Park Aerospace Corp (PKE) 2014 Q2 法說會逐字稿

Good morning. My name is Katina and I will be your conference operator today. At this time I would like to welcome everyone to the Park Electrochemical Corporation second-quarter fiscal year 2014 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

At this time I would now like to turn the 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 to Park's second-quarter conference call. I have with me as always, Matt Farabaugh, our CFO. Matt and I will start with some introductory remarks and we will go into Q&A.

Matt, why don't we get started with some financial commentary?

Okay, thank you, 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 March 3, 2013, 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 second quarter ended September 1, 2013 P&L which are not specifically addressed in the earnings release.

During the fiscal year 2014 second quarter, North American sales were 51% of total sales. European sales were 6% of total sales and Asian sales were 43% of total sales compared to 42%, 9%, and 49% respectively for the second quarter of the prior fiscal year and 48%, 9%, and 43% respectively for the 2014 fiscal year first quarter.

Sales of Park's high performance non-FR4 printed circuit materials were 88% of total laminate and prepreg material sales in the second quarter of fiscal year 2014, 82% in the second quarter of the prior fiscal year, and 86% in the first quarter of fiscal year 2014. Sales of Park's aerospace materials and parts were $7.5 million in the second quarter of the 2014 fiscal year compared to $5.8 million in the second quarter of the prior fiscal year and compared to $6.7 million in the first quarter of the 2014 fiscal year.

Investment income net of interest expense for the second quarter of the 2014 fiscal year was negative $108,000 compared to positive $179,000 in the second quarter of the prior fiscal year and negative $103,000 in the first quarter of the 2014 fiscal year. The net expense in the first and second quarters of the 2014 fiscal year was primarily the result of the interest expense associated with the Company's borrowing under a five-year revolving credit agreement in the fourth quarter of the 2013 fiscal year.

The effective tax rate before special items was 19.9% in the second quarter of the 2014 fiscal year compared to 15.0% in the second quarter of the prior fiscal year and compared to 19.0% in the first quarter of the 2014 fiscal year. The US GAAP income tax provision included a $2.2 million tax benefit in connection with a tax refund related to amended Federal income tax returns.

During the second quarter of the 2014 fiscal year, the Company had one customer, TTM Technologies, that was more than 10% of total sales. The four remaining customers rounding out the top five were ISUPETASYS, Sanmina, Viasystems and [Wooz], in alphabetical order. The top five customers totaled approximately 49% of total sales; our top 10 customers totaled approximately 61% of total sales; and the top 20 customers totaled approximately 73% of total sales.

Okay, Matt, thanks a lot. This is Brian. And in the last couple of quarters or so, Matt's comments are really limited to items that are not covered in the news release so Matt's comments are therefore more brief and more to the point. Also a transcript of Matt's comments have already been posted on our website so you can look up the data there. I know he is covering a lot of numbers, a lot of detail.

Also, just in case you didn't notice in our news release, we do a comparison in the tables to the prior quarter in this case the first quarter as well as the prior year's comparable quarter, the second quarter that was actually based upon a suggestion we got from one of our shareholders which we liked.

And it makes sense because in this world, things move so fast that the more relevant comparison is often the prior quarter rather than a year ago and as I think you know, Park's business is not really seasonal very much so it is not you want to compare second quarter to second quarter (inaudible) seasonality issues. So you might note that. And a lot of our comments also on earnings calls relate to the comparison to the prior quarter so it makes sense as well, doesn't it?

Okay so a little more financial perspective. For the second quarter first of all, second quarter versus second quarter the current year's second quarter the sales were a little bit lower but the bottom line a little bit better. One of the key reasons well in last year's second quarter, we still had our Zhuhai and Waterbury plant open. They were closed toward the end of the second quarter beginning of the third quarter so that is a big difference in terms of carrying those costs last year's second quarter as compared to this year's second quarter.

Also aerospace did quite a bit better. It is significant -- it is improving every quarter and if you look back to the second quarter of last year, it's significantly better so that is clearly a factor. And high performance, as Matt indicated, the high performance percentage keeps moving up. So those I think would be the three main explanations as to why the second quarter of this year might be better even though revenues were off.

Let's see -- I am going to bounce around here a little bit. Let's look at the second quarter this year versus the first quarter. So the second-quarter bottom line again better than the first quarter. Why? The key reasons, a little bit better revenue, revenue up a little bit, high performance up and again, aerospace. That is an important factor that continues to improve and that has a meaningful impact on the bottom line.

In the first and second quarter this year, the Waterbury and Zhuhai plants were not open. So that would not be a factor when comparing those two quarters.

The only thing I want to mention is SG&A in the second quarter is low and some of that is not sustainable. We can't quantify how much but some of it is kind of year-end items that are just being adjusted at the second quarter close, accruals for profit-sharing and bonuses and things like that which are not decided until the second quarter. So I just want you to be aware of that particularly the analysts looking at trying to figure out what is going to happen in the future.

So you could see the differences in SG&A from the second quarter of this year compared to the first quarter as well as the second quarter of last year and some of that improvement or reduction is sustainable but some of it probably is not.

Also for those of you who are interested -- oh, one more point. Don't forget to pay attention to that interest income, that interest income line especially when you are comparing Q2 to Q2 because there is about a $300,000 pretax delta worse in Q2 of this year as compared to Q2 of last year. And it is for two reasons. One is our interest income, the interest we earn on our cash is just very, very slight even though the cash position is larger. And of course the other reason is that we have a $52 million loan which we took out at the end of the fourth quarter and we are paying interest on that loan.

So when you look quarter to quarter, that is on an annualized number, it is fairly significant.

So what about how we are doing and the breakdown by month in the second quarter and the first three weeks of the third quarter. Okay, well, the news there isn't that great. The months of June and July were pretty good but August was fairly weak except for aerospace. So we had two good months in June and July and then August was not so strong unfortunately and except with the exception of aerospace.

And then the first three weeks of September, that trend continues more along the lines of August rather than June and July again with the exception of aerospace which continues to be relatively strong. But of course that is a smaller portion of our business and Matt told you how much already so the impact is not as much although I do want to mention that.

Yes, I don't know what to say. We sure like to put three or four good months together but we are feeling encouraged after June and July and then August just wasn't there for us. And I have a feeling this is something to do with the new normal they call it, this new economy that we have created for ourselves with more like a European-based economy in US with high unemployment, anemic growth, very significant debt that nobody knows how to pay off.

So I hope it is not the new normal but a lot of people are smarter than I am are saying it might be. Maybe that new normal will exist until we hit a wall at some point and then something might be done about it. But again that is -- that kind of insight is for smarter people than me.

Some other items I thought you might be interested in though. Let's see, last quarter we talked about a contract which we entered with a large jet engine company and for 2013, 2014 and 2015, only a small amount of revenue in 2013, less than $1 million and maybe about $6 million in 2014 and 2015. But I mentioned during the call that the customer had asked us to significantly increase that amount. We haven't finalized our arrangement with them but they are asking us to do that.

It is actually double, they are asking us to double the amount in 2014 and 2015 and they have also asked us to handle a very significant amount of business through 2021, very large dollars. We will keep you posted on that.

I noted during the first quarter call, I thought we would have finalized our arrangement with respect to this increase by the second quarter call and I said I would update you then. And we haven't -- the customer has been fairly clear they would like us to do this but we haven't finalized our arrangement with them in terms of the business going forward. But this -- it is certainly a major opportunity for Park. I don't think there is any way to describe it other than a major opportunity for Park.

Another thing I want to bring to your attention is that Textron AirLand, a division of Textron, just announced a new aircraft which is called a Scorpion. It is a strike aircraft, a military aircraft. We have been working on that program for I guess close to a year and we have reduced a significant number of the primary and secondary structures for that aircraft. We received permission to discuss this by the way. That is why we are doing it. We thought you would be interested.

These are prototypes but a significant portion of primary, secondary structures and also tooling for that aircraft. And the reason I mention that to you it is prototypes so the volumes aren't going to be significant in terms of dollars, the number of parts are very significant because it is basically a composite aircraft.

But the reason I am mentioning that to you is because I think it might be meaningful in terms of indicating what kind of progress we have made. If we are making primary structures for prototype structures and tools for a new military aircraft, I would believe that would mean we are kind of arrived. That is not for the second string or the B team I wouldn't think.

These prototypes are much more difficult in production because you have to do it very quickly, you don't have a lot of time for to put a lot of quality and engineering systems in. So to be successful in this kind of program and to be very responsive which I think we have been requires some talent and capability. So I just thought you should know that.

And you can look it up. It is called the Scorpion. I mean it is all over the news so just Google that and you will see all about the aircraft and nice pictures of it and everything else. So just thought you might be interested in that.

Some new products were announced in the second quarter, Alpha Strut, which is complementary to our Sigma Strut. Sigma Strut has been used in space mostly. James Webb, the Space Shuttle the Max Launch Abort system for Orion; the Sigma Struts are very high load-bearing struts, low weight high load-bearing.

The Alpha Strut has designed a new strut which is similar technology but designed more for aircraft rather than space meaning that the load-bearing capabilities wouldn't be quite that level but the economics would be more attractive to an aircraft company. Aircraft companies are generally not going to buy Sigma Struts. They are very expensive but when you go into space the premium for weight is quite a bit of a different equation.

I think someone told me once that NASA back in the shuttle days would pay over $30,000 a pound for weight savings. That is not the math that an aircraft company would use. They will pay something for weight savings but not $30,000 a pound. And anyway in any case, so that is a new product. We are happy about that and just was announced last month or two I guess but we have received some good interest on it and even just last week, we received an inquiry from a serious company that is interested in talking to us about purchasing a significant number of them.

We don't know whether it will pan out or not but the interest is good.

The other new product we announced is NL9000. That is an RF product. It is a PTFE-based RF product that we developed recently and that is for automotive radar and antennas but mostly automotive radar which is a very important emerging technology. You know most new cars -- a lot of new cars have very fancy radar systems on them to help you not get into an accident I guess. I have an old car so I don't know how these things actually work but I am told they are pretty nice.

But that is a product that also has received a lot of attention actually. It has only been out there I think again a month or two ago a couple of months, received a lot of attention. It has already been put on a pretty big program for a large automotive supplier, automotive electronic supplier. Too early to tell what that might mean in terms of revenue.

And just while we are on that topic, interesting comment every now and then I just kind of food for thought -- we introduced a product several years ago called Mercurywave not Meteorwave. Meteorwave is a little bit more recent. Mercurywave is probably three or four years ago. It is also an RF product, not a digital product and that is a non-PTFE product and that actually has done pretty well. It didn't go out there with a big bang but in the last year, it has gotten some really interesting traction on -- these are cell tower antennas mostly. This would be replacement for more traditional conventional PTFE-type materials.

So there are some updates on some new developments and some products. And I think -- let me just make sure -- I think I hit all the points that I had in my notes here. So yes I did.

Operator, I think we are ready to take some questions if there are any.

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

Yes, good morning folks.

Hi, Sean.

So if I could start on the aerospace, Brian, looking to see maybe if you can talk a little bit more about the strength that you are actually seeing coming through in revenues in that space today. It looks like that business was up about maybe 30% almost year over year and I think better than 10% sequentially. So just trying to understand a little bit more of what is behind that and the degree that you suspect that that could be sustainable beyond I think the explicit contracts that you laid out. And I have a follow-up to that as it pertains to that jet engine contract.

Well, the big question mark is always going to be the overall economy and that is difficult to predict. As I said even though the electronics revenues dropped off in August and September, aerospace continued to be strong. So they are not always tracking each other in terms of the overall economy as a driver. But aerospace is certainly not immune to the economy. No question about that.

So that is one factor I think we really have trouble understanding. But I think what is going on here in part anyway is that we are still kind of emerging as a player in aerospace so some of it -- some of this is going to be new programs that are getting on, market share, it is not just the economy. We are not just kind of floating up and down with the economy. But really what we have noticed so far is actually kind of a drop in a bucket as compared to the type of things we are talking about in terms of revenues and dollars.

And let me just say that we still have a way to go with Kansas. I don't think in my lifetime I will ever do that again, you know do a greenfield like that where we are just kind of pick a field somewhere and say this is where we are going to do it. But we paid a lot of dues for sure over the last five years and things are definitely getting better every week, every month, every quarter just in terms of our operating situation let's call it that. And as things get better and we get we perform better, that opens up opportunities for us.

When we are struggling, we struggled with the transition from Waterbury to Kansas. It is really difficult to get new business because we are just not executing that well you know? But in the last three or four months and it is a progressive thing, every month gets better, the execution is better and that opens up more opportunities for us and those opportunities continue to come. And sometimes from places we don't even expect or places we are not even looking, it just comes. It is not that we found the opportunity. The opportunity finds us.

So my feeling is they are is a place in the sun for what we are doing. We are trying to do things differently. We have a different attitude I think we are trying to have a different attitude about responsiveness and urgency and flexibility than normally is found in the aerospace industry. So let me just leave it at that.

The other thing is we have one facility that does parts and materials under one roof and that seems to becoming more and more of an advantage. It was hard to see what we were going to get done until maybe a few months ago because like I said, we still were struggling with the transition and operating difficulties. So again, it is hard to really do a lot of market development when you are not executing all that well.

But we are not perfect and I don't want to give anybody the impression we are or anything close to it but it has gotten a lot better and it keeps getting a lot better. And as that happens, I think the market is seeing more of the good things we bring to the table rather than just the operating difficulties during the transition.

So I think unless we have a problem, a major problem with the economy, the global economy particularly the Western economy, I think that it is sustainable. And also, Sean, I believe it has a lot of potential for acceleration. The things we are talking about make the current numbers you are looking at in terms of current growth really small like a drop in a bucket.

And I only mentioned one of them because that is a significant item, one item but there are other items that are coming our way as well. And so I think we feel good about what we have done. I certainly would tell you that -- my feeling with the benefit of hindsight is that the very important move we made whenever that was six, seven years ago, very important for Park. But -- and I think we are still yet to see the real results of that.

So what's the follow-up question?

Yes, I think that you hit on a few things there. Let me see -- the follow-on I have here is as you referenced some numbers for that jet engine contract, when you talk about 2013 and 2014, are you talking fiscal or are you talking calendar?

Calendar. So 2013, all calendar. This is calendar year arrangement. So for 2013, our 2013 is long gone. For calendar year 2013, less than $1 million. The original contract which is still in place called for about $6 million a year in 2014 and 2015 but we have been asked to double that and then extend to 2016 and that has not been finalized yet. And then we have asked to handle out years 2017 through 2021 where the numbers escalate really dramatically.

Okay. So all else being equal, it sounds like if you are going to do sub $1 million for this calendar year, they are asking you to double that say that is a 12. So let's say the delta now we are at 11 as an incremental number to add to whatever your otherwise calendar 2014 numbers would have been. And then there are some other perhaps not as large sized contracts similar to this jet engine contract but there are a few others that could be incremental or should be incremental as well in 2014. Is that the proper way of thinking about this?

Yes, I think so. So double, it's easy math. So it would be $12 million, $11 million, $12 million let's say in calendar 2014 and in calendar 2015. And then more thereafter. Right. And then there are other things we are looking at, always looking at that none of which to my knowledge have this significant large and also fairly fast impact.

But there are things which could impact 2014 nevertheless although I am not aware of anything that would be any one thing, Sean, which would be at that scale.

Okay. Brian, if I can just jump to the electronic side and then I am going to jump back in the queue. The high performance percentage of 88%, that seems to imply about $32.5 million number. Is that roughly accurate? And if so, can you then explain the non high-performance business, how that had performed in the quarter or what might have happened there? It seems like there might have been a decent dip in the quarter versus May down perhaps double digits when you look at that revenue line. Thanks.

On high performance, so our high-performance is what 88% now of electronics and so right, that means that non-high-performance is 12% and it is going down. We really don't get any new non high-performance business and I don't think we have for a long time. So mostly we are running out the legacy stuff but we are just not really attractive for -- in the non high-performance area.

So what we have in the high-performance is really legacy and that is going to continue to run out. And obviously it is our challenge and it is important that we continue the emphasis -- sorry -- continue to emphasize the high-performance area and I think so far that has gone okay.

The key thing there is for us to continue to develop new products and to get those new products on new programs, qualified new programs because maybe we haven't really covered that before in conference calls and I think it is an important point that you see lots and lots and lots of news announcements of this and that from different companies -- I mean it is like every day. But the key thing is are those products credible? Have they been well tested? Is the data valid? Are you ready to manufacture it?

In other words, when we announce a product, we have a reputation for announcing much more slowly than others. It might take an extra nine months to announce a product but what it means is when it crosses the wires next day -- no sorry, next minute -- if somebody calls up customer service, they want to order it, we will take the order, delivery next week. So I just want you to be aware there is another element to this. It is not just coming out with a nice press release about a new product. The product has to be robust, the data has to be valid and we need to be able to manufacture it on a consistent basis and be able to deliver it.

I don't know, I think that is going okay. It's always more of a challenge, right, and we discussed that but that is our challenge and we continue to come out with these new products that are valid and viable products that get into the market. And I feel pretty good about how we are doing with that -- with that effort I mean.

That's very helpful, Brian. Thank you.

Morris Ajzenman, Griffin Securities.

Hi guys.

Hi Morris.

Okay, thank you. A question just kind of following up on the electronic side. You mentioned weakness into August and through September. Any geographic areas where the weakness was prominent? Anything you can give more color on that from a geographic perspective?

Not really, no. Nothing dramatic. The weakness seems to be -- I don't know -- we had this question last quarter, Morris, and we are reluctant to give a lot more color on the first three or four weeks of a new quarter because we are concerned that that is almost too much information. It could therefore be misleading. Week to week it is can a be a little different.

But if you look at the first three weeks of this third quarter, the month of August, you would have to say yes it is hard to identify a clear and discernible trend of any kind in terms of a geographic pattern.

Okay. Switching gears back on the composite side, you highlighted during the conversation here again in the previous quarter the jet engine manufacturer, the potential possibilities going forward can be meaningful and then you highlight Textron gave you permission to discuss talking about working with the Scorpion. How many other companies -- and I know you can't mention them -- are you in close negotiations that could be meaningful? Is it just a couple? Is it half a dozen? I really have no idea of how many other potential customers of a meaningful size you are in negotiations with. Can you give us some sort of ballpark idea?

Well, you know what, Morris, I guess it depends what you mean by negotiations. A lot of these situations don't end up with discussions of long-term contracts. In other words, we get an RFQ and we respond with a quote and it is a multiyear quote but it is adjusted based upon -- the price is adjusted based upon certain considerations.

When we get to a situation like this engine company, it is not going to be that way. They are not going to give us an RFQ and we respond and then they give us POs. There is a long-term contract that is involved and that is subject to a lot of back-and-forth negotiation. So it really depends what you are talking about.

At this point, I mean I don't even know what to say but I guess there are half a dozen or more situations we are looking at in different stages of maturity but this situation with the jet engine company is a little different because of the scale and size and how much is at stake for not only Park but for this company as well. From their perspective, they need -- they absolutely need a contract because so much is at stake.

Last quick one on the aerospace. Anything as far as on the horizon for acquisitions for the composite aerospace?

Last quarter we announced we were looking at something and we were and that actually was kind of an unusual thing was aerospace and electronics both. But that just kind of fizzled out. It just died on the vine I don't know what you would call it. We are looking at smaller acquisitions as well that would be both aerospace -- potentially aerospace and electronics oriented. So the I guess the answer is mostly no.

I think some of the discussions that result could relate to use of cash might be more contracts where investment might be required. And I guess I should say -- I am a little bit -- I have mixed feelings about this but I know you are interested so I will talk about it a little bit. This jet engine company, I mentioned the out years, we would definitely need to make an investment in order to be able to service that expectation -- I mean a factory.

Thank you.

Leonard Cooper.

Hello, can you hear me?

Yes, Len. How are you doing?

Hi, Brian. Each time I call on these conference calls, you never mention depreciation or amortization. Is there a number for that for the last quarter?

You know, I noticed that. I read this transcript from the prior quarter. I noticed you asked that question and I was going to mention it, Matt, maybe we better include that going forward and I forgot to. So our bad. In the third quarter, we won't force you to ask the question, Len. Do we have the D&A?

Yes, it is a little under $1 million a quarter.

For both?

Yes, for the combination of D&A.

Also you asked capital or you just (multiple speakers)

No, no. He was just asking on the depreciation and amortization.

Okay. Last year there was a return of capital situation. Is that something that my accountant should worry about for this year?

Well, I don't know. I mean accountants are paid to worry about everything aren't they? But I really don't have any comments about it. I think you all know the situation which is that our cash is largely overseas. We have the $52 million of debt now and it is something a little less than $60 million of cash in the US.

I don't know the exact number but of the total, much less than half of it -- well less than $60 million, somewhere $55 million, $60 million let's say is in the US and the rest is overseas. That is not an answer. I just want to remind you of that factor because it is a consideration.

Okay. I hear a lot about 3D printing. Is that of any interest to Park? Does that affect Park?

Well it is a new technology that is being talked about for electronics as well as aerospace, right?

Right.

And these are what you call bleeding edge type technologies and we try to stay tuned in with these things and try to understand what it could mean to us, how it could impact us because that is really the question often with these new technologies. We are not going to be driving the technology, we are not that kind of company, we are a smaller company. But for us, we need to figure out what it might mean for us and how we might want to take advantage of it.

There are a lot of technologies, half dozen of those kind of technologies which are bleeding edge, which you are trying to figure out what it means and whether they are going to really take off or not. And if they do how it might impact us and how we might be able to take advantage of it. (multiple speakers)

Thank you. Well, these seem to be very exciting times from an engineering point of view and I think you are to be congratulated for the progress you have made in these endeavors.

Thank you very much.

Thank you. Bye.

Jiwon Lee, Sidoti & Company.

Thanks, good morning. Just let's see if we can knock out a couple of quick questions. Brian, back to your aerospace and composites, now with this jet engine Company, are you sole source?

I don't think we can answer the question. I mean we know the answer but I'm going to have to be very careful about these discussions because I don't really know -- we haven't identified the company but even still, there are certain things that this company may be identified at some point if they give us permission and there are certain things that they probably don't want to be known on their side.

Okay, that's fair enough. And if things go well in 2014 and 2015 and you finalize your 2016 negotiations soon and then there is an uptick indicated some investments, could you give us some ranges as to how many millions might be necessary? It doesn't have to be precise but give us some ideas about the capital that might be necessary.

$10 million.

About $10 million. Okay. Very good.

That is a real -- you asked for an estimate and I don't mind sharing that with you but that is kind of a rough estimate let's call it that.

So at the present time, the infrastructure that you have can support a lot of the business that is going to ramp up.

What is the question? Sorry.

At the present time I guess until 2016, your current infrastructure is enough almost enough to support this business ramp. Is that the right way to understand it, Brian?

No, it's enough. It is not almost enough. It is enough. And 2017 is when it would really -- maybe 2016 but certainly 2017 that is when it is not going to -- we are not can a be able to make it anymore.

Terrific. And then switching gears to the PCB side, Bryan, you mentioned the automotive radar that is relatively sort of a new market for you and that is strong as well as the antennas that is strong. I would imagine still just looking at the PCB side of things that they are a relatively smaller portion of your overall business. So talking a little bit more about the traditional market for your PCB, the networking and datacom, could you talk a little bit more about the dynamics that might be going on in that market?

First of all, you are correct that those other products relate to our (inaudible) what we call digital and digital, that is our main market for electronics and as you call, it datacom, networking, Internet infrastructure based upon cloud computing and all the latest and greatest things.

When you look at our numbers and the numbers in August and the first three weeks are anemic, a lot of that is based upon that market and I don't know, I have a feeling this is tied into somewhat of an anemic economy that we have globally. I don't know if it is any one particular aspect of that market, Jiwon.

But -- look, I have got to be careful because I know people want to know what is going on currently and we try to address that but I don't want to overemphasize it either by spending so much time on it. I just want to let you know what the facts are and those are the facts. And as I also commented, it is kind of frustrating because you would like to put together three or four good months in a row and it seems like you have got two months and you feel better and then the next month isn't so great.

I don't think anything we are talking about by the way relates to anything with market share. It is just like what you said, it is the overall market, Jiwon. So I am not -- that is not a very specific answer but hopefully that is a little helpful.

No, that is helpful. Thanks. Just I forgot one question related to the Textron thing. It is a prototype now but typically with this type of military program, what is kind of the lead time and the risk of this program not actually materializing in the commercial value?

Okay, now I really shouldn't say because you need to ask Textron that. And I have really got to be careful there because I don't want to make news for Textron. But you might want to just Google it and look at up because they are very out there with this product. A lot of promotion, a lot of news coverage, seems to be an exciting concept because it's a little different than the normal way of developing a military strike aircraft.

But in terms of the expectations for the aircraft and things like that, I think that you really need to talk to Textron about it.

And I just also should comment that we are talking prototypes so that doesn't mean we are on the production parts. I don't know whether we would be or not. So I just want you to be aware of it. It is not significant volume in terms of revenue because it is prototypes. It is a lot of parts. The reason I brought it up is not so much that it has a major revenue impact, it is more that to me anyway it is indicative of the fact that we have developed some I think some pretty serious capability actually.

Understood. Good luck. Thanks so much.

Okay, thanks, Jiwon.

[John Lopez], Vertical.

Hi, thanks so much. I don't want to get too focused on the short-term stuff but you guys had given us like a little bit of a roadmap I guess last quarter. And is it just safe to assume -- I don't need the exact numbers -- but is it safe to assume that the June and July were sort of north of $15 million a month and then the August number dropped sort of below $14 million? Is that sort of the right framework?

I really -- that's not what we want to get into actually quantifying the months. We haven't done that in the past and I would prefer not to do it. Also one thing we have to explain which is important is that our June month is a five-week month and our July and August are four-week months so there is another reason we wouldn't want to do that apples to apples. But I would say you are probably in the right direction. Your numbers are reasonable.

Okay, okay. And then just qualitatively, is September lower than August?

No.

Okay. So kind of banging around where it was in August?

I think that is a good way to describe it, yes.

Okay, okay. And then I just want to go back to the market share thing for a quick second because if I sort of just look at the string of numbers you guys reported in the printed circuit materials and I am using the rounded numbers I guess so maybe I am off by a little bit. But it looks like that business hasn't grown on a year-on-year basis for like two years.

And the other thing just to get your thoughts on is Sanmina was a 10% customer. They have dropped off. Flex was a 10% customer, they have dropped off and you guys have referenced some stuff going on there last quarter. TTM sort of the last 10% customer at the moment. So can you just sort of step through why are you so confident this isn't a marketshare problem because the markets have not contracted for two years and you had some guys that were 10% that aren't now. So how do we kind of square all that stuff?

Okay, so in terms of the customer share, it moves around. These are circuit board companies and the key thing is the OEM program. And sometimes the programs move around from one circuit board company to another. That may or may not have a big impact on Park when those things move around.

For electronics, it is not really a topline push for us and we have spoken about this for a long time. We think it would be a mistake for us to go after topline in electronics. So for us we need to continue to protect the quality of our revenues and that is why you see we have more and more high performance. It is kind of a natural -- it is kind of a self-actuating strategy as the low performance becomes more commoditized, moves market share there and we pick up business in the high-performance area.

So also our new products have been out I guess a year or two now and when I mean new products I am talking about not the ones we were just referring to the new digital products of [Dash 20] and Meteorwave. And I have said before in the last couple of quarters that it seems like those products are getting good reception. They are getting on new OEM programs. That is what we really want to see.

If you ask me what I expect, what we expect for the future it is hard to say. We would like to see some top-line growth but that wouldn't be our focus. Our focus is the quality of the topline rather than the quantity so that the bottom line continues to be protected and enhanced.

Got you. Okay. But just -- and I am not trying to parse words -- but it sounds like what you are sort of saying is maybe there is some proactive share loss to the extent that you are not chasing business that is sort of low-end that you may have chased before. So there may be some proactive pruning within the portfolio?

I am not sure I understand what your point is but we have lost market share in the low-end for years now to the point where there is very little left in terms of low-end. And now the large majority of what we'd have in electronics is what is called high-end or high-performance.

I talked about this in the last couple of quarters and let me just comment is that we are fairly simplistic in our description of high-performance and non high-performance as if all high-performance is equal. That is not really true. There is different strata within high-performance and our revenues within high-performance are getting pushed more to the higher end of high-performance which means higher margin.

I mentioned our Signal Integrity product line the last couple of quarters where we are getting -- that is a bigger portion of high-performance and those kind of trends I think will continue but it really is not just a market thing it is up to us to continue to drive the story from the perspective of developing new products and getting new products in the market and on new programs.

Got you. Makes perfect sense. So sorry, just so I can -- the soundbite in my head, what you are effectively arguing is the trace of the printed circuit materials business is mostly a function of the trace of the market and not so much related to the other stuff?

Well, in the short-term I think absolutely, absolutely in the short-term. If you look quarter over quarter, I think that is really a general economy or market situation.

Got you. Okay. Sorry, just one last one to come back to the aerospace side and that stuff sounds really exciting. I just want to make sure I understand the dynamic which is -- and I am not asking for an update on the negotiation you have spoken about it. But is there a margin implication -- you talked about the potential for the investment but is part of this that there is like a concern on your part is the only word I can think of just in terms of what the initial margin profile this looks like on the upsized version of that? If that question makes sense?

So in other words, the initial negotiation you had was for that sort of $6 million for the next couple of years. If that does get upsized meaningfully, does that come with a price concession or something on your end that would lead you to some concern about the profitability of that for the interim period?

Especially the out years and that would be something we would have to negotiate. So we will see what happens. But of course it is a concern. I am not so concerned with the immediate term but the out years and those are part of the things that are being discussed now.

Got you. Very helpful. I appreciate all the answers. Thank you.

Okay, you bet.

Sean Hannan, Needham & Company.

Yes, thanks. Actually most of my follow-up have been answered. A quick housekeeping question though, CapEx, what was that in the quarter?

CapEx for the quarter, it wasn't actually very significant, a couple hundred thousand.

Very small.

Okay. So $200,000, $300,000?

Yes.

Okay. Thanks very much for the color, folks.

With no further questions at this time, I would now like to turn the call back to Mr. Brian Shore for closing remarks.

Okay, thank you operator and thank you all for listening in and thank you for your questions. Matt and I will be here the rest of the day. If you have any follow-up questions, feel free to give us a call. Thank you again and have a good day. Goodbye.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.