Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Chris Donaghey – SunTrust Robinson Humphrey.
Chris Donaghey – SunTrust Robinson Humphrey
First of all, on the support and sustainment revenue, obviously very strong in the quarter. Is that $72.2 million just the Force Protection component of support and sustainment, or is there GD component in there as well?
Michael Moody
It is all of the spares and sustainment, which includes the spares delivered by GD under subcontract.
Chris Donaghey – SunTrust Robinson Humphrey
And in the press release it says that you were able to get some gross margin on the General Dynamics-related revenue. Can you talk about that a little bit?
Michael Moody
We are getting some margin in regard to that spares business. In regard to the vehicles, I think you understand there’s just a small royalty fee that is payable. But in regard to the spares there is a margin that Force Protection earns on that subcontract.
Chris Donaghey – SunTrust Robinson Humphrey
And obviously in the quarter operating margin was very strong, certainly versus my expectation. As we start to think about the business going forward, can you kind of walk us through how you are going to structure the company and what kind of target margin structure you may be looking for, say a year from now, when things may be in a more normalized, non-MRAP program type of environment?
Michael Moody
In general terms I think I’ve indicated in my comments that we look to structuring the company with a real focus on getting the best results for our existing customers out of the current products, out of the services and sustainment enhancement, out of those vehicles, so that’s a whole activity where there will be significant focus. And my belief is enhanced improvement.
And as I said, we are looking at a broader range of products, a broader range of customers, which is complimentary to what we’re doing.
In terms of margins, I think that Charles has made the comment before, and he might like to speak here, we have generally looked at our initial targets as industry averages, and certainly that is what we are looking at initially in terms of what we expect to achieve.
I think that this quarter has demonstrated that we are able to enhance performance at the gross profit line and the bottom line. And certainly we have made some significant progress, but I don’t believe that is the end of the progress we can make.
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