Park Aerospace Corp (PKE) 2003 Q1 法說會逐字稿

Please stand by. We're about to begin. Good day, and welcome to the first-quarter 2002 results conference call for Park Electrochemical Corporation. Today's conference is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to the president and chief executive officer, Mr. Brian Shore. Please go ahead, sir.

Thank you, and good morning, ladies and gentlemen. Welcome to our first-quarter conference call. I have with me, as usual, Murray Stamer, our senior vice president of finance, and we're going to do the - we're going to follow the same procedure that we always follow, which is Murray is going to start with some financial perspective on the first quarter. I might add a few comments. Then we'll go right into the question and answer portion of the call. Murray, why don't you go ahead.

All right. Thank you, Brian.

Good morning. Certain statements we may make during the course of this discussion which are not related to historical financial information may be deemed to constitute forward-looking statements. Any forward-looking statements are subject to various factors that could cause actual results to differ materially from our expectations. We have sort forth in our most recent annual report, on Form 10-K for the fiscal year ended March 3rd, 2002 various factors that could affect future results. Those factors are found after Item 7 of that Form 10-K. Any forward-looking statements we may make are subject to those factors.

Now, I'd first like to summarize the financial information included in our press release for the first quarter of our 2003 fiscal year ended June 2nd, 2002.

Net sales for the first quarter were $56.6 million compared to net sales of $59.1 million for the prior fiscal year's first quarter.

The net loss for the 2003 fiscal year's first quarter was $0.6 million, as compared with a net loss before nonrecurring charges of $3.1 million in the prior year's first quarter.

Last year, the company incurred nonrecurring pretax charges of $16.4 million during the first quarter. As a result, the 2002 first-quarter after-tax net loss, inclusive of these nonrecurring charges, was $14.6 million. The fiscal 2003 first-quarter loss per share was 3 cents basic and diluted compared with a loss per share of 16 cents basic and diluted before nonrecurring charges in the prior year's first quarter.

The prior year's first quarter loss per share, including nonrecurring charge, was 75 cents basic and diluted.

Now I'd like to briefly review some of the significant items in our first-quarter P and L.

During the first quarter of the 2003 fiscal year, Park's sales were down 18% compared to the prior year's first quarter. The company's sales dropped precipitously during the 2002 first quarter due to the downturn in the global electronics industry, and then remained depressed for the balance of the year. The small improvement in sales experienced during last year's fourth quarter continued in the 2003 first quarter.

Sales by region during the 2003 first quarter were down by 22% in North America, down by 24% in Europe, and were up by 7% in Asia compared to last year's comparable period.

During the fiscal 2003 first quarter, North American sales were 57% of total sales, European sales were 23% of total sales, and Asian sales were 20% of total sales, compared to 60%, 25%, and 15%, respectively, during the prior year's first quarter.

Sales of U.S. high-performance materials were 88% of U.S. laminate and pre-preg material sales for the first quarter of fiscal 2003, up from the 83% level for last year's first quarter and the 86% level for the 2002 fiscal year.

On a worldwide basis, high-performance material sales were 76% of laminate and pre-preg material sales for the first quarter of fiscal 2003, compared to 66% for last year's first quarter and 71% for the 2002 fiscal year.

Gross profit for the first quarter of fiscal 2003 increased to 11.1% of net sales compared to 4.7% in last year's first quarter.

This increase in gross profit was mainly the result of the significant cost reduction measures put into effect throughout the 2002 fiscal year.

Selling, general, and administrative expenses declined to $8.1 million for the first quarter of fiscal 2003 from $9.5 million for the prior year's first quarter. However, as a percentage of sales, SG and A expenses were 14.4% of net sales for the fiscal 2003 first quarter compared to 13.7% for last year's comparable period.

The 2003 first-quarter loss from operations was 3.3% of net sales compared to a loss from operations before nonrecurring charges of 9% for the prior year's comparable period.

During the 2002 first quarter, the company incurred a nonrecurring charge for the loss on the sale of the assets and business of its mass lamination operation in Arizona and the closure of a related support facility. The total pretax charge relating to this sale and closure was $15.7 million.

In addition, $0.7 million of severance charges were incurred related to the workforce reductions to the continuing operations of the company. The loss from operations including these nonrecurring charges was 32% - 32.7% of net sales during the 2002 first quarter.

Other income, which is net investment income, decreased to $0.9 million for the 2003 first quarter from $1.7 million for last year's first quarter. This decrease in net investment income is mainly the result of lowering prevailing interest rates.

The effective tax rate was 30% for both the first quarter of fiscal 2003 and for the prior year's first quarter.

Moving on to our balance sheet, Park's working capital at the quarter ended June 2nd, 2002 was $167.5 million as compared to $167 million at March 3rd, 2002, the end of the 2002 fiscal year.

Cash and temporary investments amounted to $149.2 million at the end of the first quarter of the 2003 fiscal year compared to $151.4 million at the end of the prior fiscal year.

During the first quarter of the 2003 fiscal year, the company had capital expenditures of $2.7 million, depreciation of $4.4 million, and paid the normal quarterly dividend of $1.2 million. As we have in the past, we invest the available funds on a conservative basis in highly rated, short-term, fixed-income securities and money market funds.

Stockholders' equity of $292.7 million at June 2nd, 2002 was virtually flat compared to $292.5 million at the end of the prior fiscal year.

Stockholders' equity per share was $14.88 per share compared for $14.89 per share at the end of the prior fiscal year.

In summary, Park's strong cash balance, lack of debt, high level of working capital, and clean balance sheet will allow Park to continue to weather the current market downturn and be in a position to take advantage of new opportunities where we can find them.

Thanks, Murray. This is Brian. And, you know, Murray's story is very simple and straightforward, as it should be, and I really have not too much to say this time. My comments will be brief.

As far as an update is concerned, on the outside world it's pretty much unchanged. I'm talking about the market, the global market for our product line.

You know, there are little ups and downs but in terms of any trend that would be - that would be clear, I don't think there is one. There's not one that I think we are, you know, able to report about, anyway.

And as far as when the market does really recover, we still don't know that and we really don't spend a lot of time wondering about it or thinking about it. As I reported, you know, quarter off quarter after quarter, we come to work every day, working for a living, and trying to make things better for our company, and that's what we're all about. We're here every day to help our customers succeed and we don't spend a lot of time, you know, contemplating or wondering about what will happen in the outside world.

But as far as I know, anyway, there's no significant change in the outside world environment, and, you know, there are a lot of experts out there that have opinions about when the electronics industry will recover and how rapidly it will recover and my opinion really is no better than anybody else's.

But, again, it's not something we spend a lot of time dwelling on or thinking about because it's one thing we have no control over. We focus on the things we do have control over, which, again, is to make improvements in our business every day and to be out there doing everything we can for our customers to help them succeed every day.

And that's really it, on the inside world as well, so there really isn't any change on the inside world of any consequence either. I think you know, because we have discussed this many times in the past several quarters now, that we did reduce our cost structure of the company, and it's a reduction on the run rate, an annual run rate, of over $30 million a year currently as compared to the beginning of last year, let's say.

But that's really pretty much stable for the last couple quarters now. We haven't done anything significant on the cost side in the last couple quarters.

Now, when I report that number, I always want to remind you that those are hard cost savings which relate to people issues. Those do not relate to material costs or other savings in the factory, which we work on all the time.

So the actual cost savings are considerably more than that, but we haven't really reported that number. We just report the number based upon the workforce reductions which, unfortunately, we went forward with.

I think you also know, so I'm just really repeating things we've covered many times, that we're not a slash and burn type company. The workforce reductions that we did, we were very pained by them and we felt very bad about it, but we also always thought of our future. We never took the heart out of anything. We're always thinking of our future. We're doing the best we can to manage our P and L on a current basis, but everything we do is really balanced much more heavily toward what's right for the company's long-term future. That's what we're all about, and, you know, we could be criticized - and we always - you know, we always are - about our long-term perspective.

I remember a couple years ago people saying we weren't aggressive enough, we weren't spending money quickly enough and buying - you know, doing these high-priced acquisitions. Well, I guess we'll have to decide who was right about that and who wasn't.

But in any event, it's really business as usual for us which means we're working our rear end off every day to help our customers succeed and that's it.

And when the market recovers, it will recover, but it's my job and our job to make sure that tomorrow the company's better than it is today, and today it's better than it was yesterday, and that's all there is to it.

Like I said, my comments will - will be brief, and they have been brief because there really isn't a lot new to talk about in terms of the outside world or the inside world. So maybe I'll leave it like that, and then we'll - when we go right into the question and answer session portion of the call, operator, can we get started with questions and answers, please?

Yes, sir. Today's question and answer session will be conducted electronically. If you have a question, you may ask it by pressing the star key followed by the digit 1 on your touch-tone telephone.

Once again, that is star 1 to ask a question. If you find that your question has been asked and answered, you may remove yourself by pressing the pound key.

We'll take our first question from Shawn Severson with Raymond James.

Hi. This is actually David Nazer in for Shawn today. Just a quick question - couple quick questions. First, regarding the gross margins, you guys were up to 11.1%, up from 9.8 in the previous quarter. Revenue essentially stayed flat on, you know, a run rate basis, as you mentioned. So where would you see the up side of margins coming from that? Is it just a better mix? Just some of the more additional cost savings you guys are just getting out of the manufacturing side itself? Can you give us a little more color on that?

Go ahead, Murray?

Yeah. The main reason that the gross profit percentages were up in the first quarter compared to the fourth quarter really relates to the fact that in the fourth quarter, we had some shut-downs. If you remember the fourth quarter is actually a 14-week quarter.

Uh-huh.

So you have one extra week of overhead in the fourth quarter that you don't have in the first quarter. So you basically have the same top line with less overhead.

Okay. And you mentioned business has been more or less remains stable. Would you still characterize it at 4.3 to 4.4 weekly run rate that you mentioned coming out of the last call.

Well, that's what - if you do the math, the first quarter was a 13-week quarter and I think it's 4.35, approximately, per week. We just divide by 13, the top line, and if you're also asking about, you know, where we see it going, you know, we really don't have much to say about that.

We - again, we don't see a lot different happening in the outside world in the short term, in the next few months. We could be wrong about that, because we don't have any control over the outside world.

Just one thing I should point out - we should point out to you, and really maybe even remind you of, which is that even in this very depressed market, we still have some of the seasonal factors which with we deal with in prior years as well, and that means the summer season, the second quarter, the summer season, is sometimes a little lighter because there are holidays, particularly in Europe.

I think also, just to be, you know, blunt about it, I think a lot of people in our industry outside of people working at our company are feeling a little de-moralized right now so I think some of them would be very happy to take a couple weeks off and regroup a little bit, you know. We're not really feeling de-moralized but I think we're probably the exception and not the rule.

And so, you know, I'm not - I really, from my perspective, anyway, would have a lot of difficulty giving you any meaningful guidance in terms of, you know, what to - how to consider this summer factor, but I think you probably want to just consider that. And it is a - you know, it's a seasonal thing. It wouldn't necessarily mean anything about any kind of long-term trends.

So far at this point, we're into the - what is it, the third week of June. We haven't seen, you know, any real change in our business levels.

So for the most quarter, this last quarter, it was within the 4.3 to - you said 4.35, but it - you know, pretty much hovered within that 4.3 to 4.4 range, not much of a change either up or down, though, right?

Oh, you mean like week to week.

Yeah. From week to week.

Oh, yeah, it's actually pretty steady week to week. And, you know, obviously we're talking about an average there, but actually it is pretty steady.

Yeah, uh-huh.

We don't have - in terms of our shipments, in particular, you know, there are not a lot of big spikes up and down. Even in the bookings there aren't because the lead times are so tight that the - you know, the bookings really track the shipments very, very closely.

Okay. Thanks very much, gentlemen.

We'll go next to Nathan Churchill with Sidoti and Company.

How you doing? I was wondering if you could give an indication if you've seen any increase in design activity.

You know, yes, I hear this and, you know, it's not - I can't - we're not in a position to give you a scientific, you know, survey. We just hear a lot of things anecdotally from our customers and also OEMs directly as well, because you may know we have a pretty meaningful, let's call it, OEM function where we deal direct with OEMs as well as customers.

And, yeah, we hear these things and, again, I'm just going to be able to give you an anecdotal perspective. I mean, I was just talking to one of our customers yesterday and he was commenting that he has seen more activity. And actually, more repeat business, you know, than he had seen previously.

The problem in the last year for a lot of our customers is they were seeing, you know, lots of prototype things but nothing was ever being released to volumes, so they would never get any repeat orders.

But some - again, it's anecdotal and I have to be real clear about that. I don't have scientific perspective here. But if you're asking me what I hear - and I certainly listen as much as I can and I speak to customers as much as I can - I hear that, yeah, maybe a little more of activity on that level, and as well as a little more repeat activity.

Okay. Could you give us an update on whereabouts the progress is for updating the - the high-tech treater in France? How much capital spending do you have left on that and when do you expect that to be finished?

I don't - Murray, do you have the spending information? I don't really have that.

Nathan, how about I get back to you about where we are on any information on the treater. We're pretty early in the process.

Treater is supposed to be operational and, you know, I just got back from Europe and I should have a better answer for you. I think it might have slipped a little bit, but just frankly, it's issues with suppliers. But I think we're talking the end of the third quarter, something like that, in terms of when the treater will actually be operational.

Okay. All the cost-cutting, was that fully reflected in this past quarter?

Yes, the - right. The cost structure, as far as the people side of the business is concerned, has been stable for the last six months, I think. There - there are ongoing cost reduction activities at every business unit that continue. So those activities continue, but we haven't really quantified those because I think those can be a little soft and I - you know, frankly, I hear people talk about these things in other companies and I think they're a little phony sometimes because it depends on what you compare it to and everything.

So we've only dealt with very hard cost savings, and the cost savings that we've reported about, which are people cost savings, those - that's been really, you know, stable, if you will, in place for maybe six months now. So there really isn't any change from the people side of our business in our basic cost structure.

Okay. That said, do you have a target percentage for SG and A as a percent of sales?

No. No, I don't think we do. I mean, you know, we don't - we don't have complete control over the top line, of course, and, you know, we don't really run the business that way, to be honest with you. We just - we do the best we can every day, and make adjustments every day. You know, I have numbers in my head that I work with that I don't share with other people and, you know, I target and I watch and, you know, really I don't know whether you're aware of this, but we do - we have weekly P and Ls and roll-ups and everything else, so we watch our business very, very carefully.

But I don't like these kind of broad-brush directions, because often, you know, they're coming from CEOs that don't really know their business very well, because they deal in big percentages rather than understanding what the heck is going on out there, and I'd rather know what's going on out there and make decisions based upon facts on a - you know, kind of an ongoing basis, rather than just give you a target number.

Okay. And lastly, can you give us an idea of the break-even? Would you expect that if you had next quarter top line where this quarter's was, that the bottom line would be right around the same?

Well, you know, we've answered those - we've I guess evasively answered that question in the past and I just want to remind you again that we try to be fairly protective of some of the cost structure issues in our company because of the fact that these conference calls are very public affairs these days, and almost every quarter now, we have a competitor, at least one competitor, actually listening in on the call. We get the list later on of the participants. So we're a little uncomfortable and it's a disadvantage for us because our competitors are, you know, not independent public companies.

But, look, I mean the analysts are doing a real good job out there, and I really mean that sincerely. There's so much data and so much history now that I think the analysts have a pretty good fix on, you know, our cost structure and sales contributions to the bottom line, and I think the - I think the analysts are in a pretty good position to approximate and estimate what our break-even is.

Obviously, we're getting pretty close to it at this time.

Okay. Thanks a lot.

And we'll go next to John Roberts with Buckingham Research.

Good morning, guys.

Good morning.

Good morning.

Even though the overall revenues have been somewhat stable here, the non-high-performance business continues to gradually erode away and it's been offset by the shift towards the high-performance. Is there a level at which the non-high-performance gets small enough that you've got some additional rationalization opportunity here or consolidation opportunity?

Well, the thing is that except for our - you know, our elegant product line, which is made in Neltech, principally, which is a dedicated plant to high-tech, that's not just high-performance - those are low-loss materials and things like Polyamit and dash 13's and 6000s we call them, and even the PTFE business, but the rest of the business units produce both high-performance, high-TG and low-TG products.

So it's not that there's even a separate part of the facility that would be dedicated to low-TG and another part of the facility that would be dedicated to high-TG. All of the entire equipment package and all the volume facilities - and I'm including here California, New York, England, France, Germany, and Singapore - all the equipment installations are capable of producing - and in fact, do produce - both low and high-TG products.

So I don't know if you understand that, but it really wouldn't be, okay, we don't need this low-TG, you know, equipment set anymore because we're not producing low-TG products anymore.

The evolution, by the way, is really a natural evolution. We haven't - we haven't, you know, discontinued the supply of low-TG to any customer. It's just that our customers are the higher-tech customers so they keep evolving to higher and higher technology circuit boards, which require, you know, higher TG, higher technology materials.

So it's really not even a customer mix thing. It's the same customers but those customers are evolving and gravitating toward higher technology work, and it's kind of - it's a natural phenomenon, really.

And so should we expect the non-high-performance to just continue, and in an absolute basis to go down, as well as a relative basis, irrespective of market conditions, or if the market were to pick up, would you guys actually pick up production of the non-high-performance as well?

Well, that's an interesting question. It's my opinion that the trend continues as it has, and will continue in, you know, strong markets as well as weak markets.

Okay. And lastly, assuming that the market just continues stable here for the next several quarters to even possibly longer, give us - remind us again the capital spending for this year and next year, and at what point would you feel comfortable enough to start using some of the $150 million of cash for either share repurchase or, if you saw valuations on acquisitions start to come down?

You want to talk about the capital situation, Murray?

Sure. Capital spending this year will range, you know, depending upon the cutoff, when we get close to the end of the year, in the 10 to $15 million range. You know, depreciation will probably be in the 19 to $20 million range. And that's - we haven't done any projections into - it's premature to talk about our fiscal 2004 year at this time.

Yeah. That would not really be that meaningful because we're just - you know, we're really just beginning the 2003 year.

And I'll just give you a - you know, a little general comment on, you know, our approach to spending, which is that we really haven't changed our perspective very much. We're looking for opportunities all the time to invest our money in, either in our own facilities or in other technologies or businesses, because, you know, as I said in the introductory remarks - and that's obviously something you've heard a lot about - is we think long-term. You know, I think I even made this comment in the press release this time, that the two things that matter to us are that long-term we believe in the industry, we believe in the future of the global electronics industry, particularly in the high-tech end of it, and we believe in what we're doing. We believe in ourselves. We believe in our company.

If those two things are true - and for us, they are - that's enough for us to keep going forward and keep making investments.

So, you know, we're - we've been looking at opportunities as - you know, over the last six months or so, and again, the - the question is, does it make sense, is it strategically proper for us, and is it logical. Is it logical. Is it just based upon some kind of mob mentality where you have to buy something, or is it logical. Can we logically, you know, justify it to ourselves.

You know, if the answer is yes, then we're going to pursue it. If the answer is no, I don't care who says what, I don't care if everybody else is doing it, we're not going to do it, because we're not following any kind of mob mentality here.

As far as the capital spending is concerned, at this point we're really not looking to add a lot of capacity, but we could - we continue to upgrade our technology, and no more or less than, you know, if the market was stronger or weaker. You know, as compared to, you know, historical perspective.

As far as the stock - buying stock, you know, people ask that from time to time, and I guess I'll just say what I always say, which is that it's not really our - you know, our priority focus. It's not - you know, we don't really think a lot about that. If the stock price, you know, really collapsed for some reason, you know, we would start to think about it more carefully.

I don't know what happens to the stock market and stock price is something else that we can't predict. I don't see any reason for that to happen, because, you know, we're going forward with our plans and we feel real good about our company, we feel we have a strong company, but if the stock price for some reason did, you know, just collapse or go down precipitously, we would probably be inclined to think about it more, because we - that's what's happened in the past.

At this point, it's not something we're thinking about very much, and it's not really kind of central to our thought process. I know there are other companies that they're always out there buying stock all the time, and I'm not criticizing that. But it's just not our focus. It's - we don't want to manage the stock price, we want to manage the business.

And even though right now we're not finding a lot of opportunities to spend $150 million, you know, we're out there looking for opportunities to invest the stockholders' money in an intelligent, logical way, and, you know, whether the market's good or bad next month or the month after that, I'm telling you that if we find something, you know, we're going to want to look at it carefully. Because, again, we're going to think long-term, does this make - is there an intelligent logical reason to be doing this. If there isn't, like I said, I don't care who else is doing it. Everybody else in the whole world could be doing it, which is the case three or four years ago or two or three years ago. Everybody had to buy, you know, something, no matter what the price was, and, you know, we weren't going to get caught newspaper that hysteria and we're not going to get caught up in it now either. But on the flip side, you know, we're still looking. So maybe that's more of an answer than you really were looking for, but I thought I'd just share some perspective with shall.

That's good. Thank you.

You bet.

We'll go next to Jesse Pitchell with Needham and Company.

Yes. Good afternoon. Congratulations on a good execution here in this quarter. Most of my questions have been answered, but let me just ask you: Where do you stand on the higher yields and efficiencies that you had planned in expanding some of your facilities with the next-gen process in handling equipment? So I mean how much of the gross margin improvement we're seeing here is due to the head count reductions versus the higher yields, and where do you see further savings in the variable production going forward?

Well, that's a real good question. I'm glad you asked it. And I think that we - most - the opportunities are mostly ahead.

We have all the equipment installed and running, and it's running at pretty, you know, high levels in terms of production. The only thing that really is limiting it is just the amount of business we have. But what we're trying to do is steer some of our business to the newer lines so we can get the benefit of them and really, you know, kind of enhance them and make those - the fine-tuning changes that we want to make.

We feel that we have two or three years to go, though, to really enhance this technology, because now it's installed and it's running very nicely, but we feel the benefits are still ahead. And now that, you know, the suppliers are out of it, now it's our hard work that really will make the difference between a pretty nice equipment installation and an elegant, wonderful equipment installation. And I'll tell you something, we're going for the wonderful standard right now.

But I think we got two or three years to go.

We're already - and to answer your question more specifically, we already are seeing better yields and better productivity on the equipment. However, we just need to balance that with something else, which is that the world has become very, very quick turn with no lead times, and of course that impacts in a negative way our yields and productivity.

So there's, you know, two different factors that are kind of working against each other here.

Gotcha. You know, speaking of quick turn, you've given us in the past some indication of, you know, what you're seeing quick turn volumes - the forecast for quick turn volumes. Can you comment on where you see quick turn headed in the next quarter?

In the quarter, I don't know if I could say anything too intelligent about that, but I can say that it's become so much more of a - you know, of a factor. Just, you know, every month it seems like quick turn, quick turn, quick turn is more and more important.

Obviously, that's partly because the market is, you know, so expressed and people are nervous. Meaning, you know, customers and OEMs, they don't want to order in advance because they're afraid they're going to get burned, you know. But I also think it's something that will be more of a factor permanent permanently, particularly in the western markets. You know, a quick turn, a lot of specialty-type orders, because, you know, as technology is driven, it's less kind of standardized volume oriented, and it's something that we are really working hard on to do better and better at. You know, to find ways to get - to respond a couple hours more quickly to a customer as compared to what we could do, you know, last month.

And, you know, it's - we just think it's a real important part of our future. We really just don't like saying no, and we very rarely do say no, and just so you know, I mean, you know, let's get all the cards on the table. That also costs some money, you know. It's - I mean, we could have a very efficient business if we were very customer unfriendly. We would say, you know, look, we'll it for you on July 23rd and that would be it. Of course that's not how we want to run the business. And what we need to do, our challenge is this: It's kind of maximizing or managing two almost competing things. One is the responsiveness of the customer. The other is to, you know, run our business as efficiently and cost-effectively as possible, you know, and that's the challenge and that's what we're working on

You - back to your - the process and handling equipment that you've installed, do you consider that a competitive advantage now, or is it keeping up with the competition? I mean, you must know what some of your competitors have, in terms of their equipment and their - and their yields. I mean, are you able to use these upgrades as a selling point?

I know a little bit about what our competitors do. I think it's already a very significant advantage. Not just with yields, but also with quality, consistency, technology levels, cleanliness, and I think it actually is quite a nice selling point, because the customers who have visited our facilities are - really feel very good about them, because they can see the technology that's gone into these installations. And also, frankly, you know, it symbolizes our commitment to our future.

Great. And then just last question. Could you talk about your major customers? Have there been any change in the top five customers? Any new customers? Thank you very much.

Murray, you want to read off the major - no major changes, but go ahead.

Yeah, there really aren't any changes and the top three customers are always the top three customers, I think as long as we've been going through this process, pretty much. You know (inaudible) is the No. 1 customer, followed by Tyco, which is No. 2 and Multech which is No. 3.

And remember, Multech is part of Flextronics.

Right. And once you get below the top 3, then the other group, you know, they sweep swapping places but our fourth largest customer this quarter was Petasis, and our fifth largest customer is EIS, which is a distributor.

Petasis is a Korean company, it's a high-tech Korean company. EIS is a very large distributor of electronic product, and I'm just looking at it myself, and really the - you know, it's the usual suspects. And they - you know, they swap places every now and then but it's the usual suspects, the top 5, top 10.

You know, in previous quarters, I believe via systems was in your top 10. Are you adequately reserved for via systems? We saw some other companies take some pretty good reserves for via systems.

Well, via systems is a - you know, really a thing of the past for us. You know, via systems is really no - not even in our top 40, I don't believe. You know, we just really don't have a lot of business with via systems anymore.

I have to ask that. Thank you very much.

Yeah.

We'll go next to Adam Wolfman with Lehman Brothers.

I was wondering if you could give us a quick update on your OEM and early involvement program, if there have been any changes or your relationships there.

On the OEM side? Well, you know, we've learned so much about the OEM world that one thing we've learned is there are more OEMs than customers. I mean, circuit board customers. You know, everybody knows the Ciscos and Lucents but there's lots and lots of names out there, you know, that I'd never even heard of until recently. And it's been interesting trying just to manage the whole OEM scene because there's just so many OEMs working on so many different new technologies. That's one of the exciting parts of our business. We just did add a person to the OEM group. He's an EE, electrical engineer, and we're real excited about that because, you know, now we're really going to be able to work with the OEM designers on helping the OEMs design, you know, systems that are manufacturable and design systems that under - that have some comprehension of the material capabilities. You know, the problems in the past is that the, you know, OEM designers unfortunately were designing in a vacuum. They just didn't have this capability, and often they would design systems that were, I mean, just extremely difficult from a manufacturability perspective.

So, I mean, I don't think there's any, you know, one major breakthrough from the OEM side. I think we're probably dealing with, you know, the - essentially all of the key OEMs at this time, but I would tell you that it's something I'm personally real excited about and a lot of other people in the company are, and like I said, we've actually added an individual to the OEM group, an EE, a double E, so that we can work directly with the OEMs, the OEM engineers from the design perspective.

Great. Thank you.

Once again, I'd like to remind everyone it is star 1 to ask a question. We'll pause just a moment to see if you we have any more.

Mr. Shore, it appears we have no further questions. I'd like to turn the call back over to you for any additional or closing remarks.

Okay. Well, thank you, operator, and thank you, everybody, for listening. It's been really nice talking with you again, and look, you know, where to find us and we'll talk to you in I guess a couple - few months after we finish our second quarter. In the meantime, you all have a great summer, and we'll talk to you or see you soon. Good-bye.

This does conclude the Park Electrochemical Corporation conference call. We thank you for your participation. You may disconnect at this time.