Newport Corporation Q1 2008 Earnings Call Transcript

May.13.08 | About: Newport Corporation (NEWP)

Newport Corporation (NASDAQ:NEWP)

Q1 2008 Earnings Call Transcript

April 30, 2008 5:00 pm ET

Executives

Chuck Cargile – SVP, CFO and Treasurer

Bob Phillippy – President and CEO

Analysts

John Harmon – Needham & Co.

Mark Miller – Brean Murray

Spininma [ph] – Thomas Weisel Partners

Jiwon Lee – Sidoti & Co.

Ed Einboden – Wm Smith & Co.

Operator

Good day, everyone, and welcome to the Newport Corporation first quarter 2008 financial results conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Chief Financial Officer Mr. Chuck Cargile. Please go ahead, sir.

Chuck Cargile

Good afternoon and welcome to Newport's first quarter 2008 conference call. With me today is our President and Chief and Executive Officer, Bob Phillippy. In this call, we will comment on Newport's financial results for the past quarter, discuss our outlook for the company, and provide updates on some of our key initiatives. Please refer to our press release we issued earlier today, which includes our income statement, balance sheet, and details concerning our performance for this quarter compared with prior periods. Also I encourage you to check our website at newport.com, where we've posted historical income statements, balance sheets, and schedules that detail historical trends for sales and orders by market and the performance by our two reporting segments.

I would like to remind you that during the course of this conference call we will be making a number of forward-looking statements that are based on our current expectations and involve various risks and uncertainties. The risks and uncertainties are discussed in detail in our periodic SEC filings. Although we believe that the assumptions underlining these statements are reasonable, any of them could prove inaccurate and therefore there can be no assurance that the results will be realized. In addition, our comments refer to our results from continuing operations.

As indicated in our press release our first quarter 2008 orders were truly outstanding. We normally experience a bit of seasonal dip in the first quarter of the year, but this year our first quarter order intake level of $125 million was the second highest in Newport's history, second only to the fourth quarter of 2007. In the last six months our new orders have exceeded $255 million.

It's important to note that we recorded these strong total orders in the first quarter, despite the expected seasonally low activity from our research customers and continued weakness in demand from our semiconductor equipment customers. These areas were both slow in the first quarter of 2008, but this weakness was more than offset by over $15 million in new orders from our photovoltaic customers and by an all-time record of $26 million in orders from our life and health sciences customers. We are very enthusiastic about these results, as we've been focused on and successfully increasing our penetration in these areas for some time now. By way of comparison, the $125 million in total orders for the first quarter of 2008 was approximately 13% higher than the first quarter of 2007.

Our revenue of $115.2 million in the first quarter of 2008 represented an increase of 7.4%, compared with the prior-year sales level. We reported net income in the first quarter of 2008 of $3.7 million or $0.10 per share. In the first quarter of last year we reported net income of $5.3 million, or $0.13 per share. The reduction in net income on a year-over-year basis is due almost entirely to a reduction in gross margin, despite the higher revenue levels.

Our gross profit for the first quarter of 2008 was $46.1 million, or 40% of net sales, compared with $46.6 million, or 43.5% of net sales in the first quarter of 2007. Although our gross margin improved sequentially over the fourth quarter level, and was consistent with our expectations, further improvement in our gross margin continues to be a primary focus for us in increasing our overall profitability.

The lower gross margin in the first quarter compared with the prior-year period was driven by both external and internal factors. Externally, the pricing environment has intensified, particularly in our research market. This dynamic is not unusual when you consider that the sluggish research market environment creates heightened competitive pressures. In addition, shipping costs are increasing at a rapid pace, driven primarily by increasing fuel costs.

From an internal perspective, we've discussed the improvements we are making in our Laser Division over the past few quarters. Bob will discuss the progress of our activities in this area more in a minute. In short, we believe we are making significant progress and we expect this to become more visible in our financial statements later this year. Also, the investments we are making in manufacturing in China, and to enable full utilization of our SAP system are a drain on our overall profitability in the near term, but we expect them to provide a positive impact to our gross margins and total profitability in the future.

Selling, general, and administrative expenses for first quarter of 2008 were $29.8 million, or 25.9% of net sales, compared with $30 million, or 28% of net sales in the comparable quarter of 2007. SG&A dollars remained relatively flat, even with the 7.4% increase in revenue. As we increase our orders and grow revenue in the long term, we will continue to tightly manage our discretionary spending to reduce SG&A as a percentage of revenue.

Research and development expense for the first quarter of 2008 was $11.4 million, or 9.9% of net sales. Although we spent an additional $800,000 on R&D in the current quarter versus the prior-year quarter, it was unchanged as a percentage of total sales. We continue to closely monitor our R&D spending to ensure adequate focus on exciting opportunities in areas such as photovoltaic manufacturing, fiber lasers, and to support our initiatives for life and health sciences customers. In recent quarters we've managed to increase our R&D investment in these critical areas while keeping the total spending within our target range of 9% to 10% of total revenue.

Our cash, cash equivalents, and marketable securities totaled $134.5 million at the end of the first quarter of 2008. That's a decrease of approximately $9.4 million compared with the end of 2007 It should be noted that during the quarter we used $11.4 million of cash to repurchase 1.1 million shares of our stock on the open market, which completed the repurchase program authorized by our Board of Directors in 2006. Dating back to the first quarter of 2007, we've repurchased a total of 6.4 million shares of our stock, and have reduced our diluted share count to 36.6 million.

Now I'd like to discuss our outlook. The following statements are forward looking and refer to our expected results from continuing operations. Sales for the second quarter of 2008 are expected to be approximately equal to the first quarter level. As I mentioned, we are enthused by the high level of new orders we've booked in the last two quarters. In addition, our backlog of items scheduled to ship in the next 12 months is at an all-time high. However, many of these orders are scheduled for delivery in the next 9 to 12 months. Therefore, we expect to see most of the benefit of this large backlog in late 2008 and early 2009.

We expect our gross margin for the second quarter of 2008 to be slightly higher than the 40% we recorded in the first quarter of 2008. SG&A expenses for the second quarter of 2008 are expected to be in the range of $31 million to $33 million. The increase over the first quarter level is attributable primarily to performance-based restricted stock units awarded under our equity incentive program. These awards were made late in the first quarter of 2008 and the second quarter will therefore include a full quarter of the related expense. The increase is also due to annual salary increases that for us become effective in April, and a higher expense related to incentive compensation. We expect other SG&A expenses to be approximately the same level as the first quarter of 2008.

R&D expense for the second quarter of 2008 is expected to be higher than the first quarter of 2008, in the range of $11.5 million to $12 million. This is due primarily to increased investments in our R&D programs related to the photovoltaic market. We expect our income tax rate in the second quarter of '08 to be approximately 15% to 16%. This amount will vary depending on certain state minimum taxes, taxes on foreign earnings, and adjustments to income tax reserves.

We expect our number of diluted common shares outstanding for the second quarter of 2008 to be in the range of 36 million to 37 million, depending on the number of stock options exercised and any share repurchases made by the company during the quarter.

Based on the increases in certain expenses, coupled with the relatively flat revenue level, we expect our earnings per diluted share in the second quarter of 2008 to be at or slightly below the first quarter 2008 level.

Our first quarter results have positioned us well to achieve the full-year targets that we identified in our prior conference call in January of this year. At that time we highlighted that we expected to have revenue in the range of $465 million to $480 million and earnings per share in the range of $0.65 to $0.80 per share. The strong orders and backlog give us increasing confidence in our top-line growth, not only in relation to the guidance for 2008, but also for growth in excess of 10% on a year-over-year basis in 2009. More importantly, we believe that this strong growth in top line, combined with the internal operating improvements and investments we are currently making, will deliver strong profit growth in 2009 and beyond.

Now I'd like to turn the call over to Bob Phillippy to discuss some of our key initiatives and opportunities.

Bob Phillippy

Thanks, Chuck. Clearly, the highlight of the first quarter was our excellent order intake, which positions us well to achieve our growth objectives. Our initiatives in the photovoltaic market are particularly exciting. However, before I talk about this, I would first like to comment on some of the key factors that have been influencing our financial performance during the last few quarters.

First, the semiconductor equipment industry, which historically represents the majority of our business in the microelectronics market, continues to be in a cyclical downturn. Several of our key OEM customers in this market have forecasted even further weakening in near-term market conditions. If their forecasts are accurate, this will clearly negatively impact our revenue in the next few quarters. However, that being said, we believe that our position with these customers remain strong, as we have not lost any current programs due to competition, and we continue to capture new design wins.

We will use this market pause to work collaboratively with our customers to develop products and subsystems for new applications and next generation platforms. This approach has proven successful in increasing our share during past market cycles, and we expect it to do so again.

Second, our Lasers Division has been in the process of implementing a comprehensive plan to improve its financial performance. Although the division's profitability was at a low point this past quarter, as anticipated, its orders, sales, and profitability were all better than expected. In particular, our laser diode business in Tucson, Arizona has made significant gains in operational performance. Further, the key operational metrics for the division are improving, and we believe that we are well on the way toward addressing the process and systems issues that have hampered our performance. We are increasingly confident that our improvement plan will be largely completed by the fourth quarter of this year, and we will achieve our targeted objectives.

Third, the ramp up of our Wuxi, China facility continues as planned. Since the opening of the facility in December 2007, we have focused on transferring the manufacture of selected products to Wuxi, and began shipping products produced in Wuxi on a very small scale during the first quarter of 2008. The output of this facility will continue to increase rapidly during 2008, such that we now expect this facility to operate at a break-even level by the fourth quarter of this year, and to begin positively impacting our overall financial performance in 2009.

Finally, our project to implement SAP at all our worldwide locations remains on track for completion by the end of the third quarter of 2008. This common systems platform creates new opportunities for us to improve the effectiveness and efficiency of our business. We have been executing our SAP implementation program since the fourth quarter of 2006, and the sites that went live first are already utilizing this platform to improve their businesses. By the end of this year, once all sites are fully functional on the SAP system, we will be able to more completely leverage the capabilities made available through this enhanced platform. As we get closer to 2009 and completion of the implementation, we expect our use of SAP to provide us a financial benefit, whereas to date it has been a drain on profitability. We believe that these factors, while negatively impacting our near-term performance, will position the company for significant sales and earnings growth in the future.

Now, I'd like to discuss some very exciting developments in Newport's business. Our first quarter orders for solar cell manufacturing applications were more than $15 million, or 12 % of our overall order intake. This amount is greater than our orders from this market for the entire year of 2007, and clearly exemplifies the positive response to our ability to work with customers in this industry to develop photonic solutions, to increase throughput, and improve yields in the manufacture of solar cells. While the timing of a few large orders made this quarter particularly strong, activity in the photovoltaic market is robust, and our unique solutions are gaining increased acceptance.

We have and plan to continue to increase our investment and focus in R&D to develop products intended to fuel our growth in this market. We have active programs in our motion control, lasers, solar simulator, optical systems, and integrated solutions business areas that are focused on applications, including solar cell scribing, edge isolation, and test. Additionally, we are on track to open our new applications laboratory and demo center in Stahnsdorf, Germany at the end of this quarter.

With the opportunities we see today, we could record more than $30 million in orders from this market in 2008, which would be triple the $10 million in orders we announced for 2007 in our January conference call.

Another bright spot for our first quarter orders performance was the life and health sciences market. Our orders from this market grew 17.4% over the first quarter of 2007, and represented an all-time quarterly record for us. In this market, we primarily sell components and subsystems to OEM customers for bioinstrumentation and medical therapeutic applications. In the first quarter, we captured four significant OEM design wins in these areas.

We also had another strong quarter of orders for our Mai Tai DeepSee laser, which combines proprietary optical dispersion compensation techniques with our tunable ultra-fast laser platform to enhance the image quality of multi-photon microscopes.

While much of our incremental R&D spend is focused on photovoltaic applications, our new product pipeline in other areas is also quite robust. A few examples of pending introductions include a new line of laser diode drivers to be introduced in the second quarter of 2008. This modular new product line will effectively service OEM applications for special purpose drivers, while also allowing the addition of user interface features for our scientific customers.

We are also introducing a new generation of SmartTable vibration control systems, which integrate our patented active damping technology into a new highly-modular feature-rich isolation platform designed to improve lab space optimization and safety for scientific research customers.

Our development activity in fiber laser technology also continues at a rapid pace, with the initial products from both of the previously-announced platforms expected to generate revenue in 2008.

In summary, while our financial performance for the near term will be constrained a bit by the cyclical downturn in the semiconductor equipment industry, the soft scientific market, and the in-process nature of our key initiatives, we are successfully capitalizing on some significant market opportunities that we expect to drive strong revenue and operating income growth beginning in the fourth quarter of this year, and continuing into 2009. Our unique ability to leverage our expertise in laser, motion control, and optical technologies to develop solutions for our customers' application needs puts us in an excellent position to capture both high growth and emerging market opportunities.

Thank you and now we would like to turn the call over to any questions you may have. Operator?

Question-and-Answer Session

Operator

(Operator instructions) We'll go first to John Harmon with Needham & Company.

John Harmon – Needham & Co.

Hi, good afternoon.

Chuck Cargile

Hi, John.

Bob Phillippy

Hi, John.

John Harmon – Needham & Co.

Hi, guys. A couple of questions please. I guess, first of all, you talked about your $15 million in photovoltaic orders, given that your view of the market is $70 million for lasers, you'd own the whole market if it were only lasers, I don't know if you gave a split or if you could kind of talk qualitatively about how much might be lasers and how much would be motion control equipment and so on?

Bob Phillippy

Hi, John, this is Bob Phillippy. We have talked about the laser market sizing, but I think the important thing to note is, as I mentioned during the prepared remarks, we've got active programs going on in solar simulators, motion control, optical systems, and integrated solutions, and that expands the size of the market significantly for us. I think I'll stop short of quantitatively assessing that at this point, but it's a pretty good size and growing fairly rapidly, so, as I mentioned, we consider it a pretty exciting opportunity.

John Harmon – Needham & Co.

Okay, thank you. And still on the topic of lasers your Laser Division was unprofitable in the quarter. You said that it beat your own expectations, I guess could you say what your expectations were? And maybe just elaborate a little on how we see this as a turning point for that business?

Chuck Cargile

Yes, John, it's Chuck. When we entered the quarter in January we had said that lasers would have a weak first quarter, that traditionally the seasonal impact in that business impacts us pretty significantly in the first quarter. We had expected them to have a loss greater than what we recorded, and we also exceeded the revenue from what we had expected when we entered the quarter. So both the top line and the bottom line they exceeded the expectations. I don't want to say by how much, we don't generally discuss on internal forecast, but when we came up with the guidance that we gave in January it was a little more conservative, and we were pleased with what we saw in the lasers. We're not pleased with losing money in the business and believe that Q1 will be a low watermark for the year, and believe that we could get back into profits in Q2, and certainly see that improving each quarter throughout the year.

John Harmon – Needham & Co.

Okay, and then one more if I may. I'm sorry, I dialed in a little bit late, the profitability of your PPT Division was down sequentially and year over year, is that a function of product mix or something else?

Chuck Cargile

It's absolutely a matter of product mix. The – I think, John, hopefully you have – sent to you, or you can pick up the website, the split in revenue and profit by the division and you can see that even though the PPT revenue was up a little bit, profit was down just a little bit less than $300,000 or $400,000 and that's because the mix of products. We had mentioned in our call in December – or in our call in January about the December results that much of what we had booked for just texturing tools was going to ship in Q1 and we said at the time, if you look back at the script, the Q&A, we had said then that carries a little bit lower margin than what we get in the rest of the PPT business. So this quarter, to have a similar revenue level or a little bit higher, it was with a different mix of products.

John Harmon – Needham & Co.

Got it, thank you very much.

Chuck Cargile

You are welcome.

Operator

We'll go next to Mark Miller with Brean Murray.

Mark Miller – Brean Murray

Good afternoon. Congratulations on your orders.

Bob Phillippy

Thanks, Mark.

Mark Miller – Brean Murray

Just a question, Bob, did you give the backlog – the total in the backlog?

Chuck Cargile

We did not give a total in the backlog, we did say that it's – the backlog scheduled to ship in the next 12 months is the highest that we've ever had. And actually we do – if you look on the press release in the back, Mark, on the – at the bottom of the income statement, you can see the very last row says backlog scheduled to ship in the next 12 months is $128.2 million versus $115.4 in the prior year.

Mark Miller – Brean Murray

In terms of the build in the photovoltaics backlog, how do you characterize the margins of those products with respect to your typical margins, or are these higher margins the same or below?

Bob Phillippy

It's a mix – this is Bob Phillippy – it's a mix of both, I'd say, on average. It probably comes out to close to the desired corporate average, depending on the volumes that go out in a particular quarter, but it's in line,. There are some, a bit below, and some a bit above.

Mark Miller – Brean Murray

Thank you.

Operator

We'll go next to Ajit Pai with Thomas Weisel.

Spininma – Thomas Weisel Partners

Yes, hi, this is Spininma [ph]. I'm calling in for Ajit. I have a couple of quick questions. First one, just wanted to ask about the pricing comments you've made at the beginning of the call in terms of scientific instruments. How is that pricing? Could you elaborate a little more on that? How has it changed and do you think most of those changes are behind for '08 now or how do you look into the next couple quarters on that?

Bob Phillippy

Hi, this is Bob, let me just touch on that a bit. So, we mentioned we have seen some price erosion during the course of 2007 and into 2008. I suspect, as – and I think we have talked about it in previous calls – that this is driven in part by companies attempting to achieve growth targets in the face of weak market conditions. While this helps make customers happy, at least in the short term, it's not very healthy for the industry because it can make investment in a particular sector less desirable. We continue to confront the issue as we have by increasingly effective price management just on a tactical basis, and continued efforts just to differentiate our products and provide great service and support to our customers.

Spininma – Thomas Weisel Partners

When we think about the next quarter's gross margin, what is – I guess, your projection indicates that there is some improvement from the Laser Division side clearly impacting the results assuming flat kind of quarter-over-quarter revenue levels. What kind of pricing assumptions do you guys use to get to that gross margin?

Chuck Cargile

We don't factor in our model when we forecast the margin. We are not factoring in increasing deterioration in the pricing, nor are we factoring in an appreciation in pricing. We look more at what we are living with today and how our internal efforts can be used to make the margin better through internal operations as opposed to pure pricing.

Spininma – Thomas Weisel Partners

Okay, this is very helpful. And another quick question, in terms of the photovoltaic side, if you could please repeat how much were the numbers in the prior quarter and what were they a year ago?

Chuck Cargile

What we have said externally and most recently we said for 2007, in January we announced that for the full year of 2007 we had $10 million in new orders, and in the first quarter of this year we had $15 million. So $15 million for this quarter compares with $10 million for four quarters of '07.

Spininma – Thomas Weisel Partners

Great. And the last question is just wanted to ask in terms of the stock-based compensation in the quarter, how it was divided between the line items on expense side and what is the outlook for the next quarter in stock-based comp?

Chuck Cargile

Okay. For the first quarter the stock-based compensation was about $800,000 and almost all of that is in SG&A, There's a little bit in cost of sales, a little in R&D, maybe $50,000 in each, but the bulk of it's in SG&A. Now there will be a – quite an increase in Q2 because we actually issued the next grant of restricted stocks in the month of March, so there is very little of that in Q1 because they start being expensed once they get issued, so they weren't expensed except for the last couple weeks of March. We'll have a full quarter expense in Q2. So in Q2, it's probably going to increase somewhere between $700,000 and $1 million versus Q1, so sequentially up maybe somewhere between $750,000 and $1 million.

Spininma – Thomas Weisel Partners

Great, thank you.

Chuck Cargile

Welcome

Operator

We'll go next to Jiwon Lee with Sidoti & Co.

Jiwon Lee – Sidoti & Co.

Good afternoon.

Bob Phillippy

Hi.

Jiwon Lee – Sidoti & Co.

I jumped into the call a little bit late and I didn't quite catch your rest of '08 outlook, particularly the second half, how you viewed your sales and the EPS tractions in the second half.

Chuck Cargile

Okay, what we said was with the strong order intake that we had this quarter, and even some of the order intake for Q4 that's still on our shippable backlog, that we have increasing confidence in the $465 million to $480 million of revenue for this year, which is the guidance that we've given in January, so we reconfirm that. And we've said that we believe, since much of the orders that we've taken are shippable in the next 9 to 12 months, and with the traction that we are getting in the photovoltaic space, that we are becoming increasingly confident that we can have 10% year-over-year growth in 2009 versus 2008.

Jiwon Lee – Sidoti & Co.

Oh, I see, okay. That's pretty helpful. Any commentary on your CapEx goal for '08?

Chuck Cargile

Yes, for capital you'll see – that has been inflated over the last year and a half because of our SAP initiative, and we went live with SAP at our two large foreign locations in the first quarter, so we are quickly approaching having all of our sites worldwide on SAP. So in this quarter we spent over $2 million in capital on SAP. By the end of this year that will be down to close to nothing, so you'll have $2 million a quarter that we won't have in capital. So whereas this quarter our capital spend was over $4 million, that should be down closer to $2 million, $2.5 million, something like that, by the end of the year, a quarter.

Jiwon Lee – Sidoti & Co.

Okay. And, Chuck, did you make a comment on your operating cash flow for the quarter?

Chuck Cargile

We noted that the cash balance went down a little over $9 million because we used over $11 million to buy back stock.

Jiwon Lee – Sidoti & Co.

Okay. Could you give me the operating cash flow then?

Chuck Cargile

No, but you can see that when we do our 10-Q, which will probably be filed sometime next week. You'll get a full cash flow statement. We don't issue a cash flow statement as part of the earnings release.

Jiwon Lee – Sidoti & Co.

Okay, fair enough. And finally, I guess more questions to Bob. You have highlighted pretty much the similar goals that you did last quarter to get the margins up by year-end into next year. Of the four items that highlighted, where do you feel that you have made the most progress so far?

Bob Phillippy

I think we've made pretty good progress on each of the initiatives, and one of the things that we've been trying to do is communicate consistently about the targets, about the expected end dates of some of the improvement programs, and about what we expect to achieve as a result of completing them. I mean, of course, just in managing the normal course of business we have to deal with a variety of internal and external factors and the continued, or perhaps even deteriorating condition in the semiconductor equipment cyclicality is not an encouraging thing, but from an internal implementation perspective, I think we are proceeding just fine and every one of the four is on track.

Jiwon Lee – Sidoti & Co.

Okay–

Chuck Cargile

I think, let me add, Jiwon, that we'll see – we are seeing – or we are expecting to see in Q2, improvement in lasers. The improvement in lasers will certainly be reflected in our financial statements before significant improvements from the new facility in Wuxi and from being more efficient from an operations perspective because of SAP. SAP will be done by the end of the year. Wuxi, we've said, will continue to be a drain on profitability throughout 2008, will be a benefit in 2009. So those last two things that I mentioned are really gearing us up for 2009, whereas lasers' improvement is absolutely a 2008 factor.

Jiwon Lee – Sidoti & Co.

That's very good. Thank you. And finally, did you say the solar sale new orders, the total or where you expect to be about $30 million, including the $15 million new order that you took in first quarter?

Bob Phillippy

Yes, I said that first quarter was particularly high because of the timing of a few large orders that we received during the quarter, but that we certainly could see our way to exceeding $30 million for the year.

Jiwon Lee – Sidoti & Co.

Oh, I see. Great, thank you very much.

Chuck Cargile

You are welcome.

Operator

We'll go next to Ed Einboden with William Smith & Co.

Ed Einboden – Wm Smith & Co.

Good afternoon, everyone.

Bob Phillippy

Hi, Ed.

Ed Einboden – Wm Smith & Co.

I just was wondering – I don't know if you can talk high level as to what the expenses that you guys are using photovoltaic and the R&D that you are using to build that business sort of what those I guess areas are that you are focusing on kind of on a high level basis?

Bob Phillippy

Yes, the thing that we've talked about in the past, Ed, which is becoming even closer to completion is the new lab that we have in Stahnsdorf, Germany that's specific for the photovoltaic initiative. So we are developing new products for that space and we are also incurring additional research and development expenses. We haven't – we've had a little bit of selling expense, not a dramatic amount. We don't have a new department necessarily focused on it. So we have been able to achieve the good growth that we saw in Q1 orders without tremendous amount of new infrastructure, but there is, as we've said and as we've guided to for Q2, some additional spending that you'll see primarily in the R&D line.

Ed Einboden – Wm Smith & Co.

Okay, so it's not necessarily sales you are building out per se?

Bob Phillippy

No.

Ed Einboden – Wm Smith & Co.

Okay. And I was wondering what your thoughts were as far as stock back. You guys have depleted what you had out there and whether you would address that going forward or not?

Bob Phillippy

You are right. We have purchased all the shares that were authorized by the Board in 2006 ,and as I've said consistently in this forum and others, the buy back is a Board decision. We'll have our annual shareholder meeting in May and we have with that at the same time as our May Board meeting, and so that will be an item on the agenda for May, so we'll have to wait and answer that question after the Board addresses it.

Ed Einboden – Wm Smith & Co.

Okay, good quarter guys.

Bob Phillippy

Thank you.

Operator

(Operator instructions). And it appears we have no further questions at this time. I'd like to turn the call back over for additional or closing remarks.

Bob Phillippy

Thanks again for joining us today and for your continued interest in Newport Corporation.

Operator

That does conclude today's presentation. We thank you for your participation, and you may now disconnect.

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