Coherent Corp (COHR) 2003 Q2 法說會逐字稿

Good morning everyone, and welcome. Today's program is being recorded. For openings remarks I'll turn the program over to the Chief Financial Officer of Coherent, Ms. Helene Simonet. please go ahead.

Good afternoon, and welcome to our second quarter conference call. First I will speak to the results of the second quarter and John Ambroseo our CEO will speak to operations achieved during the quarter as well as the summary on the state of the company. We will also continue to provide forward looking financial guidance for the current quarter only. Certain market uncertainties, make guidance beyond 3 months quite difficult and please remember that the guidance provided is only an estimate and is subject to different risks and uncertainties such that actual results may differ significantly. Additional information concerning these factors are contained in the company's filings with the SEC. Listeners are encouraged to refer to the risk disclosure described in the company's reports on forms 10-K, 10-Q and 8-K as applicable. Copies are available from the SEC, from the Coherent website, or from Coherent investor relations.

Before moving on to the second quarter results I want to highlight that today we announced our plans to launch a tender offer to acquire all outstanding shares of Lamda Physik not already owned by Coherent. We will offer EUR 9.25 for 5.25m shares, and the tender offer will be contingent upon Coherent up dating 90% of Lamda shares with the intention of a subsequent delisting. During the call John Ambroseo will comment on the process and objectives of this transaction.

We reported second quarter revenues of 103.5m and net income of 1.9m or 7 cents per share. These earnings included a one-time gain of 2m net of taxes and minority interest or 7 cents per share representing a 4.4m settlement fee received by Lamda relating to the cancellation of some customer during the fourth quarterof fiscal 2001. The settlement fee of 4.4m was recorded as other income in the income statement. This one time gain was offset by a good will impairment charge of 2.4m, 1.8m net of minority interest or 6 cents per share related to Lamda's photography business.

Excluding the aforementioned one time items net income was 6 cents per share. Please note that the 6 cents per share includes a higher than anticipated inventory charge at Lamda Physik of 2.7m corresponding to 4 cents per share which was also necessitated by the lower photography business outlook. Despite the adjustment I am pleased that during these challenging times the company remained profitable from continuing operations and made positive strides in some of our major areas of emphasis.

The tax rate for the quarter as reported was approximately 52%. This was higher than expected as the good will impairment charges are nondeductible expenses. Excluding the impact of the good will impairment the effective tax rate was approximately 32.5%. Our worldwide (ph) book-to-bill ratio was just a hair below one. Within our electro-optic segment the book-to-bill ratio was 1.0 to 1. Within our Lamda segment it was .8 to 1.

Q2 orders of 103m represent an 11.5% increase from the same period a year ago and it improved 9% from the immediately preceding quarter, as we saw strengthening in some of the end markets we serve. Our electro-optic segment bookings of 83.7m are higher than any of the last 8 quarters. More specifically electro-optic orders increased 5% sequentially and 14% compared to the same period last year.

While Lamda Physik photography orders improved both sequentially and year-over-year despite a weak semi-conductor capital equipment spending environment we are clearly not out of the woods yet as attested by the charges I mentioned earlier. Lamda did, however, experience some pickup in industrial orders after weaker than expected Q1. Total bookings of 19.3m were up 2% year-over-year and 35% sequentially.

Later in our report John will provide more information on Lamda's business and as a reminder Lamda Physik I can will present a detail earlier tomorrow morning and John will supply you with the appropriate conference call numbers.

Total company sales in Q2 '03 were 15m up 5% from the same quarter a year ago and up 1.5% sequentially. By business segment sales were as follows; Electro-optics, 79.3m, an increase of 2.4m or 3.1% from Q2 '02, an increase of 1.8% of Q1 '03. Lamda Physik had sales of 24.2m for the quarter, an increase of 2.5m or 11.4% from Q2 '02 and essentially flat with Q1 '03.

The electro-optic sales by significant market application for the second quarter fiscal '03 are as follows; I will first read Q2 '03 numbers followed by Q1 '03. Scientific and government program 23.1 versus 22.6. Microelectronics, 13.4 versus 12.4. Material processing, 14.6 versus 13.2. OEM components and instrumentation, 21.1versus 24.3. Graphics arts and display, 7.1 versus 5.4. Total electro-optics, 79.3 versus 77.9.

Gross profit of 41m or 39.6% was within our guidance of 39 to 41% and was flat compared to the prior quarter. If we exclude Lamda's higher inventory charge the company's gross profit would have been in the range of 42%.

The breakout of gross margin by segment is as follows: 43.3% for electro-optics, a gain of 2.2 points from Q1 and this was primarily the result of higher than projected (inaudible) in our CO2 factory in Bloomfield, Connecticut combined with a favorable product mix. In addition we continued to see the benefits of our manufacturing cost structure improvements. John will provide an update of the two ongoing projects aimed at reducing cost of goods sold by 2 to 3 percentage points for the electro-optics business segment.

In the Lamda business segment, Q2 '03, gross profit percentage fell to 27.6, a drop of 7.4 points from Q1, primarily as a result of the previously mentioned additional inventory reserve requirement of 2.7m driven by the lower than forecast business outlook in the photography business. To summarize with the exception of the large inventory charge at Lamda, we are pleased with the profit improvements we are seeing and we continue to focus in our goal of taking the gross profit percent level closer to the mid 40s range. To achieve this goal, simplifying the supply change and rationalizing our overall manufacturing operations is imperative and we're up this challenge.

Operating expenses including intangible amortization but excluding impairment and other charges of 2.8m were 39.1 million or 37.8% of sales compared to a guidance range of 36 to 38% of sales.

R&D spending for the quarter of 12.3m was 11.8% of sales and came in within the upper range of our guidance of 11 to 12%. Absolute dollars spending in R&D has remained fairly constant the past several quarters. SG&A spending for the quarter including amortization of intangibles but excluding the 2.8m impairment and other charges was 26% of sales in line with guidance at the high end of the range provided last quarter.

Our balance sheet remains healthy with 237.5m in cash plus short-term investments up by about 7.5m from Q1 and equating to about $8 per share. At the same time total debt decreased 14.4m, primarily the result of Lamda paying off itss entire short-term borrowing position.

In summary, our balance of cash plus short term investments net of debt, increased approximately 22m during the quarter. Please note that the positive Light acquisition was completed subsequent to our quarter end and the accounting for this acquisition will be reflected in our third quarter results. Coherent book value remains at approximately $19 per share and as mentioned frequently our balance sheet remains an emphasis of management.

At the end of Q2 '03, accounts receivable day sales outstanding increased to 73 days which is two days more than the level of Q1 '03. Electro-optics sales outstanding 63 days compared to 70 the prior quarter, a significant improvement. Lamda's receivables outstanding was 107 days compared to 74 the prior quarter. Lamda's days increased as some large customers pushed out scheduled payments. I'm happy to report though that subsequent to the quarter end a significant amount of these push down balances have already been collected.

Inventory day sales outstanding remains at 83 days at Q2 '03. Electro-optics increased to 68 from 65 days partly as a result of selected inventory bills and support of growth and in connection with the CO2 manufacturing relocation from California to Connecticut. Lamda Physik's inventory days decreased 131 days from 141 at the end of Q1, mainly as the result of the additional inventory reserves this quarter.

Capital spending for the quarter was approximately 6.5% of sales and well within our guidance. Capital spending for the remainder of fiscal 2003 is still projected between 6 to 8% of sales.

While we are fortunate to have a sizable background and a diverse customer base current market conditions still make it difficult to forecast beyond one quarter. We anticipate Q3 '03 revenues to increase 5% from Q2 '03 levels as we recognize positive slides in Q3 '03. We expect gross profit rates in the range of 40 to 42%. R&D should run in the range of 11 to 12% of revenue. SG&A expenses, including intangible amortization will continue to fall in the range of 25 to 26% of revenue. We anticipate other income and expense to be about zero. The annual effect is tax rate excluding the second quarter non-deductible good will charges are expected to be approximately 32.5, which is consistent with the second quarter rate. In addition we estimate end process R&D expenses of approximately 4.5m associated with the positive Light acquisition which will be recognized in our Q3 results.

To summarize, fiscal Coherent is as strong as ever. We are beginning to get some increased profitability in some of the markets we serve although our customers still exhibit cautious ordering patterns. The acquisition of Positive Light should enhance our financial performance as well as increase our product offers on the scientific and commercial sides of our business. We continue to introduce and produce innovative cost effective quality products and solutions, which is how Coherent became the leader in the markets we serve. I am now pleased to turn you over to John Ambroseo, our CEO

Thank you. Good afternoon everyone and welcome to our second quarter conference call. I'm pleased to report that Coherent delivered another solid operating performance in our second fiscal quarter of 2003. We are especially encouraged by improvement in gross profit in the electro-optic segment.

Before providing a market commentary I would like to review our recent M&A announcements. Earlier today we announced our plans to launch a tender offer To acquire all shares of Lamda Physik that we do not already own. The offer will be EUR 9.29 cents or $10 per share at current exchange rates for 5.25m shares. The management and supervisory boards at Lamda Physik have voted to support the tender proposal. In addition Dirk Basstein(ph), Lamda's CEO and co-founder who holds 10.26% of the shares has agreed to tender all his shares. Mr. Basstein has also announced his intention to resign his position either upon completion of the tender or surrendering his shares.

While there are several factors that influenced our decision, the overriding (inaudible) is the unique capabilities of Exmer (pf) technologies to enable certain commercial markets, such as flat panel display manufacturing segment and micro-lithography. Lamda has enjoyed success on the flat panel arena and recent comments by a large customer suggests that Lamda has gained some ground on the competition. We are encouraged by these remarks but realize there is much work ahead to fully participate in the litho market space. In this respect we believe that combining the resources of Lamda with Coherent should significantly improve our probability of success in the litho market.

There are several stages in the tender process to be completed by the end of May, when we anticipate opening the formal offer period. Our goal is to obtain 95% of all shares we already own 60% as was mentioned earlier, so that we can initiate a squeeze out under German rules an collapse Lamda Physik into a business unit within Coherent. This will allow us to eliminate the cost associated with Lamda's public structure, drive supply chain synergies and reduce overall SG&A expenses. In an effort to provide visibility into the tender process, we will post results on our website under the investor relations section beginning 7 to 10 days after the initiation of the formal offering. Results will be updated weekly.

In February, Coherent announced the planned acquisition of Positive Light corporate or PLI, which designs and manufacturers advance solid-state laser for the scientific and industrial markets. Many of you may be unfamiliar with PLI since they were a private company. Founded in 1993, they have earned a reputation for performance and reliability and share Coherent's commitment to innovation.

The main motivation behind this acquisition was the high degree of market and product synergies between the companies. PLI has served several of the same end markets as Coherent including scientific, material processing and microelectronics. Their product portfolio is very commentary to Coherent's there by allowing us to provide the highest performing and broadest solution set to our customer base.

Another attractive aspect of PLI is their focus on solid fiscal management where they again share our emphasis on profitable growth and cash generation. All of us are painfully aware of the difficulty in finding deals that can be accretive to the acquiring entity. We believe PLI represents this kind of opportunity given the level of coherence and world class distribution network, as well as supply change synergies in optics, crystals and dios (ph).

PLI reported annual revenues of approximately $20m which excludes distributor margins and sales of front-end or seed lasers that are integrated into certain PLI systems. The estimated value of these excluded items ranges from $5 to $8m dollars per year, which we should begin realizing upon expiration of the current distribution contract on 31 December, 2003.

As we reported in our press release earlier today, Coherent paid approximately $43.4m for PLI. While the transaction accounting is not yet finalized we can say that the assets purchased included approximately $8.3m of cash and notes. At close the cash consideration paid to the shareholders of PLI was offset by approximately S4.4m of notes resulting in a total cash outlay of about $39m. We are also pleased to announce that PLI's senior management has been retained under multi-year employment agreements. We welcome the PLI employees into the Coherent family.

Let me now move on to the results of our second fiscal quarter. We maintained our investment in research and development during the second fiscal quarter, Coherent spent approximately $12.3m or 11.8% of revenues on R&D during Q2 of fiscal 03. We continue to innovate abbreviate and expand our product portfolio with an emphasis on performance, ease of use and reliability. For those of you on the east coast who would like an update or introduction to our product portfolio I invite you to stop by our booth on the conference on lasers and electro-optics or CLEO, a trade show taking place in Baltimore. The exhibition will be held from June 3rd to June 5th, Positive Light's products will also be on display at the show.

We continue to make progress on our supply chain initiatives. To date we have transferred approximately 70% of our volume and printed circuit board assemblies to our contract manufacturing partner. We have had no adverse impact on shipments, revenues or quality during the quarter. I would like to commend our internal transfer team, Adventure (ph), our CM partner for their outstanding efforts in the transition process.

While the overall program remains on schedule, the SARS outbreak in East Asia may impact the final stages in Singapore. Normally we would have our employees on the ground in Singapore to assist in the process. However, we have placed travel restrictions or our employees consistent with the world health organization's suggested policy regarding travel to the affected areas. This may delay the completion of the project by up to three months. The delay will not impact product delivery to our customers.

Our second project is the consolidation of all CO2 laser manufacturing at our site in Bloomfield, Connecticut. The build-out and move in at Bloomfield was completed on schedule, pilot production began the week of March 31, and we are in the process of training team members at the Bloomfield site for the production ramp scheduled at the end of May. The phase out of our Santa Clara CO2 facility has been delayed by 2 to 3 months due to increased demands of CO2 products within our materials processing segment. I suspect everyone shares my opinion that this is a good reason for a delay. To remind everyone of our previous project items, the expected cumulative impact from both projects is a reduction of 2 to 3 percentage points of COGS for the elector-optics business segments. The savings delay should be partially offset by improved utilization of the CO2 business unit.

Orders for our EO segment, were 5% or 5% higher sequentially and 14% from the prior year period. The following market review will provide insight as to where the growth has occurred. Bookings in our scientific and government business were down 6% sequentially and 1.3% from the prior year period. The softness in Q1 was a result of funding delays in the US and Europe as local and federal governments struggled with economic priorities, and in the case of the US, approval of the new budget.

The aforementioned acquisition of Positive Light will bolster orders from the scientific market in future quarters with the greatest benefits achieved after we assume full distribution at the end of the calendar year. Within the OEM component and instrumentation market, orders decreased 18.6% sequentially but increase 7.2% from the same prior year period. I would like to remind everyone the instrumentation side of our business jumped in Q1 of 'O3 as a result of some large OEM orders that are placed periodically throughout the year.

In Q2, we experienced weakness in the medical OEM business, apparently resulting from inventory management amongst some of our customers. That being said, Coherent continues to penetrate new market by introducing new products such as the Fio-flame (ph) which are displacing legacy technologies due to performance, package and reliability, and not surprisingly we are seeing increased demand within the defense market for a variety of products.

Bookings for material processing were up 38% sequentially and 10.7% from the prior year period. The continued growth is directly attributable to the continued expansion of atomic based tools and manufacturing environments, especially in China. To give you an idea of the pace of change, industries once looked upon a state such as the fashion (ph) industry continue to embrace our technology. For example 60% of the worlds shoes are made in China. And lasers are no used to cut and mark leather. Blue Jeans are no longer high tech either as lasers are used to fade and design patterns as well as for the cutting of fabric.

Gartner Inc, a leading market research firm recently projected that worldwide semiconductor capital spending will grow 7.2% to $30 billion in 2003. While this growth may seem trivial compared to years past, Coherent expects to be a direct beneficiary of this expansion for our microelectronics segment which concludes semiconductor capital equipment, flat panel display manufacturing, direct right technologies, printed circuits boards, micro-machining, and advanced electronics components.

We have recently introduced new products in the microelectronics area, such as the Paliden (ph), a solid state product for laser direct imaging of printed circuit boards, and Avia X (ph), a solid state laser used for silicon dicing and microvia drilling. Bookings in the microelectronics market were up 6.6% sequentially and 12.6% from the prior year. The increased strength in orders arose from initial orders and ongoing qualifications across a broad range of customers.

The semiconductor capital equipment market continues to adopt light space solutions at an increasing rate. While this quarters order intake is encouraging we are eagerly awaiting a period of sustained recovery as this will be one of Coherent's largest growth opportunities in the future.

Graphic arts in display was Coherent's fastest growing market on a percentage basis for the third consecutive quarter. Bookings were up 65.4% sequentially and almost 101% from the prior year period. In previous conference calls I had qualified the growth by stating that the dollar amounts were small. This is no longer the case as orders in Q2 were in excess of $12m. What makes this more remarkable is that the order growth continues to provide a softness in the broader graphics market which is usually a function of the economy at spending.

In the second quarter our computer plate business was remarkably robust, receiving a sizable order for lasers used in newspaper printing. Coherent's customers are finding our compass (ph) series of lasers and semiconductor diat (ph) lasers have better performance, markedly less down time and a lower overall cost of ownership than the competition.

I will now switch to Lamda Physik. Sales of 24.2m were relatively flat sequentially and up 11% from a year ago. Lamda's new orders of 19.3m during the second quarter of fiscal '03 were an improvement from both the prior quarter and prior year's performance. Lamda's orders for the second quarter of 2003 were up 35% from the immediately preceding quarter and 2% if the prior year period. Although the semiconductor industry is still depressed, litho's bookings were up sequentially and from the prior year, but with largest pithogry (ph) stepping company, AMSL, recently forecasting that 2003 is expected to be the third year in a semi conductor industry's worse downturn it could still be at least a few quarters before any material pick up litho orders occurs.

Lamda Physik did have some significant accomplishments in the second fiscal quarter, including European customers' recent announcement that it's delivering the industry's 1st full field 157 nanometers step-in-scan tool to Europe's leading independent research and development chip consortium at the university's microelectronics center or IMEC. IMEC is an international center of excellence for microelectronics.

On the extreme UV front, Lamda Physik announced that their extreme technologies joint venture with Yen Optic AG (ph) has shipped the first prototype of an EUV light source. EUV light sources may be used to produce chips with feature size of 30-nanometers and less. The receiving customer is UK's based Xitech (ph), which will produce a prototype EUV based tool. The shipment of the first EUV light source underscores the technological lead that Extreme technology enjoys over the competition, especially since Extreme did not expect to deliver its first device until 2006.

The industrial side of the business continues to exhibit lumpiness as customers work for previous volume orders and or inventory. Sales and orders for the flat panel display market were approximately $2.5m primarily for service. Lamda does expect to meet its annual forecast for this market.

The man within materials processing market segment strengthened the second quarter although there was no dominant application. TO hear more about Lamda's end market please listen to a replay of Lamda's conference call which can be heard tomorrow morning at 49 (for Germany) -69-9205-6444. Again, that replay number is 49-69-9205-6444. The call will be held in English.

Before turning the call back over to the operator for the Q and A session I would like to make everyone aware of an event occurring this week which is somewhat melancholy for all of us at Coherent. Bob Quillinan, our long time CFO and our current EVP for mergers and acquisitions is retiring this week from active service at Coherent. And on behalf of the Coherent organization I would like to thank Bob for 23 years of incredible service. On a more personal note, and I believe I speak for Helene as well, Bob has helped us tremendously in our new rolls over the last year and it's going to be difficult without him but we'll sure we will cross paths with him occasionally. The call is now yours.

Thank you. At this time if you have a question, please press star one on your touch-tone telephone. We'll take our first question tomorrow from Byron Walker with UBS Warburg.

Good afternoon. I have two questions. One is trying to get an apples to apples without other stuff earnings. I rough out 10 to 11 cents. That about right?

If we exclude the 2.7m exceptional high inventory charge, then it would be 10 cents.

Okay. And the other question is, can you give me some more insight on how Coherent can help Lamda gain additional tracks in the lithography (ph) market?

Hi Byron, it's John. With respect to litho market there are a number of things that Lamda is currently working on, particularly in reliability engineering, that encompasses materials as well. We have resources in those areas which we can bring to bare. I think you're probably aware we own a materials company located in New Jersey, which we have already engaged working with Lamda to be able to provide some advance materials for the litho space in particular and there are just a number of engineering disciplines as well that we can bring. I would say the second piece there may, and I want to stress may be an opportunity to leverage the Coherent service organization to provide some backup to Lamda Physik equal to extend their service capabilities even further.

Thank you.

Moving next to Max Sheets with CSFB.

Two questions. Can you characterize what sort of cost savings you might be able to realize if you don't have to maintain the separate company structure tour and public company structure for Lamda? And second was curious we're seeing announcements regularly about increasing CAPEX by a lot of the panel manufacturers and it doesn't seem like they fit the books yet for Lamda and their laser. I was wondering if you could comment on the outlook for which you expect to see those orders come through for a lot of the (inaudible) going up right now.

Max, it's John. With respect tomorrow any potential cost savings there is a process that we have to follow here and it's part of the regulations for doing a tender offer in Germany where we have to file a formal offer document that spells out our intentions. We have not filed that document yet and we will be doing so over the next few weeks. So speaking to any specifics or areas that we might be focusing on in terms of cost savings would be premature at this point but we will release that information as soon as we do this filing. The second question if you could repeat it.

Regarding LCD panel expansion?

Yes.

We're seeing fairly substantial increase in looks like CAPEX by panel makers in both Taiwan and Korea)

Lamda is obviously very close contact with their customer in that space and they are expecting an order. Typically the customer places a large order which is filled over many months, so they are still burning threw the last order right now and we would expect a follow order to come in the next quarter or 2. And again I want to stress for that business in particular, it's probably more appropriate to look at the annual performance rather than anything that goes from quarter to quarter.

Thank you.

We'll mere now Ali Irani from CBIC World Markets.

I was hoping you could comment a little bit on the electro-optics business. It seems the broad base comes from a number of applications. Does this add some confidence to this kind of single digit to mid point sequential growth could be extended through the fiscal year. And I hoping John in particular, you could give us some update on chip (inaudible) business replacing the Argon lasers out on the field.

Let's see. In terms of the general electro-optics business, obviously we are very pleased by what the team has been able to achieve operationally in the last quarter. When I was going through the individual markets, I think some of those stand out pretty significantly materials processing obviously has enjoyed a significant amount of growth over the last year and even the last quarter, we certainly see strength in that market as we have throughout the past few quarters. The graphic arts business also growing at a very high rate and starting to contribute significant dollars is an encouraging factor. The other markets are doing okay, given the environment but we haven't seen the recovery certainly in microelectronics, a broad base recovery has not occurred yet and that's an area that you're much more qualified to discuss than I am.

So it's still a mixed bag. Clearly we're encouraged by the results but I don't feel that it's appropriate to come out and say we're in a full-blown recovery mode yet. As far as the compact lasers that are used in the bioinstrumentation segment, here it's a very similar story to the graphic arts business. The end market continues to be in the doldrums yet we see our business there performing reasonably well, again based on a displacement strategy of the existing legacy products. So that hasn't derailed but a general recovery in that market obviously creates a lot more opportunity.

Just one follow-up a little bit on the technical side. Obviously your approach on the Lamda Physik or DPB light sources and lithography is different than (inaudible). I was hoping you could give us some color on what the customers were saying about the future of lithography and how they view the power of the DPB light sources emitted from yours versus the competitive positioning.

You know, there's been a lot of airtime given to this topic recently and certain announcement that is were made by one of the stepper manufacturers created a small furor in the marketplace. We are currently employing different technology structures. At the end of the day, the most important things for the customer are performance, in other words the ability to create the image, the reliability and the cost. And we believe that Lamda is making in roads in certainly in the performance and reliability front and based on what we're hearing, they have a cost advantage. Those things have to coincide in order for them to really have a place in the market. So you know, saying one technology is better than the other, if they meet and you can meet the other requirements then you get to play.

Great. Thank you.

John Harmon with Needham and Company has our next question.

Good afternoon. First of all, in your press release you said you wanted to give 95% of the shares down to Physik. Would you settle for 75%, which would enable you to take over the company?

Our goal, John, is to get 95% so we can initiate a squeeze out. Under those circumstances we can extract a maximum synergy. Going for less is not a consideration at this point in time as we have made a -- what we believe is a very reasonable offer for the remainder of the shares, and we will closely monitor how to tender offer proceeds.

Do you expect any resistance from German small shareholders groups, especially since your tender offering price is below than the offering during the IPO.

It's hard for me to project cha each individual shareholder will be thinking. The premium that has been offered I believe Helene outlined in the presentation are reasonable, in the press release, the premiums have been outlined and those are certainly reasonable premiums. The shareholders will have to make a decision whether that premium represents the best opportunity for return for themselves.

Thank you. Did you noticed any hesitancy on the part of your customers on when the war in the Middle East was still on the come and have you noticed any improvement in sentiment since then?

Well, certainly I can't say we noticed any hesitancy in the customers. I did mention some funding issues that existed in the European and US markets which were based on broader economic issues rather than the war specifically and since most of the hostilities have ended I would say the customers were general are feeling better about the world. I don't know if that's caught up as feeling better about the economy yet.

Thank you. Last question, you didn't give any guidance on cost synergies but could you ballpark the cost of being a public company in Germany?

I tried to touch a little about it on that. We're not trying to be coy here. We do have obligations under the German regulations to file what our intentions are when we do the squeeze out. So prior to issuing that document we are going to refrain from making any specific comments.

All right. I had to ask. Thank you very much.

And JD Avichar (ph) with Specific Edge Investment Management(ph).

Just wanted to get a little more clarification on the flat panel revenues. I understand it's lumpy. But maybe give us sort of on an annualized basis sort of what it was last year and your thoughts whether it will be up this year.

We'll have to did I go out that number, JD. If you will give us a moment.

Will we realize a full quarter PLI revenues again this quarter?

Yes.

Okay.

And it will be a full year based on their current distribution arrangement. So that excludes the (inaudible)and the distributor margin that I mentioned during my conversation.

It should just be the roughly 5m a quarter.

I believe we said last year was roughly 20m dollars so yes.

Excellent. And they have similar margins?

We have made no comment on the margins yet.

Okay. I thought I'd try. Actually I guess if you don't have the numbers close at hand.

My recollection is that it was between 10 and 20% higher this year than last year.

Again as a reminder that is star 1 for any questions at this time we'll move next to JD Paget (ph) with Founders Asset Management.

The question has been answered, thank you.

Thank you. Again as a final reminder that is star 1 for any questions or comments that you may have. And there appear to be no further questions at this time.

I'd like to thank everybody for participating in the call and we certainly look forward to having you on line at the end of next quarter. Good day.