Nortech Systems Incorporated (NSYS) Q3 2015 Earnings Report, Transcript and Summary

Greetings. And welcome to the Nortech’s Third Quarter 2015 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now pleasure to introduce your host. Paula Graff, Vice President and Chief Financial Officer of Nortech. Thank you. Ms. Graff. You may begin.

Thank you, good morning and welcome to Nortech Systems third quarter fiscal 2015 conference call. I’m Paula Graff, Vice President and CFO. With me today is Rich Wasielewski, Nortech’s President and CEO. Following my brief introduction, Rich will offer comments on our initiative industry trends and our first quarter result. Then we’ll open up the call for questions. As we begin, please be advised that statements made during this call maybe forward-looking and are subject to risk factors and uncertainties. Please see the Safe Harbor statements in our press release and SEC filings. Now I turn the call over to Rich Wasielewski. Rich?

Thanks, Paula, and good morning, everyone. Our third quarter saw, plus executed on several key strategies and events. We acquired and integrated design engineering service from Devicix specializing in medical devices. We had billing from our new PCB operation out of Mexico after absorbing ramp up cost over the past several months. Our expansion in China move forward with several milestones accomplished. We selected our location, secured an agreement on a facility lease, hired the plant OP manager, all keeping us on track and on plan for a mid-2016 production launch. We moved our corporate offices to a new location in Maple Grove, Northwest suburb of Minneapolis. The new offices provide needed space for growth and expansion for our engineering, strategic sourcing and business development teams. Creating a more collaborative environment building on the One Nortech solution for our customers. And we continued our 25th anniversary celebration recognizing three facilities, honoring their heritage and commitment in Nortech and its customers. The event included testimonials from defense customers emphasizing the importance of our product and service to our troops in our military operations. And from our strategic medical customers how we helped improve and save people’s life. It was always good for our -- its always good for our employees to hear directly from our customers and how important they are not only to the OEM, but the end user of the applications. Their pride and job satisfaction shows up in our quality and workmanship and that's why they come to work. Looking at the economy and industrial trend, on the economy, we agree with many of our peer companies that we are still experiencing mix performances. Pockets of sluggish and pockets of improving demand vary by markets and by customers. We are feeling some macro-economic impacts in our customers are too. Global uncertainty, softness in the oil and gas, and the strong barrel [ph] continues to affect our largest customers. However, we also have other top ten customers who are showing signs of stability and recovery. After trending negatively from most of the year, we are seeing increased activity and it’s showing up in our backlog. Considering the overall EMS industry in North America, the analyst firm, New Venture Research estimates 6% revenue growth both in 2015 and now in 2016. This is down considerably from a robust 12% in 2014. When we look at the EMS peers in our side range companies over a 100 million, less than a 500 million in annual sales, our performance is on par with -- on a year-to-date basis. With that as background let us look at our third quarter results. Our sales in the third quarter showed a healthy increase up 13% sequentially to 30.4 million and up 8% over the prior year. Our industrial customers led the way up 14% and are steadily recovering over the past several quarters. As we discussed on a number of our quarters calls it is the industrial markets that are taken biggest hits since the 2009 financial recession. Our industrial strategies were simplified. So One Nortech improved the qualifications of new business opportunities and increases the penetration with existing accounts like cross selling all of our service offerings into integrated solution and its starting to take hold. Our new acquisition was also a contributing factor recording 1.1 million in additional revenue in a quarter. Our 90-day backlog on September 30th was 24 million was up 23% in the beginning of the quarter. Backlog for the industrial and aerospace customers showed double-digit percentage increases both sequentially and year-over-year. Our medical backlog was down from the prior year but posted a healthy sequential increase aided in part by 1.3 million from our acquisition. Taking a deeper dive into our three key markets. For industrial as just mentioned it was another strong quarter with many of our positive trends continuing. Sales were up sequentially and over the prior year along with the backlog. The majority of our industrial segments are having success. Semiconductor equipment continues to strengthen, year-over-year for the third quarter were up 61%, for the year growth was just under 50%. Increases have been driven by our high-level box build assembly expansion and our capabilities with specialized cable assembly. Transportation is another bright spot for us year-over-year we’re up 34% in the third quarter and full year is up 35%. So we've been very consistent in our growth in this area. Some of this is driven by the upcoming regulations for tracking vehicles, fleet management services and time on the road. Power systems for the quarter year-over-year we’re up 79% and year-to-date up 24%. This is really driven by working through early engagement and gain featuring our high-level assembly integration. Some other industrial customers are still experiencing mixed results. Process management and control due to the oil and gas economics as well as the relatively strong U.S. dollar continues to affect the segment as it has in the past two quarters. As it relates the oil and gas we’re down just over 30%, for the three quarters our control business however is up 25%. Environmental controls were slightly down in this sub-segment through third quarter due to NPI, New Product Introduction delays from our customers. Turning to defense and aerospace, aerospace/defense was up 10% both sequentially and over prior year there are signs of positive momentum as mentioned in recent calls including strengthening backlog, bookings in pipeline. Our quarterly bookings were the highest we’ve seen in two years, our 90 day backlog ended the quarter at 5.5 million up 27% sequentially and 48% over the prior year. Our defense successes are driven through our continued unit long term relations with major customers. The vehicle market has started to return in earnest including our recent multiyear award related to the joint light tactile vehicle project. Our extensive experience with the army equipment and their platforms will also enable growth in this associated sub segment including unmanned applications. We recently won a multiyear bomb program that is beginning to increase their orders. Medical revenues were up 21% sequentially and 1% over prior year, through investments like the Devicix acquisition were moving up to the front of the early engagement phase. And Devicix perfectly complement our existing medical device capability, centered on our medical device production facilities in Milaca, Minnesota which was acquired in 2010. We can support all levels of medical devices that’s 1, 2 and 3 by providing design, manufacturing and post market service. We also have experience in navigating the challenging FDA regulatory process. Nortech has had successfully introduced over 40 medical device products through the FDA regulatory process and now with Devicix we’ll be able to communicated a combined 300 devices designed and/or produced, an impressive history of FDA performance and availability. We’re seeing demand expand at both Devicix engineering, their design services and Nortech engineering, production transport services. Especially with the promise of full integration. We've seen four engineering service projects already booked and required our FDA registrated manufacturing capability and are in line for additional opportunity for these same customers. To finish off, the medical market our largest medical customer has raised their demand forecast for the first time in nine months and that bodes well for us heading into the fourth quarter, and also helping us with the improved customer mix. Let's moving on to gross margin, given our recent gross margin performance I'll spend little more time on the causes and the corrective actions. For the third quarter we generated 2.9 million in gross margin dollars at 9.5% of sale, up sequentially 83 basis points and $460,000 to the second quarter. Volume accounted for the majority of the improvements in both dollars and percentage, there are price and cost improvement actions underway to get the margins more in line where they need to be. When you compare to last year we’re down 300 basis points. Our ongoing investigation analysis into the causes of the drop is centered on three major opportunities, customer and product mix, ramp of cost for Mexico PCBA expansion and new product introductions and higher labor cost. The customer and product mix is industrial versus medical, industrial have increased from 48% of the total sale to 53% of total sales in 2015 and the medical market has decreased from 38% to 34%. There is currently a considerable delta between the lower industrial margins and the medical margins. We expect this mixed improve overtime with our medical engineering acquisitions and the new medical products in momentum, coupled with a more aggressive industrial qualification reporting process, focusing more on value and less on price. The ramp up cost for the Mexico PCBA operation has averaged close to $35,000 per month. This is now behind us as we have gone into full production mode at the end of September. The mix of new products introduces into the system this quarter are more complex and required more setup and engineering support than expected cutting into the margins. Last year's third quarter average 14% gross margin for new products and this year we're at 4%. Corrective actions are being taken at the quote and order processing phases. Item such as setup engineering support, part qualification cost are now being more heavily considered where it makes good business practice at -- in a much earlier stage in the process. The other major areas of cost that has showed up in our increasing -- the other major area is our increasing cost of labor and labor related items such as taxes and health insurance that are outpacing our efficiencies. Actions taken are at an increased emphasis in investment into automation and lean manufacturing. Our Mexico and Asia strategies once fully implemented not only support our growth initiatives, but also provide options to deal with the cost and pricing pressure facing us today. There are two other areas of cost that our management team is focused on and they provide major opportunities for improvement. Our material cost which is 50% plus of our total revenue and our underutilization plan capacity, on the material opportunity we're implementing a collaborative global source and team strategy and a large part of that strategy is expansion into the Asia markets and their supply chain. It will give us a sourcing presence for low cost alternatives that is long overdue. The plant capacity studies are ongoing, locations, building, equipment, labor availability, plant capabilities, technical and product knowledge along with qualification and quality certification, customer preferences and financial considerations are all factors that are taken in the consideration. We visit this area on an ongoing basis as I just mentioned. Because our business and customer requires change so quickly and our planning window is so narrow, we have to adjust accordingly. Just going to get off the script little bit to talk about the third quarter here when you’re talking about the narrow window. We had a nice quarter at $30 million, we had $9 million shipments in July, August was $8.3 million and then the rest over $12 million was shipped in the September, so when you’re going from the $8.3 million to $12 million, you’re talking about 50% increase in manufacturing requirements and demand and it puts a stress and complexity on the system. We do have in place the con-bonds [ph] and vendor managed inventory, but when you're talking about that increase and not level it out, it just puts stress on the entire system. Moving on to SG&A, our selling expenses of 1.2 million in the third quarter were down 100,000 from the second quarter with the percentage of sales at 4.1% which is below our target of 4.5%. We are committed to our growth initiatives in the right business development activities required in this level, funding is necessary. On the G&A expense side, 1.6 million was on par with the second quarter and lower on the percentage basis to sale that 5.3 versus 6.2 for the sales last year. For the nine-month period G&A expenses were down 300,000 and 30 basis points. The decrease in SG&A was due to cost reductions implemented throughout the year to match our customer demand. We're pleased to post an operating profit for the third quarter of 23,000 after operating losses of the prior two quarters. We were added by the increase in revenues and other cost reductions that actions taken in the quarter. We've reported a net loss in the third quarter of 124,000 and $0.05 per diluted common share compared sequentially to the second quarter of 378,000 loss and $0.14 per share. Prior year net income was 333,000 and $0.12 as mentioned our net income in 2015 has been impacted by customer mix external factors, acquisitions, and expenses and ramp up cost for growth and cost reduction initiatives both in Mexico and Asia. Taking a look at our liquidity, we set aside our liquidity needs with cash generated by operations and an operative rating [ph] line of credit with Wells Fargo Bank. On September 30, we had an outstanding balance of 6.9 million under the line of credit and unused availability of 7.5 million, and supported by our borrowing base. Net cash provided by operation activities for the nine months ended September 30th was 3.9 million. Cash was generated by non-add back cost which is amortization, depreciation and the timing of accounts payable payments. Working capital increases in account receivables and inventory we’re offset by extending accounts payable terms and conditions. Our supplier base helped this work through the cash bubble related to the acquisition and now cash flow is being helped by the higher revenues. We had positive operating cash flow in the quarter of $3.9 million after using 138,000 from operations in the second quarter. Free cash flow is now positive 2.5 million for the nine months year-to-date. Some additional comments related to the Devicix Engineering Services. First of all the integration, the past 120 days has gone very smooth and as planned, the integrity and talent as the Devicix’s ownership, management team and engineering professionals is very impressive, they do what they say and they do it very well and they’re performing today at a very high level. So we’re very pleased so far with the integration. Devicix Engineering business delivered a 1.5 million in revenue -- I’m sorry, 1.1 million in revenue and starts the fourth quarter with 1.3 million in our 90-day backlog. We’ve already won new programs from the collaborative efforts with several different customers as I mentioned earlier. As we said in the last call this acquisition enhances our medical device business in Medtech product development into the fastest growing market. Many large more establish medical device OEMs are looking for cradle to grave [ph] design and then factoring partners and we now have the necessary breath of capabilities to meet those needs. The 10-Q just reported will provide a full detail look into the acquisition and provides an estimated preliminary fair market value of the assets and the transactions. But I’d like say, I’d like to take your time to little look, a little with a highlight in the major items today. We purchased all of the tangible, intangible assets as Devicix under the agreement of 5.3 million. It breaks down as follows. $2 million in cash at close, 2.3 million in notes over the four years with some offset if certain revenue levels are not met, and a 1 million in assumed working capital adjustments associated with the ongoing business and customer cash deposits. There is additional earning out consideration. One type through the engineering service revenue, and the earn out starts at the $6 million level. And another one tried to new product synergies generated from new and pass Devicix customers. The earn out has a fair market value today of 851,000. Intangible assets after the independent valuation work was completed, came in at 2.1 million, 814,000 of trade name value, and 1.3 million in customer relations. Goodwill came in at 3.2 million in fair market value including the earn out potential of that 851,000 I mentioned earlier. This is in line with service type business transactions, generally a 50-50 split good will to tangible and intangible assets. And then you take into account any additional considerations for items such as earn-out the expected synergies of the combined business are expected to cover the good will. Historically Nortech has not had any significant good will in books and this will be monitor closely as we move forward. So in summary it’s been a challenging 120 days, we’ve made some good progress in many areas, backlog and pipeline activities cash management and have two major initiatives implemented and contributing going forward. The engineering service acquisition and the Mexico PCB expansion, we will continue to monitor the timing and execution of our other growth and cost reduction initiatives. Although we’ve made progress, we need to execute on the gross margin improvements discussed earlier to restore bottom line profitability. We fully expect to make more progress in the fourth quarter and we have the backlog and plan to make it happen, we just need to execute. Thank you and now we look forward to answer any questions you might have this morning. Operator please open the lines.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Mark Franklin with Wells Fargo. Please proceed with your question.

Good morning, the only question I have relates to the acquisition. I was quite surprised when I review that -- to find out that you had paid quite a substantial premium over fixed asset, in fact I think you pick up $100,000 of tangible assets and you paid 5.3 million. Your intangibles at the end of the second quarter were about little over 100,000 now they are 5.4 million. What made this company with apparently run rate of about 4.5 million in revenues worth such a gigantic premium over tangible assets and why was it worth your tangible book value declining from 22 million to less than 17 million and your book value per share tangible going from over 8 to around 6?

Throughout the call today I provided the market background for you, so you can see just through the FDA how that impacts our combined medical device production business with the engineering side, roughly 40-45 FDA certified products through our company before the acquisition, now we’re with a firm that has done -- combined now a firm that we can communicate over 300 items through that, very impressive here in our marketplace. The growth in medical devices is there, where we’re at it provides a different type of return. The current core business added height would be a 6% EBITDA generally we play in the 4 to 6 range companies our size and in the core business only play in that, when you move into the engineering and the medical side and grow that business especially on the device and medical device side the multiples are much greater. We did of course take that into consideration and the first -- it's only one quarter but we’re now just through one quarter and have experienced about a three times multiple to our current core business EBITDA. So we feel if the acquisition, if it continues through the performance that we did for the acquisition and for the first quarter it will add strategic value growth in an area of that’s much needed which is the gross margin and take us to that early engagement that we were missing.

Is there any pro forma published, anywhere I take to look in your queue I couldn’t find any.

We don’t go forward we do have in the acquisition, there is the table saying what it was with and without Devicix, I think the nine months it showed about a $0.07 improvement for the nine months of 2015. So I think we’re in the $0.25 loss area and with them included if for the whole year we'd be at $0.18. So you are getting a feel for the improvements that it can make for us.

It's in the September 2, I haven’t reviewed the whole thing.

If you look in the acquisition note you'll find it.

Okay I’ll take a look, but still seems like, if you go over the price given -- your company was selling at half a book value, now its two-thirds of book value.

The company is transforming Mark. It's transforming to more early engagement and design, but not only is the company doing it, the industry is doing it. The combination of design and manufacturing is what the competition has done, what the big boys have against us and we now can have a level playing field.

Our next question comes from the line of Sheldon Grosky with Grosky Associates. Please proceed with your question.

Looks like you were juggling a lot of balls and had a lot of balls in the air at the same time in the third quarter, so hopefully you won't drop them.

We feel the same way.

So at least some of this behind you, you move your headquarters, you're starting up Mexico, you acquired -- that’s a lot for one quarter. So let me ask you about Mexico and China. Are you expecting the facilities there to add to revenues or to reduce revenues from other American facilities?

When we get into the growth that we’re experiencing and the early engagement and the box build type at that the industry is growing on we want to be a little more selective on our customer end business in the long run. We like to build domestically more profitable better gross margin business so we can provide more value added. The two you mentioned Mexico and Asia, let's take Mexico, as a much different scenario, we've already been there for 12 years, we’re establish, it's one of our better producing facility both in delivery and quality and the team that was there were making cables and wires assemblies complex -- they got more and more complex throughout the 12 years that we've had them and it turned out there are lot of the team members on our staff of the leadership team has a PCAB experience. So, it was a logical expansion for us and our customers have been asking for it. Over the last 10 years or so, the supply chain has gotten better even, when we went there for cables it was tough on the connector, interconnects and wiring, we almost like we were the leading edge of the supply chain but now it's more robust, you've seen more U.S. companies, OEMs moved down there, primarily to do -- were located in Monarca [ph] primarily to do their own PC boards. So, we're getting some of that business now because we're down there and that's generally driven by our customers that want to be there and they're having production in the country. So there's not as much benefit because in the SMT world there is not as much as labor but the legacy boards do have lot of [indiscernible] that creates to some of that labor, that's needed down there and that labor cost saving. So, it's a long answer, Sheldon, I'm sorry on that. We do not expect any dilution. As a matter of fact the project when it went down the Mexico had -- we have two PC board houses here in The United States, each one of them had identified $2 million out of each, so $4 million transfer and that would be to extend of it. So, it's not a huge amount of movement, it's mostly for customers that want to produce in country, for country or for specific cost reasons. The Asia one, there is a movement with the large global customers to produce in country, for country. Our Mexico operation is very -- for the North America is very competitive with Asia now and we expect that concept to grow in both countries and they will grow as the OEMs produce more in those countries and that's I think the biggest point to get to you Sheldon.

Let's go over to that other little question, profitability. Now I'm looking at the Q and I'm looking at the pro-forma of Q and the pro-forma of Q seems to show that you would have been profitable lot on pro-forma basis for the third quarter, have you had the Devicix on board and I might be missing -- I'm not exactly an expert of what I'm reading here, but that looks like --.

You're saying -- we don't know - I think it was $0.02 loss in the third quarter, I think you're looking at the far right with the nine-months and that was from the -- that's from 2015 year to date if we had --.

I was looking at the left actually which is 2014, okay.

Right.

Okay. But in any case, how soon should we optimistically expect a profit from Nortech. You mentioned that you have a good backlogs, it sounds like lot of things are following in places, is the December quarter to fast to hope for?

No, not for where I’m sitting. We've got some good momentum going, I was a little more cautious on this and at last call said sometime in the second half. I think we hit that mark, we made considerable progress hitting the income from operations even though with 23,000 or almost to breakeven, it was a 400,000 improvement from the quarter before and the Mexico startup is behind us, it's contributing to the top line it's not taken away and Devicix has been accretive already and that's a very positive, our big OEM medical guidance is forecasting an increase which we didn't expect going into the fourth quarter, we planned on it being flat like it's been for the first two and three quarters. So, we have good momentum and what 24 million backlogs that's huge, that's as big a backlog as we've had. Devicix, the Engineering service only 1.3 of it, still takes that out you’re still at 22 and some change. It’s one of the largest backlogs we had since 2009. So I’m pretty confident, I don't know -- you’re trying to give you out on line there, but just I’m pretty confident that we can turn the quarter and that's why we went through the gross margin actions that we’re taking

One other question related to what we were just talking about, you mentioned that there was fast ramp up of revenues between July and September, you mentioned that by the run rate through September was already putting some strain on the company, is that momentum continuing from September or is September looking like was a peak month?

It appears to be peaked out. Like I said, we did like 9 million, 8.3 and then whatever the difference is there it’s about 11.7 [ph]. It really was sum that was two things, with the sum was some past dues, from the other two months, some delays in new products and the reason we could do that much was because we -- a lot of it came from our con-bond and vendor managed finished goods inventory, so we were okay. That had -- of course that could get replenish. We’re seeing it more stable across the board October, November and December and the backlogs are very strong and they’re even getting better as we speak. But we should not -- it should be a little more manageable because it’s more straight lined.

Okay. Maybe you have successfully [indiscernible]. Okay thank you.

Well, we see all we did. Sheldon, but thanks, making us feel good, somebody appreciates it.

Thank you. Our next question comes from the line of Mitch [indiscernible] with Wedbush Securities. Please proceed with your question.

I’m a bit of a new comer to the company. Some of my questions might be easy for you but [multiple speakers] you are talking about ongoing cost reduction efforts and that would sort of imply a recognition that certain cost were out of line and with ongoing, if you could go into that a little bit more and the magnitude and the expected impacts on your both gross and pre-tax margins that would help me around my brain around this a little bit.

Yes. I think if you look at the 10-Q you will see our major customer in the medical side that dropped from I don't know 26% to 18% of sales. So if that 6 points and roughly a $100 million you can calculated that's $5 million or $6 million down to a major medical accounts that only helps us out with margin in the medical side also helps us out with absorbing those plants and utilizations. So that was -- that customer and product mix, it was huge for the first nine months. It was good to see a little increase from them in the third quarter, which helped but we’re seeing even a larger increase here come in the fourth quarter. So that's the first place that we’re looking at the higher labor because of some of the investments that we made in Mexico and expansion on operation and the acquisition it put some constraints on us investing in more automation and that hasn’t helped us either, so we’re trying to get that back, we’re looking for the capital to be more targeted at automation in the near future.

So that would be a CapEx aimed at reducing production cost as opposed to an existing cost line that's out of wack, right?

Well, yes when you do -- when you have for us anyway because we’re not capital intensive, but when you have two major investments as this, outside the ongoing business cycle it puts a constraint on that CapEx side. But we’ve gotten through that and now we’re all looking at plans, we’re prioritizing the ones that give us the biggest bank for the buck.

Okay. My next question has to do with the acquisition and you mentioned the revenue contribution and that its accretive, and looking at your historic margins I guess gross margins and they’re already double-digits and pre-tax margins around the percent or so, if I overlay that on top of the price paid for the acquisition, I’m coming up with a number of -- if you got 4.4 million a year in revenues, if that's your run rate and you’re making a couple of percent that’s somewhere between 44,000 and 88,000 a year and trying to, I guess I’m looking for some input as to why -- maybe the margins that had business or going to be a lot higher than your historic business and if they are not, what’s the strategy, what’s the synergy that’s going to allow both the design and the build to be a lot bigger and more profitable?

Well there are two areas the medical device by far, is our best margin product. We don't necessarily want our competition to know what we’re quoting or get so that’s a little harder position to answer that question. I think there is two pieces of information that you heard today, one if you got to the Q you're going to see that, the Devicix folks, if they were in with us for the nine months would have generated the $0.07 per share improvement. That’s roughly a pretax number about $40,000 to $45,000 per cent. So you're talking about $280,000 to $300,000 bucks, a good guys so far for nine months, if you get another $100,000 that would be about $400,000 of accretiveness for us. And $404 million is 10%, bottom-line you just said we’re doing historically 1%, I would say that pretty good trade off from my seat.

And then the last one and again pardon my inexperience here a bit, just has to do with capital allocation with your stock trading at that pretty material discount to its tangible book, and understanding that you have the -- now some debt on the balance sheet as result of the acquisition. Is there a time when you could envision outgain capital towards share buybacks and would your current borrowing arrangement permit that?

I think our current borrowing arrangement would allow that, we’re on an asset based banking which they would just have to approve it and depending on the time today given our performance is not right. We look at trying to get more float out there, I would say all the time. It's kind of time like the capacity studies, they are ongoing. It's part of our DNA. But I think the timing for investors at least from my seat is good given everything that we've done as, Sheldon said we bit off quite a bit here at one time, but I didn't really have much to say about the timing. We planned PCBs, the acquisition came on. And I think it's a same thing with what you're mentioning there. I think if we can bounce back here in the fourth quarter and to 2016, then we can answering some of those questions for you, but float is definitely a piece of our strategy and how we can get more out there, and there are -- we have this -- I don't think we’ve discussed necessarily on this conference call, but we have discussed it in the board room and they are very interested in doing that.

When you're talking about float, I think you're talking about getting more shares out there?

Possibly again more shares out there, yes.

But when you’re operating at a discount, how in the world could you do that on a basis that is feasible for shareholders, that wasn’t dilutive --.

I said it was timing, I'm not saying today or in the near future. It's an option for the future, it's one of the ones we look at. So it is not the right time to do that or with the performance that we have.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Well if there is no further questions, we’ll conclude today's call. Thank you for your interest in Nortech. And have a great day.