Park Aerospace Corp. (PKE) Q3 2017 Earnings Report, Transcript and Summary

Good morning. My name is Vince and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp’s Third Quarter Fiscal Year '17 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. Good morning everybody. Happy New Year, I’m with Matt Farabaugh, our CFO as usual and we’ll start with some introductory remarks for the quarter and then we’ll go into the questions. So Matt, why don’t we get started with some of the financial commentary. Sorry, let me just also add before even Matt get started that Matt’s comments – or transcript of Matt’s comments are already posted on our website, so you can check out website for the detailed information. 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 February 28, 2016, 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 fiscal year 2017 third quarter ended November 27, 2016 P&L, which are not specifically addressed in the earnings release. During the fiscal year 2017 third quarter, North American sales were 49% of total sales, European sales were 10% of total sales, and Asian sales were 41% of total sales, compared to 53%, 7%, and 40% respectively for the 2016 fiscal year third quarter; and 55%, 7%, and 38% respectively for the 2017 fiscal year second quarter. Sales of Park’s high performance non-FR-4 electronics materials were 94% of total electronic material sales in the 2017 fiscal year third quarter, 94% in the 2016 fiscal year third quarter, and 93% in the 2017 fiscal year second quarter. Park’s electronics sales were $19.0 million or 72% of total sales in the 2017 fiscal year third quarter compared to $25.5 million or 74% of total sales in the 2016 fiscal year third quarter, and $20.2 million or 70% of total sales in the 2017 fiscal year second quarter. Park’s aerospace sales were $7.5 million or 28% of total sales in the 2017 fiscal year third quarter, compared to $8.9 million or 26% of total sales in the 2016 fiscal year third quarter and $8.8 million or 30% of total sales in the 2017 fiscal year second quarter. Gross profit for the 2017 fiscal year third quarter were $6.6 million or 25.1% of sales, compared to $10.3 million or 30% of sales for the 2016 fiscal year third quarter, and $7.2 million or 24.9% of sales for the 2017 fiscal year second quarter. Selling, general, and administrative expenses for the 2017 fiscal year third quarter were $4.6 million or 17.4% of sales compared to $5.3 million or 15.3% of sales for the 2016 fiscal year third quarter and $5.1 million or 17.6% of sales for the 2017 fiscal year second quarter. Investment income net of interest expense in the 2017 fiscal year third quarter was $87,000, compared to negative $128,000 in the 2016 fiscal year third quarter and $35,000 in the 2017 fiscal year second quarter. Before special items, earnings before income taxes for the 2017 fiscal year third quarter were $2.1 million or 8.0% of sales, compared to $4.9 million or 14.3% of sales for the 2016 fiscal year third quarter, and $2.2 million or 7.4% of sales for the 2017 fiscal year second quarter. Before special items, net earnings for the 2017 fiscal year third quarter were $1.9 million or 7.3% of sales, compared to $4.2 million or 12.3% of sales for the 2016 fiscal year third quarter, and $2.0 million or 6.9% of sales for the 2017 fiscal year second quarter. Depreciation and amortization expense in the 2017 fiscal year third quarter were $720,000 compared to $847,000 in the 2016 fiscal year third quarter and $825,000 in the 2017 fiscal year second quarter. Capital expenditures for the 2017 fiscal year third quarter were $100,000 compared to $92,000 in the 2016 fiscal year third quarter and $53,000 in the 2017 fiscal year second quarter. The effective tax rate before special items was 8.2% in the 2017 fiscal year third quarter compared to 14.2% in the 2016 fiscal year third quarter and 7.6% in the 2017 fiscal year second quarter. For the 2017 fiscal year third quarter, the top five customers were Daeduck Electronics, GE, Sanmina, TTM, and Wus in alphabetical order. The top five customers totaled approximately 36% of total sales during the 2017 third quarter. Our top 10 customers totaled approximately 49% of total sales and the top 20 customers totaled approximately 65% of total sales for the 2017 fiscal year third quarter.

Thank you, Matt. This is Brian again. So, let me go through a few items to update you on our business. First of all kind of a non-Park thing but it implies to a lot of companies, let’s call it the Trump factor, so I guess that not too many people thought the outcome was going to be the outcome, but as a result it seems like there is a very serious commitment on the part of the new administration to do things with taxes particularly regarding corporate taxes and repatriation. Park has about $240 million overseas, of that 25% tax will be paid to repatriate that money under the current tax environment, that’s in approximation but use that for reference that would be about $60 million tax build if we repatriate that money. With the changes that are being proposed that could go to zero, because we’ve already paid 15% on that money so that money is after 15% tax approximate these are around numbers. So the theory is that we would pay the net difference between what we’ve paid and the new tax rate. In addition to that, there’s discussion of a repatriation holiday you know kind of a one-time thing, so that’s very significant for Park. We’ve been waiting for this for a long time you know and even if the results were not as favourable tax wise, we probably would have at least paid off the loans that we have and we said okay, fine it is what it is, no reason to continue to wait we would have paid off the loan which I think are about $70 million now. But this is a big deal for Park. So if this tax, if these tax flows is going to affect as people are discussing and if and when they do, that will be an opportunity for Park to repatriate significant amounts of cash. At that point, whether the tax laws are as they are there is no reason to continue to wait, right. We are not going to wait another two years or four years whatever. At that point we would expect to pay a large cash dividend and that’s something that the board has discussed and that would be subject to something that’s happening between now and then like a big investment opportunity and acquisition or something like that which is not in the quarters right now or some restriction that would be imposed on repatriation like you know pay dividends or something like that with the cash. So it’s not a guarantee, but I thought you should know our intention and we’ve been waiting for this for a long long long time. We tried to have money overseas for a long time. We keep waiting another two years, another two years, another two years and as we know there has been pretty much gridlock in the government for long time, so nothing has happened, but it seems like something will happen that’s what the expert seem to believe, anyway something will happen soon and it will be significant. So I just want you to know about that, I want you to know what we would do if something does happen in terms of the tax law change. So I’m not going to speculate as to what the tax law would be or when it will be enacted, but if and when new tax law is enacted, we would intend at that point to take action in terms of a large dividend or some other way to return cash to shareholders, subject again to some other usages of the cash coming up between now and then or some restriction that would be imposed by the government. Just wanted you to be aware of that, you might as well be aware of it, because it’s something that’s been discussed seriously at the board level. So one other thing I want to mention to you, which you really don’t talk about pretty much, but it’s become significant and all of you probably should be aware of it, the strong dollar, the weak euro actually has a negative P&L impact on our company because intercompany loans, these are not loans of outside people, but the way it works is that loans are denominated in dollars, so the weak euro that our French location you know has to come up with more euros to pay the loans off and there are negative impacts of the P&L. These are really not cash items, they are P&L book items, but in the third quarter was $96,000 in the second quarter $81,000, first quarter $41,000. Now the currency is little off, obviously that an issue goes away, but I suppose you should be aware of it, that’s all and those are all SG&A, G&A items by the way, those are negative impacts. Let’s go to a discussion about the third quarter and the fourth quarter. So the third quarter is pretty much a continuation of the second quarter in terms of it being electronic store or electronics continue to be weak, electronic revenues continue to be weak as you noted already from a mass commentary. Aerospace is not really a story here in terms of explaining the P&L weakness; it’s a topline weakness, which really continues to be an electronic store at least did in the third quarter continue to be an electronics story. So, as far as the fourth quarter is concerned though, I thought you’d be interested in all of that, and we were off to what I would say a very good start. We have five weeks in the books, but there’s a five week month of December. So the bookings, the revenue, especially the bottom line is coming in quite strong in the first five weeks of the fourth quarter and that’s basically the month of December, which is interesting because you know normally you might expect that some of it would be a little weak, because there are you know two day -- two weeks of holidays that are kind of you know lead into the December month. So, I just hope you should be aware of it, I know you are always interested in how the current quarter is going, so again I would say we are off to a pretty good start in the fourth quarter, something seems to be going on there. Let’s talk about electronics and then we’ll talk about aerospace, actually a bit more in electronics. So it seems like the third quarter was a bottom and it’s moving up now that’s consistent what might just the prior comment I made about the fourth quarter in general, and that also was electronic story. Someone asked me at the end of the second quarter whether the second quarter is a bottom, and I thought they didn’t know, but it looks like the third quarter was a bottom atleast based upon the first five weeks of the fourth quarter. So what’s going on, let’s break it down, lets’ break sorry electronics down into Asia and North Americas, we have to go into some sub categories here because the story is really quite different, the markets are different, the dynamics are different between Asia and North America. So when we talked last time after our second quarter, during our second quarter conference call, we talked about pursuing OEM and program agreements. Our focus for a long, long, long time has really been the customers [Indiscernible] and we decided after some kind of difficult self-analysis what I recall it that maybe that wasn’t the best way to go. It was a good approach I think for us for many many years we decided that we really need to change our focus towards, more towards OEM marketing and reaching program agreements with OEMs. The focus of these efforts has been mostly on the Meteorwave product line and that’s where most advanced product, product line Meteorwave 1000, 2000, 3000, 4000. It seems like the market is enamored with Meteorwave, the Meteorwave product line that’s a feedback that we are getting, that’s the feeling we have for lots and lots of different sources. Let’s talk about what we’ve achieved so far just in the last quarter. So we have four OEM commitments, agreements, program agreements, again related to Meteorwave, 15 additional OEM program agreements under negotiation and I should say those four OEMs, they are not little OEMs, they are the big ones, the biggest really. So the fifth, we have 15 additional OEM agreements that are under negotiations. We have 14 OEMs that are qualified, Meteorwave, 20 more OEMs during the qualification process, 50 circuit board shops have tested Meteorwave, 9 circuit board shops have ULs for Meteorwave. We are also doing working on with OEM programs for other products [indiscernible] Mercury wave which is an RF product, I think you know they are probably -- but the main focus in on Meteorwave, that’s our leading digital product as you know. Just one more thing on Asia before we shift to the U.S. We talked about a joint development agreement that we’ve been working on I guess for over a year now with one of the major OEMs in Asia and the candidate materials have been scaled up, that means we have done manufacturing runs, these materials that are being tested. So I think that the project is going well, that’s a nice project for us to be working on especially considering the OEM we are working with. The U.S., it's quite a different story. And my feeling anyway is the U.S. electronics is more of a niche market and there aren’t going to be really big volume opportunities by making large deals or reaching large agreements with OEMs, I just don’t think the U.S. is that kind of market. So the same story as we talked last at the end of the second quarter. We are working on doing restructuring out West. We have two locations California, Arizona and there have been a number of intervening events that have prevented us from going forward, from implementing the restructuring plans, we have two or three of that. We have under consideration, so we got delayed a little bit for good reason, though I mean it wasn’t that we just didn’t get to it, there are other things that came up that caused us to just taking a look. I think that would then maybe a month make a decision as to how the restructuring will go. We are not talking about closing a facility; we are talking about restructuring the two facilities and operating them really as one business unit. Once the restructuring is complete, which is probably about a six month give or take timeframe, it will be a $3 million to $4 million benefit per year and the cost, onetime cost is probably get in that range $3 million to $4 million something like that. We don’t have, we haven’t finalized the plans, so I’m just giving you some ball park numbers, but I wanted to understand what we are doing and that’s going to be significant in the U.S. I think because there isn’t really, at least in my opinion opportunities for huge volume increases or you know benefits whatever you want to call in the U.S. for electronics. Let’s go the aerospace; I think aerospace continues to be a pretty optimistic story for Park. We have a solid team in aerospace, we can’t just – which I think maybe for me maybe one of the best news items we have and that boards quite well I believe for our future as a company. I think we have a pretty nice thing going in aerospace. Now I am not concerned that anybody is going to take that in the wrong way meaning we could relax and become complacent, I’m not concerned about that all, because our team, aerospace team doesn’t think that way. And that’s why I think we have very good prospects of aerospace. A lot of good things are going, happening for us but I think the opportunities continue to be quite significant. The last time, I think I mentioned that we are working with one of the very large aircraft OEMs in the world on a number of different specifications. We signed a qualification agreement with one of their specs; just you know that’s a big deal when just -- when just two parties sign a qualification agreement. That being said, the screening has been done, discussions are over and now we’re doing it. And the reason for that is that both parties now need to make a serious investment of time and money, so neither parties going to go forward unless there’s a very high expectation of success. There are few other specifications that we’re pursuing. Also an interesting significant parts opportunity has come our way with that company for a legacy aircraft. It’s a parts choosing our materials also. I’m not really at liberty to go into any details, but it’s a very nice opportunity for us and also kind of fits within our business culture of being a niche company, doing difficult things, moving quickly, responding quickly. Like I said, these are legacy airplane parts, so it’s a different kind of mindset, sometimes spares have to built very quickly, nobody wants to inventory lots of lots of spares of anything. So, it’s a good kind of business field for us to pursue meeting legacy aircraft. There are I think you all know just thousands of legacy aircraft out there also see opportunities are quite significant. The GE Aviation, last time we spoke I think mentioned that they’ve suggested that we enter into a life of program agreement rather than I think originally it was going to be a maybe a 10-year agreement. And sorry to say this, but we’re still working on it. You know the progress is little bit slow, but we’re still working on the life of program agreement. We also, I think you know we have entered into a joint development agreement with GE as well. That’s going I think pretty well. And this program is being pushed pretty hard. GE wants to be in production with this new product by January 1, 2018, and that’s probably is an aggressive schedule, but that’s the objective. And it’s a big opportunity for Park, this development not only with GE but with others. And actually something else has come up with GE recently, and that’s a part, a large part that would be using our materials and we’ve been given a go ahead on it for Phase 1 anyway. This is a development scenario but it’s really nice to be doing a large for GE Aviation, and we’re not able to go until the details about that product this time. Scorpion Jet, we’ve been working on Scorpion Jet program for a while, I think you know that. We produce the large number of composite parts and assemblies, also low volume tooling for the demo unit, which has been flying I guess for couple of years now. But we also product the large number of composite parts, assemblies and low volume tooling for what they call – what Textron calls, the first production conforming Scorpion Jet. I had that in quotes. I had to read that correctly. Now that its maiden flight on December 22, 2016 we’re not really able to say anything more about the program except we’re really very pleased and honor to be working on this program. We want to know more about it. I need to refer you to the Textron website. But like I said that first production conforming Scorpion Jet has maiden flight on December 22, 2016. You can see picture of it and everything. We produced a large number of composite parts, assemblies and also tooling for that aircraft. So I think yeah, covering scorpion that really wraps it up in terms of aerospace. So, operator, why don’t we go to the questions at this time?

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

Yes. Thanks folks. Can you hear me?

Just fine, Sean. Yes.

Okay, great. Good morning and Happy New Year. First question I have here is on the aerospace side. So in terms of that joint development agreement that you’ve referenced with GE really pushing to want to be in production by January 18, is the opportunity for that a number that has factored into how do you kind of qualify the ramp-up of your aerospace business over the next few years? And is there anyway to get a sense of your expectations for how that may contribute to this segment?

Those revenues are not been taken into account at all. We’re trying to be conservative. The information we’ve given you is based upon specific forecast related to programs that were on. So the variable is how many airplanes are built. We’re not just speculating pie-in-the-sky stuff with the information we’ve given you in the past about GE. So, we have not included this information at all. However, I should say that the opportunity is very large. Remember, we talked about the development agreement with this big electronics OEM. I would say it’s more of a niche opportunity. The development agreement with GE is no niche opportunity. It’s very large and it’s been very, I don’t know what you call it, kind or helpful to our cause because they have not prevented us from selling this product to other companies. So, the opportunity is very large with GE, but also with other companies as well, other aerospace companies that would use this product. I can’t quantify it. We’ve been given some forecast numbers from GE, but they’re really not at liberty to discuss those, but it’s not a niche product opportunity, its significant dollars.

Okay. That’s helpful. And then whether you’d want to include, exclude. It sounds like you probably want to exclude, any characterization around how to think about the aerospace, if you here not sure if there’s been any recalibration, your expectations for how this business ramps for you over the course of the one to two to three years. Could you provide a little bit more insight around that is where we stand today on beginning 2017 here?

Really not update, not change that we can report based upon our second quarter call. There’s nothing, you know obviously showing, a lot goes on, lot of back and forth, lots of discussions, negotiations but nothing, no real change to report.

Okay. Switching over to the electronic side for a moment, it sounds like you have pretty good progress here and perhaps a lot of optimism in terms of some potential ramp-up with Meteorwave over the coming quarters or years. Just want to see if I can get kind of a summary perspective from you around that the degree that you expect that or would hope that you can really start to grow that business once again. So that would be part one. And then part two, if there is really more of a muted expectation because structurally the business is really different than it was 15 years ago. At what point would you guys need to take a really hard look? Does it make sense to be a part of Park anymore or maybe there’s an opportunity to capitalized at least on a business line that is getting some good momentum and perhaps monetizing it especially as we think about the bigger picture where aerospace is going for you because I don’t believe there’s necessarily a lot of synergy between the two segments?

Sean, I think I’ve did a forecast for the next four quarters for Meteorwave, a pretty detail forecast every week or two. We have a lot of focus on that. The optimism you refer to is correct, that’s based upon our expectations, our forecast and the forecast is not just kind of a pie-in-the-sky forecast. There’s no other category, they are names and dates and things like that in the forecast. So I think that optimism is warranted. I think we have something here, something going that has promised an opportunity for Park, especially knew the short term, I’d say next year or two. We do expect based upon our internal forecast some significant revenues just in the next 12 months, so this is not a long term three or four year’s scenario. As far as electronics is concern long term, the synergy really needs to be based upon the Park principles and culture. That’s the key thing. It doesn’t have to be synergy based upon their product line through technology although I think you know there is some synergy based upon the product technology, manufacturing technology. The markets are quite different and there is very little synergy. But the synergy if there is any way – any synergy that really binds two business activities relates to and it’s based upon the Park culture, the Park culture that’s described in our annual report letters and things like that. So, look you’re asking obviously an interesting question and it’s a sensitive question. I guess what I could say specifically about it is right now, I think we have some reasonable basis for optimism. We don’t want to be like everybody else. We’re not interested and just being another supplier. We need to be special. We need to be different. We need to be unique. If we’re not then I don’t know what the future is. So, that’s what I’m talking about when I refer to those Park principles. We can never get complacent. Good is never good enough. And maybe those things just sound like you know kind of words and things like that, but for me anyway that to be lot more than words. So as long as there is the optimism and especially we’re binding by the Park principles, I think the future is just fine.

Okay. Last question here. Is there a way to take a shot at providing at least some type of color in understanding the relative cash flows of the electronics business versus the aerospace business either as it stands today or how we’re thinking about it over the course of calendar 2017?

I don’t understand it, could you – I’m not sure understood what you’re asking for, Sean.

Yes. So, what I’m trying to understand a little bit more about is when you think about the cash generation coming on a per segment basis, the electronics, where is that significance versus the aerospace side? Is there an ability perhaps to continue funding, say some of the development within the aerospace sides? We kind of affected subsidization coming through more mature, better cash flow scenario on the electronic side. I’m just trying to understand the relative merits of two segments, how strong they are and what you may expect this year as that changes?

Okay. Let me do the best I can. That’s kind of a pretty wide open question, but electronics is still going to be our legacy, its our legacy business, it’s a mature industry aerospace, the real growth story for Park, aerospace is really the future store for Park, that’s where the bigger opportunities are especially top-line. I don’t think the electronics, our electronics business has a same kind of top-line growth opportunity that aerospace would, obviously aerospace is also starting from a smaller base. But we’re not going to see these big, big opportunities, I don’t think electronics. I just don’t think the industry works that way. It’s a much more mature. There are opportunities, but it’s not opportunity to double the size of electronics overnight. The inroads that the guys are making with Meteorwave are quite significant, Sean, but it’s a different kind of dynamic than with aerospace which is more of a long term fundamental story. So, in terms of funding the opportunities with aerospace, I think we’ll make sure we have the ability to do that. And I think the lack of funding will be -- we will hold this back in terms of realizing the opportunities with aerospace. I had a feeling that’s not exactly what you’re going forward but I’m not sure, is there anything else you want me to try to focus on in answering that question.

Yes. I can take it offline. That’s fine. That’s fine Brian. Thanks so much.

Okay. Thanks. Happy New Year.

Happy New Year.

Thank you. Our next question is from David Reich-Hale of Newsday. Your line is open.

Yes. Hi. How are you?

Hello. How are you?

Great. Thanks for taking the question. Couple of quarters ago you had said that there was continued weakness in demand in China as well. And is that still going on or is that sort of dissipated?

That’s a good question, because we can tell you about our experience probably more intelligently than you know the China in general. For me I’m not an expert in China but I find it always confusing to really understand what’s going on there, lot of conflicting inputs. But as far as we’re concern China business if you will in electronics is going well. That’s our biggest market in Asia. That’s our biggest market for electronics period. So the fact the electronics is I think is pretty clearly experiencing an upward trajectory is could be partly a China story. It’s probably the market maybe being little better. I think it’s also partly because the Meteorwave has made some real inroads with these OEMs. And it’s too hard separate what’s going on just for us and what’s going on in the market.

Sure. Thanks. And you’d mentioned restructuring out West, that’s the U.S. electronics sector that you’re talking about?

Yes. We have locations in Arizona and California, electronic locations in Arizona and California and that’s where we are referring to.

And is there an expectation that you would close one of those offices or you just sort of downsizing both of them?

They are not offices, they are factories, manufacturing plant.

Sure, okay.

Right. And we’re not intended to close one of the two factories, but our intention is to – they have been – those factories have been business unit of Parks for many, many years. But they are separate business units, with kind of separate cost structures. The plan is to operate those two locations as one business unit.

Okay. Would that mean layoff or…?

It might but we’re not going to comment at this time.

Okay, Brian. Thanks a lot.

Okay. You bet.

Thanks. Our next question is from Leonard Cooper of Private Investor. Sir, your line is open.

Leon. Hello, Leon. Operator, I think we might have lost Leon, Leon Cooper.

Hello.

Hi, Leon. Yes, How are you Leon?

Good. Do you hear me now?

Yes. We hear you just fine.

One, Happy New Year to you and your wife, I appreciate the pictures.

Thank you.

I notice that 3D printing in metals and plastic has been getting a lot of attention including from GE. And also self-driving vehicles is there any affect on Park from those technologies?

In terms of 3D printing, we noticed as well that GE has been very active in that area and have done some acquisitions even. It doesn’t so far relate to our activities with GE. So I mean, it is something that we continually ask them about, whether there’s anything they would like us to work on, anything they’d like us to do to support those activities, but at this point the answer is no. In self-driving vehicles I guess that would relate to RF Electronics and its not something we’ve been really strong in. We have some more RF electronics activities like PTFE and we call it Meteorwave products for RF applications, but most we do is for digital and infrastructure, networking and military that probably doesn’t apply the self-driving vehicle technologies.

Okay. And one last question, does Park have available the manpower that’s needed to cover all these activities?

It is not really so, that’s a challenge for Park. Its kind of ongoing activity and discussion Park about how do we handle the opportunities, I think particularly in aerospace I’ve made the comment probably many times before Leon, that there are more opportunities in aerospace than we really could handle, so we have to select the opportunities. So yeah, it’s not financial resource, its human resources that we’re really talking about, and that’s kind of a constant challenge that we try to manage it way through. I did mention probably more than once now that we’ve very strong team in aerospace. This is a team that doesn’t like expecting failure. So not very willing to say, look we just can’t handle that opportunity because we’re too busy. So we have a group of people that are very dedicated, very intense and just don’t like to turn down opportunities.

Okay. Thank you.

Sure. Happy New Year to you and your wife.

Thank you.

Thank you. We have a follow up from Sean Hannan of Needham & Company. Your line is open, sir.

Yes. Thanks for taking the follow-up here. Just operationally in terms of costs, any commentary that’s worthwhile around copper, number one. And then, in terms of SG&A, the degree that the current level are sustainable other than I think what you may have just referenced here that you’re probably have to invest a little bit in SG&A some of these opportunities gain momentum, but that would probably be a higher quality problem. So can you provide some color around copper as well as sustainability of SG&A?

Yes. Sure. We can do that. In Q3, copper is not a significant impact for Park. In Q4, we’re looking at doing something. It’s been our practice for many years to pass through changes in our copper costs and kind of cent by cent or dollar for dollar basis, so we’re looking at doing that. There’s always a lag as I think as you know Sean, so when copper costs going up that usually has short-term impact, negative impact on our P&L, when we’re going down there is a short term benefit because you know again it’s a little bit of lag effect. There could be that kind of impact in Q4 for making the adjustments. We can’t really quantify them quite yet, but it could be a negative impact from copper in Q4. In Q3, there is a very small negative impact not worth mentioning. And sorry, I lost it, the other question – SG&A. Yes. So, look Park is a fortunate company in the sense that we have very dedicated people, people care about the company, its future. People come here and they want the best for Park. So the third quarter was not a good quarter, we all know that. And the one lever that we can pull to deal with that very easily is SG&A, things like bonus accruals, so we do that and that’s a right thing to do. I think it’s a responsible thing to do and our people on board, because our people I think by and large are pretty committed and are looking to be a Park for long haul and not just to get an extra bonus for this year or last year. So we pull those levers and we’ll keep pulling them as we feel necessary because still we are a public company after all and we have accountability, but it’s not just me that has the accountability, it’s all of people of Park I think that share that accountability as it should be. So, we’ll keep pulling those levers. We will. I don’t know what SG&A will be in the fourth quarter but we’ll look at where we are and we’ll make those judgements based upon where we are.

Okay. So it sounds like from a restructuring standpoint most of those costs are going to be geared towards your cost line and then SG&A you’re going to try to toe the line as best you can moving forward?

Okay. I’m not sure I got you. Restructuring, obviously that’s one-time event and I think I mentioned that they’ll be – we believe there will be $3 million, $4 million benefit going forward, right? Some of that would be in the SG&A line, some of would be the cost of sales line, cost of goods sold line, maybe I’m missing the point of your question now.

No. That is requisite, so it’s going to be focused on both areas. That’s helpful.

Yes. It would be. Yes, it’s right.

Okay. Thanks so much folks.

Okay. Thank you for questions.

At this time, I see no other questions in queue. I’ll turn it back to Mr. Shore for any closing remarks

Okay. Thank you, operator and thank you everybody else for listening in to our third quarter call. Matt and I are here today. So, if you have any follow-up questions just give us a call. And last thing we want to do is wish you all a very Happy New Year, all the best to all of you in 2017. Have a good day. Good bye.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes your program. You may now disconnect. Everyone, have a great day.