AAR Corp (AIR) 2008 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AAR Corp. second-quarter fiscal 2008 earnings call.

At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (OPERATOR INSTRUCTIONS). As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host today, Mr. John Bowman, Director of Investor Relations. Please begin, sir.

Thank you, Sean. Good morning, ladies and gentlemen, and thank you for joining this morning's conference call.

Before we begin, we would like to remind you that certain of the comments made today relate to future events, which are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Please refer to the forward-looking statement disclaimer contained in the press release issued last evening, as well as those factors discussed under Item 1A entitled "Risk Factors" included in the Company's May 31, 2007 Form 10-K. By providing forward-looking statements, the Company assumes no obligation to update the forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events.

At this time, I'd like to turn the call over to our Chairman and CEO, David Storch.

Thank you, John, and good morning to everyone. Joining me today in our boardroom are Tim Romenesko, our President and Chief Operating Officer, and Rick Poulton, our Chief Financial Officer.

Hopefully, handling the earnings release in this fashion is an improvement for all, and we welcome your feedback either today or shortly thereafter if this is more convenient for you folks.

The Company, as you can see, performed very well in the second quarter of fiscal '08, resulting in record quarterly sales and net income. Sales grew 27% to $310.6 million, and income from continuing operations grew 28% to $17.9 million. Of the consolidated sales growth, 21 percentage points were organic, as we continue to penetrate commercial and defense markets.

We drove significant gross profit margin expansion versus the first quarter of '08 and reached 10% operating margins as we leverage our cost structure and maintain the sharp focus on operational efficiency across the Company.

In the Aviation Supply Chain segment, sales were $144.8 million, up 8% from last year. Gross margins improved 200 basis points to 24.2%, giving us $35 million of gross profit, an increase of 17%. Effective sourcing and merchandising, solid execution, and progress with profit improvement initiatives were the main drivers for the strong performance.

During the second quarter, we invested over $75 million in inventory and equipment to support customer requirements in this segment. These investments were processed late in the second quarter and as a result did not materially impact Q2 revenues. We continue to explore additional opportunities in this segment, and the expectation going forward is for growth to return to the double-digit level as we begin to generate sales in the inventory we acquired during the second quarter and secure more program business.

Our MRO segment experienced strong growth in the quarter as well. Sales grew actually quite significantly; sales grew 54% to $68.7 million compared to the prior year, and gross profit increased 61% to $9.9 million, resulting in a gross profit margin of 14.4%, which represents a 160 basis point improvement from the first quarter. We addressed the issues we discussed last quarter in our heavy maintenance operations and are pleased with the results. We are on a really good path here. Our focus has always been on providing high-quality work while reducing aircraft downtime for our customers, and this strategy is working.

Structures and Systems sales increased 28% to $79.8 million versus last year, and gross profit grew 21% to $10.8 million, resulting in a gross profit margin of 13.5%. Sales were stronger at all businesses within the segment on a year-over-year basis with the majority of growth driven by continued strong demand and new business awards for specialized mobility products, as well as the impact from the acquisition of Brown International. Margins in this segment improved from the first quarter as we benefited from a more favorable mix of products sold.

Aircraft Sales & Leasing remains a significant profit contributor to the second quarter, delivering $2.1 million more in operating profit compared to the prior year. The strong performance is a result of a larger portfolio which delivers more consistent results, as well as the sale of two aircraft, one which was off our balance sheet and one from an unconsolidated joint venture.

During the second quarter, the Company also purchased one aircraft. As of November 30, we had a total of 39 aircraft, 29 of which are held in joint ventures and 10 of which are held in our AAR portfolio. We continue to see lots of action in this segment.

As a percentage of sales, SG&A declined to 10% versus 10.6% last year. SG&A costs were higher on a year-over-year basis and slightly higher sequentially, as we continue to invest in ways to fuel additional growth and to fund operational improvement initiatives.

Net interest expense increased during the quarter, principally due to increased borrowings, as we've made significant investments, as I indicated earlier. These investments have been mostly around inventory and also aircraft that we bought for our inventory businesses.

For the first six months of the year, we purchased 272,000 shares of AAR stock on the open market. The current authorization from the Board of Directors allows us to purchase up to 1.5 million shares.

We are excited about our recent acquisition of Summa Technology, which we announced near the end of the second quarter and completed this month. Summa is a leading provider of high-end subsystems and precision machining, fabrication, welding and engineering services, located in Huntsville, Alabama. Summa brings important, new capabilities to customers to AAR and has a very strong management team. This acquisition helps us meet our goal of increasing the mix of OE content and strengthening our competitive position in the defense markets, and this business will serve as a hub for our parts manufacturing businesses. As we gain more confidence with our new businesses like Summa, acquisitions will be an important part of our growth strategy.

Overall, we are extremely pleased with the Company's financial results and operational performance for the second quarter and the first half of the year. We continue to generate positive momentum and capitalize on opportunities to grow and improve the business. We're very upbeat about our prospects for the second half of fiscal 2008.

With this, I'd like to wish you all a safe and happy holiday season. Thank you for joining us on this conference call. At this time, let's open it up to any questions you may have.

Thank you. (OPERATOR INSTRUCTIONS). Eric Hugel, Stephens Inc.

Good morning, guys. Good quarter.

Can you talk about, I guess with regard -- I guess I was listening to you speak at the CSFB conference the other week, and you talked about you guys are seeing business opportunities as a result of the weakening dollar out of Europe on the MRO side of the business. Can you sort of flush that out a little? Is that sort of just talk, or are you actually seeing business come across?

Eric, what I indicated was that, for the first time in recent memory, for me at least in my business career which spans 29 years in aviation, you know, historically, there was more of a drive for U.S. folks, U.S. operations to send aircraft either into Asia or Europe. If I go back in time, more so in Europe, more so today in Asia, but that with the weakening dollar, what we were starting to see, which are starting to kick in, say, in the last 30 days prior to when I made that speech, was that we are starting to see folks from Europe express interest in putting aircraft into North America because of the high -- the exchange rate the way it is.

So right now, interest is being expressed. You know, I believe that there will be some opportunities in that regard if the U.S. currency continues to stay as weak as it is.

Okay. Also, there is a competition coming up. I guess Northrop and Boeing are going -- I guess it's a recompete on the KC-10 supply chain maintenance contract. You know, I know, on that side of the business, you are very close to Northrop. I mean, it's kind of probably a little early but is it good to assume that if Northrop won that part of the business, that you would likely be involved in that?

That's a loaded question! Use your imagination.

Okay, I'll take that as a yes. Tim, can you update us with regards to -- I guess, last quarter, I had asked on the call if you could sort of talk to us on a scale of 1 to 10 in terms of where we are, in terms of operating efficiency, both at Indianapolis and at the component repair business. Can you sort of update us? I guess on Indianapolis last quarter, you said we were roughly around a 4. Sort of where would you say we are right now?

You know, maybe, Eric, I would just talk about itt in the context of total MRO rather than specific operations. I would say that we've made significant progress. We talked about it on the last call. We felt like we were headed in the right direction. You know, we achieved the results that we were expecting.

Having said that, though, I continue to think that there is opportunity. There's opportunity to work closely with our customers to reduce thespan time. We've got process improvement initiatives going on across each of our MRO facilities, so even though we've made significant progress, I think there continues to be opportunity to get better.

On the component business, I think we are not as far along there as we need to be. We are active in terms of the initiatives there, both strategic and process, and we are going to continue to attack that until we get the results that we're looking for.

Should we expect, on the Aviation Supply Chain -- because you had a really good margin, and it looks like this quarter, and it looks like a lot of that was a result of execution. I don't know how much was mix, but over the past year or so, that business has been pretty consistent in the mid 22% margin range. You know, is that, this 24% -- I mean, should we be looking, going forward, at the margins in that business, sort of as you make improvements in the component repair business -- is that 24%? I mean is that sort of maybe not near-term but over the next, let's say, year or so, is that sort of a number that can be consistent?

You know, we have talked about margin in this business before. You have, by the nature of the business, volatility in the margins there. You know, as the component businesses improve, it's going to have a positive impact on margins, but I think you really have to expect some volatility in the margins in that segment, within a range.

Great, I will get back into the queue. Thanks a lot, guys.

Troy Lahr, Stifel Nicolaus.

Thanks. I think you guys clearly have done a good job getting margins back to this 10% goal, or not even back but just reaching 10%. As we look out further now, I guess the new target is 12.5%, if I'm correct. Can you maybe start framing that for us a little bit? It's great to have that number out there but if we don't know if it's two years out or four years out, I think a timeframe would help a little bit.

Yes, Troy, you know, obviously, we are proud of achieving the 10%. It took us maybe a little longer than we had hoped. Hopefully, we can sustain that 10% going forward and start seeing some improvement.

What I had indicated is we have kind of raised the bar because we had felt, going back around six months ago, that we had -- that the 10% was clearly in the sights and yet we were not satisfied with only being at 10%. So you know, I think it's still in our planning cycle. The planning cycle is a three-year cycle. We started signaling this about six months ago, so we are holding to that timeframe to start seeing some improvement.

Okay. Could you talk about the drivers that get you from 10% up to 12%? I guess it's SG&A, the leasing business. Can you kind of walk us through how you get to that 12%, what's your plan?

Sales growth. I think you just said it, leveraging off of our SG&A base, improving some of our underperforming businesses, and getting income off of our leasing business, as you indicated. I think you pretty much nailed it.

But is it relatively mixed between those? I mean, are you more reliant on the leasing business or do you think all of these should contribute generally pretty much equally to getting to that 12.5%?

Yes, I believe all contribute, the leasing is probably the least, so you're probably getting more of your underperforming businesses improved while at the same time continuing to drive sales growth. I mean, if we continue to get the kind of organic growth that we're getting, we should start seeing margin, as Tim starts making some progress on his operating margin, his initiatives -- you know, because we are investing a fair amount right now in driving lean through our businesses and hopefully we start seeing the benefits, which I think you're starting to see. But hopefully we start seeing more of those benefits as we move along towards, let's say, that 2.5-year time period. So I think that's a major driver, and hopefully we continue to get margins out of our aircraft leasing business.

Yes, okay. The SG&A, in the back half of last year, you did about 9.3%. Is there anything seasonal there where we could expect a decline down into kind of the 9% range in the back half of this year at SG&A as a percentage of sales?

I think that's a little bit more aggressive than we are forecasting. You know us well enough to know we watch our costs really closely. But you know, if we do a little bit better than the 10%, I think that would be really good. I think getting down to 9% probably is not in the cards, at least for the foreseeable future.

Troy, this is Rick. I mean, we've also decided, as we've discussed a little but in the past, we decided to invest to drive that top line gross margin performance as well, so there is a relationship between investing in infrastructure and investing in process improvement to drive out some of that margin you are seeing at the gross margin level. We think that's a good trade-off.

So you still see the need to invest further to keep restructuring some of these businesses, that's --?

We are seeing good yield from the investments we make and as long as we continue to see good yield, we will continue to do that if need be.

Okay, that's fair. Then lastly, can you guys just kind of walk us through Summa Technology, how much that likely could benefit this business now that you've closed on the transaction? You know, from a sales standpoint and accretive to margins or kind of near-term dilutive, how should we see that change the mix? Then also lastly, is there any integration issues that we should be concerned about? You were kind of a little bit behind on the Reebaire integration. Should that translate to potential problems at Summa also?

So, I guess, in order of your questions, from a top line perspective, we would expect this in the near-term to contribute about $25 million per quarter at the topline on a marginal basis for the Structures & Systems segment that it reports to. We still have to sort out some of the purchase accounting effects, but our expectation would be it would be about -- it would not be accretive or dilutive to the segment margin, probably right now, but we still have to sort out purchase accounting there.

I think, in terms of integration, we see this as an easier, easier integration effort because it really is a -- it's a launching pad for us into some more parts manufacturing. The level of integration will be modest early on. We will look to get some good synergies across some of our other businesses as time goes by, but we don't have the same level of integration needs that we did with, say, Reebaire.

Okay, so next quarter, we should see Structures & Systems up pretty nicely off of the second level, due to growth as some of these contracts ramp and then also as Summa is fully in there? Is that right?

You'll see top line growth from both Summa as well as organic; that's right.

Tyler Hojo, Sidoti.

Good morning, guys. First question -- I'm just wondering in terms of where you guys currently fit in terms of past utilization and in particular capacity utilization in the Indianapolis facility.

Hi, Tyler. So, we still have opportunity to grow at Indianapolis. There's a few different ways to expand. One, there is hangar space available for us there that we are not currently utilizing. We expect to go ahead and fill that out. I've mentioned before, other growth initiatives that we have in our MRO business, including line maintenance, engineering services that don't consume hangar capacity. Then we've got some good ideas to further expand there. So, we still have some opportunity for growth there.

Just in terms of an actual number of bays that are currently being utilized in Indianapolis, do you have that?

We have it. We've tried to -- it moves around a lot, you know, now that you have the activity that we have there. So it changes on a weekly basis. But you know, we are between - on any given day, we are between seven and nine bays being utilized.

Okay, thanks; that's helpful. Just on the Aviation Supply Chain side of the business, it has been a little bit, just in terms of since we've heard about kind of new opportunities or new wins there, and I think Eric's question pinpointed an opportunity. But I guess I'm just wondering if you could maybe characterize the pipeline I guess in general, specific to the Aviation Supply Chain side of the business.

The pipeline is strong.

Fair enough. Okay, and just one more for you -- I don't believe you guys gave an organic revenue growth number for the quarter. Do you have something for me?

21%.

Thanks so much.

Arnold Ursaner, CJS Securities.

I guess if most guys ask five questions, there's not too much left.

My first comment would be could you comment a little bit? You've been asked it two or three times already about the pipeline of new programs or opportunities in supply chain. Are you sensing any change in the willingness of customers to actually wrap up deals? You mentioned you've got a pretty active pipeline. Could you perhaps comment a little more behind the scenes of what you're hearing from customers about their willingness to assign multiple-year deals?

Well, in terms of what their willingness is, let's put it this way. There's a fair amount of interest in doing various different programs coming out of different parts of the world actually at this moment, so our pipeline is strong and we should be able, if not in this next quarter then in the quarter beyond that.

This quarter, the growth will be fueled largely by many of the investments that we made in the second quarter, but notwithstanding that, we should also have some success between now and the end of the year at least, fiscal year, on one or more of these programs that are in the pipeline. I don't see any difference in willingness than I have before. I think it's just a question of dotting a lot of Is, crossing a lot of Ts and just a gestation period if you will of some of these situations.

Thank you very much. I look forward to seeing you at our conference.

John Braatz, Kansas City Capital.

Good morning, gentlemen. A couple of questions -- in the first quarter in the MRO operation, you had a couple one-time hits to margins. You had the problems in Oklahoma, and then you were also -- I'm sorry, you were also renegotiating that contract with one of the carriers. How much of that -- well, was that contract successfully renegotiated? Did we see any benefit from that in the quarter? On a more broad basis, if you just net out those changes, were you in fact seeing improvements in the margins coming from Indianapolis, or from the MRO operation, if we would net out the problems that we had in the first quarter?

So the Indianapolis business has -- as you recall, it is a relatively young business for us, and it's been improving nicely. We had a few different things to take care of, customer contracts. But the most important thing I think is that the team there is working very well with customers. The processes are getting better by the day, more efficient. So, I think it's a combination of the things that we talked about related to specific contracts and just overall improvement in the way we are executing that business.

Would you think that the rate of improvement that you saw in the first, in the second quarter here, that we can continue to see that type of improvement or is this more of a level that we're seeing in the second quarter of more what we might see in the second half in the year?

We're going to continue to drive for top line growth and earnings efficiency in that segment.

Okay. One final question -- you mentioned that you sold a couple of aircraft in the quarter. Can you quantify for us what the gain on the sale or loss on the sale might have been?

Well, I think there were gains and they contributed to the earnings improvement that you've seen out of that segment.

Okay. You won't tell us specifically?

We would prefer not to.

Okay, that's fine. Thank you much.

Evan Anderson, Calyon Securities.

Good morning, guys. Great quarter. Most of my questions have been addressed but I have a few here. Can you characterize the pricing environment in MRO? Is that still stable? How is the labor environment going in the MRO?

We're okay with the pricing environment and labor environment. You know while a little tight, we've been able to go ahead and get the people that we've needed. So, I think, in both cases, we are okay. I think we could use a few more people with certain specific skill sets, but we're managing through it.

Great, thanks. Could you update us on what portion of your revenues comes from outside of the U.S.? Do you have that figure available?

Yes, it hasn't changed materially from where we were at year-end. There are still about 35% of our revenues are coming outside the U.S.

Great, thanks. Lastly, on the aircraft leasing, are you expecting any sales next quarter?

Say that one more time?

Sorry. Are you expecting any sales from the aircraft leasing business next quarter?

Yes we are.

Can you add any color or --?

Not really.

Not really? Okay, great. (multiple speakers)

you know, you're seeing consistent growth and consistent performance out of that group. I mean, in answer to the last question, in terms of what the profitability was on a transaction, you know, obviously that causes lots of problems in the business, to be communicating what kind of gain you had on a transaction. But suffice it to say that the fleet size is at a level now which affords us the opportunity to manage the business a little bit differently than we have in the past. So you should be expecting, notwithstanding from time to time a fluctuation or two, you should be expecting consistent steady earnings performance from that business.

Great. Any negative impacts from the credit markets in the aircraft leasing business?

We haven't seen them yet.

Great. Actually one more -- I think, in the last call, you talked about finishing the transition out of the Michigan facility for Structures & Systems. Did that wrap up as you expected?

Yes. Evan, let me clarify -- not 35%, 25% (for international sales).

25%. Great.

On the international question.

Thank you very much.

Stan Mann, Mann Family Investments.

Great job, gentlemen. I just have a couple of questions. You mentioned the acquisition activity. Do you believe you'll be continuing to make acquisitions in the next several quarters?

Stan, we continue to look. So what's important to us is obviously we want to -- you know, we're trying to build a great company here. In the process of doing acquisitions, we've now done, we've completed three in the last year. We've had some success on one acquisition. We expect the latest acquisition to be successful in terms of integration. The first acquisition in the MRO space didn't quite meet our expectations. We recognize we have certain challenges around it, but I think the key element for us is to see how we do on integrating the current acquisitions, and that will be a marker for the speed in which we accelerate further acquisitions. So there's a pipeline, there are opportunities out there for the Company, but I think we're going to walk before we run.

Now, having said all of that, if a situation develops that looks right for us, we will move accordingly.

That leads me to my second question. The rumor on United selling their maintenance business, or that they have, can you speak to that at all?

Well, we are aware that that business is for sale. You know, as it relates to AAR, I would prefer not to comment.

Okay. The last question, can you give me the D&A for the quarter?

Yes, the second quarter is about $9.8 million.

Okay. Is it possible for you to report EBITDA on your future reports and save us some calculations?

You know, it's not a recognized GAAP measure and we would prefer to just keep the reporting the way we have it structured right now.

Oh, you don't have cash flow in either? Is it possible to do that? More detail?

I'm sorry?

Cash flow reporting quarterly -- is that possible?

With the press release?

Yes.

I mean, obviously you will get it with the 10-Q.

Okay, but you wouldn't put it out with a press release at the same time?

Let us think about that.

Okay, thank you. Good job, gentlemen.

Troy Lahr, Stifel Nicolaus.

Thanks. I guess I still don't really understand the reason for the slower growth at Aviation Supply Chain. Was anything rolling off there from a contract standpoint, just slower travel growth from customers? I'm not following that one.

Well, I think, first of all, you still have -- you see growth; you're going to continue to see growth. I think we are telling you that there's going to be -- we're going to be back into the double digits here in the quarter we are currently in. So I think probably more timing. You know, I don't recall exactly any specific situations but --.

I think you'll also -- as we continue to improve our component businesses and the contribution that they make to the overall segment, I think, you know, that will also help our growth rate there.

I wouldn't be alarmed, let me put it that way. Rick might want to add something.

Troy, I think the short answer to your question is, in terms of why, is, one, we've already annualized all of the significant supply chain programs that we've put in place, so timing of new programs didn't give us any lift in terms of year-over-year. Then secondly, we really focused on margin generation, and I think we're very focused on high-quality sales for the quarter. So, we will continue to drive high-quality numbers, but I think, as our program pipeline continues to mature, that's where you get the double benefit of lift on the top line.

Okay. Is it safe to say you were walking away from some opportunities because the margins just weren't there?

I think I'd say it differently. If we didn't care about margins, we clearly could have stuffed more stuff through the pipeline.

Okay. At Indianapolis, you guys have talked about greater penetration at some of the airlines and the cargo carrier you have out of there. Are you starting to make headway there with some of these existing customers?

We are.

Any way to kind of quantify that or --?

Yes, you know, we've added lines with certain customers and we continue to talk to other customers about more work. You just experienced 64% growth -- 54% growth in that segment, so obviously we're making headway with our customers.

So a lot of that is out of Indianapolis?

Yes.

Okay, that's helpful. The issues that you saw at Oklahoma City, is it safe to say that those problem aircraft are kind of behind you know, or you think you've got a good understanding on that?

Yes.

All right, I'll take that. Then lastly, real quick, on the A400M, we've seen about six-month delays. It sounds like that's not going to really impact you near term, but Airbus hasn't even gotten into test flight yet on that aircraft. There could still be some more challenges ahead for them. If we're looking at longer-term delays, could this potentially start to impact results if we are seeing maybe a year delay, or still it's so small for you guys that we wouldn't expect any big charges or anything like that?

No, we don't expect any big charges. Obviously, it's not in our numbers now from a revenue or an earnings perspective. You know, we are hoping that they will be ready to accept delivery of cargo systems in calendar '08, but we don't know for sure.

The impact basically is that the revenue is not going to hit us at the time we expected, just so the revenue is going to hit us outside of what we originally maybe communicated or projected. That's a function of Airbus' delays, as you indicated.

But I think in terms of, as Tim was saying, there is no impact -- today there are no revenues coming in from that program, so it's just a question -- it's just a delay. Instead of getting accelerated sales growth, it's just going to take a little longer to get there. It's obviously a significant program to our one specific business, and then it has an impact on that group's results, but when you bring it up the consolidated level, it's fairly minor.

Okay, but if we look at a longer delay, though, I mean I just want to make sure that we are not looking at any potential inventory write-downs or anything like that, that could impact us near term.

We're not expecting that.

Okay, all right, guys. Thanks.

Eric Hugel, Stephens Inc.

You mentioned earlier that you made -- you invested, what was it, $75 million in your Aviation Supply Chain business. Was that just sort of a general, overall investment or was that related to one of your supply chain deals, like a Mesa or something like that?

It was just general investments. We bought actually some airplanes to disassemble into parts. That's the primary investment.

Okay. You also talked about you would expect, by the end of this year, to have some more Aviation Supply Chain deals, but as we've seen these things come in all shapes and sizes, Mesa where -- you know, is a big revenue and income producer, versus I guess more strategic deals like the vehicle supply chain deals. When you're talking about these types of deals sort of by the end of year, do you think it's more likely than not that we're talking about sort of a needle mover type of deal, or are we looking at more of these smaller deals?

We have one needle mover, to use your phrase, and then we have fewer that are complementary and aren't necessarily what you would call needle movers.

Okay. Finally, you mentioned that -- I guess on a conference call -- that you had signed a deal with United, that they were going to be adding an additional line I guess beginning in December at Indianapolis. I guess, one, has that started? I guess, two, how should we think about that? I don't think that's a new line. I think it just sort of replaces one of your drop-in lines. So how should we think about that? Is it more of a margin enhancer in that you guys are very experienced at doing these United planes, or is it both sort of top line and margin?

It's incremental business for us, Eric.

Okay, so it's incremental? It takes up an additional line?

Yes.

Okay, so you were at 8 before, so you're fluctuating more between 8 and 9 is sort of the way to think about it?

Right.

Okay, great. Thanks a lot, guys.

Arnold Ursaner, CJS Securities.

It's Larry Solow. Just a quick follow up -- depreciation has kind of ratcheted up a little bit. It was running kind of around $30 million for the last couple of years and now it seems to be closer to a $40 million run-rate. Is that kind of a good expectation going forward?

Yes. I mean it's D&A, Larry, so you do have some amortization from some of the intangibles we had to create on purchase accounting on these acquisitions as well. But I think -- what was the number question you asked?

Well, for the first, first half of the year, it's been like $19 million, $19.5 million, so kind of close to $10 million per quarter run-rate. Is that just a little high the first couple of quarters? Do you think it will scale back a little or --?

No, I think that's a pretty good number. I think that's a good number for what we have now. It's a function of what do we sell out of some of our own aircraft portfolio. Obviously, we've just completed this new acquisition with Summa. That will change that number as well, but I think where we're at right now is the right baseline for going forward.

Okay. Then you mentioned international is about 25% of revenues. Sometimes you've actually given a breakout or an approximate of what the growth rate was in Europe and Asia. Was it kind of in-line with the Company? Was it better, worse, anything significant out of there?

You know, I think the general split between the sub-regions outside of North America are about the same, so nothing has really changed there this year.

Okay, great. Thanks a lot.

(OPERATOR INSTRUCTIONS). I am not showing any other questions at this time, sir.

Thank you. Thanks for everyone's participation. Again, we are interested in your feedback on running the earnings release in the evening and the conference call the next morning early before the market opens. Other than that, I wish everybody a very happy, healthy and safe holiday season. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference. You may now disconnect. Good day.