Park Aerospace Corp (PKE) 2014 Q3 法說會逐字稿

Good morning. My name is Esteban, and I will be your conference operator today. At this time I would like to welcome everyone to the Park Electrochemical Corp. third-quarter fiscal year 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)

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

Thank you, operator. This is Brian. Welcome, everybody, to our third-quarter conference call. I have with me Matt Farabaugh, our VP and CFO, as usual; and we will start with some introductory remarks. Matt will start with financial commentary. I will add a few comments, and then we'll go on to Q&A.

Before we even get started, I want to remind you that a transcript of Matt's comments, the comments he is about to give you, were already posted on our website this morning. So you can go through those comments on the website, if you want to check the details. Go ahead, Matt.

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 1-A 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 third-quarter ended December 1, 2013, P&L, which are not specifically addressed in the earnings release. During the fiscal year 2014 third 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 46%, 8%, and 46%, respectively, for the third quarter for the prior fiscal year; and 51%, 6% and 43% respectively for the 2014 fiscal year second quarter.

Sales of Park's high-performance non-FR-4 printed circuit materials were 89% of total laminate and prepreg material sales in the third quarter of fiscal year 2014, 82% in the third quarter of the prior fiscal year, and 88% in the second quarter of the fiscal year 2014.

Sales of Park's aerospace materials and parts were $8.2 million in the third quarter of the 2014 fiscal year compared to $5.5 million in the third quarter of the prior fiscal year and compared to $7.5 million in the second quarter of the 2014 fiscal year.

Investment income net of interest expense for the third quarter of the 2014 fiscal year was negative $48,000 compared to positive $143,000 in the third quarter of the prior fiscal year and negative $108,000 in the second quarter of the 2014 fiscal year. The net expenses in the second and third quarter of 2014 fiscal year were primarily the result of the interest expense associated with the Company's borrowing under the five-year revolving credit agreement in the fourth quarter of the 2013 fiscal year.

Depreciation and amortization expense for the third quarter of the 2014 fiscal year was $1.012 million compared to $1.034 million in the third quarter of the prior fiscal year and $995,000 in the second quarter of the 2014 fiscal year.

As reported in this morning's earnings release, the effective tax rate for the third quarter ended December 1, 2013, was 3.3% compared to 18.2% in the third quarter of the last fiscal year. The low effective tax rate in the third quarter ended December 1, 2013, was due to high portions of taxable income in jurisdictions with lower effective income tax rates and tax incentives associated with the Company's operations in Singapore.

During the third quarter of the 2014 fiscal year the Company had one customer, TTM Technologies, which accounted for more than 10% of total sales. The four remaining customers in the top five were Sanmina, Shennan Circuits, Viasystems, and WUS, in alphabetical order. The top five customers totaled approximately 44% of total sales. Our top 10 customers totaled approximately 60% of total sales, and the top 20 customers totaled approximately 77% of total sales.

Okay, thanks a lot, Matt. Brian again. Let me add a few comments here. First of all, maybe a housekeeping item. The special dividend, which we paid, I think, about a year ago, a $2.50 per-share dividend; and all of the four regular dividends paid this fiscal year -- one has yet to be paid. It is declared and not yet paid, the $0.10 per share quarterly regular dividends.

We believe all those dividends at this point will be return of capital -- will receive return of capital treatment for federal income tax purposes. I know we get questions about that from time to time. We are not able to give definitive answers until the year is closed. But it's looking pretty likely to be that kind of treatment at this point. So I just want to let you know.

Q3 -- I think it's pretty straightforward. The bottom line was mostly explained and driven by the weak top line. Global electronics, weak; the global industry is weak.

I guess I would say that if you guys are following some of the big electronics OEMs -- the ones that we supply into, in particular -- I don't think you would be too surprised, based upon some of the reports and comments made by those companies recently, and even comments from their CEOs, about the environment in the global electronics industry and market.

So I would say thank goodness for aerospace, because that was stronger for us. That continues to be stronger for us, was better in third quarter and continues to strengthen. And that's -- I guess partly the market is pretty good, but I think it's also because of the fact that that's a newer area for us and there is market share growth there.

With electronics, we are one of the legacy suppliers that has probably been around longer than anybody else. Aerospace, we are the new kid on the block; and there's much more opportunity for us to grow in aerospace, even in a flat or even a weak market. Not so much the case in electronics.

Copper -- sometimes you people know a little bit about this. There actually was $150,000 negative from copper in Q3 compared to Q2, and that's really a timing situation. When we do these pass-throughs up or down, there's always that lag effect. And I think we've discussed that many times over the past. We don't expect any difference in Q4 as compared to Q3 regarding copper.

SG&A in Q3 was up from Q2. And that really shouldn't be too much of a surprise, because in Q2 -- during our conference call in Q2, I think we commented that the SG&A was low and probably not going to be sustainable because of some special items that were going through the SG&A line during Q2.

So let's see. The commentary about Q4 -- we have December in the books in terms of revenues, anyway, and bookings. And December is a five-week month. Remember how we work our quarters: they are five, four, four, December a five-week month.

It's really hard to reach any conclusions based upon set December, because there were two holiday weeks in December. This year both Christmas and New Year's were big factors, because they both fell on Wednesday. So there really were two weeks when we were operating in somewhat of a holiday environment; at least, that was our perception.

So I would think that December was pretty much a follow-on from Q3. When you take into account those two weeks which are holiday weeks, you would say, yes, it looks pretty much like a continuation of Q3.

Tax rate, as Matt indicated, pretty low in Q3 but not sustainable in Q4. In Q4 we probably will be back to what we might think of as more of a normal tax rate, recent history, somewhere in that 15% to 20% range. Okay?

Well, this is some of the housekeeping items. Now some updates on what's going on at Park. A couple things I want to talk to you about briefly -- these are two items we touched upon, I think, in our second-quarter -- maybe in our first quarter conference call.

The first item is the Scorpion light-attack aircraft that has been developed by Textron AirLand. We have been given permission by the company to disclose our involvement in that program. I think, until we announced in the second quarter, the program itself was a secret. Not only could we not disclose we were supplying into it, we couldn't even disclose the program existed. It was a secret, but it's not anymore.

It has received a lot of press. I think I commented during our second-quarter conference call that if you are interested, you can Google Scorpion, and you would see a lot of interesting information about it.

The update is that -- maybe this is more of a Textron update -- but the aircraft is in its test flight regime. It had its first flight sometime, I think, in November; it's going well. Remember, we supply a significant number of parts and low-volume tools into that program. And it's a prototype, so we are talking about one of each. But lots and lots of parts. And remember, primary and secondary structures.

So we feel really happy about that. We don't know if it will lead to volume. It remains to be seen. It remains to be seen how many of these airplanes Textron is able to sell, but we are happy we were able to be part of that program so far.

The other thing I want to update you on is this jet engine company. At this point we are still not in a position to disclose the name of the company. We've asked for permission, and I think we have quite a good relationship with this company. But it's a large company, so they would have to go through protocols to give us permission, and they are going through that process. So hopefully in the next month or two we will receive that permission, and we will let you know as soon as we do who they are.

So, anyway, what's going on by way of updates -- so we're talking calendar years here. For calendar year 2014 we have $11.5 million of POs. For 2015, $13.5 million of POs so far. Those are POs we have received so far for those years.

We had a small amount in -- we will have a small amount in Q4 of this year. Now I'm talking -- I'm changing gears on you, so I want to be clear. Now I'm talking our fiscal periods. So our Q4 2014, it will be a small amount.

Q1, our Q1 -- those are the months of, what, March, April, May -- right? -- of this coming year. That will be the ramp month. By the beginning of Q2 means June, we will be there; we will be at that level, which is over $1 million a month, based upon the POs we have received so far, so far.

So it's a pretty steep ramp. And my feeling is this is just really the beginning. These are just POs. This is not -- we are not talking anything about the future, any opportunities. Working on several, several significant development projects with this company. And there are also discussions of joint investment programs.

For me it's kind of hard to describe the proportion, the size of the opportunity. It's hard to really get my arms around it or my head around it, because there's just so much that we are being asked to work on with this company. We only are talking about the two years, the POs we have so far.

I think people who know us know we are pretty conservative. And I know it bothers the analysts because we are not willing to get out there and make these aggressive statements to support analyst reports, and that kind of stuff. I know that it's going to be frustrating for the analysts covering us for that reason.

So that's our history. But with that in mind, I would have to say to you that I'm not sure Park will ever be the same. You can make of that whatever you want. But I also would say that I read the analysts' reports and comments, and I have a feeling a lot of folks aren't really getting it.

I don't know what else I can do. I can report the facts. I can report my feelings. There are certain things I can talk about and certain things I can't talk about. But feeling some of us just don't really understand what's going on here.

And if there's anything else I can do to help you, I will, subject to the limitations that I'm under for a lot of reasons. But I'm doing the best I can to try to convey the enormity of the opportunity, at least in my opinion. And my opinion is an informed opinion, because I deal directly with this situation. I'm intimately involved.

So the only other thing I want to mention is that there's a Needham -- I think it's called growth conference -- next week on Wednesday. And there is a webcast, which means that I think it's an FD environment, which means that anybody can listen to the webcast. I think we put out a news release this morning just explaining to you how you can listen to the webcast.

I think you need to do it over your computer or something like that, but maybe you can listen just to the audio portion without doing that. But it might be interesting, if you would like, because that's not like a quarterly conference call; that would be a presentation where we go through more of the Company background and try to present the Company in more of a balanced way, not just with a focus on the quarter. So I just want to mention that to you in case anybody is interested in listening in to that webcast.

So that concludes the introductory comments from Matt and Brian. Operator, I think we are ready for our questions.

(Operator Instructions) Sean Hannan with Needham & Company.

I was looking to see if you folks could provide a little bit more context on the December demand being a continuation of Q3. So when I think about the electronics side of the business, given that that still is pretty much about 80% of your business -- just trying to get an understanding of how the months had performed there in this past quarter. And is that continuation that you spoke about in December -- is that really as the average of Q3, or is that how the months ultimately trended, exiting the quarter?

Okay, so we are dealing with real hairsplitting here. And I just want to say that, because I'm concerned that people will extrapolate from these comments. But during the quarter -- so there was the declining revenue September, October, November; September being the highest, October being a little bit lower, and November being just a little bit lower than October.

And when you look at December, it's so little difference between, you say, what November was and the quarter average, because it wasn't that steep a decline, you know. So -- and this is the thing. You have to use a little bit of judgment in answering that question, because you've got to factor out the two -- for us it was week three and four of the five-week month. Weeks three and four -- you have to factor those out to some extent because of the holiday week.

So if you consider all that, it's kind of -- the answer is same, whether you are looking at the end of the quarter or the quarter average, because there's very little difference in those two numbers. And it's not that -- I think to be more precise would imply that we have more precision, more a clear understanding as to what the market is doing.

From a subjective perspective I couldn't tell you there's any difference in December at all. It would be very, very difficult for any of us to reach a conclusion that it's any better, any worse. So from my perspective I would default to it's about the same, you know. And the numbers would bear that out, too.

Yes. Brian, I actually think that's a very helpful perspective. So now, if I think about what has been reported here, it looks like that electronics piece of the business was down about 15% quarter over quarter. So it seems like what we are hearing is perhaps, maybe, there's a little bit of stabilization that is materializing here as we enter the new calendar year. Of course, we've got a little bit of Chinese New Year to consider. But any additional perspective around that to add?

No. We just don't know where it's going, you know. I wish I could tell you that, yes, we got some good signs that things are going to start to accelerate. You know how we are; we really supply into capital equipment. The people who are buying laptops and iPhones, iPads, Droid devices really don't affect us directly. What affects us directly is capital spending of corporations and also Internet service providers. And so that's really going to be the driving factor for us.

And it's pretty easy to figure out where we are, because we supply into such big-name OEMs. So if they are reporting kind of funny stuff and concerning things, it's really almost impossible to conclude that we're going to not be touched by that in electronics, because we have a pretty -- we are legacy company. We have a pretty established market position as compared to aerospace, again, where there's a lot of upside potential for us. So the market could be weak for 6 months, 8 months in aerospace, but that isn't going to be the whole story for us. It's really going to be market share.

Electronics on a short-term basis quarter to quarter -- it's really going to be the market is going to drive things, probably more than anything else, I would think. But I wish I could tell you that yes, oh, yes, I see some great signs, we see great signs. But I don't see anything like that yet. But maybe next week, if we were talking, I might have a different view.

Okay, that's helpful. So on the aerospace side of your business, I think that you folks are executing to what you have been discussing over, really, a multiyear horizon. And you are starting to get a little bit of traction here. So congratulations on that.

The $8.2 million that you did this quarter -- certainly encouraging. I think we've seen some pretty consistent growth there. When we think about the purchase orders that you had referenced earlier in the call that will start to layer in in calendar 2014 and forward -- and then, of course, everything else that's positive going on within your aerospace business -- could we arguably get from this $8.2 million run rate on a quarterly basis up to the $11 million-ish level, say, by midyear 2014? Or would that perhaps be a little bit too aggressive?

I don't think it's too aggressive. You wanted -- let's just do some simple math, though. We have about a $32 million run rate in Q4, right? $32.5 million. So by June, based upon the POs, we're supposed to be over $1 million a month. That's just the POs, you know -- and actually, a little bit more than $1 million.

So that's just math. So I don't know what you want to add to that at that level. Want to add $13 million, $14 million? And that's based upon existing POs. We are not talking about -- that's so far. So far. I'm not telling you -- I'm not quantifying anything else other than what we have, POs in our backlog.

It's pretty simple math. You start with the run rate for Q4 and you decide what to add to it. But $44 million -- I think that's pretty good math. That's a run rate. Pretty easy math. I don't think that's too difficult to do that math.

Okay. So it sounds like that $11 million per quarter is pretty much in line with the logic of how you are thinking about this?

What $11 million per quarter? What is that?

$11 million per quarter? I think that would support a $44 million run rate.

Oh, I see what you are saying. Yes, I just wanted (technical difficulty) you to think we are doing it with this jet company, not -- it wasn't -- I said $11.5 million for calendar 2014 total. I wanted to make sure we weren't confusing those two numbers.

Sure, sure. I'm going to step out of line after this next question. M&A front -- any activity or specific interest there? Or are you now much more focused on executing on the aerospace before becoming more active on the M&A front again? Thanks.

M&A is pretty quiet. It's more of kind of -- let's call it an opportunistic thing, Sean. When we hear something is available, we will look into it.

But I think the implication of your question is correct, that we are really focused more on executing on this other opportunity, and also on executing -- I don't want to just totally neglect -- we don't want to totally neglect discussion of electronics; also with executing on developing -- continuing to introduce and develop new products for electronics.

Morris Ajzerman with Griffin Securities.

Just on the electronic materials side, do you get any feedback at all from your OEMs, whereas any of them can give you any sort of outlook, either optimistic or pessimistic, over the next month or two? Do they have any sort of clarity that they share with you?

Well, we ask and sometimes we get input. But it's not consistent, number one. And credibility is such that I wouldn't -- I don't think we would feel comfortable sharing that input.

I don't know. I think the track record of predicting the electronics market is just so poor, it's almost like a waste of time to even try. That's kind of maybe a little bit too much of a cynical attitude, but boy. Look, we've been in electronics since 1960. And it just seems like every time there's some change, a significant change up or down, nobody saw it coming. You know?

I mean, it's the opposite. It's just almost like you get nervous when people are feeling good about things -- oh, yeah, we are doing well; let's add, and let's go spend some more money, add some more capital, hire people. Boy, that's when you better watch out.

Well, maybe the opposite is true, also; people are pretty down in the dumps and not very encouraged. So maybe that's a sign that things are going to get better. That's more the pattern, actually. It's amazing -- I don't know if anybody is interested in my thinking.

Think of how many brilliant people there are in the electronics industry around the world. There's a lot of smart people; but boy, the ability to figure out what's going to happen is, I don't think, so great, if you look at the history, the track record.

Any feelings -- again, reaching out to your OEMs, and your sense -- the inventory level out there in the pipeline -- is it thin? Is it average? Is it high? Any sort of guess on that?

I don't even know if I should guess. My guess is it's average. Sometimes people -- we hear, oh, it's a little high. We are working down inventory; that's the reason for things being slow. But like I said, we've been around too long to get too excited about that talk.

There's so much to dial. When things aren't good, it's always the end market. Oh, all right, things are great; the economy is great. When things are bad, oh, it's always an inventory adjustment. We are just adjusting inventory.

Okay. And lastly, on new products, you always talk about new products. But over the last couple of quarters, how is that playing out? And despite the top line, electronic deals being under pressure, is new products helping somewhat in this difficult environment?

Yes, actually it is a little bit. It's good we have them, because the top line wouldn't be very nice if we didn't. But I would say, though, that with this kind of malaise in the electronics industry, it's frustrating for us, because nobody seems to have the energy to do anything.

Qualifying new products in electronics is not like aerospace. The aerospace -- you better be committed to it, because you better be committed to spend many, many, many millions of dollars and spend a couple years.

However, with electronics, not quite as difficult. But we wish there was more energy. We are doing everything we can, but the qualification has to be a joint effort with the OEM and circuit board shops. And that's frustrating for us, but it is not shocking.

We've seen this before. When things are a little bit down in the dumps, the electronics industry just doesn't have that whatever -- vim and vigor or pizzazz -- to go out and do things, make things happen. I don't know.

So I wish it was better, although we have had had some success and some revenues from our new products, which -- it's pretty nice that we have them. Because if we didn't, it wouldn't be a good story. Of course, if we didn't have aerospace, that would not be a pretty picture for Park.

Okay. And last question, and I will get back in queue here. On the aerospace, on the composite side, there's one large customer that's still unnamed. It's that jet engine company.

You gave us the purchase orders for 2014 and 2015. Are you expecting or hoping to continue to see that grow in the out years, as far as your orders continuing to ramp up?

Well, that's (technical difficulty), and I don't like talking about things that -- unless we have a -- I mean, purchase orders we are talking about because they are facts. But yes, what I'm alluding to is that we are talking through 2021 so far.

Let me maybe try to answer the question from this perspective. It takes many, many, many, many millions of dollars to qualify somebody like Park on programs like this. We spent some of our own money as well. It's a big, big, big deal.

It would be really, really, really a bad business proposition to do that with two-year horizon. It would be a real bad business proposition.

So there's no intention at all that this is a two-year arrangement. That would be a real, real bad business proposition, based upon how much effort, how much involvement with the company and with the OEMs -- meaning the companies which make airplanes -- and the amount of money that has to be spent, which is enormous, to do a two-year deal. The ROI on that -- you get any first-year accountant out of accounting school, and they are going to laugh at you and say, you better not do that one. Maybe that helps a little bit in terms of being a perspective on where this is going.

Andrew Fleming with Heartland Advisors.

Congrats on a great quarter in aero. It looks like it's up almost 50% year over year. I'm just curious; could you describe the margin profile of the aero business relative to your other business lines? And I'm talking about high-performance and non-high performance printed circuit materials.

So that's a good question. And I think it's good that you separate the two. So non-high performance, which is almost a non-topic for Park, because it is gotten to be such a small portion of our business now, about 11% -- the margins are not really much. Maybe you pay a couple light bills, and that's about it. But they are not attractive margins.

And I think I've made the comment over the years that it's almost like two different businesses: high-performance, non-high performance. But then when we get into the high-performance -- we discussed this in some of the recent quarters -- all high-performance is not the same in terms of product and in terms of margin.

So there's a lower end of high-performance and a higher end of high-performance. And if you look at aerospace, it's very similar, because all aerospace is not the same, either. There's a lower end of the spectrum and a higher end. But if you look at the up and top and higher and lower end of the spectrum, and the middle, the sweet spot, it's very similar. Very similar.

For us it's always a struggle, because we just don't buy into this thing about, oh, well, you've got to do business with low margins in order to get -- that's your cost of entry. Get in the game. I can't tell you how many people tried to explain that to me the last 20 years that this is how business is done, Brian. You have to understand, if you want to be in this business, you got to be willing to do it and not make very much money.

But that never works for us. So it's always a struggle, because we are always looking for that special thing: something different, a niche, something unusual. I will give you a little example. This Textron Scorpion -- again, it's small volume, but nevertheless, it's a good thing to talk about, because we are able to talk about it publicly.

Just recently they needed some parts quickly. This is not prepreg; this is parts. Parts take a lot more time to produce. And they wanted a real fast turn. We got it to them -- I think it's 5.5 days or something. That's kind of, like, unheard of. So that's the type of thing we need to really focus on, where we are different; where we are unique; where we could perform in a way that gives us something special.

Otherwise, we will just get in line with everybody else, and our margins won't be good. And it's that same thing we learned with electronics. We could have -- we heard this stuff back around 2001, when we had Armageddon. Oh, well, we just have to accept that we have to sell lower prices.

And we said, no, we're not going to do that. It was a good decision that we made. It made it more difficult for us, because it forced us to find those niche areas, those specialty areas where we could sell and get good margins. It's the same thing with aerospace.

But maybe that's too much explanation. The answer to your question is: about the same as high-performance electronics.

Okay. So as we grow the aero part of the business, we should see some nice margin expansion relative to the drawdown in the non-high-performance printed circuit materials?

Oh, yes, I agree.

And then also --

Yes, I agree, as we grow. Yes, go ahead.

And I'm just trying to grasp the opportunity in aero here. I understand we are in the very early stages of this ramp. As you look out further, 3 to 5 years, is it in the realm of possibilities that aero would comprise, let's say, 50% of revenue 3 to 5 years out? I'm just trying to get a sense of how big this opportunity really is.

I don't understand how big it is. I really -- I can't quantify it. I just know it's very significant.

I think three years, though, would probably be unrealistic. But five years -- I don't know, maybe. There's so many possibilities, so many things which could happen and that are being discussed actively. As I said, we have several development projects with this company, and none of them relate to small situations.

They relate to -- I don't know how to describe it. These are very, very large programs that this company is working on. They are programs anybody would have heard of.

And it's safe to say, in your opinion, we have definitely hit the inflection point on the aero side of the business?

I know you guys like that term, but I think that's a fair thing to say. Also, I just -- you reminded me of something, Andy.

I think in the last call, we commented that there was some investment that we were probably going to make in terms of expanding our manufacturing capacity. Someone asked a question, and we said it was probably around $10 million.

But that has changed; it's a dynamic situation now, because the requirements are dynamic. And it could be more than that. It could be quite a bit more than that. And we are not sure; we can't say right now, because it's really up to this company to decide where they are going with some of these projects and programs. But I just wanted to update that number, because we did put that $10 million number out there. I don't have a new number for you, because now it could be more; but it's not defined well enough for us to give you a new number.

Leonard Cooper, private shareholder.

I'm sitting here getting confused, not being an analyst and not being too good with numbers. I don't even know what year this is anymore after listening to this conference.

Would there be any advantage to getting the fiscal calendar aligned with the actual chronological calendar? I would think just in printing the quarterly reports, you would save enough ink to make it worthwhile!

You have to blame my -- I will be like our current administration: blame the last guy. You got to blame the people back around 1960.

But I understand that the reason we did this was because we figured we'd get a better deal from our accounting firms, because they are not in their busy season when we are closing. But I'm not sure that reason applies anymore; that was probably 1960.

Len, I'll tell you what. Once everything is going great for the Company, and I don't have too much to do, that will be the first project I work on. But that is actually -- you know, it takes some time in doing. And I don't think we have the bandwidth to work on that right now.

So I apologize; you will have to continue to struggle along. I get confused myself sometimes. But just let us know, and we will try to help you out if we can clarify anything.

Okay. Well, that's the answer I expected to get. You talk about all these different projects and ventures. Is there enough engineering talent available to handle all this?

No. But we are working on that. We just brought a new engineer in. We hired some new guy; I just met him on Tuesday. But we hired a new guy about two weeks ago, an aerospace engineer. And no, we don't have enough engineering. But we have plans to deal with it, though, of course.

Okay. I think in previous reports, we spoke about business aircraft and a big inventory of those planes which was impeding the new sales of such aircraft. What is the situation there? And does it affect Park?

It does. It's not good, I don't think. I don't really believe there's a lot of light at the end of the tunnel yet. And it's like anything else, of course. It's always next quarter, next year, things are going to get better.

But boy, that industry has been in a lot of trouble for a while, the business jet industry. It just hasn't really been very robust. And we decided to go into aerospace in a serious way. It was 2007 at that point. That was a very strong industry. We went to Wichita with our plant. At that point that [ABC] capital of the world, it was called.

But things have changed a lot. And we still do a lot of work with the locals, because we are there and we are able to respond quickly. That Scorpion prototype was produced in Wichita. If they go into volume, it's not clear where it would be produced. But that was helpful, because we just would get in our car and drive stuff back and forth to the facility our parts when they needed something quickly.

But I think the opportunities in aerospace have shifted and changed. We haven't really focused on the big two with Boeing and Airbus, very much. And that was, I think, a good decision; although we are getting some pull from them because of the work with the engine company a little bit now.

But there are opportunities that we think are significant in military, UAVs. Of course, we've talked about engines, rocketry. There are a lot of other aspects of aerospace -- not that we are going to turn our back on biz jets. But I think it would be a mistake, Len, for us to make that our focus area in the future -- as it was, you know; it really was when we started in 2007.

Okay. How about automotive parts? I know we've had bad experience in automotive parts. But now, with all these automatic parking devices, and look behind you, and look to the side, and cars that are going to drive themselves -- are we involved in that or might we be?

Yes. You are talking about automotive radar, as an example. I think last quarter we commented on a new product. I can't recall. Like, was it [90,000 LL] (sic - see press release, NL9000)? And that was developed by our friends Jean Francois and company in France, really specifically targeting the automotive radar market.

And there is one OEM, and a big OEM in Europe that we were working with. And that product was just commercialized very recently. So it's a little early to say. But yes, certainly we hope to participate in that market.

Okay. I really have no other question. But on analysts not getting it, somehow I think I get it. Keep up the good work, and we'll look forward to the future.

Okay, Len. Happy New Year to you.

Sean Hannan with Needham & Company.

Just an administrative question. CapEx for the quarter?

Matt, can you help us with that?

CapEx for the quarter was fairly low at about --

Oh, you don't -- you just talk about D&A? You don't --.

Yes, we talk about D&A.

Let's include CapEx in the future, because it's a common question.

Yes. It was only a few hundred thousand on the quarter.

Did you hear that?

Okay.

Small, small, small.

$200,000 to $300,000, roughly?

Yes.

And it looks like we have no more questions at this time.

Okay. So thank you, everybody, for listening in. Happy New Year to you. Matt and I are in the office today, so if you have any follow-up questions, feel free to call us. Have a good day. Bye.

Ladies and gentlemen, that concludes today's conference. You may now disconnect. Have a great day.