 - -
Proceeds from exercise of common stock options.. 150 263 194
Proceeds from issuance of warrant............... 5 - -
Proceeds from issuance of common stock, net..... 42,462 - 10,501
------- -------- -------
Net cash (used in)
provided by financing activities.......... (9,414) 108,263 10,695
------- -------- -------
Net (decrease) increase in cash (3,194) (16,539) 16,571
Effect of exchange rate on cash.................. 56 - -
Cash and cash equivalents at beginning of year... 3,990 20,529 3,958
------- -------- -------
Cash and cash equivalents at end of year......... $ 852 $ 3,990 $20,529
======= ======== =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest....................................... $ 7,580 $ 20 $ 9
======= ======== =======
Income taxes................................... $ 4,793 $ 3,049 $ 2,452
======= ======== =======

The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE

<PAGE>
PCD INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS:

PCD Inc. ("the Company") is engaged principally in designing,
manufacturing and marketing electronic connectors for use in
integrated circuit ("IC") package interconnect applications,
industrial equipment and avionics. Electronic connectors are used
in virtually all electronic systems, including data
communications, telecommunications, computers and computer
peripherals, industrial controls, automotive, avionics and test
and measurement instrumentation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated.

REVENUE RECOGNITION

Revenue is recognized upon shipment to customers. The Company
grants to certain of its distributors limited return and stock
rotation rights. Historically, the Company's return rate has been
insignificant.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or fewer to
be cash equivalents. The Company invests excess cash in a money
market fund and indirect obligations of the United States
government. The Company had all its cash in interest bearing
accounts at December 31, 1998 and December 31, 1997.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash
investments and trade receivables. The Company invests primarily
in high quality securities with short lives. Accordingly, these
<PAGE>
investments are subject to minimal credit and market risk.
Collateral is not required for trade receivables, but ongoing
credit evaluations of customer's financial condition are
performed. A greater portion of the Company's accounts
receivables are concentrated in the IC package interconnect and
semiconductor industries. The Company has not experienced
significant losses related to receivables from individual
customers or groups of customers in the IC package interconnect
and semiconductor industries or by geographic region.
Additionally, the Company maintains reserves for potential credit
losses. Due to these factors, no additional credit risk beyond
amounts provided for collection losses is believed by management
to be inherent in the Company's accounts receivables.

MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The
most significant estimates included in these financial statements
are allowances for uncollectible accounts, allowances for
inventory valuation, goodwill, intangible assets and deferred
taxes.

INTEREST RATE SWAP

The Company uses derivative financial instruments for purposes
other than trading and does so to reduce its exposure to
fluctuations in interest rates. Gains and losses on hedges of
existing assets and liabilities are included in the carrying
amounts of those assets or liabilities and are ultimately
recognized in income. The amounts receivable and payable are
recorded as a current liability with realized gains or losses
recognized as adjustments to interest expense.

Under the interest rate swap contract, the Company agrees to
pay an amount equal to a specified floating rate of interest
times a notional principal amount, and to receive in return an
amount equal to a specified fixed rate of interest times the same
notional principal amount. The notional amounts of the contract
are not exchanged. No other cash payments are made unless the
contract is terminated prior to maturity, in which case the
amount paid or received in settlement is established by agreement
at the time of termination, and usually represents the net
present value, at current rates of interest, of the remaining
obligations to exchange payments under the terms of the contract.
The interest rate swap contract is entered into with a major
financial institution in order to minimize credit risk. This
contract has a term from February 1998 through March 2001. At
December 31, 1998, the Company was a variable rate payer of
5.04797% and received a fixed rate of 5.72% on notional amount of
$35,000,000. The fair value at December 31, 1998, was an
unfavorable $523,000.

INVENTORY

Inventories are stated at the lower of cost, determined on a
first-in, first-out method, or market.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to expense as
incurred.

NET INCOME PER COMMON SHARE

In accordance with FAS 128, the following table reconciles
net income and weighted average shares outstanding to the amounts
used to calculate basic and diluted earnings (loss) per share for
each of the years ended December 31, 1998, 1997 and 1996.

</TABLE>
<TABLE>
<CAPTION>
Net Income Per Share
(Loss) Shares Amount
----------- -------- ----------
<S> <C> <C> <C>
For the year ended December 31, 1996
Basic earnings.............................. $ 4,785,000 5,478,330 $ 0.87
Assumed exercise of options (treasury method) - 813,523 -
------------ --------- -------
Diluted earnings............................ $ 4,785,000 6,291,853 $ 0.76
============ ========= =======
For the year ended December 31, 1997
Basic and diluted loss...................... $(22,836,000) 5,954,657 $ (3.83)
============ ========= =======
For the year ended December 31, 1998
Basic earnings before extraordinary item.... $ 5,191,000 7,486,915 $ 0.69
Assumed exercise of options (treasury method) - 680,610 -
------------ --------- -------
Diluted earnings before extraordinary item.. $ 5,191,000 8,167,525 $ 0.64
============ ========= =======
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Net Income Per Share
(Loss) Shares Amount
----------- -------- ---------
<S> <C> <C> <C>
Extraordinary item $ (888,000) 7,486,915 $ (0.12)
Assumed exercise of options (treasury method) - 680,610 -
------------ --------- -------
Diluted extraordinary item.................. $ (888,000) 8,167,525 $ (0.11)
============ ========= =======

Basic earnings.............................. $ 4,303,000 7,486,915 $ 0.57
Assumed exercise of options (treasury method) - 680,610 -
------------ --------- -------
Diluted earnings $ 4,303,000 8,167,525 $ 0.53
============ ========= =======
</TABLE>

In 1998 and 1997, anti-dilutive Common Stock equivalents of
79,366 and 679,468 shares, respectively were not included in the
calculation of diluted EPS.

EQUIPMENT AND IMPROVEMENTS

Equipment and improvements are recorded at cost. Maintenance
and repairs which neither materially add to the value of the
property nor appreciably prolong its life are charged to expense
as incurred. Upon retirement or other disposition, the cost and
related accumulated depreciation are eliminated from the accounts
and the resulting gain or loss is included in the results of
operations.

INCOME TAXES

The Company utilizes the asset and liability approach of
accounting for income taxes. Under the asset and liability
approach, deferred taxes are determined based on the difference
between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. Deferred tax
expense (benefit) represents the change in the deferred tax asset
or deferred tax liability balance. Tax credits are treated as
reductions of income taxes in the year in which the credits
become available for tax purposes.

<PAGE>
GOODWILL

Goodwill is accounted for in accordance with Accounting
Principles Board ("APB") No. 17, Intangible Assets. Goodwill
represents costs in excess of net assets of the business acquired
and is amortized on a straight-line basis over the expected
periods to be benefited, which is currently 20 years. The
Company's policy is to assess the goodwill based on an evaluation
of such factors as the occurrence of a significant adverse event
or change in the environment in which the business operates. An
impairment loss would be recorded in the period such
determination is made based on the undiscounted cash flows of the
related businesses. No impairment losses have been recognized in
any of the periods presented.

INTANGIBLE ASSETS

Intangible assets are accounted for in accordance with SFAS
121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. Intangible assets are stated
at cost and are amortized using the straight-line method. Loan
acquisition fees are amortized over the life of the applicable
indebtedness. Trademarks and trade names are amortized over
their estimated remaining economic lives of 20 years, consistent
with industry norms. Patented technologies are amortized over
their estimated remaining economic lives of 6 years.

FOREIGN CURRENCY TRANSLATION ADJUSTMENT

The functional currency of the Company's foreign operation is
the foreign subsidiary's local currency. Assets and liabilities
of the foreign subsidiary are translated using the current
exchange rate in effect at the balance sheet date. Revenue and
expense items are translated at average exchange rates for the
period. The resulting translation adjustments are recorded as a
component of stockholders' equity. Gains or losses resulting
from foreign currency transactions are included in other income.

REPORTABLE BUSINESS SEGMENTS

Effective for the year ended December 31, 1998, the Company
adopted SFAS 131, which requires a new basis of determining
reportable business segments, i.e. the management approach. This
approach (as contrasted with the prior requirement which utilized
a specified classification system for determining segments)
designates the Company's internal organization as used by
management for making operating decisions and assessing
<PAGE>
performance as the source for business segments. On this basis,
the Company has two principal businesses and, therefore, two
reportable segments: IC Package interconnect segment and the
industrial equipment and avionics segment. Segment results, as
well as selected geographic data, are presented on this new
basis, as well as retroactively.

NEW ACCOUNTING STANDARDS

In 1998, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities ("FAS 133"),
which becomes effective for all fiscal quarters beginning after
June 15, 1999. FAS 133 standardizes the accounting for
derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement
of financial position and measure them at fair value. The
Company is currently evaluating the impact that FAS 133 will have
on its future reporting requirements.

3. ACQUISITION OF WELLS ELECTRONICS, INC.:

On December 26, 1997, the Company acquired all of the
outstanding stock of Wells Electronics, Inc. Wells is a
manufacturer of IC Package interconnect products. The
acquisition was financed by a combination of a new bank credit
facility of $90 million of which the Company borrowed
approximately $83 million upon consummation of the acquisition
and a $25 million subordinated debenture. The acquisition is
being accounted for as a purchase in accordance with APB Opinion
No. 16.

The Company allocated the purchase price of the acquisition
based on the fair value of the assets acquired and liabilities
assumed. Acquired intangible assets consist of patented
technology and trade names and trademarks valued at approximately
$3.2 million and $10.4 million, respectively. A portion of the
purchase price was allocated to these intangible assets. These
intangible assets are being amortized over their estimated useful
lives of 6 and 20 years, respectively. Additionally
approximately $44.4 million of the purchase price was allocated
to purchased research and development projects that were
identified as having no alternative future value and had not yet

<PAGE>
reached technological feasibility. This amount was charged to
operations at the acquisition date.

The final purchase price of approximately $130,907,000, which
was subject to adjustment by the amount by which the net worth,
with certain adjustments, of Wells as of the closing date, as
agreed to by the Company and the seller, is less than or more
than the corresponding net worth as of September 30, 1997, was
determined during 1998. The aggregate purchase price of
$130,907,000 included acquisition costs. Acquisition costs
consist of approximately $500,000 of financial advisory fees and
$936,730 of professional fees. The aggregate purchase price was
allocated as follows:

Current assets............................ $ 7,445
Equipment and improvements................ 9,501
Acquired intangibles...................... 13,539
Acquired in-process research & development 44,438
Goodwill.................................. 61,718
Other assets.............................. 1,624
Liabilities assumed....................... (7,358)
--------
$130,907
========

4. EXTRAORDINARY ITEM:

In the second quarter of 1998, the Subordinated Debenture
issued to Emerson Electric was paid in full. The Company
incurred additional interest expense of $642,500, which
represents the amortized portion of the Emerson Warrant
applicable to the second quarter of 1998, and prepayment
penalties of $812,500, which represents the prepayment penalty
associated with the Subordinated Debenture.

5. INVENTORY:

Inventory consisted of the following at December 31:

1998 1997
(In thousands)
Raw materials and finished subassemblies.. $3,536 $3,387
Work in process........................... 492 532
Finished goods............................ 1,014 877
------ ------
Total..................................... $5,042 $4,796
====== ======
<PAGE>
6. EQUIPMENT AND IMPROVEMENTS:

Equipment and improvements consisted of the following at
December 31:

<TABLE>
<CAPTION>
Estimated Useful 1998 1997
Life in Years (In thousands)
<S> <C> <C>
Tools, dies and molds............ 5 $13,497 $11,244
Machinery and equipment.......... 10 5,732 5,546
Office furniture and fixtures.... 5 1,968 1,978
Computer software................ 3 383 99
Transportation equipment......... 4 237 205
Leasehold improvements........... Shorter of lease term 713 718
or useful live ------- -------
22,530 19,790
Less accumulated depreciation.... 7,442 4,852
------- -------
15,088 14,938
Capital expenditures in progress. 3,039 905
------- -------
Equipment and improvements, net.. $18,127 $15,843
======= =======
</TABLE>

7. INTANGIBLE ASSETS AND GOODWILL:

Intangible assets and goodwill consisted of the following at
December 31:

1998 1997
(In thousands)
----------------
Patented technology...................... $ 3,155 $ 3,155
Trade names/trademarks................... 10,384 10,384
------- -------
Subtotal............................... 13,539 13,539
Less accumulated amortization.......... 1,083 -
------- -------
Net intangibles...................... $12,456 $13,539
======= =======
Goodwill................................. $61,718 $61,718
Less accumulated amortization.......... 3,126 -
------- -------
Net goodwill......................... $58,592 $61,718
======= =======

<PAGE>
8. ACCRUED LIABILITIES:

Accrued liabilities consisted of the following at December 31:

1998 1997
(In thousands)
----------------
Compensation and benefits.............. $1,420 $2,210
Professional fees...................... 414 846
Income taxes payable................... - 2,604
Other.................................. 1,147 1,784
------ ------
Total.................................. $2,981 $7,444
====== ======

9. LINE OF CREDIT AND LONG-TERM DEBT:

On December 26, 1997, the Company entered into a secured
$20,000,000 Revolving Credit Agreement ("Revolver"), $30,000,000
Secured Term Loan Agreement A and $40,000,000 Secured Term Loan
Agreement B (collectively referred to as the "Senior Credit
Facility") with several banks. The Senior Credit Facility is
collateralized by all of the assets of PCD and its subsidiaries.
In conjunction with the Senior Credit Facility, PCD and Wells-CTI
(formerly Wells Electronics, Inc.) each entered into a stock
pledge agreement pledging all or substantially all of the stock
of the subsidiaries of PCD and Wells-CTI. Each of PCD, Wells-CTI
and certain of their subsidiaries also entered into a security
agreement and certain other collateral or conditional assignments
of assets.

In August 1998, the Company renegotiated the Senior Credit
Facility. As a result, Term Loan A and Term Loan B were combined
into a single term loan. Accordingly, the interest rate premium
of 50 basis points charged on Term Loan B was eliminated.
According to its terms, the re-negotiated Senior Credit Facility
will terminate on or before December 31, 2003. At December 31,
1998 and 1997, borrowings of $55,700,000 and $83,000,000 were
outstanding under the Senior Credit Facility at a weighted
average interest rate of 7.60% and 8.96%, respectively. The
unused portion of the Revolver at December 31, 1998 and 1997 was
$10,300,000 and $7,000,000, respectively.

<PAGE>
The agreement governing the Senior Credit Facility contains
numerous financial and operating covenants. Among these
covenants are restrictions that the Company (i) must maintain
John L. Dwight, Jr. as chief executive officer of the Company or
obtain the consent of the lenders under the Senior Credit
Facility to any replacement of Mr. Dwight; (ii) may not, without
the prior consent of such lender, acquire the assets of or
ownership interest in, or merge with, other companies; and (iii)
may not, without the prior consent of such lenders, pay cash
dividends. The Senior Credit Facility also requires that the
Company to maintain certain financial covenants, including
minimum fixed charge coverage ratio, as defined; minimum quick
ratio, as defined; maximum ratio of total senior debt to EBITDA,
maximum ratio of total indebtedness for borrowed money to EBITDA,
minimum interest coverage ratio, maximum capital expenditures, as
defined, during the terms of the Senior Credit Facility.

Long-term debt consists of the following:

1998 1997
(In thousands)

Total long-term debt.......... $46,000 $70,000
Less - current portion........ 8,400 4,700
------- -------
$37,600 $65,300
======= =======

Maturities of long-term debt are as follows:

Year Ended December 31,
- -----------------------
Amount
(In thousands)
--------------
1999..................................... $ 8,400
2000..................................... 8,800
2001..................................... 9,200
2002..................................... 9,600
2003..................................... 10,000
-------
$46,000
=======

<PAGE>
10. SUBORDINATED DEBENTURE:

On December 26, 1997, the Company entered into a Subordinated
Debenture and Warrant Purchase Agreement ("Purchase Agreement")
with Emerson Electric Co. ("Emerson"), the Company's largest
stockholder. Pursuant to the Purchase Agreement, the Company
issued to Emerson a Subordinated Debenture ("Debenture") with a
principal amount of $25 million at an annual rate of interest of
10% and a Common Stock Purchase Warrant (the "Emerson Warrant")
for the purchase of up to 525,000 shares of PCD Common Stock at a
purchase price of $1.00 per share. In April 1998, the Company
paid the principal, interest and prepayment penalty of 3.25%, or
$812,500, in full. Accordingly, 375,000 shares of the Emerson
Warrant terminated by the terms thereof, leaving the Emerson
Warrant only exercisable for 150,000 shares of PCD Common Stock.
The Emerson Warrant expires on December 31, 2000.

11. INCOME TAXES:

The provision (benefit) for income taxes for the years ended
December 31, 1998, 1997 and 1996 was as follows:

1998 1997 1996
(In thousands)
-------------------------
Current
Federal $ (220) $ 2,937 $2,504
State............................ 625 514 471
Foreign.......................... 1,560 - -
------- -------- ------
Total current................. $ 1,965 $ 3,451 $2,975
------- -------- ------
Deferred
Federal.......................... $ 1,345 $(12,107) $ (62)
State............................ (32) (3,146) (18)
Foreign.......................... (170) - -
------- -------- ------
Total deferred................ 1,143 (15,253) (80)
------- -------- ------
$ 3,108 $(11,802) $2,895
======= ======== ======

The components of the net deferred tax asset consisted of the
following at December 31, 1998 and 1997:

<PAGE>
1998 1997
(In thousands)
-------------------
Deferred tax assets (liabilities):
Difference in accounting for inventory $ 154 $ 148
Accounts receivable allowances........ 87 81
Vacation and other accruals........... 373 351
Net operating loss carryforwards...... 429 -
Foreign Tax Credit carryforward....... 156 -
Amortization.......................... (565) -
In-process research and development... 14,336 15,362
Difference in depreciation methods (778) (607)
------- -------
Net deferred tax asset............ $14,192 $15,335
======= =======

The deferred tax consequences of temporary differences in
reporting items for financial statement and income tax purposes
are recognized, if appropriate. Realization of the future tax
benefits related to the deferred tax assets is dependent on many
factors, including the Company's ability to generate taxable
income. Future tax benefits are recognized to the extent that
realization of such benefits is more likely than not.

At December 31, 1998, for state tax purposes, the Company has
a net operating loss of approximately $5,945,000 which expires
after 2001. In addition, the Company has a foreign tax credit
carryforward of approximately $156,000 which expires after 2003.
The Company does not provide for U.S. deferred income taxes on
the undistributed earnings of its foreign subsidiaries as the
earnings are considered to be permanently reinvested.

The analysis of the variance of income taxes as reported from
income taxes compiled at the U.S. statutory federal income tax
rate for continuing operations is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Income taxes at U.S. statutory rate of 34% $2,520 $(11,777) $2,611
State income taxes........................ 391 (1,737) 300
Benefit of foreign sales corporation...... (127) 88 -
Benefit of foreign tax credits............ (156) - -
Foreign tax rate differential............. 501 - -
Non-deductible expenditures............... - 1,624 -
Other, net................................ (21) - (16)
------ -------- ------
$3,108 $(11,802) $2,895
====== ======== ======
</TABLE>
<PAGE>
12. COMMITMENTS AND CONTINGENCIES:

LITIGATION:

On August 21, 1995, a predecessor ("CTi") of the Company's
wholly-owned subsidiary, Wells-CTI, Inc. ("Wells-CTI"), filed an
action in the United States District Court for the District of
Arizona against Wayne K. Pfaff, an individual residing in Texas
("Pfaff") alleging and seeking a declaratory judgment that two
United States patents issued to Pfaff and relating to certain
burn-in sockets for "leadless" IC packages (the "Pfaff Leadless
Patent") and ball grid array ("BGA") IC packages (the "Pfaff BGA
Patent") are invalid and are not infringed by CTi, the products
of which include burn-in sockets for certain "leaded" packages
(including Quad Flat Paks) and BGA packages.

The Company believes, based on the advice of counsel, that CTi
has meritorious positions of non infringement and invalidity with
respect to the Pfaff BGA Patent issues raised in the District of
Arizona litigation and, as necessary, will vigorously litigate
its position. There can be no assurance, however, that the
Company, CTi or Wells-CTI will prevail in any pending or future
litigation, and a final court determination that CTi or Wells-CTI
has infringed the Pfaff BGA Patent could have a material adverse
effect on the Company. Such adverse effect could include,
without limitation, the requirement that CTi or Wells-CTI pay
substantial damages for past infringement and an injunction
against the manufacture or sale in the United States of such
products as are found to be infringing.

<PAGE>
LEASES:

The Company leases office and production facilities in
Peabody, Massachusetts, South Bend, Indiana, Yokohama, Japan,
Swatara, Pennsylvania and Phoenix, Arizona and leases
distribution and a technical sales support facility in
Northhampton, England. These rentals are subject to escalation in
real estate taxes and operating expenses. Rental expense for the
years ended December 31, 1998, 1997 and 1996 was $1,270,000,
$480,000, and $498,000 respectively.

Minimum future rental commitments under leases with remaining
terms in excess of one year are approximately as follows:

Year Ended December 31, Amount
- ----------------------- (In thousands)
--------------
1999...................................... $1,137
2000...................................... 1,005
2001...................................... 962
2002...................................... 909
2003...................................... 697
2004 and thereafter....................... 1,274

13. STOCKHOLDERS EQUITY:

COMMON STOCK

In February 1996, the stockholders approved an increase in the
authorized common stock of the Company to 25,000,000 shares,
$0.01 par value per share, and the stockholders approved a
twelve-for-one stock split effected in the form of a stock
dividend. All references to the number of shares and per share
amounts have been restated to reflect the split.

TREASURY STOCK

On January 30, 1996, the Board of Directors approved a
resolution to restore any and all Common Stock of the Company
which had been repurchased by the Company to the status of
authorized but unissued shares.

<PAGE>
STOCK OPTIONS:

DIRECTORS STOCK PLAN

The Company's 1996 Eligible Directors Stock Plan (the
"Directors Stock Plan") was approved by the Board of Directors on
January 30, 1996 and thereafter by the Company's stockholders.
Under the Directors Stock Plan, commencing with the 1997 annual
meeting of stockholders, each director who is not an officer or
employee of the Company or any subsidiary of the Company (an
"outside director") who has not previously been granted an option
to purchase shares of Common Stock will be granted, on the
thirtieth day after such meeting, an option to purchase 3,000
shares of Common Stock at an exercise price equal to the fair
market value on the date of grant. In addition, on the thirtieth
day after such meeting, each outside director will be granted an
option at each annual meeting of stockholders to purchase 1,500
shares of Common Stock at an exercise price equal to the fair
market value on the date of grant. A total of 36,000 shares of
Common Stock are available for awards under the Directors Stock
Plan. Each option shall vest 6 months after, and expire 10 years
from, the date of grant of such option. As of December 31, 1998,
22,500 shares of the Company's common stock were available for
future grants and 6,000 of the 13,500 options which are
outstanding under the 1996 Directors Stock Plan were exercisable.
No options may be granted under the Directors Stock Plan after
January 29, 2006.

1996 STOCK PLAN

The Company's 1996 Stock Plan was approved by the Board of
Directors on January 30, 1996, and thereafter by the Company's
stockholders. The 1996 Stock Plan provides for the grant or award
of stock options, restricted stock and other performance awards
which may or may not be denominated in shares of Common Stock or
other securities (collectively, the "Awards"). Stock options
granted under the 1996 Stock Plan may be either incentive stock
options or non-qualified options. The 1996 Stock Plan is
administered by the Compensation Committee. Subject to the
provisions of the 1996 Stock Plan, the Committee has the
authority to designate participants, determine the types of
Awards to be granted, the number of shares to be covered by each
Award, the time at which each Award is exercisable or may be
settled, the method of payment and any other terms and conditions
of the Awards. While the Committee determines the prices at which
options and other Awards may be exercised under the 1996 Stock
<PAGE>
Plan, the exercise price of an option shall be at least 100% of
the fair market value (as determined under the terms of the 1996
Stock Plan) of a share of Common Stock on the date of grant. The
aggregate number of shares of Common Stock available for awards
under the Plan is 324,000. No option shall be exercisable with
respect to any shares later than 10 years after the date of grant
of such options or 5 years in the case of incentive options
granted to the owner of stock possessing more than 10% of the
value of all classes of stock of the Company. Vesting is
determined in the sole discretion of the Compensation Committee
of the Board of Directors and the typical vesting plan is in four
approximately equal annual installments, the first of which vests
on the date of grant. As of December 31, 1998, 214,000 shares of
the Company's common stock were available for future grants and
36,918 of the 103,500 options which are outstanding under the
1996 Stock Plan were exercisable. No awards may be made under
the 1996 Stock Plan after January 29, 2006.

1992 STOCK OPTION PLAN

The Company's 1992 Stock Option Plan as amended on January 30,
1996 provided for the grant or award of stock options, which may
be either incentive stock options or non-qualified stock options
to key employees and directors. The Compensation Committee
administers the 1992 Stock Option Plan. No option shall be
exercisable with respect to any shares later than 10 years after
the date of grant of such options or 5 years in the case of
incentive options granted to the owner of stock possessing more
than 10% of the value of all classes of stock of the Company.
Vesting is determined in the sole discretion of the Compensation
Committee of the Board of Directors and the typical vesting plan
is in four approximately equal annual installments, the first of
which vests on the date of grant. As of December 31, 1998, no
shares of the Company's common stock were available for future
grants and all 517,850 options outstanding are exercisable.

The following table summarizes the transactions from these plans:

<PAGE>
Weighted
average
Options exercise price
------- --------------
Options outstanding at December 31, 1995 954,000 $ 1.23
Options exercised..................... (157,701) 1.22
Options granted....................... 15,000 12.00
-------
Options outstanding at December 31, 1996 811,299 1.43
Options exercised (165,449) 1.59
Options canceled...................... (4,000) 12.00
Options granted 78,000 21.08
-------
Options outstanding at December 31, 1997 719,850 3.46
Options exercised..................... (119,500) 1.26
Options canceled...................... (2,000) 21.50
Options granted....................... 36,500 19.45
-------
Options outstanding at December 31, 1998 634,850 4.74
=======

Summarized information about stock options outstanding at
December 31, 1998 is as follows:

<TABLE>
<CAPTION>
Exercisable
Weighted ------------------
Average Weighted Weighted
Number of Remaining Average Average
Range of options Contractual Exercise Number of exercise
Exercise prices outstanding Life Price options price
- --------------- ----------- ----------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
$1.15................ 408,350 3.80 $ 1.15 408,350 $ 1.15
1.54-2.08........... 109,500 6.38 1.66 109,500 1.66
12.00............... 5,750 7.50 12.00 3,750 12.00
16.125-18.50........ 45,250 8.87 17.26 18,500 17.11
21.50............... 16,000 9.08 21.50 4,000 21.50
23.25............... 50,000 9.00 23.25 16,668 23.25
</TABLE>

For the years ended December 31, 1998, 1997 and 1996, options
to purchase 560,768 shares, 630,685 shares and 740,049 shares,
respectively, of Common Stock were exercisable with the remaining
options becoming exercisable at various dates through
December 26, 2002. The Company has recorded deferred compensation
of $239,000 for the difference between fair value and exercise
price for options granted in 1995 and such deferred compensation
is being amortized over the option vesting period.

<PAGE>
Generally, when shares acquired pursuant to the exercise of
incentive stock options are sold within one year of exercise or
within two years from the date of grant, the Company derives a
tax deduction measured by the amount that the fair market value
exceeds the option price at the date the options are exercised.
When nonqualified stock options are exercised, the Company
derives a tax deduction measured by the amount that the fair
market value exceeds the option price at the date the options are
exercised.

SUPPLEMENTAL DISCLOSURE FOR STOCK BASED COMPENSATION:

The Company has three stock-based compensation plans, which
are described above. In October 1995, the FASB issued SFAS 123,
Accounting for Stock-Based Compensation. SFAS 123 is effective
for periods beginning after December 15, 1995. SFAS 123 requires
that companies either recognize compensation expense for grants
of stock, stock options, and other equity instruments based on
fair value, or provide pro forma disclosure of net income and
earnings per share in the notes to the financial statements. The
Company adopted the disclosure provisions of SFAS 123 in 1996 and
has applied APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has
been recognized for its stock option plans. Had compensation cost
for the Company's stock-based compensation plans been determined
based on the fair value at the grant dates as calculated in
accordance with SFAS 123, the Company's net income (loss) and
earnings (loss) per share for the years ended December 31, 1998,
1997 and 1996 would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
1998 1997 1996
------------------------ --------------------------- ------------------------
Net income Net income Net income Net income
Net income per share (loss) (loss) per share Net income per share
---------- ------------- ---------- ---------------- ---------- -------------
Basic Diluted Basic Diluted Basic Diluted
----- ------- ------ ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As reported... $ 4,303 $0.57 $0.53 $(22,836) $(3.83) $(3.83) $4,785 $0.87 $0.76
Pro forma..... $ 3,898 $0.52 $0.48 $(23,119) $(3.88) $(3.88) $4,665 $0.85 $0.74
</TABLE>

The fair value of each stock option is estimated on the date
of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions:
<PAGE>
1998 1997 1996
----- ------ -----
Dividend yield............... None None None
Expected volatility.......... 61.7% 48.79% 45.0%
Risk free interest rate...... 5.40% 7.27% 7.27%
Expected life (years)........ 5.0 5.0 5.0

Weighted average fair value of options granted at fair value
at date of grant:

1996.......... $ 7.83
======
1997.......... $12.73
======
1998.......... $12.57
======

The effect of applying SFAS 123 in this pro forma disclosure
is not indicative of future amounts. Additional awards in future
years are anticipated.

14. PROFIT SHARING PLAN:

The Company has Employee Savings and Profit Sharing Plans (the
"Plans") under section 401(k) of the Internal Revenue Code of
1986, as amended. All employees of the Company, after reaching
the applicable service level, are eligible to participate in the
Plans. A participating employee may elect to defer on a pre-tax
basis up to 15% of his or her salary. This amount, plus a
matching amount provided by the Company, is contributed to the
Plan. Company contributions to the Plans for the years ended
December 31, 1998, 1997 and 1996 amounted to $190,000, $93,000
and $80,000, respectively.

15. EMPLOYEE STOCK PURCHASE PLAN:

During 1998, the stockholders of the Company approved the 1998
Employee Stock Purchase Plan (the "1998 Employee Stock Purchase
Plan") covering 80,000 shares of the Company's Common Stock. All
employees who had completed twelve months of employment, except
for those employees who possessed at least 5% of the voting power
of the Company's Common Stock were entitled, through payroll
deductions of amounts up to 10% of his or her salary, to purchase

<PAGE>
shares of the Company's Common Stock at the lessor of 85% of the
market price at the offering date or the offering termination
date. No shares were issued in 1998.

16. SIGNIFICANT CUSTOMERS AND EXPORT SALES:

One customer accounted for approximately 15.8% of the
Company's net sales in 1998, a second customer accounted for
approximately 12.7% of the Company's net sales in 1998 and a
third customer counted for approximately 14.5% and 17.4% of net
sales of the Company in 1997 and 1996, respectively. A fourth
customer accounted for 12.7% of the net sales of the Company in
1997. The Company had export sales of approximately $13,705,000,
$3,876,000 and $2,975,000 in 1998, 1997 and 1996, respectively.
All export sales are in U.S. dollars. No one country or region
(other than the United States) accounted for greater than 10% of
net sales.

17. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED):

<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------------------
Mar 28, Jul 4, Oct 3, Dec 31,
-------- ------- ------- --------
<S> <C> <C> <C> <C>
1998
Net sales.................. $16,726 $18,553 $15,786 $13,326
Gross profit............... 9,485 10,847 9,161 7,567
Net income (loss) before
extraordinary item........ (27) 2,317 1,753 1,148
Extraordinary item,
net of taxes.............. - (888) - -
Net income (loss).......... (27) 1,429 1,753 1,148
Basic earnings (loss) per share:
Income (loss) before
extraordinary item...... $ - $ 0.29 $ 0.21 $ 0.14
Extraordinary item....... $ - $(0.11) $ - $ -
Net income (loss)........ $ - $ 0.18 $ 0.21 $ 0.14
Diluted earnings (loss) per share:
Income (loss) before
extraordinary item..... $ - $ 0.27 $ 0.19 $ 0.13
Extraordinary item...... $ - $(0.10) $ - $ -
Net income (loss)....... $ - $ 0.17 $ 0.19 $ 0.13
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------------------
Mar 29, Jun 28, Sep 27, Dec 31,
------- ------- ------- -------
(In thousands, except per share data)
1997
<S> <C> <C> <C> <C>
Net sales................... $6,217 $7,233 $8,077 $ 8,269
Gross profit................ 2,953 3,507 3,927 4,289
Net income (loss)........... 1,175 1,504 1,693 (27,208)
Net income (loss) per share:
Basic.................... $ 0.20 $ 0.25 $ 0.28 $ (4.52)
Diluted.................. $ 0.18 $ 0.23 $ 0.26 $ (4.52)
</TABLE>

18. SEGMENT INFORMATION:

The Company designs, manufactures and markets electronic
connectors for use in IC package interconnect applications,
industrial equipment and avionics. The Company has two principal
businesses: IC package interconnect segment and industrial and
avionics segment. Each of these is a business segment with its
respective financial performance detailed in this report. Net
income of the two principal businesses excludes the effects of
special charges and gains. The results for IC package
interconnects include the effects of royalty revenues from IC
package-related cross-license agreements. Business assets are
the owned or allocated assets used by each business. Included in
corporate activities are general corporate expenses, net of
elimination of inter-segment transactions, which are generally
intended to approximate market prices. Assets of corporate
activities include cash and short-term investments and corporate
equipment and improvements, net.
<TABLE>
<CAPTION>
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Sales:
Industrial/Avionics...................... $ 18,214 $ 17,199 $ 16,761
IC Package interconnect.................. 46,177 12,597 10,096
-------- -------- --------
Totals................................. $ 64,391 $ 29,796 $ 26,857
======== ======== ========

Net income(loss):
Industrial/Avionics...................... $ 2,426 $ 2,724 $ 2,180
IC Package interconnect.................. 2,866 3,083 2,309
Corporate activities..................... (101) 414 296
Special charges - IC Package interconnect (888) (29,057) -
-------- -------- --------
Totals................................. $ 4,303 $(22,836) $ 4,785
======== ======== ========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Special charges:
Acquired research & development.......... $ - $ 29,057 $ -
Extraordinary item....................... 888 - -
-------- -------- --------
Totals................................. $ 888 $ 29,057 $ -
======== ======== ========

Assets:
Industrial/Avionics...................... $ 8,960 $ 9,909 $ 12,304
IC Package interconnect.................. 108.521 116,683 8,602
Corporate activities..................... 1,623 - 11,550
-------- -------- --------
Totals................................. $119,104 $126,592 $ 32,456
======== ======== ========

Equipment and improvements:
Industrial/Avionics...................... $ 7,042 $ 6,367 $ 5,982
IC Package interconnect.................. 17,522 14,328 3,734
Corporate activities..................... 1,005 - -
-------- -------- --------
Totals................................. $ 25,569 $ 20,695 $ 9,716
======== ======== ========

Additions:
Industrial/Avionics...................... $ 1,341 $ 1,179 $ 1,376
IC Package interconnect.................. 3,550 10,853 526
Corporate activities..................... 885 - -
-------- -------- --------
Totals................................. $ 5,776 $ 12,032 $ 1,902
======== ======== ========

Depreciation:
Industrial/Avionics...................... $ 843 $ 810 $ 790
IC Package interconnect.................. 2,588 720 599
Corporate activities..................... 41 - -
-------- -------- --------
Totals................................. $ 3,472 $ 1,530 $ 1,389
======== ======== ========

Intangible assets:
Industrial/Avionics...................... $ - $ - $ -
IC Package interconnect.................. 75,257 75,257 -
Corporate activities..................... - - -
-------- -------- --------
Totals................................. $ 75,257 $ 75,257 $ -
======== ======== ========

Amortization:
Industrial/Avionics...................... $ - $ - $ -
IC Package interconnect.................. 4,209 - -
Corporate activities..................... - - -
-------- -------- --------
Totals................................. $ 4,209 $ - $ -
======== ======== ========
</TABLE>
<PAGE>
The following geographic area data include trade revenues
based on product shipment destination and royalty payor per
location, and property, plant and equipment based on physical
location:

<TABLE>
<CAPTION>
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
Geographic area net trade revenue :
United States............................ $ 50,682 $ 25,879 $ 23,849
Japan.................................... 1,131 - -
Singapore................................ 3,573 - -
Rest of world............................ 9,005 3,917 3,008
-------- -------- --------
Totals.................................. $ 64,391 $ 29,796 $ 26,857
======== ======== ========

Geographic area equipment and improvements:
United States............................ $ 22,594 $ 18,414 $ 9,716
Japan.................................... 2,975 2,261 -
Singapore................................ - 20 -
-------- -------- --------
Totals................................. $ 25,569 $ 20,695 $ 9,716
======== ======== ========
</TABLE>

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Wells Electronics, Inc.:

We have audited the accompanying consolidated balance sheet of
Wells Electronics, Inc. and subsidiaries as of May 3, 1997
(Successor) and the related consolidated statements of income,
shareholders' equity, and cash flows for the 53 weeks ended May
3, 1997 (Successor period), the 48 weeks ended April 27, 1996.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the aforementioned Successor consolidated
financial statements present fairly, in all material respects,
the financial position of Wells Electronics, Inc. and
subsidiaries as of May 3, 1997, and the results of their
operations and their cash flows for the Successor period, in
conformity with generally accepted accounting principles.
Further, in our opinion, the aforementioned Predecessor
consolidated financial statements present fairly, in all material
respects, the financial position of Wells Electronics, Inc. and
subsidiaries as of April 27, 1996, and the results of their
operations and their cash flows for the Predecessor periods, in
conformity with generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial
statements, effective May 2, 1996, Siebe plc acquired all of the
outstanding stock of Unitech plc in a business combination
accounted for as a purchase. As a result of the acquisition, the
consolidated financial information for the periods after the
acquisition is presented on a different cost basis than that for
the periods before the acquisition and, therefore, is not
comparable.

KPMG LLP

Chicago, Illinois
January 15, 199

<PAGE>

WELLS ELECTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
as of May 3, 1997
(In thousands, except share data)
<TABLE>
<CAPTION>

Successor
May 3, 1997
-----------
<S> <C>
ASSETS
Cash & cash equivalents............................. $ 95
Accounts receivable - trade......................... 4,516
Allowance for uncollectible accounts................ (100)
Inventory........................................... 2,540
Prepaid expenses and other current assets........... 416
Deferred tax assets................................. 571
-------
Total current assets...................... 8,038
Property, plant and equipment, net.................. 9,224
Intangible assets, net.............................. 10,157
Due from affiliate.................................. 3,231
Other assets........................................ 135
-------
Total assets.............................. $30,785
=======

LIABILITIES AND SHAREHOLDER'S EQUITY
Short-term debt..................................... $ 268
Accounts payable - trade............................ 3,016
Accrued expenses and other current liabilities...... 2,669
Due to affiliate.................................... -
Total current liabilities................. 5,953
Long-term debt...................................... -
Deferred tax liabilities............................ 6,185
Minority interest................................... 6
-------
Total liabilities......................... 12,144

SHAREHOLDER'S EQUITY
Common stock, $10 par value; 13,500
authorized shares; issued 7,825 shares............. 78
Additional paid-in capital.......................... 14,510
Retained earnings................................... 4,367
Foreign currency translation adjustments............ (314)
-------
Total shareholder's equity................ 18,641
-------
Commitment and contingencies........................ -
Total liabilities and shareholder's equity $30,785
=======

See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>

WELLS ELECTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
for 53 weeks ended May 3, 1997 and 48 weeks ended April 27, 1996
(In thousands, except share data)

<TABLE>
<CAPTION>
Successor Predecessor
May 3, 1997 April27, 1996
<S> <C> <C>
Net sales........................... $27,492 $17,998
Cost of sales....................... 13,181 9,271
------- -------
Gross profit................... 14,311 8,727
Operating expenses.................. 8,758 6,624
------- -------
Income from operations......... 5,553 2,103
Non-operating income(expense):
Interest income..................... 11 6
Interest expense.................... (93) (115)
Royalty income...................... 630 844
Minority interest................... (6) -
Other expense....................... (23) (40)
Foreign exchange gain/(loss)........ 264 40
------- -------
Total non-operating income 783 735
------- -------
Income before income taxes........ 6,336 2,838
Provision for income taxes.......... 1,969 586
------- -------
Net Income................ $ 4,367 $ 2,252
======= =======

Earnings per share.................. $558.08 $287.80
======= =======
Average number of shares............ 7,825 7,825
======= =======
</TABLE>

See accompanying notes to the consolidated financial statements.

<PAGE>
WELLS ELECTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
for 53 weeks ended May 3, 1997 and 48 weeks ended April 27, 1996
(In thousands, except share data)
<TABLE>
<CAPTION>
Foreign
Additional Currency
Common Stock Paid-in Retained Translation Total
Shares Par Value Capital Earnings Adjustments Equity
------ --------- -------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 3, 1995.. 7,825 $78 $ 6,547 $(2,544) $ 273 $ 4,354
Net income........... 2,252 2,252
Net change foreign
currency translation
adjustment.......... (273) (273)
----- --- ------- ------- ----- -------
Balance, April 27, 1996 7,825 78 6,547 (292) 6,333
Acquisition adjustments 7,963 292 8,255
Net income............. 4,367 4,367
Net change foreign
currency translation
adjustment............ (314) (314)
----- --- ------- ------- ----- -------
Balance, May 3, 1997... 7,825 $78 $14,510 $4,367 $(314) $18,641
===== === ======= ======= ===== =======
</TABLE>

See accompanying notes to the consolidated financial statements.

<PAGE>
WELLS ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for 53 weeks ended May 3, 1997 and 48 weeks ended April 27, 1996
(In thousands)
<TABLE>
<CAPTION>
Successor Predecessor
May 3, 1997 April 27, 1996
----------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 4,367 $ 2,252
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization.................. 2,205 1,426
Gain on disposition of equipment............... (59) (12)
Provision for (benefit from) deferred taxes.... 50 (30)
Changes in operating assets and liabilities:
Increase in net accounts receivable......... (673) (732)
Decrease (increase) in inventory............ 906 (1,038)
Decrease (increase) in prepaid expenses and
other current assets...................... 60 (176)
Decrease (increase) in other assets......... 93 (23)
Decrease in due from affiliate.............. (3,242) (454)
Increase in accounts payable................ 215 337
Increase (decrease) in current liabilities.. 661 (91)
Increase (decrease) in other liabilities.... 3 4
------- -------
Total adjustments...................... 219 (789)
------- -------
Net cash provided by operating activities........ 4,586 1,463

Cash flows from investing activities:
Capital expenditures........................... (2,975) (1,971)
Proceeds from sale of fixed assets............. 386 18
------- -------
Net cash used in investing activities............ (2,589) (1,953)

Cash flow from financing activities:
Net (payments of) proceeds from short-term debt (885) 739
Principal payments of long-term debt........... (1,458) (241)
------- -------
Net cash (used in)
provided by financing activities................ (2,343) 498
------- -------
Net (decrease) increase
in cash and cash equivalents (346) 8
Cash and cash equivalents
at beginning of the period...................... 441 433
------- -------
Cash and cash equivalents at end of period....... $ 95 $ 441
======= =======

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest....................................... $ 82 $ 109
======= =======
Income taxes................................... $ 1,301 $ 1,055
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
WELLS ELECTRONICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 3, 1997
(In thousands)

1. NATURE OF BUSINESS

As of May 3, 1997 and for the year then ended (fiscal 1997),
Wells Electronics, Inc. ("the Company"), an Indiana Corporation,
was a wholly owned subsidiary of UL America, Inc., whose ultimate
parent company, Siebe plc, is a publicly held corporation based
in the United Kingdom. On April 24, 1989, UL America, Inc.
acquired Wells Electronics, Inc., and for the eleven months ended
April 27, 1996 (fiscal 1996) the Company was a wholly owned
subsidiary of UL America, Inc.

The Company has two subsidiaries: Wells Electronics Asia Pte
Ltd. in Singapore ("Wells Asia") which is a wholly owned
subsidiary and Wells Japan Ltd. ("Wells Japan") in Japan which is
approximately 98% owned by the Company. The remaining 2% is owned
by a Japanese corporation.

The Company is principally engaged in designing, developing,
manufacturing and marketing a broad line of burn-in/test sockets
and plastic carriers for the global semiconductor industry. These
products are employed in the handling and quality assurance phase
of semiconductor manufacturing.

The Company's ultimate parent, Unitech plc, was acquired by
Siebe plc, on May 2, 1996. Following the acquisition, a new basis
of accounting was applied. The fair market revaluation of the
Company's assets and liabilities resulted in an acquisition
adjustment of $8,255, net of the related deferred tax liability
of $5,962. As a result of the acquisition, property, plant and
equipment was written up to appraised fair market value of $8,535
(net historical cost was $4,319). Additionally, trademarks and
software were written up to appraised fair market value of
$10,001 (net historical cost was $0) and goodwill of $708 was
retained. There were no other significant accounting adjustments.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

<PAGE>
BASIS OF PRESENTATION

The consolidated financial statements include the accounts of
Wells Electronics, Inc. and its subsidiaries. Significant
intercompany balances and transactions have been eliminated.

The consolidated financial statements are prepared in
accordance with United States generally accepted accounting
principles. The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those
estimates. The most significant estimates included in these
financial statements are allowance for uncollectible accounts,
inventory reserves, and warranty reserves.

There are 53 and 48 weeks in fiscal 1997 and 1996,
respectively, due to the change in the fiscal year end subsequent
to the Siebe plc acquisition.

REVENUE RECOGNITION

Sales and related cost of sales are recognized upon shipment
of products to customers.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be
cash equivalents.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade
receivables. The Company provides credit to customers in the
normal course of business. Collateral is not required for trade
receivables, but ongoing credit evaluations of customers'
financial condition are performed. Additionally, the Company
maintains reserves for potential credit losses. As of May 3, 1997
the Company had no significant receivable write-offs. The Company
operates in a single segment of the semiconductor industry.

<PAGE>
RESEARCH AND DEVELOPMENT

Research and development costs are charged to expense as
incurred.

INVENTORIES

Inventories are stated at the lower of cost or market. The
inventories are valued at standard cost which approximates the
first-in, first-out (FIFO) cost method. Certain inventories are
valued at the moving average cost method.

PROPERTY, PLANT AND EQUIPMENT

For fiscal 1997, property, plant and equipment are stated at
fair value based upon independent appraisal. For fiscal 1996,
property, plant and equipment are stated on the basis of cost.
Equipment under capital leases is stated at the present value of
minimum lease payments at the inception of the lease.

Material, labor and overhead costs associated with the
manufacture of molds are capitalized and classified as tooling.
Acquisition cost is used to cost molds which are purchased from
outside vendors.

Depreciation is provided using the straight-line method over
the estimated useful lives of depreciable properties as follows:
buildings and improvements, 10 to 33 years; machinery and
equipment, 7 to 13 years; and tooling, 2 to 6 years.

Equipment held under capital leases and lease improvements are
amortized using the straight-line method over the shorter of the
lease term or estimated useful life of the asset.

INCOME TAXES

The Company recognizes deferred tax assets and liabilities for
the expected future tax consequences of temporary differences
between the financial statement bases and the tax bases of the
Company's assets and liabilities using enacted statutory tax
rates applicable to future years.

INTANGIBLE ASSETS

<PAGE>
The straight-line method is used to amortize intangible
assets. The goodwill and trademarks are amortized to expense over
20 years and computer software is amortized over 6 years.

FOREIGN CURRENCY TRANSLATION

The accounts of foreign subsidiaries are measured using local
currency as the functional currency. For those operations, assets
and liabilities are translated into US dollars at the end of
period exchange rates and income and expenses are translated at
the average exchange rates. Net exchange gains or losses
resulting from such translation are excluded from net income and
accumulated in a separate component of shareholder's equity.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF

The Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of, during fiscal 1997. This statement requires that
long-lived assets, including associated goodwill, and certain
identifiable intangibles to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. It
also requires that long-lived assets and certain intangible
assets to be disposed be reported at the lower of carrying amount
or fair value less costs to sell. Adoption of this statement did
not have any impact on the Company's financial position, results
of operations, or liquidity.

NET INCOME PER COMMON SHARE

Net income per common share is computed using the weighted
average number of shares of common stock outstanding.

3. FOREIGN OPERATIONS

The Company's net income is affected by foreign currency
exchange (gains) losses resulting from translating foreign
currency denominated trade receivables and payables of Wells
Japan and Wells Asia and other realized and unrealized foreign
currency (gains) losses.

<PAGE>
4. INVENTORIES

As of May 3, 1997, the total inventories of $2,540 consist of
the following: raw materials and supplies $778, work in process
$223 and finished goods $1,539

5. PROPERTY, PLANT AND EQUIPMENT

As of May 3, 1997, total property, plant and equipment of
$9,224 consists of: buildings and improvements $171, machinery &
equipment $4,186, tooling $5,499, construction in progress $576
and accumulated depreciation of $1,208.

6. INTANGIBLE ASSETS

As of May 3, 1997, intangible assets consist goodwill of $708,
computer software $349, and trademarks of $9,674 offset by
accumulated amortization of $574 for a net total of $10,157.

7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of May 3, 1997, total accrued liabilities of $2,669 consist
of: compensation and benefits $1,038, income taxes payable $605,
product warranty $300, and other accrued liabilities of $726.

8. DEBT

As of May 3, 1997, short-term debt consists of line of credit
of $214 and current maturities of long-term debt $54 (which
constituted the total long-term debt outstanding.

Wells Japan has a 125 million yen (approximately $985 at May
3, 1997) line of credit with a Japanese bank that was guaranteed
by its ultimate parent. The interest rate at May 3, 1997 was
2.375% per annum.

9. INCOME TAX EXPENSE

Components of income tax expense (benefit) consist of:

<PAGE>
Current Deferred Total
------- -------- -----
1997:
Federal.................... $ 1,370 $ 43 $1,413
State and local............ 353 - 353
Foreign.................... 196 7 203
------- ------ ------
$ 1,919 $ 50 $1,969
======= ====== ======

1996:
Federal.................... $ 358 $ (30) $ 328
State and local............ 109 - 109
Foreign.................... 149 - 149
------- ------ ------
$ 616 $ (30) $ 586
======= ====== ======

Actual income tax expense differs from the amounts computed by
applying the enacted US federal corporate rate to income before
income taxes as a result of the following:

1997 1996
------ ------
Federal income tax expense at statutory rate $2,190 $ 965
Increase (decrease) resulting from:
Foreign tax rate differential............. 2 (50)
Reduction of valuation allowance.......... (499) (299)
Foreign subsidiary losses................. - -
State income taxes, net................... 233 72
Other, net................................ 43 (102)
------ ------
$1,969 $ 586
====== ======

The tax effect of temporary differences that give rise to
deferred tax (assets) and liabilities follow:

1997
--------
Deferred tax assets:
Inventories - principally obsolescence.... $ 201
Bad debts................................. 36
Other - principally accruals.............. 334
Net operating loss carryforward........... -
Total deferred tax assets......... 571
Valuation allowance............... -
Net deferred tax assets........... 571

<PAGE>
Deferred tax liabilities:
Property, plant & equipment............... 1,828
Capital lease............................. 148
Intangible assets......................... 4,200
Other..................................... 9
Total deferred tax liabilities.... 6,185
-------
Net deferred tax liability (asset) $ 5,614
=======

10. LEASES

The company leases certain of its manufacturing facilities,
sales offices and equipment. Some leases include provisions for
renewals and purchases at the Company's option.

Rental expense for all operating leases approximated $562 and
$241 in fiscal year 1997 and 1996, respectively.

Future minimum operating lease payments consist of the
following at May 3, 1997:

FISCAL YEAR
-----------
1998.............................. $ 619
1999.............................. 615
2000.............................. 564
2001.............................. 511
2002.............................. 499
Thereafter........................ 1,738
------
Total minimum lease payments........... $4,546
======

11. PROFIT SHARING AND RETIREMENT PLANS

The Company has adopted a Plan ("401(k) Plan") pursuant to
Section 401 of the Internal Revenue Code. Salaried employees may
contribute a percentage of their compensation to the 401(k) Plan,
but not in excess of the maximum allowed under the Code. Salaried
employees are eligible for participation at their one year
anniversary. The Company makes matching contributions of 25
percent of employee contributions but not in excess of the
maximum allowed under the Code. In addition to any Employer
401(k) Contribution discussed above, the Company in any Plan
Year, to the extent it has Net Profits or retained earnings, may
make additional matching Employer 401(k) Contributions to the
extent it deems appropriate at its complete discretion.
<PAGE>

Effective February 19, 1997, the Company adopted a Retirement
Income Plan for the hourly employees whereby the Company will
make a contribution of $0.19 per hour for all hours worked into a
retirement income plan, with the employees contributing a
matching amount. The contribution will increase to $0.20 and
$0.22 per all hours worked effective February 19, 1998 and 1999,
respectively. The employee matching contribution will increase
accordingly.
The Company's combined matching contributions for the 401(k)
Plan and Retirement Income Plan were approximately $67 and $63 in
1997 and 1996, respectively.

12. RELATED PARTY TRANSACTIONS

The Company was charged with corporate management fees of $25
in 1997 and $193 in 1996. Non-interest bearing long-term
receivable due from affiliates was $3,231 at May 3, 1997. This
consists of $2,550 from Siebe Inc. and $681 from UL America, Inc.

13. COMMITMENTS AND CONTINGENCIES

The Company has been party to ongoing litigation with Wayne K.
Pfaff and an affiliated corporation regarding alleged patent
infringements. Subsequent to the balance sheet date, the Federal
Circuit Court of Appeals found in favor of the Company.
Management believes that the likelihood of any future liability
in this regard is remote and as such, has established no
provision.

14. SUBSEQUENT EVENT

On November 17, 1997, UL America, Inc. agreed to sell all of
the Company's issued and outstanding shares of common stock to
PCD Inc. The purchase price of this transaction is $130 million.

15. SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates in the integrated circuit connector
industry which is a single industrial segment. One customer
accounted for approximately 18% and 15% of the Company's sales in

<PAGE>
1997 and 1996, respectively. The Company had no other single
customer with sales greater than 10% of total sales.

Sales between geographic areas are at cost plus approximately
50% mark-up. The Company has significant operations in foreign
countries. Information regarding operations by geographic area
for fiscal 1997 and 1996 is as follows:

USA FAR EAST
------- --------
Fiscal 1997:
- ------------
Net Sales......................... $17,528 $ 9,964
Operating income.................. 3,749 1,804
Identifiable assets............... 22,734 7,378

Fiscal 1996:
- ------------
Net Sales......................... $10,049 $ 7,949
Operating income.................. 735 1,368
Identifiable assets............... 7,302 5,903

16. Summarized Quarterly Financial Data (unaudited) for the:

<TABLE>
<CAPTION>
Three Months Ended
Fiscal 1997: May 3, Feb 1, Oct 26, Jul 27,
- ------------
<S> <C> <C> <C> <C>
Net Sales......................... $8,767 $7,471 $5,284 $5,970
Gross profit...................... 3,605 4,609 2,816 3,281
Net income........................ 2,189 1,178 412 588
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING
AND FINANCIAL DISCLOSURE

None.

<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are the executive officers of the Company and
their ages as of December 31, 1998 and positions held with the
Company, as follows:

Name Age Position
- --------------------- --- ---------------------------------------
John L. Dwight, Jr. 54 Chairman of the Board, Chief Executive
Officer, President and Director

Richard J. Mullin 47 Vice President and President, Wells-CTI
Division

Michael S. Cantor 62 Vice President and General Manger, PCD
Industrial/Avionics Division

Jeffrey A. Farnsworth 52 Vice President and General Manager,
Wells-CTI Phoenix

Mary L. Mandarino 44 Vice President, Finance and
Administration, Chief Financial
Officer, and Treasurer

Roddy J. Powers 55 Vice President, Operations

Mr. Dwight has served as Chairman of the Board, Chief
Executive Officer, President and a director of the Company since
November 1980, when he purchased a controlling interest in PCD.
Mr. Dwight was previously Vice President - International of
Burndy Corporation, an electronic connector manufacturer. Mr.
Dwight has 28 years of management and operating experience in the
connector industry.

Mr. Mullin has served as Vice President and President, Wells -
CTI Division since December 1997. From June 1993 to December
1997, he was President and Chief Executive Officer of Wells. From
May 1983 to June 1993, Mr. Mullin was Executive Vice President
and Chief Financial Officer of Wells. Before joining Wells, Mr.
Mullin was a CPA with Peat Marwick Mitchell & Co. for nine years.

<PAGE>
Mr. Cantor has served as Vice President and General Manager,
Industrial/Avionics Division since February 1998. From July 1988
to February 1998, he was Vice President, Sales and Marketing. Mr.
Cantor joined the Company in 1983 and has held various positions
in management. From 1980 to 1983, Mr. Cantor was President - U.S.
Operations for Balteau S.A. and from 1972 to 1980, Director of
Regional Operations at Burndy Corporation. Mr. Cantor has 38
years of experience in the connector industry.

Mr. Farnsworth has served as Vice President and the General
Manager, Wells - CTI Phoenix since December 1997. From October
1993 to December 1997, he was Vice President and General Manager
- - CTi. Mr. Farnsworth was a founder of Component Technologies,
Inc. in 1983, and remained with the Company, in various positions
in sales and marketing, following the acquisition of Component
Technologies, Inc. by the Company in 1988. Mr. Farnsworth has 23
years of experience in the connector industry.

Ms. Mandarino has served as Vice President, Finance and
Administration, Chief Financial Officer and Treasurer since 1989.
Ms. Mandarino joined the Company in 1986 and has held several
positions of increasing responsibility in finance. Prior to
joining PCD, Ms. Mandarino held various financial positions with
American Brands, Inc. and Dresser Industries, Inc.

Mr. Powers has served as Vice President, Operations since he
joined the Company in 1983. Previously, he was the General
Manager of the Incon Division of Transitron, which was acquired
by PCD.

For information with respect to the Directors of the Company,
see "Election of Directors" in the Proxy Statement for the PCD
Inc. 1999 Annual Meeting of Stockholders, which portion of the
Proxy Statement is incorporated herein by reference.

Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's executive officers, directors,
and persons owning ten percent or more of a registered class of
the Company's equity securities to file reports of ownership and
changes in ownership of all equity and derivative securities of
the Company with the Securities and Exchange Commission ("SEC").
SEC regulations also require that a copy of all such Section
16(a) forms filed must be furnished to the Company by such
officers, directors and shareholders.

<PAGE>
Based solely on a review of the copies of such forms and
amendments thereto received by the Company, or written
representations from the Company's officers and directors that no
Forms 5 were required to be filed, the Company believes that
during 1998 all Section 16(a) filing requirements applicable to
its officers, directors and shareholders were met.

ITEM 11. EXECUTIVE COMPENSATION

The information contained under the caption Executive
Compensation in the 1999 Proxy Statement is incorporated herein
by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The information contained under the caption Security Ownership
Of Management and Principal Stockholders in the 1999 Proxy
Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained under the caption "Certain
Relationships and Related Transactions" in the 1999 Proxy
Statement is incorporated herein by reference.

<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K

(a) Documents Filed as a part of the Form 10-K Report

1) Financial Statements

PCD INC.
DECEMBER 31, 1998 and 1997
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements

WELLS ELECTRONICS, INC.
MAY 3, 1997
Independent Auditors' Report
Consolidated Balance Sheet as of May 3, 1997
Consolidated Statements of Income for the 53 weeks ended May
3, 1997 and 48 weeks ended April 27, 1996
Consolidated Statements of Shareholder's Equity for the 53
weeks ended May 3, 1997 and 48 weeks ended April 27, 1996
Consolidated Statements of Cash Flows for the 53 weeks ended
May 3, 1997 and 48 weeks ended April 27, 1996
Notes to Consolidated Financial Statements

2) Financial Statement Schedules

All financial statements and schedules have been omitted
because the required information is included in the
consolidated financial statements or the notes thereto, or
is not applicable or required.

<TABLE>
<CAPTION>
3) Listing of Exhibits
<S> <C>
2.1(1) Share Purchase Agreement among UL America, Inc., Wells Electronics, Inc. and PCD Inc.
dated as of November 17, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
2.2(1) Undertaking to Furnish Copies of Omitted Schedules to Share Purchase Agreement dated
as of November 17, 1997

3.1(2) Restated Articles of Organization of Registrant effective March 22, 1996.

3.2(2) By-Laws of Registrant, as amended, effective April 1, 1996.

4.1(2) Articles 3, 4, 5 and 6 of the Restated Articles of Organization of Registrant
(included in Exhibit 3.1).

4.2(2) Specimen Stock Certificate.

10.1(1) Loan Agreement between PCD Inc. and Fleet National Bank dated as of December 26, 1997.

10.2(1) Unlimited Guaranty from Wells Electronics, Inc. to Fleet National Bank dated as of
December 26, 1997.

10.3(1) Security Agreement between PCD Inc. and Fleet National Bank dated as of December 26,
1997.

10.4 Amended and Restated Security Agreement between Wells-CTI, Inc. and Fleet National
Bank dated as of July 31, 1998.

10.5(1) Stock Pledge Agreement between PCD Inc. and Fleet National Bank dated as of
December 26, 1997.

10.6(1) Stock Pledge Agreement between Wells Electronics, Inc. and Fleet National Bank dated
as of December 26, 1997.

10.7(1) Conditional Patent Assignment from PCD Inc. to Fleet National Bank dated as of
December 26, 1997.

10.8(1) Conditional Patent Assignment from Wells Electronics, Inc. to Fleet National Bank
dated as of December 26, 1997.

10.9(1) Conditional Patent Assignment from Wells Japan Kabushiki Kaisha to Fleet National Bank
dated as of December 26, 1997.

10.10(1) Conditional Trademark Collateral Assignment from PCD Inc. to Fleet National Bank dated
as of December 26, 1997.

10.11(1) Conditional Trademark Collateral Assignment from Wells Electronics, Inc. to Fleet
National Bank dated as of December 26, 1997.

10.12(1) Collateral Assignment of Contracts, Leases, Licenses and Permits from PCD Inc. to
Fleet National Bank dated as of December 26, 1997.

10.13(1) Collateral Assignment of Contracts, Leases, Licenses and Permits from Wells
Electronics, Inc. to Fleet National Bank dated as of December 26, 1997.

10.14(1) Undertaking to Furnish Copies of Omitted Exhibits and Schedules to Loan Agreement and
Related Documents dated as of December 26, 1997.

10.15(1) Subordinated Debenture and Warrant Purchase Agreement between PCD Inc. and Emerson
Electric Co. dated as of December 26, 1997.

10.16(1) Subordinated Debenture issued to Emerson Electric Co. dated December 26, 1997.

10.17(1) Common Stock Purchase Warrant issued to Emerson Electric Co. dated December 26, 1997.

10.18(1) Registration Rights Agreement between PCD Inc. and Emerson Electric Co. dated as of
December 26, 1997.

10.19(1) Subordination Agreement among PCD Inc., Emerson Electric Co. and Fleet National Bank
dated as of December 26, 1997.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.20(1) Undertaking to Furnish Copies of Omitted Exhibits to Subordinated Debenture and
Warrant Purchase Agreement dated as of December 26, 1997.

10.21(2) Lease dated June 29, 1987, between Centennial Park Associates Realty Trust II and the
Company, for premises located at Two Technology Drive, Centennial Park, Peabody,
Massachusetts.

10.22(3) Second Amendment to lease agreement dated July 15, 1993, between Centennial Park
Associates Limited Partnership III and the Company.

10.23(4) Third Amendment to lease agreement dated as of June 25, 1996, between the Company and
Centennial Park Associates Limited Partnership III.

10.24(2) Lease dated May 1995, between CMD Southwest Four and CTi Technologies, Inc., for
premises located at 2102 W. Quail Avenue, Phoenix, Arizona.

10.25(3) Lease dated September 21, 1995, between Blackthorn Area Partners and Wells
Electronics, Inc., for premises located at 52940 Olive Road, South Bend, Indiana.

10.26(3) Amendment dated May 16, 1997 to Lease dated September 21, 1995, between Blackthorn
Area Partners and Wells Electronics, Inc., for premises located at 52940 Olive Road,
South Bend, Indiana.

10.27(3) Sublease dated October 10, 1992, between Daiwa House Kogyo Co., Ltd. and Wells Japan,
Ltd. For premises located at Paleana Building 2-2-15, Shin-Yokahama, Kohuku-Ku,
Yokohama, Japan (English translation).

10.28(3) Lease dated September 25, 1997, between United Building and Leasing Corporation and
Well Electronics, Inc. for premises located at 421 Amity Road, Swatara, Pennsylvania.

10.29(2) Registrant's 1992 Stock Option Plan and related forms of stock option agreement.

10.30(2) Registrant's 1996 Stock Plan and superceded forms of stock option agreement.

10.31(2) Registrant's 1996 Eligible Directors Stock Plan and superceded form of stock option
agreement.

10.32(5) Form of option agreements for the 1996 Stock Plan.

10.33(5) Form of option agreement for the 1996 Eligible Directors Stock Plan.

10.34(2) April 2, 1985 Stock Purchase Agreement and Amendment to Stock Purchase Agreement dated
March 31, 1983.

10.35(3) Collective Bargaining Agreement between Wells Electronics, Inc. and Local Union 1392,
International Brotherhood of Electrical Workers, dated February 19, 1997.

10.36(2) Letter of Agreement dated September 18, 1995, between International Assemblers, Inc.
and Cti Technologies, Inc.

10.37(3) Letter Agreement with Richard J. Mullin, effective December 26, 1997.

10.38(3) Management Incentive Plan.

10.39(6) Registrant's Employee Stock Purchase Plan.

10.40(6) Form of option agreement for the 1998 Employee Stock Purchase Plan.

10.41 First Amendment to Loan Agreement between Fleet National Bank and other lenders dated
July 31, 1998.

10.42 Second Amendment to Loan Agreement between Fleet National Bank and other lenders dated
August 31, 1998.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
<S> <C>
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers, LLP.

23.2 Consent of KPMG LLP.

27.1 Financial Data Schedule.
- ----------
</TABLE>
(1) A copy has been previously filed with the Company's
current report on Form 8-K, (Commission file no. 0-27744), as
filed on January 9, 1998, and as amended on March 11 and 24,
1998 and April 20, 1998 and is incorporated in this document
by reference.

(2) A copy has been previously filed with the Company's
registration statement on Form S-1 (Registration no. 333-
1266), as filed on February 12, 1996 and amended on March 15
and March 21, 1996, and is incorporated in this document by
reference.

(3) A copy has been previously filed with the Company's
registration statement on form S-1 (Registration no. 333-
46137), as filed on February 12, 1998 and as amended on March
20, 1998 and April 13, 1998 and is incorporated in this
document by reference.

(4) A copy has been previously filed with the Company's annual
report on Form 10-K (Commission file no. 0-27744), as filed
on March 28, 1997, and is incorporated in this document by
reference.

(5) A copy has been previously filed with the Company's
quarterly report on Form 10-Q, (Commission file no. 0-27744),
as filed on September 27, 1997, and is incorporated in this
document by reference.

(6) A copy has been previously filed with the Company's
registration statement on Form S-8 (Registration no. 333-
57805), as filed on June 26, 1998, and is incorporated in
this document by reference.

<PAGE>
<TABLE>
<CAPTION>
Management Contracts and Compensatory Plans
<S> <C>
10.29(1) Registrant's 1992 Stock Option Plan and related forms of stock option agreement.

10.30(1) Registrant's 1996 Stock Plan and superceded forms of stock option agreement.

10.31(1) Registrant's 1996 Eligible Directors Stock Plan and superceded form of stock option
agreement.

10.32(2) Form of option agreements for the 1996 Stock Plan.

10.33(2) Form of option agreement for the 1996 Eligible Directors Stock Plan.

10.37(3) Letter Agreement with Richard J. Mullin, effective December 26, 1997.

10.38(3) Management Incentive Plan.

10.39(4) Registrant's Employee Stock Purchase Plan.

10.40(4) Form of option agreement for the 1998 Employee Stock Purchase Plan.
- ----------
</TABLE>

(1) A copy has been previously filed with the Company's
registration statement on Form S-1 (Registration no. 333-
1266), as filed on February 12, 1996 and amended on March 15
and March 21, 1996, and is incorporated in this document by
reference.

(2) A copy has been previously filed with the Company's
quarterly report on Form 10-Q, (Commission file no. 0-27744),
as filed on September 27, 1997, and is incorporated in this
document by reference.

(4) A copy has been previously filed with the Company's
registration statement on Form S-8 (Registration no. 333-
57805), as filed on June 26, 1998, and is incorporated in
this document by reference.

(b) Reports on Form 8-K

The Company filed no reports on Form 8-K during the fourth
quarter of 1998.

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereto duly authorized.

PCD INC.

Dated: March 26, 1999 By: /s/ John L. Dwight, Jr.
----------------------------------
John L. Dwight, Jr.
Chairman of the Board, President and
Chief Executive Officer

Dated: March 26, 1999 By: /s/ Mary L. Mandarino
----------------------------------
Mary L. Mandarino
Vice President - Finance and
Administration, Chief Financial
Officer, and Treasurer (principal
financial and accounting officer)

Dated: March 26, 1999 By: /s/ Harold F. Faught
----------------------------------
Harold F. Faught
Director

Dated: March 26, 1999 By: /s/ C. Wayne Griffith
----------------------------------
C. Wayne Griffith
Director

Dated: March 26, 1999 By: /s/ John E. Stuart
----------------------------------
John E. Stuart
Director

Dated: March 26, 1999 By: /s/ Theodore C. York
----------------------------------
Theodore C. York
Director

<EXHIBIT>
EXHIBIT 10.4
AMENDED AND RESTATED SECURITY AGREEMENT

THIS AGREEMENT made as of July 31, 1998, by and between
WELLS-CTI, INC., an Indiana corporation (formerly known as Wells
Electronics, Inc. and successor by merger to CTi Technologies,
Inc., a Massachusetts corporation "CTi Technologies"), with a
principal place of business at 52940 Olive Road, South Bend,
Indiana ("Debtor") and FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States having
an office at One Federal Street, Boston, Massachusetts 02110, as
Agent for itself and each of the other Lenders who are now or
hereafter become parties to the hereinafter defined Loan
Agreement ("Secured Party"). Capitalized terms used but not
expressly defined herein shall have the meanings assigned thereto
in said Loan Agreement.

SECTION 1. RECITALS.

(a) Secured Party and Debtor entered into that certain security
agreement dated December 26, 1997 (the "Security Agreement") in
connection with that certain Loan Agreement dated December 26,
1997 by and among PCD Inc., a Massachusetts corporation
("Borrower"), Secured Party and the therein defined Lenders (the
"Original Loan Agreement"); and

(b) Borrower has requested and Lenders have approved the merger
of CTi Technologies into Wells Electronics, Inc., an Indiana
corporation and the contemporaneous name change of Wells
Electronics, Inc., to Wells-CTI, Inc., (such merger and name
change being herein collectively referred to as the "Merger");
and

(c) In connection with the Merger, (a) Debtor has executed and
delivered, or agreed to execute and deliver (i) this Amended and
Restated Security Agreement, (ii) a Reaffirmation of Guaranty and
Stock Pledge Agreement and (iii) amendments to various other
security documents given by it to secure the Guaranty, including,
without limitation, associated UCC-1 Financing Statements; and
(b) Borrower, Agent and Lenders have entered into a First
Amendment of Loan Agreement (the "First Amendment of Loan
Agreement"); and

(d) Agent and Debtor have agreed to enter into this Amended and
Restated Security Agreement and acknowledge that this Amended
<PAGE>
and Restated Security Agreement amends, restates and supercedes
the Security Agreement in its entirety; and

(e) The Original Loan Agreement, as amended by the First
Amendment of Loan Agreement shall hereinafter be referred to as
the "Loan Agreement".

SECTION 2. THE SECURITY INTERESTS.

(a) In order to secure (i) payment and performance of all of the
obligations of Principal Debtor under the Loan Agreement and
under the Notes, (ii) the performance of all of the obligations
of Debtor to Secured Party contained herein, and (iii) the
payment of all other future advances and other obligations of
Principal Debtor or Debtor to Secured Party and/or the Lenders,
including, without limitation, any future loans and advances made
to Principal Debtor or Debtor by Secured Party and/or the Lenders
prior to, during or following any (a) application by Principal
Debtor or Debtor for or consent by Principal Debtor or Debtor to
the appointment of a receiver, trustee or liquidator of Principal
Debtor's or Debtor's property, (b) admission by Principal Debtor
or Debtor in writing of its inability to pay or failure generally
to pay its respective debts as they mature, (c) general
assignment by Principal Debtor or Debtor for the benefit of
creditors, (d) adjudication of Principal Debtor or Debtor as
bankrupt or (e) filing by Principal Debtor or Debtor of a
voluntary petition in bankruptcy or a petition or an answer
seeking reorganization or an arrangement with creditors or to
take advantage of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debts, dissolution or liquidation
statute, or an answer admitting the material allegations of a
petition filed against it in a proceeding under any such law (any
of the foregoing shall hereinafter be referred to as a
"Bankruptcy Event"), any interest accruing under the Notes and/or
the Loan Agreement after the commencement of a Bankruptcy Event
to the extent permitted by applicable law, and any and all other
indebtedness, liabilities and obligations of Principal Debtor or
Debtor to Secured Party and/or the Lenders of every kind and
description, direct, indirect or contingent, now or hereafter
existing, due or to become due (all of the foregoing being
hereinafter called the "Obligations"), Debtor hereby grants to
Secured Party for its benefit a continuing security interest in

<PAGE>
the following described fixtures and personal property
(hereinafter collectively called the "Collateral"):

All fixtures and all tangible and intangible personal
property of Debtor, whether now owned or hereafter acquired by
Debtor, or in which Debtor may now have or hereafter acquire an
interest, including, without limitation, (a) all equipment
(including all machinery, tools and furniture), inventory and
goods (each as defined in the Uniform Commercial Code, if so
defined therein); (b) all accounts, accounts receivable, other
receivables, contract rights, chattel paper, and general
intangibles (including, without limitation, trademarks, trademark
registrations, trademark registration applications, servicemarks,
servicemark registrations, servicemark registration applications,
goodwill, tradenames, trade secrets, patents, patent
applications, leases, licenses, permits, copyrights, copyright
registrations, copyright registration applications, moral rights,
any other proprietary rights, exclusionary rights or <PAGE>
intellectual property and any renewals and extensions associated
with any of the foregoing, as each of the foregoing may be
secured under the laws now or hereafter in force and effect in
the United States of America or any other jurisdiction) of Debtor
(each as defined in the Uniform Commercial Code, if so defined
therein); (c) all instruments, documents of title, policies and
certificates of insurance, securities, bank deposits, deposit
accounts, checking accounts and cash of Debtor; (d) all
accessions, additions or improvements to, all replacements,
substitutions and parts for, and all proceeds and products of,
all of the foregoing and (e) all books, records and documents
relating to any of the foregoing.

(b) All Collateral consisting of accounts receivable,
contract rights, instruments, chattel paper and general
intangibles (each as defined in the Uniform Commercial Code) of
Debtor arising from the sale, delivery or provision of goods
and/or services, including, without limitation, all documents,
notes, drafts and acceptances, now owned by Debtor as well as any
and all thereof that may be hereafter acquired by Debtor and in
and to all returned or repossessed goods arising from or relating
to any contract rights, accounts or other proceeds of any sale or
other disposition of inventory, are sometimes hereinafter
collectively called the "Customer Receivables".

(c) The security interests granted pursuant to this SECTION
2 (the "Security Interests") are granted as security only and
shall not subject Secured Party to, or transfer or in any way
<PAGE>
affect or modify, any obligation or liability of Debtor under any
of the Collateral or any transaction which gave rise thereto.

SECTION 3. DELIVERY OF PLEDGED SECURITIES, CHATTEL PAPER
AND DATABASE. All securities including, without limitation,
shares of stock and negotiable promissory notes, of Debtor,
whether now owned or hereafter acquired by Debtor, shall be
delivered to Secured Party by Debtor simultaneously with the
delivery hereof or, with respect to after acquired securities,
promptly after the same have been acquired by Debtor (which
securities are hereinafter called the "Pledged Securities") shall
be in suitable form for transfer by delivery, or shall be
accompanied by duly executed undated instruments of transfer or
assignments in blank, all in form and substance satisfactory to
Secured Party. EXHIBIT A attached hereto and made a part hereof
sets forth a complete description of all securities owned by
Debtor on the date hereof. Secured Party may at any time or from
time to time, at its sole discretion, require Debtor to cause any
chattel paper included in the Customer Receivables to be
delivered to Secured Party or any successor agent or
representative designated by it for the purpose of causing a
legend referring to the Security Interests to be placed on such
chattel paper and upon any ledgers or other records concerning
the Customer Receivables.

SECTION 4. FILING; FURTHER ASSURANCES. Debtor will, at its
expense, execute, deliver, file and record (in such manner and
form as Secured Party may reasonably require), or permit Secured
Party to file and record, any financing statements, any carbon,
photographic or other reproduction of a financing statement or
this Security Agreement (which shall be sufficient as a financing
statement hereunder), any specific assignments or other paper
that may be reasonably necessary or desirable, or that Secured
Party may reasonably request, in order to create, preserve,
perfect or validate any Security Interest or to enable Secured
Party to exercise and enforce its rights hereunder with respect
to any of the Collateral. Debtor hereby irrevocably appoints
Secured Party as Debtor's attorney-in-fact to execute in the name
and behalf of Debtor such additional financing statements as
Secured Party may reasonably request.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF DEBTOR.
Debtor hereby represents and warrants to Secured Party that (a)
Debtor is, or to the extent that certain of the Collateral is to
be acquired after the date hereof, will be, the owner of the

<PAGE>
Collateral free from any adverse Lien except as permitted under
the Loan Agreement; (b) except for such financing statements
identified on EXHIBIT C hereto and such financing statements
relating to Liens against Debtor specifically described in and
permitted by the Loan Agreement, no financing statement covering
the Collateral is on file in any public office, other than the
financing statements filed pursuant to this Security Agreement;
(c) all additional information, representations and warranties
contained in EXHIBIT B attached hereto and made a part hereof are
true, accurate and complete in all material respects on the date
hereof; and (d) there are no restrictions upon the voting rights
or the transfer of all or any of the Pledged Securities (other
than as may appear on the face of any certificate evidencing any
of the Pledged Securities or as may be imposed by any state or
local agency or government) and Debtor has the right to vote,
pledge, grant the Security Interest in and otherwise transfer the
Pledged Securities free of any encumbrances (other than
applicable restrictions imposed by any state or local agency or
government or Federal or state securities laws or regulations).

SECTION 6. COVENANTS OF DEBTOR. Debtor hereby covenants
and agrees with Secured Party that Debtor (a) will defend the
Collateral against all claims and demands of all persons at any
time claiming any interest therein other than that of Secured
Party; (b) will provide Secured Party with prompt written notice
of (i) any change in the office where Debtor maintains its books
and records pertaining to the Customer Receivables, and (ii) the
movement or location of Collateral to or at any address other
than as set forth in EXHIBIT B attached hereto; (c) will promptly
pay any and all taxes, assessments and governmental charges upon
the Collateral prior to the date penalties attach thereto except
to the extent permitted under the Loan Agreement; (d) will
immediately notify Secured Party of any event causing a
substantial loss or diminution in the value of all or any
material part of the Collateral and the amount or an estimate of
the amount of such loss or diminution; (e) will have and maintain
insurance at all times in accordance with the provisions of the
Loan Agreement; (f) except in the ordinary course of business or
as otherwise permitted under the Loan Agreement, will not sell or
offer to sell or otherwise assign, transfer or dispose of the
Collateral or any interest therein, without the prior written
consent of Secured Party; (g) will keep the Collateral free from
any adverse Lien (other than Liens permitted under the Loan
Agreement) and in good order and repair, reasonable wear and tear
excepted, and will not waste or destroy the Collateral or any

<PAGE>
part thereof; and (h) will not use the Collateral in violation of
the Loan Agreement or this Agreement.

SECTION 7. RECORDS RELATING TO COLLATERAL. Debtor will
keep its records concerning the Collateral, including the
Customer Receivables and all chattel paper included in the
Customer Receivables, at the location(s) set forth in EXHIBIT B
attached hereto or at such other place or places of business of
which Secured Party shall have been notified in writing no less
than ten (10) days in advance. Debtor will hold and preserve
such records and chattel paper and will, to the extent provided
in the Loan Agreement, (a) permit representatives of Secured
Party at any time during normal business hours to examine and
inspect the Collateral and to make abstracts from such records
and chattel paper, and (b) furnish to Secured Party such
information and reports regarding the Collateral as Secured Party
may from time to time reasonably request.

SECTION 8. RECORD OWNERSHIP OF PLEDGED SECURITIES. Debtor
will promptly give to Secured Party copies of any notices or
other communications received by Debtor with respect to Pledged
Securities registered in the name of Debtor. Upon the occurrence
of an Event of Default, Secured Party may cause any or all of the
Pledged Securities to be transferred of record into the name of
Secured Party (or a designee of Secured Party).

SECTION 9. RIGHT TO RECEIVE DISTRIBUTIONS ON PLEDGED
SECURITIES. Unless an Event of Default shall have occurred and
be continuing, Debtor shall be entitled, from time to time, to
collect and receive for its own use all dividends, interest and
other payments and distributions made upon or with respect to the
Pledged Securities, except:

(i) dividends of stock;

(ii) dividends payable in securities or other property
(except cash dividends);

(iii) other securities issued with respect to or in
lieu of the Pledged Securities (whether upon conversion of the
convertible securities included therein or through stock split,
spin-off, split-off, reclassification, merger, consolidation,
sale of assets, combination of shares or otherwise).

<PAGE>
All of the foregoing, together with all new, substituted or
additional shares of capital stock, warrants, options or other
rights, or other securities issued in addition to or in respect
of all or any of the Pledged Securities shall be delivered to
Secured Party hereunder as required by SECTION 3 hereof, to be
held as Collateral pursuant to the terms hereof in the same
manner as the Pledged Securities delivered to Secured Party on
the date hereof.

SECTION 10. RIGHT TO VOTE PLEDGED SECURITIES. Unless an
Event of Default shall have occurred and be continuing, Debtor
shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Pledged
Securities and to exercise conversion rights with respect to the
convertible securities included therein, and Secured Party shall,
upon receiving a written request from Debtor accompanied by a
certificate signed by Debtor's principal financial officer
stating that no Event of Default has occurred, deliver to Debtor
or as specified in such request such proxies, powers of attorney,
consents, ratifications and waivers in respect of any Pledged
Securities which are registered in Secured Party's name, and make
such arrangements with respect to the conversion of convertible
securities as shall be specified in Debtor's request, such
arrangements to be in form and substance reasonably satisfactory
to Secured Party.

If an Event of Default shall have occurred and be
continuing, and provided Secured Party elects to exercise the
rights hereinafter set forth by notice to Debtor of such
election, Secured Party shall have the right, to the extent
permitted by law, and Debtor shall take all such action as may be
necessary or reasonably appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers and take
any other action with respect to all the Pledged Securities with
the same force and effect as if Secured Party were the absolute
and sole owner thereof.

SECTION 11. GENERAL AUTHORITY. Debtor hereby irrevocably
appoints Secured Party Debtor's lawful attorney (which
appointment shall be deemed a power coupled with an interest)
with full power of substitution, in the name of Debtor, for the
sole use and benefit of Secured Party, its successors and
assigns, but at Debtor's expense, to exercise, all or any of the
following powers with respect to all or any of the Collateral
during the existence and continuance of any Event of Default:

<PAGE>
(i) to demand, sue for, collect, receive and give
acquittance for any and all monies due or to become due;

(ii) to receive, take, endorse, assign and deliver all
checks, notes, drafts, securities, documents and other negotiable
and non-negotiable instruments and chattel paper taken or
received by Secured Party;

(iii) to settle, compromise, compound, prosecute or defend
any action or proceeding with respect thereto;

(iv) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof or the related goods
securing the Customer Receivables, as fully and effectually as if
Secured Party were the absolute owner thereof;

(v) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference
thereto;

(vi) to discharge any taxes or Liens at any time placed
thereon; and

(vii) to execute any document or form, in the name of
Debtor, which may be necessary or desirable in connection with
any sale of Pledged Securities by Secured Party, including
without limitation Form 144 promulgated by the Securities and
Exchange Commission;

provided, that Secured Party shall give Debtor not less than ten
(10) days' prior written notice of the time and place of any sale
or other intended disposition of any of the Collateral.

SECTION 12. EVENTS OF DEFAULT. Debtor shall be in default
under this Security Agreement upon the occurrence of any Event of
Default under the Loan Agreement.

SECTION 13. REMEDIES UPON EVENT OF DEFAULT. If any Event
of Default shall have occurred and be continuing, Secured Party
may exercise all the rights and remedies of a secured party under
the Uniform Commercial Code. Secured Party may require Debtor to
assemble all or any part of the Collateral and make it available
to Secured Party at a place to be designated by Secured Party
which is reasonably convenient. Secured Party shall give Debtor
ten (10) days' written notice of its intention to make any public

<PAGE>
or private sale or sale at a broker's board or on a securities
exchange of the Collateral. At any such sale the Collateral may
be sold in one lot as an entirety or in separate parcels, as
Secured Party may determine. Secured Party shall not be
obligated to make any such sale pursuant to any such notice. To
the extent permitted by law, Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same
to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time
or place to which the same may be adjourned. Secured Party,
instead of exercising the power of sale herein conferred upon it,
may proceed by a suit or suits at law or in equity to foreclose
the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of
competent jurisdiction.

SECTION 14. APPLICATION OF COLLATERAL AND PROCEEDS. The
proceeds of any sale of, or other realization upon, all or any
part of the Collateral shall be applied in the following order of
priorities: (a) first, to pay the expenses of such sale or other
realization, including reasonable attorneys' fees, and all
expenses, liabilities and advances incurred or made by Secured
Party in connection therewith, and any other unreimbursed
expenses for which Secured Party may be reimbursed pursuant to
SECTION 15; (b) second, to the payment of the Obligations in such
order of priority as Secured Party, in its sole discretion, shall
determine; and (c) finally, to pay to Debtor, or its successors
or assigns, or as a court of competent jurisdiction may direct,
any surplus then remaining from such proceeds.

SECTION 15. EXPENSES; SECURED PARTY'S LIEN. Debtor will
forthwith upon demand pay to Secured Party: (a) the amount of any
taxes which Secured Party may have been required to pay by reason
of the Security Interests (including any applicable transfer and
personal property taxes but excluding taxes in respect of Secured
Party's income and profits) or to free any of the Collateral from
any Lien thereon and (b) the amount of any and all reasonable
costs and expenses, including the reasonable fees and
disbursements of its counsel and of any agents not regularly in
its employ, which Secured Party may incur in connection with (i)
the collection or other disposition of any of the Collateral,
(ii) the exercise by Secured Party of any of the powers conferred
upon it hereunder, (iii) any default on Debtor's part hereunder
or (iv) any Bankruptcy Event.

<PAGE>
SECTION 16. TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL. Upon the repayment and performance in full of all
the Obligations and the expiration or termination of any
obligations of Secured Party to advance funds to Debtor, or upon
the sale of any Collateral which is permitted under the Loan
Agreement or as otherwise consented to in writing by Secured
Party, the Security Interests on such sold Collateral shall
terminate and all rights to the Collateral shall revert to Debtor
or such other party as may be entitled thereto. Upon any such
termination of the Security Interests or release of Collateral,
Secured Party will execute and deliver to Debtor such documents
as Debtor shall reasonably request to evidence the termination of
the Security Interests or the release of such Collateral, as the
case may be. Notwithstanding the foregoing, this Security
Agreement shall be reinstated if at any time any payment made or
value received with respect to an Obligation is rescinded,
invalidated, declared to be fraudulent or preferential, or set
aside or is required to be repaid to a trustee, receiver or any
other party under any case or proceeding, voluntary or
involuntary, for the distribution, division or application of all
or part of the assets of Debtor or the proceeds thereof, whether
such case or proceeding be for the liquidation, dissolution or
winding up of Debtor or their respective businesses, a
receivership, insolvency or bankruptcy case or proceeding, an
assignment for the benefit of creditors or a proceeding by or
against Debtor for relief under the federal Bankruptcy Code or
any other bankruptcy, reorganization or insolvency law or any
other law relating to the relief of debtors, readjustment of
indebtedness, reorganization, arrangement, composition or
extension or marshalling of assets or otherwise, all as though
such payment had not been made or value received.

SECTION 17. NOTICES. All notices, requests, demands and
other communications provided for hereunder shall be in writing
and mailed or telefaxed or delivered to the applicable party in
the manner set forth in SECTION 9.6 of the Loan Agreement.

SECTION 18. MISCELLANEOUS. (a) No failure on the part of
Secured Party to exercise, and no delay in exercising, and no
course of dealing with respect to, any right, power or remedy
under this Security Agreement shall operate as a waiver thereof;
nor shall any single or partial exercise by Secured Party of any
right, power or remedy under this Security Agreement preclude any
other right, power or remedy. The remedies in this Security
Agreement are cumulative and are not exclusive of any other

<PAGE>
remedies provided by law. Neither this Security Agreement nor
any provision hereof may be changed, waived, discharged or
terminated orally but only by a statement in writing signed by
the party against which enforcement of the change, waiver,
discharge or termination is sought.

(b) This Security Agreement shall be construed in
accordance with and governed by the laws of The Commonwealth of
Massachusetts, except as otherwise required by mandatory
provisions of law.

(c) This Security Agreement may be executed in several
counterparts, each of which shall be an original and all of which
shall constitute but one and the same Security Agreement.

SECTION 19. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.

(a) Except to the extent prohibited by applicable law,
Debtor irrevocably:

(i) agrees that any suit, action, or other legal
proceeding arising out of this Security Agreement or any of the
Loans may be brought in the courts of record of The Commonwealth
of Massachusetts or any other state(s) in which any of the
Collateral is located or the courts of the United States located
in The Commonwealth of Massachusetts or any other state(s) in
which any of the Collateral is located;

(ii) consents to the jurisdiction of each such court
in any such suit, action or proceeding; and

(iii) waives any objection which it may have to the
laying of venue of such suit, action or proceeding in any of such
courts.

For such time as any of the Obligations of Debtor to Secured
Party shall be unpaid in whole or in part and/or the Commitment
is in effect, Debtor irrevocably designates the registered agent
or agent for service of process of the Debtor as reflected on the
records of the Secretary of State of The Commonwealth of
Massachusetts as its registered agent, and, in the absence
thereof, the Secretary of State of The Commonwealth of
Massachusetts, as its agent to accept and acknowledge on its
behalf service of any and all process in any such suit, action or
proceeding brought in any such court and agrees and consents that

<PAGE>
any such service of process upon such agent and written notice of
such service to Debtor by registered or certified mail shall be
taken and held to be valid personal service upon Debtor
regardless of where Debtor shall then be doing business and that
any such service of process shall be of the same force and
validity as if service were made upon it according to the laws
governing the validity and requirements of such service in each
such state and waives any claim of lack of personal service or
other error by reason of any such service. Any notice, process,
pleadings or other papers served upon the aforesaid designated
agent shall, within three (3) Business Days after such service,
be sent by the method provided therefor under SECTION 9.6 of the
Loan Agreement to the Debtor at its address set forth in the Loan
Agreement. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN THE DEBTOR AND
SECURED PARTY WITH RESPECT TO THE FINANCING DOCUMENTS AND/OR ANY
OF THE TRANSACTIONS CONTEMPLATED THEREBY.

SECTION 20. SEPARABILITY. If any provision hereof is
invalid or unenforceable in any jurisdiction, the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of Secured
Party.

IN WITNESS WHEREOF, this Security Agreement has been
executed by the parties hereto all as of the day and year first
above written.

WELLS-CTI, INC.

By: /S/ Mary Mandarino
-----------------------------
Mary Mandarino
Treasurer

FLEET NATIONAL BANK, as Agent for
itself and the other Lenders

By: /s/ Scott D. Wheelock
-----------------------------
Scott D. Wheelock
Vice President

<EXHIBIT> <EXHIBIT 10.41>
FIRST AMENDMENT OF LOAN AGREEMENT

This FIRST AMENDMENT OF LOAN AGREEMENT (this "Agreement") is
made as of the 31st day of July, 1998 by and among (a) PCD INC.,
a Massachusetts corporation with a principal place of business at
2 Technology Drive, Peabody, Massachusetts 01960 (the
"Borrower"), (b) FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States and
having an office at One Federal Street, Boston, Massachusetts
02110 as a Lender and in its capacity as Agent ("Agent") for
itself, and for each of the other Lenders who now or hereafter
become parties to the hereinafter defined Loan Agreement and (c)
the other Lenders.

W I T N E S S E T H:

WHEREAS, Borrower, Agent and Lenders are parties to that
certain Loan Agreement, dated as of December 26, 1997, (as the
same may be further amended from time to time, the "Loan
Agreement") pursuant to the terms of which Lenders made (a) a
$30,000,000 Secured Term Loan A, (b) a $40,000,000 Secured Term
Loan B and (c) a $20,000,000 Secured Revolving Credit Loan to
Borrower; and
WHEREAS, capitalized terms used herein and not otherwise
defined herein shall have the meanings set forth in the Loan
Agreement; and
WHEREAS, Borrower has requested and Lenders have approved
the merger of CTi Technologies, Inc., a Massachusetts corporation
into Wells Electronics, Inc., an Indiana corporation ("Wells")
and the contemporaneous name change of Wells, as survivor of such
merger, to Wells-CTI, Inc. ("Wells-CTI"), (such merger and name
change being herein collectively referred to as the "Merger");
and
WHEREAS, in connection with the Merger, (a) Wells-CTI has
executed and delivered, or agreed to execute and deliver an
Assumption Agreement and Amendment to various security documents
given by it securing the loans, including, without limitation,
associated UCC-1 Financing Statements; and (b) Borrower, Agent
and Lender have agreed to modify the Loan Agreement in certain
hereinafter set forth respects.
<PAGE>
NOW THEREFORE, in consideration of the mutual covenants
herein contained and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Borrower, Agent and Lender hereby agree as follows:

I. AMENDMENTS TO LOAN AGREEMENT: The Loan Agreement be
and hereby is amended in the following respects:

1. The definitions of "WELLS" and "WELLS JAPAN"
appearing on page 16 of the Loan Agreement are
hereby deleted in their entirety and the following
are substituted therefor:

"WELLS" means Wells-CTI, Inc., an Indiana
corporation.

"WELLS JAPAN" means Wells CTI Kabushiki
Kaisha, a Japanese limited stock company,
having its principal place of business at
Paleana Building 2-2-15, Shin-Yokahama,
Kohuku-Ku, Yokahama, Japan.

In this regard, all references to "WELLS" or "WELLS
JAPAN" in any of the other Financing Documents
shall Be deemed to refer to WELLS-CTI AND WELLS CTI
KABUSHIKI KAISHA respectively.

2. "EXHIBIT 1.1" and "EXHIBIT 4.1.1" attached to the
Loan Agreement are hereby deleted and their
entirety, and "SUBSTITUTE EXHIBIT 1.1" and
"SUBSTITUTE EXHIBIT 4.1.1" attached to this First
Amendment of Loan Agreement are hereby substituted
therefor, respectively.

II. OTHER AGREEMENTS:

1. All references to the Loan Agreement in any of the
other Financing Documents, are hereby amended to
refer to the Loan Agreement, as amended by this
Agreement.

2. All of the terms and provisions of this Agreement
are hereby incorporated in the Loan Agreement and
the Loan Agreement is amended accordingly. In the
event that any term or condition contained in this
Agreement conflicts with, or is inconsistent with,
any provision of the Loan Agreement, as amended
hereby, the terms and conditions of this Agreement
shall supersede and control. In all other
respects, the provisions of the Loan Agreement,
shall remain in full force and effect, including,
without limitation, any and all additional terms
and conditions therein which are not in conflict
with the provisions of this Agreement.

3. The Borrower hereby restates and repeats all of the
representations, warranties and covenants of the
Borrower set forth in the Loan Agreement and each
of the other Financing Documents to the same extent
as if fully set forth herein and the Borrower
hereby certifies that all such representations and
warranties are true and accurate as of date hereof.

2
<PAGE>
4. The Borrower hereby further represents, warrants
and confirms that (a) all of the Financing
Documents and the terms thereof are hereby ratified
and confirmed, (b) the Loan Agreement, as amended
hereby, and each of the other Financing Documents,
as amended hereby, are all in full force and effect
and evidence the valid and binding obligation of
Borrower enforceable in accordance with their
respective terms and (c) there does not exist (i)
any offset or defense against the payment or
performance of any of the indebtedness or
obligations of the Borrower evidenced or secured by
the Financing Documents or (ii) any claim or cause
of action by Borrower against Agent or any Lender.

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written, under seal.

WITNESS: BORROWER:

PCD INC.

______________________________ By: /s/ Mary L. Mandarino.
---------------------------
Mary L. Mandarino
Treasurer

WITNESS: AGENT:

FLEET NATIONAL BANK, as Agent
for the Lenders

______________________________ By: /s/ Scott D. Wheelock
---------------------------
Scott D. Wheelock
Vice President

3
<PAGE>
LENDERS:

FLEET NATIONAL BANK, as Lender

_________________________ By: /s/ Scott D. Wheelock
---------------------------
Scott D. Wheelock
Vice President

STATE STREET BANK AND TRUST
COMPANY

_________________________ By: /s/ Bruce Daniels
---------------------------
Bruce Daniels
Vice President

IMPERIAL BANK

_________________________ By: /s/ William Sweeney
---------------------------
William Sweeney
Assistant Vice President

EASTERN BANK

_________________________ By: /s/ John P. Farmer
---------------------------
John P. Farmer
Vice President

IBJ SCHRODER BANK & TRUST
COMPANY

_________________________ By: /s/ Michael Graham
---------------------------
Michael Graham
Director

4
<PAGE>
CORESSTATES BANK, N.A.

_________________________ By: /s/ Lyle P. Cunnigham
---------------------------
Lyle P. Cunningham
Vice President

FIRST SOURCE FINANCIAL LLP

_________________________ By: /s/ John L. Walding
---------------------------
John L. Walding
Vice President

<EXHIBIT> <EXHIBIT 10.42>
SECOND AMENDMENT OF LOAN AGREEMENT

This SECOND AMENDMENT OF LOAN AGREEMENT (this "Amendment")
is made as of the 31st day of August, 1998 by and among (a) PCD
INC., a Massachusetts corporation with a principal place of
business at 2 Technology Drive, Peabody, Massachusetts 01960 (the
"Borrower"), (b) FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States and
having an office at One Federal Street, Boston, Massachusetts
02110 as a Lender and in its capacity as Agent ("Agent") for
itself, and for each of the other Lenders who now or hereafter
become parties to the hereinafter defined Loan Agreement and (c)
the other Lenders.
W I T N E S S E T H:

WHEREAS, Borrower, Agent and Lenders are parties to that
certain Loan Agreement, dated as of December 26, 1997, as amended
by that certain First Amendment of Loan Agreement dated as of
July 31, 1998 (as the same may be further amended from time to
time, the "Loan Agreement") pursuant to the terms of which
Lenders made (a) a $30,000,000 Secured Term Loan A, (b) a
$40,000,000 Secured Term Loan B and (c) a $20,000,000 Secured
Revolving Credit Loan to Borrower; and
WHEREAS, capitalized terms used herein and not otherwise
defined herein shall have the meanings set forth in the Loan
Agreement; and
WHEREAS, in addition, Borrower has requested and Agent and
Lenders have agreed to amend the Loans in certain respects,
including, without limiting the generality of the foregoing by
(a) consolidating Term Loan A and Term Loan B into one Term Loan,
(b) adjusting the payment schedules of the Term Loans so as to
have one Term Loan payment schedule and (c) amending certain
financial covenants set forth in the Loan Agreement (collectively
the "Amendment"); and
WHEREAS, in connection with the Amendment, (a) Borrower has
this day executed and delivered to each Lender its Amended,
Restated and Consolidated Term Note in the principal amounts set
forth on EXHIBIT A attached hereto and incorporated herein by
reference (collectively, the "Amended and Restated Notes") and
(b) Borrower, Agent and Lenders have agreed to modify the Loan
Agreement in certain hereinafter set forth respects.
<PAGE>
NOW THEREFORE, in consideration of the mutual covenants
herein contained and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Borrower, Agent and Lender hereby agree as follows:

I. AMENDMENTS TO LOAN AGREEMENT: The Loan Agreement be and
hereby is amended in the following respects:

1. The definition of "APPLICABLE MARGIN" appearing on
pages 2-4 of the Loan Agreement is hereby deleted in its
entirety and the following is substituted therefor:

"APPLICABLE MARGIN" means, with respect to the
Revolving Credit Loan and the Term Loan, for each
Libor Loan, two and one-half percent (2.50%) per
annum and for each Prime Rate Loan, one and one
quarter percent (1.25%) per annum, provided,
however, that if, at any time on or after the
receipt by the Agent of the quarterly financial
statements for the Borrower's June 30, 1998
fiscal quarter and each subsequent Borrower
fiscal quarter provided to the Agent by the
Borrower pursuant to SECTION 5.3.3 hereof, the
ratio of (a) total Senior Debt on a consolidated
basis as of the last day of the most recently
ended fiscal quarter of the Borrower to (b)
EBITDA, is within the ratios set forth below and
if and so long as no Event of Default or Default
exists, the Applicable Margin shall, subject to
the last sentence of this definition, equal the
rate set forth below opposite the applicable
ratio:

APPLICABLE MARGIN APPLICABLE MARGIN
RATIO LIBOR LOAN PRIME RATE LOAN
Less than 2.75:1 and greater 2.25% 1.00%
than or equal to 2.50:1

Less than 2.50:1 and greater 2.00% 0.75%
than or equal to 2.00:1

Less than 2.00:1 and greater 1.75% 0.50%
than or equal to 1.50:1

Less than 1.50:1 and greater 1.50% 0.25%
than or equal to 1.00:1

Less than 1.00:1 1.25% 0.00%

Any change in the Applicable Margin required
pursuant to the foregoing shall become effective on
the fifth Business Day after the Agent receives the

2
<PAGE>
Borrower's financial statement for the Borrower's
fiscal quarter in question; provided, however, that
each of the above referenced interest rates shall
remain in effect only so long as Borrower qualifies
therefor and provided further, however, that interest
rate reductions shall become final only on the basis
of Borrower's annual audited financial statements and
in the event that such annual audited financial
statements establish that the Borrower was not
entitled to a rate reduction which was previously
granted, the Borrower shall, upon written demand by
the Agent, repay to the Agent for the account of each
Lender an amount equal to the excess of interest at
the rate which should have been charged based on such
annual audited financial statements and the rate
actually charged on the basis of Borrower's quarterly
financial statement(s) (provided that in the event
of a dispute as to the appropriate fiscal quarter as
to which any adjustment should be allocated, the
decision of the independent accountants of the
Borrower shall be made in accordance with GAAP and
shall be binding upon the Agent, the Lenders and the
Borrower absent manifest error); and provided
further, however, that in the event that Borrower
fails to provide any financial statement on a timely
basis in accordance with SECTION 5.3.3, any interest
rate increase payable as a result thereof shall be
retroactively effective to the date on which the
financial statement in question should have been
received by the Agent in accordance with SECTION
5.3.3, and the Borrower shall pay any amount due as a
result thereof upon written demand from the Agent.
The Agent shall send the Borrower written
acknowledgment of each change in the Applicable
Margin in accordance with the Agent's customary
procedures as in effect from time to time, but the
failure to send such acknowledgment shall have no
effect on the effectiveness or applicability of the
foregoing provisions of this definition or Borrower's
obligations with respect to payment and calculation
of interest on Libor Loans.

2. The definition of "Fee Letter" appearing on page 8 of
the Loan Agreement is hereby deleted in its entirety and
the following is substituted therefor:

"FEE LETTER" means each of that certain fee letter
dated October 31, 1997, that certain fee letter dated
as of the date of the Second Amendment of Loan
Agreement and any subsequent fee letter between
Borrower and the Agent regarding certain fees payable
by the Borrower.

3. Subsection (C) of the definition of "Interest Period"
appearing on page 10 of the Loan Agreement is hereby
deleted in its entirety and the following is substituted
therefor:

(D) for the Term Loan, no Interest Period shall end
after the Term Loan Repayment Date and for the
Revolving Credit Loan, no Interest Period shall end
after the Revolving Credit Repayment Date; and

3
<PAGE>
4. The definitions of "Term Loans", "Term Loan A", "Term
Loan B", "Term Note A", "Term Note B", "Term Loan A
Repayment Date" and "Term Loan B Repayment Date", all
appearing on page 16 of the Loan Agreement are each
deleted in their entirety and following are substituted
therefor:

"TERM LOAN" means the term loan in the aggregate
principal amount of $50,000,000 to be maintained by
the Lenders pursuant to SECTION 2.1.1 hereof.

"TERM NOTE" means an amended, restated and
consolidated term note of the Borrower payable to
the order of a Lender in the form of EXHIBIT 1.6
hereto evidencing the Indebtedness of the Borrower
to such Lender with respect to the Term Loan.

"TERM LOAN REPAYMENT DATE" means the earlier to
occur of (i) December 31, 2003 and (ii) such earlier
date on which the Term Loan becomes due and payable
pursuant to the terms hereof.

In connection with the substitution of such
definitions, all references in the Loan Agreement or any
of the other Financing Documents to (a) the "Term Loans",
"Term Loan A" and "Term Loan B" shall be deemed to refer
to the "Term Loan", (b) "Term Note A" or "Term Note B"
shall be deemed to refer to the "Term Note" and (c) the
"Term Loan A Repayment Date" or the "Term Loan B Repayment
Date" shall be deemed to refer to the "Term Loan Repayment
Date".

5. SECTIONS 2.1.1. AND 2.1.2. appearing on pages 19 - 20
of the Loan Agreement are hereby deleted in their entirety
and the following is substituted therefor:

SECTION 2.1.1. TERM LOAN. Borrower shall pay on the
last day of each calendar quarter ending on or in
between the dates set forth below the amount of the
Term Loan set forth immediately opposite such dates
below:

Repayment Quarterly
Dates Payment Amount
------------- --------------
September 30, 1998 through
December 31, 1998 $2,000,000

January 1, 1999 through
December 31, 1999 $2,100,000

January 1, 2000 through
December 31, 2000 $2,200,000

January 1, 2001 through

4
<PAGE>
December 31, 2001 $2,300,000

January 1, 2002 through
December 31, 2002 $2,400,000

January 1, 2003 through
September 30, 2003 $2,500,000

Term Loan Repayment Date Then Remaining
Outstanding Balance
of the Term Loan

SECTION 2.1.2. INTENTIONALLY OMITTED.

6. SECTION 2.2.2 appearing on pages 21 and 22 of the Loan
Agreement are hereby deleted in its entirety and the
following is substituted therefor:

SECTION 2.2.2. FEES On the last Business Day of
each March, June, September and December commencing
September 30, 1998 and continuing through the
Revolving Credit Repayment Date, the Borrower shall
pay to the Agent for the pro rata account of each
Lender, a fee in an amount equal to .50% per annum of
the amount, if any, by which the average actual daily
amount of the Revolving Credit Loan Commitment for
the quarterly period just ended (or in the case of
the first such payment, the period from the Closing
Date to the date such payment is due) exceeds the sum
of (x) the average of the actual daily (on the basis
of a year of 360 days, for the actual number of days
elapsed) outstanding principal balances of the
Revolving Credit Loans PLUS (y) the average of the
actual daily aggregate amount of the outstanding
stated amount of any Letter of Credit or Letter of
Credit Agreement, and any unreimbursed amounts
thereunder; provided, however, that if at any time
after the receipt by the Agent of the quarterly
financial statements for the Borrower's June 30, 1998
fiscal quarter and each subsequent Borrower fiscal
quarter provided to the Agent by the Borrower
pursuant to SECTION 5.3.3 hereof, the ratio of (a)
total Senior Debt on a consolidated basis as of the
last day of the most recently ended fiscal quarter of
the Borrower to (b) EBITDA, (i) is less than 2.5:1.0
and greater than or equal to 2.0:1.0 and if and so
long as no Event of Default or Default exists and is
continuing, the Borrower shall pay to the Agent for
the pro rata account of each Lender a fee in an
amount equal to .45% per annum of the amount, if any,
by which the average actual daily amount of the
Revolving Credit Loan Commitment for the quarterly
period just ended (or in the case of the first such

5
<PAGE>
payment, the period from the Closing Date to the date
such payment is due) exceeds the sum of (x) the
average of the actual daily (on the basis of a year
of 360 days, for the actual number of days elapsed)
outstanding principal balance of the Revolving Credit
Loans PLUS (y) the average of the actual daily
aggregate amount of the outstanding stated amount of
any Letter of Credit or Letter of Credit Agreement,
and any unreimbursed amounts thereunder; (ii) is less
than 2.0:1.0 and greater than or equal to 1.5:1.0 and
if and so long as no Event of Default or Default
exists and is continuing, the Borrower shall pay to
the Agent for the pro rata account of each Lender a
fee in an amount equal to .40% per annum of the
amount, if any, by which the average actual daily
amount of the Revolving Credit Loan Commitment for
the quarterly period just ended (or in the case of
the first such payment, the period from the Closing
Date to the date such payment is due) exceeds the sum
of (x) the average of the actual daily (on the basis
of a year of 360 days, for the actual number of days
elapsed) outstanding principal balance of the
Revolving Credit Loans PLUS (y) the average of the
actual daily aggregate amount of the outstanding
stated amount of any Letter of Credit or Letter of
Credit Agreement, and any unreimbursed amounts
thereunder or (iii) is less than 1.5:1.0 and greater
than or equal to 1.0:1.0 and if and so long as no
Event of Default or Default exists and is continuing,
the Borrower shall pay to the Agent for the pro rata
account of each Lender a fee in an amount equal to
.35% per annum of the amount, if any, by which the
average actual daily amount of the Revolving Credit
Loan Commitment for the quarterly period just ended
(or in the case of the first such payment, the period
from the Closing Date to the date such payment is
due) exceeds the sum of (x) the average of the actual
daily (on the basis of a year of 360 days, for the
actual number of days elapsed) outstanding principal
balance of the Revolving Credit Loans PLUS (y) the
aggregate amount of the outstanding stated amount of
any Letter of Credit or Letter of Credit Agreement,
and any unreimbursed amounts thereunder or (iv) is
less than 1.0:1.0 and if and so long as no Event of
default or Default exists and is continuing, the
Borrower shall pay to the Agent for the pro rata
account of each Lender a fee in an amount equal to
.30% per annum of the amount, if any, by which the
average actual daily amount of the Revolving Credit
Loan Commitment for the quarterly period just ended
(or in the case of the first such payment, the period
from the Closing Date to the date such payment is
due) exceeds the sum of (x) the average of the actual
daily (on the basis of a year of 360 days, for the
actual number of days elapsed) outstanding principal
balance of the Revolving Credit Loans PLUS (y) the
aggregate amount of the outstanding stated amount of
any Letter of Credit or Letter of Credit Agreement,
and any unreimbursed amounts thereunder (the "Unused
Fees"). In addition, the Borrower shall pay to the
Agent for its own account certain fees as specified
in the Fee Letter.

6
<PAGE>
7. SECTIONS 2.6.1.1 AND 2.6.1.2 appearing on pages 27 and
28 of the Loan Agreement are hereby deleted in their
entirety and the following is substituted therefor:

SECTION 2.6.1.1. In addition to each other principal
payment required hereunder, the outstanding principal
balance of the Term Loan shall be repaid on the Term
Loan Repayment Date and the outstanding principal
balances of the Revolving Credit Loans shall be
repaid on the Revolving Credit Repayment Date.

SECTION 2.6.1.2. On or before the 90th day after the
end of each fiscal year of the Borrower commencing
with the fiscal year ending December 31, 1998, the
Borrower shall prepay to the Agent for the accounts
of the Lenders in accordance with their Pro Rata
Shares an amount of the outstanding principal
balances of the Term Loans equal to 50% of the
amount, if any, of Excess Cash Flow for such fiscal
year; provided, however, that if, based upon the
financial statements for the Borrower's immediately
preceding fiscal year end delivered to the Agent
pursuant to SECTION 5.3.2, the ratio of (a) total
Senior Debt on a consolidated basis as of the last
day of the most recently ended fiscal quarter of the
Borrower to (b) EBITDA, is less than 2.00:1, the
Borrower shall not be required to make such
prepayment on account of such fiscal year. Such
prepayments shall be in addition to any and all other
mandatory and voluntary prepayments required or
permitted hereunder and shall be applied to the
principal installments of the Term Loans in
accordance with SECTION 2.6.1.6.

8. The first sentence of SECTION 2.6.1.6. appearing on
page 29 of the Loan Agreement is hereby deleted in its
entirety and the following is substituted therefor:

SECTION 2.6.1.6. Any amount repaid by the Borrower
and/or any Subsidiary under this SECTION 2.6.1 shall
be applied on a pro-rata basis to the respective
amounts of the remaining payments to reduce the
remaining quarterly payments of the Term Loan.

9. SECTION 5.1.12. appearing on pages 50-51 of the
Loan Agreement is hereby deleted in its entirety.

10. SECTION 5.1.12A appearing on pages 51-52 of the Loan
Agreement is hereby deleted in its entirety and the
following is substituted therefor:

SECTION 5.1.12A. MAXIMUM RATIO OF TOTAL
INDEBTEDNESS FOR BORROWED MONEY TO EBITDA.
Maintain at the end of each fiscal quarter of
Borrower a ratio of (i) total Indebtedness for
Borrowed Money on a consolidated basis as of the
last day of such fiscal quarter to (ii) EBITDA, of
not greater than 3.00:1.00.

7
<PAGE>
11. PCD Control Systems, Inc. has changed its name to PCD
Control Systems Interconnect, Inc. All references to PCD
Control Systems, Inc. in the Financing Documents are
amended to read PCD Control Systems Interconnect, Inc.

12. At the request of the Borrower, the Agent and the
Lenders hereby consent to the following transactions and
waive any Default or Event of Default which may be
occasioned thereby under Sections 2.6.1.5, 5.2.3, 5.2.8,
5.2.12 and 5.2.20:

(a) the liquidation of Wells-CTI Pte Ltd.;

(b) termination of the operations of the Korean branch
office of Wells CTI KK;

(c) organization of a new Japanese Subsidiary of Wells-
CTI, Inc. to be wholly-owned by Wells-CTI, Inc., the
borrowing of Revolving Credit Loan proceeds and/or
additional borrowings from the Lenders or any of them for
the purpose of capitalizing such newly organized Japanese
Subsidiary and the sale of the issued and outstanding
capital stock of Wells Japan by Wells-CTI, Inc. to said
newly organized Japanese Subsidiary; provided, however,
any such additional borrowings (other than those under the
Revolving Credit Loan) shall be repaid with seven (7) days
of the date thereof).

The foregoing waivers and consents are strictly limited
to the transactions expressly described above and shall
not be deemed to extend to any other transaction or to
imply any consent or waiver by the Agent or the Lenders to
any other similar transaction.

13. EXHIBIT 1.9 attached to the Loan Agreement is hereby
deleted in its entirety and SUBSTITUTE EXHIBIT 1.9
attached hereto is substituted therefor.

II. OTHER AGREEMENTS:

1. All references to the Loan Agreement in any of the
other Financing Documents, are hereby amended to refer to
the Loan Agreement, as amended by this Amendment.

2. All of the terms and provisions of this Amendment are
hereby incorporated in the Loan Agreement and the Loan
Agreement is amended accordingly. In the event that any
term or condition contained in this Amendment conflicts
with, or is inconsistent with, any provision of the Loan
Agreement, as amended hereby, the terms and conditions of
this Amendment shall supersede and control. In all other

8
<PAGE>
respects, the provisions of the Loan Agreement, shall
remain in full force and effect, including, without
limitation, any and all additional terms and conditions
therein which are not in conflict with the provisions of
this Amendment.

3. The Borrower hereby restates and repeats all of the
representations, warranties and covenants of the Borrower
set forth in the Loan Agreement and each of the other
Financing Documents to the same extent as if fully set
forth herein and the Borrower hereby certifies that all
such representations and warranties are true and accurate
as of date hereof.

4. The Borrower hereby further represents, warrants and
confirms that (a) all of the Financing Documents and the
terms thereof are hereby ratified and confirmed, (b) the
Loan Agreement, as amended hereby, and each of the other
Financing Documents, as amended hereby, are all in full
force and effect and evidence the valid and binding
obligation of Borrower enforceable in accordance with
their respective terms and (c) there does not exist (i)
any Default or Event of Default, (ii) any offset or
defense against the payment or performance of any of the
Indebtedness or Obligations of the Borrower evidenced or
secured by the Financing Documents or (iii) any claim or
cause of action by Borrower against Agent or any Lender.

IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written, under seal.

WITNESS: AGENT:

FLEET NATIONAL BANK, as Agent
for the Lenders

_________________________ By: /s/ Scott D. Wheelock
-----------------------------
Scott D. Wheelock
Vice President

LENDERS:

FLEET NATIONAL BANK, as Lender

_________________________ By: /s/ Scott D. Wheelock
-----------------------------
Scott D. Wheelock

9
<PAGE>
Vice President

10
<PAGE>
STATE STREET BANK AND TRUST
COMPANY

______________________ By: /s/ Bruce Daniels
---------------------------
Bruce Daniels
Vice President

IMPERIAL BANK

_______________________ By: /s/ William Sweeney
---------------------------
William Sweeney
Assistant Vice President

EASTERN BANK

_______________________ By: /s/ John P. Farmer
---------------------------
John P. Farmer
Vice President

IBJ SCHRODER BANK & TRUST COMPANY

_______________________ By: /s/ Michael Graham
---------------------------
Michael Graham
Director

FIRST UNION NATIONAL BANK
(Successor by merger with
Coresstates Bank, N.A.)

_______________________ By: /s/ Lyle P. Cunningham
---------------------------
Lyle P. Cunningham
Vice President

11
<PAGE>

FIRST SOURCE FINANCIAL LLP

_______________________ By: /s/ John L. Walding
---------------------------
John L. Walding
Vice President

PCD, INC.

_______________________ By: /s/ Mary L. Mandarino
---------------------------
Mary L. Mandarino
Treasurer

12
<PAGE>

SUBSTITUTE EXHIBIT 1.9

NAME OF LENDER, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS: PRO RATA SHARE

Fleet National Bank Revolving
One Federal Street Credit Loan: 25.1259%
Mail Stop: MAOFD07A Term Loan: 25.1259%
Boston, Massachusetts 02110
Attn: Thomas W. Davies,
Senior Vice President

WIRE TRANSFER INSTRUCTIONS:

Fleet National Bank
One Federal Street
Boston, Massachusetts 021110
Attn: Susan Koulouris
Telecopy: (617) 346-1633]0151
ABA #: 011000138
Account: Commercial Loan Services
Attn: Agent Bank MA
Account #: 1510351 G/L
Re: PCD Inc.

NAME OF LENDER, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS: PRO RATA SHARE

Street Bank and Trust Company Revolving
225 Franklin Street Credit Loan: 16.6619%
Boston, Massachusetts Term Loan: 16.6619%
Attn: Bruce Daniels,
Vice President

WIRE TRANSFER INSTRUCTIONS

State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts
Attn: Cindi Kenny
Telecopy: (617) 664-3465
ABA#: 011000028
Re: PCD Inc.

13
<PAGE>
NAME OF LENDER, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS: PRO RATA SHARE

Imperial Bank Revolving
225 Franklin Street, 28th Floor Credit Loan: 8.73%
Boston, Massachusetts 02109 Term Loan: 8.73%
Attn: William Sweeney,
Assistant Vice President

WIRE TRANSFER INSTRUCTIONS:

Imperial Bank
2015 Manhattan Beach Boulevard
Redondo Beach, CA 90278
Attn: Debbie Smith
Telecopy: (617) 521-9410
ABA#: 122-201-444
Re: PCD Inc.

NAME OF LENDER, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS: PRO RATA SHARE

Eastern Bank Revolving
53 State Street, 13th Floor Credit Loan: 10.71%
Boston, Massachusetts 02109 Term Loan: 10.71%
Attn: John P. Farmer,
Vice President

WIRE TRANSFER INSTRUCTIONS:

Eastern Bank
53 State Street, 13th Floor
Boston, Massachusetts 02109
Attn: John P. Farmer, Vice President
Telecopy: (617) 263-2521
ABA#: 011301798
Re: PCD Inc.

14
<PAGE>
NAME OF LENDER, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS: PRO RATA SHARE

IBJ Schroder Bank & Trust Revolving
Company Credit Loan: 16.6619%
One State Street Term Loan: 16.6619%
New York, New York 10004
Attn: Michael Graham, Director

WIRE TRANSFER INSTRUCTIONS:

IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Bill Reyes - Loan Department
ABA#: 026007825
Re: PCD Inc.

NAME OF LENDER, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS: PRO RATA SHARE

CoreStates Bank, N.A. Revolving
28 State Street Credit Loan: 11.00%
Suite 1100 Term Loan: 11.00%
Boston, Massachusetts 02109
Attn: Lyle P. Cunningham,
Vice President

WIRE TRANSFER INSTRUCTIONS:

CoreStates Bank, N.A.
28 State Street
Suite 1100
Boston, Massachusetts 02109
ABA#: 031000011
Account: Commercial Loan Wire Account
Attn: Dee Scott
Account #: 00013-20452
Re: PCD Inc.

15
<PAGE>
NAME OF LENDER, ADDRESS FOR NOTICES
AND WIRE TRANSFER INSTRUCTIONS: PRO RATA SHARE

First Source Financial LLP Revolving
c/o First Source Financial, Inc. Credit Loan: 11.1103
2850 West Golf Road Term Loan: 11.1103
5th Floor
Rolling Meadows, Illinois 60008
Attention: Ms. Kimberly Kerr

WIRE TRANSFER INSTRUCTIONS:

First Source Financial LLP
c/o The Bank of New York
Corporate Trust Administration
101 Barclay Street
New York, New York 10286
Attention: Ms. Cheryl L. Laser

<EXHIBIT> EXHIBIT 21.1

SUBSIDIARIES OF PCD INC.

PCD Control Systems Interconnect, Inc., a Massachusetts
corporation
PCD USVI, Inc., a United States Virgin Islands corporation
WELLS-CTI, Inc., an Indiana corporation
SUBSIDIARIES OF WELLS-CTI, INC.
Wells-CTI Kabushiki Kaisha, a Japanese corporation
Wells International Corporation, Inc., an Indiana corporation
SUBSIDIARIES OF WELLS INTERNATIONAL CORPORATION, INC.
Wells Electronics Asia Pte. Ltd., a Singapore limited liability
company

<EXHIBIT> EXHIBIT 23.1

CONSENT OF PRICEWATERHOUSECOOPERS LLP

We consent to the incorporation by reference in the Registration
Statements of PCD Inc. on Form S-8 (File Nos. 333-07393, 333-
07403, 333-07405 and 333-57805) of our report dated January 29,
1999, relating to the consolidated balance sheets of PCD Inc. and
subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholder's equity, and
cash flows for the three years in the period ended December 31,
1998, which reports are included in this Annual Report on Form
10-K.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
March 25, 1999

<EXHIBIT> EXHIBIT 23.2

CONSENT OF KPMG LLP

We consent to the incorporation by reference in the Registration
Statements of PCD Inc. on Form S-8 (File Nos. 333-07393, 333-
07403, 333-07405 and 333-57805) of our report dated January 15,
1998, relating to the consolidated balance sheets of Wells
Electronics, Inc. and subsidiaries as of May 3, 1997 and the
related consolidated statements of income, shareholder's equity,
and cash flows for the 53 weeks ended May 3, 1997 and the 48
weeks ended April 27, 1996 which report is included in this
Report on Form 10-K.

/s/ KPMG LLP

Chicago, Illinois
March 26, 1999

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY TO REFERENCE TO SUCH FINANCIAL INFORMATION
</LEGEND>

<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 852
<SECURITIES> 0
<RECEIVABLES> 6,170
<ALLOWANCES> 319
<INVENTORY> 5,042
<CURRENT-ASSETS> 12,388
<PP&E> 25,569
<DEPRECIATION> 7,442
<TOTAL-ASSETS> 119,104
<CURRENT-LIABILITIES> 24,227
<BONDS> 37,600
0
0
<COMMON> 84
<OTHER-SE> 57,193
<TOTAL-LIABILITY-AND-EQUITY> 119,104
<SALES> 64,391
<TOTAL-REVENUES> 64,391
<CGS> 27,331
<TOTAL-COSTS> 27,331
<OTHER-EXPENSES> 19,381
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,234
<INCOME-PRETAX> 8,866
<INCOME-TAX> 3,675
<INCOME-CONTINUING> 5,191
<DISCONTINUED> 0
<EXTRAORDINARY> (888)
<CHANGES> 0
<NET-INCOME> 4,303
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.53

</TABLE>