Allient Inc (ALNT) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2010 Allied Motion Technologies conference call.

My name is Jennifer and I will be your operator for today.

At this time, all participants are in listen-only mode and later we will conduct a question-and-answer session.

(Operator Instructions).

I would now like to turn the conference over to your host for today, Sue Chiarmonte, Vice President, Secretary, and Treasurer.

Please proceed.

Thank you, operator.

Welcome to Allied Motion's conference call to discuss the quarter and year ended December 31, 2010.

We appreciate your joining us for this call.

We distributed the press release earlier today and a copy is available on our website, www.alliedmotion.com.

Today's call is being broadcast live on the Internet and will be available for replay immediately after the call for 90 days.

To access the Internet broadcast and replay, go to the Company's website and click on the webcast icon.

As a reminder, please note that the Safe Harbor statements included in our press release also apply to all comments made on this conference call.

I will now turn the call over to Dick Warzala, President and CEO of Allied Motion Technologies.

Thank you, Sue, and welcome, everyone, to our fourth-quarter 2010 conference call.

Here's the plan for today's call.

I will begin with a review of the fourth quarter and the 2010 results and I will discuss certain events that occur during the year.

Next, I will provide an outlook for 2011 and will go behind the numbers to provide you with some insight as to the significant activities and opportunities for the coming year.

After that, Dick Smith will provide a detailed financial review and I will then follow up with a brief summary before we open the mics for questions.

First, let's start by reviewing the results for the fourth quarter and the year 2010.

Quarter four sales were up 24% over quarter four 2009 and up 32% for the year.

Quarter four earnings per share were $0.12 per fully diluted share versus $0.02 in quarter four 2009.

Earnings per share for the year were a new record at $0.45 per share and that compared to a loss of $1.65 a share in 2009 and a positive $0.39 a share in 2008.

The reason that we were able to accomplish the increase in earnings even though we had by $5.4 million less in sales when we compare it to our record year in 2008 is because of some of the restructuring we did and the implementation of a number of our Allied systematic tools to improve the efficiencies and eliminate waste at our operations.

That's something that we always continuously work on, and we will do so in the future.

As I mentioned, 2010 sales were $5.4 million less than our record year in 2008, yet net income exceeded that previous record year of 2008 by $676,000.

We had a gross profit increase in the fourth quarter to 29% compared to 25% in the fourth quarter of 2009.

For the year, our gross profit was 28% versus 21% for 2009.

The key to continuous improvement in this area and from the increases that we saw here in 2010 were more systems and solutions selling, and that will continue to drive that in the future.

Cash flow, we began 2010 with cash net of debt of $3.9 million.

We then paid $7.7 million in cash for Agile and Ostergrens in 2010 and we ended the year with cash net of debt of $2.7 million.

From an order standpoint, 2009 quarter four we had $12.2 million in new orders and in 2010 quarter four, $18.9 million in orders.

We set a record for orders for the year at $92 million versus $58 million in 2009.

Looking at our market comparisons compared to the fourth quarter of 2009, medical, vehicle, industrial, electronics, and aerospace and defense were all up.

Compared to the third quarter of 2010, fourth quarter 2010 to third quarter 2010, vehicle was up while all other markets were down slightly.

On a year-over-year basis, all markets except aerospace and defense were up and aerospace and defense was down slightly.

The year-end backlog of orders is at a new high at $37.9 million at the end of 2010 compared to $21 million at the year-end 2009.

Now I would like to highlight several other significant events during 2010, which include, we completed the transition of our encoder operation from Chatsworth, California to Tulsa in the first quarter.

The benefits that we derived from this were cost reduction, improved depth of our engineering and management teams, and an emphasis on motor/encoder system design capabilities.

The Agile acquisition was completed in late second quarter 2010.

The benefits we have derived and expect to derive in the future brings us new customers, provides margin improvement through system sales, and it provides us with additional engineering resources to develop electronic motion control products in the future.

The Ostergrens acquisition was completed in the fourth quarter, as we know, December 30.

So just got it in.

The benefits we expect to derive from Ostergrens have expertise in custom electronics, have integration capabilities meaning they can add many elements of a motion system together and integrate it and provide more complete solution to customers.

They have a salesforce in Sweden and they provide us with a base for our own Asian operations in Changzhou, China.

And like Agile, additional engineering resources to develop electronic motion control products are now again available.

We continued to progress in developing our European and North American one team salesforce.

You may ask why that's so important but as Allied Motion continues to emphasize and focus developing a team that can sell all of our products, it not only did that, it also expanded our geographic sales coverage.

Several new products were developed and initiated during the year with an emphasis on integrating the full capabilities of our product offerings especially in the electronic motion control area.

One of the benefits we will see from this, higher value-add per sale, higher margins, and a reduction in the number of competitors capable of offering what we would call our type of solutions.

Now as we move on, let's for the next phase of this provide you with a brief outlook for 2011, which is really our view of what we currently see and we will discuss some of the key activities and actions for the coming year that will drive the growth of the Company.

First off, as we have already said, we are coming off record bookings in 2010 and we have a record year-end backlog leading into the year.

The economy also appears to be stabilizing with less of a concern from the economists on a double-dip recession.

Our internal cash flow from our operations will continue to fund our growth opportunities both internally and externally.

We will emphasize gross margin improvement.

Gross margin improvement requires cost reductions, new products emphasizing more complete motion control systems, and a support structure trained to sell, apply, and service our products and customers.

We talked about our electronic motion control and expanding capabilities there.

That brings new growth opportunities and adds value in many new applications.

The investments we have made in people are providing opportunities now.

Additionally, the Agile and Ostergrens acquisitions will accelerate the development process.

In 2010, sales were 60% US versus 40% rest of the world primarily being Europe.

We expect 2011 to be closer to a 50-50 split and potentially Europe will have a larger percentage of sales than in North America.

Asia legs pretty far behind, but it does provide significant growth opportunities for us.

We have many customers who are multinationals.

They have located their production in China and we feel it is absolutely required for us to be there to service those customers.

To support our growth, we will continue to develop our one team salesforce in North America and Europe and we will begin the expansion into Asia.

Ostergrens brings systems integrations experience and we will utilize that experience to help create and launch what we will call solution centers in Europe, North America, and eventually Asia to support our sales efforts in each continent.

These solution centers provide us and provide our customers with a single point of contact.

There's an emphasis on system sales.

It requires us to develop platforms or product line platforms that we can then customize from, thereby allowing us to provide quick delivery of prototypes to ensure we have the design wins in the future.

In 2011, you will see further development in promotion of our parent brand, that is Allied Motion.

Our global structure is being defined and we will use that to our advantage.

We now have our own Company and resources in China and that will further facilitate our sourcing capabilities and provide closer contact with our customers located in China and throughout Asia.

We will, as I mentioned earlier in the conference call, we will continue to utilize Allied Systematic Tools or AST for short, which is our lean manufacturing improvement toolkit to improve efficiencies and eliminate waste in our acquisitions and to further improve in our existing operations.

And last but not least, as I mentioned in our earnings press release, the capabilities provided by our two acquisitions combined with our internal product developments in 2010 allows us to take the next step forward in raising the bar, by providing Motion Solutions That Change the Game for our served markets and customers in 2011.

This means a strong focus and emphasis will be placed on ensuring we effectively integrate the capabilities we have acquired.

Next I would like to turn it over to Dick Smith, who will provide you with a detailed financial review for the quarter and the year.

Thank you, Dick.

As Dick has just indicated and as was reflected in our press release that was put out this morning, we did achieve record profits for the year ended December 31 of 2010.

We did achieve net income for the year of $3.585 million or $0.45 per diluted share compared to a net loss of $12.449 million or $1.65 per diluted share last year.

Now revenues for the year increased 32% to $80.6 million from $61.2 million last year.

Included in the 2010 operating results were several nonrecurring after-tax charges that totaled a net of $36,000.

Now the details of these charges were included in the press release, so I will not repeat the list here.

The 2009 net loss of $12.4 million included total nonrecurring after-tax charges of $11.7 million.

And these charges included several items, the largest of which was an after-tax asset impairment charge that was $11.1 million of that $11.7 million total amount.

Again, the details of the other items making up the total are detailed out in the press release.

Now excluding these nonrecurring items, net income for 2010 was $3.621 million or $0.45 per diluted share and for 2009, the net loss was $742,000 or $0.10 per share.

New orders booked during 2010 was a record at just over $92 million which is an increase of 58% over the $58 million of bookings for 2009.

Backlog at December 31, 2010 was $37.9 million, reflecting an 80% increase over the backlog at the end of 2009, and that does include the backlog of Ostergrens Elmotor, the Swedish company that was acquired on December 30, as was previously announced.

So we have approximately $17 million more in backlog going into 2011 than we did coming into 2010.

The 32% increase in sales from last year was the result of an increase in sales in virtually all of our major industrial or industry sectors except aerospace and defense, which was down 4% for the year.

59% of our sales for the year were the US customers with the balance of our sales to customers primarily in Europe, Canada, and a little in Asia.

Sales to our US customers increased 38% and sales to customers outside of the US were up 24% for the year.

Now of the 32% in revenues, 34% was due to an increase in sales volume for the year and that was partially offset by a 2% unfavorable currency change reflecting the dollar strengthening against the euro.

Now for the fourth quarter, the Company achieved $983,000 in net income or $0.12 per diluted share and that compares to net income of $117,000 or $0.02 per diluted share for the fourth quarter last year.

Revenues for the quarter increased 24% to $21 million from $17 million last year.

Now again, net income in the fourth quarter includes a $189,000 nonrecurring charge for the transaction costs that were incurred in acquiring Ostergrens.

Again, the accounting rules changed in 2010 where all transaction costs now have to be expensed as incurred, whereas before they were treated as part of the purchase price of an acquisition.

So we had a total of $572,000 of transaction costs incurred during 2010 that was charged against earnings in 2010.

Net income for the fourth quarter of 2009 includes net nonrecurring charges of $330,000 and again, the details of that are included in the press release.

But excluding these nonrecurring charges from the fourth quarter of both 2010 and 2009, the fourth-quarter results would be net income of $1.123 million or $0.14 per diluted share for 2010 and $335,000 or $0.04 per diluted share for 2009.

Now the 27% increase in revenues in our fourth quarter of 2010 reflects a pickup in almost all of our major markets to varying degrees.

57% of our sales for the quarter were to US customers with the balance of our sales to customers again primarily in Europe and Canada.

Sales to our US customers were up or increased 28% for the quarter and sales to customers outside of the US increased 19% for the quarter.

Of the 24% increase in sales, 27% is due to an increase in sales volume partially offset by a 3% reduction due to the effect from the strengthening of the dollar against the euro.

Now the fourth quarter and year results include Agile Systems, which is a subsidiary that we acquired on June 3 of 2010.

Agile's name was changed to Allied Motion Canada on June 15 and now operates under that name.

For the year, Allied Motion Canada contributed 2% of the total revenues achieved by the Company or $1.6 million of sales.

We acquired Ostergrens on December 30, 2010, so the reported results of Allied Motion do not include the results of Ostergrens' operations for 2010 but the consolidated balance sheet at year-end does include the purchase of Ostergrens.

Ostergrens achieved sales of $17 million in 2010.

Our gross profit margin improved for both the quarter and year and it improved by 4% for the quarter from 25% last year to 29% this year and improved by 7% for the year from 21% in 2009 to 28% this year.

Now the 7% increase in margin for the year was due primarily to several factors.

4% was due to an improvement in variable margin reflecting lower material invariable overhead costs resulting from our cost reduction efforts and also the selling of higher margin products, as Dick had mentioned and 3% resulted from the improvement in the percent that our fixed manufacturing overhead costs are to the increased sales volume.

Selling, general, and administrative and engineering costs as a percent of sales for the fourth quarter increased to 22.1% this year compared to 21.9% last year.

But it decreased for the year to 21.6% compared with 22.9% for 2009, with the decrease due properly to the increase in sales.

Now the total operating expenses for the quarter and year excluding the fire-related recoveries, amortization and other nonrecurring items increased by $952,000 or 26% for the quarter and increased by $3.4 million or 24% over last year.

Now the administrative costs increased $835,000 or 44% from the fourth quarter last year and increased $2.7 million or 40% from last year, primarily as a result of the incremental costs of adding Allied Canada plus increased compensation expense including incentive bonuses and stock compensation.

Engineering costs were up 5% for the quarter and 3% for the year reflecting again the incremental costs of adding Allied Motion Canada as well as the expansion of our electronics engineering resources.

Selling expenses were up 8% for the quarter and 17% for the year, reflecting higher sales commissions and the strengthening of our sales organization.

Now depreciation and amortization expense decreased for the quarter and the year.

It decreased $122,000 for the quarter and decreased $1.1 million for the year from $2.9 million last year to $1.8 million this year.

Now for the year, interest expense was down $52,000 to a total expense of $3,000 for 2010, reflecting less debt outstanding and lower borrowing costs.

EBITDA before the nonrecurring costs, increased to $6.978 million for the year compared with $1.6 million for last year.

And then EBITDA before these nonrecurring costs and the stock compensation expense, which is also a non-cash expense, actually was $7.776 million when you add $1.2 million of capital expenditures in 2010 compared with $865,000 last year.

The Company used $970,000 of cash during 2010, which reflects $6.8 million of cash that was generated during the year reduced by the $7.7 million that was used to make the acquisitions of Ostergrens and Agile and pay the related transaction costs.

So the Company ended the year with $3.5 million in cash and $795,000 in bank debt, or a net cash and debt position of $2.76 million, which compares to a net cash and debt position of $3.87 million at the end of 2009.

Our net stockholders equity at December 31 was just under $30 million or $3.69 per share and our tangible net book value is $20.370 million or $2.51 per share.

Okay, I will now turn the meeting back over to Dick.

Thank you, Dick.

Now what I am going to do is just provide you with a brief summary of what you heard highlighting some of the most significant events and then what we will do after that is open the mics for questions.

To summarize, record earnings and bookings in 2010.

We funded our growth opportunities internally in 2010 and we ended the year once again with a net positive cash position.

Agile and Ostergrens acquisitions enhanced our electronic motion control capabilities.

That gives us more system solutions, potential for higher gross profits, more value add per customer.

Our one team sales organization continues to expand and leverages all of our product capabilities and allows us to grow as a Company, that is Allied Motion, not just individual business units.

We now have our own wholly owned Company in China to provide us with a base for cost improvement, and future market expansion in Asia.

Our emphasis in 2011 will be on effective integration of our acquisitions.

Last but not least, AST, or Allied Systematic Tools, will be utilized to provide continuous improvements in all of our operations and that is never ending.

Now, operator, we will open up the mics for questions.

(Operator Instructions).

[Warwick Jervis].

Thank you.

Good morning, gentlemen, and congratulations on a good quarter.

I just had a couple of questions or I guess areas of question I want to go over.

The first is regarding Ostergrens and the second sort of on the product mix.

So in the first area, I know you disclosed the revenue at Ostergrens would be about $17 million I think in 2011.

Can you talk a little bit about the margins in that business and will that be accretive to your margins?

Dick, do you want to take that?

Well, we are in the process of finalizing the pro forma information that will have to be filed here with the SEC.

But it was -- if you look at 2010 on a pro forma basis which looks back at -- the transaction took place at the beginning of the year, it was not dilutive but it was not accretive.

It would have not affected the earnings per share.

It is based upon what we are looking at in 2011.

It should be accretive in 2011.

Okay, and then how much of the year-end backlog came from that entity?

From just Ostergrens?

Yes.

About $4.8 million.

Okay, great.

And then moving over to the product mix, I sort of look at your Company as medical, aerospace, vehicles, and other, just in my mind that's how I sort of group it.

I know you guys don't break out a lot of information by segment, which is something you may want to consider because I do think that it's helpful to better understand the business.

But when you look at your backlog at year-end, as well as your new project pipeline, where do you see the growth in the business going forward?

And part of that ties into Ostergrens again, which is what markets do they serve?

Okay, this is Dick Warzala.

I will take that.

The markets that we are focusing on as we move in -- we have been focusing on, I would say, for the last few years and we will continue to focus on in 2011, are the medical markets.

In addition to that, we do have -- the vehicle markets provide we feel some real opportunity and when we talk about vehicles, we have to be careful because we are not a mainstream automotive supplier.

We are really specialty vehicle, off-road vehicles, and also some other specialty vehicles like hybrid vehicles or alternative energy vehicles.

So that is where we will continue to emphasize the -- you see more electrification of vehicles, you see we will call anything that moves something, a vehicle in our classification.

So if you're looking at automated material handling, that's a market that we see that we have a good offering to attack.

And in addition, unmanned vehicles, so we feel that with our complete line of electronics, our wide range of different types of motor products, our feedback element, and our gearing that we do have a great opportunity to service those markets.

As far as Ostergrens goes, it is -- it continues to be similar to what we have throughout Allied Motion.

Ostergrens primarily -- primary served market would be vehicle or material handling.

They also have medical.

They also have some instrumentation that we see as good opportunities.

I do believe that they will provide us with a good anchor to help us in the vehicle markets as we call our vehicle markets and alternative energy markets -- a great deal of experience there.

Okay, great.

So medical vehicles, I guess defense was down a little last year.

That's probably pretty difficult to predict, but do you have projects in the pipeline there?

Yes, could you help us get those kicked open?

We do, and what we did see is that particularly in the defense markets that many projects that had been started are on hold waiting for funding and so forth.

And we are -- and we continue to work on design activities in those markets.

Once funding does come, we believe that that will again pick up for us.

It's a very good market for us.

We do have products that meet the needs of that market.

And as I talked about here is we have had our tagline in our Company, it's been -- through our strategy sessions it has been developed as motion solutions that raised the bar -- what we mean by that bar of performance and we want to give our customers a competitive edge.

What we heard -- you heard and you saw in the press release and you heard in the conference call here is we feel we are ready to move to the next step here, the next level.

And we will call Motion Solutions That Change the Game for our customers and our served markets.

We have -- we invest quite extensively in technology and we assign responsibilities to what we call -- what you might call our divisions or business units in a normal market, we call them technology units.

And each of those technology units has ownership of specific technologies with the emphasis being on creating products that go from raising the bar to now changing the game.

So that's the emphasis we will take going forward and we do believe that we can offer something unique to the aerospace and defense markets.

Okay, great.

Thank you very much.

(Operator Instructions) Charles Neuhauser, Mainwall Investment.

Good morning.

I wanted to circle back to my usual focus on the margins.

It sounded -- I thought I heard you say that the Ostergrens acquisitions should produce higher profit margins for the Company or should enable you to raise your profit margins.

I believe you said something along those lines.

Well, what -- Ostergrens is a fairly unique company when you look at it from our perspective.

We in our acquisition strategy right from the beginning have looked at companies that were complementary to our existing companies.

And we looked at companies that could bring something new to the table for Allied Motion.

And in Ostergrens, there were a number of things.

First off, they have a very strong position in the Scandinavia market, particularly Sweden.

They add sales coverage in those markets, which we didn't have direct sales coverage.

They have a China capability which, when I say they have a China capability, they haven't utilized the China capability to penetrate that market and that's important for us in the future as we see many of our customers have put manufacturing operations in China and continue to expand and see tremendous growth opportunities there.

So they have a good team over there, a good base of operations, a source -- many different types of products.

Whereas we will at Allied Motion, we primarily were manufacturers and produced on the motor side, Ostergrens was an integrator and would select motors as part of the solution and procure them.

So we see opportunities there that we can bring some technology in the opportunities that they have and also it expands our reach by bringing a product set that we don't have to invest in to develop.

They do integration and that to us is again, key as we move forward.

And integration meaning that they will take and emphasize their custom electronics.

And that's what the driver is from the Ostergrens side of the business is customer electronics and using that to integrate a motion system or solution.

Typically in those areas, you will see that they provide higher gross margins.

Some of the opportunities we see at Ostergrens is that since it's all purchased today from outside suppliers except for -- I should say not except for -- some of the electronics, you are -- you have multiple suppliers in the chain and therefore your overall gross margins may be lower.

But as we have seen particularly with the Agile acquisition is the electronics do give us the opportunity to add more value in every sale to leverage the customer base that we have, and we can do the same with Ostergrens.

So are the margins at Ostergrens where we would like them to be?

The answer is no.

Do we believe we can have a positive impact on those and improve on those in the future?

The answer is yes.

You talked a bit about the outlook for 2011.

Obviously the economic -- general economic outlook sense of how things are going must feel better today than it did 12 months ago.

So would you -- you should not I wouldn't think be sticking your neck out too far to assert that the pre-existing non-Ostergrens business should continue to grow in 2011?

Yes.

And I guess we don't -- I can't imagine that Ostergrens would be expected to decline for any reason, so that should at least be flat to up if not similarly to the pre-existing Allied businesses I would think also.

So if you just add the $17 million to the $80.5 million you reported, that's a 20% increase over the $80 million that you reported, which is rather meaningful.

And it also appeared to me that the pretax profit margin for the fourth quarter excluding the transaction costs wasn't -- again was higher than that for the full year, meaning that margins continued to improve in the fourth quarter of the year just ended.

Am I looking at that correctly?

Yes.

Okay, so if we look at 2011 with a rather sizable 20% topline growth just from the acquisition, plus we will have to assume that you will have some organic growth from the basic Allied businesses, would it not -- that not lead to some sort of operating leverage to cause an expectation that the profitability, the margin should continue to improve somewhat in 2011 versus 2010?

Well, you know, as you know, Charles, typically we don't provide any guidance and I would have to say that there was nothing that you said that I could disagree with without saying anything else.

Okay, that's fine.

Is there going to be much of an increase in depreciation and amortization because of the acquisition?

The -- it will go up.

Right now we are estimating it to go from about -- it will go up about -- depreciation and amortization will go from about $600,000 for the year.

Okay, so a bit but not -- so more like $2.5 million, I guess?

That's correct.

The other thing was the tax rate in the fourth quarter looked a little funny.

What do you anticipate the tax rate for 2011 to be?

Well, it's obviously because of the different countries that we are in.

It depends on the mix of sales and where the sales are coming from.

So we are probably looking around -- we are estimating roughly a 32% effective tax rate in 2011.

Okay.

And again, I guess without talking about specifics of 2011 or anything else, but it would -- and we've talked about this in past -- but it would seem to me that the nature of your business should not prevent you from generating something like let's say a low double-digit 10% type operating profit margin versus the 7% maybe that you are at today.

And it would seem to me that with a sizable acquisition, the opportunity to increase your business with China, all the stuff you've just been talking about -- that the ability to bring more of the revenue dollar down to the bottom line should be enhanced at least at the moment versus where you might have been over the last six, 12, or 18 months.

And barring some significant global economic downturn, I would think continuing to make progress on improving the profitability is well within the realm of possibility.

Is that -- again is that any sort of a statement that you would have any kind of fundamental disagreement with?

None at all.

(multiple speakers) I think it's pretty good, pretty accurate.

I mean, really, you've made a lot of progress here.

You should be at the Magic $100 million revenue level and again, keep up the good work.

And as far as I'm concerned, I feel like you are certainly on the right track.

Thanks for your good work.

Now you both are named Dick.

I can never remember which is which.

Which of you guys is retiring or moving on?

That's Dick Smith.

Okay.

Well, thank you, Dick Smith, for everything you've done and I will be tuned in in the future.

[Laney Martin].

Good morning.

Of course the year-over-year and quarter-over a year ago quarter numbers are very positive.

But tell us a little bit more about the fourth quarter to the third quarter comparison which if I'm looking at this correctly are flat to slightly down across all income measures.

And what is that telling you and what does that portend for the future?

It's Dick Warzala.

We'll talk about that as -- looking at 2010 as a year and what occurred there and as we had talked about in previous conference calls, we saw a large influx of orders and really the economy kicked back in much faster than we had expected.

We had talked about a three-year return to 2008 levels and instead, we came back much faster than we expected.

That caused us and we feel that there were certainly some inventory replenishment going on there earlier in the year and it put a severe demand on materials in the marketplace which caused lead times to stretch out.

So through the year, and I mentioned in I believe every conference call except for this one, that our general managers and the personnel in our companies were focusing much of their effort on chasing down materials and trying to accelerate deliveries so we could meet the demand we were seeing.

We feel that once that inventory rebuild had occurred and replenishment of some inventories, and also delivery of certain products that have had longer lead times and deliveries were delayed, that the market would stabilize at some level and we believe that fourth quarter we saw that.

We were still catching up into Q3 and the fourth quarter we did see it stabilize.

We also do have some impact of some seasonality, but that I would have to tell you is very minimal and it's hard to predict year-over-year, and especially the way the economy has gone here in the last three to four years.

It's been unpredictable, so it's hard for us to say let's normalize that, come up with some numbers for you.

I think it's safe to say that we feel we are on a normal run rate and the fourth quarter represents that run rate.

The acquisitions that we had at both Agile, which remember that was only half a year in our results to and Ostergrens will provide us some topline growth.

We also believe that the projects that we worked on as the market turned down in 2009, we made a conscious effort that we were not going to cut the critical resources that were important for winning new projects and growing the Company in the future.

We believe that was a smart decision.

We managed to the Company for cash flow.

We kept those key resources in place and it allowed us to really focus on the design wins and new applications.

So we feel very bullish about having done that and the opportunities that that will bring in the future.

So to answer your question, stabilization, the inventory replenishment impact is out.

It's now more stable and that our growth will come from some organic growth from an economic standpoint and from the design wins that we had last year and we will continue to have coming into this year.

Were you a little disappointed that the fourth quarter was flat with the third quarter as opposed to showing some growth?

Actually based on as I said to you -- well, we would always like to have growth.

Sure, we would like to -- since fourth quarter revenues exceeded third quarter, but we were not displeased with knowing that the delays and the catch-up that we had going into the third quarter and we had to deliver product that fourth-quarter, the dip was very slight.

So I wouldn't say yes, we would always like to have growth quarter-over-quarter.

On the other hand, I would not say we were disappointed.

And the Agile acquisition, did it contribute positively to earnings in its first two quarters?

Yes, it did.

Well, thank you very much and good year-over-year performance.

There are no further questions at this time.

I will now turn the call back over to Dick Warzala for closing remarks.

Okay, operator.

Thank you, everyone, for participating in this conference call and we can assure you that we will do everything in 2011 to keep our shareholders satisfied and to grow the Company.

We have many, many new projects.

We're going to focus on integration of our acquisitions and running our business to -- certainly streamline it to the standpoint of using our Allied Systematic Tools or AST to help us improve and continuous improve.

That's not going to end.

So again, once again, thank you very much.

We appreciate your support and we look forward to having an even better 2011.

Thank you, operator.

You are welcome.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.