Greetings, and welcome to the Astronics Corporation Fourth Quarter 2011 Quarterly Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Debbie Pawlowski, Investor Relations for Astronics Corporation. Thank you, Ms. Pawlowski, you may begin.

Thank you, Kevin, and good morning, everyone. We appreciate your time and interest in Astronics even on this morning after the Super Bowl game. On the call today is Peter Gundermann, Astronics President and CEO; and Dave Burney, Chief Financial Officer. They will be discussing the results of the fourth quarter and full year of 2011, as well as the outlook for 2012. This call will conclude with a question-and-answer session. If you don't have the release from this morning, it is available on company website at astronics.com. As you are 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 website or at sec.gov. So with that, let me turn the call over to Peter.

Thanks, Debbie, and good morning, everybody. Thanks for tuning in. Our agenda is to talk through the fourth quarter, do a brief wrap up of 2011, and turn our attention to our expectations for 2012. In summary, the fourth quarter was a very strong quarter for the company. We ended 2011 on a strong note, and we are enthusiastic about our prospects going forward. For the fourth quarter, revenue was $61.1 million, which is another new quarterly record. I think that was our third quarterly record in 2011. $61.1 million is up 18% over the fourth quarter of 2010 and up 8.5% consecutively over the third quarter of 2011. In the fourth quarter, our revenue was 95% Aerospace and 5% Test Systems. The bottom line benefited from that volume. We reported net profit of $5.2 million, which is equal to 8.5% of sales and $0.40 per diluted share, up from $0.35 per diluted share in the fourth quarter of 2010. If you read the press release, you know that buried in those numbers is an intangible asset write-down of $2.5 million related to our Test Systems business. I'll talk about that write-down a little bit more later on, but for now know that $2.5 million pretax write-down had the effect of reducing our earnings per share of $0.12 on an after-tax basis. Profits were also negatively affected during the quarter by a $500,000 reserve for the bankruptcy of American Airlines. That had the effect of reducing our earnings per share by approximately $0.04. During the quarter, our engineering and development expenses were $9.5 million, which is equivalent or roughly on pace for where we were all year, and roughly consistent with where we expect to continue to be as a sneak peek preview going into 2012. Bookings for the quarter…

[Operator Instructions] Our first question is coming from Michael Callahan from Auriga Securities.

I guess, just to start off, it looks like Cabin Electronics really carried results again in the fourth quarter as is all year. There's a mix there on, kind of retrofit versus new aircraft. Can you give us any insight as to what you're seeing for 2012 as, I guess, specifically on the retrofit part, is that going to slow down a little bit and OEMs are going to take over? Just kind of what are your thoughts around that topic?

Well, our first thought is that, we don't differentiate a whole lot, as you probably know, between retrofit and new OEM sales. Obviously, they're different growth drivers, but they often tend to move together. When the airlines have money, they buy airplanes and they retrofit their fleets. And when they don't, they don't. And we don't necessarily price them any differently or pursue them any differently. But our -- and it's a little hard to tell for us because more and more of our sales are going through the big IFE, in-flight entertainment providers, but our best guess is that it's -- you can think of it as a 50-50 split roughly. We continue to see good opportunities directly through the airlines and we continue to pursue them. And I don't think we see a noticeable drop-off in that business going forward.

Okay, I guess what I was driving at though is just as we -- I guess we know the build rates for the OEM guys and then we know the programs you're on. And then, that was probably reflected in the growth rate for the quarter, but previous to that most of the growth was likely not from line rate increase, because they didn't happen yet. So I guess, would we be expecting to see the, I guess, retrofit then to the airline as kind of leveling off with most of the growth coming from the increased line rates?

That's a good question. We wonder that a little bit ourselves, and that's part of the reason why we have a range in our revenue projection going forward. We do -- we're continuing to get solid interest. There's no reason to think that there's a major change coming from the field, so to speak. So I don't know how to answer your question more definitively than that, but you're right. The OEM rates don't fluctuate drastically quarter-to-quarter, they are going up. We -- and they do vary somewhat, I can use A380 as an example. An A380 fully equipped with our equipment is going to contribute to the tune of $300,000 to $450,000 of product, and if there are 5 of those in a quarter, that definitely helps us. Whereas if those 5 airplanes aren't equipped with our product or are equipped less with our product, that can swing it. But we clearly are experiencing solid demands both directly to the airlines and through the IFE OEMs directly to airlines. We're not aware of anything that would substantially change the current picture.

Okay, it's fair enough. I guess the other thing that -- on Business Jets sales, can you give us an update a little bit on the Electronics Power Distribution Systems, I guess both on the Lear 85 and I know some undisclosed programs, are those trending to your expectations? And are they still on track?

Overall, yes. We are -- just for a little bit of background for others listening on the call, we have a technology that we have applied to Business Jet, electrical systems that we think is very favorable. It'll offer some significant weight and technological advantages to our customers. And the big program we keep talking about is the Lear 85. We have indicated, I think in the last call, that we've won another one that we have not disclosed yet, and we think there are a couple of others that are really close to that level. And so we continue to be optimistic about the home for our technology in that segment, and most projections for Business Jet volumes call for volumes to be pretty flat at current depressed levels over the next couple years, and then accelerating pretty briskly. We tend to be focused on the future and not the immediate 24 months. There's not a whole lot we can do about that. Our task is to get our hardware on new airplanes as they're being developed, and we think that picture is pretty optimistic. And we think that when the boom happens 3, 4 or 5 years out, there are going to be more and more airplanes carrying Astronics electrical distribution equipment, and we think that's going to be a real nice market position for us. As far as how those programs are progressing through development, I don't think I can comfortably talk about those programs for those customers. They do that themselves, but I can tell you that from our perspective, our equipment and our firm is performing pretty well. As you might imagine, or as I'm sure you know, the Aerospace world's a pretty small world. You don't win new programs if you significantly underperform on existing or past programs. And we think we're doing a pretty good job for the customers we've signed up, and we think that makes our task easier selling our capabilities and systems to new airplanes as they're announced. So I would tell you that, that's a long way to fan that we think things are progressing pretty well in that market, even though current production volumes are low.

Okay. Just one last quick thing on the Ballard Technology acquisition. What's -- seems that the run rate should be about just shy of $1 million a quarter just dividing -- or I'm sorry $1 million a month, just by dividing out the revenue you guys gave, divided by 12, but December, which was only month that you had it, came in at about half of that. Is that just because of the holidays and shutdowns and things like that? Or is there more seasonality there?

There is seasonality there. To the extent that they sell products -- this is kind of theory in conjecture at this point, but to the extent that they sell product to government agencies and to defense integrators, I'll call them, they tend to get orders that are seasonal and kind of bump up against the end of the fiscal year and they tend to deliver out of inventory, so their backlog tends to be pretty low and they turn their orders around typically in 90 days at most. So if they receive an order today, they ship it next month. December was low and -- but you look back historically over what they've done, and it seems like they're 70%, 75% in the second half of the year. So we would obviously hope for more than $400,000 a month, but that's probably going to happen every once in a while, especially in the front half of the year. When we get into the second half, we'd expect that average volume to be up substantially.

[Operator Instructions] Our next question is coming from Tyler Hojo from Sidoti & Company.

First question, just -- what did Panasonic-related revenues contribute in the quarter?

It was about 36% of our consolidated revenue.

Okay. Okay, great. And then just moving over to Test Systems, I'm just kind of curious, it looks like you have about $8 million in backlog there. But I'm just trying to gauge the potential risk that perhaps you see another program canceled or -- how do you look at basically the quality of that backlog as we sit here today?

I think the backlog's okay, that's -- of all the things we worry about, it's not necessarily the backlog. The VDATS program was never one that we actually counted as an order, so it didn't show as a backlog reduction. I think once you get an order, you're okay. I think our bigger concern is just budget constraints and the difficulty of getting major awards awarded by the government in this environment. Again, it's not just our company that seems to be suffering through this little period in time. It seems like most companies that we're aware of, in terms of competitors, are dealing with many of the same stresses. And it's more a function of winning orders rather than worrying about the backlog that you have in place.

Okay. And obviously, if you're guiding to $10 million to $12 million in revenue for Test Systems, which I think is the number, you're anticipating on winning some new business through 2012, just wondering, is that still kind of international opportunities or what are you looking at there?

We are pursuing international opportunities. I talked about that quite a bit 1 year ago, 1.5 years ago. A fair number of those opportunities were in the Middle East. You can imagine what's happened to any kind of predictability in that part of the world over that time frame. And so you haven't heard me talking about those opportunities quite as much, but again, we think that there is demand. And we think the customers want our capability and want our product. It's a matter of surviving the procurement process and our customers getting funding. And that's just purely and simply what it boils down to for the foreseeable future. So again, our strategy is to identify and pursue the bigger opportunities, and we think there are some. In the meantime, we want to preserve the competency of our organization while minimizing our expense. And we think there's an opportunity to apply the talents we have elsewhere, and thereby, transfer cost. So we think we can make kind of a win-win out of that. And also, we're down to the point where Test Systems is 5% or 6% of our business. We have other product lines that are 5% to 6% of our business. We think that the opportunity has justified the continued involvement.

Okay, and based on kind of applying some of the talents within Test into other aspects of the business, did I hear you correctly in saying you expected to -- that business segment to basically transition to profitability in 2012? Was that right?

I don't think I said that. I'd like that. If we can make it breakeven, we'll be happy.

Okay. All right, great. And just lastly for me. You did this, to some extent, with the Biz Jet end market and Commercial Transport, but I was hoping that you could maybe just walk through what your guidance anticipates in terms of, kind of, end market growth. I don't believe you commented on Military or the FAA business.

Well again, we would view the FAA business as relatively small. It's 5% or 6% of our total. I think the thing that we try to focus on is the major trends going on. And Michael asked about it earlier. A big element of that is retrofit, not in OEM sales or Commercial Transport. And it's a little hard to get a handle around that in terms of timing and specifics, but the interest we see from customers, the health we see from customers, leads us to believe that the current scenario and current trends in the market are reasonable -- can reasonably be expected to continue going forward on the Commercial Transport side. On the Business Jet side, there's a real diversity going on out there in terms of OEM success these days. Those who build airplanes at the high end of the spectrum are experiencing reasonably strong sales in terms of unit volumes. And the guys who build the smaller, cheaper airplanes are generally finding the going much more difficult. In terms of installed base or current programs, we are unfortunately more weighted towards the smaller end of that market, and we aren't expecting necessarily significant increases in OEM unit volume going forward. We are going to benefit, to some extent, by having increased shipset content on those airplanes being built. I mean, that's a trend that's been going on for years. We would expect that to kind of marginally continue in the current year. The big activity for us is building and doing engineering work for new airplanes, which aren't even announced yet in some cases and won't be flying realistically for 2 years, maybe 3. And in those areas, we have pretty significant restrictions in terms of what we can and can't say, but we're pretty…

Right, okay. And just lastly, how about Military sales within the Aerospace segment? Kind of wide range of product mix, what are your expectations there?

We think it's going to be stable. I think that's the safe assumption. We're -- a lot of talk is out there these days about Joint Strike Fighter. Joint Strike Fighter is a big program for us. We certainly don't want to see it cut drastically, but there may be some reductions in volume in the out years. In the meantime, again, our equipment seems to be performing pretty well and we're pretty pleased with it. So we got to get through this low rate production, and they're going to be ramping that up. We're on V-22, that's a healthy program for us. We're going to have to go through a little bit of a lull in terms of our Tactical Tomahawk program, where our shipments get ahead of final shipments for the customer here to the U.S. Military. But that's a long-term program that we expect to be reengaged with, kind of towards the end of 2012. I look across the Business Jet world, and I look across the Military world in particular, I like the positions that we're on. I like the platforms that we're on and I like the positions that we have. We don't expect anything in terms of downside risk. We just don't think there's a whole lot of downside risk out there. The Business Jet world has responded and is continuing to respond to the financial crisis of a couple years ago, and it's got to draw down the inventory of used airplanes that it competes with out there on the market. We think that the new products as they get developed and put into the showrooms, so to speak, will do that pretty successfully. And we think that in the Military world, while Military budgets are shrinking, we like the Aircraft that we're on and the positions that we have. So we feel reasonably solid in all those areas.

[Operator Instructions] Our next question is coming from Dick Ryan from Dougherty.

So Dave, 2 things on the financial side. Would the depreciation level change much from what we're seeing with the addition of the new facilities in Ballard?

The depreciation level relating to the new facilities won't change a whole lot, reason being, the biggest piece of that is going to be the facility that we're going to be completing, that AES we'll move into at the end of this year. So we won't start depreciating that until they move into it, but what will have an impact on our depreciation and amortization is the amortization that will be related to the Ballard acquisition for the intangible assets. So our estimates for that will be that, that will have about a $750,000 increase in amortization for the next foreseeable future until those long-term intangible assets are amortized. Well, that's kind of a long-winded way to say, I think we'll see depreciation and amortization go up by maybe $1 million this year versus 2011.

Great. What -- how should we look at any additional CapEx needed in 2012?

In addition to the buildout of the AES building?

Yes.

I think it'll be a little bit higher than what we've seen in the past, mainly related to some tooling on some programs that we think we'll be acquiring the tooling for as we go into production.

Okay. And on the OpEx side, if we back out the bad debt reserve for Q4, is that an OpEx number that we should think could be a base as we get through 2012?

Yes, I think it's a reasonable estimate. Pete touched on some of the -- kind of the headwinds that we see potentially, as well as some of the tailwinds that we see.

Okay. One last thing. Pete, anything on the order side? I mean, do you see any pricing changes for things kind of coming into the pipeline, either positive or negative impacts?

Nothing significant, Dick. I think other than the intangible asset write-down, and to the lesser extent, the legal expenses that we're incurring, which may be a function of being a slightly bigger business than we've been before. Q4 was kind of a steady state running quarter for us. It wasn't driven by anything drastically happening underneath the covers that we have to disclose. So no, I wouldn't say we see anything substantially changing.

Your next question is coming from Scott Lewis from Lewis Capital Management.

A couple questions. On cabin power, we've seen a lot of, I guess particularly domestic airlines go to this kind of Wi-Fi-only strategy and I know, Pete, you've said for a while now, you like Wi-Fi, you think it can only help you guys. I'm wondering though if enough time has passed, have you seen any airlines coming to you saying, our customers like the Wi-Fi, but they're kind of demanding power now, and we'd like new bids for our fleet?

Our story hasn't changed a whole lot. We obviously haven't announced any big narrowbody sales, in particular, which might indicate or confirm that desire, but it's just kind of a, from our perspective, it's a common sense linkage. Even though it's possible to put Wi-Fi on an airplane without putting in-seat power, I mean, to a certain extent Wi-Fi isn't all that useful, especially on flights more than a couple hours without having some kind of capability for power in the seat. So I think our customers recognize that and we're continuing to get interest, and I would expect that as time goes on here, that, that linkage between Wi-Fi and in-seat power will strengthen. Even though I don't think it's ever going to be a deal where we're going to go out jointly with a Wi-Fi provider per se, but we know who they are and they know who we are. And to the extent that we see opportunities for each other, there might be some collaboration that way. But we continue to take the position that personal electronics are becoming more and more common. People are -- I'm a case in point, I once traveled just with a computer or just with a phone, now I got a computer, a phone, an iPod and an iPad. And I don't think I'm that far out of the ordinary. And so as those kinds of electronic gadgets proliferate, and as the capability of those gadgets improves, and as electronics services like Wi-Fi continue to make inroads like they have in every other part of our lives, we think that the need for power in the seat increases. And we think it's a product that has room to run, from a market perspective, for our company.

Okay. And then second question is on the Business Jet side, something caught my eye with your release about HondaJet where you were doing windshield heat controllers, and I think that's kind of a new category for you that goes beyond lighting and lighting controllers. Are there other things like that you're working on for Business Jet that's going to expand you beyond power distribution and lighting?

Well actually, it's not a -- we wouldn't call it a very new development. That's a new box with some new specifics and new technology directly for the HondaJet airplane, but it is not a -- well, we've done windshield temperature controllers before. We've done things like fire suppression controllers. We've even done power supplies for electric razors in the back of commercial airplanes in the bathrooms, so PA amplifiers, we have quite a range of capabilities. I wouldn't read too much into that one other than I'll tell you that we think the HondaJet is an interesting airplane, and we think that Honda is a company that, if they put their mind to it, obviously they can accomplish a lot in whatever they want to do. This particular airplane has taken a while for development, like you might expect of any company that's developing an airplane for the first time. And we've stayed in pretty close touch with them. We think that under certain circumstances, our capabilities could be a good match for the kind of airplanes that they want to develop. And it just so happened that our interests aligned in the area of this windshield temperature controller, but I wouldn't read that it's a brand-new product launch for us or anything like that into it. It's more a first step with Honda and Astronics.

[Operator Instructions] Our next question is coming from Dave Cohen [ph] from Anova Advisors [ph].

One sort of footnote type of question, historical footnote question. In terms of Eclipse, is that -- would you term that a dead issue at this point, or do you see some opportunity there?

Well, I'd like to think there's some opportunity. We -- again, a little bit of background for others who may not be as up to speed on this. We were fairly involved with the Eclipse program when that first launched, whenever that was. Boy, time flies, I'm guessing here, but it's probably 8 years ago. And we did the entire electrical distribution system from the generators forward. We did a lot of cockpit lighting and pilot interface lighting, and we did the exterior lighting on that airplane. And the new owners of Eclipse have gone out, and we have negotiated a supply agreement whereby we'll continue to provide those systems. I think it's limited to like 100 shipsets or something, but when they build 100 shipsets, we'd be thrilled. They -- a minority owner is United Technologies, and we think that, obviously, they are a company that has the capability to do what they want to do with that airplane, and they're saying they want to put it back into production when the market conditions are right. So we're on board to help out. We're not in a situation where we have to do a whole lot of reengineering or redevelopment or recertification or anything like that. That's not really our interest. It's more of providing the old systems to new build airplanes if they're fortunate enough to get orders, so we encourage everyone on the call to go buy an Eclipse if you want. It would help us out.

And just refresh my memory, we have sitting in inventory probably more than 100 shipsets, right, and are now carried at 0, is that correct?

I don't know if I'd say more than 100. It's probably safe to assume -- we've been building spares and doing some retrofits and things like that, so some portions, some components are less inventory than others, but yes, you're right. It's probably safe to say we have 70, 75 complete shipsets. In some cases more, depending on the system, in some cases less. And they're generally not on the books at anywhere near full value. So to the extent that Eclipse is successful and starts building hardware, at least while we're chewing down that inventory, it would be a nice contributor for us.

[Operator Instructions] It appears there are no further questions. I'd like to turn it back -- the floor back over to management for any further or closing comments.

We'll, very good. Thanks for tuning in. Almost an hour on the call today, that's maybe a new record for us. We appreciate your interest, and we look forward to talking to you at end of the first quarter. Have a good day.

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