萬機儀器 (MKSI) 2002 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the MKS second-quarter earnings conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question and answer session. If anyone needs assistance at any time during the conference, please press the star followed by the zero. As a reminder, this conference is being recorded today, Tuesday, July 30th of 2002.

I would now like to turn the conference over to Ms. Johnna Main, director of investor relations. Please go ahead, ma'am.

Thank you, and good afternoon and welcome to our second-quarter earnings conference call. By now, you should have received a copy of our earnings release. If you did not, please go to our website at www.MKSInstruments.com or you can call 978-975-2350, extension 5524, after this call.

As a reminder, various remarks that we may make about future expectations, plans and prospects for MKS constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in this afternoon's press release and in the company's annual report on Form 10-K for the fiscal year ended December 31st, 2001 and most recent quarterly report on Form 10-Q, each of which is on file with the SEC.

In addition, these forward-looking statements represent the company's expectations only as of today. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statements should not be relied upon as the representing the company's estimates or views as of any date subsequent to today.

Finally, I'd like to remind everyone that during the Q and A period, each period - each person will be limited to two questions initially. We will circle back for further questions as time allows. And now, I'd like to introduce John Bertucci, chairman, chief executive officer and president of MKS.

Thanks, Johnna, and I want to thank you all for joining our earnings conference call.

With me today is Ron Weigner, our chief financial officer. I'll give an overview of the second quarter and then Ron will give a detailed review of the results. I'll make some closing comments and then we'll be happy to answer your questions.

Let me begin by saying that we're pleased to report financial results that exceeded the company's revenue and earnings guidance. We reported a sequential quarterly revenue increase of 45% to 85.9 million. The underlying sequential quarterly growth rate for the current MKS product groups was 36%, which includes strong growth from the acceptance of our products in new customer applications. The reported 45% growth rate includes a full quarter of sales from ENI, TeNTA and IPC. This was the second sequential - consecutive quarter of increased sales to major semiconductor capital equipment manufacturers and end users. Sales to the semiconductor segment increased by 78% over the first quarter. The increase in sales in the second quarter was primarily due to increased demand from our semiconductor OEM customers which included the pipeline effect of those customers adjusting their work in process inventory.

Turning to the highlights, we introduced new products and achieved major design wins in the quarter. MKS's new products and integrated subsystems support our customers' ongoing technology transitions and their growing requirement for advanced process control through digital networks. Let me give you some examples of recent successes.

In pressure measurement and control, we displaced a key competitor with design wins on a tungsten CVD tool. We also achieved a key design win at another major OEM with a special version of our industry-standard Baratron capacitance manometer. Last week at SEMICON West, we introduced the new all digital i-Baratron product family that offers higher functionality than analog products at lower cost and provides built-in E-diagnostics capability.

We have recently agreed to private-label some of these products for a major OEM and see further private-label opportunities in other product areas for which we do not presently have high market share.

In materials delivery, we continued to achieve successes in applications for our integrated subsystem products. We introduced the dual pressure controller subsystem, which integrates pressure and flow technologies for multiple zone cooling. This new product has achieved its first design wins on 300-millimeter etched tools at a number of OEMs. As you know, MKS is the leader in subsystems used for backside wafer cooling.

We also introduced the all-digital ALTA multi-gas multi-range Mass-Flo controller which provides high performance in terms of accuracy and reliability and repeatability and recorded initial sales for this product in a thin-film OEM application.

Our expanded offering of ASTRON reactive gas generators continues to achieve success in applications for semiconductor and flat-panel manufacturing. The ASTRON continues to demonstrate highly reliable, cost-effective performance. We introduced the ASTRONi, the next generation of reactive gas generators, which maximizes performance while eliminating the need for argon gas in process chamber cleaning. New versions of our ASTRON product have been designed into multiple applications in 300-millimeter semiconductor and flat-panel markets.

In ozone, we continued our leadership position with design wins on the latest generation of 300-millimeter [EOS]-zone CVD tools. The conversion efficiency of Aztec's semi zone generator is a key factor in customers continuing to choose MKS for this application. Our [Liquizone] product is the leading source of ozonated liquids for advanced wet cleaning processes. We expect MKS will benefit as the industry adapts the environmentally benign processes that our [Liquizone] technology enables.

In the quarter, we received orders for this product at a key end user.

We're particularly pleased with ENI's progress in the key DC power supply, power delivery segment. Product reliability and power delivery accuracy are key differentiating factors for MKS - for ENI's DC products and customers are evaluating new versions for their 300-millimeter tools.

On the RF side, ENI continues to execute well in the key dielectric etch market, where it is the market leader. Dielectric etch is expected to grow faster than the industry as chip designs migrate to copper dual [damicene] structures. We believe that now that ENI and Aztec are both parts of MKS, we will see further opportunities to increase market share in the power delivery segment by combining our technical expertise in power and plasma management. Our HPS products group achieved design wins for vacuum components and effluent management subsystems at two major OEMs. In the vacuum technology area, OEM customers view MKS's ability to provide integrated vacuum subsystems as a key benefit as they continue to outsource the design of these subsystems.

There's also been strong interest in our recently-introduced MEMs based micro-[paroni] vacuum gauging line. This MEMs based product is a break-through technology in the indirect vacuum gauging area, which has seen little innovation in recent years.

We expanded the PICO family of portable high sensitive helium leak detectors to include a battery-operated atmospheric sniffer and a vacuum-based version that bring our innovative PICO leak detection technology to a broad range of manufacturing and service industries. Major fabs have taken delivery of our PICO product for a variety of leak detection applications.

We maintained our strong position in process monitoring, with orders from various end users including a major Asian fab. The multi-gas purity analyzer from On-line Technologies has been selected by a major LE D manufacturer to monitor the purity of gases used in their manufacturing processes.

Last week, at SEMICON West, many of you saw our capability in enabling advanced process control and E-diagnostics. The acquisitions of TeNTA and IPC added critical mass to our position in digital networking. We are a leading provider of hardware and software at the tool level for enabling APC and E-diagnostics. As you know, MKS sensors, components, and subsystems, are the source of much of the process chamber data. These data sources are interfaced to TeNTA's process chamber controllers using analog and digital networks. The data can then be routed to the fab network through IPC's hardware and software. By integrating these product lines, we enable our customers to make more informed decisions that could increase their tool productivity. According to industry data and company estimates, the market for this type of information is expected to grow to approximately 550 million by the year 2006.

Technology integration continues across our product groups. To enable these more highly integrated products, we opened a technology center in San Jose to enhance close coordination on subsystem design with our customers. Today MKS offers an increasingly broad range of instruments, components, subsystems, and digital interfacing products to provide customers with higher up time, better yields, and greater throughput on more valuable wafers. By integrating our product technologies, we are able to provide customers with higher value solutions at lower total cost.

We believe that MKS is in a strong position in our industry segment because of our technological leadership, and we are very positive about our long-term growth prospects.

In the near term, based on current order rates and quarter-to-date shipments, we anticipate essentially flat to moderate sequential growth in the third quarter, following a better than expected second quarter.

Now, I'll turn the call over to Ron for the details of our financial results.

Thank you, John, and good afternoon, everyone.

Second quarter 2002 sales were 85.9 million, a 45% increase compared to our first quarter 2002 sales of 59.1 million, and an increase of 18.3% compared to second-quarter 2001 sales of 72.7 million.

For your information, three months of ENI revenue were recorded in the second quarter, compared to only two months in the first quarter.

TeNTA and IPC revenues were also included in the second quarter.

On a cash basis, we essentially broke even for the second quarter of 2002, with cash earnings of $182,000. This compares to first quarter 2002 net cash loss of 4.3 million, or a loss of 9 cents per share, and second quarter 2001 net cash earnings of $270,000, or 1 cent per fully diluted share on approximately 39 million shares outstanding.

The underlying sequential growth rate for the complete MKS product line, which assumes the same product mix in the first quarter and in the second quarter of 2002 was 36%. The reported 45% growth rate includes a full quarter of sales for ENI, TeNTA and IPC.

Looking at the revenue mix, sales to semiconductor OEMs and end users rose sequentially and accounted for 74% of total sales in the second quarter of 2002, compared to 61% of sales in the first quarter. Second-quarter thin-film sales increased sequentially but were lower as a percent of sales due to the strength of our S.E.M.I. business. Thin-film customers accounted for 7% of second quarter sales compared to 9% in the first quarter. Sales to other markets decreased slightly, and accounted for 19% of second-quarter sales compared to 30% in the first quarter.

Our top 10 customers in the second quarter accounted for approximately 55% of total sales, compared to 43% in the first quarter, reflecting increased sales to our major semi OEM customers. Applied Materials continued to be our largest customer and represented 27% of sales in the second quarter compared to 16% in the first quarter.

Combined sales to Applied and one of its subcontractors, who is also a customer of MKS, represented approximately 31% of second-quarter sales compared to 20% in the first quarter. A major manufacturer of MRI equipment continues to be one of our top 10 customers.

Looking at the second quarter geographic sales mix, U.S. sales increased sequentially to 68% of total sales, primarily due to increased demand for major OEMs. Sales to Asia increased sequentially to 22% of total sales, reflecting increased sales to Japanese OEMs and Asian semiconductor fabs.

Sales to Europe showed a modest sequential increase on a dollar basis, but declined on a percentage basis to 10% of total sales.

These results compare to the geographic first-quarter sales mix of 67% U.S., 19% Asia, and 14% Europe.

Gross margin improved to 34.6% in the second quarter. This compares to 32.5% in the first quarter, and 39.2% in the second quarter of 2001, excluding a $2.6 million charge for excess and obsolete inventory.

The sequential improvement in gross margin was primarily due to increased utilization of existing manufacturing capacity in the second quarter. However, this was partially offset by a higher percentage of second-quarter sales to major semiconductor OEMs which are typically at lower gross margins compared to other markets. Sales to OEMs increased to 63% of sales in the second quarter, compared to 46% of sales in the first quarter, and 54% of sales in the second quarter of 2001.

Gross margin for the second quarter of 2002 compared to the second quarter of 2001 was lower, primarily due to manufacturing overhead being a higher percentage of sales.

Second-quarter R and D spending increased to 12.1 million, or 14% of sales, compared to 9.1 million or 15.5% of sales in the first quarter. As John mentioned, we introduced a number of new products in the quarter and we are working closely with our customers on new programs. We accelerated our R and D spending in the second quarter to support higher levels of activity, and increased our R and D head count by 10%. Also, in the second quarter R and D spending included ENI, TeNTA, and IPC for the full quarter.

SG and A expenses were 20.7 million, or 24.1% of second-quarter sales compared to 17.1 million or 28% of first-quarter sales.

The increase of expenses was primarily due to the inclusion of ENI, TeNTA, and IPC, for the full quarter. SG and A expenses also included increased professional fees related to a patent infringement lawsuit that came to trial in the second quarter. We are gratified that a jury found in favor of our claim of patent infringement on our ASTRON product. We have not recorded the amount of the jury award as this matter is still pending.

Amortization of intangible assets increased to 4.1 million in the second quarter as a result of our acquisitions of ENI, TeNTA, and IPC, compared to 2.2 million in the first quarter.

In-process R and D charges were 2.3 million, and represented final IP R and D valuations for ENI and TeNTA and preliminary IP R and D valuations for IPC.

We are expecting a higher tax benefit for the year than we were in the first quarter. As you know, in loss years, the higher tax rate results in a higher tax benefit. Excluding nondeductible acquisition-related charges, the tax rate for the six months ended June 30th and for the remainder of the year is expected to be a 48% benefit as compared to a 35% benefit in the first quarter.

This change is due to the estimated increase in tax benefits related to foreign operations.

The second quarter results include an adjustment to the tax benefit to bring the six-month rate to 48% before nondeductible acquisition-related charges. Excluding this benefit and assuming the first-quarter tax rate of 35%, second-quarter cash earnings per share would have been a loss of 4 cents per share.

Looking ahead, and assuming profitability in 2003, our effective tax rate for 2003 could be approximately 31%, and would reflect continued tax benefits from foreign operations.

At the end of the second quarter, the worldwide workforce increased to 2,313 people from 2,159 at the end of the first quarter, reflecting a combination of new hires in engineering and manufacturing and the IPC acquisition.

Turning to the balance sheet, cash and investments for the second quarter were approximately 121 million compared to 142 million in the first quarter. The use of cash primarily relates to our acquisition of IPC in the second quarter, increased use of working capital primarily for accounts receivable and inventory, and reduction of short-term debt and reduction in long-term debt.

Accounts receivable of 54.8 million in the second quarter increased by 5.1 million from 49.7 million in the first quarter. Days sales outstanding for the second quarter improved to 58 days compared to 77 days in the first quarter.

The first quarter days sales outstanding was higher than normal due to higher shipments in March compared to prior months of the quarter.

Inventory turns for the second quarter improved to 2.6 turns compared to 2 turns in the first quarter. Inventory increased sequentially from 79 million to 88 million, primarily to support increased orders from customers in Asia and to support the production of new products. Our goal is to achieve inventory turns of 5 times by the end of 2003.

Capital expenditures were 2.6 million in the second quarter compared to 1.6 million in the first quarter of 2002, and were primarily for engineering tools and manufacturing equipment for new products. In 2002, we estimate capital expenditures will not exceed 12 million.

Depreciation was 3.8 million for the second quarter compared to 3.4 million for the first quarter. We estimate depreciation expense for 2002 will be between 16 and 17 million.

The net increase of 3.1 million in other current assets primarily reflects increased income taxes receivable. The increase of 18 million in goodwill and other acquired intangible assets reflects the final purchase price allocation for ENI and TeNTA, and the preliminary allocation for IPC.

Long-term liabilities increased 10.3 million, representing deferred tax liabilities related to nondeductible acquired intangible assets of ENI, TeNTA, and IPC.

Looking ahead, after an extremely strong second quarter, we anticipate a lower rate of sequential revenue growth in the third quarter. Based on quarter-to-date shipments and current order rates, we estimate that third-quarter revenues could range from 85 to 90 million. Based on this sales volume, third-quarter gross margin could range from 34 to 36%.

While we are accelerating our focus on reducing material costs, we will not begin to see results until existing higher-cost inventory is sold. We estimate it will take a few quarters to absorb this inventory.

We're also accelerating expense containment while continuing to invest in R and D.

Third-quarter R and D spending could increase sequentially to 12 to 13 million, while SG and A expenses are expected to remain flat at approximately 21 million. Amortization of acquired intangible assets, which is excluded from our cash earnings, is estimated to be approximately 3.8 million in the third quarter.

Given our estimated sales range, we estimate - we anticipate that third-quarter net cash earnings per share could range from a loss of 4 cents per share to break-even based on approximately 51.5 million basic shares outstanding.

This concludes our financial discussion. I now would like to turn the call back to John.

Thank you, Ron. As we look ahead, we believe we are well positioned to grow the number and value of integrated technology solutions that we are delivering to customers. At the same time, we are focused on managing our supply chain and leveraging manufacturing excellence across our product groups. Let me conclude by saying that we are pleased to join our peer companies in the Russell 1000. Ron and I will now take your questions. 00:22:06

Thank you, sir. Ladies and gentlemen, at this time we will begin the question and answer session. If you have a question, please press the star followed by the 1 on your push-button phone. If you would like to decline from the polling process, press the - press the 2 - press the star followed by the 2. You will hear a three-tone prompt acknowledging your selection. Your questions will be polled in the order they are received. If you are using speaker equipment, you'll need to lift the handset before pressing the numbers. One moment, please, for the first question.

The first question is from Robert Stern. Please state your company name followed by your question.

My company is Needham.

Good afternoon, gentlemen.

Good afternoon.

My question is on the private labeling. I'm wondering, first of all, if you could give us - if you can't tell us the customer involved, can you give us some idea. Is this an old customer, a new customer, a large customer, small customer? Give us some background about that customer?

I said it was a large OEM.

Oh, you did? Okay.

Can you explain the effect of private labeling on your income? I mean, is this - how does private labeling affect your margins and your service model?

The margins are the same. The private labeling is still done under the contracts that we have with our OEM with the same kind of pricing. The private labeling is really a matter more between the OEM and their customer, and the relationship with how they deal with the customer, which I think is best left to discuss with them.

As far as service is concerned, most of our service and spares are sold directly through the OEM, so whether it's private labeled or MKS branded, the spares are sold through the OEM that sells the tool.

In the aftermarket, after warranty, I guess you would think of it much like the automobile industry. If you have replacement tires, you can get them typically from the manufacturer of the tires after the warranty period. It's the same kind of situation.

Our service is - in the field is more related to applications help, depot service for a large legacy of products, manufacturing in the field, modification of products, upgrades and so on, and our revenue levels, our service revenues, aren't really affected by the private label. We've been doing private labeling for various products for a long period of time. The reactive gas products, generator products, for example, have been private labeled for some period of time. So it's a - it's for us a non-issue except that there were a lot of questions about it so we decided to address the issue.

Yeah. I appreciate that.

Was it - was the private labeling issue primarily for the Baratron or were there other products involved?

At this point, it's for the Baratron, but I'm not going to go into any further details about private labeling and what products we might discuss.

Okay. Thank you.

You're welcome.

Thank you. The next question is from Brett Hodess. Please state your company name followed by your question.

Merrill Lynch. Good afternoon, guys.

Hi, Brett.

A couple of questions. First, on - given that the - the three acquisitions are now, you know, sort of grandfathered so that we're looking at sort of an apples-to-apples comparison for the September quarter versus June and that the outlook is flat to, you know, modest growth, can you tell us what areas look most likely to grow? Is it the OEM side or direct customer side or - or, you know, is it new products like power and whatnot?

And which areas are more likely to be flattening out or dipping down?

The 300 - the new areas, the new acquisitions, like TeNTA, for example, and D IP, are pretty much 300-millimeter. And so you would expect them to follow the 300-millimeter growth pattern. Whereas other products are combinations of both 300-millimeter and 200-millimeter.

A lot of the 300-millimeter design wins that we have, new wins, have been in the - in the power area, and also, of course, in the usual product areas, pressure and flow and vacuum products, and the ASTRON, the generator - reactive gas generators and all pretty much follow a combination of 200-millimeter and 300-millimeter patterns.

There's also, of course, the flat-panel area, and again, we've seen - as I noted - some design wins in that for the ASTRON products and so we expect that area to be strong.

So it sounds like, John, that a lot of the new - the new design wins and new product areas are where you're going to continue to get the growth from, but the most capacity-driven side is pretty - is where the - what's going to keep things from having much growth overall?

Yeah, I think that's a good assumption.

Okay. And then what implications does that have - I know Ron just gave us some discussion of the gross margins for the coming quarter in the 34 to 36% range, which is, you know, relatively in the range we're at now or up a little higher, but since these are new products, will that start to give us more margin - or give you more margin leverage over the - as we move forward?

Right now, Brett, I think on some products, the material cost is a little bit higher than we expected and we're working very diligently to - and are very optimistic that we can get that cost down, but that might take a quarter or two before we start seeing some results.

Okay. And then -

And also, just to add to that, as we said, the products that are more capacity related, that - they're also products that we have inventory and parts of that are relatively higher cost on a FIFO basis. We have to work those down.

Got it. Okay. And then the final question I had was when you look at the - the substantial revenue out-performance this quarter just ended, you gave us the breakdown for what was core and what was, you know, added by the new products but when you look at the - you know, the - over the next quarter or two, this is a different way of what I already asked. Is it mostly the core, the new design wins for core products that are going to be driving growth or is it the - some of these new additions in the last quarter? Do you have a - you know, driving the growth?

Well, we're only talking about Q3.

Yeah.

And the core products are still, of course, a big part of the business. We consider ENI part of the core at this point. And so it's still driven really by the - you know, by the pressure, flow, and power business and the reactive gas generators and the TeNTA business, D.I.P., and others are much smaller part of our total mix at this point.

Great. And I just wanted to say that I did see, at a big OEM, all those Baratron pressure things coated in white instead of the normal MKS colors at SEMICON last week, so they were all over the place, the private labeled stuff. Thank you.

Okay.

Thank you. The next question is from Fred Wolf. Please state your company name followed by your question.

It's Adams, Harkness and Hill.

Could you, Ron, give us a proportion of products that were integrated versus older component products? You've done that in the past.

Yeah. We've done that on an annual basis, Fred, because it's difficult to break it out quarterly. And last year, that was about 17% for 2001. We can say qualitatively that it's higher this year, but we don't really keep that on a quarterly basis.

Okay. You think it will go up significantly to above 20% or . . .

I can't say. Our target is 30%, but I'm sure we're not at 30%.

Okay. Great. Thank you.

You're welcome.

Thank you. The next question is from Tim Summers. Please state your company name followed by your question.

Investec. Thank you.

Because you're going to be seeing a fairly sharp slowdown in revenue growth in the third quarter over the second, is there a risk that OEMs that you deal with have excess inventory of your components currently?

Well, we try to monitor that, and we based our expectation for this quarter based on current order rates and shipment levels, and obviously we have several months - two months more to go in this quarter. I think that what we talked about about the pipeline effect is a - is not a onetime effect. Basically when they run their in-process inventories down to a point where they're consuming what their - when they're buying - when they're buying what they're consuming, then that rate stays pretty constant.

So I don't expect - I don't anticipate that there are big inventories, particularly for the higher-priced items. But it's hard for us to get a handle on that. We believe that there's not been a big inventory buildup. Not unless their production rates decrease substantially, but at current kind of production rates, we don't expect that.

Okay. Thanks, John.

You're welcome.

Thank you. The next question is from Ted Berg. Please state your company name, followed by your question.

Hi. Lehman Brothers. I just had a follow-up on that previous question.

So are you anticipating that going forward, then, that your demand will meet the end market demand for components? Is that just a fair conclusion?

Well, I - yes. I think it depends on the ordering patterns of the OEMs themselves, which aren't completely under our control. We are delivering to them on a just-in-time basis, but if they're paying close attention to their inventory levels, then we should be pretty much mirroring demand.

Okay. And on - I had a specific question on ENI. I know that you're very strong in the etch area and you highlighted that in your prepared remarks. I know that that's also an area that your key competitor is targeting for market share gains. I was wondering, first of all, if you've seen any more intense pricing pressure or any market share wins by your competitor in etch and then secondly, I was wondering, you know, what opportunities you see in the other areas, CVD, PVD. I know you mentioned you had some 300-millimeter evals out there for PVD. I was just wondering if you expect any market share wins to come down the line in the next couple quarters.

Well, as I mentioned, dielectric etch, we're very strong in that, and we haven't seen any - any erosion of that. We have a very strong position. And we have made headway in PVD. It's more than just evaluations, it's actually product going out, more than just the evaluation level.

With CVD areas, we are a - more of a second source in CVD, and that's an area, also, that we're highly interested in. But that's an interesting product area. It has high emphasis from our - from our viewpoint for potential growth for MKS, and so we're - we are certainly being and will be aggressive about the development. As I mentioned, we have increased our R and D spending and as Ron mentioned, we increased our R and D spending in the quarter and some of that was for that product area.

Okay. And then I had a final question on your connectivity products. I was wondering if some of the other competing solutions that are out there, can they extract information from your components, your pressure transducers and your other components or do you have to use the TeNTA box and the IPC box to get that data?

No. This is open architecture. It's - typically they're device net or prophy bus, it could be Ethernet, it can be analog signals. What we're providing is the - the box themselves which - and that's where the IP S, but it talks to any protocol.

Okay. And would it - what would be the advantage to the customer for using the TeNTA box, you know, with your components versus using, you know, some of the other competing alternative solutions? Is there, you know, more robust data gathering processes?

TeNTA has done a very good job and has had some significant design wins because they have reduced the size of the control box, provided higher functionality in a smaller box. IPC in the same way has provided a lot of the safety interlocks and a lot of the - basically gatekeeper software that's very difficult to develop. They've got a real time advantage in having done this to be able to be a watchman in who gets what information and from what tool and what part of the information they get.

So both of them have some very good proprietary software and hardware, and that's their competitive advantage.

Okay. Thank you very much.

You're welcome.

Thank you. We have time for one final question. Our last question comes from Kevin [inaudible]. Please go ahead with your question.

Hi, Thomas Weisel Partners. This is Andrew Biggs for Kevin [inaudible] and the majority of my questions was answered regarding ENI in the second half. I was wondering if you could at all quantify your market share gains in DC power supply.

Well, we don't - we don't really quote or give the market share of any of the product areas. The DC is typically used in PVD -

Uh-huh.

- and I guess you'd have to look at 300-millimeter PVD tools that are out there.

Okay.

To determine that.

Great. Thanks.

Okay.

Thank you. Gentlemen, please continue with any closing statements.

Well, thank you all have much. Just a closing comment is that we do believe that our product breadth and process know-how combined with our experienced management team and a strong balance sheet will enable us to continue to outperform the semiconductor equipment industry and we thank you for participating in our call today. Thank you very much.

Thank you. Ladies and gentlemen, this concludes the MKS second-quarter earnings conference call. If you would like to listen to a replay of today's conference call, please dial 303-590-3000 or 800-405-2236, with access number 481303. Once again, if you would like to listen to a replay of today's conference call, please dial 303-590-3000 or 800-405-2236, with access number 481303.

You may now disconnect, and thank you for using 00:38:44 ACT teleconferencing.