Astronics Corp (ATRO) 2013 Q1 法說會逐字稿

Greetings and welcome to the Astronics Corporation first-quarter 2013 financial results conference call.

At this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions)

It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Astronics Corporation. Thank you, Ms. Pawlowski, you may begin.

Thank you, Latanya, and good morning, everyone. We certainly appreciate your time today and your interest in Astronics. On the call I have Peter Gundermann, Astronics President and CEO; Dave Burney, Chief Financial Officer; and Mark Peabody, Executive Vice President.

We will discuss the results of the quarter and the Company's strategy and outlook, and then open the call for a question-and-answer session. If you don't have the news that was released 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 a question-and-answer portion of this teleconference. These statements apply to future events and 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 the 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 Peter.

Thanks, Debbie. Good morning, everybody. Thanks for tuning in.

We're going to talk today about our first-quarter results and then, if you've seen the news, you know that our first quarter was a pretty strong start to 2013. We are pretty pleased with it. In many respects, though, the events the first quarter were pretty basic.

It was kind of a straightforward, logical extension of many of the things that we've been experiencing and talking about for the last few quarters. So from our perspective it wasn't really much of a surprise, but it was very good. We set a number of records and I will probably refer to a number of them through the course of this phone call.

Revenue in the first quarter just shy of $74 million, a new record; up 13.6% over the similar comparator quarter from 2012. As in recent quarters, we were dominated by our Aerospace segment. 97% of our revenues are Aerospace, 3%, or a little bit more, Test Systems.

Pumping that kind of volume through our cost structure does good things to the -- as we move down the income statement. Jumping to the bottom, net profit for the quarter was $8.6 million, up 11.6% -- excuse me, 11.6% of sales, which is also a new record, up 40% over the comparator period from 2012 when we recorded $6.1 million net income. Our earnings per diluted share was $0.56, up from $0.40 a year ago.

Finally, bookings, the other kind of big metric that I look at every quarter, were $78.5 million, another new record. That's a book-to-bill ratio of 1.06.

So just a quick recap of the first quarter. When we have record revenues, record profits, and record bookings to me that's the big three, and it doesn't get a whole lot better to start off a new year.

Looking a little bit below the surface, our engineering and development expenses for the quarter were $12.8 million. That's an increase of $2.8 million over the same period from last year, and we are restating our range for that expenditure this year to $48 million to $53 million as a total for 2013. That's a little bit higher than what we said last quarter.

We are just that much further into the year. We realize the work we have ahead of us based on projects we've signed up for and the rate that we experienced in the first quarter puts us at the lower end of that range, so we expect some level of increase in our quarterly rates as we go forward.

Looking at our Aerospace segment, revenues of $72 million, up 15% from the first quarter last year. Again, 97% of our total revenue. Aerospace contributed all of the margin.

Our markets; commercial transport sales continues to be our biggest market, 70% of our total, and up 15.5% over the first quarter last year. It's always good when your biggest market is showing strong growth.

Our business jet market is 12% of our total and was up 30% over last year. That is in part due to new programs that are starting up and in part due to the inclusion of Max-Viz, which we bought, I believe, in June of last year. So the first two quarters will show Max-Viz in the current periods but not in the comparator periods.

Military sales were down marginally in the first quarter, $8.6 million, 12% of our total. We think -- everybody asks questions about sequestration and the effects on our business. We believe that in our military Aerospace business that we are going to be pretty stable for a while.

We are on high-priority programs generally or we sell spare parts that keep airplanes flying, and we don't since much of a pullback in those particular areas. So we expect our military sales in the aircraft or the Aerospace segment to hold up reasonably well.

Looking at our product lines, our two biggest product lines are doing pretty well. That is they are cabin electronics, which is our code for in-seat power, and our aircraft lighting product line. Those two together are about 80% of our sales.

The larger of the two, cabin electronics, about 54%, 55% of our consolidated sales, is up 15% in Q1 compared to Q1 in 2012. And our aircraft lighting product lines, which are about 25% of our consolidated sales, were up almost 7% for the first quarter. So that's pretty good performance from our biggest product lines.

Then when you move to our smaller product lines we see some pretty strong growth also. Our avionics product are only 7% of our total, but up 70% year-over-year. And, again, part of that's due to the inclusion of Max-Viz this year when we didn't have them in the earlier period last year.

Our airfield lighting product line is up 50% -- 47%, 48% -- but is only 4.5% of our total. That is primarily due to timing on sales to the FAA. For those of you inclined to model our future results, I wouldn't necessarily going and extend that growth rate indefinitely for that product line, but we do expect reasonable growth out of our avionics product line going forward.

Our airframe power product line was down marginally in the first quarter, down 3.6%; 6% of our total. But, again, we talk a lot about our capabilities and our investment in that particular part of our business where we have pretty high expectations for the longer-term future.

Some details; everybody is always curious about our sales to Panasonic in the quarter. They were $24.7 million. And I expect some people will want to know what our 787 sales were for the quarter; they were relatively light at $2 million.

Moving to our Test Systems segment, revenues were $2.3 million. That's down from $3.1 million in the comparator period a year ago; about 3% of our consolidated sales.

Our business is not profitable at that level. We did take some significant steps during the quarter to pair our cost structure down to our expected activity levels. Those changes should lower our cost structure there about $2 million on a rolling 12 month basis, so for the remainder of the year we expect our cost structure to be reduced by about $1.5 million in that segment.

Bookings were $2.3 million for the quarter, leaving us a backlog of $3.6 million. We will talk about forecasts here in a little bit, but we are expecting revenues to be at about $10 million for the year for that part of our business.

Turning to our balance sheet, we continue to be pretty conservatively financed. Cash on hand at the end of the first quarter is $17.8 million, total debt of $28 million, leaving us a net debt of about $10.1 million. Compared to companies in our space that's a very conservative capital structure.

Looking forward, we released initial guidance for 2013 of $275 million to $310 million in revenue. Our rolling 12-month shipments at the end of the first quarter put us at the low end of that range, about $275 million.

Our rolling 12-month bookings at the end of the first quarter were about $289 million, more towards the middle of the range. Our first-quarter shipments annualized put us at about $300 million, slightly above the middle of the range, and our first-quarter bookings of $78 million, $79 million annualized would put us at about $314 million, which is beyond the range.

So we, at this point, are leaving --- are tightening up the bottom end of our range slightly. We're going -- instead of $275 million to $310 million, we're going to go $280 million to $310 million. We are expecting $270 million to $300 million out of our Aerospace segment. We are expecting about $10 million out of our Test Systems segment.

Qualitatively, I will tell you from my perspective I think we have more upside potential to push the upper limits or exceed them in that range than we do face a downside risk that would put us towards the lower end of the range. But we don't really have enough insight into how the year is going to shake out to modify that range substantially at this point, so we are just tightening it up a little bit on the bottom side. And, of course, we will continue to watch it and report on it as the quarters go by.

So I think that's my --- those are my prepared comments. Latanya, let's open it up for questions, if there are any.

(Operator Instructions) Tyler Hojo, Sidoti & Company.

Good morning. Just a first question is related to kind of the pipeline of airline retrofits for the in-seat power, the cabin electronics business. Could you just talk about kind of how the pipeline stands today and what your expectations are in terms of potentially shipping some of your new USB products to that market?

Sure. We continue to be pretty optimistic. We have talked about long-term trends where the narrowbody world is increasingly waking up to our capabilities and technologies, whereas we have traditionally been more of a wide-body phenomenon.

And we have done some work that suggests that we have quite a bit of potential in that narrowbody world. We estimate the vast majority of seats, like 85% or 90% of the seats out there, do not have our type of product installed at this point, whereas in the wide-body world the penetration rate is quite a bit higher. But still we estimate about 50% at this point; 50% have our product, 50% don't.

So we think that the trends that have brought us where we are -- more personal electronic devices and Wi-Fi on board and those kinds of trends -- continue to stoke demand for our product and we are pretty optimistic.

Now let me spend a little bit of time talking about our USB offerings, because I think there's room for some clarification here. We have traditionally marketed a 110 volt AC system, and we have recently been talking about what I will call a dedicated USB system, which would, instead of being a 110 volt three-pronged jack or outlets, there is simply a USB outlet.

But there also are systems in between there where we will put a USB outlet on our 110 volt system, so if you're sitting in the seat you will see both a 110 volt outlet and a USB outlet. Our dedicated USB system was intended to service or more targeted at narrowbody airplanes because it's a little bit lighter, it's a little bit cheaper. We thought it might be of more interest to narrowbody airplanes.

We are still in development of that system. We have not installed a single unit yet. We are expecting certification of it to occur sometime in the third quarter. Mark Peabody is on the line; I may ask him to [correct] me on that.

But here is my point, when you look at our market there are a lot of narrowbody airplanes out there that are interested in in-seat power. They aren't necessarily going to simply wait for the dedicated USB system. Some of them are going to say we want the full boat 110/USB combination. Some are saying I don't need USB; I just want the traditional 110 volt system like all of our other airplanes.

It's a little bit of an evolving picture, but I think the important trend, when you stand back and you look at the market, is that there are a lot of narrowbody seats out there for us to address. We have a range of products so that unique personality, so to speak, of the airlines that are operating these airplanes, they can pick the one they like. And we see places for all three derivations of our product, if that makes sense.

Mark, 2013, right?

Yes, third quarter. Yes, late this summer.

Okay. Just in regards to kind of the product suite and what is kind of being --- where there's the most demand for those products, I guess what I'm curious is when you first started talking about USB it kind of sounded like that was really going to be the product that was going to go --- open up narrowbody.

Are you now -- in the conversations you're having with your customers, does it seem like the narrowbody operators are much more receptive to kind of looking at the traditional products, like the 110 volt plug?

Yes, I think that's safe to say. You're right, we originally envisioned our dedicated USB as being an enabler that would kind of be the straw that broke the camel's back so to speak. It certainly has gotten a lot of attention and we think we are going to sell quite a bit of it. But there are other airlines who say we want our customers to be able to charge their computer, not just their iPad.

Right, okay. Very helpful. Just one other question for me. When you talk about the E&D spend for 2013, is it possible to maybe help walk us through where the incremental expense is coming from? Maybe just from a product category?

Let me give you a quick answer and let me take the action to do more of a thesis on that on our next conference call, because it has been a little while since I've done this.

But I think the rule of thumb -- you can think of it in a couple ways. One is that we --- roughly half of what we are spending, maybe a little bit less is discretionary in nature in the sense that we are developing a product or a capability or an offering that we think holds promise in the market. The other half, or maybe two-thirds, are things that are a little bit more advanced and we are actually under some kind of contractual obligation.

So there is certainly a big discretionary element, but these days it seems more and more, as we get involved on specific big programs, more and more of it is contractually obligated development where we have to perform. That's one thing.

I think I will wait a little bit and talk on the next call about how we allocate it, but I will give you a heads up. A big part of it is dedicated towards what we call aircraft power, so it's the flight-critical electrical distribution on small aircraft. We have been talking about the Lear 85, as you know, for a long time.

We have, in the last few months, picked up three other programs that we are actively working on that we are not allowed to disclose yet, and there's a fourth that is close. And those programs definitely take resources and take money. So disproportionately we are not --- we don't spend it in the same places where we make our money right now.

Got it. Would it be fair to say that the other three to four programs that you are working with on the electrical power distribution side, would you expect your shipset content to be similar to Lear 85, or is it too early to say?

It's probably a little early to say and I'll tell you why. The Lear program has moved around a lot. What we originally bid it at is probably less than half of what we are currently signed up for, and it's a little early to say whether the other programs are going to evolve in similar ways.

And there are also similar or different sized airplanes. The Lear 85 -- people think of Lear as being pretty small airplanes. The 85 is not a small airplane, it's deceptively large.

So some of the other ones we are doing by comparison are much smaller airplanes, but I will say that when -- we are looking forward to being able to release these and I expect by the end of the year we will be able to announce all of them. When we do that I think you will be struck by how we have kind of surrounded the market, so to speak.

We are going to have --- there's a rotary wing application in there, there's a turboprop application in there, and, of course, the Lear and the Eclipse airplanes being jets. The combination of the programs will show the range of capacities and capabilities that our systems possess. I think it's pretty impressive.

Got it. Okay, thanks so much for that color. I appreciate it.

Dick Ryan, Dougherty.

Good morning. Dave, just a couple housekeeping items here. Tax rate, how should we be looking at that for the year?

Low 30% range for the next three quarters -- 30%, 31%, 32%, in that range. If you saw the press release, we had a pretty big pickup as we recognized 2012 R&D tax credits in our first quarter of 2013 and that was because of the legislation that put into law -- the 2012 R&D tax credit did not get passed until January, so the accounting rules required us to wait until the first quarter to recognize that. But I think going forward we are going to be in the 31%, 32% range.

Okay. You mentioned Panasonic's contribution. What are you seeing from Talus, are they -- as far as a customer?

Well, our business with Talus has picked up over a year ago. I don't have the exact number in front of us, but the deliveries and the shipments to Talus have picked up over the first quarter. Not a 10% customer with us, but growing.

Okay. Pete, you mentioned obviously the strong bookings. Can you kind of give us a little color what you might be looking at from a bookings expectation standpoint over, let's say, the remainder of the year?

Well, I would say that is the biggest variable affecting our top-line guidance. In general, bookings have been ramping slightly ahead of our revenue. I guess we would expect to see that continue. If it gets a little bit stronger than we expect, there's upside potential from our delivery performance for the rest of the year.

But beyond that I'm not sure I can give you a whole lot more guidance. We always have a range of opportunities that are in our sites, and if we win the things we expect to win and the projects that we expect to go forward go forward, we think it's going to continue to be a pretty positive picture.

Okay, great. Thank you. When you look at the -- you talked about the USB, the combo, even then maybe the straight 110, do the narrowbody fleets -- are they looking at it more from a price or weight standpoint? Or what's the real differentiation that they are looking for?

I guess my answer to that --- Mark, I will give you a shot at this in a minute. But the way we look at it I think is that airlines are --- they have personalities. In the narrowbody world especially, unlike the widebody world, there's a little bit more of a price sensitivity maybe and there's a little bit more of a weight sensitivity.

So we think having the range of products allows narrowbody operators to kind of show their personality. We've got customers in work right now doing the full boat USB/110 system. It's basically as high end a system as we can put out there in terms of power per passenger.

They are saying that the weight is okay and the price is okay and we want the capability. There are other airlines out there, we believe, that will probably going the other direction, saying we want to provide some power to our passengers but we want the lightest weight and the cheapest cost. And I think what we are encouraged by, again to step back a little bit, is the overall trends in the market continue to be pretty positive.

People --- airlines increasingly want to provide power to passengers, even those who haven't made a decision to do so yet. And I think we are very well positioned in having a pedigreed range of products that we can go in and say tell us what you want and we can do it.

Mark, you want to add anything to that?

The only thing I would add, Pete, is one of the other things that's happening is the average passenger today carries on at least two electronic devices, whether it be a laptop or an iPad type of device and a cell phone. Now, with the migration of a lot of the narrowbody aircraft going to wireless access, the demand for the passengers to have power to charge their devices, or at least keep a charge, is growing. The airlines are seeing that and they are seeing that from their customers.

Okay. Pete, you mentioned the Max-Viz. How about Ballard? What are you seeing with that tuck-in acquisition?

It's a neat little company. We are --- we have seen pretty strong growth, in the neighborhood of 25%, 30%, and we are expecting that to continue. It's proportionally a solid contributor to our bottom line. We are pretty pleased.

Okay, good. Thank you.

Michael Callahan, Topeka Capital Markets.

Good morning, guys; a good start to the year. I guess the first question I wanted to ask here is on the SG&A line, pretty good performance. This quarter was actually even down sequentially despite higher sales, way down as a percentage of sales year-over-year.

It was pretty volatile over 2012. How should we be thinking about SG&A going forward, and I guess what happened in this quarter that caused it to be so low?

You want to take that one, Dave?

Yes, as compared to our first quarter a year ago, our legal costs were down about $0.5 million or so. That was the big driver in the SG&A line.

Okay. And then I guess in comparison to the fourth quarter?

Fourth quarter they were --- I don't have that in front of me, but in the fourth quarter we also had high legal costs as well. I don't have the number in front of me right now.

Okay, fair enough. And so I guess going forward throughout 2013 the first-quarter run rate probably more of a benchmark than the prior year?

Yes, I think the first quarter is a pretty good barometer for what we see for the balance of the year.

Okay, great. I guess another thing here just on the bookings that you saw for the quarter, could you just give us any color as to where some of the pockets of strength and then weakness, or maybe by end market?

I guess I would say that it was kind of an average distribution. There were no real outliers. It's not as though we were surprised by anything necessarily. It wasn't as though any big thing kicked in or dropped off. It was just kind of solid across the board proportional with the rest of our business.

Okay, so I guess digging a little further, defense was kind of on par with the rest of the Company?

Like I said, the aircraft side in particular, the Aerospace side of our business in defense, we feel like we are pretty well positioned. Who knows how this budget situation is going to evolve, but we've got --- joint strike is a big program for us, B22, and then we do a lot of spares to various operating platforms at the moment.

I will give a little plug cautiously here that we see some encouraging signs in our Test Systems side, too. It's --- we continue to kind of plug away there and we see some significant needs taking shape.

I think there's a reasonable chance that we talk at the end of the next quarter we will have more positive news from that business. We will see, of course, but that part of the business has been hurt by the government's funding situation these days. Hopefully, we have kind of weathered the worst of it in terms of downturn.

Okay, thanks. Then I guess just one last thing here on the in-seat power business. Something I don't think you guys mentioned is I guess the in-flight entertainment units that are built into the seat. I have kind of noticed that those have become a lot more common. Do you have a similar market share as far as supplying power to those units as well?

And, two, has the -- I guess the quantity in which airlines have been adding those, has that changed the dynamic a little bit for getting into the narrowbody market and the weight concerns that go along with it?

Well, we don't talk about it specifically maybe as much as we should, but we are very active in that space. Most of our sales to Panasonic and most of our sales to Talus are in fact what we might call hybrid units where we are providing power directly to passengers and also driving their IFE systems.

Our view of the world is that widebody airplanes have been the traditional sweet spot for embedded IFE program systems and they will continue to be so. We don't see people spending a couple hundred million dollars on an airplane and then chintzing on the passenger entertainment.

On the narrowbody side, however, there is definitely an argument that the weight and cost of those systems doesn't line up very well with the typical narrowbody mission, which is maybe a little bit shorter than half of an average movie. So there it's more of a personal electronic device, Wi-Fi type of entertainment proposition and, from our perspective, they still need passenger power. So, to us, when we look at the widebody world, our opportunity continues to be in conjunction with our IFE partners. In the narrowbody world our major opportunity is more as a stand-alone kind of system.

Okay, just one quick follow-up on that. Have you heard anything from I guess your customers with those in flight or IFE units? I just kind of noticed a change where it allows passengers to purchase food and things like that directly from that unit.

Have you heard anything in terms of maybe what the benefits are to the airlines financially? Does that get them over the hurdle maybe of some of their weight concerns or cost concerns of installing that type of equipment?

I don't know if or qualified to talk about that. Obviously, the airlines all exhibit their own unique preferences for how to get the marginal dollar out of their flying passengers and some are more aggressive maybe than others, but that's really not our line of work. Our line of work is to enable and support the IFE system in the first place, so we just don't get involved at that level.

Okay, fair enough. Thank you, guys.

Kevin Ciabattoni, KeyBanc Capital Markets.

Good morning, really nice quarter. Thanks for taking my question.

Just a follow on to Tyler's last question, looking at the increase in the outlook for E&D spending for the year, wondering if you could give us some color on whether that increase is tied to kind of new programs, whether it's scope increases on programs that you are already working on, or maybe even programs running a little more expensive than you had originally planned?

Oh, no, that doesn't happen in our business. We --- the vast majority of the increase would be driven by new programs. We have --- it's kind of a good news/bad news kind of thing, but our story has been that we are always interested in growth and that growing requires investment in technologies and an investment in programs. So as we win new programs, we obviously have to staff them, and there's a fair amount of testing and development work that may be involved.

But I will say that proportionally our development spending is weighted a little bit more, I would say, towards --- less towards basic science and more towards application at this point. We have some development programs in place where customers have signed up and we are developing systems that are derivatives of systems that we've done before, so that the marginal cost for program will come down but when we layer on an increased number of programs the cost can still go up.

And beyond that, like I said earlier to Tyler, I believe, I will be prepared in our next quarterly conference call to talk a little bit more specifically, breaking down that bundle of investment in a way that hopefully makes sense. We won't get to the point probably where we are specifically itemizing certain programs, but I can give a flavor of where that money is going.

Yes, that would be helpful. Then, secondly, I just wanted to look at margins in the Aerospace segment in particular. I know they tend to be pretty lumpy. You guys obviously had pretty good volumes in that business this quarter.

I know --- I think you've mentioned roughly $3 million to $4 million of slide outs in 4Q. So, first, I guess if you touch on how much of that $3 million to $4 million hit in the quarter. Then, secondly, if you kind of straight line this quarter's revenues it pretty much puts you right at the midpoint of your revenue guidance. So just wondering what could potentially push those margins down from that 19.9%, 20% level, if some of the moving pieces there, other than the obvious kind of volumes and the related leverage.

Well, the slide outs from the fourth quarter into the first quarter I think we are talking about those being somewhat related to a facility move that we did in our Kirkland Washington operation. I don't think it's safe to say that we saw a $4 million catch up in the first quarter, but it's probably safe to say there was maybe $1.5 million or $2 million.

We think part of what might have been happening there to some extent was customers ordering things second half of last year and having them scheduled in a just-in-case kind of scenario, almost buffering a little bit against downside risk related to a facility move. But the facility move went really well, that buffer wasn't needed, but sometimes customers don't always want to believe that ahead of time.

So I wouldn't say that was a major driver in the first quarter. I think, looking forward, bookings are the big deal and our booking performance in the first quarter was very strong. We are very encouraged by that.

And as far as cost structure, I guess we feel like we are in a pretty good place. We've made some investments of significance over the last year, year-and-a-half in terms of facilities and organizations. And we think that the growth rates we are seeing right now are substantial, but yet very manageable. We have had times in our past when growth rates have been stronger, granted from a smaller base, and it's a handful trying to stay in front, keep up with that kind of challenge.

What we are doing now is still challenging, I don't want to minimize it, but it's not the kind of scenario where -- hopefully it's the kind of scenario where we don't see the same kind of volatility we have in the past. I guess that's the way to answer it.

Dave, I don't know if you want to add anything to that.

I think Kevin touched on the big drivers, the top line. We have a lot of leverage and our margins will move primarily as our top line moves. And then the other things that are not related to top line, you also mentioned the E&D spend and then occasionally companies have times where they have -- like we did warranty reserves or inventory reserves that pop up that aren't always consistent from quarter to quarter or year to year.

But as of now I think, as Pete mentioned, we are in a pretty good run rate or run mode right now with things.

Okay, great. That's helpful. Then just lastly, Test Systems this quarter the operating margin there was a little worse than it had been. But was that just one-timers related to the kind of expense management? And could you talk a little bit about what in particular you guys did there in Test Systems?

Sure. I think some of the loss was definitely related to the reduction in force, and that's what it basically was is a reduction in the force. That business is a high variable cost business. It's basically expertise of qualified people. The game that we have been playing is to maintain and preserve our intellectual capital and our --- and the people who actually get the job done, while at the same time recognizing that the environment is a pretty difficult environment.

So we got to the point where we made a more significant reduction. I don't have these numbers directly in front of me, but I want to say it was as much as 30% of our workforce that we had to, unfortunately, make some tough decisions on. But that being said, we believe that we have the people on board and the capabilities on board to continue to pursue the opportunities that we see in front of us.

Again, I gave a hint a little bit earlier; we do see some opportunities more in the near term than we have before. So if the customers do what they say they are going to do, we think hopefully we are going to be getting off the bottom here in relatively short order.

Great, that is all I had. Thanks.

Scott Lewis, Lewis Capital Management.

Thanks for taking the call and congratulations on the very nice quarter, guys. I just have a question in the business jet area.

These small/medium jets seem to have been lagging the last few years and maybe the next couple years compared to the larger, longer-range jets where you guys seem to have less content. Could that possibly change over the next several years, or are there kind of stressful reasons that you don't really play in that market?

That's a good question. I don't see it changing very quickly, if at all, primarily because there simply aren't many people making those kinds of jets and they don't have development programs anywhere near as frequently as they do at the light end. So we certainly know who Gulfstream is and we know who Bombardier is and we do have product on those airplanes, but you're right, our sweet spot is more in the smaller end. And the smaller end has not had the kind of recovery this year that most industry watchers were expecting and now they are hoping for next year.

But from our perspective, we are really looking a few years out and those small jet manufacturers are continuing to develop new airplanes. We are very encouraged by the participation that we get on those new platforms, and that's where we think the real value is for us.

In the short term, we are tied to production rates and we wish that production rates would be higher than lower, but at the end of the day there's not a whole lot we can do about it. What we can do is make sure that we are well represented on the new platforms and that our technologies get a fair shake. And in that respect, we think we're doing pretty well so we are pleased.

Okay, thanks. All my other questions were answered. Thanks.

(Operator Instructions) Gregory Macosko, Lord Abbett.

Most of my questions have been answered. I like the color on the business jet area. Could you just tell us a little bit from -- if you pro forma with Max-Viz, roughly how much that did grow on a comparable basis, the business jet piece?

I don't know. Dave, can we do that real quickly?

Yes. Well, in the first quarter of 2012 we didn't have Max-Viz. Max-Viz sales in the first quarter of 2013 were about $1.4 million.

Okay. So I will just back that out and look at it year-over-year; just is it growing?

Some areas have grown. I think in general what I would call the shipping rate of it probably hasn't increased, but we have had some nonrecurring engineering revenue from the Lear. And we actually started shipping a little bit more to Eclipse than we were a year ago, so ---.

Wow, that's nice. Okay. And then I see that you have signed a new --- you signed a contract with Panasonic. I understand you probably can't get too particular, but just in general terms, did you feel like you came out fine on that contract and is there opportunity for upside with the higher volumes?

We wouldn't view that particular release as a game-changing kind of release. We have a pretty close relationship with Panasonic and we have for a long time. We certainly expect to continue well into the future, and I'd view that release more as a business as usual confirmation than anything else.

Mark, I don't know if you want to change my flavor on that at all.

I think that's accurate. We had already discussed the 787 and 350, so I think, like you said, it's not really a game-changer at this point.

Right. Thanks very much.

There are no further questions in queue at this time. I would like to turn the call back over to Mr. Gundermann for closing comments.

Okay. Well, I think that was one of my shortest speeches and one of our longest question-and-answer periods, but I appreciate everybody taking part and for your continued interest in Astronics. We look forward to talking to you next quarter. Have a good day.

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