Park Aerospace Corp (PKE) 2012 Q3 法說會逐字稿

Good morning. My name is Derek and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp third-quarter fiscal year 2012 earnings 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 would like to 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 third-quarter conference call. I have with me, as usual, Dave Dahlquist, our VP and CFO. Dave and I will start with some introductory remarks and then we will go to the questions. Dave, why don't you get us started with the financial commentary?

Sure, great. 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've set forth in our most recent annual report on Form 10-K for the fiscal year ended February 27, 2011 various factors that could affect future results.

Those factors are found in Item IA and after Item 7 of that Form 10-K. Any forward-looking statements we may make are subject to those factors.

I would first like to summarize the financial information included in the news release for the third quarter ended November 27, 2011. Net sales for the 2012 fiscal year third quarter ended November 27, 2011 were $47.3 million compared to net sales of $46.9 million for the prior fiscal year's third quarter. Park's sales for the first nine months were $149.6 million, compared to sales of $160.5 million for the prior fiscal year's first nine months.

Net earnings for the 2012 fiscal year third quarter were $5.4 million compared to net earnings before special items of $6.3 million for the prior fiscal year's third quarter.

During the 2011 fiscal year's third quarter, 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. Accordingly, net earnings were $5 million for the third quarter ended November 28, 2010.

Park's net earnings before special items for the first nine months of the 2012 fiscal year were $19.2 million compared to net earnings before special items of $25.6 million for the prior fiscal year's first nine months.

During the first nine months of the 2012 fiscal year, the Company recorded pretax other income of $1.6 million related to the settlement of certain lawsuits. During the fiscal year 2011 first nine months, the Company recorded the charge of $1.3 million for the closure mentioned above. Accordingly, net earnings were $20.3 million for the current fiscal year's first-nine-month period and $24.3 million in the prior year's first-nine-month period.

Park reported basic and diluted earnings per share of $0.26 for the third quarter ended November 27, 2011, compared to basic and diluted earnings per share before special items of $0.31 for last year's third quarter. Basic and diluted earnings per share were $0.24 for last year's third quarter.

Park's basic and diluted earnings per share before special items were $0.93 for the nine-month period ended November 27, 2011, compared to basic and diluted earnings per share before special items of $1.24 for last year's nine-month period. Basic and diluted earnings per share were $0.98 for the nine months ended November 27, 2011, compared to $1.18 for the nine-month period ended November 28, 2010.

Now I would like to briefly review some of the other significant items in our third-quarter P&L. During the fiscal year 2012 third quarter, North American sales were 46% of total sales, European sales were 15% of total sales and Asian sales were 39% of total sales, compared to 49%, 10% and 41%, respectively, in the third quarter of the prior fiscal year.

Sales of Park's high-performance, non-FR-4 printed circuit materials were 79% of total laminate and prepreg material sales in the third quarter of fiscal year 2012; 72% in the third quarter of the prior fiscal year; and 79% in the second quarter of fiscal year 2012.

Sales of Park's advanced composite materials and parts were $7 million in the third quarter of the 2012 fiscal year, compared to $5.5 million in the third quarter of the prior fiscal year and compared to $7.1 million in the second quarter of the 2012 fiscal year.

Sales of advanced composite materials and parts were $19.8 million for the first nine months of the current fiscal year, compared to $17.9 million in the prior year's comparable period.

The gross profit percentage for the third quarter of fiscal 2012 was 27.5%, compared to 30.9% for the prior-year third quarter. Selling, general and administrative expenses were 14.8% of net sales for the 2012 fiscal year third quarter, compared to 13.6% for the prior year's comparable period. Investment income for the third quarter was $188,000, compared to $123,000 for the third quarter of fiscal year 2011.

As a result, pretax operating profit was 13.1% of net sales for the 2012 fiscal year third quarter compared to 14.8% for the prior year's third quarter.

Park's earnings before income taxes were $6.2 million for the 2012 fiscal year third quarter compared to earnings before income taxes and before special items of $8.2 million for the prior fiscal year's third quarter.

The effective tax rate was 13.1% for the 2012 fiscal year third quarter compared to an effective tax rate before special items of 23.1% for the prior fiscal year's third quarter.

Turning to Park's balance sheet, cash and marketable securities were $262.1 million at November 27, 2011, compared to $250.4 million at the end of the prior fiscal year. Working capital was $286.4 million at the end of the 2012 third quarter compared to $271.7 million at the end of the prior fiscal year. During the current fiscal year's first nine months, the Company had capital expenditures of $3.4 million and depreciation expense of $4.3 million, compared to capital expenditures of $2.6 million and depreciation expense of $5.2 million for the prior year's first-nine-month period.

Stockholders' equity was $341 million at November 27, 2011, compared to $325.3 million at the end of the prior fiscal year. Finally, stockholders' equity per share at November 27, 2011, was $16.43, compared to $15.70 per share at the end of the prior fiscal year.

Okay. Thanks a lot, Dave. Brian again. Let me add a few more comments, so we start with the Q3 bottom line versus Q2, mostly explained by the top line, I think, the difference; I think they match pretty well. Nothing too unusual to discuss there, I don't think, in terms of the detail to the bottom line; again, mostly a top-line story.

Okay, I'll just jump around here a little bit. What about the third quarter went? I know you always ask that month-to-month. September and November were better. October was down quite a bit; October was quite a bad month as compared to September and November, which were about equal.

I know you are interested in the first three weeks of the -- we have three weeks in the books, I should say, of Q4, for December. I know you are interested in that in terms of the top-line bookings and revenues. They are up as compared to Q3. And why is that? I don't know what it is, we don't know; it may be just getting stuff in before the holidays. It is very hard to tell this time of year. But facts are what we report; speculation, we are not so good at that. And it would be speculation as far as I am concerned.

I think we sense that maybe the last couple of weeks or so, the world is feeling a little bit more optimistic, but I don't know. That is such a weak, thin thing. This is now my opinion, that that could evaporate in two weeks. Look at the stock market, you, a great example. One week everything is wonderful, all the problems of Europe are solved, and the next week, it is Armageddon. So I don't know. Maybe the economy follows that kind of psychology as well, a little bit. But again, that is my opinion. I am not an expert on that kind of stuff.

So, outlook, hard to say. Really don't know if the economy is getting better -- really getting better and sustainably getting better, that is good for us. On a short-term basis, our P&L is very much driven by the global economy. Long-term, a lot of other factors come into play, as we have explained before. But if you're looking quarter to quarter, you really want to look at the global economy, I think. That is what is going to drive the difference more than anything else.

Let's see, what else can we talk about? Kansas, we always talk about Kansas -- well, at least for the last probably five, six, seven quarters. I think in the second-quarter conference call, we told you we expected the losses to be worse in Q3 as compared to Q2 in Kansas. That actually did not happen. They were about the same. That is just because we overestimated some of the costs of qualification -- the re-site qualifications. So about the same; so not worse, but not better in Kansas.

Q4 in Kansas, the plan is it should be better because a large majority of the business from Waterbury is to be transferred to Kansas there by the end of the quarter. And that is back-end loaded even within the quarter, but Q4 should be somewhat better. And we are guesstimating here. There are so many variables which are hard to really predict with a lot of accuracy. But we are guesstimating to the extent you are interested that Q4 will be somewhat better than in Kansas.

Next year, then, it is a whole different story because then the re-site should be completed and we'll have a very different kind of profile for Aerospace in the US.

Let's see, tax rate. Tax rate quite low in Q3. A lot of different factors involved there, none of which we want to go to in detail. But we think that for the year in Q4, we are looking at somewhere between 16% and 18%. Again, a lot of uncertainty with the tax rate, so I have got to give you the caution whenever we comment about what the tax rate might be, there are so many things that could affect it which we cannot predict. And these little things, they drive it up and down quite considerably in some cases. But, we do believe that the rate in Q3 is lower than we will see going forward, at least in Q4. And again, Q4 and the year maybe 16% to 18%. That is -- again -- I'll say it again -- that is an estimate or guesstimate.

Bounce around here a little bit. We talked in the last few quarters about the Japanese crisis and how it has affected our business. I think last quarter we commented that we lost quite a bit of market share as a result of the crisis. So the key raw material that affected our business, we are back in business with that. There is no shortage anymore. The manufacturer of that material in Japan, we've worked with them quite closely, they are back up and running. And we don't have any shortage at this point. There is no allocation.

However, we did lose market share. Back in the early summer time frame in particular, we didn't have enough product to supply the demand, and more importantly, we couldn't give accurate predictions to the customers and OEMs as to when that would change. So some of the OEMs got quite nervous. We believe we lost somewhere around $8 million annualized of market share for that particular product.

Now, if you look at our revenues for that product, you would not see an $8 million dip. It would not be that much, because we have other programs that have come up and maybe we have gained some -- we have got some new programs. But in terms of existing programs that we were on, that we still would have been on -- we are quite sure -- if it wasn't for this disaster, probably about an $8 million to $9 million hole in our top line. That is annualized. I am not doing it by quarter.

And that is not going to -- that market share we lost will not come back. It is just very -- it wouldn't be realistic to expect those programs to come back to us. That doesn't make any sense.

As far as the product is concerned, it is a high-end product, as we've discussed before, so we have a lot of optimism for that product for now and in the future. We still do a lot of business with that product. I don't want to give you the wrong impression. And I think importantly, we have high expectations for that product for the future.

The one good thing -- I think we commented on this before -- that had come out of the disaster is it has made us much closer to this supplier. Dave and others have spent a lot of time in Japan, meeting with the supplier and talking about future programs, which is a good thing.

A couple other little news events that we reported, but in case you missed. We had a grand opening in Kansas, and that was -- I don't remember -- a couple weeks ago or so. That was a great opening of our parts activity. We have been operating in Kansas for quite a while, as you know.

But the expansion, which was to design and manufacture composite parts for Aerospace, that was just really opened the last few weeks, so we had a little grand opening party that was very nice. And the facility in Lynnwood, Washington, is now closed. We are not operating that facility anymore. That was part of the plan.

Let's see. We introduced a new product called N4800-20. You might want to watch that one; that is not a little tiny niche product. That we feel could be a very important product for Park for a long time to come.

We also announced another product called N7000-3 laminate, but that is more of a niche product. That is a polyimide product, that is a niche product, but we are still happy about that.

And I also would encourage you to stay tuned, because there are maybe two or three more coming in the next few months, I would think. That is our expectation, anyway; we will see what happens. And so maybe just luck, I don't know, timing, but it seems like we're going through a period now where Park is introducing a number of new products, some of which could be very important to Park's future.

Yes, I don't have anything else on my little list here. I think that covers most of the items I want to cover by way of introduction. So I will tell you what. Operator, can we go to questions now?

Sure thing. (Operator Instructions) Morris Ajzenman, Griffin Securities.

Hi, Brian. Hi, David. Question specifically on gross margin. Year-over-year, declined from 30.9% to 27.5%. I presume some of that is reflected in what you discussed and loss of market share being an allocation. But can you kind of walk us through some more on that? Again, sales didn't change that much from quarter to quarter, so it is some mix or something going on there. Can you just help us understand that a little better?

Yes, one of the things that we just have to remember, Kansas, because -- you are right, a good point; the top line hasn't really changed that much. But there is a lot of costs in Kansas that we're incurring now to bring the business over. So those are costs that are just really -- those costs don't result in revenue; those are costs that are just costs, and that is a big impact to the gross margins, of course.

Dave, you want to add something? Do you have any other comments?

I think that would be -- that is probably the biggest single factor that is driving it, more so then the product that Brian was referring to, the supply disruption from Japan. Kansas, I think, is really driving it, the supply disruption. And the other factor that is in there is if you look at the distribution of where our revenues were on a global basis, they are different this quarter than they were a year ago, and that can have some impact as well.

But if I am correct, I think you had stated that the Kansas shortfall was approximately -- not the shortfall, but the incremental cost was about $1.5 million. And I think that is what it -- my best guesstimate would be is what it was this quarter. Is that $1.5 million right? Because if it is, then the gross margin is explained, but not fully by Kansas. First of all, is the $1.5 million a ballpark figure for the incremental cost for the quarter?

Are you talking about Q3 versus Q3?

Well, look, my understanding was in Q2, it was about a -- I think $1.5 million drag. And I think you said it was about the same drag into the third quarter as far as the loss.

You know, I am not sure we have actually quantified the actual loss in Kansas. I think we try to give the relative comparisons. Dave, what about Q3 to Q3? What would the comparison be?

It would be at least $1 million, probably a little more than $1 million of delta between Q3 to Q3. That would be about the number.

Okay. So can I just interrupt then? So [if you said] $1 million higher expense; nonetheless, if you look at it year-over-year, your gross margin still would have deteriorated. And I guess is that -- then you started to state that's just the way revenues evolve from the different geographic regions would have caused that further shortfall?

Well, you mentioned the change in the mix caused by some of the market share that we would have lost in the high-performance product that Brian was making reference to.

Right, right.

(multiple speakers) the story, a piece of the story would be the geographic mix of some of the revenues. And then it would be kind of odds and ends after that.

Yes, I think there is another point here, though. You keep -- you said, I think, expense. We are not talking about expense; we are talking about P&L impact. There is a lot more revenues in Kansas [in than] last year's third quarter, so we are talking about a significantly greater loss, but more revenues. Those revenues -- you are seeing revenues, but you see it is a double whammy. Because normally, the more revenues would deliver more of a bottom line, enhance the bottom line. So with Kansas, we have more revenues, considerably more revenues in the third quarter of this year as compared to last year, but considerably higher loss. So those two things are both driving our gross margin down and down hard. Because obviously gross margin is a function of the top line, right? That is your part of the equation. Normally more top line, more bottom line; this is the opposite (multiple speakers). Quite a dramatic effect.

The last follow-up then on Kansas, and I will get back in queue. Can you give some sort of feel then for fiscal '13? What sort of -- I know you don't like giving too much guidance, but just help us along. I presume it is not going to be a drag anymore, be contributing. But any sort of help on how we can look at this modeling into next year what Kansas can look like?

Yes, I think we said, you know, maybe for a few quarters now, that we don't expect -- like you said, we don't expect Kansas to be a drag next year. There may be some cleanup costs with restructuring, things like that; those would be one-time costs, maybe related to Waterbury. We don't know what is going to happen with our Waterbury facility.

But, Kansas, right, should not be a drag going forward. And we said that I think for the last few quarters, and that is still our plan. At the end of this quarter, which only is 2.5 months from now, all of the Aerospace activity that is currently being handled out of Waterbury is to move to Kansas. At that point, Kansas would not be a drag anymore. I mean, we have done the modeling only 100 times.

There may be some cleanup costs, some one-time items in the first half of the year. We can't predict that because we don't know what will happen. But yes, that is still our plan, as we have enunciated I guess for maybe two or three quarters now -- I don't remember.

Thank you.

Sean Hannan, Needham & Company.

Yes, thanks. Good morning. So was looking to see if I could get a little bit more color around the performance in Asia. I think it was about 39% of your revenues this quarter. You have spoken a little bit around the challenge you had within the supply chain and the consequences of some lost share with one of your products, about $8 million to $9 million of revenue loss through annualized.

Can you help me to better understand, when I look last quarter to the November quarter sequentially, how much of that decline in Asia was either market based versus what was tied to some of those share losses, et cetera?

I don't think we want to quantify it, percentagewise or anything. But I think there was a pretty weak market during the second quarter -- sorry, third quarter, in particular, like I said, October. October was really a mess.

And see, the thing is, when you have a short-term impact like that, it is usually something to do with the overall economy or the overall market. New products, things like that, they don't move that quickly, so it is usually something about the market we are feeding into. And I think it was -- October was not good at all, so --. And November was back to the level of September. I don't know what to make of that, except those are the facts.

So, yes, there was the market share loss. But I think that at least as significant, maybe more significant, was the market itself. But I don't think we are prepared to give you a percentage breakdown. I don't think that would be appropriate.

Okay, well, Brian. Thank you. That's helpful. On the back of that, then, if I were to look quarter-to-quarter in the geographic breakdowns that you do have, it would seem that North America may have been flattish for you, Europe was up a little bit and you just talked about Asia being down. Can you characterize the state of those markets as you see them today?

Well, we commented -- doing the best we can, we commented about November being a little bit better, and December, actually, improving, in the first three weeks anyway, from November. And that would be a function of the market health.

I don't really believe -- I can't -- I am not aware of any one market that is moving out of sync with the others either. I think they are all a little bit better, including Asia, the last few weeks in November as well. There has been some improvement. But it has applied to North America. Europe is a small market for us, and a little bit of a niche market, so it is hard to really extrapolate from Europe very much. But the big markets for us in North America and Asia, they seem to be moving somewhat in sync, I think.

Okay. That's helpful. The new products that you have introduced, and those that you are about to introduce, can you discuss this a little bit more, some of the traction that you have with those products? I'm assuming there really wasn't any contribution in the past quarter. Are there revenues actually materializing thus far in the current quarter? And any more color there would be helpful.

You are correct. There were no revenues in the prior quarter. So with the product I mentioned, the N4800-20, is not a niche product; it's intended to be an important product for Park for the future. We introduce these products, announce these products after we have what we call a preliminary UL qualification. And that is so the customers and OEMs can get qualified internally. But for commercial programs, they are not going to sell any products that would be made with this material -- it wouldn't be appropriate until the final UL is granted. And that is expected, I think, April or something like that.

So what's going on now is we are out there talking to the OEM customers quite a bit and sampling and getting qualified, so that when the product is -- when we receive the final UL qualification, that is when we would expect to see actual revenues. Right now, would be qualification activities.

Okay.

I should -- 7000-3, that is not really -- not much of a UL issue; it is actually more for military/NASA. It is a specialty product for NASA applications, And we're not going to see a significant amount of revenue. It's a very nice niche product to have because these products, even though the top -- the revenues are not very significant, the margins are quite nice, quite nice. It's good to have in our product portfolio.

Okay, that's helpful. And then so off that margin comment, when you think about the new products that you are coming out with today, those that you just discussed as well as perhaps those that are on the horizon, is there any -- what color can you provide us around how much these should be margin-enhancing for the overall model versus what you post in the quarter? So do they inherently enhance the model by the nature of the product or would this in the aggregate really be just help to the model in terms of more basic scenarios such as better revenue leverage.

Okay, so the 4800-20 and one other product that we hope to introduce in another next, let's say, month, those are intended to be volume products, but they are also high-end products and we believe somewhat unique products. And those products will be higher-margin products or not at all, because that is how they will be introduced into the market. We are not going to sell those products on price, I can assure you of that.

So if we have any revenues for those products, those revenues will be quite attractive margin revenues. Our expectation is -- our plan, anyway, the product line, is to sell those products as high-end products with unique properties, where we will be able to earn the appropriate margins, based upon the uniqueness of the products.

Okay, and you're saying thus far, in terms of your discussions and sampling, early stage, but the feedback is positive?

Oh, I would say -- yes, I would say quite positive. I think that is a very fair statement.

Okay, thank you so much for the color.

Sure, absolutely.

(Operator Instructions) [Len Cooper], private investor.

Hi, Brian. I hate to say it, but as usual, I am very confused, more so than usual. I know that we have money overseas and this talk of repatriation has come up from time to time. I didn't hear any mention of that today. I know the eurozone is a mess, and no one knows what is happening.

Is this euro crisis affecting in any way the money that we have overseas? Is our money in danger of being wiped out or take a haircut, as they call it?

No, not at all. We are very conservative with how the money is invested. Now, the Europe crisis -- obviously other concerns about the global economy and how it might drag down the whole economy. But, no, we don't have any of our money invested in anything that is exposed to euro risk.

Well, that's good. A year ago, we were looking forward to getting a special dividend. I don't know what to say now. I see that we have more cash and marketable securities than ever, and I wonder if there is any contemplation of such a special dividend before year end.

I wonder, what do you mean by a year ago, you were looking forward to it? I don't understand.

But in any event, Len, let me answer the question. So, our US cash is still in the same position it was, more or less. It is not -- most of the cash is overseas. That situation hasn't changed during the second quarter or the third quarter. So we are trying to be more careful with the US cash. We're still talking about significant investments in the US with acquisitions, joint ventures with other companies. And we could do some $50 million investment -- I mean, that is not that big; let's face it -- and we wouldn't have very much cash left in the US.

Now, we are standing by. I don't know what the recent -- most recent word is from Washington about repatriation, yes or no or maybe. It's hard for me to -- that gets me confused -- you want to talk about confusion -- trying to follow the government -- really, I am not kidding. But that would be a difference, if we were able to repatriate; that would make a difference in our thought process. But right now, until we get some clarity as to what is going to happen, I think that we have a real strong case to spend a lot of our US cash on special dividends.

Hello?

Yes, Len.

Yes, okay. On another -- most of your improved products have to deal with high temperatures in many instances. Are you looking at all at low temperatures, at super-conductive temperatures, like minus 350 degrees Fahrenheit and so on and so forth?

That's pretty cold. No, it is not really in our R&D plan at this point. You're right, it is high temperature. I think we might call it thermal reliability and also very important is electrical properties. Those are the probably two biggest categories that we would be focused on from a reliability and electrical properties of our electronics products. Now Aerospace is totally different, of course. But I think you are talking about electronics, right?

Yes, well, I know in the computer industry, super conductivity is becoming more and more important, because it cuts the heat generation, which is a big factor. So I just thought I would bring that up.

Well, those are my questions and I thank --

You know what, Len? You are very knowledgeable guy. What we will do is we will put that on our list for discussion internally -- super-conductive or very low temperature materials. It is not something we really discuss, but I think we should. We will get that on our list and we will talk about it internally.

Well, if you do get serious about it, I have a contact for you.

Okay, well thank, you very much for that idea.

Okay. Okay, thank you and enjoy the holidays.

Thanks. You too, Len.

Jiwon Lee, Sidoti & Company.

Thanks and good morning. I hopped onto the call a little bit late, so just wanted to clarify a couple of quick things. First of all, Brian, did I hear correctly that the extra P&L impact from the Kansas plant, your current expectation is at the beginning of fiscal 2013, those extra P&L impacts will go away?

That is our plan.

Okay, that's helpful. And then (multiple speakers) -- yes, go ahead.

-- in case you missed it, we commented also that there could be some cleanup or one-time items, but we are not -- we don't know at this point. It depends on how things go -- toward the beginning of next fiscal year.

What would the consolidation have an impact on your manpower, either from a production point or from a G&A point? Would they be largely sort of a flattish impact?

Largely what?

Flattish impact? In other words, would you have additional hiring needs, or are the manpower that you need out of Kansas largely in place now?

Oh, okay, that's a very good question. And that is really part of the story here. I think we keep talking about qualification costs, but you are quite correct. We have hired -- we have pretty much the whole staff in place in Kansas as well as we bring the business over, so we've put a lot of cost in in anticipation. Very good point.

So there could be a few hourlies that we may want to add for a couple extra shifts in Kansas, but the staff is in place. There will really be no meaningful additional costs, people costs, in Kansas that we are anticipating. So, we will have to see what happens. But toward the -- at the end of the fiscal year, beginning of next fiscal year, there could be some reduction in total headcount at Park as a result of the consolidation.

Okay. Terrific.

We already have some reduction based upon the small number of people that were in Lynnwood. We have invited those people to relocate to Kansas. Some have, but some haven't, and we no longer maintain that operation.

Okay. And then, Brian, I think you mentioned something about the same product that you lost market share in Japan. And I wanted to get a better idea whether that product carries above corporate average margin? Where do they fit in in terms of the margin profile within your PCB materials segment?

Yes, I would really be in the very upper end of our product mix -- product portfolio in terms of margins.

Okay, that's what I thought also. And for Dave, could you discuss the Top 5, 10 and 20?

Sure, Jiwon, happy to do that. We had two customers this quarter that represented (technical difficulty) of total net sales, and those were Sanmina and TTM. Rounding out the Top 5 were ISU Petasys, Multek and WUS, in no particular order. The Top 5 customers represented 49.6% of total net sales; the Top 10 customers represented 62.7%; and the Top 20 represented 74.5%.

Terrific. That's all for me and happy holidays.

Happy holidays to you, Jiwon.

Morris Ajzenman, Griffin Securities.

Hi, any residual fallout from Thailand as far as your Company is concerned during [the third] quarter?

(technical difficulty) we are not really in that kind of market. We got lucky. But maybe we deserve some luck after Japan. So in terms of our supply chain, we don't have any impact.

Thank you.

Sean Hannan, Needham & Company.

Yes, thank you for the follow-up. Brian, I was looking to see if you could dive a little deeper for us in terms of what you are seeing competitively in the different geographic markets, if there is a way you can characterize that for us today.

I don't think I understand what you are really looking for in that question.

Okay, well, for example, in Asia, we saw that due to some challenges you had around your supply chain, you lost some share, but that was kind of a unique circumstance. When you look at the different geographic markets, are there competitive dynamics, either through more aggressive competitors or perhaps product introductions that are coming from your competitors, that are changing the landscape?

And you are looking for a geographic distinction in that regard?

Geographic or general, whatever would be --

Okay, so let's do the best we can to answer that question. First of all, the loss of market share wasn't just in Asia. The product was sourced in Japan, but it was not just an Asian story in terms of our market share. I just want to make sure we remember that.

Okay, so I guess nothing new here, but Asia, for years now, has been a very competitive market. And there really aren't a lot of Western competitors left anymore, Western-based competitors. There is one in particular outside of Park, but the Asian companies have migrated into the US market.

I don't know how to answer that question. I guess you just feel it is more intense in Asia all the time, a little bit more rough and tumble, maybe a little less polite, a little less respectful. But that is not new; that is how business is done in Asia often, and it is a not very nice, not very pleasant. It doesn't really matter to us, because we don't respond to that kind of behavior, not in a positive way, anyway, so --.

But if you are asking if we see any difference, I'm not aware of anything different in the last quarter or two quarters or three quarters in terms of the competitive landscape.

Okay, thanks. And then another question for Dave. The SG&A line was about $7 million this quarter in November. What should we expect as we look forward from here?

I think to the best of our ability to look at that, Sean, I think we don't see significant changes in the SG&A line going forward at this point.

Is there any reason in the near term why that should either tick up or tick down?

There is nothing compelling at this point that would really drive it one way or the other at this point.

Okay, thank you.

At this time, I am showing no further audio questions in queue. I would like to turn the call back over to Mr. Brian Shore for any closing remarks.

Thank you, operator, and thank you, everybody, for joining our call. It's been nice talking to you, as usual. Other than our Christmas party, which is very important, Dave and I are available the rest of the day in the office, so feel free to give us a call if you have any follow-up questions.

And that is about it, so I wish everybody a very, very happy holiday and all the best next year, and we will talk to you soon. Goodbye. Have a good day.

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