Second Quarter Conference Call – Fiscal 2002
04 / 30 / 2002Highlights
Industrial Aircraft SpaceRecent Conference Calls
Before we begin, we call your attention to the fact that we may make forward-looking statements during the course of this conference call. These forward-looking statements are not guarantees of our future performance and are subject to risks, uncertainties and other factors that could cause actual performance to differ materially from such statements. A description of these risks, uncertainties and other factors is contained in our news release of today’s date, our Form 10-Q for the quarter ended December 31, 2001, and in certain of our other public filings with the SEC.
Good morning, everybody. Thanks for joining us today. This morning we’ll discuss our results for the second quarter of fiscal ’02 and we’ll update our guidance for the year.
Sales for the quarter were $182 million, almost identical to the second quarter of last year. But the mix was quite different. Military Aircraft was up 19%, Space up 11%, whereas Commercial Aircraft sales were down 10%, and Industrial sales were down 9%. On a year-to-date basis, sales of $356 million are up 5% from last year.
Earnings for the quarter of $9.3 million were up 36% from last year. Of the $2.5 million increase in net earnings, less than half relates to the change in goodwill accounting. If we’d added back the goodwill expense in last year’s second quarter, net earnings would have been $7.9 million and the increase in this quarter would have been 17%.
On a per-share basis, earnings were 61 cents in the quarter, up 20% from last year’s 51 cents per share. Certainly, earnings per share have the benefit of the change in goodwill accounting, but we also have 15% more shares outstanding this year than last as a result of the equity offering of last November.
Looking at the P&L, our gross margin of 32% is up nicely from last year’s 29%. On the other hand, we’re running somewhat higher R&D, 4.7% of sales. Our SG&A, at 16.4% of sales, is at a higher level than last year. Interest expense is down by $1.6 million from last year, mostly a result of lower rates. Our tax rate is substantially lower than it was at this time last year.
All in all, we’re very pleased with the growth in earnings and earnings per share, particularly in today’s economic environment.
Now, to the segments. Normally, we discuss Aircraft first, then Space, and then Industrial. In the interest of getting the not-so-good news out of the way, I’d like to change the order today and do Industrial first.
Industrial sales of $63.1 million are down 9% from last year. Maybe we shouldn’t feel too badly about that since we know that there are other industrial companies experiencing sales reductions of 20% and 30%. Nevertheless, in our Industrial segment, we’re not quite making our numbers in either sales or earnings.
Perhaps the situation is most easily described in terms of our expectation for the entire fiscal year. You may recall that we began the year with a forecast for Industrial of $272 million, which would have been a $11 million increase from the $261 million we achieved last year. We had forecasted this increase on the basis that we had a predictable sales pickup in combat controls for military vehicles, which we persist in considering an industrial product. And, also, we have some additional revenue months of the acquisitions we made in the early part of fiscal ’01. In our conference call 90 days ago, we updated that guidance to reflect our order input and our first quarter actuals, and we moved the $272 million down to $256 million. We thought that was a pretty conservative projection. In recognition of what did, or didn’t, occur, in the second quarter, we’re now projecting that the $256 million will actually turn out to be more like $250 million, and that’s after adding about $3 million in revenue over the next two quarters from our acquisition in Japan of the TSS product line. Our downward revision is the result of just generally slower activity in almost all product areas. Our entertainment simulator business will be down a little, as will controls for material test machines, metal forming, and our electric drives business. Even the repair and overhaul business is running below our most recent projection. You may recall that we’re anticipating a very large year-over-year increase in the combat controls business for military vehicles, and that is happening, but at a slightly slower pace. What we thought would be a $12 million increase over last year’s sales may turn out to be a $9 million increase.
Good morning, everybody. Thanks for joining us today. This morning we’ll discuss our results for the second quarter of fiscal ’02 and we’ll update our guidance for the year.
Sales for the quarter were $182 million, almost identical to the second quarter of last year. But the mix was quite different. Military Aircraft was up 19%, Space up 11%, whereas Commercial Aircraft sales were down 10%, and Industrial sales were down 9%. On a year-to-date basis, sales of $356 million are up 5% from last year.
Earnings for the quarter of $9.3 million were up 36% from last year. Of the $2.5 million increase in net earnings, less than half relates to the change in goodwill accounting. If we’d added back the goodwill expense in last year’s second quarter, net earnings would have been $7.9 million and the increase in this quarter would have been 17%.
On a per-share basis, earnings were 61 cents in the quarter, up 20% from last year’s 51 cents per share. Certainly, earnings per share have the benefit of the change in goodwill accounting, but we also have 15% more shares outstanding this year than last as a result of the equity offering of last November.
Looking at the P&L, our gross margin of 32% is up nicely from last year’s 29%. On the other hand, we’re running somewhat higher R&D, 4.7% of sales. Our SG&A, at 16.4% of sales, is at a higher level than last year. Interest expense is down by $1.6 million from last year, mostly a result of lower rates. Our tax rate is substantially lower than it was at this time last year.
All in all, we’re very pleased with the growth in earnings and earnings per share, particularly in today’s economic environment.
Now, to the segments. Normally, we discuss Aircraft first, then Space, and then Industrial. In the interest of getting the not-so-good news out of the way, I’d like to change the order today and do Industrial first.
Industrial
Industrial sales of $63.1 million are down 9% from last year. Maybe we shouldn’t feel too badly about that since we know that there are other industrial companies experiencing sales reductions of 20% and 30%. Nevertheless, in our Industrial segment, we’re not quite making our numbers in either sales or earnings.
Perhaps the situation is most easily described in terms of our expectation for the entire fiscal year. You may recall that we began the year with a forecast for Industrial of $272 million, which would have been a $11 million increase from the $261 million we achieved last year. We had forecasted this increase on the basis that we had a predictable sales pickup in combat controls for military vehicles, which we persist in considering an industrial product. And, also, we have some additional revenue months of the acquisitions we made in the early part of fiscal ’01. In our conference call 90 days ago, we updated that guidance to reflect our order input and our first quarter actuals, and we moved the $272 million down to $256 million. We thought that was a pretty conservative projection. In recognition of what did, or didn’t, occur, in the second quarter, we’re now projecting that the $256 million will actually turn out to be more like $250 million, and that’s after adding about $3 million in revenue over the next two quarters from our acquisition in Japan of the TSS product line. Our downward revision is the result of just generally slower activity in almost all product areas. Our entertainment simulator business will be down a little, as will controls for material test machines, metal forming, and our electric drives business. Even the repair and overhaul business is running below our most recent projection. You may recall that we’re anticipating a very large year-over-year increase in the combat controls business for military vehicles, and that is happening, but at a slightly slower pace. What we thought would be a $12 million increase over last year’s sales may turn out to be a $9 million increase.
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