Brian Shore - Chairman and CEO Matt Farabaugh - CFO.

Morris Ajzenman - Griffin Securities Sean Hannan - Needham.

Good morning. My name is Shannon and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Park Electrochemical Corp First Quarter Fiscal Year 2018 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. Welcome everybody to Park Electrochemical's first quarter conference call. I have with me as usual Matt Farabaugh, our, I guess Senior Vice President and CFO, and we'll pick the call up with some introductory comments and we'll go into our Q&A. Also remember that a transcript of Matt's comments is already posted on our website.

There is some detail in Matt's comments, so you might want to check the posting on the website. Go ahead, Matt..

All right, 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 26, 2017 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 2018 first quarter ended May 28, 2017 P&L, which are not specifically addressed in the earnings release.

During the fiscal year 2018 first quarter, North American sales were 56% of total sales, European sales were 7% of total sales, and Asian sales were 37% of total sales, compared to 53%, 8%, and 39% respectively for the 2017 fiscal year first quarter, and 55%, 7%, and 38% respectively for the 2017 fiscal year fourth quarter.

Sales of Park’s high performance non-FR-4 electronics materials were 92% of total electronics materials sales in the 2018 fiscal year first quarter and 94% in the 2017 fiscal year first and fourth quarters.

Park’s aerospace sales were $8.7 million, or 32% of total sales, in the 2018 fiscal year first quarter compared to $7.7 million, or 24% of total sales, in the 2017 fiscal year first quarter and $8.2 million, or 30% of total sales, in the 2017 fiscal year fourth quarter.

Park’s electronics sales were $18.7 million, or 68% of total sales, in the 2018 fiscal year first quarter compared to $23.8 million, or 76% of total sales, in the 2017 fiscal year first quarter and $19.4 million, or 70% of total sales, in the 2017 fiscal year fourth quarter.

Gross Profit for the 2018 fiscal year first quarter was $6.3 million, or 23.1% of sales, compared to $8.8 million, or 27.9% of sales, for the 2017 fiscal year first quarter and $7.4 million, or 26.8% of sales, for the 2017 fiscal year fourth quarter.

Before special items, selling, general, and administrative expenses for the 2018 fiscal year first quarter were $4.4 million, or 15.9% of sales, compared to $5.3 million, or 16.9% of sales, for the 2017 fiscal year first quarter and $4.7 million, or 17.0% of sales, for the 2017 fiscal year fourth quarter.

Investment income, net of interest expense, in the 2018 fiscal year first quarter was $510,000 compared to $45,000 in the 2017 fiscal year first quarter and $422,000 in the 2017 fiscal year fourth quarter.

Before special items, earnings before income taxes for the 2018 fiscal year first quarter were $2.2 million, or 8.1% of sales, compared to $3.5 million, or 11.1% of sales, for the 2017 fiscal year first quarter and $2.8 million, or 10.2% of sales, for the 2017 fiscal year fourth quarter.

Before special items, net earnings for the 2018 fiscal year first quarter were $2.5 million, or 9.1% of sales, compared to $3.0 million, or 9.5% of sales, for the 2017 fiscal year first quarter and $2.5 million, or 9.2% of sales, for the 2017 fiscal year fourth quarter.

Depreciation and amortization expense in the 2018 fiscal year first quarter was $807,000 compared to $827,000 in the 2017 fiscal year first quarter and $733,000 in the 2017 fiscal year fourth quarter.

Capital expenditures in the 2018 fiscal year first quarter were $105,000 compared to $41,000 in the 2017 fiscal year first quarter and $48,000 in the 2017 fiscal year fourth quarter.

The effective tax rate before special items was negative 12.4% in the 2018 fiscal year first quarter compared to 14.4% in the 2017 fiscal year first quarter and 9.1% in the 2017 fiscal year fourth quarter. The first quarter tax rate included a reversal of a Fin48 tax reserve.

The tax rate excluding the reversal of the Fin48 tax reserve would have been 18.7%. For the 2018 fiscal year first quarter, the top five customers were Aerojet, GE including its subcontractors, Sanmina, TTM, and Wus, in alphabetical order. The top five customers totaled approximately 34% of total sales during the 2018 first quarter.

Our top 10 customers totaled approximately 49% of total sales and the top 20 customers totaled approximately 66% of total sales for the 2018 fiscal year first quarter..

Okay, thanks a lot Matt. It's Brian here again. Why don’t I start out with a few comments about the quarter itself, then we'll talk about where we're going a little bit. Okay, so let's just deal with the tax provision. As Matt said, it was negative, which obviously, is unusual item. It would have been 18.7%, if not for this Fin48 adjustment.

And the EPS would have been $0.09 rather than $0.12 based upon 18.7% tax rate. Okay, just want to make sure you hear that. So, 18.7%, that's quite a high rate based upon recent history. We're not predicting the rate is going to move up that high kind of on a sustainable basis, but it could move up.

Couple of things have happened, one is we had a credit where we're benefitting from in Singapore which has expired. And also in the U.S., as we start making more money in the U.S. that will drive our tax rate up as well of course we all know from all the discussions in Washington that the U.S.

corporate tax rate is the highest in the industrialized world, so maybe that will change. But based upon current tax rates in the U.S. that can move our combined tax rate up as well, we get through the restructuring out West in electronics and aero continues to perform better. That could drive our tax rate up because U.S.

as I indicated has higher tax jurisdiction as compared to Singapore where we have the balance of our major operations. Also couple other specific points, Q1 bottom line, which affected negatively when you compare to Q4 by $600,000 a short-term credit, which we had in the Q4, which were not available in Q1 just based on the operating calendar.

Another thing we just want to make sure, you keep in mind because restructuring the P&L is kind of messy now, there are a lot of duplicative costs that we are incurring as we go through the restructuring.

And that really surprised what we expected and planned, so until we are done with the restructuring that’s complete -- we're still, the P&L will continue to be burdened by those duplicative costs. At this point, we expect to complete the restructuring by the end of the second quarter, but that’s not a guarantee.

That’s our current plan and expectation. So we will see it. Each one should be aware of that. If you look at the top line and bottom line, the bottom line is worse compared to the top line especially when we look at that $0.09 number. Well okay, you can do the math.

The $0.09 at this time would be based upon higher tax rate than in the fourth quarter, but you can do the math. You can see that the bottom line is not aligned with the fourth quarter based upon on the top line. So, restructuring charges, just want to update you on those.

In the first quarter, I think Matt said, it was 1.4 million or maybe that was in the news release. The second quarter about 3 million. The third quarter -- third quarter and beyond, we should say 1 million to plus, I am not sure.

The benefit remember $3 million to $3.5 million and we are hoping that benefit will be mostly, even fully realized in the third quarter, but depends when the restructuring itself was completed. So, and the fact that will stay to a cost, restructuring costs in the third quarter, it doesn’t mean that the benefit won't be there.

Those things are not necessarily linked in terms of timing. So, let's talk about electronics in the U.S., obviously, the big news is the restructuring. We discussed this during our fourth quarter conference call, which was I think less than two months ago.

So, you have -- you are pretty much updated a lot of the new events on the key things get through the restructuring, the niche focus. We believe that the market in the U.S. is for us anyway a niche market in electronics. So, Egypt, we continue with the aggressive OEM marketing, a program that we discussed for last couple of quarters.

We now eight OEMs signed up for program pricing arrangements and we've discussed that in the past that we have updated you on the OEM counts so it keeps moving up. A couple of new products that we introduced last week actually, so if the time is good. One is M-Ply. There is new release on M-Ply.

It's a PTFE Bond Ply for PTFE multi-layer hybrid construction, which is something that seems to be becoming more and more popular these days in terms of advanced electronic circuit constructions, circuit board constructions.

And the other one is Mercurywave 9350, that’s a 3.5 Dk controlled dielectric and that’s for RF or cellular-based stations another RF applications. For RF, the controlled Dk is very critical apparently. So, I think we mentioned this in the fourth quarter call.

But we just start to see the results from these efforts and these situations in electronics in the second half of the fiscal year results through restructuring, results from the OEM marketing program in terms of top line growth. Aerospace, so some of these we'd just reiterate.

We covered some of these things in the fourth quarter call, but let's just go through it. First of all, the first quarter of aerospace was a pretty good quarter in terms of both top and bottom line for the base line business, that lets say compared to the fourth quarter. So, there was improvement in top and bottom line over the fourth quarter.

And the second quarter for aerospace looks pretty good as well, looks like that improvement will continue. But the real story for me is the huge opportunities in aerospace. It's nice that the base business -- the base line business is moving in the right direction, but the real story has not been told.

The real story is based upon the huge opportunities. We announced, I think or we told you anyway during our fourth quarter call that we've signed a long-term agreement with GE Aviation. We entered into a long-term agreement. It's a little bit maybe confusing, but we just did a new release about this agreement a couple of days ago.

And the reason for that is that we needed to get approval from GE and it takes a little while, the GE being a big company to get approval. So, even though for some it was old news, we thought to put out the news release anyway about this long-term agreement. It's something that's really very exciting for Park, I think.

It deals with hundreds of millions of dollars of business through mid-term and the agreement. Interesting because actually it's in news release, our first sale at Park in 1954 was to GE Schenectady in the amount of $300. So, in a way, that's kind of fitting -- it's really very special thing for Park I believe that we have that agreement.

And just continuing with the GE story, we also, as we reported in the past, are working on a joint development agreement. It's going well. It's developed a new product. GE launched to is pushing to go into production with that new product, really next year, very significant revenue that's not what we call a niche product.

That's a product which would entail significant revenue. The nice thing when we work on development programs with GE is that when the development is complete or qualified. That's a very, very, very very big deal with aerospace.

That's what happened with our AFP material and that's what -- that's a plan anyway with this development project that we're working on now. People on aerospace would tell, you can have the best mousetrap, but if you are not qualified with anybody, it's probably going to sit there for a quite few years and collect dust and maybe rust a little bit too.

So, that's the really nice thing as once the project is complete, we're qualified, we do it in our production. And the reason that happens as GE is pushing, this is not so much from our side, this is on GE side something they want to quite a lot.

So, and I mention I think last year time, but I'll mention again, we are working actively on a several other opportunities with GE that translated into the meaningful revenue, significant revenues. We are not going to go into details of those right now, but they are being actively worked on.

These are not just preliminary discussions, actively worked on, being worked on. So, and the contract we entered into, the long-term agreement is with MRAS, Middle River Aircraft Systems, which is a subsidiary of GE Aviation. It's the subsidiary, the division of GE Aviation which focuses on the sales and thrust reversers for jet engines.

There are many other GE Aviation divisions which produce other components for the engines. These are internal structure components. So, we just have a one-year arrangement with GE Aviation because the two groups got out of a sink a little bit. We now have [RFQ] from GE Aviation for the future and we are working through that [RFQ].

But I should mention that we are qualified already on several other products that are included in the [RFQ]. So, we never want to get overconfident, but since we're already qualified the chances I think are quite good that we will continue with at least those products.

And obviously, there are opportunities for more because there is some products in the [RFQ] which were not qualified on right now, we are not producing for GE at this time. So that's an upside opportunity and that would be an addition to what we have already.

Just want to touch on the redundant factory because we haven’t spoken about that for a while, I don’t think. I think I've told you before that our understanding and arrangement with GE was, once we signed a long-term agreement with them we built the redundant factory.

So, we are probably thinking while we sign a long-term agreement what's the status of the factory. We've asked GE for couple of other things, not new agreements, but some additional information that we've asked for.

And we're waiting to get your back from GE and those items, and once we had that information then we would go ahead and kick-off that expansion plan. It may move up to 15 million approximately that's a real rough number.

I think we previously told just more like 12 million, but the reason for that is that the capability of the factory is expanding from its actual design based upon opportunities that we're working on.

This capacity is for redundancy as I said, but it also needed for capacity as it turns out based upon the plans and forecast that we are currently working on with the GE Aviation. Last time we touched on the fact that there is another very large aircraft OEM that we've been working with. I just update you a little bit.

It's only I think less than two months since our last call. So some of this maybe repetitive, but the first specification we’re actively working on the qualification that’s specification we’ve already been audited. And I checked back, I wasn’t sure this was the case. I didn’t want to say this was not true. The auditors they came in for whole week.

This is I guess pretty large aircraft company. The term they used was they were shocked at how well we did. And I was quite surprised they said that to us, but that’s the term they used. I didn’t go back and check to make sure. That’s what they said.

So that went well and I suspect that we’ll be up and running and qualify to that specification in near future. And that should translate into real revenue. I’m not sure exactly when, but I would think by the beginning of next year. There are several other specs that this large aircraft company has that we’re pursuing working on.

And should that for the same company, we’re doing parts and spares for military aircraft. I should say we’re working on a progress on parts and spares for military aircraft that hasn’t actually happened yet.

We’ve done a lot of the other work that needs to be done for them to be in a position to give that business, and also working on qualifying for a large part for a civilian aircraft, legacy civilian aircraft.

To me, it's just my feeling, I’ll tell you just so you'd be probably interested that it feels to me like this one is about to break with the so large aircraft company. There is multiple components to it so that means everything will break at once, but I feel pretty good about our status with that company and our developing business with them.

The Scorpion program, we should touch on that every quarter. It's going well. We’re very privileged to be part of that program. I won’t say too much more about it, and actually why don’t we leave it at that because we’ve already spent a lot of time on the introductory remarks when we go to the questions. Operator, we’re ready for questions now..

Thank you. [Operator Instructions] Our first question comes from Morris Ajzenman with Griffin Securities. You may begin..

In the past, you gave some sort of color on what looks like so far into the first month of the current quarter. Would you care to do that? And then secondly as a backdrop, it's been about a decade here now where the electronic material side of the business has been under pressure as far as the top line is concerned for whatever various reasons.

Any sort of comment to where you might think there might be a turn happening as far as this difficult environment we’re in?.

So Morris, first of all in terms of the first few weeks of the second quarter, there really is nothing to talk about. It's kind of just tracking the same trend. The three months of the first quarter were kind of very flat when compared to the other, maybe March, April and May.

So no particular movement that’s worth talking about in the first three weeks of the second quarter. As far as electronics, that’s obviously the big question and that’s what we’re saying when we believe the things will start moving up in the second half. There’s two aspects of it. One is the bottom line and that really relates to restructuring.

The restructuring isnt’t designed to get more business, that’s to refocus our business in the U.S. So, our costs are lower, but also we focus more on being a niche company in the U.S. in each business in the U.S. Asia is quite different, it's like the totally different story.

That’s where we are aggressively seeking revenue with our OEM marketing program and OEM program pricing. And we’re saying although we don’t know for sure that we’re looking for the second half of the year where the revenues will start to move up again for electronics. You’re quite correct, so it looks like we’re kind of bumping along the bottom here.

And the issue for us is we explained this before, we have new products and we have legacy products. The legacy products are going to get less. There is really very little we can do about that. That’s just how it is.

There are programs and those legacy product revenues for us and so the challenge is for our new product revenue to exceed the loss of our legacy product revenue. So with that, that’s where we’re looking for in terms of switch. It's not that the new product revenue is not there, but it hasn’t outpaced the loss of the legacy product revenue yet..

And the gross margins this quarter is 23.1%, that's kind of a low point for you guys looking back over the last few years, and it's down 480 basis points year-over-year.

I mean clearly top line decline has a negative impact, but again pricing competition has reached a level here where getting back to 30% is just not doable?.

I don't agree with that at all, I think it is doable and it should be something we should achieve. Yes, the gross margins are poor in the first quarter. We mentioned some of the factors, it's really electronic story, I said that aerospace is actually up as compared to the fourth quarter both top and bottom line. So, it's really an electronic story now.

The P&L and the gross margins are being held down. The part we talked about the shutdown credits that we had in the fourth quarter that made the fourth quarter look better as compared to the first quarter, but also we're still bogged down with the duplicative cost related to the restructuring. It's a messy P&L until we get through the restructuring.

Ultimately, the key driver for the top to bottom line and the gross margin in electronics is going to be the revenue. So, it's really credit goal that we start to move the revenue up based upon the OEM marketing plans and programs that we have in place that we've been working on.

The guys have been working on very aggressively I guess for about nine months now..

Last question, CapEx the last three years have been under 0.5 million per annum, billing this facility based on GE contract any sort of ballpark figure what CapEx can be for this fiscal year?.

Which fiscal year, this fiscal year?.

Yes..

So, I think we mentioned it could be up to $50 million for that factory and the questioning would be what period that the money is spent on, and it's really hard of us to predict that. So it could straddle this fiscal year and next fiscal year, it depends when we started.

And that's not totally something we can predict because that depends on when GE gets back to us with this additional information we requested. So, it's really difficult for us to predict how it would break up between this fiscal year and next fiscal year, but if we started the project, let's say in three or four months, there would be a straddle.

I would think that all the spending would be complete by the end of next fiscal year though..

Thank you. Our next question comes from Sean Hannan with Needham. You may begin..

Just to follow up on some of the commentary, Brian. I'm not sure if I'm clear in terms of at least the general thoughts, viewpoints on the electronics side of the business. The legacy side is declining, not a surprise, right, that's been going on. That's a general trend we've had for a very, very long time.

You're getting though good momentum on the new products.

Do you feel or when do you feel that we might be hitting an inflection point because had the impression that we were pretty close to that, you know kind of by this midyear point where electronics should be able to realize something like that?.

Yes, so, it's similar question anyway, Sean. I think we said last quarter's call and we'll say again that we think we’ll see the change in the second half of our fiscal year, right, in terms of when the new product gains will start to outstrip the legacy product losses. That's just the best we can do to predict.

I guess I'm not giving very much color because we've done it before and it kind of gets to be repetitive, but there's a lot of I think very positive, very good reception to the OEM marketing program. The activity is very high. There are a lot of arrangements that we've reached with these OEMs.

I guess in some cases, it takes a little you know while for new programs to actually go into effect and for product actually to be put in production. It's not nearly as long as aerospace. But there could be some little lag time.

So and I think you're right also, I think we expected that inflection point to use your term to have occurred little bit earlier maybe by now. So, if we see it in the second half, maybe we're a few months behind where we thought we would be, about six months ago if that makes sense. You can understand what I'm saying.

But the dynamics are still in place that really is not different from my point of view. There is a question of timing and as we said a few times now, we believe we'll see that inflection point in the second half of next year..

Is there any evidence or conversations that you've either through your customers or the OEMs, if indirectly that there's an opportunity for that in the third quarter.

So just trying to sense, is there anything that you're seeing right now?.

We're seeing a lot. I'm not doing a very good job of kind of conveying the sense of positive direction and maybe even the excitement. What we don't have is quantification. It's something we asked 25 times every time we meet with an OEM or customer. And in terms of quantifying the timeframe, it's been really difficult for us to pin these people down.

So we do the best we can with our forecasting. We update our forecast on a pretty regular basis. But forecasting is going to be somewhat a guess based upon information we have then we have to extrapolate, obviously, into a real forecast. That's not unusual. That's how any business operates.

But the questions you're asking us, Sean, those questions are asked 25 times every time, I mean, it's a little bit exaggeration, but maybe half a dozen times, every time we sit down me with a big OEM or big circuit board customer Asia, I mean without exception. And we'll go see them every six weeks or so, so we'll check again.

You said this, now we're back that's still truly you want to modify. You want to adjust it. So, I think we do the very best we can to really hone in on the timing because we know it's important. But I still think that notwithstanding we've done the best we can. There's some limit to our ability, really nail it to a month.

So, I think we'll stick with the second year from next year. We feel that will be the inflection point and that's probably the best we can do. And if I gave you anything more in terms of an answer, I think I'd be getting over the line in going into just kind of speculation area and that’s really not useful. I don't think you want me to do that..

Let me see if I can ask something on the supply of materials within electronics. So, there's been some commentary through the course of this year and some of it seems to be more pervasive recently that the availability of the copper foil is becoming a bit more of a concern.

There're a lot of other markets that perhaps not as present with demands for that. So I want to go on to EVs, HUVs, et cetera.

Where do you stand in terms of the opinion on that? Are you seeing anything as an impact on pricing as a result of that supply scenario? What would you have in the background in terms of from a business risk standpoint in being able to secure your allocations around that material? Thanks..

So, so far so good, we have not had any supply problems yet although some of the suppliers have taken the opportunity to raise prices. We have our procedures, what we pass-through these increases.

So this happens from time-to-time recently, I guess as you said Sean, there're other uses for copper in automotive and things like that, and that's the explanation anyway as to why prices need to go up. And we've had some price increases. However, normally the price increases are tied to the LME, but this is something little different.

Supply has not been an issue for us. I hear the same thing. We hear the same things that there're supply issues in this industry. I think we've done a pretty good job of working over the long haul with our suppliers.

And so I think that's been a good thing for us, it's probably paying dividends, we've worked with suppliers for many-many years on a consistent basis..

And then switching over to the aerospace side, when you -- it seemed like the commentary you had a little bit earlier was that you would expect some continued sequential progression in the revenues coming through within that business. You've been up now two quarters in a row.

Should we expect that the magnitude of this progression remains similar or that perhaps there's an opportunity for some acceleration by the time that we get into the back end of the calendar year? Thanks..

That’s a good question. I think it’s a first choice which is aggression should be similar. We just heard yesterday that there is an increase in the forecast from our big customer and that helps us. But the big quantum improvements increases in top line are going to be not this year.

The forecasting we have for GE Aviation in particular and MRAS is very precise. It goes out 10 years and it's based upon aircraft units, so it's pretty predictable, how many Boeings, how many AirBuses, the Boeing or Bus plan to produce itself. So the numbers get quite big, quite big, quite big, but that it grows overtime.

But we get to 2021, fiscal '22, calendar 21 fiscal '22, we're starting to see some significant revenues. It doesn’t just go up that one year or so and it's not that kind of thing it goes up overtime, but those significant revenues will not really be seen in this fiscal year we don’t believe.

So, it's more the first choice the progression rather the large quantum leaps. But we get out of those 21, 22 years then the numbers are quite significant..

Thank you. Our next question comes from Nick [indiscernible] Management. You may begin..

I was just wondering, can you envision in scenario absent tax reform where would make sense to bring some of the cash home? I understand the math of it, but if you could just -- I know you've covered it before, but what it makes sense at any point absent tax reform to bring some of that cash home? Thank you..

So, good question. I guess the thing that’s difficult about it we didn’t cover it in this quarter is that the uncertainty. A couple of quarters ago it seemed like there was a certainty that the tax reform would be proved sometime this year and maybe August.

Now, it's not clear what's going to happen and people say, well, healthcare thing has to be done first, I guess depends who we ask. So, it's kind of an ironic situation because if somebody can come down from heaven and say to us, there is never going to be tax reform.

Then, there will be nothing first us to wait for, and then we just do we would have to do. So, we are kind of waiting for the dove here a little bit in that uncertain environment. So, on the other hand, if tax reform does occur then it will be much more advantageous to repatriate fund.

Much more advantageous to repatriate funds because the dollars are very significant between repatriate before tax reform and after considering kind of things that are being discussed regarding tax reform. Now, the exception would be if there is something, some specific need for the cash like a transaction.

But I don’t think, we talked about I think couple of quarters ago after Trump was elected and it was kind of a surprise. There was optimism about tax reform. We said look once the tax reform goes through we would expect to repatriate money and pay significant cash dividend.

But I don’t think our shareholders want us doing that because it's going to cost the shareholders and the Company a lot more to do that before tax reform goes into effect. It's just the economics are not good.

Now on the other hand, if we're told like I said going back to the first point that somebody comes down from heaven says, there was never going to be tax reform then it’s a different equation. There is just nothing to wait for anymore and then we have to consider our options from that perspective.

So, it’s a little bit of complicated right now and we are stuck in this area of uncertainty. But assuming there will be something happening let's say in the next year and I'd say that would result in a significant benefit in terms of cost repatriation. I don’t think our shareholders would want us to repatriate money to pay a large dividend now.

These would just be too expensive for the Company and for our shareholders. It wouldn’t be cost effective to do that, if in fact there would be a much less expensive avenue for doing so somewhere down the road in the foreseeable future.

So, it's probably not a really great black one answer, but I think that kind of ways it out for you in terms of our thinking..

Thank you. [Operator Instructions] Our next question is a follow-up from Morris Ajzenman with Griffin Securities. You may begin..

Just the clarification, during the presentation you spoke about second half fiscal '18, we might see some growth as new products and up overtake both the legacy headwind and restructuring. And then when you as answered the previous question, you then said that we would see improvement in the second half of next year.

I just want to make sure, is that second half of fiscal '18 you hope for further improvements or second half of fiscal '19?.

18. So, we're saying that we hope to see the improvement in the electronics top line in the second half of the current fiscal year, which is '18 as you've said..

When you look back quickly you had stated in the question next year, you meant the second half of this year? Thank you..

Why do you ask the question because it would be unfortunate, if I left that confusion out there..

Thank you. Our next question is from Richard Bill with Princeton Financial [ph]. You may begin..

I'm fairly new to the story here, but a lot of stuff was made at the Paris show with the Boeing 737 Max with the leap engine.

Is that part of your components as well?.

So, there is three programs are using leap engine. The 737 is not a program we're on. That's because MRAS is not on that program. We're still sourced with the MRAS. I think we've explained that before. The leap programs that we are on are the A320neo on that 919, but not the 737..

Thank you. I’m showing no further questions at this time. I’d like to turn the call back over to Brian Shore for closing remarks..

And this is Brian again, thank you, operator. And thank you everybody for listening in and for questions today. Matt and I will be in the office for the rest of the day. So, if you have any follow-up questions, please feel free to give us a call.

And I guess we won't be talking to you at least in the conference call till after the summer is over, so I wish all of you a very wonderful summer. And have a nice day and hopefully we will talk to you soon. Take care..

Ladies and gentlemen, this concludes today conference. Thanks for your participation and have a wonderful day..