TechPrecision Corp (TPCS) 2011 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the TechPrecision Corporation first quarter fiscal 2011 earnings conference call. (Operator Instructions). This conference is being recorded today, Thursday, August 12th of 2010. And I would now like to turn the conference over to Brett Maas of Hayden IR. Please go ahead, sir.

Thank you and welcome. Joining us today on the call are James Molinaro, TechPrecision's new Chief Executive Officer; and Richard Fitzgerald, Chief Financial Officer.

Before we begin, let me remind you that this call is being broadcast over the Internet and that a recording of the call and the text of our remarks will be available on our website.

I would like also like to direct listeners' attention to the Safe Harbor statement contained in our press release issued today and posted with these remarks, both of which apply to the content of this call.

I would now like to turn over to Mr. Jim Molinaro, TechPrecision's CEO, to provide opening remarks. Jim?

Thank you, Brett, and I'm going to help you on your Italian -- it's Molinaro. But that's okay. We will work on that.

Good afternoon, everyone, and thank you for joining us today.

Let me start by commenting that I'm excited to join the TechPrecision group and want to thank Lou for his hard work in stabilizing the business and for Rich for going above and beyond the call, exceeding his CFO responsibilities, as well as the rest of the Ranor team that helped create these results we're going to talk about today.

I did a great deal of research on TechPrecision before accepting the job, and when I did, I told the Board I believed the company was a good to great story. And that's very much what we are dealing with.

I believe we have a tremendous platform upon which to build, and my job as a customer centric and growth focused CEO is to focus our resources and implement processes to ensure our growth.

I plan to provide good stewardship, augment our business development efforts, and perhaps find additional accretive acquisitions to add to our holding company. Our goal is to find synergistic precision manufacturing and fabrication entities that we can add to our organization, allowing us to be -- allowing us to more effectively leverage our administration, sales and marketing infrastructure.

In this market there are several potential targets. We are moving cautiously to make sure that these potential acquisitions would be a good fit. We will continue to be opportunistic, and note that any acquisition we complete has to comply with the basic rule of one plus one equals three.

As demonstrated by this quarter's financial results, TechPrecision continues to move in the right direction, and the 85.4% year-over-year revenue growth demonstrates that our core markets are continuing to recover from the challenging economy. TechPrecision is positioned for long-term, sustainable growth, and we have seen three consecutive quarters of steady improvements throughout the industries we serve.

Our efforts to focus our business development activities on customer opportunities that present the greatest potential for long-term production programs has resulted in a steady increase in activity, including requests for proposals and expanded sales pipeline.

You can see this progress also in the continued expansion of our backlog, which reached $25.5 million as of the end of June.

I would like to thank Stan Youtt, Ranor's CEO, and his team for their tremendous efforts this quarter. Ranor was able to accelerate production to meet rising demand, and their efficiency exceeded their most optimistic estimates.

Before I turn the call over to Rich, I want to take a moment to introduce myself. After that I'll have Rich cover the financials, and then I'll provide my perspective on our markets and the growth drivers inherent to our business.

First, a bit about my professional background. I join TechPrecision from Solvinti, LLC, which is a firm I co-founded and where I served as Principal for the last year. Solvinti was a North American and European distribution company for polycrystalline and monocrystalline wafers cells in solar panels.

Previous to Solvinti I served as President and CEO of Akrion Systems, where I led an organization that manufactured equipment for the semiconductor, defense, commercial products, and solar companies. At Akrion my focus was on diversifying our revenue streams and expanding business opportunities by tapping into ancillary markets such as solar energy, consumer products and military applications. As you can tell, these are initiatives I'll be focused on at TechPrecision as well.

I rose to the CEO position after serving as Vice President of Sales, Service and Marketing for Akrion. And before Akrion I was President of Submicron Inc. and earlier served as the company's Vice President of Sales and Marketing as well as VP of Engineering.

With that brief background review concluded, I'll turn this call over to Rich Fitzgerald for a review of our first quarter 2011 financial activity. Rich?

Thank you, Jim, and welcome to TechPrecision.

For the three months ended June 30, 2010, as Jim indicated, sales increased to $6.2 million, which is up 85.4% from our $3.3 million revenue for the first quarter of our prior fiscal year.

Net sales during this quarter were positively impacted by a full quarter of orders and production from one of our largest customers, GT Solar.

It is important to note that we increased revenue both sequentially and year-over-year, even while missing a portion of lower margin revenue related to the procurement of raw materials for our largest customer, GT Solar. As many of you know, in August of last year we transferred inventory materials related to GT Solar to that customer, resulting in a significant one-time gain for us. And that occurred during the second quarter of last year.

We have continued to store this inventory, and now that this business is beginning to recover, we are working off this inventory and only recognizing processing or service revenue at this time. This has helped our gross profit margin within the first quarter but has dampened our overall revenue level.

So I am especially pleased that we grew our top line, even with this dynamic factored in.

The trend of lower material sales will continue until the previously transferred inventory is extinguished, and it appears that that is likely to happen during the second and third fiscal quarters of this year.

We expect to see an increase in procurement services as we move through the second and third quarters, and this will augment our revenue and provide the greatest impact during the third fiscal quarter of this year.

Turning to gross margin, for the first quarter of 2010 our margin was 37.6% or $2.3 million, compared to a gross margin of 17.0% or $565,000 during the first quarter of fiscal year 2010.

The gross margin increase was primarily attributable to better utilization of our capacity and the mix of completed projects within the quarter.

Our revenue is weighted towards services, as we aren't recognizing materials procurement revenue for GT Solar, and we are experiencing higher margins as a result of that dynamic.

Our mix of service and materials procurement should normalize sometime during the third or fourth quarter of this year, as I indicated earlier.

Total operating expenses for the quarter ended June 30, 2010, where $1.02 million, as compared to $768,000 in the same fiscal quarter last year. This reflects an increase in payroll and related costs, including share-based compensation during the quarter, as well as increased professional fees, public company expenses, and additional consulting fees related to executive search efforts and in the support of our ongoing ISO 9000 certification process at our subsidiary, Ranor.

Net income for the quarter was $810,000 or $0.06 per share basic and $0.04 fully diluted. This compares to a net loss of $125,000 or $0.01 per share loss in the same quarter last year.

As of June 30, 2010, TechPrecision had working capital of $14 million, as compared to working capital of $13.2 million at the end of last fiscal year, March 31, 2010. This is an increase of $725,000 during the three months ended June 30, 2010.

Cash generated from operations was $1 million for the quarter ended June 30, 2010, as compared to cash utilized or used by operations of $857,000 for the same quarter last year.

As of June 30, 2010, the company had $9.6 million in cash and cash equivalents, which is up $817,000 compared to the balances at the end of March 31, 2010.

Stockholders' equity during the period increased 7% to $12.9 million, as compared to $12.1 million at the end of March 2010.

With that brief financial synopsis, I'd now like to turn it back over to Jim for some closing remarks. Jim?

Thank you, Rich. So this was a good start to a new fiscal year. We've been building momentum over the last several quarters as the economy recovers and we implement a more strategic and focused approach to generating new and expanded business.

There are two specific initiatives to help us accelerate our growth.

First, we are implementing a strategic sales and marketing process involving our internal sales engineers. We'll be tracking and measuring their progress in a very disciplined way and system. This process involves a strategic review of our existing customers and targets other strategic customers. I am confident this will help us grow our pipeline, develop new customers, and most importantly, expand our business with current customers.

Second, we will be expanding our outside sales and marketing organization, with a particular focus on four industries -- defense, nuclear power, aerospace, and clean tech. At this point, these all verticals with the highest near-term opportunities, and Ranor has proven strategic advantages. We want to leverage this leadership position and increase our market share.

These initiatives are part of our ongoing strategy. Upon joining TechPrecision, I met with all employees and laid out a specific theme involving the acronym GREAT, that stands for Growth, Respect, Execution, Accountability, and Teamwork.

Everyone in the organization knows we are on a great mission, transitioning a good company to a great one. If you visit our facilities, you will soon see T-shirts with this theme, and expect you will be hearing about this on future calls as well.

We have a strong base and a good business, and now it's time to execute and grow.

Externally, we have targeted new opportunities and are seeing great receptivity in the marketplace with our more sophisticated integrated partnering approach with our customers and prospective customers. This type of value selling will result in more robust pipelines that should yield incremental orders and backlog moving forward.

Our specific goal is to secure more new strategic tier 1 customers during this fiscal year.

Let me spend a few minutes talking about the verticals we address and the increasing demand we are seeing.

It is well known that alternative energy and clean tech are hot areas and that global demand for energy is increasing. This, coupled with the environmental concerns, remain a driver for our business, particularly in areas like solar, wind and nuclear power.

Because our capabilities and the nature of the equipment required by these companies in these industries, we intend to focus our services in this sector.

We also expect to market our services for medical device applications where customers require -- requirements demand strict tolerances and the ability to manufacture complex heavy equipment. In this area we remain excited about our relationship with Still River Systems.

As you know, Still River successfully extracted a clinical beam from the first production unit for the world's smallest high energy proton therapy accelerator. This milestone event paves the way for the first installation of the Monarch250 proton beam radiotherapy system at the Siteman Cancer Center at the Barnes-Jewish Hospital in Washington University School of Medicine in St. Louis.

Our subsidiary, Ranor, has been working in close collaboration with Still River Systems over the past 2 1/2 years to develop an efficient manufacturing process to produce the system. Following FDA clearance of the Monarch250, this could generate approximately $30 million in revenue to Ranor over the next three years.

Keep in mind, this project is still in a relative infancy state, but much progress has been made, and things appear to be accelerating.

We have additional efforts focused on the development and fabrication of NRC regulated medical isotope storage solutions, in addition to components for the Still River machine.

Clean tech vertical is also an area of investment and growth. We recently received a multimillion dollar letter of intent from a new tier 1 publicly traded energy industrial sector customer. We also received an initial project engineering order of several hundred thousands of dollars. The contract is evidence of our success in diversifying our customer base and adding additional top-tier customers.

Our Ranor subsidiary will produce the process chambers for new point of use industrial gas generation system, eliminating the logistical complexities of over-rail and road shipping, as well, enabling real-time feeding production of purified industrial gases.

The initial purchase order for this project engineering -- the initial purchase order is for project engineering, and we expect production units to ship approximately one year from now, with higher volumes anticipated in late 2001 (sic) or early 2012, after successful testing.

Another driver for our business is the federal government stimulus efforts. Because of our manufacturing capabilities, our nuclear certifications, and our historical relationships with suppliers in the nuclear industry, we believe that we are well-positioned to benefit from an increased activity in the nuclear sector.

Our pipeline is at a higher capacity than it has ever been, and we are carefully considering the right mix of margin and production as we pursue new business.

In terms of our outlook, I mentioned that our goal is to add four tier 1 strategic customers during this current fiscal year. We've added one. We have at least three to go.

Specifically as we look into fiscal Q2, we expect gross profit and operating income will continue to track above the previous year due to higher capacity utilization of our facility, as well as a mix of production related revenue across revenue levels comparable or above the first quarter we just completed.

Over time we expect our business development efforts to help smooth the quarter to quarter volatility in the revenue and drive incremental profitability as we more effectively utilize our capacity.

We are optimistic about our new strategic direction, which is reflected in our pipeline and resulting backlog. Certainly we are benefiting from some of the improving market conditions, but we also think the actions that we've taken are contributing to the positive direction.

We very much appreciate the support of our investor base during this exciting phase of our corporate development and look forward to updating you on our next conference call. Thank you very much.

Operator, we are now ready to begin the Q&A session.

(Operator Instructions). Michael Potter, Monarch Capital Group.

Congratulations, guys. Great quarter. And Jim, welcome aboard.

Can you give us a little update on what the status is of the ISO 9000 certification and when you anticipate receiving the certification?

We are tracking the ISO 9001 certification with audits for the month of September. So hopefully in September or October we complete that. It's a very important quality guideline to show our new customer base as well that we have that.

Okay. Has that impaired our ability on some contracts by not having the ISO 9001?

No. But as people look at the company, it's a nice thing for them to see. It gives them a comfort level that we have the quality systems in place to deliver their requirements. And I think it's much needed that we have it in place, and we'll get it done by September/October.

Okay. On the sales and marketing initiatives that you are looking to implement, can you give us a little more color on what changes you are going to make? How many additional people are you going to be adding? Are these going to be on the Ranor side or on the parent TechPrecision side? Exactly what your view is on sales and marketing.

Great question. First of all, we -- first let's talk about the systems and processes for Ranor internal.

Ranor has done a fantastic job and has an excellent relationship with its customers, but my experience is that we have been more of a reactionary fabrication and machining group. As the customers are asking for more of our services, we respond.

And the part of the processes we are implementing, which is called the SWOTs process, is closed loop strategic sales processes to help better understand the customers that we currently have and implement strategies to expand our business with those customers in a proactive -- so what we are dealing with is moving the company from a reactive mode to a proactive mode. And this is, again, within the Ranor sales organization.

We have six wonderful people on the inside sales part of this, so it's sales engineers, and with a little training and coaching in a system they can use, we are going to expand the business we do with our current customers and then better strategically attack the new ones. And the team has embraced the process, and we are going to be having formal reviews of the SWOTs in and around early September.

So that is an exciting part, because it gets them to look at the customer differently, and the word is proactive, not reactive.

On the outside part of that, yes, we are going to bring on additional sales people and additional marketing people, and they will be under the TechPrecision umbrella. The numbers are yet undetermined, but we have added -- or we have one person in the bus development group. I would expect to add at least two people on the direct sales side, and not necessarily based in New England but based in other parts of the United States, plus additional marketing.

We have done a great job of supporting customers within a radius of comfort, and the products and services that Ranor offers are far-reaching. We became -- the issue of distance to a customer is -- becomes a bigger issue the farther away you are from the factory. But if you are the ones that can provide the best quality, the best turnaround, there is value in that and you can overcome the distance. So we've got to have a local presence with those customers that aren't in our backyard.

And so I would expect to add at least two outside sales personnel and another person to the marketing group.

All right, terrific. And Rich, just a question -- do I have the EBITDA calculation correct, we are approximately $1.5 million for the quarter?

Yes, $1.4 million, Michael.

$1.47 million; right? So can you give me the number? I came out to $1,470,000.

Yes, I've got $1,297,000, plus you got $91,000 in D&A for the year. I'm getting 1 million --

Quarter.

-- 389. Right?

Plus -- well plus stock compensation.

Yes, if you want to add that back, you get to the $1.5 million you cite.

Okay. All right. I'll get back in the queue. Thanks guys.

(Operator Instructions). Stan Trilling, Credit Suisse.

Congratulations on a great quarter, and Jim, welcome aboard.

I have a question regarding the terms of your option. I see 1 million shares at $0.70. Can you -- is there any lockup? When do -- does the -- do the shares become available to you to exercise?

Do you want to take this, Rich?

Yes, I will take that. Yes, the way traditionally and in the case of Jim's stock option grant, we've done three year vesting, and it's on a lag. So the vesting is tranched out on a straight line basis at the annual anniversary. So in his case it's a third, a third, a third vesting, and the vesting begins October 4, 2011, 2012, 2013.

Okay. And on top of his -- the incentive to come onboard, can you talk about what other ways of being compensated for results you will have?

Yes. We are yet to formalize with the comp committee and senior management a bonus program that is tied to performance goals that bring value to the company a la revenue growth, bottom-line growth, cash growth. Those goals have not been finalized yet or approved by the comp committee, but they would all be accretive to showing business improvements, and there will be a bonus program tied to that for myself, but other senior managers as well.

Terrific. I may have missed this, but do you have in the near future the ability to expand on the solar area from the sole customer we have now?

Part of the SWOTs opportunity, the strategic opportunity, is to look at the products we currently produce and in what realm that we produce those products. Right now those primary chambers are in the multi-crystalline production. And there are other players in the multi-crystalline arena producing that need -- similar products, but there is an even bigger market for those players that are producing monocrystalline wafers. And while that is atypically not a vacuum process like multi-crystalline, there are various similarities of products that we can provide to that.

In addition, there are ongoing strategic discussions with new customers associated with advanced amorphous silicon processing. Again, they would need the services and the production requirements of a Ranor. So we're looking at both mono, but also amorphous silicon to expand in as well.

Great. And can you talk about, on the medical area, where do you stand? What do you see as the low hanging fruit? And where do you see this business going over the next three years?

Well, obviously the immediate or largest revenue opportunity we see with the Still River group, the proton therapy is quite amazing, and if it gets the FDA approval, we are in pretty good shape to continue to supply them the product.

I believe Still River -- and I believe this is correct -- has already deposits for 15 additional units already, even though the unit hasn't been FDA approved. So when you have seen -- or I've seen the size of the Still River units, knowing that we fabricate those, it's a wonderful opportunity for us.

There is also the isotope transport containers. That is awaiting approval as well. And if that gets approved, somebody needs to move the isotopes around for the medical industry, and there is a nice opportunity as well there.

On the Still River, will you have a service contract as well as a product contract?

Rich, why don't you take that? I'm not (multiple speakers)

Yes, I think that's an interesting question. What we cite is the manufacturing agreement. And there are services we do provide to Still River and can supply to Still River relative to the transport of the equipment. The rigging of the equipment is somewhat unique when you transport it from production facility to its ultimate site location.

So there are opportunities for us to get revenues above and beyond the manufacturing of the unit. In situ validation of the unit once it's installed in its construction site is someplace where we might get additional revenues. But a lot of that is going to define itself as we track forward and get into construction and production post the FDA clearance.

Is that helpful?

It's helpful, but what I was really hoping you would say, that something that would have ongoing -- and ongoing revenue stream rather than a situational revenue stream having to do with the transportation of the equipment.

We -- right now we have a -- the contract is for the existing backlog. I think it's quite possible for Still River roughly -- if you ask a radiation oncologist, roughly a third of all solid tumors, if it was available, would be lined up for proton beam therapy treatment versus conventional radiation. That is not available today.

What Still River offers is the opportunity to perhaps meet that demand. So I think our growth opportunity there for us is not so much in the service end, as you say -- not that these units won't need some service, but again, we are doing the manufacturing. And I think there's a lot of upside in the manufacturing beyond the initial 15 units.

Okay. Well, thank you, and I will get back in the queue.

Tony Polak, Maxim Group.

Could you give us an idea on the medical isotope, what kind of potential is there? And also possibly the potential on the production units for clean tech in late 2011?

Yes. Let me try to handle that for you, Tony -- it's Rich. What that is is there is a mandate by the NRC that they want to upgrade these Type B transportation containers. And that is the type of container that radioactive isotopes are migrated and transported around the country.

So it will be a -- by regulatory fiat the NRC will approve the new design that meets their new requirements, and we would expect that to happen sometime over the next 6 to 9 months. It's already been delayed by quite some time.

Once that happens, there will be a mandate at the NRC level that everyone needs to start migrating toward the new containers.

We have been working with one of the first organizations to come up with a new Type B container that meets the stipulated new guidelines by the NRC, and they are tracking through the NRC approval.

So it's much like Still River in that there is a binary event where the new technology is approved, and then it becomes more broadly available in the market. The only difference is, in the NRC's case they are going to mandate that people migrate to the new design.

Who would be your customer on this?

Our customer would be the folks who own the containers and who manufacture radioactive isotopes, brachyotherapy beads, and need to transport them around.

But again, we would probably be selling it to a distributor who already has that sales channel. But the market will phase shift by regulatory fiat upon approval of Type B containers. And if we can maintain our relationship and get the production on that, that is a nice opportunity for us.

Right, okay. And the clean tech, what type of potential production units could you see a year from now, or year and a half from now?

For the customer that I noted before, we have one of our four tier 1 customers added to the channel, we are going to be delivering first product within -- I believe it's within nine to 10 months is first product shipment, and at that point, based upon its successful testing, we'll be laying out more of a high-volume module assembly for the point of use gas generation system. So hopefully in calendar year 2011 we have a -- pretty much a dedicated line just for it.

In terms of capacity, there's Still River, the medical isotope, the clean tech all of a sudden comes on a year from now or year and a quarter from now -- do you have capacity to produce for all those three people?

Those -- A, first those are great problems to have. And, B, we are currently reviewing expansion plans now to accommodate the larger requirements, especially for Still River. Those units are quite large in scale. It's like spinning a Winnebago. So we are looking at the -- we call it East Bay expansion plans to accommodate that.

Great. Is there any update on when you feel the FDA will hopefully approve the product?

I believe they've generated first beam -- I would think publicly they've given some guidance towards that. I think they are going to be receiving an updated beam unit end of this year. So I think I was hearing targets of -- I think I was hearing targets from staff, and they were targeting the April/May time frame to generate a consistent beam, and then at that point they will move into treatment. I believe they are starting with -- what? the pancreatic cancer cases for (multiple speakers)

(multiple speakers) prostate. I'm not sure what indications. I (multiple speakers)

But, Tony, yes, what Jim is alluding to is there is a two-step process.

One is an engineering feat and a feat of physics -- consistently generating the beam and proving that you can move it and manipulate it as it's currently done with the much larger, more expensive equipment. That's a step one of the FDA clearance process. It's an equivalency test.

The next piece of that is the clinical equivalency, meaning -- can you operate this in a clinical setting with all the controls and all the SOP's around it that is equivalent to the much larger footprint that's up and operating in seven centers around the country?

But they will actually treat patients, they will follow those patients and make sure the exposure to the proton beam achieves the same clinical result on the tumors or tumor beds that are tested. And I think that's -- at that point in time, you can declare equivalency and ask for the FDA to rule on that.

So that is what still lies ahead for them.

Great.

It's most of that second piece, and -- but I would say a good bit of the first piece, the "Can you generate a beam?" -- I think the feat of generating a beam was the biggest hurdle for them. Now that they can generate a beam, I think manipulating, attenuating it and gearing it for clinical use has all been done before.

Great. Thanks.

Kevin Wood, Baron Partners.

My compliments also to a great quarter, good progress.

Most of the issues you've addressed already in answering the others' questions, but I wanted to clarify one comment you made. You were talking about improvements over the rest of the year and revenues tracking above last year. Did you also say, confirm that you anticipate sequential continued improvement quarter to quarter? Or did I misunderstand?

Rich, do you want to take this?

Sure. Kevin, yes, that is clearly the case. And again, what I temper that with is this is a very project and mix related business. We are building back up. We've built the backlog up to a significant point from where it was a year ago, post the GT Solar cancellation -- some of that GT, a lot of it, not GT, in the current backlog.

I think as we continue to build backlog over the balance of the next three quarters, that will give you the forward visibility.

But again, we can be lumpy quarter over quarter, depending on the product mix and when our customers ask us to ship. We are a back-ended revenue recognition methodology, from an accounting perspective. So absent those timing differences, we should see continued improvement quarter over quarter. It may be lumpy.

Sure. We will look forward to when you have the amount of visibility that will let you actually make quantitative guidance projections for us. (multiple speakers)

Just one other question -- in the potential for expansion of your capacity that you are reviewing, is it premature to ask if you have any thoughts on your CapEx requirements over the next 12 months, whether they will be significant enough to need to look beyond your internal cash flow and existing cash position?

We have a pretty good idea on the capital requirements associated with the expansion. And one thing I want to add, recently we have opened more dialogue with Massachusetts Economic Development board to -- Economic Development Council to help us with expansions, and we are reviewing a number of wonderful programs that it looks like we qualify for to help us, especially of the CapEx side in the construction side of any of the expansions, at very favorable rates. So I think we're in pretty good shape for the next 12 months.

Yes. Jim's background at Akrion and mine before I came here both involved a lot of access to non-dilutive financing. And (multiple speakers)

We like that.

The balance sheet we have, the cash generation we have available to us, and the access to non-dilutive financing that we'd like to tap into I think gives us the ability to meet any CapEx demands we need here. And our financing capacity is significantly higher today than it was two, three years ago.

Yes. A lot of companies out there would like to be able to say that.

Oh, I know. Well, we are pleased. It's been a lot of belt-tightening and a lot of hard work both at the Ranor level and at TechPrecision to allow us to be there. So --

That's great. Well, that's all I have. We'll look forward to hearing more from you going forward.

Michael Potter.

Just a couple other questions. Jim, can you bring us up-to-date on our nuclear initiatives, both on the maintenance side, which is I guess an enormous opportunity for us, as well as new build?

Yes. We are-- again, this is part of the SWOTs process to make sure we really understand that and can strategically go after the right parts of the business. So the AP1000, the new Westinghouse nuclear reactor, is -- it fits well within our sweet spot from new construction capabilities. We expect to work very hard and partner to see that grow.

On the outages aside -- and remember, from an earlier question about people that we might hire from the outside to go focus on a specific area -- well, you just hit one. And there is tremendous opportunity to expand this.

Ranor over the years has done very good work, particularly on the -- what we call the outage or the scheduled maintenance side. And I think there's a tremendous opportunity to expand that and to remind people what we are capable of doing and supporting.

And there are not hundreds of fabrication machine shops in the United States that can support this type of work, particularly with our end stamp. It's quite limited.

And so getting the right outside salesperson coordinated with the factory and the factory's capabilities, clean up our marketing mark com associated with this -- I think there's wonderful opportunity on the outage side of this as well.

And the stat is -- in the United States 104 nuclear reactors that need the maintenance, and we want to be a part of that and a part of those people that support that. And our capabilities in our industry speaks for itself. We can do that more proactively.

Okay. How would you -- how are you going to measure this, I guess, our progress in this vertical for I guess fiscal 2011 and fiscal 2012? Where do you see us towards the end of this year with our nuclear capabilities and traction?

The issue (multiple speakers)

Or would you like to defer that to the next conference call?

Well, actually, yes. I will have a better handle on that. One of the parts of the SWOTs processes -- and the "O" in SWOTs stands for Opportunities -- that we strategically understand where are the opportunities that we can say, hey, the actual served available market is X, and we are going to go after this part of it.

Ranor or TechPrecision in the past didn't identify or know what that was or have a strategy for that. So that's what we are rallying the team around in the early part of September with the SWOTs to say -- here's the strategics for both new and for the outages or the support. Here's who we are going after. Here's who's going to do the work. And these are the products and services we are going to offer.

And again, it's from a more proactive standpoint. So don't have those exact numbers yet, but I'm telling you, that is an area of focus and particularly going to be an area focus with one of the out sides.

Michael, just to stack on top of that, one thing I'll point out -- and you will see this in the 10-Q once we file it -- roughly 8% of our backlog at the end of June, at that $25 million, is nuclear related. So we continue to carry seven figures of nuclear revenue in our backlog. And to Jim's point, we want to get more organized and more focused as to how we add to that book of business going forward.

So right now, the work we did last year, it's now time to circle back, and Bill and Jim and others will be doing this with the big EPCs and the large OEM players in the nuclear space, who do not just new build but also support the 104 plants on behalf of the nuclear plant operators.

Okay, terrific. And then I know we already have a good line of business with regard to some prime defense contractors. Can you kind of maybe review what our strategy is there in order to grow that business? And I'm assuming that is also another vertical where there is tremendous opportunity.

Absolutely there's tremendous opportunity. So first, thanks for the question.

Yes, again, all these questions related to the markets are to take a company and its culture from being a reactive to a proactive and going after the new customers but expanding the relationship with the existing customers. And particularly on the defensive side of the business, because of the quality, the on-time performance that Ranor continues to deliver to these customers, we are impressing them more every day to -- for allowing -- for us to ask them, and besides them asking us, to expand the work -- or the scope of work we are doing for them now.

And I happen to see that the defense and the initial strategy plans laid out on the defense to be already one of the more thought out ones where I can see that easily tripling over the next year. It's a wonderful opportunity. It's in our sweet spot, and I'm happy to say, it looks like at least one of our other competitors is not keeping pace with the quality and customer satisfaction that Ranor is, and that's helping us accelerate that.

All right. Terrific, guys. Thanks a lot.

At this time I would like to turn the conference back over to Mr. Molinaro for closing comments.

Thank you very much.

Thank you everyone for your questions today. They were very, very good questions. And we look forward to meeting and speaking with all of you in the coming months. Operationally, we look forward to delivering positive results for our shareholders and increasing the value of TechPrecision.

And everyone have a good evening, and if you're on the east coast, please stay dry. Bye-bye.

Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation. At this time you may now disconnect.