inTest Corp (INTT) 2007 Q4 法說會逐字稿

Greetings and welcome to the inTEST Corporation fourth quarter 2007 results conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS). As a reminder this conference is being recorded. It's now my pleasure to introduce your host, [Joseph Fialta of the Ruth Group.] Thank you, Mr. Fialta. you may begin.

Thank you. Good afternoon and welcome to today's fourth quarter results conference call. Joining us from inTEST are Robert Matthiessen, President and CEO and Hugh Regan, Treasurer and CFO. Bob will briefly review highlights from the fourth quarter. Hugh will then review detailed results. We will then have time for any questions. If you have not received a copy of today's results or release please call the Ruth Group at 646-536-7026 or go to inTEST's website.

Before we begin the formal remarks, the company's attorneys advise us that this conference call may contain statements about future events and expectations which are forward-looking statements. Any statement in this call that is not a statement of historical fact may be deemed to be a forward-looking statement. Actual results may differ materially depending on a number of risk factors including but not limited to the following, changes in business conditions and the economy generally, changes in demand for semiconductors generally, changes in rates of and timing of capital expenditures by semiconductors manufacturers. Product development programs, increases in raw material and fabrication costs associated with the company's products, implementation of additional restructuring initiatives, costs associated with compliance of Sarbanes Oxley and other risk factors set forth from time to time in the company's SEC filings, included but not limited to the company's periodic reports on Form 10-K, Form 10-Q and Form 8-K. The company undertakes no obligation to update the information on this conference call to reflect events or circumstances after the date hereof or to expect the occurrence of anticipated or unanticipated events.

At this time I would now like to turn the call over to Robert Matthiessen. Please go ahead, sir.

Thank you, Joseph, and welcome, everyone, to today's call. The overall market conditions remain challenging. Net revenues for the quarter ended December 31st, 2007, were $11.4 million, a decrease of 13% from the $13.1 million for the third quarter of 2007. When we entered the fourth quarter, the market looked like it was positioned for a rebound, based on what we are seeing and discussions with our customers and other companies that have reported, the quarter clearly did not come in as expected.

Our bookings decreased in the fourth quarter of 2007 to $10.5 million from $11.1 million in the third quarter of 2007 reflecting what we believe is a more cautious behavior from our customers. It is not unusual to see weaker order patterns going into Q4 but we of course will monitor the situation closely. During 2007, we continued investing in developing our technologies and reorganizing our distribution channels with results that we are beginning to see in the form of increased bookings and our tester interface products segment during the first quarter of 2008. We have commenced a major review of our operations to more aggressively streamline our cost structure in line with our business environment. We are confident that we will be able to successfully move ahead in this challenging environment. Our long term outlook remains focused on the return to profitability, expanding market share in existing markets, pursuing new growth opportunities and delivering increased value to our shareholders.

Let me now take a few minutes to give you additional color on our specific segments. Although our manipulator and docking group had a very difficult year, we have recently implemented an aggressive schedule of product introductions and material cost reduction with a goal of increasing market share. Shipments have begun on a specialized customer specific waiver probe only manipulator and this core design will be the basis of a general purpose probe only product that provides a full range of movement and pneumatically powered operation combined with an extremely small footprint and attractive selling price. We also have built the first of a new family of universal counterweighted manipulators that provide an economical solution to test head handling.

From March 18 through March 20, 2008, the first member of this new family will be exhibited at SemiCon China, a major trade show held in Shanghai, China. Our interface group has made great strides toward returning to profitability. Announcement was recently made of the shipment of the 750th Teradyne flex probe interface tower. Bookings for tester interface products in the first quarter of 2008 have reached about 150% of our internal forecast at this point in the quarter. Temptronic, our temperature management Product Group continues to provide solid performance. Bookings were rather slow in the beginning of the first quarter but there's been a recent increase driven primarily by the ThermoTruck product line. Let me turn the call over to Hugh now to go through the detailed financials.

Thanks, Bob. Net revenues for the quarter ended December 31st, 2007 were $11.4 million compared to $13.1 million in the third quarter of 2007. The net loss for the fourth quarter of 2007 was $4.2 million or $0.45 per diluted share compared to a net loss of $252,000 or $0.03 per diluted share for the third quarter of 2007. Included in the fourth quarter results were charges of $2.8 million or $0.30 per diluted share for the full impairment of goodwill related to prior acquisition and $535,000 or $0.06 per diluted share for the partial impairment of long lived assets. Both of these impairment charges were in our manipulator and docking hardware products segment.

Impairment charges recorded during the fourth quarter and in this segment were driven by significant operating losses experienced in the manipulator and docking harbor products segment during 2007 and the near term negative outlook for this product segment. Management felt that in light of the volatile and challenging markets in which the company operates that taking this action was prudent and appropriate at this time. The partial impairment of our long lived assets was at our Cherry Hill manufacturing operation which is the headquarters for the manipulator and docking hardware product segment. For the fourth quarter of 2007, end user net revenue was $9.4 million or 82% of net revenues compared with $11 million or 84% of net revenues in the third quarter of 2007. OEM net revenues were $2.0 million or 18% of net revenues in the fourth quarter of 2007 compared with $2.1 million or 16% of net revenues in the third quarter of 2007. Net revenues from markets outside of semiconductor tests were $1.3 million in the fourth quarter compared to $1.7 million in the third quarter.

Pm a product segment basis net revenues for the manipulator and docking hardware segment were $4.9 million or 43% of net revenues in the fourth quarter of 2007 compared with $6.5 million or 50% of net revenues in the third quarter. Our temperature management segment had net revenues of $4.7 million 41% of net revenues in the fourth quarter of 2007 compared with $5.2 million or 40% of net revenues in the third quarter of 2007. Finally, our tester interface product segment reported net revenues of $1.8 million or 16% of net revenues in the fourth quarter compared with $1.4 million or 10% of net revenues in the third quarter of 2007. The company's overall gross margin for the quarter ended December 31st, 2007 was $4.6 million or 40.5% of net revenues compared with $5.1 million or 31.9% for the third quarter. Material costs were 36.1% of net revenues in the fourth quarter of 2007 compared to 38.1% in the third quarter. The decrease in component material costs was due to changes in product mix as well as reductions in component material costs in it both our manipulator and docking hardware and tester interface product segment due to stronger supply chain management.

I'll now discuss the breakdown of operating expenses for the quarter. Selling expense was $1.9 million or 17% of net revenues for the fourth quarter compared to $2.1 million or 16% of net revenues in the third quarter, a decrease of $217,000 or 10%. The decrease was primarily due to reduced sales commission expense resulting from the lower levels of net revenues in the fourth quarter and there were also decreases in product warranty expense and advertising. These reductions were partially offset by increases in sales, salary and benefit costs. Engineering and product development expense was $1.4 million or 12% of net revenues for the fourth quarter compared to $1.4 million or 10% of net revenues in the third quarter. We had increased spending on product development materials and third party consultants, which were offset by reductions in engineering salary and benefit expense.

General administrative expense was $2.1 million or 18% of net revenues in the fourth quarter compared to $2 million or 15% of net revenues in the third quarter, an increase of $99,000 or 5%. The increase are was primarily related to higher levels of professional fees as well as increased administrative salary and benefit expense. These increases were partially offset by reductions in administrative travel. As previously noted, the goodwill impairment charge of $2.8 million or $0.30 per diluted share and the impairment of long lived assets was $535,000 or $0.06 per diluted share. Other income expense was $3,000 of expense for the fourth quarter of 2007 compared to other income of $148,000 for the third quarter of 2007, a decrease of $151,000. The decrease was driven by foreign exchange losses during the fourth quarter of 2007.

Our pre-tax loss was $4.1 million or $0.44 per diluted share for the fourth quarter compared to a pre-tax loss of $174,000 or $0.02 per diluted share in the third quarter. Income tax expense was $81,000 for the fourth quarter compared to $78,000 for the third quarter of 2007. Our effective tax rate was a negative 3% in the fourth quarter compared to a negative 45% in the third quarter. Our net loss for the fourth quarter of 2007 was $4.2 million or $0.45 per diluted share compared to a net loss of $252,000 or $0.03 per diluted share for the third quarter of 2007. Our net loss adjusted for the impairment charges was $797,000 or $0.09 per diluted share. Diluted average shares outstanding were $9.3 million for the fourth quarter compared to $9.2 million in the third quarter.

Cash and cash equivalents at the end of December were $12.2 million, up $1.5 million from the $10.7 million at the end of September. The increase in cash was the result of collections of accounts receivable during the fourth quarter. Capital expenditures during fourth quarter were $131,000. As Bob previously noted, bookings decreased in the fourth quarter of 2007 to $10.5 million from $11.1 million in the third quarter, a decrease of $614,000 or 6%. Our quarterly bookings included $1.6 million in nonsemiconductor related business booked in the fourth quarter of 2007 compared to $1.1 million booked in the third quarter. And finally our backlog at the end of the fourth quarter was $4.2 million, down from $5.1 million at the end of the third quarter of 2007. That's it for my financial review at this time. We'll now open up for question-and-answers. Operator?

Thank you. We will now be conducting a question-and-answer session. (OPERATOR INSTRUCTIONS). We have no questions in the queue at this time.

We thank you all for listening to today's call and if you -- we look forward to filing our 10-K at the end of the quarter. Thank you and have a good day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.