Astronics Corp (ATRO) 2009 Q1 法說會逐字稿

Greetings and welcome to the Astronics Corporation first quarter 2009 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deborah Pawlowski, IR for Astronics Corporation. Thank you, Ms. Pawlowski, you may now begin.

Thank you, Jackie, and good afternoon, everyone. We appreciate your time today and your interest in Astronics. On our call today is Peter Gundermann, President and CEO, and Dave Burney, Chief Financial Officer. Pete and Dave will cover the results of the quarter and talk about the prospects for 2009. If you don't have the press release that went out this morning, it is available at our website at www.astronics.com.

As you are aware, we may make some forward-looking statements during the formal presentation and the Q&A portion of this teleconference. These statements apply to future events which are subject to risks and uncertainties, as well as other factors that could cause the actual results to differ materially from where we are today. These factors are outlined in our earnings release, as well as in the documents filed by the Company with the Securities and Exchange Commission. They can be found on our website and at the SEC website, SEC.gov. So with that, let me turn it over to Pete to start the discussion.

Thank you, Debbie, and good afternoon, everybody. Thank you for tuning in to our call. I think I'm going to start my comments with a review of the market that we're operating in. I think that's the big story. That's the thing that's going to affect our future here for the next six, nine months and the word that I use to best describe the markets that we operate in is fluid. There have been quite a few changes in some of the markets and those changes we've reacted to as best we can, but they certainly have their currents and there's some sweeping ramifications that we have to consider and deal with going forward here. So I'm going to talk just for a few minutes about each of our markets in turn, starting with the commercial transport market, which is our biggest, about half of our sales. Commercial transports are the big airplanes built by Boeing and Airbus and operated by airlines around the world and the good news from a market standpoint is that the commercial transport market overall seems to be pretty stable for us at this point.

Certainly, orders at Boeing and Airbus have weakened significantly, but their backlogs are such that the production levels are generally staying high. They've announced a few reductions and a few models, but overall, production at -- in the commercial transport area has remained pretty steady. We also participate, as you -- as most of you know, in the aftermarket of the commercial transport industry, that is fleet-wide retrofits, and those markets are also maintaining themselves reasonably well. There have been some scheduled slides to the right, a few things that we thought were going to happen sooner this year are going to happen later this year, but overall the commercial transport market has -- is holding its own. The military aerospace market is the second market I want to talk about. About 20% of our volume in the first quarter went to the military aerospace market. That market also seems to be pretty stable.

We're on some pretty good programs that have some long legs to them and the military aerospace world, anyway, has been spared by the economic challenges facing the rest of the world, it seems. Now for the weaker markets. The business jet market is about 15% of our sales in the first quarter and this market is just absolutely getting slammed. We are a supplier to most of the major airframe manufacturers in the business jet and private aircraft world and it's hard to quantify exactly the stresses that are going on in that segment right now. Many of them have dropped their production forecasts for 2009 almost to half of what they thought they were going to do a few months ago, say back last August or September. Over the course of six or seven months most -- it's not uncommon to see production volume drop 40%, 50% and it seems to be continuing. We like to think we're at the bottom, but it's a little bit unclear.

We don't have the insight that they do, obviously. We only know what they decide after they decide it. But what I'm reporting to you is that our business jet customers have really dropped their production forecasts and our orders and our production volume is dropping along with it in that market. The other final market that I want to talk about is the test systems market. This is the big part of the business that we bought in Orlando in January and that market has been slow also. A little bit for different reasons, we believe. That business in particular happened to have a pretty strong fourth quarter last year, maybe stealing some revenues out of the first quarter this year, but it's also true that orders that were expected to happen early in the year have not happened yet. They've been pushed out to the right. It's not exactly clear why.

We still think that those orders are out there and we expect as early as the second quarter here to get back on track, but it seems that whether it's the change in administration in Washington or budget pressures or whatever, the military is not placing orders like they were expected to. So in summary, the commercial transport market seems to be holding its own. The military aircraft market seems to be holding alone -- holding its own. The business jet market is really weak right now and the government tests or military test systems market has been sliding schedules to the right, compared to where we expected them to be. I wanted to go through that to put a little context around our results for the quarter and our forecasts going forward. Turning to our results, the best news of the quarter, probably the only real good news of the quarter, is we set an all time sales record. $50 million in the first quarter is the highest we've ever been.

Our aerospace segment was responsible for just under $42 million of that and our test systems segment was responsible for just over $8 million. Of course, a fair amount of the revenue came from our acquisition that we did in late January of DME Corporation. If you were to peel DME out, DME contributed $11.6 million in the quarter. That's for about nine weeks. And our organic business did about $38.4 million. That $38.4 million is significantly off the pace of what we did last year, for example, annualized the $38.4 would come to $152 million. Last year we did $174 million, so that gives you an idea of the dropoff in some of our major markets. Our DME business was also slower or off the pace that we expect it to be on this year. Annualized, it was operating at a $64 million pace. We expect it to be in the range of $75 million, so we are obviously expecting that business to pick up speed over the next three quarters. We're still holding on to that $75 million expectation.

The lower volume across the business put a lot of pressure on margins. Our pretax earnings were $2 million, 4% of sales. Net $1.4 million, 2.8% of sales, earnings per share about $0.13. Looking at the sales into the specific market segments, we do have a correction to point out of some significance in our press release. On page six, the top of the page is a sales by market table and for the three months just ended on April 4, 2009, there's an error in the military aerospace and business jet aerospace numbers. The military aerospace is listed at $8.352 million. It should be $10.5 million. And the business jet is listed at $8.656 million. It should be $6.5 million. Basically we got $2.1 million misclassified as business jet that was really military. When you make those changes, the sales per segment kind of line up with the market overview that I gave a little bit earlier. Year-to-date commercial transport sales are about where they were a year ago, down marginally 4%.

The military aerospace market, as I just said, the number should be $10.5 million. That's up significantly over where we were in the beginning of last year, growth of about 35%. That's the result of some programs going into production at higher levels than what we had in the first quarter last year. The business jet market, the corrected number I just gave you was $6.5 million for the most recent quarter. That's down 31% or so from the year earlier quarter of $9.4 million. So you see the dropoff in the business jet side. It's been -- it's been pretty dramatic over the course when we compare this year to last year. The test systems business that we have in Orlando ran at -- had $8.2 million for the quarter or for the nine weeks we had it and that's an annualized rate of about $45 million. We expect something closer to $55 million for that business, so, again, the slower ordering rate is having an effect on our volume in that segment also.

From my perspective, though, probably the most concerning thing of the quarter were bookings. Bookings were very weak at $30.8 million across the entire business, $28.1million in aerospace and only $2.8 million in test systems. To put these numbers in perspective, I think there are a couple of dynamics to keep in mind. One is that when our customers slow down their production rates, they generally slow down their ordering rates even more and the reason is that they had been ordering to support a higher production rate. They've built up inventory. When they slow down their production, they can chew off that inventory quite a while before they need replenishments from us. So the first quarter, we believe, was a -- an adjustment quarter, where many of our customers were adjusting their own internal inventory levels to line up better with their own internal production forecasts.

And we suffered from that in terms of -- in terms of orders. On the test systems side, it's a little bit of a different dynamic. That business lives on big orders that come very rarely. They might get an order every year and-a-half that then they billed off of for many months and in months where they don't get those orders, the bookings rate can fall significantly below the shipping rate. But even with that explanation, $2.8 million in bookings against production of $8.2 million is relatively weak. We obviously expect bookings to strengthen for the rest of the year. You saw in our press release that we are lowering our revenue estimate to $210 million to $225 million. That's a pretty broad range but in today's environment, we think it's maybe not broad enough. That's down from a range initially of $230 million to $245 million. From my perspective, there are really three keys to the rest of the year. There are three things that we need to have happen in order to make the rest of our year a success in this environment.

The first thing is we need the commercial transport market to hold up. As I said earlier, it's 50% of our sales. There are a lot of commentators out there who are predicting doom and gloom for that market. We don't see that at this point. We see a lot of stability and we hope that the backlogs that are out there at the big commercial transport manufacturers are enough to hold production up for the foreseeable future. The second thing we need is bookings in our test segment. We do have some pretty significant bookings out there or orders -- or quotes out there for programs that we believe are going to come our way. We need our customers to actually get around to placing orders and turning us on. And we expect that process to accelerate here in the second quarter. And then of course the third thing is to manage our costs to the down side. We've taken some pretty aggressive actions in various parts of our business to make sure that our cost structure is lined up more appropriately with our customers' expectations.

We want to, of course, return a reasonable profit in this market, but we also want to stay on top of our customers' desires, because we believe things are going to turn around and when they do turn around we want to have the products and be competitively positioned to -- to accelerate as best we can when that turnaround comes. That being said, with all the little parts moving, our best guess is that the next couple quarters are likely to be similar in nature to Q1. We expect demand to be about the same. We hope that or we expect that bookings will accelerate and based on orders that we believe we're going to get for certain parts of our business, we would expect towards the end of the year to accelerate. So the end of the year should be stronger than the middle part of the year coming up. I think that pretty much concludes my prepared remarks, so we'll open it up for questions now.

(Operator Instructions). Our first question is coming from Michael Ciarmoli of Boenning & Scattergood.

Hi, guys, good afternoon, thanks for taking my call.

Sure thing.

Pete, I guess on the -- or Dave. I'm not sure who wants to take this. Gross margins for the quarter were particularly lower. Can you explain what else went into the, I guess, sharper dropoff in gross margins and can you breakout how much of engineering and development costs were recorded in the period?

Sure, this is Dave, Mike.

Hi, Dave.

The -- the driver in the lower margins was clearly the lower volume. As we've talked about in past calls, we have a fairly leveraged business. When sales are on the high side, we tend to see a lot of that, the margin drop to the operating income line and on the opposite side of that, when we see sales drop or a weak sales quarter, we see the margin deteriorate in the same way. The margins on the -- additionally, on the DME business for the two months we had it, the run rate was pretty low, so those margins for the two months are below what our long-term expectations are there as well.

Okay.

In terms of the engineering spending, we're running at about the same rate we were throughout last year, roughly $5 million a quarter, excluding the DME business.

Okay.

So I think the expectation -- that's an area that we continue to look at, too, as we look out over the next three quarters is where and how we're spending that money. At this point, I expect roughly that rate to continue, barring any -- any changes or decisions we make to move some of that stuff out. Pete talked a little bit about the fluid market that we're in here and the same thing holds true on the development side of it too. It's a fairly fluid market in terms of when customers are looking for things and pushing things out or bringing things in. We're seeing some discussions and some things being moved out a little bit, but for now we're still looking at about $5 million a quarter.

Just if I can add a little bit to that. There are a fair number of projects in the industry, especially in the -- in the business jet world, that are being pushed out. But most are not. Most are being held to the current schedule or reasonably close to it. So we in turn are being held to that schedule. An example is the Learjet 85. I mean, obviously if Lear or Bombardier were to postpone or suspend or cancel that program, we would have immediate relief in our E&D spending, but they are not. And so either are we. And -- and I will also tell you that there are, even in this downturn, certain programs that I think are really exciting and they're going ahead and they're programs that will go for many years and you've got to decide now whether you want to be on them or not. Our attitude is we want to be on them. So there's not exactly as much flexibility in some of those projects or spending as you might expect.

Okay. That's helpful. And then just do you have the percent of Panasonic related revenues in the quarter?

I don't have that with me right now. Let me see if I can get it by the end -- by the of the call.

Okay. All right, so I'll let you work on that. And then, I guess, on the DME, it looked like in the K you guys filed a while back, I guess, their 2008 revenues were $86 million or so. It seems like you guys are projecting a much lower run rate. Did anything change in that business or in that $86 million were there any large orders that were not going to or would make for a tough comp this year that are not going to be repeatable? Just trying to get a sense as to what's really happening. They've been on a pretty good growth trajectory and it seems like they're really fallen off. Is it just the lack of orders coming through right now?

We would -- I would say -- well, two things. First of all we're -- our $75 million isn't a full year.

Right.

You've got to remember that.

Right.

It's 11 months. So that explains part of the difference. Part of the difference is one of timing. There are some big programs that they are regularly part of and they get regular orders and for whatever reason, an order that was expected as early as last October hasn't come in yet. And we can't seem to get a good reason why. I don't think it's systemic or indicative of a major systemic problem at the business. I think it's a situation more of order timing. I've been down there quite a bit since we purchased that operation. I've been down there twice in the last couple weeks. I think the enthusiasm and momentum in the business remains pretty strong, it's just a matter of getting the orders to break free.

Okay. And then last question and I'll get out of the way here. It seems like there's a lot of not only talk but activity in the in-flight connectivity space, especially with some of the cellular based providers. Aircell is making a lot of noise, I think you've got Row44 out there as well, combining with some of the satellite providers. It looks like there could be just with Aircell alone outfitting, I think, the Delta fleet, maybe near-term about 2,000 planes in terms of opportunities. Do you guys see or have -- I'm sure you have the potential to get your in-seat power products in there. I know you always talked about that as being part of your strategy, if a commercial carrier is going to deploy Wi-Fi throughout the cabin, it should be logical that they give passengers the opportunity to plug in their devices. How is that area or are those, I guess, talks progressing? Do you kind of see some order flow coming from that kind of, I guess, momentum building in the near-term?

Well, it's -- first of all, by policy, we think anything that requires computers or personal electronic devices in the cabins of airplanes is wonderful. We think that the development of these Wi-Fi or cellular type systems and the widespread implementation of them is a great thing, because you're right, an airplane, an airline that puts that kind of system on but doesn't put power on is going to have less than optimal utilization of the system and perhaps some little disappointed customers. A lot of times, though, those systems are going on airplanes that already have power. It's not a one for one -- .

Right

-- one to one kind of sale. So I can't tell you -- obviously, if an airline like Southwest that really is very light on the amenities for customers, if they were to go with some kind of system like this in a widespread way, we would think there would be a very good opportunity for a pretty large in-seat power sale at the same time or close to it. But most airlines have some level of implementation already in existence. The issue is, are they going to do it nose to tail? Are they going to do it every single seat or every other seat or every row or every other row or just business class or how does it -- how does it work. But again, in general, we believe that those systems -- that those Wi-Fi systems are going to drive more demand for passenger power.

Okay. Fair enough. Thanks, guys.

Sure.

(Operator Instructions). Our next question is coming from Tyler Hojo of Sidoti & Company.

Good afternoon.

Hi, Tyler.

I guess if you wouldn't mind first just kind of starting to talk about the DME business and kind of how that's performing relative to your expectations when you acquired the business.

It's light. It's definitely light. It's lighter than we thought it would be at this point. So is our base business.

So you didn't expect the revenue to be as back end loaded, considering that you're kind of holding the guns, is that a good way to look at it?

Yes, I think --

Yes, we expected some back end loading of the revenue.

Oh, I see, for this year you're talking.

Yes.

Okay, got it. Go ahead.

But I think what Pete's referring to is that we're -- is the lack of orders that we expected by this time, that we would have seen come through is what's seems to be held up in the process. But we did expect going back to January and February that the year would be fairly back end loaded here.

Right. But we just -- we didn't expect to start off quite as weak as we have.

Okay. And I mean, maybe you could talk a little bit about the margins. I guess you had about $0.5 million in amortization expense on the test systems business. But I mean, where can -- where can those go? I mean, 2.4% seems a bit anemic.

2.4%, the margin, right?

Yes, yes, 2.4% operating margin.

Yes, it is. And again, it gets to the low run rate for the quarter. So I think we have to have volume pickup to have margin expansion, not only with the test business but it's the same story with all of our business.

The other side of it is managing our cost infrastructure, obviously, and that's something that's actively under consideration also. We're down in our organic business about 13%, 14%, 15% people-wise at this time last year.

And I mean, specific to the test systems business, where do you -- I mean, since this is completely new to us, where -- maybe you could just provide us some sort of indication of where you think the margins could go. I thought you said that DME would be kind of comparable to Astronics, just kind of on a --on its own.

Okay. That would be our expectation in a normal case. I think their -- the DME business is really experiencing many of the same things that our organic business is right now, in that our infrastructure and our expectations were built for a different level and things have changed so rapidly that everyone's kind of scrambling to get adjusted.

And in the press release you kind of mentioned taking some -- right-sizing the business or taking costs out. Just wondering if there were any sort of quantifiable charges regarding to that?

No, not necessarily, no. It's -- we have six operations and each operation has its own niche and expertise and situation and frankly, some of our operations are running very solidly at capacity. Some of them are much slower. It really depends on the products and the market. I wouldn't say we have any large scale charges buried into our financials to disclose.

Okay. And -- and how about going forward, just in kind of the context of kind of right-sizing the business for kind of further -- further slowness.

Well, we're hoping we're fine right where we are. We -- a couple more quarters of $30 million bookings and that might change a lot, but we're not expecting that to happen. So it's one of those situations where we're going to stay on our toes and we're watching, trying to read the tea leaves and see what our customers tell us and we'll respond accordingly.

Okay, understood. And just lastly from me, on -- at the end of March Fed [Des Ops] put out a presolicitation for Viper T, specifically naming DME Corp. Just wondering if that was one of the -- one of the opportunities that you guys were kind of looking at.

Well, Viper T is certainly a major part of what we do. For those who are listening who don't know what that is, it's a test system for the Marines that they have standardized on. So much like an organization might standardize on a type of computer, the Marines have standardized on a specific test platform. That platform is called Viper T and that program comes from us and if anyone on the call is planning on attending our shareholder meeting here in East Aurora, New York tomorrow, there's going to be a Viper T live and in operation in the room. It's a pretty impressive piece of hardware. But the presolicitation you are talking about, I don't think it had any numbers associated with it, right?

You could always fill in the blanks. (Laughter).

Well, I don't think it was a major one is what I was going to tell you. The way these things work is there's a standard test system called Viper T but Viper T is by itself useless. In order to use it to test something, you have to have what's called a test program set, which is all the cables, the software, the pro -- the brains or the kind of the instructions that you need to test a specific radio, let's say. If you have a radio that you want to test on Viper T, you have to have that radio's test set and we or DME are in the business both of providing the test hardware, the Viper T system in this case, and the test program set to test whatever the item is that the military wants to test. Does that make sense?

Perfect sense.

Might have a standard Windows based computer, but in order to use it you have to have software and that software, the application software is kind of what a test program set is. I think the presolicitation you're talking about might have been a test program set, which is an important part of our business because every time they change their radio or they change a scope or they change some kind of communication device, the test setup also changes. So it's kind of a recurring revenue stream and since we make the tester, the Viper T, we're obviously well positioned to also do the test program sets. So we have existing contract vehicles to do that kind of work as our customers see fit.

Okay.

And so the way that community works, a majority of the jobs that we get will show up in some of those standard publications. I would caution you against getting too excited about them individually.

Okay. I mean, was there anything kind of specific that you were -- when you mentioned your three keys, just on the defense side or the DME side, just in terms of some of the big orders that you were looking for?

Not that I'm comfortable talking about. They're competitive in nature. There is a Viper T follow-on that we are looking for and expecting, but we're having a hard time getting real firm sense of when that one's going to be coming. But there is one or two -- there are one or two others that are of significance that are in competition right now.

Okay, great. And just lastly, I don't know if -- you probably don't have this because Dave didn't give it, but just the R&D spend rate including the acquisition, would that $5 million change meaningfully?

Yes, DME's kind of running at about $1 million a quarter, roughly, on R&D type stuff.

Okay. So it would be $6 million all-in? All right. Great. Thanks a lot.

Sure.

Thank you. Our next question is coming from Gregory Macosko of Lord Abbott and Company.

Yes. Thank you. I would just like to have an understanding of the product areas. You haven't talked much about the growth rates there. I assume those growth rates are correct. They weren't varied because of the change in the aerospace segment?

You mean on the bottom of page six there?

Yes.

They should be correct; right.

Okay. Tell me where the overlap in the aerospace segment is with DME and give me a sense of the core growth rates of those sectors.

Oh, you mean without the acquisition?

Yes, right.

The acquisition creat -- contributed -- are you going to pull up something specific or should I wait?

In aerospace?

Yes, in aerospace, yes.

$1.6 million.

Oh, so that's all then? And where was that?

That's on air safety products it's $1.6 million.

I have it.

And in air field.

In air field lighting was another $1.8 million.

So 1.8 was -- and 1.6 in safety. Where's that?

That's in the lighting stuff.

Okay.

That's a level down.

It's mostly in commercial trans -- or -- it's mostly in lighting.

Okay. So basically the other three are basically the original, the core businesses and the 10 minus 15 and five are kind of a core growth number?

Right. That's safe to say. The 10 would probably without the addition be eight or seven or something.

I see. Okay, very good. Tell -- give me -- give us a feeling of, particularly in the electronics, the areas that were weak and that backed off, the kinds of products. And I understand that business jet was very weak and obviously commercial transport was weak as well. But give us a sense of the products that are doing well and the ones that are not doing well.

Well, the chart that you were just referring to would suggest that our cabin electronics is not doing well. However, it's important to keep in mind that that product line has been largely driving our growth and our success here for quite a few years. Cabin electronics is -- is what -- is a kind of a product area that is mostly for in-seat power or passenger power and while this chart may make it look like it's not doing well, one of the programs which we're sitting on is, for example, the 787 situation, where there are two approved suppliers for in flight entertainment, Panasonic and Talus. And we provide power for both of those systems. So pretty much anybody who buys a 787 who puts in flight entertainment on it, and we think they pretty much all will, will get our power system. So it's a core area of ours even though the growth here looks like it's dropping 15% over a year ago. We have pretty high expectations of that product going forward. And I -- I look at our product lines across the board and I think we're -- we're pretty well positioned.

Now, with regard to the electronics, would you say that then it's basically driven by the build rate and that's the reason for the down 15?

No, it's roughly 50% new aircraft, new production and 50% fleet retrofits.

And with a -- and they both were down similarly is what you're saying?

Well, here's where it gets a little complicated. Our biggest customer as a Company is Panasonic. Panasonic has a number of in-flight entertainment families, one of which, their most successful one, uses our power system. So they buy our power system, whether they ship it to Boeing for a new 777 line fit or whether they ship it to Thai Airways on a retrofit, we don't necessarily know.

How about the inventory in the system? Have they over-ordered and then there's -- they have to burn that off.

No, they do a pretty good job managing their inventory.

Okay. So your sense is then that both sides are down, you don't know exactly, but both pieces are down similarly, shall we say?

Well, I wouldn't get too worked up about any one quarter on this particular product. I also off the top of my head can't tell you if the first quarter of 2008 was a real record quarter. It might have been. So any comparison might make it look weaker than it is. We're expecting cabin electronics to strengthen a little bit as the year progresses here and we think there's some upside potential to our expectations in that particular product line.

Could you do the same in aircraft lighting?

Well, aircraft lighting is mostly a military and business jet product. We do a lot of cockpit work in the business jet world. We do exterior work in the military world and we're experiencing pretty strong military sales. I'm a little bit surprised, given how weak the business jet world is, how strong our lighting sales were in the first quarter. I will admit that. But we're expecting that level to moderate perhaps as the year progresses.

Okay. And again, that is -- is there a retrofit versus new in that business?

No, that's pretty much new production.

Okay. And then anything similar on airframe power?

Airframe power is pretty much new production too. The primary activity in that product area, we do a lot of military missile work there. That's a major program, so that would be military. We probably categorize that as military aerospace sales and a missile is kind of a disposable airframe from our perspective and a fair amount of our revenue is for that type of product. We're also working really hard and spending quite a bit of money right now developing an electrical distribution system for the Lear85. I think I mentioned that earlier on the call here. So that's a -- gets a fair amount of activity. I would say that we have some pretty impressive technologies and competitive advantages in this particular area, even though it's not one of our biggest product areas at this point.

Okay. And then finally, just with regard to your statement on the product development engineering, R&D. Where would you say, just generally, give us some flavor for the where the development is being focused. I sense you said with regard to airframe power, that was one that you looked at. The Lear 85, et cetera.

Right. Right, that's a program where we're developing an entire electrical system. I think there are like 12 or 14 components to the system and it's a fairly complex development process. Our system in particular is technically advanced compared to what most systems are like out there. So we have a lot of effort under way in that area. Another example -- well, frankly, our in flight entertainment customers, there are two that matter, Talus and Panasonic. If they ask us to do something, we do it.. And -- because we believe that we're pretty good at power distribution. They're really good at entertainment and games and kind of the more retail end of an in-flight entertainment system. So for a while now, they've been happy to work with us and have us do the power side of it. And so given the kind of Company PR, we've kind of made a deal with them where we do whatever they ask us to do and we think that's going to stand us in good position and we do spend some time and quite a bit of money pursuing that. It's not a contractual obligation, necessarily, like the Learjet program is at this point, but we view it pretty much the same way.

That's the majority of the types of things we spend money on. There is one other important category where we are developing a technology that we feel is very promising in the starter generator world. Starter generators on jet engines are prone to failure and actually one of the biggest maintenance items and unscheduled maintenance items on an airframe. And we believe we have some technologies that could be game changing in terms of the performance characteristics of these types of systems. But it's a very expensive development effort. The machines basically start the motor and then they turn around and produce electricity that drives everything in the airframe. So they're flight critical and obviously a new technology in that type of area is treated pretty carefully. But we have flight tests going on and it's, again, not something that we're contractually obligated to do, but it's one of those areas that we're not the only ones doing it. There's a lot of interest in it and if we want to be a supplier five years from now, we've got to get it developed now.

So it's five years out?

I just picked that out of my head. I hope it's sooner than that.

All right. Sorry to take a lot of time. Thank you.

It's all right.

Thank you. Our next question is coming from Dick Ryan of Dougherty & Company.

Say, Dave, on the amortization for DME, 500 in the quarter, is that -- should that be a level we look at going forward?

Yes, we're -- we're looking at roughly about $3 million a year, maybe a little bit under $3 million a year in amortizing that acquired intangible cost. We're still in the final stages of completing the assessment, the appraisal on that, so by the end of the second quarter that will be finalized. But I'm not expecting any significant changes to it, but the report and the analysis is in a preliminary phase right now.

Okay. And you may have addressed it. SG&A trending going forward, what should we expect there?

10% is the number that I look at. We're a little bit higher in the first quarter because our revenue was low, but I think our current run rate is about where I expect it to be going forward.

Okay. Okay. And I know I think most of that was taken care of last quarter but is there any -- any exposure left on the Eclipse side?

Yes, we have inventory and I'm trying to recall what the number was. It's the same number that we had left at the end of the -- end of the fourth quarter to service spare parts for the most part. I think it was 50 ship-sets worth of stuff. I don't have the number in front of me, but it hasn't changed a whole lot from 12/31.

Okay. Great. Thank you.

Thank you. Our next question is coming from Michael Ciarmoli of Boenning & Scattergood.

Hey, guys, thanks for taking the follow-up. I may have missed this but, Pete, the -- on your sales by product, you only broke out the lighting, cabin electronics, airframe power and your air field lighting. Can you give us a sense how some of the other product sales roll up in there, like you used to breakout the external lighting, the cabin lighting and the cockpit lighting.

Right. We don't plan to do that any more, but a majority of it is cockpit.

Majority goes into cockpit?

Right and external is a growing area and cabin is probably our weakest area, although we are doing quite a bit of work on the A380 that's kicking up right now and we have some other prospects that we're pretty excited about.

Okay. And in terms of -- obviously, the joint strike fighter, the outlook looks pretty good there. You've got product on that aircraft. Any near-term expectations with the change in funding plans? I mean, certainly it doesn't sound like the production rates have changed too much, though.

For joint strike?

Yes.

No, we don't expect joint strike to be a major contributor here for a couple years.

Okay.

But the development is going along pretty well and we've learned a lot from that program. We've benefited tremendously from it.

Okay. And did you guys -- you were talking about, I guess, the bookings may be ticking higher. Did you have sort of a book-to-bill expectation for the full year?

I don't know if we've got that far yet.

Okay.

We obviously like to see bookings exceed shipments over the course of a year. I think what you're getting to is 2010, obviously, and in my mind the big issue in 2010 is what's going to happen in the commercial transport arena, because bookings there have been weak and they've managed to maintain their shipping rates. Boeing and Airbus have both announced, I would call, very modest reductions in certain airframes for next year. If that's all that happens, I'll be thrilled.

Okay. Okay.

But we don't -- I don't pretend to have a whole lot of insight there that you can't get by reading aviation week or something.

Sure. And then Dave, did you dig up that Panasonic number, the percent of sales?

Yes, sir, $9.1 million.

$9.1 million. Okay. Perfect. Thanks a lot, guys.

Sure.

(Operator Instructions) There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

Great. Well, thanks, everybody, for tuning in. We welcome the opportunity to talk with you and we look forward to it again next time. Have a good day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.