Rogers Corp (ROG) 2009 Q4 法說會逐字稿

Good morning. My name is Stephanie, and I will be your conference operator today. At this time I would like to welcome everyone to the Rogers Corporation 2009 fourth-quarter and year-end results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you. I would now like to turn the conference over to Bob Wachob, President and CEO. Please go ahead, sir.

Good morning, ladies and gentlemen. With me today are Dennis Loughran, Chief Financial Officer; Deb Granger, Vice President of Corporate Compliance and Controls; Robert Soffer, Vice President and Secretary; Ron Pelletier, Corporate Controller; and Bill Tryon, Manager of Investor and Public Relations. First, Dennis will dispense with the formalities and then we'll get right down to business.

Thank you, Bob. I would like to point out to all our listeners that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and should be considered as subject to the many uncertainties that exist in Rogers' operations and environment. These uncertainties include economic conditions, market demands and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement. I'll now turn it back over to Bob.

Thanks, Dennis. The fourth quarter turned out quite similar to what we expected as our customers' order and usage patterns stabilized. We also did not detect any inventory build at our customers during the quarter which hopefully bodes well for the upcoming quarters. We introduced six new products in Q4, bringing us to an all-time record of 18 in 2009.

On the revenue side we again experienced strong demand for our high frequency circuit materials in the China satellite TV market. However, the power amp market was weak as the expected China 3G buildout was halted while some network issues with the TD-SCDMA systems were resolved.

As we move forward we expect most of our growth will come from three long lasting megatrends; they are the growth of the Internet, the expansion of mass transit and the global drive to sustainable energy. Within each of these three megatrends there are exciting application spaces that are projected to have growth rates varying from 10% to 30% compounded annually over the next five years.

We already have solid positions in most all of these applications and they are our key focus for additional product and market development work. We expect that over 35% of our sales in 2010 will come from the applications benefiting from these megatrends.

Currently we are involved in over 200 customer projects in these three areas and have 14 design wins since the first of this year. In total across all markets our salespeople are involved in 900 customer projects, up from 700 this time last year. Customer project activity is always a positive sign for the future and this is the highest level of activity that we've seen in many years.

In summary, we are having a strong beginning to the new year and are cautiously optimistic going forward. It sure feels a lot better than it did this time last year, I can tell you that. I'll now turn it over to Dennis to go over the details.

Thank you, Bob, and good morning again to everyone. For the fourth quarter, as Bob mentioned in his comments, we are pleased to report the results turned out, as expected, at the high-end of our guidance range which closes out 2009 on solid footing. We have our balance sheet and funding sources in good shape and our cost structures are attaining the full benefit of the restructurings undertaken earlier in the year, all of which bodes well for entering 2010 in a positive position, comparing very favorably to where we were just one year ago.

With strength in almost all of our operating segments we achieved a sales level of $78 million in the fourth quarter of 2009, $1 million above the high end of our guidance range; that result was down $600,000 or 0.8% from the fourth quarter of 2008. Overall for the fourth quarter 2009 Rogers reported GAAP profits of $0.45 per diluted share compared to GAAP earnings from continuing operations of $0.01 per diluted share for the same period in 2008.

As reported in the press release, included in the net profit for the quarter are net benefits of $0.05 per diluted share primarily related to one-time integration expenses associated with our High Performance Foams acquisition and the impairment of long-lived assets related to our Durel building in Arizona which was placed on the market in the fourth quarter. All that offset by tax benefits associated with the new US tax legislation enacted during the fourth quarter.

Excluding those one-time net benefits non-GAAP EPS was a profit of $0.40 per share coming in at the upper end of our fourth-quarter guidance range of $0.35 to $0.41 per diluted share excluding one-time charges. Fourth-quarter 2009 gross margin was 30.4% versus 27.5% for the fourth quarter of 2008. With the improvement attributable primarily to the positive impact of our significant productivity improvements and cost reductions, improved product mix and production levels, inventory had declined by $4.4 million in the fourth quarter of 2008, all of which allowed us to achieve a 300 basis point improvement on substantially similar sales levels as the same period last year.

Selling and administrative expenses for the fourth quarter of 2009 and 2008 were $16.6 million and $26.3 million respectively. The 2009 figure includes $0.5 million of one-time integration expenses associated with the silicone foam acquisition in the second quarter of this year.

Excluding those charges the resultant decline of $10.2 million was on its face related to nonrecurring -- non-recurrence of bonus expenses, $3 million, and CalAmp settlement costs, $6.8 million. However, the fourth-quarter of 2008 was already impacted by approximately $2 million of constrained spending, yielding a year-to-year decline in real spending of approximately $2.4 million with that amount driven by cost savings from staffing reductions and efficiency measures implemented on a permanent basis during 2009.

We expect to realize continued benefit from those measures and believe our [S&A] run rate will continue to be in the range of $18 million on a quarterly basis in 2010 with the uptick related primarily to incentive and compensation increases described in our January 7, 2010 press release.

Research and development expenses were $3.9 million or 5% of sales in the fourth quarter of 2009 as compared to $5 million or 6.4% of sales in the fourth quarter of 2008. The fourth-quarter 2009 spend level was slightly lower than a typical quarter reflecting an offset to what was a slightly higher than targeted spend rate through September year to date. Year to date through December research and development expenses were right at our targeted level of 6% of sales versus 6% of sales for 2008. For 2010 we again expect spending to equal our long-term target R&D spending level of 6% of sales.

Rogers' 50% owned joint ventures had fourth-quarter sales totaling $30.5 million, an increase of 16.4% compared to the $26.2 million sold in the fourth quarter of 2008 due to the recovery in demand at our High Performance Foams joint ventures that started in the second quarter. Overall equity income in our unconsolidated joint ventures in the fourth quarter of 2009 was $2 million as compared to the $1.1 million for the fourth quarter of 2008 primarily as a result of the year-over-year improvement in sales.

Other income and expense, which includes income from royalties, commissions and other fees less other expenses, amounted to a net gain of $1.2 million in the fourth quarter of 2009 compared to a net gain of $3.8 million in last year's fourth quarter. The net decline is primarily related to an unfavorable net foreign exchange impact of $2.5 million resulting from a highly favorable result in the fourth quarter of 2008 versus a negligible impact in 2009's fourth quarter.

Taxes for the fourth quarter were significantly impacted by one-time events resulting in a net benefit of $5.4 million. As identified in our press release, the total value of gross one-time benefits was $6 million, which if excluded would result in a non-GAAP fourth-quarter effective tax rate of approximately 6.7%. We believe our tax rate will be in the range of 22% for 2010 as tax rate increases in China, as well as our geographic sales mix, will negatively impact our tax profile in 2010.

Rogers ended the fourth quarter with a cash and short-term investments position of $58.1 million as compared to $43.3 million at the end of the third quarter 2009. The increase related primarily to improved cash from operations, lower inventories, strong receivable collections and auction rate securities redemptions. During the fourth quarter approximately $1.55 million of our auction rates were redeemed at par leaving a par value of $43 million outstanding at the end of the year.

Capital expenditures were approximately $2.9 million in the quarter for a total of $12.1 million for the full year 2009. For 2010 we expect capital expenditures to be approximately $17 million with the principle change being budgeted expenditures to complete our high frequency circuit laminate facility in China.

Our balance sheet improved during the quarter with a net reduction in working capital of approximately $1.2 million resulting from lower asset balances totaling $4.6 million, primarily accounts receivable and inventory, offset by lower accounts payable and other current liabilities totaling approximately $3.4 million. The modest improvement was attained despite our usual seasonal increase in accounts receivable days outstanding to 61.8 days from 54.5 days at the end of the previous quarter.

Inventories decreased by about 3%, or $0.9 million during the quarter, to a level of $33.8 million. Overall our current assets ended the quarter at 3.8 times current liabilities. We continue to have no outstanding long-term debt and have no current needs to borrow. This concludes my remarks and I'll now turn the call back over to Bob Wachob.

Thank you, Dennis. Now we'll be happy to entertain any questions.

(Operator Instructions). Fred Buonocore, CJS Securities.

Good morning, gentlemen. First I wanted to start on the guidance for Q1. It seems to be a little bit stronger than your full-year 2010 guidance had implied. And one of the things that I'm trying to get a hold of is what sort of gross margin are you considering as you formulate this earnings guidance?

The first-quarter gross margin is projected at 31%.

Great. And as you pointed out in the prepared remarks when Dennis was talking about margin for Q4, that at pretty similar sales levels to the Q4 of last year and even down from Q3 margin seems pretty robust. How much of a factor of that is mixed and what is the mix shift that's occurring that is making this?

I would say a large part of it is the cost reductions that we implemented during the course of the year, plus we were able to achieve some significant raw material price reductions during the course of the year. And then some efficiency improvements.

So, it sounds like a lot of this may be sustainable (multiple speakers)?

This is Dennis. I think that the mix is a much smaller piece of that. That 4% improvement roughly is probably in the 1% or less range related to mix. We also have the MTI operation in at a positive contribution in the first quarter as opposed -- well, they weren't even in the 2008 number, so that wouldn't have been an issue. But in general we're producing at a higher level, lower cost structures giving most of that benefit.

So it seems like it may largely be sustainable, these gains on that gross margin line?

I think that most of them are sustainable. We expect that we're going to have some increases in raw materials. Our supply-chain people have done a really good job in pushing those out of the first quarter, but they can't hold it off forever.

Got it. And then finally, just -- you talked about the 14 design wins year to date. So in other words, that is -- since that's just in the last less than two months, is that right?

Yes, that's right. That's just in those three megatrends areas.

Wow. So can you walk us through how this translates into revenue just at least maybe in terms of timing -- how these kinds of design wins typically turn into you actually producing and shipping product?

We don't count them as a design win until it goes to production.

Got it.

Because we've learned in the past, sometimes you win and then the product never gets introduced. And since we pay our salespeople on -- one of the ways we pay them is on design wins, we wait until it goes to production. But those 14, during their first 12 months, should generate somewhere in excess of $4 million. And they're spread among four antenna designs, a half dozen in the mass transit area, three of which are in the power amp area for LTE and WiMax and one is in the wind energy.

Very good, that's helpful. And then just finally, on the guidance. On the 2010 guidance you provided a few you weeks ago, care to comment on that? Is your outlook on that around the $1 range changed a little bit given what you're seeing in Q1 or too soon to tell?

Too soon to tell. Q1 is benefiting from China and the 3G for TD-SCDMA, that was put on hold during the fourth quarter because they had some network problems. But now it's as if they're trying to do it all in six weeks. So we had one day where the two fabricators pulled $1.5 million out of our inventory. They're like in a race here to see who can make the most.

So it will be pretty quick and it will be worth $2 million or $3 million this quarter. And we thought it would take two quarters for this to happen, but this is just China Mobile, so we still have China Telecom and China Unicom, who together will order about the same amount as China Mobile. And I think that probably happens in the second quarter.

So when you say together, is that together around $2 million or $3 million or (multiple speakers)?

Yes.

$2 million to 3 million?

No, $2 million to 3 million.

Very good. Thank you very much.

Tom Lewis, High Road Value Research.

Good morning. I haven't heard -- I'm not sure I've ever heard you say much about demand from infrastructure for voice and data in the developed world. If it was it was a while ago. I've been operating under the assumption that that infrastructure got plenty, got put in place, and it would be a while for demand to grow into it.

On the other hand, I've been hearing a lot lately, or hearing at least a few things, about capacity constraints in the ability -- in the infrastructure for voice and data. I was wondering if you perceived any change in the urgency with which people who build these systems are -- over the last few months or year?

Tom, I believe the constraints so far have dealt mostly with AT&T and it's because of the data associated with the iPhone and it's in some very concentrated areas like New York City and Seattle and a few other places. Yes, there's been a little uptick from that customer. But in total, in the developed world 3G is pretty flat; it hasn't really grown for several years now.

But what is it developing is LTE, long-term evolution. This movement toward mobile Internet devices, and I'll use that phrase to include smart phones, tablets, netbooks and whatever else they introduce in the next year or two, because there seems to be a lot of things that can connect to the Internet, that's going to drive a huge increase in data.

I believe that Cisco projected more than a 100% increase per year for the next five years in wireless data. So that means LTE will have to be built very quickly, it won't be this long, slow rollout that we had with 3G. And at the moment the only people putting anything in place is Verizon and I believe they put 10 cities online last year and 20 cities online this year.

For us that will mean a new application actually; it means about $1 million for the antenna application in the wireless area. But also a couple million dollars in the power amplifier area, which are really the two main applications we have in the wireless infrastructure is power amplifiers and other RF components inside the base station. And now most recently in the antennas as they have to be bimodal antennas so it will be a very significant increase in antennas that are made for Printed Circuit Materials whereas in the past it was at least 80% bent metal.

So the market for our kinds of materials will expand and last year we introduced two brand-new products designed specifically for this application. In fact, I had mentioned that we had four antenna wins, but yesterday we had two more, one of which was Korea which to me is a big surprise that we could actually win against a Korean manufacturer in Korea.

Okay, so it sounds like that to the extent there has been a capacity constraint it was just at those couple of pinch points that we've all noticed. You would think that as embarrassing as this is for these operators who are all about delivering service that this might affect their inclination to invest ahead of that. And maybe you alluded to that when you talked about the rate at which LTE will roll out, but hasn't really -- but so far the substance of constraint would just be those couple of things we all read about?

Right. In the LTE area there have been -- 19 service providers have awarded contracts for LTE. But except Verizon. No one is really putting anything in place this year, it really starts next year and becomes a really big deal in 2012.

Okay, thanks.

And that's the main reason that we are bringing up our factory in China for high-frequency materials this year so that we're ready when this comes.

Okay, well we've been hearing LTE and the LTE is long-term. But they mean to act on it you're saying in the 2012 timeframe?

That's the current projections.

All right, thank you.

You're welcome.

Jiwon Lee, Sidoti & Company.

Good morning. Bob, you have just highlighted among the three new markets that are expected to grow this year and beyond on the Internet. But if you could go back and talk a little bit about what type of opportunities you see on the transit site as well as on the energy side?

Let's start with the sustainable energy side. Here the hybrid electric and the electric vehicles are presenting a tremendous opportunity for us because the full hybrids will be using lithium-ion batteries. And those battery plates expand and contract as they heat up and cool down. If they're just stacked up together they're going to rub against each other and eventually wear a whole and it's not a good thing if a car catches on fire.

So in several cases right now our PORON is being used in between each plate and then our silicon foam is being used to seal the case that these 200 to 300 plates will go into. In addition, you have a DC to DC inverter in these cars which takes it from 12 volts to 650 volts and, in addition, you have a DC to AC inverter which converts it from DC power into AC power. Here they need to have bus bars and they're using our aluminum silicone carbide molded part to dissipate the very large amount of heat that's generated by those insulated gate bipolar transistor switching.

So this means that we have anywhere between $200 and $400 in a vehicle. And according to the market studies, by 2014 there could be 1.8 million vehicles a year that would fall into the category of full hybrid or full electric. So you can do the math, it could be $360 million to $720 million if we only got 10% that's still a pretty big deal.

In the wind energy area we have the bus bars are being used to put the power from the two megawatt or greater wind turbines on to the system and in the solar area it is the exact same application for the bus bars, but also our silicon foam for sealing those panels.

(technical difficulty) the wind and the transit side, Bob?

The transit side? The transit side is really the trains whether it be high-speed or metro. And here we have our bus bars, typically $7,000 to $10,000 per train; our silicon foam which is used as seals in gaskets, generally $2,500 per car. And then the seating material which is new, that came from our acquisition. And there we get orders in the neighborhood of $1.5 million for example in Seattle.

That's very helpful. Thank you. So, as these new products and markets are about 35% of this year's sales, how will that affect your profit margin this year?

Well, it should be somewhat helpful in improving it because generally new things carry a little better margins than those things which are seven or eight years old.

Okay. And then what were the 2009 foreign sales, especially the Asian sales, in terms of your total sales? And how do you expect that to change this year?

I think the sales in Asia were about 47% of the total. And in Europe it was probably in the neighborhood of 22%. So 69 -- well, then there are others. So somewhere in excess of 70% of our sales are outside the United States.

Okay. And would that be sort of similar this year?

Yes.

Okay. And lastly on Dennis, what's the plan for this year's CapEx spending?

Right about $17 million. We think about $4.5 million of that is related to the laminate facility in China.

Okay. Oh and then did I hear you correctly? You said the quarterly operating expenses would run about $18 million including R&D plus the compensation cost?

That's right. We've got -- that's just S&A, Jiwon; the R&D is 6% of sales on top of that.

Oh, I see, okay. That makes more sense.

And that does include -- I would point out to folks, the first-quarter guidance on top of that $18 million includes $1.2 million of stock option expense for things that vest in the first quarter accelerated so that the next three quarters would not have that and we'd actually have lower average in the second half because we're concurring $1.2 million in the first quarter. That was the only thing that was not disclosed as part of that January release, the seasonality of stock option expense.

Okay, that's helpful. Oh, and one last question, please. The raw material costs are going up, which area would that be in particular?

Everything that's associated with petroleum and with copper.

Okay. But do you feel that, Bob, you have some pricing ability to deal with this or would there be some (multiple speakers)?

No, probably not, no.

Okay, that's all for me. Thank you.

(Operator Instructions). Avinash Kant, D.A. Davidson & Co.

Good morning, everyone. A few questions, actually early for Dennis. I didn't get the stock option comment, Dennis. So you have $1.2 million more because of stock option expenses in the SG&A line in Q1, is that what you (multiple speakers)?

On an annual basis we have stock comp looking at around -- $4.5 million annually. If you pull out $1.2 million of that, there's a piece of that $4.2 million that vests for senior members of the team that could retire, there's a provision that they can do. So we have $1.2 million of the $4.5 million that gets expensed. The other $3 million gets expensed pro rata over the year. So there's just a heavier expense in the first quarter related to that aspect. It's no different than it was in 2009. I mean, in terms of that seasonality. (multiple speakers).

So between Q1 to Q2 that could be only $200,000 impact roughly?

No, let's try it again, Avinash. The first quarter is $1.2 million larger than any of the other quarters.

Right.

Okay, okay, got it.

But the calculation is $4.5 million minus $1.2 million, divide by four and add that to the $1.2 million and you get what the charge is in the first quarter.

So, in essence the guide -- it would be $0.07 per share impact in the second quarter than in the first related to that.

$0.07, right. Okay, got it. So the first quarter had the negative impact of $0.07 roughly?

Yes.

Okay. And tax rate, Dennis, you said we should model like 22% for 2010. Is that going to be 22% all through the quarter? So in the first quarter what do you have?

We project, based on the average of the whole year and every quarter you always true up to the average projected rate. So we're thinking that's the starting point for the first quarter and they'll do all the provisions at the end of the first quarter and if they're slightly different there would be a true-up to make sure the quarter is on an actual rate and then we'll go forward to give you another guidance update from there. But right now that's the average we think for the whole year.

Okay. And did you give the depreciation and amortization number for the quarter?

For the fourth quarter it was $4.4 million.

Okay. No reason to expect any major changes there, right?

Right.

Okay. And what was the headcount?

1,746.

And how much of it came from the MTI acquisition?

We hired two engineers -- are you talking about people now or are you talking about --?

People.

People. In the United States we took two engineers from Richmond to Chicago. And we added a few hourly people, maybe nine or 10. And then I believe about 25 people were added in Germany due to the acquisition.

Okay. Okay. And now in terms of products of course you -- I didn't get that comment too. You said $2 million to $3 million could come from the China Mobile and combining the other two players you would have $2 million to $3 million or you could have $5 million or so?

No, $2 million to $3 million from them. They're each about half the size of China Mobile.

Okay. And you expect that in Q2 sometime, right?

We hope. You just never know about these things. It's like India. India was going to issue their licenses last year and then they were going to issue them at the beginning of the year and now they're going to issue them later this year. We know we've won, we just have to wait because we have no control.

Right. And also about the new products -- as you mentioned, you had 18 new products introduced in 2009. How should we think of in terms of any meaningful revenue generation from these products, which year would that be?

Late 2011/2012 is when you get the biggest impact. Although we do have one product, which is in the high frequency area that we have found a way to get extremely low profile copper, that means really smooth copper, to stick to our material. And that product has already achieved $1 million worth of sales, which for us is amazing, because it's nine months.

And this was the one that you introduced in 2009, right?

Yes, yes.

Okay. And also a little bit about the cost coming back. I think you had significant cost cuts in 2009 and you have talked about some of it coming back in 2010. Could you just recap for us how much was cut in 2009 and how much of it could be coming back? And maybe -- exiting 2010 where would you be in terms of cost structure compared to exiting 2008 maybe?

How about exiting 2009? I know those numbers better.

Okay, that's fine.

We took out about $34 million worth of expense last year.

Right.

And this year we are going to institute merit increases since we had none last year. And of course the long-term compensation, which is stock options and performance (technical difficulty) restricted stock, those things in total should add $5.1 million to our expenses. Now of course that assumes that we meet our plan. If we don't then we don't get much in the way of a bonus.

Okay. So only $5 million will come back?

Some raw material and that's really hard to say. I mean our dollar assumed that there would be quite a bit of increases in raw materials. And so far so good. That's why we're doing -- one of the reasons we're doing better.

Right. But the order of that or the extent of that could not be more than $10 million or so, right?

Yes, that's right, that's right. The material content is generally in the range of 30% to 40% of our selling prices.

Okay. So still you could have at least $20 million or so lower cost structure compared to what you had in 2008 -- in 2009. 2009, sorry.

Well, no, 2008.

2008, that's right. That's right, yes, 2008.

(multiple speakers) talk about 2009 because by the third quarter we had instituted all the cost reductions and so we saw the benefit in the second half. But of course, we saw a lot of expense in the first half to get there.

Right, exactly. So it will be at least $20 million below the 2008 cost structure.

Yes.

Okay. And also, Bob, given the visibility that you have at this time, how much visibility do you have actually? And if anything, if could you comment on how qualitatively the quarters would turn out in 2010, how are you seeing them in any seasonality or any (inaudible) talk about?

Well, typically -- this is only holds about eight out of 10 times, the third quarter is the biggest, the fourth quarter is the second-biggest, the first quarter is the third largest and the second quarter is the lowest.

Okay. Do you expect the same -- Q2 to be the lowest this year also?

Yes.

You do, okay. Okay, perfect. That's pretty much it for me. Thank you so much.

Jay Harris, Goldsmith & Harris.

Thank you for taking my questions. I'd like to get into the area of cash management. In the fourth quarter from continuing operations what were -- what was the cash generated and the capital expenditures?

In the fourth quarter capital expenditures were $4.4 million and I'll say free cash flow was about $9 million.

And are we getting any income from the auction rated securities?

There's no income from that, that's basically -- we have those on the books at a reserved value, $43 million at par. Yes, I mean, they're whispering to me there's a very modest amount of expense related to the creditworthiness of the auction rates. But there's no --.

Interest-rate, Dennis.

Oh, I'm sorry, you're talking about interest rate, (multiple speakers) less than 50 basis points.

All right.

I apologize.

And until redeemed are they perpetual investments?

Yes.

And what is the -- what is your best guess as to how long we're going to own these?

The best estimate I have now is we had $6 million of redemptions in 2009. If there seems to be fairly consistent activity we currently view about a $4 million retention at par this year as a possibility depending -- but it's a long-term hold position that we've got them on the balance sheet at.

Okay. How much cash do you need to run the business? Forgetting about acquisitions.

Well, we believe we'll be a positive cash generator this year, $25 million to $30 million excluding any potential acquisitions. So the CapEx -- maintenance CapEx would be about $12 million to $13 million of the $17 million that we're projecting for this year. And above that $12 million to $13 million level would be growth in facility expansions as we need it, but we don't project any real significant amounts in 2010 or 2011 and potentially after that. But we're running at about 75% average capacity across all the businesses, so we can definitely bring on upside sales with good contribution levels and no CapEx for those.

Well, but I guess you answered a slightly different question than I had in mind. I don't know how to phrase it differently. But Just to run the business day to day with any expectation of inventory builds related to the growth in the size of the business -- how much cash do you need to keep on the balance sheet just to run the business?

Probably $15 million of cash balances across all the regions in the different banks we have spread out. That's sort of the operating level of cash balance we'd like to have.

And what -- in any given year what would be the range of acquisition expense that you might incur from -- I guess the lowest would be zero, but what do you anticipate the high end of that range might look like?

In terms of acquisition investment dollars?

Yes.

We're looking at a myriad of targets ranging from as low as $2 million to$5 million to $20 million to $30 million and at the high end there may be something bigger than that if we can find a very platform based business that meets our criteria.

And what's the likelihood you would do more than one acquisition in a year?

In the mode we're in two to three modest sized acquisitions, knowing that each of our businesses is looking at complementary businesses at the right price, you could see two to three. We did two last year, so that's obviously a proven fact.

Historically you've not declared any dividends. Is that likely to change going forward?

Well, the Board a couple times a year considers whether the dividend is appropriate or not and it's really based upon what other things we have going on acquisition wise. (multiple speakers) two possible uses of the cash, either paid out in dividends, expand the business by buying other things, or the third would be buying back stock.

Well, it looks like the money that was put into auction rate securities, at a time when I guess there was an incentive to try to maximize yield and flexibility, would have been better paid out to shareholders either in a share buyback or cash dividend.

Hindsight is great at the time --.

I always have 20/20 vision in hindsight.

(multiple speakers). If we could do it over we'd never do it, but --.

All right, thank you, gentlemen.

You're welcome.

(Operator Instructions). Dana Walker, Kalmar Investments.

Good morning. What types of things are being done differently this time to try to take today's wireless infrastructure and to make more of it without engaging in the big cap spend cycle that we investors in Rogers hope to see? Are there software approaches or other things that -- because you read about a variety of companies, be they public or private, that seem to be trying to make what exists today last longer or be more productive.

We have been doing that on a very regular basis. An example would be in our high-frequency area. A few years ago, I'll take Europe for example, we could get in the presses 10 pieces of laminate per each opening in the press and today it's 20. Did I answer the right question, Dana?

Maybe I didn't ask it all that well. You probably answered the question I tried -- it sounded like I asked. My question is this, with the 3G infrastructure extent it appears that there are a variety of wireless equipment companies or wireless software companies that are trying to extend its ability to serve this expanded demand coming from these data devices that you're describing that would not require as quickly the adoption of a new LTE cycle.

Okay. If you believe the data that says that the data rates, the amount of data going over the wireless network is going to double every year, there is really little you can do with 3G to get there. LTE handles 10 times the amount of data of 3G and LTE would most likely be only data and unlikely be voice. Voice uses very little of the spectrum.

So what seems to be going on would be a band-aid approach to something that ultimately needs a complete overhaul?

Right. Today, they're splitting the cell sites so that they put more antennas on the same mast and more base stations. So you use the same footprint but you double the hardware and so you can double the capacity. And that's what AT&T is doing, for example, to solve some of their issues in New York City and other places. But in the end you have to go to LTE to get that 10 times boost in the capability. And AT&T has a roadmap to do that, they're just a little slower than Verizon.

You mentioned how you don't perceive any inventory build at your key customers and I presume you were largely talking about the handset market. What observations do you have about the tone in the handset market? How would you describe your design win activity and what are some of the newer things you're doing in that realm?

Some of the newest things are dealing with tablets where you have a significant larger screen and in some cases we have more than $0.60 worth of polyurethane foam in a tablet device. Whereas in a common phone there might be $0.05 to $0.07 and in a smart phone it varies from $0.10 to $0.22. Certainly netbooks get us even a larger amount.

There we see increased usage because the screen size is increasing. Phones themselves, it depends on what you read. Smart phones anywhere from 14% compounded growth to 30% depending upon the market research firm. Clearly that's where most of the growth is, it's not in the old traditional voice, it's in the data part. In there that's advantageous for us.

What if anything is new at Solicore?

We're progressing well with the development project, it's on schedule and within budget.

If they had certain ambitions that would generate revenue for them of some consequence that would entail more involvement on your part in revenue creation activities, in what timeframe do see that taking place now?

Probably late 2011, early 2012.

Can you envision putting more money into this business?

I think their plan is to not have to go for another round.

That's all for me, thank you.

You're welcome.

Fred Buonocore, CJS Securities.

Thank you. My follow-up has been answered. Thank you.

At this time there are no further questions. I would now like to turn the conference over back over to Bob Wachob for closing remarks.

Thank you. To conclude I'd like to say that we believe we have laid the foundation for faster growth and increased profitability certainly as the world economy revives. And by continuing to invest in new product development and focusing on the identified three megatrends, I think that will generate significant growth going forward.

On the other hand, we continue to keep tight control on our expenses and are maintaining, as you all know, a strong balance sheet. Thank you for joining us this morning and goodbye to everyone.

Thank you. This concludes today's conference call. You may now disconnect.