Park Aerospace Corp (PKE) 2010 Q4 法說會逐字稿

Good morning. My name is Cody and I'll be your conference Operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp. fourth quarter 2010 earning release conference call. (Operator Instructions). Thank you. 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. This is Brian Shore. Welcome everybody to our fourth quarter conference call. I have with me today Dave Dahlquist, who is our VP and CFO to help out with the call, especially the financial questions. And actually let me take the opportunity to thank Matt Farabaugh who's handled the calls for us. He's our VP and Controller for the last couple years. But, Dave will be taking over from now on, I think.

Okay, so why don't we start with our financial commentary? Dave will go through that. I just want to remind you all that Dave's comments are already posted on our website. There a lot of detail in those comments. So, you can check our website if you want to go back and check those numbers for instance, okay? Go ahead, Dave.

Good morning, everyone. 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 material from our expectations.

We have set forth in our most recent annual report on Form 10-K for the fiscal year ended March 1, 2009, 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.

I would first like to summarize the financial information included in the news release for the fourth quarter and fiscal year ended February 28, 2010. Net sales for the fourth quarter ended February 28, 2010 with $50.4 million, compared to net sales of $35.5 million for the prior fiscal year's fourth quarter.

Park's net sales for the fiscal year ended February 28, 2010 were $175.7 million, compared to net sales of $200.1 million for the previous fiscal year. Park reported net earnings before special items of $8.2 million for the fourth quarter ended February 28, 2010, compared to net earnings from continuing operations before special items of $2.9 million for the fourth quarter of last year.

In the fourth quarter ended February 28, 2010, the Company recorded a net income tax benefit of $2.2 million related to certain one-time items. In the fourth quarter ended March 1, 2009, the Company recorded one-tie pre-tax charges of $5.7 million, related to restructurings and asset impairments, and recognized tax benefits of $1.2 million related to those charges and a tax benefit of $4.7 million related to the adjustments of certain valuation allowances.

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.

Accordingly, net earnings were $10.4 million for the fourth quarter ended February 28, 2010 compared to net earnings from continuing operations of $3.1 million and net earnings of $19.6 million for last year's fourth quarter. For the year ended February 28, 2010, Park reported net earnings before special items of $23.2 million compared to net earnings from continuing operations before special items of $18.9 million for the prior fiscal year.

During the 2010 fiscal year, the Company recorded the net income tax benefit of $2.2 million mentioned above. During the 2009 fiscal year, the Company recorded a one-time pre-tax charge of $0.6 million related to restructurings at certain of the Company's North American and European business units and the one-time pre-tax charges of $5.7 million related to the restructurings and asset impairments mentioned above and recognized the related tax benefits of $1.2 million mentioned above, and the tax benefit of $4.7 million related to the adjustment of valuation allowances mentioned above.

Additionally, during the 2009 fiscal year, the Company recorded the discontinued operations benefit of $16.5 million mentioned above. Accordingly, net earnings from continuing operations were $25.4 million for the year ended February 28, 2010 compared to net earnings from continuing operations of $18.5 million and net earnings of $35 million for the year ended March 1, 2009.

Park reported diluted earnings per share before special items of $0.40 for the fourth quarter ended February 28, 2010, compared to diluted earnings per share from continuing operations before special items of $0.14 for last year's fourth quarter. Diluted earnings per share were $0.50 for the fourth quarter ended February 28, 2010, compared to diluted earnings per share from continuing operations of $0.15 for last year's fourth quarter, and diluted earnings per share of $0.96 for last year's fourth quarter.

For the fiscal year ended February 28, 2010, Park reported diluted earnings per share before special items of $1.13 compared to diluted earnings per share from continuing operations before special items of $0.92 for the prior fiscal year. Diluted earnings per share were $1.23 for the year ended February 28, 2010, compared to diluted earnings per share from continuing operations of $0.90 for the prior fiscal year, and diluted earnings per share of $1.71 for the prior fiscal year.

Now, I'd like to briefly review some of the other significant items in our fourth quarter and fiscal year P&L. For the 2010 fiscal year fourth quarter, North American sales comprised 48% of total sales. European sales were 12% of total sales. And Asian sales were 40% of total sales.

Comparing the 2010 fiscal year's fourth quarter sales to the prior year's fourth quarter sales, Park's North American sales increased 24%. European sales increased 76%. And Asian sales increased 61%. For the 2010 fiscal year, North American sales comprised 50% of total sales.

European sales were 10% of total sales. And Asian sales were 40% of total sales. The entire 2010 fiscal year, Park's North American sales decreased 19%. European sales decreased 23%. And Asian sales decreased 6% compared to the prior year.

Worldwide sales of Park's high temperature printed circuit materials comprised 100% of the total laminate and prepreg material sales for the fourth quarter, of both the 2010 fiscal year and the 2009 fiscal year. For the 2010 and 2009 fiscal years, worldwide sales of high temperature printed circuit materials comprised 100% of total laminate and prepreg material sales.

Worldwide sales of Park's high performance non-FR-4 printed circuit materials, which are a subset of High Temperature Printed Circuit Materials were 73% of total laminate and prepreg material sales, the 2010 year's fourth quarter, compared to 64% in the fourth quarter of the prior year.

For the fiscal year ended February 28, 2010, worldwide sales of high performance non-FR-4 printed circuit materials were 69% of total laminate and prepreg material sales, compared to 61% for the fiscal year ended March 1, 2009. Sales of advanced composite materials and parts were $5.5 million, and $23.2 million for the 2010 fiscal year fourth quarter and full year, respectively, compared to $5.3 million and $25.5 million for the prior year's fourth quarter and full year, respectively.

The gross profits as percentages of sales were 35.1% and 29.4%, respectively, for the fourth quarter and full 2010 fiscal year, compared to 22.9% and 21.7%, respectively, for the prior year's fourth quarter and prior full year. The year-over-year increase in gross profit for the fourth quarter was attributable to, among other things, the increase in sales volume for the 2010 fiscal year fourth quarter, compared to the prior year's fourth quarter, the cost reduction activities related to restructuring of certain of the Company's North American and European business units during the second half of the 2009 fiscal year, and an increase in the percentage of sales of higher margin, high performance products in the 2010 fourth quarter compared with the prior fiscal year fourth quarter.

Notwithstanding the significantly lower sales volumes in the 2010 fiscal year compared to the prior fiscal year, the increase in gross profits for the 2010 fiscal year compared to the prior fiscal year was attributable to, among other things, the cost reduction activities and the increase in the percentage of high performance products mentioned above.

Selling, general and administrative expenses as percentages of net sales were 14.4% for the 2010 fiscal year's fourth quarter and 14.0% for the 2010 fiscal year, compared to 17.2% for the 2009 fiscal year's fourth quarter and 12.4% for the 2009 fiscal year. The lower percentage in the 2010 fiscal year fourth quarter was primarily due to the increase in sales volumes. The increase for the full year 2010 fiscal year was primarily due to the decrease in annual sales volumes.

Interest income for the fourth quarter ended February 28, 2010 was $57,000 compared to interest income of $1,633,000 for last year's fourth quarter. Interest income for the year ended February 28, 2010 was $1,062,000 compared to $6,648,000 for the prior fiscal year.

As a result, pre-tax operating profit before special items was 20.9% of net sales for the 2010 year's fourth quarter compared to 10.3% for the prior year's fourth quarter. For the 2010 fiscal year, pre-tax operating profit before special items was 16.0% of net sales compared to 12.6% for the prior fiscal year.

The effective tax rate was 10.0% for the 2010 fiscal year compared to an effective tax rate of 2.6% for the prior fiscal year. Included in the 2010 effective tax rate was the impact of certain one-time tax items. Included in the 2009 effective tax rate was the tax benefit relating to the adjustment of certain valuation allowances mentioned above.

Moving to the balance sheet, Park's working capital at February 28, 2010, the end of the 2010 fiscal year, was $261.0 million compared to $239.6 million at March 1, 2009, the end of the 2009 fiscal year. Cash and marketable securities were $237.8 million at the end of the 2010 year, compared to $225.3 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 $316.1 million at February 28, 2010 compared to $295.7 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 2010 fiscal year partially offset by cash dividends paid. Finally, stockholders' equity per share at February 28, 2010 was $15.40 per share compared to $14.45 per share at the end of the prior fiscal year.

Okay. Thanks a lot, Dave, and thanks for listening to all that. It's Brian again, a few additional comments that I'll add. So what should we highlight? Well, again, I want to just make sure you're focusing on the difference in interest income, because it is quite significant.

I think Dave said it was a mere $57,000 in Q4, compared to little over $1.6 million in the prior year's Q4. And that's obviously because of prevailing interest rates. It's pretty straightforward, but it does have a big impact in our P&L. Kansas still struggle there.

Lost almost $1 million in Q4, that's not an annualized number. That's a pre-tax number, almost $1 million. Still having a lot of difficulty with the solvent treater, as we've mentioned this over the last few quarters, we're in the process of making major modifications to the equipment as we speak.

And the hope, maybe the expectation is that within a couple of months, by, let's say, June, we should be in business with those machines. But, it's been difficult. As far as Kansas is concerned in general, I want to make sure that I explain to you that we haven't changed our attitudes about Kansas, our strategy.

We still believe it's the right thing for Park. But, it's been a difficult year, particularly because of those treaters. We think we've had a lot of work done on them the last quarter. We think we really understand the issues. And we believe that the issues are being addressed with the modifications that we've made to the equipment.

Let's see, Dave mentioned high performance. Always good thing to focus on that, that percentage continues to climb. And that's part of the explanation as to why our P&L tends to move in the right direction recently, and also it drives the gross profit significantly. And I think you know the gross profit was over 35% in the fourth quarter, which is quite a bit higher than it has been, historically.

Q1, I know you're always interested in how we're doing in the current quarter. The difference is when we announce our fourth quarter. We're well into the first quarter. We're eight weeks, actually, into the first quarter. First quarter, every quarter for Park is 13 weeks, except on a leap year. It's not a leap year.

So, we have eight weeks of the 13 weeks in the books. And the revenues in the first quarter are running at about 15% above the revenues in the fourth quarter. Those are facts. We can report them. As you know, we don't forecast. We don't give estimates on the future.

We don't know what's going to happen in the future. We're not commenting on what will happen in the future, especially with electronics visibility's always very poor. In my opinion, the electronics industry which is strong right now is just being driven by the global economy.

It's not really anything we've done. It's really a function of the global economy. I think we mentioned in the third quarter that we believe there's still a lot of leverage in our operations, meaning that with additional top line it would contribute nicely to the bottom line.

I think that's what you saw in the fourth quarter as compared to the third quarter. But, the reason we don't forecast is because, again, the electronics industry, in particular, is so difficult to forecast. And the global economy is also pretty difficult to forecast.

A [couple news] a week was volcanoes, now it's Greece and I don't know. It's for people that are a lot smarter than I am, anyway, to forecast what will happen in the global economy. But, we believe the electronics industry, in particular in electronics sales, are driven by the global economy.

And it's, at this point anyway, the electronics industry, globally, is quite strong. That's not just Asia, by the way. It's also North America, even Europe. Okay. So, that's what we know. We tell you what we know and we don't speculate about what we don't know. That's our history and pattern, as you're aware of.

So, I guess, really, I don't have too much more to say in terms of introductory comments. I think the report is really straightforward. There are some one-time items, but hopefully, if you sort through those, you'll figure out what the proper comparisons are, related to sequential comparisons for the third quarter and last year's fourth quarter, as well. So, I think what we'll do is we'll go right into the question now. Operator, we're ready for some questions, if there are any.

(Operator Instructions). We'll pause for just a moment to compile the Q&A roster. And your first question comes from Sean Hannan.

Yes, good morning.

Hi, Sean.

Hi. So, a question for you, was Tapco completely eliminated? And do they represent essentially zero res in the quarter? And then, as kind of the next portion of that, can you provide an update around the retention of their customers for how that is played out, and any negatives or positives that were perhaps surprising that ended up emerging from that decision?

Tapco in the fourth quarter, essentially, was zero sales. And they're not a factor anymore. Retention was quite good. I don't know if I would say surprising, because I think we were optimistic that retention would be quite good. So, we're pleased with the results. We wish them well, Tapco, I mean, but we feel good about the decision that was made and we feel good about the relationship we now have directly with the former Tapco customers.

Terrific. Okay. And then, when we look at the environment and you had commented around to the, kind of, the global demand environment, Brian, so thank you for that. Due to those circumstances, have you had any impacts around your pricing in the quarter? And can you remind us if there were any increases that you have planned that either passed through or that are currently about to pass through and perhaps lagging for either the May or the August quarters?

So, I think our history is we don't adjust our prices based upon market conditions. We adjust our prices based upon our raw material costs. And that's been a pattern in our history for many, many years. We don't drop our prices to get market share. We don't raise our prices when we think the market is good. We just don't do that. Other people do, but we don't. And it's fine for other people to do that. It's not our practice. We've had some minor changes, especially with copper.

But, they're really not much of a factor when you compare Q3 to Q4, or what we're expecting Q1 to Q4. So, there have been some minor adjustments. But, not that, kind of, those big lagging effects that we've had in the past, where we have a lag of maybe three months and it's a significant amount before we kind of catch up, if you will, catch up with our selling prices to our cost. So, there were some, like I said, some minor impacts, but I think almost not worth mentioning.

Okay. That's helpful. Then, gross margins, nice job there, could we view these levels, perhaps, in the low- to mid-30s as sustainable, if we were to assume a similar mix of non-FR-4 going forward? And I don't know if there's anything that should be thought of as unsustainable in terms of that product flow. And then, separately, how should we think about the advanced composites volume as that may come back down the road, how that could have an impact on that profile there?

The gross margin in fourth quarter was, I think, about 35%. There was nothing unusual in that gross margin. It's all real. And if conditions continue, there's no reason why that number can't be sustained. This is a discussion we've had for many quarters over the last couple of years. People would ask me whether there's upside to the gross margins, and my answer was always yes. I think that we really can't take much credit for it, though, in the fourth quarter.

It's really the world. The electronics economy, rather the electronics industry has been strong. We've mentioned in the past that we still have leverage on our numbers from the cost reductions. We didn't really add very much cost in the fourth quarter, but the revenues are up. So, a lot of that contributes to the bottom line and then contributes to the gross profit percentage. So, thanks for recognizing that. But, we really didn't do very much other than run our business how we normally run our business.

There's nothing that I know of that makes that number unsustainable. Again, if the outside world continues to cooperate, if the market, the electronics industry, in particular, is strong, there's nothing that I know of which makes that number unsustainable. There's certainly no special items or anything, special one-time influences, that would have created that number, the 35% gross margin number in the fourth quarter. As far as the aerospace markets are concerned, that's a little bit of a different story and maybe we should talk about that for a minute.

Maybe we should've commented that in our introductory remarks, as well. It's a little mixed, because there is some good news, if you look at space, space vehicles, NASA-type activities, military aircraft, UAVs, not so bad. But, you go to civilian aircraft, that industry, particularly the business jets, is still quite depressed. There's a huge inventory of used aircraft, late-model used business jet aircraft that has not been absorbed, not been digested. Some of these airplanes are only two or three or four years old.

They're essentially new, but they could be selling at $5 million or $6 million less than a new version. So, you have a $20 million aircraft that as new, you can buy it as a $14 million or $15 million late-model used aircraft. And most CFOs and controllers are going to scratch their head and say, "Well, what do I get for that extra $5 million?" And when the answer is, "Nothing," they're going to buy the late-model used airplane. And until that used inventory is more fully absorbed, it's going to be difficult for the business jet market to recover.

I still think it's a good strategy. I still think, over the years, people will be using more and more of these airplanes, and, in particular, overseas, I would say particularly in Asia. Right now, well, in a recent past, Europe had been a good market. That also has not been so good in the last year. But, I think that Asia's the big emerging market for civilian business aircraft. And as far as the military and space are concerned, of course, that is driven somewhat to a large extent by our government, our government policies.

And we'll kind of have to stay tuned and see what happens. We've been very pleased about some of the work we've participated in, in the space area, in particular, some NASA projects, which very gratifying to be part of. And we'll just see what our government decides to do in terms of its policies with respect to the military and space. But, in any event, you go back to your base question about gross margins, I think the model with aerospace is very similar. The operating model, let's call it, is very similar.

If the top line increases, then we'll see the gross margins increase, as well. I should add, though, that it's not just the outside world. With aerospace, that's still more of a development activity for us, right? So, it's not just the [unintelligible]. It's not just waiting for the world to get better. We continue to put a lot of our efforts into the development work in aerospace. And our fourth quarter numbers were about the same as last year's fourth quarter revenues. But, I think that in itself is probably an accomplishment, considering how bad the industry has been.

So, if we were just kind of going with the flow, if we were just kind of going up and down with the market, I suspect our revenues would've been down quite a bit in Q4 as compared to last year's Q4. They weren't, because it's considered to be development activity for us. So, not only are we waiting for the world to get better. We're also trying to take care of our own future by doing the development work in aerospace.

Okay. That's actually very helpful color. And part of what I'm trying to drive out, if we increased our revenues quarter-over-quarter about 9%, and we drove the significant increase in gross margin. Currently we're seeing another quarter-over-quarter increase. That leverage should translate through to really bring you closer to a 40% gross margin. And I just wanted to see if that logic was flawed.

I'm not going to comment on that number. But, the logic, generally, is correct. As I said, and I'll say it again, we still have some leverage in our numbers. Now, at some point, that's going to stop, because at some point we're going to have to make more investment in order to keep up with the revenue line.

But, at this point, I told you what we're operating at in the first quarter, and that has not required any additional investment. So, you can do your own math in terms of how much leverage we're talking about and how much of that leverage will drop to the gross margin line. I'm not going to comment on that. But, the concept is correct.

Okay. Thanks, Brian. And then, last question for the moment, then I'm going to hop back in the queue, how much have you transferred to Kansas and Waterbury, and what color can you provide around some of your plans going forward in what should either support some of the level of margins? What we're actually realizing, in terms of losses there, today or going forward.

I'm not sure what you're asking. We told you how much we lost in Kansas in the fourth quarter, which, of course, is unacceptable, and we're very unhappy about it. The nature of the business, though, is very similar to the nature of the business in Waterbury. A lot of what we're doing currently in Kansas, which is still fairly low revenue level, was actually transferred from Waterbury. And some of the activity is new activity. But, the margin attributes to this business is very similar to what we've done historically in Waterbury.

Okay. But, all that business that you had planned on transferring has been completed.

No, no. No, that's why the revenues are so low. No, it's still largely in Waterbury. So, fortunately, we haven't lost any business because of the difficulty in Kansas. That business stays in Waterbury, and we're not going to be able to transfer the business until we get through these modifications. I shouldn't say it that--I got to say that more carefully. We're not going to be able to transfer some of that business, a good portion of the business, until we get through the equipment modifications.

Some of it already has been transferred, but a small amount. [Unintelligible] kind of hold pending the equipment modifications, let me just explain it for a second. When you're supplying it to the aerospace industry, any significant change you make to your equipment requires what?

Requalification, so we don't want to qualify with these companies now, and then knock on their door three months from now and say, "Gee, I know that was a lot of effort you put in, in our behalf, to qualify, but now you got to do it all over again." So, you see, we're trying to be as intelligent as possible about how we do this.

Yes, thanks, Brian. That was probably a poorly worded question on my part. I did mean ahead of the modifications you're making. So, all right, well thanks very much. That's terrific. I'm going to hop back in the queue.

Okay, thanks.

And your next question comes from Jiwon Lee.

Good morning, Brian and David.

Hi, Jiwon. Good morning.

Good morning.

So, to add to your market color, Brian, could you point out specific end markets, whether it is telecom equipment, broadband, or storage, that sort of kind of added to such a big swing to your non-FR-4s during the quarter?

I think it's all the things you mentioned. Yes. Telecom, storage, internet infrastructure, IT, I think what's going on, for us. Remember the electronic product we produce does not end up with consumer applications. There's very little that you and I would buy personally that would have any Park material in it. It's mostly higher-end, higher-cost infrastructure-type equipment, which ends up being what? It ends up being related to capital budgets. So, when corporations are spending money on IT gear, that's good for Park.

It's good for our customers, running customers, good for Park. And what I think happened there a little bit was that a lot of companies, especially when the economy was very bad, they kind of held off on their IT capital spending. I know we did. Maybe it's not the best thing, but when you're spending money, I mean, I'm probably not unlike a lot of CEOs that think, "Well, let's buy some equipment." The IT stuff went later, because I don't really understand what IT does, exactly.

I mean, I'm sure it does something, but it's hard for a lot of CEOs, including me, I'll raise my hand on that one, to really get the clear connection to the value and get the business model. So, I think a lot of CEOs, a lot of companies held off their big IT spending. Just got away with basically what they needed to do.

But, we're spending money on IT now, as well. A few months ago we realized that we were buying the [unintelligible]. We needed to start investing again in our IT infrastructure, upgrading it, etc. I don't think we're that unusual. And I think that's partly what's driving the markets that we supply into.

Okay. Well, that's helpful. And you mentioned that, despite the copper pricing increasing, and some of your, I guess, Asian competitors raising the laminate pricing couple times this year, you mentioned that the pricing trends for you was fairly minor for gross margins. So, when I look at the lower cost basis that you have, and the mix shift towards this non-FR-4s, which one added more to your gross margin?

Could you just repeat that question? You're asking which added more to gross margin, the mix shift toward--.

--Or the cost cuts--.

--Higher performance electronic materials, or what's the other choice?

Mix shift or your cost cut.

Oh. Oh, okay. That's a very good question. Yes, the cost reductions that we're talking about really occurred in the '09 fiscal year. Remember, there were major cost reductions. We unfortunately closed the French operation. We closed the New York operation. And we reduced headcount. That'll happen in the '09 fiscal year. So, when we're doing comparisons from the '10 year to the '09 year, we talk about the cost reductions. You see the cost reductions really benefited the '10 year, even though they occurred toward the end of the '09 year.

There have been no significant cost reductions since that time, though. In the entire '10 year, there were no significant cost reductions. So, if you look at Q4 compared to Q4, there'd be a big impact from the cost reductions that occurred at the end of '09. But, currently, there are no cost reductions.

Say you look at, let's say, Q3 to Q4, Jiwon, or Q4 to Q1. The current operating environment, and cost reductions are not a factor. It's going to be two things. It's going to be top line and it's going to be high-performance percentage. Those would be the two main factors.

That's very helpful. And if we think about the upcoming, sort of, telecom equipment cycle, do you feel that you have the right materials and competitive products to play there?

No, not really. I mean, we have to work on that. I don't know. I'll speak for myself. I'm not happy. I'm not satisfied. I think we need to do better. We need to work harder. I'm not happy with our product development efforts. We've had some successes. We announced a couple of products last year. But, no, I don't think we're nearly good enough.

Okay. Well, I think that's pretty candid. And lastly, for David, if I could get a list of top-five customers, 10, and 20, please.

Sure. We had two customers above 10%, Sanmina at 14.4%, TTM at 11.9%. Top five customers represented 49.7% of sales. Top 10 customers represented 63.1% of sales. And top 20 customers represented 71.8% of sales.

Perfect.

You know who were the top-five customers?

And sorry, the top five, Sanmina, TTM, as I previously mentioned, [unintelligible], [Moltech], and Wus.

Terrific. That's all for me. Thank you.

And you all know Moltech is part of Techtronics, just wanted to remind you of that.

And your next question comes from Leonard Cooper.

Hi, Brian.

Hi, Len. How you doing today?

Good, good. A very good quarter, I think. I was wondering how much depreciation was in those numbers?

Think Dave has to help us with that.

Sure.

And he's talking about capitals from--.

--Yes. For the 2010 year, depreciation and amortization was $7.1 million and our capital spend during that same period was $3.4 million--.

--Um-hmm, okay, thank you. I saw a release speaking about a plastic coating, Aeroglide. Could you tell me something about that--?

--Aeroglide, a new product, yes. That was one of the new products we introduced recently. Dave, you want to comment on that a little bit?

Sure. Aeroglide is a surfacing film product. It's related to our aircraft and aerospace product line. It's a material that would be used by composite part fabricators as the outermost layer of a composite part. And the reason it would be used is to provide a smoother finish, a smoother surface on a part when it produced. And it reduces the amount of labor that goes into sanding and sort of you think of Bondo from an automotive application. Sometimes the composite parts has little pits and bumps and irregularities.

And when you paint it, like on the outside of your aircraft, it creates kind of a--it can create a lot of manual work to get a nice, smooth surface. A product like Aeroglide, and there are other products like it out in the market, but Park introduced Aeroglide, reduces the amount of touch labor, the amount of labor required for a part fabricator prior to painting.

Well, it sounds like a great product. Will it be significant ever in the balance sheets with Park?

In what? The balance sheet, you mean like revenues?

Yes.

Oh, well, we hope so.

Is it a tiny item or--?

--Huh? Pardon, what'd you say, Len--?

--I'm just wondering if it's a tiny item, or it could be significant.

I think that time will tell, but we think it could be meaningful. Think it's too early to tell. We're just getting qualified now. We have a small amount of sales, but that's kind of what we expected. Why don't you ask us six months on the road, a year down the road and we'll let you know how we're doing with it?

Okay. One last thing, you mentioned civilian aircraft, which I think is a broader term than you used to use when you spoke about which other type aircraft? Are we moving into things like the Boeing Greenliner and so on?

We haven't done very much work with Boeing, and we really haven't done any work with Airbus. And I think our strategy's unchanged there. We have elected not to focus a lot of our development effort with Boeing and Airbus for two reasons. One is we didn't want to end up becoming dependent on a company like that, where they would represent a large portion of our revenues. And the second is that it's kind of an all-or-nothing strategy. It takes so long to get--we're still the new kid on the block.

Takes so long to qualify with these people that we just didn't feel it would be the right strategy. Now, having said that, when we're talking about our struts, in particular, which are a unique patented technology, we have that sales of struts to Boeing. But, that's a very different kind of sale. We're not competing against other large composite material companies and getting into the scenario where our margins are being compressed and that kind of thing. So, I think in the future, that that probably will continue.

Although, we are, at least, wanting to consider situations with Boeing and Airbus where we feel we have some uniqueness, something that's a little different. To get into their volume programs, I don't know. That still doesn't seem too appealing to me.

Okay. Thank you. Keep up the good work.

Thanks, Len.

And you have a follow-up question from Sean Hannan.

Yes, thank you. So, one thing, it's kind of getting back at the demand scenario that you're seeing, is there a way, Brian, if you can talk a little bit, or just kind of characterize, when you talk to your customers, where lead times are for your products today and how much this has changed since the beginning of the fourth quarter. Or do you simply have the flexibility through temporary labor and bringing back former employees, whether increase in demand has not really cramped you as much?

Our lead times?

Yes.

Yes. We're not very happy about this, but they have stretched out a little bit, and we're working very, very hard to bring them back down. We don't like running our business that way. We'd like to be able to be very responsive and provide very quick turns, no matter how strong the market is. We focus on key customers and we just like being able to service them well, no matter what the market conditions might be. It's not really so much a function of labor, either.

It's more a function of how we organize ourselves logistically. We continue to provide quick-turn capabilities for customers so that if there is something particular they need today, we can do is we try to make our factories as flexible as possible, so that we can make adjustments quickly to move things around in the schedule, so that we can get the product to our customers very quickly. The lead times were getting stretched out a little bit too much, I think, a month or two ago, and mostly North America. I think we're getting close back to where we want to be, although not quite there yet.

Okay. And just in terms of magnitude, is there a number that you can provide around that?

Relative time?

In terms of weeks? Yes.

Yes. What'd you say?

In terms of weeks?

Oh, no. We don't talk in weeks. We talk in days. Weeks are not in our vocabulary. No. No, a week is too much.

Okay. So, we haven't stretched that far.

We got out some products to about 10 days, and we were really unhappy about that. It's not what we like doing. So, we like three or four days, quick turn is 24 hours. That's how it works.

Terrific. All right, thank you so much.

Okay.

(Operator Instructions). And you have no further questions at this time.

Okay. Thank you very much, Operator. So, Dave and I will be here the rest of the day. Give us a call if you have any follow-up questions. Nice talking to you. Have a good day and we'll be talking to you, actually, in just a couple of months, towards the end of June with our first quarter results. Thanks again. Goodbye.

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