ACT MANUFACTURING INC, 10-Q, 2000-11-14

ACT MANUFACTURING INC
10-Q, 2000-11-14
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 September 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 17,038,742 Shares
------------ -----------------
(Class) (Outstanding on November 10, 2000)

<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION

<S> <C>
Item 1. Financial Statements (unaudited):

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

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

Condensed Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999................................................... 4

Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999................................... 5

Notes to Unaudited Condensed Consolidated Financial Statements...... 6

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 12

Item 3. Quantitative and Qualitative Disclosures about Market Risk.......... 27

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.................................... 28

Signatures.......................................................... 29

Exhibit Index....................................................... 30

</TABLE>

2
<PAGE>

PART I. FINANCIAL INFORMATION

ACT MANUFACTURING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data - unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $ 368,515 $ 180,105 $ 850,573 $ 483,571
Cost of goods sold............................... 335,203 165,283 774,571 447,253
--------- --------- --------- ---------
Gross profit..................................... 33,312 14,822 76,002 36,318

Selling, general and administrative expenses..... 12,260 7,085 29,509 21,465
Amortization of goodwill........................ 1,395 120 1,867 342
Merger costs..................................... -- 5,601 -- 5,601
--------- --------- --------- ---------
Operating income................................. 19,657 2,016 44,626 8,910
--------- --------- --------- ---------

Interest and other expense, net.................. 5,701 1,228 9,066 3,250
--------- --------- --------- ---------

Income before provision for income taxes......... 13,956 788 35,560 5,660

Provision for income taxes....................... 5,756 2,536 14,182 4,530
--------- --------- --------- ---------

Net income (loss)................................ $ 8,200 $ (1,748) $ 21,378 $ 1,130
========= ========= ========= =========

Basic net income (loss) per common share......... $ 0.48 $ (0.13) $ 1.28 $ 0.09
========= ========= ========= =========
Diluted net income (loss) per common share...... $ 0.45 $ (0.13) $ 1.17 $ 0.08
========= ========= ========= =========
Weighted average shares outstanding -- basic..... 16,919 12,990 16,728 12,880
Weighted average shares outstanding -- diluted... 18,256 12,990 18,239 13,500
</TABLE>

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands - unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
2000 1999 2000 1999
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss)........................ $ 8,200 $ (1,748) $ 21,378 $ 1,130
Other comprehensive (loss) income:
Foreign currency translation adjustment.. (298) -- (614) 81
-------- --------- -------- --------
Comprehensive income (loss).............. $ 7,902 $ (1,748) $ 20,764 $ 1,211
======== ========= ======== ========
</TABLE>

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

3
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
2000 1999
----------- -----------
ASSETS

<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......................... $ 51,073 $ 4,558
Accounts and notes receivable, net................ 364,272 160,830
Inventory......................................... 410,283 171,762
Deferred tax asset................................ 2,089 1,252
Prepaid expenses and other assets................. 21,220 2,925
----------- -----------
Total current assets............................ 848,937 341,327
----------- -----------
PROPERTY AND EQUIPMENT--Net......................... 70,205 38,047
INVESTMENT IN AND NOTES RECEIVABLE FROM AFFILIATE... 1,061 6,434
DEFERRED TAX ASSET.................................. 2,257 --
GOODWILL--Net....................................... 147,739 10,334
OTHER ASSETS--Net................................... 19,118 6,184
----------- -----------
TOTAL............................................... $ 1,089,317 $ 402,326
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Notes payable bank................................ $ 25,905 $ --
Current portion of long-term debt and
other liabilities............................ 24,531 4,097
Accounts payable.................................. 376,789 153,764
Advance from customer............................. 50,000 --
Due to Bull SA.................................... 41,166 --
Accrued compensation and related taxes............ 8,220 3,769
Deferred tax liability............................ 253 253
Accrued expenses and income tax payable........... 39,141 9,024
----------- -----------
Total current liabilities....................... 566,005 170,907
----------- -----------

LONG-TERM DEBT--less current portion................ 205,464 46,933
CONVERTIBLE SUBORDINATED NOTES...................... 100,000 --
DEFERRED TAX LIABILITY.............................. 5,444 2,735
OTHER LONG-TERM LIABILITES.......................... 7,563 3,622
CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:
Common stock...................................... 170 165
Additional paid-in capital........................ 163,830 157,887
Accumulated other comprehensive loss.............. (1,251) (637)
Retained earnings................................. 42,092 20,714
----------- -----------
Total stockholders' equity...................... 204,841 178,129
----------- -----------

TOTAL............................................... $ 1,089,317 $ 402,326
=========== ===========

</TABLE>

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

4
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands - unaudited)
<TABLE>
<CAPTION>

Nine Months Ended
September 30,
-----------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 21,378 $ 1,130
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization........................... 9,411 4,932
Deferred income taxes................................... 221 --
Gain on the sale of investment in affiliate............. (894) --
Changes in operating assets and liabilities:
Accounts receivable..................................... (147,352) 3,193
Inventory............................................... (94,287) (38,800)
Prepaid expenses and other assets....................... (7,584) (906)
Accounts payable........................................ 80,814 10,324
Advance from customer................................... 50,000 --
Accrued expenses and other.............................. 17,408 4,562
--------- ---------
Net cash used for operating activities.................... (70,885) (15,565)

Cash flows from investing activities:
Acquisition of property and equipment..................... (6,998) (4,219)
Proceeds from the sale of investment in affiliate......... 6,417 --
Increase in other assets.................................. (12,789) (1,331)
Acquisitions, net of cash acquired........................ (136,073) --
--------- ---------
Net cash used for investing activities...................... (149,443) (5,550)

Cash flows from financing activities:
Net borrowings under line-of-credit agreements............ 93,861 13,741
Proceeds from the sale of convertible subordinated notes.. 100,000 --
Net borrowings on term loan............................... 68,640 7,000
Decrease in other liabilities............................. (2,754) (3,769)
Net proceeds from sale of stock........................... 5,948 1,964
--------- ---------
Net cash provided by financing activities................... 265,695 18,936

Effect of exchange rate changes on cash and equivalents..... 1,148 81
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 46,515 (2,098)
Cash and cash equivalents, beginning of period.............. 4,558 6,406
--------- ---------
Cash and cash equivalents, end of period.................... $ 51,073 $ 4,308
========= =========
</TABLE>

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

5
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

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 for a fair presentation of results for these
interim periods. Certain information and footnote disclosures normally included
in ACT Manufacturing Inc.'s ("the Company") annual consolidated financial
statements have been condensed or omitted. The unaudited interim condensed
consolidated financial statements have been prepared on a basis substantially
consistent with the audited consolidated financial statements. The results of
operations for the interim period ended September 30, 2000 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 ended
December 31, 1999 filed with the Securities and Exchange Commission.

Basis of Consolidation

The accompanying unaudited interim condensed consolidated financial statements
include the accounts of ACT Manufacturing, Inc. and its majority-owned
subsidiaries. All intercompany balances and transactions have been eliminated.

2. ACQUISITION ACTIVITY

On August 2, 2000, we purchased 99.02% of the issued shares and outstanding
options of GSS Array Technology Public Company Limited ("GSS Thailand") for a
purchase price of approximately $86.7 million. On August 31, 2000, we purchased
all of the issued shares of Bull Electronics Angers S.A. ("BEA") for a purchase
price of approximately $56.6 million, plus a working capital adjustment based on
the August 31, 2000 closing balance sheet of BEA. Currently, we anticipate that
the working capital adjustment will approximate $41.2 million which we expect to
pay in December 2000.

The GSS Thailand and BEA acquisitions have both been accounted for under the
purchase method of accounting, and accordingly, the results of operations of GSS
Thailand and BEA have been included in our condensed consolidated financial
statements from the respective date of acquisition. GSS Thailand will maintain
its November 24 fiscal year; accordingly, approximately one month (August 2000)
of its operations are included in our third quarter fiscal 2000 actual results.
BEA's fiscal year is December 31; accordingly, one month (September 2000) of its
operations are included in our third quarter fiscal 2000 actual results. The
respective purchase prices have been allocated to the net assets acquired based
upon their fair values. For both the GSS Thailand and BEA acquisitions, the
purchase price exceeded the respective fair value of the assets acquired and
liabilities assumed resulting in goodwill being recorded. Such goodwill is
amortized over its estimated useful life of ten years.

Below are tables of the purchase price and purchase price allocation for GSS
Thailand and BEA as of September 30, 2000. The purchase price and purchase
price allocation are subject to change.

Purchase price (in thousands): GSS Thailand BEA Total
------------------------------ ------------ --- -----
<S> <C> <C> <C>
Cash paid at closing................. $ 86,692 $ 56,600 $143,292
Estimated working capital adjustment
payable........................... -- 41,166 41,166
Estimated transaction costs.......... 4,108 3,534 7,642
-------- -------- --------
Total purchase price.............. $ 90,800 $101,300 $192,100
======== ======== ========

Purchase price allocation (in thousands):
Fair value of net assets acquired.... $ (8,055) $ 60,911 $ 52,856
Goodwill and other intangibles....... 98,855 40,389 139,244
-------- -------- --------
Total purchase price allocation... $ 90,800 $101,300 $192,100
======== ======== ========
</TABLE>

6
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

The following unaudited supplemental pro forma condensed combined financial
information is provided to reflect net sales, net loss and net loss per common
share as if the consummation of the GSS Thailand and BEA acquisitions had taken
place at the beginning of each period presented below. We have not provided
supplemental pro forma information for the nine months ended September 30, 1999
because such information was not available nor reasonably obtainable.

(in thousands, except per share data)
(unaudited)

For the Nine For the
Months Ended Year Ended
September 30, 2000 December 31, 1999
------------------ -----------------

Net sales.................. $ 1,187,934 $ 1,159,585
=========== ===========

Net loss................... $ (4,339) $ (25,683)
=========== ===========

Net loss per common share.. $ (0.26) $ (1.94)
=========== ===========

3. BANK FINANCING

On June 29, 2000, the Company entered into a Credit Agreement with a
syndicate of financial institutions led by The 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 ($75.0 million of
which the Company used to acquire BEA and $25.0 million of which the Company may
use to refinance the debt of 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 The Chase
Manhattan Bank or the prevailing rates in the Eurocurrency market. The Company
must repay all revolving loans by June 28, 2005. The Company borrowed the $75.0
million French portion of the term loans on August 31, 2000 and is required to
borrow the $25.0 million Thai portion of the term loans, if at all, by December
29, 2000. The Company is required to repay all term loans in quarterly
installments from December 31, 2000 through June 28, 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, among other things, to incur
debt, grant liens, dispose of its properties, pay dividends, make capital
expenditures or investments or enter into mergers or acquisitions.

7
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

At September 30, 2000, $137.5 million of the revolving loans was utilized and
an additional $10.4 million was available for use based upon the applicable
borrowing base. At September 30, 2000, $75.0 million of the term loan was
utilized and $25.0 million was available for use. At September 30, 2000, $80.0
million of the revolving loans was at an interest rate of 9.12% and the
remaining $37.5 million was at an interest rate of 11.00%. The interest rate on
the term loan was 11.00%.

GSS Thailand has working capital credit facilities with various financial
institutions aggregating $33.1 million, of which $26.0 million was outstanding
as of September 30, 2000. Their working capital credit facilities bear interest
at LIBOR plus 3% to LIBOR plus 4%.

GSS Thailand also has a loan outstanding denominated in Thai BAHT. As of
September 30, 2000, the outstanding balance was BAHT 160 million ($3.9 million).
The Thai BAHT loan requires monthly principal payments of BAHT 4.6 million
($108,000) with the final payment due July 2003. Interest on the Thai BAHT loan
is payable monthly at a floating rate currently equal to 8%.

GSS Thailand also has a loan outstanding in the amount of $10.5 million. The
original amount of the loan, when issued in October 1996, was $24.0 million. The
loan agreement provides for quarterly principal and interest payments over the
four-year term with interest charged at a rate of LIBOR plus 3%. The loan
contract maturity date was October 16, 2000. GSS Thailand is currently past due
on principal payments on this loan. Additionally, GSS Thailand's debt to equity
ratio exceeded that contained in the loan agreement. The financial institutions
party to this loan also provide $24.5 million of the working capital facility
above, as well as, the Thai BAHT loan above. The lenders may enforce their
rights under the loan agreement to call the debt at any time. Accordingly, we
presented the long-term liabilities related to these loan agreements as current
liabilities under the heading "Notes payable bank" in our condensed consolidated
balance sheet as of September 30, 2000.

The GSS Thailand credit facilities and loans are secured by a pledge of GSS
Thailand's fixed deposits and by a mortgage of its land, buildings, machinery
and equipment.

The financial institutions providing credit facilities to GSS Thailand have
taken no action with regard to any defaults under the loan agreements, nor have
they accelerated payments or maturities. No assurances can be given that they
will not exercise their rights under the loan agreements. We are currently in
discussions with the financial institutions to renegotiate or refinance the
Thailand credit facilities.

On November 2, 2000, BEA entered into a new Credit Agreement with a syndicate
of financial institutions led by Societe Generale. The Credit Agreement provides
that the lenders will make available to the Company up to approximately $10.7
million of revolving loans. The Credit Agreement is unsecured and interest is
payable monthly at an interest rate based on the rates in the Eurocurrency
market.

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):

September 30, December 31,
2000 1999
---- ----
Raw material..................... $345,276 $125,869
Work in process.................. 43,004 42,039
Finished goods................... 22,003 3,854
-------- --------

Total........................... $410,283 $171,762
======== ========

8
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

6. NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share is computed by dividing net income
(loss) available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted net income (loss) 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 (loss) 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):

Net Income Weighted Net Income
(Loss) Average Shares (Loss) Per
(Numerator) (Denominator) Share
----------- ------------- -----
<S> <C> <C> <C>
Three Months Ended September 30, 2000
Basic............................... $ 8,200 16,919 $ 0.48
========

Effect of stock options............. 1,337 (0.03)
------ --------

Diluted............................. $ 8,200 18,256 $ 0.45
======== ====== ========

Three Months Ended September 30, 1999
Basic............................... $ (1,748) 12,990 $ (0.13)
========

Effect of stock options............. -- --
------ --------

Diluted............................. $ (1,748) 12,990 $ (0.13)
======== ====== ========

Nine Months Ended September 30, 2000
Basic............................... $ 21,378 16,728 $ 1.28
========

Effect of stock options............ 1,511 (0.11)
------ --------

Diluted............................. $ 21,378 18,239 $ 1.17
======== ====== ========

Nine Months Ended September 30, 1999
Basic............................... $ 1,130 12,880 $ 0.09
========

Effect of stock options............. 620 (0.01)
------ --------

Diluted............................. $ 1,130 13,500 $ 0.08
======== ====== ========

</TABLE>

For both the three-month and nine-month periods ended September 30, 2000, the
conversion of the convertible subordinated notes was excluded from the
computation of diluted EPS as their inclusion would have been antidilutive. For
both the three-month and nine-month periods ended September 30, 1999, options to
purchase shares of common stock totaling 552,411 and 597,678, respectively, were
outstanding at the end of the periods, but were not included in the computation
of diluted EPS. The exercise prices on these options were either greater than
the average market price for the common stock or there was a net loss for the
period, and, therefore, their effect would be antidilutive.

9
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(continued)

7. SEGMENT REPORTING

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 nine
months ended September 30, 2000 and 1999 is as follows (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
-------- -------- -------- --------
Printed circuit boards... $356,267 $172,996 $819,651 $461,037
Cable and harness........ 12,248 7,109 30,922 22,534
-------- -------- -------- --------
Total.................... $368,515 $180,105 $850,573 $483,571
======== ======== ======== ========

As discussed in Note 2 to these condensed consolidated financial statements,
during the three months ended September 30, 2000, we acquired GSS Thailand and
BEA. Approximately one month of each of these operations has been included in
our condensed consolidated financial results for the three months ended
September 30, 2000. Financial and operational integration of these acquisitions
is currently underway. While this integration is continuing, we are operating
our business as a single segment reporting entity, but are evaluating the
integration of our new acquisitions and their impact if any, on the overall
decision making of the Company. This evaluation process will likely be completed
during the fourth quarter of 2000, at which time we will decide whether
additional segment reporting information is appropriate.

8. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, and 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 in the beginning
phase of the implementation process to adopt this Standard and therefore 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 requires companies to report any changes in revenue recognition as a
cumulative effect from a change in accounting principles at the time of
adoption. The Company adopted SAB No. 101 on October 1, 2000, as required, and
has concluded that SAB No. 101 did not have any effect on the Company's revenue
recognition policies and practices.

In September 2000, FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Under SFAS No. 140, after a
transfer of financial assets, an entity recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes financial
assets when control has been surrendered, and derecognizes liabilities when
extinguished. SFAS No. 140 also provides standards for distinguishing transfers
of financial assets that are sales from transfers that are secured borrowings.
SFAS No. 140 is effective for certain transactions and certain disclosures in
the fiscal year ending December 31, 2001. The Company is currently evaluating
the impact of SFAS No. 140 on its financial statements and related disclosures,
but does not expect that any impact will be material.

9. CONTINGENCIES

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 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

10
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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 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 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.

11
<PAGE>

ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 both 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 processes 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 eleven facilities having an aggregate of
approximately 1.5 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, a 240,000 square foot manufacturing facility in Thailand and an
approximately 230,000 square foot manufacturing facility in Angers, France. 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 first quarter of 2001. We are also in the planning stages of
adding capacity in our Mexico facility and plan on opening an 80,000 square foot
new products introduction, prototype and manufacturing facility in Dallas,
Texas. We expect to complete both this expansion in Mexico and the new facility
in Texas in the second quarter of fiscal 2001. Our facilities contained 102
surface mount technology lines at September 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.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

Our net sales increased $188.4 million or 104.6% to $368.5 million for the
three-month period ended September 30, 2000 compared with $180.1 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
$111.4 million from existing customers as well as new customers in the
networking and telecommunications market, the inclusion of BEA net sales of
$55.2 million for approximately one month of operations following its
acquisition on August 31, 2000, and the inclusion of GSS Thailand net sales of
$18.2 million for approximately one month of operations following its
acquisition on August 2, 2000.

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 97%
for the three-month period ended September 30, 2000 compared to approximately
96% for the comparable period in 1999. Net sales in the cable and harness
assembly service offering accounted for approximately 3% of net sales for the
three-month period ended September 30, 2000 compared to approximately 4% of net
sales for the comparable period in 1999.

Gross profit increased $18.5 million or 124.7% to $33.3 million for the three
months ended September 30, 2000 compared with $14.8 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 September 30, 2000 from 8.2% for
the three months ended September 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. Gross margin for the three months ended September 30, 2000 was
impacted negatively by higher costs attributable to overtime and overhead costs
to process parts received late in the quarter to meet customer requirements. In
the three months ended September 30, 2000, our overall gross margin benefited
from the approximately one month inclusion of both GSS Thailand and BEA, as our
gross margin before their inclusion was 8.7%.

Selling, general and administrative ("SG&A") expenses increased $5.2 million
or 73.2% to $12.3 million, or 3.3% of net sales, for the three months ended
September 30, 2000 compared with $7.1 million, or 3.9% of net sales, for the
three months ended September 30, 1999. 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. SG&A expenses increased in absolute dollars due to
our acquisitions of BEA and GSS Thailand and the additional spending in
corporate infrastructure to support our larger revenue base. We expect to
continue additional spending for corporate infrastructure to support our larger
revenue base over the next several quarters.

Amortization of goodwill increased $1.3 million to $1.4 million for the three
months ended September 30, 2000 compared to $0.1 million for the three months
ended September 30, 1999. The increase is due to the additional goodwill
amortization resulting from the purchases of GSS Thailand and BEA.

A charge of $5.6 million in fiscal 1999 for merger costs related to the July
29, 1999 merger with CMC Industries, Inc. consisted primarily of investment
banking, legal, accounting, printing and integration expenses and certain other
fees and expenses directly related to the merger.

Operating income increased $17.6 million to $19.7 million, or 5.3% of net
sales, for the three months ended September 30, 2000 compared with operating
income of $2.0 million, or 1.1% of net sales, for the comparable period in 1999
as a result of the above factors.

Interest and other expense, net increased 364.3% to $5.7 million for the three
months ended September 30, 2000 compared to $1.2 million for the three months
ended September 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 September 30, 2000. Also included in interest and other
expense, net for the three months ended September 30, 2000 is $1.8 million of
interest incurred on our 7% convertible subordinated notes, offset by $0.9
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 for the three months ended September 30, 2000 is
$0.6 million of interest incurred on our $75.0 million term loan, which was
drawn on August 31, 2000.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

We recorded a provision for income taxes of $5.8 million and $2.5 million for
the three months ended September 30, 2000 and 1999, respectively. In the three
months ended September 30, 2000, we provided for income taxes using a 37.5%
effective tax rate, excluding goodwill charges, which are not deductible for tax
purposes. In the three months ended September 30, 1999, we provided for income
taxes using a 40% effective tax rate, excluding merger costs, which are not
deductible for tax purposes. In Thailand, we currently operate under a "tax
holiday" that will expire in 2002 unless it is renewed. Upon the expiration of
the "tax holiday" we will become subject to taxation at a rate of 30% per annum
in Thailand. The rate at which income taxes will be provided in future periods
will depend on taxable income by tax jurisdiction.

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

Our net sales increased $367.0 million or 75.9% to $850.6 million for the
nine-month period ended September 30, 2000 compared with $483.6 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
$287.3 million from existing customers as well as new customers in the
networking and telecommunications market, the inclusion of BEA net sales of
$55.2 million for approximately one month of operations following its
acquisition on August 31, 2000, and the inclusion of GSS Thailand net sales of
$18.2 million for approximately one month of operations following its
acquisition on August 2, 2000.

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 nine-month period ended September 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 nine-month
period ended September 30, 2000 compared to approximately 5% of net sales for
the comparable period in 1999.

Gross profit increased $39.7 million or 109.3% to $76.0 million for the nine
months ended September 30, 2000 compared with $36.3 million for the comparable
period in 1999. Gross margin increased to 8.9% for the nine months ended
September 30, 2000 from 7.5% for the nine months ended September 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.

SG&A expenses increased $8.0 million or 37.5% to $29.5 million, or 3.5% of net
sales, for the nine months ended September 30, 2000 compared with $21.5 million,
or 4.4% of net sales, for the nine months ended September 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 due to the expenses related to our acquisitions of
BEA and GSS Thailand and the additional spending in corporate infrastructure to
support our larger revenue base. We expect to continue additional spending for
corporate infrastructure to support our larger revenue base over the next
several quarters.

Amortization of goodwill increased $1.5 million or 445.9% to $1.9 million for
the nine months ended September 30, 2000 compared to $0.3 million for the nine
months ended September 30, 1999. The increase is due to the additional goodwill
amortization resulting from the purchases of GSS Thailand and BEA.

Merger costs of $5.6 million related to the July 29, 1999 merger with CMC
Industries, Inc. were recorded for the nine-month period ended September 30,
1999. These merger costs consisted primarily of investment banking, legal,
accounting, printing, and integration expenses and other fees and expenses
directly related to the merger.

Operating income increased $35.7 million to $44.6 million, or 5.2% of net
sales, for the nine months ended September 30, 2000 compared with operating
income of $8.9 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 179.0% to $9.1 million for the nine
months ended September 30, 2000 compared to $3.3 million for the nine months
ended September 30, 1999. This increase is primarily attributable to higher
working capital requirements resulting in a higher average loan balance for the
nine-month period ended September 30, 2000. Interest and other expense, net for
the nine months ended September 30, 2000 includes $3.2 million of interest
incurred on our 7% convertible subordinated notes, offset by $2.0 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. In addition, for the nine
months ended September 30, 2000, we incurred $0.6 million of interest on our
$75.0 million term loan, which was drawn on August 31, 2000.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

We recorded a provision for income taxes of $14.2 million and $4.5 million for
the nine months ended September 30, 2000 and 1999, respectively. In the nine
months ended September 30, 2000, we provided for income taxes using a 38%
effective tax rate, excluding goodwill charges, which are not deductible for tax
purposes. In the nine months ended September 30, 1999, we provided for income
taxes using a 40% effective tax rate, excluding merger costs, which are not
deductible for tax purposes. In Thailand, we currently operate under a "tax
holiday" that will expire in 2002 unless it is renewed. Upon the expiration of
the "tax holiday" we will become subject to taxation at a rate of 30% per annum
in Thailand. The rate at which income taxes will be provided in future periods
will depend on taxable income by tax jurisdiction.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We had working capital of $282.9 million at September 30, 2000 compared with
$170.4 million at December 31, 1999. Operating activities used $70.9 million of
cash for the first nine months of 2000 compared with cash used for operations of
$15.6 million for the comparable period in 1999. The primary uses of cash for
operating activities for the nine-month period ended September 30, 2000 were
increases in both inventory and accounts receivable. Inventory increased $238.5
million to $410.3 million at September 30, 2000 from $171.8 million at December
31, 1999, of which $149.2 million is related to the acquisitions of BEA and GSS
Thailand and the remainder of which is primarily the result of supply chain
issues in the electronics component market. Accounts receivable increased $203.5
million to $364.3 million at September 30, 2000 from $160.8 million at December
31, 1999, of which $80.9 million is related to the acquisitions of BEA and GSS
Thailand and the remainder of which is due to the overall net sales growth of
the Company, and specifically to the back-end loading of sales during the three
months ended September 30, 2000.

These cash uses were offset, in part, by an increase in accounts payable, a
$50.0 million advance from a major customer and $21.4 million in net income from
operations for the nine months ended September 30, 2000. Accounts payable
increased $223.0 million to $376.8 million at September 30, 2000 from $153.8
million at December 31, 1999, of which $159.6 million is related to the
acquisition of BEA and GSS Thailand and the remainder of which is reflective of
our inventory build-up attributable to revenue growth. 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 Credit Agreement with a syndicate of
financial institutions led by The Chase Manhattan Bank as administrative agent
to replace our previous credit facility. The Credit Agreement is secured by
substantially all the 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 ($75.0 million of which we used to acquire BEA and $25.0 million of
which we may use to refinance the debt of GSS Thailand). This 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 The Chase Manhattan Bank, and was subsequently
replaced 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 current 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 September 30, 2000, $137.5 million of the revolving loans was utilized and
an additional $10.4 million was available for use based upon the applicable
borrowing base. At September 30, 2000, $80.0 million of the revolving loans was
at an interest rate of 9.12% and the remaining $37.5 million was at an interest
rate of 11.00%. At September 30, 2000, $75.0 million was utilized on the term
loan and $25.0 million was available for use. The interest rate on the $75.0
million term loan was 11.00%.

In April and May 2000, we received net proceeds of approximately $95.6 million
from the sale of 7% Convertible

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 $3.2 million in interest expense incurred on the notes
for the nine months ended September 30, 2000, which was offset by $2.0 million
of interest income earned on the reinvestment of the proceeds from the notes
during the same period.

On August 2, 2000, we purchased 99.02% of the issued shares and outstanding
options of GSS Thailand for approximately $86.7 million.

GSS Thailand also has a loan outstanding in the amount of $10.5 million. The
original amount of the loan, when issued in October 1996, was $24.0 million.
The loan agreement provides for quarterly principal and interest payments over
the four-year term with interest charged at a rate of LIBOR plus 3%. The loan
contract maturity date was October 16, 2000. GSS Thailand is currently past due
on principal payments on this loan. Additionally, GSS Thailand's debt to equity
ratio exceeded that contained in the loan agreement. The financial institutions
party to this loan also provide $24.5 million of the working capital facility
above, as well as, the Thai BAHT loan above. The lenders may enforce their
rights under the loan agreement to call the debt at any time. Accordingly, we
presented the long-term liabilities related to these loan agreements as current
liabilities under the heading "Note payable bank" in our condensed consolidated
balance sheet as of September 30, 2000.

The GSS Thailand credit facilities and loans are secured by a pledge of GSS
Thailand's fixed deposits and by a mortgage of its land, buildings, machinery
and equipment.

On August 31, 2000, we purchased all of the issued shares of BEA for a
purchase price of approximately $56.6 million, plus a working capital adjustment
based on the August 31, 2000 closing balance sheet of BEA which will be prepared
no later than November 30, 2000. We estimate that the working capital adjustment
will approximate $41.2 million, which we expect to pay in December 2000.

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 $7.0 million for the nine months ended
September 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 September 30, 2000, we had equipment lease lines of approximately $30.6
million available for purchases of manufacturing 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.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, 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 in the beginning
phase of the implementation process to adopt this standard and therefore 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.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 REALIZE THE EXPECTED BENEFITS FROM THE GSS THAILAND AND BEA
ACQUISITIONS.

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

. cost savings related to redundant activities;
. operating efficiencies;
. revenue enhancements;
. management enhancements; and
. other synergies.

We may not realize any of the anticipated benefits of the acquisitions.
Integrating GSS Thailand's and BEA's operations and personnel will be a complex
and difficult process and achieving the benefits of the acquisitions will depend
in large part upon the successful integration of GSS Thailand's and BEA's
businesses 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's, GSS Thailand's and BEA'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 and BEA, or
any significant delay in achieving integration, could have a material adverse
effect on our business, financial condition and results of operations. The
integration of GSS Thailand and BEA will result in significant costs as well as
demands on management personnel. The acquisitions may not become accretive to
net income at any point in the future and the benefits derived by us in the
acquisitions may not outweigh or exceed their costs.

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

The completion of the acquisitions could cause certain of our or GSS
Thailand's or BEA'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 and BEA. As a result, we may
experience some customer attrition. 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 acquisitions. 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 CONSOLIDATION AND INTEGRATION COSTS RELATED TO THE GSS
THAILAND AND BEA ACQUISITIONS.

As a result of the acquisitions, we expect that we will 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 expenses incurred in connection with the
consolidation and integration of the GSS Thailand and BEA operations could have
an adverse effect on our business, financial condition and results of
operations.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

In light of the consolidation trend in our industry, we intend to pursue
selective acquisitions of additional facilities, assets, businesses or
companies. 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 our 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 acquisitions of GSS Thailand
and 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;
. difficulties in assimilating diverse financial reporting and
management information systems;
. the diversion of management's attention from other business concerns;
. the potential disruption of our business; and
. the potential loss of key employees, customers or suppliers.

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 76% of
our net sales for the nine months ended September 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% and 52% of
our net sales for the nine months ended September 30, 2000 and for fiscal 1999,
respectively. For the three months ended September 30, 2000, Efficient Networks,
EMC, Alcatel and Nortel Networks each accounted for 10% or more of our net sales
with 17.3%, 14.4%, 13.3% and 11.2%, respectively. For the nine months ended
September 30, 2000, Efficient Networks and Nortel Networks each accounted for
10% or more of our net sales, with 19.0% and 11.2%, respectively. Customers
representing 10% or more of our net sales in fiscal 1999 were

18
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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 S-3 Incorporated in March 2000,
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 Electronics 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.

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, 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.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 can result in shipping delays and 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.

As a result of our acquisitions, we have operations in France, Ireland,
Mexico and Thailand and procurement offices in Taiwan and Singapore. We expect
to expand into other international regions. We have limited experience in
managing geographically dispersed operations and in operating in 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.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

. increased regulatory requirements;
. higher taxation;
. currency conversion limitations;
. restrictions on the transfer of funds;
. the imposition of or increase in tariffs and duties; 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. In Thailand,
we currently operate under a "tax holiday" that will expire in 2002 unless it is
renewed. Upon expiration of the "tax holiday", we will become subject to
taxation in Thailand at a rate of 30% per annum.

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 E. Zinn, Executive Vice President of European and Asian
Pacific Operations and Jim Menges, Senior Vice President of Operations for Asia,
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 executives or other key personnel could negatively affect
our business. We are currently searching for a chief financial officer. 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.

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:

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

. 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. We are currently in the process of
converting to a new global enterprise resource planning system, which we plan to
implement in all facilities, both domestically and internationally, by the end
of fiscal 2001. If we fail to adequately manage the conversion to the new
system, our operating results and financial condition could be harmed. 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 and France 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 first quarter of fiscal 2001. We are expanding our
facility in Mexico and plan on opening a new product introduction, prototype and
manufacturing facility in Dallas, Texas and expect to complete both this
expansion and new facility opening in the second quarter of fiscal 2001. We may
not be able to find additional suitable facilities on a timely basis or on terms
satisfactory to us. Moreover, expansion of existing, and establishing new,
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 and new facilities, 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.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 depends in part on our
ability to obtain 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 aggregate 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.

In December 1993, CMC Industries retained the services of a consultant to
assist in quantifying the potential exposure

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 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% 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 ACQUISITIONS OF GSS
THAILAND AND BEA COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.

Our total senior indebtedness as of September 30, 2000 was approximately
$331.0 million and we had $100.0 million of convertible subordinated notes
outstanding. 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 our 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.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

Our ability to service our indebtedness 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
convertible subordinated notes, or to fund our other cash needs. We may need to
refinance all or a portion of our indebtedness, including the convertible
subordinated notes, on or before maturity but we may not be able to do so on
satisfactory 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
satisfactory terms, or at all.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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 convertible subordinated notes may continue to be volatile.
From October 1, 1998 through November 10, 2000, our stock price fluctuated
between a low of $5.06 per share and a high of $72.25 per share. On November 10,
2000, the reported last sale price for our common stock was $21.69. The price of
our common 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.

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, our articles of organization and by-laws and
certain debt agreements 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;
. 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; and
. provide for change of control payments.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in interest rates and foreign currency exchange
primarily in our 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. We also 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. GSS Thailand has credit facilities,
substantially all of which are denominated in U.S. dollars, aggregating $47.5
million which bear interest at variable rates. Our exposure related to adverse
movements in interest rates is primarily derived from the variable rate on our
revolving and term loans and other credit facilities. As of September 30, 2000,
$80.0 million of the outstanding balance on the revolving loan was at an
interest rate of 9.12% and the remaining $57.5 million was at an 11.00% interest
rate. As of September 30, 2000, the outstanding balance under the term loan was
$75.0 million, which was at an interest rate of 11.00%. As of September 30,
2000, $40.4 million was outstanding under the GSS Thailand credit facilities at
an interest rate of 9.97%. An adverse change of one percent in the interest rate
would cause a change in interest expense of approximately $2.5 million on an
annual basis.

Substantially all of the business of our Mexico and Thailand operations are
conducted in U.S. dollar denominated transactions. The majority of the business
conducted by our France and Ireland operations are conducted in U.S. dollar
denominated transactions, although some of their business is conducted in Euro
and other currency denominated transactions. Although the functional currency of
these foreign operations is the U.S. dollar, some of the expenses of our
Thailand, Mexico, France and Ireland operations are denominated in Thai bahts,
Mexican pesos, French francs and Irish punts, respectively. We also operate
international purchasing offices in Singapore and Taiwan, where expenses are
paid in Singapore and Taiwan dollars, respectively.

As of September 30, 2000, our France operations had foreign exchange currency
contracts outstanding which hedged certain balance sheet exposures. These
contracts provided for a forward purchase of U.S. dollars on October 31, 2000 in
an amount of $100 million to satisfy dollar-denominated payables of the French
operation, and on November 30, 2000 in an amount of $3.5
million.

SFAS No. 107 requires disclosure about fair value of financial instruments.
Financial instruments consist of cash equivalents, accounts and notes
receivable, accounts payable and certain other short-term liabilities, and
current and long-term debt obligations. The fair value of these financial
instruments approximates their carrying amount, except for the 7% Convertible
Subordinated Notes (the "Notes"), at September 30, 2000. The fair market value
of the Notes was $137.9 million with a carrying amount of $100.0 million.

In the prior year, international operations did not represent a significant
portion of our net sales or net assets. Therefore, that exposure was not
considered material to us. We were exposed on our $107.0 million credit facility
which, except for $17.0 million, bore interest at variable rates. At that time,
an adverse change of one percent in the interest rate would have caused a change
in interest expense of approximately $514,000 on an annual basis.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

10.1 First Amendment to Credit Agreement dated September 26, 2000 among the
Company, 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
10.2 Assumption Agreement to the Credit Agreement dated August 31, 2000 made
by ACT Manufacturing US Holdings LLC
10.3 Employment Agreement between the Company and Robert Zinn dated
August 2, 2000
11 Computation of Net Income (Loss) Per Common Share
21 Subsidiaries
27 Financial Data Schedule

(b) Reports on Form 8-K:

The Company filed a report on Form 8-K on September 8, 2000, which
announced that the Company completed the acquisition of all the issued
shares of Bull Electronics Angers for a purchase price of approximately
$56.6 million in cash, plus a working capital adjustment.

The Company filed a report on Form 8-K/A on August 17, 2000, which amended
the Form 8-K filed on August 9, 2000 regarding the acquisition of GSS Array
Technology Public Company Limited and filed the required historical and pro
forma financial statements in connection with the acquisition.

The Company 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 Company 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.

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

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.

November 14 , 2000 ACT MANUFACTURING, INC.

/s/ Christopher Gorgone
--------------------------------
Christopher Gorgone, Vice President of
Administration and Treasurer
(Principal Financial and Accounting Officer)

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ACT MANUFACTURING, INC. AND SUBSIDIARIES

EXHIBIT INDEX

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

10.1 First Amendment to Credit Agreement dated September 26, 2000 among the
Company, 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
10.2 Assumption Agreement to the Credit Agreement dated August 31, 2000 made
by ACT Manufacturing US Holdings LLC
10.3 Employment Agreement between the Company and Robert Zinn dated
August 2, 2000
11 Computation of Net Income (Loss) Per Common Share
21 Subsidiaries
27 Financial Data Schedule