Richard Greulich: So if the purchase order is to purchase X amount of dollars for this piece? And is that then increase to include the capital spending that’s included in that.
Bobby Lilley: The capital — the offset of the CapEx is part of the contract liability I talked about that’s in the other noncurrent liabilities and it gets offset against depreciation as it amortizes.
Richard Greulich: Okay. Now if supply chain interruptions have been causing a problem with the more steady flow and usage of labor, how can you take that into account when you enter into pricing with the purchase order.
Alex Shen: How do you take into account something that’s like an interruption?
Richard Greulich: Correct. In other words, you said that — and here, I’m talking…
Alex Shen: It’s pretty difficult, Richard, to take into account directly and quote to a customer and say, in case of interruption, I’m going to charge you this much more.
Richard Greulich: Understand. And you’re hearing a question from somebody who has never done any manufacturing administration or management. But if you think — do you think that supply chain interruptions like that will continue on?
Alex Shen: We’re delving into an area of — so we were talking about supply chain interruptions with our customer furnished material, right?
Richard Greulich: Correct, correct. With your supplier furnished.
Alex Shen: With my customer furnished material. So which in this case the supply chain is the actual customer that gave me the IPO to begin with. So it’s kind of puts me in a real bind. I’m jammed up between them and them.
Richard Greulich: Right, okay. I appreciate that clarification. Is there any way you can go back and read negate or we recompense yourself given it wasn’t your fault.
Alex Shen: There are certain limits until I understand the magnitude and until the job is really done, I won’t understand the magnitude because much of our manufacturing spans quarters and sometimes spans two or three years. So to answer your question correctly, do we go back to the customer for things that are not my fault and then do things that perhaps could be the customers fault. The quick answer is absolutely, yes.
Richard Greulich: But it sounds like you don’t do it on a contemporaneous basis.
Alex Shen: We do it every day. We do it in a way that the — so I can get a yes from them. Otherwise, if I can’t give them an answer on, well, how much is it going to be? I don’t know until I spend it all. Yes, it’s difficult to give them a forecast and then change it later and say, “Oh, I need a little bit more.” Well, what is it, right? It’s you know, there’s humans on the other side that also have bosses that need to sign off on, okay, show us evidence of the extra expenditure. Is it all done yet? Because if it is not done yet, than wait or something. What can I get today though. These negotiations happen every day.
Richard Greulich: So from a — an outsider looking at that process, it would seem — I would conclude then that what I’m seeing is the worst possible case of that is you’re getting — you will get no recompense for that. That’s how it’s flowed through the financial statements as of now. Would that be correct?
Alex Shen: No. It’s a mix of all kinds of stuff. Because it’s not just one contract we’re talking about, right? It’s an aggregate of the quarter. The quarter wasn’t spent on making one part.
Richard Greulich: Okay. I want to shift just real quickly to one other thing. Well, you’ve always stated that defense is obviously the major part of the company’s business. You still have precision machinery as part of another — I’m sorry, industrial. Are there opportunities there for revenue growth over the next year to 1.5 years?
Alex Shen: Are there — so that’s a little bit of a trick question, but the answer is yes. There’s growth. But we’re predominantly in defense.
