AstroNova Inc (ALOT) 2012 Q3 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Astro-Med Inc.

fiscal 2012 third-quarter earnings release conference call.

(Operator Instructions).

I would now like to turn the conference over to Mr.

Stanley Berger.

Please go ahead.

Thank you, Douglas.

On behalf of the management of Astro-Med, we are extremely pleased that you have taken the time to participate in our conference call.

Thank you for joining us to discuss the Company's fiscal 2012 third-quarter fiscal results and business outlook.

Before I introduce management, I would like to remind everyone that certain statements made during the course of this conference call, especially those that state management's intentions, hopes, belief, expectations or predictions for the future, are forward-looking statements.

During this conference call, we may make forward-looking statements within the meaning of the Securities Exchange Act of 1934.

These statements are based on the Company's present expectations and beliefs concerning future events are necessarily based on certain assumptions, which are subject to risks and uncertainties.

Actual results may differ materially from those discussed here.

More information on these factors is included in the Company's filings with the Securities and Exchange Commission.

By now you should have received a copy of the news release, which was issued yesterday.

If you have not received a copy, please go to our website at www.astro-medinc.com where a copy of the press release can be downloaded from the Investing section of our home page.

Hosting the call today are Everett Pizzuti, President and Chief Executive Officer, and Joe O'Connell, Senior Vice President, Treasurer and Chief Financial Officer.

At this time I will turn the call over to Mr.

Pizzuti.

Thank you, Stanley, and good morning, everyone, and thank you for joining our quarterly conference call.

As Stan mentioned, Joseph O'Connell, our CFO, is with us this morning as well.

As publicly announced yesterday, we completed another successful quarter with improvements in sales, operating income and earnings per share as compared to last year's third quarter.

As you know, our third quarter, which includes the month of August, is typically affected by the near shutdown of Europe for vacations, as well as vacations for many of the types of customers that we do business with here in the United States.

And despite this, we achieved good increases in sales from both domestic, as well as international markets.

Sales from each of our three major product groups were up from last year's corresponding quarter.

We are especially pleased at the continued growth in our Grass product group where sales were up 12.7% over the prior year with a favorable mix of products sold domestically and through our branches and dealers in the rest of the world.

From our QuickLabel Systems product front, we had good increases in both color label printers and media domestically, but our European branch sales were somewhat tempered by both the August shutdowns that I referred to and the general economic instability there.

We are particularly happy, however, that with the steady increase in QLS, QuickLabel Systems consumables, which we feel are a bellwether for the general economy.

Our ruggedized products, particularly the printers for flight deck and cabin, continued with the strong growth we have been experiencing all year.

Many of the aircraft for which we have been -- for which we have printer contracts, are now in production, and so our shipments are increasing by high double digits.

Other contracts will be going into production in the next few months and will add to the aggressive growth of this segment.

And we signed additional new contracts in the quarter for new aircraft for the years ahead.

Meanwhile, we have printer negotiations in progress with aircraft manufacturers from around the world.

This is clearly a busy, busy and growing segment of our business.

We are seeing increases in our flagship TMX data acquisition system for a variety of applications ranging from power plant to automotive and railway monitoring.

You may recall also that we announced a new Test and Measurement product earlier this summer, a portable, compact, lightweight, low-cost but powerful [A-Channel] product.

We are happy to report that, although we do not have demo units for demonstration yet, we have already booked over $300,000 in new orders for this exciting new product.

We expect to begin shipping late in December.

Now, for the full financial details, I will turn the microphone over to Joe O'Connell, and then after his presentation, I will provide updates on our guidance for the year, and then we will take your questions.

Joe?

Thank you, Everett.

Good morning, everyone.

I'm very pleased to share with you Astro-Med's third-quarter financial results for our current fiscal year 2012.

As perhaps you have heard, the Company reported sales of $19,569,000 in the quarter, representing a 6.8% increase from the prior year's third-quarter sales.

The increment we shared is between the Company's domestic channels at $14,205,000, up 6.2% from the prior year, as well as from our international shipments at $4,977,000, up 2.5% from the previous year's international sales in the third quarter.

In profiling the third quarter, sales by product group has QuickLabel Systems brand of color and monochrome printers and related consumable products at $10,352,000 in the quarter, reflecting an 8.3% growth rate from the prior year.

Here our printer lines posted double-digit increases, and our consumable products also contributed to that growth.

Our Test and Measurement product group of reporters and ruggedized products achieved sales in the quarter of $4,324,000, representing a 4.5% increase from last year's T&M sales in the third quarter.

And lastly, the Company's life sciences product group of Grass Technologies with its broad line of neurophysiological, clinical and research products reported sales of $4,892,000 in the quarter, representing a growth rate of 12.7% from the prior year's third-quarter Grass sales.

The Company achieved gross profit dollars in the third quarter of $8,014,000.

That is an improvement over last year's third-quarter gross profit by some 8.3%, as well as a 60 basis point increase in the margins to 41%.

A favorable product mix, as well as a lower manufacturing cost, contributed to the improved margins.

Operating expenses in the third quarter were $6,826,000, reflecting a 2% increase in spending from the previous year's third quarter and dropping the secondary cost as a percentage of sales to $0.35 as compared to last year's $0.365 per sales dollar.

The Company earned $1,188,000 in operating income in the quarter, reflecting a $481,000 or 68% improvement in the operating income from last year.

Operating margins also improved from last year's 3.9% to 6.1% of the third-quarter sales.

Our provision for federal and state taxes in the quarter were $319,000, which includes a tax benefit of $113,000 related to the filing of the prior year's tax returns.

As a consequence, our effective tax rate in the quarter was 28.5% higher than last year's benefit of 8.3%.

On a GAAP basis, Astro-Med achieved net income during the quarter of $800,000 or $0.11 per diluted share, which is comparable to the prior year's net income of $792,000 with a similar earnings-per-share of $0.11 per diluted share.

However, if we exclude the one-time respected tax benefits from each quarter, we would report a non-GAAP EPS of $0.09 per diluted share, representing a greater than a 50% improvement over the prior year's third quarter non-GAAP EPS of $0.06 per diluted share.

Prior to reviewing the balance sheet and the cash flows, a quick review of the Company's operating results for the first three quarters of this year is as follows.

Our sales revenues for at the end of the third quarter were $58,764,000.

That represents a 10.5% increase over last year.

The composition of the revenues is Test and Measurement sales are up 14%, QuickLabel Systems sales are up 7%, and Grass Technologies sales are up 15% on a year-over-year basis.

Our gross profits for the year are $23,416,000, represent a 10% improvement over last year and reflecting a margin of 39.8%, slightly down from last year's 40%.

Operating income for the year is $2,958,000.

That is an improvement of 58% over the prior year with a margin of 5.1% as compared to the 3.5% earned in the prior year.

The Company has earned to date $2,277,000 in net income or $0.31 per diluted share, an increase of approximately 47% over the previous year's net income and related earnings-per-share of $0.21 per diluted share.

Quickly looking at the balance sheet, also strong at the end of the quarter, the balance sheet improved during the quarter with our cash and marketable securities position at $22 million, representing a 6.8% or $1.4 million improvement from the year-end balance.

Accounts Receivables rose slightly from year-end to $11,350,000, representing some 51 days outstanding, down some three days from the year-end DSO of 54 days.

Inventory dollars also dropped 5% from year-end to $13,607,000.

This balance represents 106 days on hand, some 18 days lower than the year-end inventory on hand of 124 days.

Our capital expenditures for the first nine months are $971,000, representing funding for machinery and equipment, information technology, tools, dies and fixtures, etc.

Our capital expenditures are tracking slightly less than our depreciation charges here, which were 1.1 for the first nine months.

The Company paid out $1.5 million in cash dividends year-to-date at the rate of $0.07 per share per quarter.

The Company's book value is also up slightly from year-end at $7.47 from $7.37.

Our employee population has also declined from the beginning of the year by approximately 19 people to stand at about 404 at the end of the quarter.

And lastly, our sales per employee have also improved to $187,000 per employee from $164,000 per employee for a comparable period in the prior year.

That completes the review of the financials, Everett.

Thank you, Joe.

We continue to be confident in the balance of our year.

We recognize the uncertainty of the global economic environment, especially in Europe, but feel that both our unique products, as well as our strong distribution channels across -- around the world, position us well to achieve our goals.

As stated in our press release, we are affirming our guidance of sales from $78 million to $79.5 million and EPS from $0.37 to $0.39.

This does not include the one-time insurance benefit of $0.04 recognized in the second quarter.

And now Douglas, we are ready for any questions.

(Operator Instructions).

Mark Lanier, Pegasus Capital.

Congratulations on the quarter.

I wanted to ask a question in regards to the QuickLabel Systems and got a little bit more granular on the results of the quarter and the momentum in that side of the business.

I was a little bit surprised to see the growth rate slow from double-digits of the previous quarter year over year given the strong product introductions and was interested in what your comments are.

Okay.

With regard to QuickLabel Systems, we did experience a little lower than anticipated sales of our -- some of our color printers for a couple of reasons.

One is we were down a little bit in Europe because of the situation there and, secondly, because we experienced some technical issues with the Vivo!

that impeded some of our production.

So for those couple of reasons, the color printers did not reach our expectations.

Plus, the consumables on that side were up single digits as well.

So on both sides of the fence, we were below double-digit.

But, as I had mentioned earlier, we feel good about the future because we feel a leading indicator for us is the consumable business, and that business began to turn around briskly early in October and has continued since.

So we consider that a bellwether for the future.

Could you also comment upon the new contracts in the aircraft side and perhaps give an idea of what their significance is?

Well, most of them now are bound by confidentiality agreements, so we cannot publicly disclose the names of the vendors of the customers.

But I can tell you that they are for new aircraft that will go into production in two or three years -- it depends -- from now.

We are in the early stages where we provide samples and engineering models.

But those -- the beauty is, as we continue to get new contracts quarter after quarter, they keep layering themselves on the existing contracts.

And so every quarter and every month we get more and more releases against these contracts.

So that is the good part.

So we have got two or three new contracts in the quarter just ended.

Plus, as I mentioned previously, we are in negotiation with a number of manufacturers around the world, and these contracts that we are getting are not only for the big aircraft manufacturers of large commercial aircraft, but also we are into the business jet market where we have got some significant contracts.

Again, we are not at liberty to disclose any names or numbers because of the confidentiality clauses in those contracts.

And Grass was certainly a highlight of the quarter.

Would you talk about what is driving that continued growth?

Is it growth in the market, or is it your product introductions do you think?

You know, it is the effort that we have been putting into the new product developments at Grass.

It is all of the development time that we have been spending on the software.

The software is probably the leading part of any of these systems, and we have been spending a lot of time and development money on improving the software and adding features that make it not equal -- not only equal to anybody out there but better.

So we are leading the technology there.

And so -- and then we have made improvements -- continue to make improvements in our hardware.

So I think these two things combined have given us a much better position to differentiate us from our competitors.

And so the sleep market was a booming market a couple of years ago.

It is not booming as much now, mainly because of, I guess, the economy.

But we are still, nonetheless, getting more market shares, we are getting more share from our competitors, and we are getting into new avenues of the EEG market as well.

And additionally we continue to increase our sales of the consumables, and in this part of the business, the consumable here, is really it's the electrodes, which are not necessarily throwaway, but they are -- they have a limited lifetime.

And so our electrode sales among the consumables really continue to increase as well.

So all of those factors have led us to gain more market share as a leader in sleep and EEG systems.

Thank you.

That is helpful and good luck going forward.

Joshua Zable, WJB Capital.

Congrats on a nice quarter, guys.

I just wanted to follow up on the questions about the Grass group here.

Very, very helpful color, so I know you started to get at it.

I just was wondering is there any way you could give us a sense of -- I know you had some new products launched, just difference in growth driven by that consumables stream versus equipment?

Was it majority equipment in the quarter?

And then maybe also just how much of that came from the US?

I know you mentioned weakness in Europe.

I think you were talking more about the other businesses.

But I'm just wondering what drove the growth there, if you could give us any more granularity?

Yes, I can give you a little bit.

Yes, we did introduce some new products that are on the EEG side of the market, and those products are taking hold very nicely.

One of those products is an ambulatory EEG recorder, which is quite compact and small and very competitive.

It does a very nice job.

So we are gaining market share with that.

Our hardware sales are growing very nicely both domestically and around the world, a little softer in our branches, which is Europe -- our branch is mainly Europe because of the situation there.

But we are doing a lot more in the rest of the world in places like Asia and Japan, South Korea, Australia, Mexico.

Those markets are continuing to grow for us.

So, even though Europe is a little bit weaker, we have a very strong position in those other areas.

So, in general, Grass is the pioneer in this business, and we are continuing to lead the field now on the technology side, and we are making great roads on the market share side.

For example, our consumables sales are up over 17% over the prior year.

And, as they say, those consumables are the things like electrodes and electrode cream that we have been manufacturing for a number of years.

And in case you were not aware of it, we sell our electrodes not only to our own customers who buy our systems, but we even sell them to our competitors.

And the competitors buy them and sell them with a Grass label on them because of the great value of that Grass name.

And we are not ashamed to sell these things to our competitors.

Nice.

I don't blame you.

I don't blame you.

And then I guess just obviously with the new product in EEG, you said ambulatory, I know you guys talked about sleep market, I know you guys also sell to research, more research facilities.

Can you talk about the end customer?

Who was buying it?

Was it -- especially the new product, was it hospitals?

Was it more ambulatory centers?

Was it, I guess, I'm just trying to look for color on the -- because it seemed like you guys outperform your competitors.

So I'm just trying to understand the market a little bit.

Yes, the ambulatory products I bought -- we are selling those both to hospitals and to smaller clinics and standalone labs.

It is interesting.

Some of the -- we found that some of the sleep labs are looking to expand their business by going into the EEG side.

So those are some new markets that we have been grabbing, and we see a future there as well.

So that is kind of where this new business is coming from.

On the research side, you asked about that.

Those are the kinds of products that we sell to pharmaceutical companies and schools and universities, and that business continues strong as well.

So all segments of the Grass products have been doing quite well.

And then just last question as it relates to Grass, and I really appreciate you guys answering, again, when I looked across your competitors, most of them did not grow or barely grew at all.

You guys obviously grew nicely.

I know you said it seems like its strength is across the board in terms of obviously geography, end customers and product mix, so that is all great.

I guess I'm just trying to understand the market.

It seems like hospital spending has been pretty healthy or healthcare spending actually has been healthy this quarter.

What do you see sort of right now?

Do you see the momentum continuing?

Is the primary driver of growth here marketshare gains?

I'm just trying to understand sort of -- obviously with a really nice quarter in the books, I'm just trying to understand if the momentum is continuing, you were seeing anything slow down, anything pick up, just any color on what you are seeing more recently would be great.

Okay.

Yes, we see the market continuing.

The level of demonstrations that our field guys are making continues to be very brisk.

The requests for new quotations and proposals are continuing now into this -- which is our fourth quarter.

We do a lot with tradeshows, and we have gotten excellent responses at trade shows.

In fact, there is a major trade show coming up in the first week of December, one of the major shows of the year.

So for all of these reasons and our great products, we are able to continue gaining market share, and we see the hospital budgets are there to support this new business.

Okay.

And a mix of disposables and equipment, do you guys share that?

We don't break that out.

Great.

Well, congrats on a really, really nice quarter.

Thanks for taking all my questions.

Steven Busch, Southpaw Investments.

Another good quarter.

So just a couple of quick questions.

So you had double-digit sales increases in your flight deck recorders, printers?

That is correct.

And so in the Test and Measurement division, sales overall were up about 4.5%, so were we losing sales elsewhere, or can you comment on like the percentage of T&M that is airline-related?

Yes, as you know, in what we call Test and Measurement is the composition of these data acquisition recorders and then the ruggedized products segments.

So the Test and Measurement recorders are relatively flat and, in fact, down a little bit, whereas the ruggedized products are up high double-digits, and that is where all of the increase is coming from, and that is not a surprise because that is what we have been concentrating on.

Right.

But so can you just comment on why the other sales were down or flat?

Well, the Test and Measurement data acquisition market has been a relatively flat market now for a few years.

We have some good products in that market.

We are continuing to introduce new products, and we make good profit margins on those products.

With not a lot of effort, we are able to sell them because of the name we have established over the years.

So we see that continuing.

As I mentioned earlier in the meeting, we introduced a new -- we call it the Dash MX.

It is an eight-channel portable recorder.

It sells for $10,000.

We introduced it only on the Internet and with the literature because we don't have demonstration models yet, but we will have those demonstration models at the end of this month, and we will be shipping production units to customers in December.

And, as I mentioned earlier, even without demonstration models, the excitement of this new product is so great that we have over $300,000 in orders without a demo, and that is a little bit unusual.

So it was good.

So what percentage is the airline-related businesses of T&M sales growing?

Well, I guess we don't break that out, do we, Joe?

We don't break that out, but it is -- all we can say is it is growing very, very aggressively.

Okay.

I'm just trying to -- because I know we have a huge backlog, so I'm just trying to figure out like, for example, you said, there's two to three new orders in the quarter --?

Yes, we --

And so can you comment on, like, the dollar size of those orders?

Yes, these are contracts that we don't put on the books until we get release orders.

And so these contracts are typically for the 10- or 15-year-life of an aircraft, and so they are several million dollar contracts.

But we do not book them.

All of our bookings are done as the contractors release printers for delivery.

And so every day, every week we get releases for the 787, for the 737, for the 747, for the A380, from the various contractors that we are dealing with, and these releases, as I say, are literally coming in daily.

And that is what goes into the backlog, and that is what we are ultimately shipping.

Right.

So it's helpful, but I guess I'm trying to see how big -- given the large size of the backlog, how -- and all the new orders that these companies are taking in the release of, like, the 787 now flying and such, what size can we expect over the next year or two years of sales in that division?

Well, that's a good question because we have got it intermingled with the data acquisition products, and I guess we will have to think about a way to give you some kind of a measurement on that.

You know, what it is, Steven, it is, as you say, I think the ruggedized, we expect that to be really clearly a strong double-digit profile.

I think the recorder business will depend on our ability with these new products.

As Everett points out, it has been pretty much a flat if not declining market for a good number of years.

But we are encouraged with some of the new products that we have coming out, and I think that hopefully will start to stabilize and perhaps maybe start to grow again.

But I think the real driver in this particular segment is obviously going to be the ruggedized printers.

Right.

And what is the ruggedized backlog right now?

It's a good -- most of the -- it is a good piece of the $7 million that we have.

We had basically about $7.5 million in backlog, and almost more than half of that is ruggedized.

And what is the big number, the number four out years that you have not booked yet but that are --?

(multiple speakers) Yes, we probably have $125 million to $150 million in contracts in hand.

Right.

So I guess that is the number we are all trying to get at, right?

Right.

How much of that is going to be released this year or next year, or is there going to be -- are we in a substantial ramp-up mode now where we will see that really come down a lot because we are getting the orders by 50%, or is it just going to be a 10%, 12% a year forecast?

These contracts are for about a 10-year window on average.

So you can figure that in.

But all we can tell you is the place is definitely picking up very aggressively now that these planes are beginning to fly.

Okay.

Fair enough.

So any share buybacks going on or any --?

None at this -- not during the quarter.

We did not -- we did increase the authorizations, as you may know, but no, we have not bought any shares during the quarter.

I was also going to mention that on a year-to-date basis T&M actually is at a double-digit profile.

It is up 14% year over year.

Okay.

Now this kind of may be a weird question, but Rhode Island is having some economic issues, government funding issues.

Is that affecting your employee base at all or (multiple speakers) you expect future tax increases there?

Actually what happened is the General Assembly to the surprise of everybody accepted some -- voted to approve some sweeping reform in the whole pension system for state workers, you know, from schoolteachers to fire and police.

And so they are going to make reductions, and they are going to discontinue COLA for a number of years and make other reductions and get people to pay into 401(k)s instead of all of these other benefit programs.

And that has really no bearing on Astro-Med nor our employees.

Well, I just wondered if they were going to increase their taxes to try and come up with some revenues?

No.

What they have done here with the sweeping reform is they are going to decrease expenses.

Right.

Okay.

Well, hey, another great quarter and look forward to more.

Joe Furst, Furst Associates.

Congratulations on a good quarter.

You are certainly making progress in the right direction.

My question was about the ruggedized printer backlog.

It was just answered by the previous person.

So congratulations on a good quarter.

Keep up the good work.

Sam Rebotsky, SER Asset Management.

Let me understand the backlog a little better.

It was about $8 million at the end of the previous quarter.

It is $7.5 million now.

At this same time at July 31, 2000, it was about $7.114 million.

Is it expect to stay around this area?

Is this the normal backlog of work that you would do to get into the subsequent quarters?

What kind of timeframe is this backlog?

Is it just a couple of months, three months, or what is the nature of the backlog timeframe?

It is kind of mixed.

I would say on average it's about a year's worth printing.

It's no more -- it is probably less than a year.

It is a kind of a blend of demand that we will ship out in the next quarter, as well as we have another the next three quarters.

In fact, the $8 million, I would say, represents (multiple speakers) six months of backlog.

And if we look at the contracts, $125 million to $150 million, that could be 10 to 15 years.

Of these contracts, have all these planes -- I mean finally the latest Boeing plan is working and is basically being delivered.

Are all these planes at this point being delivered?

Yes, we have been delivering printers, and the rate is accelerating for the 787s for both the cockpit and the cabin.

Don't forget we sell to the cabin on many of these planes as well.

And so that has increased.

The A380 continues to grow.

We have got a contract with -- for one of the regional jets with Bombardier that is beginning to pick up.

That is a contract we have had for three or four years.

It takes this amount of time to go from the award of a contract to ramped up production.

And so that contact is going to be hitting the streets pretty soon -- in higher production pretty soon.

We have some other business jets that will be ramping up later next year, I would say in the second half of next year, the calendar year.

Another business jet contract we have will be ramping up.

So you are going to see the level of -- when we announce our backlog going forward, you will see that going up as these contracts kick in.

So it would appear that sales should be -- I don't know if it is 25%, what kind of numbers your sales would increase based on these contracts into the new fiscal year.

Is there a way to look at it compared to what it was previously?

What was it previously that you are booking into sales out of these contracts?

Well, I think historically this has been a small business that is really growing.

I think last year we might have talked in terms of something in the order of about $6 million or $7 million.

So it is -- obviously it could grow 25%, but it does not have the critical mass just yet to have a huge impact in terms of the overall numbers for the Company.

But I think the expectation is over the next three to five years and really for the next number of years it is going to be real serious both in terms of the revenues, as well as the profitability contributions to the companies.

Well, that is kind of exciting, and that should drive the Company, I guess, much more.

Could you talk of any acquisitions that you might be looking at or what your plans are going forward?

What your direction might be?

Is there anything, any areas you are interested or any type of situations you might see?

We are actually going through right now the -- it's that time of the year we go through a strategic planning process.

And actually part of that growth of the Company is really -- obviously we have grown historically more organically than anything else, but I think that there is an appetite to identify those companies that would be a tuck-in opportunity for each of the groups.

I think all three segments are identifying businesses that would be reasonable candidates for the inclusion in the various segments.

But I think the decision for all of us is to make sure that we basically identify companies that would really contribute successfully both in terms of the growth and the topline, but also from a profitability standpoint.

And, in fact, I was going to say we did speak to a couple of companies during this past quarter and nothing specific right now, but we are continuing with the specific program of investigating targets that will fit in with any one of the three segments that we deal with.

The tuck-ins would seem desirable because there would be less risk presumably, and presumably most of these things you are looking at for a cash purchase versus stock, I assume?

That is correct.

That is right, Sam.

As far as -- is there any thought about any extra dividends or something at year-end considering the possibility that taxes may increase on dividends?

We talk about that at each board meeting, and certainly it will be on our agenda at the end of this year.

We typically focus on that on the fourth quarter, and that will be a topic at our next meeting, our next board meeting.

Good luck.

The numbers look good.

(Operator Instructions).

Jim Dowling, Jefferies Capital.

I came on a little late, so I apologize if you addressed this.

You have given the revenue comparisons of the three segments.

Did you go into what their operating profits were or their margins, and if you have not, could you?

We have not, Jim, to answer your question.

We are in the process of doing that.

I think what we have done is, from a segment standpoint, we are actually -- we are at -- at this point, we have the folks at Grass updated pretty close to what they have been averaging, which is roughly around 19% from an operating standpoint.

Actually it's going to be up probably over 20%, and the T&M in a similar profile will be up over 10%, probably closer to 14%.

And then QLS at this point, it looks like it's about a double -- it is about a single-digit return on the QLS business.

Okay.

And lastly and at the risk of beating the horse to death on backlog and releases and all the rest of it, maybe if I asked the question this way, we could get a little more information.

If, as you look at that ruggedized backlog and as you are being told or what you anticipate on your own to be the production schedules of planes going forward, if all of that happens and the stars align, etc., etc., what would you think that increase in the plane part of your business would be?

So I'm not asking you for a projection, but conditioning on what I mentioned.

Well, I think part of it will depend on how the other business does as well.

Because I think our expectation is that the business for ruggedized is going to be at clearly a very strong double-digit profile.

I think a little bit of the reconciliation is the fact that although we quote the $100 million in terms of the opportunities that we have in terms of contracts, I think, as Everett mentioned before, the backlog that we have now represents actual orders that the customers have provided to us.

So it is obviously a smaller value relative to the opportunities that we have over the next 10, 15 years.

But I think in terms of Jim's question was as to what he thought the impact would be in terms of prospectively the ruggedized business as we start to ramp up the volume and the demand for the product.

So, as I said, I think you might want to comment on that as well.

Yes, you know, it is hard to give you a good measure on that because it is intermingled with the data acquisition products, but we are going to see like over 20% growth just on the ruggedized segment if we were able to break that out, 20% to 25%, in fact.

That is the kind of growth we are getting out of that segment.

Now, as Joe mentioned, the dollar amount has been small, but it is growing now very aggressively.

And so that is going to be more and more a greater percentage of our overall instrument business.

So it is something to definitely keep an eye on.

Well, if that happens and if we were just to posit that the data part of it just stays flat for the sake of this discussion, and you get this 20% to 25% growth and we are sitting here a year from now looking at this segment, what kind of comment would you have on the margins that they would be able to achieve?

That is a great question, Jim.

I don't think it is unrealistic to think it would be in that similar profile that we are looking at right now of probably on a segment operating basis would probably be around 15%.

(Operator Instructions).

Mark Lanier, Pegasus Capital.

One last question about the overall corporate operating margin.

It was certainly evident the operating leverage in the business looking at this quarter year over year.

Longer-term do you have a goal in mind as to what that corporate operating margin could become?

We do.

The expectation is to get that over 10%.

I think the strategic plan is identified between 10% and 13% is really where we would like to see that at some point during the next three years to be, but the goal is to get it at well over 10%.

Well, thank you and good luck and, again, congratulations.

There are no further questions in queue.

I would like to turn the call back over to management for closing remarks.

Thank you very much to everyone, and I guess we will be talking to you, again, in March when we finish the audit of our last quarter.

So until that time, have a good holiday, and we will see you again.

Happy Thanksgiving.

Thank you.

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