Eye on the Future…

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Presidents MessageCongratulations for an amazing team effort by the 2015 USA Women’s Soccer Team. It was truly amazing to watch them pull through with a victory after letting it slip through their fingers 4 years ago when they neglected to play through to the final second! The 2015 Champions focused on the goal every second of the game, supporting each other and always working together.

Similar to the teamwork I saw during the World Cup, Delphon had an exceptional 2nd Quarter with everyone working together to achieve record margins of 57%. All divisions exceeded the 95% On-Time delivery target, meeting our customer needs. In addition, scrap was at an all-time low with product yields meeting target. The Manufacturing team worked to improve efficiency and product yields. Everyone from the Vice President of Operations to the new manufacturing hires worked together toward our common goals.

The engineering team continued work to improve yields on the Vertec and ESD products. They also worked on new material formulations to improve the performance of other critical products. The materials and engineering groups worked together to implement new cost savings processes. The teamwork between engineering and manufacturing has helped sales secure new customers and broaden Delphon’s product offerings.

Even though Q2 was exceptional, we now need to focus on the next game. Just as the World Cup Champions have to work and continue to improve in order to stay on top of the competition, so does Delphon. We are half way through the year and the forecast for the semiconductor market is mixed for the second half; some customers are projecting strong growth while others are in the middle of merging with other companies, making it difficult to predict. The forecast for Delphon is to just hit budget and be 4% above last year’s Q3. We still have many goals we are working to achieve and we can only do this with the focus and team work we had in Q2.

Congratulations on your great performance and thanks for all your continued hard work.

DelphonAugust 2015 Newsletter

News

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Gel-Pak Update

Booming China Sales …Darby Davis

When I first started at Gel-Pak back in 1999, the optoelectronics industry (think Internet) was just beginning its first massive growth spurt which resulted in large Gel-Pak sales in China. It seemed like every other company in Fuzhou was manufacturing polished crystals used in OptoE devices. These crystals were deemed fragile and expensive so AD boxes and VR-76 trays were the carrier of choice.

As the OptoE market matured and low cost Chinese Gel-Boxes became available, our China sales dropped off significantly. Those were tough times for Gel-Pak in China, but thanks to the hard work of Michael Yeng, Benjamin Huang, and Joe Shao, Gel-Pak’s sales there are now at an all-time high with double-digit annual growth over the past 4 years. Back in 2011 our gross sales to China were only $745K, but this year we expect to exceed $3M…WOW!!! If all our expectations come true, 2016 sales will be even higher.

So what is the main reason for this booming Gel-Pak growth in China?? The answer in one word is CETC! CETC stands for the Chinese Electronics Technology Group Corp. (No idea why the “G” got excluded!) There are more than 60 different CETC Research Institutes throughout China and several of them are GaAs wafer foundries which produce high-end Known Good Die used in microwave devices. These CETC Institutes use our VR tray (between 10K-100K a year per Institute) to ship these fragile and expensive GaAs die. This is great business for us! It is also noteworthy that longtime customers such as Olaro, Photop, and HGST continue to deliver consistent sales as well.

The Delphon R&D department has done a great job developing cost competitive ESD Gel-Boxes that we now market around the world. In China, Finisar is showing a rapidly increasing demand for this product. We already have $200K in sales year to date!

Gel-Pak has come a long way in China and our future continues to look bright. I think sales for the remainder of 2015 will be strong and if all goes as planned, we will maintain this momentum through 2016.

Eye on the Future…

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The Lean Scene

Delphon Margin Is Not Marginal…Philip Haseltine

Profit margin is a very difficult thing to maintain. Everything is working against you. From the cost of raw materials and labor (and scrap) required to build product, to the rent, utilities, supplies, freight and everything else required to keep the facilities running and shipping quality product. Everything is going up in cost. Couple this with the fact that all of the Delphon divisions are feeling increased pressure from our customers to not only keep the price the same, but many are pushing for us to lower prices. Increased costs plus lower prices certainly does not equal successful margin stability.

With that said, Delphon is exceeding margin targets for the first half of 2015. In fact, June was the highest margin single month in company history. How does that happen you ask? Well, I am here to tell you. This can only happen thru increased sales or prices, a shift in sales to higher margin product lines, an increase in production efficiency, or by cutting costs. So how does this translate to Delphon’s success?

The leader of the Delphon pack for margin improvement for the year has been UltraTape. We are 6.5% above 2015 budget and above all of 2014 by a massive 9.5%. With sales volume slightly below budget and a small price increase accounting for about one third of the improvement, the UltraTape team did this by more effectively managing their expenses and labor due to efficiency improvements. On the tape side we changed processes to remove unnecessary production steps, added pre-inspection steps to eliminate work performed on known bad product, and added a cleanroom lead to free up other labor resources to work on additional continuous improvement activities. On the label side, we decreased the startup waste for jobs by using low cost set-up material, improved processes for flexo setup steps, and extensively evaluated job costs at the conclusion of every job to make good decisions on which jobs could efficiently be processed in house, which should be farmed out, and which needed a price increase. And this is just the beginning for UltraTape. In the second half of the year look for many more improvements designed to streamline processes including an automated washing system and a bagging system, both for the UltraClean line of tape products.

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The Lean Scene (cont.)

TouchMark has also gotten into the margin improvement race with a 2.1% increase versus 2015 budget and 2.6% above all of 2014. About a year ago TouchMark embarked on a project to streamline the inspection process and level of inspection for the jobs that come thru our production floor. Those streamlined processes really began to pay dividends in 2015 and this coupled with a reorganization of QC responsibilities which allows print operators to focus more on printing activities have contributed greatly to the bottom line. Additionally, the installation of in house plasma has been successful beyond our imaginations. We were forecasting an 80% savings versus using outside plasma services when we decided to purchase our own plasma system. Now that we are up and running efficiently with our own system, we are realizing savings greater than the planned 80%. Big win.

While Gel-Pak is 0.7% below budget for the year in terms of margin, we are 1.2% above the margin percentage for all of 2014. This means that we are doing better than 2014, but not quite as good as we had planned. Gel-Pak has been challenged with coming up to speed on some new products, a sales shift to higher dollar but lower margin product lines, and a sales bump at the same time that a key supplier shut down production, triggering huge air freight bills. Any of these could have singularly had a severe negative impact on margin. Gel-Pak faced them all within the first half of 2015. However, Gel-Pak has been working hard to manage expenses during this period which has almost mitigated all of these cost increases/efficiency hits to almost meet 2015 margin targets. Many of those early challenges feel like they are behind us now and Gel-Pak is ready to soar for the rest of the year.

Thank you for your efforts and let’s keep up the great work.

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TouchMark Update

TouchMark Completes Medtronic Drill Bit Qualification… James Garner

Earlier this year, Medtronic approached TouchMark to qualify the printing process for their stainless steel drill bits that are used in delicate cranial surgeries. The drill bits require 3 different colored depth markers printed 360° in precise locations on the part.

The qualification process required TouchMark to demonstrate that the equipment and pad printing process were capable of meeting the customer’s requirements. This qualification process is known as IQ, OQ, PQ validation. It gives customers a high degree of confidence in the quality being produced. Installation Qualification (IQ) was the first step which was to verify the printing equipment was installed according to specifications. Next was the Operational Qualification (OQ) which challenged the high and low machine setting parameters while still meeting the customer’s specifications. Lastly was the Performance Qualification (PQ) which was the final test to verify the machine and process meets job specifications.

This extensive qualification process took 4 months to complete. TouchMark’s Sales, Quality, and Engineering staff had weekly meetings with Medtronic to review the work done and address any issues during the process. Medtronic’s R&D engineers provided their guidance and support throughout this process. We learned a lot during this process and when it was all said and done, the IQ/OQ/PQ qualification report was 67 pages long. We are now ready to print production quantities of the drill bits, which we just received with our first purchase orders.

The TouchMark team did a great job completing the IQ/OQ/PQ validation process. The information learned during this process can easily be applied to any other medical customers requiring such qualifications in the future. Great job Team TouchMark!

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UltraTape Update

UltraTape is Looking Ahead…Lance Ochs

We are almost three quarters into 2015 and UltraTape sales have seen some ups and downs. However, we have our eye on the future and there are some great opportunities lying ahead.

One of the “ups” from Q2 was that UltraTape won its single largest PO in company history. Brewer Science needed a custom booklet label designed to meet new GHS standards. There was a very tight deadline associated with this project and Brewer needed the labels on their product, ready to ship in a matter of weeks. UltraTape was able to produce 44 different label configurations in a short, 3-week lead time.

UltraTape also displayed at the Semicon West show in July, which was very successful in generating new leads and customers.  The sales team is in the process of working on new applications and projects that were generated from the show and are confident that this will create additional revenue later this year and going into 2016. UltraTape also launched a new website that provides a more user friendly interface with improved functionality and navigation.

Most of the big changes this year at UltraTape have come from the manufacturing department with the addition of new equipment and process changes to improve efficiency.  With these changes and additional ones coming later this year, manufacturing has been eyeing the future to make sure we take care of all our customers’ needs and expectations.

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Employee Spotlight

Philip Shue…Jennifer Nunes

Diana’s promotion to CFO left her position as controller open. After an extensive search, Delphon was lucky enough to find Philip Shue. Philip joined the accounting team last December and has had to hit the ground running!

Prior to joining Delphon, Philip was director of accounting for FiberTower for seven years. FiberTower specializes in building cell towers for wireless companies like AT&T. Before working for FiberTower, Philip was an accounting manager for UTStarcom, a broadband network provider.

While attending college, Philip discovered that he had a penchant for numbers. He decided that accounting would be a wise career choice partially because he enjoyed working with numbers and partially because it suited his personality. Philip received his Bachelor of Science degree from Hawaii Pacific University and his Master of Accounting degree from University of Hawaii.

Other Delphon News… ws…Congratulations to TouchMark for being a great example of keeping an eye on the future and thinking strategic. During the last quarter, TouchMark:

Made significant process improvements, including implementing defined quality service levels, simplifying quality system/documentation, changing the final / in-process inspection process and increased operator output. 

Achieved strong financial results exceeding plan by 30% so far this year.  Exceeded annual goal of greater than 50% gross margins.  The performance is the result of the support, dedication and hard work of the

entire team.

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HR News

New Employees:Gel-Pak:

Emily Desley-Bloom – Quality Engineer May Guo – Divisional AccountantSheila Barretto, MFG Trainee Mohammad Roshangah – Accts. Rec. Specialist Pio Cabanban – MFG Trainee Jerick Pamanano – MFG TraineeMarissa DeLeon – MFG Trainee

UltraTape:

Jeff Scott – Materials Manager Julie Martin – Sales Accounts Manager

C.I.P Contributors: Leila Estabillo, GP Khanh Vo, GP Liberty Gaspe, GPDebbie Janke, GP Joey Flores, GP Belinda Philips, UTKoffi Amegblenki, UT

Benefit Reminder:Health Club ReimbursementCommunity Service PTO DayDelphon FoundationEducation Reimbursement