DDi (DDICQ) 10-Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

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: 000-30241

DDi CORP.

(Exact name of registrant as specified in its charter)

Delaware	06-1576013
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1220 N. Simon Circle

Anaheim, California 92806

(Address of principal executive offices) (Zip code)

(714) 688-7200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer  ¨	Accelerated filer  þ	Non-accelerated filer  ¨	Smaller reporting company  ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  þ

As of July 31, 2009, DDi Corp. had 19,791,594 shares of common stock, par value $0.001 per share, outstanding.

DDi CORP.

FORM 10-Q for the Quarterly Period Ended June 30, 2009

TABLE OF CONTENTS

		Page No.
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2009 and 2008	2
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18
Item 4.	Controls and Procedures	18
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Submission of Matters to a Vote of Security Holders	20
Item 5.	Other Information	20
Item 6.	Exhibits	21
Signatures		22

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

DDi Corp.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

	June 30, 2009			December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	23,941		$	20,081
Accounts receivable, net		19,674			25,504
Inventories		13,806			13,768
Prepaid expenses and other current assets		922			620
Total current assets		58,343			59,973
Property, plant and equipment, net		26,092			27,848
Intangible assets, net		1,754			2,134
Other assets		690			825
Total assets	$	86,879		$	90,780
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	244		$	244
Accounts payable		8,162			11,635
Accrued expenses and other current liabilities		7,474			8,776
Income taxes payable		499			1,636
Total current liabilities		16,379			22,291
Long-term debt		1,150			1,272
Other long-term liabilities		1,896			2,113
Total liabilities		19,425			25,676
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock—$0.001 par value, 190,000 shares authorized, 22,738 shares issued and 19,791 shares outstanding at June 30, 2009 and December 31, 2008		23			23
Additional paid-in-capital		246,726			245,589
Treasury stock, at cost — 2,947 shares held in treasury at June 30, 2009 and December 31, 2008		(16,323	)		(16,323	)
Accumulated other comprehensive loss		(88	)		(354	)
Accumulated deficit		(162,884	)		(163,831	)
Total stockholders’ equity		67,454			65,104
Total liabilities and stockholders’ equity	$	86,879		$	90,780

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

1

DDi Corp.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Net sales	$	37,177		$	51,188		$	76,452		$	98,540
Cost of goods sold		30,498			40,815			62,513			78,424
Gross profit		6,679			10,373			13,939			20,116
Operating expenses:
Sales and marketing		2,829			3,192			5,734			6,468
General and administrative		2,835			3,332			6,259			7,170
Amortization of intangible assets		190			1,340			380			2,679
Restructuring and other related charges		—			82			—			267
Operating income		825			2,427			1,566			3,532
Interest expense		197			191			395			386
Interest income		(52	)		(76	)		(108	)		(232	)
Other expense (income), net		121			(26	)		76			(113	)
Income before income tax expense		559			2,338			1,203			3,491
Income tax expense		125			831			256			1,266
Net income	$	434		$	1,507		$	947		$	2,225
Net income per share:
Basic	$	0.02		$	0.07		$	0.05		$	0.10
Diluted	$	0.02		$	0.07		$	0.05		$	0.10
Weighted-average shares used in per share computations:
Basic		19,715			21,303			19,715			21,646
Diluted		19,803			21,326			19,772			21,659

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

2

DDi Corp.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	947		$	2,225
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		4,093			5,629
Amortization of intangible assets		380			2,679
Amortization of debt issuance costs and discount		52			51
Non-cash compensation		1,137			1,301
Other		48			342
Changes in operating assets and liabilities:
Accounts receivable		6,084			(5,132	)
Inventories		97			(961	)
Prepaid expenses and other assets		(199	)		37
Accounts payable		(3,569	)		1,200
Accrued expenses and other current liabilities		(1,561	)		634
Income taxes payable		(1,160	)		278
Net cash provided by operating activities		6,349			8,283
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(2,271	)		(5,209	)
Net cash used in investing activities		(2,271	)		(5,209	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt		(122	)		(122	)
Repurchases of common stock including commissions		—			(5,789	)
Net cash used in financing activities		(122	)		(5,911	)
Effect of exchange rate changes on cash and cash equivalents		(96	)		180
Net increase (decrease) in cash and cash equivalents		3,860			(2,657	)
Cash and cash equivalents, beginning of period		20,081			20,445
Cash and cash equivalents, end of period	$	23,941		$	17,788

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

3

DDi Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of DDi Corp. and its wholly-owned subsidiaries. DDi Corp. and its subsidiaries are referred to as the “Company” or “DDi.” All intercompany transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements and notes thereto contain all adjustments necessary for a fair statement of the financial position of the Company as of June 30, 2009 and the results of its operations and cash flows for the three and six months ended June 30, 2009 and 2008, and such adjustments are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of results of operations to be expected for the full year.

The Company has prepared these financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such regulations, although the Company believes the disclosures provided are adequate to prevent the information presented from being misleading. The condensed consolidated balance sheet data as of December 31, 2008 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. This report on Form 10-Q for the quarter ended June 30, 2009 should be read in conjunction with the audited financial statements presented in DDi’s Annual Report on Form 10-K for the year ended December 31, 2008.

We have evaluated subsequent events through July 31, 2009, the date of issuance of the condensed consolidated financial statements.

Description of Business

DDi is a leading provider of time-critical, technologically-advanced printed circuit board (“PCB”) engineering and manufacturing services. The Company specializes in engineering and fabricating complex multi-layer PCBs on a quick-turn basis, with lead times as short as 24 hours. DDi has approximately 1,000 customers in various market segments including communications and computing, military and aerospace, industrial electronics, instrumentation, medical, and high-durability commercial markets. The Company’s engineering capabilities and manufacturing facilities located in the United States and Canada, together with its suppliers in Asia, enable it to respond to time-critical orders and technology challenges for its customers. DDi operates primarily in one geographical area, North America.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162(“SFAS 168”). SFAS 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. SFAS 168 does not change U.S. GAAP and will not have a material impact on the Company’s condensed consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165,Subsequent Events (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Among other things, SFAS 165 requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The Company adopted the new disclosure requirements in its June 30, 2009 condensed consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 requires fair value disclosures in both interim as well as annual financial statements in order to provide more timely information about the effects of current market conditions on financial instruments. The Company’s adoption of the provisions of FSP FAS 107-1 and APB 28-1 effective June 30, 2009 had no impact on the Company’s condensed consolidated financial statements.

4

DDi Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 2. INVENTORIES

Inventories are stated at the lower of cost (determined on a first-in, first-out or average cost basis) or market and consisted of the following (in thousands):

	June 30, 2009		December 31, 2008
Raw materials	$	6,094	$	6,144
Work-in-process		4,627		4,513
Finished goods		3,085		3,111
Total	$	13,806	$	13,768

NOTE 3. REVOLVING CREDIT FACILITY

Availability under the Company’s $25 million revolving credit facility (the “Credit Facility”) with General Electric Capital Corporation is based on various liquidity and borrowing base tests including the Company’s eligible accounts receivable and inventories. The Company’s wholly-owned operating subsidiaries are the borrowers under the Credit Facility. The Credit Facility is guaranteed by DDi Corp. and all of its subsidiaries that are not borrowers under the Credit Facility. The Credit Facility is collateralized by the accounts receivable, inventories and other tangible and intangible personal property (other than property, plant and equipment) of the borrowers, and by a pledge of the stock of the Company’s subsidiaries, and expires in March 2010. Revolving credit advances under the Credit Facility bear interest at the prime rate (3.25% at June 30, 2009). The Company can elect to have any new revolving credit advances, or convert any outstanding revolving credit advances, in excess of $1.0 million and in increments of $500,000, made as a LIBOR-based loan with a term of one, two, or three months at a rate of LIBOR plus 1.5%. The Credit Facility contains customary covenants including financial covenants regarding the Company’s fixed charge ratios and capital expenditures if Liquidity, as defined in the agreement, falls below a certain threshold. Through June 30, 2009, Liquidity has been above the financial covenant measurement threshold since obtaining the Credit Facility. There are also negative covenants regarding incurrence of additional debt, liquidation, merger or asset sales or changes in the Company’s business. The Credit Facility restricts the Company’s ability to pay cash dividends on its common stock and restricts its subsidiaries’ ability to pay dividends to the Company without the lender’s consent. As of June 30, 2009, the Company was in compliance with all required covenants.

The available borrowing capacity under the Credit Facility was approximately $13.3 million as of June 30, 2009 and no amounts were outstanding.

NOTE 4. LONG-TERM DEBT

The Company has a term loan mortgage on its Ohio facility. The loan is secured by the Ohio facility’s real property. The note matures in April 2015, bears interest at LIBOR plus 1.5%, and has monthly principal payments of approximately $20,000 plus accrued interest. At June 30, 2009 and December 31, 2008, the effective interest rate of the term loan was 1.82% and 2.93%, respectively, and the principal balance was $1.4 million and $1.5 million, respectively.

5

DDi Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 5. PRODUCT WARRANTY

The Company records warranty expense at the time revenue is recognized and maintains a warranty accrual for estimated future warranty obligations based upon the relationship between historical sales volumes and anticipated costs. Factors that affect the warranty liability include the number of units sold, historical and anticipated rates of warranty claims and the estimated cost of repair. Management assesses the adequacy of the warranty accrual each quarter. To date, actual warranty claims and costs have been consistent with the Company’s estimates. The changes in the Company’s warranty accrual were as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Beginning balance	$	790		$	746		$	805		$	750
Warranties issued during the period		1,001			1,277			2,128			2,059
Warranty expenditures		(1,014	)		(1,183	)		(2,156	)		(1,969	)
Ending balance	$	777		$	840		$	777		$	840

NOTE 6. INCOME TAXES

The Company adopted the provisions of FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109(“FIN 48”), on January 1, 2007. The Company had $1.0 million and $921,000 of total gross unrecognized tax benefits at June 30, 2009 and December 31, 2008, respectively. If recognized in future periods there would be a favorable affect of $1.0 million to the effective tax rate. Management anticipates a decrease of approximately $600,000 in the tax contingency reserve during the remainder of 2009. This anticipated decrease has two primary components: (i) approximately $285,000 due to statute expirations and (ii) approximately $334,000 associated with settlements.

The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and Canada. The Company has substantially concluded all U.S. federal income tax matters for years through 2004. Canadian income tax matters have been examined through 2004 with 2005 through 2007 currently under examination by the Canadian Revenue Agency. State jurisdictions that remain subject to examination range from 2002 to 2008.

The Company’s effective income tax rate differs from the U.S. federal statutory tax rate of 35% primarily as a result of the mix of earnings between tax jurisdictions, research and development credits, state income taxes and its continuous evaluation of the realization of its deferred tax assets and uncertain tax positions.

Effective January 1, 2009, due to the adoption of SFAS No. 141(revised 2007),Business Combinations,any reduction of the U.S. valuation allowance that was related to net deferred tax assets that were in existence as of applying fresh-start accounting and any adjustments to uncertain tax positions for years prior to the Company’s emergence from bankruptcy in 2003 will now be recognized as a U.S. tax benefit as opposed to a reduction of goodwill and additional-paid-in capital as was done in the past.

NOTE 7. STOCK-BASED COMPENSATION

Stock Options

During the three months ended June 30, 2009, 135,000 stock options were granted to Company directors and a key employee with a grant date fair value of $1.38 per option. The options granted to Company directors fully vest after one year from the date of grant and the options granted to the key employee vest over three years in equal installments commencing one year after the date of grant. As of June 30, 2009, the total compensation cost related to all outstanding non-vested stock options not yet recognized was $790,000, net of estimated forfeitures. This cost will be amortized on a straight-line basis over the remaining weighted-average period of approximately 1.1 years.

Restricted Stock

There were no grants of restricted stock during the three and six months ended June 30, 2009. As of this date, the total compensation cost related to all outstanding non-vested restricted stock awards not yet recognized was $1.5 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over the remaining weighted-average period of approximately 2.1 years.

6

DDi Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Stock-based Compensation Expense

The following table sets forth expense related to stock-based compensation (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Non-cash compensation expense:
Cost of goods sold	$	135	$	113	$	274	$	242
Sales and marketing expenses		92		70		180		140
General and administrative expenses		290		468		683		919
Total non-cash compensation expense	$	517	$	651	$	1,137	$	1,301

NOTE 8. STOCK REPURCHASE PROGRAM

The Company’s Board of Directors (the “Board”) previously authorized a common stock repurchase program of up to 3,000,000 shares of the Company’s common stock in the open market at prevailing market prices or in privately-negotiated transactions. In February 2009, the Board amended the stock repurchase program to increase the amount of shares of common stock authorized to be repurchased by up to an additional $10 million worth of shares. The stock repurchase program is subject to applicable legal and regulatory requirements and obtaining the consent of the lender of the Company’s Credit Facility. If the Company is unable to obtain the lender’s consent, it would be restricted from repurchasing the additional $10 million worth of shares authorized. The stock repurchase authorization does not have an expiration date, and the stock repurchase program may be modified or discontinued at any time. The Company will continue to review the value in repurchasing shares after considering its cash levels and operating needs as well as other uses for its cash that could create greater shareholder value.

No shares were repurchased during the six months ended June 30, 2009. As of June 30, 2009, the Company had repurchased a total of 2,946,986 shares since the inception of the program.

NOTE 9. SEGMENT REPORTING

Based on evaluation of the Company’s financial information, management believes that the Company operates in one reportable segment related to the design, development, manufacture and test of complex PCBs. Since early 2005, the Company has operated primarily in one geographical area, North America. Revenues are attributed to the country in which the customer buying the product is located.

The following table summarizes net sales by geographic area (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Net sales:
North America(1)	$	34,851	$	46,163	$	71,251	$	89,869
Asia		1,744		4,582		3,818		7,838
Other		582		443		1,383		833
Total	$	37,177	$	51,188	$	76,452	$	98,540

⁽¹⁾ The majority of sales in North America are to customers located in the United States.

7

DDi Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 10. NET INCOME PER SHARE

Effective January 1, 2009, the Company adopted FASB Staff Position 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (“FSP EITF 03-6-1”). Under FSP EITF 03-6-1, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method as described in SFAS No. 128,Earnings Per Share.The Company’s adoption of FSP EITF 03-6-1 had no material impact on its consolidated financial statements.

Basic net income per share is computed by dividing the net income for the period by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted-average number of common and common equivalent shares outstanding during the period, if dilutive. The dilutive effect of outstanding options and restricted stock is reflected in diluted earnings per share by application of the treasury stock method, which includes consideration of share-based compensation required under SFAS No. 123R,Share-Based Payment.

The following table sets forth the calculation of basic and diluted net income per share (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Weighted-average shares of common stock outstanding - basic		19,715		21,303		19,715		21,646
Weighted common stock equivalents		88		23		57		13
Weighted-average shares of common stock outstanding - diluted		19,803		21,326		19,772		21,659
Net income	$	434	$	1,507	$	947	$	2,225
Net income per share - basic and diluted	$	0.02	$	0.07	$	0.05	$	0.10

For the three and six months ended June 30, 2009, common shares issuable upon exercise of outstanding stock options and vesting of restricted stock of 2,630,856 and 2,662,185, respectively, were excluded from the diluted net income per share calculation as their impact would have been anti-dilutive.

For the three and six months ended June 30, 2008, common shares issuable upon exercise of outstanding stock options and the vesting of restricted stock of 2,263,510 and 2,271,954, respectively, were excluded from the diluted net income per share calculation as their impact would have been anti-dilutive.

NOTE 11. COMPREHENSIVE INCOME

SFAS No. 130,Reporting Comprehensive Income, establishes requirements for reporting and disclosure of comprehensive income and its components. Comprehensive income includes unrealized holding gains and losses and other items that have previously been excluded from net income and reflected instead in stockholders’ equity. The following table summarizes the Company’s comprehensive income (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Net income	$	434	$	1,507	$	947	$	2,225
Other comprehensive income:
Foreign currency translation adjustments		366		29		266		(42	)
Comprehensive income	$	800	$	1,536	$	1,213	$	2,183

NOTE 12. FAIR VALUE MEASUREMENTS

On January 1, 2008, the Company adopted the provision of SFAS No. 157,Fair Value Measurements(“SFAS 157”), for applying fair value measurements to assets and liabilities reported in the financial statements at fair value on a recurring basis. SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

8

DDi Corp.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. As of June 30, 2009, the Company’s financial assets and financial liabilities that were measured at fair value on a recurring basis were comprised solely of money market deposits. The Company invests excess cash from its cash depository accounts in highly liquid money market accounts and reflects these amounts within cash and cash equivalents on the consolidated balance sheet at a net value of 1:1 for each dollar invested.

The fair value of the Company’s cash equivalents was $21.4 million and $16.3 million as of June 30, 2009 and December 31, 2008, respectively, and was based on quoted prices in active markets for identical assets (Level 1 input).

Effective January 1, 2009, the Company adopted SFAS 157 for all nonfinancial assets and liabilities that are measured at fair value on a non-recurring basis, such as identifiable intangible assets. The adoption of SFAS 157 for nonfinancial assets and liabilities that are measured at fair value on a non-recurring basis did not impact the Company’s financial position or results of operations for the three and six months ended June 30, 2009, and the Company does not expect the adoption to have a material impact on the amounts reported in its consolidated financial statements in future periods.

NOTE 13. COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved from time to time in litigation concerning claims arising out of the Company’s operations in the normal course of business. Management does not believe any current legal claims or litigation as of June 30, 2009 will have a material adverse effect on the Company’s financial condition, results of operations or cash flows, and the Company has not recorded any loss contingencies at June 30, 2009.

Leases

On May 1, 2009, Dynamic Details, Inc., the Company’s wholly-owned operating subsidiary, entered into agreements with the Swenson Family Limited Partnership and EMC Associates, L.P. to amend the real property leases covering the Company’s Anaheim manufacturing facility and corporate headquarters. The amendments extend the lease terms for the premises until September 30, 2012. The leases cover approximately 90,000 square feet, with an aggregate rent of approximately $59,000 per month beginning October 1, 2009.

9

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

The following is a discussion of the financial condition and results of operations for our fiscal quarter and year to date period ended June 30, 2009. As used herein, the “Company,” “we,” “us,” or “our” means DDi Corp. and its wholly-owned subsidiaries. This discussion and analysis should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in DDi Corp.’s Annual Report on Form 10-K for the year ended December 31, 2008.

Some of the statements in this section contain forward-looking statements regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events, which involve risks and uncertainties. All statements other than statements of historical facts included in this section relating to expectation of future financial performance, continued growth, changes in economic conditions or capital markets and changes in customer usage patterns and preferences, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as may, will, should, expect, plan, intend, forecast, anticipate, believe, estimate, predict, potential, continue or the negative of these terms or other comparable terminology. The forward-looking statements contained in this section involve known and unknown risks, uncertainties and situations that may cause our or our industry’s actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. Factors that might cause actual events or results to differ materially from those indicated by these forward-looking statements may include the matters listed under “Risk Factors” in Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 including, but not limited to, changes in general economic conditions in the markets in which we may compete and fluctuations in demand in the electronics industry; increased competition; increased costs; our ability to retain key members of management; our ability to address changes to environmental laws and regulations; risks associated with acquisitions; adverse state, federal or foreign legislation or regulation or adverse determinations by regulators; and other factors identified from time to time in our filings with the U.S. Securities and Exchange Commission (“SEC”).

Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors.

Our Company

We provide time-critical, technologically-advanced printed circuit board (“PCB”) engineering and manufacturing services. We specialize in engineering and fabricating complex multi-layer PCBs on a quick-turn basis, with lead times as short as 24 hours, and on manufacturing products with high levels of complexity and reliability with low-to-moderate production volumes. We have approximately 1,000 PCB customers in various market segments including communications, computing, military/aerospace, industrial electronics, instrumentation, medical, and high-durability commercial markets. Our customers include both original equipment manufacturers (“OEMs”), electronic manufacturing services providers, and military/aerospace companies. With such a broad customer base and approximately 40 to 50 new PCB designs tooled per day, we have accumulated significant process and engineering expertise. Our core strength is developing innovative, high-performance solutions for customers during the engineering, test and launch phases of their new electronic product development. Our entire organization is focused on rapidly and reliably filling complex customer orders and building long-term customer relationships. Our engineering capabilities and manufacturing facilities located in the United States and Canada, together with our suppliers in Asia, enable us to respond to time-critical orders and technology challenges for our customers.

Industry Overview

Printed circuit boards are a fundamental component of virtually all electronic equipment. A PCB is comprised of layers of laminate and copper and contains patterns of electrical circuitry to connect electronic components. The level of PCB complexity is determined by several characteristics, including size, layer count, density, materials and functionality. High-end commercial and military/aerospace equipment manufacturers require complex PCBs fabricated with higher layer counts, greater density and advanced materials, and demand highly complex and sophisticated manufacturing capabilities. By contrast, other PCBs, such as those used in non-wireless consumer electronic products, are generally less complex and have less sophisticated manufacturing requirements.

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We see several significant trends within the PCB manufacturing industry, including:

• Short product life cycles for electronics. Rapid advances in technology are significantly shortening product life-cycles and placing increased pressure on OEMs to develop new products in shorter periods of time. In response to these pressures, OEMs look to PCB manufacturers to offer design and engineering support and quick-turn manufacturing services to reduce time to market. Many OEMs, in an effort to increase electronic supply chain efficiency, work with a small number of technically qualified suppliers that have sophisticated manufacturing expertise and are able to offer a broad range of PCB products.

• Increasing complexity of electronic equipment. OEMs are continually designing more complex and higher performance electronic equipment, which requires sophisticated PCBs that accommodate higher signal speeds and frequencies and increased component densities and operating temperatures. In turn, OEMs rely on PCB manufacturers that can provide advanced engineering and manufacturing services early in the new product development cycle. OEMs are also requiring more lead-free materials and other “green” products which add to the complexity of the materials utilized in the manufacturing of PCBs.

• Increasing demand for military and aerospace products.The military/aerospace market is characterized by time-consuming and complex certification processes, long product life cycles, and a unique combination of demand for leading-edge technology with extremely high reliability and durability. An increased focus on incorporating technology in products for reconnaissance and intelligence combined with continued spending on military communications, aerospace, and weapons systems applications are anticipated to drive steady end-market growth. Success in the military/aerospace market is generally achieved only after manufacturers demonstrate the long-term ability to pass extensive OEM and government certification processes, numerous product inspections, audits for quality and performance, and extensive administrative requirements associated with participation in government programs. Export controls represent a barrier to entry for international competition as they restrict the overseas export of defense-related materials, services, and sensitive technologies that are associated with government programs. In addition, the complexity of the end products serves as a barrier to entry to potential new suppliers.

• Increased demand volatility in commercial end-markets.As a result of the continued downturn in the global economy, demand for PCBs from the commercial sector, including the communications, computing, industrial electronics, and instrumentation markets, continues to be volatile. Companies operating in these industries, including existing or potential DDi customers, are experiencing deterioration in their businesses, which in turn may cause them to delay or cancel orders from PCB manufacturers. It is still unclear when this downward trend will begin to abate but, until it does, continued demand volatility and softness in the commercial end-markets is expected.

• Shifting of high volume production to Asia. Asian-based PCB manufacturers have been able to capitalize on lower labor costs and to increase their market share in the production of PCBs used in higher-volume consumer electronics applications, such as personal computers and cell phones. Asian-based manufacturers have generally been unable to meet the lead time requirements for the production of complex PCBs on a quick-turn basis.

Results of Operations for the Three Months Ended June 30, 2009 Compared to the Three Months Ended June 30, 2008

The following tables set forth select data from our Condensed Consolidated Statements of Operations (in thousands):

	Three Months Ended June 30,						$ Change			% Change
	2009			2008
Net sales	$	37,177		$	51,188		$	(14,011	)	(27.4	)%
Cost of goods sold		30,498			40,815			(10,317	)	(25.3	)%
Gross profit		6,679			10,373			(3,694	)	(35.6	)%
Gross profit as a percentage of net sales		18.0	%		20.3	%

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Net Sales

Net sales are derived from the engineering and manufacture of complex, technologically-advanced multi-layer PCBs.

Net sales decreased $14.0 million, or 27.4%, for the second quarter of 2009 compared to the second quarter of 2008. The decrease in net sales was primarily due to a decline in customer demand related to general economic conditions. While net sales decreased in a number of our markets, we experienced continued growth in the military/aerospace market, and this market grew as a percentage of total net sales to approximately 33% for the second quarter of 2009 compared to approximately 19% for the second quarter of 2008.

Gross Profit

Gross profit for the second quarter of 2009 was $6.7 million, or 18.0% of net sales, compared to $10.4 million, or 20.3% of net sales, for the same period in 2008. The decrease in gross profit was primarily due to less efficient absorption of fixed costs on lower net sales.

Non-cash Compensation Expense

	Three Months Ended June 30,
	2009		2008
Non-cash compensation expense:
Cost of goods sold	$	135	$	113
Sales and marketing expenses		92		70
General and administrative expenses		290		468
Total non-cash compensation expense	$	517	$	651

Non-cash compensation expense related to stock awards was recorded in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R,Share-Based Payment (“SFAS 123R”).

Sales and Marketing Expenses

	Three Months Ended June 30,						$ Change			% Change
	2009			2008
Sales and marketing expenses	$	2,829		$	3,192		$	(363	)	(11.4	)%
Percentage of net sales		7.6	%		6.2	%

Sales and marketing expenses decreased by $363,000, or 11.4%, for the second quarter of 2009 compared to the second quarter of 2008. The dollar decrease was primarily due to lower commissions and management incentives on reduced sales levels. The increase in sales and marketing expenses as a percentage of net sales was primarily due to the lower sales levels.

General and Administrative Expenses

	Three Months Ended June 30,						$ Change			% Change
	2009			2008
General and administrative expenses	$	2,835		$	3,332		$	(497	)	(14.9	)%
Percentage of net sales		7.6	%		6.5	%

General and administrative expenses decreased by $497,000, or 14.9%, for the second quarter of 2009 compared to the second quarter of 2008. The dollar decrease was primarily due to lower compensation expense driven by continued streamlining and centralization of administrative functions, as well as lower non-cash compensation expense and management incentives. The increase in general and administrative expenses as a percentage of net sales was primarily due to the lower sales levels.

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Amortization of Intangible Assets

Amortization of intangible assets in 2009 relates to customer relationships identified in connection with the acquisition of Sovereign Circuits, Inc. in the fourth quarter of 2006. These intangibles are being amortized over their estimated useful life of five years resulting in $190,000 of amortization expense per quarter through October 2011. The decrease in amortization expense from $1.3 million in the second quarter of 2008 is due to the customer relationships identified during the allocation of the reorganized value of the Company subsequent to our emergence from bankruptcy in December 2003 becoming fully amortized in the fourth quarter of 2008.

Restructuring and Other Related Charges

The restructuring and other related charges in the second quarter of 2008 of $82,000 were the result of the fees and expenses related to litigation with the landlord of two buildings in connection with the closing of our Arizona facility in 2005. We completed remediation of the Arizona facility (encompassing three separate buildings) and exited the last building in the third quarter of 2006 but had continued expenses related to the litigation through its resolution in December 2008.

Interest Expense

Interest expense consists of amortization of debt issuance costs, fees related to our asset-based revolving credit facility (the “Credit Facility”), interest on our note payable on our Ohio facility, and interest expense associated with long-term leases. Interest expense was essentially flat at $197,000 for the second quarter of 2009 compared to $191,000 for the same period in 2008.

Interest Income

Interest income earned on our cash balances decreased by $24,000 to $52,000 for the second quarter of 2009 from $76,000 for the same period in 2008. Although the Company maintained higher average cash balances during the second quarter of 2009 compared to the same period in 2008, reduced interest rates resulted in an overall reduction in interest income.

Other Expense (Income), Net

Net other expense (income) consists of foreign exchange transaction gains or losses related to our Canadian operations and other miscellaneous non-operating items. For the second quarter of 2009, net other expense was $121,000 compared to net other income of $26,000 in the second quarter of 2008 and was primarily related to the decrease in the average exchange rate in 2009 of the Canadian dollar to the U.S. dollar compared to 2008.

Income Tax Expense

Income tax expense for the second quarter of 2009 was $125,000, or 22.4% of pre-tax income, compared to $831,000, or 35.5% of pre-tax income, for the same period in 2008. The decrease in income tax expense was primarily due to lower pre-tax income. Our effective income tax rate differs from the U.S. federal statutory tax rate of 35% primarily as a result of the mix of earnings between tax jurisdictions, research and development credits, state income taxes and our continuous evaluation of the realization of our deferred tax assets and uncertain tax positions.

Effective January 1, 2009, due to the adoption of SFAS No. 141(revised 2007),Business Combinations(“SFAS 141R”), any reduction of the U.S. valuation allowance that was related to net deferred tax assets that were in existence as of applying fresh-start accounting and any adjustments to uncertain tax positions for years prior to our emergence from bankruptcy in 2003 will now be recognized as a U.S. tax benefit as opposed to a reduction of goodwill and additional-paid-in capital as was done in the past.

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Results of Operations for the Six Months Ended June 30, 2009 Compared to the Six months Ended June 30, 2008

The following tables set forth select data from our Condensed Consolidated Statement of Operations (in thousands):

	Six Months Ended June 30,						$ Change			% Change
	2009			2008
Net sales	$	76,452		$	98,540		$	(22,088	)	(22.4	)%
Cost of goods sold		62,513			78,424			(15,911	)	(20.3	)%
Gross profit		13,939			20,116			(6,177	)	(30.7	)%
Gross profit as a percentage of net sales		18.2	%		20.4	%

Net Sales

Net sales decreased $22.1 million, or 22.4%, for the six months ended June 30, 2009 compared to the same period in 2008. The decrease in net sales was primarily due to a decline in customer demand related to general economic conditions. While net sales decreased in a number of our markets, we experienced continued growth in the military/aerospace market, and this market grew as a percentage of total net sales to approximately 33% for the six months ended June 30, 2009 compared to approximately 16% for the same period in 2008.

Gross Profit

Gross profit for the six months ended June 30, 2009 was $13.9 million, or 18.2% of net sales, compared to $20.1 million, or 20.4% of net sales for the same period in 2008. The decrease in gross profit was primarily due to less efficient absorption of fixed costs on lower net sales.

Non-cash Compensation Expense

	Six Months Ended June 30,
	2009		2008
Non-cash compensation expense:
Cost of goods sold	$	274	$	242
Sales and marketing expenses		180		140
General and administrative expenses		683		919
Total non-cash compensation expense	$	1,137	$	1,301

Non-cash compensation expense related to stock awards was recorded in accordance with the fair value recognition provisions of SFAS 123R.

Sales and Marketing Expenses

	Six Months Ended June 30,						$ Change			% Change
	2009			2008
Sales and marketing expenses	$	5,734		$	6,468		$	(734	)	(11.3	)%
Percentage of net sales		7.5	%		6.6	%

Sales and marketing expenses decreased by $734,000, or 11.3%, for the six months ended June 30, 2009 compared to the same period in 2008. The dollar decrease was primarily due to lower commissions as a result of the reduction in sales levels. The increase in sales and marketing expenses as a percentage of net sales was primarily due to the lower sales levels.

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General and Administrative Expenses

	Six Months Ended June 30,						$ Change			% Change
	2009			2008
General and administrative expenses	$	6,259		$	7,170		$	(911	)	(12.7	)%
Percentage of net sales		8.2	%		7.3	%

Total general and administrative expenses decreased by $911,000, or 12.7%, for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. The decrease in general and administrative expenses was primarily attributable to lower compensation expense driven by continued streamlining and centralization of administrative functions, as well as lower non-cash compensation and management incentives.

Amortization of Intangible Assets

Amortization of intangible assets in 2009 relates to customer relationships identified in connection with the acquisition of Sovereign Circuits, Inc. in the fourth quarter of 2006. These intangibles are being amortized over their estimated useful life of five years resulting in $190,000 of amortization expense per quarter through October 2011. The decrease in amortization expense from $2.7 million in the first half of 2008 is due to the customer relationships identified during the allocation of the reorganized value of the Company subsequent to our emergence from bankruptcy in December 2003 becoming fully amortized in the fourth quarter of 2008.

Restructuring and Other Related Charges

The restructuring and other related charges in the first half of 2008 of $267,000 were the result of the fees and expenses related to litigation with the landlord of two buildings in connection with the closing of our Arizona facility in 2005. We completed remediation of the Arizona facility (encompassing three separate buildings) and exited the last building in the third quarter of 2006 but had continued expenses related to the litigation through its resolution in December 2008.

Interest Expense

Interest expense consists of amortization of debt issuance costs, fees related to our Credit Facility, interest on the note payable on our Ohio facility, and interest expense associated with long-term leases. Interest expense was $395,000 for the six months ended June 30, 2009, essentially flat compared to expense of $386,000 for the same period in 2008.

Interest Income

Interest income earned on our cash balances decreased to $108,000 for the first six months of 2009 from $232,000 for the same period in 2008. Although the Company maintained higher average cash balances during the first half of 2009 compared to the same period in 2008, reduced interest rates resulted in an overall reduction in interest income.

Other Expense (Income), Net

Net other expense (income) consists of foreign exchange transaction gains or losses related to our Canadian operations and other miscellaneous non-operating items. For the six months ended June 30, 2009, net other expense was $76,000 compared to net other income of $113,000 for the same period in 2008 and was primarily impacted by the decrease in the average exchange rate of the Canadian dollar to the U.S. dollar.

Income Tax Expense

Income tax expense for the six months ended June 30, 2009 was $256,000, or 21.3% of pre-tax income, compared to $1.3 million, or 36.3% of pre-tax income, for the six months ended June 30, 2008. The decrease in income tax expense was primarily due to lower pre-tax income. Our effective income tax rate differs from the U.S. federal statutory tax rate of 35% primarily as a result of the mix of earnings between tax jurisdictions, research and development credits, state income taxes and our continuous evaluation of the realization of our deferred tax assets and uncertain tax positions.

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Effective January 1, 2009, due to the adoption of SFAS 141R, any reduction of the U.S. valuation allowance that was related to net deferred tax assets that were in existence as of applying fresh-start accounting and any adjustments to uncertain tax positions for years prior to our emergence from bankruptcy in 2003 will now be recognized as a U.S. tax benefit as opposed to a reduction of goodwill or additional-paid-in capital as was done in the past.

Liquidity and Capital Resources

	June 30, 2009		December 31, 2008
	(Dollars in thousands)
Working capital	$	41,964	$	37,682
Current ratio (current assets to current liabilities)		3.6 : 1.0		2.7 : 1.0
Cash and cash equivalents	$	23,941	$	20,081
Short-term borrowings	$	—	$	—
Long-term debt, including current portion	$	1,394	$	1,516

As of June 30, 2009, we had total cash and cash equivalents of $23.9 million. Management defines cash and cash equivalents as highly liquid deposits with original maturities of 90 days or less when purchased. We maintain cash and cash equivalents at certain financial institutions in excess of amounts insured by federal agencies. However, management does not believe this concentration subjects the Company to any unusual financial risk beyond the normal risk associated with commercial banking relationships. We frequently monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principal and secondarily on maximizing yield on those funds.

Our working capital, current ratio and cash and cash equivalents increased from December 31, 2008 primarily due to cash generated from operations partially offset by our investments in capital equipment during the first six months of 2009.

Our principal sources of liquidity to fund ongoing operations have been existing cash on hand, cash generated from operations and, if needed, our Credit Facility, along with proceeds from various equity offerings and asset sales. We believe that our current cash balance, in combination with net cash expected to be generated from operations and the availability of our Credit Facility, will fund ongoing operations for at least the next twelve months. In the event that we require additional funding during the next twelve months, we will attempt to raise capital through either debt or equity arrangements. We cannot provide assurance that the required capital would be available on acceptable terms, if at all, or that any financing activity would not be dilutive to our current stockholders.

Revolving Credit Facility

Availability under our $25 million revolving Credit Facility with General Electric Capital Corporation is based on various liquidity and borrowing base tests including our eligible accounts receivable and inventories. Our wholly-owned operating subsidiaries are the borrowers under the Credit Facility. The Credit Facility is guaranteed by DDi Corp. and all of its subsidiaries that are not borrowers under the Credit Facility. The Credit Facility is collateralized by the accounts receivable, inventories and other tangible and intangible personal property (other than property, plant and equipment) of the borrowers, and by a pledge of the stock of our subsidiaries, and expires in March 2010. Revolving credit advances under the Credit Facility bear interest at the prime rate (3.25% at June 30, 2009). We can elect to have any new revolving credit advances, or convert any outstanding revolving credit advances, in excess of $1.0 million and in increments of $500,000, made as a LIBOR-based loan with a term of one, two, or three months at a rate of LIBOR plus 1.5%. The Credit Facility contains customary covenants including financial covenants regarding our fixed charge ratios and capital expenditures if Liquidity, as defined in the agreement, falls below a certain threshold. Through June 30, 2009, Liquidity has been above the financial covenant measurement threshold since obtaining the Credit Facility. There are also negative covenants regarding incurrence of additional debt, liquidation, merger or asset sales or changes in our business. The Credit Facility restricts our ability to pay cash dividends on our common stock and restricts our subsidiaries’ ability to pay dividends to us without the lender’s consent. At June 30, 2009, we were in compliance with all required covenants.

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As of June 30, 2009, there were no amounts outstanding and the borrowing capacity under the Credit Facility was approximately $13.3 million.

Stock Repurchase Program

Our Board of Directors (the “Board”) previously authorized a common stock repurchase program of up to 3,000,000 shares of our common stock in the open market at prevailing market prices or in privately-negotiated transactions. In February 2009, the Board amended the stock repurchase program to increase the amount of shares of common stock authorized to be repurchased by up to an additional $10 million worth of shares. The stock repurchase program is subject to applicable legal and regulatory requirements and obtaining the consent of the lender for our Credit Facility. If we are unable to obtain the lender’s consent, we would be restricted from repurchasing the additional $10 million worth of shares authorized. The stock repurchase authorization does not have an expiration date, and the stock repurchase program may be modified or discontinued at any time. We will continue to review the value in repurchasing shares after considering our cash levels and operating needs as well as other uses for our cash that could create greater shareholder value.

No shares were repurchased during the quarter ended June 30, 2009. As of June 30, 2009, we had repurchased a total of 2,946,986 shares since the inception of the program.

Consolidated Cash Flows

The following table summarizes our statements of cash flows for the six months ended June 30, 2009 and 2008 (in thousands):

	Six Months Ended June 30,
	2009			2008
Net cash provided by (used in):
Operating activities	$	6,349		$	8,283
Investing activities		(2,271	)		(5,209	)
Financing activities		(122	)		(5,911	)
Effect of exchange rates on cash		(96	)		180
Net increase (decrease) in cash and cash equivalents	$	3,860		$	(2,657	)

Net cash provided by operating activities represents net income adjusted for non-cash charges and working capital changes. The $1.9 million decrease in net cash provided by operating activities for the six months ended June 30, 2009 compared to the same period in 2008 was primarily due to our reduced revenue and production levels in the first six months of 2009 as well as decreases in accounts payable and accrued expenses as a result of the timing of payments made.

The $2.9 million decrease in net cash used in investing activities for the six months ended June 30, 2009 compared to the same period in 2008 was primarily due to a decrease in capital equipment investments during the first half of 2009.

The $5.8 million decrease in net cash used in financing activities for the six months ended June 30, 2009 compared to the same period in 2008 was primarily due to no repurchases of our common stock during the first half of 2009.

Critical Accounting Policies and Use of Estimates

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Information with respect to our critical accounting policies which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is contained on pages 25 to 27 in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. We believe that at June 30, 2009 there had been no material changes to this information.

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Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162(“SFAS 168”). SFAS 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. SFAS 168 does not change U.S. GAAP and will not have a material impact on our condensed consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165,Subsequent Events (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Among other things, SFAS 165 requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. We adopted the new disclosure requirements in our June 30, 2009 condensed consolidated financial statements.

In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 requires fair value disclosures in both interim as well as annual financial statements in order to provide more timely information about the effects of current market conditions on financial instruments. Our adoption of the provisions of FSP FAS 107-1 and APB 28-1 effective June 30, 2009 had no impact on our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Advances under our Credit Facility bear interest at the prime rate (3.25% at June 30, 2009) or can be converted to LIBOR-based loans at a rate of LIBOR plus 1.5%. If the prime rate, or LIBOR rate for LIBOR-based loans, increased, thereby increasing our effective borrowing rate by the same amount, cash interest expense related to the Credit Facility would increase dependent on any outstanding borrowings. There have been no borrowings on the Credit Facility since 2006.

Foreign Currency Exchange Risk

A portion of the sales and expenses of our Canadian operations are transacted in Canadian dollars, which is deemed to be the functional currency for our Canadian entity. Thus, assets and liabilities are translated to U.S. dollars at period-end exchange rates in effect. Sales and expenses are translated to U.S. dollars using an average monthly exchange rate. Translation adjustments are included in accumulated other comprehensive income in stockholders’ equity, except for translation adjustments related to an intercompany note denominated in Canadian dollars between our U.S. entity and our Canadian entity. Settlement of the note is planned in the foreseeable future; therefore, currency adjustments are included in determining net income (loss) for the period in accordance with SFAS No. 52,Foreign Currency Translation, and could have a material impact on results of operations and cash flows in the event of significant currency fluctuations. Gains and losses on foreign currency transactions are included in operations. We have foreign currency translation risk equal to our net investment in those operations. We do not use forward exchange contracts to hedge exposures to foreign currency denominated transactions and do not utilize any other derivative financial instruments for trading or speculative purposes.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are effective to ensure that all information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods

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specified in the rules and forms of the U.S. Securities and Exchange Commission (the “SEC”), and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, and allow timely decisions regarding required disclosure.

Changes in Internal Controls

No change in our internal control over financial reporting occurred during the quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Reference is made to our Annual Report on Form 10-K for the period ended December 31, 2008 for a summary of our previously reported legal proceedings. Since the date of the Annual Report on Form 10-K for the fiscal year ended December 31, 2008, there have been no material developments in previously reported legal proceedings.

Item 1A. Risk Factors

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of the Stockholders of DDi Corp. was held on May 12, 2009 for the purpose of electing seven directors to the Board of Directors. Each of the incumbent directors, Robert J. Amman, Jay B. Hunt, Andrew E. Lietz, Bryant R. Riley, Steven C. Schlepp, Carl Vertuca, Jr. and Mikel H. Williams were elected by a plurality vote to serve as directors of the Company for a new term of one year and until their respective successors are elected and qualified. The tabulation of votes cast for the election of Messrs. Amman, Hunt, Lietz, Riley, Schlepp, Vertuca and Williams was as follows:

	Votes For	Votes Withheld
Robert J. Amman	15,456,706	41,945
Jay B. Hunt	15,456,678	41,973
Andrew E. Lietz	15,456,678	41,973
Bryant R. Riley	15,456,706	41,945
Steven C. Schlepp	15,456,706	41,945
Carl Vertuca, Jr.	15,390,398	108,253
Mikel H. Williams	15,456,701	41,950

Item 5. Other Information

On May 1, 2009, Dynamic Details, Inc., the Company’s wholly-owned operating subsidiary, entered into agreements with the Swenson Family Limited Partnership and EMC Associates, L.P. to amend the real property leases covering the Company’s Anaheim manufacturing facility and corporate headquarters. The amendments extend the lease terms for the premises until September 30, 2012. The leases cover approximately 90,000 square feet, with an aggregate rent of approximately $59,000 per month beginning October 1, 2009.

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Item 6. Exhibits

The exhibits listed below are hereby filed with the SEC as part of this Quarterly Report on Form 10-Q. Certain of the following exhibits have been previously filed with the SEC pursuant to the requirements of the Securities Act or the Exchange Act. Such exhibits are identified in the chart to the right of the Exhibit and are incorporated herein by reference.

			Incorporated by Reference
Exhibit	Description	Filed Herewith	Form	Period Ending	Exhibit	Filing Date
3.1	Amended and Restated Certificate of Incorporation of DDi Corp.		8-K		3.1	12/13/2003
3.2	Amended and Restated Bylaws of DDi Corp.		10-Q	6/30/2005	3.4	8/09/2005
10.1	Amendment No. 5 to Real Property Master Lease Agreement dated May 1, 2009 between The Swenson Family Limited Partnership and Dynamic Details, Incorporated	X
10.2	Second Amendment to Lease Agreement dated May 1, 2009 between EMC Associates, L.P. and Dynamic Details Incorporated	X
10.3	Second Amendment to Lease Agreement dated May 1, 2009 between EMC Associates, L.P. and Dynamic Details Incorporated	X
10.4	Second Amendment to Lease Agreement dated May 1, 2009 between EMC Associates, L.P. and Dynamic Details Incorporated	X
31.1	Certification of Chief Executive Officer of DDi Corp., Pursuant to Rule 13a-14 of the Securities Exchange Act	X
31.2	Certification of Chief Financial Officer of DDi Corp., Pursuant to Rule 13a-14 of the Securities Exchange Act	X
32.1	Certification of Chief Executive Officer of DDi Corp., Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Chief Financial Officer of DDi Corp., Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, DDi Corp. has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

	DDi Corp.
Date: July 31, 2009		/s/ MIKEL H. WILLIAMS
		Mikel H. Williams
		President and Chief Executive Officer

Date: July 31, 2009	/s/ SALLY L. EDWARDS
	Sally L. Edwards
	Chief Financial Officer

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