Park Aerospace Corp (PKE) 2009 Q2 法說會逐字稿

Good morning. My name is Tiffany. I will be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp second quarter 2009 earnings release conference call. (OPERATOR INSTRUCTIONS) At this time, I would like to turn today's conference over to Mr. Brian Shore, President and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, operator. This is Brian Shore. Good morning, everybody. I'm with Matt Farabaugh. Of course, as usual, Matt is VP and Controller. Matt will start with some introductory remarks and then I'll offer a few comments of my own, and then we'll go in to Q&A. Go ahead, Matt.

Thank you, Brian. Certain statements we may make during the course of this discussion which do not relate to historical financial information may be deemed constitute forward-looking statements. Any forward-looking statements are subject to various factors that could cause results to different materially from our expectations. We have set forth in our most recent annual report on Form 10-K for the fiscal year ended March 2, 2008, the risk factors that could affect future results. Those factors are found in Item 1a and after Item 7 of Form 10-K. Any forward-looking statements we may make are subject to those factors. I would first like to summarize the financial information included in the news release for the second quarter ended August 31, 2008.

Net sales for the 2009 fiscal year second quarter ended August 31, 2008, were $55.6 million compared to net sales of $60.5 million for the prior fiscal year second quarter. Park sales for the first six months $115.4 million compared to sales of $117.6 million for last year's first six months. Net earnings for the 2009 fiscal year second quarter were $4.9 million compared to $9.2 million for the prior year's second quarter. Park's net earnings for the first six months were $12.5 million compared to net earnings of $16.6 million for last year's first six months. Park reported basic and diluted earnings per share for the 2009 fiscal year second quarter and first six months of $0.24 and $0.61 respectively compared to basic and diluted earnings per share of $0.45 and $0.82 for the prior year second quarter and six-month period.

Now I would like to briefly review some of the other significant items in our second quarter P&L. Comparing the current fiscal year second quarter sales to last year's second quarter sales. Park sales volumes decreased 8% in each of North America, Europe and Asia. During the fiscal year 2009 second quarter, North American sales 51% of total sales, European sales 11% of total sales, and Asian sales were 38% of total sales, all the same as last year's second quarter. Sales of high temperature laminate and prepreg materials comprised 99% of total laminate and prepreg sales during the second quarter of both fiscal year 2009 and fiscal year 2008.

Sales of Parks high performance non-FR4 printed circuit materials which are a subset of high temperature printed circuit materials were 57% of total laminate and prepreg material sales in the second quarter of fiscal year 2009 compared to 52% in the second quarter of the prior year. Sales of Parks advanced composite materials and parts comprised 12% of total sales in the second quarter of fiscal 2009 compared to 9% in the second quarter of the prior year. The gross profit percentage for the second quarter of fiscal 2009 was 19.7% compared to 27.1% for the prior year second quarter. The decrease in the gross profit was attributable mainly to lower sales volume, substantial losses at our business unit in Mirebeau, France, the impact of currency translation on costs incurred in Singapore dollars and significant increases in raw materials and utility costs.

Selling, general and administrative expenses were 11.1% of net sales for the 2009 fiscal year second quarter compared to 10.9% for the prior year's comparable period. The increase in these operating expenses as a percentage of sales was primarily due to the decrease in sales volume. Investment income for the second quarter was $1.7 million or 3% of net sales compared to $2.5 million or 4% of net sales for the second quarter of 2008. The decrease in investment income was primarily attributable to decreases in prevailing interest rates. As a result, pretax operating profit was 11.6% of net sales for the 2009 fiscal year second quarter compared to 20.2% for the prior year second quarter. The effective tax rate was 23.75 for the 2009 fiscal year second quarter compared to and effective tax rate of 25.2% for the prior year second quarter.

Turning to Park's balance sheet. Cash and marketable securities were $215.8 million at August 31, 2008, compared to $214 million at the end of the prior fiscal year. Working capital was $242.4 million at the end of the 2009 second quarter compared to $239.1 million at the end of the prior fiscal year. During the current year's first six months, the company had capital expenditures of $8.1 million and depreciation expense of $3.9 million compared to capital expenditures of $3.6 million and depreciation expense of $4.1 million for the prior year's first six-month period. Stockholders equity $279.8 million at August 31, 2008, compared to $269.2 million at the end of the prior fiscal year. Finally, stockholders equity per share at August 31, 2008, was $13.67 per share compared to $13.23 per share at the end of the prior fiscal year.

Thank you, Matt. This is Brian again. So I will offer a few comments as well. Also, I just want to remind you that Matt's comments are posted on the website as of maybe about two or three hours ago. There is a lot of detail in Matt's comments. You may want to check out the website to make things easier for yourself. As far as my comments are concerned. First of all, it's a pretty difficult environment, to offer perspective in, considering the financial crisis that seems like the world is emersed in at this point in time. We will do our best, as always.

First of all, when we talk a little bit about Q2 as compared to Q1, comparison to Q1 is probably more meaningful because it's more recent. We go back to classic Q2 to Q2, there are a lot of different things that have transpired during the year. It's kind of hard to track. Let's talk Q1 to Q2 or Q2 compared to Q1. First of all, and let's talk about the difference which impacted the bottom line. First of all, the top line is off and that's pretty straight forward. Analysts can figure out what kind of bottom line impact would result in the top line.

Raw material costs, you know our policy is that we pass along increases in our raw material costs in the form of selling prices increases, but we also have a lag effect because we give our customers little time to figure out what to do to digest the problem and to respond themselves. This quarter was hit particularly hard because we had raw material increases that went in to affect June 1, and our selling price increases, the related selling price increases kind of neutralized the bottom line impact went in to effect September 1, so the whole second quarter exposed. We didn't recover any of the problem counteract any of the problem during the second quarter. In the third quarter the problem has been dealt with, but that doesn't help the second quarter.

The impact of the second quarter was about $700,000. That's not annualized just in the quarter alone, Q1 compared to Q2. That's negative $700,000. Of course these numbers are all pretax. That problem should go away for Q3 unless we have additional increases and I don't feel inclined to speculate about that kind of thing considering the environment that the global economy is emersed in right now because it's very difficult to understand where raw material costs will go. In the short-term, in particular, three to six months, so I will pass on that one.

Then, of course, you read that we had done some restructuring recently, we did restructuring in California which was a work force reduction. That's been implemented I guess as of a few weeks ago. We also announced that we proposed to the work force the closure of our French operation in Mirebeau, France, outside Dijon which, of course, is heartbreaking for us, that operation has been a part of Park since the mid 80s, as I recall. It's a long time part of the Park family, but it's completely not viable as far as we are concerned.

At this point we are engaged in the consultation process with the work force required by French law, but we have proposed a closure. I think we said we believe the discussion will conclude in Q3 or Q4. If the proposals implemented, the facility will be closed. During Q2 the facility lost money at the rate of $5 million a year, that's annualized, but during Q2 $5 million analyzed per year, so you can divide by four if you want to figure out what the impact was in Q2 alone. High performance percentage. Normally every quarter we talk about high performance percentage of our electronic sales going up and up and up. Actually, in Q2 went down, not a lot but a little bit. The reason, and it will be interesting to see by the way, what happens going forward. But when you read about capital investment being throttled back, particularly in an environment where there is global financial crisis, you can expect that. High performance sales, they go in to infrastructure, that's capital equipment. IT infrastructure, telecom infrastructure. Our sales of high performance do not go in to cell phones, PC's things like that.

When you hear talk with the internet supply companies, telecom infrastructure companies about their business being off, that's going to effect the part of the electronic sales that really drives the bottom line for Park. Be aware of that. There have been announcements recently by the big internet infrastructure companies that IT infrastructure companies that maybe their outlook is not so rosy. I don't know what the outlook should be because the environment is so confusing right now, particularly with what is going on in Washington. Maybe they will clarify in the next couple days. When it does clarify, the next question is what does it mean? Again, you have to talk to people that's above my pay scale, as they say. I wanted you to be aware of that. That had an impact of probably about $0.5 million negative, that's not annualized. That's in the second quarter. I'm sorry. Some numbers I'm giving you are annualized and some I'm giving you for the quarter. That's an impact for the quarter, just $500,000 for the quarter. The change in the mix regarding performance.

Remember, electronic products that we said over and over again that it's almost like two different businesses. High performance is where we make the money. The FR-4 where the standard product is really what maybe pays the light bills on a good day and that's about it. As you know, the long-term trend is a smaller and smaller portion of our electronic product sales are going to be the commodity or standard product. Just the way the situation is naturally progressing, as we spoken about, discussed numerous times.

Utility costs. Utility costs just in Q2 compared to Q1, $500,000 impact. That's not an annualized number. That's the impact for Q2 compared to Q1. So when you talk about the impact of the things that affected the bottom line Q2 compared to Q1, we don't have a lot of positives to talk about. We have a lot of negatives. We can talk a little bit about the restructuring, as we mentioned already the closure in France is a proposal and we are in the consultation process with the work force regarding that proposal. If that is implemented, the California restructuring or work force reduction already has been implemented our estimated that the impact of the bottom line going forward will be about $8 million to $9 million. $8 million to $9 million annualized. That's not per quarter and of course that's pretax. California, restructuring has been implemented.

If the restructuring or closure proposed closure is implemented in France the total impact $8 million to $9 million pretax per year going forward. So, really no big changes in terms of cost for Pioneer in Kansas actually Q1 to Q2, in case some of you were wondering about that. That's not really what the story is about. Those are the main factors. Q3, all I can tell you is factually there is no change in the first three weeks. We have three weeks in the books of bookings and revenues, and the first three weeks of Q3 are very similar in terms of booking to sales patterns compared to Q2, and other than that I think it would be foolish of me anyway to predict what might happen in Q3 because of the uncertainty in the global environment at this point, the global, economic, financial and credit environment.

We already talked about IT Telecom infrastructure. A couple other updates you might be interested in. Kansas progressing on schedule, so that's good news. We have done a number of test runs with the new hot melt machine, these are internal test runs for qualification. One of the two solvent machines is in process of being installed. The building I think reported last time was essentially complete. It is certainly complete now. There are two solvent machines that are going to be installed. One is being installed now and the next one will follow. That's progressing on plan.

We talked a lot about Mexico recently. We are working feverishly on our plan for Mexico. Mexico is a little more complicated than we thought it would be. It's funny because a lot of American companies, the first so called overseas venture that they embark on is Mexico. We have been operating overseas since 1960s, actually, a little bit before my time; 1960s in Europe. Manufacturing 1980s in Singapore. We have a plant in China. We have a plant in Malaysia, Canada, and so I think we have been around the world manufacturing for a long time. Mexico is a little surprising because you think it's next door, it's a little more complicated than we thought. We have to sort through the things. We also are watching carefully as we analyze the Mexico opportunity, trying to size it properly based upon what we think is going to happen with the market.

Let's put the financial recent financial events of the last couple of weeks aside. What I would say is that the aircraft market has been very, very robust. I think everybody would agree with that for several years. I suspect that's going to change. I suspect that the aircraft market is going to change in the next year or two, that's regardless as to what happens with the financial crisis. I think it got ahead of itself. We will see what happens. For us that's not always a bad thing. That sometimes presents more opportunities which leads to the balance sheet, of course. In this kind of environment, I don't know about you, I'm happy about our balance sheet.

I'm not unhappy about our balance sheet. We have a pretty clean balance sheet. I think everybody would have to agree with that. We don't have any junk in our balance sheet. We have no long-term debt, as you know. We have good amount of cash. We are going to be using that balance sheet to try to find opportunities as things develop, particularly as the economy continues to seem to unravel.

M&A we are actively looking at one situation. This situation relates to the manufacturer of composite parts for aircraft. We bought a company earlier this year that is engaged in that kind of activity. We are actively looking at one other acquisition opportunity at this time. The other situations that we reported on over the last couple of quarters, those are not active. There is one that is active, and we are pretty interested in it by the way. But, again, we will be looking to use our balance sheet, especially over the next 6 to 12 months with all the financial uncertainty, I have got to tell you and I think I complained about this before that we had cash for quite a while at Park but it's been frustrating because I feel in the past it hadn't mattered. When we are looking to do an acquisition, we are competing against companies that don't have money, but it doesn't matter because they can get it. Bankers lining up outside the door trying to give them money. Having money didn't mean anything. Maybe now it does. Maybe it's not been so easy to get money in the future. Maybe that's a advantage for Park. But, believe me to the extent it is, we will be looking exploit and use it.

We're hoping also that valuations become realistic. In a market where everybody is kind of pie in the sky, valuations don't make any sense. We remember that with the electronics industry in the 90s. Everybody was right, we were wrong. The world was going to grow and grow and grow and grow and we were wrong. It turns out that actually maybe a little hindsight maybe we were a little right. Maybe we are a little right with the aircraft industry as well because until about a week ago, boy, it was never going to do anything except grow. Maybe that has changed a little bit. We will see what happens.

We are going to look for opportunities. As far as the rough environment, I think you have to say that Park knows how to operate in a rough environment. The real question I would ask, the question I ask every day is are we going to be able to secure our future? I think that's an open question. Are we going to transition aggressively the new product lines? That's the question I still ask myself every day. We work as hard as we can to make the answer to that question yes, but talk is cheap. On that note, operator, why don't we go to Q&A.

(OPERATOR INSTRUCTIONS) Your first question comes from Sean Hannan, Needham and Company.

Yes. Good morning, thank you. So I think that you folks typically have a pretty challenged outlook. Visibilities often fairly difficult for you. Can you provide perhaps a bit of commentary for us right now for how incrementally more challenging this outlook has become for you with the demand environment?

Sean, I think that the situation in Q2 is challenging and I think we talked about some of the things we done already to meet the challenges. That was consistent with my comment at Park I think knows how to operate in a difficult environment. I think the real question is not what happened so far. Fine. We'll take it. We can handle it probably better than most. The real question in my mind, Sean, and maybe you should answer that question, you're probably smarter than I am about those kind of things, is what is going to happen over the next six months or the next month. That's why I think I opened my comments by saying this is really an interesting day on which to do a conference call and try to offer any perspective. So the fallout from the Lehman situation and, what is that two weeks old now, not even, we haven't seen that yet. We don't know where that's going to go.

The current environment, as I said, so far in Q3 looks kind of like Q2 in terms of order patterns and our revenues and that kind of thing. So really hard to say about the future, of course. The existing situation, we know how to deal with those kinds of things. When we will, we don't need to be prompted. We know what our responsibility it. Of course, meanwhile we are continuing to try to do everything we can to drive our new product lines for our future.

Okay. So I suppose if I can just work off that. In the current environment and demand perspective looks similar to prior quarter, but through the course of the quarter we saw the direction of the mix change, with your FR-4, non-FR-4 materials. And is that trend has that stabilized or is it possible that that trend is actually continuing based on all of the larger macronews that we are hearing with infrastructure buildouts and at the end of the day kind of networking equipment?

The answer is we haven't seen it continue at this point. Let's see what happens. I'm not going to name names but the big internet networking companies are saying watch out because our customers may not be ordering big ticket items. Whatever we have so far in the last month or last few weeks is consistent with the quarter. We are not seeing another step down at this point. I was just saying and kind of speculating that read other people's -- bit internet companies, IT companies, infrastructure companies, news releases and they are saying they are concerned. Probably rightfully. We have to see what happens. In terms of what's impacted us so far, we haven't seen anything over and above what we saw in Q2.

So based on some of these pressures that might be out there, are you seeing any ramifications on pricing within the marketplace?

Pricing meaning what?

(inaudible) pricing for your customers.

You mean our selling prices? Yes, well, we are not very popular right now because we are sticking with our policies. We haven't done anything with the utility costs. Utility costs are becoming a real factor, so far we just decided to eat those. In terms of our selling prices and raw material costs, we are sticking with our policy. I think there is just in the electronics industry, of course, we are talking, right? I think there is so much more tension out there now, never was a happy place any way. But it's the level of unhappiness is ratcheted up. We are not very popular, not very light. I do hear that there is capacity in Taiwan and China and places like that. I think we are unique actually as far as electronic material supplier for circuit boards are concerned. I think we are probably about the only real specialty company out there. The rest of them work commodity oriented. I'm not knocking that but when you're a commodity oriented operation, you really trade based upon supply and demand, capacity utilization and things like that.

The first thing these guys are going to do when they get nervous about demand and they have excess capacity is they are going to start changing their prices and we heard about these things. You know what we said before that we are going to continue to lose market share and I suspect we will, partly because of the competition. The competition is better, too. In the old days, maybe three or four years ago, maybe they weren't that robust. Maybe some of the OEM's weren't willing to put their programs, competition in Asia for their programs because they are concerned about quality, reliability, supply, but I think they are pretty good. So those concerns have gone away. Their prices are better to some extent anyway. To a large extent, I believe, prices are better. There goes our FR-4 market share.

Okay. That's helpful. You also had commented on there being a number of factors that had pushed the raw material pricing up for you which then resulted in a lag for your price pass through on September 1. Is there a way perhaps to either quantify or qualify the order of magnitude for what the different contributors were in raw materials, assuming that copper was probably the largest but just wanted to see if we can get a sense from you?

Sean, you're absolutely right. Copper is the big story here. That's the wild card. I read things about copper may go up because of China or India even though the economy is down. You're absolute right. Copper is the large majority of the story. I think we quantify the impact, right, we told you $700,000 in the quarter as of September 1 goes away, but that doesn't mean there won't be additional increases in our costs during the third quarter. We don't know that. We don't know that.

Okay. Then lastly, you folks typically provide the names of the top five customers you had in the quarter.

Yes, we can do that. Matt will you help us please.

Top five customers for us were Sanmina, TTM, [Wooz], [Tapco], and Multek.

Okay. Terrific. Thanks very much. I'll get back in the queue.

Thanks, Sean. Operator any other questions?

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Jiwon Lee with Sidoti and Company.

Good morning. Just to be sure that I understand and are on the same page as you, what was the dollar decline, sequential dollar decline, of your non-FR-4 sales during the quarter?

I think Matt has given us the percentages. Didn't you Mat? Percentage breakdown, high performance percentage?.

Yes. The high performance is for the quarter was 57% of our total electronics.

Q1 it was 60?

It was just a hair under 60.

We don't have that in front of us. You know what the top line is, obviously we are talking about the non-high performance but I think you have enough to do that math.

Okay. So according to my calculations, Brian, I get to about $4 million quarterly fall from the non-FR-4 side which attributed to almost all of your sequential sales fall. Am I understanding it correctly?

I think you're probably right. However, right, as I said we continue to lose market share with non-FR-4.

You continue to lose market share in the non-FR4 or the FR-4s?

I'm getting mixed up. We don't usually say non-FR-4 we say high performance. We continue to lose market share with FR-4; however, our market share high performance in Q2 was down because of the factors we discussed.

Okay. Thanks for the clarification, I thought, Brian, you mentioned something about the half a million impact on the non-FR-4 side. That's why I was asking.

What?

Half a million dollar sales impact on the non-FR-4 side. That's why I was asking. That's clear now, thank you.

What we were saying, let me go back and do it again. I know it's pretty difficult to parch through all of this. We're saying the impact of the loss of high performance, the reduction of the high performance percentage of our sales, the impact of the mix was $500,000 in Q2 compared to Q1. It was high performance mix. Matt just said it was 60% or close to 60% in Q1 and in Q2 was 57, right?

Yes.

Okay. So that 3% difference had an impact of $500,000 Q2 to Q1, which is negative in Q2.

That's very clear. Thank you very much. As for your composite material you have (inaudible) hopefully coming on board some time in calendar '09. If I go back and do the 12-month trailing sales, you were just about $25 million on annual run rate. With this capacity addition on an organic basis alone, how should we look at the business in terms of dollar increase or in terms of percentage of sales, could you give us a little more color?

It's really not a capacity question so much because we currently have capacity up at [Waterbury]. It's really capability and focus. The Kansas plant should be our plan objective, that should be the best plant in the world that makes this kind of product. It's situated in the Wichita area where a lot of the aircraft companies are located, of course. That's really what it's about. It will have capability that is quite a bit in excess of the capability of the Waterbury facility. The capacity question is not really the issue. That's not the right question because we actually have capacity. We are trying to install capability which will attract more business.

Okay.

It will be a very, very long day in the future where we will be talking to you about not having enough capacity in North America to make advanced deposit prepreg materials.

Understood. Excuse me I have a bad cold. Last question. On your recent deal that you are looking at, what else can you tell us, how would it change potentially if you are successful? I'm trying to get to your head as how you view the business, where you think you can take this business to. Can you give us color on how this might add to your composite business and how big this deal might be?

We are not going to comment on the size. It's quite a bit larger than the acquisition we did earlier this year which was more an acquisition about capability and technology. A very small operation. This is actually quite a bit larger. Larger operation so it actually would be operation that has much more effective and (inaudible) manufacturing capability whereas a smaller operation we purchased we didn't buy for manufacturing capability, it was technology know how. I think the key point here is we decided to focus a lot of our sales and marketing effort in the parts side of composites as compared to materials. Parts is just new to us, part structures for aircraft last maybe five or six months since we purchased (inaudible) which is now called [PASC] in [Lynwood]. The plant in Mexico would also be to produce parts.

We decided we are going to go after parts more aggressively or most aggressively. We are not backing off the materials side of the composite story, but we concluded it is much more of a long-term situation. It takes a long, long time to become qualified for materials. Usually have to wait for new programs to get your materials qualified. We're the new kid on the block, aircraft industry. I told you this over and over again. It's one of my frustrations the aircraft industry is low, very risk of diverge, very conservative. It is very difficult to get in.

It's like the opposite I think of what we have electronics where I suspect we are in the lead in high performance and other companies are trying to knock off our market share. We are -- the tables are turned when it comes to aircraft, but we believe that with parts and structures that even though it does take some time and we have to try to be patient, we believe our opportunity to grow that aspect of the composite product line for aircraft, that opportunity is more immediate. That's why we decided to focus on that. This is all new because we weren't even in that product line until we bought Novo which was in March, I guess, end of March. I don't know how many months it is, maybe four or five months. That's what we are emphasizing. That's what this acquisition would be about. It's not materials. It's parts or structures of aircraft. The Mexico plant that we are researching and studying parts and structures composite parts and structures for aircraft.

Okay. Finally, for Matt, could you give us the percentage sales for each of your top customers? The top five, please?

I can give you the percentages for Sanmina was 14.8, TTM was 11.2. Wooz was 10.8. Total top five was 51.9%. Total top ten was 67.2%.

20 please?

Top 20, yes, that would be 77.8.

Okay. That's helpful, thank you.

Next question comes from the line of Mona Eraiba with TCW.

I want -- seems like every question possible has been asked. I want to get color about end markets for top line decline in the revenue, what was the end markets that was weaker, which ones stayed stable?

The only markets that we think were stable were military and maybe medical, but that's small. Good margin but small. The main market for our electronic product, particularly high end product, is going to be internet infrastructure, IT infrastructure with the, we're dealing with the household named companies that lead that industry. It's again it's based upon capital spending, it's not based upon consumer spending. We don't make anything electronic-wise, if you will, that would end up being purchased by consumer. Doesn't go in the cars. It doesn't go in to PC's. It doesn't go in to laptops. It doesn't go in to cell phones. It goes in to big installations, big infrastructure, million, $2 million, $5 million boxes.

Okay. But you don't have (inaudible) like servers, network equipment?

No we don't have that broken down. It is all going to the same place. Actually, just so you know because we are not being obtuse, when we sell a product to a company that is producing for a -- Cisco for for example, we don't even know, we're not necessarily going to know what exactly kind of equipment it is, but we know generally the market it is going in to.

You haven't seen further deterioration, business similar Q3 the first three weeks which is not really that big.

Exactly. I'm telling you the facts that we know. I guess I would leave it up to you and others to decide how much you want to read in to that. We often report what we know for the first few weeks of the quarter.

When do you think the French situation is going to be out of your numbers?

I think when we reported when we announced the proposed closure, by the way, that it would be treated as a DO if the plan is implemented. It will be Q3 or Q4 we suspect

You're waiting for what? For an agreement to implement the plan? What are you waiting to make it as discontinued operation?

Yes. So if you ever operate in France you will know that it's quite difficult and many procedures required by law that want us to go through. It's not really an agreement so much but there are a lot of complicated and time-consuming procedures. Unfortunately, we had two other restructuring in the same location over the last three or four years and we're quite familiar with the procedures. This time we are proposing a closure.

So you tried to restructure it. That didn't help that much so now you're shutting it down.

Exactly. We tried twice and the market kept moving away from us. It helped, but whatever benefit we got, the market deteriorated further and now it's to the point where we are at critical mess anyway so we didn't think another restructuring.

Any other states or anything any benefit out of this when you close it down? Are you going to sell land, sell or anything or just whatever you are going to get for that you are going to use for compensation and so forth?

I think when we did our announcement, what did we say, Matt, 5 to 6 million was our estimate? Do you remember?

Yes.

5 to 6 million was the estimated charge. That's a P&L charge. The cash is quite different. Cash would be, we expect the cash might be almost neutral actually.

But you don't have real estate or a benefit selling --

We do. We own real estate but that is a net number that we --

That's the net number. Thanks.

Your next question comes from the line of [Leonard Cooper], private investor.

Hi, Brian.

Hello .

The second last lady asked most of the questions I was going to ask. Although she did have about four one last question -- but I was wondering about the sphere of influence that Park is having or trying to grow in the aircraft industry and what progress is being made along those lines.

Well, that's really a key question for us. I must say that my feeling, my opinion is that our sphere of influence to use your term is coming along very nicely. We seem to be getting a lot of attention. I mentioned the last time we spoke we had been asked to quote on several probably half a dozen large [RFQ's] for the aircraft industry, which was kind of a new event. We never saw one of those RFQ's until about four or five months ago. So I think that's an indicator. I like to see the revenues, I like to see the top line. That's where it's a little frustrating for me. I think I mentioned before that I'm counseled by my counterparts in large aircraft companies. I need to just understand I have got to be patient. The aircraft industry doesn't move like electronics industry. So every now and then I want to bang my head against the wall a little bit. I think the objective are that our sphere of influence is doing very nicely. The aircraft companies are recognizing that we have something a little different to bring to the table. There's a lot of complaints about the supply chain for aircraft being quite weak, undercapitalized, immature, unsophisticated, I hear this over and over again and then obviously, this is what's being told to me, and what they are saying is we are different so they see us as an opportunity. My next question is why don't we have more business from you, well, that's the part that takes a long time. That's the frustrating part. I do believe there is a recognition. As I mentioned in my introductory remarks, I'm hoping that the fact that we have a balance sheet and cash will actually widen the gap between Park and some of our competitors in the aircraft supply chain.

I think it's rather interesting when I was in engineering in the 50s, there were reports coming out of aviation research saying that the wing tips should be bent up, it took about 50 years before they started to do that on airliners.

We have done some parts that are composite wing tips.

I didn't know that. I thought I mentioned that before. That's one of the things we have done. Even with the small operation we have in Washington. Thank you.

Your next question is a follow up from the line of Sean Hannan with Needham and Company.

Thank you. So on a separate topic, but another materials company out there, [Izola] that has begun to initiate a couple of IP protection suits basically towards some Asian players. Is this -- in looking at your offering and some of the efforts that Izola is starting to move forward with in their protection, is this anything that you looked in to in terms of something to be concerned about and looking in to your line a little bit more specifically?

I don't think you should be too concerned about it. We know the people at Izola pretty well. We have good relations with them. Let me just suffice to say, we had our little informal discussions which are very friendly in nature. Interesting what they are doing. More power to them. I hope they do well. I wish them well. I could be wrong, but from everything I know I wouldn't recommend you get too concerned about that for Park.

That's great, thank you.

(OPERATOR INSTRUCTIONS) At this time, Mr. Shore, there are no further questions.

Okay. Thank you operator and thank you all for listening on this difficult day very difficult time, hopefully the next time we speak there will be more clarity as to the condition of the world, better or worse or indifferent, a little more clarity anyway. Thanks again for listening. Have a good day. Feel free to give us a call any time. Bye now.

This concludes the Park Electrochemical Corp conference call. You may now disconnect.