Ducommun Incorporated (DCO) Q3 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Third Quarter 2017 Ducommun Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will follow at that time. [Operator instructions] As a reminder, today's conference is being recorded. I would like to introduce your host for today's conference, Moderator, Chris Witty. Sir, please go ahead.

Thank you and welcome to Ducommun's 2017 third quarter conference call. With me today are Steve Oswald, President and CEO, and Doug Groves, Vice President, Chief Financial Officer and Treasurer. I'm going to discuss certain limitations to any forward-looking statements regarding future events, projects or performance that we may make during the prepared remarks or the Q&A session. Certain statements today that are not historical facts, including any statements as to future market conditions, results of operations, our restructuring plans and financial projections are forward-looking statements under the federal Private Securities Litigation Reform Act of 1995 and therefore are perspective. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. In addition, estimates of future operating results are based on the company's current business, which are subject to change. Particular risks facing Ducommun include, among others, the cyclicality of our end-use markets, the level of U.S. government defense spending, legal and regulatory risks, management changes, the cost of expansion and acquisitions and competition. These risks and others are described in our annual report on Form 10-K filed with the SEC, and our forward-looking statements are subject to those risks. Statements made during this call are only as of the time made and we do not intend to update any statements made in this presentation except if and as required by regulatory authorities. This call includes non-GAAP financial measures. Please refer to our Form 10-Q filed with the SEC for a reconciliation of the non-GAAP measures referenced on this call to the most similar GAAP measures. We filed our Form 10-Q with the SEC yesterday describing our results for the quarter ended September 30, 2017. You will find a link to the company's SEC filings, including our Form 10-K, on the company's website under the Investor Relations tab. I would now like to turn the call over to Mr. Steve Oswald for a review of the operating results. Steve?

Thanks, Chris. And thank you everyone for joining us today for our 2017 third quarter conference call. I'll begin by providing an overview of the recent developments after which Doug will review our financial results in detail. Well, first let me start by briefly talking about a few accomplishments this quarter and our near-term focus. I was pleased with our Q3 performance primarily due to two reasons. First, we saw 15% growth year-over-year on our military and space platforms as we continue to benefit from resurgence in demand for the F-15 radar racks along with increased shipments on certain helicopter platforms and missile systems. Our defense related backlog is now stable at $256 million. We are optimistic about future top-line growth in the quarters to come. Second accomplishment to note this quarter was the sequential 230 basis point improvement versus second quarter and operating margins for our structures business. As Doug will review in a moment the structure's operating margin was 5.8% this quarter versus 3.5% in Q2, a significant increase. As I mentioned earlier, the past margins were unacceptable and pretty much continue to be as we work hard to improve those. But with Jerry Redondo in the group since May we are announcing the progress I expect now and in the future. This brings me to the next major topic I like to discuss which is our restructuring plans. I spoke during the past 2 earnings calls about how we've been assessing all aspects of the organization to further streamline processes, increase asset utilization and expand margin with particular focus across our structure's operation. We're now taking initial steps to improve our company, announcing plans that result in $22 million to $25 million of pretax restructuring charges beginning in the fourth quarter of 2017 and running through 2018. We're still finalizing the details as to the timing of certain initiatives such as operations affected and the write-down of inventory and impairment of fixed assets. However, the goals are clear, beginning in 2019 the company anticipates these restructuring measures in aggregate result in a total cost savings of approximately $14 million annually. Given the expected results of such initiatives combined with higher manufacturing efficiencies as new platforms ramp, our margins and cash flow should be greatly improved and Ducommun will be more efficient, stronger and innovative supplier to the aerospace and defense industry. Our plans also involve an assessment of all our products and programs to ensure we are engaged on the right type of attractive profitable applications. Just as we decided some time ago to exit certain contracts when appropriate within the business and regional jet space we will reduce our involvement on platforms that are unattractive, inappropriate or lower our overall margin profile. Such decisions will play out in 2018 and that will impact top line growth in our commercial aerospace operation even as we seek continued higher demand across a number of large fixed-wing platforms, particularly within the narrow-body space where we have an excellent position. I'll have more to say about such strategic decisions in the future but suffice it to say that there will be some -- still some programs which should not leverage our core competency or do not meet our internal investment hurdles. I want to share with you that when I began as CEO I clearly communicated to the leadership team that we're only going -- that we were going to be decisive regarding actions on all business which either lost money or marginally profitable. As I said in the past, we need to take these steps to position Ducommun for higher level performance, one that we owe our customers, employees and shareholders alike. At the same time, we will continue to look at opportunistic bolt-on acquisitions that can strengthen our capabilities and improve our market position in key platforms. Such was the thinking with the purchase of lightning diversion systems in this past September. Based in Huntington Beach, California LDS is a world leader in lightning protection systems using proprietary technologies of various aerospace applications. We believe the company has a strong position in a niche market and was well worth its $60 million price given the key aircraft platforms it serves and potential growth trajectory. I'm also happy to share that we are on track integrating LDS into our existing electronic segment and we are very optimistic about the impact this will have on our margins going forward. I'm also pleased as well to have Dave Wilmot, the President of LDS and his team as part of Ducommun after bidding successfully and competing heavily against several other more key names in the aerospace industry for this property. So, we've accomplished a great deal this quarter, improving margin sequentially, acquiring a key aerospace supplier. We also paid down debt as well and our backlog increased to $655 million. And with the announcement of some significant restructuring plans we are well on our way to building Ducommun of tomorrow. Now let me provide you some additional color on our end-markets, products and programs. Beginning with our military and space sector we posted third quarter revenues of $62.8 million, up 15% year-over-year as I mentioned earlier. This positive performance is indicative of overall increasing demand for the platforms we serve with sales up 20% year-to-date. The top-line growth is driven by higher sales of radar racks, particularly for the F-15 as well as expanded shipments for helicopter platforms like the Apache and Blackhawk along with higher spending on missile defense systems. Military backlog, as I mentioned earlier, remains robust, $256 million. As I said earlier, and I'm optimistic regarding further opportunities for system upgrades and defense spending increases in the quarters to come. Within our commercial aerospace operations overall sales were $61 million this quarter, down from roughly $64 million last year. As mentioned in past quarters, decline in 2017 has been due to weakness within the regional business jet markets, including the wind down of one particular program is expected to continue impacting year-over-year comps for the first quarter of 2018. In contrast our large commercial fixed-wing business is stable and growing with sales of roughly $40 million this quarter versus $36 million in 2016, driven by strong deliveries to Boeing for the 737 platform as well as to Airbus for the A320 and A330 aircraft. We ended the quarter with a record commercial aerospace backlog of $367 million. And we are working hard to execute on many growth platforms for 2018 and beyond. In addition, as I mentioned earlier, growth next year will primarily be across our core narrow-body programs as we assess our portfolio to further reduce exposure to unattractive and lower margin business. I also have to report we also remain on track in regards to our next-generation titanium operation in Parsons, Kansas. Our production continues to ramp up on the Boeing 737 MAX, Airbus A320neo, A330, A350 along with very important programs as well for Gulfstream G500 and G600. It's been a of solid execution and we're on track to complete this expansion in the spring of 2018. I'm proud of how far we've come and pleased to see the record backlogs and sequential increase in margins. With our restructuring plans now framed out in broad terms we will focus on finalizing these initiatives to streamline Ducommun's operations and increase asset utilization. We'll have much more to say on this topic in the quarters to come. So, with that I'll now have Doug review our financial results in detail. Doug?

Thank you, Steve, and good day everyone. Revenue for the third quarter of 2017 was $138.7 million compared to $132.6 million for the third quarter 2016. The increase year-over-year reflects $8.1 million of higher sales within our military and space markets, a $0.9 million increase in revenue in our industrial end markets which was partially offset by $2.8 million lower sales to our commercial aerospace customers primarily due to the winding down of a regional jet program and softness in the jet market as we've discussed in the past. The top-line military growth year-over-year was due to higher demand across many of our platforms. Ducommun's backlog was approximately $655 million at the end of the quarter, illustrating the strength of the industry and our position on key platforms as Steve discussed. Moving to gross profit, our gross margin was 18.8% in the third quarter versus 19% in last years' comparable period. The declining gross margin year-over-year was primarily due to product mix and program manufacturing inefficiencies on certain new commercial aerospace platforms within the company's Structural System segment. SG&A was $18.8 million in the third quarter versus $17.2 million in 2016 with the primary increase being higher compensation and benefit costs. Operating income for the third quarter of 2017 was $7.2 million or 5.2% of revenue versus $8.1 million or 6.1% of revenue in the prior-year period. The decrease in operating income year-over-year primarily reflects the higher SG&A I just mentioned. Interest expense was $2.1 million in the third quarter 2017 versus $1.9 million last year as the positive impact of a lower outstanding term loan balance was more than offset by higher utilization of the company's revolving credit facility which was partially used for the acquisition of LDS. Net income for the third quarter was $4.7 million or $0.41 per diluted share compared to $5 million or $0.44 per diluted share for the third quarter of 2016. Our effective income tax expense during the quarter was $0.9 million or 16.8% compared to $1.2 million or 19.8% in the comparable period last year. The income tax rate for the 2017 third quarter was reduced due to the finalization of our 2016 federal tax return which included some favorable adjustments and share-based compensation accounting. For the upcoming fourth quarter the expected tax rate is to be in the range of 23% to 25% excluding any discrete items. Adjusted EBITDA for the third quarter of 2017 was $14.5 million or 10.4% of revenue compared to $14.9 million or 11.2% of revenue for the comparable period in 2016. Now let me turn to the segment results. Our Structural System segment posted revenue of $59.7 million in the third quarter of 2017 versus $60.9 million last year. The slight decline was primarily due to $1.6 million of lower sales on our regional and business jet platforms as I previously mentioned. Structural Systems' operating income for the third quarter was $3.5 million or 5.8% of revenue compared to $5.9 million or 9.7% of revenue last year. The third quarter of 2017 once again included the impact of ongoing investments in new programs although margins rose 230 basis point sequentially from the second quarter. As Steve noted, we are taking appropriate strategic measures to boost long-term structural margins through ongoing restructuring initiatives while facing some near-term manufacturing inefficiencies due to the Parsons facility expansion and a ramp up of new programs. Turning to the Electronic Systems segment, our Electronic Systems segment posted revenue of $79 million in the third quarter versus $71.6 million in the prior-year period. These results reflect $7.7 million of higher shipments within the company's military and space end-use markets as well as $0.9 million increase in industrial sales partially offset by $1.3 million of lower revenue across our commercial aerospace platforms primarily reflecting the softness in the business jet market as previously mentioned. Electronic Systems posted operating income for the third quarter of $8.2 million or 10.4% of revenue versus $6.6 million or 9.2% of revenue in the prior-year period. Corporate general and administrative expenses, CG&A, for the third quarter was $4.5 million or 3.2% of company revenue compared to $4.4 million or 3.3% of revenue last year. Turning to liquidity and capital resources. We generated $11.1 million of cash from operations in the third quarter of 2017 compared to $15.5 million in 2016. We also paid down $8.9 million of debt in the quarter and still expect to pay down approximately $12 million to $15 million in debt for 2017. We will continue to pay down debt with our free cash flow while balancing strategic investments including opportunistic acquisitions like LDS. In terms of CapEx we spent $8.4 million in the third quarter and we anticipate spending approximately $26 million to $30 million in total this year which includes the ongoing Parsons facility expansion and continued investment in new programs as we prepare for the next generation aircraft platforms ramping up in 2018 and beyond. Now turning to the restructuring. As Steve mentioned we have initiated a restructuring plan to stream company's operations and increased asset utilization, particularly within the structures business. The company currently expects that these actions will result in approximately $22 million to $25 million or pretax restructuring charges beginning in the fourth quarter of 2017 and continuing through the planned completion of such activities at the end of 2018. Of these charges about 40% are expected to represent actual cash outlays for employee separation and business consolidation costs and about 60% will be comprised of cash charges for the write down of the inventory and impairment of fixed assets. Approximately $10.5 million of the charges are expected to be recorded in 2017. After such measures are complete in late 2018 the company anticipates total cost savings of approximately $14 million annually beginning in 2019. So, in closing, the quarter was one of continued execution on our plans to ramp up production of Parsons, look to address inefficiencies across the operations and increase our content backlog on a variety of key aerospace and defense platforms. We believe we are actively taking the correct steps to transform Ducommun into a better-performing, faster growing and more technology focused company for years to come. I'll now turn it back over to Steve for his closing remarks. Steve.

Thanks, Doug. I'll just add a few final comments and we'll open it up for questions. As Doug and I discussed the company has I think made some great strides becoming what we wanted to be, right? To be more customer focused, technology driven aerospace and defense enterprise and also obviously with lots of growth potential. We made progress on several fronts this quarter almost bolstering our backlog to the highest levels in recent history. In addition, with a series of restructuring initiatives we are setting the stage for Ducommun being more important and relevant player in the cutting-edge aerospace and defense applications of tomorrow. I'll have more to say about our restructuring activities in the quarter to come. And with that, operator, let's now open the call for question.

Thank you. [Operator instructions] Our first question comes from the line of Mark Jordan with Noble Financial Capital Market. Your line is open. Please go ahead.

Good morning, gentlemen. I'd like you -- could you give us some operational metrics on LDS for example trailing 12-month revenues or operating profit margins or EBITDA?

Hi Mark. Thanks for the question. As we probably in the -- you noticed in the press release we weren't too descriptive and we would just say that it's a smaller business and it's roughly a little less than 5% of total revenue of the annual revenue within the electronics segment and that we do expect as we move forward that the impact though because it's got a different profitability profile in some of our contract manufacturing that it's probably going to be somewhere between 75 to 100 basis points improvement in the total electronics segment operating margins as we move forward.

Okay. Relative to the restructuring, your comments imply that you'll have charges, primarily non-cash charges in 2018 of between $11.5 million and $14.5 million. Question I have is, obviously the full impact of the cost savings won't be realized until 2019, but do you have a sense as to some of the earlier cost savings that you might be able to realize and do you have a sense of how much you'll be able to offset some of those incremental $11.5 million to $14.5 million in charges with cost savings realized in '18?

Sure, so of the of the total cost savings, I mean we do expect to see some of those start to flow through as early as the first quarter. So, of the charge that we're taking here in the fourth quarter a little less than probably 40% of that charge will start flowing through in the first quarter of 2018. And then obviously there'll be more savings just depending upon the timing of a lot of the other actions that we're going to be taking. But there'll be more to come on that as we work through this and we'll be obviously updating you each quarter on our activities.

Okay. So that will help offset some of those charges.

Right.

Do you have an estimate of what would be a normalized tax rate for 2018?

Sure, yes, we're right now -- obviously all this is depending what's going to happen here in Washington but under the current tax code we're looking at somewhere between 27% and 28% before any discrete items that may impact the rate.

Okay. Thank you very much.

Thank you.

Thank you. And our next question comes from the line of Ken Herbert with Canaccord. Your line is open. Please go ahead.

Hi. Good morning, Steve and Doug.

Hi Ken.

First just wanted to follow-up on the restructuring. Steve, it sounds like you're clearly starting to prioritize where you want to invest or your outlook specifically within the commercial market as part of this action. Can you provide any more color on maybe your thought process now on the commercial aerospace segment, specifically how that's translating as part of the restructuring to maybe some decisions or priorities around specific programs or specific areas of investment?

Yes, well, let me just -- couple of things. First, as getting started here in January and getting to know the business obviously I've come across things as we mentioned in the call at applications and things that we're doing that are just marginally profitable. So, I think that what I've told the team what we're going do and we'll keep you updated, Ken, is that we're going to look hard at things that either don't fit our competencies or, you know what, it's just a market where we could use our energies to do better things and be more profitable in other areas. Okay. So, a good example is this business jet situation where we already took charge but we're unwinding that and taking a lot of time to work on that and manage that and it's going to be out of the company and that's sort of the cadence that I want for the company is that we only have so much energy during the day to do our jobs and we need to focus on things where we can really drive top line and bottom line and as well as using our resources appropriately. So, we'll have to update you as we go forward, but again we're going to continue to look hard to be decisive on those types of things.

Okay. And then on the growth within the space and defense market in particular, was all of that, was any of that result of maybe share gains you've taken with some of your key customers like Raytheon or is that really just volume growth that you're seeing across, you specifically called out helicopters and radar racks, was there anything else sort of unique going on there?

Ken, it's Doug, so no not really, I mean it's really more rate driven. For example, in the case of Raytheon their missile business grew 10% year-over-year and we're benefiting from that as one of their top suppliers on those platforms. So, as we continue to see increased defense spending and more foreign military sales it's primarily rate, it's a competitive industry, so we're certainly keeping our share and going after more and targeting new customers in the missile area like Lockheed where we're not doing much today, but it's primarily rate-driven at this point.

Ken, this is Steve. Obviously, we're competing against different companies all the time, right, so this rate-driven. We're also working real hard with Raytheon, other customers to make sure we run the business and I think we're seeing that as well.

Okay. Great. And just finally obviously a great job with LDS. I think it hits exactly, Steve, at least what you've outlined what you are looking for out of the gain on an acquisition strategy. Can you just talk about maybe the pipeline you're seeing now and what should we be looking for moving forward on the M&A front?

Yes, well, thanks for that. And I just want to mention to all our investors and folks that follow us is that the LDS auction was very competitive and I think our team as well as I mentioned Suman Mukherjee who joined us this year did an excellent job and it's nice to see Ducommun win, okay. So, we're expecting more of that. As far as on profiles I think from my statement I'd like to continue in that same kind of cadence with companies similar to LDS, bolt-ons, things that are interesting. I think the pipeline is fairly good. But as we all know living in this world is that it's absolutely competitive and so we got our work cut out for us, but I think we got -- we have obviously shown that we can do this and be very successful. So, I think more good things to come and I think again the pipeline looks pretty good at this point.

Great. Thank you very much.

Thanks Ken.

Thank you. And our next question comes from the line of Edward Marshall with Sidoti. Your line is open. Please go ahead.

So, I guess the first question is the delay in some of the recognition of some of these costs wind downs. I'm curious, are you waiting for certain programs to come to an end before the launch?

So, yes, I mean, Ed, a lot of this business in A&D, particularly commercial is done under a 5-year contract so we're certainly going to meet all the commitments to our customers. But as some of these programs come up for renewal over the next coming quarters I will tell you that we're really looking at them very hard to see if it's business that we want to keep and does it meet the profitability profile that we're looking for or do we go ahead and transition it. So, it's just really a function of looking at these programs as they're coming up for renewal to see if they're things that we still want to do because we have obviously got choices as evidenced by our backlog.

Got it. And I guess -- I guess these product lines have been identified, I mean you're giving a contribution to cost in the future. So, I'm curious maybe you can talk about some of the product -- the program lines, I'm assuming they've been informed and then maybe some of the revenue associated with the cuts and what Ducommun might look like after the cuts are complete.

Yes, Ed, just to clarify your question, so you're asking about existing programs within the portfolio and which ones we've identified?

That's correct.

Yes. Well, I mean we're working through that, and to be quite honest it's a sensitive topic with our customers. So, we're not in a position to get real specific, I mean the one specific we have been talking about would be this regional jet program that we took a charge on in '15 and then we've actively been unwinding with that customer. But there potentially will be others that will be looking at as we work our way through this in 2018 as part of this overall effort to improve the profitability profile of the company.

Got it. And of the $14 million in cost savings you identified how much is associated with the regional jet program?

Well that particular program exits in '18 and we took a reserve, so basically it means that -- that we were generating revenue but not really any profit. So very small of that is included in that number.

And then maybe you can talk more generally about the revenue associated with the cuts. As I start to think about maybe, let's say, 2019, if we just looked at no growth in the business today what would the profile of your top line look like? How much?

Sure, well. I mean, it's hard to go out to 2019. I mean we think obviously we're going to continue to see rate increases on the narrow body which bodes well for us because that's a big part of what we do in commercial aerospace. But I think as we look at the overall profile '18 more near term it's probably low single digit on the top line as we weed through some of these programs as well as benefit from the build rates on the narrow bodies.

I guess what I'm asking, maybe I asked it wrong but you have $14 million of cost identification. I'm trying to understand what the top line impact will look like on those costs?

It's minimal, yes.

Yes, I think it will be minimal. And this is -- yes.

I mean, I think, yes, I think next year low single and then we're going to -- my expectation is things are going to start moving?

So, you expect -- you expect top line to grow with -- through this that cutting certain product lines I think in your prepared remarks you had mentioned you anticipate a revenue impact from cutting?

Yes, there's going to be some but, you know, I think again I think the best way to look at is we're going to be looking at low single in 2018 where there is going to be some puts and takes, right. So, as we exit some of these lines or applications we're obviously we're picking up good business as things ramp up with us at Airbus and some other things, right, because we're getting started with them and we're doing the job. So, I think things are looking good there for the future. So, I think that there is puts and takes and I think when we get into 2019 we'll have to see how that goes as far as next year. But I think everything is moving in the right direction.

Okay. Doug, there's a lot of revenue -- there's new revenue recognition adjustment for 2018. I'm curious how that -- lot of aerospace companies are seeing the impact of that and meaningful impact to the recognition of revenues throughout the programs. Knowing that you have five-year live programs how is Ducommun, how are you preparing kind of for the new adjustments and what, how does that -- how does that run through? And associated with these the trim and the cost cutting, is that -- will that have any impact as well?

Sure. Well, the short answer is that we're expecting a pretty minimal impact. I mean there's the one-time impact as we're going to adopt this prospectively and then once we get going quarter-over-quarter things will start to smooth out. But from the preliminary analysis we've done, it doesn't look like it's going to be too material to Ducommun.

Got it. Thanks very much.

Okay. Thank you.

Thank you. [Operator instructions] Our next question comes from the line of Mike Crawford with B. Riley FBR. Your line is open. Please go ahead.

Thank you. Did you change the way that you account for backlog or does it, the prior numbers restated to include LDS?

No. Good question, Mike. We did restate the prior-quarter numbers due to a change in how we had recognized some of the backlog actually on the base business that we've got.

Okay. So that's why it's up $20 million from what you previously had reported for the prior quarter?

Right.

And no other changes to think about regarding that?

No, not really, no, no.

Okay. As you with things like wind shield assembly for Airbus, how big of a customer should we expect Airbus to become as a percent of your revenue '18, '19?

Sure, well, we had previously said that Airbus is roughly 15% of our commercial aerospace revenue today and growing at a very nice clip. So, we're expecting to continue to win new business with Airbus particularly in titanium part of our business.

Okay. So just steady growth there.

Yes, this is Steve, just so everyone knows on the phone and on the call, is that we -- this was a big deal a year for Airbus and us in Parsons and it's all about the ramp up, right, I mean and 2016 there was some activity but this is really been the year where I think operationally the team with everything going out of Parsons, very nice job and we're only getting better as we go forward here. So, I think the story is good for Airbus. I think that -- I think we've proved to them that we're worthy of getting direct Airbus contracts and we're looking forward to more to come, so positive thing there.

Okay. Thank you, Steven.

Yes. Sure.

[Operator instructions] We do have a follow-up question from the line of Edward Marshall with Sidoti. Your line is open. Please go ahead.

Just a quick point of clarification. You said LDS is going to have 75 to 100 basis points of margin above that of the existing electronics business. Did you mean it was going to raise the electronics by 75 to 100 basis points or that business is 75 to 100 basis points.

No that -- with the addition of LDS to the portfolio it will raise the overall segment margin 75 to 100 basis points over time.

So, I -- okay, so it's a relatively profitable business. I mean it looks like you might have paid close to almost 3.8 times sales -- 3.8 times sales based on some of the information you provided. So, I'm assuming it's relatively profitable in order to make that impact on such a small revenue base?

Yes, that's a reasonable assumption, Ed, yes.

Thanks.

Okay. Thank you.

Thank you. And I'm showing another follow-up question from the line of Mark Jordan with Noble Capital Market. Your line is open. Please go ahead.

Thank you for the follow-up. Doug, could you share a guess of what your CapEx spend might be next year?

Sure, yes, happy to, Mark. I mean, we do expect CapEx to return to more normalized levels. This year was an exception with our Parsons expansion project. So, it typically runs somewhere between $15 million and $17 million a year and that's, we're expecting it to roll back to next year. Obviously if we win some new big programs we're going to make the requisite investment. But at this point that's the normalized range we would be looking at.

Thank you.

Thank you. And there appears to be no further questions in the queue. And I would like to turn the conference back over to Mr. Oswald for any closing remarks.

Okay. Thank you very much and thank everyone for joining us today on the call. Obviously, lot of things happening here at Ducommun. I think for the most part I think very positive, we still have lots of work ahead of us but I think it's good work, I think it's going to strengthen the company and I think it's also going to position us well in the marketplace as we drive for growth and we make sure that we're doing the right things on the cost side. So again, I want to thank everyone for their time and the continued interest and support of the company. We look forward to seeing you next quarter. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a great day.