Sanmina Corporation (SANM) Q2 2012 Earnings Report, Transcript and Summary

Good afternoon. My name is [Britney] and I will be your conference operator today. At this time, I would like to welcome everyone to the Sanmina-SCI second quarter fiscal year 2012 earnings conference call. (Operator Instructions). Thank you. I would now like to turn the conference over to your host Ms. Paige Bombino. Ma’am, you may begin.

Thank you, [Britney]. Good afternoon, ladies and gentlemen, and welcome to Sanmina-SCI’s second quarter fiscal 2012 earnings call. A copy of today’s release is available on our website in the Investor Relations section. You can follow along with our prepared remarks in the slide posted on our website. Please turn to page two, the Safe Harbor Statement. During this conference call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We caution you that such statements are just projections. The company’s actual results of operations may differ significantly as a result of various factors including the state of the economy, economic conditions in the electronics industry, changes in customer requirements and sales volume, competition and technological change. We refer you to our quarterly and annual reports filed with the Securities and Exchange Commission. These documents contain and identify important factors that could cause actual results to differ materially from our projections or forward-looking statements. You will note in our press release and slides issued today that we have provided you with statements of operations for the three months and six months ended March 31, 2012 on a GAAP basis, as well as certain non-GAAP financial information. A reconciliation between the GAAP and non-GAAP financial information is also provided in the press release and slides posted on our website. In general, our non-GAAP information excludes restructuring costs, acquisition and integration costs, non-cash stock-based compensation expense, amortization expense and other infrequent or unusual items to the extent material. Any comments we make on this call as it relates to the income statement measures will be directed at our non-GAAP financial results. Accordingly, unless otherwise stated in the conference call, when we refer to gross profit, gross margin, operating income, operating margin, net income and earnings per share, we are referring to our non-GAAP information. I would now like to turn the call over to Jure Sola, Chairman and Chief Executive Officer.

Thanks, Paige. Good afternoon, ladies and gentlemen, and welcome to our conference call. Here with me today is Bob Eulau, our CFO.

Good afternoon, everyone.

Well, the agenda we have today is that Bob will review our financial results for the second quarter fiscal year 2012. I will follow up with the comments relative to Sanmina-SCI results and future goals. Then Bob and I will open for question-and-answers. And now I would like to turn the call over to Bob.

Okay. Thanks, Jure. And please turn to slide three. Overall, the second quarter was challenging but not significantly different from what we had expected. Revenue of $1.46 billion was down 2.6% on a sequential basis and down 6.8% from the second quarter last year. This was at the low end of our guidance of $1.45 billion to $1.55 billion. Our gross margin came in at 7.4%, which was up 10 basis points from the first quarter. Operating margin declined 20 basis points from the first quarter to 3.1%. Non-GAAP EPS was $0.27, which was at the midpoint of our guidance for the quarter. This was based on 84.1 million shares outstanding on a fully diluted basis. Finally, cash generation was strong this quarter, with cash flow from operations of $60 million and free cash flow at $46 million. I’ll discuss cash in more detail in a few minutes. Please turn to slide four. Revenue was down 2.6% or $39 million from Q1 to $1.46 billion. From a GAAP perspective, we reported a net loss of approximately $1 million, which results in earnings per share of negative $0.02. This was down relative to last quarter by $0.12. The GAAP loss included a $6.5 million charge for the call premium and unamortized issuance costs associated with the redemption of $150 million of debt during the quarter. There was also a $2.8 million reserve that was taken for a customer that declared bankruptcy during the quarter. Restructuring costs totaled $5.5 million for Q2. The cost primarily reflects what we’ve been recognizing as expenses are incurred related to real estate. Looking forward, we will continue to see some ongoing restructuring charges on our GAAP P&L of approximately $4 million to $5 million per quarter that primarily relate to real estate which is being held…

Thanks, Bob. Ladies and gentlemen, I will review our business environment in March quarter, I’ll talk about short-term business environment for third quarter, and then I’ll talk to you about visibility that we’re seeing today and really talk about our outlook for the rest of the calendar year 2012. Just to add to what Bob said to recap second quarter, as we expected, second quarter continued to be challenged by relatively flat demand in most of our key markets and demand decline in our multimedia segment during the quarter. When we provided our outlook for second quarter, we had a forecast to see a slight improvement in our communication network segment, but that did not transpire. More specifically, we did not see growth in our wireless access products and also in some of the networking products as our customer forecasted. Defense and aerospace market, we saw some good stability in our products that we build, but we also saw continued inventory correction in the component side of the business, such as printed circuit boards, plastic and metal and so on. Regarding the material supply, during the quarter we did not experience any major supply constraints, with some challenges, but there was no significant impact on the revenue. And we continued to see more inventory correction in all other markets than what we anticipated at beginning of the second quarter. Now, please turn to slide 10. As you can tell, communication networks continues to be our major market, which is 45% of our revenue. Defense, industrial and medical is 25%, enterprise computing and storage 17%, and multimedia about 13%. Our top ten customers consisted of 47.4% of our revenue, and we also had one customer about 10% plus in revenue. Please turn to slide 11. Now, I’d like to talk to…

Thank you. (Operator Instructions). Your first question comes from Sean Hannan. Sean Hannan – Needham & Company: Yes, good evening.

Hello, Sean.

Hi, Sean. Sean Hannan – Needham & Company: Hi. So, if I could follow up on some of the comments you’d made, Jure, around some of the demand that didn’t materialize in the quarter, specifically communications. You indicated that some of the wireless access as well as perhaps some networking didn’t come through as what was previously forecasted or hoped for. Can you remind us whether this was predominantly new programs that you’re expecting to materialize? And then when you think about, secondarily, when you think about next quarter and kind of the back half of that year, how much of that is really weighted toward the new programs versus some of the existing programs pulling through?

Well, first of all, we had a substantial slowdown on the wireless access product, which is basically cellular radios last couple of quarters. We felt that maybe we’ll have a little bit higher shipment during the quarter on that part of the business, and that did not materialize. As we look in the future, we think that business bottomed and we expect it to move in the right direction. Some of the LTE programs especially, those were a little bit delayed, at least with the customer that we involved in, we saw nice upside in the quarter, not as high as we expected originally. But on a positive side, that continues to improve. As you know, communication networks for us is the big part of the market, almost half of our market. And we think for that market segment, we think we bottomed out, because we’re starting to see, again, some inventory filling-up, especially in the components side, and that’s where I said earlier is we expect that to continue in the second half of the year. And overall we expect that part to move in the right direction. Sean Hannan – Needham & Company: Okay, that’s helpful. And then there was a lot of detail I think that you folks had provided in your efforts to build out your components group as well as some new and proprietary products, Newisys, Viking, etc. Could you provide us a little bit of an update around the progress you're making there versus what your -- some of your goals are within those sub-segments, what you had previously laid out? And what do you expect at this point when you think about either bookings in the second half of the year, may take longer to realize than perhaps what you were thinking back in November?

Well, first of all, both of these markets, what we call Viking Technology and Newisys systems, Viking Technology is really focusing on memory modules, solid-state drives. That business for us continued to deliver good results financially, we had some delays in some of the programs, so we didn’t see as much growth. But profitability actually for that business improved since November. We expect to see hopefully more growth in the second half on that business. On Newisys, which is an enterprise storage product, actually in that business improved lots since November, a lot of opportunities that we are working on. Growth did not come as fast as we anticipated, but we believe that the customer base that is looking into this product and also the way we are positioned is probably a lot stronger than what I thought in November. Sean Hannan – Needham & Company: That’s very helpful, Jure. Thank you.

Yeah. Thanks, Sean.

Your next question comes from Craig Hettenbach. Craig Hettenbach – Goldman Sachs: Yes, just a question on the multimedia business. Anything you guys need to do there in terms of from an OpEx perspective? Or maybe said another way, can you talk about how you expect that business to kind of normalize a bit, particularly in set-tops?

Yeah, Craig, let me give you that one. You know, set-top business, we have two key customers in that business. One customer has been with us for many, many years. If we look at that business, a lot of things change in that market. But I just want to tell you, if you look at the multimedia area, we’re really expanding to other areas such as gaming equipment, a lot of the high-end what I would call photography type of cameras, really expensive cameras. I'm talking to cameras that are well in the thousands and thousands of dollars, point-of-sale systems, automotive, electronics. So we kind of expect other businesses to kind of fill in what we are losing in set-top box. Again, these two customers that we have are very critical to us, will continue to do relationship. But really in that group we have to expand to other focus markets that we’ve been driving for a long, long time. Craig Hettenbach – Goldman Sachs: Okay. And if I can follow up on the comment on positive book-to-bill, can you just discuss as you went through the quarter how business trended kind of month to month and then how things look in the first month of the current quarter?

Well, first of all, let me make a comment for the last quarter. It was a little bit backend-loaded. During the quarter, we worked on a lot of new opportunities that we’ve been working on actually for many, many months. Some of those opportunities, like I said, the revenue is not as high as what we anticipated, let’s say, three, four months ago. But on a positive side, a lot of these programs are real and should continue to help us book in the future. Book-to-bill was slightly positive. We expect that book-to-bill to improve in the third quarter. And I would expect that, based on what we see today, that will continue in the positive direction. Bob, I don’t know, during this quarter so far, there’s really --

Yeah, a typical quarter for us is very backend-loaded, and last quarter was that way. We can’t draw a lot of conclusions at this point, just starting a new quarter. But early indications are pretty positive. Craig Hettenbach – Goldman Sachs: Okay. Thanks for that.

Thanks, Craig.

Your next question comes from Wamsi Mohan. Wamsi Mohan – Bank of America: Yes, thank you.

Hi, Wamsi. Wamsi Mohan – Bank of America: Hey, Bob; hey, Jure.

Hi. Wamsi Mohan – Bank of America: Can you talk a little bit about your expectations of the components business? So you mentioned it was up 1% quarter over quarter, but how do you think it progresses through the course of this year? And in the context of your guidance of 2% revenue growth quarter over quarter at the midpoint, it doesn’t sound like you're expecting any sort of snap-back in the near term because your margin guidance is sort of in line with this quarter. Is that the right way to think about it?

Yeah, go ahead.

So, yeah, I think the growth, the slight growth we saw this quarter we believe is an indication that we’ve probably bottomed out on the components business. And we continue to believe that that business will be the one where we see signs of recovery first. That’s what we’ve seen in the past as we’ve come through soft periods. So we’re hopeful that we’ll begin to see some momentum there. We’re not forecasting, as you described, a snap-back. I mean, we think that we’ll see some gradual progress there. The contribution margins are great on the components side, so we’re anxious to see some revenue growth there. But I think we’re -- you're probably looking towards the second half of the calendar year. Wamsi Mohan – Bank of America: Okay. Thanks, Bob.

Thanks, Wamsi.

Your next question comes from Shawn Harrison.

Hello, Shawn. Shawn Harrison – Longbow Research: Hi. Wanted I guess just to touch on the margins. At the low end of the guidance the margins would be down this quarter on relatively stable sales. Is there a mix factor occurring this quarter that could pressure margins downward? I'm just trying to get an idea of how you could see a margin decline on a gross margin basis.

Well, I would say that mix is always a factor every quarter, and we never can predict it with incredible precision. We think, if we see the components business gain momentum, then we probably can move towards the high end of the range. If we don’t see that, if it can stay flat, then we see some of the other businesses’ increase will be towards the low end of the range. But as we said earlier, it’s very early to be predicting what’s going to happen this quarter. I think the midpoint is something we’re pretty confident in. Shawn Harrison – Longbow Research: Okay. There’s no incremental, it’s solely mix, there’s incremental costs or anything involved?

No, there’s nothing, no significant change. It’s more how does the business unfold here this quarter. Shawn Harrison – Longbow Research: Okay.

Yeah. And just to add to that point, it’s really, addition to the mix, what revenue comes in. And the more we load this factor up, the faster it falls to the bottom line. Shawn Harrison – Longbow Research: That’s fair. And then the follow-up questions was, when looking at kind of the top ten customer base, it looks like that drove the majority of the sales decline sequentially for the March quarter. As we look into that June quarter guidance, would we expect the top ten customer base to provide most of the uplift or is it a little bit more diversified?

Well, first of all, our top ten usually higher percentage of the revenue, so if I just kind of look at the list, we had a few bigger customers that were down more last quarter. We expect those customers to be recovering a little bit at a faster rate. So, your comment is right, so a lot of upside will come from the top ten. Shawn Harrison – Longbow Research: Okay. Thanks so much.

Sure.

Your next question comes from Brian Alexander. Brian Alexander – Raymond James & Associates: Thanks, guys.

Hi, Brian.

Hi, Brian. Brian Alexander – Raymond James & Associates: Hi, Jure and Bob. It looks like for the June quarter you narrowed the range of revenue guidance for the quarter back to a $50 million range from $100 million the last couple of quarters. Does that I guess suggest improved visibility based on some of the comments you made earlier about customer optimism in the second half? I'm just curious what drove that kind of narrowed range for June?

Well, I think we had less visibility last quarter. It could have went either way. If things fall in what we thought at the beginning of the quarter, we’re going to have on the top end. I think today we feel a lot more comfortable what’s in front of us, and I would hate to use the word precise, but I think we can guide a little bit better. But at the same time, you know, we’ll see how things shake up. There’s a lot of good things during the quarter, and hopefully there’s a way to improve it. Brian Alexander – Raymond James & Associates: Okay. And then back to components, I don’t know if you touched on this earlier, but how are the margins overall for components in the quarter? I know you said sales were up 1%. You sound optimistic about bookings patterns going forward. But are we still below the corporate average and well below peak levels? Maybe put that in perspective.

Yes. So what I said earlier is we’re hopeful that we’ve bottomed out at this point because components were up slightly sequentially. They were this quarter unfortunately below the corporate average, although they did improve a little bit sequentially. So I think what we’ve got to do is see some revenue growth, and as Jure said, once we get the revenue growth, we can really generate some good contribution margin really in any of the factories but particularly in the components factories. Brian Alexander – Raymond James & Associates: Okay. Okay. And then just on the PCB expansion in China, how significant of a capacity addition is that?

It’s a major one. We have a capacity, if you look at about 250,000 square-foot factory in China, we’re doubling that size of that factory. Most importantly, we’ve been building up higher technology in there and really the whole focus of the new expansion of this factory is to be able to build a high-layer account in a advanced printed circuit board. So, for us it’s a major and it’s a big expansion. Brian Alexander – Raymond James & Associates: I guess, how should we think about utilization in that context, and how much line of sight do you have on the revenue stream that you --

Well, I think, you know, this factory, we’re just finishing the building, this factory will not come to what I would call, say, to full production till sometimes end of this calendar year. Brian Alexander – Raymond James & Associates: So, is that something that will pressure margins, I guess --

No, it would not pressure. I think it would help improve the margins. Brian Alexander – Raymond James & Associates: Okay. Thanks.

Your next question comes from Jim Suva. Jim Suva – Citigroup: Thank you, Jure and Bob, and thanks for letting me ask a question.

Hi, Jim.

Hi, Jim. Jim Suva – Citigroup: Hi. When we think about your sales rate year over year and your operating margins year over year, and that just lets us not worry about the seasonality impact, it appears that your operating margins and EPS are dipping year over year. Is that a function solely due to your top-line sales declining year over year, or is there something more going on to the story there? And then the second question is, with the year-over-year sales declining, is your company right-sized the way you want it, or do you think you need to do some business realignment?

Yes. So you touched on the most significant factor, is revenue down year over year. And if you look at both the first and the second quarters, revenue was down more than $100 million when you compare it to the prior year’s quarter. So, that puts a lot of pressure on us. We also, as we’ve noted, have seen the revenue hit us from the components side. We got hit there first, and that affected margins, they came down pretty significantly in the components areas during the first and second quarter. As I said, they came up a little bit relative to Q1 in the second quarter. But if you compare the first two quarters’ components this year versus last year, margins were down a fair amount. So I think it’s revenue and then it’s mix. From a, you know, is there restructuring that needs to be done? We don’t see that at this point. We’re continuing to get, as we said, pretty good signals from our customer. We think we’ve got the right global footprint. We need to keep pushing on the actions we’ve been working on for quite a while to improve our margins, which includes getting the right business mix, loading up the factories, improving our operating performance in each and every factory. So I think it’s a tough period from a revenue and demand standpoint, but structurally we feel like we’re in fairly good shape for the future.

Yeah. And Jim, if I can add to that, I think the market that we are focused on is more high-end infrastructure. As we know, half of market comes from the telecommunication networks side, as we know, that side has been a little bit slower first six months. As we said earlier, we expect that to improve in the second half of the calendar year. But to add on the structure itself, with our new structure that we shared with all of you six months ago, we’re really -- our restructuring is basically done. We separated our businesses to focus on efficiencies. The good thing about structure, I mean we are very lean when it comes to the people and overhead, you know, company, if you just look at the -- we have a lot of upside to build on. Most of our factories have paid off. So, lean structure in place. So, just to add to what Bob said, it’s all about right now loading this up, and as -- most important thing is that the customers are there. I think it’s all about demand. And as demand comes in, there’s a lot of leverage in our model. Jim Suva – Citigroup: And then maybe a follow-up question for Jure. If we were to contrast Sanmina versus, say, a low-volume producer like Plexus or a higher-volume producer like Jabil or Hon Hai, can you help us bridge the gap about why they’re seeing year-over-year growth and Sanmina is not?

Okay. Let me just kind of -- we don’t compete with Foxconn, but if you look at our competition that is focusing on the enterprise type of product, I don’t, at least the data that I'm looking, I don’t think there was a lot of growth in the last six months, where in the lot of the what they call high-velocity product, more consumer stuff, there was lots more growth there, and other manufacturing services that we offer. For us, again if you look at the businesses that have really not grown is the enterprise, old, traditional, even the defense and the medical businesses, we’ve got a position in both of those businesses, it’s just that the demand for those products has a lot slower expansion in the last six months. Are those good markets to be in? Answer is yes. And so I think the company is set up to compete with a small guy. We have a lot of capabilities. We do really high mix, low volume. And then in a focus market such as telecommunication market infrastructure, we basically set up to compete with anybody in the world. Jim Suva – Citigroup: Yeah, great. Thank you for the details and great clarification on helping me understand that. Thank you, Jure.

Thanks, Jim.

Thanks, Jim.

Your next question comes from Sherri Scribner. Sherri Scribner – Deutsche Bank: Hi. Thank you. I wanted to get a little more detail on the multimedia segment. I think you commented in the prepared remarks that the set-top box business was down. I would typically expect that business to be down sequentially. But was it down more than you expected? And as it relates to set-top boxes, what are you seeing from customers? Are you losing share or was there some impact from the HTD shortage?

Well, Sherri, first of all, we can’t specifically talk about the customer. I think we did -- we knew the things were going to be down a little bit, but they were a little bit down more than what we anticipated. We expect during the summer, if you look at kind of historical on this type of business, usually the March quarter, it’s typically the slowest and June quarter. And then things start picking up September, December quarters. So I think there’s some seasonality going on with these two customers. Again, with one customer we had a relationship forever, and we expect to continue that relationship with them. With the other customer, our relationship is in a niche area, and we’ll continue to serve in a niche area. But we’re not going to chase every order in the set-top box business. Sherri Scribner – Deutsche Bank: And were you impacted by HTDs in that segment?

There was no impact at all, significant impact. Our customers were able to procure some of the product early, in some cases paid the premium to get it. As I mentioned earlier, we did not have a significant impact on the revenue in multimedia at all. Sherri Scribner – Deutsche Bank: Okay. That’s helpful. And then in terms of the server, the enterprise computing and storage business, that was up sequentially, which a bit of a surprise. Is that related to new program wins? You're expecting that to continue to be strong as we move into the fiscal third quarter, but is that new program wins, or what’s going on there?

Well, enterprise computing and storage, these things just don’t happen overnight, but in last couple of quarters, some of the programs that we have, our newer programs we see more upside. And I think our own products, our Newisys product is doing pretty well, and that’s starting to help us move in the right direction. And as I said earlier, we expect to continue to gain the revenue share in that side of the business. Sherri Scribner – Deutsche Bank: Okay. What percentage is the Newisys business of that segment?

We don’t break it down. Sherri Scribner – Deutsche Bank: Okay. Thank you.

Thanks, Sherri.

Your next question comes from Christian Schwab.

Hello, Chris. Christian Schwab – Craig-Hallum Capital Group: Hey, Jure, how are you?

Good. Christian Schwab – Craig-Hallum Capital Group: Good. Can you give us a utilization rate on the components business, what utilization rate you're currently at?

Well, it depends -- as I mentioned, I mean if you look at an average, our utilization rate based on people, it’s probably in 80 to 90 percentile through most of the plants. We adjust those things. In this type of business, Chris, you adjust on a monthly basis. But as we mentioned earlier, of course we can be shipping 10%, 15% extra with same labor force. So, you never in those type of businesses, you cut down so low that you can’t pick up an upside. So we think the market has now bottomed out, so it’s all about having a right infrastructure in place and be able to service our customers as the demand improves. But we do expect the demand in the component side to go up because we have a pretty low inventory right now with most of our customers. Christian Schwab – Craig-Hallum Capital Group: Right. You said it’s the lowest inventory you remember in a while. Can you quantify how long that while has been?

Well, at least the last three years. Christian Schwab – Craig-Hallum Capital Group: The last three years, lowest in three years?

Yes. Christian Schwab – Craig-Hallum Capital Group: Perfect. And then on the new factories that you're building in China and India, does any of that have to do with the market share gains or is that just sheer capacity needed?

Well, India, you know, we have multiple customers in India that we’re focusing on growing the Indian markets, so it’s really more regional focused in India. We have a lot of great opportunities and some great customers in that area. That area, this year, we needed to add additional space there. So you can say, yeah, it’s a market share win, but it’s the customers we worked for many years. On the circuit board technology, we need more expansion -- more expansion in China. At the same time, we are increasing the number of the layer and technology that we want to build in China to stay -- to be able to compete globally. So it’s really more strategic, but we do expect to grow our printed circuit board business in the next 12 months. Christian Schwab – Craig-Hallum Capital Group: Perfect. And then on the optical side, with all the shakeouts and things like that, do you believe going into the second half, your positioned to gain market share there?

Well, I think we’re well-positioned. I mean, communication networks is half of our business, as you know, a lot of advanced networks today have built an optical technology. I think we are playing -- we are involved with all the key players in that area. And most importantly, that we are producing some of the most advanced optical technology that our customers are using today. So we’re well-positioned. I think that I would -- I'm not 100% expert in any of these markets, but I would say that also the optical demand in the future should be improving. Christian Schwab – Craig-Hallum Capital Group: Great. Thank you. No other questions.

Thanks, Christian.

Your next question comes from [Austin Bernandez].

Hello, [Austin]. Austin Bernandez – Analyst: Hey there. Good afternoon. My first question really pertains to sort of the confidence -- the confidence you have in your second half sort of expectations as coming off of the quarter where your comp sales were not exactly where you had anticipated. What gives you the confidence that the second half of the year would be what you were expecting sort of earlier this year? And if you could sort of provide any color, that would be helpful.

Well, number one, I think, [Austin], personally, I was surprised that the communication networks is going to be down actually in December quarter than our first quarter, we saw the down, and then that continued to be down in the March quarter. And we were finishing the fiscal year 2011, our expectation was that the communication networks is going to be up, and the multimedia we also expected to be up, which neither one of those happened. So, really is that we, you know, our expectation was higher. I mean we knew that around December timeframe, and then when we talked in our last call in January 18, we’d said that things were challenging. And at that time, I think I said that we think the second half of calendar year will be a better year. We see that today for two reasons. I think our customer forecasts are more real today. I think we understand them a little bit better. Number two, the pipeline, in other words, the inventories are very low. And when you add those two things together -- and also the new programs, the new projects that we’ve been working on for a long time, that hopefully we’ll have a higher demand. You add all those three things together, it shows us that we should have a better second half of 2012. Austin Bernandez – Analyst: And I'm not sure whether you touched on yet today, but were there any significant wins during the quarter, this particular quarter?

Well, I think one that I talked about earlier, we expanded our Sanmina Global Services. As you know, the global services market for us is very profitable. We’ve been working on this one for a long time, and we won a long-term partnership with a very, very key player, customer of ours, for many years to come. So that was a significant win during the quarter. And then we had a nice significant win [with regards] to other markets, but usually we don’t talk into details of those things. Austin Bernandez – Analyst: Thank you.

Thanks. Operator, we have time for one more call.

Yes, sir. Your next question comes from Amit Daryanani.

Hello, Amit. Amit Daryanani – RBC Capital Markets: Hi, good afternoon, guys. A couple of questions. One, you’ve talked quite a bit about expecting better demand trends in the back half and on your customer side. Can you help us understand what sort of recovery could you be looking at the back half? Do you expect things to just be seasonal or do you think you can get back to at least being flat on a year-over-year basis on the back half?

Well, it really all depends how some of these things shake out. I mean, one thing that we learned in the last six months, that you can’t always go with 100% forecast because some of the forecasts that we had earlier in the year did not materialize. I think today we understand the future better. I believe our customers, as I just mentioned two minutes ago, a lot more confident about the second half, the inventories are low, and they’re starting to talk about the long-term components, some of the components that are hard to get, and they’re starting to put a better plant in the place. In addition to that, we’ve got some new programs that should be able to kick up. So, yeah, I mean, you know, we want to get back to that run rate that we had four quarters ago. Yeah, is that possible? Answer is yes. Amit Daryanani – RBC Capital Markets: Fair enough. And then just two quick questions on my side. One, on capital allocation, given the fact that you guys moved debt -- financing your debt maturities to 2016 and beyond, how do you think what capital allocation from now going forward? And then secondly, could you guys touch on the bad debt expense you had in the quarter? Is there some residue headwind we should be thinking about in the out-quarters, or have you taken the entire hit in the March quarter numbers? Thank you.

Yes, this is Bob. When you asked about capital allocation, I assume you're asking about uses of cash. And really our priorities remain the same. I mean, the first priority is to make sure we have the cash we need to grow the business. The second is to do small strategic acquisitions, which we don’t do very often. And then third, to continue to de-lever the company. So, I think you’ll continue to see us delevering the company over time. We’ve done quite a bit in the last three months because the opportunity has been there, and we’ll continue to look for that going forward. And in terms of the bad debt situation, it was customer who declared bankruptcy during the quarter, and we believe that we properly accrued for that. We don’t anticipate further adjustments. I'm hoping we can have some recovery on what we’ve reserved for. But at this point, we think that’s the right number. Amit Daryanani – RBC Capital Markets: Bob, are you still engaged with that customer or is that relationship finished?

We are still engaged with that customer. Amit Daryanani – RBC Capital Markets: Got it. Thanks a lot.

Thanks. Well, ladies and gentlemen, again, thank you for participating in our conference call here today. Hopefully we answered most of your questions. If not, please give us a call. You know, like I said, we’re excited what’s in front of us, and looking forward to talking to you in three months from now. Thanks a lot.

Yeah. Thanks everyone.

Bye-bye.

And this does conclude today’s conference call. You may now disconnect.