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Executives

Dick Southworth - President and CEO

Jack Freeman - SVP and CFO

Analysts

Fred Buonocore - CJS Securities

Sean Hannan - Needham & Company

Lance James - RBC Global Asset Management

Rick D'Auteuil - Columbia Management

Spectrum Control, Inc. (SPEC) Q4 2010 Earnings Call January 10, 2011 4:45 PM ET

Operator

Welcome to Spectrum Control Inc. 2010 fourth quarter and fiscal yearend conference call. Representing the company today we have Dick Southworth, President and Chief Executive Officer; and Jack Freeman, Senior Vice President and Chief Financial Officer.

The discussion of the company's operating performance for the fourth quarter and fiscal year ended November 30, 2010, should take about 20 minutes. We will then try to answer as many questions as reasonably possible. We expect to conclude this conference call at approximately 5:30 pm Eastern Time.

As a reminder, the following discussion will include certain forward-looking statements which reflect management's current views with respect to future market conditions and operating performance. These forward-looking statements are subject to certain risks and uncertainties which could cause actual results to differ materially from historical results or those anticipated. These risks and uncertainties are described in detail in the company's most recent quarterly and annual SEC filings.

The words "believe," "expect," "anticipate," and similar expressions identify forward-looking statements. Listeners are cautioned not to place undue reliance on these forward-looking statements. Such forward-looking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this call.

I would now like to introduce Mr. Dick Southworth, President and Chief Executive Officer of Spectrum Control.

Dick Southworth

Welcome to Spectrum Control's 2010 fourth quarter and fiscal yearend conference call. I'll briefly review some key operating and financial highlights for the period, after which Jack Freeman will review our financial performance in more detail. We will then be happy to take any questions.

For the fourth quarter of 2010, we reported net income of $3.3 million or $0.25 per share on sales of $42.7 million. For the comparable period of 2009, we had net income of $2.1 million or $0.17 per share on sales of $34.1 million. For fiscal 2010, we generated net income of $12.8 million or $1 per share, $0.98 diluted, on sales of $163.9 million. For the year 2009, we had net income of $8.6 million or $0.68 per share, $0.67 diluted, on sales of $132.3 million.

So we are very proud of our performance for the full year of 2010. Compared to a year ago, our 2010 annual revenue grew 24% and our net income and the earnings per share each increased by 50%.

For the full year of 2010, customer orders totaled $162 million, an increase of almost $30 million over 2009, or 23%. For the year of 2010, our book-to-bill ratio was a solid 0.99 to 1. This current year performance reflects the continued success of our strategic plans that supplement ongoing organic growth with targeted business acquisitions.

During 2010, we consummated and integrated three business acquisitions, each bringing new technologies and product capabilities to our company. We optimistically look forward to 2011 as we strive to build upon our 2010 achievements. So these are just some of the highlights and accomplishments of 2010.

At this point, I'd like to introduce Jack Freeman, our Chief Financial Officer and ask Jack to review our fourth quarter and year end results in greater detail. When Jack has completed his presentation, I will fill with some final comments and we will open the floor to questions at that time. Jack.

Jack Freeman

Thanks, Dick. On October 29 of 2010, we acquired all of the outstanding stock of Summit Instruments. Based in Akron, Ohio, Summit designs and manufactures custom inertia sensors, accelerometers, inertial measurement systems, and related products and assemblies. These complex products complement and expand our existing sensors and control product offerings, consisting of precision position sensors and advanced thermal products.

Currently, about 80% of Summit's revenues are generated from military and defense applications, including our various missile defense systems. Summit products are also used in numerous commercial applications, such as wind turbines and test and measurement equipment.

During the fourth quarter of fiscal 2010, we successfully integrated the acquired operations with our existing Sensors and Controls Business, with Summit generating over $700,000 of product sales, which were immediately accretive to our consolidated earnings.

In the fourth quarter of fiscal 2010, our consolidated sales in total were $42.7 million, an increase of $8.6 million or 25% from the same period last year, in addition to the $6.3 million aggregate impact of our recent acquisitions consisting of Micro Networks in November of 2009, Sage Labs in June of 2010 and now Summit Instruments late in October of 2010.

Our consolidated sales were $2.3 million or 7% compared to the fourth quarter a year ago, excluding those acquisitions. This organic sales growth, we think reflects the overall improvement in our commercial market conditions, as well as the impact of our new products that we sell into these commercial markets.

In the current fourth quarter, sales of our Advanced Specialty Products were $13.6 million, that's up $2.7 million or about 20% for the same period last year. Excluding the impact of our acquisition of Summit Instruments, sales of our Sensors and Controls increased about $700,000 or 15% from a year ago. For Advanced Specialty Products and our Sensors and Controls, shipments to customers and virtually all of our key commercial markets were up from the comparable period of last year.

Total customer orders for all products for all four of our businesses in the aggregate that we received in the fourth quarter of fiscal 2010 were disappointing $38.7 million, reflecting the current caution and uncertainty that's pervasive throughout the military and defense industry. However, our customer order rates and really book-to-bill ratio in the fourth quarter was significantly better than many, but not virtually all of our industry peers.

For the full fiscal year of 2010 our consolidated sales were $163.9 million, that's an increase of $31.6 million or 24% from fiscal 2009. In fiscal 2010 our three business acquisitions contributed $18.1 million or 14% year-over-year growth. Organic sales growth for fiscal 2010 amounted to $13.5 million or about 10%.

In the current quarter our gross margin was $11.4 million or 26.8% of sales, compared to $9.4 million or about 27.6% of sales for the same quarter last year. For the fiscal year ended November 30, 2010, our gross margin was $44.1 million or about 26.9% of sales, compared to $34.4 million or 26% of sales last year.

During the fourth quarter of fiscal 2010, certain of our microwave operations were moved into a new state-of-the-art leased facility in Marlborough, Massachusetts. Our new facility, which has approximately 43,000 square feet of manufacturing space, reflects the consolidation of two operations that we had assumed in connection with our acquisitions of Micro Networks Corp back in November of 2009, as well as SatCon Electronics in September of 2008.

Although this consolidation had a negative impact on our fourth quarter performance, with approximately $1 million of microwave shipments being delayed, along with certain temporary inefficiencies and direct moving expenses of approximately $450,000, we believe the long-term benefits of this consolidation will be significant. We currently anticipate that this consolidation will be substantially completed by the end of the first quarter of fiscal 2011. Upon completion, we expect our operating efficiencies to improve, our manufacturing capacity to increase, and our overall manufacturing cost to decrease.

During the current quarter selling expense amounted to $3.1 million or 7% of sales, compared to $2.7 million or about 8% of sales for the same period last year. The reduction in selling expense as a percentage of sales primarily reflects the leveraging of certain fixed cost over greater sales volumes. Aggregate to G&A expense was relatively unchanged at $3 million in the fourth quarter of fiscal 2010 versus about $3.1 million in the comparable period of fiscal 2009.

During the fourth quarter of fiscal 2010 acquisition related cost associated with our acquisition of Summit Instruments only totaled about $57,000. For the full fiscal year of 2010 aggregate acquisition related cost for all of our business acquisitions amounted to about $418,000. All of these costs are included in our G&A expenses in 2010.

During the current quarter the domestic line of credit agreement, we have with our primary lending institution was amended, increasing the aggregate amount of our revolving line of credit to $50 million. Borrowings under this four-year agreement will bear interest at rates below of the prevailing prime rate. Currently we have $48 million of borrowing capacity under this amended agreement. We believe this increased borrowing capacity will help us more quickly and effectively respond future business acquisition opportunities as they arise.

For the fiscal year of 2010 and 2009 our effective income tax rate was 36.7% and 36.0% respectively, compared to an applicable Federal and State statutory income tax rate of about 40%. Differences between the effective tax rates and statutory tax rate primarily arise from domestic production activity deductions, state tax provisions as well as foreign income tax rates. With the recent reinstitution of a U.S. federal R&D tax credit in December, we believe our effective tax rate in fiscal 2011 will decrease slightly to approximately 35.5%.

During the fourth quarter of fiscal 2010, net cash provided by operating activities was $4.2 million. For the fiscal year 2010, net operating cash flow was a record $19.5 million, reflecting our growing profitability as well as improved accounts receivable and inventory turnover rates. For the fiscal year ended November 30, 2010, our positive operating cash flow and our existing cash balances enabled us to reduce our outstanding short-term bank borrowings to only $1.0 million, support the aggregate cash purchase price of $13.4 million for our three current year business acquisitions, as well as to enable us to fund internally our capital expenditures of $6.4 million.

At the end of last fiscal year November 30, our total stockholders equity was just under $130 million, reflecting a book value of about $9.89 per share. We believe that our strong cash flow and financial position continue to provide a solid foundation for our anticipated future growth.

With that, Dick will make some concluding comments.

Dick Southworth

Thanks, Jack. The current market conditions, particularly for military and defense related products are somewhat tentative. Speculation regarding future military defense targeting and its impact on individual programs is causing certain customers to delay or push out orders and delivery dates. This condition is prevalent throughout our industry.

Based upon the nature and diversification of our military defense business however, we firmly believe that these market conditions will only temporarily impact our business. Based on these current market conditions and the completion of our Massachusetts facility consolidation, we presently anticipate our 2011 first quarter sales to be $42 million to $43 million, with earnings of $0.27 to $0.28 per share.

If these operating results are achieved, we will once again have significant growth from the comparable period of a year ago, with sales up 11% to 14%, and earnings per share up 42% to 47%. On a longer-term basis, we remain very optimistic about the future of our company. As overall market conditions improve, principal applications for our military, defense products continue to be strong, and we continuously develop new and innovative solutions for our customers.

So at this point, I would like to open the discussion for any questions you may have.

Question-and-Answer session

Operator

(Operator Instructions) Our first question is from Fred Buonocore with CJS Securities.

Fred Buonocore - CJS Securities

Just wanted to see how many million dollars of microwave shipments that got delayed due to the consolidation. Do you expect to deliver those in your fiscal Q1 or will that stretch out a little bit probably?

Dick Southworth

No, we expect to have I would say Fred, probably 80% of it shipped in Q1. Now remember, our Q1 contains all the Christmas and New Year's holidays. And so it's our shortest period throughout the year, reflecting an add-in. And where our guidance is for those number of days, I think it's a very good period and reflects those additional shipments.

Fred Buonocore - CJS Securities

How many fewer shipping days do you calculate for your business for your Q1 versus one of your regular quarters?

Dick Southworth

Our Q1 will have 58 days. I think we'll have about four fewer days or five days through our fiscal fourth quarters, so that accounts for a good chunk of that remaining 20% that I presume would go into Q2.

Fred Buonocore - CJS Securities

And then in terms of the inefficiencies and moving-related cost, it sounds like from the context of your comments that that you'll some more in Q1. Can you quantify those, or at least give us a sense relative to what you saw in Q4?

Jack Freeman

I can try. The basic assumption that you set forth is correct in that we expect to have some of those inefficiencies continue in the first quarter, but they'll be significantly less than what they were in the fourth quarter. We certainly expect them to be significantly less. Hence I can do it in the context of our gross margins. With those inefficiencies, our gross margin percentage in the fourth quarter fell below 27%. And even with some inefficiencies expected to continue in the first quarter, but to a lesser extent, we expect our gross margins to get back up to about a 28% level in our first quarter. So less that what w otherwise would expect, but significantly better than what they were in the fourth quarter.

Fred Buonocore - CJS Securities

And then, can you give us a sense for the military platforms where you are seeing the push-outs? Is it kind of across the board for you; is it a few select platforms? And what sorts of programs are these?

Jack Freeman

Fred, I would have to say, it's pretty well across the board now. So far in our first quarter, we have seen our (mix) program break loose with a contract for about $3 million plus. So we are starting to see some of that break loose, but it's just been probably, I would have to say pretty well across the board.

Our microwave business was the only business where the order rate was below what we expected, all being military. And in some of the other business where military might have been down, like commercial-sized pickup (fork). But in the fourth quarter, that was down about $6 million, and we are expecting a good portion of that in the first quarter and second quarter of this year.

In our discussions with our customers, we have not lost any business, and none of the programs have been cancelled. The programs have been pretty well all funded, and there's just a delay in timing for their releases. And they keep assuring us that, so we kind of take them for their word on that.

That's what I wanted to clarify too. I mean, it sounds like most of the programs that you participate in really aren't the kinds of things that are slated or have major concern over having significant cuts for those platforms.

Dick Southworth

Fred, we've gone through all of those. And we really see little if any impact in 2011 or 2012. And we have to look beyond that at that time. For us, whether it's new programs or its upgrading old programs or buying old platforms, it's all same for us. So we can't attribute any of the softening to lost programs or cut to the defense budget at all.

Operator

(Operator Instructions) The next question is from Sean Hannan with Needham & Company.

Sean Hannan - Needham & Company

You gave a book-to-bill for the year of about 0.96. Did you give a current book-to-bill exiting the quarter? Can you provide perhaps a little bit of color around the different segments that contribute to where you are today?

Jack Freeman

Our book-to-bill actually for the year was 0.99.

Sean Hannan - Needham & Company

Okay, 0.99, great. And for the quarter?

Jack Freeman

Well, the bookings for the quarter I think in total were $38.6 million versus shipments of $42.7. So was about 0.7 to 1 if I remember right.

Sean Hannan - Needham & Company

Well, let me see if I can follow up on that. When you look into the quarter in terms of order rates or forecasts from your customers, can you talk a little bit from the push-out there? Is there some other dynamics at play? Can you discuss some of the stability in the quarter evolve that you are seeing today versus perhaps a quarter or two ago?

Jack Freeman

I don't know if I can put some solid rationale for why the programs are delayed or the funding or the release of the orders are being delayed right now, other than what our customers have relayed to us as far as watching their ordering practice right now, why the (different) concerns with the government may make some additional moves other than what they have projected.

Typically, where we may have received the orders with more advanced purchases, we seem to be receiving the orders with very quick turnarounds in deliveries required, which we're able to do and service our customers very.

From a platform standpoint, I think it goes across to pretty much every platform. Where we see our main growth is in the missile defense and from military and communications and then radar and electronic warfare. And it's pretty equal across all of those areas.

And again, I think the one thing I can qualify and say is we go out to all of our customers that (inaudible) none of their programs are lost and we're basically a sole source on them and it's just going to be when they release the programs.

Sean Hannan - Needham & Company

Okay, that's fair. So I guess what I was getting at is it sounds to me, correct me if I'm wrong, that this year has been really a change in the order volatility in and of itself. Now you've seen (inaudible) some of your prior quarters. Is some of the military and defense spending slow down and it's been present for a little bit in companies such as, you know, other than just yourselves. We did have some push-out this quarter, and there have been some other factors at play, but it doesn't sound like volatility has really changed. Is that correct?

Dick Southworth

Yes, I would say that's correct.

Sean Hannan - Needham & Company

And then last one and I'll hop back into the queue. When you considered your guidance, how should we think about the competition of your segments? Do we really expect all of it to be quite flat? How much indication now of what might be slightly up or down, or how should we think about that?

Dick Southworth

I think the most appropriate way to think of it is that there's not a significant difference among our core businesses in terms of their overall operating margins. And so when we give aggregate guidance, there is not a significant exposure or risk associated in terms of mix.

Again, there are some slight differences, but overall they are not significant. So I think it's fair to suggest you don't have to worry too much about the individual segments, because if one is up and one is down in a similar amount, we would not expect that to have a significant impact on our overall operating margins.

Sean Hannan - Needham & Company

Non-Military, non-defense, is there anything you're seeing in terms of price changes, pressure from these non-military, non-defense customers now that the general component environment is becoming a little bit less strained?

Dick Southworth

Sean, remember what we provide are all customer-application specific. So price erosion for us is really not a factor.

Jack Freeman

Just a quick point of clarification when you asked about the book-to-bill in the quarter, that's a dollar amount, but I think I've misstated the book-to-bill ratio. We did indeed book about $38.7 million in the quarter versus shipments of 42.7, which is about 0.9 to 1 book-to-bill ratio.

As we stated in our comments, we think that book-to-bill ratio in the quarter is significantly better than our peer group that significantly participated in the (inaudible).

Operator

Our next question is from Lance James with RBC Global Asset Management.

Lance James - RBC Global Asset Management

Could you give a little bit of feel for what is going on in your non-defense businesses, whether you hang up what the tenure of business is there on the non-defense side, whether you're seeing any particular pockets of strength or weakness in your order pattern?

Dick Southworth

Lance, I would say if we've seen any weakness in 2010 it was in the communications sector, and that was not to any great degree. And when I say weakness, it's a percent of overall growth.

So last year, if we look at the revenues from communications, it was up 30%. Our medical and industrial markets were up 30%. This is year-over-year. Our commercial aircraft was up 30% year-over-year. Our consumer automotive, it's just that little niche piece on the slide there. That was the only thing where we've seen any kind of softening. And it was maybe $0.5 million impact year-over-year down.

But everything else was up significantly and continues to be up, I would say.

When I commented earlier about the communications, we did see Communication slow down in the fourth quarter, and we still ended up with a 30% year-over-year growth.

Lance James - RBC Global Asset Management

Well, congratulations on a strong overall year. If we're looking at the fourth quarter in particular, which obviously versus last year was quite strong, maybe not up to what your August quarter was, would you attribute that just to some slowing in some orders on the defense side and as you mentioned some of these inefficiencies, I guess, $450,000 worth in terms of the acquisition? Or if you were to compare your August quarter versus your November quarter what would be the big differences?

Jack Freeman

Yes, the big difference really relates to the impact of our consolidation into the new Massachusetts facility where there was a two-pronged impact. One is the inefficiencies and the direct costs that we had to incur and charge immediately against cost of sales and operations for the quarter were about $450,000 and the delay or push-out of $1 million or so of shipments at a variable or a prime margin level that meant the prime margin we lost was $650,000 to $680,000 for the quarter as a result of that $1 million push-out.

So the impact of the margins on those pushed out to shipments and the indirect and direct costs of the move in total is a little bit over $1 million, which after-tax would equate to about $0.05 a share, and that's really the event during the quarter that previously was not anticipated.

And so, that's the one big change when we compare the fourth quarter to the previous third quarter.

Operator

(Operator Instructions) The next question is from Rick D'Auteuil with Columbia Management.

Rick D'Auteuil - Columbia Management

Actually I have just a couple. The first one is, in your guidance for the next quarter, the 11% to 14% growth, what does that equate to in organic growth ex acquisitions?

Dick Southworth

Well, let me put it this way. As we've previously indicated, our organic growth for all of last year was about 10% with other 13% to 14% from acquisitions amounted to our 23% to 24%. And in total, on hand I don't have, I can't tell you just for the first quarter, but that type of mix is pretty indicative of what we would expect in general going forward and that is 10% or more organic growth supplemented by additional acquisitive growth of another 10% or more.

So for the year I can tell you that our organic growth rate actually for next year, we think it will be at least to that historical level of 10%. But I can't tell you specifically for the first quarter by itself.

Rick D'Auteuil - Columbia Management

It's clearly a lot less than 10% is that right? I don't know when you're lapping all the acquisitions, but that would I guess be the missing data point.

Jack Freeman

I would agree that based on the order intake for the fourth quarter and some of the delays and push-outs that we talked about, how that impacts, a continuation of that has some impacts on our first quarter. And that's why our first quarter organic growth would be less than what we would expect for the full year. But again, overall for the full year we remain optimistic that we're going to hit that same level of organic growth as I said that we achieved in 2010 or better.

Dick Southworth

And Rick, I'll just try to do a quick calculation on it. I think what the best answer for that is that will be about half organic and half through acquisitions. And remember our earlier comment that our first quarter is on a day-by-day basis is our shortest quarter that we have every year. So when you look at it sequentially it has an impact moving 02:16 down about six days, I think it is from the prior quarter.

Rick D'Auteuil - Columbia Management

And I'm a little confused on inefficiencies and the color I think you just provided Lance or the previous caller. If you're gross margins are going to recover at least 120 basis points and that's I think what you said, right, earlier?

Jack Freeman

Yes, that is correct.

Rick D'Auteuil - Columbia Management

And yet there was 450,000 of inefficiencies from the move. It sort of implies on the same level of revenues, because roughly your guidance is flat sequentially, right, on revenues?

Jack Freeman

Sequentially, yes.

Rick D'Auteuil - Columbia Management

So it implies about $0.5 million of improvement in gross margin, yet some of the $450,000 is going to impact. Some of the issues related to the $450,000 to a lesser extent, but to some extent are still going to be there in Q1, right?

Jack Freeman

To a far, far lesser extent. The direct cost which make up about $170,000 of that $450,000 impact in fourth quarter, those direct cost are virtually all behind us. And then the other $277,000 impact which in our fourth quarter, which really related to the time and effort that was exerted by both our direct and indirect manufacturing personnel in order to consummate that move. There's a very small part of that that we would expect to continue in the first quarter. But the bulk of that is behind us as well.

Rick D'Auteuil - Columbia Management

But was there also a mix issue then in the quarter? I still can't get 120 basis points with no help on the revenue line to help on the efficiency side. So is there a mix issue that improves sequentially?

Jack freeman

I mean there's some mix impact, maybe the other components that we didn't talk about that that's coming into play is that, for 2010 health insurance, we were self funded and would stabilize insurance for when aggregate claims or individual claims reached a certain dollar amount. And we had a very high incidence of high impact claims hit us in the fourth quarter.

Going forward for 2011, we are on a fully insured or fully indemnified plan so that risk of those incremental costs does no longer exist. Actually compared to the fourth quarter going into the first quarter, there's an improvement in those reduction in those health cost, because of the big hit that we had to take in the fourth quarter for those.

Rick D'Auteuil - Columbia Management

Is it $250,000 to the gross margin line?

Jack freeman

In fact it's actually a little bit more than that. Individually the one business that really got hit hard by that was our Advanced Specialty Products, and their impact alone was greater than $250,000 that you mentioned.

Operator

The next question is a follow-up from Fred Buonocore with CJS Securities.

Fred Buonocore - CJS Securities

Can you talk a little bit about your acquisition pipeline and where you stand in terms of potential targets and anything maybe of a larger size.

Dick Southworth

Our pipeline is very active, probably one that I was very, very excited about. I don't think I can make work as far as (inaudible) can be accretive for our business.

So right now, I don't have anything that's going to be an immediate addition, but we're very active in that.

Jack Freeman

And as a further indication of that, our further beliefs that they will continue to be significant acquisition opportunities, that was a primary driver for our desire to increase our domestic line of credit up to $50 million in the fourth quarter.

Historically and recently, we've generated very positive operating cash flow. So even with the organic growth rate that we're expecting going forward, our operating cash flow has been and would continue to be expected to be sufficient to meet any working capital requirements with that growth. So it's really primarily related to having that borrowing capability readily available, so that we can respond to significant acquisition opportunities as they arrive.

So our whole approach to that line of credit I believe is an indication that we remain optimistic that they'll continue to be significant acquisition opportunities presented to us.

Fred Buonocore - CJS Securities

And as an extension to that question, if for a reason you have trouble closing or if some targets take longer to close, then you might have hoped that you continue to generate cash. Would you consider share repurchases?

Dick Southworth

Perhaps. We still do have a open share repurchase program that has been authorized by our Board of Directors. We've not repurchased any shares for a few years now based on the continued growth of the company and the acquisitions. We think that we better serve the shareholders by utilizing that liquidity for acquisitions and growth as opposed to a share buyback.

But it still is open, and if the company were to fundamentally change with respect to either our acquisition outlook or something dramatic to our stock price, then we have a program in place so we can act very quickly on, but we really don't anticipate that.

Operator

The next question is a follow-up from Rick D'Auteuil with Columbia Management.

Rick D'Auteuil - Columbia Management

Just wanted to dig into the first quarter, and I guess round numbers is something like 5% or maybe a little better than that organic growth. On the call, you're suggesting you expect the year to be 10%. I am unclear as to why all of a sudden we see a nice improvement from Q1. Why does all the uncertainty go away after Q1?

Dick Southworth

Typically, our Q1 is really in that state. If you look at it historically, our Q2 and our Q3 become much stronger and the cycle of our programs and the orders for thicker solutions from our customers and when they desire that.

In the first quarter, our microwave group invested a lot of money in flow of new very, very extensive integrated assemblies, which we had no revenues, but we'll start seeing revenues in Q1 from that and then lot more revenues in Q2.

So we had the expenses in Q4. We will see the benefits initiate in Q1 and then at a much greater degree in Q2. And those are all qualified in new programs.

It's the nature of our business. We are not selling commodity type of product. In a lot of cases, they're very long qualifying and it all depends on when our customers get their total qualifications done and released.

Rick D'Auteuil - Columbia Management

Right now, you talked about cautious military order rates. You are not assuming that that tone changes in any material way to get to the numbers you are talking about?

Dick Southworth

All we are saying is we know the releases have been delayed, but those releases we believe are forthcoming and without any major hurdles to shipment timing.

Operator

There are no further questions in queue. I'd like to turn the call back to management for closing remarks.

Dick Southworth

Well, we thank you all for joining us today, and we'll terminate this conference call. Thank you.

Operator

This concludes today's teleconference. You may disconnect your lines. Thank you for your participation.

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