BTU International Q4 2007 Earnings Call Transcript

BTU International, Inc. (BTUI)

Q4 2007 Earnings Call

February 26, 2008 5:00 pm ET

Executives

Paul J. Van der Wansem - Chairman of the Board & Chief Executive Officer

James M. Griffin - Vice President, Global Sales & Service & Corporate Officer

Thomas P. Kealy - Vice President, Chief Accounting Officer & Corporate Controller

Doug Lawson – Vice President Business Development

Analysts

Colin Rusch – Broadpoint Capital, Inc.

Patrick McGlinchey – Sidoti & Company

[Len Goldberg – Goldberg Capital Management]

Daniel Beckman – ING

Vernon Essi – Needham & Company

Matt Winthrop – Oppenheimer

Carlos Rangel – MAP

James Quinton – Barrett & Company

Presentation

Operator

Good day and welcome to today’s fourth quarter and year end 2007 earnings release conference call. As a reminder today’s call is being recorded. For opening remarks and introductions I would like to turn the call over to Mr. Paul van der Wansem. Please go ahead, sir.

Paul J. Van der Wansem

Good afternoon everybody. I’m Paul van der Wansem, CEO of BTU International and it’s our pleasure to do this conference call for our fourth quarter and year end results for 2007. We are pleased that you all could join us. With me here today is Jim Griffin, Vice President of Global Sales; Tom Kealy, Vice President, Finance; and Doug Lawson, VP of Business Development to assist me in any issues you may want to bring to the table. This call will be in four parts. I’ll begin with a brief discussion of fourth quarter and year end results. After that I’ll have Jim talk about the markets and what he sees in the markets we are serving and I’ll take over again and talk about how plans and our actions regards the alternative energy sector as well as covering some of our outlook in the immediate future. After that we will have a chance to have a question and answer session.

Before we begin I’d like to note that statements made during this call will include forward-looking statements concerning our future financial and operating performance and our expectations regarding future orders for our products, future development for our products, the capabilities of our products and their ability to meet the needs of our customers, the company’s marketing and sales strategy and trends in the industry served by BTU. These forward-looking statements are not promises nor guarantees but are subject to risks and uncertainties that could cause actual results to differ materially from those described or implied in the forward-looking statements. Such factors are described in the company’s quarterly reports on the SEC Form 10Q for the quarter ended September 28, 2007 and in the press releases issued today regarding the company’s fourth quarter 2007 results and the formation of its Alternative Energy Group. Statements made during this call are current as of today only and the company undertakes no obligation to publicly update or revise these forward-looking statements unless required by law. A copy of our earnings release can be found on the BTU website at www.BTU.com or you may request a copy by calling 978-667-4111. Let’s begin.

BTU as most of you know is in the business of providing advanced thermal processing equipment for mostly electronics and manufacturing industry which really breaks down in printed circuit board assembly and semiconductor packaging as well as for alternative energy markets such as solar, nuclear fuel and hydrogen powered fuel cells. All of these applications require highest reports precise temperatures and atmosphere control in the manufacturing process for the devices which are critical.

Now let’s take a look at our fourth quarter 2007 results. As you may have been able to read in the press release our fourth quarter sales were $18.3 million which was up about 11% compared to $16.5 million in the preceding quarter and up about 10% compared to the same quarter of a year ago. Net income for the fourth quarter 2007 was $0.6 million or $0.06 per diluted share compared to a net income of $0.5 million or $0.06 per diluted share in the preceding quarter and compared to a net income of $1 million or $0.11 per diluted share in the fourth quarter of 2006. Net sales for the year 2007 were $63.7 million which was down about 19% compared to $78.3 million for the year 2006 and net income for 2007 is $1.9 million or about $0.21 per diluted share compared to a net income of $9.2 million or $0.98 per diluted share for the year 2006. Revenues for the quarter and income before tax were in line with our expectations. However, we had a bit of surprise on the per share earnings were negatively impacted by about $0.04 due to a higher than forecasted effective tax rate in one of our overseas subsidiaries and I’ll come back to that in a moment. Our balance sheet is in excellent shape. Cash flow for the year was neutral although we made major investments in a new ERP system and we started building off new laboratories and all in all our cash for the set was neutral for the whole year.

Talking about the little surprise on the tax side that happened in one of our overseas subsidiaries that was a little bit of a battle but we survived that and unfortunately it did give us a little bit more of a hit in Q4 and for the year than what we expected.

I also need to update the audience on a change on our auditing firm. Yesterday Vitale Caturano was our auditing firm and notified us and the company agrees that our auditors would not stand for reelection upon completion of the current year audit and 10K filings. There are no disagreements over accounting issues BTU is grateful for Vitale Caturano for six years of diligent service and we hope and wish to see them do well and BTU will be seeking a firm with broad capabilities to serve BTU worldwide and the company is filing or has filed by now an 8K on this topic. So I guess what I will do later on is comment specifically on the press release regarding the build up of our alternative energy group, the relation of the new people there and we have in mind. Before I do that I’d like to turn it over to Jim first of all to give us a quick update on what he sees in the markets. Good day. Go ahead Jim.

James M. Griffin

Thank you all for joining us this afternoon on the conference call. I‘ll take a few minutes looking at some of the highlights in Q4 starting with the alternative energy. In the solar market place our sales were up significantly quarter-over-quarter. In the silicone solar market we shipped a large repeat order for multiple in line phosphorous diffusion firing furnaces. These were large production volume units producing in the 25 megawatt capacity per line. This was with a key global customer for BTU. We have since received repeat orders from that customer and expect additional orders to follow along through the year. Also in Q4 we had our first integrated diffusion system with a BTU doper accepted by a leading China based manufacturer for their new process development line. This capability strengthens our position to address the market trend moving from batch to in line processing for the diffusion applications.

In Q4 we increased our order activity in the IR metallization area with strong bookings quarter-over-quarter. Bookings were global with China leading the way. Our China manufacturing and support capability has been a key factor in the sales wins. In March we will be holding a solar technical symposium coinciding with the opening of our Shanghia solar lamp. The focus is on both silicone and thin film technology and will include process presentations by key technologist in each area. The symposium is presented in conjunction with Dek our printer partner for a fully integrated metallization line. The solar lab will further increase our support capabilities for customers in China and for all the Asia Pacific area. In Q4 we also shipped an anti-reflective coating system and that unit will be going to a European research center. We also participate in the thin film market in the solar arena and in the thin film we shipped our first production system earlier this year and also bought another system for a second process with the same customer this year. We have targeted both the CIG and [CADTEL] technology markets as opportunities for BTU.

Our experience in designing large volume thermal processing equipment has positioned BTU as a value partner for thin film manufacturers as they address equipment challenges and scaling up production. In the electronics marketplace where we participate in the printer circuit board assessment and semiconductor packaging markets we did see as downturn in sales that coincided with market trends. We’re continuing to expand our product lines and added Paramax 100A to our Paramax product line in the printer circuit board assembly area. We’re also continuing to expand our customer base and we did see a large increase in new customers both in China and also in Brazil. In the semiconductor packaging area although it was down we did see a positive note in Q4 in that one of our key large OEM customers has returned with orders and the future looks a little brighter there, as we didn’t have to go through a period of about a year and a half where they were digesting inventory, so that seems to be heading in the right direction. So, overall, electronics sales expect a relative flat Q1, now I’ll hand it back to Paul, and he’ll give you some additional guidance.

Paul J. Van der Wansem

First of all I would like to make people aware, that the press release you got, we started to form a totally new business group for alternate energy. That group will drive primarily the solar part of the energy both [inaudible] as well as silicon based, and to that group we have found two key leaders. And the reason were setting it up as a separate group, is that we wanted to disentangle that group, and not be burdened by the other part of our business which is in electronics and in some custom made equipment. So, this group will have its prime focus to drive the alternate energy business, and for now that means that we will be doing a lot of activity in solar. We hired two key executives for that group, to run it first of all, John McCaffrey, he’s joined us as vice president of alternate energy and he’ll be in charge of all engineering and product development. And Jack has a law background, initially at Polaroid, but he also was in the Navy as a nuclear engineer and after this he was one of the key people to build Evergreen in designing and building their first US pilot plan and the initial manufacturing facilities. After that he moved to set up with Q-Cells and designed the initial 30 megawatts Ever-Q factory in Germany, he then moved to DayStar for [inaudible] technology where he was involved in CIGS and set up a pilot line foil and then the initial line for the 25 megawatt manufacturing facility which is being built in California. So Jack is going to be a key ingredient in driving our solar business into the future. Together with him we have also acquired Doug Lawson who joined us recently, Doug will be in charge of the business of development and marketing for the alternate energy group, and his prime responsibility will focus on drawing the company’s alternate energy with a special focus on solar most centered on the silicon based solar parts. Doug has an extensive background in rapidly growing company like PRI Automation and his background is also in the processing area where he used to work for Intel and Digital, so we welcome both of these new individuals, and we expect with the driving force of those two members to our executive team, that we will be on the rapid road to develop our business in the Solar area.

In addition, we are spending to open two new solar research labs, one in Billerica here which will be opening later on this year, and one in China in Shanghai, which will be opening next month. Those activities are key activities for us to change our strategy, to build what we see as a huge opportunity in solar, and to go after that with a vengeance and hire the right people for this. Now that obviously, will have somewhat of a negative impact on somewhat a meek year into 08, certainly the way were starting out the year, as you’ve seen in my outline for in the press release, we are looking as an outlook here in first quarter, we have kind of a fairly low revenue pattern, $15.8 to $16.8 million, and we expect the bottom line to be a little bit above the breakeven somewhat marginally profitable. So, as we move through this year and although we expect that we are going to double sola, again over last year, and with an outlook of the electronics business to be somewhat in line with last year meaning flat, we expect that we are going to growing somewhere for the whole year around 15 to 20 % at least but the pressure will be one the bottom line for two reasons, we are expanding fairly rapidly to build out our opportunity in solar, we have seen boasts in Silicon based as well as in thin film based. Huge opportunities where we can apply our technology, and we want to take advantage of it, but we are going to have to pay the piper a little bit in the mean time in order to really take advantage of those opportunities.

So, for this year we see some pressure on the bottom line in general, we’ll have higher expenses than normal, but we think its for a good cause because we want to double not only this year, but we expect we will be able to at least double also again next year in our solar energy business. We feel that for our low ball strategy, that it is incredibly important for us to build a different business there. So with that I’d like to turn it over to basically a Q&A session, and see what people are interested in and we tried to answer the questions. Gavin if you could take it from here to lead the Q&A.

Question-and-Answer Session

Operator

(Operator instructions) We will take our first question from Colin Rusch of Broadpoint Capital.

Colin Rusch – Broadpoint Capital, Inc.

The first question is about customers, how many customers are qualifying tools right now on the solar side.

Paul J. Van der Wansem

Jim maybe could you give an answer? Do you know how many people are qualifying new systems?

James M. Griffin

By qualify do you mean the total market, Colin?

Colin Rusch – Broadpoint Capital, Inc.

How many customers are evaluation your tools at this point on the diffusion furnace

James M. Griffin

We have a significant number that are evaluating our tools for inline processing in the fusion area. As I mentioned, we have one system that has been shipped and been accepted. We’re in discussions with a very large number of customers and in the process of running testing for them here at Billerica, and will be expanding that capability in testing in China very shortly.

Colin Rusch – Broadpoint Capital, Inc.

And what’s the timeline for taking those customers from evaluation process to closing sales? Are you expecting that to happen within a quarter or a couple of quarters?

James M. Griffin

I would say that is probably going to take probably one to two quarters.

Colin Rusch – Broadpoint Capital, Inc.

And then, have you got any feedback on the performance of the tools from the customer that has accepted it in terms of conversion efficiencies? Are you looking at 16% plus on typical monocrystalline wafers? Where are you coming out on that?

James M. Griffin

They were in the 16% plus range.

Colin Rusch – Broadpoint Capital, Inc.

And your still pushing through about 1500 wafers an hour?

James M. Griffin

They were evaluating it for that capability.

Colin Rusch – Broadpoint Capital, Inc.

Okay. Great. Then, could you remind us of the solar revenue as a percentage of total revenue?

Paul J. Van der Wansem

Yeah, I think, when we talk about the doubling of solar, if you take a figure for last year of a little bit more that $9 million and double that at least for this year and double that again for next year, you’ve got a pretty good sense of where it is.

Colin Rusch – Broadpoint Capital, Inc.

Of that $9 million is there a percentage we can look at in terms of thin film versus polycrystalline?

Paul J. Van der Wansem

That seems to fluctuate. Thin film is really the latest part, in the early part of the year it was all silicon based and towards the end of the year, it became somewhat thin films and if I were to take a stab at it for right now, in the early days of this year, and maybe one third thin files and two thirds silicon based.

Colin Rusch – Broadpoint Capital, Inc.

With your focus on CIGS and [CADTEL] we’re looking at a lot of start up companies that are in development phase going into commercialization phase, over the next 12 months or so where are you seeing the thin film opportunity in terms of geographic breakdown, are you seeing the films going to Asia? The US? Or in Europe, as your primary opportunity?

Paul J. Van der Wansem

I think Jim can compliment my answer, but basically what we’re seeing is quite a bit of activity in the United States, first of all. We are seeing activity in Europe where we are starting to engage with certain customers and I would say there’s a little bit of stuff going on in the Far East but Jim maybe able to talk about that a little bit more.

James M. Griffin

Yes. What we’re also seeing Colin is that folks that may be based in the US looking at expanding production capability and it looks like on the thin film said even the South East Asia looks like to be a fairly hot spot for some of the folks in terms of their expansion. As Paul mentioned, we are talking with a few customers in the China and Taiwan also was another location where there’s activity in the thin film side.

Colin Rusch – Broadpoint Capital, Inc.

Great and are those customers in South East Asia are they US based, Europe based or Asia based?

James M. Griffin

Certainly US - there are some that are US based that we know that are going to be heading that way and so I’d say that right now it would be US based.

Operator

And we’ll take our next question from Patrick McGlinchey from Sidoti & Company.

Patrick McGlinchey – Sidoti & Company

Previously you guys have estimated revenue from the alternative segment constituting I guess 30 to 35% for total system sales in 2008. Is that still the case here?

Paul J. Van der Wansem

Yes it will be basically one way to look at it is in our total system sales we will be looking in the 30% range. Yes.

Patrick McGlinchey – Sidoti & Company

Okay. And now with the build-up trying to accelerate the growth of the alternative energy segment we’re going to see expenses climb here, what type of level of total sales do you think? I know we went from 22% was historical levels in 07 floated around 30%. What does it look like in 08 and possibly 09?

Paul J. Van der Wansem

Well as I’ve said I don’t want to change the tune to much here but we are at least trying to double what we’re doing in the solar sphere. It’s a little bit harder to predict what’s going to happen in nuclear. That’s a fairly unpredictable market as things happen and when things happen there they’re bigger orders but are highly unpredictable as to when they come in. It takes us a long time to discuss things and then its somewhat over unpredictable manner as which we see sometimes orders for that. So, let me excluded it for a moment and you just pinpoint and think about what we’re doing in the solar area with at least doubling for this year and next year that should give you a fair indication of where that comes out.

Patrick McGlinchey – Sidoti & Company

Okay. Could you just give us a little more color on that tax item and any possibilities of future problems? Can we expect anything like this again? Hopefully not, obviously.

Paul J. Van der Wansem

No hopefully not you’re right.

Patrick McGlinchey – Sidoti & Company

What was the problem there?

Paul J. Van der Wansem

Well it had to do with some of the withholding tax of certain charges we make to that subsidiary. We saw legitimate charges but as soon as you then actually transfer the money back from that country to the United States there was a withholding tax on it. We right now have no intention of bringing that money back. We may even use it there for further investments. So there was somewhat of a dispute as to what degree we ought to put a reserve on the books for a tax liability or not and that came out the way it came out and we had to basically at the yearend acknowledge that and we did book a charge. Now for people going forward we are fairly cautious and I’ll tell you also to tell those people who are trying to run a model here that you ought to, for lack of better knowing, we ought to reckon this year we may see a tax rate of somewhere around 35%.

Patrick McGlinchey – Sidoti & Company

Okay. One last question, I guess your guiding revenue for net for the quarter $16 to $18 million. Can we expect then second half of 2008 will have greater sales?

Paul J. Van der Wansem

Yes well let me first of all correct you in what you said to me, I think in my press release it talks about $15.8 to $16.8 and secondly the backlog and that’s a little bit different from the other electronics sector. The backlog is specifically in the solar sector, alternative energy is building nicely and we expect therefore that Q2 will see a nice increase at least in the solar part. It’s still a little bit dubious as to what is happening with consumer spending and how that effects the cap ex for those people who are in specifically the PC board assembly area. It seems that, as Jim said, that we see a little bit more light and a little bit more glory in the area of semiconductor packaging which was way down as well last year.

Operator

And we’ll take our next question from Len Goldberg from Goldberg Capital Management.

[Len Goldberg – Goldberg Capital Management]

Could you talk a little bit about the competition in the solar business?

Paul J. Van der Wansem

Yes I can talk about a little bit and then someone else can chip in I guess. But the competition basically, we have very strong competition in a number of German companies. The Germans were early on in this game and they had strong subsidies in Germany and they build up quite a strong industry in Germany supporting most the German and European industry for solar and now are expanding beyond that and trying to reach into the Far East and United States. Those manufacturers typically are pretty high cost. I wouldn’t say anything bad about the equipment necessarily but it is high cost equipment. There is a one key supplier [Santotherm] who delivers and can deliver a turnkey project, set up the whole factory. One pays dearly for that and I think initially as people are sometimes have a lot of money but not a lot of know how but people may be buying a turnkey project, but I think that over time we will see that decline. We think that people are going to pick out the best equipment for the line as they become more familiar and be moving into an area where we are seeing more and more know how in the manufacturing itself of how to put a line together and what to pick and choose. And so we feel longer term that it may be advantage in some cases to have the ability to do a term key line. We think as we see in the electronics industry that ultimately you win with the best piece of equipment and we think that’s going to be true for this industry as well.

Doug Lawson

I think one other key difference on the competition side is our Chinese manufacturing capability. We basically - you know our competitors are European and a few US based and none of them have the same capability in China that we have in terms of the cost and also the presence that we have in China which as you know is the largest market and largest growing market, fastest growing market for solar and I think that’s a key differentiator of ours.

Paul J. Van der Wansem

And to add to that you know we also have of course competition here in the United States. There are certain suppliers who have different pieces of the line, different pieces of equipment and we should not ignore those people. But our key name of the game really is on two issues that we talk about silicone that is on the integrated diffusion line due to the doping and diffusion where we bring out a new doper and as Jim has talked to you about and secondly in the whole metallization line. Those are our key lines at least for this year where we at least in the silicone space are playing. On the thin film side it stretches from large, very large annealing furnaces for roll off and for glass and coating applications for [inaudible] [CADTEL] or CIGs in some cases. Those are the key ingredients of what we’re offering today and we hope to expand that further in the future.

Operator

And we’ll take our next question from Daniel Beckman of ING.

Daniel Beckman – ING

In the $9 million for the solar business, is that for 2007?

Paul J. Van der Wansem

That’s right.

Daniel Beckman – ING

Okay and then if that doubles in revenue and the electronics business is basically, flat I guess I just wanted to see how you footed to the 30 to 35% solar as a percent of sales in 2008

Paul J. Van der Wansem

The 30% plus is the alternate energy that has some nuclear in it, very little sold of our fuel cells because it’s really early days and we’re not counting on major sales there at all. Then you also have to take into account, that on top of that you have some custom systems were still doing for some legacy customers, which many neither fit into the electronics business nor in the alternate energy business sector. If you add that up, that’s how you get to those percentages

Daniel Beckman –ING

A follow up question on the tax rate, you mentioned the 35% tax rate is that just a 2008 event or from now on is your tax rate 35%?

Paul J. Van der Wansem

I don’t dare to tell you that answer, because I don’t know. At least for 2008 that’s what we are calculating within our budget right now

Daniel Beckman – ING

A final question, could you talk about the gross margin difference between the electronics business and the alternative energy business?

Paul J. Van der Wansem

Yeah I could spend a few words on that. Basically, the electronics business as you are well aware is specifically in the S&P, the PC board assembly market is much more of a commodity product and sees, a as it is low temperature equipment sees more competitors than in some of the other equipment we’re doing. So by virtue of those two factors and the high price pressure with on the electronics manufacturing where people are now building PCs, between $100 and $200 and putting that board together they are get very little money for it and they make only few percentage points. So, there’s a huge pressure in that industry to do things cheaply, as cheaply as possible in some cases, and that puts a lot of pressure on the pricing here. So, we typically see lower margins in the S&P sector, we see higher margins I would say in some of the semiconductor applications because they are a little bit more intrinsically difficult with more special specifications. If you then go to solar, we probably and alternate energy in general which includes nuclear, we would probably look at the upper end of the margin range for us for those types of products.

Daniel Beckman – ING

Okay. Then I’m sorry, just one final question, how much additional are you going to have to spend for these investments in new people and research and development next year? Where will those numbers kind of come out?

Paul J. Van der Wansem

Well, I think if you were to look at the model, what we reckon will be somewhere in the 8.5 to 9% in R&D and we’ll have some significant expenses in the SG&A because we’ll be attending and putting all our efforts in [inaudible] shows and beefing up our marketing and process capabilities, and that’s going to hit our SG&A line as well. So most of those expenses will probably be hovering around the upper end of what we’ve seen and that you will take into account.

Operator

Will take our next question from Vernon Essi of Needham & Company

Vernon Essi – Needham & Company

I just wanted to follow on that last question, it was sort of the line of thinking I had here. In terms of the capital outlays you’re going to have, are you going to be ticking upwards your cap ex at all to invest in these new labs? Or is this mostly going to be a variable component going forward in terms of your spending?

Paul J. Van der Wansem

No, there will be both variable and cap ex. I mean, the outfitting all those labs with the equipment and the instruments we need as well as the equipment is going to be in cap ex, and as I said before our cap ex will be running ahead of us at about at least one and half times our depreciation rate, and depreciation runs somewhere between $1.2 million for us at the present.

Vernon Essi – Needham & Company

So you would be jumping up to about $1.8 million?

Paul J. Van der Wansem

Yeah.

Vernon Essi – Needham & Company

Ok, if we go back to sort of the sales cycle of this equipment versus, you know you already installed meaning the solar equipment rather, versus the installed base of the electronics equipment, is there going to be a shift somewhat in terms of the – obviously you are indicating you’re going to be spending more money but on an incremental basis to win new business, is it safe to assume that the gross margin uptake you would be getting on the solar side, at least initially, would be offset and then some on the op ex side? Because it sounds like you’re going to have more than engineering sale with your customers as opposed to a turnkey. It seems like your having more of a pull strategy which can take longer in some instances, but you might have a better relationship with your customer. Is there any pros and cons on that on the model longer term that we should be thinking about?

Paul J. Van der Wansem

I think you right on is that it is a different sale in many instances. We hope that once we are into some of those companies and we have proven what our product can do, that we are in there for the longer haul. I think that we have an advantage. I believe that we have a very strong infrastructure, going back to our electronics business around the world, and most of these countries in terms of service and support, and spare parts. People are looking to, especially for example the [CADTEL] people, for building their thing films on glass, you don’t want to ship those glass [inaudible] around the world, you want to build factories where you’re going to use it. So, the support for those factories and the support for the equipment they’re using is going to be an important as well, so I think we have a leg up in many cases on that score over at least some of our competitors maybe not all. In general, I think engineering sales at least for the time being over the longer haul I think will be able to benefit that will get multiple orders as [inaudible] which will obviously take a lot less effort than the first ones.

Operator

(Operator Instructions) We’ll take our next question from Matt Winthrop of Oppenheimer.

Matt Winthrop – Oppenheimer

Paul, normally calls like this when my heart sinks and I see the first couple of press releases, it seems like it’s a little bit different this time, is that fair to say?

Paul J. Van der Wansem

It is different, it’s quite a bit different

Matt Winthrop – Oppenheimer

If you were going to extrapolate out, and two of the other previous gentlemen sort of went in this direction, but let’s just say its 2009 and your back at $75 odd million run rate and now solar is 35 40% of the business, you’ve spent a lot on equipment and building these resources and hiring this talent. All things considered equal, are you a more profitable company and/or do you consider at some point either exiting or spinning off the traditional business because this is where the growth is in the next 10 years?

Paul J. Van der Wansem

I’m not saying yes or no, it’s impossible.

Matt Winthrop – Oppenheimer

Is there a published solar association potential growth rate globally on solar equipment that you sort of subscribe to, that you say, “Wow, this is worth investing all the time and energy?”

Doug Lawson

I actually haven’t seen a number published by anybody on equipment specifically at this point, so really what well go by is looking at the growth in terms of facilities that are being built. And as you know, we take a look at a 25 megawatt line, we looked at the cost of capital the cap ex that goes into that then we can kind of extrapolate out what the growth rates look like.

Matt Winthrop – Oppenheimer

Two last quick ones, I noticed the gentlemen you hired from Boston University, and you guys won some prizes didn’t you, or had some scientific work with them for the academic side, might this yield some future business?

Paul J. Van der Wansem

No, I don think you can draw that conclusion at all.

Matt Winthrop – Oppenheimer

Lastly, it sounds like China is really taking off, are you selling mostly internally or you using a third party? How are you doing all these sales?

Doug Lawson

Were selling direct and were also selling through agents or distributors.

Operator

We will take our next question from Carlos Rangel of MAP

Carlos Rangel – MAP

I was wondering if you could comment a little more on the big picture in terms of the nuclear product with walking beam. Given all the nuclear plants that are going up around the world, do you see a long term growth driver for the product? What are your thoughts?

Paul J. Van der Wansem

Yes, I think I’ve covered somewhat in previous calls, but I’ll go over it quickly one more time. Basically what we’re seeing is that there are about 30 nuclear power plants being built in Asia, there are a couple of them on the [inaudible] and even Europe. There is an inkling that the United States may get really serious about nuclear power as well. Right now we have seen over the last 20 years very little, if any in investment in nuclear, and that was also true for the people we sell to, and were selling to the people who manufacture the nuclear fuels. There are about 10 to 12 guys in the world who do that, some of them in Russia, some of them in Kazakhstan, some of them in Japan, you name it, the UK, Germany, even Sweden, France, of course and the United States to just name a few of the countries who are involved in that. We see that there is a turn now to upgrades in those nuclear fuel facilities, because people thought maybe five or 10 years ago that nuclear was going to be the dying industry, it is now reviving, and people are starting to put money back into it.

We’ve seen some big conglomerations, like Westinghouse as part of Toshiba, GE is getting together with Hitachi for example, and those guys are the big guys who build nuclear power plants, and are very instrumental in doing that together with the French company [Arriva]. We see that we therefore have demand for upgrading facilities in some cases and demand for additional capacity which may mean sometimes that people throw out their old equipment and buy new equipment and we are actually actively quoting several of those projects around the world. So, as I said before, sometimes it’s hard to predict as to when it happens and therefore, we have a hard time pinning it down whether were going to have big lumps of revenue one year or another. So, when it happens, we’ll do a press release and let you guys know and in the meantime we are betting heavily on solar and putting a lot of effort into the solar energy part, where we think we’ve got a lot to contribute.

Operator

Well take our next question from Patrick McGlinchey of Sidoti & Company.

Patrick McGlinchey – Sidoti & Company

I guess just a follow on real quick, the press release you have bookings up 2.5%, I take it that’s $22 million is that right?

Paul J. Van der Wansem

Not sure where you got that number from.

Patrick McGlinchey – Sidoti & Company

Was your 06 December 31 number $8.9 million? Is the 2.5 times year-over-year, quarter-over-quarter?

Paul J. Van der Wansem

No, the 2.5 times is the bookings we had in 07 compared to 06.

Patrick McGlinchey – Sidoti & Company

Ok, I’m sorry, so then in the backlog of $8.9 million from December 31, 2006, what’s the - do you have a number for 07?

Paul J. Van der Wansem

That back log has gone up, but we are issuing a number as usual only when we do our 10K.

Operator

Well take our next question from Matt Winthrop of Oppenheimer.

Matt Winthrop – Oppenheimer

Paul, what is the name of the new business?

Paul J. Van der Wansem

We are calling it The Alternate Energy Group, and it is not a full division yet, but the alternate energy really covers [inaudible] for what we do in primarily in solar and also in nuclear fuel. And at some point in the future, if [inaudible] fuel cells ever come to fruition that will fit under that hat as well. But it has a separate engineering, separate marketing, and that’s where we start.

Matt Winthrop – Oppenheimer

In essence so it’s BTUI Alternative Energy Group, it’s not going to have a separate standalone name at some point?

Paul J. Van der Wansem

It may at some point.

Operator

We will take our next question from Jim Quinton of Barrett and Company.

James Quinton – Barrett & Company

One of the previous callers mentioned something about some gross margins and so forth, and I might have missed part of it, did you put a number on what the gross margins are in the solar business at all?

Paul J. Van der Wansem

No, I actually did not, I said there on the higher end of what we see here and that typically in the commodity type business and the low term [inaudible] business which is basically all electronics, S&P related and that’s on the lower end of the scale. And you could see where it would come out on the average if you look at our report.

Operator

It appears we have no further questions. I’d like to turn the call back over to our speakers for any additional or closing remarks

Paul J. Van der Wansem

Thank you all for your attendance. I hope you all follow closely what were going to do especially in the alternate energy sector. That does not mean to say that were going to let up on what we try to do in the electronics sector, but alternate energy is really the new leg on the stool and that’s where were putting a lot of our efforts as you’ve seen in our press release and that’s where we hope to excel in the next number of years. So keep your eyes and ears open and hopefully, we’ll keep you up to date as best as we can. Thank you for your attendance, and hope to speak to you when we do our first quarter release in April the 29^th. Thank you and good bye.

Operator

Again, that does conclude today’s conference. We do appreciate your participation. You may disconnect at this time.

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