CPI Aerostructures Inc (CVU) 2017 Q4 法說會逐字稿

Good morning, and welcome to the Q4 2017 CPI Aerostructures Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I now would like to turn over the conference to Sanjay Hurry. Please go ahead, sir.

Thank you, Keith, and good morning, everyone, and welcome to CPI Aerostructures 2017 Fourth Quarter and Full Year Financial Results Conference Call. A copy of the company's earnings press release that was issued earlier today and the accompanying PowerPoint presentation to this call are available for download on the Investor Relations section of the CPI Aero website.

On the call today are Douglas McCrosson, President and Chief Executive Officer; and Vincent Palazzolo, Chief Financial Officer. At the conclusion of their prepared remarks, management will hold a question-and-answer session.

As a reminder, 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 the company at any time, the government's ability to reduce or modify its contract if its requirements or budgetary constraints change, the government's right to spend or borrow the company from doing business with them as well as competition in the bidding process for both government and subcontracting contracts. Subcontracting customers also have the ability to terminate their contracts with the company if it fails to meet the requirements of those contracts or if their customer reduces or modifies its contracts due to budgetary constraints. 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 and other risks can be found in the company's filings with the SEC.

Before turning the call over to management for their prepared remarks please note that management is available for follow-up calls with institutional investors following the conclusion of this call. Please contact me via details listed in today's press release to schedule a follow-up.

With that said, I'd like to turn the call over to Douglas McCrosson, President and Chief Executive Officer. Good morning, Doug.

Good morning, and thank you, Sanjay.

And good morning and thank you all for joining us on our call. I'll begin this morning with a review of our performance for the fourth quarter and full year 2017 before offering some thoughts on 2018 and an overview of our plan to acquire Welding Metallurgy, or WMI, which we announced this morning. Vince will then review over financial results for both periods, the financial considerations of our acquisition of WMI and introduce our financial guidance for 2018. I will then conclude our prepared remarks. Let's begin.

I'm pleased to report another quarter of solid financial performance, the result of our continued focus on operational excellence and program execution. We continue to advance our defense market strategy, winning a $15.8 million multiyear contract from Lockheed Martin for the manufacturing of multiple canopy actuation driveshaft assemblies on that F-35 lightning aircraft. This is our second contract for the F-35, in effect doubling the value of our content on this program. Equally significant, this new order speaks to our strong relationship with Lockheed Martin and our ability to leverage superior program execution to secure additional work from the largest defense prime contractor in the world.

Our financial results for 2017 attest to how far we've progressed since we undertook a series of operational and strategic initiatives in 2014 to return to the company -- to return the company to its defense market routes. Since then we have placed greater focus on multiyear opportunities, expanded and diversified our revenue base and implemented profitability improvement initiatives. As a result, this year, we restored annual profitability and positive operating cash flow.

Key financial highlights for the year include: first, pretax income came in at the high end of our guidance range for the year as capital investments and improvements made within our facility continued to enhance productivity and efficiency. Second, we generated a substantial turnaround and profitability year-over-year with earnings per share of $0.65 in 2017 compared to a loss per share of $0.42 for 2016. Third, cash flow from operations was $1.6 million compared to negative cash flow from operations of $6.6 million in 2016.

While we anticipated year-over-year revenue growth, as we discussed on our third quarter call, we experienced order pushouts from newer defense programs still in their development phase at delayed revenue recognition, which together with an expected step-down in E-2D shipments resulting in flat year-over-year revenue.

Turning to Slide 4. Execution on our defense market strategy has given us a backlog of contracts that serve as a foundation for our long-term growth. At 2017 year-and, defense backlog stood at $301.3 million, up 18.2% from year-end 2014 and down 6% from year-end 2016. The decline, year-over-year, reflects the budgetary standstill between the presidential election and the signing of the omnibus appropriations bill in May of 2017. With the signing of that bill, we did add approximately $54 million to backlog over the balance of the year. Multiyear defense awards now comprise 78% of consolidated backlog.

On slide 5, you can see the many successes of our defense market strategy. This slide illustrates that approximately $282 million of the total backlog at 2017 year-end is derived from defense contracts announced since November of 2014. All but 2 of the programs on this slide are in production with periods of performance that extend beyond 2022 in some cases and affords us good visibility in annual defense revenue in future years. Notable awards in the year reflected the deepening of our relationships with leading defense prime contractors, including 2 5-year supply agreements with Sikorsky totaling $29 million on the Black Hawk helicopter. These awards followed the signing of the multiyear 9 contract by Sikorsky with the U.S. Army. A $14.8 million award from Bell for the AH-1Z attack helicopter, our TacSAR contract with UTC Aerospace though a 1-year development contract, this award positions us well to secure a multiyear award when this program moves into production.

A $2 million purchase order from the U.S. Air Force for structural modification kits for the T-38 Trainer under a contract potentially worth $49 million. Since being awarded the contract in 2015, we have received orders to date totaling about $14 million. And as I've previously noted, our canopy actuation system driveshaft program, our second contract on the F-35. Subsequent to the end of 2017, Bell amended our long-term contract for the AH-1Z helicopter by adding an additional year valued at $3.8 million. This amendment increases the potential value of the contract to $18.6 million. We also recently announced additional purchase orders to supply E-2D wind components for the third and fourth aircraft under our 4-aircraft contract for E-2D's bout for Japan.

As we look ahead to 2018, we are going to build on our accomplishments in 2017 and accelerate the momentum we have in the defense sector to drive top line growth. Let me spend a few minutes now discussing the inputs that are shaping our perspective on 2018.

The start of the year has brought renewed defense spending uncertainty with the Department of Defense operating with funds provided by fifth continuing resolution. As a consequence of this spending uncertainty, previously anticipated new awards are being pushed out. For example, while each of the proposed 2018 and '19 authorization bills contain money for the A-10 rewinging program, the delay in passing in appropriations bill has now pushed out the anticipated contract award date into early 2019. Against this backdrop, however, is a clear strengthening of long-term industry fundamentals.

The combination of growing geopolitical tension in the President's call for increased defense budgets has the defense industry preparing for defense opportunities on the horizons. The President's fiscal 2019 budget proposal aligns with our core competencies, namely a continuous production, procurement of newer platforms such as the F-35 and CH-53K, funds monetization programs for current aircraft such as the F-16 and the A-10. And it provides funding for aircraft and systems and development such as the B-21 and the Next Generation Jammer Pod. With industry fundamentals strengthening, we brought Jay Mulhall on board last month as Senior Director of Business Development and Strategy for defense markets. Jay will lead our business development efforts in areas that stand to benefit greatly from increased DOD spend, particularly electronic warfare, intelligence, surveillance and reconnaissance and autonomous systems, areas where we enjoy significant competitive advantage. Having a retired after a 33-year career at Northrop Grumman, Jay brings deep industry experience that is integral to our strategy of pursuing emerging growth opportunities and expanding our business. As the DOD bounces between modernization and readiness, we believe that our strong defense portfolio together with a broader base of business entering 2018, a deep backlog and a pipeline of opportunities, positions us for strong organic long-term growth.

Turning to Slide 7, our bid pipeline reflects our sales emphasis on multiyear opportunities in the defense market. We continue to remain selective about bidding on new commercial aircraft programs and we limit participation to the opportunities where we believe we can offer a compelling value proposition to our customer. We are seeing continued strong demand within our Aerosystems and Kitting supply chain management segments and now nearly 80% of the value of the bid pipeline are in these key areas.

You'll see some of the opportunities in our bid pipeline listed on Slide 8. Under these opportunities third and fourth orders for the Japan E-2D we received after the close of the year. Of note, the F-16 Service Life Extension Program, or F-16 SLEP, is one of the largest potential awards for which we are competing in 2018. The government has valued this opportunity at several hundred million dollars over a 10-year period and we believe that a winner will be selected within the next few months.

Turning to Slide 9, our focus on multiyear defense awards gives us excellent long-term revenue visibility. Our defense and commercial programs together have the potential to generate approximately $389 million over the remainder of their periods of performance. While we have a broader opportunity set today, the pace of conversion of those opportunities and the backlog the revenue rest, at times, with the lawmakers in Washington D.C. In acquiring WMI, we are taking matters into our own hands and showing continued growth in the near term, while better positioning ourselves to capture larger and more complex awards once defense spending levels are set.

We've talked before about our plans to supplement organic growth with acquisitions that expand our capabilities in support of a larger defense portfolio and have been evaluating acquisition candidates for a while that meet our strategic and financial criteria. With WMI, we chose the perfect transaction, our first in over 2 decades, and of course, the first with me as CEO. From an operations, customers, programs and capabilities perspective, WMI is an ideal fit for CPI Aero.

Turning to slide 11. Let me explain why acquiring WMI is a right transaction for us. First, we share customers, programs and capabilities. In our Aerostructures business acquiring WMI significantly increases content on key defense programs including the E-2D Advanced Hawkeye, F-35, UH-60 Black Hawk and the Sikorsky CH-53K. The F-35 is the largest military aircraft program and the CH-53K is the largest helicopter program within the U.S. Department of Defense. Second, acquiring WMI gives us a broader and more diverse set of Aerosystems assemblies. For instance, we're combining WMI's technical capabilities in the areas of welding and tube bending with our mechanical and bonding abilities. Adding WMI's electrical wire cabling, integrated electronics and wire harnesses capabilities gives us greater control over content for integration work. For our pod business, this means we can offer customers like United Technologies with their TacSAR pod or Raytheon with their Next Generation Jammer Pod. A more integrated solution that elevates our standing as a key partner in their production processes, allows us to bid on larger work packages and expands content share in existing programs.

Also WMI has a long-standing relation with Raytheon on the Sea Sparrow guided missile launching system where it provides turnkey electronics integration solutions. Through this shared anchor customer, we're now in a position to transfer our Aerosystems assembly capabilities into naval defense programs. As a result, acquiring WMI adds to our growing pipeline of larger and more complex programs. Finally, the transaction leverages the cost management and operational improvements implemented in prior years to enhance our overall profitability and cash flow generation. I'll come back to this point in a minute.

In summary, the acquisition of WMI as a highly strategic to CPI, gives us added capabilities to support a larger defense portfolio and boosts our growth opportunities.

As you can see on Slide 12, WMI has strong overlap with our customers and programs, including the E-2C and D in the Black Hawk helicopter and gives us a new presence on new programs such as the Sea Sparrow guided missile launching system produced by Raytheon for the U.S. Navy.

Finally, slide 13 details the transaction. We are paying $9 million in cash to acquire WMI, subject to customary adjustments based on the net working capital of WMI at the closing of the transaction. Agreement also calls for plus up to -- for up to $1 million payable in cash to Air Industries if WMI enters into certain long-term supply agreements during 2018. I mentioned earlier that acquiring WMI leverages the cost management and operational improvements we've implemented over the past few years. The efficient infrastructure, we now have in place, allows for a smooth and low-risk integration of WMI's operations into our own facility. It certainly helps that WMI is located close to our facility, literally just miles away and that we have similar asset-light business models. Largely through the integration process and into a lesser extent eliminating some duplicate of overhead, we expect to realize post-closing synergies of approximately $900,000 during 2018. Post closing, we anticipate WMI will contribute more than $15 million in revenue annually, which would represent growth of about 15% over the 2017 revenue, incrementally benefiting our overheads rates and factory utilization. And we expect the transition -- sorry, we expect the transaction will be accretive to 2018 earnings per share, including transaction expenses of approximately $600,000. All in all, we're creating value with the acquisition of WMI strategically, operationally and financially through realized synergies and enhanced profitability and cash flow generation.

We expect to finance the transaction through a new term loan with an expanded and extended credit facility with our existing lender and to close the transaction during the second quarter. Once we've closed the transaction, we anticipate being able to fully integrate WMI into our facility before the start of the fourth quarter of 2018.

I'll turn the call over now to Vince Palazzolo, our CFO, to review our financial results for the fourth quarter and full year in greater detail. Vince will also introduce our financial guidance for 2018. I will then come back with some closing comments before opening the call to questions. Vince?

Thank you, Doug. Start, revenue for the fourth quarter of 2017 was $23.8 million compared to $24.3 million for the fourth quarter of 2016. As Doug mentioned in his opening remarks, we experienced order pushouts from newer defense programs, which resulted in limiting our fourth quarter revenue. Also revenue on our E-2D outer wing program declined from the fourth quarter of 2016, which was an expected cyclical decrease related to the timing of new purchase order releases.

Gross profit was $5.5 million compared to $5.9 million for the fourth quarter of 2016. We sustained a strong gross margin for the quarter of 23.1% with above the range of 21% to 23% for 2017 that we had previously shared with you. Gross margin was driven by an ongoing benefit of cost and process initiatives to further lean on manufacturing processes.

SG&A increased by $200,000 for the fourth quarter compared to the same period last year, the result of higher health insurance costs in 2017.

Pretax income was $2.8 million for the fourth quarter compared to $3.4 million for the fourth quarter of last year, predominantly the result of the lower revenue in Q4 2017 compared to 2016. Because of the new tax law signed by the President in December, we recognized the lower tax rate in Q4 2017, which resulted in net income that was unchanged from last year at $2.1 million.

EPS for the quarter was $0.23 compared to $0.24 for the same period last year.

Turning to the balance sheet highlights. Cost and estimated earnings in excess of billions on uncompleted contracts or CE&E was a $111.2 million, an increase of approximately $11.6 million compared to December 31, 2016. As was the case in Q3 of 2017, the CE&E increase was largely due to increased activity on our newer programs, especially the Next Generation Jammer Increment 1 Pod program with Raytheon and our new weapons pylon assembly program with Sikorsky. We ended the year with working capital of $78.3 million compared to $70.6 million at December 31, 2016, an increase of $7.7 million. During 2017, we implemented several initiatives to improve operating cash flow. As a result of these efforts, we generated operating cash of $1.6 million with 2017 whereas in 2016 we used cash of $6.7 million to support operations. At December 31, 2017, total long-term debt stood at $9 million compared to $10.2 million at December 31, 2016. We had $22.8 million outstanding on our $30 million revolving line of credit at the end of 2017. Shareholders' equity improved to $74.3 million at quarter-end -- at year-end with the book value of $8.38 per share. Our debt to capital stood at 0.43.

We expect -- for 2018, we expect revenue in the range of $92 million to $96 million compared to $81.3 million for 2017. Pretax income is anticipated to be within the range of $9.1 million to $9.6 million compared to $8.5 million for 2017. Our effective tax rate for the year is expected to be 23% to 24%.

Our guidance includes the results of the acquisition of Welding Metallurgy Inc. assuming we close the transaction during the second quarter.

This concludes my prepared remarks. I will now turn the call back to Doug for additional commentary and closing remarks. Doug?

Thank you, Vince. Let me offer some concluding thoughts before opening our call to questions. We have meaningful, long-term growth opportunities ahead of us born of our strong defense portfolio and a focus on the defense market that is today yielding a large and diversified backlog and a growing bid pipeline of new opportunities. Over the past 3 years, we've leaned out our manufacturing processes and have become much more efficient as an organization the benefits of which we began to realize in 2017. Now with an efficient infrastructure, we are focused on increasing revenue, both organic and inorganic to propel earnings growth. The acquisition of WMI is reflective of this strategy. With greater capabilities and increasingly competitive offering in the marketplace and singular focus on execution, we are extremely well situated for long-term success. I would like to thank you for your attendance and continuing support of CPI Aero. Keith, you can open the call to questions. Thank you.

(Operator Instructions) And today's first question comes from Ken Herbert with Canaccord.

Congratulation on WMI. I just wanted to ask a first question, Doug, on the -- your backlog, I think, the guidance for 2018, I think, you indicated that you do not include some programs that are, maybe a timing risk from some defense programs. How do you, assuming we get the omnibus deal signed and worked out this week, how do you see the impact on the backlog? And is there perhaps any change we should think about in timing related to some of these programs as part of the fiscal '18 guidance?

Yes. The significant change in our guidance is resulting from the A-10 pushout. There are others that are related to some programs that are new start programs that have yet to be started. I think, we're anticipating that the impact of 2018 moved us, maybe, a few million dollars of organic growth out of the year largely compensated and increased by the acquisition. But yes, there were several million dollars' worth of timing-related revenue that probably would have been in 2018, that is now in 2019.

Okay, okay, that's helpful. And for -- on the acquisition, it looks like, obviously, it fits very well just in terms of the proximity and the geography. Does this change longer term what you've talked about potentially or move the needle in terms of a gross margin? What do you think the company can do from a gross margin standpoint, not just maybe in '18, obviously, but as you think out in '19 and '20 and beyond?

Yes, this was an excellent acquisition for us in many ways, and one of the key ways is that we believe that our scale will enable the products that we are bringing over with -- acquiring with the transaction to expand greatly. And we believe that the margin profile of the Welding Met product line in our facility with our overhead structure and our efficient manufacturing systems will benefit greatly. That said, they also have a very nice mix of electronics programs that are, I say, higher than our average margin. So I think, in the long run, you will definitely see margin expansion from CPI. The other thing that's really important to recognize is, we're bringing over a lot of work and a lot of direct hours and we're really going to have a high facility utilization and a much lower factory overhead make us more competitive on future programs as well as to lower the future cost of all of our current programs that we were running before the acquisition. So I would say, a huge economic plus for the combined businesses.

Okay, that's great. And can you just remind me again, I just missed it, your expected revenue contribution from WMI? Or what's embedded in the guidance for '18?

You didn't miss it, we didn't say it. So -- and we won't be saying that. The -- what is -- the range in the revenue guidance is really largely related to the timing of the closing of that transaction.

Okay, okay. And what are the -- maybe what did the business do in 2017, can you comment on that?

I can't. They'll be audited financial statements filed within 75 days after closing. I can tell you that, on an annualized basis, the revenue that we're acquiring is about 15% higher than what it was in 2017.

Okay, okay. And then just finally, it sounds like the F-16 SLEP program and the TacSAR program with United Technologies could both be -- timing of those could both be pretty significant for this year. Sounded like the F-16 is maybe sooner rather than later. Can you give a little bit more detail, Doug, on expectations on timing there? And what you're thinking of that particular program and your chances in this as well as on the TacSAR opportunity? I know you're on a 1-year contract, but the chances in timing of maybe looking at extending that or moving forward on that?

I'll start with the F-16. As you know, we're doing work right now, very similar work on the F-16 on -- with DLA and we're to 2 to 3 years into that program. Many of the components that are on that contract and similar components will be on the F-16 Service Life Extension Program. The -- so it's a supply chain management, obsolescence management, I'll say a fairly complex kitting and logistics support type of contract. That program should -- it's a small business set aside, so we qualify for that. There are probably about 7 or 8 competitors to that. We feel that we have probably a stronger position than most on that list with our experience on the F-16 to date and our good past performance on similar programs in the past. I'm not going to handicap it, but it would be a clearly the winner of that program no matter what size you are will be a game-changer type program should you be successful. We're hopeful. I think we've put in a very good competitive proposal. We priced it to win, we have a good deal of experience and we know what our costs are going in. So I think we did an excellent job on that proposal, but I want handicap our percentage chance right now. As far as the TacSAR program, that program is very similar to our DB-110 program that we also do with United Technologies. We will be the -- in that case, we'll be the sole source provider of the structure once they get launch customers. Our customer, which is UTC Aerosystems has not yet announced yet a launch customer. We are optimistic that we will get it turned on to start production within 2018. Timing is again, largely related to the FMS process, because these are foreign military sales opportunities for United Technologies and we can't necessarily control that.

And the next question comes from Mike Crawford with B. Riley.

Doug, is it fair to say that WMI within Air Industries Group was not profitable in 2017?

I think you just need to be careful when you -- if you try to deduce what WMI was from the Air Industries' public filings. There are plenty of adjustments that are intercompany adjustments that aren't necessarily clear in there. We're comfortable that it is a profitable business in 2016 and '17. And it's more so profitable when we bring it in to our own facility.

Once you bring it in by the fourth quarter of 2018, what will your footprint look like in terms of ability to take on new work and/or ramp back up on the A-10 at some point, potentially?

Right now the floor space plan that we have keeps our A-10 line compressed a little bit, but still intact. So when the A-10 does come online, we have availability and we feel that we would have adequate space within this facility to take on more programs as well. We will be -- I would say, we would probably be at 10% to 15% free floor space, not including any kind of mezzanine operation -- any kind of mezzanining that we could do to take some things up and make a quasi-second story. We feel very confident that this building will be a high floor space station, very efficient, much more efficient than it is currently and still has room to grow.

Okay. And then, Vince, is that 23% to 25% tax rate something that you think continues beyond 2018?

I do. The reason we're kind of giving a little bit of a range is because the details of the new -- how the new tax law is actually going to exactly run through our financial statements is not perfectly -- perfect science yet, but the new tax law plus state taxes with the cap with significantly lower federal tax rate should keep us in that 23%, 24%, 25% range for the foreseeable future.

Okay. And then last question is on the cost and estimated earnings account that grew about $11 million in 2017, including a few million in the fourth quarter. So do you have visibility as to what might happen to that account in 2018 and/or beyond?

A lot of that growth in the fourth quarter was related to Next Generation Jammer. The first fully complete pod didn't ship until the first quarter 2018. So that was what a lot of the run-up was in the fourth quarter 2017. Now that we are shipping that, the CE&E should kind of stabilize for the remainder of this year. Well I don't -- I'm going to say, I don't foresee that it would go up, however, with that being said, starting in the first quarter you're not going to see CE&E on the balance sheet anymore. The new revenue recognition standard that took effect January 1, will change the presentation of contract assets and contract liabilities into different line items and there will be more description in the notes. So on a gross level, it's not going to be materially different, but the presentation is going to be different.

Okay. Just given that answer and, Vince, if I could just extend that final question to you. From say a free cash flow perspective, but for an accounting change, you don't expect much of a change on the old CE&E accounting, but we're going to have to look at the numbers differently by the time you file the Q1 report, is that a fair paraphrase of what you said?

Correct. Yes.

(Operator Instructions) And the next question comes from Mark Jordan with NOBLE Capital.

Questions related to the expenses of the acquisition. In your slides, you say there will be about $600,000 of expenses. Will that be expensed in the first or second quarter? How does that break down? And then I assume with the synergies then you'll earn that back. So basically the expenses and synergies are a wash for the year? Is that the way we look at it?

Yes, it's more.

Well there's $900,000 of -- it's definitely more synergy than transaction expense.

Okay. But from a modeling standpoint, that $600,000 of expenses, is that in the first or second quarter? Or how is it split? So that we can -- I get surprised a little bit on that nonoperating expense in the quarter.

It will be in both. It will be split between the 2.

Okay. And going back to the margin question for WMI. Could you say, what were their gross margins historically, again, prior to any enhancements or synergies that you -- the combination should bring?

I can characterize the margin profile as very -- I'm not going to say exactly what it was, but it is consistent with companies in that industry and maybe slightly lower than our own -- at times it's been higher, at times it's been lower, but we feel that it's, why don't we say in the mid-'20s, similar to like ours is. And that's presynergy. So the -- what we -- and that's historically over a period of time. The one thing I did want to kind of highlight and maybe I didn't make clear is we expect to close this transaction as soon as possible and in the second quarter, hopefully, early second quarter. And during a roughly 3-month period of time, while we own the company, we will be operating from our location as well as their location. And when, I said, we'll move all of the personnel and equipment over to our facility that will be at the start of the fourth quarter. So the true post-closing synergies where we get the advantage of not having duplicate of rent expense will be starting in the fourth quarter. But we will own the company, again, in the second quarter.

All right. What are your expectations for cash flow from operations this year? And what is your expectations for CapEx for 2018?

What I'll say for cash flow is, when we close and we may -- we'll probably update everybody on that, we'll maybe fine tune the guidance, because we'll know exactly when we close and will update cash flow guidance of the combined entity at that time. I can tell you that pre-acquisition, our standalone guidance would be more positively -- more positive cash flow than we had in 2017.

Okay. Comment on CapEx?

CapEx is in -- within our normal range. We will definitely have some that are related to facilitization, particularly of -- with the acquisition, but nothing that is outside of some historical -- we ebb and flow sometimes with CapEx. Vince, you have any -- It's under $1 million still.

Yes. I mean in the last 3 years, we've averaged around $200,000 a year, $200,000 to $250,000 a year.

Maybe double that.

Maybe we'll double that, roughly, maybe a little bit more, but it's still going to be where we anticipated it would be under $1 million.

Okay. Final question for me. The go-forward combined financing package you'll have in place, is there any comments on the incremental interest rates there? Will it be consistent with what you were paying? Or what's your outlook?

That is still being negotiated, but -- that is still being negotiated, but we're working to make the rates similar to what -- where -- we have now.

(Operator Instructions) Okay, as there is nothing else at the present time. I would like to return the call to Mr. McCrosson for any closing comments.

Thank you, Keith, and thank you, everyone, for attending our call today. It was exciting announcements today and we're looking forward to what the future brings here. Vince and I look forward to speaking to you again in May when we report our 2018 first quarter results. Thank you, very much.

Thank you. This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.