Operator:

Greetings, and welcome to the CPI Aerostructures, Inc. Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Edward Fred, Chief Executive Officer. Thank you, Mr. Fred, you may begin. Edward Fred: Thank you, Christine. Good morning and thank you all for joining us for our Fourth Quarter and Year End 2011 Conference Call. If you need a copy of the press release issued this morning, please contact Lena Cati of the Equity Group at (212) 836-9611, and she will fax or e-mail a copy to you. Also, if you would like to listen to this call again, you can hear a replay on our website's Investor Relations section in about an hour at www.cpiaero.com. Before we get started, I want to remind investors that this conference call will contain certain forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. Included in these risks are the government's ability to terminate their contracts with us at any time; the government's ability to reduce or modify its contract if its requirements or budgetary constraints change; the government's right to suspend or bar us from doing business with them; as well as competition in the bidding process for both government and sub-contracting contracts. Our subcontracting customers also have the ability to terminate their contracts with us if we fail to meet the requirements of those contracts, or if their customer reduces or modifies its contracts to them due to budgetary constraints. Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statement contained in this conference call. Additional information concerning these and other risks can be found in our filings with the SEC. This morning, I will give you a brief overview of our 2011 full year results. I will then hand the call over to Vince Palazzolo, our CFO, so he can walk you through the financial statement details of the fourth quarter. As reported earlier this morning for the year ended December 31, 2011, revenue reached an all-time high of approximately $74,136,000 compared to approximately $43,991,000 for the year ended December 31, 2010. Pretax income was approximately $10,539,000 compared to pretax income of approximately $543,000 for the same period last year. Net income for the full year was approximately $7,417,000 or $1.04 per diluted share compared to net income of approximately $530,000 or $0.08 per diluted share for the 2010 full year. Selling, general and administrative expenses for 2011 were approximately $7,932,000 or 10.7% of revenue compared to approximately $5,415,000 or 12.3% of revenue for the same period in 2010. So with that prelude, I will now hand the call over to Vince Palazzolo, our CFO, so he can walk you through the financial statement details. Then I will comment on the current business environment, our guidance for 2012 and then briefly wrap things up and open the call to questions. Vince? Vincent Palazzolo: Thanks, Ed. As reported in this morning's press release comparing the fourth quarter of 2011 to the fourth quarter of 2010, revenue was $24,092,200 compared to $7,464,546. Gross margin was 27% as compared to a negative margin of 45% last year. Pretax income was $3,901,020 compared to a pretax net loss of $4,758,536. Net income was $2,673,020 or $0.37 per diluted share compared to a net loss of $2,965,536 or a negative $0.44 per diluted share last year. Selling, general and administrative expenses were approximately $2,523,000 or 8.9% of revenue, compared to approximately $1,364,000 or 18.3% of revenue for the prior year. Now I'll pass the call back to Ed. Edward Fred: Thanks, Vince. New orders for 2011 were a record $83.6 million and well above our previous record of $61.7 million which we set in 2010. This award growth was driven in part by the fact that we received the expected follow-on releases on 2 of our major subcontracting programs, the E-2D and the G650. The G650 releases were for $24.5 million, while the E-2D orders equaled $11.2 million. In addition, we received the $2.9 million award from Sikorsky to provide structural assemblies for spares on the BLACK HAWK military helicopter, and we won 2 new programs to build inlet and flap assemblies for Honda Jet and to manufacture various assemblies for Bell Helicopter for its AH-1Z ZULU Attack Helicopter. There's also a real business potential from the approximately $280 million of unawarded solicitations outstanding once these programs are funded and/or awarded. This potential is evidenced by the strong start we've had in 2012, with year-to-date new contract awards totaling $28.1 million compared to $22.3 million for the same period last year. One of these new awards which we received in February was very exciting in a couple of ways. We received the purchase order from a new customer, Goodrich Corporation. And for the first time, CPI will have the authority to design modifications to the structure it is manufacturing. In the past several years, our reputation has been elevated in our industry, thanks to our impressive list of customers, the success we have experienced in the important programs that we're working on, and the exposure we have had and the contacts we've made at various aerospace and defense institutional investment conferences. This manifested itself in the expansion of our customer base in 2011 as we added 2 prestigious companies, Honda Aircraft and Bell Helicopter to this list, in addition to adding Goodrich early in 2012. We are now in the midst of establishing relationships with additional prime manufacturers, including other helicopter and business private jet companies. We've come to recognize CPI Aero as a premier supplier of aircraft structure. Among the other unawarded bids outstanding are contract opportunities with these potential customers. We look forward to reporting on our progress of turning solicitations with these prospects into awards and contracts in the very near future. We are reaffirming our guidance for 2012, projecting that revenue will be in the range of $95 million to $98 million, with the resulting net income in the range of $12 million to $13 million. Also, we intend to provide our 2013 guidance in our first quarter 2012 earnings release in May. To support our expected growth in new orders, customers' programs and of course, revenue and profits over the coming years, in November 2011 we increased our line of credit with Sovereign Bank to $18 million. Additionally, in mid-December, we completed the relocation of our -- to our 171,000 square foot facility, which is nearly 3x the size of our former location. Pictures of the new facility are available on our website, www.cpiaero.com. On a separate note, CPI Aero will continue to tell its stories as often as possible. And to that point, we'll be presenting at the Roth Capital 24th Annual Growth Stock Conference next Tuesday, March 13. We are also scheduled to present at the 13th Annual B. Riley Investor Conference held in Santa Monica on May 21 through the 23, and the Stevens Annual Spring Conference held in New York City on June 5 and 6. We look forward to the coming years with great anticipation and excitement as we execute on our current contracts, develop new customers and deliver unprecedented financial results for our company. At this point, I would like to open the floor to questions. Christine, can you allow callers to place questions now? Operator: [Operator Instructions] Our first question is from Mark Jordan with Noble Financial. Mark Jordan: Ed, I was wondering if you would talk a little bit about the A-10 program, where it stands with regards to billing activity and your accounts receivable. Secondly, talk about the funding for that program and what you think is the longer-term outlook for the A-10 project? Edward Fred: Okay. I'm going to split this in half. I will talk to you about the funding issue and Vince will talk to you about the receivable issue. The funding issue is that there really isn't one. I think some people got a little concerned when the current budget had almost all of the money sliced out of it for A-10 to Boeing for the A-10 Wing Program and misinterpreted that, that there was going to be a problem with the program itself. The only issue that existed there was that Boeing was late on its deliveries for a variety of reasons, and the government was sitting on a pile of money that was due to pay Boeing already and yet hadn't paid them because they hadn't completed their part of their contractual obligation. Therefore the Congress and Pentagon and Defense and everybody else, saw no reason to allocate more money in 2012 when they're sitting on the pile of money from 2011. So this was more of a funding transfer than anything else. There has been no talk of this program going away, even though there's been talk of retirement of some A-10s. It still doesn't reach the level of the 242 planes that the government had ordered re-winging on. We have now received releases to build, what guys, 100 -- 117 of those 242s so far. Our work is not slowing up in any way, shape or form. We have not been asked to slow down. In fact, we're turning out more landing gear parts than you can possibly believe when you look out into our shop. So from that perspective, there is no funding issue. It was simply a delay in funding or a push-out of funding by the government to Boeing simply because they hadn't delivered yet. Vince, I'll let you take the receivable question. Vincent Palazzolo: Yes. The cash receivables from the Boeing job are on track to what we had projected, which was still negative in the fourth quarter. And a lot of the runoff that you see in the cost and estimated earnings line is related to that job. But that was expected as one of the reasons that we expanded our line of credit near the end of the year. The shippings through the first and second quarter are also on track to begin that turnaround which we talked about in the last quarter's conference call of when we expected that program to be able to begin to generate positive cash flows and have the receivables come down. So I would say it is higher in the fourth quarter. The fourth quarter was a bigger number than where we stood in the third quarter, but within the range of what we expected and that we still project -- our projection is still on track for the turnaround come in the next couple of months on the program. Mark Jordan: Second question related to bids outstanding. At year end you were at 282. I think at the end of the third quarter 399. Did you -- what did you kind of debook from that bids outstanding? Was that business that went away? Or how do you account for that drawing down? And secondly, you alluded to some new customers that you're marketing to. Are those new customers in that outstanding bid portfolio? Edward Fred: Okay, first part of the question, the number came down basically through 2 avenues. One, we had a customer reduce scope on the job that they had originally put out as a bid. So we in turn reduced our bid, which eroded some of it. And the second thing is, and this happens all the time, it just happened -- occurred right at the end of the quarter and we don't want to mislead anyone into thinking -- we handle the situation the same way every single time, and in this case it caused the number to go down. And that is we had a customer -- we asked for a resubmittal of bids, not just from us, from all of our competitors. Everybody had to do a resubmittal. And so the bids that we're in are no longer valid, therefore we pull it out of our number and not leave it there knowing that's not going to be the number again. So we pull it out, which reduced the number a bit significantly I would say. And in the coming weeks, we will be resubmitting and that number will jump way back up again. Had we not been announcing earnings right now, you never would have seen that flip-flop. So to answer, I think, what is the underlying question here no, we didn't lose any major bids or proposals. We did not lose any major competitions. The number will be higher in the not-too-distant future. So we're not concerned that all of a sudden business is going away. In fact, the waters are churning with new business potentials, et cetera. All I will say to you without getting specific on the second part of the question is that there is some new customer solicitations in that number, but not a significant amount yet. A lot of the new customers who we're trying to cultivate are at the early stages of the bid process. We have not submitted things to those customers yet. But again, that will also be a driver in the growth of that number as the year goes on. Operator: Our next question is coming from the line of Mark Tobin with Roth Capital Partners. Mark Tobin: First on just some housekeeping. Can you give us the depreciation and amortization CapEx and operating cash flow for the quarter? Vincent Palazzolo: Depreciation and amortization for the quarter was $210,000. CapEx was higher than the last 3 years combined. It was $1 million in the quarter, all because of work related to the new building within the range of our projection. But a big number, it will stand out. And operating cash flow was negative. I don't have it for the quarter. I'm sorry. Mark Tobin: Year is fine. Vincent Palazzolo: Year is 13.7 negative. Mark Tobin: Okay, thank you. And then looking at the guidance for 2012, Ed, can you give us a sense of kind of how that breaks down and what your underlying assumptions are as far as how much of that revenue you already have booked? And then any other, I guess, risks to it or potential upside to it? Edward Fred: At this point in any given fiscal year, we probably have in the vicinity of 85% of the revenue booked, and the balance is based on new contract wins that we anticipate based on historic win levels every single year. And so that's where we stand on it right now. If there were major wins that we had not anticipated, obviously those numbers could go up to 12. By the same token, if the bidding -- the winning process went ice cold, we might not hit that guidance number. But again, given 7 -- basically 7 years of history on what we win every single year, we're very, very confident on what that number will be. And keep in mind that number has been out there now for probably 5 or 6 quarters, at least. So we're, again, pretty confident that we'll land right in that range that we projected. Mark Tobin: Understood. And how much cushion are you giving yourself schedule-wise, specifically on the Honda Jet program? Edward Fred: We don't need a lot of cushion schedule-wise because even if they get delays, we've already been tasked with building the early, I won't call it prototypes, if you will, but low rate production unit runs. We've been -- already been given the go-ahead to build the tooling for these jobs and that is how we generate revenue. Keep in mind when you -- when you use percent of completion, it is not deliveries. So knowing that we've been given the go-ahead to build these things, I could build them all tomorrow, in theory, and record all of the revenue for Honda tomorrow. Now we're not going to do that. You build this just in time, obviously. But there is no issue. If they get delayed, they wouldn't -- or sped up, it might not necessarily change our revenue projection for jobs like that this year. Mark Tobin: Got it. And then finally, looking ahead to -- again, as we look at '12 and kind of how it flows from a quarter-to-quarter basis, do you have a sense of whether it's going to be more front-end or back-end loaded from a revenue standpoint? Edward Fred: Okay. As you know, we don't give quarterly guidance. I will tell you that historically our quarters usually go first quarter lowest, second and third higher, but not necessarily one more so than the other, and fourth is always -- tends to be the highest we have. The reason for that is not seasonal, but I think our customers at the same time are always looking for a better year end, and building up their numbers and hence, that gets passed down to us in the build schedule. So I think you would see a first quarter this year that would be lower than the fourth quarter that we just reported, and then each one stepping up a slight bit where the fourth quarter is always higher. And that again, is a historic trend with us. And so I don't see anything necessarily different in that. If we see something different just as we did this year, or this past year, 2011, when we thought the third quarter might be low, we'll apprise everyone of that situation. But otherwise, I think you should look at a first quarter that's better than last year's first quarter, but not as good as this year's fourth quarter, and then stepping up each quarter thereon until the end of the year. Operator: Our next question comes from the line of Alex Hamilton with EarlyBirdCapital. Alexander Hamilton: On the facility issue, I know this is a little bit of going backwards, but can you remind us on great, you have a facility 3x the size what you had. You're winning new awards, but can we talk about sort of, I guess as quickly as we can, sort of the financing and on the margin, what is that costing you? Edward Fred: Well, all I'll say to you -- I mean, I'm not going to get into the detailed cost of moving into this facility. All I will say to you is that rolling into this facility allowed us to win new jobs, which has allowed us increase revenue. In theory, $20 million from '12 over '11. And so the increase in revenue basically offset the increase in cost to operate this new facility, as evidenced by the fact that our projections show, and you can do the math, basically the same gross margin in 2012 that we had in 2011 which goes to show that as we continue to grow from 2012 on, operationally and perhaps gross margin-wise, we will get even more efficient. So this was not -- this is not, certainly not just our desire to be in somewhere bigger or to have a pretty place. As a matter of fact, I did everything I could to avoid a move. We were just going to expand. But with a list of customers that we've been pursuing, with the fact that we knew, but we couldn't tell all of you, we knew that we were winning Honda Jet, we were winning Goodrich, et cetera, and we're going to need the space to grow anyway and that some of the things we're looking at for the future will require additional space. This just made the best, both strategic but also fiscal sense, as a direction for the company to take. So again, I guess to answer your question, the move here from a dollars-to-dollars or an apples-to-apples comparison is that moving here really hasn't cost us anything more in margin that it would have had we stayed in the other place, because we wouldn't have been able to make this work. Alexander Hamilton: Thank you, and then can you just update us, and then I'll open it up to someone else, on the Bell program and when that should be up and running? Edward Fred: I'd have Doug McCrosson here, my COO. So he's going to take that one. Doug? Douglas McCrosson: The Bell program is now up and running. The tooling is being manufactured. We're preparing the floor space right now to accept the tooling, and we are probably a month or 1.5 months away from some of the major detail parts coming in to support that build. Operator: Our next question comes from the line of Michael Callahan with Auriga Securities. Michael Callahan: I guess the first question I wanted to ask relates to Sikorsky and where things stand with them. I guess the one -- in another way the, kind of great 2011, that Sikorsky was the one customer that -- you're just one supplier goal in 2010, that will -- and quite a few bids outstanding, and it seems like that's not quite materializing as we had hoped. Do you have any updates to -- with those programs? Edward Fred: Yes. They are -- the logjam there is breaking, and we've talked about Sikorsky many times and how long it takes to get something from them. But I'll give them a pass here, if you will, in that there was a lot that we bid on than a lot of our competitors bid on, and other programs that we didn't bid on, just this overall thing that was tied up in the multi-year rate negotiations they were having with the U.S. Government. They needed to get their funding before they could turnaround and fund programs that we're bidding on and other people are bidding on. That finally occurred at the very, very end of 2010. So we're now seeing a lot of movement on those contracts. We've had a lot of discussions. We actually go to Sikorsky once a week to try to finish up negotiations on some of the bids that are in and some of the new stuff that maybe coming down. So we're pretty confident that in the not-too-distant future, these things will work themselves out and hopefully and optimistically be reporting to you on a couple of award wins there that we've been expecting and still expect to get. Michael Callahan: Okay. That's fair enough. I guess the next thing I want to talk for a minute about was your prime defense business was up, it shows in the press release, 51% in the year. Is this starting to finally improve? I know throughout the past 5 years, it's all but gone away. Is this finally starting to improve on that end? And are you expecting additional growth into 2012? Edward Fred: Mike, I don't want to deceive people. 51% of almost nothing is not a big jump. No, it's picking up slightly. Do we see it coming? Absolutely. Conflicts are winding down. Resources are being brought home. The word we've gotten is that fleets will be looked at, meaning back in the old days when we used to be so much, 100% almost, direct to the U.S. Government, they would look at 5 planes and decide what was needed on those 5 planes, and then we'd get an order and then somebody else go out and look at 5 planes somewhere else, and so on and so on. We've been led to believe that it will be done very differently now; they will actually take looks at fleets, for example the fleet of C-5s, and see just how many cargo doors are required, wingtips are required and fuselage panels are required and on and on and on. And that will be true of all of the assets within the U.S. Government inventory. And that's not going to happen fast. So I think it's our belief at this point that we'll win some indirect work -- I mean, some direct work in 2012 without doubt, but we really see that kind of business picking back up again in 2013 when they've had a full year to evaluate their needs, get money into the next budget to fund the requirements that come from those needs and then that's when think we'll see -- we and others will see a significant growth back into that arena. Michael Callahan: Okay. I guess just the last thing I wanted to ask is on the SG&A line, it's ticks up pretty significantly sequentially. I assume that is related to the move to the new facility. But going forward, is there kind of an SG&A dollar amount or percentage, I guess, target that you guys have, or is this kind of the new run rate from even bigger filled-in, presumably more cost? Edward Fred: I'm going to let Vince take that one. Vincent Palazzolo: Well in dollars, a big portion of the uptick was related to the contractually computed bonuses that the executive management get -- or that the management get, not just the executives get, based on the profitability, which was severely depressed last year. So the computation yielded a small number. When you had a big year, that number goes up. What I would take from the SG&A line is the percentage as compared to revenue. Historically, we've run at 11%. The percentage in the fourth quarter was 8.9%. I think that, that type of trend is something that you should look at going forward. I think that that's probably going to be consistent, that will keep the percentage as a percentage of revenue down in that 8%, 9% range. Edward Fred: Keep in mind, Mike, we also put something in earlier in the year. We announced it, we put it out, that our Board members had changed their -- we asked them to change their compensation methodology so that we were able to cap their expenses or the expense of the Board fees. And again, it was nothing they were doing wrong. They were being paid mostly in stock options versus cash. And because of the volatility in our stock -- which was a good thing, it means the stock was going up dramatically, but the volatility caused us to have almost $1 million worth of expense simply because of a Black-Scholes calculation. Now we have capped that at, I believe, $560,000 -- cumulative $575,000, something like that, for the entire group, by giving them a bigger cash component and limiting the amount of stock options they could get based on Black-Scholes to a ceiling for each individual shareholder -- or director, shareholder. So between that, and as Vince said, the bonuses this year, which won't be as high next year obviously, just based on the fact that while we're growing beautifully, we're not growing in comparison to what we did last year because of the depressed bonus. And so that said, next time I see you, I will buy the beers, okay? Michael Callahan: That sounds good. I guess just one follow-up on that. Do the bonuses always come in the fourth quarter? So should we always expect to see an uptick in the fourth quarter or... Vincent Palazzolo: No, we compute them on a quarterly basis, but they're trued up in the fourth quarter because you can't exactly do the computation until you reach the end of the year. But we do take a portion of that in each of the quarters and just do the true up in the fourth. Operator: Our next question comes from the line of Steve Shaw with Sidoti & Company. Steve Shaw: Do you guys have a number for outstanding bids related to helicopter work? Edward Fred: Steve, we don't give that out. We don't break it down that deeply in the -- for the general public. So I really can't answer that for you. Steve Shaw: Okay. And then, Vince, was the CapEx number you gave previously for the quarter of the year? Vincent Palazzolo: $1,020,000 was for the quarter. Edward Fred: And again, almost all of it relating to the move here, Steve. Operator: Our next question comes from the line of Chris Sigala with B. Riley & Co. Christopher Sigala: So it's great to hear that you expect to work down the receivable overhang with Boeing over the next few months. I was just curious if this implies that you would expect that account that caused an excess in -- of estimated earnings to come down throughout the rest of the year? Vincent Palazzolo: Well, the answer is that overall it may not come down, although it will be coming down on the Boeing job per se. We do have the new work for Goodrich, which is going to start building up. So it may stay flat over the course of the year, and it'll just be the components that are shifting. Certainly I would expect that even in the worst case, that it would not be rising as rapidly as it did in the tail end of 2011. I think that's a fair statement. Christopher Sigala: Okay, so you expect to be cash flow positive from operations for the year? Vincent Palazzolo: By the end of the year, yes, I would say so. Christopher Sigala: Okay, great. And then just last question was curious if you can talk a little bit about progress on the G650 program? That seems like -- to be one of your more exciting opportunities a while back, and just kind of curious how that's tracking? Edward Fred: It's doing fantastic. We just -- as I stated, we've got tremendous number of orders from them last year. About what unit are we up to now building? Vincent Palazzolo: One -- 27... Edward Fred: We're building unit #27, and we have orders for... Vincent Palazzolo: 98... Edward Fred: Up to unit #98 already. Vincent Palazzolo: Kind of one, one a week. Edward Fred: We're building -- we're literally building a set of leading edges one per week. So 10 edges, one ship set every single week. But their program is fantastic over at Gulfstream. They've announced an up-rate in production on the plane. It's been incredibly well received by the public. As we've told you many times, they've got -- publicly have said they have 200 orders of record. So it is -- it is a very exciting program for us. We're thrilled to be on it. And we're really enjoying watching an entire ship set turn out every single week. We have 2 crews on it now, we have the day crew and a night crew, which is the first time we've ever employed one consistently here. So a real great revenue generator for us. Operator: Our next question comes from the line of Bhakti Pavani with C.K. Cooper & Company. Bhakti Pavani: I just wanted to know that if I'm correct, the revenues from the military and non-military came about to 86% to 14% this year for the 2011? Edward Fred: That's about right. Vincent Palazzolo: That should be right. Edward Fred: That's about right, yes. Bhakti Pavani: So do you think that going forward in 2012, do you think that kind of revenue mix? Or do you think that's going to change a little bit? Edward Fred: Based on what we know going forward, we see the rate shifting somewhat more towards non-military than military. We're not getting the 50-50 anytime soon, that's certainly the case. But with the ramp up in G650, with S-92, with Honda Jet, all of that should make the -- probably, the balance start to shift a little bit more towards non-military. I wouldn't go crazy with it yet, but certainly headed in that direction. Vincent Palazzolo: [indiscernible] Bhakti Pavani: Okay. My next question is about your line of credit. You extended your line of credit to $18 million, and if I'm correct you withdraw -- you withdrew up to $16 million, if I'm correct, for the -- for 2011? So how are you using that? And do you have any plans of expending that next year? Vincent Palazzolo: We -- most of the -- as I have mentioned to one of the other questions, a lot of that cash has gone into the funding during the negative cash flow portion on the Boeing contracts. Or a lot of that has been on inventory and work in process and labor going into the Boeing program. That's a big bulk of it. As for do we plan on increasing it in 2012... Edward Fred: We're just looking at it. Vincent Palazzolo: We're always looking at what we would need to fund our cash flow and growth and potential new business that Ed had mentioned early on the conversation that would require new tooling. So everything is sort of open. And as we go along, we alter our plans to accommodate what we need. Edward Fred: Right. I mean, I would say to you, I hope I have to go back for more money to the bank this year. That just means we're doing better and better. Good problem to have. Bhakti Pavani: Okay. The other question is, Ed, could you talk a little bit more about what's going on the E-2D front, with the E-2D contract? Edward Fred: The E-2D is operating exactly as we hoped it would. A lot of people again worried in the defense budget that there'd be a slowdown in it or delay in it, and there were some cuts in it that people saw, but it did not impact us at all because we were not expecting that many orders nor was, I believe, Northrop Grumman at the time. So our program is exactly where it was supposed to be. We've got a build right now, right through the year 2012. Nothing changing there into '13, I believe, well into '13. Vincent Palazzolo: We have 18 aircraft on... Edward Fred: Right. We have 18 aircraft on order at this moment. So even if there were to be a slowdown in that program, that's not going to hit us until late '13 or '14 from a revenue impact standpoint. So again, people talk all the time about the shrinking defense budget, et cetera, and we obviously completely understand it and we're not silly enough to think it can't ever impact us. But we happen to be on some very, very good programs right now that don't seem to be getting impacted as much as other programs are in the military budget, E-2D, A-10, C-5, things like that. You have C-5; they're going to retire 30 or 40 planes. That still leaves 60. So we think we're positioned extremely well. Bhakti Pavani: Okay, sounds great. My last question is for Vince. What would be the -- what was the CapEx for 2011, for the whole year? Vincent Palazzolo: For the whole year, it was $2.3 million. Bhakti Pavani: And do you see that continuing for 2000 -- going in 2012, do you see that or do you plan to increase? Vincent Palazzolo: No, I would say that it will be severely less than that in 2012. Maybe 300,000. Edward Fred: Right. Vincent Palazzolo: Most of that increase, the big bulk of that increase was all related to this new building. And now that that's in place, I mean, CapEx obviously is a long term. So I would say it's significantly less than that. Bhakti Pavani: Okay, and lastly, what was the headcount of -- what was the headcount of the company? Edward Fred: 152 at year end. I think that was the number. Vincent Palazzolo: Right. Edward Fred: 152 employees at year end. Operator: Our next question is a follow-up question from Michael Callahan with Auriga Securities. Michael Callahan: Yes, listen Ed, one follow-up on the defense business we talked about earlier in the call, I guess the prime defense business to the government. Can you tell us what the peak was in the past? How high that piece of the business can get? And then also just how you guys think about prime contracts with the U.S. Government in comparison to overall defense budgets, meaning if defense budgets are cut, I would think that would -- that piece would still be safe just as their bringing an aircraft back would be a lot easier to repair them than build new ones. Edward Fred: Right, okay. First of all, at its peak, I think it was 2004-ish, we did $30.3 million in revenue. The entire amount was direct to the U.S. Government. That was our peak. At that point in time, we were the second largest supplier of structural aircraft parts, replacement parts, behind only Lockheed Martin and obviously Lockheed Martin was the OEM on a lot of those aircraft. So it wasn't weird to be behind them. So we were a $30 million company that was #2 in the world in providing those parts. We had a lot of competition from a lot of small companies, most of them private. Since the downturn in that business, a lot of those companies have either gone by the wayside because they couldn't adjust. I mean we got very lucky, I will admit that. We went from $8 million -- from $30 million to $18 million in 2 years from that business. So it was quite a downturn. A lot of companies could not withstand that and went out of business. Others changed their direction. We went in the subcontracting route. One of the competitors I'm thinking about switched from the Air Force to the Army and has a wonderful business running now, but isn't a competitor anymore and we talk all the time. So I think what you have to look at is in that period of time before planes got shot up and went to war for the last 8, 9 years, we were doing an amount of $30 million with a pool of say 50 competitors. Today, when this comes back up, I think you'll see a pool, first off, that starts at a lot higher dollar amount because it's not modifying 5 or 6 or 7 planes; it's modifying fleets of planes. The pool of competitors will be down significantly because of the attrition of the ones we competed against then. So I think the potential is something beyond $30 million a year. I would expect us to be able to reassume our position as one of the leading suppliers of these parts in the entire world. That said, I don't take any of that into my projections ever right now until I see it start to come back. But if you're asking is there a hidden gem in here somewhere? Yes, that is a hidden gem. That could be $30 million to $50 million that could go into our revenue number at some point where it was never planned on, and was work we always did and know how to do better than anybody else. As far as a shrinking defense budget, I think it plays into our hands very well in that how we got to that $30 million number was we were one of the few companies that actually understood how to build parts for out-of-production aircraft. It's not the same as building a brand-new part. The parts don't fit on a plane the same way if the plane is 30 years old and you build a part today exactly new. You have to understand how to modify that part that allows for the shifting of the plane over 30 years of flying, et cetera. All of that said, we feel that being in that arena, having that kind of knowledge, in a shrinking defense budget only helps because it is logical that if the defense budget is shrinking so much, you're not going to go out and buy new aircraft; you're going to refurbish and maintain what you already have because you might be able to do 4 or 5 planes for the same exact price it would cost you to buy one brand new one. So again when this comes back, we believe -- and this is not just a belief, it's historically accurate that we are in the prime position to be able to grab a whole lot of that business when it finally comes. Our only question, our only issue and why we don't pound our chest about this potential business is no one knows when it's going to come yet. And so we sit back quietly and we wait for it. We've developed a beautiful business without it and when it comes back, we'll be right there to go get it again. Michael Callahan: Okay, I guess when the orders come in, how short is the lead time until you would see the revenue impact? Edward Fred: Those are very interesting. It will depend on how they do them. If they do them exactly like they used to do them in the past, you would bid on a contract, it would be awarded within 3 months and then it would be completed within 6 to 18 months because it was here is a part, here is a number of parts -- the quantity of those parts we want, go. So you could actually win a job in January and have it done by July or August or September or December. Fully -- the full revenue booking in it. And if you go back and look -- if you remember, and I believe there's a presentation on our website, if you look at the slide show we have, there's a page that talks about contract awards and the next page does revenue. If you go to that contracts page and look at what we won and the year we won it and then move forward one slide to the revenue page, you'll see that revenue tracked almost one year to the day from when we won contracts. So if we won $30 million of contract in year 1, it generated $30 million worth of revenue in year 2. If we won $7 million worth of contracts in year 2, we would have recorded $7 million worth of revenue in year 3. So there's about a one-year lag, which tells you everything was produced on average within a 12-month period of time. Michael Callahan: Okay, I guess just 2 last things on that topic. One is I assume you have not seen a big uptick in available bids on these types of projects so far. And actually, if they do go by fleet instead of by aircraft in the future, is that going to significantly increase the competition from bigger players as obviously the contract value would increase significantly as well? Edward Fred: I'm going to say, I guess logically that would seem to be the case. However, by doing it via fleet versus planes, it might take a contract that was $2 million back in the day, back in the '03, '04 time frame, and make it $12 million now as opposed to a $2 million contract. That is still very, very small for a lot of the people we compete against today. Don't forget, we're competing against companies nowadays that are anywhere from $300 million to $1.7 billion. We compete against divisions of Triumph, which is a $3 billion company now. A $12 million contract is not necessarily something they're going to go hog wild over. For us, that's a significant piece of work. For them, it might not necessarily be. I won't use names, but for some of those companies I just mentioned, over $0.5 billion dollars approaching $1 billion or slightly over, that would not interest them all that much. We don't see them on the contracts that we're winning now. We just announced the Goodrich contract that was what, $11 million basically. There wasn't a lot of those people out there competing on that either. So while there will be some additional competition, I like our chances just based on our track record and being able to go back in and say, "Remember us? We were the best you've had. And we're back, and we're still here and let's go." Operator: [Operator Instructions] Mr. Fred, it appears we have no further questions at this time. I would now like to turn the floor back over to you for closing comments. Edward Fred: Okay, thank you, Christine. Well, I'd like to thank all of you for participating in this call and look forward to speaking to you again in early May for our first quarter earnings call. And perhaps I'll see some of you at the Roth next week. Thank you. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day. Edward Fred: Thank you, Christine.