Astronics Corp (ATRO) 2010 Q3 法說會逐字稿

Greetings, and welcome to the Astronics Corporation Third Quarter 2010 Financial Results Conference Call. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jim Culligan, Investor Relations for Astronics Corporation. Thank you, sir. You may begin.

Thank you, Diego, and good afternoon, everyone. We appreciate your time and interest in Astronics. On the call with me today is Pete Gundermann, Astronics' President and CEO, and David Burney, Chief Financial Officer. On the call they will be covering the third quarter 2010 results, as well as the outlook for the Company and we'll conclude with a question and answer period. If you don't have the release that went out this morning, it's available on the Company's Web site at astronics.com.

As you aware, we may make some forward-looking statements during the formal presentation and the question and answer 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 documents filed by the Company with the Securities and Exchange Commission, which can be found at our Web site or at SEC.gov. So with that, let me turn the call over to Pete.

Good day, everybody. Thank you for tuning in. We're going to talk about our third quarter results, year-to-date results and what we see happening here in the immediate future.

In summary, my feeling is that our third quarter was a really great quarter for Astronics. We didn't set too many records but, taken in its totality, arguably our best quarter ever. We had revenue just shy of $50 million. I think we've had one quarter in our history where we were higher than that. Our revenues for the quarter were up marginally from $48.6 million in the third quarter of 2009 and up from $47.1 million in the previous quarter, the second quarter of 2010. 92% of our sales were from our Aerospace segment, $46 million out of the $49.9 million, definitely our strongest Aerospace quarter ever. The remainder, $3.9 million, or 8% of the total, came from our Test Systems segment and we'll talk about both of the segments more in a minute.

We were quite profitable on that revenue level. Our net profit for the quarter was $4.6 million, up significantly from the third quarter last year, when we had net profits of $2.5 million, and up from the preceding quarter, where we had similar profits of $2.4 million. That's $0.41 per diluted share for the immediately concluded quarter versus $0.23 a share in the third quarter last year. Bookings also were very strong. We had bookings of over $62 million in the quarter, way up from $44 million in the third quarter of 2009. Some of that booking level was perhaps timing but, no matter how you look at it, shows pretty solid demand, continuing demand and strong pull from our market. That's a book-to-bill ratio of 1.25 and it meant that, at the end of the quarter, we had, again, a near record backlog of $110 million. I think we have been above that level, maybe in one quarter previously.

So, with those kinds of results in our third quarter, our 2010 through nine months is shaping up to be a pretty solid year. Revenue of $144 million, and that's actually down slightly from $145.6 million last year through nine months; again, 92% Aerospace, or $133 million of the total, and 8% Test Systems, or $11 million of the total. On shipments of $144 million, we have net income of $10.5 million, which is up substantially, 80% or so, from our 2009 net income of $5.9 million. That's a net income level of 7.3% of revenues and $0.94 per diluted share for the current year versus $0.53 through nine months last year.

We've been able to achieve those results while maintaining our engineering and development investment. We're at $21 million in our cost of goods this year, which is pretty much the same as where we were at this point last year. We've been generating quite a bit of cash; we continue to do so. At the end of the quarter, we had over $22 million cash on our balance sheet and a net debt of about $16 million, so we're pretty conservatively financed and we have available room on our credit facility in the neighborhood of $35 million.

Before digging into the segments, I wanted to talk a little bit about the overall trends that are driving these results and helping us quite a bit, and one of those results which is maybe obvious but worthy of bringing some attention, is that we've been facing some pretty stable demand in the recent quarters and that's-- for those of you who have been following us for a few years, you know that we went through a real big growth spurt for a number of years, up until the recession hit, and then we had a pretty abrupt adjustment to make. And the point I want to make is that when you have that kind of change happening in your demand, either to the positive side or to the negative side, it gets real hard to fine tune your infrastructure and your cost structure because the market is very much a moving target.

Today, we benefit, so to speak, by having relatively stable demand. We're not experiencing the growth we did a couple of years ago, but when you have pretty stable demand, you're really able to dial in your infrastructure and your work force and, as such, we're able to optimize our profitability in ways that was a little bit more difficult a couple of years ago. For example, our headcount is down about 20% this year over where it was this time last year, even on comparable sales levels. T

he other thing that's worth mentioning is that, in our Aerospace business in particular, we have a marginal contribution of about 50% of the incremental sales dollar. So, in looking at the quarter that we just concluded, comparing it to the previous quarter, revenue was up just about $3 million and, on that, we would expect to see increased contribution of about $1.5 million and that's pretty close to what we saw. There were a couple of other things going on when you look at the second quarter to the third quarter, but when we move from $47 million and make a certain profit up to $50 million and we'd expect to make substantially greater profit in percentage terms and that's sure enough what happened.

We've experienced some cost savings last year to this year that's also contributing to our overall results. One of the more notable ones is the lower intangible asset amortization from our DME acquisition a year ago; that's saved us about $1.8 million in costs so far this year as opposed to last year. That helps explain some of the difference. And also we've had some product mix changes that I'm not going to spend a whole lot of time weeding through, but we've had some older programs that have kind of died out. Maybe one that's worth mentioning is our Eclipse program from a couple of years ago. That has been replaced by a more profitable business. So, you take all that into account and I think it helps explain why we're doing as well as we're doing on the bottom line now, both in the last quarter and year-to-date compared to previous periods.

Moving to the segments, looking at our Aerospace business, again, 92% of total or $133 million; that's up 11% year-to-date over where it was last year. All of our profits come from our Aerospace segment. With 92% of the total, we certainly are and remain an aerospace company, primarily. Looking at the segments and the product lines - how we divide the business, and I'm referring specifically to the tables on the second to the last page of our press release here -- our cabin electronics product line to the commercial transport industry continues to kind of carry the day in our business. Transport sales year-to-date are $80 million, 56% of our total and up 20% over our 2009 year-to-date numbers from a year ago. Most of our transport sales, or a lot of our transport sales, are cabin electronics; that's our in-seat power product primarily; year-to-date sales of $63.5 million, which again is 44% of our total revenue and up nearly a third, 31% over our first nine months of 2009. So, commercial transports are very important; our cabin electronics sales within the commercial transports business similarly very important.

Another bright spot which we haven't talked about a whole lot in the past has to do with our FAA, or airport lighting. That's part of our DME acquisition a year and a half ago. Airfield lighting is $9.3 million year-to-date through the first nine months; that's up 50% over where it was for the first nine months last year and it's a positive indication. It's more due to timing from the FAA than anything else, but we have a couple of programs going on that we call design/build programs with specific airports that are doing construction projects and when those construction projects come our way, we tend to have a nice kick in our income statement.

The military part of our Aerospace business is down slightly this year, $25.3 million through the first nine months, down from $29.5 million last year. That's primarily due, as we've mentioned in the past, to the conclusion, at least temporarily, of the Tactical Tomahawk Power Conditioning Unit that we build. That is a cruise missile program; we expect continuing involvement in that program. We're just in a little bit of a gap from production, which will last through this year and into next year. And then there's the business jet business, $17.3 million so far this year, up slightly from $16.9 million through the first nine months of last year. That's about 12% of our total revenue and it's a varied picture in business jets. We are happy that our customers are not in freefall like they were a year ago this time, but some of the signs that looked like they were going to be more positive three or four months ago are a little cloudier today. It seems that demand hasn't picked up exactly the way they had forecast it, and I can't speak necessarily for the business jet manufacturers themselves, but our sense, looking at the press releases and looking at their forecasted demand in the near future, is that they are by no means out of the woods yet. Things may get a little bit worse for business jet manufacturers and business jet production going forward here than we had hoped. Our outlook for the Aerospace segment is positive and overall our bookings so far this year are $155 million. That's 17% ahead of our shipments, and we think continued strength in the commercial transport side and the military side will offset any weakness that we may run into from business jets.

Our Test Systems segment, revenues of $3.8 million in the third quarter, $11 million year-to-date; that's about 8% of our total. It's the same story as last quarter when we talked. We are not profitable at that level. We know we're not profitable at that level. We've experienced an operating loss year-to-date of about $1.4 million on that Test Systems segment. Bookings year-to-date are $13.4 million. I guess if there's a good sign, that's about 20% above what our shipments have been so far this year, suggesting that our production level in the near future should start to inch up. But the big news there is that we continue to have pretty strong quoting activity, and we're going to talk about our 2011 plans briefly but one of the biggest questions is, what do we think is going to happen to that Test Systems segment? And, at this point, it's a little hard to predict because a lot of these seeds we've been planting have not shown themselves and have not been determined a win or loss, from a bidding perspective. It hard to predict what our revenue is going to be there going forward. But I think it's safe to say that, based on the bookings that we have experienced, that we bottomed out; it can't get a whole lot worse.

So, looking forward, I mentioned earlier our second quarter bookings were $62.5 million, 25% above shipments for the quarter. That brought our bookings year-to-date to $169 million, up 46% from where we were this time last year. Obviously, that is a big relief and a big improvement. This time last year, sitting on that booking level, we had real questions as to how this year was going to shape up and work out, but the bookings have come through and they've come through very nicely, exceeding our shipment level by about 17% so far this year.

Based on that bookings and our current expectations for the fourth quarter here, we've tightened our revenue guidance to $191 million to $195 million for the year. In February, we started out the year saying that we would be in the $170 million to $190 million range, so we've inched that up. I expect we're going to be at or near the top end of that range, around the $194 million, $195 million level. As always, though, there is some downside potential, but I'll also say that there's some upside potential, so we could vary around that level by $1 million, $2 million or $3 million, but I'm expecting at this point we're going to be at around $194 million, $195 million for the year.

We do not habitually forecast the bottom line performance but, invariably, somebody's going to ask when you look at the numbers, does that means we expect our fourth quarter top line to be similar to where it is in the third quarter, and given that we don't see any major changes happening in our cost structure one quarter to the next, it's reasonable for us to think that if our revenue comes in similarly in the fourth quarter, that we're going to have another pretty strong bottom line performance in the fourth quarter, also.

Our 2011 shipment forecast is in development. We're not ready to talk about that in a whole lot of detail yet. We usually roll that out in January with our year end results, but we're reasonably optimistic that 2011 is going to be another pretty good year for the Company. When we do our forecasting, we take a number of things into account and one of the things is, and probably the easiest thing, is basically production rates at the OEMs. It's usually a pretty good indicator. People usually have a pretty good handle on what production rates are going to be for airplanes and we know what we put on the various airplanes so it's pretty easy to add up those numbers and that part of our business base is usually pretty predictable, 2009 notwithstanding.

The second part has to do with retrofits, primarily for fleets of commercial airlines. As time gets closer, that retrofit volume gets a little more predictable and we're thinking that that will be roughly similar next year to where it was this year. The final side and probably the most wide open side at this point has to do with our Test Systems business. Again, we have a number of pretty significant contracts out under review. It's hard to predict whether we're going to win them or not. We have learned to be a little conservative there, but we've also learned that it's hard to predict even when they're going to be awarded. And with the current administration and the way they've been managing things, contract schedules seem to be even less predictable than normal. We'll talk about 2011 in January but, at this point, we expect it to be a similar year to 2010, perhaps a little bit better if all the things line up appropriately.

I think that ends my prepared remarks, Diego, so if there are questions, we'll take them now.

Thank you. (Operator instructions)

Our first question comes from Tyler Hojo with Sidoti & Company.

I was just wondering, in regards to Test Systems, at what kind of quarterly run rate do you think you need to be in terms of sales volumes to be basically breakeven? I mean, I think your guidance implies something in the $5 million range for the fourth quarter. Is that enough to get you close to breakeven?

It should be close. We'd expect it to be kind of closer to $6 million, somewhere in that range. It varies quite a bit on the program and the product mix, but the other thing to keep in mind with that business is that it's got a really high variable cost element to it. We can make it profitable on $500,000 in revenue if we absolutely needed to. We're maintaining cost beyond what the volume there supports in anticipation of certain programs which we think are coming our way, so we think that's kind of a self-correcting issue, sooner or later, one way or another.

That sounds good, and in regards to kind of strategy there, I noticed that some of DME's test systems were highlighted in some Thales material. Just wondering if we should expect more of that kind of on a go-forward basis, in terms of growing the current sales base, and is that kind of what you're alluding to in terms of opportunities for 2011?

That's certainly one of them. For those unfamiliar, Thales is a prominent military radio communications manufacturer. They sell radios all around the world and one of the challenges that they face, along with other radio manufacturers, is providing some means for their customers to test their radios in the field. That's not something that they do particularly well. In Thales' case, they've been impressed enough with some of our equipment that they're promoting it. I don't think they're actually using our name though, are they, Tyler?

I didn't see your name, but I saw the product.

Yes, the product is our product and it's our kind of model number and it's-- anybody who knows our stuff would recognize it, but Thales is basically reselling it to their customers and this is something that started just recently and we think is going to be pretty successful. Let me deviate even a little bit more and say that the product in question is very similar to what we proposed to the Marine Corps for that GRMATs program which we were competing for a while back. And we continue to believe that, even though we lost that program, our technology is pretty good and it gets pretty good reviews whenever we get to show it and that Thales situation is an example of why we're somewhat optimistic. If Thales, who knows military communications pretty well, has decided that our product is the product that they should promote to their customers around the world, it further reinforces our belief that we've got something pretty good, even though we haven't sold a lot of it yet.

You have sold some?

We have sold some. I'm not sure I can talk specifics. They're not stocking our product; what they're doing is basically ordering it to satisfy orders they get and, you know, we think we're going to be able to talk about order volumes on that pretty quickly.

I guess we'll wait to hear more. And just in regards to, you know, kind of the core Aerospace business, I was wondering if you could maybe put some borders around what you're generating from the commercial aftermarket and what's more tied to OEM? And is that OEM level- the OEM level of shipments, you know, are you already shipping to kind of the anticipated production rates for 787 yet, or is that still in front of you?

Well, let me get that one first because it's easy. We are not really shipping any 787 right now, and looking at 2011, we do not believe that we're going to be significantly affected by the 787 in 2011 because we've already shipped 30 shipsets or so of product to our customers for 787 already; we did that last year, even the year before. So, we're a little bit ahead of the curve. What that means is that when Boeing starts ramping up 787 and all of the suppliers around the world start talking about the 787 impact on their financials, we're going to be strangely silent. That doesn't mean we're off the program; it just means that we've got to wait for that inventory that we've already shipped to get through the process.

As to aftermarket, our best guess is a third to half of our in-seat power product goes to existing airplanes, somewhere in the field. It's a little hard to measure because when we sell a program to an airline, part of it may go to their existing fleet, part of it may go to new lines of the airplanes being built at Boeing and Airbus.

From a strategic perspective, it doesn't really matter to us. The challenge we have is, when a new airplane is developed at Boeing or Airbus, like the 787 or the 350, our interest, our initiative, is to get our product on that airplane as a standard feature. But at the same time, we maintain a continual presence with the airlines around the world so that they are aware of our product offerings and may standardize on our product even before they pick whether Boeing or Airbus are going to be supplying their product. So, we pretty much price it the same way, we pretty much sell it the same way. It's not a situation where we get very different margins or very different pricing, you know, say, from an airline than we do from Boeing or Airbus. I know some companies and maybe much of the industry is set up that way. That's not the way our business works.

I mean, a third to a half of your deliveries, I mean that's more of a guess than anything else, is that fair?

Yes. Save, do you want to fine tune me here?

Yes, that's about right

I think that's reasonably accurate. I mean, a big part of what we do is we sell parts to the IFE guys and, you know, once we sell it to them, we don't always know where it goes and it's the same product, whether it goes on a new, you know, 747 or it goes on an old A320.

Right, I get that. It just seems like, given that the aftermarket has been relatively weak, I mean we're seeing signs of recovery over the past couple of months but, in light of the fact that it has been weak, your results have been pretty strong and it just seems like kind of a high number to be shipping to the aftermarket, to me.

Well, I think our sense is that there are pockets of strength around the world and airlines are increasingly willing to consider and spend money to improve the passenger experience and we happen to be in a niche that I think benefits from that tendency pretty strongly.

Well, I'll let somebody else ask some questions. Thanks a lot.

Thank you. Tyler, one other thing I should mention, we do a lot of aftermarket work with airlines. One of the frustrations we have is that they tend to have pretty high barriers in terms of letting us talk about it. You know, they tend to be retail-oriented companies and they want to control their message out to the market. And we've had a number of situations recently where we've been involved in programs - pretty substantial programs with name brand airlines -- and they decline to let us talk about it, so we can't and it's a frustration we have. We're trying to figure out how to get around or manage that communication barrier, but it is something that, I think, if we could talk more freely, I think it would answer a lot more questions.

Our next question comes from Scott Lewis with Lewis Capital Management.

Hey, Pete and David, very nice quarter all the way around.

Thank you.

I'd like to ask about the FAA airport number which, as you pointed out, was very good. Do you think that's something that's sustainable over the next couple of years, or is that really just a couple of design builds that hit this quarter?

There are two parts of it. There's the FAA part of it; which we-- it's just real difficult to predict. They have money in their budget and they spend it; they don't have money in their budget and they don't spend it. It's very much a budget-driven kind of purchasing exercise that they go through. And that being said, there is some drive in the FAA to modernize the airfield lighting technologies to improve reliability, lower costs, specifically, going to solid state light sources like LEDs, just like what's happening everywhere else in the world. And so there may be some opportunity there and we are involved in some development programs there that we hope will be fruitful. But the other side of it is the design build side of it, where we're out selling more to municipalities, or to local airports. And, frankly, we feel our best opportunity for growth in that particular product line is to develop that side of the business a little bit more. I'm not suggesting that's a real easy thing to do; it's very much a different kind of sale than what we're used to, but we've had some taste of success. The two programs that I referred to, one's in Lambert Field in St. Louis, and the other's in, yes, Roswell, New Mexico. When you're traveling around Roswell and you see strange lights, those could be ours. But we think that the forecast around the world is for more and more private aviation, and we think that there will be more and more airports built. And the lighting systems that we build, a lot of them, are basically not to help airplanes travel around on the ground but, rather, help them navigate their way in the air to an airport, and those are really important lighting systems. So, we think that there is some potential there but, you know, in the short term, especially on that kind of business volume, it's going to be lumpy.

OK. My second question was about the Test Systems contract you announced early in October, I think. You called it significant for DME in the press release, even though the numbers were kind of small, at least that $1.5 million initial. Could you just give a little more color on that contract and maybe, you know, what it could mean in the next year or two?

Sure. What the Marines did is they went out and awarded three what they call IDIQ, Indefinite Delivery, Indefinite Quantity contracts, one of which was to us and two others to other companies, obviously competitors of ours. And the idea is that they're going to be fielding a lot of hardware which we have supplied, our VIPER/T program specifically, over the last few years. They're going to start fielding a lot of those systems, and they're going to need what they call Test Program Sets in order to test hardware on those systems. So, if they have a gun site, for example, they might want to hire a company, they could hire us, or one of the other two companies who've got these IDIQ programs, to go out and develop a test routine, including the adapter cables and other types of interface hardware and the instructions and maybe the test recording forms and do that work for them. And this IDIQ, you might think of it as basically a ticket to play. It's not necessarily in and of itself worth anything, but what it means is that we will be able to bid on these individual task orders, they call them, once they let them out. Now, with the IDIQ they also released two task orders and we won both of them, so that's what that press release was about. We expect that, over time -- in fact, right now there are three more pending -- they'll come out with these task orders. I don't think they necessarily have to compete them; I'm not sure about that. They could go direct to one of the three companies, but their general practice will be to say to the three companies, "We've got this task order that we want to have done and why don't you guys give us abbreviated bids," you know, we're already prequalified, so to speak, in terms of our rates and our capabilities, and then they can rather expeditiously award that task order to one of the three IDIQ holders as the need comes up.

Lastly, Pete, now that you guys are accumulating some cash, $22 million, do you have any plans for paying down debt or acquisition, or what are you thinking about as you add to that cash pile?

We don't necessarily have specific - I'm going to let David talk about this if I don't do it correctly - but I would say we don't have specific plans for that cash. You know, our capital expenditures have been pretty modest. I will tell you we have a couple of facility issues lingering that may take a fair amount of cash to get done the way we want to do them. We're always involved in, it seems at some level, some acquisition effort and that could be another way to use it, and we could pay down debt. We've got some debt that's a little higher interest cost than other debt. The advantage to doing that is it frees up room in our revolver. We feel we have plenty of room in our revolver to handle whatever cash requirements we might need, even without that $20 million on our balance sheet. But the short answer is, we don't have any real firm plans for it. David, you want to add anything?

No, I think that summarizes it pretty good.

Thank you. (operator instructions) Our next question comes from Dick Ryan with Dougherty & Company.

Great, thanks for taking my call, guys. Say, David, just a couple of number questions, or Pete. Is [ER&D] part of COGS -- I didn't catch your comment on that - did you comment on the year-to-date or the quarter?

I guess both. We're spending pretty much according to our plan and I think I mentioned it in the context of saying that, despite continuing that spend, we were able to achieve the bottom line results that we achieved.

Yes, for the quarter, we were right around $7 million and year-to-date's right around $21 million and I would expect the fourth quarter to roughly follow what we've been doing the last couple of quarters, being in that high $6 million area for the quarter.

OK. Can you give us a sense what we should consider for '11, next year?

You know, I think the farther out you look on that, the more it will depend to a certain degree on some programs that we're hoping to get on in the pipeline.

There's some relationship there and, for lack of anything else at this point, I guess I'd tell you it'd be something similar, but we'll talk about that in more detail next call.

David, tax rate was a little lower than I was considering. What led to the tax rate, 29%, and how should we think of that for Q4?

I would think of the tax rate being more normalized, in the 33%, 34% range. What the third quarter reflects is the recording of some R&D tax credits. We calculated our R&D tax credits and made a slight adjustment to them and that resulted in the low quarterly tax rate.

Do you have a level where Panasonic was in the quarter?

Yes. For the quarter, about $12 million.

Pete, you mentioned solid state lighting. Can you kind of tell us where you are in that development program? I mean, is it something that's taking a fair amount of the funding that you're looking at now, or when would you be introducing your lighting systems there? Kind of give us a sense of size.

For the airfield side of it, I would tell you that our expenses are not real significant and our ability to sell those are somewhat related to the FAA deciding that they want to proceed, so it's really hard to predict on that one.

That should be it for me. Thanks, guys.

(operator instructions) Our next question comes from David Cohen with Athena Capital Management.

Most of it has been covered, but a couple of minor follow-ups. One, with regard to the FAA lighting, is my memory correct that there was some stimulus money that was supposed to go towards that general area?

We thought so.

Yes, I don't think it was significant. Initially, it was going to be a lot more than it ended up being, I think.

And I'm not sure they spent it the way that we expected they would spend it, so I don't think we benefited from it. But you're right; you have a good memory, David. But it didn't work out the way that we at one time thought it might.

But we don't have to worry about stimulus money disappearing and these numbers deflating again?

No, I don't think the stimulus had much, if anything, to do with it. I'll take a note and check on that and try to remember to bring it up next time if I incorrectly answered.

Then the other thing -- we had talked about this very briefly some time ago, but with regard to Eclipse, obviously the core seems to have a little bit of life left in it. What do you think the likelihood is that, at some point, there might be a business there for us again?

Boy, you know, we can't answer for them, but I'm happy to theorize and speculate on a lot of things and let me, again, first answer that the Eclipse program, though painful for us financially in the fact that it was ultimately unsuccessful, was very beneficial in a couple of regards. One is that their appetite for technical risk on that airplane was really high and one of the things that they took a risk on was our electrical distribution system, which turned out to be a very, very good move, both for them and for us. We got something like 30,000 flight hours on a system that, at that point, had not previously been fielded. Since then, we're doing the Lear 85 program, largely adapting the Eclipse technology, and because Eclipse as an organization kind of disintegrated, people went to the four corners of the planet from Eclipse and those people all have pretty good memories of our capability and our product. And we, today, are enjoying quite a bit of support and interest from around the world on new, smaller aircraft development efforts. And that doesn't directly answer your question, but whenever we talk about Eclipse, I feel compelled to bring that up.

As far as Eclipse goes themselves, I think the guys running Eclipse - I met them recently at the NVA show and talked to them a little bit - I think they're reasonable guys, and I think they have a good fundamental understanding of kind of where they are as a company and what they need to do to bring that about. I think, though, the biggest thing that's beyond their control and beyond our control, really, what is the demand going to be for those very small, light business jets? And it certainly hasn't materialized to be anywhere near what the original founders of Eclipse thought it would be and, in today's market, that part of the industry in general seems to be getting absolutely hit the hardest. That owner/operator market where people are going to walk up and fork over $2 million or $3 million or $4 million for an airplane, they couldn't get the liquidity, they couldn't get the financing, you know, a year ago, I think the financing problem has kind of gone away, but it's much tighter than it used to be and people just aren't stepping up and buying those airplanes at this point. So, even more established manufacturers who build that kind of airplane are finding it really tough going. I think in order for Eclipse to actually get into production again, even though the owners are talking about that, there has to be a real step change in the demand side before that can become a reality. All that being said, we are still shipping product to Eclipse and year-to-date, what is it, David?

We're just right around $1 million in spares.

Yes, we've done about $1 million. They make our top 30 list or something. So, it's still a reasonable program and obviously there's pretty high contribution margin whenever we ship anything to them because most all of it was written off. So, we're going to do what we can to help them along, and we hope the best, but I think the demand side has to change substantially before they're going to seriously be building airplanes.

Just for the record, I'd prefer lower margins and no write-offs before the margin was recorded.

So do we, we'll keep that in mind.

Thank you. Your next question comes from Dick Ryan with Dougherty & Company.

Pete, just a quick follow-up. Your comment on 2011 being similar to 2010 or a little better, is that from a revenue standpoint?

Right. When I'm looking at the demand, I don't see anything substantial dropping off and it could be, if the things line up, that we could see some nice gains in certain areas, including our Test Systems business, so that's what we're hoping for.

Great. Appreciate it, thanks.

Sure.

Ladies and gentlemen, there are no further questions at this time. I'll turn the conference back over to management for closing remarks. Thank you.

Okay. No real closing remarks. Thanks for attending, everybody. We look forward to talking to you next time. Take care.

Thank you. Ladies and gentlemen, you may disconnect your lines at this time. Thank you all for your participation.