Park Aerospace Corp. (PKE) Q2 2016 Earnings Report, Transcript and Summary

Good morning. My name is Amanda and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp Second Quarter Fiscal Year 2016 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session [Operator Instructions]. Thank you. At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, Operator. This is Brian. Welcome everybody to our second quarter conference call. As usual, I have with me Matt Farabaugh, our VP and CFO. Matt and I will go ahead with some introductory remarks and then we will go to the questions. And I just want to remind you that Matt’s remarks and comments, there is a transcript of those comments and reports on our Web site. There is some detail in, so there if you want to check on our Web site feel free. Go ahead Matt.

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 March 1, 2015, 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. I'd like to briefly review some of the items in our second quarter ended August 30, 2015 P&L, which are not specifically addressed in the earnings release. During the fiscal year 2016 second quarter, North American sales were 56% of total sales, European sales were 6% of total sales, and Asian sales were 38% of total sales, compared to 46%, 6%, and 48% respectively for the 2015 fiscal year second quarter, and 48%, 6%, and 46% respectively for the 2016 fiscal year first quarter. Sales of Park's high performance non-FR-4 electronics materials were 93% of total electronics material sales in the 2016 fiscal year second quarter, 92% in the 2015 fiscal year second quarter and 93% in the 2016 fiscal year first quarter. Park's electronics sales were 26.2 million or 69% of total sales in the 2016 fiscal year second quarter, compared to 33.8 million or 80% of total sales in the 2015 fiscal year second quarter, and 28.1 million or 74% of total sales in the 2016 fiscal year first quarter. Park's aerospace sales were 11.8 million or 31% of total sales in the 2016 fiscal year second quarter compared to 8.6 million or 20% of total sales in the 2015 fiscal year second quarter and 9.7 million or 26% of total sales in the 2016 fiscal year first quarter. Investment income, net of interest expense for the 2016 fiscal year second quarter was negative $39,000 compared to negative $134,000 in the 2015 fiscal year second quarter and negative $104,000 in the 2016 fiscal year first quarter. Depreciation and amortization expense for the 2016 fiscal year second quarter was $840,000 compared to $865,000 in the 2015 fiscal year second quarter and $837,000 in the 2016 fiscal year first quarter. Capital expenditures for the 2016 fiscal year second quarter were $52,000 compared to $179,000 in the 2015 fiscal year second quarter and $176,000 in the 2016 fiscal year first quarter. The effective tax rate before special items was 12.7% in the 2016 fiscal year second quarter, compared to 13.3% in the 2015 fiscal year second quarter, and 10.9% in the 2016 fiscal year first quarter. Gross profit for the 2016 fiscal year second quarter was $10.4 million or 27.3% of sales, compared to $12.2 million or 28.7% of sales for the 2015 fiscal year second quarter, and 11.4 million or 30% of sales for the 2016 fiscal year first quarter. Before special items, selling, general and administrative expenses for the 2016 fiscal year second quarter were $5 million or 13.2% of sales, compared to $6.3 million or 14.7% of sales for the 2015 fiscal year second quarter, and $5.8 million or 15.3% of sales for the 2016 fiscal year first quarter. Before special items, earnings before income taxes for the 2016 fiscal year second quarter were $5.3 million or 14% of sales compared to $5.8 million or 13.7% of sales for the 2015 fiscal year second quarter, and $5.5 million or 14.4% of sales for the 2016 fiscal year first quarter. Before special items, net earnings for the 2016 fiscal year second quarter were $4.6 million or 12.2% of sales, compared to $5 million or 11.8% of sales for the 2015 fiscal year second quarter, and $4.9 million or 12.9% of sales for the 2016 fiscal year first quarter. For the 2016 fiscal year second quarter, the top five customers were AAE, GE, Sanmina, TTM, Viasystems, and Wus, in alphabetical order. The top-five customers totaled approximately 41% of total sales during the 2016 second quarter. Our top 10 customers totaled approximately 57% of total sales and the top 20 customers totaled approximately 71% of total sales for the 2016 fiscal year second quarter. Since the share purchase authorization announced on January 8, 2015, the Company purchased an aggregate of 699,788 shares at a weighted average purchase price of $20.71 totaling $14.491 million leaving 550,212 shares that may be purchased by the Company pursuant to such authorization. The Company purchased an aggregate of 118,756 shares at a weighted average purchase price per share of $21.61 and an aggregate purchase price of 2.566 million during the 2015 fiscal year fourth quarter, an aggregate of 444,834 shares at a weighted average purchase price per share of $21.32 at an aggregate purchase price of 9.484 million during the 2016 fiscal year first quarter and an aggregate 136,198 shares at a weighted average purchase price per share of $17.92 and an aggregate purchase price of 2.441 million during the 2016 fiscal year second quarter.

Thanks Matt. And we did decide to provide the detailed share purchase, the stock repurchase plan for the last three quarters. So, let me see if I can add a little more perspective, this is Brian of course. So let’s talk about second quarter. Actually, things were going fairly well for us through June and July and then things kind of fell apart in August. So it’s really when I -- and it’s really to look at the facts and the details for Park, it’s an Asia story, meaning it’s a Singapore story for us. The reasons, now there are people that are probably smarter than I am, not probably, definitely smarter than I am that might have more informed opinions. But to me it’s something about the global economy and that’s kind of maybe a [cop out] [ph] explanation because you could say the global economy is responsible for just about everything. But if you want to focus a little bit more, I think it also relates to China, two of our three largest electronics OEMs are Chinese, large Chinese electronic companies. And I think China has been affected even more so, my feeling is than the rest of the world globally and the electronics industry anyway. So, that’s not good for us because Singapore is where we have better margins. All revenues at Park are not equal, we rather have -- if we have a total of $37 million of revenue for instance in a quarter we want more of that in Singapore and less someplace else because the margins out of Singapore are better than they are in the west. The pricing is not different, that’s not the issue, we keep to -- we have pretty consistent pricing globally because most of our markets are global, but our costs may not be the same. Another factor which you should be aware of which effects a number of things for the quarter, including the aerospace revenues is that we had a one-time sale to a company called AAE, not even mentioned them as a top five customer, they had never appeared as a top five customer before. But this is a special arrangement under which we sold to them a very specialized fabric for ablative purposes. These programs are very -- these are for rocket program, just happens to be mostly for Lockheed. These programs are very long term and the contractors are very concerned about making sure they have a supply of this raw material which is not easy to get actually. And this is a fabric, it’s not prepreg. So our arrangement with this company is, we sell them -- we buy the fabric, we sell it in the same day. So we turn it around in one day, we actually don’t take the inventory risk, we don’t use our cash, we sell it to maybe a small markup though and then we hold it for the ultimate customer and wait for them to call us and say okay now we want this release, that release. And I think most of this product will be released in the next six to nine months, but some could take much longer than that, depending upon the program. That’s the arrangement we have. But at the store it's a lot of things because we got $2.2 million of revenue with very little margin, so it moves and it's a one-time item like I said. The real revenue and the real profit will come when we actually produce the product for them, when we actually make the prepreg out of this product for the end customers. So what it does is it gives us $2.2 million of revenue, it also is aerospace revenue but very little contribution to bottom-line. So if you want to look at Q1 versus Q2 for instance, now we’re talking about the whole company not just aerospace, the top-line are almost identical, weren’t they? But in a way you almost have to subtract that 2.2 million out of the second quarter top-line in order to understand the bottom-line drivers because that 2.2 million did contribute very little to the bottom-line. And there is a small markup just to make sure our costs are covered to the whole of the inventory, but like I said the margins for us come when we produce the prepreg product, which is an ablative product, a highly specialized product for rocketry applications. So I just wanted to mention that. So when -- so we talked about the top-line, now let's talk about the bottom-line. The two big negatives for the bottom-line, it will be Q2 versus Q1 where again the revenues were similar, is that in August things really came unglued in Asia and then we had this other factor, this kind of special one-time factor related to that AAE sale of $2.2 million. Now interestingly the U.S. electronic operations which you know haven’t been hitting any home runs for long time, are just kind of going along, they haven’t really been impacted so much. This is really an Asian story. So they’re operating in the U.S. electronic operations, already operating at much lower level than they were let's say 10 years ago, but it's really not a U.S. story, it's a Asia story, it's a China story and therefore for Park it's a Singapore story and therefore it's also a bottom-line story. Now the other thing that you might noticed is that the SG&A was significantly lower in Q2 as compared to Q1 and that wasn’t an accident. What we did was we reduced the fiscal year 2015 accruals for profit-sharing and bonuses, we actually hadn’t paid or decided to make a final decision on profit-sharing or bonuses for 2015 fiscal year yet and we decided to reduce the accruals for those programs significantly, so many of the people at Park especially I’m not just talking about the officers that will share in that unfortunate event, participate in that event, but that’s the offset, if you look at SG&A you see that the SG&A is actually a benefit for P&L because it's quite lower. But that’s a one-time item, we made a one-time adjustment to that accrual now the bonuses and profit-sharing will be paid. So that’s not sustainable that’s a one-time item. So let's continue here with some other comments with regards to Q3, so we actually have five weeks in the books for Q3 which is based through the month of September, five out of 13? And unfortunately the news continues and at least for September in those first five weeks and the news meaning that Asia is weak, China is weak and the rest of the BUs are kind of just about the same let's say, the same as before August I mean. So not too much has changed for Park except Asia and that all happened in August and that continues in September. And aerospace we know because it’s a matter of totally in the aerospace number, even if we back out the 2.2 million it’s still kind of not a bad number, I think a little bit better than Q1. So that’s not part of story and the France and California and Arizona operations is not really part of story. They haven’t been contributing significantly for a while, they’re operating on a lower level, but that’s not new, that’s kind of just the states close situation, people are looking for explanations and insight into Q1 versus Q2 or vice-versa I guess. So when will the Asia economy and China economy get better, so that’s way beyond over my pay scale, seriously I mean you could watch CNBC or whatever you want and there will be plenty of brilliant people that will give you opinions on it, unfortunately they are all -- not going to agree on anything. What we’re told by customers and OEMs is really all over the lot, but and maybe it’s wishful thinking, I don’t know but some of them say, yes maybe by the end of the year things will kind of sort out and settle down, meaning get better. I am talking again in Asian electronics. So aerospace not really part of the story as we already committed, but you know that because Matt already gave you the aerospace revenues for the quarter. So let’s see buyback, Matt gave you the buyback information as already commented and I just want you to know that at this point we’re pretty restricted in terms of any additional buybacks by the bank covenants, we took out these bank loans as you remember so we could pay these dividends, the special dividends that we pay without having to pay the big tax bill to repatriate funds, we could have done that, but we thought well maybe there would be some kind of breakthrough where the government and we got on the same page and there would be a tax bill that will be approved which would lower the tax penalty -- reduce the tax penalty of brining the money back. Now I know that with all the politics, there is -- a lot of the candidates are talking about that, but of course that’s still quite a ways off and we don’t know what we’re going to do. I mean everything is always on the table everyday including just repatriating the funds paying the taxes and paying the loans offs and getting those loans off our balance sheet. The company has as you know net cash of -- what is it about $165 million, so the Company has very-very strong cash position, extremely strong balance sheet but nevertheless we still deal with these covenants and I guess I won’t comment on them except that these covenants restrict us from doing very many -- much more stock buyback activity, even at these very low prices that the stock is trading at right now. So let’s see, well I guess want -- we’ll go to the questions in a second, but I wanted to just mention that we just declared a dividend a few weeks ago which will be 30 years in a row of regular quarterly dividends without any -- ever skipping a dividend or reducing a dividend, that’s 30 years in a row. I am not sure how many other investments would be able to talk about that, but at least that’s what will be on Park’s record. And I think you know this, but the last -- since 2015 fiscal -- 2005, 2005 fiscal year, $333 million of cash dividends are paid since then. I feel like it’s little bit of a broken record talking about our big aerospace customer, what’s happening because it’s such a big part of our life. But we did receive a 10 year forecast yesterday and it’s quite -- and that’s supposed to lead to a 10 year agreement that is -- and the numbers are quite large. I am not going to give any kind of color on -- other than say they‘re quite large. So I guess that’s progress as I’ve commented in the past that things will move a little more slowly than we’d like but that is some progress. And I don’t know, I think why don’t we leave it at that, maybe some other items will come up in the questions, so operator I think we’re ready for questions at this time.

Thank you [Operator Instructions]. We do have a question from the line of Leonard Cooper who is a Private Investor. Your line is open.

Somehow in all this bit about buying back shares. Could you tell me what the number of shares currently outstanding is?

Matt, I don’t know if you can help us with that. I think it’s actually in the news release, such as a percentage average number.

It’s roughly 20 million, it is, but it’s 20 million.

Still around 20 million.

Hold on a second, what’s the number Matt?

It’s roughly 20,300,000.

Do you get that, about 20,300,000. See the number in the news release is an average for a quarter, I don’t think it has the end of the quarter. But Matt did indicate in his comments that we purchased since the stock buyback was authorized, just about 700,000 shares, 699,788 shares. So that’s close to 700,000 as you can get. So, I guess we have about 21 million, the kind of rough math and this number would I think also be in the 10-Q.

[Indiscernible] buyer of shares.

It's -- we're just under 20,300,000 at this point.

Just under 20,300,000, go ahead Len.

I see that you've made several personal purchases of shares.

Yes.

Well, I look at that as an optimistic sign.

Either it's optimistic or I have a very bad investment adviser, I don't know.

I thought you do that on your own.

Yes.

In prior discussions you spoke of seeing change and redundancies [indiscernible] supplies for GE.

Yes.

Any comments on those or?

Yes, my comment is, it's little bit frustrating for me because I think in our last call I said by now we'd have more news for you and the ball really is just in their court. I mentioned that we just got this forecast which was something which is important and that was as intended to lead in a very near future was actually supposed to be last month to the proposed 10-year agreement and once that is put to bed, then our understanding is that's when we would proceed with the redundant facility.

Thank you. Our next question comes from Sean Hannan of Needham and Company. Your line is open.

First question here and I've got a number of them. If you can help me to understand the degree of the drop off that you saw in August, were you running June and July around 9 million to 10 million a month and then maybe August dropped off to 6 to 7, can you help me understand that magnitude? Thanks.

So I think we're going to decline to quantify specifically and I have to remind you that June is a 5-week month and July and August are 4-week months, so we would always talk in weekly averages. The month of July actually was a month in which that onetime of sale occurred 2.2 million, so that pushed July up a little bit. But just looking at --.

Great, and I admit on the electronics side, Brian just to clarify.

Right, okay so, I am looking at that in total because the aerospace is kind of flat across the quarter except for that one time sale, so we kind of expected that question. I think we're going to decline to quantify it by percentage or anything like that, but it’s meaningful, it’s significant you could look at the numbers without getting your pocket calculator out and say yeah, the number in the month of the August is not like the prior months and particularly if you look at the Singapore line item, that where you see it. The rest of the lines are kind of going sideways, maybe a little up, little down, nothing to even speak about but that Singapore number actually dropped to some extent in July and then dropped further in August.

Okay, so then just to follow on those comments as well as getting back to some of the earlier comments you had for the first five weeks of this current quarter that we're in. It is -- when you were talking about the softness continuing, is that a reference -- are you going to a reference point of August meaning that we're running at a similar averaged August or that there is incremental softness that's materialized a similar trend?

I think that it is similar to August. September is trending with August.

Okay. And then if there is a way maybe if we can talk a little bit more or explore a little bit more on the electronics demand within China, so it looks like the regions down nearly 30% year-over-year. We've talked about some macro as well as perhaps some region specific demands challenges, didn't know if it's time perhaps also to revisit the topic of share losses. Now I realize that the PCB space hasn't been great, share allocation can move around a little bit at times, but in the grand scheme of things given we're offering higher technology pre-price in laminates, can we talk about whether there is a potential we could be losing share perhaps to some of the Taiwanese? Maybe that they're making enough product within this space that can be characterized as good enough, can we talk a little bit about this -- the share position and share dynamics competitively? Thanks.

Sure. So this is -- there is two answers to the question I guess, one is yes, there is an ongoing trend the Taiwanese and even some Japanese company coming in quite aggressively and that’s kind of maybe a longer story. If you want to look at the quarter of August and September I think that’s absolutely nothing to do with it at all. The good news is I think we have developed some pretty solid positions with these two leading Chinese OEMs and they are very significant companies and like I said two of our three largest electronics OEMs are now these two companies and that’s kind of a new development. So actually that’s going in the positive direction. But I think that the -- I don’t know my sense is that Chinese economy is really not very happy right now. And obviously these companies are not just supplying it to China, these are large companies, but I think they still are very much driven by the Chinese economy not just in terms of the market but also the psychological factors, I mean which effects them, I think in their way of looking at the markets. As aerospace is kind of much more steady as you go; electronics companies are very reactive and they turn on a dime. So the story for August-September, I don’t believe is in Asia, I don’t believe that’s a market-share story. There is a longer term trend where the kind of lower end of our high performance product keeps getting picked off and picked off and picked off. We basically sell very little non-high performance products and almost none in Asia. I mean I don’t remember the percentage 3% to 7% or something like that, it's very insignificant. So it’s being picked off though, and the market-share story is the lower end of high performance, our job of course is to push hard with our new products because there is very little we can do to protect the lower end of our product line even though it’s high performance other than get in the mud with the Asians and I think that’s a -- what is the expression, like a one way ticket to Palookaville, that’s a real, real bad strategy if you asked us. Just one of those companies has asked us to do joint development project with them. So I don’t want to say anything more about that, but it's -- I feel, I mean other than the fact that the market is really troubled, I think we were happy to be positioned well with -- we feel that we’re well positioned in Asia. These are [up and comers] [ph], the names that we’ve been talking about for the last 20 years, I am not saying they’re not a factor anymore, but these are the people -- I mean these companies are very large also, so I don’t know if [up and comers] [ph] is even the right way to talk about it and maybe not as well known by western people, but I think these are the companies that we really want to be aligned with for the future.

Okay, as part of that, you would mention this new product momentum, it doesn't seem that the new products on the electronics side, perhaps, have had the degree of uptake in the aggregate thus far, that maybe you've been hoping for. Can you talk to that a little bit, and are there any signs of change or accelerated adoption, et cetera? Thanks.

Yes, so I think that’s a correct statement, but you're comparing it to what I was hoping for of course and for better. But the reason that the electronics top-line is what it is because of the adoption of the new products. If we’re just continuing to sell the legacy products, it wouldn’t be a good thing at all, not just in terms of the current P&L but also in terms of our position strategically. So you ask -- it’s depends on what minute you asked me really because electronic moves so quickly, but and there are lot of pretty hot issues we’re working on. However in terms of the new products, I have to be a little careful here because some of these things are highly confidential and we are working with a large circuit board, very large circuit board company and also OEMs on accelerated development work and just commercialization of our new products, and that’s something new those are not just kind of ongoing things that there is special activities, so it’s not just kind of more of the same. We still have to make these things work we still have to bring home the bacon if you will, so these things are not in the bank. But these activities are different they are significant, they’re consuming and they’re not just kind of, Sean, just the ongoing kind of development activities that we’ve been involved with or our commercialization activities we’ve been involved with for the last three to four years with the new products. This is in last three months, I would say. The activity has become heightened.

The interest level and activity has become heightened?

Not interest, no, it’s lot more interest. It’s putting a lot work and effort into being qualified on programs and with large OEMs and customers.

Okay, so it’s some cautious optimism?

Yes, it’s not interest. I mean that we’re exhausted actually from how demanding this work is, at least I am and I’m old, so I get exhausted easily.

Okay. So I'm going to ask one question now on the aerospace side, and then I'm going to jump back in the queue. So what should we now expect for aerospace in the back end of the year? So it looks like you're -- if I pull out AAE, you would have been very marginally down, effectively flattish quarter-over-quarter. Now, I realize we're a few years away from the bigger ramps, but I have the, at least, expectation there should be some incremental business working in the back half of this year. Is that still relevant and what should we be thinking about aerospace now at this point in FY16?

I think ’16 aerospace is a lot more predictable than electronics of course. I think that we should look for more or less flat over the first and second quarter, over third and fourth quarter. I mean there is -- the opportunities now are very palpable at present, but they don’t have months involved with them, they have years and decades. So, I am not aware of anything that would significantly impact up or down the aerospace situation in the short-term.

Okay, I mean for example, I saw that the -- and correct me if I'm wrong, but I saw that Comac ARJ21 aircraft did its final demonstration flight, and I think customers are going to start taking orders at the end of this year. I didn't know if there's any impact to you based on, I think you're in on the GE engine on that aircraft platform?

That’s correct.

It wasn't clear to me if that perhaps starts to provide a little bit more momentum, or what have you. Thanks.

So the big drivers for us with GE are the 747 which is kind of flat and the really big driver is A320neo with the LEAP engine. Now Comac you mentioned the bigger story for Park is C919 which has the LEAP engine as well, that’s another big program for Park but that’s still a couple of years out. The ARJ which is with CF34-10A engine that’s our program you’re right but it’s small. So the big drivers for at least GE, we’re talking GE 747 which just doesn’t seem to be much more than flat based upon the forecast that we’re receiving and the big one is going to be -- that has more immediate impact will be the A320neo with the LEAP engine, the C919 like I said also is a LEAP engine, but that’s a little bit further in the future and that also has some big potential revenue associated with it.

Thank you. Our next question comes from Morris Ajzenman of Griffin Securities. Your line is open.

Okay, thanks. Just a follow-up from the last previous question. You started touching on it, but I know there's not much more you can say about GE. But I was going to ask other programs you are on, if you'd give us any color. And you started to, but is there any more color you can give us? Is there any programs that would be a jump start to fiscal ’17? Anything that you can help us along that line, we'll be appreciative.

The forecast, we've talked about this and like I said aerospace doesn't change every three minutes like electronic does. Let’s talk calendar years because that's where the forecast its structure. It's more of a jump in ’17, ’18 then in ’16. The programs, there is also Embraer they have a CF34-10E engine. And I believe that we haven't switched over to that program yet. Once we do then it will be our program, meaning that there might be some legacy inventory that's been worked down, I got to be careful about saying too much there. The other -- we talked about both the Chinese programs which are good programs to be on and then there is the Passport 20 program. And that's not only the thrust reverser and cowlings to nacelles, but it’s also some internal structure of the engine which is -- that's an exciting thing for Park, that's a new area for Park. And we're working on a number of other engines platforms for GE and Boeing aircraft for different parts of the aircraft, which would not be -- different parts of the engine, which would not be as significant at these numbers we're talking about, which are mostly for thrust reversers and cowlings in very large parts. But we're looking at other parts of the engine, a number of them and a number of different engine platforms. But you're asking about big revenue driver that really hasn't changed, the biggest one of all is going to be the A320neo I think and that's happening now. I would think the next big driver might be even a Comac 919, we expect that could significant if the Chinese are successful in introducing that aircraft. That aircraft is a single aisle aircraft to compete against the single aisle Boeing and AirBus airplanes that's a lot different than the ARJ which is a regional jet which doesn’t really go into Boeing and AirBus' turf much.

Thank you. Our next question comes from Leonard Cooper who is a private investor. Your line is open.

While sitting here I noticed an absent of mention of many countries like India, Pakistan, Brazil, Russia, Mexico, Indonesia, Australia, do those mean anything to Park presently?

Well, could you explain a little bit more what you're asking Leo?

Are you trying to develop markets in those countries?

Oh, I see, yes. India, we do some aerospace work, electronic work already. Pakistan, I don’t think so. What are the other countries? I forgot.

Mexico, Russia.

Yes, Russia, we have not been successful in Russia, we tried in aerospace, haven't gone anywhere in electronics, there is nothing there for us. Brazil, Mexico not too much. So I think India is probably only country on that list where we have some meaningful presence at this time. Some of these are through like GE may use contractors in these countries, but that’s really not our work, that's just being quantified on programs. So we can't really take too much credit for that.

Thank you. Our next question comes from Sean Hannan of Needham and Company. Your line is open.

Yes, thanks for the follow-up here. So, want to see if I could ask, first, were there any 10% customers in the quarter, and how does that compare to last quarter? Obviously we have the data on the top five, but didn't know if anybody individually was over 10%.

We stopped specially disclosing that, but maybe Matt can take a look.

Yes there was one, TTM.

They’re our largest customer, I thought that’s what Matt was going to say. Of course TTM acquired Viasystems. So that’s our largest customer and I think we might have even told you who our second largest customer is in our annual report which is generally GE.

Sure, and then in terms of -- when I look at copper commodity prices, did you realize an effective benefit in gross margins based on declining prices in the quarter and does that present a little bit of a scenario next quarter where you don't get that benefit to help gross margins, or how should we think about copper impacts in the quarter and next?

I think that there is a little benefit in the second quarter and I think that the third quarter will be similar to the second quarter in terms of the copper impact. We’re not talking about significant dollars here. This is a kind of a sensitive topic because I’m thinking of our policies, we pass these changes on to the customers, but there is sometime a lag effect. So again little benefit in Q2 as compared to Q1, Q3 probably neutral to Q2, but little as in, let’s keep in perspective, small.

Sure, okay. And then in terms of the SG&A levels in bringing those down this quarter, are you able to sustain around this 5 million type of spend, particularly given where the revenue outlook or general demand outlook might be? Can you talk about SG&A expectations?

Yes, I think I tried to cover it, but I obviously didn’t do a good job. The answer is no because it was really one-time. These are 2015 accruals that we for bonuses and profit-sharing which had not been paid yet, but we really could do that once, so obviously now we have to go and it's kind of late in the year fiscal 2015 in other words the year that ended February ’15. So it's getting kind of late we need to go ahead and pay these things. So that’s a one-time item.

Okay, so it's a one-time true up?

It's a one-time adjustment, we reduced our accrual which actually has real impacts to the people in the Park and company in terms of their profit-sharing and bonuses, but it only can be done once for 2015 and now like I said it has to be paid. So it's not -- that adjustment is not -- is a one-time thing and it's not sustainable. So it isn’t really a true up, I guess you can say it's a true up, but it's a real adjustment and what we plan to pay, the bonuses and profit-sharing based upon the quarterly performance and other things.

Okay so outside of that adjustment would we be sustaining then the remainder of our SG&A spend and can you give us some context of what the adjustment level was? I mean, what should we be going back to? Are we getting back to a high $5 million number, approaching $6 million, or?

When we look at the -- the first quarter’s 5.8 million looks like the fourth quarter’s 5.6 million, the third quarter’s 5.7 million, I think we’re talking about those kind of numbers. You could -- and I can’t give you that kind of resolution down to the last dollar, but we’re probably talking more in the 5.5 range I think, Sean, not the $5 million range.

That’s great and alright I think that addresses all of my questions here.

Thank you. [Operator Instructions] And I am showing no additional questions. I like to hand the call back to Brian Shore for closing remarks.

Thank you. This is Brian again and thank you everybody for listening in on our second quarter call. Matt and I are at the Melville office please feel free to give us a call if you have any follow-up questions. Again thank you and have a good day. And we’ll talk to you soon. Good bye now.

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