Second Quarter Conference Call – Fiscal 2004
04 / 29 / 2004Highlights
Aircraft - Q2’04Space - Q2’04Industrial - Q2’04Components Group - Q2’04SummaryRecent Conference Calls
Our other important customers in the medical equipment field are Phillips, Hitachi and a Chinese company named Neusoft. They buy slip rings, both electric and fiber optic, for use in CAT scan machines. Sales of this equipment totaled $1.2 million in the quarter.
Looking at the military side of the business, once, again, the largest single program was the Commanders Independent Viewing System for the Bradley Fighting Vehicle. Sales were slightly under $1 million. In the Moog breakdown, we would have included these controls for military vehicles in the industrial category. Second quarter industrial sales, other than military vehicles, were up over 20% compared with quarter one.
If we look at the ten largest aerospace programs, they total $4.1 million, about the same proportion of sales as last quarter. They include radar programs - LAMPS, Lantirn, Longbow, and aircraft programs like the V-22, CH-47, Bell AH-1, and the Apache.
During the last quarter, we did an analysis of revenues in the aircraft business and concluded that about 38% of our $15.5 million in sales for the quarter were actually aftermarket sales. The good news is that this helps the aircraft business to be a nicely profitable business. On the other hand, aftermarket revenues are a little harder to predict than original equipment.
Breaking the $33 million in sales down by product, it’s about 45% slip rings, 38% motors, and the balance, or 17%, electromechanical instrumentation, actuators and fiber-optic devices.
Operating margins for the quarter of 12.2% were within the range that we’d anticipated. If we continue this performance for the balance of the year, operating margins will be about 11.3%, the second highest of our segments, and very close to the Moog average.
As of last quarter, we were forecasting sales of $135 million for the Components Group. We are now seeing a delay in the order for Tranche 2 of the Eurofighter, on which we provide fiber-optic avionics equipment. That will move $2 million out of the year. The Components Groups was a supplier on the Comanche Program and the cancellation of the Comanche will take another $750K in revenue out of the year. Those two effects and the general run rate in the industrial business suggest that sales between $130 million and $132 million would be a realistic expectation.
In summary, then, we had a strong quarter, particularly when we consider that we did have some cost problems in the Space segment of our business. Aircraft and the Components Group are pretty much on track and the Industrial segment’s doing better than we had forecasted.
We’re updating our guidance for the year in this fashion. It appears that Aircraft sales will come in at about $405 million, with margins for the year of about 16%. Sales in Space will be down to $86 million. We’re hoping for a break-even in the operating profit line for the balance of the year which would bring us in with a negative margin for the year of 2.4%. Industrial sales could very well come in at or near $307 million, and margins could move up to around 9.8%. If the Components Group sales maintain the current level, we’ll achieve sales for the year of $130 million, with margins in the neighborhood of 11.3%.
The sum of the segment sales as we’ve forecasted them would result in total sales of $928 million, very close to the middle of the range that we had initially projected. However, we now believe that earnings will be above the middle of the range and that we will finish the year at, or close to, $2.17 a share, an increase of 18% over the year previous. We’re anticipating a third quarter of about $.56 and a fourth quarter of $.60 per share.
Looking at the military side of the business, once, again, the largest single program was the Commanders Independent Viewing System for the Bradley Fighting Vehicle. Sales were slightly under $1 million. In the Moog breakdown, we would have included these controls for military vehicles in the industrial category. Second quarter industrial sales, other than military vehicles, were up over 20% compared with quarter one.
If we look at the ten largest aerospace programs, they total $4.1 million, about the same proportion of sales as last quarter. They include radar programs - LAMPS, Lantirn, Longbow, and aircraft programs like the V-22, CH-47, Bell AH-1, and the Apache.
During the last quarter, we did an analysis of revenues in the aircraft business and concluded that about 38% of our $15.5 million in sales for the quarter were actually aftermarket sales. The good news is that this helps the aircraft business to be a nicely profitable business. On the other hand, aftermarket revenues are a little harder to predict than original equipment.
Breaking the $33 million in sales down by product, it’s about 45% slip rings, 38% motors, and the balance, or 17%, electromechanical instrumentation, actuators and fiber-optic devices.
Operating margins for the quarter of 12.2% were within the range that we’d anticipated. If we continue this performance for the balance of the year, operating margins will be about 11.3%, the second highest of our segments, and very close to the Moog average.
As of last quarter, we were forecasting sales of $135 million for the Components Group. We are now seeing a delay in the order for Tranche 2 of the Eurofighter, on which we provide fiber-optic avionics equipment. That will move $2 million out of the year. The Components Groups was a supplier on the Comanche Program and the cancellation of the Comanche will take another $750K in revenue out of the year. Those two effects and the general run rate in the industrial business suggest that sales between $130 million and $132 million would be a realistic expectation.
Summary
In summary, then, we had a strong quarter, particularly when we consider that we did have some cost problems in the Space segment of our business. Aircraft and the Components Group are pretty much on track and the Industrial segment’s doing better than we had forecasted.
We’re updating our guidance for the year in this fashion. It appears that Aircraft sales will come in at about $405 million, with margins for the year of about 16%. Sales in Space will be down to $86 million. We’re hoping for a break-even in the operating profit line for the balance of the year which would bring us in with a negative margin for the year of 2.4%. Industrial sales could very well come in at or near $307 million, and margins could move up to around 9.8%. If the Components Group sales maintain the current level, we’ll achieve sales for the year of $130 million, with margins in the neighborhood of 11.3%.
The sum of the segment sales as we’ve forecasted them would result in total sales of $928 million, very close to the middle of the range that we had initially projected. However, we now believe that earnings will be above the middle of the range and that we will finish the year at, or close to, $2.17 a share, an increase of 18% over the year previous. We’re anticipating a third quarter of about $.56 and a fourth quarter of $.60 per share.
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