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Executives

Lawrence Sala – Chairman, President and CEO

George Blanton – SVP, CFO and Treasurer

Analysts

Rich Valera – Needham & Company

Mark Bauser – BlueFin

Chris McDonald – Kennedy Capital

Greg Weaver – Invicta Capital

Anaren, Inc. (ANEN) F4Q10 (Qtr End 06/30/10) Earnings Call Transcript August 4, 2010 5:00 PM ET

Operator

Good day, ladies and gentlemen, and welcome to Anaren’s fourth quarter earnings call. (Operator Instructions) I would now like to turn the conference over to your host for today Mr. Larry Sala, Chairman, President and CEO. Sir, you may begin.

Lawrence Sala

Thank you. Good afternoon and thank you for participating in the Anaren fiscal 2010 fourth quarter conference call. I’m joined again today by George Blanton, our CFO, and Joe Porcello, our VP of Accounting. I’ll provide a brief overview of the results of the quarter and for the fiscal year after which George will review the financial highlights. We will then take your questions.

Certain statements made during this conference call will be forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially from those discussed. You are encouraged to review our SEC reports and exhibits to those reports to learn more about the various risks and uncertainties facing our business and their potential impact on our net sales, earnings, and stock price.

Net sales for the fourth quarter were $45.3 million, up 3% from the fourth quarter of last year, and up 7% sequentially from the third quarter, an increase in Space & Defense Group net sales drove the overall increase from the third quarter. The strong fourth quarter sales drove record sales for the fiscal year of a $168.8 million.

New orders for the quarter were $57 million as a result of robust new orders in the Space & Defense Group, resulting in record total new orders of $174 million for the fiscal year.

Non-GAAP operating income for the quarter was a record $6.7 million or 14.9% of net sales, up 5% from the fourth quarter of last year. The increase in Space & Defense Group net sales, a favorable overall product mix and our continued cost reduction efforts positively impacted profitability for the quarter and for the fiscal year.

Wireless Group net sales for the quarter were $14.5 million, down 5% from the fourth quarter of last year but up 2% sequentially from the third quarter. Improved demand for standard infrastructure in consumer components drove the increase in net sales from the third quarter. Demand for standard component products remained robust throughout the quarter. New product and technology development efforts remain focused on expanding our standard component product portfolio.

During the quarter, the Group continued to expand the Xinger 3 high power resistor and consumer component product lines. In addition, the Group introduced the new Anaren Integrated Radio or AIR product line of low power wireless modules. These FCC compliant transceiver modules utilize Texas Instruments’ low power RF transceiver ICs and offer industry leading size and performance. Customers had exceeded 10% of Wireless Group net sales for the quarter were E.G. Components, Nokia, Motorola, and Richardson.

For the Space & Defense Group, net sales for the quarter were $30.7 million, up 7% from the fourth quarter of last year. Profit margins for the Group continued to improve as a resulted of increased product yields.

Product and technology development initiatives for the Group remained focused on cost reduction of our LTCC technology, introduction of radiation ARM (ph) and hybrid electronic module standard products for satellite applications, RF manifold and hybrid electronic module opportunities for ground based radar and airborne radar applications and the development of integrated microwave assembly technology.

New orders for the quarter totaled $41 million and included contracts for components and assemblies for using ground based and airborne radars, counter IED applications, communication satellite, passive ranging and airborne jamming applications. The acquisitions completed in fiscal 2009 have increased the Group’s addressable market as well as the Group’s dollar content on a number of new subsystem opportunities.

Space & Defense order backlog at June 30, 2010 was a record $89.6 million. Customers that generated greater than 10% of Space & Defense Group net sales for the quarter were Lockheed Martin and Northrop Grumman and Raytheon. George?

George Blanton

The highlights of the fourth quarter income statement and balance sheet at June 30, 2010 are presented on a non-GAAP basis. These non-GAAP measures are each adjusted from GAAP results to exclude certain non-cash items, including equity based compensation and acquisition-related inventory step-up and intangible amortization.

The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with Accounting Principles Generally Accepted in the United States. Please refer to our Q4 earnings release for a reconciliation of GAAP and non-GAAP measures.

Non-GAAP gross margin was 16.7 million or 37% of our current quarter, compared to 16 million or 36.4% for the fourth quarter of last year. Gross profit as a percent of sales increased slightly in the fourth quarter of fiscal 2010 from the fourth quarter of last year, due to a more favorable product sales mix in both the Wireless Group and Space & Defense Group. Gross margins were enhanced by the decline in sales of lower margin, high material content custom wireless group products. This was partially offset by lower production yields for circuit boards and disposition of excess materials for our wireless product is being discontinued.

Non-GAAP gross profit for the fiscal year 2010 was 37.4% compared to 34.6% for the fiscal year 2009, a $5 million improvement. We expect non-GAAP gross margins to be between 36 and 40% for the first quarter of fiscal 2011.

Investment in research and development was 8% of net sales from the fourth quarter compared to 8% of sales for the fourth quarter of last year. Current R&D spending in supporting wireless standard component product development as well as a number of projects in the Space & Defense Group and is not expected to decline in the near future.

Non-GAAP operating income was 14.9% of net sales for the fourth quarter, up 30 basis points from the fourth quarter of fiscal 2009. The increase was a result of a favorable product mix, better overhead absorption and successful execution of cost reduction programs. Non-GAAP operating income for fiscal year 2010 was 14.1% compared to 12.8% in fiscal year 2009, a $2.5 million improvement.

Interest expense for the fourth quarter of fiscal 2010 was a $139,000 compared to 282,000 for the fourth quarter of last year. We expect interest expense for the first quarter to be approximately $130,000.

Non-GAAP net income was 10.3% of net sales or $0.32 per diluted share for the fourth quarter of fiscal 2010 compared with 9.8% of net sales or $0.30 per diluted share for the fourth quarter of last year.

The effective income tax rate for the fourth quarter of fiscal 2010 was 28.2%. This compares to a tax rate of 30.3% for the fourth quarter of last year. The projected effective tax rate for all fiscal 2011 absent one-time events is expected to be approximately 32%.

Balance sheet highlights include cash provided by operations was 9.4 million in the fourth quarter and $28.1 million for the fiscal 2010 period. Capital expenditures were 1 million in the fourth quarter and 4.9 million for the fiscal 2010 period. Cash, cash equivalents and investments were approximately 74 million at June 30, 2010 compared to approximately 64 million at June 30, 2009.

The company repurchased approximately 3,000 shares of its common stock for a total of $50,000 in the fourth quarter. There are approximately 516,000 shares remaining under the current Board repurchase authorization at June 30, 2010.

Accounts receivable were 29.1 million at June 30, 2010, up 4.7 million from June 30, 2009. Days sales outstanding was 59 days, up 8 days from June 30 last year. Inventories were 31.4 million at June 30, 2010, down 3.9 million compared with June 30, 2009. The reductions reflect improved operating efficiencies and scheduling and production flow at our (inaudible) Space & Defense and Wireless operations. Larry?

Lawrence Sala

Thanks. For the fourth quarter – excuse me, for the first quarter of fiscal 2011, we expect comparable sales for the Wireless Group and the Space & Defense Group from our just completed fourth quarter. As a result, we expect net sales to be in the range of $42 to $46 million.

We expect GAAP net earnings per diluted share to be in the range of 24 to $0.27, using an anticipated tax rate of approximately 32% and accounting for approximately $0.06 per share in charges related to expected equity-based compensation expense and acquisition related amortization of intangibles. Non-GAAP net earnings per diluted share are expected to be in the range of 29 to $0.33 for the first quarter.

We will now take questions. And Mary, we’ll take questions now please.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Rich Valera from Needham & Company.

Rich Valera – Needham & Company

Thanks. Good afternoon gentlemen and congrats on a nice quarter. I got your guidance for the first quarter but it looks like you had some very healthy Defense bookings and I want to get in some other questions but it sounds like you have nice initiatives going on in the Wireless side that could drive some growth in the back half, so just wondering how we should think about the potential progression of the top line in each segment as we move into the back half of this year? Would we expect some growth in either or both segments?

Lawrence Sala

Well, our typical Space & Defense business is still backlog driven and we try to level shipments as much as possible throughout the year. So our expectation is that our Space & Defense Group should have a strong start and stay relatively level throughout the year. Obviously, if we continue to see good order patterns, we may see some growth as the year progresses. But I don’t think we don’t want to mislead anyone in that. We had a layer booking quarter in Space & Defense in the third quarter, and obviously in our fourth quarter our TV (ph) folks are pushing hard to get orders booked and make their objectives, so some of that will just carryover from orders that we didn’t book in the prior quarter.

On the Space & – I mean on the Wireless side, we’re starting out seeing some of the stronger demand patterns that we’ve seeing in quite some time. So we’ve had a good steady demand for the last six months and it seems to be strengthening as we got through June and July. So we’re optimistic about how the year is starting out and the potential here at the beginning. We’re expecting some revenue contribution from these new initiatives in the second half of the year but I think it's just going to be driven more by our – whether or not we see these demand patterns continuing. If the kind of demand we’re seeing now on Wireless continues, we would expect to see sequential growth in our Wireless business and improvement but that’s a very unpredictable for us.

Rich Valera – Needham & Company

Great. I know historically Larry, you’ve had some fairly significant exposure to India, I think your largest customer there. Recently, things have been pretty much shut down in India as far as new orders as they go through some security issues. Do you have any sense of that’s affected you and if you could on the flip side get some of the rebound as those orders presumably resume in the fourth calendar quarter?

Lawrence Sala

Most of that business came from our custom assembly – most of that exposure came from our custom assembly business. From what remains in our Wireless business is really largely standard component driven. We don’t have the kind of exposure to India that we used to in terms of the high concentration with one customer with the higher dollar custom assembly used to do. So I would say, no, we don’t feel as though we’re being as negatively impacted by that issue today and we shouldn’t see a significant rebound. Obviously, we’ll see some rebound because our standard components are used by virtually every OEM, for every market. So we certainly would expect to see some upside in demand in our standard components if that market starts deploying, again at any significance. But I don’t think we’ll see that volatility of the level we used to see when we had a significant amount of custom assembly business and concentration there.

Rich Valera – Needham & Company

Speaking of the concentration with the custom business with that one large customer, where do you think that is, you think you’ve kind of hit a local bottom here and we just kind of bump along at these levels, and eventually I guess trend down perhaps lower but it’s just – if you give us a sense of where you feel like we are with that customer?

Lawrence Sala

Yeah, I think in general we feel like we’re relative bottom in our custom assembly business. We’ll continue to see some of that business. I mean we still have custom assembly demand from a number of OEMs, it’s not going to be a significant revenue driver for us or we don’t think exceptionally volatile as we go forward. But we feel like from a custom business, we’re at a relative bottom.

From the standard component side with the new product introductions we’ve made in our Xinger product line, in our resistor product line and our consumer product line, we’re definitely seeing growth in our addressable markets and definitely seeing stronger order patterns in the last four, five months than we’ve seen previously.

Rich Valera – Needham & Company

I know you mentioned in your prepared remarks but didn’t give a whole lot of color on it, the AIR modules you introduced for TI, can you give us any color on your expectations? I’m sure it would start small but do we think those contribute a material amount of revenue to the wireless business in the late in this fiscal year or do we think that’s more of a fiscal ‘12?

Lawrence Sala

Yeah, I think we talked material, we’re feeling it’s more in 2012. This product line is the result of redirecting a lot of the R&D focus we had on cost reductions and trying to maintain and survive in our custom assembly business but what we believe is a higher margin much higher growth potential product line for us. It’s a very diverse set of customers that we’re addressing. It’s a very standardize product line, so we should be able to gain a lot of production efficiencies in it. And we’re just a little too new into this market to really be able to absolutely understand what the design-in cycles and the ramp up expectations are for these new customers. So it’s a little difficult for us to predict the rate of production ramp up that we should expect, but I will say that we’ve been more than pleased with the reception of the product line, the interest in the marketplace, the number of real design-in activities that we have ongoing, the performance of our folks as far as product and market development. And so we feel good about where we are relative to our plans and expectation. So I think we count it as measureable revenue in the second half of this year and material revenue early in 2012.

Rich Valera – Needham & Company

Great, that’s helpful color. And just one more if I could on the defense side, you mentioned some IED orders received apparently in the fourth. Can you give anymore color on those? Are those crew upgrade orders with Servtek (ph) or follow-on or is that something related to maybe 31 (ph) activity, any color would be appreciated?

Lawrence Sala

No, it's all follow-on orders with our existing customers for both space crew systems as well as upgrade orders. Right – as it stands right now our belief is – we believe booked the production rates and demand stay the same through about our March quarter and it’s really from everything we can see the last probably meaningful production orders of this first then what we’ll call second generation of crew work that we’ve been doing. Now we expect to see some follow-ons spares, orders over the next year or two, but we believe that this is probably the last or the real significant production orders that we’ll receive.

Rich Valera – Needham & Company

Do you think you could have some next gen orders coming in the interim before you sort of deliver on the current generation stuff?

Lawrence Sala

It’s not – it’s difficult for us to predict timing. We do believe there is future potential for additional upgrades of systems that we’ve participated on and obviously there is other variation and programs out there for other systems. We don’t – we believe it’s likely that there’ll be some gap in production for us between finishing up the first generation – production and any next generation production and we really don’t have good insight into the likelihood that a next generation system actually moves into production. But we have delivered some development hardware, we do know there is activity going on, we just can’t really predict the exact timing and the likelihood of that turning into the production opportunity for us.

Rich Valera – Needham & Company

Great. That’s helpful. Thanks gentlemen.

Lawrence Sala

Yeah, thank you.

Operator

(Operator Instructions) Our first question comes from the line of Mark Bauser from BlueFin.

Mark Bauser – BlueFin

Thank you. Rich asked all my questions. But I’ll come up with some new ones. Can you walk me through what you see maybe given the level of investment in the wireless group? What kind of longer-term growth do you think that level investment should drive once you are kind of get through the last of the cost term and get into a normal business cycle?

Lawrence Sala

Well that’s business is challenging I guess to predict long-term growth rates given that now our infrastructure business anyway is largely standard component driven and we got a fairly high level of penetration rate. We’re pretty much moving ahead at the rate of the growth of the overall infrastructure market which is been relatively flattish in the last few years. We have – we believe that increasing our addressable sum by the product introductions we’ve had expanding the slots that we can participate in both on the receive as well as the transmit side. But our expectations there would be as market conditions stayed the same, we’ll probably hit a mid-single digit 5% kind of growth expectations for that product line. Because we do give our pricing every year obviously some times more frequently even if our standard component business.

With the new products we’re introducing in this air product line, we think they have very material growth potential for us. We believe they could be our largest product line in this group. So, we think over the course of the next couple of years that there is potential to see strong year-over-year growth performance driven by our air product line assuming that we have the kind of success that we’re predicting. So, with that success, we think we could start to see material growth 10 to 20% or more kind of annual growth rates but it’s going to take a new growth engine like that in our wireless group to really drive material annual growth.

Mark Bauser – BlueFin

Great. Is it too early to say we’ve got our first air design win or first handful of air design wins or what are the milestones that you’d looking?

Lawrence Sala

Design wins a little tougher to predict since it’s a standard product. We don’t – we can say we have orders. We shipped products. We’ve gotten through our FCC certification, so we are production ready. And we’re probably engaged with may be eight or 10 meaningful customers today where we definitely feel we’re working through the process of design-ins. So, it’s tough to tell from our end when customers actually got all of their qualifications done and then they’re really ready to ramp up and get going.

Mark Bauser – BlueFin

Great, great. And just one quick one for just of George, can you remind what the required debt pay down is the next 12 months and beyond that as your buyback intended to just offset dilution or what you see going forward with the repurchase?

George Blanton

With the debt first of all, we did make a $10 million payment on July 30, I think it was 30, yeah, so we pay down the debt. Now we have $30 million of debt not 40. And that’s 10 million a year going forward, so that’s annually. From our buyback standpoint, I think – we think that we’ve done a good job with our buyback with the stock price where it is, it’s probably not something high in our priority list. We have a better use of our cash. Obviously if it goes in different direction, we may have some other ideas but I think we are satisfied where we are with our cash position and we continue to look for opportunities to deploy that cash with acquisitions more than we would with the buyback at the current price.

Mark Bauser – BlueFin

Great. Thanks for your help.

George Blanton

You’re welcome.

Lawrence Sala

Thank you.

Operator

Thank you. Our next question comes from the line of Chris McDonald from Kennedy Capital.

Chris McDonald – Kennedy Capital

Hi, good evening. Thanks for taking my question. Just wanted to get an update on the consumer area and how growth is going there and what new opportunities that you’re looking at on the consumer side to be obviously independent of the whole air (ph)?

Lawrence Sala

Sure. Well our consumer component product line continues to perform very well for us. We kind of intentionally try not to identify sales separately for this product line because the product line as we’ve expanded in the last year has really diversified significantly and I think consumers somewhat of a (inaudible) of the sales out of this product line. With the introduction of couplers, power dividers and other types of devices, the applicability of the product line has grown significantly and so now a meaningful percentage of sales come from infrastructure applications like radios, and receive side functionality in the base station and other small signal processing types of application. So, from the sales standpoint and order standpoint, we continue to see quarter-over-quarter growth in our consumer type products.

Then also we’ve talked a little bit about the introduction of a series of Balun Transformers that we introduced specifically for high speed A to D converter applications and we believe that these A to D converters are necessary for the latest generation of wireless signal processing and base station applications as well as host of other just high speed signal processing applications both commercial and military. And we believe that we’ve got designed in our reference designs with a number of the leading A to D (inaudible) to these devices and so our expectations is we’ll continue to see continued diversification and addressable market growth for our consumer product in fiscal ‘11. So in general continue to see good order patterns and continued diversification of that product line.

Chris McDonald – Kennedy Capital

Are those – there are others A to D opportunity something that would kind of digress (ph) support gradual growth or is there an opportunity for more of a step function in addressable market and growth that’s associated with that? I understand that I’m not clear.

Lawrence Sala

Well, let’s a step function relative to sales levels of our consumer group yes, I mean that the advantage of our A to D products is very highly differentiated product, much higher ASP. So, ASPs between $0.50 and $1.00 is our expectation where the majority of our consumer product line has ASPs in the $0.05 to $0.20 range for generating sales today. So, meaningful in terms of incremental to the consumer group; tough for us to predict how quickly those opportunities could ramp up in whether or not that could be meaningful to the overall wireless group’s revenues or not but given the kind of $8 million pace of sales in our consumer group, we certainly believe that they can be incremental and meaningful to consumer run rate.

Chris McDonald – Kennedy Capital

Okay. Thanks for that. Then I just wanted to get your thoughts around with Xinger 3 now having been out for a period of time. To what extent that product is helping to drive growth as well?

Lawrence Sala

Well, we’re still trying to get data points on that. Our current view is that it’s having a significant impact on growth and demand for our Xinger product line. We’ve been surprised at the rate of adoption of the product to the marketplace. We’ve kind of try to tamper the introduction so that we can get our capacities ramped up and make sure that we can maintain our production rates and keep people satisfied and it’s continues to challenge us in terms of the rate of adoption. And we also believe that the product has opened up new design slots where our customers historically have either done things themselves on printed circuit boards and now they are simplifying their boards and providing that function through a Xinger product as well as employing linearization techniques that are now achievable due to the performance in size and cost pointing of our Xinger 3 product that they previously either didn’t do because it wasn’t practical, again try to do something implemented themselves.

So, we definitely think it’s expanded our addressable market. It’s tough to tell exactly how much in the adoption rate and demand has definitely exceeded our expectations.

Chris McDonald – Kennedy Capital

Would you care to venture a guess on what inning in the ballgame we might in on just the customers embracing that product and all the different design possibilities that it offers?

Lawrence Sala

Well, it’s more of adoption in the marketplace. We typically work closely with our largest customers as we’re developing and beta testing and refining these designs and so they tend to get out running first with the kind of higher demand types of components, in our Xinger families there might be 20 different Xinger products in any generation and so. Up until really the last quarter, we only had introduced maybe three or four of those Xinger 3 products. Now we’re starting to really broadly to allow a dozen different designs that people can use as well as making that whole family available to all of our distribution partners and all of our customers. So, we’re probably only in at most second or third inning of really seeing the peak of the demand for this product.

Chris McDonald – Kennedy Capital

Great. Thanks a lot and (inaudible).

Lawrence Sala

Thanks.

Operator

Thank you. Our next question is a follow-up from Rich Valera of Needham & Company.

Rich Valera – Needham & Company

Thank you. George, on the gross margin, obviously you had very strong gross margins last quarter and a pretty significant dip this quarter around 350 basis points. Was that purely mixed or where some other factors in there and how should we think about the sort of normalized gross margin if it were relative to those levels?

George Blanton

I think you are it’s primarily product mix. We did have a very strong product mix. We’re even where last quarter, where we had strong product mix. We had within our product mix our customers that were even extra strong from our product mix. So, it gave us a very good gross profit look. This quarter we did have good product mix not quite as good and then we had this – some issues with the production yields and the circuit boards and we disposed some excess inventory in our custom product line. So those are things that we don’t plan to recur this – the problems of the circuit boards, we think we’ve identified the issues and corrected those and of course some of the absolute inventory we consider obsolete that disposed off from the curve also. So, those contributed to the change in the gross margin and we think we’ll definitely be in this 36 to 40% range absent some of these one-timers that we had and we always seem to have one-timers but we think that that’s the very sustainable level and it could improve without these one-timers.

Rich Valera – Needham & Company

Great. Could you give a rough sense of how much those – the two issues impacted? Were you talking 100 or 150 BPs?

George Blanton

It could be in excess of $0.5 million.

Rich Valera – Needham & Company

Okay. That’s a helpful number. Okay, that’s it from me. Thank you.

George Blanton

You’re welcome.

Lawrence Sala

Thanks Rich.

Operator

Thank you. Our next question is a follow-up from Chris McDonald from Kennedy Capital.

Chris McDonald – Kennedy Capital

Hi. Just to forgot to ask one question. Does the guidance for the tax rate reflect anything relative to passage of the R&D tax credit? And what might the impact be if the tax credit is (inaudible)? Thanks.

George Blanton

No, it doesn’t at this point. The 32% itself there does not reflect – our typical credits would be about 600,000 a year. So, we’d take couple of percent off the way.

Chris McDonald – Kennedy Capital

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Greg Weaver of Invicta Capital.

Greg Weaver – Invicta Capital

Yes, hi guys. Let me go into the quarterly IED run rate is roughly?

Lawrence Sala

Currently it’s really kind of peak-in last quarter and this current quarter probably in $3.5 million range and somewhere 3.5 the highest and may be 4.

Greg Weaver – Invicta Capital

Okay. And the custom business is – that’s down to a 2, 3 million a quarter now?

Lawrence Sala

Correct. But it’s also use to be 90% with one customer and be very challenging margin wise. Now it’s more diversified amongst many more customers and it’s not really as bigger drag on our margins as that one large customer was. So, even as we today – if that business diminishes and we pick up more standard component concentration, it only have as big and a positive impact on our wireless margin as it has up to now.

Greg Weaver – Invicta Capital

Any thoughts on the Motorola sale in terms of disruption in your business?

Lawrence Sala

Yeah, I mean we don’t have high expectations for the kind of custom business we’ve done there to continue, so we really feel like we’re just going to continue to write out the platforms that we’ve been on some time with them. And that business will diminish as well. Throughout the year, it peaked in value. But, for the last several quarters, they haven’t been that big a customer. It was just really late last quarter that there was some fairly significant demand from them but we don’t expect that long-term.

Greg Weaver – Invicta Capital

Okay. And just lastly, Rich had most of my stuff on the gross margin but the – would you – George would you characterize that the variability in the gross margin from a mix perspective is more on the defense side of the equation now that custom has settled down to a small level?

George Blanton

I think in the fourth quarter, it had some bearing on the custom business as we finished out some of the orders with our big customer product. We think the mix issues will probably subside. We feel like it’s – wireless sides are little more stable now given the mix of more component business and standard products and on the space and defense side, it think it’s stabilizing. We may see a slight uptick in some of the material content going forward but it will be fairly stable. So, I hope that helps?

Greg Weaver – Invicta Capital

Okay, great. I appreciate it. Thank you.

Operator

Thank you. Our next question comes from the line of (inaudible) from Sidoti & Company.

Unidentified Analyst

Hi, guys. I was just wondering if you could give us some insight into your acquisition strategy, whether you’re looking at something this year or next year or whether or not it would on the wireless side or space and defense side.

Lawrence Sala

We are definitely looking for something this year. We’ve been kind of actively re-engaged on the acquisition for probably the last months; definitely have seen a large increase in the number of opportunities to look at. So, it seems like there is a lot of business our size that people contemplating, selling these days, so that’s been a positive and we’re definitely looking a little harder on our space and defense business trying to (inaudible) our technology portfolio there to support kind of the integrated microwave assembly products that we like to be able to develop, so, looking more for active technology for our space and defense group. We won’t be opposed to something in the wireless but we don’t have a real clear vision as to what that would be. Yes, we’ll see as this air product line progresses if there is anything that makes more sense for us on the wireless side from an acquisition standpoint.

Unidentified Analyst

Great. Thanks guys.

Lawrence Sala

Yeah.

Operator

Thank you. I assume no further questions in the queue. So, I’d like to turn the conference back to Larry Sala for closing remarks.

Lawrence Sala

Well we thank you for your participation and we look forward to speaking with you next quarter.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This does concludes the program and you may all disconnect at this time.

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