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Bank of America Merrill Lynch Industrials and Materials Conference Call

September 5, 2012 11:00 am ET


Don R. Kania – President and Chief Executive Officer

Unidentified Analyst

[Call Starts Abruptly] The Bank of America Merrill 2012 Industrials and Materials Conference. It’s my great pleasure today to introduce FEI Corporation and speaking today for the company will be Don Kania, President and CEO of the company.

FEI is a $2 billion market cap company. A little bit different from entering companies presenting here, we’re global leader in simplifying sophisticated scientific instruments namely electron microscope that are used in the electronics industry, they’re used in Material Sciences doing a lot in terms of natural resources, also used heavily in Life Sciences research. there is a guy that helps everybody design the materials that are being talked about here.

And with that, I’ll turn it over to Don.

Don R. Kania

Thank you, and good morning everybody, thanks for coming today. And the usual Safe Harbor statements apply for us. So let’s get in the meat of it. So we make very, very sophisticated microscopes, and for the purposes of this discussion, it’s probably pretty much all you need to know. But we’ve been working quite aggressively on not just selling the microscope to a customer, but selling the solutions to customer in a market orientation of the company, which has been evolving over the past few years, which has been quite successful for us.

So how you make the samples that go into the microscopes, which are shown in the middle here? and then what you do with the data that comes out, so you can get useful information, so that the customer can create value for himself with what we do.

So what’s the investment thesis overall? Technology leadership, workflow that has provided solution to the customer, has led to market share leadership; we are the market share leader in this segment. It’s a secular growth opportunity, I think a couple of very important reasons, we’re diversified geographically, and there is plenty of opportunity in the world, and the world is a big place, and that’s a wonderful thing. And as well as we have diversified market, so we crosscut, and I’ll talk about each of those, a variety of different customers.

And at the same time, we have a strategy to expand our served available market, and to exactly double it by 2015. And in these uncertain economics times, both the diversity of markets, geographies and the fact that we’re going after existing markets; we don’t need markets to grow for us to have the opportunity for FEI to grow. We’ll provide a better mousetrap into new segments and I’ll highlight that.

So I think, we have the opportunity in these times our uncertainty to be more robust. We have been expanding our margins, we got a good track record with that, and we have plans to continue that in the future that comes with better products, better operations; we’ve done some acquisitions, which will improve that as well. And then we’ve had significant cash generation, we started to pay a dividend happened in the last six weeks or so. And we do, do opportunistic buybacks with our cash. So we’re trying to be more efficient with our balance sheet overall.

As this outline of the growth, we go back to ‘98, we had bookings have been grown about 12% in compound annual growth rate, you see some volatility in that. in the near-term, we’ve also had a good track record of continuing to grow, and as you can see if you look at the period of the great recession, we didn’t suffer a significant amount during that period. And I think that speaks to the robust of our diversified market geographic model for the company.

If you look by segment, and let’s go through briefly what the segments are. Electronics, think semiconductor customers, think Intel, it’s about a third of our business, and we like it at that type. I’d like to emphasize lot of people who often look at noncyclical businesses are little bit scared buyback, and our thesis is within that segment we’re cyclical growth, our opportunity has been growing, and I’ll show you some data on that.

We have a certain call Material Science, think college professors, researchers, and industrial companies that looking material, and I want to understand where the items are, what the items are doing in that information, the capability we provide them with. And then Life Sciences, we provide a similar capability to researchers think National Institutes of Health and universities primarily some technologies, medicals of customer of us. Well we’re providing them with a capability to image in three dimensions, interesting pieces of the biological machinery of life.

And then finally have a large service and components business, two of our sophisticated, they’re complicated average stone crisis of $1 million to give you scale, and we can provide the proprietary service capability for that, a modest gross margin business, but highly profitable business overall.

If you look by the bookings by geography, I want to focus on the charts on the bottom. We are about third USA and Canada with the trend lines. Europe plus, which I have been placed include South America, the way we report right now. It’s been about core to a third of our business, and what’s been that the big driver in the past three years, and I’ll show a little bit more on that is the growth of the emerging markets particularly Asia and specifically China over the past few years. China represents about eight of FEI’s business.

Emerging market growth, we see on the chart here on the left hand side. We continue to invest in these emerging regions. So if you look at the growth rate outside of Asia, this would include Eastern Europe, think about Poland, the Middle East, Latin America and Africa. We’ve had a 38% compound annual growth rate since ‘03.

If you look at China in particular, we’ve had really fabulous growth rates and so now 46%, and we expect continued strong growth in the region, and we’ll continue to invest more dramatically. China has a wonderful long-term view of investing in science and technology to create a workforce to create diversified industries within China as a whole. And it is the very strong center for us as we go into the future. But our market diversity is a great strength of the company.

So the other major leg of our growth is we have market diversity, we have geographic diversity, is now let’s go find new served available market, now highlight that as I go through the presentation. But the idea here is that with our powerful technology, and our solution orientation, we can now pour what we do to new customers that are spending money on different products today. So, we have required these other markets to grow. We just required that FEI delivered a better solution to this place, other peoples’ technology. And through this process, we’ll start to have new competitors, as we entered these new markets with our market share that hopefully a much better solution. So, our goal is to double that served market in the next few years. So, you can see a build up chart there.

So am I go to each of the business segments briefly to give you a sense of how the market grows and what we do a little bit more. So we’ve had a strong growth in our Material Science segment. It’s a global business, again that’s college professors or people do a materials research that an industrial companies.

The competitive environment is very interesting. Over the past few years has been focused on who can see the smallest thing, we got down to the atomic level and then we asked ourselves the question who is going to pay to see half an item as opposed to the whole item. And it turns out, we didn’t think you’re going many people. So, we invested and shifted the competitive landscape to what we call fast analytics, but that simply means is now we can tell you very quickly, which item is which, that silicon, that oxygen, that uranium. And it turns out we have very compelling highly differentiated technology in that segment, which is extremely viable, which sets us apart from the competition. I just see below, we also think now introducing time resolution into the system.

Now you can take these things like chemistry happening at the new atomic level. So you can watch the items move around, and it’s really quite a compelling capability for researchers around the globe. So you should take away here. We’re going to continually evolve our competitive position to continue to dominate the marketplace with better technology and better solutions for the customers overall.

Lots of growth in the emerging markets, we've seen bookings grow by 10% compounded rate in this segment, and we think we can continue to grow the served market by going after new customers, particularly in chemistry, which are not our traditional customer base to continue high single-digit growth over the next few years in this segment. (Inaudible) third of our business and let’s move faster. Our newer our business for us is the Natural Resources segment. What the company that makes fancy microscopes to with Natural Resources think oil and gas, mining. What we can do is, we can characterize, we’re offset the finest level of detail. We can tell you which minerals or which and how they’re distributed in three dimensions. It turns out if you're in a resource industry that takes things out of the ground that's really important that’s mining oil and gas.

And so in the mining segment what can we do, we can give a mining engineer at more information to optimize extraction efficiency and minimize cost mostly energy that goes into that. By understanding how the minerals are distributed, so it's a return on investment discussion with the customer.

In oil and gas, we can give some one who use drilling for oil or drilling on an existing oilfield how to make better decisions on drilling, when to stop, when to turn. And drilling costs went to $100,000 to $500,000 a day, so the economics here can be quite compelling as well.

And in the emerging segment particularly the shale to the unconventional oil sources we are finding that people just want to understand the rocks better, so they can make better decisions about how much there is, and how much they can get out both obviously with lots of economic impact. So the theme here is, understand the rocks, understand the economic impact of understanding the rocks better. So there’s a rerun on investment discussion with the customer, and we can assess markets that exist today that are very large and we put some numbers here in the a few $100 million level in terms of the served market that we can start to excess over the next few years that’s by 2015.

So in the Natural Resources segment, we’ve really pull together via acquisition and via hiring a global team of sophisticated geoscientists and business professionals and the mining oil and gas segment. The other key is, we have to create a solution just having the information is an enough, so what we’ve been able to do overtime is to show that by measuring at a well side we’re able to provide information in the timely manner that means one hour or less. We can understand rocks at the point of scale and then we can also convert that information to properties that are important for the customers. That’s what we’ve outlined here.

Last year in the well side segment and in the oil and gas segment, we did three tests with key customers at different places around the globe. We’re in Papua New Guinea we were in, the Persian Gulf and we did a test in Europe on shale. We’ve been very successful on that testing, this is a year of our first commercialization. I would like to highlight here what’s exciting for FEI as well as this is a least model, least payment model, so it’s not selling equipment, its leasing out the equipment and you get a fee for each measurement made.

We work together with people like Halliburton oil service providers, who have the personal at all of these crazy locations to support the measurements and we split the fee with them. We provide service and the equipment software and hardware, they provide the on-site support, as well as more global support, and we’re early in the process. We’ve highlighted here the growth of this business from $12 million to about $30 million. Last couple of years we expected to continue to grow quite aggressively over the next few years.

With the potential for a served available market growing to a triple-digit millions pretty quickly, overall what we think is that today about a $1 billion just spent on this class of measurement done manually. We can automate it, we can do it better. We hopefully can excess a large segment of that $1 billion that’s spent today.

In electronics, semiconductor customers Intel, Samsung, TSMC, the usual cast of characters all our customers. We’ve continue to provide key technology, so they can understand how to develop new processes and how to introduce those processes into manufacturing. So we are at the front end of doing new things in the semiconductor business and as everybody knows, the key to the semiconductor business is to make things smaller, make them better, make them cheaper. We enable that capability with our key customers like Intel. Without us they can’t continue that relentless pursued of enhanced performance. Thus we also see that over time, as things have get smaller and smaller and more its more complicated, but in fact they have to acquire more FEI’s equipment to support that process overall.

So if we jump to the next page. I’m going to show a picture here, this kind of data that a semiconductor customer would get. On the left hand side you see how big it is, the size measured in nanometers, and below our bunch of process steps, and what its above that that grey line, and if you look at the yellow versus the green, the green is an old technique, where the new technique. And as things get smaller you can see more of the measurement fall into the space the TM space that’s what FEI does.

And so over time what we’ve seen, is that we touch more process steps we’re more intimate with the customer, and if you want to look at market important data, which is how big the business is. If we look at the cyclical semiconductor capital equipment company, which over the last couple of cycles to stay flat. In the other words, the amount of capital spent with the same in the ‘06, ’07 timeframe as it was in the ‘10 or ‘11 timeframe. FEI’s business grew 30%.

So we garnered greater share of spend if you want to say at that way, we become more important the customers need more of what FEI provides, and we think that trend continues as we go to smaller and smaller circuit. So it’s not cyclical, it’s cyclical growth. And it’s an important profitable segment for FEI. It’s about a third of our business, we like it the third of our business. It’s a nice balance for us against all our other marketplaces that we serve today.

Life Sciences strategy here is we pick this powerful imaging capability that we have. We can take 3D pictures of all sorts of things that I don’t even understand what they do, but we can understand the biology is shape driven, structure is function, so if you can take images of important biological entities, you can understand better how they work and we do that in three dimensions. And so by providing that capability, and understanding better how to deliver through Life Sciences’ community. We’re sign to break into about a $0.5 million marketplace that served by other technologies today. So this is goal get existing spending [forward] in the FEI, because we have a better solution. We have a different solution than they have. So we’ll have new competitors as a result, but the idea here is, let’s go take other peoples’ money to grow FEI overall.

We do that in two areas structural biology, which is what I just described as well as cellular biology, this is more now bringing together optical imaging, all biologists use optical imaging and electron microscope imaging, higher resolutions imaging that we do bringing those two worlds together that’s a support that we bought a small optical microscope company in the last year or two have – FEI have both pieces of technology.

It’s about 10% of our business today, the bookings been grown about 15%. We think we’re early in the growth opportunity here. We think we can grow that service available market much faster than that as you can see on this page. But we’re targeting mid-teens of growth over the next few years. So build the better mousetrap, go take other peoples money, we will be less sensitive than other people are to what the NIH budgets are, but – because the money is already there. So we think it’s a robust strategy for these times. If things grow better than people expect so much the better for FEI. But the key here do something, the other technologies can’t do, do it better than they could never think of doing take that spending share enter with effectively zero market share, and have new competitors that we don’t have today, but that’s okay, we’re ready for that, because we think we have robust solutions that are new and differentiated.

So a long in a way to build this portfolio of marketplace is in and solutions for those customers. We have done some M&A in the recent times. Revenues are all modest. This is our current view about a $10 million, $20 million max in terms of annualized revenues, bringing technology though that’s key to enabling a larger solution for FEI. So we bought an Optical Light Microscope Company in November called TILL Photonics. We brought a ruggedized SEM company, which is central to our Natural Resources solutions so rugged microscope that can go sit on oil rig and work 7/24.

We purchased our Korean agent. We needed to get closer to our big customers of Samsung and [Intel] and that's part of our continuing global diversification, so we have bought them. And bought the software company more and more software is going to be central to our future to differentiate the products and again provide those answers to customers that they need, we deal with massive datasets, and so we bought Visual Sciences Group, literally beginning of August, so in aggregate for this year these acquisitions are all kind of neutral to 2012, but in 2013 would be accretive. And more importantly they're going to leverage up the things we already sell, because we have better solutions that we can offer against our competitors and against new competing technologies for FEI.

Financial results, I think on this page you can see we have revenue, gross margin, other income statements, I think the same where we have focus is the far right the compound annual growth rates from 8 to 11 and you can see the 12 year today. But revenues grown at 11.3% compound annual growth rate by focusing on improving gross margins, paying good attention to operating spending, we’re able to leverage operating income by almost 60% on a compound growth rates during that period.

So FEI has been pull together a very powerful team of executives to execute against not only top line growth but continue to multiply that operating income, you can see the EPS acceleration and net income, Ray and team have done a great job on packs as well. We use our global footprint to both minimize our manufacturing costs, but also minimize our tax exposures, and then accelerating cash flows from operations throughout the period. So we feel very good about the performance that we’ve had in the past and that's a good predictor of the future. So if you look at the second quarter, we had record revenue. We had a record for the quarter in terms of orders, which came after our first quarter, which was an all-time record for orders, so FEI in terms of the high level is my best of future indicator in terms of order flow has been showing very, very strong results there.

And gross margin continue to expand, we hit a best we had in a decade which is the modern FEI’s of best record we've ever had 47.2% continue to improve within operating margins, record EPS generation, so it's a very positive quarter for us overall, good cash and putting the cash to work as I alluded to you earlier we paid our first dividend of $0.08 a share. A point of your on the dividend is, yes, we started modestly, but we think it's a good way of return value to shareholders, but we just see opportunity to accelerate that dividend payment over time as company continues to be successful.

If we look at the balance sheet and cash flow, I think, if we look at the cash flow per share, which I think is important thing to look at. You can see that acceleration from the 2005 to 2011 timeframe going from $25 to $2.35 over that period. Again, I think that speaks to really what we have done with the income statement in terms of improved performance there and maintained pretty good discipline around our operations.

There is, I will highlight opportunity for continued improvement in operations both from the gross margin perspective and from the cash management perspective. Our inventory turns are not quite world-class and that’s another statement, but there's opportunity to improve there. And in terms of management metrics, those are shifting at way over time. So over the next few years, there will be more emphasis on cash as we grow the company.

If we look at our business model overtime, we can see in 2012 year-to-date, we can see the gross margin acceleration there and showed for the first half of the year, I think good management of operating spending, good acceleration on the operating income, and we presented the world with our long-term target now which we identify as mid-2015. And we plan to have a new factory online in the Czech Republic with the bulk of our manufacturing at the beginning of 2015, that we should be able to deliver along with new products and new markets, improve gross margin, good control on operating spending, and operating income between 20% to 22% range for that period.

And I would claim that we've had a good track record of achieving our other previous milestones in terms of operational improvements overtime. So the management team deserves to be congratulated for that.

In summary, it's a growth opportunity. That's a growth opportunity that somewhat resilient to macro. We’re obviously going to be affected by it, but I think less still than others, we show that during any kind of difficulties during the last recession. It's the global diversification, it’s the market diversification, providing those leadership products and then really going after other people's mind, which makes us a little bit different and many people are dependent on a segment’s growth overall. We’ll continue to expand margins, and we’ll continue to generate cash significantly, focusing on investing in FEI, doing acquisitions, continue the dividend and doing opportunistic share buybacks.

And with that, I’m going to close it and we’ll open up the floor for questions.

Unidentified Analyst

Okay, thanks, Don. So I will kick it off. You obviously, you did have record orders in Q1 and Q2, which were, you’ve given how you thought you are very cautious, I think on the back half, you got a little bit more positive on your Analyst Day, clear trends there, Mark world have changed since the beginning of the year, I guess, are the orders you have in backlog right now, are they enough to take you through the rest of the year in terms of where your goals are?

Don R. Kania

Obviously, Q3 we have a pretty good visibility to obviously because of backlog, and we will carry about six months backlog for reference to operate the company. I think, we started that good order flow to make four happen that as we guided at our call, we recall it 6% to 9% growth for the year, we still stand, I mean I can’t, but now reiterating it, but that’s the statement that we made at that point in time. So our view of the macro environment is cautious, but we are also confident in our business model, so I will stand by that way.

Unidentified Analyst

And I guess when you look at just the moving parts in that model is, would it be in for the rest of the year, would it be more from the mature, would it be mostly academic in government maybe uncertainty from the spending and the sense of the fiscal click and filtration process, would you have more potential issues with that as you go into it, or do you think it would be more, it’s something that we can where you think it would stand?

Don R. Kania

Actually if we go by the, it’s called the sciences and the U.S. has been a pretty weak market place for us for the past couple of years. And so we actually, right maybe it’s Don, Don actually thinks, there's an up tick for modest upside in the U.S. once the visibility or what's going to happen with [filtration] falls off the table, because people have been very, very ready since the spend given uncertainty and nice to be a researcher. And what you do when things looked high, it quit spending and you protect your people. And I think there's a lot of people out there doing that very thing. And if they get more visibility to what 2013 budgets are look like, I think that will actually free up a little bit of money.

I think we’re going to see a little slowdown in semi, the electronics, that will come down a little bit, that’s probably in the second half effect. And in the sciences, the Boeing effect is still China is going to remain resilient, and China is going to spend as they have five-year plans they stick to their plans. And it's the size and perhaps American logic, but nonetheless we saw during the last recession and we hear it from our customers and we talk to them individually.

In industrial customers, yeah, I think you'll see again, and that’s the global thing, you'll see all industrial customers get a little more cautious. But I think overall the ability to balance our geographies and with the flow of new products, which we didn't talk about here, we’ve got some nice new products that we’ve launched that we feel pretty comfortable with this. The visibility that we have is, maybe not quite through the end of the year, but it’s not over that timeframe.

Unidentified Analyst

And just following up on a comment you just made. So what are the emerging markets investing, what has China invested in relative to the – what the U.S. business is?

Don R. Kania

Yes, I think you're alluding to – at some conferences as we show a little chart, if we go back five years, we look at our top spenders in the sciences, so basically take out electronics, and you look at Life Science and Material Science. And the list, if I remember correctly with the U.S., Germany, Japan was somewhere in their usual cast of characters.

Look at the 2011 data; it was China, which was even unknown five years ago, U.S. was second. So probably most of the Americans in this room, that’s more embarrassing from the product growth perspective, from the business perspective, that speaks to the strength of the investment, and that China continues to make. So U.S. is split with one to two, China went from nowhere to one in five years.

And all our indications are that they’re going to continue to invest strongly. We've invested strongly to garner those benefits. And again those, all they refer to FEI numbers they don't refer any kind of global investment, so there is probably some parallels in there.

Unidentified Analyst

Any questions from the audience?

Question-and-Answer Session

Unidentified Analyst

Thank you. Can you speak to the near line opportunity, just give us a little more detail on that compare, contrast that with the lab opportunity and any potential cannibalization there?

Don R. Kania

Sure, just to give a little more, in the Electronic segment, we have been traditionally a provider of equipment to laboratories. Every factory that makes semiconductors typically as the laboratory associated with it, which provides measurement on demand basis to the manufacturing operations.

We've recently, as I showed in the data as we grow in the business, a lot of that growth is driven by manufacturing people wanting access to the data more quickly, more directly and what we are finding out that means, they actually willing to own the equipment, which is good because they have larger budgets. They have larger demand, and it just still feels our thesis that we’ll see continued growth.

Now the question was, is there going to be a cannibalization? I think in aggregate, let’s just focus on the aggregate. We like that growth curve that we show, but we’re not saying that we’ve got another 30% in next pump, we’ll continue to grow, when talk with Intel, Samsung, Hynix, TSMC. It's very clear they will continue to expand their investments in FEI class product, whether it sit in the lab or in the factory, we don't really care.

We'll make some engineering modifications are required, but it's really the utilization that's important. So think about maybe it is going from ad hoc fee for measurement to really a piece of the manufacturing manager’s tool that he can use to control his manufacturing process. And he is just going to spend more money.

Unidentified Analyst

Can you just – you didn't really come out, but can you talk a little bit about the competitive landscape, I mean what you trained, I mean you – and particularly I know that not – I don’t think, you’ve reported by some of the other Life Sciences can maybe reported some of their Japanese competitors gone a little bit more aggressive in terms of pricing and can you talk about what your....

Don R. Kania

Yes, we have one Japanese competitor called JEOL. It’s ever shrinking Japanese company very traditional in its model, not profit-making listed on the topics. So, when people talk about Japanese getting aggressive of pricing, we have a competitive with always aggressive on pricing, if anything given their financial performance have to get really the static or less so. And the way we do with that FEI is we got to be better, and so we can charge more, and so we can make more money, and if you look at their financial results, which are a negative 11% operating income versus FEI, there is 30 points spread almost between the two in terms of their financial performance so we do better.

The more global competitive landscape includes in Japan, Hitachi High-Tech which is (inaudible) Hitachi, a large globalised competitor and then there is Carl Zeiss company, which is a German company, which provides electron microscopes as well. We’re the largest in terms of market share and each of those competitors focuses on a different piece of a marketplace where they can compete with us. No one competes broadly against this always with as large as product portfolio as we do, which we see as one of our strength. And generally our competitors compete on the basis of microscopes not solutions for customers none of them have made the investments that we have in preparation technology as well as software analysis of the data they have comes down on the other side.

We think we have the long-term winning strategy. We think the data has shown that. But to me market share is a result, leading market share is a result of having better stuff, feel better supported better solutions for the customer. So I think that’s price picks volumes of the landscape. I think go to the individual parts to point out what’s were right here about, who competes with.

Unidentified Analyst

I mean, when you approach, when you go, do have the well side conversation and you’ve done the Natural Resources and you are pushing them and return on investment argument, I mean how do you – have you run the economic models, have you done those, I mean can you just give us a basic idea of returns...

Don R. Kania

So I think about the easiest way to understand is just say growth rates the measurement of cost of the measurements up to the customer are typically measured in the thousands of dollars per day, and won't be any more specifics in that. The potential savings of the day of drilling is $100,000 to $500,000 if you either avoided a mistake or make a smart decision of what you’re doing and you can say that they have drilling cost to returns can be obviously substantial. So there is both risk issue. You can avoid problems that we shutdown the well or you can optimize return on its traction in oil and gas situation. But the cost leverages are significant in terms of that understanding, and we're maturing the model. I wouldn't say if we could right down the back of the envelope model pretty straightforward, but we're trying segments of markets high-temperature, high-pressure wells versus deep water versus land and understand the new launches of the various economics wells that's in development right now.

Unidentified Analyst

And you’re commercializing well side program this year and that is on track?

Don R. Kania

On track, we don't talk specifically, so maybe little – just to step back, ‘11 with the year we did three test sites with different partners around the globe, demonstrated new technology, demonstrated some used cases; ’12 is about now let's commercialize, let’s get paid generally for what we do in the model that we want to employ, which is the piece bringing model with the services provider. We provide the equipment. We provide the service. Our partner provides the onsite support that executes the measurements, therefore we don't have to build a global infrastructure and a lot of odd places were oil wells happen to occur. We don’t have the scale to support that, so it's a win-win for our partners and us and the customers at the end.

Unidentified Analyst

In the Life Sciences market, can you just talk about just placing new technologies specifically in structural biology that must be x-ray diffraction and it will more like that. Obviously what you need to show in terms of (inaudible) people start making decision, I mean, I know you've got some of these moving labs that makes other work collaborations like what the tripping point when you think it will say, oh, yeah I really should by SEM or SBM as opposed to in NMR?

Don R. Kania

I think, what I like to tell people is, science is like any other businesses with fashion and aspect to as follow the leader kind of thing. So the key, the similar moment which we build the groundwork for this when world-famous practitioner one of those other technologies NMR, XRD in conjunction with one of our customers there, one of our users stands up and says I can measure something within FEI microscope that I can’t measure with NMR, XRD and it's important. And we think we are on the track that showed that and that’s we have a partnership within IH essential fees of that partnership is impact to demonstrate that capability with experts from those other disciplines to make it happen and that's in process. And that's what…

Unidentified Analyst

I think we’ll come to an end, here I’m going to ask you one final question, which is – you’ve expanded the number of investors that you used to have, you’ve got a little bit more coverage in Life Sciences, more people coming in looking from an industrial standpoint, because those are your core semi caps, when you have these conversations with investors at this point, at this phase, what do you think is the biggest misconception about the company, what’s misunderstood about FEI?

Don R. Kania

I think people struggle most with the fact that comes from that perspective is on our cost of business. They all struggle with this, everybody knows that semiconductors are largely cyclical and it can be very difficult at times, and that will challenge the company’s stability and performance, and the push back is they look at the data. So when you look at what happened during the great recession, look, we’ve gone through, you said that semiconductor cycle curve, I showed, look at the financial performance of the company much smoother way, both one, because we have cyclical growth and two, multiple markets in this geographic exposures. So really operate a secular growth company with tremendous leverage to the bottom line.

And I think that's a – it’s a great formula for an investor, and I think we’ve shown that with the soft market performance, and now having more people look at it. The other interesting thing is, in the past probably a year, little less, you sit down on meetings like this and I have investors coming and say, where did you guys come from? I came in when (inaudible) pop up on my screen and I think we've been working hard over the past few years to get better coverage, more diversified coverage and really show people we are an instruments company, diversified instruments company with global reach that has tremendous opportunity.

Unidentified Analyst

Okay, thank you very much.

Don R. Kania

Thank you all for coming.

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