Park Aerospace Corp (PKE) 2011 Q4 法說會逐字稿

Good morning. My name is Alicia and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corporation fourth quarter FY 2011 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). Thank you.

At this time I will 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. Welcome to our fourth-quarter conference call. I have with me -- actually not with me, but on the call is Dave Dahlquist, who is Park's CFO and Vice President. Dave and I are not in the same location. I think that was the last call, we did the same way, so bear with us if it takes longer to coordinate our comments.

In any event, we'll start as we normally do with Dave's commentary. After Dave finishes his introductory comments, I will share a few comments of my own and then we will go into the Q&A portion of the call. Go ahead, Dave.

Okay. 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 materially from our expectations we have set forth in our most recent annual report on Form 10-K for the fiscal year ended February 28, 2010, various factors that could affect future results. Those factors are found in Item 1a and after Item 7 on 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 27, 2011. Net sales for the fiscal year 2011 fourth quarter ended February 27, 2011, were $51.2 million compared to net sales of $50.4 million for the prior fiscal year's fourth quarter.

Park's net sales for the fiscal year ended February 27, 2011 were $211.7 million compared to net sales of $175.7 million for the previous fiscal year. Park reported net earnings of $8.3 million for the fourth quarter ended February 27, 2011 compared to net earnings before special items of $8.2 million for the fourth quarter of last year.

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. Accordingly, net earnings were $10.4 million for the fourth quarter ended February 28, 2010.

For the fiscal year ended February 27, 2011, Park reported net earnings before special items of $33.9 million compared to net earnings before special items of $23.2 million for the prior fiscal year. During the 2011 fiscal year, the Company recorded an additional charge of $1.3 million in connection with the closure in January of 2009 of its Neltec Europe SAS business unit in Mirebeau, France.

During the 2010 fiscal year, the Company recorded the net income tax benefit of $2.2 million mentioned above. Accordingly, net earnings were $32.6 million for the fiscal year ended February 27, 2011 compared to net earnings of $25.4 million for the year ended February 28, 2010.

Park reported diluted earnings per share of $0.40 for the fourth quarter ended February 27, 2011 compared to diluted earnings per share before special items of $0.40 for last year's fourth quarter.

Diluted earnings per share after special items were $0.50 for the quarter ended February 28, 2010.

For the fiscal year ended February 27, 2011, Park reported diluted earnings per share before special items of $1.64 compared to diluted earnings per share before special items of $1.13 for the prior fiscal year. Diluted earnings per share were $1.58 for the year ended February 27, 2011 compared to diluted earnings per share of $1.23 for the prior fiscal year.

Now I would like to briefly review some other significant items in our fourth-quarter and fiscal year 2011 P&L. The 2011 fiscal year fourth quarter, North American sales comprised 47% of total sales. European sales were 11% of total sales, and Asian sales were 42% of total sales, compared to 48%, 12%, and 40% respectively for the fourth quarter of the prior fiscal year.

For the 2011 fiscal year, North American sales comprised 47% of total sales. European sales were 10% of total sales and Asian sales were 43% of total sales compared to 50%, 10%, and 40% respectively for the prior fiscal year.

Worldwide sales of Park's high performance non-FR-4 printed circuit materials were 77% of total laminate and prepreg material sales for the 2011 fiscal year fourth quarter compared to 70% in the fourth quarter of the prior year.

For the fiscal year ended February 27, 2011, worldwide sales of high performance non-FR-4 printed circuit materials were 74% of total laminate and prepreg material sales compared to 68% for the fiscal year ended February 28, 2010.

Sales of advanced composite materials and parts were $5.5 million and $23.3 million for the 2011 fiscal year fourth quarter and full year respectively compared to $5.5 million and $23.2 million for the prior year's fourth quarter and full year respectively.

The gross profits as percentage of the sales were 33.1% and 33.0% respectively for the fourth quarter and full 2011 fiscal year compared to 35.1% and 29.4% respectively for the prior fiscal year's fourth quarter and the prior fiscal year.

Selling, general and administrative expenses as percentages of net sales were 12.8% for the 2011 fiscal year's fourth quarter and 13.2% for the 2011 fiscal year compared to 14.4% for the 2010 fiscal year's fourth quarter and 14.0% for the 2010 fiscal year.

Investment income for the fourth quarter ended February 27, 2011 was $228,000 compared to investment income of $57,000 for last year's fourth quarter. Investment income for the fiscal year ended February 27, 2011 was $645,000 compared to $1.062 million for the prior fiscal year. As a result, pretax operating profit was 20.7% of net sales for the fiscal year ended -- for the fiscal year 2011 fourth quarter compared to the pretax operating profit before special items of 20.9% the prior fiscal year's fourth quarter.

For the 2011 fiscal year, pretax operating profit before special items was 20.1% of net sales compared to 16.0% for the prior fiscal year.

The effective tax rate was 21.0% for the 2011 fiscal year compared to an effective tax rate of 10.0% for the prior fiscal year. Included in the 2010 effective tax rate was the impact of certain one-time tax items. The effective tax rate before special items was 20.4% for the 2011 fiscal year compared to 17.7% for the prior fiscal year.

Moving to the balance sheet, Park's working capital at February 27, 2011, at the end of the 2011 fiscal year, was $271.7 million compared to $261.0 million at February 28, 2010, the end of the 2010 fiscal year.

Cash and marketable securities were $250.4 million at the end of the 2011 year compared to $237.8 million at the end of the prior fiscal year.

As we have in the past, we invest available funds on a conservative basis in short-term fixed-income securities and money market funds.

During the 2011 fiscal year, the Company had capital expenditures of $3.7 million and depreciation expense of $6.7 million compared to capital expenditures of $3.4 million and depreciation expense of $7.1 million for the prior fiscal year.

Stockholders' equity was $325.3 million at February 27, 2011 compared to $316.1 million at the end of the prior fiscal year. Finally, stockholders equity per share at February 27, 2011 was $15.70 per share compared to $15.39 per share at the end of the prior fiscal year.

Thanks a lot, Dave. This is Brian again. By the way, as always, a transcript of Dave's comments are posted on our website. There's a lot of detail in Dave's comments, so you might want to take a look at those comments on the website.

I don't have too much to add, actually, this quarter. A few comments, though. I'm going to start out with our quarterly discussion of Kansas. The quarterly loss in the fourth quarter -- the loss improved in Kansas, but we expect to go back to the pre-existing levels just we're starting to ramp up our costs as we are transferring business over from our Waterbury operation. So we expect a loss to -- like I said, to go back to the pre-existing levels for I guess the next few quarters, I would say two or three quarters, while we are bringing -- while we are ramping up. We have to bring the costs on before we can bring the business on, for obvious reasons. So that should be a temporary event.

Let's see, copper, I'm sure you want to know about copper. Not much of an impact Q3 to Q4 in our copper situation in terms of our bottom line, our P&L. Not that copper is not moving up and down, but as you know, we adjust our prices, our selling prices as our copper costs change. It is also subject to a lag effect, though, as the copper costs go up and down.

We do expect a negative in this -- in Q1 of about $250,000 as compared to Q4, though. That again is that lag effect. Copper goes up, it takes us sometimes a couple of months before we adjust our selling prices. So we expect in Q1 as compared to Q4 a negative $0.25 million.

We also -- remember, there was an announcement about this. We also donated $250,000, $0.25 million in Q1 to the Japan relief efforts. That would of course affect our Q1 as well.

Our legal costs, we talked about this for the last few quarters. I think as you know because they are above our normal levels by about $0.25 million a quarter. Again in Q4 that was the pattern, about $250,000 more than our historical levels because of the litigation we are involved with.

I just wanted to highlight Dave's comment about the high performance percentage in the fourth quarter at 77%. I think that's an all-time high. Japan, yes, that's been a big deal for us. It did not affect our fourth quarter because the earth quick occurred in the first quarter, at the beginning of the first quarter, but the management has been earning its keep the last couple months since the Japan earthquake. It has been very difficult to sort out the supply-chain questions. Learn more every week. It is also difficult to get clear information from Japan, sometimes. We have had three trips to Tokyo and we are back -- we have seen our management back in Tokyo next week.

We're doing the best we can to manage the situation, which has been quite difficult. So it affects some products more than others, certain products we have on pretty strict allocation because we just can't get the raw materials needed, so that would have affected our revenues and will affect our revenues in the first quarter.

And long-term, we are still sorting things out. Long-term, what do I mean by long-term? Long-term for us is six months to the Japan situation because we're working on it every day, so when you talk six months, that seems like an eternity.

But we are not out of the woods yet. It has been very difficult. I think we -- are not giving ourselves a pat on the back. Believe me, I don't do that, but I think we have done a pretty good job managing our way through a difficult situation, difficult would probably be a pretty good understatement.

Obviously the human tragedy is beyond comprehension, so we are dealing with our little problems in the business world, which don't compare at all to the human tragedy. We have a lot of friends in Japan. We have had friends in Japan for a long time, so we are very tuned into the human side of the equation.

For you, that are interested in Q1, we have eight weeks in the books because we announce our Q4 late because we obviously do it after we get our audit done, so we have eight weeks, eight out of 13 weeks in the books for Q1. And our revenue run rate, our bookings rate a little bit above Q4 but just a little bit. So why don't we just say it's kind of at the level of Q4 in Q1. That's not withstanding the issues with our Japan supply challenges, let's call it. Those are of the facts. I know you like to have the facts.

So again, revenue run rate, bookings run rate in Q1, the first eight weeks of Q1, eight out of 13, let's say you're at the levels maybe a little bit above the levels of Q4. And you know what -- I am out of things to talk about, so I'll tell you what, operator, why don't we see if there are any questions for Dave and me?

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

One thing I was looking to see, thanks for the color, Brian, around the bookings and revenue trends thus far this quarter. If there's a way that you can provide perhaps a little bit more color around what did you actually see the dynamics month-to-month during the course of 4Q as well as how we have been seeing that demand in that first eight weeks? Has it been linear? Any information would be helpful.

In the first -- in the fourth quarter, rather, the month of January was a little up from the months of December and February so the middle month was a little bit stronger. I don't -- I have no idea what to attribute that to. Of course December is not a surprise because there are holidays in December and in the first quarter, it's fairly flat. There's nothing unusual going on if you look at the first eight weeks in the first quarter, it's really flat, nothing remarkable worth mentioning.

Okay, that's helpful. And then when you talk about Japan, can you elaborate on how much of your supply chain comes from Japan with regard to the three major raw materials for your products? I think that you are going to be sourced a little bit more with some rather than others and if we could just get a little bit of clarity around that, that would be helpful.

You know, Japan -- let me answer the question this way. Any company that is in -- works in the technology area, manufacturing would not be surprising to find that a good portion of its supply chain is based in Japan even if it's not the direct raw material, maybe the raw material behind that raw material comes from Japan.

That's because I think Japan as a country is focused on high margin type products where they have offshored the lower margin products, the higher margin products Japan has kept inside Japan because the costs are so high they can't afford to move it off -- out of Japan. So a high technology company is going to be more oriented toward the higher performance material that would be manufactured in Japan.

We source just about every -- parts of everything we buy from Japan. You talked about three key raw materials. I assume you're talking about copper foil and you're talking about fiberglass cloth and you're talking about different resins and we source different components, different aspects of all those things from Japan.

I also should say that one of the comments -- one of the things that is unclear to us is how the Japan supply interruption is affecting demand because if an integrator, an OEM, a contract manufacturer finds components, for instance, they're just not going to go ahead and make circuit boards if they can't find components to assemble onto the boards. But it has been very difficult for us to figure that out and some of our business levels are -- it's not inconsistent with that kind of comment -- in some cases stronger, in some cases less strong.

The other thing that we have to be concerned about since we're talking about Japan is panic buying. We are very, very careful to try to do everything we can to determine that the orders we are receiving are legitimate orders, not just panic buying orders. We've been very strict about that and we have not accepted orders in some cases where we are suspicious.

So it's very complicated, these crosscurrents because on one hand the industry itself may be somewhat affected by the inability to get components. There also may be some panic buying in the mix. (multiple speakers) I don't even want to get into specifics about which suppliers more affected than others at this time though.

Yes, I got that sense. Okay, all right, well, let me see if I can ask a completely different question. Is there a way if you can discuss the number of efforts or initiatives underway on the R&D side within your electronics focus? And if there's a way to provide just your commentary around how some of these efforts have changed over the course of the past few quarters a year and what you are attempting to do?

The R&D in electronics?

Yes.

So we have -- I don't know, let's say about five or six R&D projects that focus in the electronics area. I would say two or three of them are very key projects, very important projects for Park which could be very impacted if we are successful. Obviously if we are not successful, we are not impacted.

Now the three of them are very close to the finish line. That does not mean they will cross the finish line because it's happened before that a project will fall apart right at the finish line for one reason or another. Some kind of final test that's required to be passed is not passed.

But we have two or three that are very close to the finish line and could be very impactive for Park obviously in a positive way if they get over the finish line. What I mean by -- I would say this year, this year it should be a yes or a no in this calendar year.

Brian, just if you can remind us, five to six projects, is that kind of your norm on the electronics side versus, say, the last year or two years ago? How does that differ?

I think the number is not that different. We try -- we have elected to focus on three of them which are the most impactive maybe more than the others, but I don't think the number itself is that different. But maybe the intensity of the focus on your top three is a little different than in the past.

The R&D group is I think there's a high sense of urgency that is very focused on these three key projects and it has a lot of high-level management attention or at the top -- at a detailed level, even.

And then in terms of the areas of application that are more obvious to you in terms of either the evolution of the industry or where it's making sense for you to have greater participation, what are the areas that stick out where these products may apply?

All three of these that I mentioned are in the high-speed low-loss area. Which, did you understand what I mean by high-speed low-loss?

Yes.

Okay, good.

Terrific. I'll hop back in the queue. Thanks so much.

Morris Ajzenman, Griffin Securities.

Good morning. Just a broad sort of question, advanced composites. What can you talk about, give us some sort of tease going forward of any of your various project stages of progress you are in with your customer base. And anything moving forward to where we might see something of a more sizable nature? Again, you're probably running at $20 million, $22 million per annum, thereabouts, revenue run rate. Are we getting into anything -- sort of inflection points looking across the different programs you are involved in where something might be happening this fiscal year?

This fiscal year, I doubt we're going to see a big spike this fiscal year. We are working on programs that are significant, large programs, but as I've commented before, I think the -- maybe the most frustrated person of all is how slowly things go with aerospace. But having said that, some of the programs we are working on are large programs, it's possible we see some impact this fiscal year, but I wouldn't see a large number -- large topline impact this year. I don't think that's realistic.

And I'm just -- as I said before, I'm learning today to try to be patient and understand that these things take a long time.

One of the things that we have to understand also is that we are just a small company in the aerospace industry, so we are not going to change how the aerospace industry does business. That's just not realistic. It's not going to happen. They take the time they are going to take and there are probably some good reasons for them. I'm not being critical. It's just when you come from electronics, it's very difficult to get used to it.

And we have to realize that it's just not, like I said, realistic for us to expect to be able to change the nature of the aerospace industry. So if we are going to be successful, we are going to have to be able to work within the patterns and practices of the aerospace industry and also accept the timeframes that the aerospace industry uses for developing products and qualifying materials and qualifying parts of new aircraft.

Thank you.

Jiwon Lee, Sidoti & Company.

Thanks and good morning. I just wanted to kind of get back on the revenue side of things. How would you characterize market demand now either by looking at your key end markets, the telecom infrastructure side, or the networking equipment side, or looking at it geographically?

I don't think we can distinguish so much between telecom and networking. That's a little bit difficult for us to do especially in a real short-term horizon basis. Geographically, Asia is stronger than North America and Europe for us is kind of a little quirky because it's mostly dependent on one large company that's our -- we have a major customer in Europe that really is not so focused on the European market.

But let's just say this, that Asia is stronger than the West at this point.

Okay, just kind of sifting through your comments on the Japan situation, the revenues and the materials, in your opinion or mind, is there any sort of a lost revenue as a result of all this?

Yes, because we have restricted sales of certain products because we know that we have to. Otherwise we would just run out of raw materials. So oh yes, we have restricted our -- it is just at something we have done, we have to do it every week. It has been very difficult dealing with our customers and our OEMs who have legitimate needs for these products. We don't believe that they were being alarmists in most cases. We don't believe it's panic buying. We believe they have programs and are working on new programs. Some of these products are high-tech products and they are trying to go out with new products of their own, the OEMs, and it's very frustrating.

So it has not been an easy -- that's why I said, the management has earned its keep in the last couple months because there's been a lot of very tense and difficult discussions on a daily basis about why we can't provide what the market would like to have.

Would you take a stab at what percentage of your overall materials demand that might address?

No, I would not. I certainly have no idea, Jiwon, about how -- to what extent the overall market is affected by inability to get components, as we were discussing earlier.

Okay, then the Kansas side on the composites, you are sort of implying that the quarterly losses was kind of returned to about $1 million level over the next few quarters as you transition out of Connecticut into Kansas.

Yes, but as I said, as I think we said or Dave said or I said in the last quarter call, we plan for that transition to be complete by the end of the fiscal year. At that point, Kansas should be in the black. Then Connecticut, we will decide what to do based upon the extent to which we develop these other products for Connecticut which are non-aerospace related.

And on the revenue side of the composite materials, Brian, just kind of knowing what you know with your aerospace OEMs, the discussions of it, and the kind of programs that you are involved, if it is kind of stretching beyond fiscal this year, can you try to sort of kind of help us as to how the revenue may trend up as these new programs -- as the OEMs are currently planning now sort of kind of start bringing those in?

You know, that's a question that's asked often and it's obviously a very good question and I'd rather not quantify it. The reason is it's just very difficult and there's a lot of uncertainty about these programs, what will go, what won't go, how successful they will be.

Aerospace companies sometimes are a little optimistic. They tend to be a little optimistic and we just want to be a little careful about disclosing things which we really don't have enough confidence in to disclose.

Okay, Brian, thanks. That's fair enough. Then one last question for Dave, just for housekeeping, can we discuss the top five, 10, 20, who the top fives were and the percentage of the concentration please?

Sure. For the fourth quarter, we had three customers that were above 10% and those customers were TTM, Sanmina, and Flextronics. Top-five customers represented 56% of sales for the fourth quarter; top 10 represented 70% of sales for the fourth quarter; and top 20 represented 79% of sales for fourth quarter.

For the full year, again, we had three customers that were more than 10% of sales. For the year we do -- we will disclose the percentages, so TTM for the year represented 16.4% of sales. Sanmina represented 14.6% of sales, and Flextronics represented 10.2% of sales for the full year.

Top-five customers represented 56% of sales for the year; top 10 customers 69% for the year; the top 20, 78% for the year.

That's great, thanks.

(Operator Instructions). Brad Evans, Heartland.

Brian and Dave, good morning. Brian, let me just make sure I understand what you have kind of articulated to us in terms of at least how the dynamics or the tenor of the business are progressing through the first quarter. So it sounds like we're on about a $4 million per weekly run rate from a sales perspective. But as you just indicated, if not for supply constraints coming out of Japan, you would be at a higher level of sales.

That's a correct statement.

Okay, thank you for that. Did you -- would you say that the supply constraints coming out of Japan, are they starting to improve or are they similar to what they were, say, three weeks ago?

Similar to what they were three weeks ago in a sense that we don't have enough confidence that we really understand the picture well enough to loosen things up. So from our perspective, we're just not doing that. So we have with certain products in particular, it does not affect every product. It affects two or three key products of ours but they are important products, okay? For those products, we are limiting that we will allow customers and ultimately OEMs to purchase on a week-to-week basis. We are also only accepting orders on a week-to-week basis. We will not accept an order for two or three weeks out, which is very unusual.

So we are not at the point where we are ready to loosen it up. Dave and a couple of other top management people will be in Japan next week and we speak to the people and deal with our suppliers on a daily basis of course. But what we found is with dealing with some of our good suppliers in Japan, it helps to be in front of the person in order to talk things out more carefully and get better information.

So this will be our fourth trip to Japan and we really are evaluating this situation, Brad, on really basically a daily basis as to whether we should loosen things up or not loosen things up. At this point, we discuss it every day. We've decided not to loosen things up yet.

What percent of your products are on allocation today? Can you just guesstimate or help us understand what percent of the portfolio is on allocation today?

We would rather not discuss that.

Are there opportunities to source materials from other locations or is that just impossible at this point?

Okay, so there are a lot of materials which are affected -- and that's a good question. And for the large majority of materials, we have been able to do them. We have done it with our alternative materials. The one material that affects a couple of products and those are significant meaningful products for us, is a unique material where we are sole source for the Japanese supplier and it's a technical product where we work fairly exclusively with this Japanese supplier. So they would not be an alternative for that particular material.

That's very helpful. Brian, do you think that your -- are you doing business with new customers as a result of the -- it's a tragedy of course, but have you seen inquiries from folks you haven't done business with in the past? Are you taking any -- do you feel like you might be taking some market share?

We don't have -- this is a product that is unique to Park, this particular product, so I don't know if we can take market share because on this particular product, it's our product and so we would have the market.

We've had a lot of interesting inquiries from people that we don't hear from too much, but we are concerned about what that is. We're very concerned about whether it's over buying or panic buying and we try to do our best to understand the dynamics of every order situation.

If it's -- Brad, if it is just an ongoing program and you have that customer, they have been ordering for the last two years in this level. That's easier to understand. If we have a customer OEM out of the blue that all of a sudden is interested, it doesn't mean it's not legitimate, but we have to understand what it is.

This is a technical product, a technology product, so it's not surprising that new programs would be put on this material. Just because it's something new doesn't mean that it's panic buying or over buying. It could be just okay, this is a new program ramping up.

Okay, I just had two other thoughts real quickly. Just in terms of -- pardon my scientific ignorance here, but from a reformulation perspective, have you gone -- have you explored all those avenues at this point as well from a reformulation perspective?

That's not possible at least in the short term. It's possible that another company could develop a competitive product, but in the short term dealing with our supply issues, we don't think that's going to be a meaningful factor.

So the key thing that we need to do is work with the suppliers in question. They are having a difficulty. We have done everything we can. We've even offered financial support, but that's really not the problem. This is -- these are big companies that have good financial resources. Long-term, I think this situation in Japan has been a wake-up call for the world in terms of the supply chain of people including Park may be taking things for granted which we should not have taken things for granted. So long-term once we get out of the crisis mode, then we have a look at what do we to find -- to provide for redundancy backup? Maybe we could work with companies to build facilities in other locations outside Japan, for instance that kind of thing.

But that's not -- none of those prospects could do anything to alleviate the short-term situation, because they are really long-term discussions. In order to put capacity in locations, we are talking at least a year, probably more.

Okay, I just wanted to get your thoughts also. I read with great interest Flextronics' -- their quarterly report where they indicated that monthly orders and bookings for Multek are at a record levels. Do you -- how do you reconcile that with potential shortages of materials in the supply chain?

I don't know. I think Dave mentioned that Multek is one of our top three customers. They continue to do very well. And I guess I shouldn't say anything else about it. I don't know what to say about Multek in particular. I guess I'm not being at all smart-alecky here, but I think that would be a good question for the management of Flextronics as to how they have been able to manage the supply chain situation particularly from the perspective of components, because they have multiple issues. It's not just their ability to buy material from us. They are a key customer of ours, but also components for their assembly work.

Okay. Good quarter and we appreciate your managing through this tough environments. Thanks.

(Operator Instructions). A follow-up from Brad Evans, Heartland.

I ceded the floor. I thought there might be more questions, but, Dave, what were the losses in Kansas for the quarter? You didn't connect -- can I get a number for that, please?

Sure, the losses for the quarter in Kansas, I'm just pulling out the right piece of paper. Bear with me just a second.

I think it was -- let me just chime in. Brad, maybe by $750,000, $800,000, that's below the normal, the last year, which is about $1 million a quarter. So it was a little bit better, but like I said, that's going to swing back like we said because of the ramp up of costs.

Okay, and dividends paid for the full year, was it roughly $29 million? Is that correct?

Dave, can you help us with that? I don't know the answer to that. We paid a special dividend, one special dividend in the last year, I think, and then had our quarterly. So --

Yes, $28 million, almost $29 million.

So just -- the balance sheet obviously is still tremendously strong, so congratulations on the cash flows there. Just curious what -- any thoughts on capital spending for this year, upcoming year for 2012?

I don't think we had that sorted out yet and most of our big projects are kind of winding down. We are finishing our Kansas expansion. That should be done in another few months. We have two major projects in Singapore which are winding down the installation of a second new treater as well as the conversion of one of the existing treaters for PTFE.

I probably should have mentioned that in my introductory comments that those projects seem to be going okay and they are getting close to completion.

And then the other I guess the big question in terms of spending would be things like acquisitions, which I know we talk about every quarter just about, but we are still working on them. Some of them are the larger size. So -- but we don't have a specific capital spending budget.

I would think that the sustained level of capital stuff, Brad, is not significant. $5 million to $10 million sustaining, because like I said, most of the big projects are winding down now. We don't have any new projects we are about to announce for any major expansions at this time. We have possibilities, one customer that we are bidding a program, asked if we would build a plant, that we would be willing to build a plant to support the program. We said yes depending on circumstances, of course. But we said yes, that would be of potential significance.

But I don't know if that would even be this year when we'd start to do the spending. I just want to remind you again we discussed this in the past, of that $250 million Dave mentioned, only about $75 million to $80 million was in the US and we paid that special dividend not too long ago. So we've got about $75 million to $80 million in the US and that's the amount that's available for dividends in the US at this point.

We are still crossing our fingers and hoping that there would be an opportunity to repatriate that the government would give us an opportunity to repatriate the effect our attitudes toward spending and capital spending in the US and also a payment of dividends.

You and I both. Okay, that's great. And then can you just give us your vision for over the next couple of years how you see the advanced composites business playing out in terms of -- over the next few years, what would you consider success in terms of topline and swinging from a loss to a profit, what type of magnitude of profitability should we hope to see over the next few years there, Brian?

That is -- of course that's a very key question. I think at this point our focus is more on the specialty capability, unique capability rather than just being a volume player. We've learned a lot in the last couple of years of course and learned by some mistakes and we are getting to be more -- becoming more reluctant to fall in the trap of just taking a lot of volume work because we know how that plays out and we have learned how it plays out, maybe not always in our favor.

The Kansas plant, as I alluded to, it's going to be -- the expansion should be done by August I guess into summer, so then we are going to be ramping up the transition of parts activities, manufacturing of composite parts, assemblies in Kansas as well.

So it looks like by the end of the fiscal year Kansas should be pretty much set with the transition of the business from Waterbury and from Lynnwood, Washington. And we are at the same time building capability and I think that's partly consistent with the comment I made a minute ago about looking to build uniqueness rather than just volume. We are hiring engineers, specialized engineers, aerospace engineers, design engineers, [construction] engineers to help us develop more of that special capability, which would allow us to do business at what we would consider to be acceptable margins and acceptable for us is high. We are not looking to do high-volume low-margin work.

So I know that's a lot of words that don't answer your question. The reason is we don't really have a hard answer to the question in terms of how we define success topline wise. I think I define it more in terms of what we create and how much we could generate bottom line and how much uniqueness we create and how much of a specialty environment we create, how much we are able to create a situation if the industry needs to come to us for solutions because other companies just are not able to provide a solution.

Remember on other thing that we've mentioned before is that really the only company we know of anyway which is going to be in one location producing, designing and producing composite parts and assemblies as well as materials, our feeling is that should be a real advantage to us especially from a technical perspective to have both those capabilities under one roof.

Just to be clear then, so hopefully we break into black in the fourth quarter for Kansas, is that correct?

Well, our plan is for that because, like I said, by the end of the fiscal year, Brad, we plan to have all the aerospace work transitioned from Waterbury. What is not transitioned at that point is not going to continue to be supported and that should -- based upon the amount of existing business, this has nothing to do -- we are not even talking about any additional business we bring on this year, just based on existing business the math is quite simple that we would be in the black by then.

Okay, thank you very much.

At this time, you have no further questions.

Okay, thank you very much, everybody, for joining us on our fourth-quarter conference call on this auspicious day especially for New Yorkers, and Dave is in the office. Feel free to give him a call. You can call my office as well and Martina, my assistant, will find me.

Have a good day and we will be talking to you actually fairly soon because our first-quarter call should be sometime toward the end of June. Thanks again. Have a good day. Goodbye.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.