Curtiss-Wright Corp (CW) 2004 Q2 法說會逐字稿

Welcome to the Curtiss-Wright Corporation's Second Quarter 2004 Earnings Conference Call. Today's conference will be hosted by Martin Benante, Chairman and CEO of Curtiss-Wright. This call will be in a listen-only mode while the company presents its recent financial results. I will now turn the floor over to Martin Benante. Please go ahead.

Thank you, Krista and good morning, everyone. Welcome to our second quarter 2004 investor conference call. Joining me on the call today is Mr. Glenn Tynan, our Chief Financial Officer, who will begin our forum today.

Thank you, Marty. If you do not have a copy of our earnings release, which was issued yesterday, please call Ms. Deb Tory at 973-597-4712 and she will be happy to e-mail or fax you a copy and add you to the Curtiss-Wright distribution list for all future press releases and other corporate communications.

Before we begin, we will make certain forward-looking statements on today's call, such as statements about the company's confidence and strategies or expectations, about the results of operations, future contracts or market opportunities.

While we believe that our operating plans are based on reasonable assumptions, we cannot guarantee that we will meet any expectations that might arise from these forward-looking statements or their underlying assumptions.

Such forward-looking statements are made pursuant to the Safe Harbor provisions of the Security Reform Act of 1995 and involve risks and uncertainties that may produce results that are materially different from those expressed or implied during this discussion. Such risks and uncertainties include those factors that generally affect the business of aerospace, defense, marine, electronic, and industrial companies.

Please refer to our SEC filings under the Securities Exchange Act of 1934 as amended for a more thorough discussion of risks and uncertainties as well as further information relating to go our business. Now Marty will begin our discussion regarding Curtiss-Wright's financial and operating performance for the second quarter of 2004. Marty?

Thank you, Glenn. Today we'll begin the call with the quarterly performance update and then turn the call over to Glenn for a discussion of our segment performance and financial position. At the conclusion of Glenn's remark, I will conclude with an update of our full year guidance and then open the call up for questions.

I am pleased to report a robust second quarter of double-digits revenues, operating income and earnings growth. We increased our sales 22% to $222 million from $183 million in the second quarter of 2003. Acquisitions contributed approximately $30 million in the incremental sales during the second quarter of 2004.

Operating income increased 43% to $26 million in the second quarter, with acquisitions contributing approximately $2.7 million in the incremental operating income. Our strong operating performance resulted in a 32% increase in net earnings for the second quarter to approximately $14 million or 67 cents per diluted share. This compares to $11 million or 52 cents per diluted share in 2003 on a split-adjusted basis.

The increase in net earnings was achieved despite a $2 million increase in interest expense or approximately 6 cents per diluted share from the second quarter of 2003. In addition, new orders increased 12% to $208 million in the second quarter of 2004 and our backlog reached a record level of $559 million.

During the first half of 2004, we also achieved double-digit growth in sales, operating income and earnings due to our balanced blend of strategic acquisitions and organic growth. We're very pleased with the progress we have made and we believe our focus on advanced technology, the high performance platforms and diversified markets will continue to enable us to achieve consistent performance in varied economic environments as we have demonstrated over the last six years. As a result, we are very optimistic about our future.

I will now turn the call over to Glenn to discuss our segment performance and financial position.

Thank you, Marty. Overall, our segments provided a 22% increase in sales and a 43% increase in consolidated operating income during the second quarter. This was primarily driven by contributions from acquisitions and organic sales growth of 8% in Motion Control and 19% in Metal Treatment.

In our Motion Control segment, sales increased 50% to $92 million and operating income increased 144% to $10 million in the second quarter of 2004. The significant growth is due to contributions from acquisitions made in 2003 and 2004, as well as organic sales growth of 8%. The acquisition growth has been primarily in the defense electronics market, which has resulted in Curtiss-Wright being able to provide customers with end-to-end embedded computer solutions.

Organic sales growth was driven by an increase in sales of military aerospace products for F-22 and V-22 production and F-22 spares and higher electronic sales for the 767 tanker-refueling program.

The operating income improvement is due to the increased volume, favorable sales mix and the benefits from previously implemented cost controls. In addition, the operating margins for our overhaul and repair businesses have shown improvement from the prior year, primarily due to cost control initiatives and higher volume.

In our Metal Treatment segment, sales for the second quarter of 2004 of $45 million were 23% higher than in 2003. Organic sales growth of 19% was driven by higher global shot-peening revenues due to a pickup in the general economy and industrial markets and strong sales from our laser-peening technology, which was in the process of opening our UK facility at this time last year.

In addition, Metal Treatment is benefiting from strategic, bolt-on acquisitions that expanded our product offerings and market penetration. Operating income improved 51% during the second quarter, due to higher volumes for our shot-peening business, increased margins and reduced startup costs from our laser-peening technology and favorable foreign currency translation.

Our Flow Control segment generated sales of $86 million during the second quarter, which is essentially flat with the comparable period last year, due primarily to lower sales of Flow Control products to the US Navy, offset by solid growth in the other Flow Control businesses and the contributions from acquisitions.

Similarly, operating income increased by 1%, due to the profit impact of lower sales for the Navy. It is important to note that our core US Navy sales remain stable, but these large, long-term contracts are subject to swings due to timing of when contracts begin and end. We have work hard to mitigate the impact of these swings.

However, we are pleased to report strong growth in the other Flow Control businesses. In particular, we experienced higher sales and improved product mix to the power generation and oil and gas market and higher sales of electronic products to the Navy.

Additionally, at the end of May, the Flow Control segment completed the acquisition of NOVA and Trentec, which provided a significant addition to our power generation business as well as opportunities to support complimentary businesses with the Navy, the Department of Energy, and the oil and gas market.

Now I would like to take a moment and update you on our financial position. During the second quarter of 2004, Curtiss-Wright generated $17.6 million in free cash flow, defined as net earnings, plus depreciation and amortization, less capital expenditures. Depreciation and amortization was approximately $10.9 million in the second quarter and capital expenditures totaled $7.6 million.

At that time close of the second quarter, we had working capital of $209 million, and total debt outstanding of $302 million. Our net debt-to-capital was 33.7%. And on July 23, Curtiss-Wright announced the completion of an amended bank credit facility, significantly increasing our borrowing capacity to $400 million from our previous facility of $225 million.

We are very excited about the growth we have achieved at Curtiss-Wright and this facility is part of our ongoing effort to maintain ample liquidity for our operations and sufficient flexibility to act quickly on new opportunities.

The new revolver expires in 2009 and the pricing reflects current favorable market terms. I will now turn the call back to Marty to conclude our presentation.

Thank you, Glenn. We've had a very active and profitable first half of the year, which has met Management's strategic goals and financial targets. Since the beginning of year, we have completed eight acquisitions for an aggregate consideration of approximately $177 million, which will provide us with a balanced combination of new products, geographic market access, and synergies in each of our business segments.

Additionally, we are successfully integrating the significant number of acquisitions we have made in recent years, as indicated by our continued sales growth and strong operating income performance.

In our core businesses, we're very pleased with the progress we have made, and we remain on track to achieve our organic growth objectives. Let me describe just a few of our organic growth initiatives. In Motion Control, we recently announced a key contract win for $6.3 million to provide leading technical upgrades of Radar Warning Receiver Systems for US Army helicopters. This is an excellent example of our ability to provide state-of-the-art electronic systems for current military platforms.

Additionally, at the Farnborough air show last week, our Motion Control segment announced a reorganization of its operations, integrating its core businesses, and new acquisitions into three cohesive divisions: Embedded Computing, Integrated Sensing, and Engineering Systems.

This new alignment of Management and capability will provide opportunities to cross-market products under one Curtiss-Wright brand. We believe the combination of cohesive capabilities, established customer relations, and brand-name recognition will enable us to gain significant additional market share in the defense, aerospace, medical, and general industrial markets.

In our Metal Treatment segment, we're building our fifth and sixth laser, which are expected to be operational by the end of this year, with revenues beginning in 2005. We are currently exploring new market opportunities for our laser peening services, such as aerospace wing parts, highly stressed gears, and applications in oil and gas and medical implants.

In our Flow Control segment, our Delta drive coker valve received record orders in the first half of 2004. Leveraging our focus on advanced technologies, we continue to make great strides in the commercial markets.

And many of you will probably notice our press release Wednesday, announcing our $3.8 million contract for design, development, build, and test of a Compact Pulsed Power Supply in support of the US Army's electromagnetic gun.

This is a very exciting win for us as it supports the US Army's objectives for development of the future combat systems. And it is an opportunity for our Flow Control segment to not only expand into other military branches, but also act as a prime contractor.

Our defense diversification strategy has produced approximately 20% growth in both the defense and commercial markets. The net results of the first half of 2004 is that each of our business segments provide performance consistent with our strategy, which enable the company to generate excellent results.

Of equal importance in achieving this growth and operating performance, we have also maintained a solid capital structure, which provides the flexibility to expand and support our operational objectives. We are committed to preserve the strength of our capital structure as we move forward.

At this point, I would like to update our full year 2004 guidance, which includes recent acquisitions and our current market forecast. We anticipate revenues for the full year 2004 to be approximately $920 to $930 million and operating income to be in the range of $108 million to $115 million.

We expect our consolidated earnings per share to be in the range of $2.85 to $3.05. And, finally, we expect our free cash flow to be in the range of $60 to $65 million. In addition to these financial targets, we remain focused on executing our operational strategy, maintaining our conservative capital structure, and enhancing value for our shareholders. We have now concluded the presentation portion of our conference call. I would like to open the lines for questioning. Krista?

Thank you. The floor is now open for questions. If you do have a question, please press the number "7" or letter "Q" on your telephone keypad at this time. Questions will be taken in the orders they were received.

If at any point your question has been answered, you may remove yourself from the queue by pressing "7." If you are using a speakerphone, we ask that while posing your question, you pickup your handset to provide favorable sound quality.

Again, ladies and gentlemen, if you do have a question or comments, please press the number "7" or letter "Q" on your telephone keypad at this time.

Please hold while we poll for questions. Our first question comes from Peter Arment. Please go ahead.

Good morning, Glenn, Marty.

Hi, Peter. How are you doing?

Good. Congratulations on another good quarter. Question regarding the laser-peening sales. Obviously it looks like the volume and the margins continue to ramp up nicely. How much, I guess, additional sales opportunity does a fifth and sixth laser, you know, bring on-line for 2005?

We conservatively estimate that each laser is about $4 million and we have the possibilities of our increased fire rates to be somewhere near $5 million.

OK. So can -- so the annual run rate that you're at now is somewhere between $12 and $16 million or somewhere in there?

Our annual run rate right now is about $10 million.

About $10 million.

Right. But we are going to starting to slow down a bit because you heard me talk a little bit about our opportunities. It just so happens that we've picked opportunities in four different markets and you have to develop those opportunities.

We're really changing the way engineers look at metal integrity. It's the one thing to have a problem. It's another thing for that customer of ours to be able to go back to his customer and indicate the problem has been solved and it's done through a lot of material research. That's the reason why we picked another aerospace.

We've picked an industrial with high-stress gears, oil and gas, and also medical implants. You know, medical implants right now have a life of about 10 years. You know, with out laser-peening technology, that can increase ten fold, so basically it would be a lifetime implant.

OK. And is this the, I guess, the additional -- there's no more additional startup costs, I guess, from the UK facility and, Glenn you mentioned that and comparing year-over-year?

Yes.

What was the level of start-up costs in the year ago period?

I don't know off hand, Peter.

OK. Just another question regarding the embedded systems market. The Primagraphics acquisition that you made in May.

Right.

What sort of annual run rate are you at now in terms of building up your embedded systems business?

We are about $170 million.

$170 million?

Right. As a matter of fact, we anticipate a 43% increase in electronic systems in the second half versus the first half. So, we have a lot of built-up military programs that, especially in the embedded computer side, that will be shipping on the second half of this year.

So, should we see a richer operating margin mix then for...

Yes. To give you a little bit of where we see the second half of the year going, we see our sales being up approximately 10%. Most of that is on the military side and almost all of that is organic growth. This is been some shifting in our schedules based on some schedules with as far as the -- or move outs as far as JSF is concerned and also the F-22. However, we do see our operating income increasing between 15 and 20%, based on a lot of our sales being more organic sales in the second half.

Great. And then just regarding the consolidation of the most control of the reorganization of the three groups. Is there any sort of physical consolidation of facilities or is it more just a management?

No. It's really more of aligning our sales opportunities, our management to be more along a single structure, so there is no consolidation cost there.

So, there is no reduced headcount or severance or anything of that nature?

No, not at all.

OK. Great. Thanks very much.

Thanks, Peter.

Thank you. Our next question comes from Tyler Hojo. Please go ahead.

Good morning.

Good morning, Tyler.

I got on the call a little bit late so I apologize if any of this is redundant. But, first of all, in the press release, it said the quarter was benefited by one-time tax benefit of $1.5 million from a legal structure.

Yes.

And it says that was for the first six months. Is there a break out from the quarter?

Let me clarify. It was in the first quarter, only, Tyler.

OK.

It has no affect on the second quarter at all.

OK. Very good.

Right. Our second quarter results were not helped by that transaction.

OK. Very good. Very good. And as far as laser peening, just to follow up, other than lasers five and six, have you been kicking around any ideas for any other new lasers other than those?

No. We are kicking around the mix of mobile lasers compared to stationary lasers.

OK.

But we know that we'll be making -- Once we get five and six down with the modulating head and the Mobile laser, obviously, we expect to be successful at that, then we will start making more of those lasers available. As we continue to develop new opportunities.

OK. Fair enough. And as far as the 77, last I heard, you were bidding on five systems, I believe? Is that still the number? I mean, is there ...

No, actually, we're bidding on about eight opportunities.

OK.

We were not a prime contract -- We're more on a secondary contracting role. So, we wouldn't make any announcements about new projects until maybe the fourth quarter of this year until the first quarter of next year.

OK. Great. And just one final question. How are you finding the acquisition market right now, just as far as your, your backlog goes and just the pricing of, you know, acquisition candidates?

I think that, you know, there's still robust -- There's still quite a few companies out there. I would say under the electronic side, we tend to see the amount you have to pay for the business a little bit higher. But I think as you move towards more technical capable companies, you'll always see that situation take place, regardless of what sector they're in.

OK. How is your backlog of potential acquisitions looking?

We think pretty good.

OK. Well, congratulations on the quarter, guys.

Thank you very much.

Thank you. Our next question comes from Jim Foung. Go ahead.

Hi, gentlemen. Good quarter.

Hi, Jim. How are you doing?

Hi Jim, How are you?

Good. Just going back to the laser let me see if I got this correct. You have four lasers currently in operation, two more coming on stream?

Right.

OK. And in each laser produces about $4 million of revenues?

They can, yes.

And when are the two coming on stream?

In the -- They will not start generating revenues until the first quarter of2005.

OK. First quarter of '05. OK.

Right. But one of things in the investment community, this is not a situation where it worked in one area and, therefore, that results can be transferable to another situation. Each situation, because of safety of flight situations or the more stressed problems you have, the greater amount of development you have.

So, in the beginning, there is a lot of development as you continue to go on, a lot of that data is transferable. Right now, there is no data.

We have set that market and that market requires a lot of material testing. And even though the results -- initial results come out to be very good, there's still a lot of destructive testing and in many instances operational testing that need to take place in other words to secure those opportunities. So even though they're capable of generating that revenue -- because we don't have that many -- right now we're switching back and forth between production and development.

OK.

And that will sort itself out as we get more and more lasers into the field, based on those qualification testings that we're doing.

OK. So, and then I know you indicate that you're also looking into four new markets.

Right.

But just putting that aside for a minute, are there any plans to introduce more lasers for the whole of 2005, besides these two?

We are going to definitely produce more lasers in 2005.

OK. Do you have a number?

Not at this moment.

All right. OK. OK. And then just switching back to these new markets, are there, I guess, development costs or, I don't know, startup costs? There're additional expenditures related to that so that in the second half of this year, I think we should factor in some sort of additional costs?

No.

No?

No. Because right now we are looking at putting in brick and mortar. We're looking more into Mobile lasers where we would put them on trucks. And then transfer an entire system to the area. The first two we built with brick and mortar -- we put facilities in. We anticipate that we will do more of that in the future also, but we will do a lot more, I think, mobile lasers than stationary lasers.

OK. And if you look at your current margin in Metal Treatment, 17%, as pretty sustainable for the second half? I know you gave guidance for the entire year in terms of -- not so much by segments. Maybe you have some parameters for segments, that would be useful, too.

Well, on the metal treatment -- Let's go through all three divisions. We see both Flow Control and controls. Right now, Flow Control is 11%, operational margin, motion control is about 10.5%. There is going to be very strong shipments from Flow Controls in the second half and they'll move into that 10.5% to 12% -- Or 11.5% to 12% range. And so will Flow Control.

Metal Treatment, there's some seasonality in the third quarter and fourth quarter because you have vacations. There will be vacation time and plant shutdowns in the third quarter and, you also have the holidays in December.

However, we are raising the guidance there between 15% and 17%, where originally we were between 14% and 15%. Jimmy, I think the first thing is once metal treatment comes out of the third quarter, based on their results and we cannot predict how strong of a summertime they'll have. That will be a good indication of whether we're going to do a little bit better than we talked about. I don't think we're going to do. We will not do any worse than what we just talked about.

Right. OK. Good. And then lastly, in terms -- Just going to Flow Control with the US Navy and the timing of some contracts.

Right.

I guess when you think some of this business will come back, are you seeing kind of a ...

It's not that the business is going away.

Right.

It shows little organic growth because in the first quarter of last year, we shipped those two very large contracts.

OK.

We still have a real robust Navy program, it's just the timing again, when I say that sales will be up 14% in the second half of Flow Control, almost all of that is Navy. It just so happens the way the contract's full.

OK.

But we're going to see a very strong organic growth in the second half of this year. That, again, will bring in additional sales and profitability.

OK. So, that will imply that that Navy business is, I guess, the continuation of the contractual business, then.

Yes. I mean, we still have very, very strong orders there.

OK. And I guess just as a broader question, regarding visibility, I think since you do have quite a bit of government contracts. As you look out in, 2005, are there any gaps that you see in terms of timing of programs, timing of deliveries?

Not right now. I mean, we haven't laid out quarter-to-quarter, because they tend to fluctuate. But we see a strong 2005. The only fluctuation we've seen, I guess, is in the last guidance and I'm not talking about 2005, I'm talking about 2004. We said, we would have a strong third and fourth quarter.

Right now, the third quarter looks very similar to the second quarter. There's been some shifting of contracts and some push out on the F-22 and the JSF. But the third quarter will be very similar to the -- the third quarter will be very similar to the second quarter and we're going to have an excellent fourth quarter.

Terrific. And that's very helpful. Thank you.

So long, Jimmy.

Thank you. Our next question comes from Eric Hugel. Please go ahead.

Good morning, guys. Great quarter.

Thank you. Hi Hugel, how are you doing?

Just following up, I guess, on Jimmy's question with regards to the segment guidance, can you run through what your revenue expectations are for the segment?

Hold on just a second. Right now, we see controls being somewhere around $380 million, Flow Control about -- also about $380 million, and Metal Treatment about $165 million, somewhere in that area.

$165 million would imply for Metal Treatment a pretty significant slowdown.

Well, again, we have, if you look at last year, there was a $5 million reduction in the second half compared to the first half. There is, again, the shutdown of plants in December. But we'll see, I mean again, you have to take a look at how we come out of the third quarter.

OK.

It's not something that we can predict.

OK. Can we talk about -- I mean, just a sort of Metal Treatment. Airbus is poised to raise production rates on the A-320 family, I guess from 20 to 30 per month. I guess in increments beginning sort of next year and through '06. And they're looking at raising their 8330 and 8340 line to eight a month from six in the second quarter of '05. You know, when should you guys or are you feeling it now? When should you start seeing the incremental revenue from that ramp up in production there?

We should start to see it somewhere at the middle to end of the fourth quarter.

OK. Can you sort of give us an update as to where things stand on A-380? I mean, is that for the next sort of year or so going to be relatively flat production? I know you're making stuff now. But it's sort of early on in the program.

Right now, we have not received any information that that program was going to ramp up or move any place from where it is right now. So our current schedule of producing them stays the same. Some of our schedules, frankly, on the other two models

Right.

There is an intention of moving it, but we have not seen anything contractually yet.

OK. Can you sort of -- I guess Boeing, back on their -- a couple of days ago on their conference call, they raised their delivery rates for the 737.

Right.

I mean, does that have a -- I mean, what kind of impact --I mean, is that sort of de minimus - I mean, the amount of content that you supply to the 37? I mean does that move the needle? Does that do anything for you guys?

No, it does. It definitely does. I mean, when you take a look at the controls, they have the lead edge on that particular program. Not only, that we have a lot of sense, I mean, traditionally, if you looked at Curtiss-Wright, you'd only look at the mechanical side. But now we have a host of electronics on that airplane, too. And not only that, even though we don't form the wings for Boeing, we do a lot of shot peening and coatings for the aerospace industry.

So, it does move the needle for us. So we're hoping that, you know, the 737 goes. Obviously if airbus improves their situation, it's going to help us. Our commercial segment is going to do well.

But as far as I'm concerned, you know, when use really look at Curtiss-Wright, as a whole, right now we're looking at increasing our sales 23% over last year, which is what we've done since 1996. And also our profits are going to be increasing somewhere around 28%, which is what we've done consistently since 1996.

Right.

So, we have it built up in defense, commercial aerospace starts to look good, the industrial side starts to look good. We're on all those sides. We've grown our commercial side and that's been more organic growth than it has been acquisition growth, both in the gas and oil and in the power generation market. So things -- the needle is starting to point towards a lot, all three markets are going to do very well for ourselves.

I guess my final question with regards to new aircraft carrier work, I guess, that $180 million sort of pot that you have for each carrier, sort of what kind -- what is your revenue expectation for '04 and sort of do you have a better sense as to sort of how that sort of looks like going forward?

I think the last conference call I indicated we should have about between $30 and $40 million this year.

But -- was that all from new carrier or was part of that sort of development, sort of steady state carrier development?

Most of that was new because we did a lot in development the year previous. There is some development in there from the valve side and some from the electronic side, but not as significant as it was from the pump side.

OK.

And we should do about $70 million for the year following, which would be 2005, and it should filter out the next two years should be about even.

Great. I'll let somebody else get on the line. Thanks.

OK.

Thank you. Our next question is a follow-up from Peter Arment. Please go ahead.

Just a quick question on the Bradley -- Your Bradley content. There's a lot of talk about significant amount of research work going on as vehicles come back and start to be not only repaired but potentially upgraded.

Right.

What kind of incremental revenue opportunities is that for Curtiss-Wright? I remember your content was pretty good.

Pretty good. Why don't we talk about that entire Army situation and the F.C.S., the Future Combat System.

Sure.

Now obviously Future Combat System are being put off. Fortunately for us, the electromechanical gun is something that decided to go forward because there are several bridges interested in that technology.

In the interim, there's going to be a lot of upgrades and new work on the existing tanks that we have out there. So, you know, there is going to be opportunity, both on the new builds and also on the upgrades and retrofits going forward. And I think that needs to get sorted out. But we do know that there's a lot of tanks that need to be maintenanced.

Right. So, there's nothing in your current plan, though, for these upgrades?

We have seen some up ticks in some of electronic, better computers for the Bradley. So I would imagine that is going to continue. We're just -- I think seeing -- starting to see the beginning of that.

OK. So, we expect probably a stronger in terms of sales opportunity in '05?

Yes.

OK. Thank you.

Thank you. Our next question comes from Chris Deneehy (ph). Please go ahead.

Hi, Good morning.

Hi, Chris.

A question on the revenue guidance. I don't know, if I missed this or not. But the $920 to $930. What is the organic growth versus the acquired growth?

About 8% for the entire year.

OK. And just looking out in 2005, given the movement that you were just talking about in F.C.S. and Joint Strike Fighter, how does 2005 look like it is shaping up from an organic growth perspective?

I think, we've indicated if the market -- At least 8%. The thing is, if the economy takes off or does better than what it's been doing, our metal improvement sales will grow dramatically. I think our defense -- our backlog's at record level. Most of that defense work is organic. So, I think that we'd be looking at more than 8% next year.

OK. And then just in terms of the flow...

Not only that, our commercial backlog, which is all organic, is building also. I'm sorry.

That's OK. I was just going to ask if the organic growth would be seen in both 8% in flow control and motion control as well or if the organic growth this quarter obviously flow control was a little?

Yes. I think obviously if the commercial airlines are raising their rates, you'll see it in all three of our businesses -- will be closes to double-digits.

That's all I have. Thanks.

OK. Thanks, Chris.

Thank you. Our next question is a follow-up from Eric Hugel. Please go ahead.

Hey, guys. Following up in commercial aerospace, if we sort of look at and think of your commercial businesses in the cycle on sort of a timeline where we've come down at post 9/11 and SARS and all that stuff and we're scraping along the bottom, sort of where are we right now in terms of are we still scraping along the bottom here in terms of what you're seeing in the market or are we starting that turn-up?

No. You know, when you take a look at our OEM sales, we're basically flat with last year. We do have increased schedules for airplanes going out into '05 and '06. We have said there's some improvement in our repaired overhaul, especially on the margins side but with this additional discussion about Airbus increasing their schedules and also Boeing increasing theirs, obviously that will have a good effect on us.

If you remember post 9/11, our commercial aerospace is about $145 million. That's half of what it was when we were in that post 9/11 timeframe.

OK. Great. Thanks a lot, guys.

All right. And not only that, we've also acquired companies that also have additional sales on commercial aerospace since that time.

There appear to be no further questions at this time.

OK. Well, thank you very much for joining us today. We look forward to speaking to you again during our third quarter call in October. Take care.

Bye-bye.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.