ATI Inc (ATI) 2009 Q4 法說會逐字稿

Hello, ladies and gentlemen, and thank you for joining today's Ladish Co. conference call, entitled fourth quarter and year-end results. As a reminder, all lines will be on listen-only mode. We will conduct a question-and-answer session at the conclusion of the call.

At this time it is my pleasure to turn the call over to Mr. Wayne Larsen, so that we may begin.

Thank you. Good morning, everyone. Thanks for dialing in to the call this morning. Gary Vroman is here with me. Gary and I will be sharing duties again today. I'm going to start off and quickly run through some of the results in the numbers. Gary will give you a little more qualitative assessment of the year from his perspective and also a snapshot look as we head into '10 and '11.

Before I go any further, of course, I'll give you the caveat that we may be making some forward-looking statements today, and those will be pursuant to Safe Harbor provisions of the Securities Litigation Reform Act of 1995, and they're subject to risks and uncertainties, and management's opinion. So with that behind us, let's talk about the year and the fourth quarter.

Let's start off talking about the fourth quarter. As we alluded to at the end of the third quarter, the third quarter was clearly the bottom for us last year. We had a nice bounceback in the fourth quarter. Obviously way below '08 levels, but a significant improvement from the third to the fourth quarter. Revenues were up to $83.2 million, but more importantly, you saw in the fourth quarter that we began to head back in to not an area where we're satisfied with but certainly a much better area as far as where we're at as far as gross income. Gross income of $8.7 million in the fourth quarter got us back to 10.5% of sales. The nice part about that is it is actually higher than where we were last year in the fourth quarter, with considerably more sales. A lot of the steps we took during the course of the year to right size the business and get things behind us, I think really played out in the fourth quarter, and you saw that certainly as the percentages on the income came in.

As you work on down through the the rest of the financial statement for the fourth quarter, you ultimately got down to a $3.3 million of pre-tax income. Again, it's certainly a big improvement over the third quarter and where we have been in the first nine months of the year. One of the other important aspects in the fourth quarter, as I'm sure you noted from the statement, is we had a tax provision, which is actually a benefit of about $3.7 million. That tax provision resulted from a credit that we recognized in the fourth quarter from a valuation reserve that we had established for some Wisconsin state taxes that we determined that we were correct on, that we had a credit coming. We recognized the entire credit in the fourth quarter, obviously, so it was a significant benefit for us, and it netted down to a tax credit of $3.7 million. That got us down to net income of $7 million in the fourth quarter or $0.44 a share. Again, significant pickup after the modest loss we experienced in the third quarter, and moderate income in the first half of the year. So overall a nice strong finish for us.

As far as for the year overall, we came in the year with about $350 million in sales, about a 25% reduction from '08. Again, that reduction was somewhat across the board, although there were certain segments of our business that were hurt more than others. Certainly the industrial side of our business took the biggest pounding in '09 versus '08. We look at how our three buckets of sales that we look at, how they worked out for the year. Jet engine sales stayed relatively constant for the year, came in at about 55%. The big gain was on our aerospace sales really driven by helicopter sales, ratcheted up to 33% in '09 from 24% in '08. And correspondingly industrial sales took the biggest dive in '09, as they dropped from 20% in '08, down to 12% in '09. As you look at it by quarter, the fourth quarter numbers were pretty similar to that, although industrial was even down to 11% in '09.

The big drive in the down side of industrial is really twofold. One part of that, obviously, is the big reductions we have seen in sales from our European operations from the Polish facility, though we have also had some reductions in '09 on the industrial side domestically at our main forging facility here in Wisconsin. The upside to that is certainly the domestic side on the industrial side is probably going to be the first to improve as we head into '10. We have already seen from that Caterpillar. I'm sure a lot of you probably saw the article in the Wall Street a couple of weeks ago about the bull whip effect of Cat building their business. And we're already seeing that now, which is partially certainly tied to the build back up of employment that we have experienced already in this first quarter.

Looking further, as far as '09 in general, as you look down through the year, and the results, we came in with a pre-tax income of about $3.1 million, offsetting the small loss we had had in the first nine months of the year, which ultimately got down with the benefit of the tax affect, got us down to $6.6 million in net, or $0.42 a share for the year. Again, significantly down from last year, but certainly a pick up and building in the right direction for where we want to go.

One of the areas that looks year-over-year like there is some significant swing is in our interest experience. Our interest expense for the year in '09 was $5 million versus about $2 million in '08. That's really a reflection of the difference between capitalized interest and expensed interest. In '08 we had a significant amount of interest capitalized because of the large capital expenditure programs we had going on both in Wisconsin and in Oregon. That's pretty much flip flopped year-over-year. So if you look at the true total interest year to year, in '08 the interest was about $4.4 million, versus about $6 million in '09. The higher interest in '09 being from the fact that we ad the $50 million private placement of long-term notes out for the entire year of '09 versus only about a third of the year in '08.

Looking down to probably the highlight of the year overall, clearly had to be the jobs -- all the people in the Company really working on the balance sheet side of the business. We ended the year with almost $20 million in cash on the books, as opposed to last year we were at about $5 million. The real factor being the drive that people did both to generate cash from the business, and also to generate cash from getting the working capital down. Inventories were reduced dramatically during the course of the year as people right sized their business, and got their business in a better position. People also obviously took advantage, brought receivables down. Payables were brought down quite a bit to offset and actually as a result, the fourth quarter, while it was certainly a positive cash throw, it was really a reflection of the business and the driving on the inventory side.

Overall, further down, if you look at where things went on the balance sheet side, depreciation for the year ended up at about $15.4 million, up from about $13.3 million last year. Another positive aspect, obviously is all of the cash flow that was generated as we reduced all of our bank debt during the course of '09, and paid off about a $1.5 million of capital leases that we inherited with the Chin-Tech acquisition. So the backlog is in good shape.

As Gary alluded to in the press release, we saw order of growth in the fourth quarter. We had a really positive fourth quarter as far as order activity. Got the backlogs back up to $504 million. We ended the third quarter at about $475 million, so even though we had obviously positive sales growth in the fourth quarter, we had certainly even more so positive order growth in the fourth quarter. Looking across the other aspects of the Company, we ended the year with employment at about 1,600, down about 19%, almost 20% from where we started the year. While that's obviously not the quite same level as the 25% sales reduction, obviously in this business it's not quite one to one as far as where employment reduction with sales reduction, but overall, I think it balanced out pretty well.

In total it was obviously a challenging year, but I think all of our operations responded well, certainly in the fourth quarter, to get things back in order, and by the fourth quarter obviously we really saw the benefit of a lot of the hard decisions and steps people took during the first nine months to get the business right-sized and to get things going forward.

So that's obviously the financials in a nutshell. I'm going to turn the call over to Gary now to talk about things more from a qualitative side. I will still be here, obviously, with Gary afterwards when we go to questions, and feel free, and we'll both do what we can. So Gary?

Thanks, Wayne. Looking back on 2009, I really feel that Ladish fared pretty well when you consider the hands we were dealt from our customers and from the markets. The demand signals change constantly, and as a result brought our top line sales down that 25% that Wayne talked about. Our focus quickly turned to cost control, operational improvements, cash generation, all of the things that we know how to do, we have done before, and we did very well, quite frankly. Employment levels dropped at 19%, and every knows that is a necessary step but it is, in fact, a disruptive step in a manufacturing organization. Yet despite those disruptions, we were still profitable in 2009, and it prepares us for a better 2010.

As I did say in the press release, we feel those fourth quarter results are a sign of some stability returning to our business. And as much as we would all like it to mean more than that, I can't emphasize enough that that's what we're talking about right now is stability. We are likely in for a period of several months going forward, where we're going to go sideways. We don't expect things to get worse, we don't expect things to get much better. We think this market is going to take a breath. We think our customers are going to figure out where their inventories levels lie, and we're going to figure out, all of collectively, what the second half of the year is going to hold. We still believe the cyclical recovery has in fact begun, and if these world economies cooperate a little bit, there should be these opportunities we talked about for modest growth in the second half of the year.

As we look ahead to the balance of 2010, again, we need be careful not to paint the market with too broad a brush, and by that I mean we have to go beyond big headlines to determine the impact on all of the Ladish businesses. For example, how many planes that Boeing and Airbus are going to build doesn't matter as which as which models are built. Or how big the DOD budget is doesn't matter as much as which programs are funded and what rates those programs are funded. Or how much general industrial business we do and whether we do it here in the States or with our international operations. That doesn't matter as much as what parts are going to be made. And so on and is forth. In other words, 2010 is a year where we still expect recovery, but the degree to which we recover is influenced very much by the mix of the demand and the variability in these inventory levels throughout the supply chain. We think we have better handle on what has happened with destocking, and we think we understand those inventories better now than we certainly did six or nine months ago, but it's bound to be a little messy for a while here in the first half of the year, and we're thinking by mid year we'll be able to see more clearly what the second half of 2010 and beyond is going to bring to our business.

Looking at those three major markets that Wayne talked about -- engines, aerospace and industrial -- on the engine side of the business, while we do prepare military and commercial parts for our customers, the big driver for us is still commercial. And the destocking that has gone on in these engine markets is definitely settling down. We are seeing some true demand, some true orders for some parts that are needed right away from some of our engine customers. Business travel, airline finances, fuel prices, it's the same old story, and that's what is going to tell the tale for this market. There is guarded optimism out there, though, People are starting to make a little bit of money in the airline industry, and we hope that it comes to pass that revenue passenger miles grow. And the more planes we get in the air, the better off we'll be.

On the aerospace side of the business, our helicopter business stays very steady and strong, and we expect it to continue throughout the year. On the space side of our aerospace business, we're certainly disappointed in Washington's approach towards the US presence in space and the Constellation program. It's too early to tell the impact from the President's most recent budget declarations, but that was a little disappointing. I will caution you here that the government fiscal year that we are currently in still does have some funding for space, but the President's budget for the 2011 year and beyond is a little troubling. We'll keep an eye on that situation.

On the industrial side of the business, we have already seen some Caterpillar recovery, and we have even brought back a few people to address that change in demand. We believe that demand should be real as the year goes on. Our foreign operations are still facing a tough climb out of a really hard year last year, and that huge drop in demand that they experienced, but even over there they are seeing some stability and signs of hope on the horizon.

Keep in mind, no matter how the markets go, the improvements we put in place across the business in 2009 are still there. So surviving the worse recession in decades has brought confidence to our employees. They know they can handle whatever the markets dish out. We'll do our best to anticipate, adjust and get everything we can out of this uncertain time, and we expect incremental gains from the modest top-line growth in 2010. We showed what we can do with incremental gains with this cost structure we have in place in the fourth quarter results. I have confident we're going to improve our bottom line in 2010, but we're really looking forward to the second half of 2010 and forward to 2011 and 201 when our markets, we expect, could be back in a big way.

So with that, I have no further comments. Edmund, if we want to open it up for questions, that's fine.

(Operator instructions). Our first question is is from Tyler, you may proceed.

Good morning, guys. Can you hear me okay?

Yes.

Okay, great. The first question is if you can just comment on by-product sales, and if that came back a little bit in the fourth quarter, and what your expectations are for 2010?

The by-product sales market isn't very different than the rest of our markets. If you charted the two, they do have a tendency to trend together. We're still not seeing the by-product sales and the after-market sales that we did a couple, three years ago that I know people remember. I think we need to be cautious about that the same way that we're cautious about our markets going forward.

Understood, but if you could just say up, down, or flat, relative to, say, the third quarter of the year.

Slightly up.

Okay. Very good. And then nice work on the free cash flow, just wondering what your expectations are as we look to 2010?

Certainly our expectations for 2010 are that we will certainly be cash positive again in 2010. I don't have any wild expectations that we'll generate at the end of the day quite the level of cash that we did in '09 because we're not going to be ratcheting our working capital down that much farther as we did in '09. And with business recovering and growing, there's actually some working capital perspective demands, be it on the receivable line or otherwise. But we certainly expect to be positive, Tyler. We also have a few other cash demands in '10 that we're going to have to face. We have a first tranche of our long-term debt that has to be repaid in May, and clearly our pension obligations are going to be higher in '10 than they were in '09.

Okay. Thanks for that color. And just lastly, I think you guys alluded to Aries and the press that was out from the budget yesterday. Would you be able to quantify how much revenue you guys generate on an annualized basis on Aries?

On Aries at this point, Tyler, it's relatively low because the program is still in its infancy. The real issue to us is going to be what kind of future revenues are we going to lose if they cancel the program.

We're not talking about a huge impact in our 2010 year. We're talking about what it means to us in three and five and seven years if that program doesn't go forward.

I see, great, thanks.

I was just going to say, we don't break it out any more so than just telling you it is in the aerospace group.

Okay, thank you very much.

Our next question is from JB Groh, you may proceed.

Good morning, guys. I just had a question. You obviously did a great job on the margins in Q4, and I'm assuming some of that is maybe productivity with keeping experienced workforce around and maybe the people that you had, the reductions that you made were maybe some of the guys that didn't have as much experience and that kind of thing. I'm just wondering if you could comment on the sustainability of that margin number. If we go sideways in terms of revenues in the first half of the year, can you hold that, or are there other specific things in there that wouldn't stick around? Or are there certain things in the first two quarters that would make it more difficult to keep that double-digit gross margin?

No, we expect to maintain where we're at at this stage J.B. We don't expect to lose ground. There are always issues quarter-to-quarter. The first quarter is usually our worst quarter for energy expense and heating because of our lovely Wisconsin winters. So there's some variable in some areas like that. But we don't expect to lose ground as far as with the productivity gains we have achieved.

Okay. And are you guys running stuff through the new press now? What sort of utilization are you getting out of that? Is it basically idle, are you running some stuff through it but not full bore? How would you characterize that?

I would characterize it as, yes, we are running stuff through the new press, and when the engine markets recover we're going to be very happy that we have that press available for that isothermal capacity. Right now it's mainly going through qualification programs with our largest jet engine customers in preparation for the build up.

So, when you say that, does that mean it's generating product that you are able to -- a salable product, right?

Technically the answer is yes, because you make a small qualification run, and some of those qualification pieces can be sold, but practically speaking, no it's not considered a production unit yet. I mean it's production ready, but we're not producing anything that's going to make a difference in the numbers in the first part of the year.

But bottom line a year out or something, efficiency improves pretty dramatically there.

Available capacity helps, and incrementally it will help that we have that unit available. And yes, we have expect some good benefits from that unit being available next year.

Okay. And maybe this might be helpful, of the 33%, that's, quote/unquote, aerospace, how is the mix of that between what we would consider space, and what is more helicopter driven?

It's much more helicopter driven. The thing about the space business is it has a tendency to come in waves in our business, and when programs occur it can be very good for our business to have what we call building 66, where that equipment is that makes most of those space parts, have building 66 busy is good for our business. It's not hurting us, necessarily, because we haven't had a lot of space business in the last few years, but it could be very helpful in the future, if Constellation and Aries and all of those other launch vehicle opportunities come to pass.

So great margins on that, but fairly lumpy in terms of how it hits.

Yes, that's well said.

Great. Thanks for the color and good job, guys.

Our next question is from Steve Levenson. Steve, you may proceed. Mr. Levenson if you have your phone muted --

I'm here now, sorry about that, thank you. Nice to see things turning. You've done a great job bringing down the inventory. Can you tell us, though, what your situation is with raw materials, and what sort of lead times you're seeing? Will you be able to get material in to the house to deliver the parts on the sort of schedules you are expecting?

We have had constant conversations with our raw material suppliers, and today, the OEMs are even more closely tied to the raw material suppliers. So there's much better communication as we go up this time in the cycle than there was in the previous three or four cycles. I feel that we have just talked it to death, and we feel that we are prepared for this upswing in raw materials. We're not going to carry them here until we need them to make product, but I do feel that we're prepared and people are communicating very well in the supply chain.

Okay. Thanks. Does that include the powder materials too?

Powder materials, yes. We have had those conversations, and as you know from previous conversations, we would still prefer to have more options when it comes to powder materials than what we have, but we're working those issues as well.

Okay, thanks. On the orders that you are beginning to see, do you believe they are more OEM or after-market parts?

I'm going to bail out on you and tell you that it's a mix. I can think of situations where it's definitely after market, and I can think of situations where it's definitely OEM build. We're not seeing the spares activity, and the after-market activity that we would expect clearly because the airlines aren't flying as many planes. But there are both things going on out in the market right now, mainly because whether it's inventory for somebody to ramp up their build or whether it's inventory for spares and after market, there just isn't as much inventory. So both things are happening.

Okay, thanks. Last, on the helicopter situation. The defense budget came out yesterday. It sounds like things are pretty good for helicopters. Which ones, if you can say, help you the most, or are you on every single rotocraft that's out there?

I'm not shy about telling you that Sikorsky helicopter is our bigger helicopter, but we're also on plenty of other helicopter platforms. But the top is Sikorsky, and we like the Blackhawks and Seahawks.

Great, thanks very much.

Our next question is from Eric Hugel. Eric, you may proceed.

How are doing? Good quarter here. Just a quick question, the rest have been answered. Are you guys done with plant shutdowns or any other upcoming maintenance events coming up for you guys?

For the most part, plant shutdowns and maintenance events were taken care of in the calendar year 2009. Depending on which Ladish business we're talking about, there are still some other opportunities for us to take some downtime and get ready. For the most part the answer is yes, we're done with those. There is just a pocket here and a pocket there where we're still going to do some limited shutdowns.

Fair enough, thank you, guys.

Our next question is from Tom Lewis. Tom, you may proceed.

Good morning. First question, looking out over the next four to six quarters in addition to what you already mentioned about developmental work on the new press, can you give us a sense of the degree to which your mix will include work that could be classified as developmental compared to normal or in absolute terms either way.

The vast majority of our work will be to support existing programs. Developmental programs are ongoing throughout our markets, whether it's engines or whether it's aerospace. But the buildup -- I hope I'm answering your question, if not, ask it again -- the vast majority of our sales for the next four to six quarters are going to be driven by existing programs, not developmental work.

Okay. How about relative to your normal experience? I mean, there's always some, but sometimes it's higher than normal, sometimes it's lower than normal, would you characterize it as lower than normal over the next couple of years?

I wouldn't call it lower than normal, Tom, I would say it is probably pretty indicative of what we typically experience. The only thing I would add to what Gary said was one of the programs obviously that is going to be a big program for us in the future is the new Rolls engine for the Airbus 350 XWB, and that program, obviously, while I wouldn't consider it developmental, Rolls is working on a new engine, we're obviously working with it them, and it's going to be a great engine for us. We're working on that now, and that will continue into the future.

Okay. I'm glad you mentioned that Cat article. In reading it, I would think that given your size relative to a lot of those suppliers, and how much of that small degree to which that sort of business is a part of what you do, that we can assume that managing that particular upturn in business is not particularly challenging to you guys. But I was also thinking that it might be pretty emblematic of the challenges that you faced as aerospace business ebbs and flows. Is that a fair characterization?

When the Caterpillar business picks up, the activity is very heavy in what we call the hot end of the business, in the forge shop and down at the end. There's not as much post-forge processing on Caterpillar. And we do need more human resources in our forge shop areas and in our cleaning and grinding and post processing of those forgings. So it's interesting that the Caterpillar work when it comes back signals an increase to our workforce in the forge shop, and then because they typically lead, it actually sets us very well for when the aerospace business starts to return.

Okay. And question with respect to the gross margin improvement. Am I correct in recalling that last year fourth quarter you were very skewed to industrial product and that was a part of that being an abnormally low gross margin year ago?

Yes, fourth quarter last year, Tom, the industrial side of the business was about 20% versus 11% this year, so that certainly is one factor of you see the gross margin improvement that you do. And that was, again, partially skewed to the European side of the business. We had domestic falloff, but we had a much bigger falloff on the industrial side in Poland.

Right. And last question is there anything that you could point to that would be a good reason to back off of the assumption that your revenues this quarter Q1 probably would probably be a bit more than they were in Q4?

The reason that there's this pause on our end is we don't know. Steady and sideways, and flat. I'm trying to decide how many different ways I can say that we just expect to go sideways for a while. Our customers are all across the board as we have conversations with them, trying to figure out themselves what 2010 holds for them. And as I said, we don't expect it's going to go down, but I don't want to get people's hopes up that it's going to go up significantly, so could you just let us stay with sideways?

Yes. Is the downtime that you took at the end of the fourth quarter that much different than the days of downtime in the first quarter then?

It is a little different. We will have a few more working days in the first quarter than we did in the fourth.

All right. Let's leave it at that then. Thanks, bye.

Our next question is from [Frank Flich], Frank you may proceed.

Yes, you mentioned by-product sales. And the prices for some scrap products, particularly titanium are up significantly from last years lows, although historically maybe they are still not that high. So can you just give us a little more color? Are you still holding scrap and waiting for higher prices or are you selling it off steadily?

It's more toward the latter. Selling it off steadily. If we were holding, which we did periodically over the last 12 to 18 months, there would be month here or a month there that we would hold, hoping that the price was going to change. It was just for a short period of time. It wasn't like we were building a mountain of scrap over the course of six or eight or ten months. And you characterize the difference in price as up a little bit. It is just up a little bit. The scrap sales also are sometimes tied to availability of raw material, and into deals that we have with raw material suppliers, and OEMs and LTAs. So it's a complicated mix, and, no, we're not holding our scrap right now. We are selling it.

The point you made was that you were selling it, but the prices historically still are relatively low?

They are still relatively low historically, yes.

Thank you. What aerospace programs do you see as critical looking out ahead?

They are all critical to us. There are very few aerospace programs in which we don't participate.

Thank you.

Our next question is from JB Groh. JB, you may proceed.

Couple more while we've got the time. I had a question on 787 and the engine programs there in particular. It sounds like everyone has been working through some inventory that has been slopping around in the chain for a while. But when would you expect, if the production schedule is as Boeing says it is going to be and they're going to build 30 this year before certification, what are your expectations in terms of when your customers are going to turn you back on and start producing parts specifically for those two engine programs for the 87?

I don't see it making a significant difference to our business until mid-to late in the second half of the year, JB.

So there's still some stuff out there that they are working through, but it would be sometime middle of this year that you would get some sort of uptick?

Yes, I think we're going to have a much better idea in the middle of this year for what the balance of the year holds, and for what 2011 holds. Because this destocking that has gone on, and as these programs gear back up again, and people start building planes and flying planes, we still don't truly understand what inventory is in the system at every level of the supply chain. And that's why we continue to give you wishy-washy guarded answers about when the pickup is going to influence our bottom line.

I guess you are on both of those engines, correct?

Yes, we are.

And could you characterize how many ship sets you have sent out the door? It's going to be more than two engines per plane with some spares and that kind of thing? But how should we think about what has already been shipped versus what the potential is?

We haven't broken it down like that in the past, and I'm not comfortable breaking it down right now.

The problem we always wrestle with at the start of any program, JB, is we don't know how many parts are getting lost in cut-ups, how many parts are getting lost in spin trials. And the OEMs are zealous in not telling us that information. They don't want to tell anybody that information. So we're always playing in the dark at the start of any new engine program.

That makes perfect sense. You mentioned LTA. What are the significant rollovers here in the next couple of years? I know you anniversaried a couple not so long ago, but what is the status there?

Over the course of the next 18 months, we will have discussions with some of our larger customers including Rolls-Royce and GE for some rollovers on LTAs and there is also some more negotiation going on in the helicopter side too. There was a period of relative inactivity over the last couple of years, and now going into the next couple of years we're going to have more activity with our bigger customers.

And I guess a little bit of an upturn in the industry doesn't hurt your position in that regard?

We'll be happy just to go do what we expected we were going to do with these LTAs, and continue to support them with their programs. We put in a isothermal press for a reason. When these businesses return for the OEMs, when their business levels return, it is going to require capacity on our end. So we're just going to be happy to get it back to where we thought it was going to be when we were planning all this two and three years ago.

Obviously that wasn't built on spec and we're not where you had hoped to have been a couple of years ago, right?

Right.

Okay, thanks a lot.

Our next question is from Rob Harper. Rob, you may proceed.

(inaudible) operations. Obviously when you bought it, you thought you could keep the industrial business fairly steady while you got certified for some higher-margin business, and obviously the industrial economy hurt you there. But can you fill us in on the certification for the higher-margin business when it comes back?

I want to be sensitive to the fact that there are some competitive things here, so I don't want to talk specifically. In general. And you broke up at the beginning. Area you talking about the Polish operations?

Yes, Polish operations.

Okay. We are having some very good progress. We have made some very good progress over in Poland, building our aerospace base of business, and at the same time trying to become more efficient on the industrial side of the business. As the aerospace business picks up, and as the industrial business comes back, both things are going to help the Polish operations.

So you are pretty confident that you have enough certifications now that when the engine business or whatever the higher margin stuff comes back, you can fill your order book a little better?

I'm confident that as the aerospace business returns, that what we're doing right now to become qualified on certain programs over in Poland is going to bring benefits to our business in the future.

Great, Thank you.

Our next question is from Tyler. Tyler, you may proceed.

What percentage of ZKM's business is actually aerospace today?

We don't break it out, Tyler.

Okay. Would it be possible to say how many aerospace customers you have, basically filling out that production process?

I will tell you that we have right now at least a half dozen aerospace customers that we're actively either talking to and making parts for, or we know that we will be making parts for.

Okay, that's helpful. And then just lastly for me, your key competitor indicated that they recently had two smaller forging outages recently. Just wondering if that perhaps could lead to a nearer-term pickup for you guys?

No, not in that case.

Great, thank you.

We have no further questions at this time.

Okay. If everybody has got their questions in, we'll let everybody move on for the rest of their day. We appreciate everybody calling in today. If you have any follow-ups or anything, obviously give me a call. I'm sure you have all got my phone number. So hang in there for the first quarter, we'll continue to do what we do here, and we'll be talking to you in April. Thanks, everybody.

Thank you, ladies and gentlemen. This call has been concluded.