Park Aerospace Corp (PKE) 2017 Q3 法說會逐字稿

Good morning. My name is Vince and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp third-quarter FY17 earnings release conference call.

(Operator Instructions)

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

Thank you, operator, this is Brian. Good morning everybody, happy new year. I'm with Matt Farabaugh, our CFO, as usual, and we will start with some introductory remarks of course and then we'll go into the questions.

Matt, why don't we get started with some of the financial commentary. Sorry, let me just also add before even Matt gets started that Matt's comments, a transcript of Matt's comments, will be posted on our website. So you can check our website for the detailed information. Go ahead, Matt.

Thanks, Brian.

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

We have set forth in our most recent annual report on Form 10-K for the fiscal year ended February 28, 2016 various factors that could affect future results. Those factors are found in Item 1A and after Item 7 that Form 10-K. Any forward-looking statements we may make are subject to those factors.

I'd like to briefly review some of the items in our FY17 third quarter ended November 27, 2016 P&L which are not specifically addressed in the earnings release. During the FY17 third quarter, North American sales were 49% of total sales, European sales were 10% of total sales and agent sales were 41% of total sales, compared to 53%, 7% and 40% respectively for the FY16 third quarter, and 55%, 7% and 38% respectively for the FY17 second quarter.

Sales of Park's high-performance non FR-4 electronics materials were 94% of total electronics material sales in the FY17 third quarter, 94% in the FY16 third quarter, and 93% in the FY17 second quarter. Parks electronic sales were $19 million or 72% of total sales in the FY17 third quarter, compared to $25.5 million or 74% of total sales in the FY16 third quarter, and $20.2 million or 70% of total sales in the FY17 second quarter.

Park's aerospace sales were $7.5 million or 20% of total sales in the FY17 third quarter, compared to $8.9 million or 26% of total sales in the FY16 third quarter, and $8.8 million or 30% of total sales in the FY17 second quarter. Gross profit for the FY17 third quarter was $6.6 million or 25.1% of sales, compared to $10.3 million or 30% of sales for the FY16 third quarter, and $7.2 million or 24.9% of sales for the FY17 second quarter.

Selling, general and administrative expenses for the FY17 third quarter were $4.6 million or 17.4% of sales, compared to $5.3 million or 15.3% of sales for the FY16 third quarter, and $5.1 million or 17.6% of sales for the FY17 second quarter. Investment income net of interest expense in the FY17 third quarter was $87,000, compared to negative $128,000 in the FY16 third quarter, and $35,000 in the FY17 second quarter.

Before special items, earnings before income taxes for the FY17 third quarter were to $2.1 million or 8% of sales, compared to $4.9 million or 14.3% of sales for the FY16 third quarter, and $2.2 million or 7.4% of sales for the FY17 second quarter. Before special items, net earnings for the FY17 third quarter were $1.9 million or 7.3% of sales, compared to $4.2 million or 12.3% of sales for the FY16 third quarter, and $2 million or 6.9% sales for the FY17 second quarter.

Depreciation and amortization expense in the FY17 third quarter was $720,000, compared to $847,000 in the FY16 third quarter, and $825,000 in the FY17 second quarter. Capital expenditures for the FY17 third quarter were $100,000, compared to $92,000 in the FY16 third quarter, and $53,000 in the FY17 second quarter.

The effective tax rate before special items is 8.2% in the FY17 third quarter, compared to 14.2% in the FY16 third quarter, and 7.6% in the FY17 second quarter. For the FY17 third quarter, the top-five customers were Data and Electronics, GE, Sanmina, TTM and WUS in alphabetical order. The top-five customers totaled approximately 36% of total sales during the 2017 third quarter. Our top-10 customers totaled approximately 49% of total sales, and the top-20 customers totaled approximately 65% of total sales for the FY17 third quarter.

Thank you, Matt. This is Brian again. Let me go through a few items to update you on our business.

First of all, a non-Park thing, but it applies to a lot of companies, let's call it the Trump factor. I guess not too many people thought that the outcome was going to be the outcome, but as a result, it seems like there is a very serious commitment on the part of the new administration to do things with taxes, particularly regarding corporate taxes and repatriation. Park has about $240 million overseas, and about 25% tax will be paid to repatriate that money under the current tax environment. That's an approximation, but use that for reference. That would be about a $60 million tax bill if we repatriated that money.

With the changes that are being proposed, that could go to zero because we've already paid 15% on that money. So that money is after 15% tax approximate, these are round numbers. So the theory is that we would pay the net difference between what we've paid and the new tax rate. In addition to that, there is discussion of a repatriation holiday, a one-time thing. So that is very significant for Park.

We've been waiting for this for a long time, and even if the results were not as favorable tax wise we would have at least paid off the loans that we had. We would have said, okay, fine it is what it is, no reason to continue to wait and we would have paid off the loan of which I think are about $70 million now. But this is a big deal for Park.

So if these tax laws go into effect as people are discussing and if and when they do, that will be an opportunity for Park to repatriate significant amounts of cash. At that point, whatever the tax laws are, they are, and there's no reason to continue to wait. We're not going to wait another two years or four years, whatever.

At that point, we would expect to pay a large cash dividend. That is something that the Board has discussed, and that would be subject to something else happening between now and then like a big investment opportunity, an acquisition or something like that which is not in the cards right now, or some restriction that would be imposed on repatriation like to pay dividends or something like that with the cash.

So it's not a guarantee, but I thought you should know our intention. And we've been waiting for this for a long, long time, we've had that money overseas for a long time. We keep waiting another two years, another two years, another two years. But as we know, there has been pretty much gridlock in the government for long time so nothing has happened but it seems like something will happen. That's what the experts seem to believe anyway, is something will happen soon and it will be significant. So I just wanted you to know about that, I wanted you to know what we would do if something does happen in terms of a tax law change.

I'm not going to speculate as to what the tax law would be or when it will be enacted. But if and when a new tax law is enacted, we would intend at that point to take action in terms of a large dividend or some other way to return cash to shareholders, subject again to some other usage of the cash coming up between now and then or some restriction that would be imposed by the government. Just wanted you to be aware of that, you might as well be aware of it because it is something that has been discussed seriously at the Board level.

One other thing I want to mention to you which we really don't talk about very much, but it's become significant enough that you probably should be aware of it. The strong dollar, the weak euro actually has a negative P&L impact on our Company because inter company loans, these are not loans of outside people. But the way it works is that the loans are denominated in dollars, so with the weak euro, our French location, have to come up with more euros to pay the loans off and there are negative impacts to the P&L.

These are really not cash items, they're book items, but in the third quarter, it was $96,000, in the second quarter $81,000, first quarter $41,000. Now if the currencies level off, obviously that issue goes away but I just thought you should be aware of it, those are all SG&A items, by the way, those negative impacts.

Let's go to a discussion about the third quarter and the fourth quarter. The third quarter is pretty much a continuation of the second quarter in terms of it being an electronics story, electronics continue to be weak, the electronic revenues continue to be weak as you noted already from mass commentary. Aerospace is not really the story here in terms of explaining the P&L weakness and the top line weakness, it really continues to be an electronic story, at least it did in the third quarter continue to be an electronics story.

So as far as the fourth quarter is concerned though, I thought you'd be interested to know that we got off to, I would say, a very good start. We have five weeks in the books, there's a five-week month of December. So the bookings, the revenues and especially the bottom line is coming in quite strong in the first five weeks of the fourth quarter, that's basically the month of December, which is interesting because normally you might expect the summer to be a little weak because the two weeks of holidays that are inter [weaved] into the December month.

I just thought you should be aware of it. I know you are always interested in how the current quarter is going, so again I would say we are off to a pretty good start in the fourth quarter. Something seems to be going on there.

Let's talk about electronics, and then we will talk about aerospace, actually a little bit more in electronics. So, it seems like the third quarter was the bottom and it's moving up now, and that is consistent with my just the prior comment I made about the fourth quarter in general, and that also was an electronics story. Someone asked me at the end of the second quarter whether the second quarter was the bottom, and I said I didn't know but it looks like the third quarter was the bottom, at least based upon the first five weeks for the fourth quarter.

So what's going on? Let's break it down, let's break electronics down into Asia and North America. So we have to go into some sub categories here because the story is really quite different and the markets are different, the dynamics are different between Asia and North America.

When we talked last time after our second quarter and during our second quarter conference call, we talked about pursuing OEM program agreements. Our focus for a long, long time has really been the customers, the circuit board shops and we decided after some difficult self analysis, whatever you call it, that maybe that wasn't the best way to go. It was a good approach I think for us for many, many years we decided that we really needed to change our focus more toward OEM marketing and reaching program agreements with OEMs.

The focus of these efforts has been mostly on the Meteorwave product line, and that's our most advanced electronic product line, Meteorwave 1000, 2000, 3000 and 4000. It seems like the market is enamored with Meteorwave, the Meteorwave product line that is the feedback that we're getting, and that's the feeling we have from lots and lots of different sources.

Let's talk about what we've achieved so far just in the last quarter. We have four OEM commitments agreements, program agreements, again, related to Meteorwave. 15 additional OEM program agreements under negotiation.

I should say those four OEMS, they are not little OEMs, they are the big ones, the biggest really. And we have 15 additional OEM agreements that are under negotiation. We have 14 OEMs that are qualified Meteorwave, 20 more OEMs are in the qualification process, 50 circuit board shops have tested Meteorwave, 9 circuit board shops have ULs for Meteorwave.

We also are working on with OEM programs for other products, [PTFC], and Mercurywave which is an RF product, I think you know that, Poly and the [M-12]. But the main focus is on Meteorwave, that is our leading digital product as you know.

Just one more thing, in Asia, before we shift to the US. We talked about a joint development agreement that we have been working on I guess for over a year now with one of the major OEM's in Asia, and the candidate materials have been scaled up, that means we have done manufacturing runs with these materials and they are being tested. So I think that project is going well, that's a nice project for us to be working on, especially considering the OEM we are working with.

The US is quite a different story. My feeling anyways, the US electronics is more of a niche market and there aren't going to be really big volume opportunities by making large deals or reaching large agreements with OEMs. I just don't think the US is that kind of market.

So the same story as when we talked last at the end of the second quarter. We're working on doing a restructuring out West. We have two locations, California and Arizona, and there have been a number of intervening events that have prevented us from going forward from implementing the restructuring plans, we have two or three that we have under consideration.

We got delayed a little bit for good reason though, it wasn't that just we didn't get to it. There were other things that came up that caused us to take another look. I think that within maybe a month we will make a decision as to how to restructure and we'll go. We are not talking about closing a facility, we are talking about restructuring the two facilities and operating them really as one business unit.

Once the restructuring is complete which is probably about a six-month give or take timeframe, it will a $3 million to $4 million benefit per year. And the cost, the one-time cost, is probably again in that range of $3 million to $4 million, something like that. We haven't a finalized a plan, so I'm just giving you some ballpark numbers but I wanted you to understand what we are doing and that is going to be significant in the US I think because there isn't really, at least in my opinion, opportunities for huge volume increases or benefits or whatever you want to call it in the US for electronics.

Let's go to aerospace. I think aerospace continues to be a pretty optimistic story for Park. We have a solid team in aerospace in Kansas, which I think is maybe for me maybe one of the best news items we have and that bodes quite will I believe for our future as a company.

I think we have a pretty nice thing going in aerospace. Now, I'm not concerned that anybody is going to take that in the wrong way, meaning that could relax and become complacent. I'm not concerned about that at all because our team, our aerospace team, doesn't think that way and that is why I think we have very good prospects for aerospace. A lot of good things are happening for us, but I think the opportunities continue to be quite significant.

Last time I think I mentioned that we are working with one of the very large aircraft OEMs in the world on a number of different specifications. We signed a qualification agreement on one of their specs. Just so you know, that is a big deal when two parties sign a qualification agreement.

That being said, the screening has been done, the discussions are over and now we're doing it and the reason is for that is that both parties now need to make a serious investment of time and money. So neither party is going to go forward unless there is a very high expectation of success. There are a few other specifications that we are pursuing.

Also, an interesting significant parts opportunity has come our way with that company for a legacy aircraft. It is parts using our materials also. I'm not really at liberty to go into any details, but it's a very nice opportunity for us. And it also fits within our business culture of being a niche company, and doing difficult things, moving quickly and responding quickly. Like I said, these are legacy airplane parts, so it's a different kind of mindset.

Sometimes spares have to be built very quickly. Nobody wants to inventory of lots of lots of spares of anything. So it's a good kind of business field for us to pursue, meaning legacy aircraft. There are, I think you all know, just thousands and thousands of legacy aircraft out there also so the opportunities are quite significant.

With GE Aviation, last time we spoke I think I mentioned that they have suggested that we enter into a life of program agreement rather than I think originally it was going to be maybe a 10-year agreement. And I'm sorry to say this, but we're still working on it. The progress is a little bit slow, but we are still working on the life of program agreement.

We also I think you know have entered into a joint development agreement with GE as well, and that is going I think pretty well. This program is being pushed pretty hard. GE wants to be in production with this new product by January 1, 2018, and that probably is an aggressive schedule but that is the objective. It's a bit opportunity for Park, this development project, not only with GE but with others.

Actually something else has come up with GE recently, and that's a large part, that would be using our materials and we have been given the go ahead on it for Phase 1 anyway. This is a development scenario, but it's really nice to be doing a large part for GE Aviation, and we are not able to go into any details about that part at this time.

Scorpion Jet, we have been working the Scorpion Jet program for a while. I think you know that. We produced a large number of composite parts and assemblies, also low-volume tooling for the demo unit which has been flying I guess for a couple of years now.

But we also produced a large number of composite parts, assemblies and low-volume tooling for what they call, what Textron calls, the first production conforming Scorpion Jet. I had that in quotes, I had to read that correctly. That had its maiden flight on December 22, 2016.

We are not really able to say anything more about the program, except we are very pleased and honored to be working on this program. If you want to know more about it, I need to refer you to the Textron website. But like I said, that first production conforming Scorpion Jet had its maiden flight on December 22, 2016. You can see pictures of it and everything. We produced a large number of composite parts, assemblies and also tooling for that aircraft. So I think covering Scorpion, that really wraps it up in terms of aerospace.

Operator, why do we go to the questions at this time.

Yes, sir.

(Operator Instructions)

Our first question is from Sean Hannan of Needham & Company.

Thanks, folks. Can you hear me?

Just fine, Sean, yes.

Good morning and happy new year. The first question I have here is on the aerospace side.

In terms of that joint development agreement that you had referenced with GE really pushing to want to be in production by January 2018, is the opportunity for that a number that has factored into how you've qualified the ramp up of your aerospace business over the next few years, and is there any way to get a sense of your expectations for how that may contribute to the segment?

Those revenues have not been taken into account at all. I guess we are trying to be conservative. The information we've given you has been based upon specific forecasts related to programs that we are on. So the variable is how many airplanes are built. We are not just speculating pie-in-the-sky stuff with the information we've given you in the past about GE. So we have not included in this information at all.

However, I should say that the opportunity is very large. Remember we talked about the development agreement with this big electronics OEM? I would say it is more of a niche opportunity. The development agreement with GE is no niche opportunity. It is very large, and they have been very -- I don't know what you call it, kind or helpful to our cause because they have not prevented us from selling this product to other companies.

So the opportunity is very large with GE but also with other companies as well, other aerospace companies that would use this product. I can't quantify it. We have been given some forecast numbers from GE, but we are really not at liberty to discuss those. But it's not a niche product opportunity, it is significant dollars.

Okay, that's helpful. And then whether you would want to include, exclude, it sounds like you probably want exclude any characterization around how to think about the aerospace from here. Not sure if there has been any recalibration of your expectations for how this business ramps for you over the course of the next one to two to three years. Could you provide a little bit more insight around that, at least where we stand today at the beginning of 2017 here?

Really no update, no change that we can report based upon our second quarter call. There's nothing -- obviously, Sean, a lot goes on, a lot of back and forth, a lot of discussions, negotiations. But no real change to report.

Okay. Switching over to the electronics side for a moment. It sounds like you have pretty good progress here, and perhaps a lot of optimism in terms of some potential ramp up with Meteorwave over the coming quarters or years. Just wanted to see if I can get a summary perspective from you around that, the degree that you expect that or would hope that you can really start to grow that business once again. So that would be part one.

And then part 2, if there is really more of a muted expectation, because structurally this business is really different than it was 15 years ago. At what point would you guys need to take a really hard look at does it make sense to be a part of Park anymore and maybe there is an opportunity to capitalize at least on a business line that is getting some good momentum and perhaps monetizing it, especially as we think about the bigger picture where aerospace is going to? Because I don't believe that there is necessarily a lot of synergy between the two segments.

Sean, I think we updated our forecast for the next four quarters for Meteorwave. A pretty detailed forecast every week or two. We have a lot of focus on that. The optimism you referred to is correct. It is based upon our expectations or forecasts, and the forecast is not just a pie-in-the-sky forecast. There's no other category, they are all names and dates and things like that in the forecast.

So I think that optimism is warranted. I think we have something here, something going that has promise and opportunity for Park especially here in the short term, let's say next year or two. We do expect based upon our internal forecast some significant revenues though just in the next 12 months. So this is not a long term 3- to 4-year scenario.

As far as electronics is concerned long term, the synergy really needs to be based upon the Park principles and culture. That is the key thing. It doesn't have to be synergy based upon their product lines or technology, although I think you know there is some synergy based upon the product technology and manufacturing technology. The markets are quite different, and there is very little synergy. But the synergy, if there is any synergy that really binds the two business activities, relates to and is based upon the Park culture. The Park culture that's described in our annual report letters and things like that.

Look, you're asking obviously an interesting question and it's a sensitive question. I guess what I can say specifically about is right now I think we have some reasonable basis for optimism. We don't want to be like everybody else. We are not interested in just being another supplier. We need to be special. We need to be different. We need to be unique. If we are not, then I don't know what the future is. So that's what I'm talking about when I refer to those Park principles.

We can never get complacent, good is never good enough. And maybe those things just sound like words and things like that, but for me anyway they would have to be a lot more than words. So as long as there is the optimism and especially we are abiding by the Park principles, I think the future is just fine.

Okay. Last question here, is there a way to take a shot at providing at least some type of color in understanding the relative cash flows of the electronics business versus the aerospace business, either as it stands today or how we're thinking about it over the course of calendar 2017?

I don't understand that, could you -- I'm not sure I understand what you are asking for, Sean.

What I'm trying to understand a little bit more about is, when you think about the cash generation coming on a per segment basis, is the electronics, where is that significance versus the aerospace side? Is there an ability perhaps to continue funding say some of the development within the aerospace side, so an effective subsidization coming through on a more mature, better cash flow scenario on the electronics side? I'm just trying to understand the relative merits of the two segments, how strong they are and what you may expect this year as that changes?

Okay, let me do the best I can. That is a pretty wide open question.

Electronics is still going to be our legacy -- is our legacy business. It is a mature industry. Aerospace is the real growth story for Park. Aerospace is really the future story for Park. That is where the bigger opportunities are, especially top line.

I don't think our electronics business has the same top line growth opportunity that aerospace would, obviously aerospace is also starting from a smaller base. But we are not going to see these big opportunities I don't think in electronics, I just don't think the industry works that way. It is much more mature. There are opportunities, but it's not opportunities that double the size of electronics overnight. The end roads that the guys are making with Meteorwave are quite significant, Sean, but it is a different kind of dynamic than with aerospace which is more of a long-term fundamental story.

So in terms of funding the opportunities with aerospace. I think we will make sure we have the ability to do that. I don't think the lack of funding will hold us back in terms of realizing the opportunities with aerospace. I have a feeling that's not exactly what you're going for, but is there anything else you want me to try to focus on in answering that question?

I can take it off-line, that's fine, Brian. Thanks so much.

Okay, happy new year.

Happy new year.

Our next question is from David Reich-Hale of Newsday.

Hello, how are you?

Hello, how are you?

Great, thanks for taking the question. A couple quarters ago, you had said that there was a mid continued -- there was continued weakness in demand in China as well. And is that still going on or has that dissipated?

That's a good question because we can tell you about our experience probably more intelligently than the China in general. For me, I'm not an expert on China but I find it always confusing to really understand what is going on there. A lot of conflicting inputs.

But as far as we are concerned, our China business, if you will, in electronics is going well. That's our biggest market in Asia. That's our biggest market for electronics period. So the fact that electronics is I think pretty clearly experiencing an upward trajectory is going to be partly a China story. It's probably the market maybe being a little bit better, I think it's also partly because the Meteorwave impact for Meteorwave has made some real inroads with these OEMs. It's a little hard to separate what's going on just for us and what's going on in the market.

Sure, thanks. And you had mentioned restructuring out West, that is the US electronics sector that you're talking about?

Yes, those are -- we have locations in Arizona and California, electronics locations in Arizona and California, and that is what we were referring to.

Is there an expectation that you would close one of those offices or are you just downsizing both of them?

They are not offices, they are manufacturing plants. We not are intending to close one of the two factories. But our intention is to -- those factories have been business units of Park's for many, many years but are separate business units with separate cost structures. The plan is to operate those two locations as one business unit.

Okay. Would that mean layoffs?

It might, but we're not going to comment on that at this time.

Okay, Brian, thanks a lot.

You bet.

Our next question is from Leonard Cooper, a private investor.

Hello, Len? Operator, I think we might've lost Len Cooper.

Hello?

Hello, Len. How are you, Len?

Good. Can you hear me now? Yes, we hear you just fine. One, happy new year to you and your wife. I appreciated the pictures.

I noticed that the 3D printing in metals and plastic has been getting a lot of attention, including from GE and also self-driving vehicles. Is there any affect on Park from those technologies?

In terms of 3D printing, we noticed as well that GE has been very active in that area, has done some acquisitions even. It doesn't so far relate to our activities with GE. It is something that we continually ask them about, whether it's anything they would like us to work on, anything they would like us to do to support those activities. But at this point, the answer is no.

And self-driving vehicles, I guess that would relate to RF electronics, and it's not something we have been really strong in. We have some RF electronic activities like our PTFE and we call it Mercurywave products for RF applications, but most of what we do is for digital and infrastructure, networking and military. That probably doesn't apply to these self-driving vehicle technologies.

Okay. One last question, does Park have available the manpower that's needed to cover all these activities?

Not really, so that is a challenge for Park. It's an ongoing activity and discussion of Park about how do we handle the opportunities, I think particularly in aerospace. I've made the comment probably many times before, Len, that there are more opportunities in aerospace than we really could handle so we have to select the opportunities.

It's not financial resources, it's human resources that we are really talking about. That's a constant challenge that we try to manage our way through. I did mention probably more than once now that we have a very strong team in aerospace. This is a team that doesn't like accepting failure. So not very willing to say look, we just can't handle that opportunity because we are too busy. So we have a group of people that are very dedicated, very intense and just don't like turning down opportunities.

Okay, thank you.

Sure, Len, happy new year to you and your wife.

Thank you.

We have a follow up from Sean Hannan from Needham & Company.

Yes, thanks for taking the follow up here. Just operationally in terms of costs, any commentary that's worthwhile around copper, number one?

And then in terms of SG&A, the degree that the current levels are sustainable, other than I think what you may have just referenced, you're going to probably have to invest a little bit in SG&A as some of these opportunities gain momentum. But that would probably be a higher quality problem. So can you provide some color around copper as well as sustainability of SG&A?

Sure, we can do that. In Q3, copper was not a significant impact for Park. In Q4, we are looking at doing something.

It has been our practice for many years to pass through changes in our copper costs on a cent-by-cent or dollar-for-dollar basis, so we're looking at doing that. There is always a lag as I think you know, Sean. So when copper costs are going up, that usually has at least a short-term, negative impact, on our P&L when they're going down there is a short-term benefit because again there's a little bit of a lag affect. There could be that kind of impact in Q4 as we are making the adjustments. We can't really quantify them quite yet, but it could be a negative impact from copper in Q4. In Q3, there was a very small negative impact not worth mentioning.

And the other question, SG&A. Look, Park is a fortunate company in the sense that we have very dedicated people. People care about the Company and its future. People come here and they want the best for Park.

So the third quarter was not a good quarter, we all know that. The one lever that we can pull to deal with that very easily is SG&A, things like bonus accruals. So we do that, and that's the right thing to do, I think it's the responsible thing to do and our people are on board because our people by and large are pretty committed and are looking at to be at Park for the long haul and not just to get an extra bonus for this year or last year. So we pull those levers and we'll keep pulling them as we feel necessary, because we are public company after all and we have accountability.

But it's not just me that has the accountability, it is all the people at Park I think that share in that accountability as it should be. So yes, we will keep pulling those levers. We will. I don't know what SG&A will be in the fourth quarter, but we will look at where we are and we will make those judgments based upon where we are.

Okay. So it sounds like from a restructuring standpoint, most of those costs are going to be geared towards your COGS line and then SG&A you're going to try to tow the line as best you can moving forward.

I'm not sure I followed you. The restructuring, obviously that's a one-time event and I think I mentioned that we believe there will be a $3 million to $4 million benefit going forward. Some of that would be in the SG&A line and some of it would be in the cost of goods sold line. Maybe I'm missing the point of your question though.

No, that addresses it. So it's going to be focused on both areas, and that's helpful.

Yes, it would be. Yes, that's right.

Okay. Thanks so much, folks.

Okay, thank you. Thanks for your questions.

At this time, I see no other questions in queue. I'll turn it back to you, Mr. Shore, for any closing remarks.

Thank you, operator, and thank everybody else for listening in to our third quarter call. Matt and I are here today, so if you have any follow-up questions just give us a call.

The last thing I want to do is to wish you all a very happy new year, all the best to of all of you in 2017. Have a good day. Good-bye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your program. You may now disconnect. Everyone have a great day.