ACT MANUFACTURING INC, 10-Q, 2000-08-10

ACT MANUFACTURING INC
10-Q, 2000-08-10
PRINTED CIRCUIT BOARDS

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

_____________
FORM 10-Q

[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2000

[_] 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: 0-25560

ACT Manufacturing, Inc.
----------------------
(Exact name of registrant as specified in its charter)

Massachusetts 04-2777507
-------------- ----------
(State or other jurisdiction of (IRS Employer ID. No.)
incorporation or organization)

2 Cabot Road
Hudson, Massachusetts 01749
--------------------- -----
(Address of principal executive offices) (zip code)

Registrant's telephone number, including area code: (978) 567-4000

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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock 16,881,461 Shares
------------ -----------------
(Class) (Outstanding on August 8, 2000)
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION
ITEM 1--Financial Statements:

Condensed Consolidated Statements of Operations for
the three months ended June 30, 2000 and 1999........................... 3

Consolidated Statements of Comprehensive Income for
the three months ended June 30, 2000 and 1999........................... 3

Condensed Consolidated Statements of Operations for
the six months ended June 30, 2000 and 1999............................. 4

Consolidated Statements of Comprehensive Income for
the six months ended June 30, 2000 and 1999............................. 4

Condensed Consolidated Balance Sheets as of
June 30, 2000 and December 31, 1999..................................... 5

Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 2000 and 1999............................. 6

Notes to Condensed Consolidated Financial Statements.................... 7

ITEM 2--Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 11

ITEM 3--Quantitative and Qualitative Disclosures about Market Risk...... 4

PART II. OTHER INFORMATION

ITEM 2--Recent Sale of Unregistered Securities.......................... 25

ITEM 4--Submission of Matters to a Vote of Security Holders............. 25

ITEM 6--Exhibits and Reports on Form 8-K................................ 26

Signatures.............................................................. 27

Exhibit Index........................................................... 28
</TABLE>

2
<PAGE>

PART I. FINANCIAL INFORMATION

ACT MANUFACTURING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited--in thousands, except per share data)

Three Months Ended June 30,
---------------------------

2000 1999
---- ----

Net sales......................................... $252,970 $157,519

Cost of goods sold................................ 230,279 146,459
------- -------

Gross profit...................................... 22,691 11,060

Selling, general and administrative expenses...... 8,398 8,288
------- -------

Operating income.................................. 14,293 2,772
Interest and other expense, net................... 2,772 992
------- -------

Income before provision for income taxes.......... 11,521 1,780

Provision for income taxes........................ 4,493 752
------- -------

Net income........................................ $ 7,028 1,028
======= =======

Basic net income per common share................. $ 0.42 $ 0.08
======= =======

Diluted net income per common share............... $ 0.40 $ 0.08
======= =======

Weighted average shares outstanding--basic........ 16,716 12,931
Weighted average shares outstanding--diluted...... 17,745 13,319

ACT MANUFACTURING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited--in thousands)

Three Months Ended June 30,

2000 1999
---- ----

Net income........................................ $7,028 $1,028

Other comprehensive (loss) income:
Foreign currency translation adjustment...... (140) 38
------ ------

Comprehensive income.............................. $6,888 $1,066
====== ======

The accompanying notes are an integral part of these condensed consolidated
financial statements.

3
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited--in thousands, except per share data)

Six Months Ended June 30,
------------------------

2000 1999
---- ----

Net sales......................................... $482,058 $303,466

Cost of goods sold................................ 439,368 281,970
------- -------

Gross profit...................................... 42,690 21,496

Selling, general and administrative expenses...... 17,721 14,602
------- -------

Operating income.................................. 24,969 6,894
Interest and other expense, net................... 3,365 2,022
------- -------

Income before provision for income taxes.......... 21,604 4,872

Provision for income taxes........................ 8,426 1,994
------- -------

Net income........................................ $ 13,178 $ 2,878
======= =======

Basic net income per common share................. $ 0.79 $ 0.22
======= =======

Diluted net income per common share............... $ 0.74 $ 0.22
======= =======

Weighted average shares outstanding--basic........ 16,631 12,898
Weighted average shares outstanding--diluted...... 17,755 13,325

ACT MANUFACTURING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited--in thousands)

Six Months Ended June 30,
------------------------

2000 1999
---- ----

Net income........................................ $13,178 $2,878

Other comprehensive (loss) income:
Foreign currency translation adjustment...... (316) 81
------- ------

Comprehensive income.............................. $12,862 $2,959
======= ======

The accompanying notes are an integral part of these condensed consolidated
financial statements.

4
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............... $124,387 $ 4,558
Accounts receivable, net ................ 207,815 160,830
Inventory ............................... 207,973 171,762
Deferred tax asset ...................... 1,252 1,252
Prepaid expenses and other assets ....... 9,596 2,925
-------- --------

Total current assets ................ 551,023 341,327

PROPERTY AND EQUIPMENT--Net ................ 37,588 38,047
INVESTMENT IN AND ADVANCE TO AFFILIATE ..... 612 6,434
GOODWILL--Net .............................. 9,861 10,334
OTHER ASSETS--Net .......................... 19,011 6,184
-------- --------

TOTAL ............................... $618,095 $402,326
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and
other liabilities .................... $ 3,374 $ 4,097
Accounts payable ........................ 124,831 153,764
Advance from customer ................... 50,000 --
Accrued compensation and related taxes .. 4,796 3,769
Deferred tax liability .................. 253 253
Accrued expenses and other .............. 12,849 9,024
-------- --------

Total current liabilities ........... 196,103 170,907

LONG-TERM DEBT--Less current portion ....... 122,532 46,933
CONVERTIBLE SUBORDINATED NOTES ............. 100,000 --
DEFERRED TAX LIABILITY ..................... 2,735 2,735
OTHER LONG-TERM LIABILITIES ................ 2,461 3,622
CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Common stock ............................ 168 165
Additional paid-in capital .............. 161,157 157,887
Accumulated other comprehensive loss..... (953) (637)
Retained earnings ....................... 33,892 20,714
-------- --------

Total stockholders' equity .......... 194,264 178,129
-------- --------

TOTAL ...................................... $618,095 $402,326
======== ========
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------

2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................................... $ 13,178 $ 2,878
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization ........................................................... 4,603 3,657
Gain on the sale of investment in affiliate ............................................. (894) --
(Decrease) increase in cash from:
Accounts receivable ................................................................. (47,062) 22,785
Inventory ........................................................................... (36,323) (5,473)
Prepaid expenses and other assets ................................................... (6,671) (175)
Accounts payable .................................................................... (28,933) (14,163)
Advance from customer ............................................................... 50,000 --
Accrued expenses and other .......................................................... 4,852 (332)
-------- --------
Net cash (used for) provided by operating activities .............................. (47,250) 9,177
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ...................................................... (3,834) (3,028)
Proceeds from the sale of investment in affiliate .......................................... 6,417 --
Increase in other assets ................................................................... (12,828) (511)
-------- --------

Net cash (used for) investing activities .......................................... (10,245) (3,539)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line-of-credit agreements ................................ 81,224 (6,657)
Proceeds from the sale of convertible subordinated notes ................................... 100,000 --
Repayments on term loan .................................................................... (6,750) --
Decrease in other liabilities .............................................................. (759) (585)
Net proceeds from sale of stock ............................................................ 3,273 814
-------- --------
Net cash provided by (used for) financing activities .............................. 176,988 (6,428)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS ....................................... 336 81

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......................................... 119,829 (709)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .................................................. 4,558 6,406
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................................................... $124,387 $ 5,697
======== ========
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.

6
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

The unaudited interim condensed consolidated financial statements furnished
herein reflect all adjustments, which in the opinion of management are of a
normal recurring nature, necessary to fairly state ACT Manufacturing, Inc. and
subsidiaries' (the "Company") financial position, cash flows and the results of
operations for the periods presented and have been prepared on a basis
substantially consistent with the audited consolidated financial statements.

The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal year.
These interim condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the period ending
December 31, 1999 filed with the Securities and Exchange Commission.

2. ACQUISITION ACTIVITY

GSS Thailand

On March 15, 2000, the Company signed a pre-tender agreement (the
"Agreement") to acquire GSS Array Technology Public Company Limited ("GSS
Thailand"). As part of the Agreement, certain of GSS Thailand's principal
shareholders agreed to tender all their issued shares and outstanding options to
the Company. GSS Thailand is a Thai-based contract electronics manufacturing
company and is listed on the Stock Exchange of Thailand.

Under the terms of the Agreement, GSS Thailand would be delisted from the
Stock Exchange of Thailand and ACT would then make a cash tender offer for all
issued shares and outstanding options of GSS Thailand. Upon the closing of the
acquisition, ACT would assume on- going relationships with GSS Thailand
customers and will retain certain GSS Thailand management to support this
additional operation.

On April 28, 2000, approximately 84% of GSS Thailand shareholders voted to
delist their company from the Stock Exchange of Thailand in a general
shareholder meeting. On May 15, 2000, the Stock Exchange of Thailand approved
the delisting of GSS Thailand and the tender offer for all of the issued shares
and outstanding options of GSS Thailand commenced on May 26, 2000.

On August 2, 2000, the Company completed the purchase of 99.02% of the issued
shares and outstanding options of GSS Thailand for approximately $86.6 million
and GSS Thailand will be delisted from the Stock Exchange of Thailand.

BEA

On July 12, 2000, the Company entered into a share purchase agreement with
Bull and Bull S.A. for the acquisition of all of the issued shares of Bull
Electronics Angers S.A. ("BEA") for a purchase price of approximately $56.6
million, subject to adjustment in certain circumstances. BEA provides
electronics manufacturing services to OEMs and has operations located in Angers,
France. Under the terms of the agreement, prior to the closing, BEA will spin
out its printed circuit board fabrication business to a separate subsidiary of
Bull. The acquisition is subject to various closing conditions and is expected
to close in the third quarter of fiscal 2000.

3. BANK FINANCING

On June 29, 2000, the Company entered into a new Credit Agreement with a
syndicate of financial institutions led by Chase Manhattan Bank as
administrative agent to replace the Company's previous credit facility. The
Credit Agreement provides that the lenders will make available to the Company up
to $150.0 million of revolving loans (up to $20.0 million of which the Company
may use in a variety of currencies, and the balance of which the Company may use
in U.S. dollars) and up to $100.0 million of term loans (up to $75.0 million of
which the Company may use to acquire BEA and $25.0 million of which the Company
may use for GSS Thailand).

The revolving loans are subject to a borrowing base formula, under which the
Company may borrow up to specified percentages of the value of various
categories of its assets, including accounts receivable, inventory, machinery
and equipment. Interest is payable either monthly or quarterly, at the election
of the Company, at an interest rate based on either the prime rate of Chase
Manhattan Bank or the prevailing rates in the Eurocurrency market. The Company
must repay all revolving loans by June

7
<PAGE>

29, 2005. The Company must borrow all term loans by September 30, 2000, and
repay them in quarterly installments from December 31, 2000 through June 29,
2005.

The Credit Agreement requires the Company to meet certain financial
conditions, including net worth and the ratio of total debt, senior secured debt
and interest and other fixed charges, to earnings. The Credit Agreement is
secured by substantially all of the assets of the Company. In addition, the
Credit Agreement limits the Company's ability to incur debt, grant liens,
dispose of its properties, pay dividends, make capital expenditures or
investments or enter into mergers or acquisitions.

At June 30, 2000, $122.5 million of the revolving loan was utilized and an
additional $27.5 million was available for use based upon the applicable
borrowing base. There were no borrowings on the $100.0 million term loan. At
June 30, 2000, the interest rate on the revolving loan was 9.79%.

This new Credit Agreement replaced the previous credit facility the Company
executed on July 29, 1999. The former credit facility provided for a $107.0
million Senior Secured Credit Facility with a group of banks led by Chase
Manhattan Bank as agent and was subsequently amended on May 12, 2000, increasing
the credit facility to $132.0 million. This credit facility provided for a $7.0
million, five-year term loan and a $125.0 million five-year line of credit, both
of which were secured by substantially all of the assets of the Company. Under
the terms of the new Credit Agreement, the Company was required to repay the
$6.5 million portion of the $7.0 million term loan that remained outstanding as
of that date .

4. CONVERTIBLE SUBORDINATED NOTES ISSUANCE

In April and May 2000, the Company received net proceeds of approximately
$95.6 million from the sale of 7% Convertible Subordinated Notes due April 15,
2007 (the "Notes") in a private placement. The Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all the
Company's existing and future senior indebtedness. Interest payments are due on
the Notes on April 15 and October 15 of each year. The proceeds of this
convertible debt offering were used to fund the acquisition of GSS Thailand (see
Note 2). Until allocated for specific use, the net proceeds from this offering
were invested in short-term, interest-bearing, investment grade securities. The
Notes were subsequently registered on a Registration Statement on Form S-3, File
No. 333-41406, effective August 4, 2000.

5. INVENTORY

Inventory consisted of the following at the dates indicated (in thousands):

June 30, December 31,
2000 1999
---- ----

Raw material............................... $180,280 $125,869
Work in process............................ 26,114 42,039
Finished goods............................. 1,579 3,854
-------- --------

Total.................................... $207,973 $171,762
======== ========

8
<PAGE>

6. NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted net income per common share reflects the potential
dilution as if common equivalent shares outstanding (common stock options and
the exchange of convertible notes for common stock) were exercised and/or
converted into common stock unless the effect of such equivalent shares was
antidilutive.

A reconciliation of net income per common share and the weighted average
shares used in the earnings per share ("EPS") calculations for the periods
indicated is as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
Net income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Three Months Ended June 30, 2000
Basic........................................ $ 7,028 16,716 $0.42
=======
Effect of stock options...................... 1,029 (0.02)
------ -----
Diluted...................................... $ 7,028 17,745 $0.40
======= ====== =====
Three Months Ended June 30, 1999
Basic........................................ $ 1,028 12,931 $0.08
=======
Effect of stock options...................... 388 --
------ -----
Diluted...................................... $ 1,028 13,319 $0.08
======= ====== =====

Six Months Ended June 30, 2000
Basic......................................... $13,178 16,631 $0.79
=======
Effect of stock options....................... 1,124 (0.05)
------ -----
Diluted....................................... $13,178 17,755 $0.74
======= ====== =====
Six Months Ended June 30, 2000
Basic......................................... $ 2,878 12,898 $0.22
=======
Effect of stock options....................... 427 --
------ ------
Diluted....................................... $ 2,878 13,325 $0.22
======= ====== ======
</TABLE>

Options to purchase 41,000 shares of the Company's common stock and the
conversion of the convertible subordinated notes were excluded from the
computation of diluted EPS for both the three-month and six-month period ended
June 30, 2000, as their inclusion would have been antidilutive.

7. OPERATING DATA

The Company operates within a single segment of the electronics manufacturing
services industry. The Company organizes itself as one segment reporting to the
Company's chief decision maker.

A summary of the principal service offerings' net sales for the three and
six months ended June 30, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Printed circuit boards...................... $242,953 $149,508 $463,384 $287,489
Cable and harness........................... 10,017 8,011 18,674 15,977
-------- -------- -------- --------

Total................................. $252,970 $157,519 $482,058 $303,466
======== ======== ======== ========
</TABLE>
9
<PAGE>

8. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended in June 1999 and effective for
the fiscal years beginning after June 15, 2000. The new standard requires that
all companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
the impact of SFAS No. 133 on the consolidated financial statements of the
Company. The Company will adopt this accounting standard on January 1, 2001, as
required.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements. SAB
No. 101 must be adopted in the quarter ended December 31, 2000 and requires
companies to report any changes in revenue recognition as a cumulative effect
from a change in accounting principles at the time of adoption. Management has
concluded that SAB No. 101 will not have any effect on the Company's revenue
recognition policies and practices.

9. CONTINGENCIES

On February 27, 1998, the Company and several of its officers and directors
were named as defendants in a purported securities class action lawsuit filed in
the United States District Court for the District of Massachusetts. The
plaintiffs amended the complaint on October 16, 1998. The plaintiffs purport to
represent a class of all persons who purchased or otherwise acquired the
Company's common stock in the period from April 17, 1997 through March 31, 1998.
The amended complaint alleges, among other things, that the defendants knowingly
made misstatements to the investing public about the value of its inventory and
the nature of its accounting practices. On December 15, 1998, we filed a motion
to dismiss the case in its entirety based on the pleadings. The Company's motion
to dismiss was granted without prejudice on May 27, 1999 and the case was closed
by the court on June 1, 1999. On June 29, 1999, the plaintiffs filed a motion
with the court seeking permission to file a second amended complaint. The
Company opposed that motion. On July 13, 1999, the court denied the plaintiffs'
motion to amend, noting "final judgment having entered in the case." On July 26,
1999, the plaintiffs filed a motion with the court asking the court to extend
the 30-day period for filing an appeal of its ruling dismissing the case. The
Company opposed that motion as well, and the court denied the motion on August
10, 1999. The plaintiffs filed an appeal with the United States Court of Appeals
for the First Circuit requesting that the Court of Appeals reverse each of the
orders described above. In an opinion dated May 5, 2000, the Court of Appeals
affirmed in all respects the orders of the District Court that the plaintiffs
had appealed.

In December 1993, CMC Industries retained the services of a consultant to
assist in quantifying the potential exposure to CMC in connection with clean- up
and related costs of a former manufacturing site. This site is commonly known as
the ITT Telecommunications site in Milan, Tennessee. The consultant initially
estimated that the cost to remove and dispose of the contaminated soil would be
approximately $200,000. CMC subsequently entered into a voluntary agreement to
investigate the site with the Tennessee Department of Environment and
Conservation. In addition, CMC agreed to reimburse a tenant of the site $115,000
for expenditures previously incurred to investigate environmental conditions at
the site. CMC recorded a total provision of $320,000 based on these estimates.
In fiscal 1995, an environmental consultant estimated that the cost of a full
study combined with short and long term remediation of the site may cost between
$3.0 and $4.0 million. Subsequent environmental studies done in 1999 have
estimated such costs as between $750,000 and $3.5 million. During CMC's fiscal
1996, the State of Tennessee's Department of Environment and Conservation named
certain potentially responsible parties in relation to the former facility. CMC
was not named as a potentially responsible party. However, Alcatel, Inc., a
potentially responsible party named by the State of Tennessee's Department of
Environment and Conversation and a former owner of CMC, sought indemnification
from CMC under the purchase agreement by which CMC acquired the stock of one of
the operators of the facility. To date, Alcatel has not filed any legal
proceedings to enforce its indemnification claim. However, Alcatel could
initiate such proceedings and other third parties could assert claims against us
relating to remediation of the site. We have entered into an agreement with
Alcatel pursuant to which the statute of limitations on their indemnification
claim is tolled for a period of time. In the event any proceedings are initiated
or any claim is made, the Company would defend itself vigorously but defense or
resolution of this matter could negatively impact our financial position and
results of operations.

From time to time, the Company is also subject to claims or litigation
incidental to its business. The Company does not believe that any incidental
claims or litigation will have a material adverse effect on its results of
operations.

10
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Quarterly Report on Form 10-Q, including the following discussions,
contains trend analysis and other forward-looking statements within the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Any
statements in this Quarterly Report that are not statements of historical facts
are forward-looking statements, which involve risks and uncertainties. Our
actual results may differ materially from those indicated in the forward-looking
statements as a result of the factors set forth elsewhere in this Quarterly
Report on Form 10-Q, including under "Cautionary Statements." You should read
the following discussion and analysis together with our condensed consolidated
financial statements for the periods specified and the related notes included
herein. Further reference should be made to our Annual Report on Form 10-K for
the period ended December 31, 1999 and our Registration Statement on Form S-3,
File No. 333-41406.

OVERVIEW

We are a leading provider of value-added electronics manufacturing services
to original equipment manufacturers ("OEMs") in the networking and
telecommunications, computer and industrial and medical equipment markets. We
provide OEMs with complex printed circuit board assembly, primarily utilizing
advanced surface mount technology, electro-mechanical sub-assembly, total system
assembly and integration, and mechanical and molded cable and harness assembly.
We target and have developed a particular expertise in serving emerging and
established OEMs who require moderate volume production runs of complex,
leading-edge commercial market applications. These applications are generally
characterized by multiple configurations and high printed circuit board
densities. As a result, they generally require technologically-advanced and
flexible manufacturing as well as a high degree of other value-added services.
As an integral part of our offerings to customers, we provide the following
value-added services: new product introduction services, advanced manufacturing
and test engineering, flexible materials management, comprehensive test
services, product diagnostics and repair, packaging, order fulfillment and
distribution services.

We currently manufacture at ten facilities having an aggregate of
approximately 1.6 million square feet. Of our leased manufacturing facilities,
four of the facilities are located in Massachusetts and one facility is located
in each of Santa Clara, California; Lawrenceville, Georgia; Corinth,
Mississippi; and Dublin, Ireland. We also own a 4.4-acre tract of land and a
110,000 square foot manufacturing facility on that property in Hermosillo,
Mexico and a 240,000 square foot manufacturing facility in Thailand. All of our
manufacturing facilities have been certified to the ISO 9002 international
quality standard, except our Corinth, Mississippi facility which has been
certified to the ISO 9001 international quality standard. We have signed a lease
for a new 202,000 square foot facility in San Jose, California that is under
construction. We plan to move our existing Santa Clara operations and equipment
to this new facility. We expect to begin operating in this new facility in the
fourth quarter of 2000. Our facilities contained 77 surface mount technology
lines at June 30, 2000.

We recognize revenue upon shipment to customers or otherwise, under certain
contracts, when title to and reward of ownership pass to the customer. We
generally do not obtain long-term purchase orders or commitments from our
customers. Instead, we work closely with our customers to anticipate delivery
dates and future volume of orders based on customer forecasts. The level and
timing of orders placed by our customers vary due to:

. customer attempts to manage inventory;
. changes in the customer's manufacturing strategy; and
. variation in demand for customer products due to, among other things,
introduction of new products, product life cycles, competitive conditions
or industry or general economic conditions.

We may purchase components for product assemblies based on customer
forecasts. Our policy is that customers are generally responsible for materials
and associated acquisition costs in the event of a significant reduction, delay
or cancellation of orders from the forecasted amounts.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2000 AND 1999

Our net sales increased $95.5 million or 60.6% to $253.0 million for the
three-month period ended June 30, 2000 compared with $157.5 million for the
comparable period in 1999. The increase was attributable principally to a net
expansion of business in our printed circuit board assembly service offering of
$93.4 million from existing customers as well as new customers in the networking
and telecommunications market.

11
<PAGE>

three-month period ended June 30, 2000 compared to approximately 95% for the
comparable period in 1999. Net sales in the cable and harness assembly service
offering accounted for approximately 4% of net sales for the three-month period
ended June 30, 2000 compared to approximately 5% of net sales for the comparable
period in 1999.

Gross profit increased $11.6 million or 105.2% to $22.7 million for the
three months ended June 30, 2000 compared with $11.1 million for the comparable
period in 1999. Gross profit as a percentage of net sales ("gross margin")
increased to 9.0% for the three months ended June 30, 2000 from 7.0% for the
three months ended June 30, 1999. Our margin increase was primarily attributable
to the growth in our sales volume, economies of scale associated with our higher
purchasing volumes and increased absorption of overhead in our Mexican facility.

Selling, general and administrative ("SG&A") expenses increased $0.1
million or 1.3% to $8.4 million, or 3.3% of net sales, for the three months
ended June 30, 2000 compared with $8.3 million, or 5.3% of net sales, for the
three months ended June 30, 1999. SG&A expenses in the three months ended June
30, 1999 included bad debt expense of $900,000 related to an insolvent customer.
SG&A expenses as a percentage of net sales decreased as a result of our
continued focus on cost management programs while sales volume increased.

Operating income increased $11.5 million to $14.3 million, or 5.7% of net
sales, for the three months ended June 30, 2000 compared with operating income
of $2.8 million, or 1.8% of net sales, for the comparable period in 1999 as a
result of the above factors.

Interest and other expense, net increased 179.4% to $2.8 million for the
three months ended June 30, 2000 compared to $1.0 million for the three months
ended June 30, 1999. This increase is primarily attributable to higher working
capital requirements resulting in a higher average loan balance for the three-
month period ended June 30, 2000. Also included in interest and other expense,
net for the three months ended June 30, 2000 is $1.4 million of interest
incurred on our 7% Convertible Subordinated Notes offset by $1.2 million of
interest income earned on the reinvestment of the proceeds we received in
connection with the issuance of these Notes.

We recorded a provision for income taxes of $4.5 million and $0.8 million
for the three months ended June 30, 2000 and 1999, respectively. The Company
provided for income taxes using a 39% and 42% effective tax rate for the three-
month period ended June 30, 2000 and 1999, respectively.

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000 AND 1999

Our net sales increased $178.6 million or 58.9% to $482.1 million for the
six-month period ended June 30, 2000 compared with $303.5 million for the
comparable period in 1999. The increase was attributable principally to a net
expansion of business in our printed circuit board assembly service offering of
$175.9 million from existing customers as well as new customers in the
networking and telecommunications market.

Net sales in the printed circuit board assembly service offering (including
value-added services such as new product introduction, system integration, test,
repair and order fulfillment) as a percentage of net sales was approximately 96%
for the six-month period ended June 30, 2000 compared to approximately 95% for
the comparable period in 1999. Net sales in the cable and harness assembly
service offering accounted for approximately 4% of net sales for the six-month
period ended June 30, 2000 compared to approximately 5% of net sales for the
comparable period in 1999.

Gross profit increased $21.2 million or 98.6% to $42.7 million for the six
months ended June 30, 2000 compared with $21.5 million for the comparable period
in 1999. Gross profit as a percentage of net sales ("gross margin") increased to
8.9% for the six months ended June 30, 2000 from 7.1% for the six months ended
June 30, 1999. Our margin increase was primarily attributable to the growth in
our sales volume, economies of scale associated with our higher purchasing
volumes, an increase in sales with higher margins in the first quarter and
increased absorption of overhead in our Mexican and Massachusetts facilities.

Selling, general and administrative ("SG&A") expenses increased $3.1
million or 21.4% to $17.7 million, or 3.7% of net sales, for the six months
ended June 30, 2000 compared with $14.6 million, or 4.8% of net sales, for the
six months ended June 30, 1999. Although SG&A expenses decreased as a percentage
of net sales due to our continued focus on cost management programs while sales
volume increased, these expenses increased in absolute dollars to support our
larger revenue base and anticipated growth in fiscal year 2000.

Operating income increased $18.1 million to $25.0 million, or 5.2% of net
sales, for the six months ended June 30, 2000 compared with operating income of
$6.9 million, or 2.3% of net sales, for the comparable period in 1999 as a
result of the above factors.

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Interest and other expense, net increased 66.4% to $3.4 million for the six
months ended June 30, 2000 compared to $2.0 million for the six months ended
June 30, 1999. This increase is primarily attributable to higher working capital
requirements resulting in a higher average loan balance for the six-month period
ended June 30, 2000. Interest and other expense, net for the six months ended
June 30, 2000 includes $1.4 million of interest incurred on our 7% Convertible
Subordinated Notes offset by $1.2 million of interest income earned on the
reinvestment of the proceeds we received in connection with the issuance of
these Notes. Also included in interest and other expense, net is a $0.9 million
gain on the partial sale of our investment in eOn Communications (formerly
Cortelco), a related party.

We recorded a provision for income taxes of $8.4 million and $2.0 million
for the six months ended June 30, 2000 and 1999, respectively. The Company
provided for income taxes using a 39% and 41% effective tax rate for the six-
month period ended June 30, 2000 and 1999, respectively.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We had working capital of $354.9 million at June 30, 2000 compared with
$170.4 million at December 31, 1999. Operating activities used $47.3 million of
cash for the first six months of 2000 compared with cash provided by operations
of $9.2 million for the comparable period in 1999. The primary uses of cash for
operating activities for the six-month period ended June 30, 2000 were increases
in both inventory and accounts receivable and a decrease in accounts payable.
These cash uses were offset, in part, by a $50.0 million advance from a major
customer and $13.2 million in net income from operations. Inventory increased
$36.3 million to $208.0 million and accounts receivable increased $47.1 million
to $207.8 million at June 30, 2000. The increase in inventory and accounts
receivable is the result of continued sequential quarterly revenue growth. In
addition, the increase in inventory is also attributable to the forecasted
growth within our Mexican operations in the third fiscal quarter of 2000.
Accounts payable decreased $28.9 million to $124.8 million at June 30, 2000 as
we made payments to certain suppliers which support programs of the major
customers which provided us the advance earlier than our customary payment
terms. In the second fiscal quarter of 2000, a major customer advanced us $50.0
million to strengthen our materials procurement capabilities and enhance the
services we provide to this customer. This advance is unsecured, non-interest
bearing and has no maturity date. The advance will be repaid through the offset
against future invoices billed to the customer beginning after April 1, 2001.

On June 29, 2000, we entered into a new Credit Agreement with a syndicate
of financial institutions led by Chase Manhattan Bank as administrative agent to
replace our previous credit facility. The Credit Agreement is secured by
substantially all assets of the Company. The Credit Agreement provides that the
lenders will make available to us up to $150.0 million of revolving loans (up to
$20.0 million of which we may use in a variety of currencies, and the balance of
which we may use in U.S. dollars) and up to $100.0 million of term loans (up to
$75.0 million of which we may use to acquire BEA and $25.0 million of which we
may use for GSS Thailand). This new Credit Agreement replaced the previous
credit facility we executed on July 29, 1999. The former credit facility
provided for a $107.0 million Senior Secured Credit Facility with a group of
banks led by Chase Manhattan Bank, and was subsequently amended on May 12, 2000,
increasing the former credit facility to $132.0 million. The former credit
facility consisted of a $7.0 million, five-year term loan and a $125.0 million
five-year line of credit, both of which were secured by substantially all of our
assets. Under the terms of the new Credit Agreement, we were required to repay
the $6.5 million portion of the $7.0 million term loan that remained outstanding
as of that date. At June 30, 2000, $122.5 million of the revolving loan was
utilized and an additional $27.5 million was available for use based upon the
applicable borrowing base. There were no borrowings on the $100.0 million term
loan. At June 30, 2000, the interest rate on the revolving loan was 9.79%.

In April and May 2000, we received net proceeds of approximately $95.6
million from the sale of 7% Convertible Subordinated Notes due April 15, 2007 in
a private placement. Interest payments are due on these notes on April 15 and
October 15 of each year. The proceeds of this convertible debt offering were
used to fund the acquisition of GSS Thailand. Until allocated for specific use,
the net proceeds of this offering were invested in short-term, interest-bearing,
investment grade securities. We recorded approximately $1.4 million in interest
expense incurred on the notes for the six months ended June 30, 2000, which was
offset by $1.2 million of interest income earned on the reinvestment of the
proceeds from the notes during the same period.

On August 2, 2000, we completed the purchase of 99.02% of the issued shares
and outstanding options of GSS Thailand for approximately $86.6 million.

We sold 575,000 shares of common stock of eOn Communications (formerly
Cortelco), a related party, for net proceeds of approximately $6.4 million in
the first quarter of 2000. We recognized a gain on this sale of approximately
$0.9 million.

Capital expenditures of approximately $3.8 million for the six months ended
June 30, 2000 were primarily for the acquisition of equipment related to our
operations.

We lease a manufacturing facility and certain equipment and computer
software used in our manufacturing operations under capital lease agreements
that expire through 2003.

As of June 30, 2000, we had equipment lease lines of approximately $25.3
million available for purchases of manufacturing

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equipment, computer hardware and software and furniture.

Our need for, cost of and access to funds are dependent in the long-term on
our future operating results as well as conditions external to us. We may
require additional capital to finance further acquisitions or other enhancements
to or expansion of our manufacturing capacity. Although no assurance can be
given that any additional financing will be available on terms satisfactory to
us, we may seek additional funds from time to time through public or private
debt or equity offerings or through further bank borrowings or equipment lease
financing. We believe that our current sources of liquidity are adequate to
support our anticipated liquidity needs for the next twelve months.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended in June 1999, effective for
fiscal years beginning after June 15, 2000. The new standard requires that all
companies record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. Management is currently assessing
the impact of SFAS No. 133 on the consolidated financial statements of the
Company. The Company will adopt this accounting standard on January 1, 2001, as
required.

CAUTIONARY STATEMENTS

The Private Securities Litigation Reform Act of 1995 (the "Act") contains
certain safe harbors regarding forward-looking statements. From time to time,
information provided by the Company or statements made by its employees may
contain "forward-looking" information which involve risks and uncertainties. Any
statements in this Quarterly Report on Form 10-Q that are not statements of
historical fact are forward-looking statements. The following cautionary
statements should be considered carefully in evaluating the Company and its
business. The factors discussed in these cautionary statements, among other
factors, could cause actual results to differ materially from those contained in
the forward-looking statements made in this Quarterly Report on Form 10-Q and
presented elsewhere by management from time to time. If any of the following
risks or uncertainties actually occurs, our business, financial condition and
operating results would likely suffer. In that event, the market price of our
common stock could decline. These cautionary statements are being made pursuant
to the provisions of the Act and with the intention of obtaining the benefits of
the safe harbor provisions of the Act.

WE MAY NOT CLOSE THE ACQUISITION OF BEA.

Our obligation to close the acquisition of BEA is subject to various
conditions, including among others:

. the PCB business shall have been spun out to a separate subsidiary of
Bull;
. no material adverse effect on BEA shall have occurred; and
. all third party consents shall have been obtained.

We cannot assure you that the conditions set forth above will be satisfied
or that we will consummate the acquisition of BEA on a timely basis or at all.
Even if we consummate the BEA acquisition, we may not realize any of the
anticipated benefits of the acquisition.

WE MAY NOT REALIZE THE EXPECTED BENEFITS FROM THE GSS THAILAND ACQUISITION.

We have completed the acquisition of GSS Thailand with the expectation that
the acquisition will result in certain benefits, including, without limitation:

. cost savings related to redundant activities;
. operating efficiencies;
. revenue enhancements;

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<PAGE>

. management enhancements; and
. other synergies.

We may not realize any of the anticipated benefits of the acquisition.
Integrating GSS Thailand's operations and personnel will be a complex and
difficult process and achieving the benefits of the acquisition will depend in
large part upon the successful integration of GSS Thailand's business in an
efficient and timely manner. The diversion of the attention of our management
and any difficulties and related costs encountered in the process of combining
ACT and GSS Thailand's operations, could cause the disruption of, or a loss of
momentum in, our activities. The inability to successfully integrate the
operations and personnel of GSS Thailand, or any significant delay in achieving
integration, could have a material adverse effect on our business, financial
condition and results of operations after the acquisition. The integration of
GSS Thailand after the acquisition will result in significant costs as well as
demands on management personnel. We cannot assure you that the acquisition will
become accretive to net income at any point in the future or that the benefits
derived by us in the acquisition will outweigh or exceed its costs.

THE GSS THAILAND ACQUISITION MAY RESULT IN LOSS OF CUSTOMERS, EMPLOYEES AND
SUPPLIERS.

The announcement and completion of the acquisition could cause certain of
our or GSS Thailand's customers to either seek alternative sources of product
supply and service, or delay or change orders for products or services due to
uncertainty over the integration of GSS Thailand. As a result, we may experience
some customer attrition after the acquisition. For the same reason, we may also
see certain suppliers ending their relationship with us. Difficulties in
combining operations, including the uncertainty related to organizational
changes, could also negatively affect employee morale and result in the loss of
key employees as a result of the acquisition. Any steps taken by us to counter
such increased customer, supplier and employee attrition may not be effective.
Failure by us to control attrition could have a material adverse effect on our
business and results of operations.

WE EXPECT SUBSTANTIAL TRANSACTION, CONSOLIDATION AND INTEGRATION COSTS RELATED
TO THE GSS THAILAND ACQUISITION.

As a result of the acquisition, we incurred transaction costs of
approximately $7.0 million, including investment banking, legal, accounting and
printing fees. We expect that we will also incur significant consolidation and
integration expenses which we cannot accurately estimate at this time. We expect
to charge the consolidation and integration expenses to operations in fiscal
2000. The amount of the transaction costs is a preliminary estimate and is
subject to change. Actual transaction costs may substantially exceed our
estimates and, when combined with the expenses incurred in connection with the
consolidation and integration of the GSS Thailand operations, could have an
adverse effect on our business, financial condition and results of operations.

WE MAY FAIL TO MAKE ADDITIONAL ACQUISITIONS AND MAY NOT SUCCESSFULLY INTEGRATE
ACQUISITIONS WE DO MAKE, WHICH COULD IMPAIR OUR ABILITY TO COMPETE AND OUR
OPERATING RESULTS.

In light of the consolidation trend in our industry, we intend to pursue
selective acquisitions of additional electronics manufacturing services
providers, facilities, assets or businesses. We may compete for acquisition
opportunities with entities having significantly greater resources than us. As a
result, we may not succeed in acquiring some or all companies, facilities,
assets or businesses that we seek to acquire. Failure to consummate additional
acquisitions may prevent us from accumulating sufficient critical mass required
by customers in this consolidating industry. This failure could significantly
impact our ability to effectively compete in our targeted markets and could
negatively affect our results of operations.

Moreover, acquisitions that we do complete may result in:

. the potentially dilutive issuance of common stock or other equity
instruments;
. the potentially dilutive impact on earnings per share;
. the incurrence of debt and amortization expenses related to goodwill
and other intangible assets; or
. the incurrence of significant costs and expenses.

Acquisition transactions, including our recent acquisition of GSS Thailand
and our pending acquisition of BEA, also involve numerous business risks,
including:

. difficulties in assimilating the acquired operations, technologies,
personnel and products;
. difficulties in managing geographically dispersed and international
operations;
. the diversion of management's attention from other business concerns;

15
<PAGE>

. the potential disruption of our business; and
. the potential loss of key employees.

OUR BUSINESS MAY SUFFER IF THE NETWORKING AND TELECOMMUNICATIONS SEGMENTS OF THE
ELECTRONICS INDUSTRY FAIL TO GROW AND EVOLVE.

Our customer base has historically been concentrated in a limited number of
segments within the electronics industry. Net sales to customers within the
networking and telecommunications segments accounted for approximately 80% of
our net sales for the six months ended June 30, 2000, 66% in fiscal 1999 and 58%
in fiscal 1998. Developments adverse to these industry segments could materially
and negatively impact us. These industry segments, and the electronics industry
as a whole, experience:

. intense competition;
. rapid technological changes resulting in short product life-cycles and
consequent product obsolescence;
. significant fluctuations in product demand;
. economic cycles, including recessionary periods; and
. consolidation.

A recessionary period or other event leading to excess capacity affecting
one or more segments of the electronics industry we serve would likely result in
intensified price competition, reduced margins and a decrease in our net sales.

THE LOSS OF MAJOR CUSTOMERS COULD ADVERSELY AFFECT US.

We depend on a small number of customers for a significant portion of our
business. Our five largest customers accounted for approximately 60% of our net
sales for the six months ended June 30, 2000. For the period, Nortel Networks
and Efficient Networks, Inc. each accounted for 10% or more of our net sales
(19% each).

Customers representing 10% or more of our net sales in fiscal 1999 were
Nortel Networks and S-3 Incorporated (formerly Diamond Multimedia) with 15% and
13%, respectively, as compared to Nortel Networks and Micron Electronics, each
with approximately 12% of our fiscal 1998 net sales. The timing and level of
orders from our customers varies substantially from period to period. The
historic level of net sales we have received from a specific customer in one
particular period is not necessarily indicative of net sales we may receive from
that customer in any future period.

Our results may depend on our ability to diversify our customer base and
reduce our reliance on particular customers. Our major customers may not
continue to purchase products and services from us at current levels or at all.
In particular, we terminated our business with Ascend, which was acquired by
Lucent Technologies, in the fourth quarter of fiscal 1999 and we experienced a
significant decrease in sales to Micron in the third quarter of fiscal 1998. For
various reasons, including consolidation in our customers' industries, we have
in the past and will continue in the future to terminate or lose relationships
with customers. We may not be able to expand our customer base to make up any
sales shortfalls from our major customers so as to increase overall net sales.
Because certain customers represent such a large part of our business, any of
the following could negatively impact our business:

. the loss of one or more major customers;
. a significant reduction or delay in purchases from any major customer;
. discontinuance by any major customer of the sale of products we
manufacture;
. a reduction in demand for the products of major customers that we
manufacture; or
. the inability or unwillingness of a major customer to pay for products
and services on a timely basis or at all.

OUR CUSTOMERS DO NOT ENTER INTO LONG-TERM PURCHASE ORDERS OR COMMITMENTS, AND
CANCELLATIONS, REDUCTIONS OR DELAYS IN CUSTOMER ORDERS WOULD ADVERSELY AFFECT
OUR PROFITABILITY.

The level and timing of orders placed by our customers vary due to:

. customer attempts to manage inventory;
. changes in the customers' manufacturing strategy, such as a decision
by a customer to either diversify or consolidate the number of
electronics manufacturing services providers used or to manufacture
their products internally; and
. variation in demand for customer products.

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<PAGE>

We generally do not obtain long-term purchase orders or commitments from
our customers. Instead, we work closely with our customers to anticipate
delivery dates and future volume of orders based on customer forecasts. We rely
on our estimates of anticipated future volumes when making commitments
regarding:

. the levels of business that we will seek and accept;
. the timing of production schedules;
. the purchase of materials;
. the purchase or leasing of facilities and equipment; and
. the levels and utilization of personnel and other resources.

Customers may cancel, reduce or delay orders that were either previously
made or anticipated for a variety of reasons. Significant or numerous
terminations, reductions or delays in our customers' orders could negatively
impact our operating results. We often purchase components for product
assemblies based on customer forecasts, at times without a written customer
commitment to pay for them. Our policy is that customers are generally
responsible for materials and associated acquisition costs in the event of a
significant reduction, delay or cancellation of orders from the forecasted
amounts. A customer's unwillingness or inability to reimburse us for materials
costs in the case of a significant variance from forecast could adversely affect
our operating results.

INCREASED COMPETITION MAY RESULT IN DECREASED DEMAND OR PRICES FOR OUR SERVICES.

The electronics manufacturing services industry is highly competitive. We
compete against numerous U.S. and foreign electronics manufacturing services
providers with global operations, as well as those who operate on a local or
regional basis. In addition, current and prospective customers continually
evaluate the merits of manufacturing products internally. Consolidation in the
electronics manufacturing services industry results in a continually changing
competitive landscape. The consolidation trend in the industry also results in
larger and more geographically diverse competitors who have significant combined
resources with which to compete against us. Some of our competitors have
substantially greater managerial, manufacturing, engineering, technical,
financial, systems, sales and marketing resources than we do. These competitors
may:

. respond more quickly to new or emerging technologies;
. have greater name recognition, critical mass and geographic and market
presence;
. be better able to take advantage of acquisition opportunities;
. adapt more quickly to changes in customer requirements; and
. devote greater resources to the development, promotion and sale of
their services.

We may be operating at a cost disadvantage compared to manufacturers who
have greater direct buying power from component suppliers, distributors and raw
material suppliers or who have lower cost structures. Our manufacturing
processes are generally not subject to significant proprietary protection, and
companies with greater resources or a greater geographic and market presence may
enter our market or increase their competition with us. Increased competition
from existing or potential competitors could result in price reductions, reduced
margins or loss of market share.

WE MAY NOT BE ABLE TO OBTAIN RAW MATERIALS OR COMPONENTS FOR OUR ASSEMBLIES ON A
TIMELY BASIS OR AT ALL.

We rely on a single or limited number of third-party suppliers for many
proprietary and other components used in the assembly process. We do not have
any long-term supply agreements. Shortages of materials and components have
occurred from time to time and will likely occur in the future. In particular,
we are currently experiencing a shortage in components such as tantalum and
ceramic capacitors, flash memory, and dynamic and static ram. Raw materials or
component shortages could result in shipping delays or increased prices, which
could adversely affect our ability to manufacture products for our customers on
a timely basis or at acceptable cost. Moreover, the consolidation trend in our
suppliers' industry results in changes in supply relationships and in the price,
availability and quality of components and raw materials. Due to our utilization
of just-in-time inventory techniques, the timely availability of many components
is dependent on our ability to both develop accurate forecasts of customer
requirements and manage the materials supply chain. If we fail to do either, our
operating results may suffer.

OPERATING IN FOREIGN COUNTRIES EXPOSES US TO INCREASED RISKS.

We acquired in fiscal 1997, and then subsequently expanded in fiscal 1998,
operations in Dublin, Ireland. As a result of our merger with CMC, we acquired
operations in Hermosillo, Mexico and a procurement office in Taiwan. As a result
of our acquisition of GSS Thailand, we acquired operations in Thailand and a
procurement office in Singapore. We expect to expand into other international
regions. We have limited experience in managing geographically dispersed
operations and in operating in

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<PAGE>

Europe, Mexico or Asia. We also purchase a significant number of components
manufactured in foreign countries. Because of the scope of our international
operations, we are subject to the following risks, which could materially impact
our results of operations:

. economic or political instability;
. transportation delays and interruptions;
. foreign exchange rate fluctuations;
. increased employee turnover and labor unrest;
. longer payment cycles;
. greater difficulty in collecting accounts receivable;
. utilization of different systems and equipment;
. difficulties in staffing and managing foreign personnel and diverse
cultures; and
. less developed infrastructures.

In addition, changes in policies by the U.S. or foreign governments could
negatively affect our operating results due to:

. increased duties;
. increased regulatory requirements;
. higher taxation;
. currency conversion limitations;
. restrictions on the transfer of funds;
. the imposition of or increase in tariffs; or
. limitations on imports or exports.

Also, we could be adversely affected if our host countries revise their current
policies encouraging foreign investment or foreign trade.

OUR BUSINESS COULD SUFFER IF WE LOSE THE SERVICES OF, OR FAIL TO ATTRACT, KEY
PERSONNEL.

Our future success largely depends upon the skills and efforts of John A.
Pino, Chairman of the Board, President and Chief Executive Officer, our other
key executives and our managerial, manufacturing, sales and technical employees.
With the exception of Jack O'Rear, Executive Vice President of Operations for
the Americas, Robert Zinn, Executive Vice President - European and Asian Pacific
Operations, Jim Menges, Senior Vice President of Operations - Asia, and a
small number of sales people and international employees, we have not entered
into employment contracts or noncompetition agreements with any of our senior
management or other key employees. We do not maintain or plan to acquire any
key-man life insurance on any of our key personnel. The loss of services of
any of our executive or other key personnel could negatively affect our
business. Our continued growth will also require us to attract, motivate, train
and retain additional skilled and experienced managerial, manufacturing, sales
and technical personnel. We face intense competition for such personnel. We may
not be able to attract, motivate and retain personnel with the skills and
experience needed to successfully manage our business and operations.

WE MAY NOT BE ABLE TO MAINTAIN OUR TECHNOLOGICAL AND MANUFACTURING PROCESS
EXPERTISE.

The markets for our manufacturing services are characterized by rapidly
changing technology and evolving process development. The continued success of
our business will depend upon our ability to:

. maintain and enhance our technological capabilities;
. develop and market manufacturing services which meet changing customer
needs; and
. successfully anticipate or respond to technological changes in
manufacturing processes on a cost-effective and timely basis.

Although we believe that our operations utilize the assembly and testing
technologies, equipment and processes currently required by our customers, we
cannot be certain that we will develop capabilities required by our customers in
the future. Also, the emergence of new technologies, industry standards or
customer requirements may render our equipment, inventory or processes obsolete
or noncompetitive. In addition, we may have to acquire new assembly and testing
technologies and equipment to remain competitive. The acquisition and
implementation of new technologies and equipment may require significant expense
or capital investment. Our failure to anticipate and adapt to our customers'
changing technological needs and requirements would have an adverse effect on
our business.

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WE MAY INCUR SIGNIFICANT LIABILITIES IF WE FAIL TO COMPLY WITH ENVIRONMENTAL
REGULATIONS.

We are subject to environmental regulations relating to the use, storage,
discharge, site cleanup, and disposal of hazardous chemicals used in our
manufacturing processes. If we fail to comply with present and future
regulations, or are required to perform site remediation, we could be subject to
future liabilities or the suspension of production. Present and future
regulations may also:

. restrict our ability to expand our facilities;
. require us to acquire costly equipment; or
. require us to incur other significant costs and expenses.

PRODUCTS WE MANUFACTURE MAY CONTAIN DESIGN OR MANUFACTURING DEFECTS WHICH COULD
RESULT IN REDUCED DEMAND FOR OUR SERVICES AND LIABILITY CLAIMS AGAINST US.

We manufacture products to our customers' specifications which are highly
complex and may at times contain design or manufacturing errors or failures.
Defects have been discovered in products we manufacture in the past and, despite
our quality control and quality assurance efforts, defects may occur in the
future. Defects in the products we manufacture, whether caused by a design,
manufacturing or component failure or error, may result in delayed shipments to
customers or reduced or cancelled customer orders. If these defects occur in
large quantities or too frequently, our business reputation may also be
impaired. In addition, these defects may result in liability claims against us.

OUR OPERATING RESULTS WILL DEPEND ON OUR ABILITY TO MANAGE OUR GROWTH.

We have grown rapidly in recent years and we expect to continue to expand
our operations. This growth has placed, and will continue to place, significant
strain on our management, operations, technical, financial, systems, sales,
marketing and other resources. As our growth continues, we will have to review
and revise our security procedures and operating and financial controls both
domestically and internationally. We will have to continue to invest in both our
manufacturing infrastructure to expand capacity and our operational, financial,
and management information systems. If we fail to manage our expected growth
effectively, the quality of our services and products and our operating results
could suffer significantly.

EXPANSION OF OUR OPERATIONS MAY NEGATIVELY IMPACT OUR BUSINESS.

We may expand our operations by establishing or acquiring new manufacturing
facilities or by expanding capacity in our current facilities. We may expand
both in geographical areas in which we currently operate and in new geographical
areas within the United States and internationally. We acquired operations in
Thailand in August 2000, began operations in a new facility in Massachusetts in
January 2000 and have signed a lease for a new facility in California which is
currently under construction and which will enable us to consolidate and expand
our operations. We expect to begin operations in this new California facility in
the fourth quarter of fiscal 2000. We may not be able to find additional
suitable facilities on a timely basis or on terms satisfactory to us. Expansion
of operations involves numerous business risks, including:

. the inability to successfully integrate additional facilities or
capacity and to realize anticipated synergies, economies of scale or
other value;
. difficulties in the timing of expansions, including delays in the
implementation of construction and manufacturing plans;
. the diversion of management's attention from other business areas
during the planning and implementation of expansions and new
facilities;
. the strain placed on our operational, financial, management, technical
and information systems and resources;
. disruption in manufacturing operations;
. the incurrence of significant costs and expenses; and
. the inability to locate enough customers or employees to support the
expansion or new facility.

Our results of operations could be adversely affected if the revenues associated
with new or expanded facilities are not sufficient to offset the increased
expenditures associated with the new facility or the expansion.

WE MAY FAIL TO SECURE NECESSARY ADDITIONAL FINANCING.

We have made and will continue to make substantial capital expenditures to
expand our operations and remain competitive in the rapidly changing electronics
manufacturing services industry. Our future success may depend on our ability to
obtain

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additional financing and capital to support our continued growth and operations.
We may seek to raise capital by:

. issuing additional common stock or other equity instruments;
. issuing debt securities;
. obtaining additional lease financings;
. increasing our lines of credit; or
. obtaining off-balance sheet financing.

We may not be able to obtain additional capital when we want or need it, and
capital may not be available on satisfactory terms. If we issue additional
equity securities or convertible debt to raise capital, it may be dilutive to
your ownership interest. Furthermore, any additional capital may have terms and
conditions that adversely affect our business, such as financial or operating
covenants.

WE ANTICIPATE THAT OUR NET SALES AND OPERATING RESULTS WILL FLUCTUATE WHICH
COULD AFFECT THE TRADING PRICE OF OUR SECURITIES.

Our net sales and operating results have fluctuated and may continue to
fluctuate significantly from quarter to quarter. A substantial portion of our
net sales in a given quarter may depend on obtaining and fulfilling orders for
assemblies to be manufactured and shipped in the same quarter in which those
orders are received. Further, a significant portion of our net sales in a given
quarter may depend on assemblies configured, completed, packaged and shipped in
the final weeks of such quarter. In addition to the variability resulting from
the short-term nature of our customers' commitments, the following factors may
contribute to such fluctuations:

. fluctuations in demand for our services or the products we
manufacture;
. shipment delays;
. interruptions in manufacturing caused by earthquakes or other natural
disasters;
. effectiveness in controlling manufacturing costs;
. changes in cost and availability of labor and components;
. inefficiencies in managing inventory and accounts receivable,
including inventory obsolescence and write-offs; and
. the levels at which we utilize our manufacturing capacity.

Our operating expenses are based on anticipated revenue levels and a high
percentage of our operating expenses are relatively fixed in the short term. As
a result, any unanticipated shortfall in revenue in a quarter would likely
adversely affect our operating results for that quarter. Also, changes in our
product assembly mix may cause our margins to fluctuate, which could negatively
impact our results of operations for that period. Results of operations in any
period should not be considered indicative of the results to be expected for any
future period. It is likely that in one or more future periods our results of
operations will fail to meet the expectations of securities analysts or
investors, and the price of our securities could decline significantly.

WE MAY INCUR COSTS AND LIABILITIES RELATED TO POTENTIAL OR PENDING LITIGATION.

On February 27, 1998, our company and several of our officers and directors
were named as defendants in a purported securities class action lawsuit filed in
the United States District Court for the District of Massachusetts. The
plaintiffs amended the complaint on October 16, 1998. The plaintiffs purport to
represent a class of all persons who purchased or otherwise acquired our common
stock in the period from April 17, 1997 through March 31, 1998. The amended
complaint alleges, among other things, that the defendants knowingly made
misstatements to the investing public about the value of our inventory and the
nature of our accounting practices. On December 15, 1998, we filed a motion to
dismiss the case in its entirety based on the pleadings. Our motion to dismiss
was granted without prejudice on May 27, 1999, and the case was closed by the
court on June 1, 1999. On June 29, 1999, the plaintiffs filed a motion with the
court seeking permission to file a second amended complaint. We opposed that
motion. On July 13, 1999, the court denied the plaintiffs' motion to amend,
noting "final judgment having entered in the case." On July 26, 1999, the
plaintiffs filed a motion with the court asking the court to extend the 30-day
period for filing an appeal of its ruling dismissing the case. We opposed that
motion as well, and the court denied the motion on August 10, 1999. The
plaintiffs filed an appeal with the United States Court of Appeals for the First
Circuit requesting that the Court of Appeals reverse each of the orders
described above. In an opinion dated May 5, 2000, the Court of Appeals affirmed
in all respects the orders of the District Court that the plaintiffs had
appealed.

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<PAGE>

site with the Tennessee Department of Environment and Conservation. In addition,
CMC agreed to reimburse a tenant of the site $115,000 for expenditures
previously incurred to investigate environmental conditions at the site. CMC
recorded a total provision of $320,000 based on these estimates. In fiscal 1995,
an environmental consultant estimated that the cost of a full study combined
with short- and long-term remediation of the site may cost between $3.0 and $4.0
million. Subsequent environmental studies done in fiscal 1999 have estimated
such costs as between $750,000 and $3.5 million. During CMC's fiscal 1996, the
State of Tennessee's Department of Environment and Conservation named certain
potentially responsible parties in relation to the former facility. CMC was not
named as a potentially responsible party. However, Alcatel, Inc., a potentially
responsible party named by the State of Tennessee's Department of Environment
and Conservation and a former owner of CMC, sought indemnification from CMC
under the purchase agreement by which CMC acquired the stock of one of the
operators of the facility. To date, Alcatel has not filed any legal proceedings
to enforce its indemnification claim. However, Alcatel could initiate such
proceedings and other third parties could assert claims against us relating to
remediation of the site.

We have entered into an agreement with Alcatel pursuant to which the statute of
limitations on its indemnification claim is tolled for a period of time. In the
event any proceedings are initiated or any claim is made, we would defend
ourselves vigorously but defense or resolution of this matter could negatively
impact our financial position and results of operations.

JOHN A. PINO HAS SIGNIFICANT INFLUENCE OVER OUR COMPANY.

John A. Pino, Chairman of the Board, President and Chief Executive Officer,
and a number of trusts for his and his family's benefit, collectively
beneficially own approximately 30.0% of our common stock. As a result, Mr. Pino
is able to exert significant influence over us through his ability to influence
the election of directors and all other matters that require action by our
stockholders. The voting power of Mr. Pino and these trusts could have the
effect of preventing or delaying a change in control of our company, which Mr.
Pino opposes even if our other stockholders believe it is in their best
interests.

THE SIGNIFICANT AMOUNT OF OUR INDEBTEDNESS AFTER THE ACQUISITION OF GSS THAILAND
AND THE CONTEMPLATED ACQUISITION OF BEA COULD ADVERSELY AFFECT OUR FINANCIAL
HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.

Our total senior indebtedness as of June 30, 2000 was approximately $125.5
million. Assuming we had completed the offering of the notes, the contemplated
acquisitions of both of GSS Thailand and BEA and our new credit facility as of
June 30, 2000 and had applied the proceeds of the offering of the notes to
finance the acquisitions of GSS Thailand and BEA and the remainder out of our
available credit facility, we would have had indebtedness on a pro forma basis
that would have been senior in right of payment to the notes of approximately
$338.2 million (based on the debt of GSS Thailand as of February 24, 2000 and
the debt of BEA as of March 31, 2000). In addition, the notes will be
effectively subordinated to all existing and future indebtedness and other
liabilities (including trade payables) of our subsidiaries, including any
subsidiaries which we may acquire or establish in the future. As of June 30,
2000, our subsidiaries had outstanding indebtedness and other liabilities
(including trade payables) of $113.2 million.

Our leverage could have important consequences to you. For example, it
could:

. make it more difficult for us to satisfy our obligations with respect
to the notes or our other indebtedness;

. increase our vulnerability to general adverse economic and industry
conditions;

. limit our ability to fund future working capital, capital
expenditures, acquisitions and other general corporate requirements;

. limit our flexibility in planning for, or reacting to, changes in our
business and industry; and

. limit our ability to borrow additional funds.

Any additional borrowings would further increase the amount of our
leverage and the associated risks.

THE NOTES ARE SUBORDINATED TO OUR OTHER INDEBTEDNESS.

The notes are unsecured and subordinated in right of payment to all of our
existing and future senior indebtedness. As of June 30, 2000, we had
approximately $125.5 million of senior indebtedness outstanding. Assuming we had
completed the offering of the notes, the contemplated acquisitions of both of
GSS Thailand and BEA and our new credit facility as of June 30, 2000 and had
applied the proceeds of the offering of the notes to finance the acquisitions of
GSS Thailand and BEA and the remainder out of our available credit facility, we
would have had approximately $338.2 million of indebtedness outstanding on a pro
forma basis (based on the debt of GSS Thailand as of February 24, 2000 and the
debt of BEA as of March 31, 2000) that would have

21
<PAGE>

been senior in right of payment to the notes. In June 2000, we entered into a
new credit facility, which is secured by substantially all of our assets. Any
additional borrowings under the new credit facility would also constitute
additional senior indebtedness. As a result of this subordination, in the event
of bankruptcy, liquidation or reorganization or certain other events, our assets
will be available to pay obligations on the notes only after all senior
indebtedness has been paid in full, and we may not have sufficient assets
remaining to pay amounts on any or all of the notes then outstanding. In
addition, the notes will be effectively subordinated to all existing and future
indebtedness and other liabilities (including trade payables) of our
subsidiaries, including any subsidiaries which we may acquire or establish in
the future. As of June 30, 2000, our subsidiaries had outstanding indebtedness
and other liabilities (including trade payables) of $113.2 million. Our right to
receive assets of one of our subsidiaries upon its liquidation or reorganization
(and the consequent right of the holders of the notes to participate in those
assets) would be effectively subordinated to the claims of a subsidiary's
creditors (including trade creditors), except to the extent that we are
recognized as a creditor of a subsidiary. In that case, our claims would still
be subordinate to any security interests in the assets of that subsidiary.

THE NOTES ARE NOT PROTECTED BY RESTRICTIVE COVENANTS THAT LIMIT OUR BUSINESS
ACTIVITIES.

The indenture governing the notes does not contain any financial covenants
or restrictions on the payment of dividends, the incurrence of indebtedness,
including senior indebtedness, or the issuance or repurchase of securities by us
or any of our subsidiaries. The indenture contains no covenants or other
provisions to afford protection to holders of the notes in the event of a highly
leveraged transaction except to a certain extent.

WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS.

Our ability to service our indebtedness, including the notes, and to fund
planned capital expenditures, development and operating costs will depend on our
ability to generate cash in the future through sales of our services. Our
available liquidity may not be sufficient to service our indebtedness, including
the notes or to fund our other cash needs. We may need to refinance all or a
portion of our indebtedness, including the notes, on or before maturity but we
may not be able to do so on commercially reasonable terms, or at all. Without
sufficient funds to service our indebtedness, we would have serious liquidity
constraints and would need to seek additional financing from other sources, but
we may not be able to do so on commercially reasonable terms, or at all.

WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO PURCHASE THE NOTES IN THE EVENT
OF A CHANGE IN CONTROL.

In the event of a change of control, each holder of notes will have the
right, at the holder's option, to require us to purchase all or any part of such
holder's notes. We may not have sufficient financial resources and may not be
able to arrange financing to pay the purchase price of such notes. Our ability
to purchase the notes in such event may be limited by law, the indenture and the
terms of other agreements relating to borrowings that constitute senior
indebtedness, as such indebtedness or agreements may be entered into, replaced,
supplemented or amended at any time or from time to time without the consent of
the holders of the notes. We may be required to refinance our senior
indebtedness in order to make any such payment. We may not have the financial
ability to purchase the notes in the event payment of our senior indebtedness is
accelerated. The term "change in control" is limited to certain specified
transactions and may not include other events that might adversely affect our
financial condition or result in a downgrade of the credit rating of the notes,
nor would the requirement that we offer to purchase the notes upon a change in
control necessarily afford holders of the notes protection in the event of a
highly leveraged transaction, reorganization, merger or similar transaction.

WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP OR BE MAINTAINED
FOR THE NOTES.

The notes were issued in April and May 2000 to a small number of
purchasers. The initial purchasers of the notes have informed us that they
intend to make a market in the notes. However, the initial purchasers may cease
their market-making at any time. In addition, the liquidity of the trading
market in the notes, and the market price quoted for the notes, may be adversely
affected by changes in the overall market for high yield securities and by
changes in our financial performance or prospects or in the prospects for
companies in our industry generally. As a result, you cannot be sure that an
active trading market will develop or be maintained for the notes.

THE PRICE OF OUR SECURITIES HAS BEEN AND MAY CONTINUE TO BE VOLATILE.

The trading price of our common stock has been and the trading price of our
common stock and the notes may continue to be volatile. From October 1, 1998
through August 8, 2000, our stock price fluctuated between a low of $5.06 per
share and a high of $57.38 per share. On August 8, 2000, the reported last sale
price for our common stock was $37.6875. The price of our common

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<PAGE>

stock and the notes may fluctuate significantly in response to a number of
events and factors relating to our company, our competitors and the market for
our services, many of which are beyond our control, such as:

. quarterly variations in our operating results;
. announcements of new technological innovations, equipment or service
offerings by us or our competitors;
. announcements of new products or enhancement by our customers;
. changes in financial estimates and recommendations by securities
analysts; and
. news relating to trends in our markets.

In addition, the stock market in general, and the market prices for
technology companies in particular, have experienced extreme volatility that
often has been unrelated to the operating performance of these companies. These
broad market and industry fluctuations may adversely affect the market price of
our common stock and the notes, regardless of our operating performance.

Recently, when the market price of a security has been volatile, holders of
that security have often instituted securities class action litigation against
the company that issued the security. We have been the subject of such a
lawsuit. If any of our stockholders brought another securities class action
lawsuit against us, we could incur substantial additional costs defending that
lawsuit. The lawsuit could also divert the time and attention of our management
and an adverse judgment could cause our financial condition or operating results
to suffer.

IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY, AND THIS COULD
DEPRESS THE TRADING PRICE OF OUR SECURITIES.

Massachusetts corporate law and our articles of organization and by-laws
contain provisions that could have the effect of delaying, deferring or
preventing a change in control of our company or our management. These
provisions could discourage proxy contests and make it more difficult for you
and other stockholders to elect directors and take other corporate actions.
These provisions could also limit the price that investors might be willing to
pay in the future for shares of our common stock and notes. These provisions:

. authorize the issuance of "blank check" preferred stock, which is
preferred stock that can be created and issued by our board of
directors without prior stockholder approval, with rights senior to
those of common stock;
. provide for a staggered board of directors, so that it would take
three successive annual meetings to replace all directors;
. require unanimity for stockholder action by written consent; and
. establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can
be acted upon by stockholders at a meeting.

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<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in interest rates and foreign currency exchange
primarily in its cash, debt and foreign currency transactions. We do not hold
derivative financial instruments for trading or speculative purposes.

We have a $150.0 million revolving loan which bears interest at variable
interest rates. Our exposure related to adverse movements in interest rates is
primarily derived from the variable rate on our revolving loan. As of June 30,
2000, $80.0 million of the outstanding balance on the revolving loan was at an
interest rate of 9.14% and the remaining $42.5 million was at 11.00%. An adverse
change of one percent in the interest rate would cause a change in interest
expense of approximately $1.2 million on an annual basis. We have a $100.0
million term loan available with an interest rate based on either the Prime Rate
or the Eurocurrency Rate. The effective interest rate that the lenders will
charge us under the term loan will vary depending upon our financial condition.
As of June 30, 2000, there was no outstanding balance under the term loan.

The foreign currencies to which we have exchange rate exposure are the
Irish punt, the Mexican peso and the Thai baht. At June 30, 2000, international
operations did not constitute a significant portion of our net sales and
therefore this exposure was not considered material to us.

Based on a hypothetical ten percent adverse movement in foreign currency
exchange rates, the potential losses in future earnings, fair value of the risk-
sensitive financial instruments and cash flows are immaterial. However, the
actual effects of interest rates and foreign currency exchange rates may differ
materially from the hypothetical analysis.

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<PAGE>

PART II. OTHER INFORMATION

ITEM 2. RECENT SALE OF UNREGISTERED SECURITIES

In April and May 2000, the Company sold $100.0 million of 7% Convertible
Subordinated Notes due April 15, 2007 in a private placement to four qualified
institutional buyers in accordance with Rule 144A under the Securities Act of
1933, as amended. The Company received net proceeds from the sale of the notes
of $95.6 million. The Company used $86.6 million of the net proceeds to acquire
GSS Thailand in August 2000 and the remainder for working capital. The notes are
unsecured obligations of the Company and will mature on April 15, 2007. The
notes are contractually subordinated in right of payment to all our existing and
future senior indebtedness.

Holders of the notes may convert the notes into shares of common stock at
any time prior to the maturity at an initial conversion price of $42.90 per
share, subject to adjustment; provided that a holder's right to convert a note
called for redemption will terminate on the business day immediately preceding
the redemption date. The Company may redeem some or all of the notes at any time
on or after October 20, 2001 and prior to April 20, 2003 at a redemption price
equal to 100% of the principal amount of the notes to be redeemed, plus accrued
and unpaid interest to the redemption date, if (1) the closing price of the
Company's common stock has exceeded 140% of the conversion price of the notes
for at least 20 of the 30 trading days prior to the mailing of the redemption
notice, and (2) in accordance with the terms of the Registration Rights
Agreement, the shelf registration statement covering resales of the notes and
the common stock issuable upon conversion of the notes is effective and
available for use and expected to remain effective and available for use for the
30 days following the provisional redemption date. On and after April 20, 2003,
the Company may also redeem the notes at any time at the Company's option, in
whole or in part, at the redemption prices shown in the note, plus accrued
interest, if any.

The Company subsequently registered the 7% Convertible Subordinated Notes
on a Registration Statement on Form S-3 (File No. 333-41406), which was declared
effective on August 4, 2000.

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

The annual meeting of stockholders was held on May 15, 2000. Three
proposals were submitted to stockholders as described in the Company's proxy
statement dated April 4, 2000. The following is a brief description of the
matters voted upon, the number of votes cast for and against each proposal, and
the number of abstentions.

(a) To elect two members of the Board of Directors to serve for three year
terms as Class II Directors or until a successor has been duly elected
and qualified, or until a earlier resignation or removal.

Nominee: John A. Pino Frederick W. Gibbs
Votes for Nominee: 15,127,344 15,127,344
Votes Against Nominee: 209,630 209,630
Votes Unvoted: 994,417 994,417

(a) To approve and adopt the amendment to the Restated Articles of
Organization to increase the number of authorized shares of common
stock from 50,000,000 to 100,000,000, $.01 par value per share.

Votes For: 14,822,413
Votes Against: 379,630
Abstain: 134,895
Votes Unvoted: 994,417

(a) To ratify the selection of the firm of Deloitte & Touche LLP as
independent auditors for the fiscal year ending December 31, 2000.

Votes For: 15,199,872
Votes Against: 909
Abstain: 136,157
Votes Unvoted: 994,417

The term of office for the following directors continued after the
meeting:

Edward T. Cuddy (Class I), Donald G. Polich (Class I), Bruce R.
Gardner (Class III) and David S. Lee (Class III).

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

10.1 Credit Agreement among ACT Manufacturing, Inc., The Several Lenders from
Time to Time Parties Thereto, Credit Suisse First Boston as Syndication
Agent, Societe Generale as Documentation Agent and The Chase Manhattan
Bank as Administrative Agent dated as of June 29, 2000
10.2 Guarantee and Collateral Agreement among ACT Manufacturing, Inc., Certain
of its Subsidiaries and The Chase Manhattan Bank dated as of June 29,
2000
10.3 Form of Term Note
10.4 Form of Multi-Currency Revolving Credit Note
10.5 Form of U.S. Dollar Revolving Credit Note
10.6 Master Equipment Lease Agreement No. 35018 between Fleet Capital
Corporation and ACT Manufacturing, Inc. dated June 6, 2000
11 Computation of Net Income Per Common Share
21 Subsidiaries
27 Financial Data Schedule

(b) Reports on Form 8-K:

The Registrant filed a report on Form 8-K on August 9, 2000, which
announced that the Company completed the acquisition of 99.02% of the
issued shares and outstanding options of GSS Array Technology Public
Company Limited for the purchase price of approximately $86.6 million.

The Registrant filed a report on Form 8-K on July 14, 2000, which reported
that the Company entered into a Share Purchase Agreement to acquire all of
the issued shares of Bull Electronics Angers S.A. for the purchase price of
approximately $56.6 million.

The Registrant filed a report on Form 8-K on April 6, 2000, which announced
that it intended to raise approximately $100.0 million through an offering
of convertible subordinated notes to qualified institutional buyers.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

August 10, 2000 ACT MANUFACTURING, INC.

/s/ JEFFREY B. LAVIN
--------------------

Jeffrey B. Lavin
Vice President of Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

EXHIBIT DESCRIPTION
------- -----------

10.1 Credit Agreement among ACT Manufacturing, Inc., The Several Lenders
from Time to Time Parties Thereto, Credit Suisse First Boston as
Syndication Agent, Societe Generale as Documentation Agent and The
Chase Manhattan Bank as Administrative Agent dated as of June 29, 2000
10.2 Guarantee and Collateral Agreement among ACT Manufacturing, Inc.,
Certain of its Subsidiaries and The Chase Manhattan Bank dated as of
June 29, 2000
10.3 Form of Term Note
10.4 Form of Multi-Currency Revolving Credit Note
10.5 Form of U.S. Dollar Revolving Credit Note
10.6 Master Equipment Lease Agreement No. 35018 between Fleet Capital
Corporation and ACT Manufacturing, Inc. dated June 6, 2000
11 Computation of Net Income Per Common Share
21 Subsidiaries
27 Financial Data Schedule