TTM Technologies Inc (TTMI) 2006 Q2 法說會逐字稿

Good day and welcome to this TTM Technology’s Second Quarter Earnings Release Conference Call.

Today’s call is being recorded.

For opening remarks and introductions, I would like to turn the call over to the Chief Executive Officer, Kenton Alder.

Please, go ahead.

Thank you.

Good afternoon and thanks for joining us for our Second Quarter 2006 Conference Call.

I’m here in Santa Ana with our CFO, Steve Richards.

We are very pleased by our second quarter performance with revenues of $76.7 million and earnings per diluted share of $0.25.

But before we get into any detail, let me mention that 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 differ 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 most recent 10k.

The Company assumes no obligation the information provided in this conference call.

Now, as you’ve read in our press release, TTM generated another solid quarter with record revenues, expanding margins and earnings growth.

Revenues of $76.7 million for the second quarter represented an increase of 5.5% sequentially, compared to the first quarter of 2006.

On a year-over-year basis, revenues expanded 34%.

Panel production increased slightly from the first quarter.

Panel pricing, however, was the major driver of revenue growth.

The average price on a per-panel basis increased 5% sequentially due in part to a shift in product mix and higher layer count.

Our average layer count increased to 15.9 from 15.4 in the first quarter of 2006.

Market strength was broad-based, encompassing almost all market segments and customers.

The communication and the high-end computing segments were, again, particularly strong.

We continued to add new customers - 24 in the second quarter of 2006 and our technological and operational capabilities continued to improve.

Products with 12 layers or more accounted for 68% of revenues, compared with 67% in the first quarter of 2006.

Products with 20 layers or more accounted for 38% of revenues, compared with 37% in the first quarter of 2006.

Second quarter lead times remained stable with the first quarter at approximately 12 weeks in Chippewa Falls.

At Redman, lead times were down from five weeks to three-to-four weeks.

Santa Ana’s lead times remained constant at three weeks.

Our overall capacity utilization percentage for the company was in the mid to high 80’s for the second quarter, not much change from the first quarter.

As we mentioned last quarter, we added equipment and head count at Chippewa Falls.

We did so, again, in the second quarter.

This enabled us to increase production levels and service additional business particularly in Chippewa Falls.

As for customer concentration, sales to our five largest OEMs constituted 48% of revenues in the second quarter, compared with 45% in the first quarter.

Our top five customers in alphabetical order were Cisco, HP, IBM, ITT and Juniper.

Before I turn the call over to Steve who will provide some additional details about the quarter and discuss the near-term outlook, let me make a few brief comments about trends in the printed circuit board market.

Market indicators are somewhat mixed yet we remain optimistic regarding the second half to he year.

The industry’s book-to-bill ratio has declined over the last few months.

Our book-to-bill ratio, at the end of the second quarter was just under one.

This was expected, as our book-to-bill ratio declined from the 1.2 level at the end of the first quarter.

Our lead times held steady at Chippewa Falls, yet declined in Redmond and we experienced consistently favorable pricing trends throughout the quarter.

From a North American industry standpoint, capacity additions over the past few quarters have been in line with market demand.

For these reasons, we continue to expect solid results.

Now, I’ll hand the discussion over to Steve.

Thanks, Kenton.

With record revenues and strong operating efficiency, gross margins expanded to 30% in the second quarter of 2006, compared with 27.8% in the first quarter of 2006 and 19.3 in the year-ago quarter.

Sales and marketing expense was $3.5 million or 4.5% of sales for the second quarter of 2006, compared with $3.4 million or 4.6% of sales in the first quarter of 2006.

General and administrative expense, including amortization of intangibles was $4 million or 5.2% of sales in the second quarter of 2006.

That compared with $3.9 million or 5.3% of sales in the first quarter of 2006.

During the second quarter of 2006, we reported stock-based compensation expense of $335,000.

Our balance sheet continued to strengthen even further during the second quarter.

We generated strong cash flow from operations of $10.8 million.

As a result, we were able to fund net capital expenditures of $2.3 million while expanding our cash and short-term investment position by $10.7 million to a total of $101.2 million.

Depreciation was $2.4 million.

As for our third quarter 2006 guidance, as stated in the earnings release, we expect revenues of $73 million to $78 million with stable pricing.

Our GAAP, diluted earning projection is $0.20 to $0.25 per share.

In terms of gross margins, we expect them to be about 27% to 29%.

As we discussed last quarter, we absorbed a raw material price increase as of April 1st.

Prices went up again on July 1st.

With existing lead times, we don’t expect it to be able to fully pass through this second round of laminate and pre-paid price increases until the fourth quarter.

For the third quarter, we expect this price increase to cut into gross margins by between one half and one percentage point.

As for expenses, we expect sales and market expenses to be approximately 4.6% of revenues or $3.4 million to $3.6 million and we expect GNA expense to be about $4.1 million, including amortization of intangibles - that’s 5.3% to 5.6% of sales.

As for tax rate, we expect a one-time, discreet adjustment that will reduce our tax rate to 35% for the third quarter.

It was 36.5% in the second quarter.

With that, let’s open the call to your questions.

[OPERATOR INSTRUCTIONS] We’ll go first to Matt Sheerin from Thomas Weisel Partners.

Yes, thank you.

Hello, Kent.

First question on your guidance, you know, you’ve had, I guess, four or five quarters in a row of sequential growth and solid book-to-bill.

Why do you think things have just moderated a bit?

Are customers becoming a little bit more cautious?

Was there any sort of inventory build you saw out that you there or is that kind of a seasonal trend that you normally see that you didn’t see last year because things just started picking up?

Yeah, thanks for the question, Matt.

We do not see any inventory builds in the system.

This, in our estimation, is purely a seasonal-type occurrence that happens in the summer with vacations and so forth.

If you look at our guidance for this quarter, it’s about the same as it was last quarter, so this is a seasonal effect.

As we talk with customers, suppliers, others throughout the industry, we still feel pretty optimistic about the balance of the year.

Okay and then on your margin guidance, you talked about some pressure due to the materials cost.

On the pricing, do you expect to have success in passing those price increases along again and if so, will we see margins come back to the June levels in the December quarter?

Matt, a lot of the margin, you know, growth that you’re projecting say, fourth quarter, would probably be, you know, price driven but certainly we do expect to be able to pass through the raw material price increases to our customers both during the third quarter and in the fourth quarter.

It’s primarily Chippewa Falls where there’s more of a lag because with 12-week lead times, that takes up most of the quarter and so we - that work was priced at say, Q2 prices.

So, it’ll be a bit of a time before we can get the price increases through to the Chip Falls customers but we can probably pass it through to the Redmond, Santa Ana customers with shorter lead times during the third quarter.

Okay, great and just my last question concerning Redmond.

You said lead times came in.

Why was that?

Is that because of customer mix issues or why was that?

Yeah, that’s basically Redmond services a lot of the industrial and medical customers and we had some softness.

Several customers there were in between programs and so forth, so it’s mainly just the timing relative to that particular customer base that Redmond serves.

Okay.

Okay, great.

Thanks, a lot.

Thanks, Matt.

Well, go now to Kevin Kessler with Bear Stearns.

Hey, Kevin.

Hi, guys, good afternoon.

Hey, in terms of just panel pricing, what are your assumptions then, in the guidance, in terms of average panel pricing for Q3?

We’re holding panel prices in the guidance real steady with the prices we saw in the second quarter so kind of so prices did increase for a lot of reasons.

One big factor was the increase in the layer account and the technology which of course, you know, requires a higher price and a higher material component and so were assuming the prices will stay flat for Q3 at the Q2 levels.

And in terms of your guidance, Steve.

I just didn’t catch what you said, in terms of your GNA and sales and marketing.

Yeah, GNA was just under $4 million for the second quarter and about $4.1 million in Q3.

Keep in mind most of that increase is going to be because of a higher stock-based compensation expense.

We’ll give an option grant every quarter.

We’ll give a grant out this quarter and that will raise our stock-based comp expense for next quarter.

In terms of selling expense [Inaudible].

Hello?

Kevin, you can hear me now?

Yeah, you were breaking up a little.

In terms of selling expense, we’re expecting in the three’s - $3.4 million to $3.6 million of selling expense which really is on a par with the costs we had this quarter, no increases there.

What was option expense in the quarter and what do you expect it to be next quarter and how do you guys break that up?

Is it all in your SG&A?

Nope, it was $335,000 in the second quarter which was I think about a $70,000 increase over the first quarter.

It should be around $400,000 third quarter, give or take, well, maybe give $20,000 or so and we actually do break it up both in terms of cost of goods sold, selling and GNA expense because that’s - we have to expense it in the area where the employee salaries hit.

So, if an employee whose cost to goods sold have options, that expense goes into cost of good sold and in general, the bulk of it is going to be in GNA, however, and the next biggest piece is going to be in cost of goods sold is a small piece in selling.

Okay and then, you know, your hind computing segment was one that increased rather substantially.

What happened there?

Did you guys add a new customer?

Was there a new program at ramp?

I think, Kevin, we were pretty successful there in being in the right programs with our existing customer base.

You know, we continue to add customers throughout every quarter but the increase this last quarter came again as we functioned in the high-end server space, mixed space and so forth and you’ll notice we have two customers in our top ten this quarter with Cisco, IBM.

And of course, IBM is one of those on the high-end computing that was pretty solid for us this past quarter, as was Hewlett-Packard.

And who was above 10% of sales?

It was just the two companies, IBM and Cisco.

IBM and Cisco are both 10.

Yeah.

Anybody above 20?

I think you can probably round that to 20?

Okay, for Cisco.

Great, thank you very much.

Thank you, we’ll move on to Shawn Harrison from Longbow Research.

Hi, good evening.

Just wanted to get back to the industrial medical softest.

Is that going to extend into the third quarter as well, in terms of just, you know, the customers being in between programs?

Yeah, that’s a good question and we think some of that will definitely come back in the third quarter.

Some of it will be coming back in the fourth quarter and these were like, large systems, like to a power generation plant where we put a lot of industrial controls in that system, some programs in the aerospace business that are in between revisions and so forth.

So, we believe that’ll come back.

Exactly when, we’re not sure but a major portion of that would come back in the third quarter and some into the fourth.

Okay and then just you mentioned your average pricing assumption is stable quarter to quarter.

What about the average layer account?

Would that be declining quarter to quarter and would that maybe account for some of the weakness in gross margin?

No, we don’t expect layer account to decline next quarter.

It should be stable to potentially up a little bit next quarter.

Part of that layer account issue, you know, depends on the mix of [unintelligible] Plant and of course, Chippewa Falls does most of their work in the 20+-layer category.

But certainly, a shift in layer count is not really what’s driving the margin impact.

I think more of the margin impact really is driven by absorption and largely by the raw material price increases for pre-paid and laminate.

Now, Shawn, one other thing is when in the first part of the second quarter, the July/August timeframe, that’s always just a little choppy for us, given the summer months, the vacations, the holidays, those kinds of things, so we’re not quite as efficient in that month or two and then we pick it up again at the end of the second quarter and then roll through the fourth quarter.

So, historically, that’s kind of been the pattern, so we’re still - while we’re forecasting a little bit of a flat quarter here in the second quarter, very, I guess, pretty optimistic about the rest of the year.

Got you and then my final question just has to do with quick turn demand given that, you know, kind of it is a seasonally down quarter, would you expect a quick turns percent to sales to be stable or down slightly?

In the second quarter?

In the September quarter, yeah.

It’ll probably be - let’s see, I’m trying to think.

Probably about flat I think where we’d put it into that, into the equation.

As I review that process, given all the work in the other facilities, I think it’ll be around flattish.

Okay, thanks.

We’ll move on to Amit Daryanani, RBC Capital Markets.

Thanks a lot.

Good afternoon, guys.

Hey, just a question on the 12-week lead time in Chippewa Falls.

I’m wondering if you see, you know, customers limiting your allocation there given the extended lead times and perhaps you could a little of what you did differently versus back in 2004 when, you know, we did have some others go away for the short period when the lead times are extended there.

Yeah, thanks for the question, Amit.

That’s a good one.

Our lead time at Chippewa Falls, it’s the same this quarter as it was last quarter but as you look at our lead time, we have put into the system a lot of flexibility below the 12 weeks, meaning that we reserved some capacity utilization so that customers have specific needs, we’re able to fill that need, we’re able to do some more quick turn and so forth.

So, when you compare our 12-week lead time even this quarter over last quarter, it’s a much more flexible and serviceable 12 weeks.

When you look at this lead time and go back to a couple years ago when we had 12-week or 13-week lead times, that was a locked in 12 or 13 weeks with no flexibility whatsoever.

Our CapEx program we have put more CapEx into our Chippewa Falls facility and expanded our production there, so we got - we increased our throughput but the demand kind of matched the throughput this quarter, so we weren’t able to get our lead times down but we were able to really manage that capacity in a fashion where we’re able to meet our customer needs and keep our customer happy and satisfied.

Yeah, we aren’t seeing any customer defections due to the long lead times in Chip Falls.

And just to clarify, there’s a lead time of flexible 12 weeks versus, you know, a stagnant 12 weeks, if you may, purely because you’ve added capacity, not because demand’s gone away from that side.

Is that accurate?

That’s true and then there’s one other factor is how we’ve managed that capacity also and I think a key ingredient to any - the success of any circuit board shop is how you manage your capacity and so we haven’t lost any business, demand is still solid and we’ve been able to reserve capacity below the 12 weeks and then be able to satisfy our customers.

And then just on the quick turn side of things, you know, I think that you said [unintelligible] flat sequentially in the September quarter. [unintelligible] you know, relatively weak, at least in the September quarter.

Is there a reason why we don’t expect that seasonal down take this time around?

Yeah, I think the quick turn, to some degree, you know never know quite which month it might have some ups and downs but our quick turn, historically, has been robust in July, been satisfactory in July, a little satisfactory in August but then picks up in the September month and then throughout the fourth quarter is really strong until you get to around the Christmas end of the year timeframe.

So, historically, it’s been a little soft the first part of the second - third quarter and then picks up at the end.

All right and the fact that we’re kind of at the end of July, it doesn’t sound like you’ve seen that softness yet.

It’s maintained - it’s kind of holding in there about like we had, a little softness around the 4th of July but that’s the vacation time and so forth but it’s - we’re pretty happy with where we’re positioned with regards to our quick turn.

And you know, it declined a little bit as a percentage of sales this quarter but on a dollar basis, it was certainly up.

It’s just we were up in the other segments and other facilities also.

I think the fact that our quick turn is at 19% this quarter and we still generate 30% growth margins, that says a lot about if the mix comes in a little bit differently and more favorably towards quick turn, what can happen here.

All right.

Thanks, a lot, guys.

We’ll move on to Tom Dinges from JP Morgan.

Hi, good afternoon, guys.

Kent, I’m trying to kind of rationalize the commentary about the book-to-bill being just a little bit below one because I would imagine that the major customers that you’ve got, the top five, at least, most of those are on sort of a hub pool system where booking and billing is fairly instantaneous.

So, is the fact that the book-to-bill is just slightly below one more the factor that you’ve got some of those industrial programs that you talked about, you’re a little unsure as to when those are going to ramp and perhaps the customer hasn’t actually, you know, put the order in for the capacity yet?

Is that the major reason for it?

Yeah, I think you said that probably as well as I could give you the answer.

Yeah, we’re - the softness in the book-to-bill, we anticipated that going down.

It was a 1.2 at the end of the first quarter, down to around one and we kind of, in through the first part of July, hung in about where we have for the last three or four weeks at the end of the quarter, so at that rate, where we’re at in the summer months, I think we’re anticipating at the end of the summer that we’ll be continuing on a more positive book-to-bill.

Okay and then in the discussion with your customers around pricing increases and what you guys are seeing from the standpoint of your materials costs going up, obviously, a lot of customers aren’t real happy about taking price increases, but you’ve been, you know, fairly successful at this.

Are you getting any more pushback than you normally get from customers at this point because obviously, you know, prices have been going up for customers in a lot of areas that have exposure to precious metals and other commodities.

Is that dynamic changing at all or are the dialogues still, you know, fairly constructive where everyone seems to want to share a little bit in the pain that everyone’s feeling from the rise in the commodity costs?

Well, I think any kind of price increases, the customers are always, you know, challenging.

I think, in this case, the fact that every other, you know, circuit board manufacturer both domestic and overseas is facing higher laminate prices because of the higher copper prices, at least makes us not a standalone company that’s charging them, you know, only or disproportionately versus our competitors.

So, I think the customers are never happy about it but they understand that it is a relative price increase.

I don’t think the conversations have been more painful than they have in the past, you know, any more painful than today, any kind of price increase [discussed] it normally is.

Let me add a little bit to that too.

As far as the pain to the customers, we don’t - I mean, it’s important that we share that pain but at certain times, it’s important that we do all we can to reduce that pain and so on the cost side, we’re constantly looking at ways to reduce our price, become efficient and drive costs out of our business.

I mean, that’s something that companies tend to do when times are slow.

We do it all the time, whether we’re in slow times or good times, we’re always looking at ways to reduce the costs so that we can keep the pain low.

And the other point I’d like to make is to make sure that when we think of panel pricing, that doesn’t directly mean an increase to our customers.

As we’ve talked about earlier, the one-dimensional panel pricing is affected by the facility mix between facilities, it’s affected by layer count, it’s affected by technology and a numerous other factors, so we condense it down to one dimension so that it helps everyone understand what happens to our top-line sales.

But a lot of factors go into play there.

So, we’re hoping that as we look at the panel pricing and combine that with the value add that we provide the flexibility, the quick turn, the engineering services and all the other aspects that we do beyond just ship a product, that we’re receiving value for that.

So, that’s how we want to look at this is we don’t want to get paid more than we earn.

We just want to earn every and provide value for our customers so that everyone feels good about it.

Okay, thank you.

We’ll move now to Shawn Severson from Raymond James.

Thank you.

Good afternoon.

Good afternoon.

Afternoon.

Just sort of how the [lineary] of the quarter was, I mean, did you have any kind of a surge of business at the end or did you track pretty smoothly throughout the quarter?

No, we always have - well, we typically have a little stronger third month in the quarter and that was the case this time but overall, shipments were pretty even, I mean, a little bit more in June but not drastically more.

So, there weren’t any kind of say, production inefficiencies from say, having too little work at one part of the quarter and too much at the end of the quarter.

Part of the reason why we have higher third, you know, third month, you know, sales is partly due to the hub pools from the finished goods inventory we keep with the [unintelligible].

They tend to pull more towards the end of the quarter and that affects our shipments as well as revenue.

Okay and then do you have a rough idea of how much of your business would kind of be like compressed lead time volume business?

You know, not truly quick turn or prototype or something that’s in the R&D stage but you know, I guess kind of going back to my first question, maybe somebody who underestimated, you know, what the volume demand needs were going to be and you know, needed extra in a very short period of time?

You know, Shawn, we don’t measure that and I know it was pretty positive for us this quarter.

One of the challenges that we have when we start to try to measure that is it’s kind of a moving target because your lead time moves and underneath lead time and it seems like we could spend a lot of time trying to track that measurement.

I’d rather spend our time manufacturing circuit boards and making sure we’re productive and efficient and we have these relationships with customers where we’ll do what it takes and when we deliver under compressed lead time, we think there’s some value there.

So, we are able to be succe3ssful there but as a percentage, I would - since we don’t measure it, or don’t monitor it, I’d have a hard time relating a number to you.

Sure, that’s fine and I was just wondering, you know, if you take kind of your top five customers, I mean, is there a major difference in the lead times that they get, you know, in terms of the business that you, you know, you’re backlogged, you’ve booked with them, versus maybe some of the other smaller customers, you know, in your mix?

Or is it pretty consistent across the board that you get similar, you know, timeframes or forecasts from customers?

It’s definitely not similar.

With our larger customers, we are able to have some forecasts, rolling 13-week forecasts and projections and so forth that we can plug into our system and look at and that’s one of the reasons why we can look at those forecasts that they provide to us and estimate how much we’ll need to have to flexibility below like a 12-week lead time.

So, with the larger customers that have those forecasts, that enables us to actually service them a little better and manage our capacity to a much more beneficial way of satisfying customers.

When you get into the most of the customers we serve in Redmond, then you have a discreet purchase order event that takes place in the three or four-week lead time and then your lead times fluctuate on discreet purchase orders.

In Santa Ana, you know, the shorter the lead time, the better.

We love change.

We don’t’ like anything to be consistent here, so we’re open for business 24 hours, 48 hours, whatever the customer needs and of course, trying to forecast that is much more challenging.

Sure and then have you found, you know, amongst the top five customers that they’ve been pretty consistent, you know, with their backlog and lead times and you know, not a lot of volatility or bouncing around with, you know, the projections they’re giving you and were fairly smooth through the quarter?

Well, I think they’re giving us the best projections that they have and so they’re as accurate as they can get their projections but sometimes, it’s hard for our customers to know what the end consumer will do and how that works on their end.

But as far as having the most accurate forecast that we can get, our customers provide.

Yeah, we’re getting a pretty accurate forecast.

We’ve been doing this for a number of years with all of those larger customers but it does change from time to time and it’s everybody’s best estimate at the time and that’s why we don’t spend all of our capacity on those forecasts and we reserve a little less underneath the lead time.

It has the effect of extending our lead time a little bit but it gives us the flexibility that we need.

Yeah, and that’s kind of what I was asking you is the frequency of those changes, you know, throughout the quarter up and down?

I mean, have there been any different or changes from maybe what you experienced a couple months ago?

You know, I’m not as close to that - to give you a definitive answer but it doesn’t seem to be any different now than it was a couple quarters ago.

Yeah, we aren’t seeing any kind of, you know, say, orders placed 12 weeks out and then cancelled in the meantime or you know, that’s not happening.

What we’ll see is a customer who places an order and [unintelligible] space essentially for, you know, a board and then as [is close to actually us] starting that board, they may sub out for a different board that is in their product line because the forecast they’ve done is now more quantifiable and they know they need more of this unit versus that unit.

But certainly, the customers are placing orders and we are actually producing to those orders.

There’s not a concern about cancellations.

Okay, thank you.

We’ll take a follow-up from Kevin Kessler.

Thanks.

Kent, based on your comments, it sounds like you’d still be expecting kind of a normal, seasonally December quarter.

Would that be fair?

That’s correct, yes.

And I mean, is that based on, you know, discussions with customers or is that just based on normal, seasonal trends?

Or what gives you the confidence that that should happen?

Well, it’s all the factors that we look at and we look at the macro picture, as everyone does and looks at the market indicators that are out there.

We also have our conversations with our customers and ask them what’s happening on their side of the equation and so we have, I guess, the advantage of talking directly with customers and looking at the capacity and needs and forecasts and those comments, as we talk with customers, for the majority of the time, are pretty positive, with the regard to the balance of the year.

Do you think that they’ve got at all more cautious over the last, you know, month or two or have you really sensed no change?

I mean, if there is a little bit of cautiousness, it’s not anything that I would be alarmed about.

I think we get into the seasonality and any time there’s not the continued pounding, everybody kind of takes a step back.

I don’t think there’s any alarm there from the customer side.

Okay and then what about, Steven, like, cash flow from operations, your expectations for the second half to the year?

You guys have done a great job on the first half.

You know, we had $10 million dollars in operating cash flow this quarter.

Now, it should be roughly the same size.

You know, our guidance for revenue and earnings is, you know, flat, down a little bit, flat, up a little bit, you know, it’s kind of the range that surrounds, as Kent said earlier, what we gave last quarter, so, I would think a similar size operating cash flow.

We had a large tax payment this quarter and but that may repeat again next quarter too, you know what I mean?

We are making a lot of money these days, you know, which is great but of course, we have to pay the government their share.

So, I would think a similar sized amount of cash flow.

I don’t think, you know, depreciation should be about the same size.

I don’t think we’ll have, say, a big spike in AR or inventories over what we had this quarter that would kind of eat up more cash.

So, I’d assume pretty similar at this level.

Okay and then and when you say taxes, is it a step down permanently now, like, going forward on a quarterly basis, you expect to be taxed at more of a 35% level?

Absolutely not.

It’s a good question, Kevin.

I tried to make it clear there in the script but yes, it’s a one-time benefit for the third quarter adjustment to our tax rate for the third quarter.

It’ll be 35% versus our normal 36.5%.

I’m assuming that it’ll be 36.5% again for the fourth quarter, so don’t model that farther than just a quarter.

Okay, okay, that’s good and in general, do you get a sense, in terms of the overall pricing environment from competitors?

Is that changing at all?

Do you see people as book-to-bills are coming down, are competitors becoming more aggressive on pricing or are you not sensing that yet?

I don’t sense that at all.

I think there’s still a lot of rational pricing going on so.

Okay, great.

Thank you.

We’ll go to a follow-up question from Shawn Severson.

Hey, just one quick follow-up.

Any update on the acquisition front, you know, what you’re looking at in Asia or anywhere else for that matter?

Yeah, our acquisition strategy, again, in north America, it would be to consolidate the quick turn market or move into a military aerospace that would complement our existing offerings.

And then in Asia, we look to have a facility in Asia that would complement our existing facilities here that is based on our time and technology business model.

So, we’re still very active in exploring all opportunities in all of those fronts and when the opportunity presents itself, then we’ll be hopefully actively involved.

Would you say you’re closer to anything now than you were at last quarter?

Well, we continue to look at all options, so if we get close, then we’ll continue to keep everybody [apprised] but--.

--Okay.

All right, thank you.

And gentlemen, there are no other questions at this time.

So, now, for closing remarks, I’d like to turn the call over to Mr. Kenton Alder.

Please, go ahead.

Yeah, I’d like to thank everybody for joining today and if you have follow-up questions, feel free to give Steve and I a call and we’re excited about the position of the company and the ability to executive our business model, the employees who all make it happen.

It’s just a good position to be in and we thank you for joining and look forward to the next quarter.

Thank you.

Thank you, guys.

Once again, that does conclude our conference.

Thank you for joining us.