Park Aerospace Corp (PKE) 2013 Q4 法說會逐字稿

Good morning. My name is Gwen and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp. fourth-quarter FY 2013 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. Good morning, everybody. Brian Shore here. With me as usual, Matt Farabaugh, our CFO. So Matt will start with the financial commentary, but we are going to try something a little different this time, which is that Matt will only cover items which are not covered on the news release. There is a transcript of Matt's comments, which were posted on our website earlier this morning, so you have the news release and also a transcript of the comments Matt is about to give. And we are making this change based upon inputs we have received from some of our call participants in the past. Please let us know how you like this and if you'd like to suggest we try something else. But this is an attempt to make the introductory remarks a little more streamlined. Okay? All right, Matt, why don't you go ahead?

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 26, 2012 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.

I would like to briefly review some of the items in our fourth-quarter and fiscal year 2013 P&L, which are not specifically addressed in the earnings release. It is important to note that the fourth quarter ended March 3, 2013 was a 14-week period compared to the fourth quarter ended February 26, 2012, which was a 13-week period. In addition, the fiscal year ended March 3, 2013 was a 53-week period compared to the fiscal year ended February 26, 2012, which was a 52-week period.

During the fiscal year, 2013 fourth-quarter North American sales were 49% of total sales. European sales were 9% of total sales and Asian sales were 42% of total sales compared to 46%, 14% and 40% respectively for the fourth quarter of the prior fiscal year and 46%, 8% and 46% respectively for the 2013 fiscal year third quarter.

Sales of Park's high performance non-FR4 printed circuit materials were 82% of total laminate and prepreg material sales in the fourth quarter of fiscal year 2013, 80% in the fourth quarter of the prior fiscal year and 82% in the third quarter of fiscal year 2013. Sales of Park's aerospace materials and parts were $7.0 million for the fourth quarter of the 2013 fiscal year compared to $6.7 million in the fourth quarter of the prior fiscal year and compared to $5.5 million in the third quarter of the 2013 fiscal year.

Sales of aerospace materials and parts were $25.9 million in the 2013 fiscal year compared to $26.5 million in the prior year. During the fourth quarter of the 2013 fiscal year, the Company had one customer that was more than 10% of total sales, which was TTM. The four remaining customers rounding out the top five were WUS, Sanmina, ISUPETASYS and Multek. The top five customers totaled approximately 47% of total sales. Our top 10 customers totaled approximately 62% of total sales and the top 20 customers totaled approximately 75% of total sales.

During the 2013 fiscal year, the Company had two customers that were more than 10% of total sales, which were TTM and Sanmina. The three remaining customers rounding out the top five were WUS, Multek and ISUPETASYS. The top five customers totaled approximately 48% of total sales. Our top 10 customers totaled approximately 63% of total sales and the top 20 customers totaled approximately 74% of total sales.

Okay, Matt. Thank you very much. As we indicated, much more short and sweet. So let us know how you like that. So let me give you some additional comments and perspective. This is Brian again, of course. As Matt noted and we will also try to highlight in the news release itself the fourth quarter was a 14-week quarter, which is unusual. Most of our quarters are 13-week quarters, but our fiscal year is always the closest Sunday to the end of February.

So every four years approximately, we end up with a 53-week fiscal year and when we have that occurrence, we always load 14 weeks into the last quarter to get to 53 weeks. It is almost like a leap year thing, I think, but the calendar kind of works itself out, but it is important to note that. Of course, then, not only is it a 14 week compared to 13 week for the prior year and the prior quarter, but also 53 weeks compared to 52 weeks.

But as you look at the fourth quarter, the 14 weeks, and you adjust that, the top-line revenue number, to a 13-week period, it would be about -- I think about, what, $39.6 million. It would be under $40 million in the fourth quarter if you adjusted for the 13 weeks. And that would actually be quite a bit lower than third quarter -- well, I don't know, you could make the value judgment. It would be lower than third quarter of last year and lower than the fourth quarter of the prior year. The third quarter I think was about $41.3 million and the fourth quarter of the prior year of $43.7 million.

So the thing is that it took 14 weeks to generate those revenues. Of course, the thing that doesn't change is a lot of the costs continue for the 14 weeks. So the revenues were soft in the fourth quarter. Even though it looked like they were a little bit up from the third quarter, I guess the point we are trying to make it actually was down if you kind of apples-to-apples it, third quarter versus the fourth quarter as compared to the third quarter. So just want you to be aware of that because that might explain some of the P&L features of the fourth quarter as well.

So having said that, and again, I think it is important that you just keep that in mind, let's talk about perspective with the market and what we are doing here. So I think it was like the end of September of last year, of the last fiscal year or 2012 calendar year, things dropped off and up through September, things weren't -- I wouldn't say they were going like gangbusters, right, but things dropped off. So then we got October, November, December, January, February, March where things were quite low. They stayed at that low level at six months I guess, right. I didn't mention April though. That wasn't an oversight.

But anyway, so the drop off end of September, beginning of October and they stay kind of level more or less for six months through March. People keep asking me what is going to happen, what is going to happen. Of course, I don't know. But what I can tell you is the facts. The fact is that, in April -- April was our best revenue month for about a year and our best bottom-line month for over two years. And when I say best, we have five-week months and four-week months. We are talking weekly averages so that we can apples-to-apples it. April was a four-week month; March was a five-week month. So it is important you understand that. When we compare months, we are always equalizing the timeframes between four and five weeks.

So what is going on in April? I really don't know. But those are the facts. Our best revenue month in about a year and best bottom-line month in over two years, I think. So why would that happen? Why would we have the bottom-line month being better than the revenue month if you look at it from that perspective having to go back two years to match that, over two years?

So what happened to our bottom line in that period? Things you know about. Last year, we closed our Connecticut facility. I think toward the end of the prior fiscal year or the beginning of the last calendar year, we closed our Washington facility and also during I think August of last year, we closed our China facility. All those closures were really part of a plan to consolidate into existing operations and did not involve losing any top line that I know of. But the bottom-line impact was meaningful and significant.

So that contributes more to the bottom line as compared to those prior periods. If you look back a year ago, for instance, where I said you have to go back a year to get the same top-line number during that year ago, we might have had the same top line as we did in April, but the bottom line would have been dragged down by those factors.

So let's look at aerospace because, remember, I told you that, after I guess the end of September when we closed Waterbury, that aerospace would no longer be a negative from an operating profit perspective. I wouldn't have told you that if I wasn't pretty sure that that was true. Obviously I can speak factually about it in terms of the past, but also in the future. And that is true, that has been true. Was true in the fourth quarter as well that aerospace is no longer a drag.

Now, I must say that it is not performing anywhere nearly what we would like. As a matter of fact, it was disappointing performance in the fourth quarter and I would attribute it to startup, poor execution or certainly less than optimal execution, but I wouldn't say I was very happy with it. But nevertheless, you should know that it was not a negative. It is still above water as it was expected to be. So those things contribute to the bottom line, of course.

As you went back a year ago, aerospace was more of a drag. I think we mentioned that there was a loss in aerospace in the 2012 and 2013 fiscal years. That was planned because of the transitions we talked about, the duplicate operating of facilities and the qualification costs, all right? Even though the 2013 year was negative, as we indicated it would be in our last conference call, the third and fourth quarters were not.

Now the good news is we made some adjustments there about a month ago. I'm talking about Kansas when I say there. They were announced and I feel that things are coming together more quickly now than they were before that and I feel more encouraged about how we are doing. Long term, there is nothing you can do long term. We are talking short-term stuff because I know analysts are interested in that, but you are also interested in how we are doing, I am sure. Long term, nothing really changes. This is a long-term investment for Park's future that I feel is critical and if we didn't make that decision and have the conviction and live with it, stick with it, six, seven years ago, I think Park would be a company that would not be -- would be a company with question marks, I would say, at this time.

So we are very thankful we made that decision and stuck with it, but in terms of the current performance, I feel more encouraged, like I said and I am not just kind of -- it's not just intuitive instinct; there are indicators that lead us to believe that. And that contributes also to the story in April, I would say, for sure. So not only the numbers, but the numbers are a function of the performance, execution. Remember, I said execution was disappointing in Q4 even though it is still above water, as I promised it would be and it was, but it was still disappointing. That disappointment is reversing itself now and that was reflected in the month of April.

Let's talk more about what is going on here. Let me just cover a couple things. Yes, so we talked about the closure of -- I want to backtrack here a little bit -- of Waterbury, of Zhuhai, of Washington. Oh, I want to just say one thing about copper because it was a significant impact. It was about $425,000 negative in Q4 versus the prior year's Q4 and about $150,000 negative in Q4 versus Q3. In Q1, we are not expecting very much of an impact as compared to Q4.

All right, some housekeeping stuff that Matt and I want to cover. So let's talk about electronics. We have two new products that we have been talking about quite a bit. [Dash20], which is in a very, very active qualification program activity now, being qualified in many, many OEMs and customers, certain workshops. So I think that is all very good. I think the market reception is good; that is my opinion. I think it is a very good product for the market. Remember, this is what we look at as our follow-on to [Dash13].

But I think it has a -- there are competitors to the Dash20 productline, but there is something I think a little unique about it in terms of its combination of electrical properties and reliability. Neither of which is unique, but the combination I think is unique. I believe it is a very good, solid product for today's market and I am not alone in that belief, I wouldn't say.

Meteorwave, that is our next generation working with qualification on kind of more futuristic programs. Some people at Park think that the market has not quite caught up to it yet, but -- well, we are not stopping with our development activities because, even though it is a little ahead of its market, we plan to come out -- I shouldn't say planning. We're working to come out with a new product in the near future, relative near future that will one-up Meteorwave and maybe that is based off of indications we've received from the OEMs about what might be needed three or four years down the road.

So we don't know what else to do here except to try to stay ahead of the technology curve. We are certainly not going to get into commodity business thinking and selling on price. That is not our thing.

So interesting, with the proven revenue and also bottom line, we often talk about high performance. Matt talks about that as a very key factor. I think it was 82% or something like that. My guess is that if you use our definition of high performance, our competitors would be way, way behind us, but they are catching up. I think I mentioned that we attracted competition in the high end based upon the fact that we are public. We are public about our margins; we are public about our high-performance percentage. I think a lot of our competitors took notice of that and they are coming into our market hard.

But when we talk high performance, like I said, I think we are still quite a bit ahead of others in terms of the percentage of our business, which is high performance. But we never really gave you any -- what is the word -- like color about high performance because we probably have, I don't know, 15 products that are -- that we sell actively that are in the high-performance area category and they are not all the same. There is certain high performance, which is higher than others.

So you remember we had that earthquake problem in Japan and it hurt one of our productlines, one of our real high-end productlines badly, our Signal Integrity productline. It was based upon sourcing of a very specialized material from a Japanese company, which we have a very good relationship and partnership. That earthquake actually brought us closer together I think and if you look at our revenue at this point, not only in the first quarter, but even in the fourth quarter, the Signal Integrity productline continues to grow. Even after the earthquake, it grows every year, year-over-year and it seems like a lot of the wins are in the Signal Integrity productline recently, a lot of the opportunities that we have been able to take advantage of.

And that would be -- if you want to kind of break down high performance, that would be the higher end of high performance and you are probably not going to be shocked to hear that that would equate to higher margins as well. And I'm talking about not comparing commodity [income] here, compared to other high-performance products. So that is I think quite a solid technology -- that signal integrity technology is something that I think Park would be a leader in. I don't think too many people would argue that point. So I wanted to give you a little bit of flavor, color on aerospace and also electronics because we haven't really broken down electronics very much in terms of what do we (inaudible) at high performance.

A couple of other things I want to cover though, just to housekeeping, close some things up. In the third-quarter conference call of last year, I mentioned there were three $100 million plus or minus $25 million opportunities for aerospace. I got -- a lot of people got confused or upset or all the above, which why did I bring it up. I brought it up because I was trying to say that this is an indicator of how far we have come with aerospace. We are now in a year of credibility where we are in position to talk about things like this.

But just by way of update, I already told you that one of those three was an acquisition. I think last summer, we ended that discussion; we couldn't get the numbers to work. The other two were joint ventures with aircraft OEMs that are household names, as they say and this related to develop new airplanes where we would JV with them on some aspect of it. And one of these programs was put off for a couple years. I think I reported that last time. The other one seemed to have just kind of died. So all three of those opportunities are not active anymore. We are looking at acquisitions; I should let you know that. Two things in particular and one is a category, one is not. But, interestingly, in both cases, they relate to electronics and aerospace. Kind of unusual, but that is how it is.

Let's see, okay, aerospace, a couple of other things in aerospace. Oh, so we haven't really grown our top line, as you can see; we are kind of suck at $25 million for several years now. But really our effort has been in transitioning to Kansas, getting Kansas up and running, closing the other facilities, reciting the qualifications. We really haven't had a lot of energy and time to try to grow and it is hard to grow when you are in transition. It is like an unstable foundation. You want to get this foundation stable before you put in the floor in a house.

But we started that process of growing recently and so this is not earthshaking news, but we did enter into a $13 million three-year contract with a jet engine company, again, household name. You would definitely know who they are. So that is not going to break the bank, but it is a good thing, $13 million over three years and we believe that's the estimate of the contract, but we believe actually there is quite a bit of upside opportunity there and we will see. But we believe there could be quite a bit more than that with that one program. And that leads to other programs with the same company. This is just one program.

We are doing prototype work on a new jet aircraft and whether that aircraft will end up going into production or whether it will end up being on the aircraft, if it goes into production, I don't know, but I just thought I would mention that to you because that is a nice thing. And these are many, many parts for this -- composite parts, of course, for this new jet aircraft.

We announced yesterday that we are on the James Webb Space Telescope. Not a lot of volume. This is for our patented struts. These are our SIGMA STRUTS, but very gratifying, a real honor to be on that program. I really love that kind of stuff. Remember, a few years ago, we won the Northrop Grumman R&D Supplier of the Year Award for these same patented struts. That was for the Orion, which was canceled, but the James Webb hopefully won't be canceled. We are pretty happy about being on that program; it is really an honor to be in such a special program.

And these struts, they are not little components. I mean these are the major -- this is a major part of the structure of these space vehicles. These struts are very attractive for space applications because they are very strong, very significant loadbearing capability with very light weight and in space, that is so critical is to be able to reduce weight.

So actually there is another space program that we were told we're most likely to get on too. We just heard that about a month ago. We can't talk for that one yet, but -- for the same struts, so that is good. We are happy about that. And yes, I guess that is it. I just wanted to give you a couple little updates on some of the things going on in aerospace.

So operator, that ends our introductory remarks. Can we go to the question-and-answer portion of the call please?

(Operator Instructions). Andrew Fleming, Heartland Advisors.

Hey, Brian, how are you doing?

Hello, there. How are you doing today?

Good. Hey, I was wondering if you could just comment on the strength you have seen in the different end markets and then also the OEM's reaction to the Meteorwave product thus far?

So we will take them in reverse. Meteorwave, that is the type of thing we are working with selective OEMs, large OEMs on qualification programs that are for future programs, future products for them. And I mean I don't know. My opinion is that, sorry to put it this way, but pretty damned good, the reaction. And then the end markets -- okay, so, Andrew, in electronics you are talking about, right?

Yes.

Yes. So you know what we supply into. We supply into Internet infrastructure. So we are talking servers, routers, storage, some base stations. So anything that would relate to Internet infrastructure, that is what we are going to supply into. We don't supply anything, I think just about zero, to any kind of end product that you or I could buy, any kind of portable devices, PCs. It doesn't work that way.

But I think what I have indicated previously is that the -- I don't know, I don't like the word explosion, but the significant increase in the usage of portable devices and also the cloud most people believe creates a need for more infrastructure. So the Internet service provider companies and the telecom companies, they need more equipment to handle and process all the data that is being -- because of the significant usage of portable devices in the cloud.

So the cloud is interesting because everything has to be instantaneous. It is not your computer that is doing the computing anymore, but people don't want to hit the enter button and wait 10 seconds for things to go to the cloud and come back. So it requires a lot of bandwidth. So that is what we are feeding into. Those are the trends that matter to us. People ask us, well, semiconductor companies are doing well or not well. So that is all tied together, but that is really going to be more a function of consumer activity with portable devices, PCs and that is all tied together, but it is not the immediate driver.

So if you want to kind of think about Park, you have got to think of the companies, the big OEMs that supply into the Internet infrastructure market. And then you have also got to look at the big telecom companies that are Internet service providers and ask if they are buying stuff globally. We saw our markets global; it's not a North American end market for us.

Great. Thanks.

Sean Hannan, Needham & Company.

Yes, good morning.

Hi, Sean.

So I just want to see if I could ask a follow-up around breakdown of what you had seen in the quarter. So if I look and adjust for the 14 weeks versus 13, Asia looks like was down versus the November quarter while the others were up. And it looks like it might have been down double digits and actually North America being up, it was really -- I think it was probably a small number. Europe up a little bit more. So just want to see if I can get some comments from you, Brian, on the demand that you saw in those geographies and then how much of that decline in Asia was tied to Chinese New Year versus end demand issues. Thanks.

Yes, okay, we probably should have covered that; it's a good question. North America, aero is up quite a bit and if you look quarter-to-quarter, Matt reports those numbers and that would have held up the North America percentage because most of our aerospace stuff, a large majority, is still North America. So that is really the story there; not so much electronics.

Europe, it is kind of very small. It might have been more our [PTP] productline actually than anything else, which is a little bit of a different productline for cell towers, niche productline for us. But it's so small, that any little thing is going to move the needle percentagewise.

But I am glad you brought it up because Asia was the big story and that was down quite a bit. And Asia really drives our bottom line. There is more leverage in the Asian P&L than the other P&Ls. So when Asia is down, it is not good for our bottom line generally.

Now the April story is very much at least contributed to by the Asian story. The Asian story is very much part of the April story. So does that help a little bit?

That does help a little bit. And it actually -- I think that partially addresses the next question I have. Let me see if I can just ask it though. So just trying to get a better explanation around the gross margin decline, how much of that was a function of mix with the aerospace revenues, more advanced composites up really quarter-over-quarter. Some of the drag I think that you had referenced is perhaps still flowing through there. But to what degree was copper a factor? That might have been smaller, of course, than the lost leverage that you had within Asia. Just trying to get a sense of really what were the main puts and takes to that decline there. Thanks.

Gross margin, yes. So you talked about copper; that was a factor. We talked about the 14 week versus 13 week; that is a significant factor because, like I said, you have 14 weeks of costs and maybe 13 weeks of revenues and those costs don't take a vacation that one extra week, of course.

And then the other thing that you mentioned, you touched on, which let's talk about that, is aerospace. So aerospace, let's say a bigger marketshare or whatever you call it, breakdown, sales breakdown, a lot more of it related to aerospace, but the margins aren't there yet. As I said, we are above water, but we are not looking at significant contributory margins in aerospace.

So you say aerospace, if you look at the sales breakdown, aerospace is a bigger share, right, but not contributing very much and electronics is a smaller share and Asia even a smaller share and you look at all those things and you say that is not good news for our gross margins.

Okay, thanks for that. And then, Brian, you had mentioned in your remarks a few comments around the competitors really coming into the market hard. So just wanted to see if I could get a little bit more of a sense from you today in terms of what are you seeing from their products, to what degree are they performing at least close enough perhaps with also better pricing where this is creating some of the pressure you might be seeing in various markets such as Asia? And does it feel like some of perhaps the Asian players have closed or are very close to closing the gap?

What gap?

In terms of the performance of your products versus theirs?

Well, this is not a fourth-quarter story. I mean this has --

Sure.

-- been going on since 2006 or so. I've mentioned this many times and we created a problem, we attracted the competition. At least in some cases I know that because I was told that by people who are competitors. So I guess in hindsight probably not much we could've done about it. I think we are doing all we can do, which is to continue to try to stay ahead. But there is no question it's a tougher market than it was. We really own that high-end space in the mid-2000s. Not that we had no competition at all, but we were quite dominant.

But you know what, I don't know if I am an optimist or what, but I still feel that Park has something special to offer. I feel it is something about our products, it is something about our quality, it is something about our attitude towards our customers and I sense that maybe some of these other companies are having difficulty putting those combinations together. Where pricing is going to be more of a factor, we are probably not going to win. So we are more likely to win when pricing is not the key issue and that could be either technology or maybe working closely with a customer to help them succeed on their own factory or process and it could be in responsiveness, I guess a lot of intangibles.

So my comment is I feel we are doing the right thing and I think it is paying off now. But, in other words, sticking to what we do and not selling our souls, not becoming [whores] in the market. I am very glad that we made those tough decisions and I think they are paying off now. And my feeling is they will pay off on a going-forward basis too. And that doesn't mean that there won't be tough competition. They're absolutely will be. It's probably going to get only more difficult, but we aren't negative about being in the electronics world.

I am glad, like I said, we are in the aerospace world as well, but we are not negative about being in the electronics world and we feel there is a place for us in that world. It may not be $500 million, which it was maybe back in the late '90s, but we still feel there is a meaningful place. We feel that we are the company people come to often when they are looking for something special, looking for something different. They are looking for continuity, looking for a company that is plugged into the market, that understands who the OEMs are and what they want, the customers, a company that always deals with integrity, always, no matter what other people might do. And integrity is not cheap when certain of your competitors don't really feel the same commitment to integrity.

Anyway, so sometimes you lose by having integrity, but, long term, I think it is the right thing and I think it is something that the market recognizes. I am not sure you are interested in these kind of comments at all, but, nevertheless, I thought people should hear them because, may not be responsive to what you are specifically looking for, but that is how I feel about it anyway.

Those comments are helpful, Brian. I appreciate them. Last question, just in terms of the project you had announced -- or the James Webb project, what do you sense is the dollar opportunity here on an aggregate basis these next four to five years? It doesn't sound like it is all that major, but should this exceed $10 million-ish all in or how do we put that into context?

No, it will not exceed $10 million all in. I don't have the number because the program is still under development. So what they have said is that, for all the struts, we are it. But they still need to give us the design criteria for the struts, which is basically size and loadbearing and then we have to design the struts based upon that criteria. This is not a kind of commodity type thing or volume thing. We are probably -- each one is going to be a one-off. Obviously, there is a lot of premium that is paid for it because of all the design activity.

But no, Sean, this is not the type of thing that we mention because it is some big revenue opportunity; although it does lead to other space things. I think we are getting to be pretty well known in the space community as to where to go when you build significant space vehicles. But it is not like, for instance, the thing I mentioned about the contract with the engine company where there is some real revenue that we should see from that that has upside potential as well.

I just mention it, I guess, mostly because I feel very honored, we do and that it might signify to some people that maybe we're for real. I mean, let's face it, if they put that thing up there and those things break, that is not a great situation is it?

Agreed. I follow you, Brian. Thanks very much for all the color.

You bet.

(Operator Instructions). Morris Ajzenman, Griffin Securities.

Hi, Brian. Hi, Matt.

Hello, Morris. How are you doing today?

Okay, thank you. A question here, going back a couple years ago, your top line on a quarterly basis was probably running anywhere between $7 billion to $10 billion higher per quarter. And when I look at the associated gross margins and operating margins, gross margins were probably 31% to 33%, 34%. In the last couple quarters, you are running in the 20%s. Operating margins actually broke north of 20% for a couple of quarters and now you're running anywhere between 12% and 15%.

So my question is -- I mean you talked about, during the presentation, three consolidations of facilities, which will get you better operating leverage, but on account of that, just talk about, on the high-end performance particularly, competitors moving into the space. So my question conceptually, but nonetheless, if we get back to the revenue run rate we were at a couple of years ago, putting all these things together, could we get back to margins both on a gross and operating basis where we were previously? Or can they be higher or should we not expect those sorts of margins if we hypothetically return to those revenue run rates we had a couple years back?

I would say absolutely. That is what Park is always about. If you look at our history, we haven't had a lot of top-line growth, but we have always focused on finding a way to grow our bottom line. Now we would like to see the top line grow too and we have put a lot of hard labor in over the last years with developing new products in electronics and also aerospace so we can get some top-line growth. But we have always I think been able to do more with less, right? I mean that is kind of our way of doing things. So you look at equal top line, I would hope the bottom line would be better, not the same.

I guess what I am getting at the margins, the margins you had, again, a couple of years back, gross margins, 33%, 34%. Operating margins just north of 20%. If we got back to similar top lines, again, it is a big assumption on mix and everything, but you believe with certainty that those margins would be attainable should the regular level get back to what it was in the past?

I believe that is correct. Yes, I do. Now, I am not predicting anything, but --.

I understand that. I am not asking -- I am just asking is conceptually that still in the realm that things really haven't changed that materially outside the top line declining if it was to revert back, the (multiple speakers).

Morris, it is very much in the realm. Remember what we just said. You have to go back a year from April to get to the same top line. We have to go back two years to get to the same bottom line. Now you tell me what that means.

Okay, you have answered my question. Thank you.

There are no further questions at this time.

Good. Okay, well, thank you very much, everybody. It is always good to catch up and we will be talking to you actually a little sooner intervalwise because probably toward the end of June after we release our Q1 results. Okay? Thanks, everybody. Have a good day. Matt and I are here in the office if you need to talk to us. Bye.

Ladies and gentlemen, thank you for your participation. This concludes the presentation. You may now disconnect. Have a wonderful day.