Welcome to inTEST Corporation's 2012 Fourth Quarter and Yearend Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today. A replay will be accessible at www.intest.com. I would now like to turn the conference over to Laura Guerrant, inTEST's Investor Relations Consultant. Please go ahead, ma'am.

Thank you, Vince. Joining us today from the company are Robert Matthiessen, President and Chief Executive Officer; Hugh Regan, Treasurer and Chief Financial Officer; Jim Pelrin, Vice President and General Manager of inTEST's Thermal Product segment; and Dan Graham, Senior Vice President and General Manager of inTEST's Electrical and Mechanical Products segment. Mr. Matthiessen will briefly review highlights from the fourth quarter, as well as current business trends. Mr. Regan will then review inTEST's detailed financial results and discuss guidance for the first quarter of 2013. We'll then have time your questions. If you have not yet received a copy of today's release, please email me at laura@guerrantir.com or you can get a copy of the release on inTEST's website, www.intest.com. Before we begin the formal remarks, the company's attorneys advise that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements do not convey historical information but relate to predicted or potential future events that are based upon management's current expectations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, changes in business conditions in the economy, changes in the demand for semiconductors, changes in the rates of and timing of capital expenditures by semiconductor manufacturers, progress of product development programs, increases in raw material and fabrication costs associated with our products, implementation of restructuring initiatives and other risk factors set forth from time to time in the company's SEC filings included, but not limited to, inTEST's periodic reports on Form 10-K and Form 10-Q. The company undertakes no obligation to update the information on today's conference call to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated or unanticipated events. And with that, let me now turn the call over to Robert Matthiessen. Please go ahead, Bob.

Thanks, Laura. I'd like to welcome everyone to our 2012 fourth quarter and yearend conference call. While Hugh will review the financial results in detail, I'll review some of the highlights and then we'll discuss our markets and what we're seeing in our customer base. 2012 was a very solid year for inTEST and a clear testament to the strength of our business model, which is centered on our core semiconductor ATE market, balanced with an expanded product offering into nontraditional semiconductor markets that require thermal testing. Just like everyone in the ATE sector, we operated this past year amidst challenging industry conditions which were driven by a number of capital equipment suppliers and semiconductor companies who delayed certain capital expenditures. We met these challenges head on, and we further strengthened and grew inTEST's operations. What differentiates us from a number of our peers is that we did not lose money in these challenging times. In fact, 2012 marked our third consecutive year of profitability, that's 13 consecutive quarters, and we continued to generate cash. Total bookings for the fourth quarter of $9.3 million rose 7% compared with $8.7 million in the third quarter of 2012, and fourth quarter non-semiconductor test bookings and revenue showed sharpened increases in terms of absolute dollars and as a percent of revenue. Non-semi-related bookings of $1.9 million increased 23% sequentially and represented nearly 20% of total fourth quarter bookings, the highest percentage recorded this year, while non-semi-related net revenues of $1.3 million increased 16% sequentially and represented 15% of total fourth quarter net revenues. Our diversification strategy outside of our traditional semiconductor markets helps to mitigate the cyclicality that's so closely tied to that industry and affords us several exciting new opportunities with multiple new customers. Let me go over the segments for you.…

Thanks, Bob. Net revenues for the quarter ended December 31, 2012 of $8.3 million decreased 23% from the third quarter revenues of $10.8 million. Fourth quarter 2012 end-user net revenues were $7 million or 84% of net revenues, compared with third quarter end-user net revenues of $9 million. OEM net revenues were $1.3 million or 16% of net revenues compared with third quarter OEM net revenues of $1.8 million. Net revenues from markets outside of semiconductor tests were $1.3 million or 15% of net revenues compared with $1.1 million, or 10% of net revenues in the third quarter. Thermonics' fourth quarter 2012 revenue was $1.2 million, which was down slightly from the level achieved during the third quarter. As Bob mentioned earlier, at the end of the fourth quarter of 2012, our Thermal Products segment introduced the new ATS series of ThermoStream products, which incorporated the best features of the Temptronic and Thermonics Forced Hot Air System. Therefore, going forward, we will no longer break out Thermonics revenues as the product lines have been consolidated. The company's overall gross margin for the fourth quarter was $3.5 million or 42%, as compared with $4.8 million or 44% in the third quarter of 2012. The reduction in gross margin was driven by a less favorable absorption of our fixed manufacturing costs in the fourth quarter, which increased from 20% of revenues in the fourth quarter -- or increased to 20%, excuse me, from 15% of revenues in the third quarter. While our fixed manufacturing cost increased as a percentage of revenues quarter-over-quarter, they were essentially flat quarter-over-quarter at $1.6 million. The increase in our fixed manufacturing costs as a percentage of net revenues in the fourth quarter was almost fully offset by a reduction in our consolidated material costs, which declined from…

[Operator Instructions] First question is from the line of Ken Nagy with Zacks Investment Research.

I just want to talk about the Thermal business for a minute. I know that you design equipment to fit the product and where the competition has standard products. Just wondering what the -- how long the typical test lasts until it's finished? And if the market seems to be taking to that model?

Hi, Ken, this is Bob Matthiessen. I'm going to let Jim Pelrin, our General Manager of that group, answer that. Jim?

Sure. Hi, Ken. I think the question you're asking is -- refers to our sales cycle, is that correct?

Right.

Okay. From the moment we -- in quoting an order, it could take anywhere from 1 week to 4 weeks to quote an order because we actually develop a specification along with the customer, complete specification for that product. Once the order is in-house, if it's a cryo product, it's a 6 to 8-week delivery. If it's a mechanical product, it's an 8 to 12-week delivery, which is actually very rapid for a customized product.

Great. But you see the markets taking to that model?

Oh, yes. I think that's one reason why we're successful. There are other people that offer or try to offer customized solutions, but you're really looking at a 5 or 6-month endeavor there. So the market is very happy with us.

[Operator Instructions] Next question is from the line of George Melas with MKH Management.

I think this is a question mostly for Jim. Jim, I think you've been very busy in the past year sort of integrating the Thermonics, moving it to Massachusetts and also developing sort of a new ATS line. Can you tell us a little bit about what some the progress you guys have made in terms of go-to-market strategy on the non-semi side? And how you see that evolving in...

Yes, I can. We've recently hired an individual that has been in the chiller market. And through that individual, we intend to expand our efforts in selling custom and very low temp chillers. In addition, we're at the latter stages of hiring a business development director, whose job will be to really expand our presence in the electronic test industry, as well as to look at our capabilities and try to bring them into new and different industries in whatever product form that may be.

Our next question comes from the line of Bob DeLean from Red Rock Partners.

Bob, I was a little disappointed to see that your Q1 expectations for the top line, I guess, are a little lower than I'd expect. If I recall from my notes, I think around December 14, at a conference, you may have said that quote activity had increased substantially just recently. Can you talk about the flow of business through the quarter and the flow of order activity as you're looking at Q1? Has there been a dropoff recently?

I'll tell you what, everything is really fluid right now. Yes, we did have a lot of quote activity, as you related to. And in fact, our quote pipe is quite full at the moment. We've had activity in the past couple of days that indicates that maybe things are really turning around, but of course, until you have the PO in hand, you don't have it in hand. I think -- and that extends both to the semi and non-semi areas. We have, again, we have a full quote pipeline in both cases. And so as I say things are very fluid, I don't know whether it has to do with the situation in government spending at the time. That probably is having some effect on the Thermal business. But things are up in the air and it looks like it could break either way and we're hoping it breaks in a positive direction.

But the momentum, this is Hugh, the momentum of bookings did slow down slightly from what we had seen in the fourth quarter into the first quarter.

Yes.

And then with respect to competition, as you guys track it, is your market share similar to what it was a year ago? Have you gained market share, have you lost?

Well, we believe, for instance, in our Electrical Products segment, we've gained some market share because we've had some customer wins there. And that's evidenced, we believe, by the significant increase in revenue that we had in that operation between 2011 and 2012. In our other product segments, we believe our market share is holding at this time.

Our market share is holding in the Mechanical segments. In the Thermal business, we have the market share, if you will. I mean, we control most of that in the semi area. And in fact, any business we get in the non-semi area in the Thermal business is a gain of market share on somebody else.

With respect to the nuclear piece of business, has there been any shipments yet there and what's the timetable for that?

Jim, why don't you describe?

Yes, sorry. There have been no shipments yet. The timetable is for late in the fourth quarter or early in the first quarter. It's still undergoing the final stages of qualification and then it has a 6-month run time test that needs to be conducted. It's quite a lengthy product introduction, if you will.

I think all that additional detail is very helpful. Just one, a couple of things, Hugh, with respect to CapEx and D&A for 2013, do you have some estimates there?

Our CapEx has been running about $150,000 a quarter, so I would assume it's going to be in the neighborhood of about $600,000 for next year. And what was the second part of your question, Bob, I'm sorry? Was it the DTA?

Depreciation and amortization.

Oh. Depreciation and amortization, bear with me one moment. For the year, depreciation came in at $456,000 and amortization was another $476,000. So a combined total of just around $900,000 a year.

And is that a relatively reasonable expectation for 2013 as well?

The depreciation I would say is reasonable going forward. The amortization, we had some front-end-loaded amortization related to Thermonics acquisition. I would expect that to drop down to about $350,000 to $400,000 level going forward next year.

Okay. One last thing for Bob. You guys did Temptronics, that acquisition about a year ago. I guess, can you comment at all what the current appetite is for acquisitions? What are you seeing out there and where are you in that process?

Well, first of all, it was Thermonics that we acquired a year ago, not Temptronics, that was in 2000, but...

Oh, I'm sorry...

That's okay. I get confused, too, Bob. Yes, we, as you know, we have an M&A effort going on. Right now, for your information, we have a target list that has 16 companies on it. Some of them make a lot of sense. Some of them don't make so much sense, but we're working through that. We've spent this past year, since the Thermonics acquisition, looking for new things and -- but being very careful not to go forward on something just because we want to get something. We've been very careful with our acquisitions in the past and they've all been very successful for us. I will say that as we stated before, it will probably be something in the thermal test business would be my -- those are the companies that, so far, are fitting us the very best. And we are, as I say, we have a list of 16. And of that 16, probably we have 5 that are -- that seem reasonable for us.

But I think the one thing we need to add at this point is that the company does not have anything currently identified that it's ready to execute on and...

That's correct.

We continue to evaluate opportunities. And as we have things that become more concrete, we'd be happy to disclose them. But there's really nothing at this time that we're in a position to publicly discuss because there's really nothing moving forward.

[Operator Instructions] And I'm showing no further questions at this time. I'd like to turn the conference back over to Mr. Matthiessen for any closing remarks.

Okay. Thanks for your interest in inTEST. In closing, our confidence in our business prospects remains high. inTEST occupies a profitable niche space. We have a proven long-term history with customers across the globe and provide high-quality mission-critical products that perform in high stress environments. We'll continue to work with our customers and drive innovations that allow us to continue being a leader in our targeted markets. Thanks again and we look forward to updating you on our progress when we report our first quarter results. Good night.

Thank you, sir. Ladies and gentlemen, that does conclude inTEST Corporation 2012 Fourth Quarter and Yearend Financial Conference Call. I'd like to thank you very much for your participation and you may now disconnect.