Introduction

This discussion and analysis of our financial condition and results of operations as well as other sections of this report contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in "Risk Factors" section of this report on pages 37 through 45.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires us to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the period ended December 26, 2008 describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Actual results could differ from these estimates.

The following critical accounting policies are impacted significantly by judgments, assumptions and estimates and were used in the preparation of the Consolidated Financial Statements:

· Inventory valuation;

· Purchase accounting;

· Goodwill and identifiable intangibles;

· Income taxes;

· Defined benefit plans;

· Contingency accruals; and

· Severance, impairment and other associated costs.

Please see information concerning our critical accounting policies in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the period ended December 26, 2008.

Overview

In February 2009, we announced our intention to explore monetization alternatives with respect to our Electrical segment, a producer of a full array of precious metal electrical contact products that range from materials used in the fabrication of electrical contacts to completed contact subassemblies. During the second quarter of 2009, we determined that Electrical met the qualifications of SFAS 144 to be reported as a discontinued operation in our Consolidated Statement of Operations for all periods presented. Also, all of Electrical's assets and liabilities are considered held for sale and reported as current on our June 26, 2009 Consolidated Balance Sheet. Whether in whole or in part, we expect a disposition to be completed in less than one year. In addition, on June 25, 2009, we divested Electronics' Medtech components business for approximately $201.4 million. These proceeds are subject to final working capital and financial indebtedness adjustments. Medtech was purchased with the Sonion acquisition, and produced certain components used in hearing aids, headsets and other medical devices. All open customer orders were transferred at the date of sale. We do not have any material continuing involvement with Medtech after June 25, 2009.

As a result of reporting Electrical as a discontinued operation, we only have one reportable segment, our Electronic Components Group, which we refer to as Electronics and is known as Pulse in its markets. Electronics is a world-wide producer of precision-engineered electronic components. We believe we are a leading global producer of these products and materials in the primary markets we serve based on our estimates of the annual revenues of our primary markets and our share of those markets relative to our competitors.

General. We define net sales as gross sales less returns and allowances. We sometimes refer to net sales as revenue.

Historically, our gross margin has been significantly affected by such items as acquisitions, product mix and capacity utilization. Our markets are characterized by relatively short product life cycles. As a result, significant product turnover occurs each year and, subsequently, there are frequent variations in the prices of products sold. Due to the constantly changing quantity of part numbers we offer and frequent changes in our average selling prices, we cannot isolate the impact of changes in unit volume and unit prices on our net sales and gross margin in any given period. Changes in foreign exchange rates, especially the U.S. dollar to the euro and the U.S. dollar to the Chinese renminbi also affect U.S. dollar reported sales.

We believe our focus on acquisitions, technology and cost reduction programs provides us opportunities for future growth in net sales and operating profit. However, unfavorable economic and market conditions may result in a reduction in demand for our products, thus, negatively impacting our financial performance.

Acquisitions. Acquisitions have been an important part of our strategy. In many cases, our moves into new product lines and extensions of our existing product lines or markets have been facilitated by acquisitions. Our acquisitions continually change the mix of our net sales. We have made numerous acquisitions in recent years which have broadened our product offerings in new or existing markets. We may pursue additional acquisition opportunities in the future.

Divestitures. We engage in divestitures to both streamline our operations as well as to focus on our core businesses. For example, in June 2009 we divested our Medtech components business for approximately $201.4 million, subject to final working capital and financial indebtedness adjustments. Medtech was purchased as part of the Sonion acquisition. Also, in April 2009 we divested our non-core MEMS business for an amount immaterial to our Consolidated Financial Statements. In February 2009, we announced our intention to explore monetization alternatives with respect to Electrical. As of June 26, 2009, the assets and liabilities of Electrical and MEMS are classified as held for sale in our Consolidated Balance Sheet. Medtech, MEMS and Electrical are all classified as discontinued operations on our Consolidated Statements of Operations for all periods presented.

Technology. Our products must evolve along with changes in technology, changes in availability and price of raw materials, changes in design and changes in preferences of the end users of our products. Regulatory requirements also impact the design and functionality of our products. We address these conditions, as well as our customers' demands, by continuing to invest in product development and by maintaining a diverse product portfolio which contains both mature and emerging technologies.

Management Focus. Our executives focus on a number of important metrics to evaluate our financial condition and operating performance. For example, we use revenue growth, gross profit as a percentage of revenue, operating profit as a percentage of revenue and economic profit as performance measures. We define economic profit as after-tax operating profit less our cost of capital. Operating leverage, or incremental operating profit as a percentage of incremental sales, is also reviewed, as this reflects the benefit of absorbing fixed overhead and operating expenses. In evaluating working capital management, liquidity and cash flow, our executives also use performance measures such as days sales outstanding, days payables outstanding, inventory turnover, cash conversion efficiency and free cash flow. Additionally, as the continued success of our business is largely dependent on meeting and exceeding customers' expectations, non-financial performance measures relating to product development, on-time delivery and quality assist our management in monitoring customer satisfaction on an on-going basis.

Cost Reduction Programs. As a result of our focus on both economic and operating profit, we continue to aggressively size our operations so that costs are optimally matched to current and anticipated future revenues and unit demand. The amounts of future expenses associated with these actions will depend on specific actions taken. Actions taken over the past several years such as divestitures, plant closures, plant relocations, asset impairments and reduction in personnel at certain locations have resulted in the elimination of a variety of costs. The majority of the non-impairment related costs that were eliminated represent the annual salaries and benefits of terminated employees, including both those related to manufacturing and those providing selling, general and administrative services. The eliminated costs also include depreciation savings from disposed equipment and rental payments from the termination of lease agreements. We have also reduced overhead costs as a result of relocating factories to lower-cost locations. Savings from these actions will impact cost of sales and selling, general and administrative expenses. However, the timing of such savings may not be apparent due to many factors such as unanticipated changes in demand, changes in unit selling prices, operational issues or other changes in operating strategies.

During the six months ended June 26, 2009, we determined that approximately $71.0 million of goodwill was impaired. Refer to Note 5 in the Notes to the unaudited Consolidated Financial Statements for further details. Additionally, we incurred a charge of $9.2 million for a number of cost reduction actions. These accruals include severance and related payments of $2.8 million and fixed asset impairments of $6.4 million. The impaired assets include production lines associated with products that have no expected future demand and a building to be sold.

During the year ended December 26, 2008, we determined that $310.4 million of goodwill and other intangibles were impaired, including $170.3 goodwill and identifiable intangibles of a discontinued operation. Additionally, we incurred a charge of $13.2 million for a number of cost reduction actions. These accruals include severance and related payments and other associated costs of $5.5 million resulting from the termination of manufacturing and support personnel at Electronics' operations primarily in Asia, Europe and North America and $4.1 million of other costs primarily resulting from the transfer of manufacturing operations from Europe and North Africa to Asia. Additionally, we recorded fixed asset impairments of $3.6 million.

International Operations. At June 26, 2009, we had manufacturing operations in five countries, three of which only manufacture Electrical products, and had significant net sales in U.S. dollars, euros and Chinese renminbi. A majority of our sales in recent years has been outside of the United States. Changing exchange rates often impact our financial results and our period-over-period comparisons. This is particularly true of movements in the exchange rate between the U.S. dollar and the renminbi and the U.S. dollar and the euro and each of these and other foreign currencies relative to each other. Sales and net earnings denominated in currencies other than the U.S. dollar may result in higher or lower dollar sales and net earnings upon translation for our U.S. Consolidated Financial Statements. Certain divisions of our wireless and power groups' sales are denominated primarily in euros and renminbi. Net earnings may also be affected by the mix of sales and expenses by currency within each group. We may also experience a positive or negative translation adjustment to equity because our investments in non-U.S. dollar-functional subsidiaries may translate to more or less U.S. dollars for our U.S. Consolidated Financial Statements. Foreign currency gains or losses may also be incurred when non-functional currency denominated transactions are remeasured to an operation's functional currency for financial reporting purposes. If a higher percentage of our transactions are denominated in non-U.S. currencies, increased exposure to currency fluctuations may result.

In order to reduce our exposure to currency fluctuations, we may purchase currency exchange forward contracts and/or currency options. These contracts guarantee a predetermined range of exchange rates at the time the contract is purchased. This allows us to shift the majority of the risk of currency fluctuations from the date of the contract to a third party for a fee. In determining the use of forward exchange contracts and currency options, we consider the amount of sales, purchases and net assets or liabilities denominated in local currencies, the type of currency and the costs associated with the contracts.

At June 26, 2009, we had eight foreign exchange forward contracts outstanding to sell forward approximately, 8.0 million euro, or approximately $11.2 million, to receive Chinese renminbi. The fair value of these forward contracts was $(0.7) million as determined through use of Level 2 inputs as defined by SFAS
157. These contracts are used to mitigate the risk of currency fluctuations at our Chinese operations.

Precious Metals. Electrical, a discontinued operation, uses silver and other precious metals in manufacturing some of its electrical contacts, contact materials and contact subassemblies. Historically, Electrical has leased or held these materials through consignment-type arrangements with its suppliers. Leasing and consignment costs have typically been lower than the costs to borrow funds to purchase the metals and, more importantly, these arrangements eliminate the effects of fluctuations in the market price of owned precious metal and enable Electrical to minimize its inventories. Electrical's terms of sale generally allow it to charge customers for precious metal content based on the market value of precious metal on the day after shipment to the customer. Suppliers invoice Electrical based on the market value of the precious metal on the day after shipment to the customer as well. Thus far, Electrical has been successful in managing the costs associated with its precious metals. While limited amounts are purchased for use in production, the majority of precious metal inventory continues to be leased or held on consignment. If leasing or consignment costs increase significantly in a short period of time, and Electrical is unable to recover these increased costs through higher sales prices, a negative impact on Electrical's results of operations and liquidity may result. Leasing and consignment fee increases are primarily caused by increases in interest rates or volatility in the price of the consigned material. Similarly, if Electrical is unable to maintain the precious metal leasing and consignment facilities, or obtain alternative facilities on a timely basis, Electrical may be required to finance the direct purchase of precious metals or take other actions that could negatively impact its financial condition and results of operations.

Income Taxes. Our effective income tax rate is affected by the proportion of our income earned in high-tax jurisdictions, such as those in Europe and the U.S. and income earned in low-tax jurisdictions, such as Hong Kong and the PRC. This mix of income can vary significantly from one period to another. Additionally, our effective income tax rate will be impacted from period to period by significant transactions and the deductibility of severance, impairment, financing and other associated costs. We have benefited over the years from favorable tax incentives and other tax policies, however, there is no guarantee as to how long these benefits will continue to exist. Also, changes in operations, tax legislation, estimates, judgments and forecasts may affect our tax rate from period to period.

Except in limited circumstances, we have not provided for U.S. income and foreign withholding taxes on our non-U.S. subsidiaries' undistributed earnings as per Accounting Principles Board ("APB") Opinion No. 23, Accounting for Income Taxes - Special Areas ("APB 23"). Such earnings may include pre-acquisition earnings of foreign entities acquired through stock purchases, and, with the exception of approximately $40.0 million, are intended to be reinvested outside of the U.S. indefinitely.

Business Outlook

The adverse developments in the financial markets and the dramatic contractions in the global economy that began in 2008 have increased our exposure to possible liquidity and credit risks. We are exposed to market risk resulting from changes in prices of commodities, such as non-precious metals, fuels and plastic resins. To the extent we cannot transfer these costs to our customers, fluctuations in commodity prices will impact our gross margin and available cash. We are also exposed to financial risk resulting from changes in interest and foreign currency rates.

Considering the issues mentioned above, as well as other risks inherent in our business and taking into account our significant reduction of debt as a result of the Medtech sale, we believe we have ample liquidity to fund our business requirements. This belief is based on our current balances of cash and cash equivalents, our history of positive cash flows from operations, including $14.7 million for the six months ended June 26, 2009, and access to our multi-currency credit facility.

During the first six months of 2009, we continued a series of actions implemented in mid-2008 aimed at increasing our liquidity, improving our operating results and managing a slowdown of demand evident in many end markets. Such actions include:

· reductions of selling, general and administrative expenses by approximately $20.0 million per year through a combination of tightened overall spending controls, reductions in personnel, furloughs and short work weeks;

· comprehensively re-sizing our indirect labor force and production overhead in both segments resulting in approximately $8.0 million of savings per year;

· limiting capital expenditures for our continuing operations to an annual rate of approximately 50% of fiscal 2008 levels, focusing spending on projects important to high-growth portions of our product offerings;

· initiating the monetization of the Electrical segment; and

· the sale of Medtech and MEMS.

We began to realize the benefits of these cost reduction activities late in the fourth quarter of 2008 and continuing through the first half of 2009. For example, despite the sizable decline in revenues in the six months ended June 26, 2009 as compared to the six months ended June 27, 2008, our consolidated gross margin improved approximately 1% over the prior period due to reductions in both direct and indirect labor costs as well as a reduction in other components of overhead. Additionally, selling, general and administrative expenses declined approximately 33%, or $21 million, for the same period. Although some actions undertaken, such as furloughs and short work weeks, are not sustainable for the long-term, we expect the majority of these savings to continue for the near future.

Results of Operations

Three months ended June 26, 2009 compared to the three months ended June 27, 2008

The table below presents our results of continuing operations and the change in those results from period to period in both U.S dollars and percentage (in thousands):

                                  Three Months Ended                                             Results as %
                             June 26,          June 27,       Change         Change              of Net Sales
                                 2009              2008              $              %           2009           2008


Net sales                     $92,071          $174,552       $(82,481 )        (47.3 )%       100.0 %        100.0 %
Cost of sales                  68,647           136,209         67,562          (49.6 )        (74.6 )        (78.0 )

Gross profit                   23,424            38,343        (14,919 )        (38.9 )         25.4           22.0

Selling, general
and administrative
expenses                       20,894            34,421         13,527           39.3          (22.7 )        (19.7 )
Severance, impairment
and other
  associated costs              3,193             2,447           (746 )        (30.5 )         (3.5 )         (1.4 )

Operating loss
(income)                         (663 )           1,475         (2,138 )       (144.9 )         (0.8 )         (0.9 )

Interest expense, net            (655 )          (1,057 )          402           38.0           (0.7 )         (0.6 )
Other (expense)
income, net                   $(2,031 )            $125        $(2,156 )     (1,724.8 )%        (2.2 )%         0.1 %

                                   Three Months Ended                                            Results as %
                             June 26,            June 27,        Change        Change             of Net Sales
                                 2009                2008             $             %            2009           2008

Loss (income) from
continuing operations
before income taxes     $      (3,349 )     $         543     $  (3,892 )      (716.8 )%         (3.7 )%        (0.4 )%

Income tax expense              1,544               3,181         1,637          51.5            (1.7 )         (1.8 )

Net loss from
continuing operations   $      (4,893 )     $      (2,638 )   $  (2,255 )       (85.5 )%         (5.4 )%        (1.4 )%

Net Sales. Our consolidated net sales have decreased by 47.3% as a result of the decline in customer demand resulting from the adverse developments in the global economy. Specifically, decreased demand for certain Electronics' wireless, network communications and power products negatively affected sales in the second quarter of 2009 as compared to the same period of 2008. Also, lower euro-to-U.S. dollar exchange rates experienced in the second quarter of 2009 versus the comparable period in the prior year resulted in lower U.S. dollar reported sales.

Cost of Sales. As a result of lower sales, our cost of sales decreased. Our consolidated gross margin for the three months ended June 26, 2009 was 25.4% compared to 22.0% for the three months ended June 27, 2008. The primary factors that caused our consolidated gross margin increase were the positive effects of cost-reduction and price-increasing activities initiated in late 2008. Results for the three months ended June 27, 2008 were also negatively impacted by increased costs resulting from the Mianyang earthquake and relocation costs to transfer Electronics' manufacturing operations from Europe and North Africa to Asia in the second quarter of 2008.

Selling, General and Administrative Expenses. Total selling, general and administrative expenses decreased primarily due to our overall emphasis on cost reducing measures initiated in mid-2008. Expenses were reduced in virtually all areas. Intangible amortization expense also declined compared to the 2008 period as a result of the impairment charges incurred in the fourth quarter of 2008.

Research, development and engineering expenses are included in selling, general and administrative expenses. We refer to research, development and engineering expenses as RD&E. For the three months ended June 26, 2009 and June 27, 2008, respectively, RD&E was as follows (in thousands):

                                                 2009         2008
                  Electronics                   $ 6,173     $ 10,875
                  Percentage of segment sales       6.7 %        6.2 %

The decrease in research, development and engineering expenses is due to cost reducing measures initiated in late 2008. However, as a percentage of sales, spending remained at a consistent level as compared to the 2008 period. We believe that future sales in the electronic components markets will be driven by next-generation products. As a result, design and development activities with our OEM customers continue at an aggressive pace.

Severance, Impairment and Other Associated Costs. We determined that approximately $68.9 million of goodwill was impaired during the three months ended March 27, 2009. We finalized this estimate in the three months ended June 26, 2009, resulting in an additional change of approximately $2.1 million. Additionally, we recorded approximately $1.1 million of severance and fixed asset impairments during the three months ended June 26, 2009. These charges primarily relate to writing down a fixed asset held for sale prior to its monetization.

Interest. Net interest expense decreased primarily as a result of decreased debt levels during the three months ended June 26, 2009 as compared to June 27, 2008. Interest or our outstanding loans was allocated between continuing and discontinued operations on a pro-rata basis for the second quarters of 2008 and 2009, based upon the debt expected to be retired from the dispositions compared to total debt outstanding. Amortization of our capitalized loan fees was also allocated in a similar manner.

Other. The change from other income to other expense from the second quarter of 2008 to the comparable period in 2009 is primarily attributable to net foreign exchange losses of approximately $2.1 million realized during the three months ended June 26, 2009, as compared to foreign exchange gains of approximately $0.6 million realized during the comparable period of 2008. The increase in foreign exchange losses was due to the effects of the overall weakening of the U.S. dollar to euro in 2009 as compared to 2008. Losses were realized as a result of remeasuring intercompany advances and loans into their respective functional currencies.

Income Taxes. The effective tax rate for the three months ended June 26, 2009 was (46.1%) compared to 585.8% for the three months ended June 27, 2008. The negative tax rate in 2009, reflecting tax expense on a pre-tax loss, is primarily due to higher effective tax rates in China following a change in policy issued by the tax authorities, the establishment of valuation allowances for certain deferred tax assets following the Medtech disposition and the non-deductibility of expenses related to amendments to our credit agreement. The effective tax rate in 2008 was primarily the result of net losses and restructuring activities occurring in both low tax jurisdictions and jurisdictions where we will not be able to receive a benefit in a future period.

Six months ended June 26, 2009 compared to the six months ended June 27, 2008

The table below presents our results of continuing operations and the change in those results from period to period in both U.S dollars and percentage (in thousands):

                                   Six Months Ended                                             Results as %
                             June 26,         June 27,         Change         Change            of Net Sales
                                 2009             2008              $              %           2009           2008
Net sales               $     192,044       $  333,004     $ (140,960 )        (42.3 )%       100.0 %        100.0 %
Cost of sales                 146,151          255,488        109,337           42.8          (76.1 )        (76.7 )

Gross profit                   45,893           77,516        (31,623 )        (40.8 )         23.9           23.3

Selling, general and
administrative
. . .