Q4 2021 Ducommun Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the comments fourth quarter conference call. At this time all participants are in a listen only mode. Following managements prepared remarks, well hold a question and answer session to ask a question. Please press star followed by one or you touched on.
If anyone has difficulty hearing the conference. Please press star zero for operator assistance as a reminder, this conference is being recorded today February 23rd 2022.
I'd now like to turn the conference over to Ducommun, Vice President Chief Financial Officer, and controller and Treasurer, Chris well, Sir please begin.
Thank you Norma and welcome to Ducommun 2021 and fourth quarter Conference call with me today are 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 perspective.
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 ducommun include amongst others.
The cyclicality of our end use markets the impact of COVID-19 on our operations or customers are.
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 national or otherwise.
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 state.
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 a 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 Steve.
Thank you, Chris and thanks, everyone for joining us today for our fourth quarter conference call.
Today, and as usual I would give an update of the current situation of 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.
Team has done an excellent job with the safety protocols put in place since March 2020.
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.
I want to highlight two transactions that were completed during the quarter and previous announced.
Very proud of.
First we completed the sale leaseback transaction Avago data performance center located in Carson, California.
Which was the first in the long history of the company.
The building and land was sold for approximately $143 million.
Generally 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.
We took full advantage of it.
To put 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 Mag seal as well in Q4 of <unk>.
Leading provider of high impact military proven magnetic seals for critical systems, and aerospace and defense applications for 69.
$5 million net of cash acquired.
<unk> was a critical purchase coming at the end of the second year of Covid.
It continues to advance our strategy to diversify.
And also more customized value driven engineering products with aftermarket revenue.
A portion of the proceeds from the sale leaseback transaction for the Guardian of the performance Center was deployed to pay for this acquisition.
We are thrilled with both transactions.
Turning to the Q4 financial results two comments 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 in the commercial business showed modest year over year revenue growth for the second consecutive quarter.
The commercial aerospace markets are recovering.
We're seeing some bright spots.
For example, spirit Aero systems was our fourth largest customer for the second consecutive quarter in Q4 with over 5% of revenue.
A significant difference from 'twenty to 'twenty.
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 80 cents a share for Q4 2020 and adjusted.
Diluted EPS of <unk> 79 cents, a share versus 89 cents a share in 2020.
Fourth quarter revenue was higher with ducommun commercial business showing year over year growth for the second consecutive quarter up 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 AD growth in Q4 included the F 18 F 15 F 16, Uavs that general Atomics, Raytheon, So program and other missile programs.
Our approach to the market continues to be innovative products and processes that provides significant value to the defense customer, although it's driving for a consistent high level of service.
Raytheon missile 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, as our largest customer and revenues increased more than 20% to $158 million in 2021 in 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 company.
We've been hard at work with Raytheon G, a northrop Grumman and others and will 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 S. P Y six products for G E.
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.
Commercial aerospace backlog also shows strong signs of recovery increasing sequentially for the third consecutive quarter from 276 million at the end of Q2 2000 $21 million to $333 million at the end of Q4 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.
Certainly see b, 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 actions since then and through two years of Covid shows in all our margins G. P O I EBITDA along with diluted EPS in addition to <unk>.
<unk> overall, low SG&A costs, including at a 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 commit.
Commitment for 2021 that I made during the August 12, 2020, Q2 investor call.
I'm proud of the team for this achievement.
Once again, it's 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 remained good in defense, but over the quarters ahead, we will see more and more commercial aerospace volume returned to to comment.
Our high narrow body 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 one companies to drive a higher percentage of share on key platforms and remain confident that this will occur in 2022.
Another critical areas M&A, we're always actively looking for companies that fit our model and believe this will only be an accelerator to Hy <unk> results.
This has been demonstrated in the past.
We expect to see the same continued 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 F. 18, F 15, F 16, Uavs toe and other missile programs.
The fourth quarter's military and space revenue represented nearly 70% of the Commons revenue in the period.
We also continued to be very well positioned for growth across our defense platforms over the next several quarters and all sectors, especially at Raytheon and again ended the fourth quarter with a strong backlog of $520 million, which represent 57% of the Commons total backlog.
Within our commercial aerospace operations fourth quarter revenue increased year over year to $41 6 million driven mainly by bill rate increases on other commercial aerospace platforms and business aircraft platforms.
Ducommun expects a meaningful improvement in the commercial aerospace market overall in 2022, and 2023 and the Future's 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, and the third consecutive quarter of growth.
With that I'll have Chris review, our financial results in detail Chris. Thank.
Thank you Steve.
As a reminder, please see the company's 10-K and Q4 earnings release for 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.
Fourth quarter results were clearly bolstered by the significant impact of our sale leaseback of our Gardena facility. We're pleased to see continued strong aerospace travel demand, which should translate in higher shipments going forward. We're 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 first 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 Collins 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 topline performance. In 2022. This includes our backlog. This includes the backlog of our Maxiell acquisition.
Our defence backlog of $520 million, which is higher both sequentially and versus prior year has us positioned for another strong year of a sense. 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.
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 were 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 a very good portion 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 onetime nonrecurring costs to.
The Commons reported operating income for the fourth quarter of $11 8 million or seven 2% of revenue compared to $11 6 million or seven 3% of revenue in the prior year period. Adjusted operating income was 14 million or eight 5% of revenue this quarter compared to $12 9 million or eight 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 <unk> 80 per diluted share for the fourth quarter of 2020.
As Steve discussed 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 billion adjust.
Adjusted for the sale leaseback gain and certain onetime expenses adjusted net income was $9 7 million or <unk> 79 per diluted share in the fourth quarter of 2021 versus $10 8 million or 89 cents per diluted share in 2020.
The fourth quarter of 2020, EPS had a comparative tax benefited more than $1 5 million related to incremental fin 48, 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 are.
Our electronic systems segment posted revenue of $106 million in the fourth quarter of 2021 versus $99 1 million in the prior year period. These.
These results reflect $2 9 million of higher commercial aerospace revenue and $4 9 million greater sales within our industrial end markets, particularly partially offset by <unk> 9 million of lower revenue across the company's military and space customers.
<unk> 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 onetime items in both years. The margin was 15, 5% in 2020.
One at 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 systems 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.
<unk> systems operating income for the quarter was $5 1 million or eight 6% of revenue compared to $6 2 million or 10% on a 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 onetime items in both years. The segment operating margin was 10, 6% in 2021 versus 12, 4% in 2020, the Maxiell business results are part of the structures business.
Corporate general and administrative expense see G&A expense for the fourth quarter of 2021 was $8 7 million or five 3% of revenue versus $6 1 million or three 9% of revenue in 2020 the.
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 cash flow quarter cash flow included $20 $29 million tax payment related to our gain on a sale leaseback.
Our trailing debt to EBITDA trailing debt to adjusted EBITDA ratio was approximately $2 three at the end of the year. The calculation net cash against debt and 2.3 is the lowest in the last several years.
The point to year end, we paid down an additional $30 million on our term loans and.
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 topline and bottom line pick up momentum from Q1, as we move through the year.
We significantly improved the balance sheet through our sale through our sale leaseback transaction, which provided over 110 million of after tax proceeds for the company while completing another bolt 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.
Ducommun operating results and returns for our investors going forward.
I'll now turn it back over to Steve for his closing remarks, Steve Okay. Chris. Thanks. So let me just cover a few other things before going to questions. I also want to mention that to come in 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 ducommun has a people first culture.
In addition in December in partnership with the Los Angeles charges with the National Football League and the University of California, Irvine Ducommun hoped held its fourth annual stem on the sidelines competition, a regional competition promoting stem education, and the Los Angeles, and Orange County, California High schools more than 150 students from 17 different high.
Schools participated in the 2021 contest that sulfide stadium.
And the winning teams were honoured before Los Angeles Chargers game on December 16, 2021.
As part of our company's commitment to serving our local community and promoting technical skills among high school students.
It's a common also welcomed a new board member in December Samara, Stryker, Senior Vice President controller, and Treasurer at Navistar International Corporation.
Samir will be working on the audit committee as well.
She is a great addition to our team.
And clothing.
I'd like to again take this time every quarter since our really Covid began to tell our ducommun employees.
We're proud of them and all their efforts dealing with the many challenges from the pandemic as well as the 737 Max.
All in 2020 in 2021.
Our team members show up every day at our operations and those stressful we get the job done for our customers our nation and each other.
So with that I'd like to open up for questions. Please.
Thank you and as a reminder to ask a question you will need to press star one on your telephone who was talking a question. Please press the pound key please standby, while we compile the Q&A roster. Our first question comes from Mike Crawford with B Riley Securities. Your line is open.
Thank you first do you have another one or two facilities in California that you might be able to show is that something you're going to explore this year.
Mike This is Steve, Yes, Uh huh.
And a good to hear from you, yes, we're going to explore it nothing concrete right now, but certainly we've gone on this.
This journey to look at these opportunities, especially now with the war. The markets are we felt that the Gardena facility was was right at the top so it moves on that in Q4 and throughout the year, we'll be looking at possibly another opportunity. It will we'll keep you posted.
Alright, great and then on these programs that are growing at 18, 15 16 Uavs.
So and then other missile programs like what specifically are the key structures and or assemblies that you are providing for these programs that are helping to drive some of the growth.
Well a lot of it has a lot of his circuit cards. So a lot of it is certain cards a lot of its cables.
But you know like what the toll missile, it's you know it.
It's the structural component of the missile and as I mentioned, we also just picked up the card on that Oh, 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.
Defense primes are looking at to comment and what we can provide for a floating opportunities to drive cost savings and we're.
We're oh, we're working closely with many of them.
Excellent and then should we expect rotary platforms that continue to decline.
You know here is the story.
It's I'd say, it's TBD I mean, you know certainly Fms.
<unk> versus the last few years has not been our friend.
When it comes to the rotary <unk> are we going to see a little bit as you know a little bit more on commercial helicopters I think going forward.
Especially over the next year or two but I would say rotary looks to be sort of flat to down.
Okay.
Excellent. Thank you very much Tim I think.
Thank you. Our next question comes from Pete <unk> with <unk> Securities. Your line is open.
Hey, good evening for much more way this evening, thanks for taking our questions.
Just first wanted to ask on the <unk> acquisition could you provide any extra detail on what level of revenue or earnings contribution you're expecting in 'twenty two.
As well as maybe the margin profile relative to the rest of the structural segment.
Yeah. This is Chris and on the acquisitions that we've had in the last five years all of them a bit of the sides, where theyre not there is no requirement to disclose in.
We've had that stance of not disclosing beyond really the acquisition cost and what we're required to so it's a there's nothing there's no additional detail to provide there other than.
The reason, we bought it but it would just really be excited about the product name and and where we think if we can do with it yeah. I think one other thing I think you could you could certainly that we can get a little bit to say that you know.
The margins are going to improve the structure situations.
There will be that I think that the margins are going to be helpful.
Okay, Great and then.
Following up on that.
Last question just on margins within structural systems.
Given the plans for increased production rates on the Max how are you expecting margins to trend throughout the course of the year.
Should we be expecting that we'd see sequential progression throughout the year beyond fourth quarter levels or are there some other.
Other puts and takes we should be thinking about that.
Thanks Pete.
The size of our of our two business electronics and structures there, they're just such that they do bounce around a little bit, but having said that.
Through the pandemic, we saw structures margin sort of head to a single digit level, we've gotten it back to double digits, certainly that that's where we'd like to keep it I think if you look over the course of this year, absolutely youre going to see it see it progress. These you know the rates are the.
The rates are coming back.
That as that takes hold as that comes through you know it was 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 it just depends on sort of how much of it is through here in these first couple of quarters.
Yeah, Let me just add you know obviously one of our strategies as you know we're going for scale and the way we have the business structure is that you know volume is certainly going to help us quite a bit, especially in the second half and in 2023. So we're we're pretty pretty excited about where this is going.
Okay, great. Thanks, a lot thanks for joining us.
Thank you as a reminder, ladies and gentlemen, Thats star one to ask a question. Our next question comes from Ken Herbert with RBC capital markets. Your line is open.
Hey, good afternoon, Steve and Chris.
Good afternoon.
Hey, Steve was the was the uptick in the defense structures backlog in the quarter sequentially was that Oh, Mag seal that sort of 20 million increase or was there something else.
Something else driving that.
Yeah, Matthew It was definitely a key piece of it Ken. This is Chris It was it was a key piece of it but there were there were other puts and takes but I think that's certainly the biggest piece of it.
Okay, and so if we look at the.
We could obviously the total.
Defence Defence backlog is there any way was it.
The way to segment that out was it 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 <unk>. How do we think about growth specifically in defense and space in 'twenty two.
Yeah, Ken I think couple of things first you know that's why I brought up the Offloading theme here that are look you know there's there's there's movement among the different programs up and down but you know we feel a couple of things first one at work.
We're certainly supplier of choice on lots of things for either new or current programs. We have this offloading.
2022 is going to be very good 2023 is going to be almost $100 million.
So that's really going to help us and we're still doing the share shift as I mentioned the toll missile case was a share shift from another supplier. So so we think we feel good about the fence.
Going forward, we have a very nice backlog, we we feel good about you know decent growth in our in 2022.
Okay. Okay, that's great.
And then can you just comment.
And a little more granularity on on.
Your Max.
Ship said is that are you are you still essentially in line with spirit and I guess, how much growth are you expecting.
From the Max and particular in 'twenty two.
Yeah, Ken This is Chris So a couple of things one we.
We certainly are expecting you know the pull through to start happening a little more in line with with the published rates that are out there. If you look at Max right now it's more at the 24 range, it's going to work its way up into the low thirty's, but but we're still getting part by part its a little different story. So so there's no 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, because 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 you know from what we have going on with Max as well as well as <unk> hundred 20.
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 our relationship directly with vault with Boeing and you know what are the real bright spots as after a quite a long time, we're starting our spoiler line again for the 737, Max and I'm, a rugby facility, which.
As a big revenue driver. So that's that's starting to get online and.
We're going to be back on that which is which is it was down for at least roughly 18 months.
So oh that's great.
Yep.
So and then if I could just one final question I know offloading because it 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 both Oems over the next one to two years on the rate increases.
Well first yeah, I mean look you know what one of the real bright spots.
You mentioned I think we're in really good shape with our with Boeing and we tend to especially alloy titanium operations, which you know I talk about.
We tend to really be you know the supplier of choice choice there for not only you know Boeing products for the most part but also Airbus.
Bus has a captive titanium operation as well as some others, but were sort of also a very high level supplier for them and we believe that you know.
So over the next year or two as you mentioned with with ramp up and suppliers struggling with are I think really good track record I think we've done for the most part of harvest salad tied to Airbus for over two years now even though the volumes are down a bit we feel like that's something that's going to come our way even from their internal operations. So you know we take everything.
You know, we're heading in the right direction.
For both some share gain and obviously you know for the for the rates going up.
Great well, thank you very much I'll pass it back there okay. Thanks.
Thank you. Our next question comes from Brian <unk> with Lee Street. Your line is open.
Hey, Good afternoon, Hi, Steve Hi, Chris how are you guys.
Hey, Brian .
First I wanted to offer my congratulations on being named to Newsweek's list of the top 100, most loved workplaces.
Clearly an incredible accomplishment. Thank you let's take it.
Got it.
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 is that right.
Yeah, and it was it was basically because we were in the middle of a very competitive bid process, 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 that just what took it beyond our beyond really the range that we thought for sure we would get to.
That's terrific in the earnings release, you can call it industrial growth as being somewhat timing related is it could you flesh that out a little bit.
Yeah, I think a couple of things one is.
The industrial backlog is this was a starting point definitely has some long lead time items to it and we're seeing an increase uptick in demand there and that that certainly you know it keeps us in a position to do to produce more product through there I would say you know the industrial product Brian is if you watch our cause.
You know, it's a it's not one that we that we highlighted 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 produce those products within another performance center and so its window when the things work out right and when we can get to the right place with the.
A customer will take the work on mobility.
Yeah, Brian This is Steve.
Industrial is really you know I think there is a play that had a little bit with the orders, but in general that's just really kind of opportunistic business that if we can do it in and make good money, we'll do it.
Terrific I guess last one for me if I could circle back around on <unk>, one more time I think on the nobles acquisition you did at least give us an EBITDA multiple.
Headline what would it be possible to get some color just on the purchase price discipline on that one well.
Well I'll I'll help you Directionally I guess you know if you go back to those last several we went and Steve talked specifically that you know we were really disappointing kept it under 10 times I would say due to the pandemic and through all the different variables in there in the M&A market, particularly with you know with attractive assets.
The the board the values just weren't higher so we were still in that giving recognition to the market got a little more frothy, we were still discipline, but we will not say that it was below 10 at yeah.
That's right I think look just for investors and we try to be careful here overall, but I think you know I think you can count on us still having good discipline in Mexico.
Well congratulations again on the on the strong results in the really terrific sequential organic growth in the backlog love to see that.
Thanks, Brian more to come and take care.
Thank you I have a follow up with Ken Herbert with RBC capital markets. Your line is open.
Yeah, Hey, Thanks, Chris I Wonder if you could just walk through a bit more of the detail on the cost structure associated or as a result of the sale leaseback transaction, how should we think about for modeling purposes.
The tax impact in and maybe the.
Obviously, the annual lease expense if.
If I understand well, obviously this will flow through structures, but how should we think about the moving pieces of this year moving forward.
Yeah.
Right It will go through structures.
We've talked certainly a lot about the very good news and what with this sale has done in the leaseback has done to the sale has done to our capital capital structure or capital resources, and our headroom on being able to to do things. The flip side of that is you know we've got the lease and so with that we've got roughly I'll call. It four to 5 million.
And when you count so 4 million roughly for the leasing of million for incremental property taxes. So you've got about a $5 million.
One rate coming at you annually that you know that in this market, we're going to look to that facility to do everything they can to you know to offset as much of that through through just being run at an aggressive business and pricing, where it makes sense and everything else. So that we can help offset that along with obviously spending the money on Max steel and other things to make it a.
Yeah, Ken Let me just mentioned they are longer dated facility you know make some pretty unique things in the industry. So you know we feel we as we move forward over the next 12 to 18 months. We have we have fairly good pricing power in 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 despite.
Some near term.
A headwind we think you know the sale leaseback was a homerun for us and for shareholders.
Yeah, Thanks, and if I could Steve just one final question now that you've done Mag seal I know you've had a real focus on on.
Acquisitions and more IP within your portfolio and more aftermarket can you can you level set us here heading into 'twenty two as to what percentage of the total business now represents aftermarket for both both defense and commercial customers.
Ken I think what I want to do is we're gonna have a we haven't you know.
We're going to have some more communication throughout this year I would like to Oh I'd like to get back to you on that as you know I usually do okay.
Okay perfect alright, thanks, Steve.
Tell you this it's growing and we're happy with it and it's in a strategic priority is as I'm sure you know so well.
Alright perfect.
Thank you.
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. Thanks very much just want to thank our first thanks for all the questions and the dialogue we appreciate it.
So once again, thank my team and thank as well our or our investors. We really appreciate all the support it's been obviously, a very challenging two years for 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.
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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Yes.