Some of our discussion today will include non-GAAP measures, in particular, adjusted EBITDA and adjusted earnings per share. These non-GAAP measures are reconciled with our GAAP results in today's press release and in our slide presentation. Management believes these measures are useful for analytical purposes and to assist in comparing results over time and across companies. But I'll remind you that adjusted EBITDA and adjusted EPS exclude certain material items and they are not a replacement for the reported results under generally accepted accounting principles.I'll now turn the call over to our CEO, Dave Sindelar, and Dave will begin with Slide 4. Dave? David Sindelar Thanks, Dee. And good afternoon to everybody, and thanks for joining. The first quarter of 2011 was characterized by continued strong demand, especially in the automotive market and the Industrial & Instrumentation market, together with some challenges in the areas of cost and capacity. Consolidated net sales of $238.7 million reflect a 4.4% increase compared to the pro forma combined sales for the first quarter of 2010 and a 2% decline from the fourth quarter 2010. As I discussed in our February conference call, our first quarter shipments were somewhat constrained as a result of extended maintenance, which took one of our plating lines out of production for about 1.5 month during the quarter. With this reduced throughput, overhead absorption was not what we would have expected absent the downtime. Coming back from Chinese New Year holiday, we experienced higher-than-expected attrition, which resulted in a significant number of new hires and excess cost in the form of overtime payments, training costs and in some cases, retention bonuses. As we mentioned in the press release, in April 8, wage inflation in China continues compounded by increasing wage base social taxes on Western world employers. Material costs have continued to rise based on not only on the underlying metals and other raw material costs, but also because in the strength of the global economic markets. The laminate providers are able to command a higher price for their capacity in products.
Our adjusted EBITDA for the first quarter was $29.3 million for an adjusted EBITDA margin percent of 12.2% of sales, somewhat below our year 2010 performance of 15%. Adjusted earnings per share were $0.07 in the first quarter compared with $0.15 in the first quarter a year ago on a comparable basis.We are working hard to achieve price increases in all of our customers to balance our cost pressure. These increases will be passed through of cost intended to maintain our margin dollars, and this will have the obvious mathematical effect on margin percents. Now that the temporary capacity constraints from the first quarter are well behind us, with the first quarter book-to-bill ratio greater than one in each of our end markets and with our recent capacity additions coming up to speed over the course of the second quarter, we would expect the second quarter to set a record sales level. The outlook is strong in both the PCB segment and the Assembly's business. The future effects of the Japanese disaster are, of course, unknown. It remains a possibility that raw materials and our components shortages somewhere in the electronics supply chain will cause one or more of our OEMs or CEMs customers to have to push out their orders with us. That's a risk to our second quarter outlook into the 2011 full year outlook. But barring these, orders look very good and our output is increasing because of factors I've mentioned. Our capital expenditures of $24 million in the first quarter include approximately $6 million in connection with the PCB capacity expansion projects. You might recall that we announced $100 million capacity expansion plan in September of 2010. We have now committed or spent approximately $30 million under that plan. We will soon need to relocate the capacity of our Huizhou, China facility into the other PCB's facilities because our lease ends at the end of 2012, as we had disclosed in our 10-K. Given this need and the growing market demand, we expect to commit the remainder of the $100 million of capacity expansion during the next 18 months. Read the rest of this transcript for free on seekingalpha.com