Question-and-Answer Session
Operator
Thank you, Sir. (Operator Instructions) And we will take our first question from Michael Carboy. Go ahead please, your line is open.
Michael Carboy - Signal Hill Capital LLC
Good morning, ladies and gentlemen.
Zsolt Rumy
Hi, Michael.
Michael Carboy - Signal Hill Capital LLC
Good morning, Zsolt. I'd like to explore operating leverage here, in the context of manufacturing under capacities. Could you give us a sense, Zsolt, of the split in terms of your cost of goods sold for energy costs versus other ACN costs? What I'm trying to get at is, how much margin lift there might be as plants come back up to capacity over time?
Zsolt Rumy
Generally, we have used this 1/3, 1/3, 1/3, meaning 1/3 energy, 1/3 ACN cost and 1/3 labor, not labor, but labor packaging and all the other depreciation and everything else. Obviously, when ACN is $2400 versus $1200, it's a bigger percent than when it's lower cost. So there are some fluctuations in that percentage. But in general terms, that's kind of a rule of thumb.
Michael Carboy - Signal Hill Capital LLC
Because fully loaded, you ought to be about $0.50 per pound in depreciation, right?
Zsolt Rumy
Yes, approximately.
Michael Carboy - Signal Hill Capital LLC
Okay, and do you have any plans at this point to expand beyond four lines in Mexico? And if so, when do you need to start planning and ordering for that?
Zsolt Rumy
Well, two things. As I mentioned earlier, that we really have significant opportunity for growth. And as I mentioned in previous conference calls and in our annual report, too, we are looking at this joint venture concept. We have a couple of interested parties that we may end up joint venturing some, at least part of our future expansions and that would eliminate any capital requirements from our side. Nevertheless, unless we get a very significant contract, there are really no plans for any expansion. And I want to reiterate that we can, in fact, expand in six-month increments. And in Mexico, we have a plant or a building that can take another 5 million pounds without constructing a new building. So that is a stopgap, immediate response to any new contracts that we may have.
Michael Carboy - Signal Hill Capital LLC
Okay, and then on the aerospace side of things; could you share with us your views on the timetable which you see existing steel brake fleet being retrofitted?
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