Park Aerospace Corp (PKE) 2008 Q4 法說會逐字稿

Good day, and welcome to the Fourth Quarter and 2008 Fiscal Year End Earnings 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.

This is Brian Shore. Good morning, everybody. Welcome to our fourth quarter conference call. Sorry for the delay in getting the call started. There was a technical problem with the conference call company. Anyway, helping me is Matt Farabaugh, and Matt is Vice President and Controller of Park. I think you -- most of you Jim Kelly pretty well. Jim Kelly after 10 years moved on, and we want to wish Jim Kelly well.

Anyway, we will -- other than the fact that we have Matt rather than Jim, we are going to do what we always do. We will start with some comments from Matt from a financial perspective, then I will give some comments, and then we will go right into Q&A.

Okay. Matt, go ahead.

Thanks, Brian. Certain statements that we 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 25, 2007 various factors that could affect future results. Those factors are found in Item 1A and 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 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.

In reviewing the financial performance for the 2008 fiscal year, keep in mind the 2008 fiscal year's fourth quarter included 14 weeks and the 2008 full fiscal year included 53 weeks.

I would first like to summarize the financial information included in the news release for the fourth quarter and fiscal year ended March 2, 2008.

Net sales for the fourth quarter ended March 2, 2008 were $60.6 million compared to net sales of $59.8 million for the prior fiscal year's fourth quarter. Park's sales for the fiscal ended March 2, 2008 were $241.9 million compared to sales of $257.4 million for the previous fiscal year.

Park reported net earnings before special items of $9.2 million for the fourth quarter ended March 2, 2008 compared to net earnings before special items of $8.1 million for the fourth quarter of last year. In the fourth quarter ended March 2, 2008, the Company recorded a charge of $1.4 million for the restructuring and workforce reduction at the Company's Neltec Europe SAS electronic materials business unit located in Mirebeau, France and a tax benefit of $1.5 million relating to the reduction of tax reserves. In the fourth quarter ended February 25, 2007, the Company recorded a tax benefit of $0.7 million relating to the recognition of tax credits resulting from operating losses sustained in prior years in France. Accordingly, net earnings were $9.3 million for the fourth quarter ended March 2, 2008 compared to net earnings of $8.8 million for last year's fourth quarter.

For the year ended March 2, 2008, Park reported net earnings before special items of $34.5 million compared to net earnings before special items of $35 million for the prior fiscal year. During the 2008 fiscal year, the Company recorded the charge of $1.4 million for the restructuring and workforce reduction at the Company's Neltec Europe SAS business unit mentioned above and the tax benefit of $1.5 million from the reduction of tax reserves also mentioned above.

During the 2007 fiscal year, the Company recorded a pre-tax charge of $1.3 million in connection with the termination of an insurance arrangement and recognized a tax benefit of $0.5 million related to the insurance termination charge, a tax benefit of $3.5 million relating to the elimination of valuation reserves, a tax benefit of $1.4 million relating to the elimination of reserves no longer required and the tax benefit of $0.7 million relating to the recognition of tax credits in France mentioned above. Accordingly, net earnings were $34.7 million for the year ended March 2, 2008 compared to net earnings of $39.8 million for year ended February 25, 2007.

As previously reported, during the 2008 fiscal year, the Company incurred approximately $0.5 million in out-of-pocket expenses relating to the Company's due diligence efforts in preparation for its participation in the bidding for certain of the assets and business of Columbia Aircraft Manufacturing Corporation.

Park reported diluted earnings per share before special items of $0.45 and $1.70, respectively, for the fourth quarter and year ended March 2, 2008 compared to diluted earnings per share before special items of $0.40 and $1.72 for the fourth quarter and year ended February 25, 2007. Diluted earnings per share after special items were $.46 and $1.70, respectively, for the fourth quarter and year ended March 2, 2008 compared to diluted earnings per share after special items of $0.44 and $1.96 for the fourth quarter and year ended February 25, 2007.

Now I would like to briefly review some of the other significant items in our fourth quarter and fiscal year P&L. For the 2008 fiscal year fourth quarter, North American sales comprised 51% of total sales, European sales were 12% of total sales and Asian sales were 37% of total sales. Comparing the 2008 fiscal year's fourth quarter sales to the prior year's fourth quarter sales, Park's North American sales decreased 8%, European sales decreased 6% and Asian sales increased 22%. For the 2008 fiscal year, North American sales comprised 51% of total sales, European sales were 12% of total sales and Asian sales were 37% of total sales. For the entire fiscal 2008 year, Park's North American sales decreased 12%, European sales decreased 19% and Asian sales increased 10% compared to the prior year.

Worldwide sales of Park's high temperature printed circuit materials comprised 100% of total laminate and prepreg material sales for the fourth quarter of fiscal 2008, compared to 97% for the fourth quarter of the 2007 fiscal year. For the fiscal year ended March 2, 2008, worldwide sales of high temperature printed circuit materials comprised 99% of total laminate and prepreg material sales compared to 97% for the fiscal year ended February 25, 2007.

Worldwide sales of Park's high performance (non-FR-4) printed circuit materials, which are a subset of high temperature printed circuit materials, were 53% of total laminate and prepreg material sales for the 2008 year's fourth quarter, compared to 45% in the fourth quarter of the prior year. For the fiscal year ended March 2, 2008, worldwide sales of high performance (non-FR-4) printed circuit materials were 52% of total laminate and prepreg material sales compared to 42% for the fiscal year ended February 25, 2007.

Advanced composite material sales comprised 9% of the Company's total sales for the fiscal 2008 fourth quarter and full year compared to 9% for the prior year's fourth quarter and 8% for the prior year.

The gross profit for the fourth quarter of fiscal year 2008 was 26.1% versus 24.2% for the prior year's comparable period. This fourth quarter year-over-year increase in gross profit is attributable to, among other things, increased sales of higher margin, high performance products in the 2008 fourth quarter and a higher percentage of sales in Asia, offset in part by higher copper foil costs compared to the prior year's fourth quarter. For the 2008 year, the gross profit was 25.8% compared to 24.9% for the 2007 year. The year-over-year improvement in gross profit was due to increased sales of higher margin, high performance products and a higher percentage of sales in Asia, partially offset by the lower total sales volume in the 2008 year and the higher cost of copper foil.

Selling, general and administrative expenses as a percentage of net sales were 12.1% for the 2008 year's fourth quarter and 11.2% for the 2008 year compared to 10.6% and 10.4% for the 2007 year's comparable periods. The fiscal year 2008 fourth quarter included one extra week of expenses while sales for the quarter remained essentially flat compared to the prior year's quarter. In the fiscal year 2007 fourth quarter, SG&A expenses included a favorable adjustment of restructuring accruals previously established in Europe. The increase in expenses as a percentage of net sales for the full fiscal year compared to the prior year was largely due to the expenses incurred for the Columbia due diligence effort in fiscal 2008 combined with lower sales volume.

As a result, pre-tax operating profit before special items was 15.2% of net sales for the 2008 year's fourth quarter compared to 13.6% for the prior year's fourth quarter. For the 2008 fiscal year, pre-tax operating profit before special items was 14.3% of net sales compared to 13.6% for the prior fiscal year.

The effective tax rate was 19.9% for the 2008 year compared to an effective tax rate of 9.9% for the prior year. Included in the 2008 effective tax rate is the tax benefit relating to the reduction of tax reserves. Included in the 2007 effective tax rate were tax benefits relating to the recognition of tax credits in France, the termination of a life insurance agreement, the elimination of certain valuation allowances previously established related to deferred tax assets in the United States and a benefit relating to the elimination of reserves no longer required as the result of the completion of a tax audit.

Moving to the balance sheet, Park's working capital at March 2, 2008, the end of the 2008 fiscal year, was $239.1 million compared to $233.8 million at February 25, 2007, the end of the 2007 fiscal year. Cash and temporary investments were $214 million at the end of the 2008 year compared to $208.8 million at the end of the prior fiscal year. As we have in the past, we invest available funds on a conservative basis in short-term fixed income securities and money market funds.

Stockholders' equity was $269.2 million at March 2, 2008 compared to $264.2 million at the end of the prior fiscal year. This increase in stockholder's equity was the result of the Company's net earnings during the 2008 fiscal year largely offset by cash dividends paid, including the special dividend in August 2007. Finally, stockholders' equity per share at March 2, 2008 was $13.23 per share compared to $13.08 per share at the end of the prior fiscal year.

Thank you very much, Matt, for the financial comments. And by the way, Matt's script, what Matt just read from -- obviously Matt was reading, you probably could tell, that was posted on our website earlier this morning at about 8:30. There is a lot of detail in there. So, for those of you who are interested in the detail, I would recommend you just go onto the website and review it. Certainly we can answer questions that you have as well at this time or later on today.

So, let me just offer a few other comments about the quarter, the year and also some updates on what we are doing. I think the first thing we want to point out to was that make sure you were paying attention to the tax provision in Q4. Do you notice the tax provision in Q4 was only 15.3% and there also was that $1.5 million special item? Now, this relates to an independent study that we commissioned regarding some of our tax accruals. On that basis a decision was made to reduce some of our tax accruals and, therefore, we ended up with a 15.3% tax provision in Q4, which is not sustainable. For the year, we had a 23% tax provision, and we are not forecasting, we are not giving specific guidance, but for those of you who are interested, I think that is probably more of a realistic and reasonable rate to think about going forward that 23% number more or less, all right? And just those of you who like to do a little math, if we use the 23% rate in Q4, the earnings would have been $0.41 rather than the, I think, $0.45 that we reported and that is just for those of you who are interested.

Matt talked about the gross margin. The gross margin is really good I would say, relatively good. Not that we do not think it can be improved, because we do think it can improved, but Matt really hit on the key issues here. One is the percentage of high performance sales, which are the higher margin sales of the electronic product.

And also, another thing he touched on which is interesting, which is that, do you notice that a higher percentage of our sales are coming out of Asia as time goes on. That is just kind of a natural process, natural progression. Both cases are natural progressions. We are not really forcing anything. It is the market bringing us there. The Asian sales are normally a higher margin sales. Our objective as far as our electronic product line is concerned is to be really invisible globally. So, it would be the same exact product whether you buy from Asia, an Asian business unit, or New York and California, and also we have the pricing would be fairly consistent. The costs in Asia are somewhat lower. We also have better factory utilization in Asia because that is where the business is more robust, again talking about the electronic products, of course.

Also, a note that I do not know whether we will continue to even offer these comments, but the percentage of high temperature printed circuit materials is 100% and it would be interesting to go back 10 years and see how that has changed, but we do not have any non-high temperature materials at all anymore.

Q1, I know that you are always interested, the difference when we are reporting Q4 is that we have more of the next quarter in the books that, in this case, we are talking about Q1, of course. We have 9 weeks of the 13 weeks. Q1 is a normal 13-week quarter and we have not closed the month of April. We have a flash certainly with the top line would be interesting to you. The top line is tracking a little bit ahead of Q4 and Q1. I am sure you are interested in that because I guess we are trying to figure out what the impact of the economy is at this point.

The economy is soft as everybody knows. So, so far, that is the pattern of Q1 in terms of the top line tracking a little ahead. And even the bottom line is holding up as compared to Q4 and that is something that we are just reporting factually because we have that information in the books. As you know, we do not really forecast. We do not give guidance as to what will happen in the future, but we are happy to talk about what we know. These are factual things we are happy to share it with you. So, that is just FYI.

Also note, just for you analysts again, watch your interest rate column because interest rates are down quite a bit and obviously our interest income is going to be affected. As a result, you might even notice the interest income in Q4, and you could track prevailing interest rates as well as anybody can, so you just might want to keep that in mind. And Matt reported, I think, that we completed the French restructuring in Q4. That has been done and that charge for that restructuring went through in Q4.

Updates, this is the part -- now, we have already got 22 minutes into this call. I apologize for that. This is the part that I think is most interesting, for me anyway. You probably noted that we announced not too long ago that we acquired a company called Nova Composites based in Washington State in the Seattle area. That company is now called PASC, Park Aerospace Structures Corp., and that is a pretty exciting little development for Park actually because that puts us into a new product line, which is making not just the materials in prepregs, upper composite structures, but actually making the structures for aircraft and aerospace themselves. So, we are hoping that gives us more of a presence and gives us more leverage to grow our presence let us say in the aircraft/aerospace industry with our product line.

I think we announced Nova, we even hinted that we were also looking at a way to leverage off of Nova, which we call PASC now. It is a small company and really what we bought the company for was its engineering and technical capability, its know how in that industry rather than volume manufacturing capability. That is probably something that Park historically could bring more to the table in that area actually than the Nova Company we purchased.

We are looking at building volume facilities to produce these parts at this point. We have spending some time in Mexico, and we are working on a plan to install a plant in Mexico. That decision has not been made, I want to be real clear about it, but I want to update you on what we are working on. And that was also part of the whole plan with respect to the Nova acquisition. Nova is a small company, like I said. Really specializes in engineering and exotic technology with respect of composite parts for aerospace. But, it is not really -- their footprint historically has not been volume manufacturing. That is something that the legacy Park part of the business can bring more to the table on, I think. So, we are trying to marry those two, and we are looking forward to doing that and that would be a place where we would do more volume.

One thing about making parts and structures for aircraft is it is more labor intensive in making materials. Materials manufacturing more engineering focused, more engineering content. When you are in the business of making parts and structures more labor, so you need to think about lower cost locations for that purpose, and that is the reason why we are thinking about Mexico. The market is still very much North American; although, I think as we have reported I think a number of times in the last year or so, we think the market is migrating to Asia as well, although, it is probably just the beginning end of that process.

The Newton plant. Let me give you an update on that. That is the plant in Kansas right outside of Wichita that is coming along nicely. It is scheduled to be completed by the end of the year. The building is pretty much up and we are just beginning to do the equipment installation now. So, that is good news and that is for the composite materials and prepregs used for aircraft structures. It is not for the structures and parts themselves.

Pioneer plant. That is the plant in Singapore that we recently completed a few months ago. That is to make composite materials again for prepregs, for aircraft structures, aerospace structures and parts. And the good news is that we actually shipped our first part for sale recently out of the Pioneer plant. So, it is a slow start up. The market, I think, is just emerging in Asia, but we feel good about that.

And I think we reported recently, we are still working on some M&A opportunities and I just wanted to let you know those are ongoing. We still have a couple things we are looking at. As Matt noted, I think we closed the year with about $214 million of cash and marketable securities. I think you also know that in the last few years we have paid over $100 million in cash dividends, but the cash balance is still fairly significant in our opinion. And that is it by way of updates.

Operator, can we go into our questions now?

Yes, sir. (OPERATOR INSTRUCTIONS.)

Tim Allen with Wentworth, Hauser. Please go ahead.

Yes, Brian, I am just kind of wondering to what extent do you think your current business conditions reflect the overall conditions in kind of the high performance end of the electronics industry, i.e., the market you could theoretically serve? Is there any market share geographical angle where you might be doing different than what you think the underlying conditions in the marketplace? And I have got another follow up question too.

Yes. That is an interesting question and I am not sure have a complete answer for that question, but I will give you my opinion. I think that the extent our product mix, let us say, keeps migrating toward the higher end that may make us a little different than just the market overall. You know, every quarter we report that a higher percentage of our electronic sales are in high performance. Matt reported that actually 100% are in high temp, but every quarter more and more is in high performance. That is where the high margins are.

I think I commented previously that it is almost two businesses in a sense when we talk about our electronic product line especially in terms of the margins. There is high performance where the margins are attractive. Then there is something called EPA4, which is more standard product, more commodity where the margins are not very good at all. So -- and that is a natural process. It is natural migration. We do not really have to force the issue. The market is just bringing us there.

The other thing is, as more and more production migrates to Asia and again, it is not something we are forcing, it is that the market is more and more in Asia. We do not make product in Asia and ship back to the U.S. for low cost purposes. The market in Asia is served by the Asian plants. That is also good for our margins because like I said, we kind of have a global strategy toward the market. We try to have very, very consistent products, invisible in terms of differences. And also pricing strategy is fairly global as well, but we have lower cost operations in Asia, so that will help. So, obviously the overall market is going to be a big factor in how we are doing. But, I think there might be some different characteristics and different aspects of our parts performance that you might want to consider.

But, when you are talking about your performance, it sounds like it is really more of a margin story than a volume story, if you will. That as the market -- high-speed stuff, for example, matters more, the amount of your business it can sell us into the higher speed market is more. And so, it is really not so much your volumes might be higher than the overall market would indicate, but just the part that is in your sweet spot as far as margins is bigger. Is that a correct analysis?

I think that is 100 percent correct and I think we made the comment for a couple of years now that we do not look at the electronics industry as a growth industry for Park in terms of top line.

Right.

The way to grow your top line in the electronics industry is compete in price and commodity product. The rest of it kind of happens by itself. It is based upon technology and what the OEMs are doing. It is an OEM pull. We cannot push. I mean we cannot tell the big OEMs what to do. They are going to make their own decisions as to when they introduce new technology and how they do it. But, the extent they are doing it and to the extent it migrates to Asia that is good for us. So, we are benefiting from that and you know what, the reason the percentage goes up it is both sides of the ledger, because if you are looking at dollar basis, the high performance sales are going up, but the commodity sales are also going down. We are losing market share and we are allowing ourselves to lose market share in the lower end, where we are just not going to hold on based upon price. We do not work that way. At some point, if a customer feels that they can get adequate materials, the quality is okay, delivery performance at a lower price, our response is, "Well, then you should do that. It is good for you. It is the right thing for you." We are not going to try and hold on and try to compete on price. So, it is kind of a natural progression.

What do we need to do? We need to be very, very good in execution. We have invisible quality, the product has to be the same globally. So, the OEMs in the west will be very confident about using our materials overseas, okay. Our delivery has to be flawless. Our execution has to be flawless. And we also need to continue to introduce new products. That is something that we do work on. So, that is all we can do from our end, but we cannot really force the market. The market really brings us. It pulls us. We cannot push it. If we push it, what we are doing is we are just going to compromise our margins.

Okay. Brian, and I have got one other thing relating to the aerospace thing. I happened to be domiciled in Seattle, so kind of a [VP]. How would you articulate what the Park's history in terms of the composite materials, if you will, composite materials for electronics? How much of that expertise carries over into the aerospace market? I mean there are a lot of companies who might be looking at aerospace components. That is an interesting place to be. How would you articulate Park's unique ability to make 1 plus 1 equals 3 given your existing technology base?

I think that there is a tremendous amount of overlap. I mean, the basic material that we are providing into that market is called prepreg and I think Park has been making prepreg maybe longer than anybody else that is in business now since 1959. And in terms of the product similarities, in terms of the process similarities, in terms of the manufacturing similarities, the equipment similarities are very strong, very palpable. The applications are different and that is where we have had to learn a lot of new things.

But, I must say in the last couple of years, the company has impressed me. The people in the company have been very impressive and I do not think that we have to apologize to anybody that has had more of a legacy history focused in the aircraft area in terms of our knowledge about the aircraft market, and our knowledge of how materials are used to make aircraft structures. So, we are very lucky. I think we have a really good group of people in the marketing, technical, and sales area that have really embraced this new product line for Park.

Okay. Thanks, Brian.

Operator, any other questions?

Yes, we do sir.

Jiwon Lee with Sidoti & Company. Please go ahead, sir.

Good morning. A few housekeeping items first, please. The list of top five customers, percentage, and the 10% top 10 and 20 first, please.

Do we have that, Matt? Good morning, Jiwon.

Good morning.

How are you?

Yes.

Matt is going to pull it out.

Give me a moment.

Give us another question you want to ask while Matt is digging that up, Jiwon.

Okay. Then I guess sort of kind of going back to this composite materials, Brian. When you were talking about sort of lower margins with this Nova acquisition exactly how much lower are we talking about?

I do not know what you are -- maybe I am misspoke. You have to explain what you mean. I do not remember saying anything about lower margins with the Nova acquisition. I certainly would not have intended to say that. What are you--?

Okay. I guess then I heard that it is manually intensive operation.

Okay. So, let me -- yes, we are talking about not the Nova business we acquired. We are talking about the manufacturing process for making composite parts. It is more labor intensive. Making the prepreg is more engineering intensive. Making the parts for aircraft is more labor intensive. Why? Because unlike let us say cars, if you are making composite parts for cars, you can do automation because I mean there may be 50,000 or 100,000 units of a car sold in a particular year. I mean in aircraft, 100 units a year is a lot.

So, it does not lend itself as much to automation, so there is more handwork in it. And that is why to do more volume work, I am not talking about engineering and first articles and prototypes and those type of things, proof of concepts, I am talking about more volume work. You want to do that in a lower cost location where the labor costs are lower because you are going to have more labor content in the product than you would in the materials, for instance, or in the materials we sell for electronics, same thing.

So, the materials for aircraft, the materials for electronics, more engineering content not that much labor content. You talk of making parts, more labor content. And if you go to a low cost manufacturing location, the strategy is this, you want repeatability. You do not want creativity. You want creativity in your U.S. location where you do the engineering work, we do the prototypes, where you have the technical work that is done. But, when you go to an offshore, you want repeatability. You do not want creativity. You want to move parts offshore and have them made the same way every time. That is the emphasis. So, I did not mean to suggest it is a lower margin business. If you try to do it in a high labor cost area, it probably would be, but that is not our intention.

My bad. I think I misunderstood that. So, the Kansas plant that you are currently building, Brian, now that plant will still focus on the composite material side rather than any type of component productions.

Yes. That is exactly the point, you see the -- the answer to the question is yes. And I do not think it would make a lot of sense for us to try to do volume parts anywhere in the U.S., I mean and Kansas included. Labor costs are fairly high in Kansas, of course, in Seattle as well.

Yes. And then, I guess there is no like export restrictions since you are going to be focusing on by and large the commercial aerospace business from Mexico back to wherever it is that you need to go to.

Yes. I think you are right about that. There is this little thing called NAFTA that politicians like talking about, but I do not -- I think it is pretty free and easy actually and there are a number of aircraft companies, aircraft OEMs, that have started to set up operations in Mexico as well.

The Asian angle would be more when airplanes, I think, are really being made in Asia. To make parts in Asia and then import them all the way back to North America is very difficult. And the cost savings may not even be that significant as compared to other lower cost locations such as Mexico.

Okay. And obviously your cash position continues to grow and you did comment on a couple of M&A sort of potentials that you are scanning out there. Could you give us a little more color or at least where your interest lies? You know, when you look at this, the potential is out there.

Well, let us say this, it would not be in the electronics area. We just do not see any opportunities. If something comes our way, we will consider it. But, we have not seen, let me put it that way, we have not seen any meaningful opportunities in the electronics area with respect to M&A. So, the M&A efforts are going to be more toward the aircraft product line.

That is all for Brian. Is Matt ...

Matt, do you have that information for Jiwon?

Yes. For the fiscal year, we have two customers that were over 10% of our total. That would be Sanmina Corporation and TTM. The top five customers made up just short of 50% of our total sales.

And who were the top five? You can name them.

The top five are Sanmina, TTM, Tapco, Petasis and [Woos].

Okay. So, the other three were Tapco, Petasis and [Woos].

Okay. And the top 10 and 20 in terms of percentage of your electronic materials sale?

Top ten is just over 70% and the top 20 is 78%.

Okay. That is -- I do not -- I think that is percentage of total sales, actually.

Oh, okay.

Yes.

Thank you. And the D&A for the quarter?

Sorry.

What was the D&A for the quarter?

Do you have that or we can call Jiwon back if you do not have it.

Depreciation for the quarter. I do not have for the quarter.

Okay.

Why do not we just call Jiwon back on that.

Right.

Okay. And then let us just move on. The CapEx F09 goal can you sort of kind of clarify with all your expenditures going on especially in Kansas. How much expense is ...

Yes. So, that is really such a wild card because it depends on what other things we might do, Jiwon. But, I would think that based upon what we already have in place, it is still probably going not to be in excess of $10 million because some of the Kansas money was spent in the prior fiscal year. So --and that would be the big expenditures. All the money in the Pioneer plant was spent last year. Now, so I would look at a number approximately around $10 million and that is really a rough guess. A lot of stuff is timing also depending upon when you have one year ends and one year begins, there could be spending that might bridge over that point, of course, which could skew the number.

Now, depending upon the other things we may do, and that does not include anything for Mexico, by the way, it could be more than that and even significantly more.

Okay. The final question for me is if the copper foil pricing continues to be sort of kind of rather volatile. Has there been an impact on your top or the bottom line on this?

Yes. You are right. It is so frustrating because the sense is generally that the market for electronics and copper would only be a factor for our electronic product line, of course. The market for electronics or the global economy is not that robust and you would generally think, okay, at least you would see some relief in terms of your raw material cost. But, of course, with things like China and India still growing pretty aggressively, it really has not been that way, and we are still looking for that to happen.

So, yes, the copper foil prices have been a challenge and we recently had it increased, where we had to go to our customers and explain it to them. And I think we have discussed in the past, Jiwon, that we have had these things called adders, and we have had to do that again. So, that is really taken into account in everything we said so far, but it has been a challenge. And what it does is it just forces us to discuss things with our customers that we really would rather not be discussing on an ongoing basis. I think some of our customers do not want to pick up the phone when they hear we are calling. It is, "Oh, we know what they want to talk to us about."

That is all for me. Thank you.

Yes. Operator, any other questions?

Yes. We have one more sir from Mr. Leonard Cooper who is a shareholder.

Hi, Brian.

Hello, Len. How are you today?

Okay. You made a rainy day, sunny.

Really? How did we do that?

I am looking at the stock market.

Oh, the stock price. Yes, yes. That is always a mystery to us as to what the stock will do, but I am glad you are happy in any event.

No. It is good to hear all this energy flowing. I have two questions. You talk about high production or high quantities of parts to be made in this Nova or from this Nova business that you are looking to Mexico. Could you just tell me as an example what some of these parts are?

Okay. Well, think of any kind of composite part or structure that is on an airplane. It could be a wing. It could be a fuselage. It could be a fairing. It could be an engine to sell. It could be anything. I mean, some airplanes these days are made 100% from composite structure. They do not use any metal at all, and then on the other side of the spectrum -- I do not believe there are any airplanes that are actually 100% metal, but there are many airplanes that are largely metal, and then there are a lot of airplanes in the middle. And I think what is happening is every new iteration of an airplane there is more and more composite content.

So, it is usually not an all or nothing thing. It is usually not, "Okay, our last model or type or version was an all metal. Now, we are going to come out with the next generation, which is all composite." But, every year there is more composite content on airplanes and it is all over a lot in terms of what parts. But, it could be -- any part that is on an airplane could be made out of composites and, in fact, and in some cases they are composite structures.

Could it include jet engine blades?

Yes.

Uh-huh. Okay. The other question, I did not have much notice on this teleconference, so I do not have the article. It was either in the Times or the Journal saying that it is getting very difficult in the Far East to find managers who speak English. Have you noticed any problem that is affecting Park along those lines?

No. No, we have not. I would say that speaking English or not, it is just very difficult to find management people in the Far East. The economy is quite strong in China, of course, in Singapore, and labor is difficult whether you are talking about hourly labor or salaried labor. It is very competitive. We have people in our Singapore that are going for across the street or across town for a higher wage. It happens. We try to institute a culture of employee loyalty through other things than just paying the top dollar in town, of course, because that really does not make any sense. But, it is a struggle and it is a challenge.

Um-hmm.

But, it is not so much English speaking. It is just labor in general in Asia. The economies in Asia are quite strong and I have a feeling that people in Asia maybe are a little bit overconfident about their future, but that is just my opinion.

Well, there are many people also.

There are what?

The populations are high.

There are a lot of -- yes. That is right, yes.

So, I guess it is a matter of finding trained people.

Well, yes, of course. And for plants in China, I mean there are just jillions of people that companies bring in from the rural areas and they have them come in for a couple of years. They are called contract employees. But, those are going to be hourly people that those people generally would not speak English very well at all, and they usually do not have any skills, so they need to be trained.

Leonard Cooper. Okay. Thank you.

You are welcome.

It appears we have no further questions at this time.

Okay. Well, yes, thank you everybody very much. Again, we would like to apologize for getting a late start and having that technical difficulty. Len commented it was nice to hear a lot of good energy from us and I think that is true. We are feeling a lot of energy. We feel pretty excited about all the things we are working on and, frankly, sometimes we are struggling to figure out how we can cover all the different projects we are working on. But, that is a good problem to have I think. So, I think that sense of energy is a good observation.

Anyway, again, thank you very much for listening in. Matt and I will be around the rest of the day if you want to call back with any follow up questions, and I guess we will be talking to you relatively soon because our first quarter conference call will normally be toward the end of June. Okay? Thanks again for listening and we will talk to you soon. Have a good day. Goodbye.

This concludes today's teleconference. You may disconnect at any time. Thank you, and have a great day.