Park Aerospace Corp (PKE) 2009 Q4 法說會逐字稿

Good morning. My name is Summer and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp. fourth-quarter 2009 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). At this time, I will turn today's call over to Mr. Brian Shore, President and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, operator. Thank you, Summer. This is Brian Shore and as usual, I am here with Matt Farabaugh. Welcome to our fourth-quarter conference call. We will start with some introductory financial comments from Matt. I will give a couple comments of my own and then we will go into questions. Go ahead, Matt. Why don't we get started?

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 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 March 2, 2008 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 disclosures of non-GAAP operating results as a supplement to GAAP financial results will assist the listener in assessing the Company's performance and prospects.

I would first like to summarize the financial information included in the news release for the fourth quarter and fiscal year ended March 1, 2009. Net sales for the fourth quarter ended March 1, 2009 were $35.5 million compared to net sales of $60.6 million for the prior year's fourth quarter. Park's net sales for the fiscal year ended March 1, 2009 were $200.1 million compared to net sales of $241.9 million for the previous fiscal year.

Park reported net earnings from continuing operations before special items of $2.9 million for the fourth quarter ended March 1, 2009 compared to net earnings from continuing operations before special items of $9.2 million for the fourth quarter of last year.

In the fourth quarter ended March 1, 2009, the Company recorded one-time pretax charges of $5.7 million related to restructurings and asset impairments and recognized tax benefits of $1.2 million related to these charges and a tax benefit of $4.7 million related to the elimination of certain valuation allowances, resulting principally from the closure of the Company's New England Laminates Co. and facility located in Newburgh, New York.

Additionally, during the fourth quarter ended March 1, 2009, the Company recorded a discontinued operations benefit of $16.5 million related to the elimination of a liability from discontinued operations of its Dielektra GmbH subsidiary located in Germany.

In the fourth quarter ended March 2, 2008, the Company recorded a one-time pretax 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 related to the reduction of tax reserves.

Accordingly, net earnings from continuing operations were $3.1 million for the fourth quarter ended March 1, 2009 compared to net earnings from continuing operations of $9.3 million for last year's fourth quarter. Net earnings were $19.6 million for the fourth quarter ended March 1, 2009 compared to net earnings of $9.3 million for last year's fourth quarter.

For the year ended March 1, 2009, Park reported net earnings from continuing operations before special items of $18.9 million compared to net earnings from continuing operations before special items of $34.5 million for the prior fiscal year. During the 2009 fiscal year, the Company recorded a one-time pretax charge of $0.6 million related to restructurings at certain of the Company's North American and European business units and one-time pretax charges of $5.7 million related to the restructurings and asset impairments mentioned above and recognized related tax benefits of $1.2 million mentioned above and a tax benefit of $4.7 million related to the elimination of valuation allowances mentioned above.

Additionally, during the 2009 fiscal year, the Company recorded a discontinued operations benefit of $16.5 million mentioned above. During the 2008 fiscal year, 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 mentioned above and a tax benefit of $1.5 million related to the reduction of tax reserves also mentioned above.

Accordingly, net earnings from continuing operations were $18.5 million for the year ended March 1, 2009 compared to net earnings from continuing operations of $34.7 million for the year ended March 2, 2008. Net earnings were $35 million for the year ended March 1, 2009 compared to net earnings of $34.7 million for the year ended March 2, 2008.

Park reported diluted earnings per share from continuing operations before special items of $0.14 for the fourth quarter ended March 1, 2009 compared to $0.45 for last year's fourth quarter. Diluted earnings per share from continuing operations were $0.15 for the quarter ended March 1, 2009 compared to $0.46 for last year's fourth quarter. Diluted earnings per share were $0.96 for the quarter ended March 1, 2009 compared to $0.46 for last year's fourth quarter.

For the fiscal year ended March 1, 2009, Park reported diluted earnings per share from continuing operations before special items of $0.92 compared to $1.70 for the prior fiscal year. Diluted earnings per share from continuing operations were $0.90 for the year ended March 1, 2009 compared to $1.70 for the prior fiscal year. Diluted earnings per share were $1.71 for the fiscal year ended March 1, 2009 compared to $1.70 for the prior fiscal year.

Now I would like to briefly review some of the other significant items in our fourth quarter and fiscal year P&L. For the 2009 fiscal year fourth quarter, North American sales comprised of 54% of total sales, European sales were 10% of total sales and Asian sales were 36% of total sales. Comparing the 2009 fiscal year's fourth-quarter sales to the prior year's fourth-quarter sales, Park's North American sales decreased 35%, European sales decreased 57% and Asian sales decreased 44%.

For the 2009 fiscal year, North American sales comprised 52% of total sales, European sales were 11% of total sales and Asian sales were 37% of total sales. For the entire 2009 fiscal year, Park's North American sales decreased 14%, European sales decreased 25% and Asian sales decreased 19% compared to the prior year.

Worldwide sales of Park's high-temperature printed circuit materials comprised 100% of laminate and prepreg material sales for the fourth quarters of both the 2009 year and the 2008 fiscal year. For the fiscal year ended March 1, 2009, worldwide sales of high-temperature printed circuit materials comprised 100% of laminate and prepreg material sales compared to 99% for the fiscal year ended March 2, 2008.

Worldwide sales of Park's high-performance non-FR-4 printed circuit materials, which are a subset of high-temperature printed circuit materials, were 67% of total laminate and prepreg material sales for the 2009 year fourth quarter compared to 53% in the fourth quarter of the prior year. For the fiscal year ended March 1, 2009, worldwide sales of high-performance non-FR-4 printed circuit materials were 61% of total laminate and prepreg material sales compared to 52% for the fiscal year ended March 2, 2008.

Sales of advanced composite materials and parts comprised 15% and 13% of the Company's total sales for the 2009 fiscal year fourth quarter and full year respectively compared to 9% for the prior year's fourth quarter and full year.

The gross profits for the fourth quarter and full 2009 fiscal year were 22.9% and 21.7% respectively compared to 26.1% and 25.8% respectively for the prior year's fourth quarter and prior full year. The year-over-year decreases in gross profits for both the fourth quarter and full year were attributable to, among other things, significantly lower sales partially offset by cost-reduction efforts implemented in the second half of the 2009 fiscal year, including workforce reductions at the Company's North American and Asian operations and the closure of two facilities previously reported.

Also favorably impacting the gross profits of the 2009 fiscal year and fourth quarter were the higher percentages of sales of higher-margin, high-performance products and lower average copper foil costs compared to the 2008 fiscal year and fourth quarter.

Selling, general and administrative expenses as a percentage of net sales were 17.2% for the 2009 fiscal year's fourth quarter and 12.4% for the 2009 fiscal year compared to 12.1% for the 2008 fiscal year's fourth quarter and 11.2% for the 2008 fiscal year. The higher percentages were primarily due to the significant decreases in sales volumes.

As a result, pretax operating profit before special items was 10.3% of net sales for the 2009 year's fourth quarter compared to 17.9% for the prior year's fourth quarter. For the 2009 fiscal year, pretax operating profit before special items was 12.6% of net sales compared to 18.5% for the prior fiscal year. The effective tax rate was 2.6% for the 2009 fiscal year compared to an effective tax rate of 19.9% for the prior fiscal year.

Included in the 2009 effective tax rate was the tax benefit relating to the elimination of certain valuation allowances mentioned above. Included in the 2008 affective tax rate were tax benefits related to the reduction of tax reserves.

Moving to the balance sheet, Park's working capital at March 1, 2009, the end of the 2009 fiscal year, was $239.6 million compared to $239.1 million at March 2, 2008, the end of the 2008 fiscal year. Cash and temporary investments were $225.3 million at the end of the 2009 year compared to $214 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 $295.7 million at March 1, 2009 compared to $269.2 million at the end of the prior fiscal year. The increase in stockholders' equity was the result of the Company's net earnings during the 2009 fiscal year, largely offset by cash dividends paid.

Finally, stockholders' equity per share at March 1, 2009 was $14.45 per share compared to $13.23 per share at the end of the prior fiscal year.

Okay, thank you, Matt. It is Brian again and thank you all for listening to all that. That was a pretty long introductory remark. And by the way, I hope you all know that Matt's comments are always posted on our website before the call starts, a transcript of his comments. This quarter is particularly complex with all the special items and discontinued operation changes, etc.

So let me try to give you a little perspective. First, also let me apologize because I had a dental procedure yesterday and it is a little difficult for me to speak. So if I start to lisp or something like that, it is because of that. My dentist went to the same school as that guy, Laurence Olivier, right, from -- remember Marathon Man, Laurence Olivier. I don't know, you have to be a little older to understand what I am talking about.

But anyway, so let me try to give you a little bit of perspective here. I think the best way to handle this, to understand really what the quarter was about, is to look at the earnings from continuing ops before the special items and that way you have more of a pure analysis quarter to quarter, year over year, that kind of thing.

Let me go back and review some of the things we have discussed previously just to put everything in context. We spoke at our last third-quarter conference call about the closure of New York, our New York facility and our Neltec Europe facility in Mirebeau, France. At that point, the closures had not been complete, but they had been announced. I think we said actually, for a couple quarters now, that we expect to benefit from those items, as well as some workforce reductions in Singapore and the US to have a P&L impact going forward of 17 -- that is 1 point -- correction -- $1-7 million. That is a pretax P&L benefit.

Now those closures really were not complete until the -- right the middle of the fourth quarter, the middle of -- let's say the second week of January. December is a five-week month. So I think it was just about six or seven weeks into the 13-week period. Just about half of the fourth quarter carried a large majority of that $17 million cost and I just want you to understand that and make sure you are thinking that through when you are looking at our quarter, especially you analysts. I am trying to do everything I can to give you the right kind of hints here.

Probably -- I think we mentioned in the third-quarter conference call that, of the $17 million, maybe only about $1 million of the benefit was realized -- this is annualized, of course, in the third quarter. The major benefit related to the closures of New York and Mirebeau and those benefits didn't really take hold until about halfway into the fourth quarter.

So I just want you to understand, again, we were carrying those problems, that financial burden, halfway into the fourth quarter, all right? As a matter of fact, we lost money. The Company lost money in December as a result. The revenues in December were very low. The last two weeks of December for us -- it is a five-week month with the Christmas week and New Year's week -- and I think the world was pretty demoralized and confused at that point and it seemed like people just went home. We certainly didn't have two weeks accrued for shutdown and there was very little business during that period.

As I recall, revenues were quite low in December and then add to that the fact that we had those costs that we are still carrying resulted in a loss in December. And I just want you to keep that in mind when you are looking at the quarter. And again, I would encourage you to look at the earnings from continuing ops before special items. As Matt said, we eliminated the reserve for the continuing ops for Dielektra, which was a reserve, which I think was put on our balance sheet many years ago because that progressed to the point where we felt it was the right thing to do.

Let's see, just a little comment on copper. This is not the most significant item, but if you look at Q3 to Q4, there was about a $400,000 benefit Q3 to Q4 with respect to changes in copper and I won't go into the details because it is pretty complicated. We don't think there is any meaningful difference between Q4 and Q1 though. So whatever was in Q4 is probably going to continue in Q1.

I think you ought to focus a little bit on the gross margin that was achieved in the fourth quarter. What is it? 22.9%, about 23% on about $35 million of revenues, $35 million, just to put it in perspective. The third quarter was $49 million, so we went from $49.2 million to about $35.5 million. Gross margin in the third quarter was 19.9%, the fourth quarter 22.9%. And as I said, we carried those costs and that burden halfway into the fourth quarter. So you analysts can do your own math on that, but I just want to make sure you are focusing on the right facts.

SG&A in the fourth quarter continued to be quite high and about the same dollar-wise, a little less, but almost the same as the third quarter. The percentage obviously went much higher because the top line is much lower. So what is the story there? The story there is that the SG&A really is mostly about our investment in the future, all the development work we are doing. The R&D would be in SG&A as well. But we are really not cutting back very much on that. We have done a little fine-tuning.

With R&D, by the way, you probably noticed in the press release we have a new boss of R&D, not a new person to the Company, but a new guy running R&D and we are pleased about that. I think we are getting some new focus. Hopefully we will come out with a couple of electronic products that we've been working on forever in the near future. We also are working on a number of aircraft-related products in R&D. I think some good work was being done there, but it just needed a better focus and maybe a better -- more of a taskmaster approach. So I'm crossing my fingers. I can't promise anything, but I'm crossing my fingers that maybe we will have some good news out of R&D.

But the point about the SG&A is we really haven't cut back on the SG&A. The dollar expenditures are a little less in the third quarter, but the percentage, like I said, is quite a bit higher. Whereas the gross margin is, I think, actually if you don't mind me saying, quite remarkable in light of all the circumstances that I described.

But the SG&A -- we are not really looking to cut back on it. I think it is very sad and disappointing to see these big companies that are slashing their R&D budgets. I'm not passing judgment on them. I know some of them are in deep financial trouble and don't have any choice. But it is really sad to give up on one's future because of the current financial crisis. A lot of times, these R&D projects are three, four or five-year projects and these projects are being canceled.

The point is not that people believe the economy will be bad in 2014. The point is I guess they just don't have the money to continue to invest in their future. And that is a sad position to be in. Obviously, Park is very lucky because of our balance sheet. We don't have any debt and we have cash. So we don't have to sacrifice our future and we're not doing that.

In the fourth quarter and up until now, continuing with lots of development work, especially in the aircraft area, a lot of M&A activity. We passed on a couple of things. We never do M&A just to do M&A. We don't do acquisitions just to say to anybody, including you, that, look, we did an acquisition. But a lot of activity there. We are hoping that we can take advantage of the situation and not in a Machiavellian way, but, look, our job is to do the best we can for our shareholders.

We are not a charity, so if other companies have financial difficulties and they need to go to cash with some of their assets and we have cash, well, it is our job to make the best deal for our stockholders and I won't apologize for that. I think I know what my job is; I don't have any doubt about it. I heard some news these days there may be some confusion about what a CEO's job is, but I don't have any confusion, I don't think anyway.

We are also looking to enhance our engineering capability quite a bit in the aircraft area and we are doing a lot of recruiting, outside recruiting of talent. The aircraft industry has laid off just so many thousands of people; it is so sad. But we are looking to increase our talent pool, particularly in Kansas where we have our new factory and not only just the manufacturing people, but engineering people especially. And we are looking to be able to do more design work rather than what is called build-to-print with aircraft parts doing design work, which I think the aircraft industry is looking to the supply chain more and more these days for design work.

And I think Matt last time he even mentioned we were looking to go into the STC area, supplemental type certificate, develop composite parts that we would design and own and we could sell to both the OEMs, as well as the aftermarket. These are modifications to the aircraft.

M&A valuations, as I alluded to, I am just going to read from my notes. Maybe I already covered this, but again the valuations, to some extent, are coming down. Some people are holding on and still thinking about valuations from the old days and if they can, they will. I guess the good news for Park is some owners of companies are not in a position to have emotional attachments to valuations. They just need to go to cash.

So I don't know. I think that covers most of the high points. I think we pretty much did what we said we were going to do with respect to our manufacturing footprint, our cost. Ss I indicated, oh, I don't know, many times, I think Park -- I think you could say that Park knows how to operate in a difficult environment. I don't think we have done that before.

The real question that I would have for Park is are we going to be able to really secure our future with all the new areas and development activities that we are working very hard on. And I think that I am optimistic, but I think in fairness, the vote is still out on that. But I think we did exactly what we planned to do when we said it. We are going to do it in the fourth quarter on those two fronts. One is on -- we knew we had to adjust our footprint and adjust our costs to reflect the realities of the world. But the other reason we continue to press forward very, very hard in all the development areas, both organically, as I said. We are trying to recruit the right kind of talent for our Company and also in the development area related to M&A for instance.

I'm sure I missed some things, but maybe it will come up in some of the Q&A discussion. So operator, I think I am done with my introductory remarks, as well as Matt's. So why don't we go to the questions?

(Operator Instructions). Sean Hannan, Needham & Co.

Yes, good morning, thank you.

Good morning.

So a quick question, is it possible, if you can perhaps, Brian, talk a little bit or elaborate a little bit more on what you are seeing since the close of the quarter in terms of your different productlines or the space, perhaps maybe in the magnitude of where the run rate is, say, versus where you had exited your February quarter?

The March month was tracking with the January and February month, which were relatively strong. Obviously, we had to make up -- we were in a real hole at the end of December, the March month. The first couple weeks of April seemed to be a little soft and I am just reporting the facts that we know. I do that always with reluctance because a couple of weeks is -- it is up to you to decide what to make of that, but it seems to be a little soft as compared to the month of March.

Okay. And when you look at your products, is there any difference that you are seeing in terms of your demand for the types of products that you are supplying into?

Well, Matt commented and this is something that really should be considered I think as an important factor that, in the fourth quarter, the high-performance sales of the electronic sales were 67%. That is a very high percentage and we don't spend a lot of time talking to competitors, but my guess is that there is nobody in the electronics material area for printed circuits that would be anywhere close to that. And that trend continues and that is, as Matt said, one of the ways we are able to hold our margins together.

The aircraft productline, the composite productline has done better percentagewise than the electronics productline and I don't know why that is because the aircraft industry doesn't have a lot of rosy news in it, just as the electronics industry doesn't. But my guess is maybe you have the general industry trends and then, to some extent, we have the massive development activities that are starting to lay in a little bit for us. So that maybe is helping the aircraft composite part of our productline a little bit.

And it appears that -- that's helpful, thank you. It appears that the pricing environment seems to be holding I think maybe a little bit more than what we anticipated coming into the quarter. It seemed like there might be some that you give back based on some of your raw material dynamics. Can you talk around some pricing a little bit?

Well, in the electronic products, and we have got to make a distinction there because our philosophy with pricing would be composite products is quite different, but electronic products -- I mean we are an open book. Everybody knows this. We always make adjustments and historically have made adjustments for our raw material costs and the big factor, as Matt mentioned, is copper. That has been really pretty much of a roller coaster ride and sometimes there are these timing differences between when our costs change and when we reflect those cost changes in our selling prices. And that could affect the quarter.

As we said, it was a benefit Q4 compared to Q3. We don't expect much of a difference between Q4 and Q1 though. From what we know now, that will be neutral. That doesn't mean our costs aren't going up and down; it is just a timing and the lag effect of when our costs go up or down and when the pricing goes up or down.

It looks like the copper commodity price anyway, if you look at the analysts and follow the commodity exchanges, it looks like copper is going back up again. I mean the world is such a wild place right now. I mean oil was at [$1.40] and then down to $30 and who knows what it is now. Then gold and copper and other metals, it is just such a wild place. But I guess the recent indications are that it is going up. Why that is, I have no idea. Somebody brilliant in Chicago or somewhere probably figured that out, more brilliant than I am. But, of course, tomorrow, there could be some bad news about the construction in China or something like that and it will tank again. So I hope you weren't asking me to forecast the future, but I don't know -- does that give you a little perspective anyway on what you are after?

That does. That's helpful. Thank you very much.

Brad Evans, Heartland.

Yes, good morning. Thanks for taking the questions. Just in terms of the restructuring that you have implemented, could you just help us understand kind of how we should think about the SG&A line as we move into the first quarter of 2010 versus what we saw in the fourth quarter?

I think it's about the same. I think it is a good -- just fourth quarter should track pretty nicely into the first quarter, not in terms of percentages, but in terms of the dollars spent. So we don't have any plans of any consequence to make any significant changes with our SG&A costs at this time and for reasons I previously explained.

And it sounds like you would expect, with some improvement in volumes from the fourth quarter, that gross margin should continue to expand a bit here in the first quarter?

Well, I think what you need to go back and think about again is that comment about the $17 million and the closures of France and New York, which were not fully impacted in the fourth quarter. I think New York was the first week and then France was the second week of January or vice versa, I don't remember and it is a 13-week quarter. December was a five-week month, so you are kind of 6.5 weeks into -- it's about right down the middle of the quarter there before the major benefits really took complete hold.

So I am not predicting what the top line will be because that is pretty dangerous stuff these days. Every time you turn the TV on -- I don't know about this stuff with the Swine flu. Who knows where that is going to be. I am really not going to do that; that would be dangerous. But the cost reductions -- or the -- I shouldn't say cost reductions. The benefits from those changes are in place and fully in place and have been in place since the middle to -- the first half to the middle of January and those will continue.

The top line is something that is going to be affected by the world and I am not going to venture a guess as to what the world will be like two weeks from now. It would be risky; I wouldn't know how to do that. I would be just guessing. You might as well turn on the TV and listen to some analyst and maybe they will have a brilliant idea what the economy will be over the next six weeks, but I really --.

Tax rate guidance for -- any thoughts on tax rate for 2010?

Matt, do you have any thoughts on that? The tax rate has been bouncing all over the place. I don't know -- are we thinking around 25% maybe?

Yes, I think that is probably roughly where we would expect to come out.

Yes, again, sorry about the fourth quarter. That is a very difficult quarter to decipher, but when you take -- when you filter out all the extraneous stuff, we are thinking about maybe a 25% number and please remember not to hold us to that. That is our best guess and we are just doing the best we can. And we would rather share what we know rather than not sharing anything because we might not be exactly right. But just take it from that perspective, please.

I'm just curious if you have a rough number for capital spending for 2010 at this point?

No, no. No, we don't. We do have some projects that we are working on. We completed our Kansas plant and we're working on a project actually to expand that plant, believe it or not. All the machines aren't even commissioned yet in the existing plant. And it is not a manufacturing capacity issue. We are actually looking to expand that plant to make composite parts there, as well as the materials. That decision hasn't been finally made, but when I talked about the development activities, that is one of the things we have been putting a lot of time and effort into in the last, I don't know, six weeks or so. So we will let you know when a final decision has been made there.

If we did that, it wouldn't be -- we spent $15 million in Kansas remember. It wouldn't be that kind of number. It would be probably less than half that, but it could be significant. And I am not really aware of any other major projects that right now -- of course then there is acquisition-related expenses, which are very hard to predict.

I'm sorry, what did you spend in capital for 2009?

Do we have that number, Matt?

Yes, it was about $12 million.

Do you expect to spend more in 2010 than you spent last year?

Well, in terms of the items I mentioned, that we just mentioned, the answer would be no for the -- if we do -- let's say we did an expansion in Kansas and just kind of sustaining capital. But there are always the wildcards. Remember last year, we were looking at building a plant in Mexico. That would've been a relatively expensive plant. We announced previously we put that on hold just because the aircraft market is so weak that there really is no demand for that. That was going to be an outsourcing situation where the aircraft companies were going to outsource some of what their -- principally an outsourcing situation where the aircraft companies were going to outsource things that they were doing internally to us.

But they have laid off so many people that they are just not in a position to outsource anything. And it is not the type of thing where we need a lot of leadtime on. We finished the planning. So if we wanted to pull the trigger on something like that, it probably is a year to get it going from when we pull the trigger. So that is another kind of big variable.

Again, no crystal ball here. But if you ask me, I don't see the aircraft industry recovering in the next six months to the point where these guys are out of capacity or looking to outsource. They are going to be hiring back their own employees and I don't think it is going to recover in six months anyway. But even if it did, I don't believe that the aircraft companies would be looking to outsource at this point.

That is different than what we have been doing in Kansas where we build parts there. That would be more for new work and development work, not for outsourcing existing work, which is kind of more of a volume-oriented -- would be more of a volume-oriented approach. And there would be the reason for doing a place like Mexico, the volume-oriented work because of the cost factors.

But again, that is on hold. I don't want anybody to misunderstand. That project is on hold. I think we announced it was on hold even at our third-quarter -- sorry -- I think at our second-quarter conference call, we might have announced that. I don't remember now. (inaudible) you know that.

And you talked about acquisition activity. Obviously with the strong balance sheet, that is a fortunate position to be in. Has the Board at all discussed the merits of -- I know in the past, Brian, you have done special dividends on top of -- in combination with your internal growth efforts, as well as acquisitions. Do you think that you have enough liquidity right now that you would be able to maybe consider a special dividend at this point?

In addition to our regular dividends -- well, let me just say the Board will discuss dividend policy on an ongoing basis and I don't think it is right for me to speak for the Board. The dividend policy, the regular dividend, special dividend is something the Board would discuss on an ongoing basis.

But let me just -- my personal comment would be that yes, obviously, we have more cash than we need for our operating needs; there is no question about that. We are optimistic and -- I hope this doesn't sound Machiavellian -- but we are somewhat optimistic that, in the next six to nine months, we will see some nice opportunities just because some of the sellers are going to -- they are going to be -- their backs might be against the wall. So we want to be in a position to exploit those opportunities. We certainly don't want that to go and get cash because that is a losing proposition right now. I think the people who have it are the people who are calling the shots and the people who need it are definitely out of the game altogether. Well, we are close to an altogether is my opinion.

Brian, I'm sorry. I missed your comments, If you could just repeat for me the magnitude of just revenue trends in December versus January and February?

Yes, I said that -- we didn't give a number, but the revenues in December were really off quite a bit in the -- January, February trending around $3 million a week. All our months are four or five-week months. So that is kind of the area that we're looking at in January, February, but quite a bit off in December.

Okay, thank you very much. I appreciate that.

Let me just add -- I just want -- It was really those last two weeks of December, which the world just kind of shut down. So we had five -- two of the five weeks were what happened to the world. There's almost no business. So that really turned December into some kind of train wreck. And like I said, we lost money in December and haven't done that in quite a few years, but that did happen.

I'm sorry. So there were five weeks in December and four in February and January, is that correct?

Yes. The way our periods work -- 13-week quarters -- five, four, four.

Thank you.

So March is five and for this quarter and then April and May will be four.

Okay, perfect. Thank you.

(Operator Instructions). Jiwon Lee, Sidoti & Co.

Hi, thanks for taking my questions. I have several questions, please. First, Brian, with the PCB [troll] cycle and you have the new Kansas plant running, what is the product mix like now and how should we view those mix going forward this year and beyond?

You mean the mix between electronics and the composite aircraft type products?

Correct.

Yes, I think we had, what was it, 15% in Q4 and our efforts are to grow the composite aircraft productline and we are doing everything we can with our development activities to do that. In terms of the new programs, it is slow because the aircraft companies are just slow. We continue to do a lot of work with getting qualified new programs, but sometimes these things take a little while to leg in. So I don't really want to predict anything.

We are not looking really to grow our top line with electronics, I mean consistent with the global economy anyway. If the global economy grows, then our top line would grow. But we are not looking to force the top line with electronics. We are looking -- their efforts are into growing the top line in the aircraft area. In the electronics area, we are trying to -- we are looking at -- we always focus on our bottom line. As I mentioned, we hope to introduce some products in electronics in the near future. We'll see about that; no promises.

And I just want to comment, as far as the Kansas plant is concerned, we have the [Cabitak] machine running, which is the hot melt machine. We have made samples for qualification. Everything needs to be qualified. The solvent machines are still not running. We have had an issue with our supplier, those machines and we are working -- they are working to get those machines up and running. So that is a disappointment.

It is not affecting -- I don't think it is really affecting our business because we are still supplying all our products out of Waterbury, but it is a disappointment nevertheless. It is a beautiful plant and the solvent machines are still not operational, even though the new Cabitak hot melt machine is operational. And I said that just because I want you to know. That is not something that I think you should put into your calculus in terms of the (inaudible) expectations though for the composite productline.

You mean we should be sort of kind of tempering our expectations, is that what you are saying?

No, I am not. I am saying that has nothing to do with the expectations. I am saying that it is something you should know because it is disappointing and frustrating, but it does not affect our top line because all the programs that we are working on are handled -- where the solvent-type programs, solvent-based materials are handled out of Waterbury where there is plenty of capacity. So it is not like we are getting held back by this problem in terms of our development activities, in terms of our existing business.

All right. But I didn't hear the answer on sort of how you view those mix going forward.

Yes, because I didn't give a number and I intentionally didn't give you a number. I think we cited 15% and the fact that we are trying to do everything we can to grow that part of our productline. So our objective is to keep increasing that percentage. I think, in the prior year, it was 9%, so 15%. And that is certainly not what we want. We want a lot more than that.

As I have commented in prior conference calls, breaking in and growing the productline in the aircraft area is slow because of the nature of the aircraft industry. Although I must say again, and I have said this probably more than once, that based upon the activities that we are engaged with and the work we are doing with the OEMs, I feel pretty happy about the progress we have made. Some of these programs are longer term though, as I have commented before and it will take a little while before they can ramp up. But I am not going to -- we are not going to give any specific guidance on what we expect next quarter or the quarter after that in terms of the percentage of the sales represented by the composite aircraft productline.

So on the composite side, the business dynamics are quite different than the PCB material side, right? So, at this point, Brian, do you have most of the OEM qualifications that you thought you would have? And as a result, you have a little bit of a longer-term visibility?

We have some visibility I guess, but it would be very difficult to convert that into revenues because it is one thing that you got a qualification and then the question is, well, how many airplanes are they going to build and when are they going to actually get these airplanes approved. I think the answer to your first question is yes, I think we are pretty satisfied with the progress we have made, but we are continuing to work on being qualified in other new programs as they are being introduced and as these airplanes are being developed.

But I think from a qualitative perspective, we said we are pretty satisfied, but I'm not willing anyway -- I think it really would be unfair to you and the other investors to throw out numbers because they would be based upon theories that would be very, I think, weak. So I think it is just better not to do that.

Okay. And then if you could help us out a little bit, the margin difference, the product margin difference between your non-FR-4s versus the composites.

I think they are fairly similar. The FR-4 margins, as you know, are quite low, but I think that they are all over the lot. In terms of the high-performance materials, electronics, they range from a good to extremely good. And I would say the same thing in the aircraft productline. There are a couple aspects with the aircraft productline, maybe for interiors, which are lower margin, nothing like FR-4 margins in electronics. but then there are aspects of the aircraft productline where the margins are quite good and it is kind of inversely proportional though to the volume opportunities. Some of the very exotic stuff we might be doing for space or military, you might have very high margins, but the units are going to be low.

Last two questions, thanks. So with all this $17 million cost savings coming through in the next quarter, and I think you said, last quarter, you only saw $1 million of benefit. And the composite business coming up and all these restructuring benefits coming up, should we be or can we be expecting your margins to kind of climb up to sort of the 25% about?

Okay, let me just make sure, because I think I got something confused here. What I was trying to say is that we saw only about a $1 million annualized benefit in Q3. So going into Q4, right, at the beginning of the first half of Q4, we had a small amount of the benefit from some of the restructurings, which had already been done. The major benefits to the P&L were the closures of France and New York and those occurred about halfway into the fourth quarter. All right? So there was a major benefit in the fourth quarter, but we didn't get the full benefit because those closures occurred midway through the fourth quarter. Do you understand?

Yes, I do actually. Okay, that's helpful.

That's important and I'm glad you brought it up because, obviously, we weren't clear previously.

Okay. But then with the composites sort of picking up, so questions on the margin, can you get back to sort of the mid 20% relatively quickly?

I would hope so, except with the one big caveat is, okay, we got this funny thing called global economy, which is very hard to predict. And I don't know what the business level is going to be like in the next three, four weeks or three or four months and that is the big caveat. And I don't have any insight for you in terms of what the global economy is going to do. I mean it has just been so wild because it seems like we go from little optimism to despair, then optimism to despair every three minutes almost.

Okay. And lastly, the housekeeping question, the top five customers, who they were and what their percentage was in the 10s and 20s please?

Okay. Matt will give you that. I just want to make sure that I am being clear. When I said optimism to despair, I am talking about the world economy and the view on it. I am not talking about Park because we don't have very much despair at Park. Go ahead, Matt.

For the quarter, the top customer was [TTM] followed by Sanmina. TTM was about 14.4% of sales; Sanmina was 12.1%. We had -- for the top five customers who made up about just short of 54% of the total; top 10 made up about 70% of the total.

Okay, that's all for me. Thank you.

There are no further questions at this time.

No further questions? Okay, well, thank you all for listening. I appreciate it. We will be back in touch with you a little sooner than after other quarters because we have our first quarter ending at the end of May. So we should be back in touch by the end of June with our first-quarter results and will see what happened then. Thank you all for listening. Have a good day. Any questions, Matt and I are in the rest of the day. Take care. Goodbye.

This concludes today's conference call. You may now disconnect.