Park Aerospace Corp (PKE) 2004 Q4 法說會逐字稿

Excuse me, everyone. Good day and welcome to the fourth quarter 2005 results conference call for Park Electrochemical Corporation. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over the President and Chief Executive Officer, Mr. Brian Shore. Please go ahead, sir.

Thank you, operator. This is Brian Shore. Welcome everybody to our fourth quarter conference call. I have with me as always Murray Stamer, our CFO. And we will start, as usual, with some introductory comments. And then we'll do a question and answer section of the call.

Let me get right into it. Murray, could you give us a little bit of financial perspective on the fourth quarter, and the 2005 fiscal year?

Sure, and good morning everyone. 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 set forth in our most recent Annual Report on Form 10-K for the fiscal year ended February 29, 2004, 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.

In this discussion, I will describe results of operations based on non-GAAP financial measures, as well as results determined in accordance with GAAP. We believe that the disclosure of non-GAAP operating results as a supplement to GAAP results will assist the listener in assessing the Company's performance and prospects.

I would first like to summarize the financial information included in the press release for the fourth quarter, and fiscal year ended February 27, 2005.

Net sales for the fourth quarter ended February 27, 2005 were $51.2 million compared to net sales from continuing operations of $55.3 million for the prior fiscal year's fourth quarter. Net profit for the 2005 fiscal year's fourth quarter was $4.9 million compared to net profit from continuing operations excluding special items of $4.1 million for the prior year's fourth quarter. Diluted earnings per share were$0.25 for the 2005 fiscal year's fourth quarter compared to diluted earnings per share from continuing operations excluding special items of 20 cents for the prior year's fourth quarter.

For the year ended February 27, 2005, net sales were $211.2 million, compared to net sales from continuing operations of $194.2 million for the prior fiscal year.

Net profit, excluding a pre-tax gain from an insurance settlement of $4.7 million, and a pre-tax charge of $600,000 for realignment charges, for the 2005 fiscal year was $18.1 million compared with the prior year's net profit from continuing operations before special items of $7 million. During the 2004 fiscal year, the Company realized a pre-tax gain of $33.1 million related to the Delco lawsuit, pre-tax realignment charges of $8.5 million, a pre-tax gain of $400,000 related to the sale of real estate in the U.K., and $33.8 million of losses from discontinued operations, net of taxes. As a result, net earnings were $21.6 million for the 2005 fiscal year compared to a net loss of $3.9 million for the prior year. Diluted earnings per share before special items were $0.90 for the 2005 fiscal year compared to diluted earnings per share from continuing operations before special items of $0.35 for the prior year.

Diluted earnings per share were $1.08 in the 2005 year compared with a diluted loss per share of $0.19 in the prior year. Now I'd like to briefly review some of the other significant items in our fourth quarter and fiscal year P&L. Comparing the 2005 fiscal year's fourth quarter sales to the prior year's fourth quarter sales from continuing operations, Park's North American sales decreased 8%, European sales decreased 11% and Asian sales decreased 4%. In contrast, for the entire fiscal 2005 year, Park's North American sales increased 10%, European sales increased 7%, and Asian sales increased 7% compared to the prior year. For both the 2005 and 2004 fiscal years, the percentage of sales by region were very similar, with North American sales comprising 55% of total sales, European sales were 16% of total sales and Asian sales were 29% of total sales.

Sales of North American high-temperature printed circuit materials increased to 97% of North American laminate and prepreg material sales for the fourth quarter of fiscal 2005, up from the 94% level in the fourth quarter of the prior year. Foreign high-temperature printed circuit material sales were 94% of foreign laminate and prepreg sales for the 2005 year's fourth quarter, compared to 89% for the prior year's fourth quarter.

On a worldwide basis, sales of high-temperature printed circuit materials were 96% of total laminate and prepreg material sales for the 2005 year's fourth quarter compared to 91% for the fourth quarter of the 2004 fiscal year. Sales of Park's North American high-performance, non-FR-4 printed circuit materials, which are a subset of high-temperature printed circuit materials, increased to 45% of North American laminate and prepreg material sales for the fourth quarter of fiscal 2005 compared to 35% for the fourth quarter of the prior year.

Foreign high-performance printed circuit material sales were 26% of foreign laminate and prepreg sales for the 2005 year's fourth quarter, up from 24% in the fourth quarter of the prior year. On a worldwide basis, sales of high-performance printed circuit materials were 35% of total laminate and prepreg material sales for the 2005 year's fourth quarter, up from 28% in the fourth quarter of the prior year.

FiberCote's advanced composite material sales comprised 8% of the Company's total sales for both the fiscal 2005 fourth quarter and for the year compared to 6% for both the prior year's fourth quarter and the prior year.

The gross profit for the fourth quarter of fiscal year 2005 was 20.1% versus 22.4% for the prior year's comparable period. This fourth quarter year-over-year decrease in gross profit was attributable to the lower sales volume in the 2005 fourth quarter compared to the prior year's fourth quarter.

For the 2005 year the gross profit was 20.5% compared to 16.8% for the 2004 year. The year-over-year improvement in gross profit was due to the higher sales volume in the 2005-year, the effect of cost reductions mainly from the realignment of the Company's North American FR-4 operations during the 2005 third quarter and the increased sales of higher-margin, high-performance products and advanced composite materials.

Selling, general and administrative expenses decreased as a percentage of sales to 11.4% for the 2005 year's fourth quarter, and 12.8% for the 2005 year from 13.9%, and 14.4% for the 2004 year's comparable periods. The decreases in SG&A expenses as percentages of sales in the 2005 fourth quarter and year compared to the 2004 fourth quarter and year are mainly due to the reduction in the freight costs, and the reduction in selling and administrative salaries and related expenses. These reductions in SG&A expenses, both in dollar terms and as percentages of sales, were attributable to the realignments of the Company's North American FR-4 operations that occurred during the 2004 year, and to a lesser extent during, the 2005 year's third quarter.

As a result, pre-tax operating profit from continuing operations before special items was 10.6% of net sales for the 2005 year's fourth quarter compared to 9.9% for the prior year's fourth quarter. For the 2005 fiscal year, pre-tax operating profit from continuing operations before special items was 9.3% of net sales compared to 4% for the prior fiscal year.

The effective tax rate for continuing operations was 9.2% for the 2005 year compared to an effective tax rate for continuing operations of 8.7% for the prior year.

Moving to the balance sheet, Park's working capital at February 27, 2005, the end of the 2005 fiscal year, was $201.5 million compared to $197.5 million at February 29, 2004, the end of the 2004 fiscal year.

Cash and temporary investments remained nearly flat at $189.6 million at the end of the 2005-year compared to $189.2 million at the end of the prior fiscal year. The impact of the special cash dividend of $19.9 million the Company paid on December 15, 2004 was offset by the cash generated from operations during the 2005 fiscal year.

As we have in the past, we invest the available funds on a conservative basis, in short-term fixed income securities and money market funds. During the 2005 fiscal year, the Company had capital expenditures of $3.3 million and depreciation of $10.2 million.

Stockholders' equity was $242.9 million at February 27, 2005 compared to $243.9 million at the end of the prior fiscal year. This slight decrease in stockholder's equity was the result of cash dividends paid, including the special dividend, partially offset by the Company's net earnings during the 2005 fiscal year.

Finally, stockholders' equity per share at February 27, 2005 was $12.19 per share compared to $12.33 per share at the end of the prior fiscal year.

Thank you, Murray. This is Brian again.

I really have very little to add to the comments in the press release that was issued this morning. I'll just review a couple of things, especially for those why maybe haven't seen it yet.

As far as the fourth quarter was concerned, the market in the electronics side of the business, the laminate side of the business, was about the same as it had been in the prior 2 quarters, give or take a little bit of couple of ups and downs once a month.

But generally speaking about the same, which means mixed. And that's certainly how we see the market in the first quarter. No major change.

The composites market, the market for advanced composites products was strong in the fourth quarter as it was in the third quarter and we see that continuing in the first quarter.

On the electronics side, we discussed this over and over again, but I think you know by now that our visibility is very, very poor. And I don't ever expect that's going to change. I don't think that it's going to be better. In other words, it's not a temporary phenomenon.

So that means in 2 weeks from now we really don't have a real strong feeling to which we know rather what the market will be like. But for now it seems to be about the same.

So what else should we talk about? I think that you know from our prior conference call maybe some of our press releases in the last few months that we have a major effort ongoing in our Company to reinvent our Company into an advance material company.

And as part of that effort, we have a high level group of people that is involved in intensive project let's call it that's maybe a 2 or 3 month project to very thoroughly understand the global advance composite markets, which will lead to strategic decisions, which we hope to make in the next few months as to how, where, why, when we might expand our business in the advance composite area, which we believe is a - at this point anyway - as a growth opportunities for our Company.

On the electronics side we're not really looking at that, as I think you know, as a high growth market for our Company anymore. What we're really focused on in the electronic side is the bottom line not the top line.

So just a couple of little updates, we talked about the FiberCote treater the last time we got together. And that FiberCote treater is progressing nicely, the additional treater that's been installed in FiberCote. It's basically installed now. We expect to have operational in June.

And just to close the loop on the Singapore treater, that treater is fully operational and has been for a couple of months, which I think is consistent with our prior discussions.

And like I said, I really don't have a lot to add to the comments in the press release. I think I'll leave it at that. Operator, why don't we now go to the question and answer portion of the call?

[OPERATOR INSTRUCTIONS]

Your first question comes from Rich Kugele from Needham & Company.

Thank you. Just a few questions if I could. I guess Brian, can you give us a sense now that you're in the final stages of getting the treater installed in Connecticut, ballpark type range of where you think the FiberCote business can be for the next fiscal year as a percentage of your total business?

I don't think we can do that. From a manufacturing capacity perspective that should double, essentially double the current capacity FiberCote.

Now and the business is running pretty close to capacity now. So that should give us a lot of room to grow in terms of manufacturing capacity.

Now in the composites business, there are, there's more of a variety of different types of manufacturing capabilities. So this machine is not capable of producing every type of composite product. But it has a similar capability to our existing machines, existing equipment in FiberCote.

The question on the top line growth is really, I mean I would just be really wild about guessing it. Because you have to remember it's not just FiberCote I think you're really talking about. You're talking about our advanced composite business.

Maybe 2 or 3 months down the road you might have better perspective. But so far anyway our intention unless we come to a different conclusion, our intention is to grow our advance composite business.

And that doesn't necessarily mean just through FiberCote. It could be acquisitions. It could be installation of manufacturing equipment in other geographies. It could be an addition of other kind of manufacturing capabilities, which would fill out our product line.

But at this point if I, if we gave you any guidance on that point - I know it's a very important question - it is to us as well. I think we would just really be guessing. We don't have a good feeling for that.

Okay. That's fair. How about maybe looking at it an easier way? Do we think that this is enough capacity to give you runway for a year or two years, or is this kind of something that you had that you could go and put in, install fairly quickly, and we'll see how it kind of goes from there?

Let's do the best we can to try to address that. First of all, I don't know if we mentioned this last time, but there's another treater identical, essentially identical to the treater that's being installed now. And FiberCote, which has been relocated, the FiberCote is being placed in storage so we could install that in FiberCote.

As a matter of fact, there's a place to do that or somewhere else if we wanted that kind of capability elsewhere, overseas or West Coast. Of course, we currently have a lot of treating equipment that is not fully utilized and it's possible that we might be able to convert that treating equipment to advanced composite treating. So that's something that we're thinking about.

In terms of the FiberCote facility itself, with the type of product, solvent coated product that's made on the existing machine, the existing capability, I would think that with the new treater plus the other one that's in storage that we'll have no issue with capacity there for awhile. But I think that what we might find is that we might be talking about growing the composite business elsewhere, not just through the FiberCote facility.

Again, we might be thinking about acquisitions and we might be talking about reducing this product in other geographies such as, just as an example, Europe, Asia or maybe someplace else in North America like the West Coast, as an example. So I think the best way to look at it is not just a FiberCote plant and its manufacturing capacity because that might be more limited in where we're going with this thing.

And again, I just have to be sure -- I just want to be really sure I'm being completely open and honest about this. These things are being very, very actively discussed and considered as we speak, so I don't have anything to report to you. I want to make sure that I'm not in any way suggesting that we have anything to report. I think as time goes on, the first quarter call and maybe even more so the second quarter call, we might have more specific information and guidance for you. Maybe even if it's not numerical guidance, it might be more specific in terms of what geographies we'd like to expand into, what product lines we'd like to expand into, what kind of manufacturing technologies we'd like to expand into.

Okay, that's helpful. And then I guess in terms of the other side of the business, some PCB players, and including some of your customers, have been either talking about or actually relocating some of their businesses -- their operations abroad. Have you seen any impact to date from any of these transitions or do you expect to over the balance of the fiscal year?

I would say yes, and I think that's been ongoing for really 5 years now. It's not a new trend, not a new trend, and it's not just North American companies; it's European companies as well who are moving business more and more to Asia and China. But I think it's just an ongoing part of the story. So I wouldn't consider -- I mean I know there have been recent announcements by some public companies in the U.S., but I don't think that's a new trend. And for some of our main customers, that's been their pattern for several years now.

Okay. And I guess just lastly, any change to your top five customers?

No. Actually, our top five customers are the same customers that we reported for several quarters. And just to repeat them, SanAmina is still our number one customer and then we have Tyco and Multech, which is a division of Flextronics , Petasys and Woos .

Your next question comes from Mr. Jerry Shore (ph)

Brian Shore, it would seem to me that you're now through most of the trouble or the tunnel of trouble of a five year term, and I would congratulate you on these kind of numbers. I think you should -- I think I would like to know a little bit more about your China activity. I would like to know a little bit more about your business to China and also your China factory and how you see it going these next few years.

Jerry, thank you. Nice to get a congratulations every now and then. I don't believe most of our shareholders could begin to appreciate how much effort and work has gone into these numbers because they're not easy numbers. Every cent was fought hard for. We're doing the best we can to do two things; make money for the shareholders and see to it the company has a future. So, thank you for saying that.

As far as China is concerned, in terms of our current Asian markets, China is already our largest Asian market, I believe. I didn't check that last quarter, but that has been the case I think for a year or two now. Several years ago it probably was number one Singapore, Malaysia, number two Korea, maybe three China. But I think it's reverse order. So already the Chinese market is our biggest market.

And when we're dealing with Asia we're mostly dealing with technology and print position. This is Western generated OEM type work where the Western OEMs, the big names that we're familiar with who are end customers in Europe and North America already, are moving more and more business to Asia. That's consistent with the prior question as well. This is a trend that will not stop. It's already our largest market in Asia, has been. Like I said, I didn't check the last quarter; just want to be careful about that, but it has been for a while China. And that trend is not going to stop, I don't believe. Everybody knows what's going on in China.

Our plant, though, is not, I think, the classic approach. We certainly are not chasing low cost manufacturing. The plant is being built in order to serve our existing customers more effectively. We're going to be careful about how we grow our business in China. We're not going to be chasing after customers that pay their bills in nine months, if at all, then you have to negotiate to get paid at all. And then when you do get paid, it's not worth it because the margins are terrible. There's a lot companies in China who are not us. A lot of (inaudible) companies in China, they are competing for high volume, low margin, low technology business and that's not us.

So I think our business in Asia will continue to be print driven; in other words, OEM driven and technology driven, not price driven, not volume driven. We're not looking to fill the factory up at any time. We'll fill it up as it's convenient to fill it up. But we're not into this hysterical thing about okay, we have a factory there now and now we've got to go get business at any price to fill it up. Looks like the factory's probably about three months right now, maybe toward the end of the calendar year we're talking about. But it's not going to be, to me anyway, it's not going to be a dramatic event where you're going to see a big difference in our company or our P&L. We will gradually qualify the factory and gradually transfer some of the existing business as produced fully out of Singapore to China, again to support local customers.

We also hope that as we have that presence it'll give us a little more leverage to pick up additional market share, the type of business we want. And we're going to stay disciplined about that and if that means the factory ends up being half full, so be it. We're not going to chase after business. It doesn't make sense for us and I think we've demonstrated that as a company over the last three or four years. At the end of the day we make the smart decisions, we do what's good for us. We don't chase business just for top line.

So I don't know, Jerry, if that's what you had in mind, but that's the best I can do unless you have any other follow-up questions on that matter.

Yes, I have one further question. Do you believe that the market, what you call your high technology aspect of this printed circuit is growing in China so that you will have enough customers to deal -- you can deal with who are interested in this kind of special niche activity?

There's no question because the technology keeps moving over to China and the OEMs keep pushing it over there. So it's not unusual at all for us to see something that we're working on in North America or Europe kind of disappear, reappear in China or someplace else in Asia. But again, I think it's very much OEM driven.

And, of course, the Chinese manufacturers are investing more and more money and capability and equipment and technology and they're pushing the learning curve, pushing the learning curve. So every year, every quarter, the Chinese board shops become more and more capable. The OEMs spend a lot of time over there. They're watching very carefully; they don't want to do things that are foolish and precipitous, but they're -- in my opinion, the OEMs are being intelligent about this.

I guess I have another question on the same subject. If you could look forward a year or two from now, which I know you can't even look 10 days, do you think your business size of this kind of product will be the same but shifted from the American customers to the Chinese customers?

I'm not going to answer that question. I think that whatever our laminate electronic business is, the portion of high technology of that pie will increase and increase and increase. But I don't really think I'm going to comment on the size of our business two years from now because I would just be guessing. I don't really -- I don't have an answer to that. What I do -- can tell you is that we will not allow our business to be dragged around based upon top line considerations. We're not going to have the dog being wagged by that tail. We will be focusing on the bottom line, so where it makes sense we'll do it, where it doesn't make sense we will not.

Your next question comes from Joanne Lee (ph) with Sidoti & Co.

A couple of clarification questions. Some of the numbers just flew by my head. The proportion of high temperature materials in North America in the fourth quarter was, I'm sorry, was it 99%?

No, it wasn't quite 99%, but it was -- in the fourth quarter we were at 96% and that's on a worldwide basis. And in North American region it was 97%.

97%, okay.

And that compares to -- in the prior year North America was 94% and on a worldwide basis for the fourth quarter 91%.

Okay. What about North American non-FR4 (ph) in the fourth quarter?

North American non-FR4 in the fourth quarter was 45%.

Okay.

That compares to 35% for the prior year.

Okay, great. I think I got the rest of the numbers. And could you comment a little more about these effective tax rates going forward as much as you can?

Well, the effective tax rate is really hard to peg down, as you know, because it depends so heavily on mix. But I would estimate that we would probably be in the 10 to 15% range next year on an annual basis.

Okay. And some comment about capital expenditure in fiscal '06 in light of the FiberCote expansion and all that stuff?

Well, it's very difficult to say what our CapEx is going to be. We're still in the process of looking at various projects and plans for the '06 year. We do have about $4 million in carryover spending -we're approved in '05 that will go into '06.

Okay, great. And I do read in various press releases that you are try to increase the proportion of high end circuit materials, particularly in high end digital and microwave. I'm wondering where in particular you see opportunities, be that it may geography or in markets?

Well, this is Brian; I'll take a crack at that. It's kind of a big picture question. It's clear to us that the market is very quickly, for us anyway, our market -- the market we're interested in, I should say, is quickly migrating towards higher and higher technology. And consistent with the discussion that was precipitated by the prior question, more and more technology is moving to Asia, so our technology component out of our Asian operations continues to increase really significantly as we go. I would suspect that the portion of our -- percentage of our FR4 business -- or the percentage of our business represented by FR4 will decrease and high tech will increase.

But I'm not sure, what are you -- is there something more specific that you're asking about because really the technology is being driven in all different end markets of the electronics industry and there's certainly telecom and wireless. But it's not just limited to that; it's pretty much everywhere in all different segments of the electronics industry end markets.

Are you saying that the end markets themselves are moving to Asia or the technology's moving to Asia or when you say they're different, are you saying you're serving a host of different end markets?

Really, I think it's the same end market, but the technology components are -- components of the product in those markets keep going up and up and up because the performance of the products that are being introduced by the OEMs is getting higher and higher and higher and that's what drives the requirement for higher technology product.

Okay.

The OEMs, and a lot of these are still Western OEMs understand, are pushing more technology manufacturing to Asia for obvious reasons. It doesn't take rocket science to figure out what's going on there. So again, it may be the same OEMs that we've been dealing with for years and years, the big name U.S. and European base, especially West based OEMs, but they're pushing more of the manufacturing of what they're selling over to Asia.

Okay. So are you saying that you're seeing a little more demand or indications from your OEM customers for your product lines, the high end digital and microwave? Is that what you're saying?

I think we're saying that the trend is certainly in that direction.

Okay.

Higher and higher technology. And it's not the low technology product that's going to disappear. It's just that as time goes on, we have less and less interest in that kind of product. The margins are just not there already and going forward, we don't think that's going to get better. It's probably going to get even worse.

Okay, fair enough. One last question. I wasn't quite clear. After you install the second treater in Connecticut, did you say there's another one in the storage that you might be able to avail yourself?

That's correct. I think we haven't discussed that previously, but I just wanted to mention it since one of the prior questions dealt with the manufacturing capability and capacity of FiberCote. We have two treaters that were moved to FiberCote. These are treaters which we used in Arizona previously in an operation in which we don't operate anymore.

It's not the high tech operation. It was part of the Maslam operation, which we sold to DDI many years ago, but we kept these two treaters. These are both relatively new treaters. I think they only saw about four or five years of operation, if I recall, which is fairly new in the life of a treater actually. One is being installed now. The other one is being stored at FiberCote and we could install that second additional treater at our facility. There's actually a space which we set aside for that treater if we decide to do that at FiberCote. Or we can install it at a different location in the future as we develop our strategy.

Okay, fair enough. I think those are all my questions -- oh, could you just comment on the proportion of top 5, top 10, top 20 customers of your printed circuit material sales?

Sure. And actually again, those percentages are fairly stable. The top five customers make up 48% of our total sales, our top 10 customers are 68%, and the top 20 make up almost 81%.

The next question comes from Hardin Bethay (ph) with DePrince Race and Zolo (ph).

Fantastic results. I know it's challenging, but you all are doing a good job. One question. I don't know, Murray or Brian, which one wants to take it, but there's pretty good control of costs on the SG&A line and I wanted to kind of understand if you've fully realized at this point the savings from your realignment or how we should look at that either on a dollar basis or as a percent of sales kind of going forward?

The realignment, which Murray referred to, which occurred in third quarter, that related mostly to our California facility. That's fully in our P&L top and bottom line in the fourth quarter -- in the third and fourth quarters, fully reflected in the fourth quarter. And I guess that's maybe only partially in the third quarter. I think it was maybe September, so I should correct myself; mostly in the third quarter, fully in the fourth quarter.

Okay.

Is that what you were getting at or maybe we're -- ?

Yes. And I guess the other part of the question was does the fourth quarter SG&A level, either on a dollar basis or as a percent of sales, reflect a decent ongoing run rate or is there some -- ?

Is it sustainable?

There's fixed component and variable component in the SG&A numbers. Now, a healthy portion of the SG&A is actually fixed so, as you know from following us, we really keep very close tabs upon that number. Remember, there's also a performance component, which is incentive based, which will fluctuate according to the performance of the company. So there is a partially fixed component to the SG&A percentage, so when you look at the number and you project going forward, you have to take that into account, of course.

But I would say, just to add, Murray, I would say that that number's sustainable. That's not a number, which is really squished down for the fourth quarter. I mean, we're not trying to make anybody's number or anything like that. The fourth quarter is real and the SG&A in that quarter's real. You've seen a proxy statement.

You can see how much Murray gets paid and how much I get paid. This is how we run our business. So, we understand we need to make money. We need to make money every quarter. In the future, we're hoping that it becomes a little easier to make money as we expand into areas, which we consider to be higher growth opportunity areas. But if that's the future right now, we have to make money every quarter. And we're not going to sacrifice our future budget on that, but we run our business very tough minded. But it's not a - there's nothing special in that fourth quarter. I would say it's sustainable.

Okay. That's helpful. When you look at - this is more trying to compare the, historically, core laminates business to FiberCote or more advanced materials, how do the margins differ in those businesses? Because it's hard to, I guess, grasp at this point with FiberCote only representing 8% of sales, what the margin contribution is to the total company. So, can you talk about that a little bit?

Yes, let's try, at least, because it's a really good question. The advanced composite industry is much more diverse than the laminate industry. There's so many different components and end markets and products where, at the end of the day, the only thing that you can say is in common is that, well, this is some kind of pre-print type product. At least we hope the product that we're producing and reinforced plastic, if you will, product. And there are - what we've learned, at least today anyway, is there are - there are product lines and end markets in the advanced composite area, which are very commoditized, low margin.

And then there are product lines which are high margin. But there's much more variability and there's some parallels or similarities because, of course, on the electronics side, the FL4 type volume product is very low margin left with that. And then, the higher you go in technology, generally speaking, the rule of thumb is the higher margins. But it's more of a straight line continuum.

The difference in the composite market is there's many sub markets. It's much more varied. It's not just a question of low technology and high technology. So, it's much more complex. But certainly, there are margin opportunities in the composite area, which are very attractive. And of course, it's up to us to be intelligently focused on the high margin areas and not get into the mentality that we're just going to go fill up a factory somewhere. The discipline is, at the end of the day, I guess, is the same.

Would you say, generally, that FiberCote has higher gross margins than you laminate electronic materials business?

As a whole?

Yes.

It might be a little bit higher, as a whole.

Okay.

I think it's a little higher as a whole.

Okay. Somebody already asked kind of the housekeeping DNA tax rates. Two other questions. One, you've definitely added some strength to the management team in the last several months. I mean, I think you've announced at least seven or eight, either new hires or promotions, or renaming of vice presidents. Can you kind of talk about the background of those changes, and just update us there?

And we're not done yet. So, I hope you brought your computer. Yes, it's all about our desire to reinvent their business. I - we're not much in terms of - and we get criticized for this. We're not big promoters and we don't hype to stock their company, but when we say we're going to do something, we take that very seriously. And when we say we're going to reinvent the company, we're going to do it or die trying. So, in order to do that, we need to bring in a different kind of capability, not just in terms of technical capability experience, but people who have different kinds of mindsets.

And so far, it's been very good. A lot of new people, but I'm very pleased with what we've done so far and we're also looking at, as you, I think, alluded to, how can we move people around with any organization, so they're placed in a position where they can be the most effective and contribute the most. But it's really all about reinventing the company.

As I said a couple times already, our job is to deliver performance to you on a quarter-to-quarter basis, but also to seek to an overlooking after the future of the company. And we're not going to compromise the future of the company for poor performance. So, we try and do both. We did the best we could to deliver the bottom line in the fourth quarter, but we also had other things we were working on, including especially developing our advanced material, advanced composite business and developing an organization for growth.

Okay. Good. And the final question is, back in October, you authorized a two million share repurchase authorization. Did you repurchase any shares in the quarter?

No, we did not.

Is there something that would - is, I guess, restricting you or keeping you from being active in the market during a quarter like the fourth quarter?

I think we have a better answer to that question than we did in the past because, as I said in the past, it was - we weren't really where we are now. But as we discussed, we're in the middle of a very intensive marketing effort on the composite side of our business. Marketing meaning not going out and selling or promoting. It's more doing strategy marketing to understand where we should expand and grow. But at this point, I would say I'm very happy that we have strong cash resources because we think we may want to employ those resources in a significant way over the next year or two.

And what - that, the results are not - are - still remain to be seen and we're not done with this marketing effort. But at this point, we're looking to expand our business in other areas, which we consider to be growth areas. I don't think we just want to be an electronic laminate company anymore because, again, I don't really believe that's much of a growth market. And also, to your point, I don't believe that there are significant capital requirements going forward in that side of our business.

But again, in the areas we want to expand, we're talking about expanding our own infrastructure, investing in our own infrastructure and acquisitions, both in North America and also overseas. So, at this point, anyway, I feel pretty pleased that we have preserved that cash position. As far as the buyback, that's - we discussed before and I know some people aren't happy with this answer, but it's the truth. There's no magic to it. There's no secret formula. We watch the stock and as the stock - if the stock trends lower, we become more interested. But right now, we're really thinking more forward-looking about how we can use the cash in a very positive way as a part of the reinvention of our business.

Okay. Great. Those are all my questions. Thanks for the time. Good quarter.

Thank you.

You have another question in queue from Joanne Lee (ph) with Sidoti & Company.

Yes. Just a quick follow-up question. If you could comment on the current addressable market or the market side of the FiberCote business, if you could.

The market - the market opportunity?

Yes.

Oh, well, that's an interesting question because it really depends so much on how you define the market. Unlike in the electronics market where the laminate is very separate or fab (ph) market, in the composites area, the materials and, let's say, fabrication of parts are not exactly so black and white separate. So, if you include materials as well as fabrication, it would be well over $10 billion. When we're talking materials, hard to say because again, it's really a definitional question. But I think, at this point, we believe it's in the multiple billions of dollars.

Okay. And going forward, you see your main market continue to be the aerospace or do you have some other end markets that you're hoping to capture more?

Could we talk about that again in the next couple of conference calls?

Sure.

I think I'm just going to be really honest about what (inaudible) here.

Okay.

That's what we're really spending a lot of time discussing now and for me to give you some kind of meaningful answer on that, I think we need to take the next couple of months to complete this process and then I think we'll have more meaningful answers for you.

Fair enough. Thanks again.

One thing about aerospace, since you brought it up, to me, in my opinion, that's clearly an important part of the future in composites.

Okay. Thanks again.

Once again, if you would like to ask a question, please press star, one on your telephone keypad. Gentlemen, there are currently no more questions in queue at this time.

Okay, Operator. Thank you. This is Brian again. I want to thank everybody for listening in and also complement you on your questions. I think they were high-quality questions. And nice to talk to you as always and we'll be speaking again soon, I think, just in a couple of months, actually. In late June, we'll be talking about the first quarter. So, we'll look forward to that. And if anybody has any follow-up questions, you know where to find us, as always. Thank you, again. Have a great day