Astronics Corp (ATRO) 2012 Q2 法說會逐字稿

Greetings and welcome to the Astronics Corporation second quarter 2012 financial results 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, Investor Relations for Astronics Corporation. Thank you, you may begin.

Thank you, Christine, and good morning, everyone. We appreciate your time and interest in Astronics. On the call today with me is Peter Gundermann, Astronics' President and CEO, and Dave Burney, Chief Financial Officer. They will be discussing the results of the second quarter fiscal 2012 as well as our strategy and outlook. We will conclude the call with a question and answer session. If you do not have the release from this morning, it is available on the Company website at www.astronics.com.

As you are aware, we may make some forward-looking statements during the formal presentation and 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 website or at sec.gov. So, with that, let me turn the call over to Pete. Peter?

Thanks, Debbie. Good morning, everybody, and thanks for tuning in to our call. We're going to do the normal routine this morning, talking through our results and what our forecast is for the rest of the year. And with me as usual is Dave Burney, our CFO. We'll pull him into the question and answer period as necessary.

So our second quarter we feel was another very solid quarter for the Company. Revenue was $64.9 million, just shy of our quarterly record set in the first quarter. Our second quarter revenue was 17% higher than the second quarter a year earlier. We were 95.5% Aerospace, 4.4% Test Systems. That's pretty consistent with where we've been the last few quarters.

Margins were, from our perspective, in the expected range, net profits of $5.2 million, 8% of sales, $0.39 per diluted share. That's up from net income of $4.5 million a year ago, at that point 8.2% of sales. During the quarter we had pretty high engineering and development expenses of $11.1 million, up from $8.8 million in the year earlier quarter. We also had somewhat higher SGA and costs across the Company, and we'll talk a little bit more about that later on in the call.

I think one of the most relevant aspects of the quarter were bookings. We set a new record there, $77.2 million. To give you an idea, our average for the previous four quarters was $60.1 million, so $77.2 million was a good 28% higher than where we've been for the previous year.

So combining our second quarter with the first quarter, we feel we're off to a really good first half for 2012. Revenue through two quarters is $130 million, up 17.7% over 2011. Net income of $11.3 million, 8.7% of sales. That compares to 2011 net income of $9.8 million or 8.8% of sales. 2012 earnings per diluted share through two quarters is $0.86, up from $0.76 in 2011.

Engineering and development expense through the year is running a little bit higher than we expected when the year started through six months. We're at $21.1 million, that's up from $17.1 million last year and that reflects, again, what we consider to be a pretty target-rich environment of development programs, some of which we're contractually obligated to perform on behalf of customers. And as we often discuss, some of which are more of our own initiative.

Our SG&A expense is $18.1 million through six months, versus $13.5 million in 2011. We have some legal costs in there. We have some compensation costs in there. Some of it is due to changes in our cost structure in terms of staffings, particularly with some of the acquisitions we've done. And we expect that that will be a little bit of a twist in our financials going forward compared to how they've been in the past.

Again, a real strong point, something I look at pretty closely when I monitor our business' performance. Bookings year-to-date are very strong at $138 million, up from $113 million through six months in 2011. Our tracking of bookings is fairly conservative in that we don't count an order as a booking, so to speak, unless and until we have a firm delivery date. So blanket orders and long-term agreements and things like that are not included in our bookings numbers. We think it's a pretty high quality indicator of what we expect for an activity level going forward.

Looking at our segments, Aerospace year-to-date revenue $124.4 million, up 22% and making up 96% of our total. Aerospace again contributed all the margin in the business. And when we look across our Aerospace segment, we're pretty encouraged by what we see. With respect to markets, all of our markets are up year-to-date.

Our commercial transport sales, our biggest market, were $85 million in the first half, up 27% over 2011. Our military sales are $19 million, up 11% over the first half of last year and our business jet and GA sales were $14.9 million, up 6.2% over last year.

Switching our focus and looking at products, Cabin Electronics continues to be our biggest product line, making up just over half of our total cumulative sales at $66.2 million and up 25% over last year. We'll talk a little bit more about Cabin Electronics in a minute. Our Aircraft Lighting product line is up a marginal 4.4%, making up 28% of our total sales. Airframe Power is $9.7 million, actually down marginally from a year ago, primarily due to the stopping and starting of some major programs.

And then some of our smaller product lines. Airfield Lighting is $5.1 million through six months, up 38% over last year. That's mostly driven by the timing of orders to the FAA. And our Avionics Databus product line, which came as part of our Ballard acquisition from last December, $6 million through the first half, about 4.6% of our total revenues.

Just a comment on that acquisition, Ballard Technologies. We talked at the time that it was a smaller company but it was growing pretty well and has had a pretty good track record of financial performance. And so far, through six or seven months with us, we see more of the same. We're pretty pleased with how that's going. For comp purposes, Ballard in the first half of 2011 did $3.9 million, again the first six months of 2012 they did $6 million.

So they're up over 50% compared to a year ago. We don't necessarily expect that kind of growth rate going forward but we continue to think there's quite a bit of good potential in that business and we're happy to see it the way it's performing.

We announced last week the acquisition of another relatively small avionics company, a company called Max-Viz in Portland, Oregon. Max-Viz is a provider of what's called EVS systems, Enhance Vision Systems for the general aviation business jet and helicopter markets, primarily. Although the products do apply in other markets as well, most of their sales are centered in those particular markets.

What is enhanced vision? Imagine being a pilot flying an airplane at night. Airplanes are much easier to fly when you have a sense of what the outside scene is doing. They're much harder to fly when your visibility is limited. And an enhanced vision system is a combination of receptors, cameras, so to speak, which can be tuned to see the outside scene in either the visible spectrum or maybe in infrared.

And what Max-Viz does is takes receptors like that and presents an image, which can be displayed in the cockpit of the outside scene to the pilot so that in situations of reduced visibility, the pilot has a much better sense of what the outside scene looks like. That's particularly useful at night.

It can be particularly useful during certain environmental phenomenon and kind of a classic example would be if you're landing at a more remote airport at night, as a pilot it's relatively easy to find the airport in the sense that they're usually lit up. There are navigational aids to help you find the airport but actually seeing what's on the runway is a whole other matter. You don't see that. Those landing lights they give you on an airplane really don't do you a whole lot of good until you're 150 yards or 200 yards away from the surface. And if you're flying into maybe a mountain airport and maybe there's an animal on the runway, it would be really good to see it before you're a couple hundred yards away from it.

As part of the diligence effort, I had the opportunity to fly in a helicopter outfitted with this system. And we did some maneuvers at night approaching a dark landing spot in the woods, approaching a building's helipad at night. And I'm not a rotary wing pilot but if I were and if I did any kind of night vision flying or night flying I certainly would want this system on board.

It's a smaller company. We're expecting revenues of $4 million through the remainder of this year. We expect that contribution to be mildly accretive. We paid $10 million cash at closing and there's an earn-out potential of another $8 million over the coming three years. Too early to say what portion of that earn-out we expect to pay. We certainly hope to pay the whole thing. If we do, the revenue for the Company during that time should approximately double and almost triple according to the schedule.

One more comment on our Aerospace product lines with respect to Cabin Electronics. We issued a press release last week about narrow body sales. And what we were trying to communicate with that press release is a trend that we've seen developing and brewing and we think is now getting to the tipping point, so to speak, where major airlines and even some minor airlines around the world are recognizing that power is something that passengers increasingly expect as an amenity.

And it can be at this point a real differentiator between airlines that don't offer power. And one of the things that we wrestle with a little bit in that space is that airlines are pretty careful about letting any other company like Astronics talk about their passenger amenity portfolio. They don't necessarily like to defer to others to communicate that message.

So we find it hard to get permission to talk about programs that we're involved in. But we differently feel a tipping point where these narrow body sales are starting to add up. And the prevalence and frequency of installations we think is going to snowball a little bit and start to become a pretty important part of our business.

Those of you who follow us know that for a long time our in-seat power product line has had a home in wide body, long-haul aircraft. We've often quoted the number that 90% of the installed fleet out there have some portion of our product on them. It may not be through all classes of services, may not be nose-to-tail, maybe it's just business but the vast majority of the airplanes out there feature our product to some extent.

The narrow body world has traditionally been just the opposite. We've estimated that 10% of the aircraft have some representation of our product. And what we're seeing these days is that that is starting to shift. Major airlines and minor airlines are recognizing again that passengers really desire our product, even on the narrow body shorter flights. And we expect that to be a significant contributor to our results over the long term.

Leaving Aerospace, going to Test Systems segment, revenues for the year to date are $5.7 million, 4.4% of the total and down substantially from 2011. The situation is essentially unchanged. We find a real difficult environment basically driven by a lack of funding from the government.

We continue to see opportunities. Those opportunities continue to float off into the distance a little bit. And our strategy pretty much remains the same in that we're trying to absorb costs elsewhere in our business because we do have substantial engineering talent associated with this segment of our business, but we're kind of lying low and hoping that the opportunities that we're chasing materialize sooner rather than later.

Looking forward, again, our bookings have been very strong. Twelve-month bookings for the last 12 months were $259 million and that left us at the end of the second quarter with a backlog of $114 million, which is again a record going into the third quarter. We started the year with top-line guidance of $235 million to $250 million, which was later raised to $250 million to $265 million. Now based in part on the strong bookings and with the Max-Viz acquisition we are raising our top-line guidance to a range from $260 million to $275 million.

So we continue to be pretty optimistic over our prospects. We think the second half is setting up to be strong for us, much like the first half was.

That ends my prepared comments. Christine, why don't we open it up for questions?

Thank you. We will now be conducting a question and answer session. (Operator Instructions) One moment, please, while we poll for questions. Thank you. Our first question is from Tyler Hojo with Sidoti & Company. Please proceed with your question.

Just, I guess to start, you indicated that Max-Viz is going to contribute about $4 million this year to revenue. So I guess that would be incremental. What else is driving the sales guidance up?

Well, it's a function of the strength that we're seeing really across the business from different markets. And a fair amount of our revenue is predictable because it's driven by aircraft production rates and those are generally pretty well understood. But there's a fair amount of spare parts and after-market element to our business and a lot of times those are a little harder to predict in the short term.

But we're just seeing continued strength and no real noticeable weakness outside of our Test Systems segment. And it's the combination of all those factors that give us the confidence to raise our sales budget for the year.

Okay. Pete, maybe you could talk a little bit about the narrow body win that you announced a couple weeks back. In that press release you said that targeted about 500 aircraft. Could you give us a sense of timing on that? I mean, are you going to see some of those revenues flow in this year or what's the timing there?

Most of it would be over the next year or two. These are agreements which are in place. And while we have seen some narrow body sales and while we are shipping every day some narrow body sales, what we're sensing is more of an agreement or a commitment or a conclusion, I guess I'd say, on the part of carriers to install their fleets with this kind of hardware going forward.

And it's a combination of our traditional system, so to speak, that we sell either direct to the market or through the ISE providers and a combination of the new system, which I think we talked a little bit about in the last call, which is the USB-based system kind of optimized for personal electronic devices that run off USB power.

That's a lighter and cheaper version of our system which is going to be coming to market towards the end of this year. And we have a couple of customers who are specifically interested in that program who fly narrow body airplanes. So it's a combination of all of those things.

One of the things that we're not prepared to say today is the exact split of wide body versus narrow body. It occurs to us that that may be something of increasing interest to you and to other people who follow our company. We're trying to figure out how to track that. It's not exactly obvious because none of our products are specifically geared towards narrow body airplanes. In other words, it's not a simple thing of saying these products go to narrow bodies and other products go to wide bodies.

It's a modular system and we have a general sense of what our major customers are doing with it. But there's no real clean-cut way for us to track that. But we will find some way to estimate that for you as time goes on here.

Well, that would certainly be helpful. But just getting back to the narrow body business wins that were announced I guess on August 2nd. My understanding, and maybe this is incorrect, but my thought was that those were all USB. Is that not the case?

That is not the case.

Okay. Could you give us kind of a breakout of how much was USB and how much was the legacy product?

In that press release -- I do have Mark Peabody on the line. So actually, I'm going to defer that one to you, Mark.

Okay. Actually, Tyler, the majority of those are not USB. And the current USB product that we have out there is a combination of AC power for powering, you know, laptops, etc., and a USB. We're also coming out with, next year, a USB stand-alone charging system. And that announcement didn't address those at all.

Okay. All right, very interesting. And just lastly for me, I was hoping that maybe you could talk a little bit about the increase in E&D expense guidance. Maybe if you could talk a little bit about what's driving that. I don't know if you can talk specific platforms or areas but anything you could provide would be helpful.

Okay. Well, we have a number of programs which we have been turned on to work for that we have not been allowed to make announcements for yet. So it's a little bit of a tricky situation. But I guess I would tell you, Tyler, that most of the increase is due to contractually-obligated programs which we have agreed to pursue. And it's not being driven mostly by our own internally-driven programs.

So it's a little bit of a shift in that respect. And what happens is, a customer will maybe conceive of an airplane or conceive of a project and hold a definition phase with competing suppliers like us. And then actually pick one and start formal work on it, even before the thing is announced in public. And we're kind of in that stage on a couple of programs.

So we're limited as to what we can say. But I guess I would tell you that we're not spending more money on things that we have thought up at this point. We are spending more effort and money on programs that are real programs with real customers. We just haven't been able to announce them yet.

There's also a situation where we, in some cases existing programs or programs we've been working on for quite a while continue to kind of evolve and develop maybe a little bit longer than we thought they would. So we're -- that's a little bit of a difficult situation. But if our customer runs into certification trouble and things keep changing we end up keeping -- we end up incurring additional cost to develop those programs.

So it's a little -- I don't know if that's enough color to help you understand it but we continue to think that that element of our business is a very important element. You know, we're stringing together some pretty solid growth performances over the quarters and over the years. We've done a little bit of acquisition work to help that. But a big portion of it is the direct result of the development work that we do and have done, and we continue to think that that's a really important way that we can add value to our business and to our shareholders.

Okay. That's helpful. And just one follow-up to that. I mean, with the higher level of E&D spend likely on a go-forward basis, are you going to still be able to get back to a 19%, 20% type operating margin within the Aerospace segment?

We'd like to. We've been there at times. Usually when we're there, it's a function of rapid growth where our revenue and our through-put exceeds our infrastructure investment. And as we've talked about in the past, it's a little bit over an irritative process there. But we don't predict bottom-line guidance, so it's a little hard for us to commit to that.

The second quarter wasn't that far off. It was a couple percentage points.

Right. Okay. All right, well, I'll hop back in the queue. Thanks a lot.

Sure.

Our next question comes from the line of Gregory Macosko with Lord Abbett. Please proceed with your question.

Yes, thank you for taking the question. Just perhaps maybe a little bit elementary, if I may ask. But with regard to the narrow body program and wins, are these new aircraft only or are you doing any retrofit on those?

It's mostly retrofit. It's mostly a -- it would be airlines making a decision to offer that kind of amenity to the passengers on their narrow body fleets. So when they make a decision like that, they will typically put the product on new narrow bodies that are joining the fleet. But from a supplier standpoint like ours, the biggest opportunity in the short term is to get on the installed base. And so they would typically make the decision to do both.

I see. And then the point being that on the regular rehab cycle, that those electronics would be -- that power would be installed in the seats.

Right. Right.

And then --

As they take the airplane down for maintenance or maybe they outfit the whole interior. They redo the whole interior and this is one of the features that they put in.

But it wouldn't be a driver, just to overhaul it. I would assume it's a part of a full tear-down.

I would say typically that's the case.

Okay. And then, so at this point you're saying only 10% of the installed base has power at all? Are there others supplying that? Do you have competitors doing the same at this point?

We do have competitors. We feel like we've got a very strong market share in this product in general. You know, it's hard to say exactly what it is but we would typically say that we're well over 75%.

Okay, good. And then with regard to just the lead times, just generally speaking in the aerospace commercial area, are the deliveries much in advance? How much inventory could build up in the system? Is there any risk with regard to that?

Any risk?

Yes. In other words, that delays in the programs could push back and then the hold back in terms of your deliveries relative to the installation in the planes.

Oh. Greg, I think it's a tough thing to figure out. There certainly is inventory in the pipeline with our customers. What's difficult to determine is I guess how much inventory there is. What we do know is for the majority of the past six months, we've been running pretty much as hard as we can. We saw a little bit of a slow up toward the end of the second quarter but we think that that's going to pick up in the third and fourth quarter here.

So we have this buffer between us and the ultimate customer, generally, with our product. So it gives us a little bit of a filter we have to try to look through.

Okay. And then with regard to the programs that you're developing, I assume there's no compensation for the engineering and development. That's part of the deal and your expectation is that the program will be completed and that is sort of the up-front cost of participating in the program?

Those are good assumptions, yes.

Okay. Does it ever happen that those programs are cancelled?

Yes, it does. Absolutely. But part of the challenge in our business is to pick the right customers and pick the right programs. So there are certain customers that we will do anything at any time for. And there are others where we get pretty selective. And that's part of how it works. No doubt.

With regard to the business jet area, that was up 6% or so I guess year over year. What's your outlook there? I mean, clearly it's nice growth but much slower than the other pieces of the business. What are your expectations in that area?

Well, long term we're pretty bullish on business jets. I mean, every time I get on an airplane, I'm reminded that people who can afford to fly privately will. I think there's a market for that. And I think that the performance and the safety of that particular type of airplane is getting better and better every year.

I think it's generally fair to say that the segment, so to speak, the business jet world has not performed this year like everybody thought it would. It continues to be pretty soft, it continues to be pretty weak and there continues to be some overhang in terms of used aircraft that are making it harder for the OEMs to meet their own ambitions.

But that's a short-term thing, we think. We think that that's a positive market to be in. And, you know, you look at our distribution of sales and we are 65% commercial transport through six months. Certainly commercial transport is a good place to be and we're happy to be there. But I can't tell you that three years ago we set out a target of being 65% commercial transport. That's just kind of the way the winds of fate have taken us.

And similarly, we are 6% -- or 11% business jet through six months. I would tell you that we probably have a disproportionate level of investment going on right now towards that market. And that's in part because that's where we think the opportunities are. That's in part because we think that long-term there are very good prospects there.

But right now, this year, 2012, from a half-year perspective I think it's safe to say that that market has been softer than we expected, softer than most people in the industry expected.

That's very good color. And then lastly, if you would, military was up 11%. I guess that surprises me a little bit. Just give me some color there and help as to what we should be looking for and what is making it grow that much.

Part of that growth would be the result of our Ballard acquisition last year, which contributed a certain amount of money. Percentage-wise, you've got to be a little careful with military because it tends to be bigger programs. And it tends to be a little bit lumpy in that programs start and that programs stop. And it's one of our smaller product lines.

So, you know, a $3 million contribution from a new acquisition can make it look like quite a bit of percentage growth. I would agree with you, we're happy with 11%. There's a lot of fear out there about military sales in general. I think our perspective on it is that we're on some pretty good programs and have some good opportunities. And we are not overexposed to military at this point.

So we think that we're comfortable with the situations that we have. And we're comfortable with the programs that we're on. But I wouldn't read too much into that 11% number. That could go up and that could go down, based on the starting and stopping of programs over the next year or so

You mentioned Ballard up 50% and we shouldn't expect that, I understand that. But looking forward, are there some programs there or are there any that are kind of running out or coming to an end or anything?

No, they've been performing at about a 25% or 30% growth rate for a number of years. And we're kind of expecting them to continue to be in that realm. And there is some upside potential. I guess I'd leave you with this idea -- we're just talking about military and there's an undercurrent of concern in the world these days about where military spending's going to be.

One of the things that the Ballard acquisition brings us is a presence in what I would call military retrofit types of markets where maybe it's a lot cheaper to upgrade an older airplane than to buy a new one. And that's exactly where their products go. Without going into too much detail, their products basically enable new avionic systems to communicate and work with old avionic systems.

And when you're upgrading an airplane, you're typically not upgrading from nose to tail and wingtip to wingtip, you're upgrading it incrementally. So new equipment has to work well with old equipment. And to that extent, that's an example where we think, yes, the military market may be in some trouble going forward. But we've got a little bit of a hedge here and maybe even a way to exploit those kinds of budget problems.

So that's an example of how I can sit here and tell you that I kind of like the way we're positioned in our military business. And I don't want to pretend that we're not concerned about our Joint Strike business. We have a pretty good position on Joint Strike. But even if Joint Strike takes a hit, we think long term that's still a very valuable program and we're happy to be on it.

Okay. And then with regard to Test, I mean, the loss increased on lower sales. Has it stabilized or is there a level that's stable that makes sense to -- that we should look for? I mean, clearly it's a small piece but it is losing money.

It is losing money and it's a very difficult situation. The challenge we face is maintaining the capability and capacity that we need organizationally to exercise the opportunities when they come. And it's pretty easy to see the staffing levels and the capability that we're maintaining.

The real art here is anticipating when customers are going to come through with business to justify the capability and the capacity. And we're constantly looking at that and we're constantly reviewing it. We're also looking at ways to use that talent elsewhere in our business. We have a couple of initiatives that have been started and are underway and a couple that have even wrapped up and wrapped up pretty successfully.

I don't expect that we're going to get to the point of breakeven there. And I'm not sure we should get breakeven there. I think the -- you know, it's a small enough part of our business now with potential upside that actually is pretty significant. As long as the rest of the business is doing well, we're invariably always going to have little pockets and little areas where they're basically investment centers. And that's kind of where that segment is right now. I can't sit here and tell you I expect it to change dramatically in the next few quarters.

Okay. And is that primarily defense or is that commercial? Or how is the mix just in terms of [the mark-] --

That's all defense.

It's all defense. Okay.

Yes, absolutely. It's defense electronics at a very broad level. And it's basically automated test capability from military equipment.

Okay. All right, I've asked a lot of questions. I appreciate it. Thank you very much.

I appreciate it. Thanks, Greg.

Our next question comes from the line of Dick Ryan with Dougherty & Company. Please proceed with your question.

Say, Pete, just a couple more on the narrow body side. You mentioned majors and some of the low-cost carriers. Is there anyone in particular kind of pushing this or are you seeing a fairly broad level of interest amongst those two groups and geographically?

It's pretty broad. In the press release, we talked about North America, South America, Europe and Asia. We can't get much broader than that. And we talked about Airbus, Boeing, Canada Air and [Embraer]. And so I would tell you it's pretty strong.

Certainly there are certain airlines that are coming forward more quickly than others. And those are the ones that -- you know, we look for opportunities to use specific names, but I guess I would say that people who travel a lot, who stay alert will start to see our product introduced in promotional mailings and in promotional materials offered by these airlines. But I think the best answer to your question, Dick, is we think it's pretty broad.

And getting into market, is it your legwork or is it the IFE guys that are helping to drive that?

I'd say it's both. In the narrow body world, full-blown IFE equipment is not real common. There are certain airlines out there that feature live TV and things like that, but those are exceptions. So I think in the narrow body world, you're more likely to see our system as a standalone type of offering. Not exclusively but I think that'll be more common.

Okay. And say, Dave, do you have customer concentration information like Panasonic and/or Talus for the quarter?

We do.

Panasonic or -- so you have to direct these questions to me, Dick.

Oh, okay.

Q2 Panasonic was $21 million, Q1 was $27 million.

Okay. (Multiple speakers) Looking at SG&A, you mentioned there was some legal in there, compensation. How should we look at that SG&A level going forward? Does some of that drop out or -- (multiple speakers) -- with the addition of -- go ahead.

I don't look for any big changes in the near future. I think we're kind of running at an SG&A rate of a little over $9 million a quarter. I don't expect any big changes there one way or another.

One interesting comment there, Dick, from a -- again, back to Ballard, which is getting a lot of air time in this press release. But the Company is growing and it's pretty successful. One of the differences about Ballard is that they tend to have a cost structure that's allocated quite a bit differently than the rest of our business. And they tend to have a disproportionate influence on our SG&A cost.

So that's not necessarily a good thing or a bad thing. Net in, we think that we're happy with that acquisition, as I've relayed, but they do contribute to our SG&A cost disproportionately.

Okay. And one last one. You know, some of the other companies in the aerospace sector was talking about some aftermarket weakness they're seeing. You said you're not really seeing much to this point. Can you give us a little sense of what you might be seeing in the aftermarket side or shouldn't we draw any parallels from what commentary we're hearing from some of the other commercial (multiple speakers) --

Well, I would say in general we are not seeing that and that's probably more a function of our products positioning than maybe the market in general. I don't know. But again, we just had a record booking quarter, not just incrementally but substantially higher than what we normally see. So we can't say we see much weakness there.

Most companies when they're talking about aftermarket are, you know, I guess talking about a replacement or repair kind of element to their business. That's really not our deal. We don't do a lot of replacement or repair business. You know, as we've talked about before, we sell to the aftermarket a lot like we sell to the OEMs. It's the same kind of product, it's the same kind of pricing. It's just more of a fleet sale rather than an OEM production kind of sale.

So, no, I would say we don't see that kind of weakness.

Okay. Great. Thank you.

Sure.

(Operator Instructions) Our next question comes from the line of Scott Lewis with Lewis Capital Management. Please proceed with your question.

On your bookings, very nice quarter bookings, was there much 787 starting to build up in that? Or is that still in the future?

Mark, are you still there?

I just got back. If you'd repeat the question?

Scott was asking if there's much 787 element in our bookings for last quarter.

Wow, I don't have the numbers in front of me, but it's not that much. (Multiple speakers) Under $1 million.

We're expecting 787 to start to contribute towards the end of this year but those kinds of orders are covered under long-term agreements. So we'll get delivery orders in relatively short notice. So it's probably -- I'm just speaking off the cuff here, but if we start delivering, say, in December, January we'll probably start seeing those orders in October, November.

Okay. And then I had a question on Max-Viz. Is this the kind of business where your relationship with the OEMs is going to help you grow that business?

I think it'll be complementary. Absolutely. We are pretty familiar with that part of the market. We're obviously a bigger company than Max-Viz is. But they have some relationships we don't. And they actually have some primary customers that are relatively new to us. And so we're happy about that. And some of their biggest prospects are companies that we do work with every day.

So, yes, I think it's safe to say there are some marketing and share of customer synergies that could work both ways. Did that answer your question?

Yes. And then a question, I noticed you guys have a new consumer product, a little personal locator beacon product that's supposed to come on the market soon. Is that something you guys are going to be pursuing? I know it's been delayed a little while.

It has been delayed a little while. And it is a personal locator beacon that we've been developing. And it's been going through FCC testing, which is completed or pretty close to being completed. And it's not something we're prepared to talk about a whole lot at this point, but it is a little bit of a difference for us in that it's a retail product. And you'll have to tell me where you saw that, Scott, because we haven't had a question like this come up recently.

Well, you know, that Google is an amazing thing.

Yes, it is.

And then last question. I was just wondering, Dave, if you had a figure for legal costs for the quarter? Because I know you guys have got a bunch of kind of moving pieces in there.

Yes. Well, we haven't ever talked about what our total legal costs are. We've talked about what the increment or the difference has been from the prior periods. But through the -- for the second quarter it was pretty well flat with the second quarter of last year. Year to date it is slightly higher and if you'd give me a second here, I can -- it's in order of magnitude of, I want to say $200,000 or $300,000 higher on a year-to-date basis over last year. So I can get back to you in a minute.

Okay. All right, thanks a lot, guys.

Mr. Gundermann, it appears we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Okay, very good. Thanks again for tuning in, everybody. We're pretty pleased with our first half and we're looking forward to the second half. We'll talk to you at the end of the third quarter. Thanks.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.