CPI Aerostructures Inc (CVU) 2008 Q2 法說會逐字稿

Good day, everyone, and welcome to the CPI Aero second-quarter 2008 conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode.

I will now turn the conference over to Mr. Ed Fred, President and CEO. Please go ahead, sir.

Thank you, Nicole. Good morning and thank you all for joining us for our second-quarter 2008 conference call. If you need a copy of the press release issued today, please contact Lena Cati of The Equity Group at 212-836-9611, and she will fax or e-mail a copy to you. Also, if you would like to listen to this call again, you can hear a replay on our website's Investor Relations section in about an hour at www.cpiaero.com.

Before we get started, I want to remind investors that this conference call will contain forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. Included in these risks are the government's ability to terminate their contracts with us at any time, the government's ability to reduce or modify its contracts if its requirements or budgetary constraints change, the government's right to suspend or bar us from doing business with them, as well as competition in the bidding process for government contracts.

Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statements contained in this conference call. Additional information concerning these risks can be found in our filings with the SEC.

This morning, I will give you a brief overview of our first-half results, current business environment, our outlook for the rest of 2008 and our long-term projections through 2011. Then I will hand the call over to Vince Palazzolo, our CFO, so he can walk you through the financial statement details. Then we will briefly wrap things up and open the call to questions.

As reported earlier this morning, for the first half of 2008, revenue was approximately $16.9 million compared to approximately $13 million in the first half of 2007, an increase of 31%. Pretax income was approximately $1,190,000 compared to pretax income of approximately $1,362,000 for the same period last year. Net income for the first half of 2008 was approximately $790,000 or $0.13 per diluted share compared to net income of approximately $844,000 or $0.14 per diluted share in the first half of 2007.

So with that prelude, let me introduce Vince Palazzolo so he can walk you through the details of this quarter. When he is done, I will come back on and then open the floor to questions. Vince?

Thank you, Ed. As reported earlier this morning, revenue increased approximately 22% to $9,128,406 in the second quarter of 2008 from $7,490,669 in the second quarter of 2007. Gross margin was 22% as compared to 29% in the prior-year second quarter.

As expected, the gross margin for both the second quarter and the first half of 2008 was close to the annualized gross margin expectations of 24% as we commenced various long-term programs that tend to be less profitable in the early stages. This is because of significant costs in both labor and material as we performed planning and engineering necessary to build the initial units for customer approval before we proceed with large-scale production. As we transition into the production phase, we will benefit from purchasing and labor economies, which should be increasingly evident in the years to come due to the operating leverage that comes with volume.

Pretax income was $552,812 compared to $926,448 in the prior year's second quarter, and net income was $369,812 or $0.06 per diluted share compared to $575,448 or $0.10 per diluted share in the second quarter of 2007.

SG&A expenses for the second quarter of 2008 were approximately $1,448,000 or 15.9% of revenue compared to approximately $1,262,000 or 16.8% of revenue for the second quarter of 2007. SG&A expenses for the first six months of the year were approximately $2,664,000 or 15.7% of revenue compared to approximately $2,186,000 or 16.9% of revenue for the first half of 2007.

New orders for 2008 through August 4, including new releases on previously awarded contracts, rose nearly 143% to $39 million as compared to $16 million for the same time frame in 2007. Unawarded solicitations remain at a high level, with open solicitations totaling a maximum realizable value of approximately $231 million.

At this point, let me hand the call back over to Ed for an overview of the business.

Thanks, Vince. As just reported, new orders through August 4 were $39 million compared to $16 million during the same period in 2007. This represents the largest award year in CPI Aero's history, and we still have nearly five months left to win new work.

Related to that, we anticipate that the balance of the year will remain strong for awards as we continue to diversify our customer base. We expect that our future revenue mix will reflect a larger proportion of work to be performed in our capacity as a subcontractor to major prime contractors. Importantly, the size and duration of these contracts, as well as the stature of the companies that awarded them, give us confidence in CPI Aero's long-term growth prospects.

Among the major recent awards -- a long-term requirements contract of approximately $70 million from The Boeing Company to provide assemblies for 242 enhanced wings for the A-10 Thunderbolt attack jet. The initial orders under this contract were for $13.2 million.

An initial order of $7.9 million as part of a $98 million agreement with a leading global aerospace and defense company to provide structural kits for an in-production aircraft. The eight-year agreement has the potential to generate up to $150 million in revenue to CPI Aero over the life of the program.

A long-term, multi-million dollar contract with Spirit AeroSystems for major aerostructure assemblies for the Gulfstream G650 aircraft, for which CPI will build fixed leading-edge assemblies. This contract should be a significant revenue generator for us in the years to come.

There are also a number of Sikorsky programs that represent repeat business, like the Hover Infra Red Reduction System, or HIRRS, module assemblies for use on the UH-60 Black Hawk helicopter, as well as programs that have large requirements and therefore offer follow-on order potential, such as the awards for the S-92 helicopter.

It is important that I point out the distinction and explain the long-term impact these aforementioned programs will have on CPI Aero's future. Unlike the C-5 TOP contract that the Company was awarded back in 2004, these contracts are not ID/IQ, standing for indefinite delivery/indefinite quantity awards. For some of these programs, the US government, in the case of the A-10 and the in-production aircraft, has established a requirement for continued production or a complete modification of certain structure and has a funding and delivery plan in place.

These programs should be viewed as being quite similar to the Company's T-38 program, which has been funded consistently since 2001 and is our most successful program to date. The only real difference is that we are supplying structural parts to major defense companies instead of directly through the Department of Defense. It is anticipated these programs will be fully funded, as outlined by the US government.

While the Spirit program differs slightly in that it is a new production aircraft being produced by Gulfstream, one has to look at the initial interest in this plane. Never in the history of the executive corporate jet industry has the public expressed this type of enthusiasm for an executive jet. Over 500 initial orders have been received, which gives us confidence that this, too, will become a very successful program for CPI Aero.

Lastly, our relationship with Sikorsky grows stronger every day and we look forward to a very fruitful future for both companies. Sikorsky is one of the most highly respected helicopter manufacturers in the world, and it is an honor that CPI Aero's abilities are being recognized through increased contract awards and the confidence that Sikorsky has shown in us.

Based on all of these factors, we affirm our current 2008 guidance, which calls for revenue of $35 million, a 25% increase over 2007, and net income of approximately $2.6 million, a year-over-year increase of 37%. Also, we now have significant visibility into our customers' delivery schedules, and as a result, our revenue and profits going forward.

Understanding the forecast may change due to adjustments in customer requirements, based on the most current information we have available, CPI Aero projects 2009 revenue to be in the range of $42 million to $45 million, with a resulting net income in the range of $3.9 million to $4.3 million. Additionally, CPI Aero projects that, using 2008 as a baseline, for the three-year period ending in 2011, we will achieve a compounded annual growth rate for revenue in the range of 30% to 35%, with a resulting compounded annual growth rate for the net income in the range of 50% to 60%.

In an effort to make the markets aware of the tremendous growth CPI Aero has and will experience, we will be increasing our IR efforts and will be on the road meeting with institutional investors and analysts in one-on-one or group meetings. We will be visiting New York City, Boston, Dallas and various locations along the West Coast during the next two months. So if you would like to schedule a meeting, please contact Lena Cati at 212-836-9611, and she will let you know when we plan to be in your area. Additionally, Vince and I are always available for conference calls, and we would also welcome visits by institutional investors and analysts.

Before closing, I would like to thank all our shareholders for your continued support of CPI Aero, and I assure you that your management team and your Board of Directors is working diligently to continue this profitable growth and reach our full potential as the world's premier small-business supplier of small aircraft structure.

I would be remiss if I didn't once again thank the CPI management team for sharing my vision of where we can take this Company, but more importantly, for working so diligently to make it happen. I would also like to thank all of the employees of CPI Aero for executing on that vision and being an integral part in enabling us to win such impressive awards as the ones I mentioned earlier.

I look forward to the future of this Company with great eagerness and anticipation of now executing on these contracts and then obtaining new ones due to the quality of the products we produce. CPI Aero's future has never been brighter, and we look forward to continued growth for years to come.

At this point, I would like to open the floor to questions. Nicole, before you open it up, though, I do have one question that was submitted in writing. The gentleman only gave us a first name. His name is Tony. And his basic question was that CPI Aero's balance sheet presently shows $35,021,000 in net receivables. I believe this was from the first quarter. And he then goes on to ask, I would like to know if Vice and Ed are comfortable with this number. If not, are they planning to do something about it?

In response to that, Tony, I will simply say to you that that net receivable number is made up of accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts, that account -- that comes with doing percentage of completion accounting, so that the real receivables number, actual accounts receivable, things that have been billed out, usually ranges between $2.5 million to $3 million.

Now, as we grow bigger, that number will get bigger. So will the costs and estimated earnings account. As we continue to grow, that account grows with it because it takes into account all of the work we have in process. So our true receivables are nowhere near $35 million at this moment. They're more in the $3 million range. So I hope that answers your question fully.

And with that, Nicole, if you would open up the floor to questions, we would appreciate it.

(Operator Instructions). Russ Silvestri, SKIRITAI Capital.

I actually had, I guess, three questions. First of all, given the gross margin where it is currently, can you talk a little bit about what the target margin is and just maybe walk me through a little bit of what your expectations are for the next let's say four quarters for gross margin as you look out, given the visibility you have on the revenue side? That's question one.

And then question two is, in regards to SG&A, I think in the press release you said it will be significantly lower in the second half. And I'm trying to get my arms around significantly.

And the other question related to Spirit, in terms of the opportunity there. I know you're in the Citation plane, but are there other ones outside of that? And the last one, upcoming bids that you are working on that you expect would be submitted in the next three to six months?

To answer the last one, and I didn't catch the end of the last question. I know you asked about Spirit -- are we looking at other companies, other jets? We are always looking at other opportunities. What we obviously like to do is, when we enter a new platform, we like to use that as an entree to get into other companies with that same platform. So, yes, working for Spirit and indirectly for Gulfstream will enable us to go after other biz jet manufactures and see what we can do for them. Again, I didn't catch the --

Just looking at the Spirit opportunity, what you're going to be producing in '08 and '09, if they achieve their target in terms of what is on tap for orders, what does that mean for you in revenue opportunity?

Well, I can't go into what they're -- right now, we have a contract for 134 ship-sets. The fact that they have over 500 orders at this moment, initial orders, would only mean, obviously, much more revenue than we're even projecting at this moment. I can't go out on a limb at this moment to tell you what that is going to be. One, they've never done that publicly, and two, it would probably be irresponsible of me to even try that.

Currently you have a contract with Gulfstream for 125?

134, and it is with Spirit, not Gulfstream.

Okay, Spirit, right.

Right. Okay?

Okay.

The other two parts of the question, the first two parts, I will let Vince handle.

The first question you had asked on the gross margin, what we look gross margin to be, our target gross margin for all of 2008 is 24%, which standing with that number is the target gross margin. We were at about 23% through the first half of the year. So I guess you need to be, we expect -- do the math to be a little bit higher than that to get us to 24% for a blended rate over the entire year.

And then your second question was on the SG&A -- what is significantly different? In the first half of 2008 or first half of any year, in our case, but this year's exact numbers, we have stock option charges, which are the fees that we pay to the Board of Directors. Those stock option charges totaled roughly $0.5 million. I thin it was $460,000 and change.

Those do not recur in the second half of the year. Based on the accounting rules in place, you have to take the entire expense in the shortest period available, which would be, in the case of these options, the vesting period, which is immediate. So as soon as you issue the option, you have to take the entire charge. The charge is computed based upon the Black-Scholes option pricing model. So you get one big hit as soon as you issue them. That does not occur in the second half. So you would expect a slightly higher margin in the second half of the year and at least $0.5 million less in SG&A.

Going back to this gross margin line, can you just tell me how much of it, I guess, would be -- the drag would be a result of unused capacity or I guess would be more -- manifest itself as depreciation? How do you look at it in terms of that build in capacity, and how much did that drag down gross margins?

That unused capacity has no effect on our gross margin. Our gross margin, because of the percentage of completion method, you have to extraopolate out all your costs until the conclusion of the production or the initial units that we're building to date and get a gross margin. Then when you get your next order, say, and you have a volume order, then you recompute your gross margin based on the entire contracted date amount. And once you get a higher-volume order in, you will get higher margins to go along with it.

Did I explain that?

I think so. I'm just trying to understand how the gross margin should be stepping up as we go out in time, as the orders increase.

Oh, in the future years?

Yes.

Ed can talk about --

Yes, I think, Russ, you have to look at a couple of things here. And I will piggyback onto what Vince was saying. When you get, for example, just a minimum order or produce two units, your EAC, which determines your gross margin, is based on two units' worth of product. Well, the cost of making two units is much, much higher than the cost per unit of making 100.

So we have gotten a lot of preliminary work now on some very, very big programs. So it is dragging the gross margin down with it a little bit. That is the nature of the beast. And while it may make people a little bit unhappy, it is the same thing that allows that margin to grow as we get production runs.

A prime example I'll give you is the T-38 program. On the first order of T-38s we did, we probably were in the mid- to high 20s as a gross margin. That job is now a consistent mid-30s producer because we have gotten past all the costs. You get economies of scale the more you're building, et cetera. That will happen with the A-10 program, with the Spirit program, and with the -- and the other large aerospace unnamed global world leader program. And so that is how the rate itself will step up.

Now, that's in -- I will call it, for lack of a better term, I will call it pure gross margin. Then, as we get bigger and we start to hit the kinds of numbers you saw in our long-term projections, the rates will go up as well, a point or two or even three, perhaps that way down in the out years, just from the fact that we've completely covered the overhead costs of the Company, both from an SG&A and a factory overhead level. And therefore, you drop a stronger or a bigger piece of your dollar down to the bottom line.

So that is why, when you see the revenue growth rate being at 30% to 35%, but the net income growth rate being the 50% to 60%, it's those factors that come into play. Okay?

Yes, I think I'm getting it. In terms of the, what is it, the C-5, what percent of your revenue came from that this quarter?

C-5 this quarter?

It was the C-5, right? Yes.

I would say it's probably under $750,000.

The amount of work that we have done period over period for the government is dropping not only as a percentage of our overall business, but in pure dollars, has gone down. Our business as subcontractors has increased with a very large -- in dollars and in percentage dramatically. So, although I don't know the exact number that we reported on the C-5 TOP contract in this quarter or in this first half of the year, it is dropping both in dollars and as a percentage of our business.

Russ, if you want a specific answer to that, you can call Vince after this call. And he will be able to find the number for you in five minutes. I think what is important to point out is we're projecting all of this growth both this year, next year and then the following two years out through '11, without expecting major growth in the government contracting area.

The reason is very simple. Do I think it won't grow? Not necessarily, but we're in a three-year pattern of seeing the government spending for repair and replacement parts, the stuff that was our forte, our bread and butter, it is still stagnant. Will it change after the war -- I mean, after the presidential election? Will the war change its face somehow? I would like to believe so and I would like to believe that that will become an additional growth item for CPI, but it is not built into our projections because we just don't see it happening yet.

If people had held a gun to my head over the last three years and said, tell me when it's going to change, I would be a dead man by now, because I never saw this thing dragging out this way. And it is not just CPI's problem, as I've mentioned on conference calls many times. I am in direct contact with my competitors. A lot of my competitors I've known for years. We have personal relationships. They're all experiencing the same thing.

So, the importance of the C-5 right now is minimal at best to the numbers you saw today. Does that mean that if it comes back, the C-5 couldn't be a huge growth driver on top of what I've already projected? Yes, absolutely. It would be one of the nice little surprises for us, to make things look even better.

What was depreciation in the quarter?

One second.

$60,000, $65,000.

$60,000 to $65,000.

Adam Mizel, Aquifer Capital.

A couple questions. First, based on the new contracts that you have won, do you have enough production capacity or do you need to expand the facility and/or resources to meet the current contracts?

We're absolutely fine. I don't see us needing more space at this moment at all. Could there be factors that change that down the road? Yes, absolutely. But the projections we've given today do not require any additional capacity from a building standpoint.

Obviously, we don't buy machinery, so that is not a requirement either. We won't have large CapEx. The only capacity issues, if you will, would be getting enough people in here to do the assembly work, and they would be direct employees. That's all we'd need. We don't need to increase our G&A staff or anything like that to accomplish this.

So it is simply a matter of hiring direct personnel, which, again, we embarked on that process basically, I guess, a month, month and a half, two months ago, and with some terrific results. So we believe we're very, very well positioned to be able to handle this growth with very, very little heartache or pain or anything else.

And with -- you said you have $231 million of open solicitations.

Yes, sir.

That will increase, I'm sure, over time, and/or things that you wouldn't even expect to see, whether it's the C-5 comes back or Sikorsky awards you more business. At what point in additional growth do you then come against the next step-up, where you need more fixed costs, more physical plant, where you really need to expand to the next level?

It is not a dollar value, Adam. It is a product mix value, if you will. There are certain -- we could get certain programs. If the parts are large enough and the revenue is large enough from them, it makes almost no impact at all here. If we got loaded up with Sikorsky work, it is very possible that, given the wide variety of work they have available and the kinds of assemblies that have to be done for them, it is very possible at that point.

But again, that is not a dollar value. It will depend on what the product mix is that would determine whether or not we would have to get additional facilities space. And then, even in that, there becomes a decision. And that is, do you get a, quote/unquote, warehousing facility where you put all of your shipping material and all of your nonproduction items there, so that, yes, you're running somebody back and forth all day long, but it is still cost-effective to do that? Or did you get enough work from one of these customers where you say, you know what, let's take 5000, 7000, 10,000 square feet and make it a blank facility, and you fill in the blank -- is it a Sikorsky facility? Is it a Boeing facility? Is it a Spirit facility? That remains to be seen, but that is the other alternative.

I hope I get stuck with that problem, quite frankly. Right now, we are good to go. And like I said, we can achieve these numbers without picking up additional capacity, based on the work we know we have that is going to generate these. If we get more, then it will be a very nice problem to say, you know what, I need 10,000 square feet more space than I have today.

Okay, got it. You guys, as you said, given the significant customers that you've recently added and the long-term nature of their production schedules and the planning around, that you've been able to give a reasonable look going forward, can you give a little context on how conservative or not the guidance you provided is and the kinds of ways there may be either upside or downside risks to those when you look out over the next couple years?

Adam I really can't go much further than I went in this press release. Obviously, there is some conservatism built in. I wouldn't have picked the top possible number we could hit and put that out there. I also did not go, as my history will show, I did not go ridiculously low with these, either. I think these are very solid, very makeable projections and targets over the next three years, based on the Spirit work that we currently have in house, Boeing A-10 work, the Sikorsky work and the work from the other global defense leader.

That also goes in with the other work that we have here that we have been doing for awhile and will still continue. Is there upside? There's certainly upside. There is tons of potential for upside. Is there downside? There's always downside when you make a projection like this. Obviously, and again, I think my history points to the fact I don't give guidance, and I certainly don't go out three years, unless I have a fairly high confidence level that we can achieve these numbers.

So what are the risk factors to achieving them? Are they things that you have to manage against to make sure you do make those numbers?

I'm not sure it's anything we necessarily have to manage against. It's going to be -- you know, there is a risk factor, okay? The US government wants to re-wing all or 242 A-10s. We are a supplier to Boeing for $70 million worth of that, and there is a very defined schedule out there, or I should say internally, between Boeing, ourselves, the government. I don't know if it's been published. But there is a very defined schedule as to when deliveries will be made and when we have to build.

What is a risk? Is it a risk that perhaps we have a change in administration who decides we don't want the A-10 anymore or we only want to do 120 of these aircraft? Sure. That is a risk. Do I see it as a strong risk, based on the mission that is provided by the A-10 and the fact that we have no other aircraft in our entire fleet of aircraft that can perform this? No, I don't think it is a heavy-duty risk. Otherwise, I would have brought my projections down, mitigating against that risk. Obviously, I did not in my projections take 100% of every number we have and stick it out there to you folks, because then that doesn't allow for any risk mitigation at all.

It sounds on track. As you guys look out more broadly at your business, what are you looking at that continues to give you a lot of confidence about the next Boeing or the next Spirit, whatever it may be or whatever is out there?

What am I looking at? I think what I'm looking at is the customers we've developed, we probably have developed them over the last year, but where we have been able to proudly call customers now this year, the fact that we now have Boeing work, the fact that we have Spirit work, the fact that Sikorsky has looked at us as such a wonderful supplier to them, I think these things help us in two ways.

One, it's going to help us get more work out of each of these suppliers. All of those companies are loaded with work and are actively looking for subcontractors to perform some of the work for them.

The other thing is, it opens other doors to us. When you are a supplier to Boeing, that opens doors at other major aerospace companies that perhaps never would have looked at you before. When you can list the Boeing as one of your customers, that is a huge deal. When you can list a Sikorsky as someone you supply helicopter parts to, it opens the door to the other helicopter manufacturers. And when you list Spirit and are able to say you are building four Gulfstream, it opens up the other executive jet companies to you that normally would not have taken a look at you.

I think what we are doing here is raising the scope of who CPI is. We're getting on people's radar. People are starting to know who we are before we introduce ourselves to them. And that will only open more and more doors to us.

And as an example, when you said a little while ago that we've got $230 million worth of backlog, I'm not sure it is not getting lost on everyone reading our press release or listening to this call that that number was approximately the same last quarter, yet in between those 90 days, we received major awards. You saw the dollar amounts -- one for $70 million, one for $98 million. Those were in that first-quarter number. And yet even pulling those out now as wins and no longer in the backlog, the backlog stands at $231 million.

Well, it is not just we're bidding on anything in sight, obviously. We are bidding on things that we're being asked to bid on, being given proposals to bid on, which should tell the whole world the kind of exposure we are getting and how well we are performing on the things we're already doing for these companies.

Great. I look forward to seeing more wins, then.

So are we, Adam.

(Operator Instructions). Michael Potter, Monarch Capital.

Congratulations. Really continued great progress. And as a longtime investor, I appreciate the strong guidance looking out.

Just a couple follow-ons to what you have been speaking of. I know our work with Sikorsky course has been picking up, obviously, through the announcements over the past year and a half to two years. Is there additional work or additional programs with Sikorsky that we're going after, and is there any opportunities on their commercial end?

The S-92 is a commercial helicopter and is also being used for things like search and rescue, oilwell stuff, governmental use, things like that. There is, in my opinion, an endless supply of work at Sikorsky as long as this Company continues to produce the way it has, and we fully intend to.

We have tremendous focus on the Sikorsky programs. We think they are an absolutely wonderful customer. They have tremendous backlog on all of their programs. And we will continue to pursue every single program they have and look to always spread our wings, if you will, in that company for other platforms to work on.

Right now, obviously, the big things are the Black Hawk and the S-92, but there are others. We have bid other things. We will continue to bid other things. And as they come along, we will take on just about anything, because in reality, you are building the same type of structure for any one of these aircraft. It is just a matter of getting into those programs, which, like I said, we have a full-point effort on right now.

And with regard to the pipeline, I think this question was touched upon prior. Are there any particularly large programs that we are currently focused on similar to the A-10 that we have?

There are. I can't get into what they are, obviously, but yes, there are. Look, the way CPI has always done business and why we have been very successful and why we were so highly rated back five years ago, when we were doing all this governmental work, et cetera, is that CPI has to manage a program the same way, whether it's a $50,000 program or a $50 million program. The work effort is exactly the same. You have to have a program management function on it, procurement people, expediters, engineers, et cetera.

It is much more beneficial to us if we can win large programs that have repeat production on it, like the A-10, like Spirit, like this other aerospace company's work, and like the T-38 has been for all these years. You can reduce your overheads greatly because you don't need as many people to make $70 million, if you will, that you need if you did it the way we did it five years ago. So we are constantly looking for the bigger, greater production programs.

Just to give you an example, the best year we had prior to this year was, I want to say 2005? 2004? 2005. We did $30 million. We did it while running 350 contracts at one time. We are now going to do $35 million this year, and we are under 200 contracts, and sinking rapidly, because these government contracts, once we're finishing them, there is nothing in the governmental pipeline at the moment. So we are reducing the number of contracts.

So when you take these projections I've put out today and look at those and realize that those numbers, those 2010, 2011 numbers, are based on under 50 contracts, you realize the size and scope of our contracts are getting much, much larger, which means we can be much more efficient, much more cost effective, and it is how we will attack gross margins and always look to get higher.

Our historic was 30% to 32%. That is not what I'm looking to get back to. I'm looking to get well past that, because we did that 30% to 32% with -- I won't say an abundance of people, but a lot of people to produce $30 million, where I can produce a whole lot more for a whole lot less overhead.

Terrific. And then with regard to Spirit and the Gulfstream 650, obviously Gulfstream makes other aircraft as well, and Spirit supplies other aircraft manufacturers. Are there current opportunities to supply other manufacturers through Spirit and other aircraft with regard to Gulfstream?

Yes. I'm going to carefully choose your word, though, which uses current. At this moment, we are absolutely focused on producing the first leading edge on the G650. Are we in there talking about other programs? Yes. Will they come in the next six to eight weeks or two months or three months? Probably not, because obviously, they want to see how we function on this. They have never dealt with us at all before.

But there is a ton of potential. Public information tells you, Spirit has a tremendous amount of work on the 787, when that kicks back in. Would I like to get a piece of that? You better believe it, because I believe when it is finally fixed, it is going to be one of the most successful commercial airliners we have ever seen. I want some of that.

I can go to Boeing for some of that; I can go to Spirit for some of that. And yes, let's face it -- if we produce well for Spirit for Gulfstream, there's other work that can be offloaded directly from Gulfstream. We have established a very, very nice relationship with them. We are in preliminary talking stages with the other things they might have for us to do.

And again, I think, and rightly so -- I have no problem with this -- I think both of those companies are in a let's wait and see how they do this kind of thing. I have the utmost confidence in my team here that when we deliver that first product, everybody will be as pleased as they possibly could be, because I know the work we put out here.

There are no further questions. I will now turn the conference back to management.

Okay, I would like to thank you all for attending the call today, and look forward to speaking with you a quarter from now. Thank you.

Ladies and gentlemen, this concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.