Astronics Corporation (ATRO) Q1 2013 Earnings Report, Transcript and Summary

Greetings, and welcome to the Astronics Corporation First Quarter 2013 Financial Results Conference Call. [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, Ms. Pawlowski. You may begin.

Thank you, Latonya, 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 make some forward-looking statements during the formal presentation and the 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. Pete?

Thanks, Debbie, and 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're pretty pleased with it. In many respects though, the events of 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 and we -- but it was very good. We set a number of records, and I'll 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 to 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%, a little bit more, Test Systems. Pumping that kind of volume through our cost structure does good things to the -- as you 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 3, 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, and 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 revenues. 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's in part due to new programs that are starting up and in part due to the inclusion of Max-Viz, which we bought in, I believe, in June of last year. So the first 2 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, and we believe that in our Military Aerospace business that we're going to be pretty stable for a while. We're on high-priority programs generally or we sell spare parts that keep airplanes flying, and we don't sense 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 2 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 2 together are about 80% of our sales. The larger of the 2, cabin electronics, about 54%, 55% of our consolidated sales, was 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. And then when you move to our smallest product -- 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. And 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 go 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 would 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 tear 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. And we'll talk about forecasts here in a little bit, but we're expecting revenues to be in 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 of $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 initial -- 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 $280 million to $310 million. We're expecting $270 million to $300 million out of our Aerospace segment. We're 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 feel we have enough insight into how the year's going to shake out to modify that range substantially at this point. So we're just tightening up a little bit on the bottom side. And of course, we'll continue to watch it and report on it as the quarters go by. So I think that's my -- those are my prepared comments. Latonya, let's open it up for questions, if there are any.

[Operator Instructions] Our first question comes from Tyler Hojo with Sidoti & Company. Tyler Hojo - Sidoti & Company, LLC: 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 kind of new USB products to that market?

Sure. We continue to be pretty optimistic. We've talked about long-term trends where the narrow-body world is increasingly waking up to our capabilities and technologies, whereas we've traditionally been more of a wide-body phenomenon. And we've done some work that suggests that we have quite a bit of potential in that narrow-body 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 light-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 WiFi on board and those kinds of trends, continue to stoke demand for our product, and we're 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 a -- what I'll call a dedicated USB system, which would -- instead of 110-volt 3-prong jack or outlet, there's simply a USB outlet. 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'll see both a 110-volt outlet and a USB outlet. Our dedicated USB system was intended to service or more targeted at narrow-body airplanes. Because it's a little bit lighter, it's a little bit cheaper, we thought it might be of more interest in narrow-body airplanes. We are still in development of that system. We have not installed a single unit yet. We're expecting certification of it to occur sometime in the third quarter. Mark Peabody's on the line. I may ask him to comment on that. But here's my point, when you look at our market, there are a lot of narrow-body 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 planes." And it's a little bit of a evolving picture. But I think the important trend, when you stand back and you look at the market, is that there a lot of narrow-body seats out there for us to address. And we have a range of products so that the 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 3 derivations of our product, if that makes sense. Mark, 2013, right, in the third quarter?

Yes, third quarter. Yes, late this summer. Tyler Hojo - Sidoti & Company, LLC: Okay. Just in regards to kind of the product suite and what's 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 open up narrow-body. Are you now -- in the conversations you're having with your customers, does it seem like the narrow-body operators are much more receptive to kind of looking at the traditional products, like the 110-volt plugs?

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 the broke the camel's back, so to speak. And it certainly has gotten a lot of attention and we think we're going to sell quite a bit of it. But there are other airlines who say, "We want our customers be able to charge their computer, not just their iPad." Tyler Hojo - Sidoti & Company, LLC: Right. Okay, very helpful. And 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's 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're spending, maybe a little bit less, is discretionary in nature in the sense that we're developing a product or a capability or an offering that we think holds promise in the market. The other half or maybe 2/3 are things that are a little bit more advanced, and we're actually under some kind of contractual obligation. So there's certainly a big discretionary element. But these days, it seems more and more, as we get involved in this -- 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'll wait a little bit and talk on the next call about how we allocate it. But I'll 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 3 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 disproportionally, we're not -- we don't spend it in the same places where we make our money right now. Tyler Hojo - Sidoti & Company, LLC: Got it. Would it be fair to say that the other 3 to 4 programs that you're working with on the electrical power distribution side, would you expect your shipset content to be similar to Lear 85? Or it's 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're currently signed up for. And it's a little early to say whether the other programs are going to evolve in similar ways. And they're also similar or different sized airplanes. The Lear 85, people think a Lear as being a pretty small airplane, but the 85 is not a small airplane. It's deceptively large. So some of the other ones we're doing, by comparison, are much smaller airplanes. But I will say that when -- we're looking forward to being able to release these. And I expect by the end of the year, we'll be able to announce all of them. And when we do that, I think you'll be struck by how we've kind of surrounded the market, so to speak. We're 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.

Our next question comes from Dick Ryan with Dougherty. Richard A. Ryan - Dougherty & Company LLC, Research Division: 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 3 quarters, 30%, 31%, 32%, in that range. If you saw the press release, we had a pretty big pickup as we recognize 2012 R&D tax credits in our first quarter of 2013, and that was because 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're going to be in the 30%, 31%, 32% range. Richard A. Ryan - Dougherty & Company LLC, Research Division: Okay. You mentioned Panasonic's contribution. What are you seeing from Thales, I mean, are they -- as far as a customer?

Well, our business with Thales 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 Thales have picked up over the first quarter, not a 10% customer with us but growing. Richard A. Ryan - Dougherty & Company LLC, Research Division: 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 the -- let's say, the remainder of the year?

I'd say that's the biggest variable affecting our top line guidance. In general, bookings have been ramping slightly ahead of our revenue. I guess we'd 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're obviously -- we always have a range of opportunities that we're -- that are in our sights. 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. Richard A. Ryan - Dougherty & Company LLC, Research Division: Okay, great. When you look at the -- you talked about the USB, the combo unit and then maybe the straight 110. Do the narrow-body fleets -- I mean, are they looking at it more from a price or weight standpoint? Or what's the real differentiation that they're looking for?

I guess my answer to that -- Mark, I'll 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. And in the narrow-body world, especially, unlike the wide-body 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 narrow-body operators to kind of show their personality. We've got customers in work right now doing the full boat USB/110 systems. It's basically as high end a system as we can put out there in terms of power per passenger. And they're saying that the weight's okay and the price is okay and we want the capability. And there are other airlines out there, we believe, that will probably go in 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're 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're 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, do you want to add anything to that?

Yes, the only thing I would add, Pete, is one of the other thing that's happening is the average passenger today carries on at least 2 electronic devices, whether it be a laptop or an iPad type of device or -- and a cell phone. And now with the migration of a lot of the narrow-body aircraft going to wireless access, the demand for the passengers to have power to charge their devices or at least keep the charge, is growing. And the airlines are seeing that, and they're seeing that from their customers. Richard A. Ryan - Dougherty & Company LLC, Research Division: Okay. So 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've seen pretty strong growth, in the neighborhood of 25%, 30%, and we're expecting that to continue. And it's proportionally a solid contributor to our bottom line. We're pretty pleased.

Our next question comes from Michael Callahan with Topeka Capital Markets.

I guess the first question I want to ask here is on the SG&A line. Pretty good performance. This quarter it was actually even down sequentially despite higher sales weighing down on the percent 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 up

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, we -- I don't have it 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 '13, is 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. And I guess another thing here. Just on the bookings that you saw for the quarter, can you just us any color as to where some of the pockets of strength and then weakness were, 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, and 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 just digging a little further. defense was kind of on par with the rest of the company?

Yes, like I said, I think the aircraft side, in particular, the Aerospace side of our business in defense, we feel like we're pretty well positioned. I mean, who knows how this budget situation is going to evolve, but we've got -- **Joint Strike's a big programs for us, **V-22. And then we do a lot of spares to various operation -- operating platforms at the moment. I will give a little plug cautiously here that we see some encouraging signs on our Test Systems side, too. It's a -- we continue to kind of plug away there, and we see some significant needs taking shape. And there's a -- I think there's a reasonable chance here that when we talk at the end of the next quarter, we'll have more positive news from that business. We'll see, of course. But that part of our business has been hurt by the government's funding situation these days. Hopefully, we've kind of weathered the worst of it in terms of downturn.

And 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 there built into the seat. I mean, I 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, I guess, has the quantity in which airlines have been adding those, has that changed the dynamic a little bit for getting into the narrow-body market and then 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 Thales are, in fact, what we might call hybrid units, where we're providing power directly to passengers and also driving their IFE systems. Our view of the world is that wide-body airplanes have been the traditional sweet spot for embedded IFE programs, systems, and they'll 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 narrow-body side, however, there is definitely an argument that the weight and cost of those systems doesn't line up very well with the typical narrow-body mission, which is maybe a little bit shorter than half of an average movie. So there, it's more of a personal electronic device, WiFi-type of entertainment proposition. And -- but from our perspective, they still need passenger power. So to us, when we look at the wide-body world, our opportunity continues to be in conjunction with our IFE partners. In the narrow-body 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 -- their IFE units? I kind of noticed a change where a lot of passengers that purchase food and things like that directly from the 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 their weight concerns or cost concerns of installing that type of equipment?

I don't know if we're qualified to talk about that. Obviously, the airlines 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.

Our next question is from Kevin Ciabattoni with KeyBanc Capital Markets.

Just a follow-on to Tyler's last question. Looking at the increase in the outlook for E&D spending for the year, just 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 you're 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. The vast majority of the increase would be driven by new programs. We've -- it's kind of a good news, bad news kind of thing. But our story has been that we're always interested in growth and that growing requires investment in technologies and 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're developing systems that are derivatives of systems that we've done before. So that the marginal costs per program will come down, but when we layer on an increased number of programs, the costs can still go up. And beyond that, like I said earlier to **Tyler, I believe I'll 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're specifically itemizing certain programs, but I can give a flavor of where that money is going.

Okay. Yes, that would be helpful. And 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 have mentioned roughly $3 million to $4 million of slide outs from 4Q. So first, I guess, if you could touch on how much of that $3 million to $4 million hit in the quarter. And then secondly, if you kind of straight line this quarter's revenue, it pretty much puts you right at the midpoint of your revenue guidance. So just wondering what might -- what could potentially push those margins down from that 19.9%, 20% level, 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 were 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. 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're very encouraged by that. And as far as cost structure, I guess we feel like we're in a pretty good place. We've made some investments of significance over the last year, 1.5 years in terms of facilities and organizations. And we think that, the growth rates we're seeing right now are substantial but yet very manageable. We've 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're 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 I'd answer. Dave, I don't know if you want to add anything to that?

I think Kevin touched on it, the big driver's 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 the 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're in a pretty good run rate -- run mode right now with things.

Okay, great. That's helpful. And then just lastly, Test Systems this quarter, the operating margin there was a little worse than it had been. Was that just one-time or was it 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, was a reduction of force. That business is a high-variable cost business. It's basically expertise of qualified people. And the game that we've been playing is to maintain and preserve our intellectual capital 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 onboard and the capabilities onboard to continue to pursue the opportunities that we see in front of us. And 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're going to do, we think -- hopefully, we're going to be getting off the bottom here in relatively short order.

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

Actually, I 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 of years compared to the larger, longer-range jets, where you guys seem to have less content. Do you -- could that possibly change over the next several years? Or are there kind of structural 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 Gulf Stream 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 but -- and the smaller end has not had the kind of recovery this year that most industry watchers were expecting, and now they're hoping for next year. But from our perspective, we're really looking a few years out, and those small jet manufacturers are continuing to develop new airplanes. And we're 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're 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 in the new platforms, and that our technologies get a fair shake. And in that respect, we think we're doing pretty well, so we're pleased.

[Operator Instructions] Our next question comes from Gregory Macosko from **Lord, Abbett. Gregory M. Macosko - Lord, Abbett & Co. LLC: Yes, 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 Viz 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. Gregory M. Macosko - Lord, Abbett & Co. LLC: Okay. So I just back that out and look at it year-over-year, 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've had some nonrecurring engineering revenue from Lear. And we actually started shipping a little bit more to Eclipse than we were a year ago so... Gregory M. Macosko - Lord, Abbett & Co. LLC: That's nice. Okay. And then I see that you've 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 -- kind of more as a business as usual confirmation than anything else. Mark, I don't know if you want to change that flavor on that at all?

No, I think that's accurate, and we've already discussed the 787 and 350. So I think, like you said, it's not really a game changer at this point.

There are no further questions in queue at this time. I would now 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.