Kaman Corp (KAMN) 2013 Q2 法說會逐字稿

At this time all participants are in a listen only mode. Later we'll facilitate a question and answer session. (Operator Instructions). I would now like to turn the call over to your host for today, to Eric Remington, Vice President of Investor Relations. You may begin.

Good morning. Welcome to the Kaman Corporation's Second Quarter 2013 Conference Call to discuss our earnings results. Conducting the call today are Neal Keating, Chairman, President and Chief Executive Officer, and Rob Starr, Senior Vice President and Chief Financial Officer.

Before we begin this morning, please note that some of the information discussed during today's call will consist of forward-looking statements setting forth our current expectations with respect to the future of our business, the economy and other future events. These include projections of revenue, earnings and other financial items, statements on the plans and objectives of the Company or its management, statements of future economic performance, and assumptions underlying these statements regarding the Company and its business.

The Company's actual results could differ materially from those indicated in any forward-looking statements due to many factors the most important of which are described in the Company's later filings with the Securities and Exchange Commission, including the Company's 2012 Annual Report on Form 10-K and the current report on Form 8-K filed yesterday evening, together with our earnings release. With that I'll turn the call over to Neal Keating. Neal?

Thank you, Eric. Good morning everyone and thank you for joining us. Kaman delivered a strong second quarter with diluted earnings per share of $0.67 compared to $0.61 from continuing operations in the prior year representing a 10% increase.

This performance was led by aerospace where we delivered a 17.8% operating profit margin due to a favorable product mix. Distribution improved significantly over the first quarter achieving an operating margin of 5.1%. In aerospace the favorable mix resulted primarily from higher sales of Specialty Bearing products, JPF and various missile fuze programs and initial sales under our contract to deliver SH-2 helicopters to the New Zealand Defense Force.

Higher Specialty Bearing product sales were driven by growth in our base business and several retrofit ant upgrade programs that are not related to current aircraft production. In addition, our fuzing product lines delivered a strong performance with JPF revenue up more than 40% over last year's second quarter, a 12% lower unit volume due to higher DTS sales. Also in aerospace, we continued to make progress in the AH-1V with six aircraft currently in process.

However, revenue recognition has shifted a bit to the right as we work with Bell on formal acceptance of initial deliveries and tooling. In addition to the AH-1Z, which has a potential value in excess of $200 million, we are in various stages of development or early production on a number of other new programs including the Learjet 85 composite door for Bombardier, the Global 7000/8000 Fixed Leading Edge for Triumph, the cell panels for Rolls-Royce Trent 700 and the Gulfstream G280 winglet program for Spirit.

Each of these is important to us as they add additional scale and broaden our relationships with key customers in the Aerospace industry. We saw some modest revenue from these programs in the second quarter, which contributed to the sequential improvement of profit margins, and we expect to see some further acceleration in revenues from these programs as we progress through the second half. With the addition of the New Zealand SH-2 contract, we ended the second quarter with a solid backlog of $646 million.

As we have discussed, we also have a very active business development pipeline including our next JPF contract with the US Government, and there are a number of the other encouraging opportunities that, if we are successful, would fuel even further growth. Moving on to distribution, sales in the quarter showed improvement, up 6.9% over the prior year. Organic growth increased 4.7% sequentially, as we recover from our December lows and operating profit improved to 5.1% from the 1.8% reported in Q1, as we effectively leveraged our lower costs base and revenue growth.

Organic sales, year-over-year, were down slightly, mostly as a result of the challenging environment for customers in the OEM market. This sector has been impacted by decreased export sales due to the lack of growth in Europe and slowing growth in China, as well as the strengthening dollar. Mining and primary metal manufacturing end-markets have also been difficult.

The sequential increase in sales resulted from a modest improvement in several end-markets including chemical manufacturing and fabricated metals. We have also continued to execute our acquisition strategy announcing two since our last conference call. These include Northwest Hose and Fittings, a Parker distributor with four locations in Washington and Idaho that will significantly strengthen our competitive position and provide sales synergies to our existing Kaman distribution locations in adjacent territories.

In addition, we also announced an agreement to acquire Ohio Gear and Transmission, increasing our ability to serve the Cleveland market. As we move through the second half, we anticipate additional growth from acquisitions and improving organic sales as the economy continues its slow but positive recovery. We have also seen encouraging leading indicators of further improvement to come, such as quote activity and positive book-to-bill ratios in our OEM business during the first half of the year.

While the recovery in distribution is not as robust as we would have liked or had planned for, the trends are favorable. We have reset our cost structure in this business and are well-positioned to leverage our future growth. Across the organization, we continued to invest in new programs, infrastructure and other initiatives, including a new facility that will double the capacity of our German Specialty Bearing operation to meet higher demand and drive productivity improvements.

A significant expansion in our UK tooling business, new machinery, equipment and robotics in our US specialty bearing locations to drive improved efficiencies, ERP investments in both of our segments, the formation of our Indian joint venture and the new programs in aerospace, we mentioned earlier, which will enable us to achieve higher levels of profitability. So it is a busy time, but we are excited about the progress we are making. Now, I would like to welcome Rob Starr to his first call as CFO, and turn it over to him to provide you with some additional details and color. Rob?

Thank you, Neal, and good morning everyone. Beginning in aerospace, during the first half we delivered strong performance from our specialty bearing product line. As Neal referenced, this performance was aided by the completion of a number of customer orders for retrofit programs not related to current production.

These programs included our Tornado Retrofit Program, K-flex retrofits for the Bell 205 and AW139, as well as a one time project for the entire Dreamlifter aircraft fleet used to support the 787 production line. These types of programs occur regularly. However, the activity level in the first half was higher than expected. Our base Specialty Bearings product line revenues are projected to remain strong during the second half.

However, we anticipate overall product line sales will decline, sequentially, from Q2 to Q3 before turning higher in the fourth quarter. This reflects our expectations for normalized order patterns of retrofit programs during the back half of the year. In the second quarter, we began to recognize revenue under our New Zealand SH-2 contract, recording almost $4 million in sales.

In addition, we received and advanced cash payment from the New Zealand government of $14 million shortly after contract signing, so the benefits from this program have been immediate. Distribution operating margin was 5.1% for the quarter. This was below last year's Q2 level of 5.6%, primarily due to the lower leverage associated with our negative organic sales growths and lower rebate income.

On a sequential basis operating margin improved significantly from 1.8% to 5.1% due to a number of factors. First, we reported $3 million in restructuring charges in Q1 that did not recur in Q2. These restructuring actions have resulted in $2 million in quarterly costs savings. Thirdly, acquisition sales were accretive to overall segment margin.

And finally, sales were up sequentially in total by approximately $13 million, and the associated leverage from these higher sales favorably impacted operating margin performance. We continue to expect the operating margin to increase through the second half as sales increase, sequentially, each quarter and while we maintain efforts on a higher level of sales.

With half the year, we have updated our outlook for the full. In aerospace, we have maintained the outlook for sales, but have raised the lower end of our operating profit margin guidance to reflect the strong performance in Q2. We expect aerospace sales to be relatively equal in quarters 3 and 4. However, Q4 is anticipated to be more profitable than the third quarter due to product mix.

Distribution sales are forecasted to sequentially improve as we progress through the year and end markets improve. We expect acquisition growth will help offset a slightly lower than expected level of organic sales growth, providing the confidence to slightly raise the low end of our full-year sales outlook. Along with increasing sales, we expect operating margin to continue to increase sequentially as we benefit from the operating expense leverage productivity operating expense leverage of higher sales.

Operating margin for the full year is now expected to be between 4.7%and 4.9%, Driven by a record segment operating margin performance in the second half. Our updated distribution outlook reflects our updated market forecast for the balance of the year. Based on our current market outlook, we have lowered our expectation for organic sales growths and rebate levels, and we expect our sales mix to reflect a higher level of MRO sales due to challenging conditions in OEM markets.

Our full year estimate for corporate expenses has been revised downwards to $49 million based on our most recent estimate. Our full year free cash flow is expected to be between $15 million and $20 million. This adjustment reflects an anticipated delay in cash receipts related to a direct commercial sale of the joint programmable fuze, which we now expect to collect in the first quarter of 2014.

Based on the sequential ramp up of distribution sales and profitability and the mix in aerospace, we expect net earnings in Q4 to be approximately 15% higher than in the third quarter. Other elements of our outlook remain unchanged. Overall, we are pleased with our results to-date, and we continue to manage toward meeting our full-year outlook. With that I will turn it back over to Neal. Neal?

Thanks, Rob. Overall, we delivered a strong quarter. Actually, better than we expected when we were together last quarter.

We have a long way to go to reach our expectations, but the results in the quarter build confidence in our ability to deliver through the balance of the year. With that I will turn the call back over to Eric. Eric?

Thanks, Neal. Operator, may we have the first question, please?

(Operator Instructions). First question is from the line of Arnie Ursaner. Please go ahead.

Congratulations on the quarter. I had a question regarding the $2.7 million negativeimpact of adjustments you made in the aerospace segment. Were it not for that, your margin would have been closer to 19.5%,yet your guidance for the year is several multiple points, you know, several percentage point lower than that. What specific items were unusual in Q1, in the quarter, and why are they likely to reverse, if you will, or change in the balance of the year?

Okay. Arnie, the charge that you referred to was a charge that we took primarily related to multi-year seven units on the UH-60. So it is an adjustment that goes back overall of the multi-year seven units that we have already shipped, and you're probably aware that we're near the end of multi-year seven, so it was a change in estimate. So it's really not appropriate to add that back and get to a 19 percent plus -- actually 19.2% operating margin for the quarter.

It really impacts a multi-quarter, multiple quarters, so -- and it is a -- also a relatively small adjustment given the overall size of that program, but to your point, more so on our expectations for the balance of the year, and the fact that they will be slightly below where we were in the second quarter, there's a number of factors that are going to impact that, Arnie. And I know it's probably a question on a number of people's mind, so I think that, as we outlined in our prepared comments, we had a higher profit contribution from a very favorable mix in the second quarter from Specialty Bearings, from Legacy Missile Fuzing programs, from DCS sales of JPF.

So that really helped us, significantly, in this -- in the second quarter. We do expect, during the second half of the year, that our Specialty Bearings growth will moderate. We will have a slight increase in JPF unit deliveries but lower non-JPF fuze revenue. We will also have some higher internal research and development in the second half of the year, and also as we've outlined, we expect to have a significant in increase in revenue from some of our new build to print arrow structures programs, and obviously, early on those are at much lower operating margins than our segment average.

And finally, we've got, you know, we've got good gross margins on our SH-2 sales to New Zealand, but they are below the segment average. So that's what's led us to, you know, raise the lower end of the guidance, but not to raise the upper end. You know, I think Greg Steiner and the entire Aerospace team would certainly like to over-deliver, but as we looked at it we didn't think it was really prudent to raise the high end of the outlook at this point.

Okay. Very helpful. My final question what organic sales are embedded in your guidance for distribution for the balance of the year?

Overall sales are up about 5% in each of the two quarters. You know, after, really, mid-September most everything is going to be organic, Arnie. I think that, you know, it's probably 3.5% to 4% of that 5% is probably organic.

Yes, Arnie. The expectation is for organic growth for the full year to come in the range of about 2% to 3%, largely second half loaded as we -- as you know, we consider any company on the books for more than 12-months to be organic so at that point both Zeller and Florida Bearings will be on our books for more than a full year, so as Neal had mentioned, it's about 5%,, sequentially per quarter in the back half of the year for total distribution sales.

And just again, to clarify. In Q3 do you expect positive organic sales growth and maybe -- I'm sure you'll get asked this momentarily, anyway, the trends of organic sales during the course of the quarter.

Yes. I would just say, Arnie, that organic sales trend during the quarter improved each month during the quarter, and that trend has, based on initial estimates for the month of July, has continued in July. So, we're feel pretty confident that we will see the tipping point in organic sales as we progress through the third quarter.

Thank you very much.

Thank you.

Thank you, Arnie. Our next question is from the line of Matt Duncan. Please ask one question and one follow-up. Thank you.

Good morning, guys.

Morning, Matt.

Morning, Matt.

Just to piggyback on Arnie's question there. I hate to pin you down, but just to try and get a little better idea of what these sales trends are looking like. Have organic sales done positive as of July?

We don't have final numbers yet for July, Matt. We did an initial estimate last night, and we think that they're down about 1%, organically, but again, we don't have everything consolidated yet so that could move a little bit either up or down. We would certainly prefer the upside of that, but as we looked at the trend through the first, excuse me, second quarter, and as we looked at preliminary results for July, I think the way Rob said it was really good that we would, you know, we're anticipating a tipping point during this quarter to go positive.

Okay. And then, you know, sticking on this point, you're talking about sequential sales improvement at KIT throughout the balance of the year, which is pretty atypical. I don't remember the last time your fourth quarter sales were above the third quarter. What's the driver that you're seeing that would result in your 4Q sales being up? Because seasonally, I know that's a little bit tougher quarter than the 3Q.

You know, Matt, you're right. Usually, the fourth quarter is the toughest quarter because of the timing of the holidays and everything else. However, we believe that we'll be able to have an increase from year to year driven by the trends that we see right now, and also, as you know, the third quarter is, particularly the late in the third quarter and the fourth quarter of 2012, really deteriorated. So quite frankly, the comparative period is weaker for us, as well.

Okay. And then last thing for me. On M&A, can you give us an update on what the M&A pipeline looks like on both side of the business?

Certainly, Matt. And I would like to add one hour thing if I could on the last comment that I was just reminded of. And that is that we commented quite a bit in the earlier conference calls about the deterioration in our OEM market segment, and we have seen a nice book-to-bill ratio in the first half of the year. So that also provides us some confidence in continued recovery in the second half the year, and actually our OEM business is slightly higher as -- slightly higher margin, as well so.

Okay.

And I'm sorry, Matt. Could you repeat your question again.

Yes. Just the M&A pipeline on both sides of the business. What's that looking like right now as you guys kind of progress towards the goals that you have laid out for few tower revenues for both of the segments?

Certainly. We -- since our last call, as we commented, we announced either the intent to acquire or an acquisition or both Northwest Power and Ohio Gear, so we are very pleased to have both of those companies either added to Kaman's lineup or to be added in the near future. The pipeline in the distribution side continues to be very active and we're -- we have a significant level of confidence that we will be able to complete some additional transactions during the course of the year. Of course, you can never say that for sure.

On the aerospace side a little bit less active as we have characterized, primarily driven by what we see as a continued very high acquisition multiples. Again, we have kind of talked about price for perfection, in particular, in some of the arrow structures areas and so we thinks it's a little less likely that we will be as active in the Aerospace side.

Okay. Just quickly on the KIT pipeline. Is there anything larger in there, or is it mostly the smaller deals you guys have been doing more recently?

You know, it varies. We look at a number of different size ranges, Matt. As you can imagine a lot of times that's not up to us. It's up to the seller.

Okay. Thanks, Neal.

Thank you, Matt. The next question is from the line of Steve Levenson. Please go ahead.

Thanks. Good morning, Neal, Rob and Eric.

Good morning, Steve.

Good morning, Steve.

Could you tell us on the Specialty Bearings and the additional demand that you see and the reasons behind the new plant is that from new customers, increased content in airline models or higher build rates or a combination of all three?

You know, Steve, you could have been on Greg Steiner and Rob Patterson's team when they came in for the authorization for the capital, because it's really all of the things that you touched on. You know, we've had -- we've been in our facility in Germany since we first acquired what was the RWG business, gosh, ten years ago, and it was not the best layout, as you could imagine, for an older facility but we've had multi-story et cetera, but they've had very good performance. They continue to build their business and grow volume. They are getting more content on new aircraft models and also, as you know you, can look at the aircraft roll out rates and those are going up.

So for us it made a lot of sense for a number of reasons, and we think that they've got a very good plan and are well underway on construction of the new facility. And we are really looking forward to the benefits that it will provide to our customers and our investors.

Okay. Thanks. Is A350 one of the models, and if so, is the content going to be similar to what's on 787?

Well, it is going to be one of the models. The content on the A350 for our combined Specialty Bearing product lines is actually quite a bit better than the 787. It's actually around $275,000 or $280,000 per aircraft, or over a $300,000 total, I think, for the aircraft. So we were very excited to see the A350 fly. In fact, we kind of joked the that it brought a tier to our eye, because we love to have that much Specialty Bearing content on any new high volume aircraft.

And, Steve, just as a relative point of reference there, on the 787 we have about a $100,000 of content per ship set.

So it's a big bump. Sounds great. Last one is Boeing has been talking a lot about its partnering for success, and that they want to go deep into the supply chain with that. We have heard some people say it l really is a partnership, and we've heard other people say well, they're really just trying to squeeze us a little bit. Could you comment on that a little bit and how it might work for Kaman?

You know, Steve, it's an interesting dichotomy, to be frank, but I would like to say that we work whether it's with Boeing, whether it's with Sikorsky, whether it's Airbus. Any opportunities that we have that we can deliver product to them at lower overall costs, and we can both benefit, that is certainly something that we are very interested in, and we look for to do that where we can really demonstrate the value that we can provide. They've also talked about increased volume that goes to those suppliers. We are certainly interested in increasing our volume with Boeing, and all of our customers.

So, I think it depends where you are and what kind of capabilities you have to bring to that equation, but we feel pretty good about it. And, in fact, you know, it was interesting the very supply chain guys at Boeing that we work with on a day-to-day basis were the people that came in to us and helped to expedite the special work that our bearings folks did on the Dreamlifter fleet. So, you know, they're pretty integrated from their supply chain on both side, and we would certainly like to grow our business with them.

Okay. Thanks. So, in other words, they've already provided some value engineering help. Do you now or do you think you might be able to purchase materials under their blanket agreements?

You know, Steve, actually, we do, currently, purchase under their blanket agreements, so we're -- it's to our collective advantage. I think that likely in some of the areas in our Specialty Bearings area, I don't know that they would provide any leverage there, but certainly in the composites area , Steve, it's a big deal to be able to acquire on their contracts.

Great. Thank you for all the additional detail.

Okay. Thank you, Steve.

Thank you, Steve.

Thank you. The next question is from the line of Jeff HammondPlease go ahead, Jeff.

Hey. Good morning, guys. Complies morning, Jeff. Morning, Jeff. Hey. So it sounds like just

Good morning, Jeff.

Good morning, Jeff.

So, it sounds like, just to kind of round out the quarterly, your revenue in aero kind of similar 3Q to 4Q. Margins better 4Q versus 3Q, and then kind of the sequential build in revenues and margins and distribution. Is that how we get to the 15%, you know, higher earnings in 4Q versus 3?

Yes. That's correct.

Okay. Perfect. And then can you just talk about -- so your revenues kind of largely unchanged. I think you fine tuned maybe the organic number within distribution, but just help me understand the lower margin guidance within distribution relative to kind of unchanged revenues.

Well, I think the reality of it, Jeff, is that, you know, we had significantly lower performance in the second, in -- excuse me, in the first half of the year than we had originally anticipated coming into the year because of lower organic growth rates, and in particular lower sales in our OEM segment, which, again, carry higher margins for us. And also we -- because of that lower organic growth, we had an impact of lower rebates, as well, which came through in the second quarter.

So those things, in combination, really drove the reduction in our overall annualized operating margin for distribution. As we look forward, you know, we saw good improvement in the second quarter, and we expect continued strong improvement in the third and fourth quarter to be able to get to that updated outlook.

Okay. Because it seems like most industrial companies are maybe suggesting a little more muted second half recovery than people anticipated, but it sounds like you have a good level of confidence that we get some snap back here.

Yes, Jeff. I think the way to characterize that is relative our our initial guidance that we went out late last year, we do expect a more muted response -- economic recovery in the second half, but certainly, relative our performance in the first half, we do continue sequential improvement.

Okay. Okay. Good. And then, you know, Neal, you talked about kind of, you know, robust (inaudible) activity and some potential, you know, forward wins. I mean as you kind of shake that up and consider defense spending over a multi-year periods, I mean how are you thinking about maybe the three -- the growth rate in aerospace over the next few years?

You know, Jeff, I -- we will provide more color on that as we get into, you know, the fourth quarter results, but I think, overall, we've continued to believe that we can be in the mid-to-high single-digit organic growth range for our -- our aerospace space business. You know, there's' number of things, certainly, that help us there. We've commented on the ramp-up rates, several times, on commercial aircraft, which certainly helps us from a structures perspective,, as well as a bearings perspective and on the defense side, certainly, there's going to be, you know, reductions in Department of Defense spending, but as we look at the programs that we have in-house, right now, and the anticipated ramp-up of those over the next, you know, couple of years, we still believe that we can support that again mid to upper single-digit range

Okay. If I could just sneak one more in, can you just talk about what's going on with the global aero systems or your engineering design services business?

Sure. I think, similar to many companies, we've encountered a significant reduction in demand for our engineering services from Boeing, in particular, over the last four to five months.

You know, we did comment last time that we were actually awarded Supplier of the Year for our engineering services business, so we were not real pleased that that business level is down. However, and based on where they are in their program cycle, right now, that's not all that surprising. And we have been able to win a nice order from another aerospace company that we are not able to identify at this point. So, you know, it's down based on Boeing, because so much of it is related to supporting their engineering, but it's something that we recognize is going to ebb and flow a little bit with Boeing's demand.

What we really -- one of the things that we've highlighted that's really important for us was to get that capability so that A) We could certainly continue to serve Boeing, but more importantly to reposition our capability to be able to effectively pursue design and build programs. And that's really what we think is going to be the ultimate payoff for that acquisition.

And I would just further there, Jeff, that to Neal's point, that we are seeing the benefit of the engineering compentencies in our ability to participate in a lot bid packages for build to design packages as they come out.

Okay. Great. Thanks, guys.

Thank you, Jeff.

Thank you, Jeff.

Thank you. (Operator Instructions). And the next question is from the line of Scott Graham. Please, go ahead.

Hey. Good morning.

Good morning, Scott.

Congrats, Rob.

Thank you very much.

So -- sure. I was just wondering if you kind of of took a look at the first half of this year versus the first half of last year, what would you say, roughly, would be sort of the breakdown between commercial versus defense in your aerospace business sales?

You know, actually -- one second. We have that. Give us a second on that, Scott. Actually, interesting our military is up just a little bit, and I guess that makes sense when you think about a lot of the special work that was done by the Specialty Bearings group in the second quarter of this year was more defense related and -- yes. So just -- it's not a lot, Scott, but it's a little bit more.

So the mix in aerospace is trending toward commercial, pretty much as you -- I think all of us would have expected, and so that needle is moving and that's helping you obviously, right?

You know, if you look back over the last couple of years, we've certainly grown our commercial business, and we expect that to continue. I think what the a little bit of a wild card in there is, you know, we look at our fuzing business, which clearly does not have a commercial market. So as we take that out of the mix and just normalize, we actually are seeing that shift towards a higher commercial content while growing overall.

Got you. The restructurings now, you know, kind of behind you, just kind of wondering, the 7% margin goal in distribution, is that now just a function of sales, or do you need to do some more thing is on the costs side? And what level of sales are you now thinking you kind of need to get there and sustain for how long to get there?

You know, Scott, I think that certainly sales growth will play a key role in that, and the implementation of our ERP system will also play a key role. I think that, you know, I can't be exact enough to say if it's $1.4 billion, or $1.5 billion, or $1.6 billion, but it's likely in that kind of range.

Maybe -- I don't know if I follow. 1.4?

Million -- billion to $1.6 billion.

Oh, I'm sorry. Okay. Okay. Alright. Got you. That's all I had. Thanks.

Okay. Thanks, Scott.

Thank you, Scott.

Thank you. The next question comes from the line of Michael Callahan. Please, go ahead, Michael.

Hi. Good morning. Thanks for taking my question, guys. I guess, first thing, is there any updates in the quarter as it relates to the K-MAX program, or has there been any progress there in general?

You know, there -- we really don't have any update on the K-MAX program, right now. You know, we continue to work very aggressively with Lockheed Martin to move that towards a program of record. I see there was something yesterday, Mike, that I don't have my head around yet. It was a bill that was introduced by a number of senators, or representatives, from I think it was Colorado and Utah, to increase investment or to pursue investment in unmanned fire fighting capability, you know.

Clearly with the tragic death of the 19 firefighters in the forest fire, and I know there was some discussion about ways that we might position to pursue those kinds of opportunities, as well, so but right now, we have no meaningful movement on that program to report.

Okay. Thanks. And then just, I guess, one other topic here on JPF. You mentioned, at least in the release, that foreign sales were an area strength there. I guess can you just give us a little color on maybe the trends on foreign sales versus domestic, you know, how the mix looked there, and then also, you might have given this already and if you did I miss it, had just what the JPF volume was for the quarter?

The volume, the unit volume, was in the queue. It's around 9800 units, I think.

For the year.

For the first half.

For the first half of the year.

Right. And we expect to be about 20,000, overall. In the second half of the year, we expect actually slightly higher foreign sales than domestic sales. And, again, Mike, that changes from quarter to quarter, because, typically, when we do a foreign sale it will be a large unit volume in that quarter simply because of transportation and logistic demands, as you can imagine, so that will change a little bit from quarter to quarter based on that.

Okay. That's all I had. Thanks.

Great. Thanks, Mike.

Thank you.

Thank you. The next question comes from Arnie Ursaner. Please, go ahead.

Neal, when we had been on the road, I think you had talked about, perhaps, providing additional cash flow data or information about your various businesses and I felt we would see it this quarter. Can you comment on what your status is on that?

Sure. Arnie, we -- for everyone else that's on the call, one of the things that we have discussed for a while is to provide a little bit more detail on some of the investments that we're making on programs, et cetera. So in the not too distant future you will see us outline in more detail some of the program related investments, particularly in aerospace, that we're incurring right now, and the time frame in which we expect to convert that working capital to cash. Because, as you can imagine, with as many new programs starting up as we have right now in that business, we have a significant investment in working capital until we begin to make rate production shipments. So it shouldn't -- it's not going to be too long, Arnie.

Okay. Thank you.

Thank you. (Operator Instructions). As we have no further questions, I would like to turn the call over to Mr. Eric Remington for closing remarks. Thank you. Please, go ahead.

Thank you. Thanks for joining us for today's conference call. We look forward to speaking to you again when we report our third quarter earnings in October.

Thank you for joining today's conference, ladies and gentlemen. This concludes the presentation. You may now disconnect, and have a very good day.