Third Quarter Conference Call – Fiscal 2002
07 / 31 / 2002Highlights
INTRODUCTION FOR CONFERENCE CALLAircraftSpaceIndustrialRecent Conference Calls
After the remarkable growth in the military aftermarket from ’01 to ’02 - growth from $71 million in sales to $86 million – we’re expecting a cool down year and only a 5% increase in ’03.
These effects, plus a small uplift in the engine business, will get us to $227 million in military aircraft revenue, a 15% increase. On the commercial side we’re expecting to do $159 million, only a little better than ’02. The continuation of the current quarter’s level of aftermarket revenues would get us to a 10% increase next year and a total of $57 million. This, plus a modest growth in our bizjet business, will more than offset the anticipated $10 million decline in revenues to Boeing Commercial. Next year we expect that our OEM sales to Boeing Commercial will be $50 million, as a result of spending the whole year of ’03 at their new lower production rates.
On the total of $386 million, we’re expecting a return to more typical margin levels. Given the influence of the modest margins on the cost plus F-35 program, we’re projecting a return to operating profits of 15.6%.
Sales in our Space segment of $26.1 million were almost identical with the third quarter of last year. In addition, the mix was only slightly different. Sales of satellite products increased a little bit as a result of our Tecstar acquisition. Revenues on the Crew Return Vehicle were up a little bit, and these increases offset somewhat lower sales in launch vehicles. The tactical missile business in this quarter was about the same as a year ago.
We’re expecting that a fourth quarter increase in input on the shuttle refurbishment program, and a little more action in the satellite business, will give us enough of a pickup in the fourth quarter so that we’ll finish the year at $114 million, or just slightly higher than we predicted 90 days ago. If we achieve that number, it will be an 11% increase in a very slow satellite and launch vehicle market.
Margins were a barely respectable 10.5%, noticeably lower than the 12.9% in the comparable period last year, and the 13% we’ve been running year to date. In our Space business we have a lot of short run jobs, and our profitability is very much influenced by the cost performance on products in work during the quarter. We’ve recently had some adverse experience with some of the products in our PerkinElmer acquisition and that took its toll in this quarter. We are now projecting a continuation of this kind of performance for the fourth quarter, so we’re revising our year end margin expectation to 12.4%.
For fiscal ’03, we’re expecting to see a small increase in our satellite business, but a substantial increase in our Mid-course Defense System and the Ground-Based Interceptor. Together these increases will provide about $9 million of new revenue, but they won’t offset the lack of production on the Crew Return Vehicle ($7 million), a $10 million reduction in our tactical missile business (Hellfire is down and AGM142 ended), and a general reduction of production requirements for Titan, Delta and Centaur and Ariane. We’re currently forecasting $104 million in Space segment revenues in ’03, which will be a reduction of this year’s $114 million to a level comparable to fiscal ’01.
We’re hopeful that our margin performance in ’03 in the Space business will return to more typical, historical levels, and we’re currently projecting margins of 11.5%.
Industrial sales of $65.3 million were down 6% from the comparable quarter last year. This year’s sales have the benefit of a stronger Euro and that amounts to over $1.1 million. Therefore, absent currency effects, sales would otherwise be down 7% from a year ago. On the other hand, even taking currency into account, sales this quarter are up slightly from the previous quarter and we’re hopeful that our Industrial sales have seen the bottom and are on a slow road to recovery. Compared with the third quarter of last year, sales were down in the plastic controls business, in turbine controls, in the simulator business, and in our sales of electric drives. The bright spot in our Industrial picture is in the sale of industrial products to military end users for combat controls on military vehicles. In that business we had a sales increase, compared to a year ago, of $4.3 million.
These effects, plus a small uplift in the engine business, will get us to $227 million in military aircraft revenue, a 15% increase. On the commercial side we’re expecting to do $159 million, only a little better than ’02. The continuation of the current quarter’s level of aftermarket revenues would get us to a 10% increase next year and a total of $57 million. This, plus a modest growth in our bizjet business, will more than offset the anticipated $10 million decline in revenues to Boeing Commercial. Next year we expect that our OEM sales to Boeing Commercial will be $50 million, as a result of spending the whole year of ’03 at their new lower production rates.
On the total of $386 million, we’re expecting a return to more typical margin levels. Given the influence of the modest margins on the cost plus F-35 program, we’re projecting a return to operating profits of 15.6%.
Space
Sales in our Space segment of $26.1 million were almost identical with the third quarter of last year. In addition, the mix was only slightly different. Sales of satellite products increased a little bit as a result of our Tecstar acquisition. Revenues on the Crew Return Vehicle were up a little bit, and these increases offset somewhat lower sales in launch vehicles. The tactical missile business in this quarter was about the same as a year ago.
We’re expecting that a fourth quarter increase in input on the shuttle refurbishment program, and a little more action in the satellite business, will give us enough of a pickup in the fourth quarter so that we’ll finish the year at $114 million, or just slightly higher than we predicted 90 days ago. If we achieve that number, it will be an 11% increase in a very slow satellite and launch vehicle market.
Margins were a barely respectable 10.5%, noticeably lower than the 12.9% in the comparable period last year, and the 13% we’ve been running year to date. In our Space business we have a lot of short run jobs, and our profitability is very much influenced by the cost performance on products in work during the quarter. We’ve recently had some adverse experience with some of the products in our PerkinElmer acquisition and that took its toll in this quarter. We are now projecting a continuation of this kind of performance for the fourth quarter, so we’re revising our year end margin expectation to 12.4%.
For fiscal ’03, we’re expecting to see a small increase in our satellite business, but a substantial increase in our Mid-course Defense System and the Ground-Based Interceptor. Together these increases will provide about $9 million of new revenue, but they won’t offset the lack of production on the Crew Return Vehicle ($7 million), a $10 million reduction in our tactical missile business (Hellfire is down and AGM142 ended), and a general reduction of production requirements for Titan, Delta and Centaur and Ariane. We’re currently forecasting $104 million in Space segment revenues in ’03, which will be a reduction of this year’s $114 million to a level comparable to fiscal ’01.
We’re hopeful that our margin performance in ’03 in the Space business will return to more typical, historical levels, and we’re currently projecting margins of 11.5%.
Industrial
Industrial sales of $65.3 million were down 6% from the comparable quarter last year. This year’s sales have the benefit of a stronger Euro and that amounts to over $1.1 million. Therefore, absent currency effects, sales would otherwise be down 7% from a year ago. On the other hand, even taking currency into account, sales this quarter are up slightly from the previous quarter and we’re hopeful that our Industrial sales have seen the bottom and are on a slow road to recovery. Compared with the third quarter of last year, sales were down in the plastic controls business, in turbine controls, in the simulator business, and in our sales of electric drives. The bright spot in our Industrial picture is in the sale of industrial products to military end users for combat controls on military vehicles. In that business we had a sales increase, compared to a year ago, of $4.3 million.
© Moog Inc.
