Cognex Corp (CGNX) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Cognex fourth quarter 2008 conference call. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Richard Morin. Sir, you may begin.

Thank you, and good evening everyone. Earlier tonight we issued a press release announcing Cognex' earnings for the fourth quarter of 2008. For those of you who have not yet seen this report, a copy is available on our Website at www.cognex.com.

The press release contains detailed information about our financial results, and because of that, we are not going to repeat most of that material. During tonight's call we may use a nonGAAP financial measure, if we believe it is useful to investors, or if we believe it will help investors our results and business trends. For your reference you can see the Company's income statement as recorded under GAAP in Exhibit 1 of the earnings press release, and a reconciliation of certain items in the income statement from GAAP to nonGAAP in Exhibit 2.

I would like to emphasize that any forward-looking statements we made in the press release, or any that we may make during this call, are based upon information that we believe to be true as of today. Things often change and actual results may differ materially from those projected or anticipated. You should refer to the Company's SEC filings, including our most recent Form 10-K for a detailed list of these risk factors.

Now I will turn the call over to Bob Shillman.

Thanks, Dick, and good evening, everyone. Well it was a good year compared to '07, revenue up 8%, and income per diluted share from continuing operations up 17%, but that is history. And as you know we, like everyone else, noticed the situation is getting significantly softer during the end of the year, and as you will see from the press release that we just issued, we reported revenue of only 52 million for Q4, and earnings of only $0.05 per share. These results represent a significant decrease from the results we reported for the fourth quarter of 2007 and for the prior quarter. And from what we can tell it is all due to the same thing, the severe deterioration in the world economic conditions.

Let's first turn to revenue, and after that I will address the expenses. In the semi-conductor and electronics capital equipment market, which we call Semi, the cyclical downturn that began in early '06 accelerated during the fourth quarter '08. Semi revenue was approximately 6 million for Q4, which represents a decrease of more than 50% year-on-year, and nearly 40% on a sequential basis. The largest decline in absolute dollars was in Japan, where most of our Semi customers are located.

Our sales team continues to work hard to win new accounts, and our VisionPro software product is helping in that regard, but global economic conditions have not only prolonged the slowdown, but they have made it deeper as well. In a previous phone call one of you asked me, How low can it go?, and I said it can go to zero, and I got to tell you looking at the numbers in Q1 so far, it may indeed be that.

Next in the surface inspection market, or SISD as we call it, revenue was approximately 9.5 million in Q4, a decrease of 21% from the record high quarterly revenue we reported a year ago, and a 14% decrease on a sequential basis. Unlike Semi, these decreases are not due to the negative impact of global economic conditions, rather the business is a lumpy one, and we reported significant growth in both of those comparable periods.

Our revenue from the surface inspection market in Q4 was quite good, and was above the average run rate for the year. SISD had an outstanding year in '08 with annual revenue of $36 million, which is a new record, due to market share gains, primarily in the metals industry in Asia.

The third and largest market segment that we serve, which is factory automation, we reported revenue of 36 million in Q4. Factory automation decreased 11% year-on-year, primarily due to lower revenue from the Americas of approximately 3.5 million. As manufacturers delayed funding for projects in response to the global economic conditions and declining business confidence. Factory automation revenue was also slightly down in Europe, which was due to the negative impact of foreign exchange rates and in Asia. In Japan factory automation revenue was essentially flat with the comparable quarter in '07.

On a sequential basis, factory automation revenue decreased by 15% from the prior quarter. And all geographic regions contributed to this decline, with the largest decrease in absolute dollars coming from the Americas and Asia. In Europe factory automation revenue also declined, but in this region the decrease was due to the negative impact of foreign exchange rates. Excluding FX, factory automation revenue from Europe increased by approximately 9% from the seasonally soft third quarter level.

Now let's talk about expenses. We tightened our spending in the third quarter as the factory automation market began to face stronger economic headwinds, and as the financial crisis and it's implications on the global economy and manufacturing spending became more evident, we took more significant steps in the fourth quarter to reduce expenses as quickly as possible, to better align them with a lower level of anticipated demand.

The most meaningful measures were the scheduled closure of our Operation Georgia, which will be done by mid-2009, and the elimination of 60 full time positions, which is about 7% of our worldwide headcount. That was primarily in the United States.

Other actions implemented include the following, we eliminated most of the planned new positions for '09. There will be no salary increases in '09, other than for promotions. Budgets for discretionary spending, such as travel and trade shows, were cut dramatically. And less important engineering projects and operation projects, were either put on hold or cancelled entirely.

And we cut spending in the areas with lower potential for business, and we redeployed those resources into some growing end user markets, such as solar panel manufacturing. As a result of those actions that I have just described, we expect that our operating expenses for the first quarter of '09 will be somewhere between 5 to 8% lower than the level we reported tonight for Q4.

Well, despite the challenging economic environment the Company is in great shape. Everything is fine. We just don't have any customers. In 2008, we introduced important new products that were well-received by our customers, In-Sight Micro, our next-generation vision system, then VisionPro 5.0, which is the first software-only product that we have ever offered, the DataMan 700 series of handheld ID readers. In addition, we continue to be optimistic about the success of our relationship with Mitsubishi, and we are on schedule to introduce a Cognex product to the Mitsubishi distribution channel in Q1 of '09, this quarter.

Development of our Vision Chip, vision system on a chip, the SoC is firmly under way, and we have working prototypes in the lab today. And our sales team left our recent kick-off meeting, where they received an in-depth look at the new products we will be rolling out over the next few months, and they are energized about the potential for these products, though we are only cautiously optimistic about the impact that that can have on our revenue.

We are confident in our business and the things that we can control, which are prioritizing objectives, motivating the team, managing costs. But we are very cautious about what we cannot control, which is the number of projects that customers are funding. Based on the order trends since the beginning of January, we know that revenue and earnings are likely to be down in the first quarter of '09, on both a year-on-year and sequential basis, what we cannot say with any degree of confidence is by how much.

And due to this uncertainty, we are not going to give revenue or earnings guidance for Q1, as we have often done in the past. You know we have been through tough times before, and although the reasons for the current challenge are quite different, we believe that our historically high gross margins, our strong balance sheet, and most important, the fact that we have no debt, put us in a good position to weather this prolonged economic downturn, and our expectation is that when it ends, we will be in a far better position than our competitors, which has always happened in the past.

That is it from the captain's chair here on these choppy seas, and we would like to open up the phone for any questions you may have at this time.

(Operator Instructions). Our first question comes from Chuck Murphy with Sidoti & Company.

Good afternoon, guys.

Hello, Chuck.

Could you just talk a little bit about the linearity of the orders? I mean, how have January and February fared, relative to November and December?

We are not going to give you any real specifics. Dramatically down.

Okay. So it wasn't as if --

I am looking at the numbers right in front of me, a spreadsheet, and I can tell you in every product category, except one, a small product category, down. Okay?

Okay. And that is February relative to January as well?

YTD relative to YTD last quarter, and YTD a year ago. And this is dated today. So things are down.

Okay.

I hesitate to tell you what percentage, but it is a double-digit percentage down.

And as far as how we should look at gross margins for the next couple of quarters, will you be cutting prices to get some inventory out the door, or how should we think about that?

To answer your first question, we expect the gross margin will still be in the low 70s. Cutting prices is something we have never done, and I don't believe that that is what is keeping us from getting orders. If customers need the product, if there are projects out there, an automation line, Gillette, or Proctor & Gamble, we will get the order, it is not a question have they don't have another grand or 10 grand.

The issue is all these, many or, not all, many of the projects are just put on hold. It is the same, companies around the world are doing, the Board of Directors are doing exactly what Cognex' Board of Directors did at our last meeting. We said, Gee, let's stop buying stuff. Right?

Okay.

So that is the story. No, price cutting would go not help, and we hesitate to do that anyway.

Okay. Great. Thank you.

You are welcome.

Thank you. Our next question comes from Antonio Antezano from Macquarie.

Good afternoon. Regarding the new products that you just provided some comments, if you can expand on that , what type of new products you expect to launch that would be this quarter, with maybe the impact for the

You know what, I would like to give Rob Willett the president of that division that has most of the new products, he is here joining me, and my partner, and I would like him to talk about those products.

Hi, Antonio, yes, we are going to see Cognex put a number of new products into the market in the next few weeks. They have already been introduced to the sales force, and they are products with significant potential.

Given that we haven't launched them publicly, I am not going to be too specific about what they are but they are in our vision systems business, a major product that will help us address an area that we currently don't serve in the market, with a lot of consumer products company potential.

We are going to see new releases in software, with a lot of additional functionality helping us to maintain our lead in that segment. We are also going to see a breakthrough product in the ID space, which as you know is very capable for us. Finally you are going to see us launch a product, which is specifically for the Mitsubishi channel in Japan. I will be in Japan in three weeks from today with the Mitsubishi leadership team launching the product formally, and we have, we see major potential for that, perhaps not this quarter but certainly in the years to come.

That is a product that we are sort of hoping that in the first full year that it is out there, that it could generate up to 10 million in revenues.

Under normal circumstances.

Under a normal run rate.

Okay. Regarding your guidance for spending, I guess most of that I guess decline will be on SG&A, rather than R&D?

That is probably true. Yes, there will be some, R&D might stay relatively flat. There have been some cuts relative to some of the spending on outside services, where we had some prototypes and other builds that happened in the fourth quarter, that will probably not recur in the first quarter or whatever. But most of the decline will be in the SG&A area.

Okay. I will go back in queue. Thank you.

Thank you.

Thank you. Again, (Operator Instructions).

Our next question comes from Jim Ricchiuti from Needham and Company.

Thank you, good afternoon.

Hi, Jim.

Hey, Bob, you talked about the factory automation business. Sounds like it was holding up a little better in Europe and Japan, or parts of Asia in the quarter. Now as we think about Q1 directionally, you have given us a sense of how the business is tracking. Are you seeing a lot of weakness now in Europe? Because that seems to be the big worry right now for a lot of folks.

Let me say that if I am looking right now at the total change in bookings. And factory automation is less than the aggregate percent change in all of our bookings. But if we look regionally so far in Q1 compared to Q4, the decline in factory automation in Europe is less than in any of the other regions.

Okay. The ID business seems to be holding up somewhat better. Has that begun to really soften as well, as folks who are just pushing out projects?

Yes, I am looking at the ID business now, and unfortunately that is slowing down.

Looking at the SISD business, it sounded like at one point, you felt that '09 could be a decent year, just based on backlog, and what you see in terms of the retrofits of some of your customer facilities, do you still anticipate it being a decent year for SISD, or are you also seeing thing being pushed out there potentially to 2010?

No, no, the bright start right now is SISD, and I can tell you that YTD versus '08 significant double-digit increase. Now it is still early. We are only talking about a month and a half, but it is ahead of plan.

Okay. Do you have backlog in that business that give you some--?

Yes, we do.

--visibility into '09?

I can tell you --

We don't, we disclose the total backlog not the segment.

I can tell you it has a significant backlog.

Okay. That is it for me. Thank you.

SISD is looking good.

Again, (Operator Instructions). Next question comes form [William Pike] with Pine Street Security.

Could you elaborate on the strength of SISD, you did mention, I think that Asian metals were relevant, but is the strength of the backlog based on new customers, or existing customers expanding, any insight? I am trying to get a sense of whether that will continue, or we are going to have queen for a day in the first quarter, and then fall out of bed, too?

No, our sense is that this is not just a one quarter issue. We have talked to customers, it appears in these kinds of projects for some reason they have been put in the budget and they are approved, and we are going to keep on getting them. Our gains are at some new customers, particularly in China, where we are the largest supplier of Vision in China now, of service inspection at any rate. And where these gains are competitive wins. It appears we are taking market share from our direct competitors. Without cutting price by the way.

And I see the number of shares have been down. You obviously have been purchasing stock. Can you remind me where you are in the program?

I believe we completed the total amount that we could have purchased under the 10-B-51 plan, and there is one plan remaining, it is a $50 million plan, under which we purchased some 20 million to date, and we have approximately 30 million left under that plan.

Thank you.

Was that clear, Bill?

Yes, that was clear.

Why aren't you asking, why aren't we buying back the stock? I will ask that. So Dick, there aren't enough questions out there, so I am going to push one. Dick, why aren't we buying back stock? We bought stock at 28, at 27, at 26, 24. Why aren't we buying back stock at 12? What is wrong?

We were in a quiet period, and we couldn't buy back stock.

Right. Well, but why wouldn't we by it back next week?

We could.

We could. But you know what, no one is buying anything. This is the problem. All right? Even though we felt good about buying stock back at 20, and thought it was a great deal, well, I think it is even a greater deal at this price, but nevertheless people are just nervous, and even though they pretty much might think that it is a fantastic deal, where we have about $6 of cash per share, people aren't in a buying mood.

This is a problem. Even people who are objective about these things aren't buying stock, or aren't buying things that they can afford even. That is why. That is the reason. I asked the question, and answered the question.

Next question, anyone? Anyone want to push one?

Our next question is a follow-up from Jim Ricchiuti.

I was wondering if you guys can comment on where your quarterly breakeven is now, as we get all the full cost cuts in the business? What are we looking at now on a go forward basis?

Okay. Yes. Again to a certain degree, it will depend on the percentage relationship of revenues coming from MVSD versus SISD, but what we are seeing now is SISD is relatively consistent overall. They are not seeing the kind of declines that we are seeing on the MVSD side. So assuming that that continues our breakeven point is probably around 45 million in revenues.

You mean breakeven with or without stock option expenses, Dick?

That would be, at 45 million breakeven is with stock option expense.

It is?

Yes, it is.

Okay. Bob, a question comes up occasionally just as people look at companies that are paying dividends, any plans there? Is the dividend, do you guys intend to continue paying at this rate?

Well, you might have not seen the press release today we did authorize, the Board met today authorized a $0.15 dividend for Q4, and our analysis is, that even if we continue to give this dividend, and under certain scenarios even less good ones, that we would still end up the year at $200 million or so, with cash in the bank. So there is an argument for stopping it. There is an argument for continuing it.

My argument in the past when we started the discussion with the Board, when we started dividends, I thought it should be a fraction, some percentage of the operating profit of the Company, or the net profit of the Company, which makes sense. It is basically a profit sharing, share the profit with the shareholders. But the argument against that was that nobody does that, and people won't by a stock if the dividend goes up and down and whatever.

So I was bullied around and convinced to accept a fixed dollar amount, or penny amount of dividend. The problem with that of course is that when things turn to crap, as they are, that people say, wow, you are spending too much money, which I saw before. So it should be self-correcting. The right way to do it is a profit sharing, but that is my view.

To answer your question directly, I would recommend, but it is a Board vote of course, and Board discussion, I would recommend reducing the dividend to save cash if things continue to be dismal. You can't be giving your cash away when the tank gets low. Now, the tank is not low, not nearly low, but this is another reason to not buy shares back, of course, too, because cash is extremely important now. We are seeing that.

Every article you read about failures and bankruptcies, and companies unable to pay, either their debts or notes that are coming due. So cash is extremely important, and so I would vote a vote in favor of reducing the dividend in tough times.

One other thing that I might comment on, Jim, is that as we looked at the fourth quarter if you take the net income, and add back the non-cash charges that affected that net income, the resulting cash from operations, if you will, had at least a 50% cushion over the dividend that was declared, and then when you take a look at the working capital changes, it becomes even greater.

We had over $19 million of cash generated prior, from operations, so.

That is a pretty good cushion. Can we just turn some of the newer products that you guys are working on? Vision system on a chip? Anything more you can tell us about it. It sound like it is on track. Is it on track to be introduced formally into the market in the second half of the year?

We are currently going to be holding meetings with potential OEMs for this. We are going to be having demonstrations, with senior engineering and marketing execs from some targeted customers. But, no, I don't think it is available for shipment. We might have betas by the end of the year, no betas by the end of the year even. We do have working models, actual working chips in systems that are working, but it is complicated getting chips out of a fab and getting them packaged right. And we want to make sure if we do ship them, this is the first time that we would ever sell a product that was really our own design from start to scratch, and fabbing it ourselves, through fabs of course, so we want to be very cautious about introducing it, and making sure that it is stable. The first application will be and one of our own products, and that should be available in the first half of '10.

So realistically this is a 2010 revenue story?

That is right. That is right.

How about solar? The application here is with SISD?

No, the application is with MVSD, and we already have a fairly good sized business in solar, about 3 million or $5 million a year, is it Rob?

Five.

$5 million a year in solar now. Looking at solar cells or solar chips and aligning them, and various things, and now we are looking, talking to the major manufacturers of solar cells and systems, and we are finding they have some needs that are complex, but that we can solve.

And so it is going to be MVSD, but using interestingly enough, I mean you are right to think SISD, using some SISD technology, and that is one of the reasons why we moved the fellow who was running SISD, doing a good job at it, we moved him into running MVSD now, so he is inserting a SISD technology into MVSD, and the first application will indeed be in solar.

Now just so I am clear on this, was there a new SISD product that you were going to be rolling out this year?

There is a web inspection product that is software based, and where internally it is called Snowflake, and that is being rolled out, and we already have at least one purchase order, maybe more for that, and yes, and the customer has accepted it. It is a lower cost web inspection product, that fits into the MVSD bag in price range. That is why MVSD is initially handling it. We expect though that that will also be handled by SISD at certain customers.

And the applications there for that traditionally?

Applications, let's see, there were three different applications. One was oddly enough roofing tiles, I believe, to see the uniformity of the spread of these particles on roofing tiles, which are made at reasonably high-speed, not like paper, where there was a real need. The other one is the alignment of fiber layers on certain kinds of, also on diapers, so there are a number of different applications for this lower cost, but high margin surface inspection system.

When you say lower cost, can you give us a range?

I think it is 50,000 to $75,000. The lowest cost of SISD is probably $200,000.

Okay. Thank you.

You are welcome.

Thank you. Our next question is a follow up from Antonio Antezano.

Quickly, are you still looking at acquisition opportunities? Could you comment on that?

I just came out of my office where I finished a letter of intent as a matter of fact, so, yes, we are. And we are hopeful that we will go forward with this deal, and a few others to follow right after it.

What would be your acquisition criteria? What type of acquisitions would you be looking at?

Okay, the most important thing, it has to be vision. All right? That is what we know about, and that is what we are going to stick with. So it has to be machine vision and, analyzing images. That is the most important thing.

The second thing that we look for is customers. They have, the business has to have customers who have bought the products. We are not going to by something that is highly speculative, and venture in seed, in the shape of a seed company. So probably revenues above $5 million, I would say generally, and this one is significantly above $5 million.

The third thing it has to have a culture that matches Cognex. The fourth thing it has to have some significant growth potential. It has to be addressing a market that is underserved, or is not yet taking off. And this particular company looks right to us, although everybody is having hard times, and we expect that even if we did this deal, that it may not indeed grow the first or second year because of the economic conditions. Now is a great time for companies with cash to use it for that purpose.

Thank you.

You are welcome.

Thank you. Our next question is a follow-up from William Pike.

I am going to give you a chance to leave us on a, if not a high note, a less depressing note.

Yes, I would love to.

You said at the beginning of the conversation that you had in the past, perhaps facetiously, perhaps seriously, said sales could go to zero. You started a conversation by saying they could. If you mean that literally then certainly don't change it Sarbanes-Oxley and all, but to leave on that note, I would think would leave you with a great opportunity to buy back stock very cheaply tomorrow morning. Would you care to elaborate on that comment?

Yes, okay, it is a good point. Thanks for asking it. I was referring to the semiconductor industry, and I was just on the phone with another CEO, and we were discussing the capital equipment semi cap. And some of these companies are not selling anything. All right?

The fellow I talked to mentioned that he has five XYZ products in a crate that he is not opening, because he doesn't need to open them. He paid for them of course. But they are in a crate, brand new products, semi cap products. We don't want to name the company. As a matter of fact he said ten of them, didn't he say ten? Yes, ten of them.

And these are $1 million products or more. So when things get rough, I mean, the chip companies are still going to sell stuff. There is no question. They have fabs, and the chips are coming out, and people are still buying cell phones, and radios, and cars, they are still buying something around the world, and to build those things you need the chips.

The companies that make the chips don't need any more capacity, so they are not buying any capital equipment. This is the problem. And of course, our sales into semi are to the capital equipment suppliers. That is where our sales are. That used to be 80% of our business. Thank God that we diversified, and went into factory floor and surface inspection, whatever. But I can tell you that the sales that we are seeing now to semi cap companies is almost zero.

Might there be some recovery at some point, simply because newer technologies, well maybe nobody needs capacity today, as companies eventually get optimistic about coming out the other end, might they want to get down to smaller lines, and so forth?

Yes, of course, that is going to happen. Okay? Of course. Technology isn't going to stop. And as far as I know, in lithography and in wire bonding, all of those things, there are no technological limits in sight yet. Every time there was a limit the company has found a way to make the line smaller, to make the wire bond smaller, whatever. And there is going to continuously be a demand for smaller electronics, that will be implantable in your retina, or whatever, or in your car, smaller and faster. That is going to continue. But, so the technology is able to do these things, but until someone invents something that needs that, until people start opening up their pocketbook and saying I am going to buy it, there is no capital equipment going to be sold. That is a fact.

Right. I believe Intel announced a [$1] billion project, is that just an outlier?

I don't know the people at Intel. I would be surprised, if they go out and buy that $1 billion worth of stuff. I would be surprised. Because I wouldn't be doing it. First of all, look, I am not an expert on this, but they are not in a hot and heavy competitive situation. AMD is on the ropes, from what I read, so it is not as if, gee, we had better spend this $1 billion, or our business is threatened. It is not.

If I was on their Board, of course, I don't have the data, but given the little data I know I wouldn't be spending $1 billion on capital equipment. Why? My bet is that they made that announcement to try to get people excited, and in a buying mode. That is my bet. I hope it is true.

Because we will get some more orders, because we are in 30 or 50% of the capital equipment that is out there. It would be a wonderful thing. But, look, terrible times are here. All right? We all have to calibrate to that, and say look, how bad can it be, and how do we make ends meet.

How do we get along if there is no growth in the world? It is a serious question that politicians should be saying, the world population is not expanding any more, or in most of the purchasing part of the world. The population isn't expanding, so why should things keep growing, right? It might be that we have reached the stage, I don't know, I am just proposing this, the world has reached a stage of zero growth. That doesn't mean that some company won't be growing, but on the macro level some other company will be shrinking.

So somebody will come up with a better mousetrap, and the other company will shrink. I don't know why it might be that for a long time there is going to be no growth. No growth. And that is not so bad. It might be okay, once you swallow that pill. I mean there was a time when Cognex did $150 million. We were ecstatic. Right?

We were ecstatic. And now we are doing 200-something last year, and we are depressed. So I don't know. We are still looking for growth opportunities by getting into new businesses, and so I am not saying that there is no chance for growth. But overall for the next few years, other than acquisitions, it looks tough. It looks tough.

Fair enough. Thank you.

Yes.

Again, (Operator Instructions). We have a follow-up from Jim Ricchiuti.

Hey, Dick, can you comment how currency affected the topline in the quarter, I just noticed you also had a pretty sizeable gain as well?

Okay. On the topline I think in, let's see, Q4 versus Q3, so on the topline FX was relatively negligible, wait a minute, hang on one second here. Yes, revenue. Compared to the third quarter we lost about 1.7 million due to FX.

Okay.

Compared to the, if you look at Q4 versus Q3. And the FX gain was due to a couple of factors, one of which was the significant strengthening of the Yen during the quarter, and we had Yen receivables at our Irish subsidiaries' books, and also to a certainty agree, we had Yen receivables on the SISD books, and SISD because of these projects, and the length of time that it takes, we cannot or do not hedge those receivables, because we are not exactly sure when they are going to turnaround and be collected, so we had a gain there as well.

All right. Just with respect to restructuring, further restructuring charges, do you anticipate the Georgia facility is going to be closed in Q2. Is everything pretty much in there now? There are no additional expenses associated with that?

No, in the old days when you used to decide or doing a restructuring or shut down like this, you would estimate what the total cost was, and you could take the hit all in one quarter. That changed when the FASB and the SEC found out that a lot of companies were taking these huge charges in one quarter, that were in excess of what was really being used, and then subsequently had these credits, so now a lot of those restructuring costs, you have to record on an ongoing basis.

For example, if you have a severance payment that you are going to be making to employees, but they continued to work during the shutdown period, you don't accrue for the severance cost on the day that you announce it like you did in the past, you do it over the period where those people are providing services. So we still have shutdown costs that will be recorded in the next couple of quarters. One of the larger ones will be when we in fact vacate the facility.

That is Q2?

We will have to accrue for the remaining rent that is due, because our lease does not expire until the end of December of '09.

The way we should think Q1 there could be some modest, Q2 the bigger amount, and then just I guess a more modest amount again in Q3?

My guess is, yes, except for the Q3, I am pretty sure that we will most likely be completed by Q2 with any restructuring charges that would be required on the closing of the Georgia facility.

Okay. Great. Thank you.

Because anything in Q3 would be really small.

Okay.

Good answer, Dick. He knows his stuff. Anybody else want to hit a one?

(Operator Instructions). Again, (Operator Instructions).

Okay. I want to thank all of you. Look, it is bleak, but you know things don't stay down forever. They weren't up forever. They are not going to stay down forever. I want you to know that the team still comes to work every day. Though we don't know why sometimes.

We are still coming to work, and finishing projects and working hard. Hope to report something more positive to you next quarter. Stay tuned. Bye bye.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the presentation, and you may now disconnect.