TTM Technologies Inc (TTMI) 2002 Q1 法說會逐字稿

Good afternoon and welcome ladies and gentlemen to the TTM Technologies first quarter conference call.

At this time I would like to inform you that this conference is being recorded for rebroadcast and that all participants and are in a listen-only mode.

At the request of the company

we will open up the conference for questions and answers after the presentation. I will now turn the conference over to Mr. Kent Alder, CEO of TTM. Please go ahead sir.

Thank you and welcome -- welcome to our conference call. I'd like to turn the time over to Stacey to read a brief presentation.

Good afternoon and thanks for joining us for our first quarter conference call.

Before we get started and I turn over -- back to Kent, our CEO, I would like to make the following statement.

During the course of this call we will make forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to materially from those expressed or implied by such statements.

Such risks and uncertainties include but are not limited to fluctuations in quarterly and annual operating results, the volatility and cyclicality of the various industries that the company serves, and other risks described in TTM's forms 10K or 10Q and other reports and statements as filed with the Securities and Exchange Commission.

The company assumes no obligation to update the information provided in this conference call. Now let me turn the call back over to Kent.

Thanks, Stacey. Our first quarter break-even performance on a cash net income basis is notable in light of the extremely challenging business environment. We generated new customers, sales from the continued expansion of our sales organization, and added two new names to our top ten customer list.

We aggressively managed expenses and further reduced our cost structure.

We continue to invest for the future. Ramping up our technology and bringing expanded quick turn capacity into service.

And we completed a successful secondary offering of 7.2 million shares including 2 million shares sold by the company.

As a result, our strong balance sheet got even stronger. In terms of managing expenses, we found additional ways to improve our cost structure. Now the Redmond division, we implemented minor staff reductions and mandatory vacations. We continued to negotiate lower material cost as a result of new supplier agreements.

These new arrangements will also provide for some volume discounts that will improve our margin as our volume increases. At the same time, we continued to benefit for our -- from our expanded sales capabilities. During the quarter, our sales team grew to 92 professionals, up from 85 as of the year-end 2001.

We captured approximately 40 new accounts in the quarter.

And just as important or maybe more importantly we expanded existing customer relationships. It's great to add new customers, but more telling has been our ability to penetrate these customers.

Winning more and more of their business. When relatively new customers like [Play Jet] Plexus and Jabl make it on to our top ten list it illustrates our ability to execute our strategy and service our customers.

Of course we continue to invest in our successful time and technology strategy. In 2002, our planned capital expenditures of approximately $6 million will be targeted at technological advances. During the quarter, our production continued to reflect high value added products. Including a higher percentage of quick turn boards.

Our quick turn boards increased to 44 percent of revenues in the first quarter of 2002.

Compared to 38 percent in the year ago period and 39 percent in the fourth quarter of 2001. The average ledger account statistics reflect a shift mix with a relative increase in the percentage of our business from the industrial, medical and computer peripherals end markets.

We continue to experience softness in the high-tech communications and high-end computing and end markets during the quarter.

The average layer count per panel decreased to 8.5 for the first quarter of 2002 down from 9 for the previous year and was flat sequentially with the fourth quarter of 2002.

Boards with eight layers or more represented 55 percent of our revenues in the first quarter of 2002 compared to 65 percent of revenues for the first quarter of 2001 and 57 percent in the fourth quarter of 2001. Moving up to boards with twelve layers or more, this segment accounted for 29 percent of revenues in the first quarter of 2002.

Flat with the year-ago period and up sequentially from 26 percent in the fourth quarter of 2001.

As for customer concentration, we reduced it further during the quarter. The percentage of business from our top ten customers decreased year-over-year, from 47 percent in the first quarter of 2001 to 45 percent the first quarter of 2002.

And it declined sequentially from 48 percent in the fourth quarter of 2001. For the quarter, Selectron was the only customer greater than 10 percent of revenues at 10.2 percent of sales. Now let me turn the call back to Stacey who will further discuss business conditions and the outlook.

Thanks Kent.

Let my start by highlighting our financial performance for the first quarter. Then I'll review expectations for the second quarter of 2002. First I'll provide year-over-year trends comparing the first quarter of 2002 with the first quarter of 2001. Revenue decreased 48 percent year- over-year to $23.7 million in the first quarter of 2002. We posted an operating loss of approximately $185,000 compared with operating income of $12.6 million for the first quarter of 2001. EBITDA decreased 85 percent to $2.4 million. Compared with $15.9 million for the same period in 2001. We posted a small net loss of $287,000 compared with a net profit of $7.6 million in the year ago period. Fully diluted cash earnings per share of zero cents, or break-even is down from cash earnings per share of 23 cents in the year ago period.

In terms of sequential trends comparing the first quarter of this year with the fourth quarter of 2001.

Revenues decreased 7 percent sequentially. First quarter gross margins of 9.9 percent compare with 19% for the fourth quarter of 2001. Our gross margins fell due to reduced absorption of fixed manufacturing overhead primarily in our mid-volume business and startup costs for some technology improvements in our Redmond division. Our slight operating loss of $185,000 compared with an operating income of $868,000 for the fourth quarter of 2001. Our EBITDA climbed 43 percent to $2.4 million and our net loss of $278,000 compared with a net profit of $275,000 in the fourth quarter of 2001. The break-even cash earnings per share compared to four cents in the fourth quarter of 2001. Our balance sheet continued to strengthen further due to cash raised from our secondary offering and positive free cash flow from operations. At quarters end TTM had a net cash position of $10.6 million compared with net debt of $8.1 million at year-end 2001. And our cash position increased to $41.8 million during the first quarter of 2002, Up from $24.5 million at year-end 2001. We continue to proactively manage all aspects of our working capital. We reduced day sales outstanding to 45 from 54 in the first quarter of 2001. Overall our cash conversion cycle improved by 27 percent to 35 days when compared to the same period last year.

In addition we have $25 million of unused capacity on our line of credit.

That gives us a financial [INAUDIBLE] flexibility to pursue a variety of business opportunities. Let me turn to a review of our business by type of services provided.

The extended slow down in our customers markets continued to influence both our quick turn and volume business during the quarter. We saw some improvement in demand particularly in our quick turn business.

However we continue to experience some price competition in this portion of our business and are book-to-bill remains volatile on a short-term basis. We saw some increases in the average oversize in our quick turn business we hope this is the first sign of an improvement in our ramp to volume business as we assist customers in bringing new products to market. In the prototype portion of the quick term business we saw -- we have seen the number of new jobs we produced increase as our customers continue the R&D work in anticipation of an upturn.

Overall business conditions appear to show some small signs of improvement and our visibility is still very limited.

For the second quarter of 2002 we are projecting an essentially flat quarter with Q1, 2002 in terms of revenues and profitability. We expect revenues in the 22 to $24 million range and cash earnings-per-share between a profit of one cent and a loss of one cent. With that let me open -- open up the call to your questions.

Thank you.

The question and answer session will begin now. If you're using a speaker phone, please pick up the handset before pressing any numbers. Should you have a question, please press 1, 4 on your push button telephone .

If you would like to withdraw your question please press 1, 3. Your question will be taken in the order it is received. Please stand by for your first

question. Your first question comes from Keith Dunne. Please state your affiliation followed by your question.

Hi Kent, hi Stacey.

Couple questions. One you mentioned 40 new customers in the quarter. Can you give us any color? What end markets they come from?

Are they mostly quick turn? Are there any volume kind of customers? Can you give us more color on those new ones?

A lot of those, Keith, came as through our normal course which is up through our quick turn capabilities.

That broke out a little heavier with networking and communications at about 60 percent of those new customers.

So that -- we felt like that was a positive sign. And then it was spread out, oh fairly equally. Test measurement about 9 percent.

Medical about 6 percent. I think our new customers this quarter is a little heavily -- more heavily weighted towards the networking and telecommunication segment.

And could you give us some color if you had to take a look at it how many of them are more established companies versus you know more startup kind of companies that may or may not have future funding?

I think there's still a significant number of startups in there.

We do capture a lot of significant customers as we go forward. And we're pretty proud of the ability that we have to

capture new customers. But a lot of those were some of the smaller companies that probably have some potential we haven't fully yet realized.

We also had a good portion, Keith, that came from some new divisions of Selectron, some names like [Simmons].

So we also have kind of a mix in there. But if you

just go by sheer number rather than dollar volume we probably have more in the startup area in terms of just number of customers.

Couple more questions. One do you have sales by end market for the quarter? And can you give us any color when you say 22 to $24 million next quarter. Are you

assuming that it's pretty much of a straight line quarter every month is equal, sevenish, seven and a half kind of million. Or what kind of stream throughout the quarter are you anticipating?

Sure, Keith.

Let me give you the end markets first. Networking communications was about 31%. High-end computing was 14. Industrial and medical was about 29.

Computer peripherals 18. Handheld 3. And other was about 4%. In terms of forecasting the revenues, we would expect some sequential improvement throughout the month.

Probably as you've heard in the market for other companies like Flextronics and some of

the contract manufacturers. April was down a little bit versus the March trends we've seen. So we expect some improvement going forward in the quarter.

I might add a little more color to what Stacey said there, Keith.

Our April will be a little better than our January. So we're starting out in a little better position. And we accelerated the last quarter through the month then had the fall off.

Our book-to-bill for the entire quarter was about 1.05. Book-to-bill in April was 1.1.

So again we continue to move forward here. And starting at a little better rate.

So your book-to-bill is actually 1.1 in April then.

That's right.

Can you give a little color -- the press hasn't come out I just saw something across the wire.

So it's just out now. G&A was 577 in the quarter it

looks like. Where -- anything going on there? And where do you expect that going forward?

I would expect that to typically be around 1.11 to 1.1 million a quarter.

It's down this quarter for a couple reasons. The first is we had reduction in some, what I call corporate expenses or legal, accounting and some of the variable costs we have in G&A was down. We also had an improvement in our accounts receivable aging.

Pretty significant improvement in there as we improved our collections. Which led to a reversal of a reserve of about half a penny.

Is that -- can you put that in dollars please.

About $300,000.

Okay.

On a pretax basis.

I'll let someone else -- I may come back. Thank you.

Thank you. Our next question comes from John McManus. Please state your affiliation followed by your question.

Yes, Needham and Company. Good afternoon. KENTON ALDER; Hi, John.

Hi, John.

Could you -- could you discuss a little bit about the quick turn environment.

Flex indicated they're going to convert Multech to only quick turn.

They've probably done that already. Obviously you know [INAUDIBLE] is chasing after that business there as other competitors. Maybe you could talk a little bit about that and also some idea of the pricing or price degradation you might have seen in quick turn versus the overall company in the year quarter?

Good deal, John. What we saw in terms of pricing and this is sequential the first quarter of 2002 versus the fourth quarter of 2001. Our overall prices were up 4 percent.

Quick turn was down 8 and standard lead time was up 2. As Kent mentioned in the conference call why you are seeing the dynamic of it being up 4 percent, is we had a shift of quick turn from 39 percent to 44 percent.

Volumes were up in quick turn, pretty healthily during the quarter. It's the price pressure.

We've seen competition especially in the, if you will, longer lead time quick turn. So if you broke it down in one to five and six to ten we had more competition in the six to ten days.

We think that's reflective of some of the volume shops not being able to fill capacity right now and can pick off a

quick turn or two and putting some price pressure on the margin. You don't see them as heavily into that in zero to five days. It's harder for them to execute that.

Then I will add to that we did a lot more quick turn out of our Redmond Division.

And as you recall that's our specialized facility that does

the five to ten day quick turns. And so we had a significant improvement in that five to ten day arena. Mainly out of our Redmond Division.

INAUDIBLE] you indicated that standard lead times now increased by two -- by two days? Did I understand that correctly?

I am sorry I don't understand the question, John.

Standard lead times -- you indicated. What's your lead times.

We gave you standard pricing was up 2 percent.

Yeah, sorry about that. The pricing was -- just so we get that clear for everyone. Our overall pricing was up 4 percent. Standard pricing up 2.

Quick turn down 8.

Did you -- did you look at the -- under FAS 142 was there any change there as far as your goodwill and intangibles account?

STACEY PETERSON Yes, there was. There's no impairment. But what you had seen in the past was a quarterly amortization of goodwill and intangibles of $1.2 million. The charge is now $300,000 per quarter.

We no longer amortize the goodwill. But we continue to amortize the intangible portion.

And that's -- that would be constantly going forward?

That's exactly right: So expect $300,000 per quarter amortization of intangibles.

Okay, thank you very much.

Thank you. Your next question comes from Roger Norberg. Please state your affiliation followed by a question.

Good afternoon.

JP Morgan. Stacey, Can you tell me more about the reversal in our reserves and AR'S. Is that from a couple specific

customers where you had a better situation in potential collectioner or just a broad base realignment with your total reserves.

You know what, we had both.

What we saw was a significant improvement in the percentage of our receivables in the 90-day plus category. It fell by -- that alone by 3 percentage points. Then our aging overall improved.

We had a big percentage increase moving into the 60 day and less category. So the buckets of our aging got better and then we collected better than we expected on a few customers.

So both. That kind of reflective in our working capital. I mentioned that for year-over-year period we went from 54 DSOs to 45. You can see we've really worked the working capital which will automatically dictate a change in reserve levels.

Okay. And the pricing trends you talked about were historic. Can you comment on what your expectations are in current bookings and what you see as kind of the direction of things over what you -- at least for

this full quarter.

What we've seen there is we're -- our assumptions and forecasts assume about a flat quarter with the pricing. Where we ended up at the end of the quarter.

That would imply -- that's for the overall. What about within say the quick turn versus the standard lead time business.

Actually we've assumed about both of those are stable and working with our marketing staff we've seen both of those start to stabilize.

Okay.

Were there any other changes? You mentioned Plexis and Jabl as now top ten customers. Were there any other changes

in the top ten for the quarter? Any other material changes in percentages with your top customers.

No there weren't. We only had one customer greater than ten percent and that was Selectron.

Okay. Thanks very much.

Thank you our next question comes from Eric Gomberg. State your affiliation followed by your question.

Yeah, Thomas Weisel Partners. Good afternoon. Maybe you could talk a little bit about your utilization levels across your facilities.

Eric, our utilization levels really haven't changed this quarter over the last quarter.

We're still running at the 45 percent area given our current level of equipment utilization.

If you look at it again from a labor perspective and how we've

reduced our labor we're probably at 75 percent utilization from a labor perspective.

Okay.

You talked about quick turn strength. And just wanted to get a sense -- has there been any follow-up with larger orders or ramp to

volume orders coming to support the quick turn orders or is it just some strengthing in quick turn?

I think it's just an overall strengthening. We have not -- other than a few spikes here and there there's no general trend that would indicate that we're seeing a lot of the ramp come back to us.

The one thing we did see and it's a small improvement but you know we track it pretty closely is there was a slight increase in our average order size.

Which could be -- which could be we

hope it's something -- it's a good sign. But in general I don't think we've seen any big rampups. Like Kent said, just a few spikes here and there.

When we talk about ramps too, Eric, I think we phrase that as a little more volume attached to every order.

And while we had a nice pickup in Redmond in the six to ten day delivery, it's possible that some of that was some ramp work. Just not of a sizable nature.

So just given how short lead times are in general, people were using that window as ramp volume?

That's a possibility. But we are -- we're also being a little more aggressive on attracting quick turn work also.

That's why -- as a matter of fact our new designs per day went up about twelve percent for the quarter. More prototyping and like Kent said capturing more new jobs.

Were there any particular end markets where you were seeing greater strength in quick turn or was it broad based?

It's still pretty broad based. There's nothing that jumps out significantly enough to state that one segment's improving over the other.

And I guess my last question is Stacey, you talked a lot about things being volatile and you said -- Kent you said 1.1 book-to-bill in April.

Is it fair to say though that on a week-by-week

basis you still have a good week then a bad week. That there's in general lots of volatility.

There is some of that, Eric.

But it seems to be relative also. While we still have good weeks and bad weeks. It's not to the degree that we experienced, say, two quarters ago. I think we continue to see a nice trend of stability coming in to our industry now.

At least with TTM. I think that's evident while we -- we are forecasting the next quarter to be relatively flat with this quarter, we have narrowed the range from 22 to 24 compared to last quarter and minus 1 to plus 1.

I think that's indicative of some of the stabilization that we -- that we are seeing.

Great. Thanks very much.

Thank you. Our next question comes from Helen Rady.

Good afternoon.

CIBC World Markets. I'm wondering if we can talk just about the guidance for a second. I believe that you said that the April book-to-bill was greater than January. And that you expect improvement going forward. So assuming that pricing has basically stabilized, can you just talk a little bit about why the guidance would still be showing a decline of up to 7 percent in the quarter? Is that really related to pricing?

Yeah, Helen, when I said April was better than January, our book-to-bill in January was 1.2.

Our book-to-bill in April is 1.1.

But our invoicing rate is higher in April than it was in January. And we accelerated through the first quarter on an invoicing fairly stable -- fairly constantly.

Looking back at March, the last two weeks in March went a little soft for us. And then we resumed a fairly nice level in April.

So overall you take all the factors and put them all together and there is some volatility there but we basically have a flat quarter coming up.

And given the industry

and looking at where we're sitting and the stabilization, if it stabilizes through this quarter then that's, I think, a real positive sign to some improvement in the quarters to follow.

Also, Helen, one thing we've seen with all the recent announcements, and I'll sure you have all been following them, is seem is a lot of people have had similar experiences in April.

I've heard it called a little bit of a stall, if you will.

So, we had good momentum in March as Kent said then we're also being a little bit cautious about how we think about the build up through the quarter given how volatile things have been in the past.

Even though we see stabilization, you don't want to take a short trend

and extrapolate it all the way through the quarter.

Just in terms of the end markets with high-end computing and communications buying down sequentially that really just broad based across all of your customers?

Or was it with specific programs? Can you comment a little bit on that?

I think within the high-end computing we have the Compaq production work placed in that category with the high-end servers and so forth.

And that production work has fallen off in that category.

I think that's a major contributor there. We're still doing some nice work within the -- the quick turn segment. And I think the other is -- other reasons would just be pretty much across the board softness.

Okay.

And just going forward then with the end market mix given that a significant proportion of your new customers are in the communications base would you

expect that to then increase as a percent of revenues over the coming quarters?

I think as we continue to ramp up some of those customers there's the probability that that will increase. I think as you look again at -- at particular customer bases and how they shift mix it's very difficult to forecast certain segments of the market place.

But in the longer term we think those higher -- the higher technology or working communication, high-end computing will at some time continue to increase as a percentage of our overall business.

One thing we like about our quick turn model that's proven well for us so far is whatever end market takes off with the way we've made our technology improvements and our ability to service the customer on the quick turn we can grow with that segment.

But we are very -- we could be very leveraged to the communications end market when that recovers also.

If I can just ask one more quick question. In terms of guidance for your sales and marketing expense going forward can you give a little bit of color there. Thanks.

Sure.

It will be slightly higher. I think we typically tell you all to model it around the 6% range. It might be a little higher

than that due to shift in percentage mix quick turn. We went up to 44 percent so our sales and marketing was higher this quarter because of that. There's a higher commission on quick turn sales.

Okay great. Thank you.

Thank you. Our next question comes from Kevin McCarthy. Please state your affiliation follow by a question.

Thank you guys.

Actually it's Mike Walker at First Boston. Just one question which is you had said during the quarter that design activity was picking up sequentially month to month.

Wondering if that was still the case in March and into April. And if that converted into the improved prototyping strength that you saw in the most recent quarter?

I think that when we talk about design, that's the number of jobs we tool up on.

New part numbers we have coming into our facilities. And through the month of April it ran at a -- at a pretty high rate.

I can't recall if it's at the same rate that we had the first part of March but it is significantly higher than -- than the average. And I think that's reflective of the increase in quick turn work that we have.

Because the majority of quick turn boards as they come to us -- the majority of our new part

numbers would be quick turn boards.

Great. Thanks.

Just a reminder, ladies and gentlemen, should you have a question, please press 1, 4 on your pushbutton phone at this time.

Thank you. Your last question comes from Mark Hassenberg. Please state your affiliationation followed by a question.

Nottingham Capital. Good afternoon.

Hi, Mark.

Hi, Mark.

Hi. You've done a terrific job in getting the cost structure down and you know broadening your sales capability without the incremental cost.

Looking at the upturn what it does arrive, how much of the cost reductions that you have been able to accomplish do you see as permanent and how much will those costs start to increase with the volume? What type of operating margin, SG&A do you think is realistic looking forward as a target?

Mark, I think in general the cost reductions that we've put in place will move forward with us as the volume increases.

And I think we've said many times in the past what we've done with the company with regards to strengthening our processes, is making us more efficient, improving yields, just driving costs out of our business throughout all aspects.

We have a much stronger company today than we have had in the past.

I think that's reflective of our performance that you see today relative to our -- to our competitors. And as we move forward those costs savings and process improvements that we generated will move forward as the market improves.

And we're pretty pleased with with our ability to capture new accounts and we control a lot of the accounts that come to us as to how much credit risk we take with some of these accounts.

Such that we feel real positive about the position of the company now.

Both from a cost and process standpoint as well as the customer base that we've built

up as the market place turns. We've penetrated new accounts and added new accounts. So we have the benefits from the top line improvement as well as the improvement on the cost structure side.

Thank you.

Thank you. Our next question comes again from Keith Dunne. Please state your affiliation followed by your question.

Sure. Two follow-up questions. One would be how many production days in the first quarter and how is that going to look in the second and third quarter.

There's 65 in the first quarter and 64 in the second quarter.

And as we I believe you had -- you mentioned technology startup costs.

Some different chemicals perhaps you used or some or other things. Can you give us a sense of

how many -- in dollars kind of what kind of hit that had in the first quarter? And you know can we expect it all to go away in the second quarter or how should we look at that?

I think a different way to answer the same question is thinking about the leverage on our fixed cost and how much that might of hurt our margin in the first quarter.

Would that help you solve the same problem, Keith. We think because of the increased depreciation which was a couple hundred thousand dollars plus the lower revenue stream and some other fixed components of our product that it cost us about 4 to 5 percentage points in gross margin from absorption.

That can even gets a high as 6 percent, 7 percent when you think of the fixed labor we have our

capacity is underutilized on labor. So, I think that hurt us by a percentage point or two on gross margin.

Yeah, Keith I'm going to add to that.

Timing of some of this changes that we made in the first quarter. Most of those were complete in the January/February time frame. And as we look at our operation from March and April we ran a lot -- a lot more smoothly.

And so I think we can safely

say that the cost of putting the cost improvements in are behind us.

That's right.

And they took place in the -- actually the end of December, January, February, time frame.

So just to kind of summarize because I wasn't sure how -- at one time Stacey through out three to four percent and they said one to two percent.

Should I look at it then -- that it

hit you about $300,000 in the first quarter that would go away in the second quarter from these efficiencies that Kent just referred to or is ...

You know it's really hard to quantify the exact efficiency because it affects labor and materials, Keith.

What I told on the four to five percent is an absorption

issue which has to do with fixed costs. Not -- not the startup costs.

Okay. That's what I missed.

So, yeah. So sorry that wasn't clear. Because I think that absorption is something depending on that revenue level that could still be there. But where we are we shouldn't expect that to hit us we're forecasting approximately flat.

And what was the total D&A in the quarter please?

D&A, depreciation and amortization.

Okay, depreciation was $2.2 million and the amortization was $300,00 [INAUDIBLE] of 2.5.

And did you change -- you mention the commission structure because that was higher than I thought. Are there any changes for the incentive plans below line or was it strictly a mix quick turn standard. Have you made any changes to those incentive structures?

You mean the commission structures?

Yes.

No there was no changes to commission structure. Its just a much higher percentage of quick turn.

And lastly you talked about temporary savings in the G&A portion.

You know if I just take the 600 roughly that you reported and add back the 300 it gets me 900.

You said normally a million to a million one. Can assume those savings were 100 to 200,000 and those will

reappear starting in the second quarter?

That's right.

We had some reductions in our accounting and legal costs and investor relations cost. Also insurance. But in the next quarter we'll

have costs associated with getting our annual report and that kind of cost out. So yes, it should go back up.

Okay. Thanks very much.

Thank you our next question comes from Greg Reid. Please state your affiliation followed by your question.

It's Raymond James Canada. On the military and aerospace side is that imbeded in your industrial number or do you have limited presence in that market.

We're not military approved, so we have limited presence there in that arena.

Okay. And then just following up with a strong balance sheet relative to many players in the market, what's your thoughts on the acquisition front in terms of using it to gain new customers or end market segments, et cetera?

I don't think our acquisition strategy has changed.

It's still the same and we're very cautious about looking at acquisitions. Again the strategy is complimentary to our -- what we currently do.

Which would be a technology or strengthening our quick turn. Our tactics, however, might have changed over -- over time with the changing market conditions.

So you can see with our strong balance sheet that's a real plus in today's world. Allows us to be flexible and execute our strategy.

And we'll continue to evaluate and research acquisition opportunities and be very

very prudent. There are still some opportunities out there that will be exploring over the next quarter, quarter or two.

Okay. And could those opportunities put you into new market segments like military and aerospace? Or do you view that as somewhat slower technology

than what you are currently doing?

I think that would be in addition to what we have and that would be a nice compliment to existing business.

So that's something we would look at. And if you look at those -- those

elements would -- I think as you tried to merge those into our existing operations not be a right fit. So that would be good acquisition candidates.

Okay. Thank you.

If there no further questions I will turn the conference back to Mr. Alder to conclude.

Okay we thank everybody for joining us on our conference call today.

We feel like the quarter was very successful in light of some of the challenges that we had with internally improving our cost structure as well as the external market environment towards the end of the quarter.

We're still very positive about the future and the company's position and where we can take the company with our expanded customer base and the cost structure that we've put in place.

We hope that the environment is at a bottom and to be able to perform at break-even at this bottom we think was quite an accomplishment.

As we move forward with our current -- our current operating position we feel like we have better days ahead and we're optimistic about the future.

And we're certainly well

positioned and well prepared for recovery. Thanks for joining us.

Ladies and gentlemen, that concludes our conference for today.

Thank you all for participating and have a nice day.