Park Aerospace Corp (PKE) 2006 Q1 法說會逐字稿

Good day, everyone, and welcome to the first-quarter 2006 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 (technical difficulty). Good morning. This is Brian Shore. Welcome, everybody, to our first-quarter conference call. I have with me, as always, Murray Stamer, our CFO. And we will begin with some introductory remarks, and we will go to our questions and answers.

Murray, why don't you lead off with the financial analysis in the first-quarter?

Okay, sure. Good morning. Certain statements we may make during the course of this discussion which do not relate 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 27 2005 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 refer to non-GAAP financial measures, as well as financial results determined in accordance with GAAP. We believe that the disclosure of non-GAAP operating results as a supplement to GAAP financial results will assist the listener in assessing the Company's performance and prospects.

Net sales for the 2006 fiscal year first quarter ended May 29, 2005 were $55.7 million compared to net sales of $58.5 million for the prior fiscal year's first quarter. Net earnings before realignment charges for the 2006 fiscal year first quarter or $6.4 million compared to net earnings of $6 million for the prior year's first quarter. During the 2006 fiscal year first quarter, the Company recorded $1.1 million of realignment charges for termination benefits relating to a workforce reduction at its Neltec Europe SAS subsidiary in Mirebeau, France. There is no tax benefit related to this realignment charge, and there were no realignment charges or other special items for the prior year's first quarter. Net earnings, including realignment charges for the 2006 fiscal year first quarter, were $5.3 million compared to net earnings of $6 million for the prior year's first quarter.

Basic and diluted earnings per share before special items for the 2006 fiscal year first quarter were $0.32 compared to basic and diluted earnings per share of $0.30 for the prior year's first quarter. The 2006 fiscal year's first-quarter realignment charges equated to $0.05 per share on both a basic and diluted basis. As a result, basic and diluted earnings per share were $0.27 compared to basic and diluted earnings per share of $0.30 for the prior year's first quarter.

Now, I would like to review some of the significant items in our first-quarter P&L. Sales volumes decreased 5% in North America, 9% in Europe, and 3% in Asia during the fiscal year 2006 first quarter compared to sales for the same period in the prior year. Although total sales for the 2006 first quarter declined by 5% compared to the sales for the prior year's first quarter, the 2006 first-quarter sales were at 9%, 11%, and 9% higher than the sales of the prior year's second, third and fourth quarters respectively.

FiberCote's advanced composite materials sales comprised 8% of the Company's total sales for the fiscal 2006 first quarter compared to 7% for the prior year's first quarter. The trend towards a greater mix of high-temperature and high-performance printed circuit material products continued in the 2006 first quarter. Sales of high-temperature laminate and prepreg materials comprised 97% of total North American laminate and prepreg sales during the first quarter of fiscal 2006, up from 93% for the prior year's first quarter.

The high-temperature portion of foreign laminate and prepreg materials sales was 93% of total foreign, laminate and prepreg sales for the 2006 first quarter compared to 90% for the same period in the prior year.

On a worldwide basis, high-temperature materials were 96% of total laminate and prepreg materials sales for the first quarter of fiscal 2006 compared to 92% for the prior year's first quarter.

Sales of Park's North American high-performance non-FR-4 printed circuit materials, which are a subset of high-temperature printed circuit materials, were 45% of North American laminate and prepreg materials sales for the first quarter of fiscal 2006 compared to 40% for the first quarter of the prior year. Foreign high-performance printed circuit material sales were 28% of foreign laminate and prepreg sales for the 2006 year's first quarter, up from 25% in the first quarter of the prior year.

On a worldwide basis, sales of high-performance printed circuit materials were 37% of total laminate and prepreg materials sales for the 2006 year's first quarter, up from 33% in the first quarter of the prior year.

The gross profit percentage for the first quarter of fiscal 2006 was 21.6% compared to 23.4% for the prior year's first quarter and 20.1% for the prior year's fourth quarter. The gross profit percentage was lower for the 2006 first quarter compared to the prior year's first quarter and higher than the prior sequential quarter, which was the fourth quarter of fiscal 2005, mainly due to the change in sales volumes. The reduction in gross profit for the first quarter of fiscal 2006 compared to the prior year's first-quarter gross profit was the result of the Company's reduced utilization of its manufacturing plants due to lower sales volumes, which was partially offset by the growth in the higher margin, high-performance materials sales and adjustments made to reduce operating costs.

Selling, general and administrative expenses were 11.3 of net sales for the 2006 year's first quarter compared to 14.2% for the prior year's comparable period. The decrease in these operating (multiple speakers) -- getting some interference on our line, but I am going to continue. The decrease in these operating expenses as a percentage of sales was the result of virtually across the board decreases in expenses. Freight costs were especially high during the 2005 year's first quarter due to the sudden increase in the demand at certain locations.

Pretax operating profit before realignment charges increased to 12.7% of net sales for the 2006 first quarter compared to 10.3% for the prior year's first-quarter pretax operating profit. Earnings before income taxes, including realignment charges of $1.1 million recorded during the 2006 year's first quarter, were 10.8% of net sales.

The effective tax rate for the 2006 first quarter was 10% before realignment charges and 11.8%, including the impact of the realignment charges, compared to a 0% effective tax rate for the prior year's comparable period. The 0% tax provision for the 2005 first quarter was the result of a favorable jurisdictional tax mix and the release of foreign tax provisions that were no longer required.

Turning to Park's balance sheet, cash and marketable securities increased to $192.3 million at May 29, 2005 from $189.6 million at the end of the prior fiscal year. We continue to invest the available funds on a conservative basis in highly rated fixed income securities and money market funds.

And working capital was $206.4 million at the end of the 2006 first quarter compared to $201.5 million at the end of the prior fiscal year. Capital expenditures were at $1.1 million for the 2006 first quarter compared to $400,000 for the prior year's comparable period. Depreciation expense was $2.4 million for the 2006 first quarter compared to $2.5 million for the prior year's first quarter.

Stockholders' equity was $246.2 million at May 29, 2005 compared to $242.9 million at the end of the prior fiscal year. Finally, stockholders' equity per share increased to $12.32 at May 29, 2005 compared to $12.19 at the end of the prior fiscal year.

Okay, thanks, Murray. This is Brian again, and I will just offer a couple of additional comments -- introductory comments.

First of all, you saw in the comments in the press release that we are saying that the market -- the electronics markets remain mixed -- not really any major change that we can see there. It is pretty difficult to reach important conclusions because there are so many cross currents. But I think we could continue to describe them as mixed during the first quarter, and the markets for the composite business -- you've had composite business -- continue to be strong.

As far as the outlook, let's just talk second quarter, and that is about as far as we want to venture based upon the very limited visibility that we have. On the electronics side, we sense that things are slowing down a little bit in the second quarter. Last year, when we had our first-quarter report, we had the same comment. But then, I think we were also attributing that to possibly some kind of inventory correction in the industry. We are not really seeing that now. We are not hearing about it. So my guess is -- and I guess I should underline the word "guess" here -- is that we are seeing the typical second-quarter pattern -- seasonal pattern, which really is a summer phenomenon for our Company.

Just so you know, in June, we have the first four weeks of June in the books, and that is of course part of our second quarter. Our bookings are down as a Company by just roughly 10%, if you want a reference point. That is not surprising to us, by the way. That is what we probably would expect as a seasonal phenomenon in our second quarter.

In the composite market, that market continues to look quite strong. And certainly, we believe it will continue to be strong for the second quarter and probably thereafter as well.

So that covers the market conditions of both sides of our business. I also should report to you -- just to give you an update. We spoke last -- during our -- I guess it was our fourth-quarter conference call in April -- about the fact that we were doing a high level -- involved in a high level of market study regarding the global advance composite market. And we are just really wrapping it up now. As a matter of fact, we are meeting this afternoon to begin to review the results. It is fairly complex. And I am hoping that within the next few weeks, we are going to actually then shift into -- okay, what do we do about it? Where would we possibly want to invest? Is there anything we would like to buy? Are there any acquisitions that we should be considering?

As I explained to you last time -- at least I tried to -- we are trying to be systematic about this and not just kind of jump ahead and say, let's go buy this or that. But again, we are just completing our market study now. We are going to be spending several days reviewing all the information we have. And in the next phase of the process, it will be that we will be shifting the discussion to -- what do we do about it? Where can we grow our business? Where can we take advantage of the opportunities in that market?

So we don't have anything specific to report to you at this point, other than we are just completing at this point, as I said, our high-level market study of a global composites markets.

I think that probably covers most of the key items. You know about what we have done in France because that has been publicly reported. We have brought down the size of our workforce a little bit there. It was very difficult to do that. I can assure you, in France. And it was something that was not very easy for our Company because of the regulatory and I guess social environment in France that you probably would know about. But anyway, we are through that. That business still is struggling.

Well, I just want to be clear. We have two businesses in France. One business is a PTFE/RF business. It is a small business. It is located in southern France near the Pyrenees. And that business is doing relatively well. The business we are talking about is the digital -- the printed circuit material business -- located in the Dijon area. And that business is the only business which we currently own, which is not making money. And of course, that means it is on our list -- a lot of focus and a lot of attention.

And I guess that is about it. Operator, why don't we go to the questions now? And we will do the best we can with our answers.

(OPERATOR INSTRUCTIONS). Jewan Lee (ph), Sidoti & Co.

Nice quarter. Could you just quickly review the proportion of high temperature and non-FR-4 sales again? You always kind of slide by me.

Okay, well, let's try it again. Let's start with the North American high-temperature sales. They were 97% of total sales. Worldwide high-temperature sales were 96% of total sales, and foreign high-temperature sales were 93% of foreign sales. And that compares to last year's numbers of -- North America was 93%, worldwide at 92%, and foreign were 90%.

Yes, I think the question also relate to non-FR-4 high-performance materials. You are going into that, Murray?

Yes. And on the high-performance side, North America was 45% of North American sales. Worldwide, that is 37%. And foreign was 28%. And that compares to North American sales of 40% last year. Worldwide was 33%, and foreign 25%.

Okay, great. And this tax rate continues to be lower than what I have previously estimated. Could you add a little more color on the tax rate going forward and why the tax rate was a little bit lower this quarter?

Well, the tax rate is going to depend upon the mix. You know, we have some jurisdictions where -- if we earn money, there is no income tax that we have to currently accrue. So it depends upon the mix. And that number is going to continue to be volatile. Now our estimate for the year is that we will be in that 10% range.

Okay. How about next year?

Well, it will be lower. I would say that the pressure is going to be on that tax rate to go up. But it is going to be significantly lower than the full North American -- the full U.S. tax rate.

Okay. So if we assume anywhere between 12 to 15, are we in the guideline?

I think in that 10 to 20% range is definitely in the range.

Okay. And could you give us up an update on where the construction project is for the plant in China, the Zhuhai?

That is a good question. We should have covered that in the introductory remarks. It is behind schedule. We are really looking toward the end of the fiscal year now. And I would say that it is probably about what you would expect in China. We have been in operating in China for quite a while. So nothing that we are seeing is really surprising. It is frustrating but not surprising. You turn around; the regulations are changed. You need to get new permits. And you got to start some things over again. But the building is coming along. I guess we are laying foundation in the next couple of weeks. And we are also making some final decisions on equipment.

The only thing that is interesting is that this whole world is certainly a moving target. And one of the good things about being an independent company is that when you think something is changed, you can change your direction as well. You don't have to go through a bureaucratic process. And we are looking at it a little differently. We are looking at China more as a -- maybe a Neltec-type opportunity now rather than a volume opportunity. So we are looking at making some adjustments to the equipment side as well, meaning smaller, more flexible equipments sets rather than volume equipment sets. And we are doing this stuff on the fly.

But yes, we originally said, I think, the end of this -- originally, when we first announced the program, I think it was at the end of the summer. And then I think we said the end of the calendar year as we are probably -- I think the best guess is the end of the fiscal year, when this thing is really done. And again, it is not any one thing. It is not like there is any one disaster or blowout or anything like that. It is really pretty much what you would expect if you have done this kind of thing in China in the past. So again, not surprising -- it is frustrating but not surprising. I'm glad you brought that up because I forgot to cover that.

Okay, and so you are suggesting then at the end of the fiscal year, you would be operational or just ready to construction?

Let's talk about that for a second. We are saying that the plant and the equipment will in, installed and running. And then what we will need to do is we will need to get the plant qualified with customers. And originally, it is not new customers. It is existing customers. I think we covered this previously, but actually, our largest market in Asia is now already China. You know, if you look at Singapore, ASEAN -- I guess they call it Korea, China -- China is already the largest market.

So originally what will happen is that -- or initially, I should say, what will happen is that we will transfer some of the work we are currently doing for Chinese customers to that plant. So it is not that we have to go do a whole marketing effort to get the plant going. In other words, it will happen more quickly, more a matter of getting the plant qualified rather than just starting from scratch as if we don't have any business in China.

But I think there will probably be a 3-month period. That is my best guesstimate. During which, we will be spending a lot of time with samples and getting the plant and the product coming from the plant qualified with our existing accounts in China.

Okay. And do you guys comment on utilization? I would be curious what your Singapore plant's utilization approximately is.

What it currently is?

Yes.

Oh, it is -- I am a little reluctant to give that specifics to you because I know our competitors listen to these calls. It is real unfortunate that that happens. But it -- every call, we get the list of participants, and there are our competitors. So they are listening right now.

But we have a lot of available capacity in Singapore, significant amount of available capacity in Singapore. I think that is probably as specific as we should get at this point.

All right, see if I have any more questions. Oh, and -- I guess on the French workforce reduction -- now, you said you reduced the staff in the digital materials only. Could you comment on what percentage of the staff was affected?

I think we (technical difficulty) did a press release. What were the numbers, Murray?

We went from 135 to 103. That was the dimension of it anyway.

You said that -- there is one last question -- you said that business will -- for electronic materials -- will be down in the second quarter. Does that mean year-over-year or sequentially?

No, we are not really commenting on year-over-year. We are talking sequentially. I am not saying we know it is going to be down. I am just saying what we know. And our sense is that first of all, bookings were less in June, not compared to the prior year. I am glad you asked that question. I don't (technical difficulty) not even -- I don't have an opinion on the prior year. I haven't even checked that. I am talking about based upon the prior few months, all right? And I am also saying that it is not a surprise to us because there is a seasonal pattern that we are somewhat familiar with here that is -- seems like it is playing out. So I guess the best way to put this is, we would not be surprised if the Q2 was lower than Q1.

Rebecca Epiany (ph), Needham & Co.

I guess I just have a couple of questions. One, can you just give us a little color around the strength and the advanced composites performance? Was there any particular area, or was it more broad based?

Well, are you asking about the market or about our particular business?

Particular business.

Well, let me start with the market, even though you are talking about the particular business and back into it. The market is strong. It is really much across the board. And on the advanced composites side, there are many more market segments -- end market segments of course -- than there are on the electronics side. In electronics side, there really is one big market segment that we are supplying into.

But most of the markets that we operate in seem to be fairly strong. As far as FiberCote itself is concerned, we are not looking at dramatic growth in FiberCote. And for one thing, remember that we have some capacity limitations. And that is also a good point. We should give you an update on that treater. We have talked about the treater that has been (technical difficulty) that is about a month late. I think we said it would be operating in June, running in June. And it is going to be July. We have already run the machine drive. We have put some -- we have heated up the oven. So we are making a lot of good progress there. But I think we are a few weeks off.

And once that treater is installed, that will give us the first opportunity really that we will have to start to grow that business. Right now, it would be very difficult to do that.

But I just also want to make sure that we are being clear about this discussion about the composites business because we are not looking at it as a really FiberCote-only opportunity. We are looking at it as FiberCote is our starting point, where we are looking at the possibility of growing our business in the composites area outside of FiberCote. I think if we were just going to grow organically within FiberCote, the growth would be -- would there be some growth we could achieve, but it wouldn't be what we would want. It would be less than what we would like to see.

Okay, that's helpful. And I guess then just following onto that, what about CapEx spending for fiscal 2006? Do you have any sort of guesstimate there?

Murray, do you have a guesstimate?

Yes, I think that we will probably be in the $5 million range approximately on capital expenditures based upon the current projects that we have going on.

Okay, and I think last quarter you had mentioned something about a $4 million carryover. That includes that?

Yes. When I answered that question at the $5 million level, I am talking about, for example, the China project is not approved this year. That building was approved last year, but the spending will take place this year. There are some timing issues related to when actual payments are made, not only on the building, but also on the equipment as well. And sometimes, these payments are quite large. And whether they get into one period or another is determined by when the equipment is delivered.

There is some upside potential there, particularly on the approval side, before the end of the year. And that would be partly a function of what we come up with in terms of a new strategy for expanding our business. So when Murray is talking to these numbers, he is talking about the existing business set. We are not talking about the potential for acquisitions or expansions into other areas for instance.

Sure. And we will just stay tuned for further announcements about that. And then, I have a clarification -- I kind of missed the geographic breakdown -- North America, Europe, and Asia. The revenue breakdown and then the last one is just percentages for your top 5, 10 and 20?

Okay, now, the percentages that you were looking for -- were you looking for the comparative sales increases and decreases, or--?

Yes, exactly, for --

Well, North America -- again, going quarter-over-quarter, North America decreased by 5% compared to the same period last year. Europe was down 9%, and Asia was down 3%.

Okay, that is year-over-year?

Correct.

Okay.

All right? And again, the other thing I mentioned was that if you go on a sequential basis that the sales were up 9%, 11% and 9% compared to last year's second, third and fourth quarters.

Okay -- second, third and fourth quarters. And then just your top customers, any shift in that? And then percentages for your 5, 10 and 20?

No shift in our top three customers. Again, we are still looking at Sanmina, Tyco, and Multek. What we have done for 2006 is since Pentex Schweitzer is part of Sanmina, we have included Pentex Schweitzer in Sanmina for 2006. So as a result, for the first quarter, Sanmina was 17% of our total sales. And that compares to 12% for last year. Tyco again is 12%, and Multek is 10%. So there is no real change in our top three customers and really, not a great deal of change in the percentages either.

If you look at the top five customers, they are 52% of sales. Top 10 are 72, and the top 20 customers represent 82% of our sales.

Jerry Shore, private investor.

Most of my questions have been covered by those very complete questions from those ladies. I have one additional question. Through my own sources and not through competitive information, it seems that with -- I am told that your marketing efforts in China are very strong in the areas that you work. Is that about right?

Really? I can't imagine where you heard that, if not from me. I don't know if I would sign up for that. I think we have been doing business in China for a long time. We are not Johnny-come-latelys. We have a group of people who are based in China. But I am not really happy with our marketing efforts. I think they should be stronger. So I am not sure how to respond to that. I don't find myself patting myself on the back and feeling that wonderful about all that.

As I said, we are not new to China. We have been doing business in China for many, many, many years. We have had a full-time on-site marketing effort in China for many, many years as well. But I think we should do better. I think the struggle is -- and the opportunity is I guess as well, our challenge is to develop our business into new accounts that might be more Chinese-type accounts rather than more indigenous accounts rather than the accounts that we are working with now, which are either owned by American companies or Taiwanese companies, that kind of thing.

So boy, I would be interested to know where you heard that. I would not sign up for that, necessarily, no.

Maybe that is just compared to your competitors who are listening.

I don't know about our competitors very much. I can't comment on them.

(OPERATOR INSTRUCTIONS). Alvin Hoffman (ph), Boenning & Scattergood.

This is not related to the first quarter but to statement in the Annual Report about you are open to change, and you are open to suggestion. What does electrochemical have to do with your business now, and as you see it? Or are you open to a name change, which would make it easier to understand the Company?

Well, I guess, Alvin, since we said we are open to anything, we would be open to it. It is not something that is on our priority list. And to be more serious about the answer, I guess it is my feeling that the name has been around a long, long time, and there is some meaningful recognition of a name out there. I mean I guess, I don't know what is in a name. But if you want to suggest something, go ahead and do it, and we will give some thought to it.

John Roberts, Buckingham Research.

Could you maybe give us a sense of the scope of the outcome of this composite study that you have? It's obviously doesn't sound like they wanted the decision. It is not going to be to do it, nothing. I think it sounds like you are going to do something.

I really -- unfortunately, the timing is that we just haven't -- we are just the point this afternoon actually. That is our first thing on our list after we complete our call, to review carefully the results. And I am not saying I am not aware of all the different results. But we want to do it more systematically. My guess is (multiple speakers) -- operator, we are getting some -- I don't know, some other voices -- I don't know if you hear it on the call, but --

I apologize. It is coming from Mr. Roberts' line.

I see, okay. Yes, so just to get ahead of ourselves a little bit, I think that we are encouraged that there are opportunities in the advanced composites arena that we will be pursuing. (technical difficulty) after we review the market include that -- okay, fine, there is nothing for us there; let's move on to something else.

But other than that, any other comment we make would be a little premature. And it is unfortunate that the timing is that we are just are really getting to this part of the discussion this afternoon. If our conference call was a week from now, we -- maybe we would have a little bit more input for you.

You know, investors are familiar with most of the companies like Zoltek and CyTech's composite business and Hexel. Does that type of area that you're going to continue to move into?

You know, those are some of our (technical difficulty) customers. They are different levels. We are also -- I think we would want to consider the opportunities from a broader perspective, including forward and backward integration, not just direct lateral competitors. But certainly, those are the types of areas we have been looking into. I am not going to comment on the specific companies you mentioned because that just wouldn't be appropriate. And some of those companies are very large companies; I am sure you are aware of that. But certainly, those type of situations are part of our discussion.

Jewan Lee, Sidoti & Company.

Yes, I guess I just want to tag onto this interest in the composites business. I guess this question is more relevant for a CEO. Now, what is your biggest concern on the composite? And I do realize you guys are taking a very cautious and systematic approach. But what would you say your sort of a biggest concern there, Brian?

I don't think I have an answer for that yet, not an intelligent one. Again, maybe if we got reviewed -- revisited that question a couple of months down the line, I would have a better focused answer. These are our top three concerns, let's say.

It is a very different -- what we have learned so far is that it is certainly a very different kind of industry and market as compared to the electronics market. I believe anyway that our electronics market is really a mature market at this point. And the advanced composites market is not. So there are a lot of things that are different between those two industries as a result of that one major difference, which are things you might expect. In an immature industry or in an industry that is not fully mature, there are more opportunities. It is more risks. There's more kind of peripheral companies and let's say, products technologies which are still hanging in there that may not make it.

In a mature industry, all that stuff has already been washed out. So there are technology risks. I cannot give you the top one. There are technology risks in terms of -- well, is prepreg going to be the material of choice going forward to build composites?

I think we feel pretty good about the use of composites in the industry going forward. I don't think we have a big question about that. I think there is -- we are fairly confident that the composite penetration into the global industry will continue. But that doesn't mean that it is a simple story because there are going to be aspects of the composite industry which will succeed and aspects which will not succeed for a whole bunch of different reasons -- availability, raw materials, technological obsolescence, things like that. As I said, one of the concerns that we are just really investigating is, how important a role prepreg will play in the building of composites in the future. You should understand, we are in a prepreg business in composites.

Okay, good. And another follow-up question on your electronic materials business. Now a substantial portion of your sales is OEM-directed. And since some of your EMS customers are more moving more and more of their businesses to Asia, I am wondering sort of when do you foresee your business in Asia sort of to pick up, or if you think you can benefit from that trend at all?

What was the last part of the question again, please?

Since some of your EMS customers are moving to Asia and they are consolidated their North American facilities to a degree, do you think going forward that might result in some benefits to you? Do you see some opportunities to increase your OEM sales there?

Well, that is technaoccurring (ph). There has been a very significant movement of production from North America and Europe, even more so in Eastern Europe. There is not much left in Europe unfortunately. But a significant movement of production from North America to Asia already, as driven by the OEMs. I mean, you are absolutely right. It is the OEMs that are driving this transition of the industry to being an Asia-centric industry.

The other phenomenon that we are looking at is that the pattern previously had been that the new products would be new programs -- would be introduced in terms of -- from a manufacturing perspective, I am talking about in North America. And then, when they got some legs under them, then it would be transitioned to Asia. That is why a lot of these EMS companies want to have manufacturing in North America and Asia, so they can follow the flow of production to Asia.

But what is emerging now is that it is clear that the OEMs are looking to put new programs in Asia just from day one. And that is why it is really important for us to have a strong technical presence in Asia as well. Asia is no longer just a manufacturing site for us. We have put more and more technology in Asia over the last few years because we feel that is going to be important as well. And it already is happening. It is not something I think there is too much doubt about that those trends are clearly in place.

And finally, any pricing pressure that you saw in the first quarter at all?

Yes. I would say that the answer to that question is always going to be yes. But how would we compare it to prior periods? Maybe not quite as much as in prior periods. You know, anytime you ask that question, the answer is going to be yes in the electronics industry. And that, again, is not surprising. Because if you believe it is a mature industry, those are the kind of things you see -- industry that has gone through a lot of consolidation. Pricing becomes more and more important to our customers but even more so to the OEMs. And you know, our policy is not to change pricing. But it is not because there is not pressure there.

So that puts a lot more pressure on our Company, by the way, to work even harder to come up with uniqueness because we don't have uniqueness. Something that people are interested in paying for -- it is not a good thing for our Company.

Alvin Hoffman, Boenning & Scattergood.

Have you experienced any shortage in carbon filament for your composite business?

Yes, there are shortages. I think we are doing pretty well. But that is a big, big topic of discussion in the composites industry. Everybody has an opinion about how long it will last. I think some of the suppliers are bringing to pass it online. But clearly, that is an issue -- and clearly an issue. My sense is that with our business, which is a small business, granted, we have done relatively well in terms of securing supply. And that is partly because we have leverage because FiberCote is not a stand-alone company. It is part of a larger company which purchases a lot of reinforcement materials. And also, I must say, I think we have reasonably good relationships with our suppliers as well.

And there appear to be no further questions at this time. I would like to turn things back to Mr. Shore for any additional or closing comments.

Okay, well, thank everybody for listening in. Always nice to speak to you, and we will be around the rest of the day if you do have any follow-up questions. And we will be talking to you, I guess, in a few months. So have a good summer, and we will look forward to talking to you again soon. Bye now.

And that does conclude today's conference call. Thank you for your participation. You may disconnect at this time.