Question-and-Answer Session
Operator
(Operator instructions) Your questions will be taken as time permits. And your first question comes from the line of Erik Schneider with UBS Securities. You may proceed.
Erik Schneider – UBS Securities
HI. Good morning, gentlemen. You just mentioned your – the acquisition criteria, I think, more broadly versus your previous formal targets. When you were describing, historically, a one, one and a half times revenue, that was somewhere half or less of where you’re trading at. Are you still looking to pay that sort of multiple discount relative to your current trading, given that you’re around one times revenue today?
Jim Hawkins
Yes. That’s a very good question, Erik, and something that we are monitoring as we go throughout our process here. Certainly, the arbitrage of paying one to one and a half times when we’re on that one to one and a half times revenue range is something that we have to consider. Certainly, the profitability of the company that we acquire or the potential profitability of the company is a big factor as well because it can certainly still be accretive if we were to pay over one times and certainly get their earnings up compared to ours and certainly the cost of capital we have. But it is something we are going to monitor. And ideally, if things stabilize and the valuation stay here, we would assume that our criteria would ratchet down as well, as far as valuation.
Erik Schneider – UBS Securities
Yes. But you could imagine paying your own multiple if it was a higher margin than you enjoy currently.
Jim Hawkins
Yes. I think that’s right. I wouldn’t want to certainly eliminate that. We weren't planning on doing that, but I wouldn’t want to eliminate it either.
Erik Schneider – UBS Securities
Okay. And relative to customer capital spending for that portion of your business, it sounds like you haven’t had to move your functions relative to what you put out there previously. But can you describe how those cutbacks are being manifested? You see people not making orders, you expect people not making orders, you expected people canceling orders, or people reducing order size? What are you actually seeing in the field?
Jim Hawkins
Erik, so far this quarter, as you rightfully noted, we’re keeping the guidance where we had it. I think it was maybe five weeks ago. And I think that’s an indication that we have not seen any further deterioration of the business since that time. Certainly, the last month of the quarter for the capital equipment is a very key period. And a higher percentage of those orders are placed in March. So we’re going to be monitoring that closely. But we believe that we have incorporated the changes in market dynamics into our guidance.
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