Third Quarter Conference Call – Fiscal 2004
07 / 29 / 2004Highlights
(INTRODUCTION FOR CONFERENCE CALL)Aircraft - Q3’04Space & Missiles Q3’04Industrial Q3’04Components Q3’04In SummaryRecent Conference Calls
The other major downward change from year to year is the fact that in ’04 on the V-22 program we had the opportunity to deliver a number of replacement swashplate actuators, actuators that had been rebuilt to an updated spec. That work will finish in ‘04 and in ’05 our revenues will reflect the ongoing program rate of about 12 aircraft a year and revenues will be just slightly in excess of $17 million.
We are seeing some revenue increases during ‘05. We have another new multi-year order for $13 million worth of sub-assemblies and components for the Japanese F-15. We have an order for flight control hardware on the Indian Light Combat aircraft and we’re forecasting an increase in the military aftermarket by about $7 million, or a little over 7%. All in all, military aircraft revenues should add up next year to $267 million. Together with $148 million in commercial, we’d be at a total of $415 million, up just slightly from the $410 million in ’04. Our analysis suggests that the ‘05 margin mix will be fairly comparable to ’04. So, in spite of very modest growth, we’re anticipating another very strong year in terms of operating profit from our Aircraft segment at 15.3%.
The results achieved in the Space & Missiles segment in the third quarter were by no means a home run, but there is certainly a move in the right direction. Sales of $21.8 million were up 9% from the same quarter a year ago. Operating profits, which have been negative for the last couple quarters, would have been a positive $800K were it not for booking in the quarter a loss reserve of $1.2 million in recognition of our contract on the Joint Common Missile. I think many of you are acquainted with the accounting requirements in this regard. Over the period of performance of our first Joint Common Missile contract, we’ll spend $1.2 million more than the contract amount. One might normally think of this expense as R&D but, since we incur that obligation on contract signing, we have to book the loss on that contract immediately. As I mentioned earlier, the Joint Common Missile is expected to be a program with a 25 or 30-year run. The fact that we’re booking a loss on the program in this particular quarter will be remembered as a wise investment if the program succeeds as expected.
The sales increase in the quarter came principally in the satellite and space vehicle activity. Revenues of just under $10 million were up $1.2 million from a year ago.
Our satellite launch vehicle business was almost the same as this quarter a year ago.
The start-up of the refurbishment program on Minuteman offset the decline in workload on National Missile Defense. Our ground-based, mid-course defense program, which was still in active development a year ago at this time, is now at a low level of production.
On the other hand, our tactical missile programs were up this quarter by over $1 million as a result of increased production on VT-1 and the Hellfire missile, and increased revenues on Maverick as a result of foreign military sales.
In the fourth quarter, we’re anticipating a continuation of these trends with a little further strengthening in the launch vehicle and tactical missile business, and we expect to achieve the $86 million forecast we provided 90 days ago.
In terms of margin performance, the Space & Missile segment, because of the loss reserve on JCM, was still in negative territory by $400K. We’re hoping that we actually will make $700K or $800K in the fourth quarter. And, if we accomplish that, we’ll finish the year with margin performance of a negative 2%.
For fiscal ’05, we are looking forward to a rather substantial $6 million increase in revenues in the satellites and space vehicles part of our business. Launch vehicles, strategic missiles and missile defense will be very similar to this year and we’ll see a decline of almost $4 million in our tactical missile revenues. This has to do with production rate declines on Hellfire, VT-1, and the FMS Maverick order. So, we’re anticipating an increase of only about $3 million in our Space & Missiles segment next year, to a total of just over $89 million. On the other hand, we are anticipating regaining profitability and we’re projecting margins at just under 3% for the year. Hopefully, this will turn out to be a very conservative projection.
We are seeing some revenue increases during ‘05. We have another new multi-year order for $13 million worth of sub-assemblies and components for the Japanese F-15. We have an order for flight control hardware on the Indian Light Combat aircraft and we’re forecasting an increase in the military aftermarket by about $7 million, or a little over 7%. All in all, military aircraft revenues should add up next year to $267 million. Together with $148 million in commercial, we’d be at a total of $415 million, up just slightly from the $410 million in ’04. Our analysis suggests that the ‘05 margin mix will be fairly comparable to ’04. So, in spite of very modest growth, we’re anticipating another very strong year in terms of operating profit from our Aircraft segment at 15.3%.
Space & Missiles Q3’04
The results achieved in the Space & Missiles segment in the third quarter were by no means a home run, but there is certainly a move in the right direction. Sales of $21.8 million were up 9% from the same quarter a year ago. Operating profits, which have been negative for the last couple quarters, would have been a positive $800K were it not for booking in the quarter a loss reserve of $1.2 million in recognition of our contract on the Joint Common Missile. I think many of you are acquainted with the accounting requirements in this regard. Over the period of performance of our first Joint Common Missile contract, we’ll spend $1.2 million more than the contract amount. One might normally think of this expense as R&D but, since we incur that obligation on contract signing, we have to book the loss on that contract immediately. As I mentioned earlier, the Joint Common Missile is expected to be a program with a 25 or 30-year run. The fact that we’re booking a loss on the program in this particular quarter will be remembered as a wise investment if the program succeeds as expected.
The sales increase in the quarter came principally in the satellite and space vehicle activity. Revenues of just under $10 million were up $1.2 million from a year ago.
Our satellite launch vehicle business was almost the same as this quarter a year ago.
The start-up of the refurbishment program on Minuteman offset the decline in workload on National Missile Defense. Our ground-based, mid-course defense program, which was still in active development a year ago at this time, is now at a low level of production.
On the other hand, our tactical missile programs were up this quarter by over $1 million as a result of increased production on VT-1 and the Hellfire missile, and increased revenues on Maverick as a result of foreign military sales.
In the fourth quarter, we’re anticipating a continuation of these trends with a little further strengthening in the launch vehicle and tactical missile business, and we expect to achieve the $86 million forecast we provided 90 days ago.
In terms of margin performance, the Space & Missile segment, because of the loss reserve on JCM, was still in negative territory by $400K. We’re hoping that we actually will make $700K or $800K in the fourth quarter. And, if we accomplish that, we’ll finish the year with margin performance of a negative 2%.
For fiscal ’05, we are looking forward to a rather substantial $6 million increase in revenues in the satellites and space vehicles part of our business. Launch vehicles, strategic missiles and missile defense will be very similar to this year and we’ll see a decline of almost $4 million in our tactical missile revenues. This has to do with production rate declines on Hellfire, VT-1, and the FMS Maverick order. So, we’re anticipating an increase of only about $3 million in our Space & Missiles segment next year, to a total of just over $89 million. On the other hand, we are anticipating regaining profitability and we’re projecting margins at just under 3% for the year. Hopefully, this will turn out to be a very conservative projection.
© Moog Inc.
