Ultra Clean Holdings Inc (UCTT) 2011 Q4 法說會逐字稿

Good afternoon. My name is Bentley, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ultra Clean Technology fourth-quarter and fiscal-year 2011 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) Joining us today is Mr. Casey Eichler, Chief Financial Officer, and Mr. Clarence Granger, Chairman and Chief Executive Officer. I will now turn the call over to the Company. You may begin your call conference call.

Thank you, Bentley. Welcome to our fourth-quarter and fiscal-year 2011 financial results conference call. Presenting today is Clarence Granger, Ultra Clean's Chairman and Chief Executive Officer, and Casey Eichler, Ultra Clean's Chief Financial Officer. Casey will begin by presenting the financial results for our fourth quarter and fiscal year 2011. And Clarence will follow with some remarks about the business. A few moments ago, we issued a press release reporting financial results for the fourth quarter and fiscal year 2011 ended December 30, 2011. The press release can be accessed from the investor relations section of Ultra Clean's website, along with the information for the tape delay and replay of the live webcast at UCT.com.

Together with our recently issued press release, this conference call enables the Company to comply with the SEC regulations for fair disclosure. Therefore, investors should accept the contents of this call as the Company's official guidance for the first quarter of fiscal 2012. Investors should note that only the CEO and CFO are authorized to provide Company guidance. If at any time after this call we communicate any material changes in guidance, it is our intent that such updates will be done officially via public forum, such as press release or publicly announced conference call. The matters that we discuss today include forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995, related to matters including our future financial performance, new product orders and shipments, and industry growth. Investors are cautioned that forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission. The Company disclaims any obligation to publicly update or revise any such forward-looking statements or to reflect events or circumstances that occur after this call. Now, here are the fourth-quarter and fiscal-year 2011 results.

Thank you. Revenue for the fourth quarter was $86.9 million, or a decrease of 18% from the prior quarter and a decrease of 28% when compared to the same period a year ago. For fiscal year 2011, revenue was an all-time high of $452.6 million, compared to $443.1 million in fiscal year 2010, an increase of 2% year-over-year. Semiconductor revenue for the fourth quarter was $69.1 million, a decrease of less than 1%, and non-semiconductor revenue was a $17.7 million, a decrease of 50% when compared to the third quarter. Semiconductor revenue was 80% of total revenue for the quarter and 75% for fiscal 2011. Revenue outside the US was 29% in the quarter compared to 28% in the prior quarter and 29% for fiscal 2011. Two customers had revenue over 10% for the quarter and fiscal year. Gas delivery systems represented 55% of our revenue for the quarter and 57% for fiscal 2011.

Gross margin from the fourth quarter decreased to 11%, compared to 12.2% in the third quarter, and 12.3% in the same period a year ago. For fiscal year 2011, gross margin was 13%, compared to 13.3% for fiscal year 2010. Operating expenses were $8 million, or 9.3%, a decrease of approximately $503,000 from the prior quarter. Our operating expenses as a percent of revenue will move back into the range of 8% to 9% in the first quarter of 2012. Our operating income was $1.6 million, or 1.8%, before interest expense and income taxes, compared to an operating income of $4.3 million, or 4.1%, in the third quarter. For fiscal year 2011, operating income was $23.5 million, or 5.2%, compared to operating income of $25.5 million, or 5.7%, in fiscal 2010.

An income tax benefit of $6.4 million was recorded in the fourth quarter. In the second quarter of 2009, UCT recorded a tax valuation allowance reducing its consolidated deferred tax assets by $7 million. Each quarter, we have evaluated our cumulative profits along with other assumptions in order to evaluate the reasonableness of maintaining the valuation allowance on our balance sheet. During Q4 2011, we determined that there was enough substantive evidence to reverse a majority of the valuation allowance. As a result, a tax benefit of $6.4 million was recorded during Q4, providing additional net income of $0.28 per share. In addition, our effective tax rate for the fiscal year 2011 was 23%, before the reversal of the valuation allowance, bringing the Q4 effective tax rate to 11% in order to adjust for tax expense already taken during the year. Looking forward, the tax rate for the first quarter should be modeled at 24%.

Fourth-quarter net income was $7.8 million, or $0.34 per share, with the valuation allowance or reversal previously discussed. Without the valuation allowance, adjusted fourth-quarter net income was $1.4 million, or $0.06 per share. This compares to net income of $3.2 million, or $0.14 per share, in the third quarter. Net income for the fiscal year 2011 was $23.7 million, or $1.01 per share, with the valuation allowance reversal included. 2011 net income, without the valuation allowance reversal was $17.3 million, or $0.74 per share, compared to net income of $20.1 million, or $0.87 per share for fiscal year 2010. The full year diluted -- excuse me, the fully diluted count was 23.3 million, an increase of 33,000 shares from the prior quarter. Non-cash charges for the fourth quarter were $1.1 million, related to FAS 123R and $800,000 related to depreciation and amortization.

Turning to the balance sheet, cash was $52 million, an increase of $14.1 million from the prior quarter. Cash, net of third-party debt, was $27.3 million, an increase of $15 million during the period. Gross cash was at an all-time high for UCT during the fourth quarter, and we anticipate that cash will be up slightly next quarter. Accounts receivable was $40.8 million, down $6.8 million from Q3. And days' sales outstanding increased to 42 days from 41 days. Accounts payable of $29.4 million increased approximately $2.4 million over the quarter. Days payable outstanding at the end of the fourth quarter increased to 34 days from 26 days at the end of the third quarter. Net inventory was $55.5 million, a decrease of $3.8 million over the prior quarter. On a year-to-date basis, net inventory decreased $3.8 million from $59.3 million reported at the end of fiscal 2010. Inventory levels are projected to decline slightly during the first quarter of 2012. Now, Clarence will discuss the operating highlights for the fourth quarter. Clarence?

Thanks, Casey. As anticipated, we experienced a revenue and earnings decline in the fourth quarter. However, I am very pleased that UCT was able to beat the high end of our revenue and earnings guidance, and that we are now able to project a significant business recovery in Q1 2012. As discussed in our Q3 earnings call, we did see a reduction in demand from our semiconductor equipment and high brightness LED customers. With LED being the most significant quarter-over-quarter market decline. Despite this, UCT beat our high end of revenue and earnings per share guidance projected at the beginning of the quarter. We had projected guidance of $75 million to $80 million in revenue and $0.00 to $0.02 earnings per share. We were able to beat this guidance significantly, achieving $86.9 million in revenue and $0.06 earnings per share prior to the reversal of the valuation allowance.

As Casey mentioned earlier, we were also able to further grow our balance sheet. Our cash levels are at an all-time high of $52 million, an increase of $14.1 million quarter-over-quarter. We anticipate that we will continue to grow cash over the next several quarters, along with continuing our inventory level reductions. Additionally, 2011 was a year in which we achieved record revenues of $452.6 million.

I'll now review highlights of our activities for the fourth quarter. As stated earlier, we saw a sharp decline in the high brightness LED market. During the fourth quarter, UCT shipped orders of $672,000 for LED-related gas delivery subsystems. This compares to a revenue of $15.8 million for similar products during the third quarter. As we discussed last quarter, we have seen a sharp decline in demand within the MOCVD market due to an over-inventory situation at all of our major LED customers. We do not anticipate that this situation will correct itself until the latter part of 2012. Even though our shipments declined drastically during Q4, we did achieve revenue levels within the LED market of approximately $42.7 million during 2011. And although the decline in the LED forecast has been disappointing, UCT is well-positioned with our customers on their newest generation products, which should greatly benefit us when end market demand begins to recover.

During the fourth quarter, revenue from our Asian manufacturing operations increased from 28% of total UCT revenue in Q3 to 29% in Q4. This was mostly due to the decline in the manufacturing of LED-related gas delivery systems, which are primarily built within our US manufacturing sites. We anticipate continued ramping of our Asian operations as a percentage of total revenue during 2012. As mentioned in previous calls, this is a result of our customers' continued plans to migrate more of their supply chain to Asia.

As part of UCT's ongoing diversification strategy, we are pleased to announce our business relationship with a new customer, Bruker Corporation. Bruker is a billion-dollar manufacturer of scientific instruments that support customers in life science, pharmaceutical, biotechnology, clinical and molecular diagnostics research, as well as in materials and chemical analysis in various industry and government applications. UCT has already made initial shipments to Bruker and is now qualified on one product. We anticipate shipments to them during the next year to be in the $1 million to $3 million range, with significant potential growth opportunities thereafter.

During our Q3 earnings call, I discussed the fact that one of our recent customers, FEI Corporation, has communicated to UCT that they intend to bring their US manufacturing back under their management within the next few quarters. I am now able to communicate that we have negotiated an official transition date of April 1, 2012. Most UCT employees in Portland, Oregon are in the process of transitioning to FEI. And we anticipate that we will stop providing FEI manufacturing services at the end of Q1 2012. We will, however, continue to see an income stream from FEI through Q3 2012, by assisting in all ways necessary in this transition period and after. This income stream will be approximately equal to the profit that we would have made had we continued manufacturing for FEI through Q3 2012. We are disappointed in FEI 's decision, but we are confident that we will continue to find other long-term outsourcing partners, such as the opportunity mentioned above with Bruker Corporation.

I would now like to shift to our guidance for the first quarter of 2012. In the first quarter, we are projecting an increase in revenue and EPS. Our revenue guidance for the first quarter is $105 million to $110 million, with earnings per share in the range of $0.15 to $0.18. As Casey discussed earlier, the tax rate for the first quarter should be modeled at 24%.

In summary, during the fourth quarter of 2011, UCT experienced an 18% decline in revenue quarter-over-quarter, but significantly outperformed the earnings guidance we provided at the beginning of the quarter. Also, over the past two quarters, we have experienced a greater than 35% decline in revenue due to declining industry demand, yet we have remained profitable. We consider this a testament to the flexibility of our business model. And next quarter, we are projecting the beginning of a recovery in industry demand.

Looking forward, we are excited about continued growth in Asia. And although we are experiencing a change in our relationship with FEI, we do see expanded business opportunities with other customers, both existing and new. In closing, 2011 was a year of record revenue for UCT, and we are confident that 2012 will be another strong year for the Company. With that, operator, we would now like to open the call for questions.

(Operator Instructions) Your first question comes from the line of Robert Spandau with ThinkEquity.

Thank you for taking my question. When you look to the guidance in Q1, can you describe how much of that is semi-cap sales? And any indications of how sustainable this level is beyond Q1?

Yes, this is Clarence. The level of semiconductor sales will be approximately 80%, very similar to Q4 levels. And in terms of sustainability, that obviously depends on market demand, and we are not trying to forecast beyond Q1. But recent news from Samsung and Intel certainly appears to be favorable.

Great, thanks. And it sounds like this is coming on fairly fast. So are there any concessions or expedite fees given in order to facilitate the quick ramp in sales? Or will you be able to past most of the expedite fees on to your customers?

This is Casey. I am going to give Clarence's voice a rest for a minute. Fundamentally, there isn't anything changing in that dynamic at all. If your customer orders things inside of a lead time, we have arrangements where, in certain instances, we could expedite fees, and in certain instances, we won't. But I would say that it's not -- what we are going to see this quarter is going to be traditional to what we have seen in the past, as things continue to ramp up.

Great, thanks. So then real quick, can I compare first quarter then to say third quarter 2011 in terms of margin and performance?

Yes, there's always some differences from quarter to quarter. Some quarters we have MTO, or depending on which way the ramp is going, are we ramping up or ramping down. That would be one way to think about it. I think you would have to look at some of the other dynamics around what was happening in front of and behind that quarter and adjust accordingly.

Your next question comes from the line of Edwin Mok from Needham & Co.

Hi, thanks for taking my question. Casey, first question I have for you is regarding this FEI, how are you going to recognize things in the second quarter? Are you going to be below the line? And then in terms of the first quarter, do you expect outsized bump up in the quarter because of the way the contract is structured?

The way it is structured, obviously, they are going to take over the facility or take back the facility as well as the employee base. So there will be a smooth transition there. There's inventory, which of course they're going to want, and so they will purchase that inventory from us. And then, depending on how we provide services out over the first couple of quarters of the year, that is going to dictate how revenue is recognized. As Clarence mentioned, it is roughly equivalent to had we done the work through that period. But the recognition of it is a little bit subject to our ability to provide services and the transition relief that we have been asked to provide. And depending on how much that has provided in each quarter, that will be how it rolls out. So I should be able to give you a little better picture on that at the end of this next quarter and then into the next quarter. But right now, it is a little difficult because I'm not exactly sure how we are going to be able to provide those services or what they're going to ask us for.

We don't anticipate any of it would be in Q1, so it would be in Q2 and Q3. But we are just not sure how it would be split.

I see. So Q1 is more like your current run rate --

Q1 is like the current run rate, that's correct.

Great. And then just to clarify, in terms of the employee and other costs associated with you guys transferring to FEI, are those mostly on [cost of] (inaudible)? Or should we expect a slight reduction to office related to this transition?

I didn't hear the end of the question. Could you ask that again?

Sorry. Is it mostly related -- is those costs mostly related to cost of [console] or should we expect some reduction in OpEx as well?

There really isn't much change in OpEx. There wasn't a lot of support provided there. Most of the direct and indirect headcount is, like I say, going to go with FEI. A little bit will stay with us, but most of it will go with FEI. And there aren't any big payroll costs related to this transition on our part. So I don't think you will see much of a noticeable bump down in OpEx related to it or an increase in costs related to the transition.

Great. Very helpful there. And then a question on Bruker. So obviously this is exciting to have a new customer that is coming in, and especially because of their size. Just curious what are you making for them right now? Is it -- I understand (inaudible) and a business is an increment as well? Is it more for that? And then how do you view that if you look out one or two years, or potential for a years, you just look out one or two years?

Sure, this is Clarence. So what we're making for them is we're making a subassembly that goes on an atomic force microscope, an AFM. So one or two years, our hope would be that this would offset the loss of FEI. It is in a very similar space, very similar opportunity, except they're a little further along in terms of their commitment to outsourcing.

I see. So is this the non-semi type operation then?

That's right. This is completely non-semi.

Okay. And then I guess a question I have is on the recovery on the semi cap side, are you guys seeing this quarter, how much of that is coming just from customer volume? And the customers requesting more sub-assembly from you guys, versus when you guys may have secured that turning into production?

Edwin, this is Clarence. This is primarily a overall industry growth, not so much a market share growth story. Obviously, we would like to think there is some market share growth associated with it. But it is primarily industry growth.

Your next question comes from the line of Jugadesh Iyar from Piper Jaffray.

Thanks for taking my question, Clarence and Casey. Quick question first on the gross margin side. How should we think about the gross margins? We heard 11% gross margin in 2011. How should we look at the trajectory of gross margin going forward in 2012 please?

Yes, we've have talked over the last couple quarters how we felt we were doing some things now that Gino has been here long enough to dig his hands in and make some changes. And they've been -- he and I have been partnering on a number of initiatives, and I think he has had great success. So I think we will continue to see that. We didn't guide, and we don't typically guide to specific margin. But if you can get an implied margin out of the discussion we had on OpEx as well as our top line. And I think you'll see that we think, not only on volume but also on some of these improvements, we will continue to improve the margin aspect of this business and get it to where we think it should be. And then obviously, it will fluctuate by volume. But we still have some work to do to be able to strengthen our margin, and I think that is well underway. It isn't changed in a single quarter, but I think some of the initiatives that Gino and the operations team have in place and the hard work that they're doing is starting to pay off. And I'm very excited about the opportunities to build on that this year.

So is it fair to say that your gross margins would be likely a trough in the December quarter, as long as the volumes continue to improve in 2012?

Yes, volumes continue to improve. I don't see anything out into the future that would be negative impact on margins. And obviously, the volumes would be a positive impact. So I would like to think that we'll get the benefit of increased volume, if that is the case. But we'll also get the increases of increased efficiency. So both of those, I think, will continue -- will start to deliver much better results than we possibly saw in the past.

Jugadesh, this is Clarence. We didn't see anything happen in Q4 that was negative to margin other than the declining demand. So we think the Q4 margin actually would have been higher if we had achieved a higher level of revenue.

And the second question, I'm just trying to reconcile on 2011, there was -- it was a year of probably flat CapEx. And if I remove the LED portion of [radio], revenue would have been probably down by about say 8% to 10% on a year-over-year basis. But now that in 2012 it looks like the LED portion is going to be somewhat weaker. I know you don't guide for the year and things like that. How should we think about, on a year-over-year basis in terms of if it is a flat CapEx scenario? Do you think you can at least buck the trend for this year, or is it early to tell anything? Any thoughts on that?

Yes, it is difficult to tell, and we don't guide out further. I would just probably reiterate some of the things Clarence has said in the past, which is obviously, the flat panel business has been a little bit weak. And I think most analysts are projecting that to be weaker the first half of this year and then to possibly improve. That story is similar for LED as well. That has been pretty well documented by a lot of the research that has been done. So some of the second half of the year, non-semi will be dictated on how those two markets react. We announced a new customer today, and we continue to work on customer opportunities, not only with our current customers, but new customers. And so I think we feel that we have a reasonable pipeline to be able to, as Clarence mentioned, make up for some of the decline related to FEI this year. So we are optimistic. But to your point, it is hard to tell outside of a quarter or two exactly where the market is going to go on a volume basis.

One last question, you called out two customers for the fourth quarter who are about 10%. Are those customers going to be coming back with much more rigor in the first quarter of 2012?

Yes, I think our traditionally biggest customers are seeing the same type of activity we are, and that is why we are guiding as strong as we are. So I think it is going to be consistent. We tend to track broadly with our customers, but certainly, our biggest customers have the highest impact.

Our two largest customers are in the semiconductor space, and obviously that space is recovering right now.

And finally, Clarence, do you guys have visibility into calendar Q2, or still it is only for calendar Q1, currently?

No, we really do not want to get into guidance for Q2. Obviously, the industry conditions are improving. That's what we have said. But it is too early to give any guidance on Q2.

Your next question comes from the line of Dick Ryan from Dougherty.

Good afternoon, guys. Say Clarence, I'm not sure if I missed it, did you give LED guidance for Q1?

No, I did not, but it is going to be very small number, for Q1 as well. It might be a little bit higher, but we are still talking in the $1 million to $2 million range. Again, all of our customers in that space are projecting really very slow demand until the latter part of 2012. In general, what we are hearing and reading various reports, et cetera, is that market is likely to be down from on the order of 800 tools in 2011 to 300 tools in 2012. And probably mostly backend loaded. So we are being very conservative on our projections for MOCVD tools right now.

Okay. On Bruker, were they using somebody else for outside manufacturing, or is this a step in a new direction for them?

It is not a step in a new director for them. They have been outsourcing for a while. But this is a subassembly that they were building themselves, and there are several more sub assemblies and further opportunities that we think we can participate in. And they have led us to believe that we could participate in. So it is not a new philosophy for Bruker, but these particular sub modules were being manufactured internally. And so, they are moving from insource manufacturing to using UCT.

When you look at other non-semi opportunities, are there any maybe two questions. What is the outlook for additional wins, and are there any contracts coming up for renewal in that side of the business?

I don't think there is any significant contracts coming up for renewal in that side of the business. In terms of additional wins, yes that's what I have been trying to say in our last quarter earnings call, is that in slow periods like this, that is when all of our customers have more opportunity to focus on outsourcing more. It is also when we have more opportunity to focus on these new opportunities. So I would expect us to see additional new opportunities as we move forward in a slow time like this.

Okay. Casey, would you have that cash flow number for Q4 or total for the year?

Yes, what I had said is the cash went up $14.1 million. Our net liquidity went up about $50 million. The difference there is basically the pay down in debt.

(Operator Instructions) Your next question comes from the line of Krishna.

Yes, Casey and Clarence, congratulations on the good result and a couple of questions. For fiscal year 2011, can you give us the revenue mix by end market, semiconductors, LED research, and all the different segments for 2011?

We typically don't break out the end market for the full year. We break out the semi versus non-semi. Obviously, the biggest contributors this year, as Clarence mentioned, have been the LED customers, medical and research. The only real change I see in that next year is, as Clarence talked about, LED is going to be a second half of the year story. And obviously, the research is going to continue fairly consistent in the first half, and then it is going to go to the transition that we just talked about. But the research and the medical markets have traditionally been around 7%. And in this past year, I think we have talked in the past that we were between 7% and 10% in the energy space, which includes solar, as well as LED et cetera. So those give you a general sense, but we will have more detail obviously in the K.

Okay. What were the -- are you able to provide us what the top three or four customers were as a percent of revenues in Q4 and for the entire year?

Yes, we've got two customers that are over 10% for the entire year and for Q4. It will be broken out in the K, but by customer, we do not typically talk about it. And it, as Clarence mentioned, it is in the semiconductor space. And I'm sure you have a pretty good idea of the customers in that space.

Okay. And Clarence, it looks like some of the near-term upside for Q1 is caused by the Intel and Samsung announcements. Can you give us some sense for how later this will be for the year, or whether this sharp fall off in the second half 2012? Are they expediting advanced technology orders here for the first half of 2012?

That's pretty complicated. It does appear that some of the Samsung orders are first-half focused. I would say the Intel orders are probably more evenly distributed throughout the year. But our expectation is that right now, three of our five markets that we are serving, the solar, the flat-panel, the MOCVD, are all significantly depressed. It's the medical and the semiconductor that are still doing very well. So our hope and expectation in getting into some of these other industries was that they would somewhat balance and offset one another. So our hope is and expectation is that in Q2, -- excuse me in the second half, we will start to see a bit of a recovery in these other markets, which should help to continue to drive our growth.

I'm obviously not an expert on Intel, and you guys look at a lot of the research, but another thing you have to consider, for example with Intel, how much of that is going to be CapEx spent on equipment, and how much is spent on brick-and-mortar. I think Intel is doing a fair amount of brick-and-mortar this year as well. So the mix of that also impacts our revenue, because we are driven obviously by the equipment side.

Okay. And my final question, what about the impact of the Novellus-Lam merger? How will that impact do going forward into 2012 and beyond?

Again, this is Clarence. I think, again, there is a merger with Intel -- Lam and Novellus, so then there's also the Varian-Applied Materials mergers. Obviously, there is some challenge associated with consolidation of the customers. So we have more customer concentration that we did not really want to have happen. We wanted to continue to spread our customer base. On the other hand, we are a significant supplier to both -- all four of those players, to Varian, to Applied Materials, to Lam Research and Novellus. So I really don't see any significant impact of the consolidations here. We will maybe see a little bit of economies in terms of some consolidation of our efforts, supplying one customer instead of two or two customers instead of four. At the same time, I'm sure there's bound to be a little bit of pricing pressure as well, which I assume will pretty much neutralized any benefits that we might see from dealing with fewer customers.

Okay. And how much progress are you making in terms of moving from gas distribution to full chamber and modular assembly? Can you give us some sense for the vertical integration efforts that you are seeing internally?

Yes. Last quarter, I'm trying to look up the number, last quarter 54% of our revenue was gas delivery subsystems. Next quarter, we think it will probably be slightly below 50%. So about half of our revenue is now from gas delivery systems and half from other larger module assemblies. So we think we have made pretty good progress if you go back five or six years, we were literally 100% gas delivery subsystems.

Your next question comes from the line of Gregory Macosko of Lord Abbett.

You said that you'll have the same amount of profit this year as last year. So does that mean it will be concentrated in second and third quarter? Is that what I should read into that?

I don't think I made a comment for the profit for the entire year. I'm trying to figure out what your question is? I guided to the current quarter, but not to the full year. But not for the full year.

Okay. But you said second and third quarter -- I thought you said those were the two quarters where you would see activity. You're not necessarily through the fourth quarter?

Activity as far as the LED space we talked about, and we also talked about possibly the flat-panel business coming back in the second and third quarter.

I think what you may have heard was regard to the business at FEI.

Right, that's what I meant, yes.

Okay. So at FEI, we expect that Q1 will be just a normal quarter for us, we are continuing to manufacture. And Q2 and Q3, we are going to receive a level of compensation for our assistance to them that is approximately equivalent to the profitability that we would have achieved in those quarters, were we to continue manufacturing for them.

I see. And then you stop in the fourth quarter perhaps? Likely?

That is correct. We will stop manufacturing for them in Q1, at the end of Q1. But there is a compensation settlement that will carry on through Q3 that is up approximately equivalent to the profitability that we would have made had we continued to manufacture at about the same rate that we are currently manufacturing for them.

Yes, okay. And then with regard to Q1, you said that 80% approximately is in the semiconductor area, which is you said approximately the same percentage in first quarter? Or fourth quarter?

Fourth quarter, that's right.

So that implies that the non-semi side of the business goes from order magnitude $17 million to maybe $21 million. Yet, your discussions of some of those other sub segments was pretty weak. So in effect, the medical side of the business is really going to grow sequentially?

Yes it isn't just the medical. It is, we are anticipating a little bit of a recovery in the MOCVD side as well. But yes, obviously, the order of magnitude is much smaller since 80% of our revenue is semiconductor. But yes, we are going to see a slight recovery in the non-semiconductor portion. And you are approximately correct in the percentages.

And we are still doing the FEI in the first quarter as well.

Okay that would be part of that 20% as well?

Correct.

And solar is still very weak?

That is correct. Solar, flat-panel and MOCVD are all very weak right now.

(Operator Instructions) And there are no further questions in queue at this time.

All right. I appreciate it, operator. And I appreciate everyone's attendance today, and the interest in UCT. And look forward to speaking with everybody over the course of the year. Thanks again.

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