Welcome everyone to the inTEST Corporation’s 2014 Fourth Quarter and Year-End Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [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 call over to Laura Guerrant, inTEST’s Investor Relations consultant.

Thank you operator and thank you for joining us for inTEST’s 2014 fourth quarter and year-end financial results conference call. With us today are Robert Matthiessen, President and CEO; Hugh Regan, Treasurer and Chief Financial Officer; Jim Pelrin, Vice President and General Manager of inTEST’s Thermal Products 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 and year-end, as well as current business trends. Mr. Regan will then review inTEST’s detailed financial results and discuss guidance for the first quarter of 2015. We’ll then have time for any questions. If you have not yet received a copy of today’s release, a copy may be obtained 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 and other risk factors set forth from time-to-time in the company’s SEC filings including, 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.

Okay. Thank you, Laura. I would like to welcome everyone to our 2014 fourth quarter conference call. Well Hugh will review the financial results in detail; I will review some of the highlights and will then discuss our markets and what we are seeing in our customer base. What a difference a year makes? At this time last year we were discussing the challenging industry conditions that had plagued the second half of 2013. Well, I think it’s safe to say the capital equipment industry is never truly free of challenges, our results for 2014 were notably stronger than 2013 as we had forecast, with business driven by strong demand and quote activity in the semiconductor, defense, aerospace and telecommunications industries. 2014 net revenues and earnings per share exceeded analysts' consensus estimates. In addition, we exceeded analysts' consensus estimates for both net revenue and net earnings per share for the fourth quarter. Q4 bookings were $9 million compared with third quarter 2014 bookings of $10.6 million. And net revenues for the fourth quarter were $9.9 million compared with third quarter net revenues of $10.8 million. For the full year, 2014 bookings were $42.4 million compared with $38.4 million in 2013. And 2014 net revenues were $41.8 million compared with $39.4 million in 2013. Steady growth in the electronics industry is boosting semiconductor manufacturing, while innovations in semiconductor devices and the growing complexity of silicon chips is driving demand in the ATE industry. For inTEST, we continue to see solid growth. For the full year 2014 bookings and revenue increased 11% and 6% respectively compared with 2013 fueled by the momentum and strength of our business as well as adoption of our new products from a wide range of customers. On a year-over-year basis, 29% of 2014 bookings and 27% of…

Thanks Bob. Fourth quarter 2014 end user net revenues were $9.4 million or 95% of net revenues compared with third quarter of 2014 end user net revenues of $9.9 million. OEM net revenues were $504,000 or 5% of net revenues, down from $894,000 or 8% for the third quarter of 2014. As noted earlier, net revenues from markets outside of semiconductor test were $3.4 million or 34% of net revenues compared with $3.6 million or 34% of net revenues in the third quarter. The company’s gross margin for the fourth quarter was $5 million or 51% as compared with $5.2 million or 48% in the third quarter. The improvement in the gross margin was the result of a reduction in our component material cost, which declined from 35.4% in the third quarter to 30.7% in the fourth quarter. This improvement was partially offset by an increase in our fixed manufacturing cost as a percentage of our net revenues, which increased from 14% of third quarter net revenues to 15% of fourth quarter net revenues. While these costs increased as a percentage of our net revenues sequentially, they actually declined $18,000 or 1% sequentially due to lower facility costs in the fourth quarter compared to the third. The significant reduction in our consolidated component material cost in the fourth quarter was driven by a very favorable product mix in both our Mechanical and Electrical Products segments. Our Mechanical Products segment's component material cost decreased from 47.5% in Q3 to 36.3% in Q4 while our Electrical Products segment saw its component material cost decline from 37.3% in Q3 to 34.3% in Q4. The decrease in the component material costs in both segments was driven by changes in both product and customer mix. Our Thermal Product segment's component material costs remains steady at…

I'm going to stop him from concluding because we have a correction to make.

Okay.

Outstanding shares you gave in thousands Hugh, that's in million.

Outstanding shares was $10.481 million. Thank you.

Okay.

Operator, that concludes our formal remarks at this point. And we can now take questions.

The floor is now opened for your questions. [Operator Instructions] Your first question comes from Srini Sundararajan of Summit Research.

Hi, guys.

Hi, Srini.

Hey, Srini.

Yeah. Just wanted to ask -- hi, again. My first question is, how do you see 2015 going forward. I'm not asking you for guidance specifically, but how would you characterize 2015 in terms of what opportunities that you see and how you can maximize those opportunities within the expected seasonality and stuff like that?

Srini, this is Bob. We see 2015 in our opinion as being a modestly better than 2014. I would guess numbers -- I'm just throwing numbers out, 4%, 5%, 6% improvement, I would think, in our existing businesses. And to try to drive that a little harder, we have some new products coming out, which we always do, and so we could possibly exceed the normal growth rate that we see there. And, of course, as you are aware, we also are pursuing some M&A activities and at some point -- some day in the future, they should finally pan out and give us a boost. So all of those things will be working for us, I think, as we go through 2015.

Okay. And as quick follow-up, What would be the M&A criteria? Like, traditionally it needs to be accretive and -- I mean, what are the criteria -- does it have to be geographically contiguous to you…?

Yeah. Srini this is Hugh. Clearly, we are looking for accretive acquisitions. We are focused on thermal technologies primarily that would complement our existing thermal technologies. We are looking to possibly fill in some holes we have in our product line up in the thermal side which are humidity and vibration, so we might be looking in those areas as well. But at the same time, we may be opportunistic and look at some other technologies that are not thermally oriented, but are broader test technologies. Again, everything would be accretive. As far as company size, we are looking at companies with revenues ranging from $15 million to $30 million and I guess that's probably all the criteria I can think about this point. Geographically, I know you asked about that, we are looking primarily in the U.S. at this point, but we would be willing to consider things overseas as well.

Okay. Thank you. You are so generous with the answer. Thank you.

You’re welcome.

Your next question comes from Les Sulewski of Sidoti & Company.

Hey, guys, thanks for taking my call.

Hey, Les.

So looking first, Hugh, perhaps this one is for you. How sustainable are the reductions of component costs moving forward?

Well, as I think I hoped I pointed out in this call, the Q4 component material cost is -- it was a real low point. I mean, we've had that a few times in my experience as CFO. We had it a few years ago when the June quarter -- I mean, we actually had a 53% margin in that particularly quarter, because it was a strong revenue quarter where our fixed manufacturing cost also had gone down as a percentage of revenues. As we've guided in the first quarter of this year, we are sort of going to I must say the opposite end of the spectrum. But a very unfavorable mix, driven primarily by -- for instance, in our mechanical segments significant shipments of manipulators with the contribution margin of between 25% and 30% incrementally which drives down the overall margin. That's for the first quarter. We provide guidance on a quarter-by-quarter basis as you know and is it possible that we will have another quarter in 2015 that has a component material cost of between 30.5% and 31%? It’s possible. Again, it really does rely on what's happening not in just one product segment but all three product segments. You had both mechanical and electrical with relatively low component material costs and our thermal group also stayed at a fairly low trend. So -- and as I have said for Q1 we see all three groups unfortunately heading in the other direction due to product and customer mix.

Thanks, Hugh. And I guess just to build on that, was any of the cost associated to a stronger U.S. dollar so more favorable to you in this -- at that point?

We sell in U.S. dollars globally except in Europe where we do sell in euros. So I would say that the weak -- or the strong dollar against the weak euro has caused us to book in Q3 and Q4 about $20,000 a quarter related to foreign currency translation losses. That's the only part of the world where we've really have that type of exposure. I don’t see it as being significant for us or as significant for us in 2015. But clearly I don’t attempt to guess where currencies will trade ultimately at the end of the day.

Sure. For the R&D tax credit, I guess that’s -- is this something new…?

No, the credit has been there for number of years. It’s just the federal government doesn’t bake it in. It’s got to be reapproved by Congress and Congress does not always act on this administrative issue when it should. So, for instance, we had hoped that it would have been passed sooner in the year. It was passed in the fourth quarter. I believe they passed it at this point for just 2013 and 2014 so -- and 2015 as well, I'm just getting -- I'm being told by our Controller, 2015 as well. So we wanted this issue impacting us during this year. But -- and as they permanently bake this into the tax code we've faced this issue and we’re not allowed to accrue the tax benefit until the quarter in which that tax legislation has been enacted and it was enacted in the fourth quarter. So the other thing impacting us just for your information is the reversal of valuation allowance on our German tax assets as well, and they both had about a comparable impact, I would say.

And as far as perhaps tax guidance for modeling terms, normalized rate, is the way to go with?

Yeah, mid-30s, I would say. We would have been mid-30s in Q4, have we not had those two items, we would have been right around 35%. So I think I would guide you to the mid-30s for 2015.

Okay. Thank you. I guess, maybe this one might be for Bob. You guys enjoyed some nice steady growth, you mentioned five years now. I mean, we all know that doesn’t last forever. I mean, do you see any downturn in this cycle? I mean, how do you look at the business at this point?

It’s different this time. It’s going to be good forever. We of course see the cycles. The cycles are never going to stop. The only thing has changed in those cycles is the duration of them. We used to go through a five year cycle, now it’s down to a one-year cycle where we gradually build through the year to Q3 which is the peak quarter and then things drop off again.

And Les I thing I might mention -- just to jump in here -- is that over the last five year while we've been profitable revenues have actually declined and then grown again. I mean, I'm just looking here 2010 was $20 million, I mean, $46 million, 2011 was $47 million, so you had growth in those two year. Yet 2012 and 2013 that declined slightly $43 million and then $39 million and we starting growing back up again in 2014. So…

So you have a couple of curves going there?

Yeah. I think the important thing as Bob noted in the call was that we've been consistently profitable during this period and there was a quarter in there were revenue dipped fairly low, if I recall. But we had a breakeven quarter. So I think as Bob talked about with response earlier, we see moderate growth in our base business for or in our existing business for next year and then whatever impact the acquisitions could have for us when we’re ultimately able to get one done.

Great. Thanks guys. Thanks for helping that up, walking us through that. I guess, the other one would be, stock. I mean, the stock is very cheap at this point. More than half of the market cap in cash, how do you look at it from the point of view where you can maximize the shareholder value at this point? I mean, I don’t think a share buyback is right given the small flow -- maybe another dividend if possible or M&A strategy? I know you've been searching for that. I just kind of want to get an idea of how do you look at the grown cash base and you've put that into use?

Well, we -- as you know last time we've stated this many times on these calls, say, that we are currently retaining our cash balances to grow through acquisition. We are very focused on that. We hope to be in a position to execute on something during 2015. That said, the Board of Directors if is unable to ultimately execute on an execution plan, we would look at other capital asset -- or capital allocation strategies including a buyback or a dividend. As you point out a buyback is really somewhat counterintuitive with our low number of outstanding shares and small flow, and small trading volume. So I would think about Board to do anything, it would probably be a dividend. But I think the greater -- our Board is more focused on growth and diversification of the company’s cash flow stream and that would be best executed through acquisitions.

Okay, guys. Thank you so much.

You’re welcome.

[Operator Instructions] At this time we have no further questions. I would now like to turn the call back over to Mr. Robert Matthiessen for any additional or closing remarks.

Well, thank you for joining us tonight. We thank you for your continued interest in inTEST and we look forward to updating you on our progress when we report our first quarter results. Good evening.

Thank you. This concludes your conference. You may now disconnect.