Q4 2020 Astronics Corp Earnings Call
Greetings welcome to Astronautics Corp, fourth quarter fiscal year 2020 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.
When should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I would now turn the conference over to your host Debbie Pawlowski Investor Relations for restaurant Ex Corporation may begin.
Thanks, Jim and good morning, everyone. We certainly appreciate your time today on your interest in astronomy.
On me on the call are Peter Gunderman, our chairman, President and CEO and David Burney, Our Chief Financial Officer.
You should have a copy of the fourth quarter and full year 2020 financial results that was released this morning, if not you can find them on our website and a strong ex dot com.
Let me mention that we may make some forward looking statements. During this formal discussion as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what its David here day. These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with <unk>.
Ladies and Exchange Commission.
These documents can be found on our website or at SEC Gov. During today's call. We will also discuss some non-GAAP financial measures. We believe that these will be useful in evaluating our performance you should not consider the presentation of this additional information isolation or as a substitute for results in accordance with GAAP.
Provided reconciliation of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release.
With that let me turn it over to Pete to begin.
Peter.
Okay.
Good morning, everybody. Thank you for joining me on.
On a rough agenda today will be to summary, summarize our fourth quarter of 'twenty or 'twenty or 'twenty or 'twenty and review.
We'll talk about our financial status, including our bank arrangements.
And then we'll turn our attention to a brief review of our own book as.
As we are in the early days here of 2021.
And of course.
Sure.
Yes.
I want to start with a promise, though and.
On the premise who's the book, we are very well aware that we are still being heavily affected.
The Covid pandemic, but we are increasingly of the opinion.
Solid progress is being made.
On line of sight as being an established for recovery.
Chosen markets and for our company and.
And we're going to spend quite a bit of time.
On this call talking about kind of a green shoots that we're seeing.
Why were increasingly confident that that the worst is behind us.
But first let me remind everybody what our major goals are as a company as we worked our way through this depends on like for almost a year now.
They are first and foremost protect.
Protection of our employees on the safety of our workplace a lot of credit goes to our employees, who have done phenomenal things working through this period of time, and then under a very unexpected and difficult circumstances, they've done a really good job.
Our second objective is to keep meeting the requirements that our customers have placed on us they've trusted us with some pretty important programs.
And even on the difficult circumstances, our objective is to stay up to speed with those expectations because they are important for our future.
Beyond this pandemic, which we hope at some point is it just a summary on the past.
So as such our third goal of requirements. It is true.
Best we can position the company for survival during the pandemic.
And more importantly, six bus afterwards a M.
To this end, we definitely realize that having just reported a year of $500 million in revenue and looking at our income statement that we are not optimized for financial success at 500 momentum.
We are surviving at 500 million, but we have infrastructure of a larger company and our expectation is that our revenue base will grow.
Its recovery comes on.
Comes to us so.
All of that is to say that from our perspective as we sit here today in February of 'twenty 'twenty. One it is all about demand Ah. That's the important thing to monitor that's the important thing to watch.
And that's what we are looking at very closely so well the first part of my discussion here I want to talk about what's happening with demand and again on.
Our perspective is we see.
For the first time in many many months quite a bit more good news on the horizon been bad.
And though we're not out of the woods by any stretch we're cautiously optimistic.
That's the worst is behind us.
So stepping through our core markets.
Here's what we see as a reminder, 70 per cent of our volume before the Covid pandemic.
Moving from the commercial transport market.
And that's.
Primarily Boeing and Airbus and airlines that fly those airplanes and.
For that market to be successful, we need people flying again.
It's somewhat obvious I suppose at this point.
But since we last talked there have been a number of high efficacy very safe vaccines are introduced to the market again on the obvious observation.
What.
But.
No really good news in terms of studying that slipped from the future of the expectation on our company and for the industry because that doesn't vaccines take hold especially on the rich world. The second half of 'twenty and 'twenty, one should see an increase in traffic, which is good for everybody on the industry.
The second piece of news since we last talked on again this is pretty obvious to anybody who follows the industry was up to 737, Max who's been recertified.
737, Max is an important.
Program to our strikes.
Back in 2019 before the pandemic. It was our single largest aircraft production program across our entire company.
For which we provide a minimum of $90000 per aircraft is built and depending on how it's configured the total Tam increase up to 250000 or so.
We are.
Do not expect much impact from that re certification in the first half of.
The ear as Boeing is building out a rather low rate and they're going to burn off inventory that accumulated one the production shut down almost a year ago.
But we expect from the second half, but that will start to have a meaningful impact on our financials and.
If Boeing hits their production anticipated production range going into 'twenty 'twenty two it should again be one of our larger programs.
Most of our company.
Yeah.
Switching to the general aviation business jet market.
That was before the pandemic about 10% of our volume the good news here is that.
Most of the Oems are planning to major Oems are planning to increase production rates from 'twenty and 'twenty is substantially in 2021.
Most cut production rates on new.
Yields on the pandemic in 2020, most or publicly saying that they're going to increase rates again in 2021 on most of our business.
On the jewelry market yes.
There's a mindset so production rates are really important to us.
The third and final part of our core market is the government defense area.
Which for US includes military aircraft and almost all of our customers that was about 20% of our volume pre pandemic.
We expect that.
Spending on this area will continue to be strong going through 'twenty and 'twenty one there's obviously my line.
M.
A lot of change them from Washington D. C. We do not expect those changes to affect our prospects in New York.
And the first well in the short term.
So how is all of this playing out for us and current bookings.
Our Q4 bookings were 116 million M. That's up 42% over Q3, and Q3 was up 33% over Q2 so.
Yeah, I'm not out of the woods 116 million in bookings.
<unk> is a far cry from where we were pre pandemic.
170.
480 million on average through 2019.
But again when you look at the patterns Q2 was 62 million in Q3 at 82 million in Q4 of $116 million. The trend is certainly going into the right direction.
Okay.
Aerospace bookings in the fourth quarter were up 14% test had a great quarter up 150% over a year ago that was on the heels on the previously announced.
Transit test program for the Atlanta Rapid Transit authority.
Through our customer Stadler rail, that's about a $30 million program, which we'll be executing over the next.
A couple of years.
So the real focus now.
We're watching these days is for the total on aftermarket.
Aftermarket.
I talked to earlier about 70% of our volume.
The commercial transports and of that 70% about two thirds or mindset. One third is aftermarket mindset is relatively easy to shoot a tab on because of the well publicized and publish production rates.
Primarily again at Boeing and Airbus The aftermarket is a little bit harder to get a handle on in terms of what plans are but qualitatively what I can tell you today is that we have noticed a significant increase in general activity over the last three or four months.
So airlines went into a shell from our perspective basically as the pandemic took hold and travel collapsed.
In recent months activity has picked up in terms of quoting activity on program activity not necessarily translating into orders yet there's a lot more potential there, but we're encouraged by the pickup from the airline aftermarket.
On a weekend concur with most observers in the industry that that actually is.
More closely associated with narrow body aircraft.
Rather than wide body aircraft and more closely correlated with domestic travel.
Rather than international travel.
We can also agree with the industry that the U S and China.
Seem to be.
Zooming in more activity and more health.
Well Europe lags significantly and that's simply because of the.
<unk>.
Quarantine requirements from travel restrictions that exist throughout Europe today.
So switching over to our Q4 financials.
Very briefly revenue of 115, knowing on again, we you know it was very depressed down 44, 2%.
Year over year, but up 8% sequentially I talked just moments ago about booking trends from Q2 to Q3 to Q4.
Shipments at least for now have bottomed out in Q3 and about rebounded a little bit eight per some in Q4.
We took significant cost reductions early on in the pandemic and I can go through them again, those pandemics have allowed us to have reasonable result, given the situation we feel on our income statement.
GAAP net income.
In the fourth quarter was a negative 20 million or debt.
17% due significantly to a large income tax expense, which I will let my friend David explain in just a minute.
Adjusted EBITDA was $2 9 million or three five per cent.
Cash from operations from the fourth quarter on a 5.8 million.
For the year sales of 500 million have gone down significantly from 773 million and down even more significantly from the 800, plus what we thought.
We would do in 2020 day.
The entire drop was in our aerospace segment down which was down 40% on.
Over 2019 cash.
Excluding our semiconductor business, which we sold two years ago.
It was up 15% for the year again benefiting from a couple of small acquisitions. We did in 2019, some strength in the transit bus market and continued government spending kind of across the board.
On sales on 503 million on our GAAP net loss of about 116 million M was down from income in 2019 of $52 million.
Adjusted EBITDA in 2020 was a negative 29 million.
Hughes me positive 29 million down from 88 million in cash from operations was $37 3 million down from 40, $42 7 million and.
In 2019 so.
The best thing I can say about 'twenty 'twenty. Some with that brief summary is good riddance, we're happy to be moving on.
Yeah.
I'll turn it over to day now to talk about the status with that.
Balance sheet and our banking arrangements David.
Thanks Pete.
Just a M.
I want to say a quick.
The explanation.
The explanation of the the fourth quarter are in the M E and the a full.
Full year tax expense.
A little bit Crazy, if you look at it.
Our GAAP net loss for the quarter was $20 million and a key driver in that was a $14 1 million dollar new.
Noncash valuation allowance were required to record against our deferred tax assets.
The interpretation of GAAP when it comes to assessing the revise the availability of deferred tax assets.
It looks more to past results rather than future profit expectations.
The company is accumulative tax loss for the last three years.
<unk>, we are required to abide by it calls into question the future <unk>.
Realize ability of any deferred tax assets that are sitting on the balance sheet.
And typically requires a valuation allowance to be placed against those deferred tax assets.
Well consideration may be given to the company's forecast the historical three year cumulative loss is typically weighted more heavily.
So a company may be forecasting a profitable future.
But because of the cumulative loss over the past three years, it's generally required to record a reserve against deferred tax assets.
This has no impact on cash taxes. Once we return to a three year cumulative income we will see a lower effective tax rate than what would otherwise be expected is that deferred tax asset reserve gets reversed.
I'll say that regarding net cash taxes for 2021, we expect them to be minimal limited primarily to some state tax.
Offset by some NOL carry back refunds.
Again, the important thing in this is that there's no cash impact now or in the future on this reserve.
Yeah.
Okay.
No.
There's no question there.
This year has been an extremely difficult for restaurant ex in most aerospace companies.
We went from having a budget entering 2020 expecting over $800 million in sales.
Didn't hit a wall late in the first quarter caused by the global pandemic. We're in just nine months, our quarterly sales went from $198 million run rate in the fourth quarter of 2019.
So just $106 million in the third quarter of 2021.
We took quick action to adjust as best we could to the sudden change in in our world.
And these moves were painful and unfortunately involved a lot of sacrifice from our employees and they should be commended.
Well, we're able to lower our cost structure. Unfortunately, much of the cost savings had to come by reducing our head count additional cost reductions were a result of freezing pay adjustments eliminating bonuses.
Eliminating company contributions to retirement plans and other spending cut backs.
Yes, we're currently operating our quarterly GAAP breakeven point is estimated to be around $125 million in sales.
Additionally, we reduced spending by cutting discretionary capex and halted our stock buyback programs back in the first quarter.
Yeah.
These were all.
Critical to weathering. This storm that we're going through now the second very important piece required us to work through this puzzle with our bank group.
We're able to work with our very supportive team of banks to amend our credit facility to suspend our maximum leverage ratio and replace it temporarily with more appropriate covenants given the circumstances.
Because of these moves and the support of our banks, we have been and expect to remain compliant with our debt covenants.
For the fourth quarter, we had positive cash flow from operations of $5 $8 million and ended the year with a positive cash flow from operations of.
<unk> $37.3 million.
And on a positive note we were able to finally reduce our inventory during the quarter by about $6 4 million, which is a good change from the first several quarters of the year.
Yeah.
Just to recap our amended credit facility, we amended it in early May.
It matures in February of 2023, and it's a $375 million revolving credit facility.
The key financial covenants on our first there's a maximum leverage covenant that was waived until the third quarter of 2021.
The suspension period, we will refer to this as <unk>.
Then it begins phasing in starting at six times adjusted EBITDA as defined in the agreement decreasing to five five times in the fourth quarter.
Then further declining to four five times in Q1, 2022, and then ultimately to three seven times 375 times thereafter.
It is important to note that adjusted EBITDA as defined in the credit agreement allows us for add backs of noncash expenses that typically are shown as noncash items on the statement of cash flows.
Also I should note as we mentioned in the press release debt.
Debt, we were recently notified by the acquirer of our semi conductor business that they have calculated an earn out due to us of about $10 $7 million.
We're reviewing the calculations and expect to record. This after we confirm the calculation likely in the first quarter.
The cash we receive will count towards our adjusted EBITDA under.
Under the earn.
Earn out agreement for the covenant purposes.
Okay.
There are two key financial covenants during the suspension period.
Minimum liquidity and our minimum interest coverage ratio.
Through the third quarter of 2021, we're required to maintain minimum liquidity of $180 million.
Liquidity is defined as cash plus the undrawn balance on the revolver.
At 12, 31, 'twenty, we had $242 million of liquidity or a $62 million cushion.
Through the second quarter of 2021, we're required to maintain an interest coverage ratio.
Of 175 times interest expense, except for the first quarter of 2021, which is only one five times at.
At 12, 31, 'twenty, our interest coverage ratio was roughly six times.
Other covenants include a temporary restriction on acquisitions share repurchases and dividends.
[laughter].
Regarding the pricing grid, our current debt is priced at 3.25%.
The Formula has its LIBOR plus 225 basis points at our current leverage.
With a LIBOR floor of 100 basis points.
Our outstanding balance on the revolver at year end was $173 million up slightly from the third quarter, but down $15 million from the end of 2019.
On a net debt basis, which is what our debt covenants consider new.
Net debt was $132 $6 million.
Compared with $156 1 million at the end of 2019, a decrease of $23 $5 million.
Yeah.
As I mentioned previously we cut capex spending in response to the business slow down as well in 2020, we spent $7 $5 million on capex compared with $12 1 million in 2019.
And we have a plan to spend a bit over.
M $10 million, a $10 million to $11 million in Capex for 2021.
Okay.
And Thats it from me Pete back to you.
Okay. So to wrap up looking ahead.
For 2021 M. We are unfortunately still unable to provide any kind of quality guidance.
Especially for the second half of the year.
We said in our release.
We expect the first half of 2021 to look a lot like the second half of 2020.
With the observation that Q1 revenues are likely to be light at around $100 million.
This implies a substantially stronger Q2, obviously and it's more just the nature of how orders are timed than anything else, but in general we expect the first half demand wise to look like the second half of 'twenty and 'twenty one.
And the other first half wrinkle will be the earn out.
Potential that Dave talked about.
What is today, a $10 $7 million.
Value, which we're reviewing.
And the real issue again for the second half and for the year on total it comes back to demand. It comes back to bookings bookings in the first half.
We will drive shipments from the second half so we're paying very close attention to what is happening currently M.
And.
By the time, we report again, which should be the beginning of May we should have a good grip on how the first half is shaking out.
And what the second half is likely to.
To hold for us as a company.
I think that ends our prepared remarks.
So tomorrow, if you want to open up the question line, we will entertain those now.
Sure and at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing star keys, one moment, please while we poll for questions.
And our first question is from.
Things with Beach point capital. Please proceed with your question.
Hi, guys.
That's on the quarter.
Definitely holding in well there.
Just wondering can you talk a little bit about.
Retrofit what are you seeing any increased activity there and what portion of sales that was.
Pre COVID-19.
In terms of commercial aerospace at least.
Sure.
The retrofit, it's a little hard to.
No the number with certainty, we obviously know what we ship to say on the airline as opposed to borrowing.
But we have some of our biggest customers, especially on the in flight Entertainment World provide both so.
Panasonic traditionally has been a very large customer of ours, we shipped to Panasonic.
Fair amount of their products goes to say Boeing or Airbus for line fit but it also goes to MRO as for retrofit and we don't always know how that split plays out but in general the rule of thumb that we use is that.
On the 70% of our traditional panel business don't want the commercial Aero aircraft.
Roughly two thirds with line fit and one third was aftermarket so you know.
Approximately 20% of our total which was significant.
And.
Most of our aftermarket sales are our in flight entertainment related.
Either electrical power for passengers or connectivity equipment or wireless access points or day to loaders things like that so it's dependent on airlines upgrading their IFC in flight entertainment amenities for passengers.
Which is an interesting place to be as weak as the industry crawls out of a pandemic.
Unlike a lot of companies our aftermarket initiatives on that.
Closely linked to say the number of landing or the number of flight hours or the number of flights or even the number of passengers. It's really related to what kind of service. The airlines want to offer there they're flying passengers and so one of the questions that you haven't necessarily us, but there's probably a reasonable thing on <unk>.
<unk> line is.
Let's say the industry recovers from the second half are.
Are we likely to see aftermarket sales increase ahead of that.
Or along with it or may be after it as the airlines repair their balance sheets.
And the answer is we're kind of running an experiment here, we don't really know it's Ben.
No.
Last time. This happened was almost 20 years ago when the industry went through this kind of shock and it was over in about three months. So we're.
We're running an experiment here and the best guidance I can give is what I tried to do during a my monologue, which is.
We're noticing increased activity and a lot of attention.
You know you don't typically get surprised by on order a significant aftermarket order, but on the airline it's typically a lot of back and forth.
Of configurations, and different options and alternatives and even flight trials for new equipment, which the airline wants to get comfortable with before they buy it.
All of that kind of back and forth has definitely been on the increase over the last three or four months, which gives us.
The reason to believe that the airlines are anticipating increased traffic at least domestically on the narrow body side.
And we are in a position to participate on that when the when they pulled the trigger on those programs.
Yes. The short question you got on a long answer I hope I answered most of it.
Yeah.
Great. Thanks.
And our next question is from Austin.
Canaccord Genuity. Please proceed with your question.
Hi, Peter this is Austin on for Ken.
Alright.
Hi, So just to start can you comment on what build rate you're currently at now for the 737, Max on where you sort of expect that to grow to in the second half of the year.
We're at approximately zero.
We've been shut down for a while right.
So that's an easy one and again, we are we were delivering.
I want to say, it's 30 ships a month.
A year plus ago, when Boeing shutdown production they kept us running for a couple of more in line so that accumulated.
Some number of ships, maybe 40 50 60 ships us.
And.
We don't know what.
I don't know specifically what their building at now I know theres, starting very small in there.
Planning to ramp up over the course of the year and our expectation is that they will chew through that accumulated inventory.
Near the middle of the year, So we'll start off with.
We will start delivering in the middle of the year.
For the second half of the year end and I don't know the exact schedule, but they they say they want to be running at around 30 ships on launch at the beginning of 2022. So our hope is that they get there on that.
Demand supports it.
Okay.
Okay, great Yeah, just to switch gears here can you provide any updates on our strong ex us business jet working on what the uptake looks like on the Collins contract.
Yeah.
Oh sure well most of the larger business jet business is widespread.
So.
The best way to kind of predict that is to look at production expectations at the major manufacturers I mean, textron's, obviously, a big customer of ours, both assessment on Bell.
Polaris is a customer of ours hanmi as a customer Bombardier Gulfstream does so pretty much everybody. So collectively if you look at those rates you can see what we expect to happen with a line fit business jet work the Collins programs, a little bit unique that's more of an aftermarket program at this point and it has to.
Provide connectivity.
Satellite connectivity for larger business Jets. So this is something we've been working at.
I had a few swings out over the last few years.
And we're providing an antenna system on a big contribution to Collins is providing an antenna system.
And it's a relatively new service or product that Collins is offering we can't.
Really we're not involved in Collins field sales initiatives. So it's hard for us to.
To estimate that but the feedback we get is that the product is being very well received.
And that they think there's a great market for it so we.
We did announce an order but.
Depending on demand could be consumed relatively quickly or it could stretch out for some period of time, but.
Again, we don't know exactly what Colin sales prospects, but are are indications that our hunches are that.
Yeah.
Demand is going to be consumed relatively quickly. So we're pretty optimistic about it those of them and following our company.
Before the pandemic in the good old days, we talked about three stragglers are on.
Total company was one of the strike letters.
We did a lot of restructuring.
To fix that we thought were really good shape coming into 2020, and Lo and behold. It's it's working out so we're pretty excited about that.
Great well, that's definitely very I'm optimistic and it looks good for the AR business jet Nintendo side of the business. If we if we think about defense now how significant was the MQ 25 stingray contract.
Two revenues either in 'twenty, 'twenty, one or 'twenty 'twenty two.
It's it's not in and of itself.
Critical program, but let me say that definitely will be a little bit cryptic but.
Yeah, we've we've been working on it for I call. It a franchise for flight critical electrical power for.
For smaller aircraft, we've been announcing various programs the fera.
Sarah on Fluoro program with all of the.
But certainly the dollar either Palatis PC 24.
And and.
We're developing on a very capable.
Very intelligent system that we think is has really significant advantages for customers.
Our debt build.
Small aircraft.
Well small aircraft is turning into a whole bunch of different things, it's not only helicopters and the jets from <unk>.
Perhaps on the conventional side, it's also unmanned aircraft.
Like the one you're asking about and also the emerging world potentially of.
Pilotless.
Aircrafts electric aircraft flying.
People around and commuter settings.
This is an emerging effort in the industry certainly, but it's one that we think.
Our franchise might be very very well adapted to so that MQ 25 as a as an example, it's a stuff on that direction.
At this point really to talk about value or ships that content or anything like that but we think it's an indication of where that business could go and it's a it's an exciting future not necessarily for 'twenty 'twenty, one, although we're making progress every year.
But when we look out it's it's one of the kind of big Blue Ocean areas that we can that we can focus on.
Awesome, Yeah, definitely very interesting opportunity coming up either for our unmanned systems, our urban air mobility there.
Just the last question from me what rate are you shipping that now on the 787 and do you and do you expect to stay at the level of.
The five of them on 2021.
Yes.
We don't share most of their product on the 787 I got to think about this we have a little bit that goes direct to Boeing but the majority of it goes through other companies and most of those companies.
Of that product is specific for various tail numbers. So it's reasonable to think that we're going to ship at basically boeing's planned production rate.
Not faster not not not slower so.
Our stated goal is.
Somewhat of a six per month timeframe.
And we expect to be there with them.
Okay, great. Thanks, so much for the color I appreciate it thank you.
Okay.
<unk>.
And our next.
Our next question is from Big line from Cool Yes. Please proceed with your question.
Okay.
You say Pete can you talk a little bit on the transit side I mean, you've got a couple of good wins under your belt, New York, and Atlanta, and what I mean, maybe talk about the delivery of.
Oh.
Those contracts, but what does the pipeline look.
Look like and have these two opened the door for some other opportunities.
Yeah.
Yes.
Sure.
Those are significant wins from our perspective and from our perspective.
Spectrum demonstrate.
The potential that this initiative has for US. This was as you know they're relatively new it's something which we I think we are on the New York City program.
Called our 211 about it about a year and a half ago.
And more recently now on BARDA program.
And we think it's an exciting another blue ocean so to speak.
Trains are.
Are becoming increasingly digital and increasingly integrated.
And.
A M.
The applicability of some of our test technologies for the transit market, we think.
It was a really really good fit compared to the state of the industry before.
And.
Basically what you do is you look around the world not only just the country, but the world at all the cities that run major transit systems, and that's our universe of potential here.
So.
We our strategy is to.
Get involved with various programs with various train manufacturers are only are now maybe five major ones on the world, Our New York City jobs with Carlos Hockey in Japan on obviously.
Our Marta job is with.
From there on a blind.
[noise] with Stadler.
And and.
And we're pursuing programs into other municipalities now.
Which you know maybe one by one of those two companies, maybe one by others, but we're quickly establishing relationships with the major training companies and our hope is to work with them on other opportunities on a global basis, how big will it get how fast we would get there on the way, we're kind of making it up as we go along here, but we're encouraged.
At the win rate that we've got so far we haven't lost a major one and.
And we think there are a couple of others that will hopefully be able to sign up and in the current year in 2021. So.
Again, a smaller part of our business on a newer part of our business, but on a blue ocean for potential.
So we're hopeful.
Okay. So you mentioned kind of day, the Straggler company can you kind of provide an update obviously it sounds like Oh Armstrong the antenna has been scaled back and be in a good position, but how about the V VIP.
And it looks I would assume the.
Armstrong under telephonic and is positioned nicely now, but how about the V VIP.
Yes.
Yeah, you got it right.
All three of those companies.
We've done a number of.
Kind of a restructuring of the way we run it internally.
Including some facility consolidations and things like that that have been going on in the background over the last year, you're on a half and all three of those companies report through what was telephonics, we now call the organization's CSC.
And.
By doing that we're able to share some resources, we're able to be able to move people and an effort from one project to the other it's helped our cost structure.
That helped our competencies frankly significantly so.
So on aerostat are old and southern company or a former antenna company is on a good track with the program with Collins.
I guess simultaneously improve the competency of the organization, but also downsized significantly so.
Nowhere near as Big a drain as it used to be where we still have aspirations and hopes that's going to get bigger and better.
And we'll see how those play out over the course of this year and it's kind of a similar story with Armstrong, which has been physically absorbed into our while kingdom operation in Chicago, I guess with two new facilities in Chicago Waukegan on Lake Zurich, and Armstrong has been absorbed into those too.
As part of CSC and the R V.
P operations that you talk about.
There's is doing better also revenues were up substantially I don't have that front of me exactly but I want to say that we're expecting them to almost be double in 2021 on what they willing 2019.
And part of that is.
Yeah <unk>.
Southern backs getting certified and in the market opening up a little bit so.
If we werent talking about pandemic so much over the last three quarters, we maybe would have been talking more about how we stemmed the situation there with those three and kind of move past it was a critical part of our.
2020 plan that kind of got buried in the rubble depend on it.
Great. Thank you.
Thank you.
And we have reached the end of the question do you use essentially I'll now turn the call over to Peter non Dimitri for closing remarks.
Well. Thank you much no real closing remarks that I appreciate everybody's attention, we look forward to talking to you on other.
Peter sorry.
Okay.
It looks like on a question okay. Yeah. It looked like John came on King got on John do you have a question.
Give me one P M.
John Please proceed with your question.
I did thank you for squeezing me in I think my Mic.
Interest in measures don't Wanna get it before.
Was just wondering if you could.
Tell us how orders have trended through January and February relative to Q4, I know you said, you've seen a lot of quoting and other activity, but not necessarily the translation or did they pick up at all in aerospace or are they mostly flat with what you've seen so far.
Well, it's it's early of course, John but I.
I guess I would tell you we expect.
Overall growth in bookings and we're on track to do that and it's weighted more towards the aerospace. So yeah. The aerospace bookings quarter to date first quarter are showing another step up in demand. So if we can hold that rate.
Yeah, it should be a pretty good first quarter from an aerospace perspective for sure test.
Little Lumpier tests, Jeff bumps around as you know so.
Our fourth quarter test bookings were substantial.
And we have potential for that again on the first quarter, but you never really know it's hard to it's hard to predict sometimes but aerospace is on is on a trend to do better in the first quarter than the fourth quarter for sure.
So we will hope that it is true.
We're about halfway through so a lot can happen.
Great. Thanks for that and just to be clear that $100 million in revenue you're expecting does that include that semiconductor earn out that David was talking about.
No.
You recorded in other income I believe right.
Yeah.
Okay got it and then just a quick one on any impact from the 777 incident that happened a couple of days ago. I know, it's an older expense I don't think it will but.
If there's anything to add to the things that are out there or.
Perhaps to 77 ex any fallout or rate there would be appreciated.
Yeah, nothing that we're aware of John I.
That's a pretty proven engine, so it's a little bit of a blip from our perspective on it.
Apparently not a common engine on the triple Southern so worst case scenario its not going to affect the fleet that much in.
I guess from an industry perspective, if it has to happen now is not a bad time for it to happen because there's a lot of extra triple sevens floating around doing spec. So.
I don't expect it would affect.
The effect of the Triple seven ex at all on that.
Yeah, I don't think it's going to affect international travel at all.
Either at this point.
Okay, great. Thank you very much guys.
Sure.
Any more zone Pete.
That's it.
Okay, well, thanks, everybody for tuning in we look forward to talking to you after the first quarter again.
Have a good day.
Yes.
And this concludes today's conference you may disconnect. Your line at this time. Thank you for your participation.
Okay.
Okay.
Okay.
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