Park Aerospace Corp (PKE) 2012 Q4 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 fourth quarter fiscal year 2012 earnings release conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer session. (Operator Instructions)

At this time I will turn today's call over to Mr. Brian Shore, President and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you Operator. This is Brian Shore. Good morning everybody. I have with me Matt Farabaugh, Park's VP and CFO.

Welcome to our fourth quarter conference call. We'll be starting as usual with some introductory remarks. Matt and I will cover some financial analysis followed by a couple other comments, I guess, and then we'll go into Q&A.

Matt, why don't you get right started with the financial analysis.

Okay, thanks Brian. Certain statements we may make during the course of this discussion which do not relate to historical financial information may be deemed to constitute forward-looking statements. Any forward looking statements are subject to various factors that could cause actual results to differ materially from our expectations.

We have set forth in our most recent annual report on Form 10-K for the fiscal year ended February 27, 2011, 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 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. Reconciliation of GAAP and non-GAAP measures is included in our earnings news release.

I would first like to summarize the financial information included in the news release for the fourth quarter and fiscal year ended February 26, 2012.

Net sales for the 2012 fiscal year, quarter ended February 26, 2012 were $43.7 million compared to net sales of $51.2 million for the prior fiscal year's fourth quarter.

Park's sales for the fiscal year ended February 26, 2012 were $193.3 million compared to sales of $211.7 million for the prior fiscal year ended February 27, 2011.

Net sales before special items for the 2012 fiscal year fourth quarter were $3.9 million compared to net earnings of $8.3 million for the prior fiscal year's fourth quarter.

During 2012 fiscal year's fourth quarter the Company recorded a pretax charge of $1.3 million in connection with the closure of its Park advanced composite materials business unit in Waterbury, Connecticut. Accordingly, net earnings were $3.2 million for the fourth quarter ended February 26, 2012.

Park's net earnings before special items for the 2012 fiscal year were $23.2 million compared to net earnings before special items of $33.9 million for the prior fiscal year.

During the 2012 fiscal year the Company recorded the closure charge described above and pretax other income of $1.6 million related to the settlement of certain lawsuits. 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. Accordingly, net earnings were $23.4 million for the fiscal year ended February 26, 2012 and $32.6 million for the fiscal year ended February 27, 2011.

Park reported diluted earnings per share before special items of $0.19 for the fourth quarter ended February 26, 2012 compared to diluted earnings per share of $0.40 for last year's fourth quarter. Diluted earnings per share were $0.15 for the fourth quarter ended February 26, 2012.

Park's diluted earnings per share before special items were $1.11 for this fiscal year ended February 26, 2012 compared to diluted earnings before special items of $1.64 for last fiscal year. Diluted earnings per share were $1.13 for the fiscal year ended February 26, 2012 compared to $1.58 for the fiscal year ended February 27, 2011.

Now I'd like to briefly review some of the other significant items in the fourth quarter and fiscal year 2012 P&L.

During the fiscal year 2012 fourth quarter, North American sales were 46% of total sales. European sales were 14% of total sales and Asian sales were 40% of total sales compared to 47%, 11%, and 42%, respectively, for the fourth quarter of the prior fiscal year.

Sales of Park's high-performance, non-FR-4 printed circuit materials were 80% of total laminate and prepreg material sales in the fourth quarter of fiscal year 2012, 77% in the fourth quarter of the prior year and 79% in the third quarter of the fiscal year 2012.

Sales of Park's advanced composite materials and parts were $6.7 million in the fourth quarter of the 2012 fiscal year compared to $5.5 million in the fourth quarter of the prior fiscal year and compared to $7 million in the third quarter of the 2012 fiscal year. Sales of advanced composite materials and parts were $26.5 million in the 2012 fiscal year compared to $23.3 million in the prior fiscal year.

The gross profit percentages were 25.7% and 28.3%, respectively, for the fourth quarter and full fiscal year 2012 compared to 33.1% and 33%, respectively, for the prior year fourth quarter and full fiscal year.

Selling, general and administrative expenses were 15.5% of net sales for the 2012 fiscal year fourth quarter and 14.6% for the 2012 fiscal year compared to 12.8% for the prior year's fourth quarter and 13.2% for the 2011 fiscal year.

Investment income for the fourth quarter was $203,000 compared to $228,000 for the fourth quarter of the fiscal year 2011. Investment income for the fiscal year ended February 26, 2012 was $808,000 compared to $645,000 for the prior fiscal year.

As a result, earnings before income taxes and before special items were 10.6% of net sales for the 2012 fiscal year fourth quarter compared to 20.7% for the prior year's fourth quarter. For the 2012 fiscal year, earnings before income taxes and before special items were 14.1% of net sales compared to earnings before income taxes and special items of 20.1% for the prior fiscal year.

Park's earnings before income taxes and before special items were $4.6 million for the 2012 fiscal year fourth quarter compared to earnings before income taxes of $10.6 million for the prior fiscal year's fourth quarter.

The effective tax rate before special items was 15.6% for the 2012 fiscal year fourth quarter compared to an effective tax rate of 22% for the prior fiscal year's fourth quarter. The effective tax rate before special items was 15.2% for the 2012 fiscal year compared to 20.4% for the prior fiscal year.

Turning to Park's balance sheet, cash and marketable securities were $268.8 million at February 26, 2012 compared to $250.4 million after the end of the prior fiscal year. Working capital was $290.1 million at the end of the 2012 fourth quarter compared to $271.7 million at the end of the prior fiscal year.

During the 2012 fiscal year the Company had capital expenditures of $4 million and depreciation expense of $5.9 million compared to capital expenditures of $3.7 million and depreciation expense of $6.7 million during the prior fiscal year.

Stockholder's equity was $343.2 million at February 26, 2012 compared to $325.3 million at the end of the prior fiscal year.

Finally, stockholder's equity per share at February 26, 2012 was $16.50 compared to $15.70 per share at the end of the prior fiscal year.

Okay, thanks a lot, Matt. This is Brian again. I'll add a few comments as well.

Let's talk about the fourth quarter, what's going on in the fourth quarter. The revenues are quite off as you know and that would explain most of the bottom line results. The top line, the math is pretty straightforward, pretty easy to follow.

With the revenues being off, that would mean for us that at least in the electronics area, for our electronics activities, that would mean that internet infrastructure spending is not very robust right now and that would be a global economic event I would imagine. I don't think it's a regional event.

What will happen with that in the future? I guess everybody has an opinion but I think a lot of people believe that that spending will pick up in the future related to the massive needs based upon iPhones, iPads, smartphones. We don't sell into the consumer electronics. We don't sell any products into iPhones, iPads or smartphones. I think you know that but these devices have created enormous need for more infrastructure. At least that's the belief and that's the market we sell into is infrastructure.

So, when companies like the internet service providers, Verizon, AT&T, start buying equipment that would be good for us, buy more equipment would be good for us, their capital budgets.

So, what else is going on? Kansas, Kansas continues to be the same story as it was in the third quarter, fourth quarter. All the transition activities, very challenging -- as you know, we closed the operation in Lynnwood, Washington. Those activities have been transferred to Kansas. We announced a closure of our operation in Connecticut. Those activities are being transferred to Kansas at this time.

The margins at Kansas, the operating efficiencies in Kansas, the yield in Kansas are very poor in the fourth quarter. I think it's not surprising under the circumstances of how demanding the situation is there. The good news though is that in the first quarter, things are settling down and the operating margins and the yields, waste, those kind of key manufacturing metrics are quite a bit better, quite a bit better.

We're still in the middle of it. We haven't gone through a transition yet but I think things are going relatively well. We had a delay of a couple of months in the transition that we previously announced. I'll comment on that further in a minute but other than that I would say things are going more or less according to plan in Kansas.

New products, we announced some new products in the last six months but we don't have any revenues of any consequence from those products yet. We've been talking about those products for awhile so we're very pleased that we commercialized the products. We commercialized them with a provisional or preliminary UL which was our plan. The final UL is critical and key though and that will come for both the products, four of them actually, in the next few months we expect. At that point we would expect to see some more significant revenues.

These products are high-speed, low loss products so when we talk about infrastructure and the need for more ability to process data, store data to transmit date it's not just more equipment. It's more capable equipment, equipment that operates at a different level of capability, different speeds, and these products are targeted toward those markets which I believe will be good markets in the future for us.

The new products, we have 4800-20, 4800-20 SI, 6800-22, 6800-22 SI. We talked a lot about loss even in our news releases we did something -- I think we did a news release, a little unusual, with the 6800-22 and 22 SI news release because I believe we specified the loss values of these products. Loss is really the key when you're talking about high-speed internet activities, the loss properties of the product. The 6800-22 SI, my recollection is that we indicated the loss was .004. It really tested at .0038. We rounded to 004. That's open resonator. That's 50% resin content, 10 gigahertz. The reason I say that, and we say it, is because we believe in the industry there is a lot of, some of the companies in the industry use different methodologies to test so we wanted to be very open about the methodology we use so people understood that the numbers are real and they weren't somewhat enhanced by testing methodologies or different ways of preparing the coupons.

That loss we believe is very difficult to match in the industry at this time so we're pretty excited about that product. We'll have to see what happens but that product in particular, we don't think that there are too many commercial offerings out there -- we can, call us up and we'll have it for you in three days -- that would be able to match that loss. We'll see what happens but I wanted you to know about that.

As far as the fourth quarter is concerned and the first quarter as well, those products will not have any impact. At least there won't be any significant revenues from those products.

I know you want to know a little bit about the first quarter. That's a common question so let's see what we're doing. It's very interesting, revs and bookings in Q1, and we have eight weeks in the books already in Q1. When we announced our fourth quarter results, this layer piece, where we don't announce it until we're done with our audit. We have actually eight weeks, eight out of 13 in the books for Q1 so these indications are a little more meaningful than other quarters when you know, the new quarter only has maybe two or three weeks in the books. We tell you anyway but we always caution you. We'll caution you now as well because we have five weeks to go and we don't know what will happen in the next five weeks but the revenues and booking are almost dead on in Q1 as compared to Q4 in terms of run rate -- almost dead on, almost exactly. If you look at the eight weeks as compared to the average for the Q4, almost dead on, almost exactly the same so nothing really significant there in terms of the top line bookings and our revenues.

Talk about aerospace, I might have already told you what the aerospace revenues were, advanced composite product, sorry -- advanced composite parts and materials, the aerospace revenues for Q4 versus Q4 and also Q3. Q1, the aerospace revenues are moving up a little bit in the first eight weeks, a little higher than the Q3, Q4 number. Not surprising because as we are going through these transitions we're also doing vision development work for aerospace and of course, and based on partly our new capabilities in the Kansas plant.

So, let's figure this out. The impact of aerospace -- and I'm doing something a little different here I think -- because in the past we've talked about Kansas. Now we're talking about US aerospace activities meaning Kansas, Lynnwood, Washington which is closed and Waterbury. It doesn't make a lot of sense to just talk about one part of the picture. It's better to talk about the whole picture, give you a better perspective especially since things are moving around, things are being transferred one location to another.

The Q4 versus Q3 was $100,000 worse in terms of bottom line and Q1 is looking to be better than Q4 by maybe $200,000 better than Q4. We're not there yet but it's moving in the right direction.

Let me comment on a couple other things. Oh yes, the restructuring charge, let me give you an update on the restructuring charge and the closure of our Waterbury operation.

I think we did a news release maybe in January indicating that Waterbury would close the end of April. Previously, we had indicated it was going to close the end of fiscal year but things were delayed until the end of April and now it's the end of June. Most of the work will be done in May but we're going to keep Waterbury active operating until the end of June and the reason for that is that the transfers, the qualifications, the re-site qualifications are taking longer than expected in some cases. It's like the 90/10 rule, 90% of them are done but the last 10% have been quite difficult. We didn't want to just walk away from that business. We didn't think that would be correct so we are going to suffer with the duplicate costs for a little while longer.

Also, the charge was originally announced to be $3 million. As Matt indicated, we had $1.25 million in Q4 and we believe there is about $1.3 million to go so it's probably going to come in a little less than $3 million, maybe $2.6 million, $2.7 million and that will probably be mostly in Q2 and Q3. Q1 will have ongoing operating expenses but until we close the operation we really don't get it at the restructuring cost. It goes more to the operating line.

Let's see, anything else worth talking about here? One other thing -- no, I guess that's fine. I think I covered enough by way of introductory remarks. Maybe we'll cover some more in the questions so Operator, let's go to the questions at this time please.

(Operator Instructions)

Your first question is coming from the line of Sean Hannan with Needham & Company. Please proceed.

Hello, this is Anj Sing filling in for Sean Hannan. Thank you for taking my question. My first question is regarding, based on what you reported today and considering where your costs in Kansas are as well as the fact that you've now closed Waterbury, would logic dictate that you could see another 200 to 300 basis point improvement in gross margin next quarter even if revenues were similar to today?

Q1 you're talking about? We gave you a perspective in Q1. We're looking at a total revenue so far tracking very similar to Q4 and the top line, I'm not talking about aerospace. I'm talking about the whole Company. The top line is clearly the biggest driver of our bottom line including our gross margin on a quarter to quarter basis because (inaudible) things don't change that much. The top line changes. It has a major impact.

As I said, in the first eight weeks the revenue for -- sorry, the top line is looking similar to Q4. We could see some margin improvement. We are looking at some margin improvement so far in Q1 as compared to Q4 but it's not because of the top line. It's because of the things you cited, the cost inefficiencies related to Kansas. We still have duplicate costs. Some of the costs that are tailing off a little bit are the qualification costs. That's very expensive. Those are one time items as well. The duplicate costs we still have. We could see some improvement as I indicated. There is, in the first eight weeks anyway, some margin improvement in aerospace. I think I said maybe a couple, a few hundred thousand dollars as compared to the prior quarter. I'm not sure we're going to translate that into any number of basis points for the Company's gross margin. I don't think we're going to get into that because I don't believe we have enough confidence and precision to comment that precisely anyway on the gross margin. I think you're right that they should be up a little bit.

Okay, thank you. That's very helpful and I appreciated your color on the bookings in Q1. I was wondering if you could also discuss the linearity of the February quarter in terms of what months were strongest versus weakest?

Sure, that's a question we get from Needham almost every quarter now so we kind of anticipated that.

December and January were very flat, about the same and February was higher so we had quite low months, weak months in December and January. December, it's kind of like we lost a week and a half because of the holidays so that's probably not a surprise. January, we certainly didn't come out strong out of the starting blocks and February was a little bit better but if you take the average of those, for the quarter, for those three months of course we're talking about, when we compared Q1 to Q4 we're talking about that average.

Okay and one final question from me. Can you elaborate on what you saw for demand from your different geographic regions during the quarter, realizing that January and the beginning of February might have been a little weak at least in Asia due to Chinese New Year?

I think Matt gave the geographic breakdown. I don't think there is anything particularly interesting from a geographic perspective. In electronics -- we have to talk about aerospace separately but in electronics, it's very much a global market and it's kind of unusual for there to be a lot of, on short term basis anyway, a lot of geographic lack of synchronization if you will because it's all feeding into this global market, the global electronics market. Most of the OEMs, even in the US, are sourcing and Asia and US, maybe not so much in Europe anymore but it would be surprising to see a big difference geographically on short term basis. The long term trend is probably still in place which is more in Asia, less in the west.

Aerospace is a little different for us because most of our aerospace activities as you know are in North America so aerospace would be different from electronics in that regard. Ultimately, it probably won't be but as the aerospace industry develops and becomes more mature and more progressive we think it'll become more of a global market as well.

Okay, thank you. That wraps it up for me. Thanks so much.

(Operator Instructions)

Your next question is coming from the line of Jiwon Lee from Sidoti & Company. Please proceed.

Brian, just wanted to talk a little bit about the PCB side of the business. I wonder whether there was any pricing pressure that you may have seen in the February ending quarter and is really kind of the internet infrastructure rather than the telecom side or the defense that is pulling your revenue prospect down?

Yes, I think so. When you say telecom, I'm not sure because you're talking about the big internet service providers. I don't think there is a distinction between the equipment they use for phone calls and internet anymore so I don't know about that distinction but military, that's not going to be a big factor. We've always had a reasonable military business if you will, in electronics but I don't think that's the big factor. The big factor is going to be the commercial stuff, the internet infrastructure and I'm sorry, what was the other question you wanted?

The pricing pressure, Brian.

Sorry, short term memory. What is it, a senior moment? Nothing unusual, pricing pressure is always there. It's something we always live with but I couldn't say anything any different now or in the fourth quarter or the third quarter. It's just something that we live with in electronics in particular forever and always.

Our Company has a reputation though I think which is quite well known which is that we just don't really work on price. Our price is our price and I think most of the customers and OEMs understand that so I suspect that we receive a lot less of, let's call it the abuse even than maybe some other companies in our industry because the industry knows that we're just not really receptive to that kind of discussion.

Okay, I think I read between the lines there from you. The composites outlook, Brian, it's been sort of kind of squeaking along, both the operation and the revenue side and just having the conversations that you have and the developments and the long term program wins that you are working on, where can we go from here?

Long term in aerospace, Jiwon, the operative term in aerospace is long term and I mentioned that so many times. It's such a long haul, such a long term prospect. Things move very slowly. I'm just going to go over comments I've made a number of times but that industry is very conservative. I wouldn't call it progressive, actually, and for an outsider, for a new guy on the block it's more difficult, more impediments to get in. I think we've made very, very significant inroads I must say.

I think the short term story for aerospace obviously is the transition of our manufacturing operations in the US. That's a big deal and while we're at it we're looking at significant opportunities with major OEMs that would translate into major dollars of revenue if they occur.

The question is will they? I don't know and you don't know until it's actually done. This process is very -- you really have to be patient because, let me just give you a little bit of color. If an aerospace company has a new program they will normally ask about ten companies to bid on the program and then they'll go through what is called a down-select process. They'll kind of whittle it down in the field to maybe three and then with those three they'll start doing some serious testing, screening sometimes it's called. Again, it's very time consuming. It can take over a year just to go through the screening process, maybe more, and expensive. At that point then they'll down-select and they'll say okay, you're it but now guess what? You have to go through a qualification process and that could take another year and maybe more just to prove that in fact, yes, the three batch, five batch qualifications that yes, you're it.

These are things that we learned as we went. We didn't fully appreciate how tedious and how much time it would take. Now of course the other side of the coin though is if you have the patience and you have the capability and you stick with it and you hang in there and you get through these things and you win, you're in for serious revenues for a long time because the process is so tedious and so difficult that these companies are very reluctant to change forces in midstream in the middle of a program, in the middle of an aircraft program which could go 20 years easily.

Those are the two sides of the story. The getting in is harder especially for new guys. As much as we've been around the business for a long, long time, aerospace five years ago, nobody ever heard of us but the other side of the story is that if we get in it's a good thing for us. I also would say that my opinion is that some of the players are complacent because they've been in a long time. They think that maybe they don't have a lot of, they really can't be touched. I guess time will tell whether that's true or not.

Okay that's helpful and then for, Matt, the typical question, the top five customers more than 10% and if you can run down the top 10 and 20 customers --

Sure. We had three customers that were 10% or more of our sales. That would be TTM, Multek, or Flextronics, and Sanmina. Rounding out the top five would add in ISU and WUS. Our top five made up almost 52% of our total sales. Our top ten made up about 64% of our total sales. Our top 20 made up about 73% of our total sales.

Okay great, that's all for me, thank you.

Your next question will be coming from the line of Leonard Cooper. Please proceed.

You mentioned these new products that are coming online and they haven't added to the revenues yet. Are they going to be in addition to our old products or are they going to displace some old products so that the net effect may or may not be positive or large?

I guess it's both, you know. At the beginning our existing products will still be an important part of our portfolio. In electronics, nothing lasts forever so obviously, the message is you better replace your own products because if you don't, somebody else will, right? Our existing products, I'm actually surprised how long they have lasted as robust, vital products and I don't suspect they're going to disappear overnight so I guess it's partly both, partly additive and partly replace but like I said, it would be better for us to replace the revenues of our existing products than somebody else.

It's really a function of the movement of technology, right? That's what it's all about.

Technology is moving, yes. You speak about low loss. Could you tell me very briefly what that loss is? Is it generation of heat which is a loss or what is the loss?

It's called dissipation factor. It's a term that electrical engineers would understand, the two key things that are measured, electrical properties of our electronic products are dielectric constant and dissipation factor and the measurement, I said I think at .004, when you're talking about loss, actually a lower number is better in terms of being more suitable for high-end electronic equipment.

Okay, not being an electrical engineer I don't know much more than I did before I asked the question.

Last question, what are you going to do with all that cash that's lying around in view of the very [flux-y] tax situation?

We're going to have to pay attention to the flux-y tax situations and see what happens. We'll certainly be aware of them. I think you know that, I don't remember what we reported, $260-some-odd-million at the end of Q4, only $70 million is in the US -- only, okay that's still a significant amount of money but most of our money is overseas. In addition to the flux-y tax situation it would be nice if the government will allow us to bring some of the money back to invest in the US. I think it's kind of ironic that corporate America is being criticized severely for offshoring stuff and when we want to bring money back to invest in the US and we're not allowed to it seems like somebody is a hypocrite but not us. One running for office might be a hypocrite, I don't know. There is not any one person in particular I'm talking about but there's a whole lot of them that seem to want to talk out both sides of their mouth.

Thank you.

Your next question will be coming from the line of Adam Peck from Heartland Funds. Please proceed.

I missed the high-performance and the advanced composite numbers as a percent of sales.

Matt, could you -- I think we actually went over that in the script. By the way, I should also say, Matt will give you those numbers in a second. They're in our script but the transcript of Matt's comments are actually posted on the website. Matt, why don't you go over the high-performance and also advanced composite revenues for Q4?

Sure, the high-performance sales were 80% of our total laminate and prepreg material sales in the fourth quarter. They were 77% in the fourth quarter of last year and they were 79% in the third quarter of fiscal '12.

The advanced composite materials and parts were $6.7 million in the fourth quarter compared to $5.5 million in the fourth quarter of the prior fiscal year and it was $7 million in the third quarter of the 2012 fiscal year.

For the full year the composite materials and parts were $26.5 million in 2012 compared to $23.3 million in the prior year.

Great, thanks Matt. As far as the losses, in aero, you said they were $100,000 better versus the third quarter?

In aerospace?

Yes.

Okay, so Q4 was $100,000 worse.

$100,000 worse. Was that $1.6 million then?

We've never disclosed the actual losses or actual bottom line for aerospace and the reason we don't is because the number could presented in many different ways when you talk about corporate charges and things like that. We've never really done that. We have indicated that we expect to be at breakeven. Originally, that was supposed to be at the beginning of fiscal year but since the closure of Waterbury is delayed, that's delayed as well.

I think we also mentioned in Q1 that we're looking at about, I don't know, about a 350 -- well, based upon the first eight weeks, let me just say that. We're not really giving you guidance. We're just saying based upon the first eight weeks, where we are so far in Q1, we're looking at about $300,000 to $400,000 better in Q1 than Q4 in aerospace and that is the result of some of the comments I made previously about aerospace.

Do you think breakeven would be this fiscal year then?

Yes.

Great, and as far as the gross margin --

I just want to add to that. We certainly should be at breakeven for this fiscal year. I'm not sure whether we'll be at breakeven for the whole fiscal year. I'd have to think about that a little bit more but we certainly should be at breakeven before the end of fiscal year.

I guess if you have to think about it then it could be a possibility?

Which?

That you would be breakeven for the year.

Okay, for the total year?

Right, if you have to think about it then I guess there would be a possibility that we could be breakeven for the year?

Yes, we haven't done that math and I have to go back and do it and it's a little more complicated because it relates to the timeframe for the transition. Once the transition is done we should be at breakeven I would think. We should be able to move up from there.

Okay and then sequentially last quarter you said it was flat, flat and then higher in February. What about the first eight weeks of the year, of the quarter?

This is again aerospace?

In total.

The revenues for aerospace?

Right.

Yes, I think we indicated that in Q1, the first eight weeks we're running above the revenue run rate for Q3 and Q4. Matt gave those revenue rates. What was it, Q3 was $7 million and Q4 was $6.7 million. Q1 is running ahead of those numbers, maybe about $7.5 million.

Great, thank you very much.

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

Okay, thank you very much, Operator. Thank you everybody for listening in, nice talking to you. Please, Matt is in the office the rest of the day. I'm traveling but you can reach me through Martina as well if you want to talk to me. Have a good day. We'll look forward to talking to you soon. Goodbye, thank you.

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