Entegris Inc (ENTG) 2012 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Entegris first quarter 2012 earnings release conference call. Just a reminder, today's conference is being recorded. At this time, for opening remarks and introductions, I'll turn the conference over to Mr. Steve Cantor, Vice President of Corporate Relations. Please go ahead, sir.

Good morning, everyone, thank you all for joining our call. Earlier today we announced the financial results for our first quarter ended March 31, 2012. You can access a copy of our press release on our website www.entegris.com.

Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements. These statements involve a number of risks and uncertainties which are outlined in detail in our reports and filings with the SEC. On this call, we will also refer to non-GAAP financial measures as defined by the SEC in regulation G. You can find a reconciliation table in today's press release as well as on our website.

On the call today are Gideon Argov, President and CEO; Bertrand Loy, Chief Operating Officer and Greg Graves, Chief Financial Officer. Before turning the call to Gideon, I do want to let everyone know that Entegris will be holding an Analyst Day on May 23 in New York City. You can contact me for more information about that event. With that, Gideon will now begin the call.

Thank you, Steve. Good morning and thank you for joining the call.

We had a strong start to the year and have a number of reasons to be pleased with our performance for the first quarter. We achieved sales growth of 7% from the fourth quarter of 2011 and continue to see strong demand for our products used to support leading edge processes]. We executed well, achieved solid financial results as we improved our adjusted operating margin 16.7% and recorded cash earnings per share of $0.14. In addition, we made investments to extend our technological leadership for years to come. I'll have more to say about this in a moment.

Looking at our revenue trends in the quarter, we continued to benefit from technology driven spending by leading semiconductor device makers and ramping production at 28-nanometer fabs. We believe utilization rates of 2X nodes for many of our key fab customers were at 90% to 100%, while on the legacy side of the industry, utilization rates ranged between 50% and 70%. Overall, utilization and wafer starts in the industry appear to be down in the quarter according to most industry analysts.

We've clearly benefited from the industry's adoption of advanced processes and we've seen broad base demand increase in the quarter for a number of filtration and fluid handling products for wet etch and clean applications and for our advanced FOUPs for wafer handling. These products have proven themselves to be essential to address the yield issues that typically come with implementing new and highly complex processes.

Although we're addressing these advanced contamination control needs with both unit driven and capital driven products, our mix of sales of 65% unit driven and 35% capital driven did shift slightly to the unit slide. Unit driven sales were up 8%, boosted by double digit growth of liquid filters. Sales of other unit driven products such as electrostatic chucks for both semiconductor as well as solar ion implant tools remained strong. CapEx related sales grew 4% due to continuing firm demand for advanced 300-milimeter FOUPs, and sales of fluid handling components for new tools and fab construction projects.

Looking at our business by market, our semiconductor related sales represented 74% of total and increased 7% from the fourth quarter. As I have just described the increase was largely due to demand for advanced products. Revenue in our markets outside semiconductor represented 26% of our total and increased 6% from the fourth quarter. The picture in these markets is more uneven. Several of these adjacent markets such as flat panel display remain weak, while others such as LED and solar are still digesting excess capacity built in 2011. But even with these trends, our non-semi business has performed relatively well.

Outlook for 2012 certainly appears brighter than it did six months ago. While the industry and economic forecasts second half this year are still unclear, our business is off to a strong start with momentum for further growth in the second quarter.

Looking beyond 2012 we feel confident about our prospects. We have a full pipeline of opportunities. Many of these opportunities relate to helping our customers stay on their own technology road maps, 1X and even single digit technology nodes.

The contamination issue of these nodes are requiring us to work even more closely with industry leaders and to push the boundaries of physics. In this regard, we made progress in several strategic initiatives. First, in advanced filtration coatings we announced recently the creation of our i2M Center for Advanced Materials Science, a new R&D and manufacturing center to be built in Massachusetts. This facility will house our existing membrane manufacturing, portions of our membrane development and our coatings manufacturing, as well as R&D. Putting these technologies under one roof will create one of the most advanced nanotech centers in the world and will enable us to continue to create differentiated, high value, unit driven products with the most advanced and demanding semiconductor applications.

Second, in 450-millimeter, we continue to work with a growing number of wafer growers, tool makers, and device manufacturers on their 450-millimeter projects. While the industry still has a lot to do to put into place production ready 450-millimeter fabs, our wafer handling and shipping products are all ready in use today to support developing projects. In fact this quarter, we produced our first quantities of molded product, a key milestone for us in this area.

And third, we're also continuing to support the development of EUV, both with advanced filtration as well as with solutions that protect EUV reticles during storage and handling. In short, we're very excited about our future. Greg, over to you.

Thank you, Gideon. We're very pleased with our first quarter results. We continue to execute very well as we achieved an operating margin of 16.7%, cash EPS of $0.14.

The contamination controls solutions division, or CCS, had another strong quarter. CCS sales grew 10% sequentially to $116 million and the operating margin improved to 28% from 25% in Q4.

Sales for the micro environment division grew 2% sequentially to $41 million. ME's operating margin was 14% compared to 16% in Q4.

For the specialty materials division, sales were $19 million, up 2% from Q4. Specialty materials achieved a record operating margin of 24% due in large part to favorable mix in the quarter.

First quarter gross margin improved 230 basis points sequentially to 43.5% due to higher factory utilization and improved product mix. Inventory increased by $7 million in the quarter as we increased our manufacturing output for certain products in anticipation of higher demand.

Operating expenses for Q1 were $47 million. The sequential increase reflects more normalized levels as Q4 was favorably impacted by lower variable compensation expense. R&D spending was $12 million driven by spending in advanced wafer handling, leading edge filtration initiatives, and lithography applications.

Our tax rate for the quarter of 34% was significantly higher than Q4 which included a one-time benefit. Given our anticipated geographic distribution of income, we expect a similar tax rate for the balance of 2012. Q1 cash EPS was $0.14 per share which excludes amortization expense.

Moving to the balance sheet, cash at the end of Q1 was $267 million, a decline of $6 million from Q4. This is due to three factors. An increase in working capital to support higher revenue and production, capital investments and the annual payout of variable compensation earned in 2011.

As we indicated in our fourth quarter call, we are making a number of strategic investments in our leading edge technology, including equipment and tooling to manufacture 450-millimeter wafer handling products, and the establishment of the i2M Center for membranes and coatings which Gideon spoke about. Given these significant one-time investments, we anticipate CapEx will be approximately $70 million in 2012. The majority of this spending relates to the i2M facility.

We did not purchase any stock in the quarter. Depreciation expense was $6.5 million in Q1 and CapEx was $10.6 million, $4.5 million higher than Q4 spend.

For the second quarter, we expect sales to be up 3% to 9%, and non-GAAP EPS to be $0.15 to $0.17.

In summary, we are very pleased with our Q1 performance. Demand trends remain positive and point to solid growth in Q2, and we're making critical new investments in support of our strategic growth objectives that will extend our leadership into advanced technologies.

Before we open up for questions, I also want to remind everyone about our Analyst Day on May 23 in New York City. Please contact Steve Cantor for more information about that event. With that, we'll now take your questions. Operator.

Thank you (Operator Instructions). We'll take our first question from Patrick Ho with Stifel Nicolaus.

Thank you very much. Gideon, can you give a quick update in terms of how you see this unit based recovery and whether you're going to start seeing a broader mix of different technology nodes, particularly in the June quarter and even beyond?

Good morning, Patrick. So as you know, we have limited visibility because we're a turns business for the most part. What we have seen is the advanced node operating at very high capacity, and we've also commented that that continues, and bodes well for the second quarter. We've also said that the more mature nodes are operating considerably lower capacity. Frankly, 50% to 70% is quite low, so I'm not sure I would expect that to go lower.

Having said that, we have limited visibility beyond the second quarter. I think our guidance is positive for the second quarter, and beyond that it's not easy to say in this environment.

Okay, fair enough. Maybe a question for Greg in terms of the business model. Obviously, you had a nice step up with margins due to utilization and product mix. In the near term as revenues continue to grow, what's going to be the biggest lever for margins, say at least on the June quarter end and possibly beyond?

Looking towards the June quarter, Patrick, I'm expecting gross margins to be flat to slightly positive because I wouldn't expect to see us build the kind of inventory in Q2 that we built in Q1. You won't see a lot of leverage on the gross margin line. You will see some leverage on the operating line. Our guidance numbers, the EPS guidance we provided assumes an operating margin in the 17% range. 17% plus.

Great. Maybe big picture with that new nano center that you're opening. Obviously, that's still a little bit well beyond into the future, but Gideon, can you give a little bit of color of what type of opportunities you'll be looking at once you get that up and running?

So we're tremendously excited about this because one of the things we saw in the last quarter is how leveraged we are to the advanced nodes, not just one business unit, it's quite a few of them. It's all of them frankly, everyone of our businesses. But this isn't going to be a center that actually combines several existing facilities, so we're taking advantage of some leases that are expiring, we're doing some consolidation and actually creating a more efficient working environment.

But frankly, the most important reason for doing this where we did this is to make sure we attract the best and the brightest. We are locating this in an area where there are lots of the right people that are coming out of the right universities, and this is going to be a facility that will I think allow us to stay on the leading edges of our own technologies in filtrations and in coatings. Those are the two major areas that are going to be involved in the center, and we're very excited about what this will mean for our ability to continue to innovate over not just the next couple of years, but into the next five to ten years.

Great, thanks again and nice quarter.

If I may just add, for us the advanced nodes really represent a very significant opportunity for growth, but at the same time we all recognize that the contamination challenges that the industry would have to deal with are becoming increasingly complex. So very important for us in order to continue to stay on -- or to maintain our leadership position that we invest, and that's what we're doing.

You remember killer defects can be created by a number of new types of contaminants. The industry is also contending with a smaller sized contaminants and lower concentrations, so those contaminants are [inaudible]. So again, those challenges are very complex which is really great news for us, and we really want to be sure to invest in order to provide the right solutions to our customers.

Thank you.

And we'll take our next question from Terence Whalen with Citi.

Good morning, thanks for taking the question. If I could start off with a higher level question. Can you give us an indication of how your confidence regarding growth prospects for the second half has developed over the past several months?

I understand it's a turns business, but given your observations of what's occurring in terms of some of the capacity shortages and in terms of some of the second half activity, just wanted to get your insight as to what you're seeing develop there. Thank you.

So Terence, again, I would say this. The capacity that's being put in by IBM which is driving the advanced node work that we are doing and other companies are doing. I mean these are not decisions that are being made lightly by these companies. Typically, they're decisions that involve looking into their own futures and asking the question that you're asking.

I would be personally surprised if they were not based on an assessment that there is strong continuing demand at the advanced nodes, and fundamentally driven by the devices that we are all using and that a large and burgeoning middle class around the world is using, whether it's tablets or internet enabled communication devices, or benefiting from cloud and the infrastructure that's being created around the world. These are the things that are driving business investment in this area.

These are not short-term decisions. My sense is that a lot of thought has gone into that. Capacity allocation, and capital allocation decision on the part of these companies. We're just happy to be a part of what they're doing and indispensable to what they're doing, frankly, and helping them succeed.

Okay, terrific. And then perhaps if I could ask a couple other questions regarding the income statement and also the cash flow. It seems like if I look at the gross margin level here near 43.5%. We're a couple of points below where we were in 2010 at similar revenue levels with similar revenue mix.

Can you help me understand, cycle to cycle here, what has been the puts and takes with gross margin to lead it to be a little bit lower? Is it regarding some type of product mix or rather just customer concentration? If you could help me understand that.

Okay, I'll take that in reverse order. No question, customer concentration plays a role, but I would think the primary issue on gross margin, Terence, would be when you go back to the first and second quarter of 2010, we had very good revenue from some old legacy 200-millimeter products, process products that people were putting into fabs that had very high margins. That really boosted our ME margins, our micro environment business' margins in the first half of 2010.

As that business has fallen off, we've seen a decline in the margins primarily in the Microenvironment business, so that comparison when you go back to probably the second quarter of 2010 is primarily driven by that fact. When you look at our fastest growing business, our CCS business, we continue to see very strong margin performance in that business, as well as in the Specialty Materials business.

Okay, that's very helpful. And then my final question is regarding the cash flow statement. We obviously saw a draw of working capital that seems to be a pretty seasonal pattern. What are your expectations for working capital going forward?

Also, if you can just comment about operating cash flow or free cash flow for the year given that's a large CapEx investment year for you? Thank you.

Okay, so as it relates to the year, I'm not going to comment on that. We give guidance a quarter out. As it relates to the next quarter, I would not expect to see nearly as much cash consumption as it relates to working capital. Our receivables were up very significantly. That reflects real strength in the business in March, and our inventory was up pretty significantly as well. I would expect that to abate as we move into Q2 in terms of the growth.

The other thing that really had a big negative impact on Q1 cash flow is payouts to variable compensation which amount to high teen millions payment that we made in Q1 related to 2011 performance.

Okay, I appreciate the help. Thank you.

We'll take our next question from Krish Sankar with Bank of America Merrill Lynch.

Question. Just a couple of them. In terms of your guidance of 3% to 9% growth can you help us understand how the consumables in the CapEx business would trend in Q2?

Hello, Krish, this is Bertrand. Q1 we had a ratio of about 65/35, and very frankly at this point we don't anticipate that ratio to very significantly change quarter-over-quarter, so I think it's a fair assumption to use the same ratio.

Got it, okay. And then in terms of your products, clearly you guys are doing a pretty good job in terms of penetrating the leading edge. I was wondering is there any difference, for example, like let's take a filtration product, in pricing and margin for the 2X nanometer versus legacy nanotechnology?

Well, it's a really good question. As you know, we have a pretty broad offering of technologies, so it's hard for me to give you a general answer. But again in broad terms, I would say that every time we launch a new technology addressing some of those most complex contamination challenges, it is an opportunity for us to reset the price and to get paid for the value we provide to our customers.

All right. And then questions for Greg. Did you say that the tax rate would end up being somewhere in the low 30% for the rest year? What is your guidance for the GAAP tax rate for Q2?

So I would expect the tax rate for the year to be in the range of what we had in Q1 which was 34%. Essentially the way you do the tax rate is I have to do a forecast for what I expect the rate to be for the full year, and that's how we come up with the Q1 rate.

All right. Thanks a lot, guys.

We'll take our next question from Avinash Kant with D. A. Davidson.

Good morning Gideon, Greg and Bertrand.

Good morning, Avinash.

A few questions. Some of the leading chip companies have been talking about capacity shortages at the 28-nanometer. Have you seen activities that would point to that customers trying to build the 28-nanometer capacity in a hurry?

Avinash, Bertrand. Yes, I think you're right. If you think about foundry capacity at the advanced node, it's fair to say that was extremely tight in Q1 and I think a couple of fabless companies have been ready to be public about their struggles in Q1.

That's frankly that's why many of our foundry customers did seek our help to solve their contamination challenges and to improve their yields in Q1. I would frankly expect that trend to continue and benefit us in Q2.

Now, to the other side of your question about does that mean that those companies will commit to additional CapEx for those advanced nodes. I guess it's for everybody to speculate, but if I had to place a bet, I would say that they most likely will have to do that.

Let me just add a comment, Avinash. We're seeing what I think amounts to a perfect storm in a positive sense for our business given what Bertrand just said. It's an unusual time in the industry because you have a confluence of, number one, the shift to 3X and now 2X nodes which is proving to be quite a bit more difficult from a manufacturing and yield standpoint than anything that's happened before, and that's creating very good opportunities for us and we're delighted to be helpful to our customer.

Number two, you have coming down the pike, geometric shift and a shift in fundamental technologies on the stepper side and size of the wafer even further down the road which is all ready in process, if you will. That is going to provide another impetus to what really amounts to a period of great change, but also great opportunity, and we want to make sure that we are positioned well and we want to make sure that we actually execute on the investments required to take advantage of those opportunities.

And one follow-up on that. Maybe you can break it differently, but would you give us some idea about if you were to think about 32-nanometer and below, roughly what percentage of your sales comes from 32-nanometer and below?

Very, very small. It's quite small, and that's because the percentage of production of wafers at 32 and below are still quite small overall in the industry. Now it has an impact that's disproportionate, obviously.

Right. Another question. Any impact from the bankruptcy of Elpida that you did see or you could see?

We did have a charge in the quarter related to the Elpida bankruptcy. It was between $0.5 million and $1 million.

And that's all you expect, Greg?

We have reserved for our full exposure to Elpida.

Okay. And which line item had that charge included in that?

It would be in SG&A.

Okay. Perfect, thank you so much.

We'll take our next question from Christian Schwab with Craig-Hallum.

Great, thanks for taking my question. As you guys think about wafer production -- ask you a difficult question here -- but TSM talked about 2% of wafer starts in 2011 being at the 2X node and expect that to ramp to greater than 10% in 2012. Obviously, on everyone's mind given Qualcomm's recent statements.

As we look forward and as you guys discuss with your customers, do you believe -- as you look to wafer starts at the 2X node and below, are you guys getting any indications of what you would expect those run rates to be exiting 2012 and then moving forward? Do you have any help there?

Christian, this is Bertrand. I think as Gideon stated earlier, we don't really provide long-term guidance. As Gideon mentioned, we feel pretty optimistic about trends going into the second quarter. We have studied backlog and some healthy bookings in terms of our leading edge technologies going into Q2. Beyond, that I'm not going to speculate.

That's fair. No other questions. Thank you.

We'll take our next question from Dick Ryan with Dougherty.

Good morning, guys. Greg, with the new center opening, should we look at D&A to be changing? Maybe not so much in 2012, but going forward?

As we move forward, we're going trade out some D&A for some rent expense. Our rent expenses will come down, but our D&A will come up. We expect that new center to be neutral to the P&L overall.

Okay. When you look at the target model that you guys have published for a couple of years now and going forward with the R&D spending required, how should we look at that target model?

Obviously, your spending is not going through the roof. It's still very commendable with the kind of margins, but how should we tie that to your old target model, Greg?

So at this point we haven't announced any changes to our target model. I would say is our target model is coming up on three years old. There's been a number of changes in the industry over those three years, increases in salaries and benefits and those types of things. I think it's fair to say that it's something that we're constantly looking at.

At this point we haven't announced any specific changes to that model. Your point about there is an opportunity right now in the industry, both the diameter and the node transition for us to continue to separate ourselves from our peers, and that is going to require continued significant investment and I think our plan is to make that investment to hold our leadership position.

Okay. And one last for me. Greg, when you look at the ME and the Specialty Materials Division, can the margins improve in the ME side with, obviously, higher revenue ramp. But is there anything else that can be done there to enhance the margins there?

And the other question on the Specialty Materials side is how high can those margins go? You've done good job on that side.

As it relates to Specialty Materials, we've always said that at $20 million in revenue, think about 20% operating margins. We were a little short at $20 million and had 24% operating margins. So those margins I would say on that type of volume are as good as it gets. We had a really favorable mix in that business. We're executing really well there, but we also had very favorable mix in the most recent quarters.

As it relates to ME, I would look, moving forward, to see modest improvement in those margins as volumes move up, primarily leverage around operating expenses, but I would not expect to see those operating margins go back to what we saw, that I commented earlier on for Terence, to what we saw in the middle of 2010 for instance.

Great, thanks. That's it for me. Thank you.

We'll take our next question from Jairam Nathan with Sidoti.

Thank you for taking my question. I wanted to follow-up on that ME margins. We saw revenues were flat sequentially, but we saw a significant decline in margins. Was there any pricing action taken during the quarter or something?

The margin in ME is really two things. One is some slight decline in gross margin related to product mix, but also increased spending on ER&D primarily for 300-millimeter FOUPs and 450-millimeter process technology.

Okay. Just on your guidance for second quarter of 3% to 9%. Can you call out any puts and takes which will get you for the range -- what will get you to 9% and what could be the 3%? All economy or is there anything else?

When we talk about 2% to 9%, I don't think can we talk about the economy. I think we talk about our own sense given what we see in the customer base, given our level of bookings, and it's really the current quarter we're talking about, so we're comfortable giving guidance. Given your question, I'd say barring some cataclysmic event, we would see being in that range. Steve?

Yes. Hi, Jairam. Just want to remind you too, much of our business is what we call a "turns" business. A lot of our sales ultimately are driven by orders within the quarter, so obviously is somewhat difficult to predict.

Okay. My last question is on CapEx. You said you would spend $45 million to $50 million on the i2M facility. Is all of that in the $70 million for this year, or do you think some of that will get pushed to 2013? And if you can give us some guidance on 2013 CapEx?

Sure. There could be some spillover into 2013, and I'd be surprised if there wasn't. We expect in 2012 that we'll get the building fully -- the construction costs around the building completed and some of the equipment, but probably not all of the equipment in the building. What I would say, is if this year is $70 million, I would expect next year to be somewhere probably around $40 million.

Okay.

What I would call the normalized CapEx of the business, $25 million to $30 million plus $10 million of spillover from those major initiatives. I think there's also a scenario though where this year is $60 million. If this year is $60 million, next year would probably be closer to $50 million. We've got a number of large pieces of equipment that are scheduled for either late this year or early next year, and depending on how they go, it'll impact where the total CapEx ends up for this year and what next year looks like.

Okay, great. Thank you.

We'll take our next question from Steve Schwartz with First Analysis.

Good morning, guys.

Hi, Steve.

Greg, overhead absorption in 1Q 2012, and it sound likes with the inventory build you got the benefit there. Can you give us a number around that?

It's hard for us to talk about overall capacity utilization. Our manufacturing volumes for the quarter were up pretty significantly from Q4. If you think Q4 was a quarter where our inventory actually came down, or this is a quarter where inventory went up and volumes went up, so our absorption was quite a bit higher than just the percentage increase in the revenue.

Okay. And I think you just answered this. I was going ask you what prompted the inventory build, but you just said that with volumes going up, you decided to bring up inventories. It's just simply to match the current run rate of demand?

Yes. So it was a reaction to the run rate of business in Q1, and again, our projections.

Okay. Gideon, I thought it was interesting, your comment about in the first quarter making 450-millimeter molded product, the first quantities, to use your term. Can you give us an idea of exactly what that means? Do you have a commercial line running?

The majority of the investment has been made and actually the tooling for that line. We publicly announced that we have a facility in Colorado where we're doing that, and this is in its infancy.

I want to make sure we state the obvious which is the 450 is still a future event. The volumes here are very small, but there are a lot of toolmakers that are developing tools.

There's a lot of wafers, dummy wafers that are being transported around this industry right now as part of the toolmakers developing efforts to sales, and pretty much most of those are in Entegris shipping containers, so we're delighted about the progress we're making there. We have learned to make sure that we're first, and then stay with it in these kinds of efforts. We don't intend not to be first here.

It sounds like you're doing a fantastic job. Lastly, just with respect to this i2M center. It reads like this really pulls in a lot of the technology you have under Surmet and Poco. Is that a true statement? It sounds like this is a more collaborative effort than you might have had before?

Steve, your partially correct. What we're trying to do is co-locate the number of different technologies and scientific under the same roof. Poco is primarily still located in Texas though, but your comment is valid in terms of bringing together specialty coating, membrane surface modifications capabilities in the same place and membrane making capabilities in the same place. We certainly do expect that not only will we be able to advance the existing product platforms, but that co-location may lead to some new interesting technologies and applications to be deployed.

Okay, that's great. Thank you.

(Operator Instructions). We'll go next to Jason Ursaner with CJS Securities.

Good morning.

Good morning, Jason.

First a question on the leading edge. There's been a lot written about the intensity from foundries and IBMs to push forward on improving process yields. You guys both mentioned seeing the benefit from high capacity utilization, but how sustainable do you think the level of activity is going forward? Is the revenue stream impacted at all by this intensity to ramp, or is it just utilization?

Well, it's actually both. You have a limited number of lines that are operating at those levels around the world, and it's new, kind of uncharted territory because the nature of the materials being used and because of the shrink that's required. It is causing the yield issues, and I can tell you from personal experience that it's literally difficult to meet with people at these companies who normally are more available because they're very, very busy on these issues. This is a fact that they're dealing with. My guess is, there's a long history of the industry becoming progressively better very quickly at each node, and I'm guessing that's going to happen over the next few quarters. But we're just delighted to play an important role in helping our customers respond to the yield issues that they have around the world.

Okay. And at legacy nodes you mentioned 50% to 70% fab utilization rates. Was this still trending down from last quarter?

And then some of your core products designed for the use at the 45 to maybe through the 90-nanometer node. Have you seen your order patterns reach a bottom in any of those?

Probably reached bottom and probably trending the other direction. That's kind of what we see to be honest.

Okay. The quarter of revenue from non semi and compound semis. How large is the LCD component of that, and what you're seeing in that market be reflective of what we're hearing from the large TV manufacturers?

LCD would be a very small portion of that, like less than 5% for sure.

Less than 5% of the total or of that quarter?

Oh no, of the total.

Okay. And have you seen any bounce in that market, or that's been hit pretty hard as well?

I think that, that market -- I think that's a very good point. I think when we look at our Q1 results we feel actually pretty encouraged because it's fair to say that our business was not firing on all cylinders. Our semiconductor business behaved really well in this first quarter of the year, but a lot of our non semi markets were still relatively muted and soft. LCD is one, Solar is another one, LED would be another example of that. We certainly hope that we have room for improvement as the year progresses on all of those businesses.

Okay, just last question for Greg. Is there any pending legislation for R&D credits or anything that could come through and get you back to that 30% to 32% effective rate?

As of right now, the R&D credit is not being extended. They intended to extend it year after year, but right now it's not being extended. That actually has slightly less than a point do with the increase our tax rate. So if that were to be extended, the rate would come down by a little bit less than a point.

Okay, great. I appreciate all of the commentary. Thanks, guys.

Ladies and gentlemen, that does conclude our question-and-answer session. I'd like to turn the conference back now to Mr. Gideon Argov for closing remarks.

Thank you very much for joining our call. We hope to see many of you at our Analyst Day on May 23 in New York. Have a good day.

Ladies and gentlemen, thank you for your participation. This does conclude today's conference. Have a great day.