Triumph Group Inc (TGI) 2004 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Triumph Group conference call to discuss our fiscal year 2004 fourth quarter earnings performance. You are currently in a listen-only mode. There will be a question and answer session following the introductory comments by management. On behalf of the company I would now like to read the following statement.

Certain statements on this call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause Triumph's actual results, performance, or achievements to those of the industry in which the company's operate to be materially different from any expected future results, performance, or achievements expressed or implied in these forward-looking statements.

Please note the company's reconciliation of non-GAAP financial measures to comparable GAAP measures is included in the press release which can be found on their Web site at www.thetriumphgroup.com. In addition, please note this call is the property of Triumph Group Incorporated, and may not be recorded, transcribed, or rebroadcast without explicit written approval.

At this time I would like to introduce Richard Ill, the company's President and Chief Executive Officer, and John Bartholdson, Chief Financial Officer and Senior Vice President of Triumph Group Incorporated. Go ahead, Mr. Bartholdson.

Thank you, Christina. Good morning everyone. I'd like to review the financial performance in the quarter as an intro to Rick's comments.

For the quarter, sales increased 16% to $175.8 million. And these comments will all be on continuing operations basis. Which is a record level for sales. Year came in at $608.3 million, an increase of 8% over the prior year.

Operating income in the quarter was $3 million. That was down 83% from the prior year. For the year operating income was $36.6 million, down 48%.

EBITDA on the quarter was $11 million, a margin of 6%. For the year EBITDA was $64.8 million with a margin of 11%.

Net income in the quarter was $1.2 million, with per share figure of 8 cents. For the year $19.4 million, and $1.15 per share.

Focusing a little bit on the sales number, the same-store sales we reported in prior quarters this year, first quarter was down 10%, second quarter down 10% over the prior year. That dropped to being down 3% in the December third quarter. This quarter same-store sales were actually up 3% for the first increase in nine quarters, in that statistic.

The mix of revenue continued to shift. We reported last year that commercial was 41%. For the full year this year that increased to 43% but dropped in the fourth quarter back to the 41% level.

I think, more importantly, military was 32% last fiscal year, increased to 33% for the full year this year and was up to 35% in the fourth quarter. Regional jet business was essentially flat, 5% last year, 6% this year, 6% for the quarter. Business jet revenue was 9% in '03, 8% for the full year '04, back to 9% in the fourth quarter.

Other revenue, which was 13% in '03, declined to 10% for the year and was down to 8% in the fourth quarter. Primary impact in the other category is where we classify the IGT revenue, and IGT revenue, which totaled $50 million for the full year '03 came in at $24 million for the full year '04, and dropped to 1, or dropped to $3 million in the fourth quarter.

Backlog, again, increased year-over-year. At the end of last year it was $486 million, increased to $520 million at the end of this year.

With that shift in mix between commercial and military we had some significant changes in our top ten customers in that backlog. Again, ranking the customers in backlog, we started out with the biggest backlog position is now the 777, the 737 New Generation was number two, V-22 program came in at number three, C-17 number four, F-18, number five. Then the second five was the 747, the A320, the CRJ, the F-15, and the 767.

In the sales number, Boeing continues to be our only customer greater than 10% of our revenue. The Boeing company commercial, military and space combined contributed 20.5% of our revenue, and these are sales direct to Boeing.

As we reported in the past when we track both direct and indirect sales going into Boeing programs, Boeing commercial represented 17% of our overall revenue, Boeing military came in at 11%, and Airbus, as in the past, continued to provide about 5% of our revenue.

Turning to the capital structure, net debt at the end of the quarter was $219 million, net debt to capital 30%, cash flow for the year, and looking at cash flow on what we expended outside of operations, we spent $25.4 million on capital expenditures, acquisitions, $50 million, and net debt change for the year by $26.6 million, which means that internal activities generated $48.8 million for the year. Another strong year of positive cash generation.

And with that I'll turn it over to Rick for his comments. Rick.

Thank you, John, and good morning, everybody.

Clearly, or obviously, we are disappointed with the quarter's results, and the results for the full year. We do, however, have significant optimism in some of our other areas in Aerospace Systems and Aftermarket Services which performed very well, and we expect these trends to continue going forward.

And I'll come back to that and talk a little bit about the trends going forward and, you know, what we expect in the position in which we see ourselves.

But first, talk a little bit about the current quarter's operating loss, which was predominantly in the, or solely, almost, in the Components Group and was a result of a combination of the continuing revenue decline and management review of the assets supporting the business. Now, the majority of the loss in the quarter was associated with the re-evaluation of the Components Group's assets and the outlook for the realization of the values in light of the depressed outlook and declining revenue in the business.

We have put, and we talked a little bit about it in the last quarter, we put a plan in place to review our go-forward plans in the Component Group. In the fourth quarter, as I just mentioned, we have, in fact, reviewed and completed the asset review, which affected the fourth quarter results.

Our second step, which we have announced in a press release, we realigned our company and went from three groups to two groups, namely the Aerospace Systems Group and the Aftermarket Service Group. That has been completed and is currently in operation.

The third step which we anticipate will be finished by the second quarter of 2005 fiscal is facility consolidation which will come up with significant cost reduction, and more importantly, redundancy elimination.

So as you see in the press release, what this means is that next year's sequential improvement in earnings will be very much influenced by the rate of implementation of the consolidation activity and the resulting improvement in operating results. So we feel good about the plan that we have, in fact, put in place, and we also feel good about our future going forward, for a number of reasons.

John had talked about the issue of cash generation when he ended up his comments. We do feel good about the cash generation based on the fact that we have consistently said when business is difficult, we will have the ability to generate some cash.

We are optimistic due to the fact our Aerospace Systems Group and Aftermarket Service Group, as I mentioned before, have performed very well. Our same-store sales were up in the quarter, as John mentioned.

Our backlog is up to $520 million from $486 million. Some of which was due to the backlog added with the acquisition of Triumph Gear Systems. We are enthused by our go-forward plans on the integration of Triumph Gear Systems and ACR, both in the gear business.

When we announced the acquisition of Triumph Gear Systems from Rolls Royce we also said that with the integration of those two companies we would be a significant force in the transmission and gear assembly business.

We're also very, feel very good about our diversity in the industry. John spoke a little bit about our top ten programs.

The commercial business is still very strong for us. We don't expect a full recovery, as I mentioned in the press release, until late 2005 or early 2006. I think that's relatively consistent with what some of you are projecting, but our market share in the commercial end continues to get better as we garner more market share.

In addition to that, we do have opportunity on brand-new programs, such as the 7E7, which in years past within the Triumph Group we might not have been able to bid on some of those aspects but we feel very good about the fact that we're being considered and feel we have a good chance of winning some of that business.

Our military business continues to grow. Our relationship with the C-17 program with the Air Force and with Boeing is significant. Our contracts that we've won on the aftermarket services with the APU there is very significant to the group and continues to grow.

Our aftermarket sales continue to increase. We have, in fact, initiated programs in San Antonio with the close of the Air Force base. We're initiating programs in Asia, all of which lead to the diversity of revenue and the diversity of the programs in which we participate.

As we indicated in the press release, next year we expect our sales and project them to be somewhere between 675 and $700 million and earnings per share to run somewhere between $1.70 and $1.80 for the year. As we mentioned the quarterly results sequentially improving during the year.

At that I'll open it up to any questions anybody may have.

At this time, the officers of the company would like to open the forum to any questions that you may have. If you are using a speakerphone please pick up the handset before pressing any numbers. Should you have a question please press one on your touch-tone telephone. Should you wish to withdraw your question press the pound key. Your question will be taken in the order that it is received. Please stand by for your first question. Our first question comes from Jay Getani from SG Cowen.

Good morning. Of the $16 million loss in IGT, the bad debt inventory adjustments and the asset adjustments were how much of that? I guess I'm trying to understand what kind of the core operating results were in IGT.

As we said, the majority of that loss was due to the re-evaluation process that we went through. Quantifying it beyond that, we're not prepared to do.

So do you have any initial thoughts, or can you share with us what your outlook is for IGT and its performance next year? I mean, you talk about the $4 million additional consolidation costs, but does that move you back into the black in '05?

We have, the plans as we have said in the past in the IGT business, we are essentially out of the OE business in the IGT. That was the, when I spoke about the decline in revenue, that was significantly in the OEM business where Siemens, Westinghouse, and others just simply stopped building new industrial gas turbines. So we're essential out of that business, and we made the decision to exit that business. We, however, are remaining in the aftermarket business where we can repair and overhaul products for the industrial gas turbine business.

The numbers that I spoke of that the press release speaks of up to $4 million, are the numbers about which I spoke when talking about the numbers of moving facility consolidation, redundancy elimination, which we're projecting will take place mostly in the first two quarters of the new fiscal year. It is our expectation that generally speaking that will be, you know, back in the, the end of the business will be back in the black during that period of time sometime. It's difficult to project exactly when. But we're in the aftermarket business and have exited that OEM business.

Okay. And so the 1.5 R&D for IGT focused, I presume, on the aftermarket would make sense.

Right.

Is that a good run rate going forward for '05?

No, that should be declining as we go forward in '05. The other thing, Jay, I want to mention, we put a correction out this morning on the press release. The operating loss was approximately $12.5 million. That was a typo, the $16 million.

So 12.5, not 16?

12.5, not 16. There's a release that's out this morning that corrects that.

Okay. And I guess another question. Looking at your fiscal '05 guidance, it would seem to point to an operating margin kind of the high 7, low 8% range, based on the range on the top line and then on the earnings. What are some of the restraints there? I mean, presumably, you know, these IGT expenses, the IGT R&D, although you say that should be trailing off, how, what is your outlook for commercial aftermarket? Could you kind of walk through the pieces there that hold you down to that margin rate?

Well, I think the most obvious hindrance, if you will, is the continued pressure on the OE end of the commercial business. Our aftermarket sales and aftermarket margins are, in fact, good, and they are performing very well. Our aftermarket, we're very pleased with our growth in new programs that we're in.

And I think that as the year progresses, I think we see some signs of some good things happening in some of the OE areas, especially in areas like the business jets, where we're getting pressure is in the large commercial transport area, where the build rate simply just continues to be down, and we wait, like other people, for some upturn in that. But I think the pressure there on margins is the biggest hindrance to increasing our margins.

Last question. The A320 in terms of its position in the backlog is down below into the second five grouping. It's been there before but as I look back the past four or five or six quarters it's been as high as the second. Is there anything in particular that's pushing that down?

It's the relative position, Jay. With the addition of Triumph Gear Systems brought a significant bump in the backlog with no activity with Airbus. So it's really just a relative position. No shift that's occurring in our position with Airbus.

Okay. Great. Thank you very much.

Mr. Robert Jachichero, please state your affiliation followed by your question.

Merrill Lynch. Thank you. John, I'm not in front of a computer right now but related to something earlier, do you have cash flow from operations for the fourth quarter?

The cash flow from operations in the fourth quarter, to get to the year end number, I will comment on in a minute, as I get to my paper. So why don't we go ahead with another question.

And then with that just what the D&A component, the depreciation and amortization component of that would be. Could you give us an update on the status of the pending or attempted sale of the metals business?

We have two or three interested parties. We had hoped to be able to announce the closure of that prior to the end of the fiscal year. We're unable to do so.

We have two or three current interested parties. As a matter of fact, we have a meeting with one of them Monday morning when we get back into our offices, but we're hopeful that one of those three, and we think that one of those three, those negotiations will come to fruition.

As we announced before, part of that, the metals group is actually being, you know, shut down. We've taken about a year to do it, and that's just running out some of our structural contracts, et cetera but hopefully we'll be able to announce something along those lines relatively near future.

Okay.

The full year cash provided by operating activities was $45.6 million, negative 4.5 in the first quarter, 16.4 in the second, 6.9 in the third, and 26.8 in the fourth, with depreciation and amortization being $8.0 million of that in the fourth.

Good. There was recently some speculation about Boeing looking to sell some more of their facilities. Given your high mix already with Boeing, would you be willing, unless there were unusual circumstances, to say that wouldn't be something you'd be looking to pursue or would there be smaller pieces, possibly, that you might be interested in looking at?

I think we would -- we have looked at some parts of Boeing already. We've chosen to pass on some parts of Boeing that they have offered.

I was out at one of our plants last week and one of our employees asked me whether we were interested and we were going to buy Wichita. My answer was I'd have to find a little more money than we currently have, but I think that we would be very interested in doing things and getting some smaller parts of Boeing.

The good part of that whole thing is that we are very close to Boeing, and we are, in fact, one of the people on the list of having the ability to look at what they want to sell because they look at us as a go-forward partner. But we're not currently looking at anything specific, but I think that we will be looking at some of the things that have sort of been publicly or quasi publicly announced that they're trying to get rid of.

Do you have an estimate for Cap Ex for fiscal year '05?

I think that the Cap Ex I don't look at being currently any more than it was this year, which is about the $25 million range.

Okay. Then just one final question and I'll go back in. John of, the guidance provided in the press release does that include the $4 million in anticipated cost to complete the restructuring, or realignment out in Phoenix?

That is the projection for the full year, including those costs.

Okay. Thank you very much.

Larry Baker, please state your affiliation followed by your question.

Legg Mason. Good morning.

Good morning, Larry.

If I add the $12.5 million, which I think is the corrected number you gave --.

Yes.

-- back to the fourth quarter reported operating income of $3 million, I get an operating margin of around 8.9%, sort of on a pro forma basis, in the fourth quarter. Sort of what causes that to deteriorate down to the 8% level that you're projecting for '05?

I think that part of it is that $4 million that we just covered in the restructuring. And while we have addressed the asset position, what Rick was talking about in the restructuring in the first and second quarters, getting that drag out of the earnings and sequentially improving that margin as we go quarter by quarter is the outlook for the year right now.

Right. Can you provide some guidance on like first quarter operating margin level? When you say improving during the year the average is going to be around eight, are you looking from, you know, six to ten, or seven to nine? Just sort of what type of gradually improvement do you see during the year?

I don't think we want to parse it out to that detail, Larry. I think though that the outlook has been the pattern in the past that the March quarter is typically on an operating basis and a revenue basis the best quarter of the year, just in the pattern that we follow, and we expect the pattern to take place next year.

Okay. Then finally, can you talk a little bit about, you said market share gains in the commercial market. Can you talk specifically about wins or sort of provide some detail on that?

Well, you know, I think a lot of the wins are somewhat across the board. I can talk about any number of different programs from the OE area to the aftermarket area, for example, on the C-17 program.

In the commercial area, we have the, you'll notice that the 777 has gone to number one. The 777 and the 737 are programs upon which we have a very broad array and continue to add product from our build to print companies to our design and engineer companies, and although I'm not looking at the absolute, I don't have in front of me the absolute numbers in regards to the ship set value on each one of those aircraft, they continue, and they have, in fact, continued to increase over the last few years.

So the 777 is one, 737 New Generation, up until this quarter, had been the number one program we're on, and that's one that has, in fact, significantly increased. But it basically, it goes all the way from the engine to build to print area to the design and engineer area.

And then, I'm sorry, one final question on the IGT business. You had $3 million in revenues in the fourth quarter. Is that a reasonable run rate to go into 2005?

We would think, Larry, that we've really bottomed out, and as we push growth in the aftermarket side, reaped the benefit of some of the investments that we should be marginally increasing that as we go through next year also.

Great. Thank you.

Mr. Ron Epstein, please state your affiliation followed by your question.

Merrill Lynch.

Good morning.

Earlier this week General Dynamics was cautiously optimistic about the large end of the business jet market and yesterday Textron was actually very optimistic about Cessna, I guess the lower end of the business jet market. What do you guys think? What is the outlook that you guys have for the business jet market? You mentioned earlier to Jay's question that you're seeing some improvement there. What's your expectation for the coming year?

Well, as I mentioned, we do see some improvement there. You've got to remember that some of that improvement is coming off of a period of time where companies like Gulfstream, Raytheon, Lear, Cessna, not more than six or seven months ago had assembly lines and plants shut down for a period of time, so they're coming off that shutdown, and, so therefore, you get a little bit of an increase from there.

But one of the reasons we're very optimistic in some of those companies, for example, Cessna, we have even set up a plant, we have what is called the Wichita support center within the Triumph Group in Wichita that services all the Wichita aerospace companies, and we've actually set up a manufacturing assembly facility with Cessna, or for Cessna, basically, that has increased our market share going forward in there, so I think that, and we're privy to some of the build rates that they're projecting and it makes us, that's one of the reasons I mentioned the fact that we're optimistic about the business jet increase.

We haven't seen as big a bump on increase on the parts that we do for the components and or assemblies we do for Gulfstream, but we also think that will follow.

Yeah, I think Textron was saying they were looking at like north of 200 jets in '05. Would you characterize what you're seeing as kind of a surging demand or just sort of a gentle recovery?

I would not use the word "surging." I would say that it's a definite recovery, but not surging, which is, as far as we're concerned, in running our businesses, is fine. We have the ability to participate with people like Cessna on a more constructive basis, but it is a gentle recovery.

Okay. And then just want to follow up on I think a previous question you had on the large commercial aftermarket. What is the outlook that you guys have for growth rate in that business? If you're uncomfortable saying for Triumph Group, but just in general your outlook for the commercial aftermarket in terms of growth rates and traffic and that kind of thing?

I think that you know, all I really have, we have the ability to do is sort of quote what the air miles are projected to be. They've dipped clearly after 9/11 and went down, and they are projected by virtually any forecast that we've seen to continue slowly upward in the rest of 2004, and specifically in 2005. I think there's a bigger bump between 2004 to 2005 than 2003 to 2004.

In addition to that, it happens to be our opinion that the business model in the airlines has been shifting for a long period of time.

Our company, being in Philadelphia, and seeing Southwest come into Philadelphia, and see U.S. Air react to Southwest coming in there, I think points to the shift in the business model in the airline business, and those airlines that are coming in the Southwest, the Air Tran's, this, that, and the other thing, are the airlines that we, in fact, do a lot of aftermarket business with.

So I think that not only that but we have also, both in our design and engineer area, and our third-party repair and overhaul area in the Aftermarket Services Group, are garnering a larger market share by virtue of the fact that we're offering a larger, or broader range of product.

And I think that the empirical evidence there is the inflow of work, and it's work that turns in less than 30 days and is not a big piece of our backlog, but the near-term evidence is that there is a real positive trend in the demand for the services we're providing.

Okay. Thank you very much.

Robert Steller, please state your affiliation, followed by your question.

Hi, good morning. Banc of America. A just a couple of questions to follow up on the aerospace aftermarket to start with. Could you quantify what your growth was in the last quarter?

We experienced single digit quarter-over-quarter growth, but breaking it down further than that, Bob, we haven't done.

Yeah. Great. In terms of sort of lead times you're seeing on the aftermarket, has that changed in any way? Has it extended or shortened?

I think that it really hasn't changed significantly because the trend over the last two or three years, John mentioned the turn time issue. You simply not garnering business if you don't turn your product very quickly. Obviously it's different turn times in regards to the different product we do in repair and overhaul. I don't think it's changed significantly but, on the other hand the pressure is there because you're just not getting the business unless you turn it fast.

But I also think that we're focusing on, rather than waiting for the work to appear on the loading dock, going out and marketing the capabilities, attempting to garner long-term relationships even though they're not quantified in the backlog with purchase orders and delivery dates, but pursuing blocks of business with commercial customers. A lot of activity in Asia along those lines, so it's a positive outlook for the market.

Okay. So would you describe the aftermarket growth you're seeing year-on-year given your pre-emptive moves to, say, airline capacity plus, or in line with airline capacity movements year-on-year?

Definitely plus.

Just to shift gears, looking at the acquisition front what is your appetite for future acquisitions? What can you afford, and how are you seeing purchase prices out there?

Well, our appetite, you know, remains there. We are looking at some acquisitions. I will tell you that on purpose we have slowed down to a certain extent because we've been focusing on the issues about which we spoke in the Components Group in the fourth quarter, and our strategy in the IGT business because we thought it was apropos to focus on those as opposed to you know, acquisition, but we are looking at a few.

I think from a price perspective, we passed on a few, which is no change from our previous stance in that we've been the preferred buyer in some cases without the preferred price. We are not going to go beyond our goals in what we pay for a company.

There are some expectations out there which at the present time which are higher than we're willing to pay. But that doesn't mean won't make acquisitions going into the future if we, in fact, are adding proper capacity and we're out and we're adding products and services that our customers want. We can add to our portfolio, if you will.

That's great. Thank you very much.

Byron Callan, please state your affiliation followed by your question.

Another Merrill Lynch person asking questions, guys.

Hey, Byron.

First, I just want to spend a little bit more time on FY '05. And the guidance you guys put out that also includes the sector realignment, there's no additional restructuring charges that could emerge as you walk through, that's basically all been laid out, the plan's in place, you just need to walk through it?

You're asking a difficult question, Byron, based on the fact, the answer to the question, to the best of my ability right now is that your statement is absolutely correct.

Okay. Secondly, cash flow in FY '05, that kind of comes in close to or around net income, or is there some lag that emerges from the consolidation costs that will be born in the cash flow the company sees?

No, I don't think there's any lag. And Cap Ex is in the 25 range. We should have another year of significant positive cash flow.

Great. Okay.

Naturally, pre any commitment on the acquisition side.

Most of the decision have been made on the 7E7. Is there anything left that you guys are pursuing that if you win might step up your own R&D expense in the coming year?

Yes.

Bigger than a bread box?

Bigger than a bread box.

Okay. So we'll watch that space. And lastly, just, you know, we kind of circle around this issue about the margin for FY '05 and the high single digits. When you guys think about the business generically where do you think you can get the margin back up to? I think most people are looking at a fairly pedestrian ramp in new aircraft production rates. I mean we're not going to have the repeat of, I don't think we're going to have the repeat of what we saw in the 1990s. Do we get back to low double digits? Can you get to kind of the mid teens levels that the company evidenced at the end of last decade, even 2000, 2001?

I think that you go back and, Byron, you remember when, you know, people were, when our numbers were 15, you know, 16%, and people were saying, well, can you get to 18 and 19? Our answer to that was no. In this case, in this environment, it's clear in our mind that we can get clearly to the low double digits, okay? Projection-wise if you look at our business plans going out four years we're projecting getting toward that mid-teen, you know, low to mid-teen margin level.

And that really, Rick, that really just becomes an absorption issue?

Byron, you've got to remember we're only operating at about 35% capacity in a lot of our plants. So if you go to the build rate, and if we're right, or if you're right, because some of the numbers that we use are yours, in the build rate of the commercial goes up, our absorption rate becomes very significant as we go from the 35% capacity even to 50% capacity.

In addition to that, we have made a significant financial commitment to lean manufacturing. We've done that over the last couple of years. We're continuing to do it. We've spent the money on it, and we fully expect that the results of that will be manifest itself in higher margins.

But I think, Byron, looking at the break out of revenue at 43% of the sales coming from that large OE market, that market being down running at, as Rick said, at a capacity level of 35 to 40%, the leverage on recovery there is significant.

Yeah, I guess it's just another thought it may be, you know, we can think in terms of number of airplanes, but if we get a pickup in wide-body demand, given your statement about the 777, I assume there's a lot more leverage, really we shouldn't think about, you know, 300 airplanes from Boeing, we really need to focus maybe more on the mix of airplanes, because the dollar content clearly has to be higher on the widebody airplanes.

That's true, that's right. A significant plus.

Okay. Thanks a lot.

Thank you.

Mr. John Rogers, please state your affiliation followed by your question.

D.A. Davidson. Good morning. I think most of my questions have been answered, but one thing I did want to check with you, in terms of input cost, I'm thinking metals and other things what are you seeing there, and are you starting to pass some of those through, and how much of an impact are they having on margins at this point?

Raw material costs.

Oh, raw material. Yeah, raw material, we have, in some of our major raw material, for example, our sheet metal, primarily aluminum products, we actually have had guaranteed costs and will have guaranteed costs for a little while out there.

However, the industry is realizing and some increased costs in there and is getting some getting some increases along those lines. Or if you want to look at it another way, some increases or lack of final end product price decreases, looking at it may be a negative way of looking at that, but there is some inflation in that end of the business.

And a number of our contracts, John, are pass-throughs from both Boeing and Airbus on significant items, castings and so forth, that even though transactionally we're acquiring material and processing it's done under their contract, with a markup on their cost.

And roughly what is the raw material component of your cost? Is it less than 10%?

It is down at that level, yes.

Okay.

In that neighborhood. So the cost of goods is significantly biased toward the value added to the raw material.

The other question I had is, you mentioned that you're operating a lot of facilities, or some facilities, you know, at 30% rates. Given what we're looking at in terms of the market, is there significant more consolidation opportunities that you have?

Yes.

Especially as compared to --.

What I talked about, John, the integration efforts, for example, at the two gear companies, that's one example. We also have two companies that are in the actuation business. As a matter of fact, one on the east coast, one on the west coast, and we're looking at the, as an example, doing different size actuation in one plant and smaller size in another plant.

We have two or three of our sheet metal companies that we're eliminating redundancy in regards to what products are done in what plants. We are not, however, looking at shutting those plants down. We're looking at transferring what is best done in one plant versus another, and, therefore, becoming more efficient. And at the same time, we're eliminating that redundancy and reducing costs as we do so.

But all of our plants have unique capabilities, and if they are not unique that redundancy would be eliminated. So there are opportunities which in fact we're working on. Great. Thank you.

Mr. Tyler Hojo, please state your affiliation followed by your question.

Sidoti. I only have one question for you guys. I was just wondering if you could quantify what's going on in China as far as the aftermarket? You mentioned that you've been targeting China. If you could quantify there?

I don't have the exact revenue there. What I mentioned was not necessarily, if you're referring to my comments, Tyler this, this is Rick, I was referring to Asia in general and what we're looking at is setting up, just opened a Thailand office, an office for Thailand, that's our Asian office, if you will, and we have furthered our relationships with a number of the airlines over there, a significant amount of business has been done in Asia, and frankly the reason we put it over there, we want to grow our Asian business.

We're looking at some potential, and I underline potential, joint ventures with people in Asia. So we look at our growth in Asia over the next year or two as being significant or we wouldn't have opened a Thailand office, we wouldn't have opened the Asia office. So we look at some very good things happening there.

Okay. Great. Actually one more question for you. As far as the regional jet market goes, you've mentioned in the past that one of your goals was increasing your market share with [EMBREA]. Have you been having any luck with that?

We have added some product line there, and we have added some market share. I will tell you that it's not so significant that we're going to do back flips over it, but we have, in fact, spent more time doing to try to increase that market share, and we have done so. I'd like to see it a lot more than it is, however. Thanks a lot, guys.

Are there any additional questions?

That's fine, Christina, I think we can wrap it up.

Hello.

Anybody there?

If there are no more questions, thank you, everybody.

Thank you all for participating, and have a nice day. All parties may disconnect now.