Astronics Corporation (ATRO) Q4 2015 Earnings Report, Transcript and Summary

Greetings, and welcome to the Astronics Corporation Fourth Quarter and Full Year 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Deborah Pawlowski, Investor Relations for Astronics. Please go ahead.

Thanks, Kevin. Good morning, everyone. We certainly appreciate your time and interest in Astronics. I have with me on the call Pete Gundermann, our President and CEO; and Dave Burney, Chief Financial Officer. Pete is going to go through his planned remarks and then we’ll open up the call for questions and answers. The news release you should have in hand, it was issued this morning and is available on our website at www.astronics.com. As you are aware, we may make some forward-looking statements during the formal presentation as well as during the Q&A portion of this teleconference. These statements apply to future events that 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. These documents can be found both at our website and at sec.gov. So with that, let me turn the call over to Pete to begin. Peter?

Thank you, Debbie, and good morning, everybody. My agenda is to talk through first our fourth quarter results. We felt the fourth quarter was a little bit later than expected, but a reasonable close to the year and then spend a little of time talking about 2015 in summary which we thought was a great year, solid growth, very good margins, good cash generation and a good balance sheet at the end of the year. And then close the call with some updated revenue guidance for our 2016 year which we are now well into and then turning it over for Q&A. So, as I said, the fourth quarter was a little bit later than we expected. We had some orders fall out of the fourth quarter into the first quarter primarily on the aerospace side. That’s somewhere in the range of $4 million to $5 million in revenue which we don't feel is all that significant from an annual basis, but certainly can move a quarter when you look at that level of detail. I’d like to emphasize, I guess, upfront that we don’t view that slip as some fundamental shift in our market or outlook or prospects in the market. We think things continue to be very strong for our company in general. But revenue in the fourth quarter ended being $157 million, down 5.3% year-over-year mostly because of customer schedules in our test business schedule which we were aware of about a year-ago and was no real surprise, so on the quarter aerospace revenues were up 6.1% year-over-year, test was down substantially, 44%. So with that mix change happening we ended up at $157 million in revenue. Net income was just shy of $14 million or 8.8% of sales, down from $18 million in the fourth quarter last year. Diluted earnings per share of $0.53, down from $0.71 a year ago. Some discussion on the margin profile of the business in the quarter. Our engineering and development expense was $24 million or 15% of sales, that’s higher than we've done in a while primarily because of the lower sales level. That $24 million in E&D expense compares to $20 million a year ago. The other kind of general theme that both for the quarter and for year is that when people compare on the aerospace side, specifically our margin profile this year compared to our margin profile last year, one of the changes that we have been wrestling with is our Armstrong acquisition from earlier in the year. That revenue and the contribution there definitely was a little bit of a drug on margin. So to the extent that people want to look at the year-over-year changes and try to make of sense of it between the E&D expense across the company and the kind of addition of Armstrong that more than explains those margin differences especially on the aerospace side. We also had very low taxes in the fourth quarter, 6.2%, due to passing of the R&D tax credit and I guess to complete the round, bookings were $135 million, that’s a little on the late side for us and certainly worthy of discussion is the fact that we have not received yet a substantial order that we anticipated in December for our test business on semiconductor side to boost the prospects for 2016 and we will talk about that. We expect an order, there is one coming. It’s perhaps not going to be as big as we originally expected, but I will talk about that in some detail when we get to the test business summary here. Our ending backlog at the end of the year was $247 million, we think putting us in pretty shape going into 2016. When you look at 2015 as a year of the final numbers, revenue of $692 million, up 4.7%. Aerospace was up 11% at $550 million, that’s $55 million increase. 6% of the 11.1% growth was organic. The remainder 5.1% came from the Armstrong acquisition, so half the growth was organic, half of it was from Armstrong. Our test business ended up with revenues of $142 million, that’s down $23 million or 14% from 2014. With that mix change, we still managed to be pretty profitable. Consolidated net income was $67 million, up almost 20% from $56 million net income in 2014. On a margin basis, that’s 9.7% of sales net income versus 8.5% in 2014 and $2.55 per diluted share versus $2.16 against the margin discussion. In 2014 we had a substantial amount of inventory write-up expense, $19.4 million for the year versus only $1 million in 2015. That change definitely helped 2015 results. Moving the other way, our engineering and development expense in 2015 ended up being $90 million to 13% of sales, up from $77 million or 11.6% of sales in 2014. And again, we experienced some margin pressure at Armstrong which when you look at the aerospace margins year to year, was definitely a factor. Our 2015 bookings for the year were $585 million. That’s the book-to-bill ratio of 0.84, but looking again at the segments, our book-to-bill in aerospace was $0.96, so the bookings definitely have kept up with the shipments or very close it, but our book-to-bill on the test side was 0.4, which reflects again the order that we didn't get in December as we expected. So that ratio will we believe flip around pretty quickly here in the coming weeks. Looking at the segments more specifically, aerospace first made up 87% of our fourth quarter shipments, 80% for the year. Revenues in the fourth quarter, as I said, were $136 million, up $7.9 million or 6.1% from 2014. Probably worth mentioning, especially for the aerospace business that our comparative quarter was a record quarter. In fact, we are lined up here. We are lined up here for a series of pretty difficult comparisons on the aerospace side because we have had some very good results from late 2014 through 2015. Operating profit in the quarter was $18.4 million or 13.5%. The comparative quarter last year was $19.4 million or 15.1%. Revenues for the entire year were $550 million, up 11% over 2014. Armstrong contributed $25.5 million, so organic growth was about $29.5 million or 6%. When you look at our product lines, our Electrical Power & Motion product line is our biggest product line responsible for 51% of our aerospace revenues in 2015, that’s about $280 million. The product grouping was up 9.9% or $25 million from 2014. A lot of people like to talk about our in-seat power product franchise. That one led the way. It’s buried in that Electrical Power & Motion sales grouping, but our in-seat power product was up just shy of 15% for the year in 2015. Our lighting and safety sales were $157 million for the year, up $9 million or 6% in our avionics product grouping or one of our smaller ones $56 million in revenue for the year, down 3% year-over-year. Our system certification sales were $21 million, that all comes from the Armstrong acquisition. Armstrong obviously has other sales which were grouped into our other product lines. Our operating profit for the aerospace segment year-to-date was $85 million or 15.5%. $85 million is up from $79 million a year before, but 15.5% is down from 16.1%. That margin, again, we would suggest is - can easily be attributed to increased E&D expense and the addition of Armstrong to the business. Our bookings in the fourth quarter for aerospace were $122 million, somewhat behind recent quarters, but in general on the pace and bookings for the year were $527 million with book-to-bill of, as I said earlier, 0.96. We had for the year two reportable major aerospace customers. We will identify them in our K which will be filed in the coming weeks. One was $145 million or 21% of consolidated sales, the other at $90 million in revenues, 13% of consolidated sales. Moving to our test systems segment, it was a weak fourth quarter as we expected primarily just due to the scheduling of customer deliveries primarily on the semiconductor side. $20.8 million in revenue in the fourth quarter down from $37.7 million in the previous year. For 2015 revenues were $142.6 million down from $166.8 million, but operating profit was $25.5 million or 17.9% substantially up from $12.4 million in 2014 which was 7.4% of revenues in that year. In 2014, to put the margins in perspective, there was inventory step-up expense of about $16.8 million on the test side of our business. Bookings were $13 million in the fourth quarter, $57 million for the year. We issued initial revenue guidance for 2016 in November and at the time, we had a negotiated agreement with the substantial customer for an order that expected to receive in December and for reasons that aren’t very clearly known to us, but I think if you read the press and you understand that we do business with a lot of name brands, very large companies. That demand that was anticipated by the customer in September, October declined and we have spent the time since then renegotiating a smaller demand for 2016, which we believe is done at this point, the negotiations, but the order has not yet been received. So we are kind of in the same spot now in terms of having what we believe is the pretty clear line of sight so what demand is going to be and yet we don’t have the order. So the schedule is such that we would expect an order to be coming in the next, say, four to eight weeks. It could be any day. We don’t have insight into those internal processes that we will of course based on the size of it confirm receipt in the press release as soon as possible. So, our fourth quarter backlog for the test side at the end of the year was $61.7 million. We clearly need the new order to make the forecast that we are putting out today. Looking back at 2015 by the SEC’s requirements we have had one significant customer that came in at about $90 million in sales, 13% of consolidated. The balance sheet at the end we feel we made substantial progress. We had cash on hand at $18.6 million, outstanding debt of $170 million, so a net debt of $151 million. We think that puts us in a pretty conservative camp and [indiscernible] take advantage of opportunities as they may present themselves. So looking forward, last November we issued initial 2016 revenue guidance of $690 million to $750 million based pretty much solely on the evolution with our large semiconductor customer. We are revising that now to $665 million to $725 million. Our aerospace segment forecasts remains as it was, $572 million to $617 million. Our test business revenue forecast is revised to be in the range of $93 million to $109 million. That implies growth rates in aerospace somewhere between 4% and 13%. That implies our test business will be down somewhere in the neighborhood of 30% in revenue year-over-year. CapEx planned to be in the $25 million to $30 million range in 2016, and our engineering and development expense, we believe will be about the same level as 2015, about $90 million, which works to be about 13% of revenues at the midpoint. So one other comment I guess on the Test business in general, and it’s a matter of perspective I suppose many of these things are, we own in that business, the Irvine operation specifically for a couple of years, and it’s been an interesting ride and we are expecting - we saw revenue decline in 2015, we saw - we are expecting a revenue decline in 2016 and yet, I can tell you, from my perspective, we have seen tremendous in the margin profile, and we have seen tremendous development of the organization in terms of competency and product offering and very good execution on the ground. And in the short-term, we are somewhat locked in to the programs we liked into, we expect as I said, revenue to be down about 30% this year. On the other hand, it is very clear that the skillsets that we bring to the market, the products that we have to offer and are in strong demand. And the customers are enthusiastic about the capabilities that we can offer. And our thinking, my thinking beyond 2016 is that it’s a bright future. We have got we believe a favorable trend developing in our aerospace and defense side of our Test business. I think the ground that we have covered in the semiconductor side has been not much short of spectacular in terms of appreciation from our customers and recognition in the market. And I think we feel that over time, we are going to have an increase opportunities that both in the aerospace and defense side as well as the semiconductor side and we need to get through this coming year. I look back at what we paid for that business, I look at what the returns have been, I think it’s been a worthwhile contribution and we’re excited to see how it continues to work out. So I think those are my prepared comments and Kevin, if you’re still there, why don’t we open it up for questions?

[Operator Instructions] Our first question today is coming from Dick Ryan from Dougherty. Please proceed with your question.

Great. Thanks for taking my call. Hey, Pete, couple of focuses, E&D to start with. The run rate at the end of year was kind of $96 million level, you were talking about trying to keep it flat at $90 million. So how should we look at that from a modeling perspective or do we look at it as a flat sort of occurrence going through the year or do we stay at this run rate for the next quarter and kind of see it ratchet down after that or just how do you think E&D plays through the year? And also can you give you some perspective as to where the spending is going now versus maybe a couple of years ago, sort of major programs that you’re focused on?

Sure. I would probably flat line it over the course of the quarters at $90 million in terms of modeling. Unless Dave wants to offer a competing opinion, I will let him do it right now.

No. I agree.

In terms of where it’s going, I would say it’s shifting a little bit away from some of our core airborne power programs that we’ve talked quite a bit about in the past, primarily because our systems are becoming a little bit more - the science is pretty well proven and the technology is becoming a little bit more modular and our cost of programs is coming down on a per program basis. It’s changing a little bit. We are investing more money than we have in the past in terms of our antenna systems, some of our avionics offerings and we are investing a reasonable amount on the Test side also. So it’s changing a little bit, some big programs are kind of dropping off, we are picking it up in some other areas, but our best anticipation over the course of the year is it will stay pretty flat.

Are there any leverage there that could kick in that we are kind of at this run rate pushing $100 million in E&D?

I am not sure I understand what you are asking.

I am just saying how fluid can that $90 million number be, I mean.

I would say it’s pretty solid. I wouldn’t expect it to go down, but we are well enough into the year at this point that what would drive it up are some major program wins and I think the program wins that we have made recently or we anticipate are pretty much modeled into that number.

Okay. And on the semi test side, just kind of in context, conversations have been going on with the customer probably since your Analyst or Investor Day in September, if things have changed, I am not sure, but it sounds like they like the technology, it’s saving money. I guess when you boil it down, what’s so hard to come to a decision, I understand the supply chain issues that they’ve had, but what’s so hard to come to the decision? And are we just talking about units and prices here or is it more broader conversation?

You know, unfortunately I don’t have a whole lot of insight into that, Dick, I can’t really speak for the customer other than to tell you that what we make is Test equipment, but it’s production related. I mean, I guess the short answer is that needing to figure out what their production rights are going to be and then they will buy enough equipment. But combined with what we have shipped to them over the last few years to accommodate that demand and we are not part of those discussions, so we don’t know how that works and what I am telling you is largely just guess work on our part. We kind of wait for the phone to ring and then we will negotiate the points that are specific to the demand that they have. But the issue has been trying to figure out where the demand is.

Okay. Your comment about the ground and the semi, nothing short of spectacular, appreciation from customers. Are you able to yet start moving beyond the customer here into other prospects or is that still something that maybe further down the road?

It’s very early in discussions, we certainly don’t have anything to announce there. I will say that we got $130 million business this year that was - we touch a fair amount of customers all the across the business, so we are working to apply our technologies to various opportunities when they come up in various corners. And I guess, our feeling is that it’s an improving picture across the board, not just in semiconductor, but on the aerospace and defense side too. So we certainly don’t expect 30% volume drop for the year, we are kind of in the short-term roped into the opportunities that it’s kind of our table. But when we look around at where the industry is going and where we think we can compete and play, it’s an improving picture and we’re pretty excited about it. So we’re focused both on executing in the short-term for our current customers, but also trying to keep an eye out all across the Test business for where the opportunities are going to be in 2017 and beyond. We will talk more about that as time goes on, but at this point, we think it’s an improving picture for sure.

Sure. One last one for me on that issue. You look like, you have locked in a new level for Test now, down from what you had in November. I mean, the potential variance that you could potentially experience now, do you think it’s less than kind of the unknowns or the uncertainties you were looking at in November? I mean, is this getting down to a pretty small variance plus or minus from what you’ve disclosed?

We believe so. But in our defense, I guess I would have to tell you that we thought we had a pretty firm picture in November, that was based on experience over the last couple of years, whether it’s certain rhythm to the relationship and we feel we have an obligation to tell you in our investor community, what we know when we know it. And so we were - I think, everyone in the world was surprised to have some things evolve there in that industry and for that customer. But we think now we are down the road a little bit further, so I guess we think it’s relatively solid compared to what it was in retrospect back then.

Great. Thanks for taking my questions. Thanks, Pete.

Thank you. Our next question today is coming from Ken Herbert with Canaccord Genuity. Please proceed with your question.

Hi, good morning, Pete and Dave. Pete, I just wanted to ask why not just take the full implied $50 million to $60 million for one particular customer in the Test business completely out of the guidance. I can appreciate you must have something you feel good about now, just like you did last fall. But it seems like you could a lot more to maybe sort of derisk the outlook through sort of setting that - resetting that at a much lower level than having a little more upside when you do finally finalize things. Was that part of the thought process or maybe a little more detail around why the $25 million relative to what you expected for the full year number.

Well, I guess that’s an approach. We didn’t really think about it in that way and I guess the reason is that while there is certainly a chance we could end up down there, I suppose, I would view that as a highly surprising situation, and not really representative of our real expectation. So we appreciate the interest in conservatism, but there are kind of moving set of lists across the company, so if you derisk everything, you end up with a very, very pessimistic picture. So we try to be as accurate as possible, we think we are being that way now. I think if we were go out with a much lower revenue level, it would be inconsistent with our own internal expectations and inconsistent with how we are managing the business internally. So we are just - seemed a little complicated to even think about.

Okay. I can appreciate that. I guess, has anything changed in terms or can you provide just any more specifics or confidence around in your discussions on the test side with your customer from last fall to today and maybe - because clearly like you said, you thought you would have something by the end of ‘15, we are sitting here six to seven weeks into ‘16, and you’re talking another four to eight weeks, maybe get something finalized. Has anything changed in the signaling for the customer that gives you more confidence, because it still sounds like your comment there, sort of waiting for the phone to ring, don’t - maybe don’t give a lot of confidence that your visibility has improved there.

Okay, let me - first of all, let me be clear that I can’t really speak for our customers in detail because I don’t know what’s going on within their wall. I can tell you how we perceive some things and maybe some of this as well as from an investor standpoint. It could be that our volume is going down because I don’t like our product or it could be because they have got a competitive offering or it could be because prices are being negotiated way, way down. And I can tell you pretty confidently, from our perspective the change is none of those things. The prices do move around a little bit year-to-year based on exchange rates and supplier agreements and volume, but that’s not the material issue and there is absolutely no reason that I know of for us to think that our volume is down for competitive pressures or because they don’t like the product anymore. That’s not it at all. The signals we get is that they think it’s great, it’s working very effectively, it’s simply a function of volume and demand and that’s not something we have insight into. So they don’t - they need to figure out that from their perspective before they can come to us. And there have been discussions, I don’t mean to imply with the waiting for the phone to ring comment, but that we haven’t had any of the discussions. They have been lengthy and regular and we have daily conversations, managing the program. So we have a good idea of where we are going here. But we obviously don’t have the order yet. So that’s the thing that it would be nice to be able to report at this point and we will as soon as we can. But at this point, we think we have a pretty good idea where it’s going to be and we just don’t know exactly when it’s going to show up.

Okay. And I can appreciate that. I guess on a more positive note, really nice growth this quarter in the aerospace and defense portfolio, I am sorry, with this year, in particular ‘15 within the aerospace and defense portfolio on the Test side. It sounds like from your comments maybe that kind of growth doesn’t continue into ‘16 necessarily, but can you provide a little more detail around maybe some of what you’re winning, some of where the growth is coming from and maybe a little more granularity on the outlook for the A&D part of the Test business into ‘16?

Yes, it’s a good question and it’s one of the things I was alluding to earlier. I think our feeling is that in general, the funding environment for the A&D side of our test business has been much depressed over the last five, six years and our sense and I think a growing sense in the community is that that funding level is just not sustainable, it just can't continue along like that. So, there are some new technologies that are being fielded in the services and there are some real supportability issues coming up that are challenges that we think present or represent opportunities for us. So I think we do expect some continued growth there. I think the growth on the A&D side will partially offset some of the downturn on the semiconductor side and bring it a little bit more in the balance for 2016.

Okay. That's helpful. And then just finally if I could on the aerospace side, it sounds like Armstrong was a little softer in the quarter and you alluded to that and maybe that 4 million to 5 million spills into ‘16, Armstrong in terms of margins, do they - do you see any improvement there in '16, has volumes increased or is that just going to continue to be a mix headwind for the aerospace segment?

We’re planning on increased volume and increased margins at Armstrong this year. I don't expect we will continue to talk in detail about it, it's been a challenging year for that organization, for some customer mix reasons and we think that that's going to strain itself out, and it's going to be a very successful year, it's kind of an interesting - Armstrong has been an interesting fit, they basically create a new capability for us to bring to the market, but they also create a capability or have a capability that we can use internally. And so that's not a common thing in our company. So it's been a little bit of an exercise for us to figure out how to harness that and how to employ it, and what the cost ramifications should be, and we’re not done with this exercise yet, but it's part of what we've been doing with, but the real issue driving their financial shortcoming has been some customer mix changes that we expect to straighten out in the coming year or in the current year.

Thank you. Our next question today is coming from Kevin Ciabattoni from KeyBanc Capital Markets. Please proceed with your question.

Thanks. Good morning, Pete and Dave. Just wanted to look at the Aerospace side of the guidance, obviously no changes there to the numbers, but you have the 4 million to 5 million flip out into this year and didn't really get adjusted for that. Just wondering if you could, Pete, maybe talk a little bit about if there were any kind of moving pieces within that topline guidance, even though the actual number itself didn't change?

I guess our feeling was that 4 million or 5 million is pretty significant when you’re considering the implications in a particular quarter, but as we’re heading into a New Year, I think your question basically is why don't we bump up the whole expectation for the aerospace business and we just thought it was a little early to do that and our forecasting is not always that accurate in terms of understanding what it's going to pull in and what it's going to push out. So we left it alone for the time being, but obviously, as we have in the past, as the quarters go by, we’ll take fresh looks at it and refine it as the year progresses. It's certain we should not be perceived as a lack of confidence in our aerospace business. I think we’ve put up good numbers, we continue to put up pretty good numbers and I think our expectation is for more of the same going through 2016 on the Aerospace side.

Thanks. Any insight into kind of inventory level at any of your major customers, I guess, Panasonic will be the one I would call out in particular, I mean any risk that you see some destocking there throughout the year?

I don't have anything to say there. Dave, do you have any insight into that question?

It's unusual for us to get any kind of insight into our customers and what their pipeline is other than the forecast that they give us for the year, which would incorporate that, which we've incorporated into our forecast. So I would say, any of that has been built into our model.

Well, Kevin, are you talking about the inventory that we managed for Panasonic, is that what you're asking about?

Yeah. I mean Dave kind of touched on it, I mean, I think just kind of looking at what the forecast you get from Panasonic for example, and whether that’s changed at all or you see any risk to them, kind of holding too much inventory or are you guys holding too much inventory for them?

I don't think we have any sense of that. I’ll tell you that our customers are a little bit like us in that they tend to get more accurate as the year goes on. So we definitely stay close, especially to our most important customers and Panasonic is very important to us. So I would also say just while we’re talking about that, as our company grows and as our range of products, range of capabilities increase, we are in a position to form closer and closer relationships with our biggest customers and it's interesting to look that some of our biggest customers like Panasonic, we have opportunities to work with them out of five of our different businesses at this point. At one point, it was just an in seat power relationship and it still largely is, but we do a lot of other things for Panasonic and with Panasonic, so it continues to be a pretty good situation.

That’s helpful. And then I guess turning to another kind of big customer for you guys, on the Boeing side, obviously some rate reductions that you’ve now formally announced, any major impact on the PECO business there as you see it or just kind of in-line with the reductions that Dave called out?

Yeah. We don't see it as a major situation at this point. Our biggest - we are on every Boeing airplane obviously, but the most important ones certainly from a PECO standpoint are the 37 and the 777 and we don't do as much on 47 and we don't do as much on 87, we do quite a bit of in seat power work on those airplanes, but not - that's generally through third parties. So we don't - or 37 if anything, there is upward pressure on rates, that's really good for us. 777, we think is pretty solid for ‘16, rate reductions in advance of 777X, maybe coming out later in the decade, we will have to wait and see, we don't have any real insight into it. Obviously, we would prefer not to see it happen, but we will adjust as well as the customer needs us to when that time comes.

Okay. And then last one for me, just kind of following up on the E&D expense in the quarter, I mean were there any surprises there, because it was pretty steady through the first three quarters and then had the 10% jump or so in Q4. Was there anything that wasn't necessarily in the forecast earlier in the year that kind of crept up?

It was a little higher. I don't know if I can put my finger on exactly any identifiable single fed issue, seem to be more of a kind of a search in little pockets across the board, Dave, I don't know if you have any different answers for that?

Yeah. That's a little bit across the board and a lot of the different operations, avionics, probably had a little bit higher increase in - or share of that increase than the rest of the business.

Thank you. Our next question today is coming from George Godfrey from CL King. Please proceed with your question.

Good morning and thank you for taking the question. Pete, I just wanted to dig in on the bookings for aerospace and defense and I heard the comments on the book to bill ratio for the year of 0.96, but if I look on a sequential basis in aerospace, the bookings down the last three quarters in a row. Can you talk about what is trending right there as it relates to the bookings and then secondly, keeping the Aerospace and defense guidance revenue for ‘16 the same, I guess if you're confident that outlook with the bookings trend just seems to be in a little bit of odds with that?

Yeah. I’m aware of the numbers and you’re bringing in accurately, I think it's a reasonable question, I would tell you we don't see it as a trend at this point with identifiable causes, I think it's just kind of the way that ships fell and have been falling. Our bookings bounce around a little bit quarter-to-quarter. But I would tell you that we continue to see it as a pretty positive environment and I can't give you a real reason as to why that trend - apparent trend exists in the table there on the last page of the press release. But I see it, I ask the same question, I don't think we have an answer. So obviously that trend can continue, it would be at odds with our guidance for 2016. So we would expect to turn some stronger quarters going forward here.

Got it. And then can we have a cash flow figure for the year, cash flow from operations, Dave?

I don't have that in front of me, give me a few minutes so we can circle back and I can give you our tentative number here. [Technical Difficulty] It's going to be about 78 million, 79 million for cash flow from operations.

Got it. Thank you. The last question, as it relates back to the test business in the prospecting of new customers and the activity levels and how those customers are found, is there an outreach program, do they find you in trade shows, but in feeding the grass and getting new customers, what is the process and the most common avenue to getting new people to take the test product?

Are you talking about the semiconductor industry in general?

Exactly.

Okay. Well, our first order of business has been and continues to be taking care of our existing customer relationship which we are very proud of. We feel we have done a good job and we feel largely recognized like I’ve talked about. Beyond that, it gets to be a little bit of a complicated thing, there are IT concerns that you need to be sensitive to, our situation with our current customer is really a merging of things that we brought to the table and things that they brought to the table and we certainly don't want to do anything that would complicate that - the trust that's inherent in that arrangement. But that being said, this industry, like pretty much any other industry, if you do good job at some place and you have some novel technology things, have a way of getting around, and it's a big industry, but it is dominated by a smaller number of potential customers. So we have tried to develop our capabilities there in terms of market knowledge and technical knowledge, and we’re looking for appropriate ways to participate and grow our business. And like I said, we don't have anything specific to talk about at this point, but in our semiconductor business as well as our aerospace and defense test business, I guess our feeling is like I said earlier, there are opportunities in the market we think. We’re not discouraged by what we see, we are encouraged, even though it’s found strange but it’s found strange to me in a situation to say that our revenues are going to get down 30% and yet, we’re excited about the business. So that's what I'm saying, that's where we are.

Thank you. Our next question today is coming from Matt McGeary from Eagle Asset Management. Please proceed with your question.

Hi. Thanks for taking my question. Just one housekeeping, what was CapEx, do you have a CapEx number for 2015?

2015 CapEx, 18.6 million [ph].

And just a general question on sort of capital strategy. If I look at where your stock is trading today, clearly the market, if I assume zero revenue for your test business, which it seems like an unreasonable assumption, but even if I do that, your stock is trading at a little over one times revenue, so clearly the market is dramatically disagreeing with your sort of positive outlook longer term to the test business. So I wonder what do you make of that for one and two, have you considered putting your money where it’s now a little bit and buying back some shares rather than just continuing to issue shares?

Okay. Bunch of points there I guess. We certainly recognize the current state of our stock price and are having a little bit of trouble to be honest just giving our minds around it, because we don't think it is entirely rational or makes sense. Just six to eight months ago, we were more than double the current level and since then, we put up our best quarter ever, and this last quarter wasn’t the greatest maybe, but the two together, there is the point the company has ever operated. So we're trying to get our minds around that. Historically, we have felt strongly that our best use of investment capital was to grow the business and I think we feel like our initiatives there have been pretty good and pretty successful and we - our inclined remain on that line. But as you say, there is a reality in that our stock price is substantially different from what it has been in the recent past and given that environment, we may reconsider our strategy and maybe we do need to do something along the lines of supporting our own stock price just because it can be argued as a value at this point. So it is on the table and we don't have anything to announce --.

Couldn't it theoretically be both, right I mean you guys have a good balance sheet, you generate a lot of cash and it doesn’t mean you’re not growing the business it just means --.

Yeah, you are right we have a good balance sheet, we have some dry powder and we’ll balance the opportunity set against the resources and make decisions we think are appropriate certainly.

Thank you. Our next question today is coming from Lance James from RBC Global Asset Management. Please proceed with your question.

So a question on your E&D expenditures, I’m just trying to get a feel for how discretionary those are and whether they are made with a certain return on investment or whether they are just more tied to I guess configuring product for specific customers?

It’s a good question. Our standard answer is that, a majority of it; let’s say two thirds of it is for things that we’re pretty much contractually obligated to do. So, not a lot of discretion, we’re committed and we have to go forward. The other third generally is somewhat more discretionary and something that we can't control. We certainly consider an ROI type of structure in evaluating those go, no-go decisions but ultimately those especially when you're dealing with new technology there are whole bunch of unknowns and any ROI calculation that doesn't explicitly recognize the huge number of unknowns is in my view a little bit naïve. I mean you don't always know how much it’s going to cost, you don’t always know what the market reaction is going to be. You don't always know how it’s going to work. So I would tell you that the most important factor that we use is do we think we can do it, do we think the customers will like it and can we get it done in time and we obviously have estimates of what it will cost and what we can sell it for and how the new technology that we want to invest in will compare with the existing state-of-the-art and we balance those competing variables. But I'll tell you the most important thing is to have a good sense of where the market is and you know what kind of contribution are proposed investment our new technology can bring to bear. And those are the things we consider most important.

Thank you. My next question today is coming from Scott Lewis from Lewis Capital Management. Please proceed with your question.

I had a question on your antenna business, Pete, it seems like in the industry there has been some movement lately, the American dropping Gogo et cetera. And if you can talk a little bit about where you stand both on the commercial airlines and maybe on the BizJet with your partnership Panasonic?

Okay, good question. Well, we did announce an agreement recently with Panasonic to basically bring Ku service to a certain class of business jet operation that’s not a market that we've been practically speaking very active in terms of antenna business and neither has Panasonic. So I think we are both pretty excited about how that will go. It’s not a substantial element of our business today but our ambition is to make it one as early as the second half of 2016. So we've got a lot going on in that part of our business right now. And I'll report more on it as we can but it's kind of interesting that you know there's a whole class of aircraft in the business jet world where there is exactly a high level of service out there right now. So, we think we can improve what those customers - potential customers can get pretty easily and we are moving aggressively as we can to do that. On the commercial side, we don't sell directly to the airlines typically we go through the service providers you mentioned Gogo, they are a customer of ours and we have been working with them over the last couple of years. And there are other potential customers in that universe. So when you're talking about business jets, our strategy is working with Panasonic and go directly to the market to the users. When you're talking about commercial, we have to go through some kind of service provider typically and we’ll continue to pursue both those paths. We have been weighted more towards the commercial side. I expect there will be a more even split in 2016 between business jets and commercial transport and where it goes from there I don’t, I mean, we continue to think that connectivity in the connected aero planes in general is an exciting market and its early in the game so to speak, it’s an area that's very technically active and we don't know exactly what the end state is going to be, we think a lot of twists and turns can happen between here and there and we are aggressively pursuing the options as we see them I can promise you that.

And then one just question on the large type system semiconductor order. Historically, you’ve delivered that in second and third quarter and obviously the orders are a little delayed this time. Will it get pushed out to third and fourth and do you have enough confidence in the state of the order that you’re kind of moving forward along the supply chain that you need to?

We’re not - we’re definitely moving in a coordinated fashion with our supply chain. I think your schedule prediction is probably accurate, it’s probably not a second, third quarter type sale at this point, it's probably a third, early fourth-quarter type of arrangement. But we are not going on risk and buying a bunch of inventory or anything like that.

Okay, thank you very much.

We don't see a need to do that by the way it's not been a critical part of the discussion at this point.

Thank you. Our next question today is coming from Dan Abramowitz from Hillson Financial Management. Please proceed with your question.

Things are definitely getting weird when I ask a question on a conference call.

It's been a while.

I was wondering if you could break out what the intangible amortization was for the quarter and for the year and what that number might look like going forward if you have it; it’s more of a Dave question I guess?

That certainly a Dave question.

That is a Dave question.

Dave needs a day for that question.

I was not prepared for that one right now but I'll get back to you.

You have another question Dan, or if not, we can --.

No, I think my other questions have been amply addressed but I was curious about the magnitude of that number.

If we can get an answer here in the next couple of minutes will do it, otherwise I guess we will have to hold it for the next call or something.

Thank you. Our next question today is coming from Dick Ryan from Dougherty. Please proceed with your question.

Thanks for the follow-up Pete. [indiscernible] good growth 15% in 2015. How are you handicapping that in your guidance in 2016 and if there any commentary of kind of a changing landscape in the wide or narrow body realm and from a competitive standpoint?

Short answer is steady as she goes. We certainly recognize that we’ve created a little bit of exciting market here and it's pretty obvious that a number of other companies around the industry have noticed it. But we are successful and we continue to be successful. I don't have anything new to report in terms of changed perspective on how we are in terms of the competitive landscape, I think we are pretty good shape and we continue to do a good job and we continue to be recognized by the industry for doing it.

Are you looking at double-digits growth for this year?

I think it's going to be in that range personally, I mean here is where it gets a little tricky with this particular product line. In some aero planes we are pretty much tied to the production rate 787 is a great example. So, if we know what Boeing are going to build, we know plus or minus a reasonable amount what our revenue is going to be for that aero plane. But a fair amount of our revenue goes after market and a fair amount of that goes through our IFE customers. So it’s a little bit tricky to predict what the exact order placement schedule is going to be in the shipping schedule and therefore what the revenues are going to be in any particular time period. What I do, I'd be honest is look at past trends as the best indicator for the future. And we have put together a big number of years as you know with pretty strong double-digit growth; we just finished another one. So, if we saw a reason why that would obviously change, we would reflect in our internal planning and we communicate it. So we’re not saying that today, we think it’s a positive environment we’re pretty optimistic about how things are unfolding. There is room for things to go sideways I mean there always is. So, if a couple of programs get delayed three months that can have a material impact on the fiscal reporting period but from today’s perspective mid-February early in the year we are looking at another pretty good year I think.

Thales announced a win with their AVANT IFE system for Singapore Air and I’m not sure if they talked about MC Power but they talked about USB. Are you in that program with them?

I can’t comment on the program specifically, I can tell you that Thales continues to become a closer and closer customer of ours and we have ongoing and regular dialog with them on a variety of fronts, so we’d certainly consider them a partner.

Thank you. Our next question today is coming from Ross Taylor from Somerset Capital. Please proceed with your question.

It’s actually more of a comment and it’s in support of the earlier caller who and shareholder who referenced the need or the desire to have the company stand up and do something with its balance sheet to help shareholders. It seems for several quarters you’ve talked about how really positive you are in the business outlook and it would be appropriate for you guys, I know you like to invest long term but the simple fact is, Astronics is trading like it's a little basic metal bender right here on multiple basis and its anything but that and to not take advantage of that opportunity for your long-term shareholders and your current investors to me seems to be almost negligent and it's very frustrating I think for shareholders to hear management say we don’t understand why the stock is down but then to do nothing other than throw words at it instead of doing what you should do which is throw capital at it to take advantage because you and I think, I think we both know that strategically Astronics is worth a multiple and not probably just two or a two and half or three times what the stock is currently trading at if someone were to want to acquire it or if they were want to recreate it. And I think that doing something in the short run to step up and help shareholders and to take out those who don't want to play in this stock and let us who want to play in it have a greater confidence and quite honestly not have to spent as much time explaining why we owe it to our clients would be very helpful.

Okay very well said, thank you for the comment.

Well, thank you and I hope to see some action.

Thank you. [Operator Instructions]

So let me jump in here Pete, this is Dave I have an answer to Dan’s question, amortization of intangibles in the quarter was $2.8 million.

Thank you

Kevin, it looks like I'm sorry but it looks like we’ve run out of time, so if you could just turn it back to Pete for closing.

Sure. We've reached the end of our question-and-answer session; I’d like to turn the floor back over to management for any further closing comments.

No closing comments. Thank you for your attention and for all the questions much more than we are used to. Thank you, have a good day. Talk to you soon, bye.

Thank you. That just concludes today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.