Fourth Quarter Conference Call – Fiscal 2003
11 / 07 / 2003Highlights
Q4 ResultsFiscal ’03 TotalAircraft Q4’03Aircraft Fiscal ‘03Aircraft for ‘04Space & Missiles Q4Space & Missiles Fiscal ‘03Space & Missiles Fiscal ‘04Industrial Q4Industrial Fiscal ‘03Industrial Fiscal ‘04Fiscal ’04 in TotalRecent Conference Calls
The fourth quarter in the Space & Missiles business came in at $19.8 million – close to our last forecast of slightly over $20 million. Compared to a year ago, sales for the fourth quarter in this segment were down 13%. The reduction reflects the completion of our work on the Crew Return Vehicle which was over $1 million in the fourth quarter of last year, a reduction of almost $2 million in controls delivered on satellites, and lower activity on the Space Shuttle Program. A year ago at this time, we were still refurbishing solid rocket boosters that had come back from recent launches. National Missile Defense was also a larger effort last year at this time. We were generating over $2 million a quarter in revenues on the Ground Based Mid-Course Defense Program which, in the most recent quarter, was a little over $1 million. Tactical and strategic missiles were both up a little in revenue this quarter compared to a year ago.
For the year, Space & Missiles revenues of $84.5 million were down 21% from the year previous. In dollar terms, that’s over $22 million. For the year, the reduction is principally in two places. First, we had a $7 million sales reduction in controls for satellites. This reflects the commercial satellite business coming to a virtual stop. Secondly, last year we had a $6 million job underway designing flight controls for the Space Station Crew Return Vehicle, and a $4 million contract on Gravity Probe B, and both jobs are now completed. Beyond that, our tactical missile business was down $10 million, reflecting the completion of contracts on the AGM-142 Missile and lower levels of activity on Hellfire and VT-1.
Although we achieved major cost reductions over the course of the year, a 21% sales reduction inevitably takes its toll on margins. In ’02, we ran margins in the Space business of 11.5% and, for the year just completed, our margins, on an operating basis, are barely over break-even, .6% to be precise. In the fourth quarter of ’03, our operating margins were actually a negative 4%. Over the last couple quarters, we’ve been running break-even margins in this business and the mix in the fourth quarter was slightly more adverse than the quarters that preceded it.
As I said 90 days ago, we’re projecting only stability in our Space & Missiles segment for ’04. We’re projecting sales of $89 million. There are some positives. We’re expecting increased activity in the Space Shuttle as the program prepares to resume launches. We’re in the midst of a refurbishment program on Minuteman III, overhauling equipment used for roll control and thrust vector control. This will provide some uplift in our strategic missile business for next year. We’re looking for a modest increase in tactical missiles which will get us close to $20 million, mostly as a result of an order we have for Maverick missile hardware. Our production rate for VT-1 will increase by about 33% and we’ll get back to the $4 million per year level on that program.
These positives will offset a further 10% reduction that we’re forecasting in the satellite business and a comparable $2 million reduction in activity in launch vehicles. Missile defense will also produce lower revenue next year, as a result of reduced activity in the Ground Based Mid-Course Missile Defense Booster Program.
Given the margin results achieved in fiscal ’03, we are projecting a continuation of break-even operating margins in the Space business. We do have efforts underway to improve the profitability but we’re taking a wait-and-see attitude and will project improvement when we see evidence that we’re achieving it.
Industrial sales for the fourth quarter were just under $65 million, about $1 million less than the fourth quarter a year ago. However, sales of controls for power-generating turbines at $5.7 million were over $2 million less than a year ago. Most of our other major product lines, plastics, metal forming, heavy industry, and simulators, were either ahead of, or about the same as, the sales level of a year ago.
In terms of geography, our markets are strengthening in both Europe and Asia. The weakness is in the U. S. Setting aside the effects of stronger currency, we had 7% sales growth in the quarter both in Europe and Asia. On the other hand, sales were down 42% in the U. S. That’s where we feel the impact of the decline in turbine controls.
Space & Missiles Fiscal ‘03
For the year, Space & Missiles revenues of $84.5 million were down 21% from the year previous. In dollar terms, that’s over $22 million. For the year, the reduction is principally in two places. First, we had a $7 million sales reduction in controls for satellites. This reflects the commercial satellite business coming to a virtual stop. Secondly, last year we had a $6 million job underway designing flight controls for the Space Station Crew Return Vehicle, and a $4 million contract on Gravity Probe B, and both jobs are now completed. Beyond that, our tactical missile business was down $10 million, reflecting the completion of contracts on the AGM-142 Missile and lower levels of activity on Hellfire and VT-1.
Although we achieved major cost reductions over the course of the year, a 21% sales reduction inevitably takes its toll on margins. In ’02, we ran margins in the Space business of 11.5% and, for the year just completed, our margins, on an operating basis, are barely over break-even, .6% to be precise. In the fourth quarter of ’03, our operating margins were actually a negative 4%. Over the last couple quarters, we’ve been running break-even margins in this business and the mix in the fourth quarter was slightly more adverse than the quarters that preceded it.
Space & Missiles Fiscal ‘04
As I said 90 days ago, we’re projecting only stability in our Space & Missiles segment for ’04. We’re projecting sales of $89 million. There are some positives. We’re expecting increased activity in the Space Shuttle as the program prepares to resume launches. We’re in the midst of a refurbishment program on Minuteman III, overhauling equipment used for roll control and thrust vector control. This will provide some uplift in our strategic missile business for next year. We’re looking for a modest increase in tactical missiles which will get us close to $20 million, mostly as a result of an order we have for Maverick missile hardware. Our production rate for VT-1 will increase by about 33% and we’ll get back to the $4 million per year level on that program.
These positives will offset a further 10% reduction that we’re forecasting in the satellite business and a comparable $2 million reduction in activity in launch vehicles. Missile defense will also produce lower revenue next year, as a result of reduced activity in the Ground Based Mid-Course Missile Defense Booster Program.
Given the margin results achieved in fiscal ’03, we are projecting a continuation of break-even operating margins in the Space business. We do have efforts underway to improve the profitability but we’re taking a wait-and-see attitude and will project improvement when we see evidence that we’re achieving it.
Industrial Q4
Industrial sales for the fourth quarter were just under $65 million, about $1 million less than the fourth quarter a year ago. However, sales of controls for power-generating turbines at $5.7 million were over $2 million less than a year ago. Most of our other major product lines, plastics, metal forming, heavy industry, and simulators, were either ahead of, or about the same as, the sales level of a year ago.
In terms of geography, our markets are strengthening in both Europe and Asia. The weakness is in the U. S. Setting aside the effects of stronger currency, we had 7% sales growth in the quarter both in Europe and Asia. On the other hand, sales were down 42% in the U. S. That’s where we feel the impact of the decline in turbine controls.
© Moog Inc.
