Park Aerospace Corp. (PKE) Q4 2012 Earnings Report, Transcript and Summary

Good morning. My name is Derrick, and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp. Fourth Quarter Fiscal Year 2012 Earnings Release Conference Call. [Operator Instructions] Thank you. At this time, I would turn today’s call over to Mr. Brian Shore, President and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, Operator. This is Brian Shore. Good morning, everybody. I have with me Matt Farabaugh, our VP and CFO. So, welcome to our fourth quarter conference call. We will be starting as usual with some introductory remarks. Matt and I will cover some financial analysis followed by a couple of comments, I guess, then we will go into Q&A. So Matt, why don’t you get by starting with the financial analysis.

Okay. Thanks Brian. Certain statements we may make during the course of this discussion, which do not relate to historical financial information may be deemed to constitute forward-looking statements. Any forward-looking statements are subject to various factors that could cause actual results to differ materially from our expectations. We have set forth in our most recent annual report on Form 10-K for the fiscal year ended February 27, 2011 various factors that could affect future results. Those factors are found in Item 1A and after Item 7 of that Form 10-K. Any forward-looking statements we may make are subject to those factors. In this discussion, I will describe results of operations based on non-GAAP financial measures, as well as financial results determined in accordance with GAAP. We believe the disclosure of non-GAAP operating results as a supplement to GAAP financial results will assist the listener in assessing the company’s performance and prospects. Reconciliation of GAAP to non-GAAP measures is included in our earnings news release. I’d first like to summarize financial information included in the news release for the fourth quarter and fiscal year ended February 26, 2012. Net sales for the 2012 fiscal year quarter ended February 26, 2012 were $43.7 million, compared to net sales of $51.2 million for the prior fiscal year’s fourth quarter. Park’s sales for the fiscal year ended February 26, 2012 were $193.3 million, compared to sales of $211.7 million for the prior fiscal year ended February 27, 2011. Net sales before special items for the 2012 fiscal year fourth quarter were $3.9 million, compared to net earnings of $8.3 million for the prior fiscal year’s fourth quarter. During the 2012 fiscal year’s fourth quarter, the company recorded a pre-tax charge of $1.3 million in connection with the closure of its Park Advanced Composite Materials business unit in Waterbury, Connecticut. Accordingly, net earnings were $3.2 million for the fourth quarter ended February 26, 2012. Park’s net earnings before special items for the 2012 fiscal year were $23.2 million, compared to net earnings before special items of $33.9 million for the prior fiscal year. During the 2012 fiscal year, the company recorded the closure charge described above and pre-tax other income of $1.6 million related to the settlement of certain lawsuits. During the 2011 fiscal year, the company recorded an additional charge of $1.3 million in connection with the closure in January of 2009 of its Neltec Europe SAS business unit in Mirebeau, France. Accordingly, net earnings were $23.4 million for the fiscal year ended February 26, 2012 and $32.6 million for the fiscal year ended February 27, 2011. Park reported diluted earnings per share before special items of $0.19 for the fourth quarter ended February 26, 2012, compared to diluted earnings per share of $0.40 for last year’s fourth quarter. Diluted earnings per share were $0.15 for the fourth quarter ended February 26, 2012. Park’s diluted earnings per share before special items were $1.11 for this fiscal year ended February 26, 2012, compared to diluted earnings before special items of $1.64 for last fiscal year. Diluted earnings per share were $1.13 for the fiscal year ended February 26, 2012, compared to $1.58 for the fiscal year ended February 27, 2011. Now I’d like to briefly review some of the other significant items in the fourth quarter and fiscal year 2012 P&L. During the fiscal year 2012 fourth quarter, North American sales were 46% of total sales, European sales were 14% of total sales and Asian sales were 40% of total sales, compared to 47%, 11% and 42%, respectively, for the fourth quarter of the prior fiscal year. Sales of Park’s high performance non-FR-4 printed circuit materials were 80% of total laminate and prepreg material sales in the fourth quarter of fiscal year 2012. 77% in the fourth quarter of the prior year and 79% in the third quarter of the fiscal year 2012. Sales of Park’s Advanced Composite Materials and Parts were $6.7 million in the fourth quarter of the 2012 fiscal year, compared to $5.5 million in the fourth quarter of the prior fiscal year, and compared to $7 million in the third quarter of the 2012 fiscal year. Sales of Advanced Composite Materials and Parts were $26.5 million in the 2012 fiscal year, compared to $23.3 million in the prior fiscal year. The gross profit percentages were 25.7% and 28.3%, respectively, for the fourth quarter and full year -- full fiscal year 2012, compared to 33.1% and 33%, respectively, for the prior year fourth quarter and full fiscal year. Selling, general and administrative expenses were 15.5% of net sales for the 2012 fiscal year fourth quarter and 14.6% for the 2012 fiscal year, compared to 12.8% for the prior year’s fourth quarter and 13.2% for the 2011 fiscal year. Investment income for the fourth quarter was $203,000, compared to $228,000 for the fourth quarter of the fiscal year 2011. Investment income for the fiscal year ended February 26, 2012 was $808,000, compared to $645,000 for the prior fiscal year. As a result, earnings before income taxes and before special items were 10.6% of net sales for the 2012 fiscal year fourth quarter, compared to 20.7% for the prior year’s fourth quarter. For the 2012 fiscal year, earnings before income taxes and before special items were 14.1% of net sales, compared to earnings before income taxes and special items of 20.1% for the prior fiscal year. Park’s earnings before income taxes and before special items were $4.6 million for the 2012 fiscal year fourth quarter, compared to earnings before income taxes of $10.6 million for the prior fiscal year’s fourth quarter. The effective tax rate before special items was 15.6% for the 2012 fiscal year fourth quarter, compared to an effective tax rate of 22% for the prior fiscal year’s fourth quarter. The effective tax rate before special items was 15.2% for the 2012 fiscal year, compared to 20.4% for the prior fiscal year. Turning to Park’s balance sheet, cash and marketable securities were $268.8 million at February 26, 2012, compared to $250.4 million at the end of the prior fiscal year. Working capital was $290.1 million at the end of the 2012 fourth quarter, compared to $271.7 million at the end of the prior fiscal year. During the 2012 fiscal year, the company had capital expenditures of $4 million and depreciation expense of $5.9 million, compared to capital expenditures of $3.7 million and depreciation expense of $6.7 million during the prior fiscal year. Stockholders’ expense -- sorry -- stockholder’s equity was $343.2 million at February 26, 2012 compared to $325.3 million at the end of the prior fiscal year. Finally, stockholders’ equity per share at February 26, 2012 was $16.50 compared to $15.70 per share at the end of the prior fiscal year.

Okay. Thanks a lot, Matt. This is Brian again. I’ll add a few comments as well. So let’s start with the fourth quarter, what’s going on in the fourth quarter. The revenues are quite off as you know and that would explain most of the bottom line results, the top line may have this pretty straight forward, pretty easy to follow. So with the revenues being off that would mean for us that at least from -- in the electronic area or electronics activities, that would lead to internet infrastructure spending is not very robust right now. And that would be global economic event, I would imagine. I don’t think it’s a regional event. What will happen with that in the future, I guess, everybody has an opinion, but I think a lot of people believe that that spending will pick up in the future related to just the massive needs based upon iPhones, iPads, smartphones. We don’t sell into the consumer electronics. We don’t sell any products, the iPhone, iPads or smartphones, I think you know that. But these devices have created enormous need for more infrastructure, at least that’s the belief. And that’s the market we’re selling to is infrastructure. So when companies like Ethernet service provider Verizon and AT&T start buying equipment that would be good for us and more equipment for us through capital budgets. So we thus going on, on Kansas, Kansas continues to be the same story as it was in the third quarter, fourth quarter. All the transition activities are very challenging as we closed the -- our provision in Lynnwood, Washington. Those activities have been transferred to Kansas. We announced the closures of our operation in Connecticut. Those activities are being transferred to Kansas at this time. The margin to Kansas, the operating efficiencies in Kansas, the yields in Kansas are very poor in the fourth quarter. I think it’s not pricing under the circumstances of how to manage the situation here. The good news though is that in the first quarter the things are settling down and the operating margins and the yield waste, those kind of key manufacturing metrics are quite a bit better. So, we’re still in the middle of it. We haven’t gone through the transition yet, but I think things are going relatively well. We have the delay of a couple of months in the transition that we previously announced. I will comment on that further in a minute. Other than that, I would say things are going more or less according to plan in Kansas. New products, so we announced some new products in the last 6 months, but we don’t have revenue -- any consequences from those products yet. Talking about those products for a while, we’re very pleased that we commercialize the products. We commercialized them with the provisional or preliminary UL, which was our plan. The final UL is critical and key though and that will account for both the products or 4 of them, actually in next 2 months, we expect. At that point, we would certainly we would expect to see some more significant revenues. These products are high-speed low-loss products. So we talk about it in infrastructure and the need for more ability to fastest data, store data to transmit data. It’s not just more equipment, its more capable equipment, equipment that operates at a different level of capability, different speeds and thus these products are targeted toward those markets which I believe will be good markets in the future for us. So the new products, we have 4800-20, 4800-20 SI, 1600-22, 1600-22 SI. We talked a lot about loss. Even in our news releases, we did something -- I think we did news release, a little unusual with the 1600-22 and 22 SI, unusually which I believe we specified the loss values of these products. Loss is really the key when you’re talking about high-speed internet activities, the loss properties of the product. The 1600-22 SI, my recollection is that we indicated the loss was all forged really, was tested 038 but we rounded 04. That’s open resonator. That’s 50% resin content, 10 gigahertz. The reason I say that and we say it is because we believe in the industry, there is a lot of -- some of the companies in the industry are not -- use different methodologies to test. So, we want to be very open about the methodology we use. So people understood that the numbers were real and they weren’t some enhanced by a testing methodologies or different ways to prepare any coupons. That loss, we believe is very difficult to match in the industry at this time. So we’re pretty excited about their product. Love to see what happens about the product in particular. We don’t think that there are too many commercial offerings out there. We can call us up and get a lot to you in 3 days. So that would be able to match that loss. So we’ll see what happens, but I want you to know about that. But as far as the fourth quarter is concerned and the first quarter as well, those products will not have any impact, at least there won't be significant revenues in most products. I know you want to know about -- little bit about the first quarter, that’s common question. So as you were doing -- it’s very interesting, revenues and bookings in Q4 -- in Q1 rather and we have 8 weeks or in books already in Q1. So this is -- we’ll not just look at results as later because we don’t have still -- we’re done with our audit. So we have actually 8 weeks, 8 out of 13 in books for Q1. So these indications are little more meaningful than other quarters where the new quarter 2 or 3 weeks in books. We tell you anyway, but we always caution you. We caution you now as well because we have 5 weeks to go. We don’t know what will happen in next 5 weeks. But the revenues and booking are almost dead on in Q1 as compared to Q4 in terms of run rate, what’s dead on and what’s exactly if you look at the 8 weeks as compared to the average for the Q4 almost dead on, almost exactly the same. So, nothing really significant there in terms of the top line bookings and revenue. Talk about aerospace, so Matt already told you what the aerospace revenues were. Manage composite product -- sorry -- advance composite products and materials, the aerospace revenues for, I guess Q4 versus Q4 and also Q3. Q1 the aerospace revenues are moving up little bit in a first 8 weeks little higher than the Q3, Q4 number, not surprising because as we’re going through these transitions, we’re also doing business development with aerospace, of course and based on part on our new capabilities and again as planned. All right. So let’s figure this out. The impact of aerospace and I’m doing something a little different here I think, at least in the past we talked about Kansas. Now we’re talking U.S. aerospace activities meaning Kansas, Lynwood, Washington, which is closed and Waterbury. It doesn’t make a lot of sense to just talking about one part of the picture, it’s better to talk about the whole picture, give you better perspective especially since things are moving around, things are being transferred, one location to another. So the Q4 versus Q3 was $100,000 worse in terms of bottom line and Q1 is looking to be better than Q4 by maybe $200,000 better than Q4. So we’re not there yet, but it’s moving in the right direction. Let me comment on a couple of other thing. Oh, yes, restructuring charge, just let me give an update on the restructuring charge and the closure of Waterbury operation. I think we did a news release maybe in January indicating that Waterbury would close at the end of April. Previously, we had indicated it was going to close in the fiscal year, but things were delayed end of April and now it’s the end of June. Most of the work will be done in May, but we’re going to keep Waterbury active and operating until the end of June. And the reason for that is that the transfers, the qualifications, the re-site qualifications are taking longer than expected in some cases. It’s like the 90/10 rule, 90% work done but the last 10 have been quite difficult. We didn’t want to just kind of walk away from that business, we didn’t think that would be correct. So we are going to suffer with the duplicate cost for a little while longer. Also the charge was originally announced to be $3 million as Matt indicated, we had one quarter million in Q1 -- sorry in the Q4. And we believe there’s about $1.3 million to go, so it’s probably going to come in a little less than $3 million in total may be $2.6 million and $2.7 million and that will probably be mostly in Q2 and Q3. The Q1 will have ongoing operating expenses, but until we close the operation, we’re really not getting the restructuring costs because we’re the operating line. Let’s see anything else worth talking about here -- I guess one other thing, I guess that’s fine. I think I’ve covered enough by way of introductory remarks, maybe we’ll cover some more in the questions. So operator, let’s go to the questions at this time, please.

[Operator Instructions] Your first question is coming from the line of Sean Hannan from Needham & Company.

This is Anj Singh [ph] filling in for Sean Hannan. Thank you for taking my question. My first question is regarding based on what you reported today and considering what your costs in Kansas are as well as the fact that you’ve now closed Waterbury. Would logic dictate that you can see another 200 to 300 basis point improvement in gross margin next quarter, even if revenues were similar to today?

In Q1, you’re talking about, well we gave you a perspective in Q1. We’re looking at the total revenue so far and tracking very similar to Q4 and a top line, I’m not talking about aerospace, I’m talking about for the whole company, the top line, is clearly the biggest driver of our bottom line including the gross margin on a quarter-to-quarter basis because the other things change that much, the top line changes. That has a major impact, as I said in the first 8 weeks, the revenue for -- sorry the top line is looking similar to Q4. We could see some margin improvement and we are looking at some margin improvement so far in Q1 as compared to Q4, but it’s not because of the top line -- it’s because of the things you cited, the costing efficiencies related to Kansas. We still have duplicate costs. Some of the costs are tailing off a little bit are the qualification costs, that’s very expensive, those are onetime items as well. The duplicate cost which we still have, we could see some improvement as I indicated. There is -- it is the first 8 weeks anyway. Some margin improvement in aerospace, I think that should maybe a couple -- few hundred thousand dollars as compared to the prior quarter. I’m not sure we’re going to translate that in to any number of basis points for the company’s gross margin and I don’t think we’re going to get into that because I don’t believe we have enough confidence and precision to comment on that precisely anyway on a gross margins -- it doesn’t -- I’d say. I think you’re right that that should be up a little bit.

I was wondering if you could also discuss the linearity of the February quarter in terms of what months were strongest versus weakest?

Sure. Yes that’s the question we get from Needham almost every quarter now, so we kind of anticipated that. December and January were very flat or about the same and February was higher. So we had quite low months -- weak months in December and January -- December, it’s kind of like we lost 1.5 weeks because of the holidays, so that’s probably not a surprise. January, we’re certainly didn’t come out strong, out of starting blocks and February is a little bit better, but if you take the average of those for the quarter for those 3 months, of course we’re talking about -- and we compare to Q1 to Q4. We’re talking about that average.

Okay, and one final question from me -- can you elaborate on what you saw for demand from your different geographic regions during the quarter realizing that January and beginning of February might have been a little weak at least in Asia due to the Chinese New Year?

Yes. I think Matt gave you the geographic breakdown. I don’t think there’s anything particularly interesting from a geographic perspective. In electronics, we have to talk about aerospace separately, but in electronics, it’s very much a global market. And it’s kind of unusual for there to be a lot of -- on short-term basis anyway a lot of geographic lack of synchronization if you will because it’s all fitting into this global market, global electronics market. Most of the OEMs even in U.S. are sourcing and Asia and U.S. may not suffer much in Europe anymore, but it would be surprising to see a big difference geographically on a short-term basis. A long-term trend is probably still in place, which is more in Asia, less in the West. Aerospace was different for us because most of our aerospace activities, as you know, are in the North America. So aerospace would be different from electronics in that regard. Ultimately, probably won’t be, but as the aerospace industry develops and becomes more mature and more progressive, we think it will become more of a global market as well.

[Operator Instructions] Your next question is coming from the line of Jiwon Lee from Sidoti & Company.

One, I just wanted to talk a little bit about the PCB side of the business. I wondered whether there was any pricing pressure that you may have seen in the February ending quarter and is really kind of the internet infrastructure rather than the telecom side or the defense that is pulling your revenue prospect down?

Yes. I think so. We say telecom, I’m not sure because you’re talking about the -- I think into that service providers. I don’t think there is a distinction between the equipment they use for phone calls and internet anymore so I’m not -- I don’t know but that distinction. But military and that’s not going to be a big factor. And we’ve always had a reasonable military business if you will in electronics, but I don’t think that’s a big factor. The big factor is going to be the commercial stuff, the internet infrastructure, and at start what was your question, Jiwon?

The pricing pressure, Brian.

Pricing pressure, short-term memory, so it was a senior moment, Yes, nothing unusual. I mean pricing pressure is always there. It’s something we always live with, and it’s just -- But, I couldn’t say anything any different now or in the fourth or in the third quarter. It’s just something that we live within electronics in particular forever and always. Our company has a reputation though I think which is quite well known, which is that we just don’t really work on price, our prices is our price and I think most of the customers and OEMs understand that. So I suspect that we receive a lot less or let’s call it the abuse even and maybe some of other companies in our industry because the industry knows that we’re just not really receptive to that kind of discussion.

Okay. I think I read between the lines there from you. And the composites outlook Brian, it’s been sort of kind of squeaking along both I guess the operation and the revenue side. And just having the conversations that you have and the developments and the long-term program, where is that you are working on, where can we go from here?

Long-term in aerospace, well, Jiwon, I mean the operative term in aerospace is long-term and I mentioned that so many times that it’s such a long-haul, such a long-term prospect, things move very slowly. I’m just going to go over comments I’ve made number of times, but the industry is very conservative. I wouldn’t call it progressive actually. And for an outsider, for a new guy on the block, it’s more difficult, more impediments to get in. I think we’ve made very, very significant inroads I must say. I think the short-term story for aerospace obviously is a transition of our manufacturing operations into U.S. That’s a big deal. And while we’re at it, we’re looking at significant opportunities with major OEMs that would translate into major dollars of revenue if they occur. The question is, will they? I don’t know. And you don’t know until it’s actually done. This process is very -- you really have to be patient because, let me just give you a little bit of color. So if an aerospace company has a new program they’ll normally ask about 10 companies to bid on the program and then they’ll go it, which is called a down-select process, they'll kind of winnow it down a deal to maybe be 3 and then with those 3 they’ll start doing some serious testing, screening sometimes it’s called, because it’s very time consuming, it takes over a year just go through this screen process, maybe more expensive. At that point then they’ll down select and they’ll say okay -- you’re it. But now guess what, you have to go through a qualification process and that could take another year or maybe more just to prove that in fact, Yes, we did 3 batch, 5 batch qualifications that, yes, you are it. So these are things that we learned as we went. We didn’t fully appreciate how tedious and how much time it would take. Now, of course, the other side of the coin though is, if you have the patience and you have the capability and you stick with it and you hang in there and you get through these things and you win, you’re in for serious revenues for a long time because the process is so tedious, is so difficult that these companies are very reluctant to change horses in midstream in the middle of a program, the middle of an aircraft program which could go 20 years easily. So those are the 2 sides of the story. The getting in is harder, especially for new guys as much as we’ve been around the business for a long, long time -- aerospace 5 years ago, nobody ever heard of us. But the other side of the story is that, if we get in, it’s a good thing for us. I’d also would say that in my opinion is that some of the players are complacent because they’ve been in the long time and they think that maybe they don’t have a lot of -- they really can’t be touched. And I guess time will tell, whether that’s true or not.

Okay, that’s helpful. And then for Matt, the typical question, the top 5 customers are more than 10%, and if you can run down, the top 10 and 20 customers please?

Sure. We had 3 customers that were 10% or more of our sales that would be TTM, Multek or Flextronics, and Sanmina. The rounding up top 5 would add then ISU and WUS. Our top 5 made up almost 52% of our total sales. Our top 10 made up about 64% of our total sales. Our top 20 made up about 73% of our total sales.

Your next question will be coming from the line of Leonard Cooper [ph].

You mentioned these new products that are coming online and they haven’t added to the revenues yet. Are they going to be in addition to our old products or are they going to displace some old products so that the net effect may or may not be positive or large?

I guess it’s both. I mean at the beginning, it’s not going -- our existing products will still be an important part of our portfolio, but in electronics nothing lasts forever. So obviously the message is, you’d better replace your own products, because if we don’t, somebody else will, right. Our existing products, I’m actually surprised how long they have lasted as robust, vital products. So, and I don’t suspect they’re going to disappear overnight. So I guess it’s partly both, I mean it partly additive, it even partly replaced but like I said it’d be better for us to replace the revenues of our existing products than somebody else. And it’s really a function of the movement of technology, right, that’s what it’s all about.

Well, technology is moving, yes. You speak about low loss, could you tell me very briefly what that loss is, is it generation of heat which is a loss or what is the loss?

It’s called dissipation factor. It’s a term electrical engineers would understand. The 2 key things that are measured, electrical properties of our -- electronic properties, electronic products are dielectric constant, dissipation factor and the measurements I should I think 0.004. When you’re talking about loss, actually a lower number is better in terms of being more suitable for high-end electronic equipment.

Right. Okay. Nothing electrical engineer, I don’t know much more than I did before, I asked the question. Last question, what are you going to do with all that cash, that’s lying around in view of the very flexi tax situations?

Well, we’re going to have to pay attention to the flexi tax situations and see what happens. We’ll certainly be aware of them. I think that, yes, I don’t remember we reported $260 million somewhat in Q4, only $70 million is in the U.S. and only okay, that’s still a significant amount of money, but most of our money is overseas in addition to the flexi tax situation would be nice if the government will allow us to bring some of the money back and invest in the U.S. I think it’s kind of ironic that Corporate America is being criticized literally for off-shoring stuff. And when we want to bring money back to invest in the U.S., we’re not allowed to. It seems like somebody is a hypocrite but not us. I think all of us might be hypocrite, I don’t know. Not any one person in particular I’m talking about, but there’s a whole lot of them that seem to want to talk out both sides of their mouth, people.

Your next question will be coming from the line of Adam Peck from Heartland Funds.

Hi, Brian. I missed the high performance in Advanced Composite numbers as a percent of sales.

Matt, could you, I think we’ve went over that in the script, by the way I should also say, Matt will give those numbers in a second, they’re in our script, but the script -- a transcript of Matt’s comments were actually posted on the website. Matt, why don’t you go over the high performance and although Advanced Composite or revenues grew Q4.

Sure. The high performance sales were 80% of our total laminate and prepreg material sales in the fourth quarter. They were 77% in the fourth quarter of last year and they were 79% in the third quarter of fiscal ‘12. The advanced composite materials and parts were $6.7 million in the fourth quarter and compared to $5.5 million in the fourth quarter of the prior fiscal year and it was $7 million in the third quarter of the 2012 fiscal year. For the full year the composite materials and parts were $26.5 million in 2012 compared to $23.3 million in the prior year.

As far as the losses, you said they were $100,000 better versus of third quarter.

In aerospace?

Yes.

Okay. So Q4 was $100,000 worse…

$100,000 worse.

Yes. And in that…

Was that $1.6 million then?

We don’t -- we’ve never disclosed the actual losses or actual bottom line for aerospace. And the reason we don’t is because the number could be presented in many different ways when you talk about -- corporate charges and things like that. We’ve never really done that. We have indicated that we -- expect to be at breakeven, originally that was supposed to be at the end of the fiscal year but since the closure of Waterbury has delayed, that’s delayed as well. I think we also mentioned in Q1 that we’re looking at about, I don’t know about $350 million, well based upon the first 8 weeks let me just say that we’re not really giving you guidance, we’re just saying based upon the first 8 weeks where we are so far in Q1, looking at about, $300,000 to $400,000 better than in Q1 and Q4, aerospace and that is -- the results of some of the comments I’ve made previously about aerospace.

Do you think breakeven would be this fiscal year then?

Yes.

Great. And as far as the gross margin--

I just want to answer that we’ll -- we certainly should be at breakeven for this fiscal year, I’m not sure whether we’ll be at breakeven for the whole fiscal year, I’d have to think about that a little bit more. But we certainly should be at breakeven well before the end of the fiscal year.

Okay, great. Well, I guess if you have to think about it then it could be a possibility.

Which?

That you would be at breakeven for the year.

Okay, for the total year?

Right. If you have to think about it then, I guess there would be a possibility that we could be breakeven for the year?

Oh, yes. I just have -- we haven’t done that math and I have to go back and do it and it’s a little more complicated, because it’s -- it relates to timeframe for the transition. But once the transition is done, we should be at breakeven I would think and then we should be able to move up from there.

Okay. And then the sequentially last quarter you said it was flat and then higher in February. What about the first 8 weeks of the year of the quarter?

This again in the aerospace?

In total.

The revenues for aerospace?

Right.

Okay, Yes I think we indicated that in Q1 first 8 weeks we’re running above the revenue run rate for Q3, and Q4. And Matt gave those revenue rates, it was at Q3 was $7 million, in the Q4 it was $7 million, Q1 is running ahead of those numbers, maybe about $7.5 million.

At this time, I’m showing no further questions in the queue, I would like to turn the call back over to Mr. Brian Shore for any closing remarks.

Okay. Thank you very much, Operator. Thank you everybody for listening in. Nice talking to you. Please, Matt is in the office for the rest of the day, I’m traveling but you can reach me through Martina as well as you want to talk to me. So have a good day, and we look forward to talking to you soon. Good bye, thank you.

Ladies and gentlemen that concludes today’s conference. We thank you for your participation. You may now disconnect. Have a great day.