Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Rofin-Sinar Technologies, Inc. (NASDAQ:RSTI)

F1Q09 (Qtr End 12/31/08) Earnings Call

February 05, 2009 11:00 AM ET

Executives

Günther Braun - President and Chief Executive Officer

Ingrid Mittelstädt - Chief Financial Officer, Executive Vice President - Finance and Administration and Treasurer

Analysts

John Harmon - Needham & Company

Charles Murphy - Sidoti & Company

Antonio Antezano - Macquarie Research Equities

Tobias Loskamp - Kepler Capital Markets

Stephen Bauer - BHF-BANK

Greg Halter - Soleil - Great Lakes Review

Mark Douglas - Longbow Research

Eggert Kuls - M.M. Warburg Bank

Thomas Wybierek - Nord Landesbank

Operator

Welcome to Rofin-Sinar's 2009 First Quarter Results Conference Call. Today's call is hosted by Mr. Günther Braun, Chief Executive Officer and Ms. Ingrid Mittelstädt, Chief Financial Officer. Following management's comments, you will have the opportunity to ask questions. Please go ahead.

Günther Braun

Thank you and good morning or good afternoon to everyone. I'm here in Plymouth, in Michigan; together with Ingrid, our CFO. I hope you all got the press release containing our first quarter 2009 results. We will give you some comments about our business and performance and then we will open it up for questions.

Now before we start, I would like to make the usual statement about the information you are getting in this conference call. Based on the Fair Disclosure regulation of SEC, we will also include a summary of our own financial estimates for our next quarter, but not for the fiscal year 2009.

This guidance is only an estimate and is of course subject to all the risks and uncertainties as summarized in our Safe Harbor statement, which I will read to you shortly. I would like to encourage you to perform your own market investigation and research and not place undue reliance on our estimates.

Safe Harbor Statement: Our discussion may include predictions, estimates or other information that may be considered forward-looking. While these forward-looking statements represent our best current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially.

Throughout our discussions, we will attempt to discuss important factors relating to our business that may affect our predictions. You may also want to review our last 10-Q and 10-K filings for a more complete disclosure of financial risks.

So, before I comment on the business environment we would like to do first the standard review of our performance in the quarter, ended December 31, 2008. As you have seen from our press release, we reached sales in the first quarter of 107 million, which is 27.7 million or 21% lower than any comparable quarter in fiscal 2008.

The strengthening of the U.S. dollar exchange rate decreased sales by approximately 7% or 7.8 million. So that's different to the fiscal year 2008, where we had usually a positive impact. Net income was 7.6 million or approximately 7% of net sales, is 55% lower compared to last year first quarter.

We know that the numbers are not the best, but quite satisfying, given the internal structure changes we have made in reaction to the current market conditions. Given the decline in sales of approximately 47 million from 154 million in our fourth quarter ending September 30, last year to 107 million in the first quarter, I think 7.6 million net income or 7% profitability is still very good.

The macro economic environment, which we currently face is very challenging. The financial crisis has led to significant reductions in financing for companies. Many of our industry we serve are affected and there are only few industries, which are relatively stable.

Sales in our Macro and Marking business were less impacted by the downturn, since some industries are less cyclical and solar cell business was still healthy at the beginning of the quarter.

Net sales decreased 14% over the comparable quarter to 54.6 million and was 51% of total sales. Sales of our macro business was significantly below the previous quarters. Business decreased by approximately 32% to 41.4 million, or 39% of total sales. The only exception was our low power CO2 laser business, which was on last quarter level. So also something positive.

Our component business, and you know, consists of laser diodes, active passive fibers, power supply, fiber optics increased slightly and reached 11 million, representing 10% of quarterly sales and that's thanks to last years acquisition of Nufern.

Geographical spilt; sales to Asian countries decreased by 40% to 19% of quarterly sales and reached 19.8 million. Basically all of the industries we serve were down.

The strongest sales contributor were of course, again Taiwan... or China, Taiwan, Malaysia, Korea, Japan, but on a low level. North America, as expected contributed only 18.6 million or 17% of quarterly sales. But this should not be a surprise to you, reading newspapers everyday.

Europe was responsible for the remaining 64% of quarterly sales. Sales decreased only 8% to 68.6 million compared to last year's first quarter. And I mentioned already currency fluctuations, which impacted negatively the numbers in Europe and Asia.

Our spare parts and service business decreased by approximately 26% and accounted for approximately 25% of net sales for the quarter.

Now coming to the breakdown of our quarterly laser sales by industry and of course the absolute numbers are lower compared to last year. But automotive was still on the 11% level compared to 12% in '08 first quarter; machine tool was 31% compared to 37% in '08; semi electronics was 32% versus 25% in the third quarter '08. And as I said already thanks to solar, the first half of the first quarter was pretty stable and good. Others were on the 26% level and again...

(Technical Difficulty).

Operator

Ladies and gentlemen this is the operator. I apologize that there will be a slight delay in today's conference. Please hold and the conference will resume momentarily. Thank you for your patience.

Günther Braun

We are back.

Operator: Mr. Braun has rejoined the conference.

Günther Braun

Perfect, sorry for this. It's not cost cutting. So, we have paid our bill for electricity. Sorry for that. We can continue, Ingrid.

Ingrid Mittelstädt

Okay, I begin again with the R&D expenses because I don't know when we had the technical issues yet. So R&D expenses for the quarter were 8.5 million or 7.9% of total revenues compared to 8.8 million or 6.5% of total sales in the first quarter of fiscal '08.

Quarter gross spending represented 0.8 million versus 9.2 million last fiscal year, first quarter and the decrease in R&D expense is mainly a result of the impact of exchange rates fluctuation, lower material costs in our R&D project, partially offset by a portion of the one time costs related to employee benefit.

The income from operations of 9.6 million represents 9% of sales versus 24.9 million or 18.5% of total sales in Q1 '08. That was the best first quarter of in the company's history last year. The weakening of the U.S. dollar against the foreign currencies had the effect decreasing the income from operations by 0.8 million.

Now other income expenses; the quarterly net other income was 1.5 million, net interest expense accounted for 0.1 million, compared to 1.7 million net interest income in the first quarter of fiscal year '08. The first quarter '09 includes 1.3 million exchange gains compared to 1.6 million exchange losses in the first quarter 2008.

Our effective tax rate on income before income taxes and minority interest for the first quarter was approximately 30.2% compared to 32.2% for the same period last fiscal year. And the lower effective income tax rate is mainly due to the income tax benefit on the one time cost related to employee benefit. And also in 4 million refund of withholding taxes we got in Europe. Net income for the third quarter amounted to 7.6 million and resulted in diluted earnings per share of $0.26 based on 28.9 million weighted average shares of earnings.

The weakening of the US dollar against the major foreign currencies had the effect of decreasing the net income by 0.5 million.

Given these absolutely negative macro economic conditions and the uncertainties in the market and taking into account the one time cost related to the employee benefit of approximately 1.4 million after taxes we were able to generate a net income of 7.1% of total revenue.

Now coming to the balance sheet. The strength of the US dollar mainly against the euro, comparing exchange rates from December 31 '08 versus September 30 '08 resulted in a change of approximately 2.5%. Cash and short-term investments decreased by 25.9 million to 90.5 million compared to September 30 '08, mainly due to the repayment of bank loan of 20 million and the final amount payment for our Nufern acquisition. The impact of the exchange rates fluctuation resulted in a decrease of cash of 3 million.

Trade accounts receivable net amounted to 95 million and decreased by 22.9 million compared to the end of September and this is mainly due to the reduced level of business. Exchange rates fluctuations decreased accounts receivable by 2.6 million. The day sales outstanding increased from 75 days averaged last fiscal year to approximately 81 days for the three month period ended December 31, '08.

Net inventory decreased by approximately 3.4 million to 149.9 million, mainly as a result of the exchange rates fluctuations. Taking into account the push-outs in deliveries experienced during the first of approximately 25 million the company was able to maintain nearly the same level of inventories in stock as of the end of September '08. Based on the three months cost of good sold figures, inventories churned approximately 1.7 times.

Total debt decreased approximately 21.7 million to 45 million in the balance sheet and the long-term debt represents now 11.7 million. Total debt-to-equity increased from 69% to approximately 75% of total assets.

And now I would like to give you some information related to the cash flow. During the three months ended December 31'08, the company generated 9.9 million from its operating activities. We invested 12.6 million, primarily for the acquisition of new business and capital expenditures of 2.9 million. The company used net cash of 21.3 million in financing activities, mainly related to repayments of bank debt.

And now coming to our earnings guidance. As a result of the very limited visibility and the uncertain economic conditions we can give you only guidance for the next quarter. Total revenues for the second quarter of fiscal year '09 should be around 90 million. Taking into account the already experienced order cancellations and the push outs of delivery and the uncertain situation in the market, we have to stay flexible and adjust our business to order levels. Therefore our target is to be profitable, stay profitable also in the second quarter, but the net income will really depend on the level of revenue. And this guidance is, as usual, only our best estimate and is subject to all risks of our Safe Harbor statement.

Thanks for listening and let me hand it back to Günther.

Günther Braun

Thanks, Ingrid. Before I start with my usual comments on the macro economic environment, I would like to point out that our business is industrial material process. So it's not scientific, which I believe is less affected by the current crisis. You'll remember that our first quarter sales guidance, beginning November was around $125 million. Given the sudden change in our business in November-December we had to adjust our sales guidance to 105 million for the quarter.

So push out of shipments caused these circumstances. And as Ingrid told you already approximately $25 million in sales were delayed and pushed out. The request for delays in shipment came from many of our customers in various industries we serve, including the solar cell industry.

The financial credit crisis and of course the recent reduction in oil prices had also a strong impact on our business from this industry. We do not see this business to be at the same levels done in 2008, but should the... business should be... with this industry should be less effected compared to that... let's call it classical industry.

Today, I will not do the usual review of our industry, since you already got the numbers of our first quarter. And there are no signs that the second quarter should be better. We have not seen a pick-up in business activities in our industries. So machine tool, automotive, semi, consumer electronic is still slow. I would say it's in the range 30 to 50% below last year levels. Also, of course service parts are on the lower level, since many customers use less production tools, less production equipment due to lower production volumes.

On the positive side, I would say smart card, medical device and flexible packaging are more or less on normal level. Visibility is very limited and there are currently no indications of a fast recovery. In addition the Christmas shutdowns and the Chinese New Year supported this situation.

Order entry in the first quarter was 75.2 million. But this was reduced by approximately 12.4 million of backlog, currency adjustment for the start into the new fiscal year. So the real order entry was in the range of 87 million and this is approximately our second quarter sales level.

Our typical (ph) backlog is good for three months business. And that is the reason why we gave this time only a second quarter guidance because the current market conditions do not allow us to come up with '09 fiscal year guidance. It would be more or less a crystal ball guidance, sorry for that.

We have taken actions to lower our cost structure to adjust Rofin to the current business volumes. I would call it the standard program, reducing labor costs, expenses from travel to marketing and so on. But every country is different in the way how to adjust.

As you know since we had many employees in Germany, you would think it is hard to adjust labor costs, but that is not the case. We are very flexible in the adjusting the work week days. So there is a program in Germany where you can choose to do your work five days, four days, three days and you can save the labor costs.

So currently we have many subsidiaries on a four day work week, and if business picks up, fine we can go back to five days. If business slows down, we can further reduce the work week days. And we do this on a monthly basis. So you see we're pretty effective on that.

Our current strategy is to focus on the industries in regions which are less affected by the financial crisis and there are some, of course. And the other thing, of course is we have to look into our broad product portfolio, optimize it and come out with new products into the markets. So that's clearly the target, including of course fiber, fiber laser.

Last but not least, we have opened a new sales and service office in Santa Clara in California with the target to be closer to our West Coast customers and the customer feedback was very positive.

So, let me summarize our performance over the last few years. I think we delivered, under the current circumstances in Q1 reasonable numbers in sales and even bottom line were okay. Order entry was acceptable, resulting in a backlog which supports our Q2 sales guidance. It is a time of even tighter cost controls but without jeopardizing our future business and this is the reason why R&D growth is less affected by cost cutting measures.

We continue to focus on our core competencies within our industrial laser material processing applications and the broad product portfolio and wide global and regional coverage and the solid balance sheet should support us through these challenging times.

So thanks for listening. And now we are prepared to answer your questions.

Question-and-Answer Session

Operator

Thank you so much. (Operator Instructions) Our first question comes from the line of John Harmon with Needham & Company. This line is open.

John Harmon - Needham & Company

Hi, good morning.

Günther Braun

Good morning John.

Ingrid Mittelstädt

Good morning John.

John Harmon - Needham & Company

Günther, Ingrid we lost everything on the phone connection from after where you said that other segments were 26% of sales all the way through to when Ingrid started talking about R&D expenses. So once again repeat your remarks for that section?

Günther Braun

Well thank you for the comment.

Ingrid Mittelstädt

Okay, so I come back then to the additional

Günther Braun

So this was gross profit basically and SG&A, so Ingrid maybe...

Ingrid Mittelstädt

Can I begin again? Additionally to... the lower growth profit was primarily a result of the following facts. The 9.3 million lower service and sale parts revenue representing a decrease of 26%, less fixed cost absorption as a result of the low level of business, high volume order with corresponding lower average prices in the micro business. And a portion of onetime costs related to employee benefits amounting to 0.6 million.

SG&A, including intangible, amortization for the quarter was 23% of total revenue in Q1 '09 compared to 18.5% of net sales in the same period last fiscal year. In absolute figures, SG&A decreased by 1.1 million, sorry to 23.9 million for the quarter. And the decrease in SG&A expenses was mainly a result of lower commissions and advertisement expenses as well as the impact of foreign exchange rate fluctuation at 1.1 million, partially offset by additional SG&A expenses for our acquired subsidiary, Nufern and 1 million portion of the one time cost related to employee benefits. I think then the R&D expenses explanation you already got, right?

John Harmon - Needham & Company

I do have it. Günther did you say, did you have any additional remarks after saying other segments were 26% of sales, because I was cut off as well?

Günther Braun

Let me see.

John Harmon - Needham & Company

Was cut off from that point till Ingrid started speaking about R&D.

Günther Braun

John question (ph). So I handed over to Ingrid.

Ingrid Mittelstädt

No.

Günther Braun

All right. Again where was this?

John Harmon - Needham & Company

I'm sorry, Gunter. You were giving the breakdown of sales by market segments.

Günther Braun

Breakdown...

John Harmon - Needham & Company

Automotive, machine tools.

Günther Braun

By industries, yes.

John Harmon - Needham & Company

And other is at 26% and right at that point is where you were cut off.

Günther Braun

Thanks, then I just talked about the laser units that we shipped 927 lasers in the first quarter versus 959 lasers last year's first quarter. So only 32 lasers less compared to last years first quarter. And in macro we shipped 268 lasers versus 354. So, and for marking and micro we shipped 667 lasers versus 605 lasers. So that's what you missed basically. And then Ingrid started.

John Harmon - Needham & Company

: Okay, Braun thank you. I'll ask one question. We're approaching the one year anniversary since the last time I asked. How did Nufern do in the quarter and was this a couple of million and what was... if you have the organic growth rate. I would like to hear that as well, all that you can give (ph) there?

Günther Braun

Well, Nufern did reasonably well under the current circumstances of course. Old customers are also in the laser industry, buying fibers and so I would call it a normal business. I think activities in military and defense is up. So on last year's level, but this has good positive future, I would say.

John Harmon - Needham & Company

Okay. Can you give us Nufern's revenues for one last time?

Ingrid Mittelstädt

The revenue of this quarter? It was 3.6 or 3.8 million.

John Harmon - Needham & Company

Okay. Thank you.

Ingrid Mittelstädt

You are welcome.

Operator

Thank you. Our next question comes from the line of Charles Murphy from Sidoti & Company. Your line is open, sir.

Charles Murphy - Sidoti & Company

Good morning guys.

Günther Braun

Good morning, Chuck.

Charles Murphy - Sidoti & Company

I kind of missed some stuff myself there. Could you go through, as far as the SG&A being a pretty high percentage of sales and frankly not coming down a ton on a sequential basis. Why was that again? I heard something about the employee benefits?

Ingrid Mittelstädt

Yeah, we have the one time costs related to employee benefit that impacted cost of goods sold, SG&A and R&D and the impact in SG&A was 1 million.

Charles Murphy - Sidoti & Company

Okay. And what was the impact for the other ones?

Ingrid Mittelstädt

It was 0.6 million for cost of goods sold and I can give immediately the number for R&D, it was 0.3.

Charles Murphy - Sidoti & Company

And would you have any of that repeating in the second quarter?

Ingrid Mittelstädt

No, no. It was one time.

Charles Murphy - Sidoti & Company

Okay. And I was surprised how much the R&D came down sequentially, especially with development of the fiber lasers still ongoing. I guess, could you explain where you might have cut back on projects and also just where we are in the fiber laser development process?

Günther Braun

What happened clearly is that I did not mention that of course in the first quarter we did not work certain weeks. We had a Christmas shutdown. So basically two weeks were missing where we did not work basically. There is no significant cost cuts down for our major projects, of course. So we continue on the fiber laser project and Ingrid...

Ingrid Mittelstädt

As a result of the shutdown over Christmas, I already mentioned that we had to review material cost consumed in the first quarter. And additionally to that the exchange rates fluctuations reduced (ph) R&D by 0.7 million.

Charles Murphy - Sidoti & Company

Okay.

Günther Braun

But the major projects are still in place. Of course focus is still fiber laser, we continue there for military defense applications, new fronts and on the other side industrial applications. Of course high power centers with department companies (ph).

Charles Murphy - Sidoti & Company

Could you speak a little bit about when we might see fiber laser contributing materially?

Günther Braun

Including materially, I would not say this year because it takes some time but as I said last time we are very positive now. We have done good tests, we overcome our degradation problem. So that's great and we have already lasers now in live time testing.

And we will allocate lasers with better site testing now and then let's see the result. But we don't push it now in to the market. We want to get this experience first because that's a sensitive issue, not go to the market and then really have been some trouble. But as I said positive, we had tougher times in this technology.

Charles Murphy - Sidoti & Company

Okay. Could you give us a sense of... at 90 million in sales, what your period expenses would be of that?

Günther Braun

I'll look into Ingrid's eyes. It looks like that's... we don't want... it's still a question, can we get orders within the quarter which we can ship. We do now every month for February, we decided on a four days working week. It depends if we get enough orders we keep this in March. If we have less order entry, we even further go down to three days in certain entities. So therefore it's hard to tell you that's exactly the number what we are shooting for.

Charles Murphy - Sidoti & Company

Okay. I'll turn it over to somebody else. Thanks.

Günther Braun

Thank you.

Operator

Thank you. The next question comes from the line of Antonio Antezano from Macquarie Capital. Your line is open.

Antonio Antezano - Macquarie Research Equities

Good morning.

Günther Braun

Good morning Antonio.

Ingrid Mittelstädt

Good morning

Antonio Antezano - Macquarie Research Equities

I want to ask you on that guidance of 90 million, could you expand in terms of what you expect for macro versus micro and the component, Ingrid?

Ingrid Mittelstädt

Yeah, we can tell you what the relation is in the backlogs may be this helps you to understand how the mix is. So we said the component business is not a... it is higher level in the backlog because there we did not see even in the order entries the decline or the decrease we already saw in the macro. And we have... so macro in the backlog represents only 36% and components represents 16%. And then the remaining 48% is related to marking and micro.

Antonio Antezano - Macquarie Research Equities

Okay.

Ingrid Mittelstädt

Sorry, of course, there we include some projects that will not be delivered this quarter, that are long term and we do not know if we get again some push out of the deliveries as we experienced in the first quarter.

That is the problem we have today. And we hope that during February and March this uncertainty will be reduced hopefully at one or the other industries we serve.

Antonio Antezano - Macquarie Research Equities

All right. You mentioned that you had thought EQ (ph) for Europe was more or less stable but looking at the micro there in Europe, it's getting worse, especially in Germany with the PMI index getting to record low. So I guess expectation in upcoming months will be for Europe to get weaker?

Günther Braun

I would say of course challenging but also in the first quarter, you have seen that automotive industry in Europe was down, was slow. So it was not how the... also the big guys had this Christmas shutdown. So it was less. Maybe it will go, get a little bit weaker compared to the first quarter. I don't expect too much.

Antonio Antezano - Macquarie Research Equities

Okay. And then if I can ask you how much growth (ph) I guess you generated in China and what is your outlook there and your return.

Günther Braun

Outlook on China as I said Chinese New Year basically they came back this week, back to work and let's wait and see. I personally feel we will get a little bit decreased business out of China, because also the governmental programs and infrastructure and so on where we can add some business. And that's why I believe we can improve this business. Ingrid, you have the number.

Ingrid Mittelstädt

Yeah, I wanted to give a number. So this quarter we did 5.9 million in China, representing 5.5% of total revenues. And if you'll remember the whole fiscal year '08 we did 11% of total revenue sales. So you see that even the first quarter was at a very low level compared to last fiscal year.

Antonio Antezano - Macquarie Research Equities

Okay. I'll go back to the queue. Thank you.

Operator

Thank you. Our next question comes from the line of Tobias Loskamp of Kepler Capital Markets. Your line is open, sir.

Tobias Loskamp - Kepler Capital Markets

Yes, hello. Good morning to you. A couple of questions. First of all, the push outs that you're seeing for Q4. How confident are you that these are only pushed out into the March quarter now or do you think...?

Günther Braun

In our forecast, we have not taken into account this push outs, where we know it's going to take longer. So of course push outs where today, you don't have a fixed delivery date. Certain things where you got to message okay, another six months, and this of course is not in our forecast for Q2.

Tobias Loskamp - Kepler Capital Markets

Okay. And have you've seen significant number of cancellations as well or is that still not the case?

Günther Braun

I would say on the cancellation side, Ingrid has the number, but it's less dramatic, I would say than the push outs we have seen. Ingrid, you have the number?

Ingrid Mittelstädt

Yeah. It was 4.6 million in cancellations.

Tobias Loskamp - Kepler Capital Markets

Okay. And then, maybe on... can you comment on what you think...will you break even that list roughly in revenue terms. What you say that we're close... we're nearly in the Q2, you are approaching break even or you would you say may be more around 80 million in revenue or so would be the breakeven level?

Ingrid Mittelstädt

Yeah, 85. I would say. 80-85.

Tobias Loskamp - Kepler Capital Markets

Okay, and then on... when you said don't...?

Günther Braun

If we don't do anything of course.

Tobias Loskamp - Kepler Capital Markets

And on your... as you said that services, their part has decreased. Was it absolute terms. Is it fair to assume that at least your service business is stable or...?

Günther Braun

No, it decreased of course, because you know when less production volumes are manufactured than of course then if somebody has five lasers, they use only three lasers. And of course, if you have five lasers and then if you're in trouble, I see late maintenance and all this kind of stuff. So as a percentage of quarterly sales it's our usual 25%. But it was also reduced in absolute numbers.

Tobias Loskamp - Kepler Capital Markets

Okay, makes sense yeah. And then lastly, you're in the process of setting up your own operations in China. Is it running according to plan?

Günther Braun

It's running according to plan. Of course, also the markets in China are impacted. For this low cost markets when we look to other competitors, how many lasers they sell. So it's according to plan. That's... we push it less. We try of course to save some cost there.

Tobias Loskamp - Kepler Capital Markets

And then the final question. If you look at the -- probably at the beginning of January, it was quite slow, because lot of people had been on holidays. They were on extended holidays. But would you say the order activity should be slower in Q going to Q2 versus Q1. Any feeling on that?

Günther Braun

Okay, but that's just our guess and what we believe we can reach we should be on the Q1 level. So in this range and this is basically also our sales for Q2, what we guided. So because in the first quarter if we would have not to adjust... had to adjust the backlog. This 12 million of order entry would have 87 million and that's also the range we believe we can get in the second quarter.

Tobias Loskamp - Kepler Capital Markets

All right. Okay, thanks a lot.

Günther Braun

Thank you.

Operator

Thank you. My next question comes from line of Stephen Bauer with BHF-BANK. Your line is open.

Stephen Bauer - BHF-BANK

Good morning or good afternoon everyone. Stephen Bauer from BHF-BANK.

Günther Braun

Hi, Stephen.

Stephen Bauer - BHF-BANK

I have a couple of questions. You just mentioned that your order backlog of $112 million includes postponed orders. Could you please give us the exact amount of this order. And second question, what was the rate of capacity utilization in the past quarter and which rate do you expect in Q2. And thirdly, can you comment on the pricing environment for your macro and micro products? Thanks.

Günther Braun

Okay. Many questions in pricing. Of course when you have less projects in the field and you have more companies who are very hungry than the pricing environment is of course challenging. So, but what we decided of course and we are more flexible than in the past on pricing, to get all those to for our production of course. So there is always a challenge on this side. And that's for macro and micro products, that's across the industry. That's one thing.

Other question was, help me.

Ingrid Mittelstädt

The backlog?

Stephen Bauer - BHF-BANK

Yes, what's the relative...

Günther Braun

Backlog?

Ingrid Mittelstädt

As yet we don't have a number of how many orders. 25, how many they are included now and how many are pushed out over six month or cancelled.

Stephen Bauer - BHF-BANK

Okay. But would you say that the share of these postponed orders is more than let's say 20%?

Günther Braun

You mean which are pushed out longer than for the second quarter.

Stephen Bauer - BHF-BANK

Yes, right?

Günther Braun

Okay. The question is pretty flexible. I don't know what happens next week. But I would say today in the range of at least... yeah, 75%. I would call it more to Q3 than in Q2.

Stephen Bauer - BHF-BANK

Okay. Thanks. And maybe my last question is about the capacity utilization in the past quarter?

Ingrid Mittelstädt

Well I have to say that there we are relatively flexible of course. You have seen now our numbers in the fourth quarter and there, even in the macro business last year, we worked full capacity. So what's...

Günther Braun

Let's, I will jump in. I would say on the... in the macro business, or high power CO2 lasers it's in the range of 50%, I would say. On the low power side, it's more in the 80% because still we have some additional capacity which we had also in the past.

On the marking and micro size, it depends in the first quarter, I would say it was still most of time at the beginning in the range of 80-90% but it's come down now because of less orders and slower sales projection in the second quarter. So I would go also to a 60% level of the moment. And it depends, on marking maybe less.

Stephen Bauer - BHF-BANK

Okay. Thanks.

Günther Braun

Thank you.

Operator: Thank you. Our next question comes from the line of Elliott Schlang with the Great Lakes Review. Your line is open.

Greg Halter - Soleil - Great Lakes Review

Well it's actually Greg Halter on for Elliot.

Günther Braun

Great, good morning

Greg Halter - Soleil - Great Lakes Review

Good morning guys. And I hope you don't the snow that we have here.

Günther Braun

No snow, but cold.

Greg Halter - Soleil - Great Lakes Review

Okay. I wondered if you could comment about your opinion of the quality of your accounts receivable as whether or not you've seen any major problems there so far.

Günther Braun

Ingrid?

Ingrid Mittelstädt

I would tell you that at the end of December the quality was relatively good, compared to the macro economic conditions. And in January we saw, yeah some delays in payments. But we are working on that and the reactions of the customers were okay. And we had only one minor customer that went bankrupt.

So we are monitoring that very closely and taking care of credit lines that we have with our customers. And of course in these times it's normal that clients try to finance themselves over the suppliers.

Greg Halter - Soleil - Great Lakes Review

Right.

Günther Braun

Also on automotive, here's exposure is limited so...

Ingrid Mittelstädt

Not material.

Greg Halter - Soleil - Great Lakes Review

Okay. So auto not much. Is it less than 10% of the total?

Günther Braun

Yeah.

Ingrid Mittelstädt

Yes.

Greg Halter - Soleil - Great Lakes Review

Okay, good.

Günther Braun

Also you know when we get the order, I think, also the automotive guys understand that there has to be a certain payment involved and so on. I think that's just normal when people do business with this industry today.

Greg Halter - Soleil - Great Lakes Review

And Ingrid, the one minor customer that you mentioned that went bankrupt, was that in the quarter completed or in January?

Ingrid Mittelstädt

It was in the quarter, So it's already in the number.

Greg Halter - Soleil - Great Lakes Review

Okay anything...

Ingrid Mittelstädt

It was not material.

Greg Halter - Soleil - Great Lakes Review

Okay. Anything since then?

Ingrid Mittelstädt

No.

Greg Halter - Soleil - Great Lakes Review

Okay. And looking at your cash position, can you comment on where it's invested and what is invested in currently?

Ingrid Mittelstädt

Yeah. It's normally invested in normal deposits.

Günther Braun

No auction rates securities...

Ingrid Mittelstädt

No, no. And even I forgot to say that we even realized 1.3 million from the auction rate securities we had during this quarter.

Greg Halter - Soleil - Great Lakes Review

Okay. How much is left there?

Ingrid Mittelstädt

10 million approximately.

Greg Halter - Soleil - Great Lakes Review

10 million, okay.

Günther Braun

But not shown under cash.

Ingrid Mittelstädt

No, no. It's shown under other long-term assets.

Greg Halter - Soleil - Great Lakes Review

Okay. And are you part of that UBS settlement for those auction rate securities?

Günther Braun

Why UBS?

Greg Halter - Soleil - Great Lakes Review

Well, it's an entity where quite a few of our companies have agreed to the settlement that UBS has offered. So I think, they will get payment by June of 2010.

Günther Braun

We are not part of it.

Greg Halter - Soleil - Great Lakes Review

Okay. It's the only one that I am aware of, so that's why I asked.

Günther Braun

Okay.

Greg Halter - Soleil - Great Lakes Review

And in China I know you were talking about an acquisition, has that been completed or is that still yet to be completed?

Günther Braun

Pretty close, I think we have the last papers now. As I said Chinese New Year is over, they came back beginning this week. So I hope to get the last stamp registered.

Greg Halter - Soleil - Great Lakes Review

Okay. All right that's all I have right now, thank you.

Günther Braun

Thank you Greg..

Operator

Thank you. Our next question comes from the line of Mark Douglas of Longbow Research. Your line is open, sir.

Mark Douglas - Longbow Research

Hello, Ingrid, Günther.

Ingrid Mittelstädt

Hello.

Mark Douglas - Longbow Research

You mentioned the scientific markets were relatively stable.

Günther Braun

We believe so, yeah.

Mark Douglas - Longbow Research

How much... have you indicated how much of sales scientific is for you?

Günther Braun

We have basically no sales to the scientific market.

Mark Douglas - Longbow Research

Okay. You were just mentioning in relation to your margin?

Günther Braun

Yeah, just mentioned because laser industry as we said in the past we focus on industrial, industrial laser material processing. And these are the industries which are most affected by the crisis today.

Mark Douglas - Longbow Research

In the components area, the... I may have missed it, where was the growth or was a lot of it in Dilas or a lot of it in at Nufern?

Günther Braun

No I think this was basically the acquisition of Nufern because last year in the first quarter Nufern was not yet part of our business. We closed the transaction in January, end of January. So as I said thanks to the acquisition to Nufern. As I said...

(Multiple Speakers).

Günther Braun

Reduced business.

Mark Douglas - Longbow Research

But the business didn't decline nearly to the same degree.

Günther Braun

No. More, more because as Ingrid said I think our component business was I am quite sure over 2 million somehow. And so there was a slight decrease in our component business. And that's normal because our guys are also selling into the laser industry... into industry where also business is a little bit slower.

Mark Douglas - Longbow Research

Right, right. I guess I was just anticipating it with their business having dropped off they would have... they have been trying to clear out inventory. And finally on the Slab laser, the license, when does that roll-off?

Günther Braun

One patent is... has stopped. And we have another... let me see, one in 2011, and another one by mid of this year I think.

Mark Douglas - Longbow Research

Okay.

Günther Braun

On the other side, we don't see it too much immediately someone can come up with the technology. We went through really a learning curve over this and we have certain additional know how, patents around our products that we believe we are well covered on this one.

Mark Douglas - Longbow Research

So you have some additional patents as well? Just proprietary

Günther Braun

Yeah.

Mark Douglas - Longbow Research

Proprietary know how in building the lasers. Okay. Thank you.

Günther Braun

Thank you.

Ingrid Mittelstädt

Thank you.

Operator: Thank you. (Operator Instructions). Our next question comes from the line of Eggert Kuls from M.M. Warburg. Your line is open.

Eggert Kuls - M.M. Warburg Bank

Yes, hello, good afternoon. Only one question, as to regarding your cash flow from operating... from investing activities. Out of it first 1.6 million, how much was spent for acquisitions?

Ingrid Mittelstädt

For acquisitions we had 9.3 million because a part of that was a prepayment done for the Chinese acquisition. There we went through a public bidding, and then we had a prepayment already showed under investing in the press release.

Eggert Kuls - M.M. Warburg Bank

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Thomas Wybierek from Nord LB. Your line is open.

Thomas Wybierek - Nord Landesbank

Yes, hello everyone. Good afternoon from Germany. I have couple of questions concerning the work-in-progress. You mentioned that you are flexible into your work week days and you lowered it to four days per week. Are you planning to go to short time work period (ph)? Have you applied it and how many workers are affected by that measure? And are you planning to cut jobs in the second step. And perhaps you can say how big could the impact to your personnel costs in the next coming months and quarter?

Günther Braun

Okay. We've applied for this program already, We're already in, in that program in Germany. So there where we make sense in the department we're on a four day week. It depends on order entries, what we get, we even can go further down. We do it on a monthly basis, we adjust this. But we decided for February and second half of February we will decide what we are going to do in March.

Currently we want to watch and follow what's going on really in the industries to see and define where our business level will be. And if we have a clearer picture there, then of course there could be consequences that we of course lay off people. But as you know in Germany, you have all these notice periods, which are pretty long. You have the severance pays. You have to with negotiate with workers councils.

So the program for this is more complicated to do than now we have with what is called as quick survive (ph) or short work week basically in Germany. And we know the program even you could just go (ph) for 18 months. I don't think we will do it for 18 months, but for a reasonable period we will do it until we have a better view on our business. So, that's what we did and we will continue on this one. Ingrid, you have something to add.

Thomas Wybierek - Nord Landesbank

Perhaps one last question on how many workers are affected by this measure?

Günther Braun

It depends. every entity is different because of the business volume. For example in one entity I would say save roughly 75% of the employees are in the program, because you have always certain departments like service and of course sales, we want to sell things, which has even more pressure to get business, so you cannot tell them stay at home. So that roughly the range, may be in another entity, where we have two departments which have nice business, so enough to do. So they are less effective, so it's really step-by-step, company-by-company individual we decide.

Thomas Wybierek - Nord Landesbank

Okay, thank you

Günther Braun

Thank you

Operator

Thank you. (Operator Instructions). Our next question is a follow up from; Antonio Antezano of Macquarie Capitol. your line is open.

Antonio Antezano - Macquarie Research Equities

I just wanted to follow on Nufern. You mentioned that there could be some intermediary (ph) opportunities. Could you expand on that. I mean do you expect anything for this year?

Günther Braun

No, they had already business last year and the programs here are other programs going on and I believe to have a good technology, a chance to win certain programs and they have already certain programs. So it's very much tripled the business, but there is a good chance at least to increase this by 30 to 40 this year in my opinion.

Antonio Antezano - Macquarie Research Equities

Could you repeat, bookings have increased in (ph) the business.

A - Günther Braun: The increased military defense business 30 40% compared to fiscal year '08. And we have not disclosed what we did last year by the way.

Antonio Antezano - Macquarie Research Equities

Right. Okay. Thank you.

Günther Braun

Thank you.

Operator

Thank you. And there are no further questions at this time. Mr. Braun or Ms. Mittelstädt, do you have any additional or closing remarks.

Günther Braun

No, thanks for listening. You all know we are in challenging times. We have a challenging environment. We will do everything that we deliver reasonable numbers. Our target is now really to watch what's going in the industry. I hope we get a better view after Chinese New Year, a better insight into China, what we can generate on business. I hope also that the stimulation packages all over the world will help the industry a little bit to grow..

And I hope that's also our chance that we can come out with better increased business in the next quarters. As I said, second quarter, I think we should deliver the number around the 90 million. We will be profitable and then let's see what we can disclose in our next conference call in May. Again thanks, all the best to you all and have a great day. Bye.

Operator

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

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Rofin-Sinar Technologies F1Q09 (Qtr End 12/31/08) Earnings Call Transcript
This Transcript
All Transcripts