<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, 1999

                                      or

         [_] 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                                    (Zip code)
    executive offices)

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            13,038,819 Shares
                     ------------    ---------------------------------
                       (Class)       (Outstanding on October 20, 1999)

                                       1
<PAGE>

               ACT MANUFACTURING, INC. AND SUBSIDIARIES

                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>


PART I.  FINANCIAL INFORMATION
<S>                                                                                                         <C>
ITEM 1--Financial Statements:

Condensed Consolidated Statements of Operations for the three months ended September 30, 1999 and 1998....       3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended
September 30, 1999 and 1998...............................................................................       3

Condensed Consolidated Statements of Operations for the nine months ended September 30, 1999 and 1998.....       4

Condensed Consolidated Statements of Comprehensive Income (Loss) for the nine months ended
September 30, 1999 and 1998...............................................................................       4

Condensed Consolidated Balance Sheets as of  September 30, 1999 and December 31, 1998.....................       5

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998.....       6

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

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

ITEM 3--Quantitative and Qualitative Disclosures about Market Risk........................................      28

PART II. OTHER INFORMATION

ITEM 4--Submission of Matters to a Vote of Security Holders...............................................      29

ITEM 6--Exhibits and Reports on Form 8-K..................................................................      30

Signatures................................................................................................      31

Exhibit Index.............................................................................................      32
</TABLE>

                                       2
<PAGE>

                        PART I.   FINANCIAL INFORMATION

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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



<TABLE>
<CAPTION>
                                                             Three Months Ended September 30,
                                                           -----------------------------------
                                                               1999                   1998
                                                           -----------             -----------
<S>                                                       <C>                    <C>
Net sales.......................................           $   180,105             $   137,452

Cost of goods sold..............................               165,283                 127,923
                                                           -----------             -----------
Gross profit....................................                14,822                   9,529

Selling, general and administrative expenses....                 7,205                   6,716

Merger costs....................................                 5,601                      --
                                                           -----------             -----------
Operating income................................                 2,016                   2,813

Interest and other expense, net.................                 1,228                     820
                                                           -----------             -----------
Income before provision for income taxes........                   788                   1,993

Provision for income taxes......................                 2,536                     774
                                                           -----------             -----------
Net income (loss)...............................           $    (1,748)            $     1,219
                                                           ===========             ===========
Basic net income (loss) per common share........           $     (0.13)            $      0.10
                                                           ===========             ===========
Diluted net income (loss) per common share......           $     (0.13)            $      0.09
                                                           ===========             ===========
Weighted average shares outstanding--basic......            12,989,828              12,782,946

Weighted average shares outstanding--diluted....            12,989,828              13,018,061
</TABLE>



                   ACT MANUFACTURING, INC. AND SUBSIDIARIES

       CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                           (unaudited--in thousands)
<TABLE>
<CAPTION>
                                                              Three Months Ended September 30,
                                                              --------------------------------
                                                               1999                     1998
                                                              -------                  -------
<S>                                                          <C>                     <C>
Net income (loss)..............................               $(1,748)                 $ 1,219
Other comprehensive income:
  Foreign currency translation adjustment......                    --                       43
                                                              -------                  -------
Comprehensive income (loss)....................               $(1,748)                 $1,,262
                                                              =======                  =======
</TABLE>

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

                                       3
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                           Nine Months Ended
                                                             September 30,
                                                        -----------------------
                                                           1999        1998
                                                        ----------- -----------
<S>                                                     <C>         <C>
Net sales.............................................. $   483,571 $   451,625
Cost of goods sold.....................................     447,253     425,384
                                                        ----------- -----------
Gross profit...........................................      36,318      26,241
Selling, general and administrative expenses...........      21,807      19,454
Merger costs...........................................       5,601         --
                                                        ----------- -----------
Operating income.......................................       8,910       6,787
Interest and other expense, net........................       3,250       2,807
                                                        ----------- -----------
Income before provision for income taxes...............       5,660       3,980
Provision for income taxes.............................       4,530       1,467
                                                        ----------- -----------
Net income............................................. $     1,130 $     2,513
                                                        =========== ===========
Basic net income per common share...................... $      0.09 $      0.20
                                                        =========== ===========
Diluted net income per common share.................... $      0.08 $      0.20
                                                        =========== ===========
Weighted average shares outstanding--basic.............      12,880      12,615
Weighted average shares outstanding--diluted...........      13,500      12,881
</TABLE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                               Nine Months Ended
                                                                 September 30,
                                                               -----------------
                                                                 1999     1998
                                                               -------- --------
<S>                                                            <C>      <C>
Net income.................................................... $  1,130 $  2,513
Other comprehensive income (loss):
  Foreign currency translation adjustment.....................       81      (98)
                                                               -------- --------
Comprehensive income (loss) .................................. $  1,211 $  2,415
                                                               ======== ========
</TABLE>

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

                                       4
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                      September 30, December 31,
                                                          1999          1998
                                                      ------------- ------------
<S>                                                   <C>           <C>
                       ASSETS
Current assets:
  Cash and cash equivalents..........................   $  4,308      $ 10,670
  Accounts receivable trade, net.....................    111,897       101,828
  Accounts and notes receivable from related party...      6,868         5,678
  Inventory..........................................    115,592        65,612
  Deferred tax asset.................................      1,360           880
  Prepaid expenses and other assets..................      4,467         4,204
                                                        --------      --------
    Total current assets.............................    244,492       188,872

Property and equipment--net..........................     34,985        32,279
Investment in and advance to related party...........      6,584         7,284
Goodwill--net........................................      5,940         6,224
Other assets--net....................................      2,873         3,635
                                                        --------      --------
    Total............................................   $294,874      $238,294
                                                        ========      ========
        LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Note payable bank..................................   $    --       $ 18,111
  Current portion of long-term debt..................      1,151         1,300
  Current portion of other long-term liabilities.....      1,574         1,236
  Accounts payable...................................    107,875        71,956
  Accrued compensation and related taxes.............      2,911         3,404
  Income tax payable.................................      4,047           505
  Deferred taxes.....................................        253           --
  Accrued expenses and other.........................      6,720         6,301
                                                        --------      --------
    Total current liabilities........................    124,531       102,813

Long-term debt--less current portion.................     74,412        41,756
Deferred taxes ......................................        724         1,173
Other long-term liabilities..........................      3,826         1,092

Stockholders' equity:
  Common stock.......................................        130           128
  Additional paid-in capital.........................     77,251        74,960
  Accumulated other comprehensive (loss).............     (1,610)         (180)
  Retained earnings..................................     15,610        16,552
                                                        --------      --------
    Total stockholders' equity.......................     91,381        91,460
                                                        --------      --------
    Total............................................   $294,874      $238,294
                                                        ========      ========
</TABLE>

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

                                       5
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                               Nine Months
                                                             Ended September
                                                                   30,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
<S>                                                         <C>       <C>
Cash flows from operating activities:
  Net income............................................... $  1,130  $  2,513
  Adjustments to reconcile net income to net cash (used
   for) provided by operating activities:
    Depreciation and amortization..........................    4,932     3,815
    Deferred income taxes..................................      --       (448)
    Increase (decrease) increase in cash from:
      Accounts receivable..................................    3,193   (31,751)
      Inventory............................................  (38,800)   (3,677)
      Prepaid expenses and other assets....................     (906)   (2,971)
      Accounts payable.....................................   10,324    38,760
      Income tax payable...................................    3,542     8,117
      Accrued expenses and other...........................    1,020     2,417
                                                            --------  --------
        Net cash (used for) provided by operating
         activities........................................  (15,565)   16,775
                                                            --------  --------

Cash flows from investing activities:
  Acquisition of property and equipment....................   (4,219)   (8,223)
  Payments for equipment held for sale and leaseback.......      --     (1,099)
  Deposits for facility under construction in Mexico.......      --     (2,135)
  Increase in other assets.................................   (1,331)     (751)
                                                            --------  --------
        Net cash used for investing activities.............   (5,550)  (12,208)
                                                            --------  --------

Cash flows from financing activities:
  Net borrowings under line-of-credit agreements...........   13,741    (5,200)
  Borrowings under term loan...............................    7,000       --
  Decrease in long-term liabilities, net...................   (3,769)   (1,540)
  Net proceeds from sale of stock..........................    1,964     4,362
                                                            --------  --------
        Net cash provided by (used for) financing
         activities........................................   18,936    (2,378)
                                                            --------  --------

Effect of exchange rate changes on cash and equivalents....       81       (98)
Net (decrease) increase in cash and cash equivalents.......   (2,098)    2,091
Cash and cash equivalents, beginning of period.............    6,406     9,463
                                                            --------  --------
Cash and cash equivalents, end of period................... $  4,308  $ 11,554
                                                            ========  ========
</TABLE>

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

                                       6
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1. Significant Accounting Policies

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

   The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal year.
These interim condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the period ending
December 31, 1998 filed with the Securities and Exchange Commission.

2. Merger Transaction

   On July 29, 1999, the Company announced the completion of its merger with CMC
 Industries, Inc. ("CMC"), a provider of electronics manufacturing services to
 original equipment manufacturers in the networking and telecommunications,
 computer and electronics industries. Under the terms of the merger agreement,
 each share of CMC common stock was exchanged for 0.5 of a share of ACT
 Manufacturing common stock and all CMC stock options were assumed by ACT. The
 Company issued approximately 3.9 million shares of common stock, and reserved
 approximately 0.9 million shares of common stock for future issuance under
 CMC's 1990 Equity Incentive Plan pursuant to this merger transaction.

   The merger has been accounted for as a pooling of interests, and accordingly,
 the Company's financial statements for prior periods have been restated to
 include the operating results and financial position of CMC at the beginning of
 the earliest period presented. Since CMC prepared its financial statements on a
 fiscal year ending July 31 prior to the merger, the condensed consolidated
 statements of operations for the three and nine months ended September 30, 1998
 reflect the operating results of ACT for the three and nine months ended on
 that date combined with the operating results of CMC for the three and nine
 months ended April 30, 1998. The condensed consolidated statement of cash flows
 for the nine months ended September 30, 1998 reflects the cash flows of ACT for
 the nine months ended on that date combined with the cash flows of CMC for the
 nine months ended April 30, 1998. The financial statements for the three and
 nine months ended April 30, 1998 have been adjusted to reflect the conforming
 of CMC's accounting policy with that of ACT's by expensing previously
 capitalized preoperating and start-up costs associated with CMC's Mexican
 manufacturing facility. The adjustment has also been tax-effected. The
 condensed consolidated balance sheet as of December 31, 1998 reflects the
 financial position of ACT on that date combined with the financial position of
 CMC as of July 31, 1998. The condensed consolidated statement of operations for
 the three and nine months ended September 30, 1999 and the condensed
 consolidated statement of cash flows for the nine months ended September 30,
 1999 reflect the results of operations and cash flows for the combined company
 for those periods. The condensed consolidated balance sheet as of September 30,
 1999 reflects the financial position of the combined company as of that date.

   As a result of the merger, the Company incurred transaction costs of
approximately $5,601,000. These costs have been expensed and reported as a
separate component in the condensed consolidated statements of operations for
the three and nine months ended September 30, 1999.

3. Bank Financing

   On July 29, 1999, the Company executed an Amended and Restated Credit
Agreement for a new $107.0 million Senior Secured Credit Facility ("Credit
Facility") with a group of banks led by The Chase Manhattan Bank as agent
("Agent") to replace the Company's previous credit facilities with the banks.
This new Credit Facility provides for a $7.0 million, five-year Term Loan
("Term Loan") and a $100.0 million five-year Line of Credit ("Revolving Credit
Facility"), both of which are secured by substantially all of the assets of the
Company. The Term Loan shall amortize at a rate of $1.0 million per year for
the first year and $1.5 million per year for years two through five. The
Revolving Credit Facility provides for borrowings up to an aggregate amount of
$100.0 million, limited to a certain percentage of qualified accounts
receivable and qualified inventory. Interest is payable monthly. For the Term
Loan, the Company may choose an interest rate of either (i) 2.5% above the
prevailing London Interbank Offering rate ("LIBOR"), or (ii) 0.5% above the
prime rate as announced by the Agent. For the Revolving Credit Facility the
Company may choose an interest rate of either (i) 2.25% above the prevailing
LIBOR rate, or (ii) 0.25% above the prime rate as announced by the Agent. In
addition to certain other prohibited actions, the Credit Facility limits
capital expenditures by the Company and prohibits the payment of cash dividends
on the Company's common stock. The Credit Facility requires the Company to
maintain certain minimum fixed charge coverage ratios and maximum leverage
ratios.

                                       7
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Inventory

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

<TABLE>
<CAPTION>
                                                      September 30, December 31,
                                                          1999          1998
                                                      ------------- ------------
      <S>                                             <C>           <C>
      Raw material...................................   $ 97,820      $50,354
      Work-in-process................................     15,006       12,511
      Finished goods.................................      2,766        2,747
                                                        --------      -------
        Total........................................   $115,592      $65,612
                                                        ========      =======
</TABLE>

5. Net Income (Loss) Per Common Share

   Basic net income (loss) per common share is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted net income (loss) per common share
reflects the potential dilution as if common equivalent shares outstanding
(common stock options) were exercised and 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):

<TABLE>
<CAPTION>
                                       Net Income  Weighted Average Net Income
                                         (Loss)         Shares        (Loss)
                                       (Numerator)   (Denominator)  Per Share
                                       ----------- ---------------- ----------
      <S>                              <C>         <C>              <C>
      Three months ended September 30,
       1999
        Basic........................   $(1,748)        12,990       $(0.13)
                                        =======
        Effect of stock options......                      --           --
                                                        ------       ------
        Diluted......................   $(1,748)        12,990       $(0.13)
                                        =======         ======       ======
      Three months ended September 30,
       1998
        Basic........................   $ 1,219         12,783       $ 0.10
                                        =======
        Effect of stock options......                      235        (0.01)
                                                        ------       ------
        Diluted......................   $ 1,219         13,018       $ 0.09
                                        =======         ======       ======

      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
                                        =======         ======       ======
      Nine months ended September 30,
       1998
        Basic........................   $ 2,513         12,615       $ 0.20
                                        =======
        Effect of stock options......                      266          --
                                                        ------       ------
        Diluted......................   $ 2,513         12,881       $ 0.20
                                        =======         ======       ======
</TABLE>

   For the three months ended September 30, 1999 and 1998, options to purchase
552,411 and 717,700 respectively, shares of common stock were outstanding at
the end of the period, but were not included in the computation of diluted EPS
because the options' exercise prices were greater than the average market price
for the common stock and, therefore, their effect would be antidilutive. For the
nine months ended September 30, 1999 and 1998, options to purchase 597,678 and
629,500 shares of common stock were outstanding at the end of the period but
were not included in the computation of EPS.

6. Operating Information

   The Company operates as a single segment within the electronics
manufacturing services industry.

                                       8

<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   A summary of the principal product groups' net sales for the periods
indicated is as follows (in thousands):

<TABLE>
<CAPTION>
                                              Three Months Ended   Nine Months Ended
                                                 September 30,       September 30,
                                              ------------------   -----------------
                                                 1999     1998       1999     1998
                                              --------- --------   -------- --------
      <S>                                      <C>      <C>        <C>      <C>
      Printed circuit boards.................. $172,996 $127,039   $461,037 $422,506
      Cable and harness.......................    7,109   10,413     22,534   29,119
                                               -------- --------   -------- --------
        Total................................. $180,105 $137,452   $483,571 $451,625
                                               ======== ========   ======== ========
</TABLE>

7. New Financial Accounting Standards

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

8. Contingencies

   On June 15, 1999, we received written notice from legal counsel for the
Lemelson Medical, Education & Research Foundation, Limited Partnership alleging
that we are infringing certain patents held by the Lemelson Foundation
Partnership and offering to license such patents to us. Based on our
understanding of the terms that the Lemelson Foundation Partnership has made
available to current licensees, we believe that obtaining a license from them
under the same or similar terms would not have a significant negative effect on
our financial condition. Our results of operations in a particular quarter may
be negatively affected, however. Moreover, a license may not be available on
terms satisfactory to us. Litigation with respect to patents and other
intellectual property matters can result in substantial costs and damages,
require the cessation of the use of infringing products and processes, and
force the infringing party to obtain a license to the relevant intellectual
property.

   On February 27, 1998, the Company and several of the Company's officers and
directors were named as defendants in a purported securities class action
lawsuit filed in the United States District Court for the District of
Massachusetts. The plaintiffs amended the complaint on October 16, 1998. The
plaintiffs purport to represent a class of all persons who purchased or
otherwise acquired the Company's Common Stock in the period from April 17, 1997
through March 31, 1998. The amended complaint alleges, among other things, that
the defendants knowingly made misstatements to the investing public about the
value of the Company's inventory and the nature of its accounting practices. On
December 15, 1998, the Company filed a motion to dismiss the case in its
entirety based on the pleadings. The Company's motion to dismiss was granted
without prejudice on May 27, 1999, and the case was closed by the Court on June
1, 1999. On June 28, 1999 the plaintiffs filed a motion with the Court seeking
permission to file a second amended complaint. The Company opposed that motion.
On July 13, 1999 the Court denied the plaintiffs' motion to amend, noting
"final judgment having entered in this case." On July 26, 1999 the plaintiffs
filed a motion with the Court asking the Court to extend the 30-day period for
filing an appeal of its ruling dismissing the case. The Company opposed that
motion as well, and the Court denied that motion on August 10, 1999. On August
12, 1999, plaintiffs filed a notice indicating their intent to appeal the
Court's orders of July 26, 1999 and August 10, 1999. The Company

                                       9
<PAGE>

                    ACT MANUFACTURING, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

believes the claims asserted in the action and the appeals noticed by the
plaintiffs are without merit and intends to continue to defend itself
vigorously in this action. The Company further believes that this litigation
will not have a material adverse effect on the company's business and results
of operations, although there can be no assurance as to the ultimate outcome of
these matters. No provision for any liability that may result from this
litigation has been made in the accompanying consolidated financial statements.

   In connection with the transfer of certain assets and liabilities associated
with its telephone business to Cortelco in August 1993, certain deferred income
tax liabilities have been assumed by Cortelco. Although the LIFO method of
inventory accounting is employed, a portion of this deferred income tax
liability attributable to differing financial reporting and tax reporting bases
of inventories may become payable in the foreseeable future based on certain
rulings made in the U.S. federal tax courts. Although the Company has received
indemnification from this affiliate with respect to such liability, the Company
would be liable for this tax in the event Cortelco is unable to meet its
obligation. The total amount of this deferred income tax liability assumed by
Cortelco was approximately $2.2 million as of Fiscal 1993.

   In Fiscal 1994, the Company incurred a non-recurring charge included in
selling, general and administrative expenses of approximately $170,000 related
to the costs of environmental clean-up at a former manufacturing site. The
Company's original estimate of its cost of the clean-up was approximately
$320,000 which was recorded prior to July 1994. In 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 Fiscal 1996, the Company was excluded
as a potentially responsible party ("PRP") by the State of Tennessee's
Department of Environment and Conservation in relation to the former facility;
however, Alcatel, Inc., a PRP named by the State of Tennessee's Department of
Environment and Conservation and a former owner of the Company, is seeking
indemnification from the Company 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 the Company relating to remediation of the site. We have
entered into an agreement with Alcatel pursuant to which the statute of
limitations on their indemnification is tolled for a period of time. In the
event any proceedings are initiated or any claims made, the Company would
defend itself vigorously. Defense or resolution of this matter will negatively
impact the Company's financial position and results of operations.

   In addition to the above, the Company is a defendant in several legal
actions involving certain matters arising in the normal course of business.
Management believes that the aggregate loss, if any, resulting from the final
outcome of these proceedings will not be material to the financial position or
results of operations of the Company. No additional accrual has been recorded
for these pending matters.

9. Subsequent Event

   On October 12, 1999, the Company acquired certain inventory and fixed assets
of GSS/Array Technology, Inc. located in San Jose, California, a subsidiary of
GSS/Array Technology Public Company, Ltd., a Thailand company, for
approximately $12,763,000 in cash. We have assumed on-going relationships with
select GSS/Array domestic customers.

                                       10
<PAGE>

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

  Management's Discussion and Analysis of Financial Condition and Results of
Operations contains trend analysis and other forward-looking statements.  Actual
results could differ materially from those set forth in the forward-looking
statements as a result of factors set forth elsewhere herein, including under
"Cautionary Statements."  This discussion should be read in conjunction with the
accompanying condensed consolidated financial statements for the periods
specified and the associated notes. Further reference should be made to the
Company's Annual Report on Form 10-K for the period ending December 31, 1998.

Overview

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

   At September 30, 1999, we manufactured at nine facilities having an
aggregate of approximately 893,000 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. 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. At September 30, 1999, our facilities contained 43 surface mount
technology lines and we have five additional lines on order which are expected
to be delivered in the fourth quarter of 1999.

   We recognize revenue upon shipment to customers. 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.

                                       11
<PAGE>

Results of Operations--Three Months Ended September 30, 1999 and 1998

  Net sales increased $42.7 million or 31% to $180.1 million for the three-month
period ended September 30, 1999 compared with $137.5 million for the comparable
period in 1998. The increase was attributed principally to an expansion of
business in the printed circuit board assembly product line of $46.0 million
from both new and existing customers in the telecommunications and computer
markets, offset by a decrease of revenue of $3.3 million in the cable product
line. Net sales in the printed circuit board product line (including system
integration, test, repair and order fulfillment) as a percentage of net sales
was approximately 96% for the three month period ended September 30, 1999
compared to approximately 92% for the comparable period in 1998. Net sales in
the cable and harness product line accounted for approximately 4% of net sales
for the three-month period ended September 30, 1999 compared to approximately 8%
of net sales for the same period in 1998.

  Gross profit increased $5.3 million or 55.5% to $14.8 million for the three
months ended September 30, 1999 compared with $9.5 million for the comparable
period in 1998. Gross margin increased to 8.2% for the three months ended
September 30, 1999 from 6.9% for the three months ended September 30, 1998. This
increase was primarily attributable to a higher absorption of manufacturing
overhead as a result of the increased sales volume and the result of an increase
in shipments of products with higher gross margin contribution than in the
comparable period of 1998.

  Selling, general and administrative ("SG&A") expenses increased 489,000 or
7.3% to $7.2 million, or 4.0% of net sales, for the three months ended September
30, 1999 compared with $6.7 million, or 4.9% of net sales, for the three months
ended September 30, 1998.  SG&A increased primarily due to the additional
investment in key general and administrative functions within the Company to
support both current and anticipated revenue growth.  However, SG&A as a
percentage of net sales for the three months ended September 30, 1999 decreased
when compared to the three months ended September 30, 1998 as a result of the
Company's continued focus on cost management programs while sales volume
increased.  Within the three months ended September 30, 1999 the Company also
began to realize certain SG&A expense reductions due to the elimination of
certain duplicate functions as a result the merger with CMC.

     A charge of $5.6 million for merger costs related to the July 30, 1999
merger with CMC Industries consists primarily of investment banking, legal,
accounting, integration expenses and certain other fees and expenses directly
related to the merger.

     Operating income decreased $797,000 to $2.0 million, or 1.1% of net
sales, for the three months ended September 30, 1999 compared with operating
income of $2.8 million, or 2.0% of net sales, for the comparable period in 1998
as a result of the above factors.

     Interest and other expense for the three months ended September 30, 1999
increased 49.8% to $1.2 million compared to $820,000 for the three months ended
September 30, 1998. The increase was due to higher average loan balances
outstanding during the three month period ended September 30, 1999 compared to
the same period in 1998 and an increase in the interest rate on the Company's
variable rate credit facilities in the three months ended September 30, 1999
compared to the same period in 1998.

     The Company recorded a provision for income taxes of $2.5 million and
$774,000 in the three months ended September 30, 1999 and 1998, respectively. In
the three months ended September 30, 1999 the Company provided for income taxes
using a 40% effective tax rate on pretax income, excluding merger costs, which
are not deductible for tax purposes. In the three months ended September 30,
1998 the Company provided for income taxes using a 39% effective tax rate.

                                       12
<PAGE>

Results of Operations--Nine Months Ended September 30, 1999 and 1998

   Our net sales increased $32.0 million or 7.1% to $483.6 million for the
nine-month period ended September 30, 1999 compared with $451.6 million for the
comparable period in fiscal 1998. The increase was attributable to an expansion
of business in the printed circuit board assembly product line of $38.5
million, of which approximately $28 million came from customers who did not do
business with us in the nine months ended September 30, 1998 and the remainder
came from existing customers. This increase was partially offset by a decrease
in net sales of $6.6 million in the cable and harness assembly product line.
Customers representing 10% or more of our net sales for the nine months ended
September 30, 1999 were Nortel Networks (formerly Bay Networks and Aptis
Communications)--15%; S-3 Incorporated (formerly Diamond Multimedia)--15%;
Marconi (formerly Reltec)--12%; and Lucent Technologies (formerly Ascend
Communications)--10%.

   Net sales in the printed circuit board assembly product line, including
system integration, test, repair and order fulfillment, as a percentage of net
sales was approximately 95% for the nine-month period ended September 30, 1999
compared to approximately 94% for the same period in fiscal 1998. Net sales in
the cable and harness assembly product line accounted for approximately 5% of
net sales for the nine-month period ended September 30, 1999 compared to
approximately 6% of net sales for the same period in fiscal 1998.

   Gross profit increased $10.1 million or 38.4% to $36.3 million for the nine
months ended September 30, 1999 compared with $26.2 for the same period in
fiscal 1998. Gross profit as a percentage of net sales, or gross margin,
increased to 7.5% for the nine months ended September 30, 1999 from 5.8% for
the nine months ended September 30, 1998. This increase was primarily
attributable to a higher absorption of manufacturing overhead as a result of
the increased sales volume, the positive impact of our cost management programs
and an increase in shipments of products with higher gross margin contribution
than in the comparable period of fiscal 1998.

   Selling, general and administrative expenses increased $2.4 million or 12.1%
to $21.8 million for the nine months ended September 30, 1999 compared with
$19.5 million for the same period in fiscal 1998. SG&A expenses as a percentage
of net sales increased to 4.5% in the nine months ended September 30, 1999 from
4.3% in the nine months ended September 30, 1998. SG&A increased primarily due
to costs related to additional facilities and the additional investment in
general and administrative functions, including personnel, systems and
consulting and professional fees, to support both current and anticipated
revenue growth.

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

   Operating income increased $2.1 million to $8.9 million, or 1.8% of net
sales, for the nine months ended September 30, 1999 compared with operating
income of $6.8 million, or 1.5% of net sales, for the comparable period in
fiscal 1998 as a result of the above factors.

   Interest and other expense, net for the nine months ended September 30, 1999
increased 15.8% to $3.3 million compared to $2.8 million for the nine months
ended September 30, 1998. The increase was due to higher average loan balances
outstanding during the nine months ended September 30, 1999 compared to the
same period in fiscal 1998 and an increase in the interest rate on our variable
rate credit facilities during the nine months ended September 30, 1999 compared
to the same period in fiscal 1998.

   We recorded a provision for income taxes of $4.5 and $1.5 million in the
nine months ended September 30, 1999 and 1998. In the nine months ended
September 30, 1999, we provided for income taxes using a 40.0% effective tax
rate on pretax income, excluding merger costs, which are not deductible for tax
purposes. In the nine months ended September 30, 1998, we provided for income
taxes using a 37% effective tax rate. The difference in the tax rates is due to
the effects of non-deductible expenses and the differences in pre-tax income
earned in the various jurisdictions in which we do business.


                                       13
<PAGE>

Financial Condition, Liquidity and Capital Resources

   We had working capital of $120.0 million at September 30, 1999 compared with
$86.1 million at December 31, 1998. Operating activities used $15.6 million of
cash for the first nine months of 1999 compared with cash provided by
operations of $16.8 million for the comparable period in 1998. The primary use
of cash by operating activities for the first nine months of 1999 was for the
purchase of inventory. Inventory increased $50.0 million to $115.6 million as
of September 30, 1999 from $65.6 million as of December 31, 1998. The increase
reflects inventory requirements to support fourth quarter 1999 customer demand,
our intention to manufacture more of the fourth quarter customer product
requirements earlier in the quarter than we have historically and a decision to
receive certain inventory earlier than required for the manufacturing process
to hedge potential component shortages.

   On July 29, 1999, we announced that we had executed an Amended and Restated
Credit Agreement for a new $107.0 million Senior Secured Credit Facility with a
group of banks led by The Chase Manhattan Bank as agent to replace our previous
credit facilities with the banks. This new credit facility provides for a
$7.0 million, five-year term loan and a $100.0 million five-year line of
credit, both of which are secured by substantially all of our assets. At
September 30, 1999, $68.4 million of the credit facility was utilized and an
additional $31.6 million was available for use based upon the applicable
borrowing base and the full term loan was utilized. At September 30, 1999, the
interest rate on $25 million of the line of credit was 7.63% and on the
remainder of the line of credit was 8.50%. The interest rate on the term loan
was 7.89%. The term loan amortizes at a rate of $1.0 million per year for the
first year and $1.5 million per year for years two through five. The credit
facility also provides for borrowings up to an aggregate amount of $100.0
million, limited to a percentage of qualified accounts receivable and qualified
inventory. Interest is payable monthly. For the term loan, we may choose an
interest rate of either 2.5% above the prevailing London Interbank Offering
rate (LIBOR), or 0.5% above the prime rate as announced by the agent. For the
revolving credit facility, we may choose an interest rate of either 2.25% above
the prevailing LIBOR rate, or 0.25% above the prime rate as announced by the
agent. In addition to certain other prohibited actions, the credit facility
limits our capital expenditures and prohibits the payment of cash dividends on
our common stock. The credit facility also requires us to maintain certain
minimum fixed charge coverage ratios and maximum leverage ratios.

   Borrowings under our credit facilities of $13.7 million were used primarily
for the purchase of inventory. Approximately $4.6 million of the proceeds of
the $7.0 million term loan was used to repay the long-term bank loan of CMC
Industries existing on the date of the merger. Net proceeds of $2.0 million
from the sale of stock were due to the exercise of employee stock options and
the issuance of stock under the CMC employee stock purchase plan.

   We are a party to a $17.0 million interest rate swap in order to fix the
interest rate on a portion of our outstanding borrowings under the bank credit
facility. The swap agreement provides for payments by us at a fixed rate of
interest of 6.76% and matures on October 19, 2001. The fair value of the
interest rate swap at September 30, 1999 was approximately $(249,000) since the
fixed rate of 6.76% was higher than the floating rate.

   Capital expenditures of $4.2 million for the nine months ended September 30,
1999 were primarily for the acquisition of equipment related to 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. During the first quarter of 1999, we refinanced
approximately $2.6 million of our then existing operating leases and classified
these leases as capital leases in the accompanying condensed consolidated
balance sheet for the nine months ended September 30, 1999. The effect of this
refinancing on our results of operations will not differ materially from the
previous lease financing arrangements. As of September 30, 1999, we had
operating lease lines of approximately $13.0 million available for future
equipment requirements.

   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 expansions 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
on equipment lease financing. We believe that our current sources of liquidity
are adequate to support our anticipated liquidity needs for the next twelve
months.

                                       14
<PAGE>

Year 2000 Readiness Disclosure Statements

   We are subject to various Year 2000 risks relating to our internal systems
and equipment, the systems of our key customers, suppliers and third-party
service providers and the potential decrease in demand for our customers'
products. We and the companies with which we do business utilize computer
software programs, operating systems and embedded technology in the conduct of
their operations. Many computer software programs, operating systems and
technology in use today are unable to distinguish between the year 2000 and the
year 1900 because they use a two-digit shorthand to define the applicable year.
People commonly refer to this as the Year 2000 problem. If we do not properly
identify and correct our Year 2000 issues prior to January 1, 2000, our
operations could be materially disrupted. These disruptions could be caused by,
among other things, an inability to do the following using current processes and
systems:

  .  receive technical specifications, purchase orders and payments from
     customers;

  .  order, receive, record and pay for inventory;

  .  manufacture and ship products;

  .  send invoices;

  .  process internal and external transactions; and

  .  engage in similar normal business activities.

   In addition, our operations could also be significantly disrupted if the
companies with which we do business are not Year 2000 compliant on a timely
basis. Such a failure could adversely affect a company's ability to do
business with us. Any of these Year 2000 failures or disruptions could have a
significant negative impact on our results of operations.

   To address these issues, we have undertaken an extensive project to assess
and remedy the areas within our business and operations which could be
adversely affected by Year 2000 issues, including our information technology
and non-information technology systems and processes. The first phase of the
project was:

  .  to determine the extent of our Year 2000 problem by reviewing all of our
     hardware, software, equipment and embedded technology to determine if
     any of this software and technology was not Year 2000 compliant; and

  .  to determine whether companies with which we do significant business
     will be Year 2000 compliant on a timely basis.

   The next stage in the project was to correct or replace and test all such
hardware, software, equipment and embedded technology. In the second phase of
the project, we also addressed the Year 2000 issues identified by our vendors,
third-party service providers and customers, as appropriate. We conducted the
project using internal and external resources. Finally, we determined the need
to formulate and revise contingency plans based on the results of our
assessment and remediation efforts with regard to our own Year 2000 issues as
well as those of our customers, third-party service providers and suppliers.

   All phases of the project, as defined above, have been substantially
completed. Additionally, contingency plans have been prepared in areas where
we have determined that a plan is necessary. We have discussed Year 2000
compliance with our vendors, third-party service providers and customers. We
have not been informed by any vendor, third-party service provider or customer
of significant Year 2000 compliance problems which could cause a meaningful
disruption in our operations. We will continue to work with our vendors,
third-party service providers and customers to identify any possible issues.

   Based on our review to date, we expect the total cost of our Year 2000
assessment and remediation project to be approximately $650,000, of which
approximately $450,000 has been expensed to date. Our current expectations
regarding the total cost of our Year 2000 project are subject to change as the
project progresses or additional information is obtained. The sources of the
funds for our Year 2000 project are operating cash flow and available
equipment lease lines. No other material information technology project has
been deferred as a result of the Year 2000 project. We currently do not
believe that internal Year 2000 issues will have a significant effect on our
business. We cannot assure you of this, however.

                                       15
<PAGE>

   We have identified our significant systems which could be adversely
affected by Year 2000 issues to be:

  .  manufacturing equipment, including surface mount technology lines, and
     testing equipment;

  .  integrated enterprise resource planning systems and networking software
     and equipment used in our facilities; and

  .  electronic commerce capabilities.

   We have obtained certifications from our equipment vendors indicating that
our critical manufacturing and testing equipment is Year 2000 compliant. We
have completed testing of our critical equipment. We installed and tested a
vendor-certified Year 2000 compliant version of enterprise resource planning
software in our Massachusetts facilities. The version of the enterprise
resource planning software used by our Georgia facility is certified as Year
2000 compliant by the vendor and was installed and tested by us in February
1999. The enterprise resource planning systems used in our Ireland facility was
not Year 2000 compliant and could not be upgraded. We purchased the version of
the vendor-certified Year 2000 compliant software utilized in our Georgia
facility for, and installed it in, our Ireland facility. The enterprise
resource planning software systems in our California, Mississippi, Alabama and
Mexico locations were tested in February 1999 and are believed to be Year 2000
compliant. All network software and electronic commerce capabilities have been
remediated as we believe is necessary. For the above identified applications,
we have developed manual process procedures as a contingency plan.

   Our plans and programs to become Year 2000 compliant may not succeed in
their entirety and our contingency plans may not be comprehensive or adequate.
In addition, one or more of our vendors, third-party service providers or
customers may have material Year 2000 compliance problems. If either us or any
of our customers, third-party service providers or suppliers fail to become
Year 2000 compliant on a timely basis, or if our contingency plans are not
fully comprehensive or adequate, the result could be a significant disruption
in our business. Any Year 2000 related failure or disruption would
significantly and adversely affect our business and results of operations.

New Financial Accounting Standards

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

                                       16
<PAGE>

Cautionary Statements

   While these are the risks and uncertainties we believe are most important for
you to consider, you should know that they are not the only risks or
uncertainties facing us or which may adversely affect our business. 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, and you could lose all or part of the
money you paid to buy our common stock.

                         Risks Related to Acquisitions

The expected benefits from the merger with CMC Industries may not occur.

   We completed the merger with CMC Industries with the expectation that the
merger would result in certain benefits, including:

  .  cost savings related to the elimination of redundant activities;

  .  the opportunity to generate revenue from new customers that require an
     electronics manufacturing services provider to have a minimum size and
     geographic coverage;

  .  opportunities to increase revenues from our current customers by
     providing a lower cost alternative and a broader geographic presence;

  .  operating efficiencies such as combined managerial, sales, marketing and
     technological expertise and personnel;

  .  greater ability to access the financial and capital markets; and

  .  other synergies due to the strategic fit and compatibility of the two
     companies, including their common equipment platforms and information
     systems.

   We may not realize any of the anticipated benefits of the merger.
Integrating CMC's operations and personnel with our business has been and
continues to be a complex and difficult process. Achieving the benefits of the
merger will depend upon the successful integration of CMC's business in an
efficient and timely manner. The integration of CMC with our operations could
require additional costs and expenses as well as demands on management
personnel. The diversion of the attention of our management and any
difficulties encountered in the process of combining our companies could cause
the disruption of, or a loss of momentum in, our activities. Further, we may
experience customer, supplier or employee attrition as a result of the merger.
The merger would have had a dilutive effect on our net income per share on a
pro forma combined basis for recent periods. We cannot assure you that the
merger will become accretive to net income at any point in the future or that
the benefits derived by us from the merger will outweigh or exceed the dilutive
effects of the merger.

We have incurred substantial transaction, consolidation and integration costs
related to the merger with CMC Industries.

   To complete the merger we incurred transaction costs of approximately $5.6
million, comprised primarily of investment banking, legal, accounting,
printing, integration and other fees and expenses. We expensed these costs in
the third quarter of fiscal 1999. The expenses incurred in connection with the
consolidation and integration of our companies had an adverse effect on our
operating results for the third quarter of fiscal 1999. We could incur
additional consolidation and integration expenses in the future related to the
merger.

                                       17
<PAGE>

We may fail to make additional acquisitions and may not successfully integrate
acquisitions we do make, which could impair our ability to compete and our
operating results.

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

   Moreover, acquisitions that we do complete may result in:

  .  the potentially dilutive issuance of common stock or other equity
     instruments;

  .  the 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 asset acquisition of GSS/Array
Technology, Inc., also involve numerous business risks, including:

  .  difficulties in assimilating the acquired operations, technologies,
     personnel and products;

  .  difficulties in managing geographically dispersed and international
     operations;

  .  the diversion of management's attention from other business concerns;

  .  the potential disruption of our business; and

  .  the potential loss of key employees.

                        Risks Related to Our Operations

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 63% of
our net sales in the first nine months of 1999, 58% in fiscal 1998, and 66% in
fiscal 1997. 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.

   Within the electronics industry, Year 2000 concerns may adversely affect
demands or spending patterns for our customers' products which would adversely
affect demand for our services. 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.

                                       18
<PAGE>

The loss of major customers could adversely affect us.

   We depend on a small number of customers for a significant portion of our
business. For the first nine months of 1999, our four largest customers
accounted for approximately 52% of our net sales. Customers representing 10% or
more of our net sales for that period were:

  .  Nortel Networks (formerly Bay Networks and Aptis Communications)--15%;

  .  S-3 Incorporated (formerly Diamond Multimedia)--15%;

  .  Marconi (formerly Reltec)--12%; and

  .  Lucent Technologies (formerly Ascend Communications)--10%.

   For fiscal 1998 and 1997, our four largest customers accounted for
approximately 42% and 40% of our net sales. Customers representing 10% or more
of our net sales in fiscal 1998 were Nortel Networks and Micron Electronics,
each with approximately 12%, as compared to Nortel Networks with 17% of our net
sales in fiscal 1997. 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 experienced a significant decrease in sales to Micron in the
third quarter of fiscal 1998. We expect that our business with Ascend, which
was acquired by Lucent Technologies, will terminate in the fourth quarter of
fiscal 1999. 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;


                                       19
<PAGE>

  .  the purchase of materials;

  .  the purchase or leasing of facilities and equipment; and

  .  the levels and utilization of personnel and other resources.

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

Increased competition may result in decreased demand or prices for our
services.

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

  .  respond more quickly to new or emerging technologies;

  .  have greater name recognition, critical mass and geographic and market
     presence;

  .  be better able to take advantage of acquisition opportunities;

  .  adapt more quickly to changes in customer requirements; and

  .  devote greater resources to the development, promotion and sale of their
     services.

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

We may not be able to obtain raw materials or components for our assemblies on
a timely basis or at all.

   We rely on a single or limited number of third-party suppliers for many
proprietary and other components used in the assembly process. We do not have
any long-term supply agreements. Shortages of materials and components have
occurred from time to time and will likely occur in the future. In particular,
the earthquake in Taiwan in September 1999 could cause a shortage in components
such as raw printed circuit boards, flash memory and application specific
integrated circuits. Raw materials or component shortages could result in
shipping delays or increased prices which could adversely affect our ability to
manufacture products for our customers on a timely basis or at acceptable cost.
Moreover, the consolidation trend in our suppliers' industry results in changes
in supply relationships and in the price, availability and quality of
components and raw materials. Due to our utilization of just-in-time inventory
techniques, the timely availability of many components is dependent on our
ability to both develop accurate forecasts of customer requirements and manage
the materials supply chain. If we fail to do either, our operating results may
suffer.


                                       20
<PAGE>

Operating in foreign countries exposes us to increased risks.

   We acquired in 1997, and then subsequently expanded in 1998, operations in
Dublin, Ireland. As a result of our merger with CMC, we acquired operations in
Hermosillo, Mexico and a procurement office in Taiwan. We may in the future
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.

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

  .  increased duties;

  .  increased regulatory requirements;

  .  higher taxation;

  .  currency conversion limitations;

  .  restrictions on the transfer of funds;

  .  the imposition of or increase in tariffs; or

  .  limitations on imports or exports.

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

Our business could suffer if we lose the services of, or fail to attract, key
personnel.

   Our future success largely depends upon the skills and efforts of John A.
Pino, Chairman of the Board 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, and
a small number of sales people, 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. 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.

Year 2000 problems may disrupt our operations.

   We are subject to various Year 2000 risks relating to our internal systems
and equipment, the systems of our key customers and suppliers and the potential
decrease in demand for our customers' products. Many


                                       21
<PAGE>

computer software programs, operating systems and technology in use today are
unable to distinguish between the year 2000 and the year 1900 because they use
a two-digit shorthand to define the applicable year. People commonly refer to
this as the Year 2000 problem. If we do not properly identify and correct our
Year 2000 issues prior to January 1, 2000, our operations could be materially
disrupted due to our inability to do the following using current processes and
systems:

  .  receive technical specifications, purchase orders and payments from
     customers;

  .  order, receive, record and pay for inventory;

  .  manufacture and ship products;

  .  send invoices; and

  .  process internal and external transactions.

   Our reliance on our vendors, third-party service providers and customers is
substantial. Their failure to address Year 2000 issues could have a material
adverse effect on us. If any of the following occur, our normal business
activities and operations could be interrupted which could negatively impact
our operating results:

  .  we fail to either identify or correct a material Year 2000 problem;

  .  our suppliers, third-party service providers or customers experience
     Year 2000 problems; or

  .  demand for our customers' products is reduced due to changing purchasing
     patterns in their markets caused by Year 2000 concerns.

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:

  .  restrict our ability to expand our facilities;

  .  require us to acquire costly equipment; or

  .  require us to incur other significant costs and expenses.


                                       22
<PAGE>

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.

                         Risks Related to our Expansion

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. For example, we identified a significant
inventory shortfall occurring in the fourth quarter of 1997 that substantially
adversely affected our operating results for that period. As a result of this
shortfall, we have reviewed and continue to review our security procedures and
operating and financial controls. Based upon such review, we have implemented
enhanced security systems and inventory work-in-process tracking systems. We
have also implemented various cost management programs to enhance our
profitability. These programs may not result in the anticipated cost savings,
however. We will have to continue to invest in both our manufacturing
infrastructure to expand capacity and our operational, financial, and
management information systems. If we fail to manage our expected growth
effectively, the quality of our services and products and our operating results
could suffer significantly.

Expansion of our operations may negatively impact our business.

   We may expand our operations by establishing or acquiring new manufacturing
facilities or by expanding capacity in our current facilities. We may expand
both in geographical areas in which we currently operate and in new
geographical areas within the United States and internationally. We are
currently looking for a new facility in California to consolidate and expand
our operations and an additional facility in Massachusetts. We may not be able
to find suitable facilities on a timely basis or on terms satisfactory to us.
Expansion of operations involves numerous business risks, including:

  .  the inability to successfully integrate additional facilities or
     capacity and to realize anticipated synergies, economies of scale or
     other value;

  .  difficulties in the timing of expansions, including delays in the
     implementation of construction and manufacturing plans;

  .  the diversion of management's attention from other business areas during
     the planning and implementation of expansions;

  .  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.

                                       23
<PAGE>

   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 expansions.

We may fail to secure necessary additional financing.

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

                       Risks Related to our Common Stock

We anticipate that our net sales and operating results will fluctuate which
could affect the price of our common stock.

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

  .  fluctuations in demand for our services or the products we manufacture;

  .  shipment delays;

  .  interruptions in manufacturing caused by earthquakes or other natural
     disasters;

  .  effectiveness in controlling manufacturing costs;

  .  changes in cost and availability of labor and components;

  .  inefficiencies in managing inventory and accounts receivable, including
     inventory obsolescence and write-offs; and

  .  the levels at which we utilize our manufacturing capacity.

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

                                       24
<PAGE>

We may incur costs and liability related to potential or pending litigation.

   On February 27, 1998, our company and several of our officers and directors
were named as defendants in a purported securities class action lawsuit filed
in the United States District Court for the District of Massachusetts. The
plaintiffs amended the complaint on October 16, 1998. The plaintiffs purport to
represent a class of all persons who purchased or otherwise acquired our common
stock in the period from April 17, 1997 through March 31, 1998. The amended
complaint alleges, among other things, that the defendants knowingly made
misstatements to the investing public about the value of our inventory and the
nature of our accounting practices. On December 15, 1998, we filed a motion to
dismiss the case in its entirety based on the pleadings. Our motion to dismiss
was granted without prejudice on May 27, 1999, and the case was closed by the
court on June 1, 1999. On June 28, 1999, the plaintiffs filed a motion with the
court seeking permission to file a second amended complaint. We opposed that
motion. On July 13, 1999, the court denied the plaintiffs' motion to amend,
noting "final judgment having entered in this case." On July 26, 1999, the
plaintiffs filed a motion with the court asking the court to extend the 30-day
period for filing an appeal of its ruling dismissing the case. We opposed that
motion as well, and the court denied the motion on August 10, 1999. On August
12, 1999, plaintiffs filed a notice indicating their intent to appeal the
court's orders of July 26, 1999 and August 10, 1999. We believe the claims
asserted in this action and the appeals noticed by plaintiffs are without merit
and intend to continue to defend ourselves vigorously in this action. However,
a material adverse judgment in such matter could cause our financial condition
or operating results to suffer.

   On June 15, 1999, we received written notice from legal counsel for the
Lemelson Medical, Education & Research Foundation, Limited Partnership alleging
that we are infringing certain patents held by the Lemelson Foundation
Partnership and offering to license such patents to us. Based on our
understanding of the terms that the Lemelson Foundation Partnership has made
available to current licensees, we believe that obtaining a license from them
under the same or similar terms would not have a significant negative effect on
our financial condition. Our results of operations in a particular quarter may
be negatively affected, however. Moreover, a license may not be available on
terms satisfactory to us. Litigation with respect to patents and other
intellectual property matters can result in substantial costs and damages,
require the cessation of the use of infringing products and processes, and
force the infringing party to obtain a license to the relevant intellectual
property.

   In December 1993, CMC Industries retained the services of a consultant to
assist in quantifying the potential exposure to CMC in connection with clean-up
and related costs of a former manufacturing site. This site is commonly known
as the ITT Telecommunications site in Milan, Tennessee. The consultant
initially estimated that the cost to remove and dispose of the contaminated
soil would be approximately $200,000. CMC subsequently entered into a voluntary
agreement to investigate the site with the Tennessee Department of Environment
and Conservation. In addition, CMC agreed to reimburse a tenant of the site
$115,000 for expenditures previously incurred to investigate environmental
conditions at the site. CMC recorded a total provision of $320,000 based on
these estimates. In fiscal 1995, an environmental consultant estimated that the
cost of a full study combined with short- and long-term remediation of the site
may cost between $3.0 and $4.0 million. Subsequent environmental studies done
in 1999 have estimated such costs as between $750,000 and $3.5 million. During
CMC's fiscal 1996, the State of Tennessee's Department of Environment and
Conservation named certain potentially responsible parties in relation to the
former facility. CMC was not named as a potentially responsible party. However,
Alcatel, Inc., a potentially responsible party named by the State of
Tennessee's Department of Environment and 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, we would defend ourselves
vigorously but defense or resolution of this matter could negatively impact our
financial position and results of operations.


                                       25
<PAGE>

John A. Pino has significant influence over our company.

   John A. Pino, Chairman of the Board and Chief Executive Officer, and a number
of trusts for his and his family's benefit, will collectively beneficially own
approximately 34% 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 price of our common stock has been and may continue to be volatile and you
might not be able to sell your shares at or above the public offering price.

   The price of our common stock has been and may continue to be volatile.
Since October 1, 1998, our stock price has fluctuated between a low of $5.06
per share and a high of $29.63 per share. On October 19, 1999, the closing
price for our common stock was $26.75. The price of our common stock 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, regardless of our operating performance.

   Recently, when the market price of a stock has been volatile, holders of
that stock have often instituted securities class action litigation against the
company that issued the stock. 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 our stock price.

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

  .  prohibit stockholder action by written consent; and



                                       26
<PAGE>

  .  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.

We may lose the value of our investment in Cortelco Systems which could
negatively impact the price of our common stock.

   Through our acquisition of CMC Industries, we acquired a redeemable preferred
stock investment in Cortelco Systems Holding Corp. David S. Lee, a former
director of CMC Industries and a current director of ACT, also serves as a
director of Cortelco Systems Holding Corp. Mr. Lee is also the largest
stockholder of Cortelco and beneficially owns approximately 5.6% of our common
stock. In March 1999, CMC entered into a Stock Purchase Agreement with Mr. Lee
under which Mr. Lee effectively guaranteed CMC's right to receive not less than
approximately $5.9 million by May 2002 in connection with CMC's investment in
Cortelco. We may not receive any of the $5.9 million from Cortelco or Mr. Lee,
which could negatively impact our financial condition and the price of our
common stock.

                                       27
<PAGE>

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 $107.0 million Senior Secured Credit Facility which bears interest
at variable interest rates. We have also entered into a $17.0 million interest
rate swap agreement which matures in October 2001 in order to reduce the impact
of fluctuating interest rates on our credit facility. This swap agreement is
classified as held for purposes other than trading. Under this swap agreement,
we have agreed with the counterpart to pay fixed rate payments on a monthly
basis, based upon an annual interest rate of 6.76%, in exchange for receiving
variable rate payments on a monthly basis, calculated on an agreed-upon
notional amount. Net interest payments or receipts from interest rate swaps are
recorded as adjustments to interest expense in our condensed consolidated
statements of operations. Our exposure related to adverse movements in interest
rates is primarily derived from the variable rate on the remainder of our
credit facility. As of September 30, 1999, $17.0 million of the outstanding
balance of $68.4 million under the credit facility was at a rate of 6.76%. At
September 30, 1999, $25 million of the line of credit was at an interest rate
of 7.63% and the remainder of the credit facility was at an 8.50% interest
rate. Based on the portion of this balance in excess of $17.0 million, an
adverse change of one percent in the interest rate would cause a change in
interest expense of approximately $514,000 on an annual basis.

   The foreign currencies to which we have exchange rate exposure are the Irish
punt and the Mexican peso. International operations do not currently constitute
a significant portion of our net sales or net assets. Therefore this exposure
is not considered material to us.

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

                                       28
<PAGE>

                         PART II.   OTHER INFORMATION



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

  A special meeting of stockholders was held July 29, 1999 to consider and vote
upon three matters so described in the Company's joint proxy
statement/prospectus dated June 23, 1999.  The following is a brief description
of the matters voted upon, the number of votes cast for and against each
proposal, and the number of abstentions.

   1. To approve and adopt an Agreement and Plan of Merger and Reorganization
      dated as of May 10, 1999, among ACT Manufacturing, Inc., East Acquisition
      Corp., a Delaware corporation and wholly-owned subsidiary of ACT, and CMC
      Industries, Inc., a Delaware corporation, and the issuance of shares of
      ACT common stock pursuant to such merger agreement. The merger agreement
      provides for, among other things, the exchange of each issued and
      outstanding share of common stock of CMC for 0.5 of a share of ACT common
      stock, the assumption of all outstanding options to purchase CMC common
      stock and the merger of East Acquisition Corp. with and into CMC, with CMC
      being the surviving corporation and a wholly-owned subsidiary of ACT after
      the merger.
<TABLE>
<CAPTION>


<S>                            <C>
      Votes For:               7,879,831
      Votes Against:              35,089
      Abstain:                     7,443
      Votes Unvoted:           1,169,237

</TABLE>

   2. To approve an amendment to the Restated Articles of Organization of ACT to
      increase the number of authorized shares of ACT common stock from
      30,000,000 to 50,000,000, $.01 par value per share, subject to and upon
      completion of the merger .

<TABLE>
<CAPTION>

<S>                            <C>
      Votes For:               7,821,702
      Votes Against:              85,739
      Abstain:                    14,921
      Votes Unvoted:           1,169,238

</TABLE>

   3. To approve and adopt an Amended and Restated 1995 Stock Plan pursuant to
      which the aggregate number of shares which may be issued thereto shall be
      increased from 1,250,000 to 2,250,000.
<TABLE>
<CAPTION>

<S>                            <C>
      Votes For:               6,852,335
      Votes Against:           1,054,386
      Abstain:                    15,641
      Votes Unvoted:           1,169,238

</TABLE>



                                       29
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

          10.1  Employment Agreement dated as of July 29, 1999 between the
                Company and Jack O'Rear

          11.   Computation of Net Income (Loss) Per Common Share

          21.1  Subsidiaries

          27.   Financial Data Schedule

(b)      Reports on Form 8-K

        The Registrant filed a report on Form 8-K on July 30, 1999, which
        reported that the merger of East Acquisition Corporation, a wholly-owned
        subsidiary of the Company with and into CMC Industries, Inc. as provided
        for in that certain Agreement and Plan of Merger and Reorganization
        dated May 10, 1999 between the Company, East Acquisition Corporation and
        CMC Industries, Inc., was effected on July 29, 1999 pursuant to a
        Certificate of Merger filed with the Secretary of State of the State of
        Delaware on that date.

                                       30
<PAGE>

                                  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.

October 22, 1999                ACT MANUFACTURING, INC.

                                     /s/   JEFFREY B. LAVIN
                                --------------------------------------------
                                Jeffrey B. Lavin
                                Vice President of Finance
                                and Chief Financial Officer
                                (Principal Financial and Accounting Officer)
<PAGE>

                                 EXHIBIT INDEX



<TABLE>
<CAPTION>
Exhibit    DESCRIPTION
-------    -----------
<C>        <S>
 10.1      Employment Agreement dated as of July 29, 1999 between the Company
           and Jack O'Rear

 11.       Computation of Net Income (Loss) Per Common Share

 21.1      Subsidiaries

 27.       Financial Data Schedule
</TABLE>