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spk00: Good day, ladies and gentlemen, and welcome to the Commons fourth quarter conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a question and answer session. To ask a question, please press star followed by one on your touchtone phone. If anyone has difficulty hearing the conference, please press star zero for operator assistance. As a reminder, this conference is being recorded today, February 23, 2022. I would now like to turn the conference over to DuCommons Vice President, Chief Financial Officer and Controller and Treasurer, Chris Wampler. Please begin.
spk06: Thank you, Norma, and welcome to DuCommons 2021 Fourth Quarter Conference Call. With me today is Steve Oswald, Chairman, President, and CEO. I'm going to discuss certain limitations to any forward-looking statements regarding future events, projections, or performance that we may make during the prepared remarks or the question and answer session that follows. Certain statements today that are not historical facts, including any statements as to future market conditions, results of operations, and financial projections are forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are therefore prospective. These forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In addition, estimates of future operating results are based on the company's current business, which is subject to change. Particular risks facing Dukama include, amongst others, the cyclicality of our end-use markets, the impact of COVID-19 on our operations or customers, The level of U.S. government defense spending, timing of orders from our customers, legal and regulatory risks, management changes, the cost of expansion and acquisition, competition, and disasters, natural or otherwise. These risks and others are described in our annual report on Form 10-K filed with the SEC, and our forward-looking statements are subject to those risks. Statements made during this call are only as of the time made, and we do not intend to update any statements made in this presentation except if and as required by regulatory authorities. This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for reconciliation of the GAAP to non-GAAP measures referenced on this call. We filed our 2021 annual report on Form 10-K with the SEC today. I would now like to turn the call over to Mr. Steve Oswald for a review of the operating results.
spk03: Okay, thank you, Chris, and thanks, everyone, for joining us today for our fourth quarter conference call. Today, and as usual, I will give an update of the current situation at the company, after which Chris will review our financials in detail. The company remains focused, first and foremost, on the health and safety of our employees. The team has done an excellent job with the safety protocols put in place since March 2020, and we continue to follow our best practices aligned with health authorities throughout our many operations. The total number of cases is roughly 360 since the beginning of the pandemic. And within the company, we had 80 cases in Q4 of 2021 with the new variant. Before going over the fourth quarter results, I want to highlight two transactions that were completed during the quarter and previously announced that I'm very proud of. First, we completed the sale-leaseback transaction of our Gardena Performance Center located in Carson, California. which was the first in the long history of the company. The building and land were sold for approximately $143 million, generating more than $110 million in after-tax proceeds. This was an extraordinary price based on the very high demand for commercial real estate in Southern California in Q4, and we took full advantage of it. To put it in perspective, in 2015, we had the property appraised for a financial project and it was $38 million. This transaction was a major event for our company and shareholders and allowed us to monetize a portion of our legacy California-owned real estate portfolio. Second, we completed the acquisition of MagSeal as well in Q4, a leading provider of high-impact, military-proven magnetic seals for critical systems in aerospace and defense applications for $69 million. $0.5 million net of cash acquired. MagSeal was a critical purchase coming at the end of the second year of COVID and continues to advance our strategy to diversify and offer more customized, value-driven engineering products with aftermarket revenue. A portion of the proceeds from the sale-leaseback transaction for the Gardena Performance Center was deployed to pay for this acquisition. We are thrilled with both Turning to the Q4 financial results, Tacoma's fourth quarter results were solid with company delivering year-over-year revenue growth of 4%, all organic. Company's defense business, although slightly down, still delivered a solid performance, and the commercial business showed modest year-over-year revenue growth for the second consecutive quarter. The commercial aerospace markets are recovering. We are seeing some bright spots. For example, Spirit Aerosystems was our fourth largest customer for the second consecutive quarter in Q4, with over 5% of revenue, a significant difference from 2020. In addition to revenue growth, we posted margin expansion for gross profit at 22.6%, along with adjusted EBITDA of 14.8%. The team also posted adjusted operating income margins of 8%, which is excellent progress as we continue to build our track record of delivering true operational leadership and cost management in any environment. The quality of earnings was solid as well, with the company reaching GAAP diluted EPS of $9.05 a share versus $0.80 a share for Q4 2020, and adjusted diluted EPS of $0.79 a share versus $0.89 a share in 2020. Fourth quarter revenue was higher with the Commons commercial business showing year-over-year growth for the second consecutive quarter of 12%, and continued solid defense business versus prior year with offloading programs from primes becoming more and more of a theme for our business. The programs that had growth in Q4 included the F-18, F-15, F-16, UAVs at General Atomics, Raytheon tow program, and other missile programs. Our approach to the market continues to be innovative products and processes that provide significant value to the defense customer, along with striving for a consistent high level of service. Raytheon Missile and Defense activity is also moving to a higher level since signing the Strategic Supplier Agreement with them over two years ago. We've been hard at work in many areas, current and new programs, offloading, and share shift. I'm happy to report that 2021 was a record year for that division and Raytheon Technologies overall. Raytheon Technologies is our largest customer, and revenues increased more than 20% to $158 million in 2021, and Q4 alone was over $45 million, which is showing very good momentum entering 2022. I mentioned earlier about the offloading from defense primes and the future benefits for the companies. We've been hard at work with Raytheon, GA, Northrop Grumman, and others, and we'll be over $45 million in 2022 for strictly offloading, up from roughly $31 million in 2021. We then expect $90 million plus in 2023, and the long-term revenue run rate of programs already commercialized or in development will be over $125 million by 2025. These programs include Raytheon SPY6, products for GA, tow harnesses and circuit cards, and the next generation jammer. In regards to the defense backlog, it also remains strong and ending Q4 with a backlog of $520 million. The commercial aerospace backlog also shows strong signs of recovery, increasing sequentially for the third consecutive quarter from $276 million at the end of Q2 2021 to $333 million at the end of Q4 2021. 2021, a very good sign. The total backlog of $905 million for the company is approaching pre-pandemic territory. The company's cost actions are also continuing to pay dividends. You can certainly see even before the pandemic, the company was working on initiatives to offset the 737 max beginning in Q4 2019. The effectiveness of our operational leadership and action since then and through two years of COVID, shows in all our margins, GP, OI, EBITDA, along with diluted ETS. In addition, Tacoma's overall low SG&A costs, including at our corporate level, is among the industry leaders. For the full year of 2021, revenue was $645 million versus $629 million in 2020. Operating income was $49 million versus $46 million in 2020. and backlog was $905 million versus $808 million in 2020. These numbers reflect the return to growth commitment for 2021 that I made during the August 12, 2020 Q2 investor call. I am proud of the team for this achievement, as once again, the common team meets its commitments. In regards to the outlook, our significant backlog in defense and continued momentum in commercial aerospace will result in high single-digit revenue growth for 2022. We estimate that revenue will remain good in defense, but over the quarters ahead, we will see more and more commercial aerospace volume return to the common. Our high narrow-body to wide-body ratio for our business will help us as well, and we have the capacity, supply chain, and strong operating team ready to deliver the forecasted rate increases ahead. We're also working with OEM and Tier 1 companies to drive a higher percentage of share on key platforms and remain confident that this will occur in 2022. Another critical area is M&A. We're always actively looking for companies that fit our model and believe this will only be an accelerator to higher results. This has been demonstrated in the past. We expect to see this thing continue for the company and its shareholders. Now let me provide some additional color on our markets, products, and programs. Beginning with our military and space sector, we posted fourth quarter revenue of $113.1 million, a slight decrease versus 2020. Solid showing was from revenue on some key defense platforms. As earlier mentioned, we saw increases in demand for our F-18, F-15, F-16, UAVs, tow, and other missile programs. The fourth quarter's military and space revenue represented nearly 70% of the Commons revenue in the period. We also continue to be very well positioned for growth across our defense platforms over the next several quarters in all sectors, especially at Raytheon, and again ended the fourth quarter with a strong backlog of $520 million, which represents 57% of the Commons total backlog. Within our commercial aerospace operation, fourth quarter revenue increased year over year, to $41.6 million, driven mainly by build rate increases on other commercial aerospace platforms and business aircraft platforms. The economy expects a meaningful improvement in the commercial aerospace market overall in 2022 and 2023, and the future is bright. The backlog within our commercial aerospace sector stands at roughly $333 million at the end of Q4, a significant increase sequentially compared to Q3 2021-2022. and the third consecutive quarter of growth. With that, I'll have Chris review our financial results in detail. Chris?
spk06: Thank you, Steve. As a reminder, please see the company's 10K and Q4 earnings release for a further description of information mentioned on today's call. As Steve discussed, our fourth quarter results reflected another period of solid performance and completed our full year 2021 commitment of return to growth. The fourth quarter results were clearly bolstered by the significant impact of our sale leaseback of our Gardena facility. We are pleased to see continued strong aerospace travel demand, which should translate in higher shipments going forward. We are looking forward to building on the 2021 results and our position to do so. Now turning to our fourth quarter results, let me review some of the highlights. Revenue for the fourth quarter of 2021 was $164.8 million versus $157.8 million for the fourth quarter of 2020. The year-over-year increase reflects $4.4 million of growth across our commercial aerospace platforms and $4.9 million of higher sales to industrial customers, slightly offset by $2.3 million of lower revenue within the military and space sector. The Commons' overall backlog at the end of the fourth quarter was approximately $905 million, reflecting recent growth across our commercial aerospace platforms, setting up the company for strong top-line performance in 2022. This includes the backlog of our Maxfield acquisitions. Our defense backlog of $520 million, which is higher both sequentially and versus prior year, has us positioned for another strong year of defense. As a reminder, we define backlog as potential revenue based on customer purchase orders and long-term agreements with firm fixed prices and expected delivery dates of 24 months or less. We posted total gross profit of $37.3 million for the quarter versus $34.8 million in the prior year period, while gross margins were 22.6% and 22.1% in 2021 and 2020, respectively. The slight increase in margin year-over-year reflects favorable product mix. While we are not immune to supply chain issues, we were able to manage through Q4 without significant supply chain impacts due to our performance center flexibility, utilizing strategic buys and inventory that we had invested in, and a bit of good fortune on the types of inventories that were in short supply. SG&A was $25.4 million in the fourth quarter versus $22.6 million last year, largely reflecting higher professional services fees, a main driver of which was the magnetic seal acquisition along with other one-time non-recurring costs. DeCommons reported operating income for the fourth quarter of $11.8 million or 7.2% of revenue compared to $11.6 million or 7.3% of revenue in the prior year period. Adjusted operating income was $14 million or 8.5% of revenue this quarter compared to $12.9 million or 8.2% of revenue in the comparable period last year. Interest expense was $2.8 million in the fourth quarter of 2021 versus $2.6 million in the prior year period. The company reported net income for the fourth quarter of $110.8 million or $9.05 per diluted share, compared to net income of $9.7 million or $0.80 per diluted share for the fourth quarter of 2020. As Steve discussed, the large increase year over year was primarily due to the gain recorded from our sale leaseback transaction, which equated to $132.5 million pre-tax. This, along with $2.5 million increase in gross profit, was partially offset by higher income tax expense of $31.4 million and increased SG&A expense of $2.9 million. Adjusted for the sale leaseback gain and certain one-time expenses, adjusted net income was $9.7 million or $0.79 per diluted share in the fourth quarter of 2021, versus $10.8 million, or $0.89 per diluted share in 2020. The fourth quarter 2020 EPS had a comparative tax benefit of more than $1.5 million related to incremental FIN48 reversals compared to the fourth quarter of 2021. Adjusted EBITDA for the fourth quarter was $24.4 million, or 14.8% of revenue, compared to $22.8 million or 14.4% of revenue for the comparable period in 2020, reflecting the items I just discussed. Now let me turn to our segment results. Our electronic system segment posted revenue of $106 million in the fourth quarter of 2021 versus $99.1 million in a prior year period. These results reflect $2.9 million of higher commercial aerospace revenue and $4.9 million greater sales within our industrial end markets, partially offset by $0.9 million of lower revenue across the company's military and space customers. Electronic systems operating income for the fourth quarter was $15.4 million or 14.6% of revenue versus $11.5 million or 11.6% of revenue in the prior year period, primarily reflecting improved product mix. Excluding restructuring charges and other one-time items in both years, the margin was 15.5% in 2021 and 11.8% in 2020. This quarter demonstrates the type of performance our electronic business is capable of when the combination of strong revenue and favorable mix occur with SG&A cost control at our focus factories. Our structural system segment posted revenue of $58.8 million in the fourth quarter of 2021 versus $58.7 million last year. The year-over-year increase reflects $1.5 million of higher sales across our commercial aerospace applications, partially offset by $1.4 million of lower revenue within the company's military and space markets. Structural Systems' operating income for the quarter was $5.1 million, or 8.6% of revenue, compared to $6.2 million, or 10.6% of revenue last year. The year-over-year operating margin decrease was primarily due to unfavorable product mix. Excluding restructuring expenses and other one-time items in both years, the segment operating margin was 10.6% in 2021 versus 12.4% in 2020. The MagSeal business results are part of the structure's business. Corporate general and administrative expense, CG&A expense for the fourth quarter of 2021 was 8.7 million or 5.3% of revenue versus 6.1 million or 3.9% of revenue in 2020. The year-over-year increase was primarily due to higher professional service fees of 1.8 million, a portion related to the magnetic seal acquisition. Turning to liquidity and capital resources. We have available liquidity of $176 million and generated $11.7 million of cash from operations this quarter compared with $11.1 million in the prior year period. The current quarter cash flow included a $29 million tax payment related to our gain on our sale leaseback. Our trailing debt to adjusted EBITDA ratio was approximately 2.3 at the end of the year. The calculation nets cash against debt in 2.3 is the lowest in the last several years. Subsequent to year end, we paid down an additional $30 million on our term loans. In terms of capital expenditures, we spent $6.1 million during the quarter and $16.9 million for the year in total. Going forward, we anticipate spending between $16 million to $18 million in 2022 for sustaining capital and ongoing product development. In conclusion, the fourth quarter, from an operational standpoint, played out largely like the third quarter. We posted solid results while growing our commercial aerospace backlog, setting us up for continued strong performance in 2022. We expect to see our top line and bottom line pick up momentum from Q1 as we move through the year. We significantly improved the balance sheet through our sale-leaseback transaction, which provided over $110 million of after-tax proceeds for the company, while completing another bull-on acquisition that expanded our portfolio of proprietary technology and opened up new aftermarket opportunities. We continue to look at innovative transactions such as these to accelerate our ability to deliver DeCommon's operating results and returns for our investors going forward. I'll now turn it back over to Steve for his closing remarks. Steve?
spk03: Okay, Chris, thanks. Let me just cover a few other things before going to questions. I also want to mention that DeCommon was named to Newsweek's magazine's inaugural list of the top 100 most loved workplaces for 2021. ranking number 66 among the top 100 companies recognized nationwide for employee happiness and satisfaction. This list included other companies such as Dell, IBM, and FedEx. And we are proud of our efforts to ensure Ducamin has a people-first culture. In addition, in December, in partnership with the Los Angeles Chargers and the National Football League and the University of California, Irvine, Ducamin held its fourth annual STEM on the Sidelines competition, a regional competition promoting STEM education in the Los Angeles and Orange County, California high schools. More than 150 students from 17 different high schools participated in the 2021 contest at SoFi Stadium. And the winning teams were honored before the Los Angeles Chargers game on December 16th, 2021. This is part of our company's commitment to serving our local community and promoting technical skills among high school students. To comment, also welcome new board member in December, Samara Stryker, Senior Vice President controller, and treasurer at Navistar International Corporation. Samara will be working on the audit committee as well, and she is a great addition to our team. In closing, I'd like to again take this time every quarter since really COVID began to tell to common employees that I'm very proud of them and all their efforts dealing with the many challenges from the pandemic as well as the 737 MAX pandemic. all in 2020 and 2021. Our team members show up every day at our operations, and though stressful, we get the job done for our customers, our nation, and each other. So with that, I'd like to open it up for questions, please.
spk00: Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile this Q&A roster. Our first question comes from Mike Crawford with B. Riley Securities. Your line is open.
spk01: Thank you. First, you have another one or two facilities in California that you might be able to sell. Is that something you're going to explore this year?
spk03: Mike, this is Steve, yes, and good to hear from you. Yes, we're going to explore it. Nothing concrete right now, but certainly we've gone on this journey to look at these opportunities, especially now with where the markets are. We felt that the Gardena facility was right at the top, so we moved on that in Q4. And throughout the year, we'll be looking at possibly another opportunity, and we'll keep you posted.
spk01: All right, great. And then on these programs that are growing, F-18, 15, 16, UAVs, TOW, and other missile programs, what specifically are the key structures and or assemblies that you're providing for these programs that are helping to drive some of the growth?
spk03: Well, a lot of it is, a lot of it is circuit cards. So a lot of it is circuit cards, a lot of it's cables. But, you know, like with the tow missile, it's, you know, it's, it's the structural component of the missile. And as I mentioned, we also just picked up the card on that or the cards on that program as well as the harnesses. So, so it's a mix. But we certainly lean heavy in circuit cards. I mean, that's one of the things we're really seeing as well when I mentioned this offloading is that, you know, defense primes are looking at the common and what we can provide for offloading opportunities to drive cost savings. And we're working closely with many of them.
spk01: Excellent. And then should we expect rotary platforms to continue to decline?
spk03: You know, here's the story. I'd say it's TBD. I mean, you know, certainly FMS, you know, versus the last few years has not been our friend when it comes to rotary. We're going to see a little bit, as you know, a little bit more in commercial helicopters, I think, going forward, especially over the next year or two. But I would say rotary looks to me sort of flat to down.
spk01: Okay. Excellent. Thank you very much. Okay, Mike.
spk00: Thank you. Our next question comes from Pete Osterlund with Truist Securities. Your line is open.
spk04: Hey, good evening. I'm for Mike Trimoli this evening. Thanks for taking our questions. Just first wanted to ask on the mag seal acquisition. Could you provide any extra detail on what level of revenue or earnings contribution you're expecting in 22, as well as maybe the margin profile relative to the rest of the structure segment?
spk06: Yeah, Pete, this is Chris. And, and, On the acquisitions that we've had in the last five years, all of them have been of the size where there's no requirement to disclose, and we've had that stance of not disclosing beyond really the acquisition cost and what we're required to. So there's no additional detail to provide there other than the reason we bought it. We'd certainly be excited about the product, the name, and what we can do with it.
spk03: Yeah, I think one other thing, I think you could certainly – Then we could get out a little bit to say that, you know, the margins are going to improve the structure situation. Yeah, I think that the margins are going to be helpful.
spk04: Okay, great. And then kind of following up on that line of questioning, just on margins within structural systems, just, you know, given the plan for increased production rates on a max, how are you expecting margins to trend throughout the course of the year? Should we be expecting that we'd see just sequential progression throughout the year beyond fourth quarter levels, or are there some other puts and takes we should be thinking about?
spk06: Thanks, Pete. the size of our two businesses, electronics and structures, they're just such that they do bounce around a little bit. But having said that, you know, through the pandemic, you know, we saw structures margins sort of head to a single-digit level. We've gotten it back to double-digit. Certainly, that's where we'd like to keep it. I think if you look over the course of this year, absolutely, you're going to see it, you know, see it progress. These, you know, the rates are the rates are coming back as that takes hold, as that comes through, you know, with more volume through the facilities, that will be very helpful to us. So I think the second half of the year, definitely yes. And I think, you know, it just depends on sort of how much moves through here in these first couple of quarters.
spk03: Yeah, let me just add, you know, obviously one of our strategies is, you know, we're going for scale. And the way we have the business structured is that, you know, volume is certainly going to help us quite a bit, especially in the second half of the year and in 2023. So we're We're pretty excited about where this is going.
spk04: Great. Thanks a lot.
spk03: Thanks for joining us, Pete.
spk00: Thank you. As a reminder, ladies and gentlemen, that's star one to ask a question. Our next question comes from Ken Herbert with RBC Capital Markets. Your line is open.
spk02: Hey, good afternoon, Steve and Chris. Hi, Ken.
spk03: Good afternoon. Good afternoon.
spk02: Hey, Steve, was the uptick in the defense structures backlog in the quarter sequentially, was that all MagSeal that sort of $20 million increased, or was there something else driving that?
spk06: MagSeal was definitely a key piece of it, Ken. This is Chris. It was a key piece of it. But there were other puts and takes, but I think that's certainly the biggest piece of it. Okay.
spk02: Okay. And so if we look at obviously the total defense backlog, is there any way to maybe segment that out? Was it maybe flattish or, I'm sorry, you know, flattish sequentially, up some sequentially? I mean, how do we think about the backlog in defense right now? And then I guess more importantly, either if you want to discuss this sort of With or without MagSeal, how do we think about growth specifically in defense and space in 2022?
spk03: Yeah, Ken, I think a couple of things. First, that's why I brought up the offloading theme here. Look, there's movement among the different programs up and down, but we feel a couple of things. First, we're certainly a supplier of choice on lots of things for either new or current programs. You know, we have this offloading. 2022 is going to be very good. 2023 is going to be, you know, almost $100 million. So that's really going to help us. And we're still doing the share shift. As I mentioned, you know, the tow missile case was a share shift, you know, from another supplier. So we think, you know, we feel good about the fence, you know, going forward. We have a very nice backlog. We feel good about, you know, decent growth in 2022. Okay. Okay, that's great.
spk02: And then can you just comment maybe in a little more granularity on your max ship set? Are you still essentially in line with spirit? And I guess how much growth are you expecting from the max in particular in 22? Yeah.
spk06: Ken, this is Chris. So a couple things. One, You know, we certainly are expecting, you know, the pull through to start happening, you know, a little more in line with the published rates that are out there. You know, if you look at max right now, it's more at the 24 rate. It's going to work its way up, you know, into the low 30s. But we're still, you know, again, part by part, it's a little different story. So there's no one answer there on the parts. I will also want to circle back just on your question on the backlog on commercial and I'm not sure I caught the question exactly right, but I mean, commercial structures backlog, I mean, there was a nice uptick there from what we have going on with MAX as well as A320.
spk03: Yeah, Ken, let me also just throw in here that, you know, look, we feel really good about our position at Spirit. We think it's only going to get better. Obviously, we have our relationship directly with Boeing, and You know, one of the real bright spots is after quite a long time, we're starting our spoiler line again for the 737 MAX in our Marovia facility, which, you know, is a big revenue driver. So that's starting to get online, and we're going to be back on that, which is down for at least roughly 18 months. Oh, that's great.
spk02: Yeah, good things happening. That's excellent. And if I could, just one final question. I know Offloading has been a really nice sort of secular story on the defense side. I know you've taken some share on the commercial side. How do we think about or what's your view, Steve, on incremental share opportunities in the commercial market in particular as the supply chain seems to be pretty stressed as it looks to support, you know, both OEMs over the next one to two years and the rate increases?
spk03: Yeah, well, first, I mean, look, you know, one of the real bright spots, and I already mentioned I think we're in really good shape with Boeing, and we tend to, especially on our titanium operations, which, you know, I talk about, you know, we tend to really be, you know, the supplier of choice there for not only, you know, Boeing products for the most part, but also Airbus. Airbus has a captive titanium operation as well as some others, but we're sort of also a very high-level supplier. supplier for them. And we believe that, you know, over the next year or two, as you mentioned, with ramp-up and suppliers struggling with our, I think, really good track record, I think we've been, for the most part, 100% on time to Airbus for over two years now, even though the volume's been down a bit. We feel like, you know, some of that's going to come our way, even from their internal operations. So, you know, we think everything's, you know, heading in the right direction for both some share gain and And obviously, you know, for the rates going up.
spk02: Great. Well, thank you very much. I'll pass it back there.
spk03: Okay. Thanks.
spk00: Thank you. Our next question comes from Brian Puri with ReStreet. Your line is open.
spk05: Hey, good afternoon. Hi, Steve. Hi, Chris. How are you guys?
spk06: Hey, Brian.
spk05: First, I wanted to offer my congratulations on being named to Newsweek's list of the top 100 most loved workplaces. It's really an incredible accomplishment.
spk03: Thank you. I'll take it. Appreciate it.
spk05: And the after-tax sale leaseback proceeds came in $20 million plus above what you were guiding to last quarter, which I think was $90 million plus. Is that right?
spk06: Yeah, and it was big. basically because we were in the middle of a very competitive bid process. You know, and Steve sort of hit the highlight on the industrial market out here and how, you know, sort of red hot it is. So once that competitive process took hold, that's just what took it beyond really the range that we thought, you know, for sure we would get to.
spk05: That's terrific. In the earnings release, you call it industrial growth as being somewhat timing related. Could you flesh that out a little bit?
spk06: Yeah, I think a couple things. One is the industrial backlog, as this was a starting point, definitely has some long lead time items to it, and we're seeing an increased uptick in demand there, and that certainly keeps us in a position to move more product through there. I would say the industrial product, Brian, as you watch our company grow, You know, it's not one that we highlight as a high priority. It's one that we do in these facilities where it makes sense because we don't have a facility dedicated to industrial, so we can, you know, produce those products within another performance center. And so it's when the things work out right and when we can get to the right place with the customer, you know, we'll take the work and we'll build it, and that's been good.
spk03: Yeah, Brian, this is Steve. The industrial is really, you know, I think they're playing it ahead a little bit with the orders, but in general... that's just really kind of opportunistic business that if we can do it and make good money, we'll do it.
spk05: Yeah. Terrific. I guess last one from me, if I could circle back around a mag seal one more time, I think on the nobles acquisition, you did at least give us an EBITDA multiple headline. Would it, would it be possible to get some, some color just on, on the purchase price discipline on that one?
spk06: Well, I'll help you directionally, I guess. You know, if we go back to those last several, you know, we went and Steve talked specifically that, you know, we were really disciplined and kept it under 10 times. I would say through the pandemic and through all the different variables in the M&A market, particularly with, you know, with attractive assets, you know, the values just went higher. So, we were still in that, giving recognition to that the market got a little more frothy. We were still disciplined, but we will not say that it was below 10x.
spk03: Yeah, I think that's right. I think, you know, look, just for investors, and we try to, you know, be careful here overall, but I think, you know, I think you can count on us, you know, still having good discipline on Maxil.
spk05: Well, congratulations again on the strong results and the really terrific sequential organic growth in the backlog. Love to see that.
spk03: Thanks, Brian. More to come. Take care.
spk00: Thank you. I have a follow-up with Ken Herbert with RBC Capital Markets. Your line is open.
spk02: Yeah, hey, thanks. Chris, I wondered if you could just walk through a bit more of the detail on the cost structure associated as a result of the sale-leaseback transaction. How should we think about, for modeling purposes, You know, the tax impact and maybe the, obviously, the annual lease expense. And if I understand well, obviously, this will flow through structures. But how should we think about the moving pieces of this here moving forward?
spk06: Thanks, Ken. Yeah, I mean, you're right. It will go through structures. You know, we've talked certainly a lot about the very good news and what this sale is. has done and the leaseback has done to, the sale has done to our capital, you know, capital structure, capital resources, and our headroom on being able to do things. The flip side of that is, you know, we've got the lease. And so with that, we've got, you know, roughly, I'll call it $4 million to $5 million when you count. So $4 million roughly for the lease and $1 million for incremental property taxes. So you've got about a $5 million difference. run rate coming at you annually, that, you know, that in this market, you know, we're going to look to that facility to do everything they can to, you know, to offset as much of that through just being, running an aggressive business and pricing where it makes sense and everything else so that we can help offset that along with, obviously, you know, spending the money on MagSeal and other things to make it a big win.
spk03: Yeah, Cal, let me just mention, you know, our Gardena facility, you know, makes some pretty unique things in the industry. So, you know, we feel we As we move forward over the next, you know, 12 to 18 months, we have fairly good pricing power, and we're going to move on that too. So that's our plan. And, you know, at the end of the day, we still think, you know, despite some near-term, you know, headwind, we think, you know, the sale-leaseback was a home run for us and for shareholders.
spk02: Yeah, thanks. And if I could, Steve, just one final question. Now that you've done MagSeal, I know you've had a real focus on – acquisitions and more IP within your portfolio and more aftermarket. Can you level set us here heading into 22 as to what percentage of the total business now represents aftermarket for both defense and commercial customers?
spk03: Ken, I think what I want to do is we're going to have some more communication throughout this year. I would like to get back to you on that, as you know I usually do. Okay?
spk02: Okay, that's perfect.
spk03: All right, thanks, Steve. Yeah, I would say that it's growing, and we're happy with it, and it's a strategic priority, as I'm sure you know. So more to come on it.
spk04: All right, perfect.
spk03: All right, thank you.
spk00: Thank you. And at this time, there are no other callers in the queue, so I'll turn the call back over to Mr. Oswald for any closing remarks.
spk03: Thanks very much. I just want to thank, first, thanks for all the questions and the dialogue. We appreciate it. I also want to, again, thank my team and thank Steve as well our investors. We really appreciate all the support. It's been obviously a very challenging two years for everyone, the world, our nation, companies, et cetera. We feel very good about where we're heading with the company. We hope you do as well. So have a nice evening. Thank you.
spk00: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
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