Rudolph Technologies Inc. Q4 2009 Earnings Call Transcript

| About: Rudolph Technologies, (RTEC)

Rudolph Technologies Inc. (NASDAQ:RTEC)

Q4 2009 Earnings Call

February 1, 2010 4:45 pm ET


Bob Koch - General Counsel

Paul McLaughlin - Chairman & Chief Executive Officer

Steven Roth - Chief Financial Officer


Patrick Ho - Stifel Nicolaus

Gary Hsueh - Oppenheimer & Co.


Good afternoon. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

At this time, I would like to turn the call over to Mr. Bob Koch, General Counsel.

Bob Koch

Thank you, Lisa, and good afternoon, everyone. Rudolph issued its fourth quarter 2009 earnings release this afternoon shortly after the close. We’ve been made aware of a technical problem in the posting of the earnings release. It has now been posted. However, if you still require a copy, it can be found on the company website or by calling my office at 973-448-4306 and a copy will be faxed or emailed to you. Joining us on the call today are Paul McLaughlin, Chairman and Chief Executive Officer, and Steven Roth, Chief Financial Officer.

As is always the case, I need to remind you of the Safe Harbor regulations. Any matters today that are not historical facts, particularly comments regarding the company’s future plans, objectives, forecasts, and expected performance consist of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such estimates whether expressed or implied are being made based on currently available information and the company’s best judgment at this time. Within these is a wide range of assumptions that the company believes to be reasonable. However, it must be recognized that the statements are subject to a range of uncertainty that can cause the actual results to vary materially.

Thus the company cautions that these statements are no guarantees of future performance. Risk Factors that may impact Rudolph’s results are described in the companies latest Form 10-K, as well as other periodic filings with the SEC. Rudolph Technologies does not update forward-looking statements and expressly disclaims any obligation to do so.

I will now turn the call over to Paul McLaughlin. Paul, please go ahead.

Paul McLaughlin

Thank you, Bob. Good afternoon everyone and thank you for joining us for Rudolph Technologies fourth quarter 2009 conference call. We continued our trend of delivering solid financial results with the fourth quarter exceeding high end of all our financial and operating metrics thereby putting us well ahead in our schedule return to cash flow breakeven and operating profitability. We were extremely pleased as the quarter progressed and our business continued to strengthen.

Now I’d like to highlight a number of the fourth quarter key metrics and accomplishments. (1) Record orders from $75.3 million leads to the strongest backlog in our recorded history. (2) Our book-to-bill ratio of 2.6 was also a record for the company and we exceeded the industry average by a factor of more than 2X.

(3) We exceeded our top line guidance with revenues of $28.9 million increasing 24% sequentially. This is our third consecutive quarter of double digit revenue growth. On a non-GAAP basis, we also exceeded guidance by returning to positive earnings with per share earnings of $0.02.

I’m going to start with a brief look back at 2009 and how Rudolph is positioned for a robust 2010. On the investment front, we believe we are a growth start trading at a value stock price and as such, we believe for investors, there’s a great opportunity to capitalize on such a disparity. When we finish, I hope you will draw the same conclusion and understand why we are so bullish on our business.

After my initial comments, Steve will review the financials in detail and then I will return with our guidance. While some in the industry would just as soon forget 2009, we choose a different vantage point. 2009 was a transformative year for Rudolph Technologies, confirming our strategy of diversifying the company’s technology offerings.

Our continued strategic investment in R&D, coupled with a high standard of physical discipline enabled us to weather a difficult economic environment and at the same time we’ve expanded upon our core competencies ultimately opening new market opportunities for the company. Let me expand a moment on our research and development spending. In calendar year 2009, our R&D spending amounted to $26 million, which represented just over 33% of our $78.7 million in revenue.

Obviously, this represents a non-sustainable expense running rate however, more than a year ago; we made a decision to try to use our strong balance sheet to fund a high level of critical R&D programs. This was based on our belief that we could accelerate our innovation initiatives that would lead to new products and services that customers would value when the inevitable industry upturn occurred. I think we got good bang for our R&D spend due to what I’ll refer to as the customer engineering syndrome.

This syndrome has two benefits to our development activities. First, our customers normally engineered at the fabs, at times in 2009 were on forced slowdowns, on work stop ages, etc., and per say, they were not using our equipment to any reasonable level of utilization. Consequently, the number of technical calls our engineers had to field was way down, particularly at the beginning of last year.

As a consequence, this past year Rudolph engineers could spend a higher percentage of their time on development work and less on customer operational problems, and second, these same customer engineers when they did return to work were able to spend more time on evaluating our new products. Both these factors led to the acceleration of our new product introductions.

We spent approximately $16 million, or slightly over 60% of our total $26 million spending on the inspection business units R&D, and I’m very pleased to report that our order book reached record levels on the strength of these new products. In fact, 77% of our record $75 million in Q4 orders was from our most recent product releases.

Returning to our theme, others clearly share our opinion of staying close to our customers even during a downturn. In a recent customer satisfaction survey, an industry leading market research firm ranked Rudolph one of the 10 best 2009 chip making equipment suppliers and assembly equipment suppliers’ category, and rack aculeate that we are particularly proud of as it directly reflects the views of our global customers.

Rudolph is creating a new paradigm. We have evolved from our beginnings as a front end metrology equipment manufacturer and have transitioned Rudolph into a total solutions provider. Our best of breed solutions target higher margin market segments, areas in which we can be the number one or number two player or have a path to get there and there for, we now offer a broader, more diversified product portfolio comprised of hardware, software, and services that strategically address both front end and back end market opportunities.

In response to the industries evolution, we lessened our dependence on metrology and while metrology remains a critical market for Rudolph, the macro defect inspection is presently the most significant segment of our operations, estimated to make up nearly 60% of our product mix going forward.

The fast growing inspection market affords higher growth rates, limited competition, high gross margin, and expanding markets and applications. At 25% of our business, opaque and transparent thin film metrology remain important markets for the company. In fact with the memory market becoming a large part of our orders going forward, we expect to shortly announce capacity orders for our next generation transparent and metal metrology systems.

We are known in the industry for our metrology expertise and we have fully committed to supporting our customers requirements for the 4X, 3X, and 2X technology notes, and finally, we believe our data analysis and review business unit will be roughly 15% of our business.

While some may view software as insignificant, we see it as a key differentiator, and the high tech margin glue that holds everything together, with our acquisition of Adventa Control Technologies in Q3 2009, we now have a full suite of process control solutions to go with our process analysis solutions.

These provide our customers with the latest yield management and yield improvement software. These are growing markets and we have leadership market share in several segments. Our strong investment in R&D is translating into significant organic growth opportunities for our company and our new products will be the catalyst for continued organic growth in all three of our business units.

We are poised to benefit from multiple trends including 3-D packaging; all surface inspection, advanced process control, and the migration of copper into connect metallization into both DRAM and NAND memory markets.

In short, everything that we’ve put into place reflects our planned and deliberate process to continue to strengthen Rudolph Technologies position as an industry leading provider of process characterization solutions for both the front-end and the back-end of the semiconductor fabrication process, lessening our dependence on anyone given market provides us with balance and sustainability.

We’ve taken diversification to a new level with exposure to both front-end and back-end there by muting cyclicality whereas our original products were geared 100% to the front-end, we’re now strategically operating in both areas with a nice balance of 60% front-end and 40% back-end going forward.

As you know, the front-end is more technology driven while the back end is driven more by unit volume. I think the strength of our back-end position has been reflected in our record $75 million in Q4 orders and our resulting record backlog. As I lay out earlier our product portfolio is also fully diversified with integrated software, hardware and services coming together in one total solution.

Over this transition period, our organizational structure has provided significant scope and scale and consequently, we’ve expanded our available markets which open us up to a significantly larger customer base. We now address several segments of the semiconductor supply chain starting with our traditional market of integrated device manufacturers.

Added to this we have expanding relationships with a growing OSAT, the outsource assembly and test houses and fables semiconductor houses as well. We have the ability to leverage this global organization infrastructure and we believe we will be able to grow operating margins at a higher rate than growth of the top line revenue. Read that as we have operating leverage as we expand our product through our distribution system.

With that I will now turn the call over to Steve.

Steven Roth

Thanks, Paul and good afternoon, everyone. As many of you who have followed us in the past know, we typically do not provide order and backlog data on a quarterly basis except at year end when we are required to five certain data in our SEC filings. So I thought that’s where I’d started to.

As Paul mentioned we ended 2009 with orders being the strongest in the company’s history. Driven by demand from our back-end customers, mainly the OSAT, outsource assembly and test houses, we recorded 75.3 million in bookings in the fourth quarter including several blanket orders from our customers.

This confirms our belief that the back-end companies are becoming more disciplined and acting more like front-end semiconductor market. These orders have lead to a record backlog for Rudolph of $54.1 million. As a matter of policy we do not include in backlog orders with shipment dates beyond 12 months, so this backlog number does not include over 12 million in orders that are projected to ship in 2011 and will roll into our backlog during 2010.

Switching gears, revenue for the fourth quarter totaled $28.9 million, a 24% increase compared to $23.3 million in the third quarter of 2009. Our front-end customers and in particular our foundry customers was a major contributor to the increase in revenue for the quarter. Looking at some of the revenue specifics for the quarter, front-end semi revenue was 63% of total revenue, back-end 28%, and other markets were 9%.

Breaking down the front end market, memory customers accounted for 25% of revenue, logic customers 13%, and foundry accounted for 25% of revenue. International sales represented approximately 71% of revenue of which 56% came from Asia and domestic sales accounted for the remaining 29%. From a product perspective, inspection drove our growth in the fourth quarter.

As Paul mentioned, we have transformed Rudolph from 100% front end metrology manufacturer to a broadly diversified company with inspection, metrology and software all contributing to our success. For the fourth quarter, inspection products accounted for 66% of revenue, metrology 21% and software accounted for 13%, and service revenue continued its third consecutive quarter, for quarter-over-quarter growth increasing 24%.

As part of our ongoing effort to streamline operations during the quarter, we completed the consolidation of the recent Adventa acquisition into our existing Richardson, Texas facility. In addition, we initiated a consolidation of our New Jersey manufacturing operation into our facility in Minnesota.

The New Jersey restructuring resulted in a charge of $6.4 million in the quarter for the write-off of a portion of the lease obligation and certain leasehold improvements and fixed assets, the write-down of inventory related to discontinued product lines and severance charges. We expect to realize annualized cost savings of approximately $3 million, once the consolidation is completed sometime in the second half of 2010.

Excluding the impact of the restructuring charge and stock based compensation that affect gross margin, our margin for the 2009 fourth quarter was 51%, a significant increase over the non-GAAP gross margin of 44% in the 2009 third quarter. The margin improvement was driven by shipment of higher margin inspection products, increased percentage of software revenue and lower warranty and inventory reserves.

Our product margins going forward will be impacted by product mix, especially the level of software revenue in the quarter. Our long term model calls for our gross margins to be in the range of 52% to 54%, but at quarterly revenue levels higher than we are currently at. For the 2010 first quarter, software revenues expected to increase in absolute dollars, but be a lower percentage of the overall revenue, and as such we were guiding our Q1 margins to be in the range of 48% to 50%.

R&D expenses for the fourth quarter totaled $6.8 million, compared to $6.4 million in the third quarter. While we continue to spend heavily on R&D in the fourth quarter, our new product development, the quarter-over-quarter increase is due to the full quarter impact of the engineering personnel from the Adventa acquisition.

SG&A expenses for the fourth quarter totaled $11.2 million, compared to $8.3 million in the 2009 third quarter. Excluding $3.5 million in restructuring charges, SG&A actually decreased quarter-over-quarter. That decrease was due to lower foreign exchange losses related to our branch operations in the quarter.

For the 2010 first quarter, we anticipate that our operating expenses will increase as we move to a more normal operating environment. Shutdown days and furloughs have ended as we deal with the significant ramp in our business that we’re experiencing. We currently forecast that operating expenses excluding non-recurring and unusual items will be in the range of $16 million to $17.5 million. Our provision for income taxes in the fourth quarter was a benefit of 552,000 because of our net operating loss carry forwards; we anticipate our tax provision in the first quarter of 2010 will be zero.

For the fourth quarter, we reported a GAAP net loss of $6.1 million or $0.20 per share compared to a net loss of $4.8 million or $0.16 per share in the 2009 third quarter. Our fourth quarter results included $7.5 million of non-GAAP adjustments comprised of the facility consolidation restructuring charges, litigation costs, and share based compensation. Excluding these items, we are profitable in the fourth quarter with non-GAAP earnings of 520,000 or $0.02 per share. This compares to a non-GAAP loss of $2.3 million or $0.07 per share in the 2009 third quarter.

Looking at our balance sheet, we ended the quarter with approximately $61 million in cash and cash equivalents, which is essentially cash flow neutral for the quarter. This places us well on our way to being cash flow positive in the Q1 quarter, as we previously guided. Accounts receivable increased $6.8 million to $35.3 million as a result of the higher sales volume. Inventory balances continue to show improvement even excluding the write-off related to the restructuring, decreasing $3.6 million to $45.5 million.

Before I turn the call back over to Paul, I’d like to take a moment to address our long term model. As we have discussed, our long term model calls for gross margin between 52% and 54% with operating income ranging between 22% and 28%. When operating within this long term model, our R&D spending is targeted to be between 13% and 15% and our SG&A is targeted to be between 12% and 14%.

On a historic basis, we have had quarters at those levels including two quarters in 2006. During that time, we were within our model range with top line revenues of $57 million and $58 million. However, with the lower end of operating expenses combined with the fact we expect the recent Adventa acquisition to increase our software percentage of our revenue streams, we believe we can get back into our operating levels within our long term model at quarterly revenue levels of $48 million to $50 million. This is well below the $57 million to $58 million range quarterly levels of 2006.

With that, I’d like to turn the call back over to Paul.

Paul McLaughlin

Thank you, Steve. As you have heard, we believe we have the catalyst to organically grow each of our business units and we fully expect to leverage the operating improvements made during the downturn as we move toward mid cycle operating margins sometime in 2010.

With that in mind, our first quarter 2010 guidance is as follows. We have forecasting revenues to increase 33% to 38% to a range of $38.5 million to $40 million. This will be the fourth consecutive straight quarter of double digit revenue growth. We expect non-GAAP earnings to be between $0.08 and $0.10 per share, and equally important, we expect to be operationally cash flow positive and return to positive GAAP earnings in Q1 as well. As usual, Steve gave you operating parameters for the quarter and that along with the guidance given should allow you to size our expense run rate for Q1.

Now before I turn the call over for questions, let me close with saying that I’ve never been more excited by the future and the opportunities in front of our company. Rudolph Technologies exits 2009 on a very strong note with record orders and record backlog laying the foundation for a healthy 2010.

The question many are now asking is “What about the second half of the year?” We believe our growth could well continue in the second half of 2010 and we based this on three market dynamics that we expect could drive Rudolph’s business in the second half of 2010.

First, we’ve seen the foundry market showing growth throughout 2010, with the latest CapEx increase of 80% from TSMC, which by the way they have scheduled that CapEx to be spread almost evenly over calendar year ‘10. I think we could reasonably expect other foundries to follow their lead when it comes to investing in order to stay competitive in the game. This obviously a strong plus for Rudolph as business in Taiwan represents our largest market area and relationships with leading foundries are strong. I would also note that it would not surprise me at all, if TSMC guided CapEx even higher later in the year.

Second, the DRAM and NAND memory markets have recently showed signs of recovery from unsustainable low capital spending levels in 2009. In fact just today, I saw where I supply was forecasting that the largest year-over-year increase in capital spending for 2010 will be from memory products, which they say will increase 65.5%.

Our lithography brethren followed by process tool vendors have lead the parade with solid capacity orders from memory device manufacturers and we believe it is just a matter of sequence and before inspection and metrology companies participate in something more than technology buys. These too is a strong plus for Rudolph as in prior cycles, memory revenues accounted for as high as 40% of our total revenues and we have some uniquely designed solutions for that market.

Third, the unit volume market driver for our back end business looks like it might have some sustainability. I support that feeling with the blanket orders Steve talked about from the outsourced assembly and test houses in the latest quarter, which have scheduled two deliveries, over the next several quarters. These customers are exhibiting capital discipline and this is good for Rudolph.

As a result, we believe our strategic balance of front end and back end business optimally positioned us to capitalize on these growth dynamics in the major markets we serve, and we anticipate that we will out perform the industry this year. We have the requisite catalyst to organically grow each of our business units and we fully expect to leverage the operating improvements made during the downturn as we move towards mid cycle operating margins in the second half of 2010.

Let me finish with one comment on in organic growth opportunities. As many of you know, Rudolph has had five acquisitions in the past seven years; four to support our inspection strategies and one to strengthen our software position. This has helped give our company a breadth of portfolio offerings that make us more balanced and more important to our customers.

We fully intend to advance our strategy with carefully selected acquisitions. We will continue to add business that expand our current position and inspection, metrology and software, or in areas that are about these three business areas as long as they meet our investment criteria.

We remain intently disciplined in our approach to mergers and acquisitions process, which is the reason we can take great pride in the successful integration of all five of our acquisitions in the past seven years. Bottom line as we remain active and committed to using inorganic growth as another way to enhance customer and shareholder value. Before we take your questions, I want to point you to the Rudolph website where you will find a presentation highlighting our prepared remarks from this call.

Thank you, and now let us open the call for questions. Lisa.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Patrick Ho - Stifel Nicolaus.

Patrick Ho - Stifel Nicolaus

Two part question. First, in terms of your orders for the December quarter, you mentioned that it was back end strength that drove it. Did you see some front end orders and secondly, in terms of your front end macro defect inspection business, is it a return of capacity buys, or are you seeing some kind of I guess secular driver that will help sustain these types of orders as 2010 progresses?

Paul McLaughlin

In fact, Patrick, our front end business accounted for north of 60% of our Q4 business. A lot of that came from macro defect inspection and capacity buys in the foundry business. Does that sort of answer where that came from?

Patrick Ho - Stifel Nicolaus


Paul McLaughlin

The way we look at it, I think Patrick is front end business has been strong in the macro defect inspection. Bookings were dominated by the backend and some front end. Albeit, what we all know that people like TSMC have been spending money. We don’t talk specific customers, but we have had good relationship with them and obviously when they spend money, we tend to participate. That has happened in the foundry business and that’s been really nice for us.

The other part of the business that really surprised us positively was the strength in the unit driven business from the IDMs in their own assembly and test operations as well as in the OSAT business. As you know the top five OSAT’s are big guys. These are the ASCs, the STATS, the Spills, the AMCOREs, these are being in multibillion dollar companies, and I’ve been very, very pleased with the relationship we’ve strengthened over this past year and it’s revolved into a much disciplined approach to capital equipment buying.

Read that as there were incentives out there particularly in Taiwan and then in other place to spend some money on production equipment and they did, but they’ve spread out orders over a fairly good period of time, brings back good memories from my lithography days at Perkin Elmer, when we would get orders that would spread out over four, five, six, seven, eight quarters.

This is starting to look a little bit more disciplined and I’m very, very happy that to me means better margins, better production planning and all of the things that go with a little order book that have a little more less turns business and more planned production.

Patrick Ho - Stifel Nicolaus

Maybe just a follow-up to that and then I have one question for Steve. In terms of visibility, you’re saying that you haven’t seen as much of a churns business as you’ve seen in the past. What’s your level of visibility? How much visibility do you have say into the June quarter at this point of the game?

Steve, in terms of the cost savings you mentioned in terms of moving the manufacturing from New Jersey to Minnesota, that $3 million. Can you just update us, where you are currently in your breakeven level right now? What you anticipate it to be once that’s completed?

Paul McLaughlin

Let me take the first part of that question, where you want to know a little bit or if you get the breakeven numbers…?

Steven Roth

The breakeven number I think, Patrick, we’ve talked about in the past is in the upper $20 million range and then cost savings, we’re going to be finishing those up in the second half of the year, so you’ll start seeing those really materialize beginning, I guess fourth quarter and into 2011, but we’ll get the margin improvement from the manufacturing operations, about a point and a half at least.

We think when we do that, and so it will still bring the breakeven down a little bit, but I haven’t really gone into the in depth calculation to whether it’s a 27 number or what, so you’ll have to factor that in yourself.

Paul McLaughlin

From my level, Patrick, I feel stronger about getting to our high end mid to high end of the long term operating model in that $48 million to $50 million that Steve mentioned to you. Now let me go back to your other question, which is what about the second quarter. I hope we are guiding that to be sequentially higher than this quarters $38 million to $40 million.


Your final question comes from Gary Hsueh - Oppenheimer & Co

Gary Hsueh - Oppenheimer & Co

[Lin] for Gary, a couple questions, in terms of orders you mentioned a couple of blanket orders that will be uncovered for the whole year. Could you give a little bit more color on those orders and does that mean that order might be normalized after this beginning of the year placement for the whole year orders?

Steven Roth

When you say normalized, I mean, they’re planned out through obviously all four quarters of this year and there’s a couple customers with those blanket orders, so each one is varying a little differently with how you see the tools come in and as I mentioned in my prepared remarks, there’s about $12 million combined that actually is for shipment in the beginning of 2011. So I’m not quite sure what you mean by normalizing of the shipments.

Paul McLaughlin

You’re asking, “What we expect to see them not order anymore?” I think from the particular products they picked, primarily the embedded wafer level ball grid or rate market, which we have a very, very strong position in and is vergening right now. I think they may have a somewhat limit in, but those are more orders than we had expected from them in each of the next four quarters.

On top of that I think we’ve got some other opportunities in 3-D packaging and some bump areas with those very same companies. Our relationships vary strong. So I think the answer is partial to your question on normalized, but we fully expect to continue dealing with those companies and our relationship with them in CapEx planning has reached a new peak. I’m very pleased with our ability to sit down with our customers and talk about long term capital equipment requirements and get the schedule out there.

Gary Hsueh - Oppenheimer & Co

In terms of those orders, could you comment on your production capacity and also your supply chain situation right now to support of order jumps?

Paul McLaughlin

Obviously, we had a couple fortunate things going for us. I think I mentioned in prior Conference Calls, that Rudolph had taken the approach of furloughs and gave people benefits and even though we didn’t have them on the payroll, it allowed them to get unemployment benefits, but yet we kept them on, we brought all those people back and we’re ramping and we’re adding some more.

Our constraint will probably not be people oriented, because of what we did last year to anticipate this, but there are some weaker spots in the supply chain and I would be remiss to tell you that everything is smooth when you have the ramp like we’re talking about here. There are some potholes and we’re concerned and I would say one of the more important rolls in our company is our supply chain management and that gets a lot of attention from people like me on a very regular basis as well as the senior executives in the operating units.

So I know I’m not giving you very specific things, but obviously you know the suppliers that could be seeing some pretty larger wins from a lot of people. The benefit we’ve got by getting these blanket orders is the ability we in turn for getting higher priority in their list of delivery of say the loaders and stuff like that, we’re able to give them long term orders so we’re trading off.

We’re trading off from then long term for making sure we’re at the front of the line. So as of the moment, I do not see the first quarter in serious Jeopardy. Doesn’t mean we haven’t got everything yet, but as we’re ramping, but I’d be more concerned out a little bit further in the year.

Gary Hsueh - Oppenheimer & Co

One last question, just looking at the company in a different view and obviously it’s very different from three or four years ago, because of the five acquisitions you’ve made. So, if we assume that CapEx is going back to ‘06 or ‘07 level, where do you see the new company will achieve in terms of revenue run rate? It’s very difficult right now to reference the past and kind of make an estimate.

Paul McLaughlin

It’s a good question. I lay awake at night thinking about that, but I think we have given our feeling before on that. With the current product base, that we think when it’s back to a peak, we ought to be looking at something around $250 million with what we have in the current product basket.

Now you say why yet a long way there, you’re only did $28 this quarter. Yes, that’s true but we’ll get little more and so we expect at peak time and we think we’ll be somewhere sort of mid range before this coming calendar year is out, this year we’re in now so we would expect a peak time and we think we’ll be somewhere sort of mid-range before this coming calendar without this year we’re in now.

So we would expect 2011 to get us closer to that and of course, we expect to continue down our appropriate of organic and inorganic additions to that. Does that answer your question, the 250? Is that really what you’re looking for? Okay, well we, last time, we were a little over $200 million at our peak. We have added a number of things to that and when you add those things to it and position with what we’ve done with the company, 250 is not unrealistic.

Gary Hsueh - Oppenheimer & Co.

Just to follow-up with Steve. For your $6.42 million restructuring charge, how do you split it between COGS and SG&A? I have $3.5 for SG&A; and $2.92 for the COGS.

Steven Roth

Exactly right.


There are no further questions at this time.

Steven Roth

I thank you all for joining us and we look forward to speaking with you next quarter. Thank you and good evening.


This concludes today’s conference. You may now disconnect.

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