Feb 7, 2008
Executives
Jonna Manes - Director of IR Leo Berlinghieri - President and CEO Ron Weigner - CFO
Analysts
Joe Herrick - Gutterman Research Jim Covello - Goldman Sachs Tim Summers - Stanford Research C. J.
Muse - Lehman Brothers Jenny Yu - JP Morgan
Operator
Welcome to the MKS Instruments Fourth Quarter Earnings Call. During today’s presentation all parties will be in a listen-only mode.
Following the presentation the conference will be open for questions. (Operators Instructions).
This conference call is being recorded today, Thursday, February 7th, 2008. I would now like to turn the conference over to Jonna Manes, Director Investor Relations.
Please go ahead ma'am.
Jonna Manes
Thank you. Good morning and thank you for joining our earnings conference call.
Earlier this morning, we released our financial results for the fourth quarter and the full year of 2007. You can access this release at our website www.mksinstruments.com.
As a reminder, various remarks that we may make about future expectations, plans and prospects for MKS constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Security Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in today's press release, and in the company's Annual Report on Form 10-K for the fiscal year-ended December 31, 2006, and most recent quarterly report on Form 10-Q, each of which is on file with the SEC.
In addition, these forward-looking statements represent the company's expectations, only as of today. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so.
Any forward-looking statements should not be relied upon as representing the company's estimates or views as of any date subsequent to today. We ask that you limit questions to two per firm, and we will circle back as time allows.
Now, I'd like to turn the call over to Leo Berlinghieri, Chief Executive Officer and President of MKS.
Leo Berlinghieri
I am pleased to report that fourth quarter sales were $184 million and non-GAAP earnings of $0.33 per share exceeded both our third quarter sales and Q4 guidance. We entered the fourth quarter with concerns about the near-term outlook, based in part on semiconductor OEM and industry projections about the downturn in capital equipment spending.
As it turned out, our OEM business was better than expected, although down 6% quarter-over-quarter. The decline in sales to OEMs, however, was offset by higher sales to fabs and non-semiconductor markets quarter-over-quarter.
As we noted in the third quarter, fab sales can be lumpy. Fourth quarter sales to fabs increased 19% on higher demand from Asian fabs, especially in Korea.
Our growth demonstrates that we are executing on our strategy to increase fab penetration. We are convinced that fabs will need to improve uptime yield and throughput in order to meet cost targets, as they transition to smaller geometries and new materials.
We are providing solutions to improve productivity in addition to service and spares. Our gas analysis and data management and analysis technologies detect process contamination, analyze process variation and resolve process problems that impact yield.
We also work with fabs to upgrade tools and process solutions that reduce contamination for improved yield and higher throughout. In the fourth quarter, we achieved 10% sales growth in non-semiconductor markets as demand increased in solar and flat panel display markets; greenhouse gas emissions in monitoring; and other analytical applications with project-based spending.
Solar and flat-panel display markets provide a lot of opportunity for MKS. Most of our technology for semiconductor processes can be applied with little or no modification in these adjacent markets with similar thin film processes.
This strategy allows us to leverage our technology for higher growth opportunities, while reducing the impact of semiconductor cyclicality. Our fourth quarter sales continued to demonstrate that our strategy is working.
We continue to focus on cost reduction in the fourth quarter, including staffing levels and discretionary spending, although we increased our investment in R&D as planned. In addition, non-GAAP earnings reflected lower sequential gross margin, the impairment of an investment, and a higher tax rate for the quarter.
Ron will discuss this in more detail later. We ended 2007 with sales close to our record sales in 2006, consistent with our growth strategy.
We grew our non-semiconductor business to 32% of total sales in 2007 from 30% in 2006, and you may recall 27% in 2005. Our sales to OEMs were down only 5% year-over-year after 51% growth in 2006.
Some of our innovative solutions for OEMs are integrated subsystems, where we combine technologies into critical subsystems to optimize performance, reduce the footprint, or enhance field installation. Integrated subsystems represented 24% of total sales in 2007, compared to 26% in 2006.
Most of our integrated subsystems are sold to OEMs, so the year-over-year change reflected the decrease in our OEM business and included the discontinuation of a bill to print integrated subsystem. In 2007, lower sales to OEMs were essentially offset by higher sales to fabs in non-semiconductor markets, the same pattern we saw in the fourth quarter.
Sales to fabs grew by 4% year-over-year and sales to non-semi markets grew by 8%. We intensified our focus on high growth markets, and I'm pleased that we almost tripled our sales to the solar market to approximately $17 million in 2007.
We also grew our sales for gas analysis and monitoring by approximately a 160% in 2007 as we gained market share in the combustion analysis. These environmentally-focused markets in solar energy and greenhouse gas emissions monitoring represent small but high-growth sectors of our business, and we see more opportunity going forward.
We are well-positioned with our critical technology for the global solar energy market. Reducing the cost of solar energy is required to make solar more competitive in the years ahead, and our technology can improve process control and reduce manufacturing costs.
We are excited about opportunities in other markets where manufacturers need to improve yield as the process complexity increases. They may need higher performance and more precise control for the next generation products, or more analysis to meet tougher standards or regulatory requirements.
As process challenges increase in diverse markets, we are positioned to grow faster, because we have a broad range of market leading technology. Our technology portfolio and technology leadership enable us to take advantage of opportunities to solve process problems as they arise.
While the semiconductor capital equipment spending cycle did impact our growth, we believe that the steps we took in 2007 will strengthen MKS for the next upturn and for opportunities in non-semiconductor markets. In 2007, we increased our R&D investment to improve productivity for chamber cleaning, and to continue our leadership in this technology.
We expanded our market penetration at semiconductor fabs and in high-growth markets for our solar energy production and greenhouse gas emissions monitoring. We intensified our focus on other emerging applications for our technologies, including homeland security in organic light emitting diodes, or LEDs technology for the next generation flat panel displays.
We transitioned our China manufacturing to a new facility in Shenzhen, with 35% more square footage for future manufacturing requirements. We acquired yield management software to combine with our process sensors; data collection and integration hardware; and real-time fault detection and classification software.
This combination provides a comprehensive offering for generating, collecting, and analyzing process data, and co-relating the data to wafers, chambers, and tools all across the fab. We continue to invest in IT, and also implemented the second phase of worldwide ERP system to help us manage and scale our business.
We generated a record $119 million in cash that allowed us to be optimistic about stock-buybacks and technology acquisition. We expect to capitalize on favorable market trends, going forward.
We believe these actions strengthened our competitive advantage and prepare MKS for future opportunities. Looking ahead into 2008, the outlook remains uncertain.
Some semiconductor industry analysts are forecasting a 10% to 15% decrease in capital equipment spending. We typically grow faster than our core served market by increasing our market share and our product content on tools.
In addition, we are demonstrating that we are executing on our growth strategy in non-semi markets, which could help offset a drop in our semi business. Our solar and flat panel equipment bookings were stronger in the fourth quarter.
This may be a sign that industry forecasters are right and that flat panel is recovering and could be strong in 2008. In solar we are providing solutions to customers for problems that range from chamber cleaning to process monitoring, and we believe that more of our semi technology can be leveraged to solar over time.
We expect that our solar sales could double or even triple in 2008, if the market is as we anticipate. So, our solar, flat panel, gas analysis and other non-semi business could provide the potential for $45 million to $55 million, incremental business in 2008.
This incremental growth would be consistent with our goal of 10% to 20% growth in our non-semi business. We are quite optimistic about our long-term growth opportunities.
We remain cautious about the near-term, with market conditions still unclear. Looking ahead to the first quarter, we expect that sales could remain fairly steady in range from a $180 million to $190 million.
Our visibility is limited and we will continue to monitor semiconductor market conditions and adjust our costs as required, as we pursue our strategies for long-term growth. Now, I'll turn the call over to Ron to discuss our financial results and expand on our guidance.
Ron Weigner
Thank you Leo and good morning everyone. As Leo stated, 2007 sales of $780.5 million were approximately the same as 2006 sales of $782.8 million.
Lower sales to semiconductor OEMs were offset by higher sales to semiconductor fabs and non-semiconductor markets. As a result of a slightly lower gross margin and increased investment in R&D and information technology, our GAAP net income decreased 8% to $86.4 million or a $1.51 per diluted share, compared to $94.2 million or $1.68 per diluted share in 2006.
Non-GAAP net earnings decreased 7% to $95.6 million or $1.67 per diluted share, compared to a $102.3 million or $1.83 per diluted share in 2006. Gross margin was primarily affected by mix and other costs, including higher charges for excess inventory, as a result of flattening sales and slightly higher overhead costs, which were offset by lower warranty costs in 2007.
We continue to increase our investment in R&D to support development of products for next generation tools and technology, in order to improve end-customer production yields. We also increased IT spending to a comparable level required to support current and future initiatives to implement and maintain our global ERP system.
Fourth quarter sales of $184.1 million were 2% higher compared to third quarter sales of a $181 million. Sequentially, a 19% increase in sales to semiconductor fabs, and an 8% increase in sales related to our other markets, was offset by a 6% decrease of sales to OEMs.
In the fourth quarter, sales to OEMs represented 52% of sales, sales to fabs 12% and sales to other markets 36%. Geographically, fourth quarter sales in Asia increased by 20% sequentially.
This was a result of increased demand from OEM and fab customers, especially in Korea, and represented 30% of total sales. Sales in the US decreased by 5% and totaled 58% of total sales.
Sales in Europe decreased by 4% sequentially, and represented 12% of total sales. Sales to our top 10 customers were 45% of total sales compared to 47% in the third quarter.
Sales to our largest customer, Applied Materials, decreased to 18% from 20% of total sales in the third quarter. Sales to contract manufacturers of Applied and other semiconductor OEMs decreased 24% sequentially and represented 5% of total sales.
Fourth quarter gross margin was 41.3% compared to 42.3% in the third quarter. The decrease reflects the fact that third quarter overhead costs included benefits from increased vacation time and lower charges for excess inventory, compared to the fourth quarter.
R&D expense was slightly above our guidance and increased by $1.2 million to $18.4 million, compared to the third quarter. This was primarily due to the increase in staffing and project costs.
SG&A expenses decreased $200,000 sequentially to $32.3 million, which was approximately $1.4 million less than our guidance, a favorable reduction of $1.5 million in Q3 SG&A for foreign exchange, and a one-time adjusting for stock-based compensation. The fourth quarter SG&A decrease represented approximately $1.1 million of lower IT spending in the fourth quarter, as we completed the conversion of two major locations to our global ERP system.
And a $600,000 decrease in other expenses was partially offset by a $1.5 million increase in foreign exchange and stock-based compensation compared to the third quarter. The in-process R&D charge of $900,000 is related to our acquisition of Yield Dynamics during the quarter.
Cash and investments at December 31st totaled $324 million. At December 31st, we held $5.7 million of asset-backed securities, which were AAA when purchased and went into default.
These securities have value but because of an ill-liquid market, their future value is uncertain at this time. In the fourth quarter, we recorded a $1.5 million charge related to a possible devaluation of these securities.
During the quarter, we repurchased approximately 2.8 million shares of common stock for $52 million in cash at an average price of $18.44 per share. Under the two-year $300 million buyback program authorized by the Board of Directors on February 12, 2007, year-to-date, we purchased approximately 4.8 million shares for approximately a $101 million, at an average price of $21.17 per share.
This contributed to the reduction of the diluted shares outstanding in the fourth quarter to 55.9 million shares, from 57.5 million shares in the third quarter. Actual shares outstanding as of December 31st were 54.3 million.
We expect continuing to generate cash and to be opportunistic about our future use of cash. Timing and the amount of any shares to be repurchased under this program will depend on a variety of factors including price; corporate and regulatory requirements; capital availability; and other market conditions, and the program may be discontinued at any time.
Non-GAAP earnings, which excluded amortization of acquired intangible assets, were $18.6 million or $0.33 per diluted share, compared to $22 million or $0.38 per diluted share in the third quarter of 2007. The decrease is primarily attributable to increased R&D and a less favorable tax rate.
The tax rate for the quarter was 32.7% compared to 28% for the year. The higher rate in the fourth quarter was a result of higher percentage of revenue in higher tax rate countries.
Our workforce decreased to 2860 people worldwide from 2886 as of September 30th, excluding 64 additional employees of Yield Dynamics. We continue to generate cash from operations which totaled $34.1 million for the quarter and a record $119.1 million for the year.
Cash and investments decreased by $40 million in the fourth quarter to $324 million at year-end, or $304 million net of debt. The primary uses of cash were for stock repurchase and the acquisition of Yield Dynamics.
Day sales outstanding decreased to 54 days in the fourth quarter from 58 days in the third quarter and inventory turns increased to 2.8 times from 2.6 times. Capital expenditures of $3.7 million in the quarter were primarily for test equipment and capital expenditures for the year were $15.1 million, which includes approximately $6.8 million, primarily for leasehold improvements for our new China facility.
Depreciation totaled $3.8 million for the quarter and $14.5 million for the year. As Leo stated, we anticipate that first quarter sales could range from $180 million to $190 million based on current quarterly run rates and our expectation for major semi and non-semi customers.
On this sales volume we anticipate that gross margins could range from 41% to 42%. We expect operating expenses to increase slightly, reflecting operating expenses related to Yield Dynamics, and increased employee fringe benefits and payroll taxes.
R&D expense could range from $19.1 million to $19.5 million, and SG&A expenses could range from $34.1 million to $34.7 million. Amortization of acquired intangible assets is estimated at $3.4 million.
Net interest income in the quarter is estimated to be approximately $2.6 million. Our tax rate for 2008 is estimated at 30%.
If the R&D tax credit is reinstated, our tax rate would remain comparable to 2007 at 28%. Given these assumptions, first quarter GAAP net income could range from $13.2 million to $17.1 million, or $0.24 to $0.31 per diluted share, on approximately 55.1 million shares outstanding.
First quarter non-GAAP net earnings could range from $15.4 million to $19.3 million, or $0.28 to $0.35 per diluted share. In this uncertain economic environment, we will continue our efforts to improve gross margin and monitoring, and minimize operating expense levels.
This concludes our discussion and we will now take your questions.
Operator
Thank you. (Operator Instructions).
And our first question comes from Brett Hodess with Merrill Lynch. Please go ahead.
Joe Herrick - Gutterman Research
This is actually [Joe Herrick with Gutterman Research]. Couple of things.
Leo, what you guys do in terms of looking at lean manufacturing, keeping in Six Sigma to improve your overall continuous improvement processes? And what you expect benefits to be in terms of a throughput value plan?
Ron Weigner
Okay. Well, first of all, I think we're one of the earlier adapters of lean manufacturing, at least in this space.
So, as far as almost all of our plants run, other than sometimes a new acquisition, they are already set up in the flow lines and lean manufacturing, and all operate on practices of total quality. I think where we would see the most leverage is really in our low cost region sourcing and manufacturing, and we've talked about that on numerous occasions.
But there is still leverage in terms of moving more material to low cost country. Also, there is still leverage to have more of the manufacturing in low cost country.
I would say that those would have more leverage than anything going on in-lean, since we have been involved with lean manufacturing for more than 10 or 15 years.
Joe Herrick - Gutterman Research
Okay. And a follow-up to that question; what metrics are you using in your manufacturing process to measure success?
Are you looking at [RONA], OE? How are you judging yourself against competition or even against your fellow peers to measure your success?
And in terms of going forward for 2008, what systems and solutions are you going to be putting in place to accelerate continuous improvement initiatives. I know you mentioned you are at the second phase implementing your ERP system.
Is that going to be applicable to [CI] initiatives? And can you expand on some of that?
Ron Weigner
Yeah. I think, so we keep it to two questions to everyone.
I think I will just answer the one that you talked about in terms of what we are doing, relative to measuring our manufacturing capability. I think one of the things we look at is moving materials to low cost country, as we measure purchase price variance as a measure of improvement in cost.
And the other is obviously productivity measures that we have internally. So thanks very much for your question.
Operator
And your next question comes from Jim Covello with Goldman Sachs. Please go ahead.
Jim Covello - Goldman Sachs
Good morning guys. Thanks so much.
I am sorry if I missed it. I don't think I did.
What is the breakdown of the revenue guidance between semi and other?
Ron Weigner
Yeah. We didn't break that out, Jim.
I think Leo gave sort of an estimate for the year where we thought we would do in the other markets.
Leo Berlinghieri
Well, certainly, Jim, we didn't give an estimate in the guidance, but I think when I talked about what we could potentially grow in 2008 for incremental revenue. I think that just an indicator of where semi is, but we don't know yet where semi is, obviously, because no one seems to know exactly where that is, and we don’t really give guidance beyond the first quarter.
But we don’t break down guidance relative to markets.
Jim Covello - Goldman Sachs
Can we assume that with the first quarter guidance, there was some kind of difficulties in the semi market?
Ron Weigner
Absolutely.
Leo Berlinghieri
Absolutely.
Jim Covello - Goldman Sachs
So, the reason for the good revenue guidance is the fact that you are seeing the benefit in the other market that’s offsetting the weakness in the semi side?
Ron Weigner
Right, we're getting some offset.
Jim Covello - Goldman Sachs
Appreciate that, thank you.
Ron Weigner
Although Jim, let me just say that I don’t think we see anything unusual in the first quarter compared to the fourth quarter in semi. That doesn’t mean they are exactly the same, I wouldn’t read that, I just don’t know where your question was heading.
But it certainly doesn’t mean that. There is some significant change in semi, just to point that out.
Jim Covello - Goldman Sachs
Okay. Thank you.
Ron Weigner
You are welcome.
Operator
And your next question comes from Tim Summers with Stanford Research. Please go ahead.
Tim Summers - Stanford Research
Hi, thanks for taking my question. Could we get a little bit more detail on this piece of Korean business that came into the fourth quarter?
Where you expecting it, going into the fourth quarter? And was it equipment or was it service?
And then, is this business expected to continue as we go into the first quarter, and through '08? Thanks.
Ron Weigner
Tim thanks for the question. It was equipment, and it was not expected as early as it came in, because it came in the fourth quarter.
We get some type of forecast that's rolling, so it is repetitive. It's sort of with the customers that get repetitive business.
So we absolutely are expecting more of it, but we have got more of it in the past too. So I don't think there is anything unusual there.
It's just that we hadn't anticipated an order in the fourth quarter.
Tim Summers - Stanford Research
Okay. And just again two questions.
Let me ask number two. On yield dynamics, did that have any material impact on revenue and earnings in the fourth quarter?
And what should we be assuming about an incremental benefit, going forward?
Ron Weigner
First of all Tim, it didn’t really have any material impact in the fourth quarter. There were some additional that we did acquire them at the beginning of December.
So there was a small amount of operating expenses that were included in the fourth quarter expenses. But going forward, I think as we have said, the real value of acquiring yield is that this will allow us the opportunity to sell a complete package of hardware and software to improve productivity.
So to look at the financial impact of yield on itself is really not doing justice to the value that we think it will bring to the company.
Leo Berlinghieri
Yeah and I would say it is certainly on its own. It doesn't have a huge impact across our total business.
Ron Weigner
Right, it is relatively neutral and it is small. And we say it's about 64 people that were added as a result of that acquisition.
Tim Summers - Stanford Research
Okay. Thank you.
Operator
Thank you. And we have time for one final question and our last question comes from C.
J. Muse with Lehman Brothers.
Please go ahead.
C. J. Muse - Lehman Brothers
Yeah, good morning. Thank you for taking my question.
I guess first off, I would love to follow-up on a couple of previous questions on the semi business. You have been running at around $18 to $22 million in the last three quarters.
And I guess you had somewhat of a surprise in terms of Korea coming in December. How sustainable is that business given the current environment?
How should we be thinking about that? Should we tracking utilization rates or unit volumes?
Can you give us a little help in modeling that out for 2008?
Ron Weigner
Yeah C.J, I guess first of all I didn't understand what the 18 to 20 I thought I heard something about 18 to 20 something million.
C. J. Muse - Lehman Brothers
$18 million to $22 million is where I am modeling, June, September, December for the semi business, but not OEM business.
Ron Weigner
Are you talking about fab semi business?
C. J. Muse - Lehman Brothers
Yeah exactly.
Ron Weigner
Yeah, and I don't know if you caught my answer to the previous question, that the order in Korea was not all necessarily related to fab, but all related to hardware and repetitive, which is typically more equipment for OEM base.
C. J. Muse - Lehman Brothers
Also is that flow-through into the OEM side?
Ron Weigner
That's correct.
C. J. Muse - Lehman Brothers
Okay.
Ron Weigner
And so I think you asked the question if we thought it was repetitive and it is because it's being repetitive.
Leo Berlinghieri
And there was some business to fab as well.
C. J. Muse - Lehman Brothers
But I guess if you could just isolate to semi makers in terms of how to think about that trajectory in 2008?
Leo Berlinghieri
Well, I think direct sales to the fab is less cyclical, obviously, than the sales for OEMs. We are typically tied to unit volume.
It is a part of the business, which is service and spares, so that's absolutely tied to the use of the product and production, which is typically related to utilization and unit volume. And then we do have some capital items, which are more in the analysis area, that are sold directly to fabs or ozone, which can have a little more impact of sorts on the capital side of the business.
And then we do focus on upgrades and improvement as we talked about, which usually aren't as affected as other cycles as well. So, I think to just provide you a number to put on for 2008, I can't give you that number.
I think you can just look at, sort of, the history where we report fab sales, and you will get an idea. But it's roughly been within that; I think it was maybe 9% to 10% to few years ago and it was up to 12% this year.
So I can give you an indicator. It's not going to jump 10% of the revenue.
It's a percent or two at best I think.
C. J. Muse - Lehman Brothers
Got you. Okay.
And then I guess my second question, given the strength in the non-semi businesses, can you talk about what impact that will have on your gross margins?
Ron Weigner
Well, as you know, the gross margin already affects that mix of business. So we expect gross margins.
It could have somewhat of a favorable impact, but I wouldn't call it significant, C.J. But certainly, I think it could have a small positive impact on the gross margin compared to semi.
Leo Berlinghieri
Yeah, there may be higher operating expenses. As you know with the semi OEM's, there are a lot of consumers who we sell to and so there are lower operating expenses, sometimes offsetting those lower gross margins.
So you may get a little better gross margin, but you may have slightly higher operating expenses. So I don't think it changes your model.
Ron Weigner
It is not significant?
Leo Berlinghieri
I think it's more relative to the growth than anything else.
Ron Weigner
Yeah.
C. J. Muse - Lehman Brothers
Thank you.
Ron Weigner
You're welcome.
Operator
Thank you. Well we have time for some more questions that come from Tim Summers from Stanford Research.
Please go ahead.
Tim Summers - Stanford Research
Hi. Yeah, on the flat panel business, can you give us an idea of what you have seen from your OEM customers in the last 60 days?
How steep is the ramp looking as we go into 2008? And how do you see your flat panel business doing, well, qualitatively through '08?
Thanks.
Leo Berlinghieri
As you know Tim, probably what the last six or plus quarters or eight, prior to the fourth quarter flat panel was down quite a bit. The fourth quarter was a strong quarter for flat panel, and the indication is that it should be a good 2008, based both on customers and external forecast.
I think the VLSI forecast has it at 20 plus percent growth year-over-year, if I remember correctly.
Ron Weigner
I think it's around 25.
Tim Summers - Stanford Research
Okay, thanks.
Operator
Next question comes from [Jenny Yu] with JP Morgan. Please go ahead.
Jenny Yu - JP Morgan
Hi, good morning. What's the tone among your OEM customers, and is it evenly spread out?
Leo Berlinghieri
Jenny, I am not sure exactly what you mean by evenly spread out. But to me, the tone reflects the announcements they make in the information to get share publicity, as well as what they tell us.
They share lot of details and demand information that keeps - it is constantly being refreshed. So, it's very difficult to get sort of the overall tone.
But I think the 10% to 15% reduction in capital spending seems to be consistent with some of the comments that have been made on conference calls like this with some of our major customers. I think that's probably the best indicator of what's happening in general to them, and then we look at specific tools and things of that nature to pull up our forecast.
Jenny Yu - JP Morgan
Are they all seeing the same 10% to 15% weakness, or some kind of sharing (inaudible)?
Leo Berlinghieri
I don't think everyone is saying the same thing.
Jenny Yu - JP Morgan
Why do you think that is?
Leo Berlinghieri
I think everybody has different fabs that they are aligned with. I think it depends on which fabs, or which type of devices might have the more significant impact in those OEMs, which primarily sell equipment into those fabs, and would then be more impacted by another type of device that some other OEM is selling to.
I think for us, usually we are not dependent on one type of device or one OEM, and we planned to keep it that way. So, we tend to look at the overall industry trends, as opposed to maybe one customer.
Jenny Yu - JP Morgan
Okay. And if I can squeeze in one more, are you considering any shutdowns or what would you need to see before you would do something like that?
Leo Berlinghieri
Well, as Ron and I both commented the last few quarters, we did take action and have had shutdowns during the third quarter and fourth quarters. We haven’t planned or announced any for the fourth quarter as the business, first quarter, I am sorry.
As we saw our business recover a bit in the fourth quarter, and it looks like it will stay that way at least for the first quarter. So nothing is planned, but we consider that as a normal action as we see things slow down.
Jenny Yu - JP Morgan
Okay. Great.
Thank you.
Leo Berlinghieri
You are welcome.
Operator
Thank you. And at this time, I'm showing that there are no further questions.
So I will turn it back to you for closing comments.
Leo Berlinghieri
Great, thank you for joining us on the call this morning. And as you can see, we continue to open up opportunities and markets with our broad portfolio of technology.
Thanks for your interest in MKSI. And this will conclude our comments.
Operator
Thank you. Ladies and gentleman, we thank you again for your participation in today's conference call.
And at this time you may disconnect.