FINAL TRANSCRIPT
THOMAS STREETEVENTS
Conference Call Transcript
LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
Event Date/Time: Sep. 02. 2004 / 10:00AM ET
Event Duration: N/A
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FINAL TRANSCRIPT
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LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
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CORPORATE PARTICIPANTS
TIM BONANG
Sharon Merrill Associates - IR
TOM RESLEWIC
LeCroy Corporation - President & CEO
CARMINE NAPOLITANO
Computer Access Technology Corporation - President & CEO
SCOTT KANTOR
LeCroy Corporation - VP Finance, CFO, Secretary, Treasurer
CONFERENCE CALL PARTICIPANTS
MIKE CRAWFORD
B. Riley & Company - Analyst
AJIT PAI
Thomas Weisel Partners - Analyst
NICK BALLUCIO
TCW - Analyst
BARRY RANDALL
U.S. Bancorp Asset Management - Analyst
JOHN MYERS
Merrill Lynch - Analyst
RICHARD CHU
SG Cowen - Analyst
ROBERT STARBUCK
Schroeder's - Analyst
MARK ORT
Glazer Capital - Analyst
PRESENTATION
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OPERATOR
Good day everyone, and welcome to the LeCroy Corporation and Computer Access
Technology Corporation conference call. Today's call is being recorded. At this
time for opening remarks and introductions I would like to turn the call over to
Mr. Tim Bonang of Sharon Merrill Associates. Please go ahead, sir.
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TIM BONANG - SHARON MERRILL ASSOCIATES - IR
Good morning and welcome to today's conference call which is being jointly
hosted by LeCroy Corporation and Computer Access Technology Corporation, also
known as CATC. In connection with this conference call both companies wish to
take advantage of the Safe Harbor provisions of the Private Securities
Litigation Reform Act of 1995 with respect to statements that may be deemed to
be forward-looking statements under the Act.
This conference call contains forward-looking statements including those
pertaining to LeCroy's intent to purchase CATC for approximately $85 million
excluding CATC's $45 million of cash and investments, LeCroy's ability to secure
cash funding through a combination of existing cash and term debt, its ability
to capitalize on the demand for serial data test instruments, leverage its
global, technical, direct sales force to accelerate the growth of CATC's
products, strengthen its dominant position in the data storage market, increase
penetration into the computer market, substantially expand gross margins to well
above 60 percent, increase operating leverage leading to expanded operating
margins, add to its strong cash generation capabilities and expand its business
into areas other than oscilloscopes, also the size and growth of the addressable
serial data test market and the opportunities to further enhance LeCroy's
financial performance including revenue, earnings growth, gross margins,
operating margins, cash flow and accretion to earnings.
All such forward-looking statements are only estimates of future results and
there can be no assurance that actual results will not materially differ from
expectations. Actual performance and results of operations may differ materially
from those projected or suggested in the forward-looking statements due to
certain risks and uncertainties, including without limitation volume and timing
of orders received, changes in the mix of products sold, competitive pricing
pressure, LeCroy's and CATC's ability to anticipate changes in the market, the
availability and timing of funding for LeCroy's and CATC's current products, the
development of future products and LeCroy and CATC's ability to use intellectual
property and protect their patent portfolios.
LeCroy undertakes no obligation to publicly update forward-looking statements
whether because of new information, future events or otherwise. For further
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2
FINAL TRANSCRIPT
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LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
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information on potential factors that could affect LeCroy Corporation's business
or cause actual results to differ materially are described in LeCroy's reports
on file with the SEC, including its annual report on form 10-K filed with the
SEC on September 22, 2003, form 10-K/A filed February 9, 2004, form 10-Q filed
April 30, 2004 and subsequent filings which LeCroy may make with the SEC which
can be viewed at the SEC's website at www.sec.gov.
Similarly, this conference call also contains forward-looking statements based
on CATC's current expectations, such as one, growth of CATC's products and its
leadership in certain markets; two, its ability to capitalize on the deployment
of new serial data test serial test standards and devices; three, its ability to
provide comprehensive serial data test solutions from the physical layer to the
protocol layer of the stack and four, the expected closing date of the
transaction as well as other matters that are not purely historical data. The
forward-looking statements in this conference call involve risks and
uncertainties, including but not limited to, unexpected delays in calling or
conducting CATC's special meeting of stockholders, CATC's production of new
products, market acceptance of its products and the merger, competitive
pressures, success of growth, profitability and increased stockholder value.
These and other factors that could cause actual results to differ materially are
discussed in more detail in CATC's annual report on form 10-K filed with the
Securities and Exchange Commission on February 20, 2004, form 10-K/A filed March
3, 2004; form 10-Q filed August 13, 2004 and subsequent filings CATC may make
with the SEC as amended which can be viewed at the SEC's website www.sec.gov.
On the conference call today is LeCroy Corporation President and Chief Executive
Officer, Tom Reslewic and Vice President and Chief Financial Officer Scott
Kantor, as well as Computer Access Technology Corporation President and Chief
Executive Officer, Carmine Napolitano. With that I now like to turn the call
over to Tom.
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TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
Good morning. Thank you, Tim, for your brief remarks. Good morning everyone.
Thank you very much for joining us on short notice for this important and
certainly exciting announcement. This is Tom Reslewic speaking and with me this
morning is Scott Kantor, our CFO and Carmine Napolitano, the President and CEO
of Computer Access Technology Corporation, better known as CATC. CATC's a
publicly traded company trading on the NASDAQ under the symbol "CATZ."
So today we announce that LeCroy Corporation and CATC have reached an agreement
for LeCroy to acquire CATC for $6 per share in cash or approximately $81 million
in total net cash. We plan to fund this cash purchase with a combination of
LeCroy cash and about $50 million of term debt provided by the Bank of New York,
as part of a $75 million credit facility of which $25 million will remain
available as a revolving line of credit.
This morning we would like to outline our rationale for the transaction and
provide you with a sense of what it means to the shareholders of both companies.
So the meaning for the CATC shareholders is relatively simple as I mentioned, it
means $6 per share in cash. To the LeCroy shareholder, it means a largely
non-dilutive transaction that adds a powerful growth engine to LeCroy's solidly
profitable and cash generated base business.
In addition this transaction will allow LeCroy to capitalize on the increasing
demand for serial data test solutions; to leverage its global direct technical
sales force, further extend its dominance in the data storage market, increase
its penetration in the computer market, significantly increase its gross margins
to well above 60 percent, increase operating leverage leading to expanded
operating margins and further boost its strong cash generation capabilities.
Let me explain why we believe these outcomes are realistic. CATC develops and
produces protocol analyzers aimed specifically at R&D engineers in the computer
and data storage markets. Their products are targeted exclusively at serial data
protocols like USB and PCI Express. In a few moments, Carmine will tell you a
little bit more about CATC's business and their impressive track record. Growing
at 34 percent for the first half of 2004, CATC is currently running at an annual
sales rate of $20 million per year with greater than 80 percent gross margins.
And has just recently reached the critical crossover point of profitability,
having generated about $500,000 of operating income from nearly $2 million of
cash from operations in the first half of calendar year 2004.
Translation. We are catching CATC at exactly the right time in their evolution,
when they can have the biggest and most immediate impact on LeCroy's growth and
operating performance. For the past two years LeCroy has seen an increasing
portion of its business coming from oscilloscope sales into serial data test
applications in the computer and data storage market segments. Precisely the
segments addressed by CATC. We estimate that about $45 million out of $125
million of revenue in our fiscal year 2004 came from this serial data test
market segment.
Between LeCroy and CATC we're selling about $65 million of test instruments into
this market for serial data test instruments, which we estimate to be about $190
million today. We expect this market driven by the accelerating deployment of
more and more serial data standards to increase to about $500 million in three
to five years, and we further expect to achieve 40 percent market share in that
same time frame. Clearly we expect CATC to be a huge growth driver for LeCroy.
A little bit now about the serial data market. There is little question that
serial data standards are going to increase in variety and deployment. Serial
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3
FINAL TRANSCRIPT
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LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
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data is the fast and economical way to transport digital data at high speeds
between chips, boards, devices, computer, Ipods, cameras you name it. New
standards like PCI Express, Serial ATA, and Serial Attached SCSI are on their
way to dominance in the computing and storage markets. Other new standards like
wireless USB and WiMAX propose to extend serial data protocols into the vast and
lucrative network space.
These standards mean high-speed complex signals at the physical layer and
dedicated complex languages at the protocol layer. LeCroy and CATC are ideally
suited to solve these testing problems and are already on their way to dominant
positions in this emerging market. LeCroy and CATC are nearly perfect
complements. LeCroy dominates the data storage market while CATC has deep
penetration into the computer market. CATC's sales are concentrated in the U.S.
domestic market while LeCroy gets two-thirds of its revenue from international
markets.
CATC products assist developers in the system integration stage of the design
cycle while LeCroy oscilloscopes address hardware designed at an earlier point
in cycle. There is virtually no overlap in our product lines yet we sell into an
almost perfectly matched customer base. In many ways together we are a
salesman's dream. Each product selling into the lab next-door to the other. By
combining these products into a single product portfolio we will extend our
reach from end-to-end in the customers' design cycle.
Now a word on synergies. We expect this transaction to be accretive almost
immediately on a pro forma basis and within just a few quarters even on a GAAP
basis. From a cash generation perspective, we expect LeCroy with CATC to
generate $30 million to $35 million of annual EBITDA starting in calendar 2005.
Our accretion assumptions are based on a quarterly interest expense of about
$500,000 per quarter and only a modest dilutive effect of stock options issued
at the closing of the deal. We see three important sources of synergy to fuel
this immediate financial boost.
First, we will be able to quickly save about $700,000 to $800,000 of annual G&A
expenses related to CATC's cost of being a public company. While the smallest of
the three synergies, these expenses are straightforward, easily recoverable and
by themselves cover nearly 40 percent of the quarterly interest expense.
Secondly, we expect to achieve significant synergies by eliminating many costly
third party distribution arrangements and moving to a direct distribution model
leveraging LeCroy's worldwide sales force and customer support infrastructure.
Finally, and most significantly, we see substantial upside revenue synergies as
a function of geographic and end market opportunities. LeCroy's international
organization is extremely well developed, while CATC's sales in Asia are
somewhat undeveloped and almost nonexistent in Europe. In addition, although
CATC has excellent products in the data storage market it has not fully
penetrated key data storage accounts while LeCroy enjoys excellent penetration
in the storage market.
LeCroy is currently in the mode of leveraging its cost structure and strong
gross margins into increased operating margin to scale with volume. CATC has
just passed the critical point of profitability and enjoys gross margins
substantially higher than LeCroy. With CATC, LeCroy expects to significantly
modify its target business model to feature gross margin percentages in the low
to mid 60's and operating margin percentages moving into the high teens. With
targeted 20 percent top line growth, we expect this business model to yield
significant earnings as volumes increase.
A bit about integration and execution. We are not planning a comprehensive
integration product for the CATC business. CATC is neither broken nor suffering
from low critical mass issues. This is a sound operation, staffed by seasoned
professionals who are fully engaged in executing an excellent product
development plan. Our only pressing integration task involves transitioning many
elements of CATC's distribution channel into the LeCroy direct sales force. We
have significant experience in managing this kind of transition, and the CATC
sales model already relies on key product specialists employed by CATC to
support a field force of prospecting salespeople.
These specialists will remain in place, and we will add several more to ensure
adequate product support for the LeCroy direct sales force around the world. In
fact, CATC's Santa Clara operations will function as an independent business
unit in a new serial data solutions division that LeCroy will form between now
and the closing date of the merger.
The serial data solutions division will also include key elements of LeCroy's
high-end oscilloscope business that are aimed at the serial data test market.
Upon completion of the merger, Carmine Napolitano, CATC's CEO, will join
LeCroy's executive staff as President of this newly formed division and will
lead LeCroy's strategic thrust into the serial data test market.
Now I would like to introduce Carmine who will tell you a little bit more about
CATC.
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CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
Thank you, Tom. CATC has emerged as a leader in the market for advanced protocol
test solutions to the storage and computing markets over the past decade. We
have leveraged our deep technical understanding of serial data communications
standards to become an important enabler in our customer's ability to deliver
components, systems, and devices that offer connectivity. As the world continues
to migrate through the analog to digital revolution, an increasing premium is
being placed on our customer's ability to deliver reliable, scalable,
connectivity to the other components, devices, and systems in a very complex
environment.
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4
FINAL TRANSCRIPT
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LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
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Today's PDAs provide a concrete example of the challenge our customers face. Is
today's PDA a computer, a consumer electronic device, a cell phone, a networking
device, or a storage device? The answer is that it is all of these things. And
CATC enables customers to build connectivity protocols into their products in a
way that doesn't require them to be protocol experts. I can assure you that
camcorder designers do not aspire to be protocol experts, yet all camcorders
today ensure connectivity to printers, computers and other devices.
We have successfully brought a protocol expert to the design engineer's desktop
in many of the most exciting standards today, including Bluetooth, Fiber
Channel, IEEE 1394, InfiniBand, PCI Express, Serial ATA, Serial Attached SCSI
and USB. Our focus since the inception of the company in 1992 has been to enable
industry adoption of key emerging serial data protocols. In order to assist the
industry in the adoption of these technologies, we have forged close strategic
relationships with industry thought leaders. By exploiting our unique
proprietary technological competencies, we've consistently entered markets
faster, earlier and cheaper than our competitors.
This strategic model was first validated when we launched our first USB product
in 1996 and has proven to be highly scalable as we now address 8 high-speed
serial protocols. While CATC is well positioned to deliver solutions that can
capitalize on these and other emerging serial data standards, the Company is
increasingly been focused on expanding its distribution capacity to keep pace
with the rapid expansion of our product footprint. The challenge of executing
this channel strategy has limited our ability to reach the market in a way that
can maximize our revenue potential.
With access to LeCroy's proven direct technical distribution network, we expect
to significantly improve our ability to reach customers in key geographies and
end-user markets. By leveraging this distribution network, we will be in a
position to enjoy the full benefit of global reach while simultaneously
addressing the entire product development process for our customers. Of course,
this transaction will also improve our operating cost structure by eliminating
the significant costs borne by CATC as the result of being a public company.
Speaking on behalf of all 70 employees at CATC, we are extremely excited about
the opportunity to significantly expand our sphere of influence within the
protocol market while positively contributing to LeCroy's financial performance.
Just as importantly, I am confident that the two companies' cultures will be a
tremendous fit. Both companies have established a high-performance, positive and
motivating atmosphere for their employees. Based on my direct observations in
getting to know the LeCroy team, I am confident that the two companies will
unite behind the common mission of securing a leadership position in material
data test market. Back to you, Tom.
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TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
Thanks, Carmine. Now I would like to ask Scott Kantor to walk you through some
of the specifics of the transaction.
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SCOTT KANTOR - LECROY CORPORATION - VP FINANCE, CFO, SECRETARY, TREASURER
Thank you, Tom. Good morning. At the closing of this transaction we will acquire
all of the outstanding stock of CATC for a purchase price of $6 per share in
cash. In addition, the gross purchase price will include the following
considerations. First, cash to the holders of CATC's outstanding vested
in-the-money stock options and options to purchase LeCroy stock issued to assume
CATC's outstanding unvested stock options. As a result, we expect the total net
purchase price of the transaction before deal costs to be approximately $85
million, excluding CATC's $45 million in cash and investment.
We intend to fund the cash requirement of approximately $81 million through a
combination of our existing cash plus $50 million of term debt, which is part of
a $75 million credit facility to be underwritten by the Bank of New York. The
transaction is subject to approval by the stockholders of CATC as well as
regulatory approvals and the satisfaction of other customary closing conditions.
Subject to these conditions the transaction is expected to close in our second
fiscal quarter ending December 31, 2004.
I'll run through some quick expectations in terms of timing. We expect CATC to
file their proxy within the next several days. The SEC will then have 30 days to
comment. We will also be filing our Hart-Scott-Rodino regulatory papers. We are
not anticipating any issues with HSR since the product lines have virtually no
overlap and they are in separate product markets. As soon as we get those
documents filed and through the regulatory process, CATC will schedule a
shareholders' meeting. Then, after approximately 30 days notice of the meeting,
CATC will hold a shareholder vote and we will close on the transaction. Overall,
our expectation is that we should close within the next 60 to 90 days.
Now I will turn it back to Tom.
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TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
Thank you, Scott and Carmine. So to summarize, LeCroy's strategy is to leverage
our position in serial data test by broadening our portfolio with the aim of
generating significant growth. CATC is a perfect strategic fit and a
complementary match to LeCroy in many dimensions. In addition, this acquisition
will not only be accretive in the near-term, but will drive LeCroy to superior
business model in the mid-term featuring gross margin percentages in the mid
60's, operating margins percentages in the high teens and growth rates in the
range of 20 percent.
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5
FINAL TRANSCRIPT
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LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
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Funding the transaction with $50 million of debt is inexpensive, keeps the
accretion hurdle low, limits shareholder dilution and takes advantage of
LeCroy's superior cash generation capabilities. Today, both CATZ and LeCroy are
into leverageable territory. In other words, having passed the point of
profitability we are now capable of converting revenue gains into earnings at an
exciting rate. And with that, we are ready to take your questions.
QUESTION AND ANSWER
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OPERATOR
(OPERATOR INSTRUCTIONS) Mike Crawford with B. Riley.
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MIKE CRAWFORD - B. RILEY & Company - Analyst
Could you talk a little bit more about the history of the deal; who approached
whom and if anyone else was involved?
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TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
So, the history is pretty interesting, in fact. If I go back about a little over
a year ago, I was attending a tenth anniversary of our Taiwan distributor who
has been a captive LeCroy distributor for most of its existence. And maybe in
the last two years of that 10 year period they took on CATC as their second
product to distribute. So there's a situation in the Taiwan market, a very
computer centric market, where one distributor was only in the market with two
products, LeCroy's and CATC's. And so while I was at this celebration, I became
rather intrigued in the discussions about how these guys go to market. And so
when I came back from that trip, I started some very loose discussions initially
around distribution, and I would say distribution kind of discussions were on
and off you might say for quite a long period of time. And really, this summer
when we started to have those discussions again, they led us down the path that
took us to this agreement here.
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MIKE CRAWFORD - B. RILEY & Company - Analyst
Great. Thank you.
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OPERATOR
Ajit Pai with Thomas Weisel Partners.
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AJIT PAI - THOMAS WEISEL PARTNERS - ANALYST
Congratulations on the acquisition. A couple of quick questions. One is that in
terms of the financing of the acquisition, the $75 million you will need fromthe
Bank of New York; could you give us some indication as to what the interest rate
of it is, and whether the bank has already agreed to underwrite the entire
amount?
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6
FINAL TRANSCRIPT
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LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
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SCOTT KANTOR - LECROY CORPORATION - VP FINANCE, CFO, SECRETARY, TREASURER
I will take your first question first. The interest rate is going to be about
LIBOR plus -- I would say 275 basis points. And yes, Bank of New York has fully
committed to underwrite the entire facility.
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AJIT PAI - THOMAS WEISEL PARTNERS - ANALYST
Okay, and the second question would be, what made you fund the acquisition using
just cash and not mix of cash and equity?
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TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
I think that when we really started to look into this, and we recognized that
not only did LeCroy have a great cash generation capability, but that we were at
the point where we were going to move into transition to leverage with CATC, we
felt that the accretion hurdle was much lower with debt based on the borrowing
rate, and more significantly very friendly from a dilution perspective. So we
really didn't want to add any dilution if not necessary, and we found ourselves
in the situation where both sides were able to see eye-to-eye on the notion of
cash. And we are quite confident that this structure will allow us to get
relatively quick payback.
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Ajit Pai - Thomas Weisel Partners - Analyst
Okay, and by what time -- how quickly do you expect to repay that $50 million of
down debt?
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TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
So the debt basically has a built in repayment structure that is payable over
five years. It looks for 15 percent principal repayment in year one and 25
percent in year five and kind of goes linear between those. And I think that
that will represent the most conservative case of how we would expect to pay
back. Clearly if we are generating cash the way we think we would like to, we
could be getting out ahead of that schedule.
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AJIT PAI - THOMAS WEISEL PARTNERS - ANALYST
And then the last question is in terms of consolidation of facilities, is there
anything that is going to happen on that front or would most of the synergies be
the three key areas that you pointed out?
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TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
I am sorry, could you repeat that question for me?
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AJIT PAI - THOMAS WEISEL PARTNERS - ANALYST
Yes, is there going to be any consolidation of facilities or is it going to be
primarily the three key areas of synergies that you talked about between the two
companies?
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TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
No, we are not interested in moving people east or moving people west. They've
got a very nice, professional well-contained operation out there. They are down
the street from the movers and shakers in this industry. We like them right
where they are, and of course as I mentioned before, the place where we're going
to find the big synergies both in terms of some structural cost savings as well
as upside in revenue generation is on the sales force side. And of course, that
is as you know, is geographically dispersed. That doesn't really involve any
relocations and facilities movements.
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AJIT PAI - THOMAS WEISEL PARTNERS - ANALYST
Thank you so much.
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OPERATOR
Nick Ballucio with TCW.
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NICK BALLUCIO - TCW - ANALYST
The deal sounds good on the surface. One thing in the future the FD statement
could be a little shorter; don't punish us, we can read the 10-K by ourselves.
Second point, if the deal is so attractively structured, why wasn't more stock
used to retain key employees, and how do you expect to incent the employees of
the acquired company given that they are going to be paid in cash and they can
walk away?
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TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
Great question, so I will take your first comment first, I completely agree with
you. On the second point, I should be clear that we have agreed to assume the,
CATC's option program, and we've done that in a special sort of way so all of
the vested options, whether they are in-the-money or not, and the vast majority
of them are in-the-money in fact, will be cashed out without issuing new stock.
And or new options. And the ones that are vested and out-of-the-money will be
canceled. So we are kind of drawing a line today for starters and that keeps the
dilutive effect to a minimum. And going forward, we will use a standard process
of exchanging outstanding CATC options for LeCroy options at a conversion ratio
to be determined in the few days prior to closing. And in addition to that, we
expect to target some key stock options, incentives and some restricted share
grants, as well, to targeted key employees and to various members across the
CATC staff. So Carmine and I, as you can imagine, have spent quite a number of
hours thinking through the process.
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7
FINAL TRANSCRIPT
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LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
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NICK BALLUCIO - TCW - ANALYST
Carmine, how many shares did you own in the acquired company?
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CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
I had 700,000 stock options.
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NICK BALLUCIO - TCW - ANALYST
Okay, how many of those will be converted to LeCroy stock options? As opposed to
cashed in?
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CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT &CEO
Two thirds.
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NICK BALLUCIO - TCW - ANALYST
That's what I wanted to hear. Thank you.
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OPERATOR
BARRY RANDALL WITH U.S. BANK.
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BARRY RANDALL - U.S. BANK - ANALYST
On the face of it looks like a terrific deal so I will offer congratulations
first. A couple of questions relating to, and Carmine can answer these, relating
to Carmine's or CATC's competitive position. Carmine, could you just discuss
briefly who you view as CATC's direct competitors at this point and how the
competitive landscape -- maybe Tom wants to chime in -- how the competitive
landscape changes for the combined company once the deal is closed.
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CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
We operate in two principal markets, the computing market and the storage
market. We grew up in the computing market, and in that market I would
categorize the competition as largely amongst small, fragmented companies that
are CATC size or smaller. So that is sort of the computer segment. The storage
segment is a segment that we've entered relatively recently within the last
couple of years, and the primary competitor there is Finisar. Finisar operates
in two business areas, the component transceiver side and then they have a small
test measurement group that is focused on test and measurement solutions for the
storage space.
- --------------------------------------------------------------------------------
BARRY RANDALL - U.S. BANK - ANALYST
Okay, and before Tom answers the combined question, Carmine, can you just give
us a sense for -- because I have not followed your company -- just trend wise in
terms of your average selling price for your products and such, can you just
give us a sense for how business trends have been going? I mean not earnings per
se, but just I want to know if you've got competitors, are you gaining share
from them? Are you losing share from them? Are you regaining share by lowering
prices and so on?
- --------------------------------------------------------------------------------
CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
There is a couple of concepts that we should probably go through to get a better
understanding of the answer. The first is that CATC historically has been
positioned as a premium product in a space. And the reason we command a premium
from a pricing standpoint is we typically enter the market early in its adoption
cycle. And we command premiums depending on the market, 15 to as high as 35
percent relative to the next closest competitor. So from a traditional pricing
standpoint, we are not the price leader from the low end. In fact, our typical
strategy is to be the premium product in the space.
If you look at the overall trend for protocol test gear independent of CATC, the
trend is very favorable. Obviously the bottom line is we have 80 plus percent
gross margins. We've had 80 plus percent gross margins for over a decade. So the
fundamental business model has been in place and is continuing to be favorable
largely based on a tailwind around the fact that the protocols themselves are
becoming much higher in bandwidth, much more complicated and therefore the gear
to support protocol analysis is becoming increasingly complicated, and therefore
commands higher price points. So price points have been increasing, and margins
when they are in the 85 percent range, already have been very justifiable in
that range considering the backdrop that we just talked about.
- --------------------------------------------------------------------------------
BARRY RANDALL - U.S. BANK - ANALYST
And Tom, in terms of the combined Company, do you see yourselves as a materially
different entity here or just -- you describe it to me.
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
I do, in fact. I think that we've seen a bigger part of our business aim at
serial data test, and we define that very specifically, two primary markets --
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8
FINAL TRANSCRIPT
- --------------------------------------------------------------------------------
LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
- --------------------------------------------------------------------------------
data storage and computer and semiconductor markets and solutions aimed around
standards like USB and PCI Express and so forth. So when we put the two
companies together we really are defining the serial data test market as
everything in computer and data storage that pertains to these emerging and
developing serial data standards using both protocol analyzers and scopes.
So the competitive field for those products includes of course Carmine's
competitors in protocol space, as well as our competitors in scope space and in
some cases they are the same. So for example, Tektronix, we see as a significant
provider of oscilloscopes in this space but not playing in the protocol space
for serial data test. While the other extreme is Finisar, strong player in the
protocol space but not participating at all in the scope space, and we are
somewhere in the middle with some of each and that to me makes up the big
picture of the competitive landscape.
LeCroy, Tektronix, Agilent, Finisar, once you get below that they really start
to become a larger collection of much smaller players and certainly nobody that
is providing both the physical layer solution and the protocol layer solution.
And if I think of where we are in terms of share in that market today, I would
say today even as we begin LeCroy and CATC together, probably taking about
one-third of that overall market today.
- --------------------------------------------------------------------------------
BARRY RANDALL - U.S. BANK - ANALYST
Last question, Tom or Carmine, were any of your customers polled about how they
felt about this because I know neither of you probably has any major 5 or 10
percent customers, but did you seek out any reaction as to whether or not your
customers would be happy to be buying similar products? These two sets of
products from the same firm now.
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
There certainly are two sets of products and while we have lots of the same
customers, obviously to get to this point of this kind of transaction you are
not sharing it with too many people before you get to that point. So we have not
directly discussed with any specific customer the transaction. We do expect in
the next couple of days in fact, though, to be making lots of contacts to
significant customers. And we anticipate the reaction to be quite favorable.
Both of us have strong relationships with many of these large customers like
Maxtor and Intel and others and maybe Carmine you would like to comment on that.
- --------------------------------------------------------------------------------
CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
First I want to echo what Tom said that we are confident that this will be
positively received by customers simply from the perspective of we are both
selling our respective product lines already to very similar customers. And it's
not as if these development processes are completely un-tethered. We are as a
function of being complimentary products already very complimentary in terms of
the way we address the development process. And so we expect that our customers
will see the same benefit in working with the combined Company that caused the
companies to get together in the first place.
- --------------------------------------------------------------------------------
BARRY RANDALL - U.S. BANK - ANALYST
Best of luck to all of you. Thank you.
- --------------------------------------------------------------------------------
OPERATOR
Jason (indiscernible) Funds.
- --------------------------------------------------------------------------------
UNIDENTIFIED SPEAKER
As shareholders in both companies you certainly have our congratulations; it
looks like a really great deal, makes a lot of sense from our perspective. One
just quick question just on the sales teams and the product, are you going to
cross train the sales guys to sell both products? How do you go to market with
both products?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION, INC. - PRESIDENT & CEO
You know, first of all let me separate the notion of the two teams. There are
guys in CATC today that are CATC employees that are specialists. Their mission
in life is not to be out on the front-line selling to customers every day but
rather to be supporting a front-line organization. So those guys will continue
in that capacity of focusing on the protocol solutions, and we will be adding to
that group.
On the other side, the LeCroy guys, and of course this will vary a bit from
various geographic areas but our sensation is this notion of the lab next door
is fundamentally key. We certainly want all of our sales engineers to be able to
identify customer needs in both protocol and oscilloscope space to be able to
prospect crosswise, find the protocol labs and prospect for the scope guys. Find
the scope labs and prospect for the protocol guys and we will train the
front-line sales organization to understand the products, the applications, make
the demonstrations and so forth and then we will support the heck out of them
with this broad organization of protocol solution specialists.
- --------------------------------------------------------------------------------
UNIDENTIFIED SPEAKER
Do you see any -- is it likely that if you will sort of six, or nine or twelve
months out is it likely that you'll grow the sales effort, keep the sales effort
as is on a numbers basis? What should we expect on that account basis?
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9
FINAL TRANSCRIPT
- --------------------------------------------------------------------------------
LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION, INC. - PRESIDENT & CEO
I think at the beginning we certainly got some capacity that we can absorb in
the direct sales organization. But we will be certainly adding quite a few guys
to the protocol specialist's front to make sure we are able to support
worldwide. And I'm hoping we find ourselves in twelve months having to add to
the home machine because we see the volume opportunities.
- --------------------------------------------------------------------------------
UNIDENTIFIED SPEAKER
Congratulations, great deal, and that's all I have.
- --------------------------------------------------------------------------------
OPERATOR
(OPERATOR INSTRUCTIONS) John Myers with Merrill Lynch.
- --------------------------------------------------------------------------------
JOHN MYERS - MERRILL LYNCH - ANALYST
Congratulations to all parties. Just quickly, can you, acknowledging your
disclaimer ahead of time, but can you handicap at all your -- how confident you
are this is going to close before a December 31, 2004 transaction?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
Scott, you want to take a crack at that one?
- --------------------------------------------------------------------------------
SCOTT KANTOR - LECROY CORPORATION - VP FINANCE, CFO, SECRETARY, TREASURER
I would say we are fairly confident. I think the upper end of the 60 to 90-day
range is highly conservative. Again, I think we mentioned that they are going to
file their proxy in the next week or so. In fact, the SEC has 30 days to
comment. I can't tell whether they are going to take the full 30 days and then
there has to be 30 days between the filing and the shareholder vote. But I think
we're fairly confident that this will be completed before the end of our second
fiscal quarter.
- --------------------------------------------------------------------------------
JOHN MYERS - MERRILL LYNCH - ANALYST
Super, that's great. Thanks.
- --------------------------------------------------------------------------------
OPERATOR
Richard Chu with SG Cowen.
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
I have a couple very brief questions. Could you say what the number of options
that you are extinguishing with cash is?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
That is a good question, Scott, do you have -- (multiple speakers) -- he wants
to know the number of options that would be extinguished are.
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
That you will be paying for, that is.
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
The number of options we are going to cash out.
- --------------------------------------------------------------------------------
SCOTT KANTOR - LECROY CORPORATION - VP FINANCE, CFO, SECRETARY, TREASURER
Just with the cash or the assumption as well?
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
Not the assumption, the assumption --.
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
So obviously Richard, we can't answer the assumption question because we don't
know what the share price is going to be five days before closing. But the issue
is on the options that we will cash out, do you know how many of those are?
- --------------------------------------------------------------------------------
SCOTT KANTOR - LECROY CORPORATION, INC. - VP FINANCE, CFO, SECRETARY, TREASURER
I do not know the number of shares that will be cashed out off the top of my
head.
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION, INC. - PRESIDENT & CEO
Do you think the value of those shares is in $5 million range.
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10
FINAL TRANSCRIPT
- --------------------------------------------------------------------------------
LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT KANTOR - LECROY CORPORATION, INC. - VP FINANCE, CFO, SECRETARY, TREASURER
Yes, about $4.5 million. We are going to pay $4.5 million in cash for those that
we're going to cash out but I do not have the number of shares on me.
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
That's fine. And second, just from a business model perspective, LeCroy has had
historically a relatively linear model relatively speaking within the
(inaudible). I wonder how CATC will alter that given -- particularly with the
very high gross margins. Can you talk about your linearity -- within-quarter
linearity historically?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
I appreciate -- to clarify, are you talking about order or shipment linearity
during the quarter?
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
Order and shipments.
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
I'll leave Carmine to that one.
- --------------------------------------------------------------------------------
CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
I'm sorry, you're talking about linearity within a quarter?
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
That's right.
- --------------------------------------------------------------------------------
CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
Our revenue is typically very linear, as well, through the quarter. We don't
have a concept of booking versus shipping. We have very short lead-times, and we
are pretty much hand-to-mouth, if you will, in terms of orders to shipments.
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
So for example, Tom has had in recent quarters he'll have done let's say 60
percent plus of the business two-thirds of the way through the quarter. I'm
making up the number. I apologize.
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
That's about right.
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
But is that a fair statement for CATC, as well, roughly?
- --------------------------------------------------------------------------------
CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
It is. It's very linear through the quarter. There is a slight -- the third
month is slightly more weighted than the first two, but it is not significant.
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
Okay, and then I wonder whether the question is relevant, but is there any way
that you can describe the dependence or lack thereof that you have on various
protocols here? You mentioned half a dozen or 12 of these things including
Bluetooth, PCI Express, Serial ATA, et cetera. What are things that are driving
your product portfolio revenues (indiscernible) today, and what is rising and
what is ebbing in a sense?
- --------------------------------------------------------------------------------
CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
So the Company's origins are in the BlueTooth and USB space, and those are very
stable revenue streams that we foresee continuing for the foreseeable future.
The growth drivers for the Company are really in two categories. One is the
clear emergence of PCI Express as a standard that will gain widespread adoption
in the industry at some point and CATC's early position within that market. So
PCI Express is a bet that CATC made two years ago that clearly is looking very
promising. So that is growing. That business is growing, and its looks very
promising.
The other dimension to the growth driver from a revenue standpoint is the entire
storage portfolio of products. So we have entered the storage market really over
the last 2, 2 1/2 years and have been steadily growing our storage revenue from
our storage portfolio to the point where we have had two consecutive record
quarters of contribution from our storage portfolio. So it is really PCI Express
and storage building on a stable base provided by Bluetooth and USB.
- --------------------------------------------------------------------------------
RICHARD CHU - SG COWEN - ANALYST
Thank you. Okay, that helps.
- --------------------------------------------------------------------------------
OPERATOR
Robert Starbuck of Schroeder's.
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11
FINAL TRANSCRIPT
- --------------------------------------------------------------------------------
LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
- --------------------------------------------------------------------------------
ROBERT STARBUCK - SCHROEDER'S - ANALYST
Can you go into some of the assumptions that are made in coming and saying that
the deal will be accretive in the first quarter?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
I think that the first fundamental assumption that we are making is we've got a
pretty clear bead on what our incremental expenses are going to be, which is
$500,000 per quarter, approximately in interest expense. And some effect of the
new options, although particularly early on that's not a significant dilutive
effect. So the biggest accretion hurdle right in front of us is the interest
expense. As it is, CATC today is in the mode of generating just about enough
operating income on a quarterly basis to cover the interest expense.
And of course, one of the most easily findable synergies is this G&A synergy,
which is in the seven-day $100,000 a year related to D&O insurance and having a
Board and all the other associated costs of being a public company, which will
no longer be required. So those go directly right to about 40 percent of the
interest expense immediately.
Now on a GAAP basis we have not really completed our analysis of the likely
amortizable intangibles. And so it is a little bit harder to estimate, but our
first pass says that probably now in more the 2, 3 quarter timeframe the
incremental operating margin coming from the combined business should be enough
to clear those hurdles, as well.
- --------------------------------------------------------------------------------
ROBERT STARBUCK - SCHROEDER'S - ANALYST
Also are there any income tax benefits, NOLs that CATC has?
- --------------------------------------------------------------------------------
SCOTT KANTOR - LECROY CORPORATION, INC. - VP FINANCE, CFO, SECRETARY, TREASURER
A pretty small amount of net operating losses that will obviously accrue to us,
nothing significant.
- --------------------------------------------------------------------------------
ROBERT STARBUCK - SCHROEDER'S - ANALYST
Okay. And can you talk -- I noticed that there was a relationship a couple of
years ago with Agilent. Could you discuss that briefly and what that was about?
- --------------------------------------------------------------------------------
CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
Agilent OEMs, CATC's InfiniBand product line, and that contract was terminated
approximately a year to a year and a half ago.
- --------------------------------------------------------------------------------
ROBERT STARBUCK - SCHROEDER'S - ANALYST
And just to help understand the products and the product life cycle, what is the
normal lifespan for one of these products, or how quickly does it ramp? Just
tell me, help me understand the dynamics of the CATC product line.
- --------------------------------------------------------------------------------
CARMINE NAPOLITANO - COMPUTER ACCESS TECHNOLOGY CORPORATION - PRESIDENT & CEO
The CATC product line in essence, our revenue streams from any given protocol
scales with the adoption rate of that protocol in the marketplace. And we see
three distinct phases to the adoption curve. One is the very early phase in the
process where the industry is just building the infrastructure, the chips, the
drivers, the basic infrastructure that is necessary to have an industry
enablement. The next phase will be the early adopters that take those
components, and start building subsystems and maybe some simple devices. And
then eventually the market hits widespread adoption. Our revenue grows -- our
revenue growth is consistent with the adoption rate within that market.
Our strategy historically has been to enter first, to be the first mover. And
there is a bunch of technological advantages that we have that allow us to
consistently enter markets faster and cheaper than many of our competitors. It
has to do with reusability and scalability of our proprietary technology. But by
answering first, we in essence have to make bets around where the industry is
going before the industry itself knows where it's going. And the good news now
as to where we are is that a lot of those bets were placed a couple of years
ago, and are beginning to gain traction. Specifically in the areas that I
addressed earlier by answering another question, PCI Express and the storage
portfolio.
- --------------------------------------------------------------------------------
ROBERT STARBUCK - SCHROEDER'S - ANALYST
Okay, and what sort of -- the revenues have been flat to down in general for the
last three or four years for some obvious reasons and the market conditions. But
can you talk about what you would expect the CATC part of the business to grow
or what your targets had been? And specifically your position in PCI Express and
how big a piece of what your current business would -- I mean how big could that
be of that future business?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
I want to skirt carefully around what could be looked at as guidance and I want
to just talk in general about that. Obviously we're enthusiastic about CATC
because we see it as a growth engine. Without CATC we've been talking about
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12
FINAL TRANSCRIPT
- --------------------------------------------------------------------------------
LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
- --------------------------------------------------------------------------------
trying to grow in the 15 percent range and with CATC we think we can certainly
grow in the 20 percent range. So that obviously says something about how fast we
can see CATC grow. They have grown 34 percent for the first half of 2004
compared to the first half of 2003, so they are clearly on an upward trajectory
at this point. They are running right now at in the range of $20 million
annually and maybe slightly above that. So we certainly expect those kinds of
trajectories to apply.
And I think that we will see in the coming, the first couple of quarters
obviously will be sorting out sales organization and figuring out how much --
when our real first full quarter will be in the January to March quarter. And
haven't provided any kind of guidance yet for either our second fiscal quarter
ending December or for our third. So more news on that as we go forward.
- --------------------------------------------------------------------------------
ROBERT STARBUCK - SCHROEDER'S - ANALYST
Okay, great. And one final thing. Could you discuss what sort of -- what the
thought process was in determining what the right acquisition price was for the
Company?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
I think we had a number of issues in mind. Of course, we are at LeCroy -- we're
very focused and have been very focused on cash generation. So we from the very
beginning were highly interested in what the go-forward EBITDA of the
combination companies were going to be, particularly with just kind of modest
expectations for cash earning synergies. And that go-forward EBITDA kind of
drove a level of thinking around multiples of EBITDA. That was one of the big
components that we used in looking at valuation opportunities.
The other one of course, was the notion of how rapidly we could make this
accretive. And so we obviously wanted that hurdle to be as low as possible and
as near term as possible. That was a key component. And then finally, we
recognized that this is not bargain hunting. We were looking for something that
is poised to make an immediate contribution. We think that we've got CATC just
at the exact right time. So this, all of those things together went into the
process of determining what we felt was an appropriate price.
- --------------------------------------------------------------------------------
ROBERT STARBUCK - SCHROEDER'S - ANALYST
Thank you very much, and congratulations.
- --------------------------------------------------------------------------------
OPERATOR
Mark Ort with Glazer Capital.
- --------------------------------------------------------------------------------
MARK ORT - GLAZER CAPITAL - ANALYST
Congratulations. A couple of questions if I may firstly with regard to the
merger agreement, are there any outs if I might call them that, for instance if
the financing for whatever reason that if the commitment doesn't come through or
perhaps some sort of balance sheet condition or condition placed on the amount
of cash at closing -- anything that would really other than send or material
adverse change give you guys an out?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
I think to walk you through 47 pages would be a bit challenging, but I guess I
would at the highest level would say nothing out of the ordinary, standard kinds
of terms, standard kinds of situations. Both public companies with fiduciary
responsibilities and so forth. But I do not think anything you would find
unusual or out of the ordinary.
- --------------------------------------------------------------------------------
MARK ORT - GLASER CAPITAL - ANALYST
Okay, so no quantified bogey or hurdle rate or anything like that?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION, INC. - PRESIDENT & CEO
No, nothing like that.
- --------------------------------------------------------------------------------
MARK ORT - GLAZER CAPITAL - ANALYST
Okay, can you characterize the due diligence process that you underwent
specifically relating to CATC's patent portfolio?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION, INC. - PRESIDENT & CEO
Yes, we have our -- LeCroy has our own in-house patent attorney, and our Chief
Technology Officer, or a house patent attorney as well as the consultants used
by those guys have carefully evaluated all of CATC's patents, all of any pending
applications. And not only that but a variety of other industry patents that
could be relevant in looking at this sort of thing. So reasonably careful
evaluation led by two senior guys at LeCroy with some outside help have led us
to the point where we are quite confident in this arrangement from an IP
perspective.
- --------------------------------------------------------------------------------
MARK ORT - GLAZER CAPITAL - ANALYST
Okay because we have seen situations where I guess opportunistic patent lawsuits
are filed when mergers are trying to be conducted, and that's always -- I guess
it's impossible to foretell exactly what's going to happen, but that is
something that I want to be looking at -- well, I want you to be looking at.
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13
FINAL TRANSCRIPT
- --------------------------------------------------------------------------------
LCRY - LeCroy Corporation, Inc. Acquires Computer Access Technology Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
Yes, of course, we feel the same way.
- --------------------------------------------------------------------------------
MARK ORT - GLAZER CAPITAL - ANALYST
Okay, and finally with regard to the process that you discussed earlier, was
there a point at all where additional buyers or additional potential buyers were
solicited or at least had the opportunity to look at the Company?
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
Yes, I think that for our purposes here and I can't speak to any of that. We're
primarily focused on bringing this deal to completion at this point -- we're
very focused on having reached this agreement on all the steps that are
necessary to bring the two companies together at closing, in a 60 to 90-day
timeframe.
- --------------------------------------------------------------------------------
MARK ORT - GLAZER CAPITAL - ANALYST
Thanks very much.
- --------------------------------------------------------------------------------
OPERATOR
This will conclude the question-and-answer session. Mr. Reslewic I will turn the
call back over to you for closing comments.
- --------------------------------------------------------------------------------
TOM RESLEWIC - LECROY CORPORATION - PRESIDENT & CEO
Okay. So very briefly in closing I think that the message here is that these are
two companies that absolutely belong together and that we caught CATC at
precisely the right moment in its development. In case you can't tell I am
genuinely excited about this merger. I am convinced it will come to represent a
transforming event in the evolution of our Company. And finally I'm looking
forward to welcoming Carmine and CATC's 70 employees to the LeCroy team and with
the help of all of our employees, I am ready to start writing the next chapter
in LeCroy's history with this transaction.
Thank you again for all of your interest in LeCroy. Good day.
- --------------------------------------------------------------------------------
OPERATOR
This will conclude today's conference call. We do thank you for your
participation, and you may disconnect at this time.
- --------------------------------------------------------------------------------
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