Companies in this feature include:
Barnes Group Inc.
Booz Allen Hamilton Holding Corporation
FLIR Systems, Inc.
Northrop Grumman Corporation
“The half-year underlying results reflect our continued focus on programme execution and operational efficiency,” said Tom Enders, Airbus Group Chief Executive Officer. “Revenues, profitability and cash generation all improved, and the overall financial performance means we are on track to deliver our 2015 guidance. We continue to see healthy commercial momentum across the portfolio as shown by the major contracts announced at June’s Paris Air Show. We are focused on operational priorities, including A350 and A400M ramp-up, cost control and deliveries plus the A320neo transition, as we strive to further enhance profits and cash.”
Group order intake(1) in the first six months of 2015 increased sharply to €53.9bn (H1 2014: €27.7bn), with the order book(1) value rising to €927bn as of 30 June (year-end 2014: €858bn) taking into account a positive revaluation linked to the strengthening of the US dollar.
Airbus received 348 net commercial aircraft orders (H1 2014: 290 net orders), including 57 A330 Family aircraft. Demonstrating the continued strength of the commercial aircraft market, 421 firm orders and commitments were announced during the Paris Air Show. Airbus Helicopters received 135 net orders (H1 2014: 148 units), including 29 H175s. Order intake by value rose 40 percent at Airbus Defence and Space, with strong momentum seen across business lines including additional Earth observation satellites and A330 MRTTs. In June, Defence and Space was selected by OneWeb to design and manufacture an initial 900 satellites.
Group revenues rose six percent to €28.9bn (H1 2014: €27.2 n), reflecting the strong delivery mix at Commercial Aircraft and strengthening US dollar. Commercial Aircraft’s revenues rose nine percent with 304 commercial airplanes delivered (H1 2014: 303 units), including 4 A350 XWBs and 13 A380s. Helicopters’ revenues increased five percent, driven by government programmes and services activities which mitigated lower deliveries of 152 units (H1 2014: 200 units). Defence and Space’s revenues were stable despite the deconsolidation of launcher revenues with the creation of the Airbus Safran Launchers JV’s first phase.
Group EBIT* before one-off(3) – an indicator capturing the underlying business margin by excluding material non-recurring charges or profits caused by movements in provisions related to programmes and restructurings or foreign exchange impacts – rose six percent to €1,883m (H1 2014: €1,769m) with improvements in all Divisions.
Commercial Aircraft’s EBIT* before one-off rose to €1,533m (H1 2014: €1,287m), driven by operational improvement and some favourable cost phasing including research and development (R&D) expenses.
Helicopters’ EBIT* before one-off rose eight percent to €162m (H1 2014: €150m), with lower volumes and a less favourable mix mitigated by higher services activity and the Division’s transformation plan. Defence and Space’s EBIT* before one-off increased to €267m (H1 2014: €223m), reflecting good programme execution and progress in its transformation plan.
Group self-financed R&D expenses were €1,506m (H1 2014: €1,564m) while the Group EBIT* before one-off return on sales was 6.5 percent (H1 2014: 6.5 percent).
The industrial ramp-up of the A350 XWB programme is gaining traction, with Vietnam Airlines becoming the second operator in June. Development of the A320neo is progressing with a CFM-powered aircraft making its first flight in May and flight tests of Pratt & Whitney-engined aircraft resuming at the end of July. Despite some flight test interruptions, the A320neo delivery stream is still expected to commence in 2015. The A380 programme is on track for breakeven by the year-end. Helicopters’ product renewal strategy is progressing with flight testing for the new H160 underway and the X6 concept phase now launched. At Defence and Space, four A400Ms were delivered in the first half of 2015.
Reported EBIT*(3) increased 21 percent to €2,229m (H1 2014: €1,839m), with net one-offs totalling a positive €346m and comprising:
*A €290m additional net charge related to the A400M programme. Following the accident on 9 May 2015, an analysis of the programme’s current status was conducted. Airbus Group has worked with all its partners to resume flights and deliveries. However, the accident caused setbacks on qualifying enhanced military capability and the schedule of planned deliveries. The accident stopped certain flight test activity for a number of weeks and caused bottlenecks in the production process. Industrial efficiency remains a challenge during the ramp-up phase and furthermore, the escalation formulae in the contract versus costs has gone significantly negative due to lower inflation in the eurozone(5). Airbus Group is working with its customers to agree the new schedule of military capability enhancement and deliveries as well as reviewing the escalation formulae.
*A €145m net charge related to the dollar pre-delivery payment mismatch and balance sheet revaluation driven by the weaker euro versus the dollar. The second quarter included a negative impact of €36m linked to the revaluation of the A400M provision.
*A €748m net gain from the sale of an 18.75% stake in Dassault Aviation(6).
*A net gain of €33m mainly linked to the creation of the Airbus Safran Launchers JV’s first phase.
Net income(4) increased 34 percent to €1,524m (H1 2014: €1,135m) while earnings per share (EPS) rose the same percentage to €1.94 (H1 2014: €1.45), driven by the improved operational performance. Both included the Dassault Aviation capital gain and A400M charge. The finance result was €-344m (H1 2014: €-252m) and included one-offs totalling
€ -100 m mainly from negative foreign exchange revaluation of financial instruments.
Free cash flow before mergers and acquisitions improved significantly to €-1,025m (H1 2014: €-2,270m), reflecting the delivery performance and tight cash control while proceeds of around €1.7bn from the sale of Dassault Aviation shares boosted total free
cash flow to €549m (H1 2014: €-2,244m). The net cash position at the end of June 2015 was €8.4bn (year-end 2014: €9.1bn) after a 2014 dividend payment of €945m
(2013: € 587 m) with a gross cash position of €16.8bn (year-end 2014: €16.4bn).
As the basis for its 2015 guidance, Airbus Group expects the world economy and air traffic to grow in line with prevailing independent forecasts and assumes no major disruptions. Airbus deliveries should be slightly higher than in 2014, and the commercial aircraft order book is again expected to grow. In 2015, before mergers & acquisitions (M&A), Airbus Group expects an increase in revenues and targets a slight increase in EBIT* before one-off. Based on its current view of the industrial ramp-up, Airbus Group targets breakeven free cash flow in 2015 before M&A.
Airbus Group targets its EPS and dividend per share to increase further in 2015.
* Airbus Group uses EBIT pre-goodwill impairment and exceptionals as a key indicator of its economic performance. The term “exceptionals” refers to such items as depreciation expenses of fair value adjustments relating to the former EADS merger and Airbus Combination, as well as impairment charges thereon. Airbus Group
Barnes Group Inc.
28 Jul 15. Barnes Group Inc. (NYSE:B), an international industrial and aerospace manufacturer and service provider, reported financial results for the second quarter of 2015. Net sales of $315m were down 2% from $322m in the second quarter of 2014 as positive organic growth of approximately 4% was more than offset by unfavorable foreign exchange of 6%. Net Income for the second quarter was $34.2 m, or $0.61 per diluted share, compared to $30.2m, or $0.54 per diluted share in the prior year period. On an adjusted basis, net income was $0.62 per diluted share, up 5% from $0.59 a year ago. Second quarter 2015 adjusted net income excludes $0.6m pre-tax, or $0.01 per diluted share, of the last remaining Männer short-term purchase accounting adjustments. Second quarter 2014 adjusted net income excludes the impact of Männer short-term purchase accounting adjustments of $1.9m pre-tax, or $0.02 per diluted share, and costs related to the closure of production operations at Associated Spring’s Saline, Michigan facility which were $2.3m pre-tax, or $0.03 per diluted share.
A table reconciling second quarter 2015 and 2014 non-GAAP adjusted results presented in this release to our GAAP results is included at the end of this press release.
“Barnes Group performed well in the second quarter led by our products and systems-based Industrial businesses serving the tool & die and plastics end-markets,” said Patrick J. Dempsey, President and Chief Executive Officer of Barnes Group Inc. “In addition, our Aerospace Revenue Sharing Programs experienced significant year-over-year growth which helped further expand operating margins. While overall performance was solid, results varied among our individual businesses as we are seeing softness develop in certain North American industrial markets and within China. Even so, we expect 2015 to be another year of good organic growth, operating margin expansion and cash generation,” added Dempsey.
* Second quarter 2015 sales were $202.6m, down 5% from $212.8m in the same period last year. Unfavorable foreign exchange reduced sales by approximately $20 m, or 9%. Organic sales growth remained solid, up 5% in the quarter, primarily driven by favorable end-markets served by our tool & die and plastics businesses.
* Operating profit in the second quarter of 2015 was $30.0m, compared to $28.8m in the prior year period, benefiting from $1.3m in lower Männer short-term purchase accounting adjustments and the absence of last year’s $2.3m Saline restructuring charge. Excluding these items, adjusted operating profit of $30.6m was down 7% from $32.9m a year ago. The operating profit benefit from the contribution of organic sales growth was more than offset by lower productivity, including incremental costs related to new product introductions to support future growth programs, and the unfavorable impact of foreign exchange. Adjusted operating margin was 15.1%, down 40 bps from last year’s adjusted operating margin of 15.5%.
* Second quarter 2015 sales were $112.4 m, up 3% from $109.3 m in the same period last year. Spare part sales in Aerospace Aftermarket were up significantly, while Aftermarket maintenance, repair and overhaul (“MRO”) and Aerospace original equipment manufacturing (“OEM”) sales were essentially flat year-over-year.
* Operating profit was $20.7m for the second quarter of 2015, up 24% from $16.6 m in the prior year period. The operating profit increase was primarily driven by higher contributions from spare parts sales. In addition, the Component Repair Programs in the MRO business and favorable product mix in the OEM business likewise benefitted operating profit. Operating margin was 18.4% in the quarter, up 320 bps from 15.2% a year ago primarily from the favorable aftermarket contribution.
* Aerospace backlog was $536m at the end of the second quarter of 2015, up 2% year-over-year, and down 1% sequentially from the first quarter of 2015.
* Interest expense decreased $0.2m to $2.6m in the second quarter primarily as a result of lower average borrowings which was offset in part by a higher average interest rate.
* The Company’s effective tax rate from continuing operations for the second quarter of 2015 was 28.4% compared with 27.7% in the second quarter of 2014 and 27.6% for the full year 2014. The effective tax rate increase in 2015 over the full year 2014 rate is primarily due to the expiration of certain tax holidays.
Barnes Group now expects 2015 organic revenue growth of 4% to 6% with total revenue growth essentially flat after consideration of unfavorable foreign exchange of approximately 5%. Operating margins are forecasted to be about 16.5%. GAAP earnings from continuing operations are now expected to be in the range of $2.43 to $2.53 per diluted share. Excluding $0.02 of the final Männer short-term purchase accounting adjustments recorded in 2015, adjusted diluted earnings per share from continuing operations is expected to be in the range of $2.45 to $2.55, up 5% to 9% from 2014’s adjusted diluted earnings per share of $2.34. Further, the Company anticipates capital expenditures of approximately $55 m and cash conversion to approximate 100% of net income. (Source: Yahoo!/BUSINESS WIRE)
30 Jul 15. BAE Systems announces 2015 half year Results.
Ian King, BAE Systems’ Chief Executive, said:
“Overall, the business performed well during the first half of 2015 during which we have leveraged our capabilities in adjacent growth markets and maintained disciplined cost control. We have also continued to invest in developing skills and new technologies for the future. These actions have provided resilience through an extended period of reduced defence spending in some key markets and ensured that BAE Systems is well positioned to benefit from a generally improving market environment.”
FINANCIAL KEY POINTS
* Sales1 increased by £0.9bn including incremental equipment sales of £0.3bn on European Typhoon Tranche 3 aircraft and favourable exchange translation of approximately £0.2bn
* Underlying EBITA2 of £800m after favourable exchange translation of £21m
* Underlying earnings3 per share of 17.1p reflecting a higher finance charge
* Large order backlog of £37.3bn providing good visibility of future sales
* Interim dividend increased by 2% to 8.4p per share
OPERATIONAL AND STRATEGIC HIGHLIGHTS
* £859m demonstration phase contract agreed for the UK Royal Navy’s Type 26 frigate programme
* Good momentum continues in progressively expanding the Typhoon aircraft’s capabilities, including the integration of the Captor E-Scan radar and the integration of additional weapons
* The F-35 Lightning II programme is ramping up, including our UK-based production of rear fuselage assemblies and deliveries of the electronic warfare suite from our US business
* The award of a contract to supply remote electronic units for the Boeing 777X aircraft means BAE Systems will provide the complete suite of flight control electronics for the aircraft’s fly-by-wire system
* Selected to provide information technology services to the US government in a single-award Indefinite Delivery, Indefinite Quantity contract
* US Army’s Enhanced Night Vision Goggle III programme now proceeding, with framework contract value of up to $435m (£277m)
* $110m (£70m) contract from the US Army to upgrade 36 M88A1 recovery vehicles
* BAE Systems’ 37.5% share of recent contracts signed in Egypt and Qatar by the MBDA guided weapons joint venture expected to total €1.2bn (£0.9bn)
* A total of £1.3bn of international orders are being finalised at the half year
* Acquisition of Eclipse Electronic Systems, Inc., a provider of highly-advanced Intelligence, Surveillance and Reconnaissance products and services, completed in June
* Strategic assessment of manpower and services businesses within the US-managed Intelligence & Security sector underway
* Options to address an anticipated workload reduction in Australian shipbuilding business under review, with initial headcount reductions in the first half
* Land Systems South Africa business disposal completed
Comment: BAE interims, Edison view: “We still see BAE as a major player in defence and as budgets stabilise, the long-term nature of programmes and support will generate substantial profit, however we do not envisage a rapid acceleration of earnings with the current shape of the group.”
Roger Johnston, analyst at Edison Investment Research, said, “BAE’s interims highlighted the resilient nature of the group and the importance of long term funded programmes in the UK and support for future international collaborations such as F-35. With non-defence businesses in civil avionics and cyber also providing some growth to offset the budgetary pressures that have been present over the last few years, BAE has managed to maintain a flat performance.
The key question is what will get the earnings moving again and even to hit this year’s guidance, BAE is reliant on certain aircraft orders and a resolution of how to deal with the decline in Australian shipbuilding. With a H2 bias there still remains some time for these to be sorted, however risk to near-term forecasts exists and we have been here before with BAE. We still see BAE as a major player in defence and as budgets stabilise, the long-term nature of programmes and support will generate substantial profit, however we do not envisage a rapid acceleration of earnings with the current shape of the group.”
29 Jul 15. Booz Allen Hamilton Holding Corporation (NYSE:BAH), the parent company of management and technology consulting and engineering services firm Booz Allen Hamilton Inc., announced preliminary results for the first quarter of fiscal 2016. The Company made further progress on its long-term growth strategy by continuing to invest in key capabilities and markets, while also increasing spending on bid and proposal activity to capitalize on opportunities in an improving environment.
“We are on track to deliver the financial results we have projected for the year”
“Our performance in the first quarter advances a larger narrative: Booz Allen is fully focused on achieving sustainable, quality growth,” said Horacio Rozanski, President and Chief Executive Officer. “We are managing the business today to drive revenue growth and create value for our shareholders, our clients and our people. At the same time, we are investing for the future—in new businesses, capabilities, and talent—so that we have lasting, differentiated, profitable positions in key areas.”
The Company’s revenue increased by 2.2 percent to $1.35bn over the prior year period, and confidence in the government contracting environment led the Company to increase indirect spending early in fiscal year 2016 to support bid and proposal activity and maintain a bench of available talent. First quarter investment spending on growth platforms also increased year-over-year. Headcount grew notably over the prior year and remained stable since last quarter.
The higher overhead spending during the first quarter is expected to continue in the second quarter but will result in a lower quarterly spending profile for the second half of the year, as well as a more consistent quarterly margin profile than in the last two fiscal years. The Company is executing this strategy as previously communicated, and expects annual margin expansion to continue.
“We are on track to deliver the financial results we have projected for the year,” Rozanski said. “By continuing to closely manage the business and invest in growth areas, we are positioning ourselves very well for the future.”
The Company authorized and declared a regular dividend of $0.13 per share, payable on August 31, 2015, to stockholders of record on August 10, 2015.
First Quarter 2016 – Below is a summary of additional results for the fiscal 2016 first quarter and the key factors driving those results. The results align with the Company’s business plan for FY16, which increases indirect spending during the first half of the fiscal year.
* Gross Revenue increased to $1.35bn from $1.32bn primarily as a result of an increase in billable expenses over the prior year period. Revenue on cost reimbursable contracts also benefitted from higher bid and proposal and investment spending.
* Adjusted Operating Income decreased to $127.2m from $142.1m in the prior year period. The decrease was primarily the result of pulling forward bid and proposal costs earlier in the year, compared to prior years, to meet a strong demand and higher spending on investments in growth platforms earlier in the year, partially offset by lower depreciation and amortization expense.
* Adjusted Net Income declined to $65.7m, from $74.6m in the prior year period. The decline was driven by the same factors that impacted Adjusted Operating Income.
* Adjusted EBITDA decreased to $141.3m, from $157.3m and Adjusted EBITDA margins declined to 10.5 percent from 11.9 percent in the prior year period. The decreases were driven by the same factors as Adjusted Operating Income, excluding the effect of the decrease in depreciation and amortization expense.
* Diluted EPS decreased to $0.43 from $0.47 and Adjusted Diluted EPS decreased to $0.44 from $0.50 in the prior year period. The decrease in Adjusted Diluted EPS was driven by the same factors as Adjusted Net Income.
Net cash provided by operating activities in the first quarter was $19.1m, impacted primarily by the timing of payments and receipts in the quarter, which is expected to reverse during the remainder of the fiscal year. Free Cash Flow was $6.0m as a result of operating cash, plus an increase in capital expenditures to reconfigure facilities in the Washington D.C. area. Book-to-bill was 0.92 for the first quarter, compared to 0.88 in the prior period.
As of June 30, 2015, funded backlog was $2.39bn, compared to $2.35bn as of June 30, 2014. Booz Allen’s total backlog as of June 30, 2015, was $9.26bn, compared to $9.68bn as of June 30, 2014. The decline in total backlog was due in part to the shorter duration of awarded contracts, and the timing of contract transitions and extensions, all of which have contributed to a decline in priced options.
For our full fiscal year 2016 we are reaffirming the guidance we issued on May 21, 2015. We expect revenue to be roughly flat, with a range of two percent growth to a two percent decline. At the bottom line, for the full year, we are forecasting diluted EPS to be in the range of $1.55 to $1.65, and Adjusted Diluted EPS to be on the order of $1.60 to $1.70.
These EPS estimates are based on fiscal year 2016 estimated average diluted shares outstanding of approximately 150.4m shares, and a 40.7 percent effective tax rate, which does not include federal and state tax credits that have not yet been extended or for which qualifications have not yet been established. (Source: Yahoo!/BUSINESS WIRE)
29 Jul 15. Curtiss-Wright Corporation (NYSE:CW) reported financial results for the second quarter and six months ended June 30, 2015.
Second Quarter 2015 Highlights
* The Company reaffirms expectations for operating margin of 13.3% to 13.4%, diluted EPS of $3.80 to $3.90 and adjusted free cash flow of $245m to $265m;
* Net sales decreased 4% to $545m, from $569m in 2014; Organic sales down 2%;
* Operating income decreased 9% to $65m, from $72m in 2014, due primarily to higher AP1000 testing costs, as expected;
* Operating margin for the second quarter decreased 70 basis points to 12.0%, from 12.7% in 2014, while year-to-date operating margin increased 70 basis points to 12.7%;
* Net earnings from continuing operations decreased 7% to $40m, or $0.83 per diluted share, from $43m, or $0.87 per diluted share, in 2014;
* Sale of non-core assets essentially complete, most notably the sale of our downstream oil and gas business; and
* Invested $50m in share repurchases as part of the Company’s balanced capital allocation strategy.
“Our second quarter results were ahead of our expectations, as we generated $0.83 in diluted earnings per share and continue to return significant value to our shareholders despite challenging market conditions,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “Within the Defense segment, we produced solid profitability with strong gains in aerospace and ground defense, including the receipt of a new order for our turret drive stabilization system. We generated higher margins in both our Commercial/Industrial and Defense segments, though as expected, this performance was offset by investments in the AP1000 program, as we near the conclusion of the development phase of our first-of-a-kind reactor coolant pumps.
“Looking to the balance of 2015, we continue to anticipate further margin expansion as we accelerate toward top-quartile performance in profitability. As a result, we are maintaining our full-year diluted EPS guidance of $3.80 to $3.90, although we modified our sales outlook based on slowing conditions affecting some of our industrial businesses, particularly those with exposure to the energy markets.
“Furthermore, underscoring our commitment to return capital to shareholders, thus far in 2015, we have returned more than $100m through consistent share repurchases and dividend distributions. We continue to actively repurchase shares under our buyback program and expect to repurchase at least $200m this year, with the potential for an additional $100m in opportunistic repurchases, following the recently announced expansion of our share repurchase program to $300m. Overall, we remain committed to enhancing shareholder value by improving profitability, generating strong free cash flow and maintaining a balanced capital allocation strategy.”
Second Quarter 2015 Operating Results from Continuing Operations
Sales of $545m in the second quarter decreased $24m, or 4%, compared to the prior year, driven by unfavorable foreign currency translation and a 2% decline in organic growth (excluding effects of foreign currency translation, acquisitions and divestitures). Within the segments, 5% organic growth in the Defense segment was more than offset by lower organic sales in the Power segment.
From an end market perspective, sales to the commercial markets decreased 11%, while sales to the defense markets increased 9%, compared to the prior year. Please refer to the accompanying tables for a breakdown of sales by end market.
Operating income in the second quarter was $65m, a decrease of $7m, or 9%, compared to the prior year. This performance was primarily driven by reduced operating income in the Power segment, partially offset by solid organic growth and the benefit of favorable foreign currency translation in the Defense segment.
Operating margin was 12.0%, a decrease of 70 basis points over the prior year, reflecting lower segment operating income, partially offset by the benefits of our ongoing margin improvement initiatives.
Non-segment expenses were lower as compared with the prior year, primarily due to lower pension and corporate costs, partially offset by higher foreign exchange transactional losses.
Second quarter net earnings decreased 7% from the comparable prior year period. Interest expense of $9m was in-line with the prior year period. Our effective tax rate for the current quarter was 28.9%, a decrease from 31.9% in the prior year, driven by increased foreign R&D tax benefits and a reversal of tax valuation allowance.
Free Cash Flow
Free cash flow, defined as cash flow from operations less capital expenditures, was $53m for the second quarter of 2015, compared to $81m in the prior year period, or a decrease of approximately $28m. Net cash generated from operating activities decreased $39m to $60m, primarily due to lower deferred revenues, as the prior year period included significant advanced payments related to naval defense orders. Capital expenditures decreased $11m to $7m, as the prior year period included investments in several facility expansions that did not recur.
New Orders and Backlog
New orders in the second quarter were $525m, a decrease of 24% compared to the prior year, due to the timing of significant orders within the naval defense market. Backlog of $1.64bn decreased 2% from December 31, 2014, but was 2% higher excluding the reduction resulting from the Progress Energy termination change order received in the first quarter of 2015.
Other Items – Share Repurchase
During the second quarter, the Company repurchased approximately 679,600 shares of its common stock for approximately $50m. Year-to-date through June 30, 2015, the Company repurchased approximately 1.4m shares of its common stock for approximately $97m.
Other Items – Discontinued Operations
During the second quarter of 2015, the Company recorded an after-tax book charge on its discontinued operations of approximately $11m, or $0.23 diluted earnings per share.
Full-Year 2015 Guidance
Effective January 30, 2015, Curtiss-Wright elected to make a $145m contribution to its corporate defined benefit pension plan, which is expected to significantly reduce annual pension expense and annual cash contributions going forward.
*Adjusted free cash flow guidance excludes the aforementioned pension contribution of $145 m.
Second Quarter 2015 Segment Performance
Sales for the second quarter were $304m, a decrease of $9m, or 3%, over the comparable prior year period. Organic sales were flat compared to the prior year period, excluding $12m in unfavorable foreign currency translation, primarily within the general industrial market, and a $2m benefit from acquisitions. Within the commercial aerospace market, sales were flat as OEM production levels remained essentially in-line with prior year levels. In the general industrial market, we experienced lower international project sales of severe-service valves serving the energy markets as well as decreased sales of industrial vehicle products. Those reductions were partially offset by higher valve sales supporting the Virginia-class submarine program in the naval defense market.
Operating income in the second quarter was $45m, down 1% from the comparable prior year period, while operating margin increased 30 basis points to 14.9%. Our results were principally aided by higher sales volumes of sensors and controls products, as well as the benefit of our ongoing margin improvement initiatives. We also experienced higher profitability for industrial vehicle products, despite lower sales volumes, due to ongoing margin improvement initiatives. Those improvements in operating income and margin were offset by lower sales of industrial valves and surface treatment services, as well as $1m in unfavorable foreign currency translation.
Sales for the second quarter were $120m, an increase of $1m, or 1%, over the comparable prior year period. Organic sales increased 5% over the prior year period, excluding $4m in unfavorable foreign currency translation. Our results reflect higher ground defense sales, driven by continued strong demand for turret drive stabilization systems, including a new award in the current quarter on the U.K. Scout program. In aerospace defense, we experienced improved sales of embedded computing products serving various fighter jet and UAV programs, most notably the JSF and Global Hawk programs. These increases were partially offset by lower quarter-over-quarter revenues related to avionics and flight test equipment within the commercial aerospace market.
Operating income in the second quarter was $24m, an increase of $6m, or 35%, compared to the prior year period, while operating margin improved 520 basis points to 20.4%. On an organic basis, operating income improved 21% and operating margin increased 240 basis points as compared to the prior year, excluding $3m in favorable foreign currency translation. This strong improvement in operating income and operating margin was driven by higher sales of turret drive stabilization systems and embedded computing products, as well as the benefits of our ongoing margin improvement initiatives.
Sales for the second quarter were $121m, a decrease of $16m, or 12%, compared to the prior year period. Within the power generation market, our results primarily reflect lower revenues on the domestic and China AP1000 programs compared to the prior year period. We also experienced lower aftermarket sales supporting domestic nuclear operating reactors, as a result of ongoing deferred spending on maintenance and upgrades, which more than offset higher sales supporting international reactors. Naval defense market sales were essentially flat, as higher sales of pumps and generators supporting the Virginia-class submarine program were mainly offset by decreased production on the Ford-class aircraft carrier program.
Operating income in the second quarter was $1m, a 90% decrease from the comparable prior year period, while operating margin declined 970 basis points to 1.2%. Our results, as expected, were primarily impacted by higher costs relative to the engineering and endurance testing, as well as additional costs relative to final modifications to our reactor coolant pumps on the AP1000 program. Current quarter profitability was also impacted by lower aftermarket sales volumes in the power generation market.
30 Jul 15. The Board of Directors of Finmeccanica, convened under the chairmanship of Gianni De Gennaro, has examined and unanimously approved the Half-Year Financial Report at 30 June 2015.
There was considerable improvement in both the business and financial performance in the first half of 2015, compared to the corresponding period of 2014. More specifically, Finmeccanica reported considerably improved profitability, with EBITA up almost 50% on the first half of 2014, an EBIT that nearly doubled and a net profit of €mil. 111, compared to a net loss of €mil. 39 a year earlier.
This performance, along with the agreement with Hitachi to dispose the Transportation sector (preparation for the closing of the transaction– scheduled for the second half of the year – continues), appears to be consistent with the development targets and reinforcement efforts set out in the 2015-2019 Industrial Plan.
The results for the first half of 2015, which no longer include the contribution of the operations in the Transportation sector as they are now separately classified among discontinued operations, show:
- New orders: amounted to EUR 5,539m, above expectations. The decline as compared to the same period of 2014, lower than expected also thanks to the positive impact of the forex, is attributable to significant extraordinary orders last year in Helicopters and Aeronautics.
- Order backlog: amounting to EUR 29,303m, ensures about two and a half years of equivalent production for the Group.
- Revenues: amounted to EUR 5,973m, +4.6% compared to first half 2014.
- EBITA: positive EUR 450m, significantly improved (+45%) compared to positive 310 m of first half 2014. Even excluding the expense in 2014 of about $mil. 100, relating to a specific DRS programme, there is still a significant improvement over the same period of last year as a result of the benefits connected with the efficiency-enhancement and cost reduction plans launched in previous years. ROS at 7.5%, 210 bps higher than last year.
- EBIT: positive EUR 351m, +93% compared to positive 182 m of first half 2014.
Finmeccanica is Italy’s leading manufacturer in the high technology sector and ranks among the top ten global players in Aerospace,
Defence and Security. Listed on the Milan Stock Exchange (FNC IM; SIFI.MI), in 2014 Finmeccanica generated revenues of 14.6 bn Euro. With 273 locations and production facilities in 20 countries, Finmeccanica is a multinational and multicultural group which boasts a significant presence in four markets: Italy, the United Kingdom, the U.S. and Poland. Finmeccanica’s core business activities are in the following sectors: Helicopters (AgustaWestland), Defence Electronics and Security (Selex ES, DRS Technologies), Aeronautics (Alenia Aermacchi). The company also has a significant position in Space (Telespazio, Thales Alenia Space), Defence Systems (OTO Melara, WASS, MBDA) and Transportation (Ansaldo STS, AnsaldoBreda).
- Net result before extraordinary transactions (without considering the activities of the Transportation sector under disposal): positive EUR 91m, compared to negative 61m in first half 2014.
- Net result: positive EUR 111m, compared to negative 39m of first half 2014.
- Group Net Debt including discontinued operations: amounted to EUR 4,802m, improved by 38 m compared to 4,840m at 30 June 2014, notwithstanding the negative foreign exchange differences on debts denominated in sterling and US dollar. The increase, in comparison with EUR 3,962 m at 31 December 2014, was essentially due to the negative effect of the cash flows of the period, reflecting the typical seasonality in the Group’s performance.
- Free Operating Cash Flow (FOCF): negative EUR 743m, improved by 288m compared to negative 1,031m of first half 2014. The latter was negatively impacted by the enforcement of the guarantees for the Indian contract in the Helicopters sector (€mil. 256), partially offset by higher dividends received from the joint ventures.
It should be noted that the Group figures at 30 June 2015 (except for net result and workforce) no longer include the contribution of operations in the Transportation sector to be transferred under the agreement with Hitachi, which are now only shown under “discontinued operations” and “assets and liabilities held for sale”. Therefore, the income statement and cash flow figures for June 2014 have been restated for comparative purposes, while Group Net Debt at 31 December 2014, in accordance with IFRS 5, includes such operations and has not been restated.
Given the fact that the disposal of the Transportation sector essentially allows us to complete the strategic process of better focusing on the Aerospace and Defence sector, there is no longer the need to show the results of the Aerospace and Defence sector separately from those of the Transportation sector. The remaining non-core activities (FATA and the other Transportation sector operations remaining in the Group’s portfolio) are reported under “Other activities”.
Main figures of the second quarter of 2015
- New Orders: amounted to EUR 2,898m, -6.6% compared to the second quarter of 2014.
- Revenues: amounted to EUR 3,319m, +5% compared to the second quarter of 2014.
- EBITA: positive EUR 293m, +73% compared to positive EUR 169 m of the second quarter of 2014.
- EBIT: positive EUR 241m, significantly improved compared to EUR 81m of the second quarter of 2014.
- Net result before extraordinary transactions: positive EUR 87m, compared to negative EUR 46 m of the second quarter of 2014.
- Free Operating Cash Flow (FOCF): positive EUR 137m, 86m higher than the 51m of the second quarter of 2014.
Based upon the results reported by the Group at 30 June 2015 and the expectations for the following quarters, we confirm the outlook for the entire year as presented in the 2014 Annual Report.
Analysis of the main figures of the first half of 2015
New orders were down compared to the first half of 2014 due to the decline reported in Helicopters and Aeronautics, which benefited from major extraordinary orders from the UK Ministry of Defence and from Poland for eight M346 trainers in the first half of 2014. This reduction was partially offset by the significant increase reported in Defence and Security Electronics by both DRS (+ €mil. 204), thanks especially to the beneficial impact of the US dollar/euro exchange rate and the receipt of an order for a vehicle surveillance system from the Canadian army, and by SES (+ €mil. 304), mainly due to significant orders for naval systems under Italian national programmes, which also benefited Defence Systems.
The book-to-bill ratio was higher than expected, amounting to 0.93.
Revenues rose over the corresponding period of 2014 by €264m, mainly attributable to the appreciation of the US dollar and the pound sterling against the euro, benefiting Defence and Security Electronics (especially DRS), and, to a lesser extent, Helicopters.
All the profitability indicators also showed solid improvement, with significant growth in EBITDA (+24% over the first half of 2014), EBITA (+45%) and operating profitability (+2.1 p.p. at 7.5% from 5.4%), resulting from the forecast improvement in the profitability of certain business areas and the benefits associated with the ongoing restructuring plans.
There was also an even greater improvement in EBIT (+93%), despite a slight increase in amortisation associated with business combinations (due to exchange rate differences) as a result of the lesser impact of restructuring costs and non-recurring items.
The Net result before extraordinary transactions showed a profit and represents a marked improvement (net profit of €mil. 91 compared to a net loss of €mil. 61 in the first half of 2014), due to the mentioned rise in EBIT.
The Net result amounted to €mil. 111 (compared to a net loss of €mil. 39 in the corresponding period of 2014) and reflects the results posted in the Transportation sector for operations classified among discontinued operations as a result of the agreement signed with Hitachi, for which an overall profit of €mil. 20 (€mil. 22 in the corresponding period of 2014) was reported.
Cash flows in the first half of 2015 improved considerably over the corresponding period of 2014, which was severely affected by the enforcement of the guarantees (€mil. 256) for the Indian contract in Helicopters (only partially offset by higher dividends received from the joint ventures), with a more widespread improvement across all sectors. Overall, FOCF, in line with the usual seasonal fluctuation in Group cash flows, was negative by €mil. 743 (negative by €mil. 1,031 in the first half of 2014).
The Group net debt including discontinued operations (loans and borrowings higher than receivables, cash and cash equivalents) at 30 June 2015 accounted to €mil. 4,802, slightly improving compared to June 2014. If compared to the debt posted at 31 December 2014 (€3,962m), the €mil. 840 increase reflects the usual cash absorption during the first months of the year.
Workforce at 30 June 2015 was 53,393 with a net reduction of 987 employees compared to 54,380 at 31 December 2014.
Rationalisation of company portfolio and disposals
On 24 February 2015, Finmeccanica reached an agreement with the Japanese group Hitachi for the sale of Finmeccanica’s businesses in the rail transport sector, described in more detail in the 2014 Annual Report. Once the customary conditions for these types of transactions are met, Finmeccanica will receive a payment of around €mil. 800, subject to a price adjustment. Once the transaction is completed, Hitachi will launch, as required by the applicable legislation, a takeover bid for the remainder of Ansaldo STS (approximately 60% of the share capital).
In January 2015, the process of replacing Finmeccanica Finance SA with Finmeccanica S.p.A. as the issuer of outstanding bonds was completed. The operation was approved in November 2014 as part of the process of gradually centralising all Group financial activities within Finmeccanica S.p.A. As of today, Finmeccanica S.p.A. is the issuer of all the bonds denominated in euros and pound sterling placed on the market under the Euro Medium Term Notes Programme (EMTN). Finmeccanica S.p.A. also continues to guarantee all the bonds issued by Meccanica Holdings USA, Inc. on the US market.
Following the Board of Directors resolution on 27 October 2014, on 5 May 2015 Finmeccanica has signed the 12-months renewal of the Euro Medium Term Note Programme (EMTN), keeping unchanged at €bil. 4 the maximum amount.
On 6 July 2015, in order to take advantage of favourable market conditions and the industrial efficiency-enhancement actions undertaken, as well as the Group’s improvement economic and financial outlook, Finmeccanica signed an agreement with the providers amending the terms of the Revolving Credit Facility obtained in July 2014. The new terms envisage reducing the margin from 180 bps to 100 bps. In line with the Group’s financial needs, Finmeccanica has simultaneously reduced the total amount of the credit line from €bn. 2.2 to €bn. 2 and has extended the duration by one year, to July 2020.
On 8 July 2015, Finmeccanica announced an offer to holders of its euro-denominated bonds to tender their bonds for repurchase (Tender Offer) in an effort to make the best use of the proceeds from the disposals in the Transportation sector and thereby reduce the outstanding gross debt and the associated financial charges. The operation, worth a total nominal amount of €mil. 450, was carried out at the market values for the individual bonds, plus a premium to encourage investors to tender their bonds. It was structured so as to maximise the financial return, giving priority to those bonds whose net present value (NPV) was such so as to ensure that the saving on financial charges would exceed the initial repurchase cost. The operation was successfully completed on 20 July 2015 and overall will ensure a significant saving on financial charges in the future.
The recalculated nominal values of the notes repurchased are as follows:
Outstanding bond issues are given a medium/long-term financial credit rating by the three international rating agencies: Moody’s Investors Service (Moody’s), Standard & Poor’s and Fitch.
At the date of presentation of this report, Finmeccanica’s credit ratings, compared to those preceding the last change, were as follows.
OPERATING PERFORMANCE OF THE BUSINESS SECTORS
The first half of 2015 saw, with regard to commercial performance, some decline in new orders compared to first half 2014, when there was an important level of contracts signed. It also reflects the concurrent difficulty in finalising new orders because of the crisis presently affecting certain reference markets, also in relation to the performance of the Oil&Gas sector, and the expected reduction in orders for AW139 aircraft. In the first half of 2015 we obtained a five-year contract from the UK Ministry of Defence to provide logistic support and maintenance for the fleet of AW101 Merlin helicopters.
With respect to the new AW189 and AW169, although the ramp-up in production has proceeded at a slower pace than expected, in the first quarter FAA validation for the EASA certification issued in 2014 was received and EASA certification was obtained in July.
Although slightly lower than for the same period of 2014, due to a less favourable mix of activities, profitability remained at excellent levels.
Defence and Security Electronics
Companies: Selex ES, DRS Technologies
In the first half of the year, commercial performance was excellent as a result of important new orders reported in the second quarter, including the contracts with the Italian Navy to outfit a landing helicopter dock (LHD) as part of the recently introduced programme to modernize the fleet and the order for the final two FREMMs (European multipurpose frigates).
The Revenues growth was attributable to the favourable impact of pound sterling/euro exchange rates and slight increase in revenues for the Airborne and Space Systems Division. A considerable increase in EBITA was due to the gradual recovery in profitability in certain business areas in Security and Information Systems, which had reported problems in the past, as well as the benefits associated with the restructuring plan and the efforts to improve engineering efficiency, which led to considerable savings in the costs of corporate structures and an improved industrial performance.
Performance in the first half of the year was positive overall and confirmed the signs seen in the first months of the year. The increase in New Orders over 2014 is mainly attributable to the receipt of the order from the Canadian Army under the Light Armoured Vehicle – Reconnaissance Surveillance System (LRSS) programme while higher production volumes in the Maritime & Combat Support segment have more than offset the decline in deliveries of infra-red products and systems to the US Army.
The significant improvement in EBITA, which had been penalised in the second quarter of last year by expenses of around $mil. 100 associated with a specific programme, is also attributable to the benefits arising from streamlining actions in various business lines and the efficiency-enhancement efforts introduced in previous years, in addition to improved profitability in the Training & Control Systems business line.
Companies: Alenia Aermacchi, GIE-ATR (*), Alenia Aermacchi North America, SuperJet International (*)
(*) JVs are consolidated using the “Equity Method”.
In the first six months New Orders were down reflecting order levels for ATR aerostructures and M346 aircraft, which benefited last year from the receipt of sizable orders, including that from Poland for eight M346 aircraft and related logistic support.
The first half of 2015 saw continued production on the B787 programme, with 62 fuselage sections and 37 horizontal stabilisers being delivered during the period (compared to 56 fuselage sections and 43 horizontal stabilisers delivered in the first half of 2014), and an increase in production of the M346 programme, with eight aircraft delivered to the Italian Air Force and to Israel (two aircraft delivered in the first half of 2015).
The improvement in EBITA is attributable to the higher result posted by the GIE consortium, which also benefited from the appreciation of the US dollar against the euro and higher volumes of activity on training aircraft, which more than offset the lower contribution from military and transport aircraft. Space (*)
Companies: Telespazio, Thales Alenia Space
(*) JVs are consolidated using the “Equity Method”.
During the first half of 2015, activities continued on orders for commercial and military satellite communications services, as well as on geo-information and Earth observation solutions, with volumes essentially the same as those for last year. There was, however, an increase in activity on manufacturing programmes, including Iridium, Cosmo, Gokturk and Exomars 2016 and 2018.
The higher profitability of satellite services led to better results than those posted in the first half of 2014, while the less favourable mix of activity in manufacturing was offset by lower restructuring costs as compared to the same period of 2014.
Companies: Oto Melara, WASS, MBDA (*)
(*) JVs are consolidated using the “Equity Method”.
The initial signs of a recovery in orders were seen in the first half of 2015, with orders up compared to the same period of 2014, in land, sea and air weapons systems (Major new orders include those for the Italian FREEM programme, the initial orders under the new Naval Law and logistics contracts from various countries). There was a continuing fall in production due specifically to the expected decline in activity on land, sea and air weapons systems. EBITA increased solidly due to the improved profitability of the underwater systems and the increase in deliveries by the missile systems reported during the period.
FLIR Systems, Inc.
24 Jul 15. FLIR Systems, Inc. (NASDAQ: FLIR) announced financial results for the second quarter ended June 30, 2015. Revenue was $393m, up 6% compared to second quarter 2014 revenue of $369.4m. On a constant-currency basis, revenue for the second quarter was up 12% compared to the prior year, as foreign currency exchange fluctuations negatively impacted revenue by approximately $20m. Operating income in the second quarter was $70.5m, compared to $59.4m in the second quarter of 2014. Operating income was impacted by pre-tax charges related to previously-announced restructuring initiatives of $0.5m in the second quarter of 2015 and $3.5m in the second quarter of 2014. Second quarter 2015 net income was $50.5m, or $0.36 per diluted share, compared with net income of $44.8m, or $0.31 per diluted share in the second quarter a year ago. Net income was impacted by after-tax restructuring charges of $0.3m in the second quarter of 2015 and $2.7m, or $0.02 per diluted share, in the second quarter of 2014. Cash provided by operations in the second quarter of 2015 was $48.9m.
The Surveillance segment contributed $107.8m of revenue during the second quarter, down 5% from the prior year. The Instruments segment had $90.3m of revenue, up 7% versus the prior year, and was negatively impacted by foreign currency exchange fluctuations by approximately $7m. FLIR’s OEM & Emerging Markets segment recorded revenue of $46.3m in the second quarter, down 9% from the prior year. Revenue from the Maritime segment was $52m, down 6% from the second quarter of 2014, and was negatively impacted by foreign currency exchange fluctuations by approximately $7m. Security segment revenue was $60m, an increase of 34% over the second quarter results last year. The Detection segment contributed $36.5m of revenue, an increase of 77% from the prior year.
“With currency-neutral revenue growth of approximately 7% and EPS growth of 35%, we have been successful in executing on our strategies in the first half of 2015,” said Andy Teich, President and CEO of FLIR. “Innovations in many of our commercial markets have driven broader adoption of our thermal and other sensing technologies. FLIR’s commercially-developed, military qualified (CDMQ) model continues to be a positive differentiator in our government and military markets while our restructuring initiatives have proven very beneficial from a profitability standpoint. We look forward to continuing this momentum into the second half of 2015.”
FLIR’s backlog of firm orders for delivery within the next twelve months was approximately $536m as of June 30, 2015, a decrease of $21m, or 4%, during the quarter and a decrease of $12m, or 2%, from the second quarter of 2014.
Revenue and Earnings Outlook for 2015
Based on financial results for the first half of 2015 and the outlook for the remainder of the year, FLIR continues to expect revenue for the full year 2015 to be in the range of $1.55bn to $1.6bn and net earnings, excluding restructuring charges, to be in the range of $1.60 to $1.70 per diluted share.
FLIR’s Board of Directors has declared a quarterly cash dividend of $0.11 per share on FLIR common stock, payable September 4, 2015, to shareholders of record as of close of business on August 21, 2015.
29 Jul 15. General Dynamics (NYSE: GD) reported second-quarter 2015 earnings from continuing operations of $752m, a 16.4 percent increase over second-quarter 2014, on revenue of $7.9 bn. Diluted earnings per share (EPS) were $2.27 per share compared to $1.88 in second-quarter 2014, a 20.7 percent increase.
“General Dynamics’ performance was rock solid this quarter, rounding out a strong first half. We continue to have impressive operating leverage with operating earnings at more than $1bn, up 13.9 percent over the prior year’s quarter,” said Phebe N. Novakovic, chairman and chief executive officer. “Year to date, our revenue is up 6.3 percent across the business with organic growth in all four segments, including the defense segments.”
Company-wide operating margins for the second quarter of 2015 were 13.7 percent, with margin expansion in three of the company’s four business groups compared to the second quarter of 2014.
Net cash provided by operating activities in the quarter totaled $603 m. Free cash flow from operations, defined as net cash provided by operating activities less capital expenditures, was $511m.
The company repurchased 7.5m of its outstanding shares in the second quarter. Year-to-date, the company has repurchased 12.1m outstanding shares.
General Dynamics’ backlog remained steady at the end of second-quarter 2015, with funded backlog at $55.4bn and total backlog of $70bn. Aerospace backlog increased by seven percent in the quarter, with strong order activity across the product line. Information Systems and Technology also had several notable orders in the quarter leading to higher backlog. Estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $25.6bn. Total potential contract value, the sum of all backlog components, was $95.6bn at the end of the quarter.
The company is increasing full-year EPS guidance for continuing operations from $8.05 – $8.10 to $8.70 – $8.80.
28 Jul 15. GKN plc Results Announcement for the six months ended 30 June 2015.
* Sales increased 1% organically
* Trading margin improved to 9.0%
* Profit before tax (management basis) up 4%
* Reported profit before tax was £212 m (2014: £224 m)
* Earnings per share up 1%, impacted by an increased tax rate of 24% (2014: 22%)
* Interim dividend increased 4% to 2.9 pence per share
* Free cash flow of £21 m (2014: £19 m)
* Net debt of £708 m (31 December 2014: £624 m), reflecting normal seasonality
* Acquisition of Fokker Technologies and placing announced separately today.
Commenting on the results, Nigel Stein, Chief Executive of GKN said:
This was another solid performance, particularly in our automotive businesses, with GKN Driveline delivering 4% organic sales growth and an 8.3% trading margin while GKN Powder Metallurgy achieved an 11.8% margin. GKN Aerospace delivered in line with expectations and won some important new contracts for the future. We have continued to perform well against our key markets and report good results in spite of some end market weakness, particularly in GKN Land Systems. We expect these trends to continue in the second half and for 2015 to be another year of growth.
The acquisition of Fokker Technologies, also announced today, supports our strategy, brings excellent technology, an expanded geographic footprint and additional content on high growth aerospace programmes.”
* Organic growth in commercial aerospace (+2%) partially offset by decline in military (-4%)
* Acquisition of Sheets Manufacturing Inc., to support a new contract for engine inlet lip skins for the Boeing 737Max and Boeing 777X, and additional content on Boeing 787
* New work packages won exceed $2.3 bn over contract lives
* Acquisition of Fokker Technologies Group B.V., announced today, supports GKN Aerospace strategy
* Growth continues ahead of global auto production helped by increased content per vehicle
* Trading margin improved to 8.3%
* £460m of annualised new and replacement business won
GKN Powder Metallurgy
* Trading margin increased to 11.8%
* Strong focus on technology and £90 m annualised new and replacement business won
* Chinese powder joint venture agreed subject to approvals
GKN Land Systems
* Organic sales down 8% mainly due to challenging agricultural equipment markets
* Strong cost control results in trading margin of 4.0%, including £5m restructuring charge
GKN Aerospace’s 2015 organic sales are expected to be broadly flat, reflecting growth in commercial aircraft production, a decline in military markets and the phasing of our programmes. A strong commercial order book supports attractive growth for GKN Aerospace over the medium term.
In automotive, external forecasts predict growth in global light vehicle production of around 2% with increases in India, China, North America and Europe offsetting a decline in Japan and Brazil. Against this background, GKN Driveline and GKN Powder Metallurgy are expected to continue to grow organically above the market.
Global agricultural equipment markets are expected to remain soft with only modest improvement in industrial markets. As a result, GKN Land Systems 2015 sales are expected to be lower than 2014 and the remaining £3m restructuring charge is planned in the second half to reduce further the fixed cost base. Although some markets remain challenging, 2015 is expected to be a year of further growth. Beyond 2015, we are well positioned to outperform in our large global markets.
31 Jul 15. Moog Inc. (NYSE: MOG.A) (NYSE: MOG.B) announced today third quarter earnings of $36m, or $.94 a share. Included in the third quarter earnings is a per share restructuring charge of $.11, resulting in adjusted EPS of $1.05, down slightly from last year’s $1.08 per share. Sales in the quarter of $635 m were down 7% from a year ago.
Aircraft segment sales in the quarter were $270m, down 8% from a year ago. Commercial aircraft sales of $129m were down $17m, or 12%. Sales of OEM products to Boeing were 16% lower compared to last year’s unusually strong third quarter. Airbus sales increased 12%, to $19m, as the A350 production continues to ramp up. Commercial aftermarket revenues of $31m were down 9% due to lower initial provisioning of 787 spares.
Military aircraft sales of $141m were 5% lower year over year. Military aftermarket sales were down 5%, mainly due to the winding down of the C-5M Super Galaxy modernization program. F-35 sales, at $22m, were down $1m as work on the development program subsided.
Space and Defense sales of $95m were 7% lower in the quarter. Space market sales were down 21%, to $48m, as various satellite programs were completed and NASA Soft Capture activity slowed. Defense sales were $47 m, up 13%, on improved defense vehicle and naval program sales and higher sales of defense products sold into European markets.
Sales in the Industrial Systems segment were down 12%, to $131m, with most of the decline tied to foreign currency effects. Excluding currency adjustments, energy market sales were down $3m on lower sales of steam and gas turbine products as well as weaker sales of wind energy products into Europe. Industrial automation sales, excluding foreign currency effects, were up $3m from stronger aftermarket sales. Simulation and test product sales, excluding foreign currency effects, increased $1m with gains in the simulation market offset by lower test product sales.
The Components segment had sales in the quarter of $107m, down 3% from a year ago. Excluding foreign currency effects, sales were flat. Sales into aerospace and defense markets were higher on military aircraft OEM sales and space activity. Sales of general industrial products were 9% higher while medical products sales decreased 4%. Energy components, including products sold into marine energy markets, were down $7m, to $15m, a combination of weaker oil prices and a strong quarter a year ago.
The Medical Devices segment had sales of $32m, up $3m on stronger sales of both pumps and administration sets.
The current backlog is $1.3bn. The Company updated its projections for fiscal 2015, ending October 3, 2015, to include sales of $2.53bn, net earnings of $138m and earnings per share of $3.50, reflecting additional restructuring costs.
The Company also provided its initial projections for fiscal 2016 with sales of $2.57bn, net earnings of $148m and earnings per share of $4.00, a 14% increase over fiscal 2015 guidance.
“Fiscal ’15 is turning out to be a year of multiple headwinds for our company,” said John Scannell, Chairman and CEO. “Despite this, our underlying businesses remain strong and we’re responding to the short term challenges to position our company for improvement in fiscal ’16 and beyond. Next year we’re forecasting a modest increase in sales, another year of strong cash flow and a 14% increase in earnings per share to $4.00.” (Source: Yahoo!/Marketwired)
29 Jul 15. NCI, Inc. (NASDAQ: NCIT), a leading provider of information technology (IT) and professional services and solutions to U.S. Federal Government agencies, announced its financial and operating results for the second quarter ended June 30, 2015.
“We’re on track to submit aggregate bids of approximately $2bn during 2015. In addition, our win rates are improving for both new awards and recompetes, as recent award announcements have demonstrated”
Second quarter 2015 revenue was at the high end of management’s guidance range issued last quarter, while diluted EPS was $0.02 above the high end of the guidance range.
Second Quarter 2015 Results
For the three months ended June 30, 2015, revenue increased by 10.2%, or $8.0m, over the same period a year ago. This increase in revenue is principally due to revenues derived from the company’s acquisition of Computech as well as new awards. The increase was partially offset by completed contracts and reductions in staffing and scope of work on certain contracts.
NCI’s PEO Soldier contract accounted for $8.2m, or 9.6% of revenue, in the second quarter of 2015, down $1.8m from $10.0m, or 12.8% of revenue, in the second quarter of 2014.
Earnings before interest, taxes, depreciation and amortization (EBITDA)1 for the quarter was $7.2m, or 8.4% of revenue, compared with $5.6m, or 7.1% of revenue, in 2014. EBITDA and EBITDA margin for the second quarter of 2015 improved primarily as a result of higher-margin revenue from the acquisition of Computech and lower stock compensation expense, partially offset by higher business development costs and acquisition- and integration-related expenses.
Operating income for the second quarter of 2015 was $5.3m compared with $4.1m for the second quarter of 2014. Operating margin for the second quarter of 2015 was 6.2% compared with 5.3% for the second quarter of 2014. Operating income and margin increased as a result of the factors affecting EBITDA and EBITDA margin, partially offset by amortization of purchased intangibles from the Computech acquisition.
Net income for the second quarter of 2015 was $3.0m compared with $2.4m for the second quarter of 2014. Net income increased due to the factors affecting operating income, partially offset by higher interest expense associated with borrowings to fund the Computech acquisition. Diluted EPS for the second quarter of 2015 was $0.22 compared with $0.18 for the second quarter of 2014.
Days sales outstanding (DSO) was 60 days as of June 30, 2015, compared with 59 days at March 31, 2015, and 65 days at December 31, 2014.
Cash flow provided by operating activities for the six months ended June 30, 2015, was $14.0m, $7.8m of which was generated in the second quarter. Subtracting capital expenditures of approximately $0.9m resulted in free cash flow of $13.1m for the six months ended June 30, 2015, or 2.4 times net income.
NCI reported total backlog at June 30, 2015, of $330 m, of which $132m was funded, compared with total backlog at December 31, 2014, of $410m, of which $184m was funded. Bookings for the second quarter were $24m, equating to 0.3 times revenue.
Changes to Executive Management
As reported in the announcement issued earlier today, NCI’s Chairman and CEO Charles K. Narang will be relinquishing his duties as CEO and will remain chairman. This is effective as of October 1, 2015. The board of directors will name Brian J. Clark, currently NCI’s president, as CEO of NCI at its next scheduled meeting on July 30, 2015.
Based on the company’s current contract backlog and management’s estimate of future tasking and contract awards, NCI is issuing guidance for its third quarter and updating guidance for full fiscal year 2015. The table below represents management’s current expectations about future financial performance based on information available at this time:
“NCI continued to post excellent operating results in the second quarter of 2015,” said NCI’s Chairman and CEO Charles K. Narang. “We continue to see the benefit of higher margins from Computech’s revenue base of agile software development and big data projects. Bookings continued to lag, but we are beginning to see some traction with smaller awards – both recompetes and new wins.
“I will continue to be involved with day-to-day operations during the transition to my role as NCI’s chairman on October 1. Thereafter, I will assume a more high-level, strategic role as we explore new options for the company. I am confident that under Brian’s leadership, NCI will explore avenues of growth that include acquisitions and other options to enhance shareholder value.”
“We’re on track to submit aggregate bids of approximately $2bn during 2015. In addition, our win rates are improving for both new awards and recompetes, as recent award announcements have demonstrated,” said NCI’s president, Brian J. Clark. “The quality of NCI’s pipeline remains healthy as we qualify new potential awards that align even more closely to our core competencies.
“As CEO, I will continue to focus the company on winning new awards that individually and collectively would be transformational for NCI. As Charles noted, we also will explore various new strategic options for the company. We will provide more detail on these options at the appropriate time.” (Source: Yahoo!/BUSINESS WIRE)
29 Jul 15. Northrop Grumman Corporation (NYSE: NOC) reported second quarter 2015 net earnings increased 4 percent to $531m, or $2.74 per diluted share, from $511m, or $2.37 per diluted share in the second quarter of 2014. This quarter’s results include a $38m, or $0.20 per share, net tax benefit for additional research credits. Second quarter 2015 diluted earnings per share are based on 193.7m weighted average shares outstanding compared with 215.2m shares in the prior year period. The company repurchased 6.8m shares of its common stock for $1.1bn in the second quarter of 2015. As of June 30, 2015, the company had repurchased 54.3m shares toward its previously announced goal of retiring 60 m shares of its common stock by the end of 2015, market conditions permitting.
“Our team continues to create value through strong operational performance and effective cash deployment. Going forward we will continue to focus on portfolio, performance and cash deployment as value creation drivers for our shareholders, customers and employees. Our portfolio affords us a unique and robust opportunity set, and we are optimistic about our future,” said Wes Bush, chairman, chief executive officer and president.
Second quarter 2015 segment operating income was unchanged from the prior year, and segment operating margin rate increased 30 basis points to 12.6 percent. Operating income declined 1 percent and operating margin rate increased 20 basis points to 13.8 percent.
Total backlog as of June 30, 2015, was $37.0bn compared with $38.2bn as of December 31, 2014. Second quarter 2015 new awards totaled $4.6bn, and new awards for the first six months totaled $10.7bn.
Second quarter 2015 cash provided by operating activities before after-tax discretionary pension contributions increased to $626m from $572m in the prior year period.
Changes in cash and cash equivalents include the following for cash from operating, investing and financing activities through June 30, 2015:
* $28m used in operations after $500m discretionary pension contribution
* $232m used for capital expenditures
* $1.9bn used for repurchase of common stock
* $600m net proceeds from issuance of long-term debt
* $309m used for dividends
The company’s 2015 financial guidance is based on the spending levels provided for in the Bipartisan Budget Act of 2013 and the Consolidated and Further Appropriations Act of 2015. The guidance assumes no disruption or cancellation of any of our significant programs and no disruption or shutdown of government operations resulting from a federal government debt ceiling breach. Guidance for 2015 also assumes adequate appropriations and funding for the company’s programs in the first quarter of the U.S. government’s fiscal year 2016.
Updated 2015 financial guidance incorporates the impact of the company’s $500m discretionary pension contribution in the first quarter of 2015. In addition, the company now expects an effective tax rate of approximately 32 percent for 2015. Guidance for 2015 operating margin rate, effective tax rate and cash metrics incorporates year-to-date results, as well as the effects of an anticipated change in tax methods that is expected to improve the company’s cash from operations while increasing its unallocated corporate expense and effective tax rate in the second half of 2015.
Second quarter 2015 operating income decreased 1 percent and includes a $29m decrease in net FAS/CAS pension adjustment and a $22m decrease in unallocated corporate expenses. The decrease in unallocated corporate expenses is principally due to a reduction in reserves for overhead costs.
For the second quarter of 2015, federal and foreign income tax expense declined to $205m from $245m in 2014, and the company’s effective tax rate decreased to 27.9 percent from 32.4 percent in 2014. This quarter’s lower effective tax rate reflects a $38m net benefit for additional research credits claimed on prior year returns.
Aerospace Systems second quarter 2015 sales were slightly higher than the prior year period due to higher volume for unmanned and space programs, partially offset by lower volume across a number of other programs, primarily the F/A-18 in manned military aircraft. Higher unmanned sales reflect higher volume across a number of programs, including Global Hawk. The increase in space programs reflects higher volume for restricted activities.
Aerospace Systems second quarter 2015 operating income increased 11 percent and operating margin rate increased 120 basis points to 12.8 percent principally due to risk retirements on a restricted program.
Electronic Systems second quarter 2015 sales decreased 3 percent, primarily due to lower volume for land and self-protection systems and airborne tactical sensor programs, partially offset by higher volume for navigation and maritime systems and combat avionics programs.
Electronic Systems second quarter operating income decreased 9 percent, and operating margin rate decreased to 15.7 percent due to business mix changes, which resulted in lower volume for mature fixed price production programs and higher volume for cost-type development programs, as well as less favorable performance for land and self-protection systems.
Information Systems second quarter 2015 sales decreased 5 percent, primarily due to declines in command and control programs, including lower volume for the Consolidated Afloat Network and Enterprise Solutions program, the impact of in-theater force reductions, and completion of the Ground Combat Vehicle program.
Information Systems second quarter 2015 operating income decreased 2 percent, and operating margin rate increased 30 basis points to 10.1 percent. The increase in operating margin rate was primarily due to program completions and improved performance across the portfolio.
Technical Services second quarter 2015 sales decreased 2 percent principally due to lower volume for the ICBM program and completion of the Combined Tactical Training Range program, partially offset by higher volume for international programs.
Technical Services second quarter 2015 operating income and margin rate were comparable to the prior year period.
24 Jul 15. Rockwell Collins, Inc. (COL) reported third quarter fiscal year 2015 earnings per share from continuing operations increased 12% to $1.33 compared to $1.19 in the prior year. Total sales for the third quarter of fiscal year 2015 were $1.293bn, a 2% increase from the same period in fiscal year 2014. Cash provided by operating activities for the first nine months of fiscal 2015 totaled $341m, an increase of $76m, or 29%, compared to the $265m reported for the first nine months last year.
“This was a solid quarter of execution, highlighted by double digit earnings per share growth, as well as strong cash flow and operating margin performance,” said Rockwell Collins Chief Executive Officer and President, Kelly Ortberg. “I’m particularly pleased with our operating margin performance in spite of relatively weak commercial aftermarket sales and headwinds associated with foreign currency rates. As we look forward to the balance of the year, we are narrowing the range of expected performance in our outlook for fiscal 2015.”
Following is a discussion of fiscal year 2015 third quarter sales and earnings for each business segment.
Commercial Systems, which provides aviation electronics systems, products and services to air transport, business and regional aircraft manufacturers and airlines worldwide, achieved 2015 third quarter results as summarized below.
* Original equipment sales increased due to higher customer funded development program sales, improved share of airline selectable equipment, higher deliveries in support of the A350 and Legacy 500 entry into service, and higher hardware sales for Chinese regional aircraft.
* Aftermarket sales decreased primarily due to lower spares provisioning for the Boeing 787 program partially offset by higher regulatory mandate sales.
* Operating earnings and operating margin increased primarily due to higher sales volume and favorable contract adjustments.
Government Systems provides a broad range of electronic products, systems and services to customers including the U.S. Department of Defense, other government agencies, civil agencies, defense contractors and ministries of defense around the world.
Fiscal Year 2015 Outlook
The following table is a summary of the company’s financial guidance for continuing operations for fiscal year 2015, which has been updated from the guidance previously provided on April 23, 2015:
Rockwell Collins’ Pro Line Fusion® flight deck lands on new Beechcraft King Air turboprops
Pilots flying new Beechcraft King Air 350i, 250 and C90GTx turboprops from Textron Aviation Inc. will experience intuitive, eyes-forward flying with its Pro Line Fusion® flight deck. Aircraft deliveries are expected to begin later this summer starting with the King Air 250.
Data Link Solutions Awarded $478.6 M Contract for Production of MIDS JTRS Terminals
Data Link Solutions, a joint venture between BAE Systems and Rockwell Collins, was awarded a maximum potential $478.6 m indefinite-delivery/indefinite-quantity contract from the Space and Naval Warfare Systems Command for the production, development and sustainment of Multifunctional Information Distribution System Joint Tactical Radio Systems terminals.
Airbus Helicopters, Vector Aerospace and Rockwell Collins sign Pro Line Fusion® cockpit upgrade agreement
Airbus Helicopters, Vector Aerospace and Rockwell Collins entered into an agreement to jointly develop and market the scalable and flexible Pro Line Fusion integrated avionics solution to upgrade Airbus Helicopters platforms.
Rockwell Collins to provide advanced cabin management and HD entertainment system on Dassault’s new Falcon Jet 5X, 8X
Rockwell Collins was selected to provide the FalconCabin HD+ cabin management and entertainment system for Dassault’s new Falcon Jet 5X and Falcon Jet 8X business aircraft. With this selection, Rockwell Collins builds upon its role as Dassault’s sole cabin system supplier for its entire new aircraft fleet.
Star Air to upgrade Boeing 767 fleet with Rockwell Collins’ large format flight displays
Rockwell Collins’ large-format flight displays, inspired by the same display system found on Boeing 787 Dreamliner airplanes, have been selected by Denmark-based Star Air for its fleet of 11 Boeing 767-200BDSF cargo airplanes.
Rockwell Collins equipment selected by the following airlines:
* Rockwell Collins’ PAVES™ Broadcast in-flight entertainment and Airshow® 3D Moving Map systems will be featured on 15 new Next-Generation Boeing 737 aircraft on lease by China Eastern Airlines. Deliveries are expected to begin in late 2015.
* ALAFCO Aviation Lease and Finance Company, based in Kuwait, selected a suite of Rockwell Collins avionics, including MultiScan ThreatTrack™ weather radar and Multi-Mode Receiver, for 85 A320 NEO aircraft. In addition, ALAFCO is provisioning its A320 NEO fleet for Rockwell Collins’ PAVES™ Overhead Broadcast and PAVES Wireless Content Distribution inflight entertainment system. Deliveries will begin in 2017.
* Cathay Pacific Airways Ltd selected Rockwell Collins’ new visual system that combines the JVC Kenwood VS2500 laser-hybrid projector with Rockwell Collins’ industry-leading EP®-8000 image generator. The new visual system will be installed on the airline’s first Airbus A350 XWB full flight simulator next month in Hong Kong.
Rockwell Collins information management services were selected by the following:
* Mactan Cebu International Airport has selected Rockwell Collins’ ARINC vMUSE for improved passenger processing. In two separate agreements, Rockwell Collins’ ARINC GLOBALink has been selected by Korea Airports Corporation and Korea’s T’Way Air.
* Rwanda’s national carrier, RwandAir, selected Rockwell Collins’ ARINC common use passenger processing systems and related technologies to support the airline’s strong passenger growth. Under a new, five-year contract, RwandAir will implement the company’s ARINC vMUSE™ common use check-in platform, ARINC AirVue Flight Information Display System and AirDB 7, the latest generation ARINC Airport Operational Database system.
* Colombia’s Department of Immigration has chosen Rockwell Collins’ ARINC Border Management solution to improve immigration and border control at airports throughout the country. The agreement, which is the company’s first in South America, will allow Colombian government officials to use Advanced Passenger Information (API) data to improve clearance, combat smuggling and fight illegal immigration at border control points. API data provides pre-arrival and departure information on all passengers and crew members.
Rockwell Collins begins worldwide customer evaluation of ARINC MultiLink flight tracking service
Rockwell Collins and nine undisclosed airlines from around the world have launched a trial program for the new ARINC MulitLinkSM flight tracking service. The service, which was announced in March, offers a comprehensive and cost-effective global flight tracking solution for the world’s airlines.
Boeing selects Rockwell Collins for Canadian CH-147 service and support
The Boeing Company has awarded Rockwell Collins a contract to provide avionics service and support for the Royal Canadian Air Force’s fleet of 15 CH-147F helicopters.
Rockwell Collins selected by Airbus to provide wireless EFB solution
Rockwell Collins was selected by Airbus to provide the Electronic Flight Bag interface and communication unit for Airbus A320 and A330 aircraft families. The optional system for airlines, exclusively provided by Rockwell Collins, will be available and certified next year.
Rockwell Collins’ Talon radio selected by Embraer for Brazilian Air Force I-X Project
Rockwell Collins’ Talon radio was selected by Embraer for the Brazilian Air Force I-X Project. Under the terms of the agreement, Rockwell Collins will provide Talon radios for six Embraer Legacy 500 aircraft, which also feature Rockwell Collins’ Pro Line Fusion® avionics. Under the Brazilian Air Force I-X Project, the Legacy 500 aircraft will be used for flight inspection and airport calibration missions.
(1) Research and development expenses for the Information Management Services segment, including the ARINC acquisition, do not include costs of internally developed software and other costs associated with the expansion and construction of network-related assets. These costs are capitalized as Property on the Summary Balance Sheet. (Source: Yahoo!/BUSINESS WIRE)
30 Jul 15. Rolls-Royce Holdings Plc, 2015 Half Year Results.
Warren East, Chief Executive, said: “Despite the disappointment of our recent update, our second half outlook remains positive and full-year guidance for revenue, profit and cash issued on July 6th remains unchanged. The continued growth in our order book demonstrates the long-term demand for our innovative products and services, and underpins my confidence in the fundamental strength of our business.”
* Order book up £2.8bn to £76.5bn
* Underlying revenue down 3% to £6.3bn (H1 2014: £6.5bn)
* Underlying profit before tax down 32% to £439m (H1 2014: £646m)
* Return on sales** down 3.2 percentage points to 7.3%, largely reflecting 2015 revenue mix and a higher R&D charge
* Payment to shareholders of 9.27p per share, up 3%Aerospace
* Secured the largest ever order to provide Trent 900 engines and TotalCare® service support to Emirates, helping grow the Civil Aerospace order book to £66.4bn, up 5% on 2014 year end
* Underlying revenue up 2% to £4.3bn (H1 2014: £4.2bn)
* Underlying profit before financing charges and tax down 27% to £432m (H1 2014: £593m)
* Lower demand for Airbus A330ceo creates H2 2015 and 2016 headwinds for Trent 700 deliveries
Land & Sea*
* Improved second quarter performance from Power Systems offset weaker start to the year while weaker Marine held back overall results
* Underlying revenue down 12% to £2.0bn (H1 2014: £2.3bn)
* Underlying profit before financing charges and tax down 56% to £48m (H1 2014: £109m)
* Weakness in offshore markets expected to hold back full year 2015 and 2016 Marine performance
Commenting on the outlook, Warren East, Chief Executive, added: “In the near term, we are managing a significant transition from mature engines to newer, more fuel efficient ones, such as the Trent XWB, Trent 7000 and Trent 1000. At the same time, we are taking appropriate actions to mitigate the effects of weakness in our offshore marine markets. While these create a profit headwind in the near term, it is critical we successfully deliver our product launches, complete our supply chain transformation and sustain investment in our businesses to strengthen their competitive positions. The initial phase of my ongoing operational review has and will continue to concentrate on how we drive improvements and sharpen our focus to make us a more resilient and sustainable business.”
Comment: Edison view: “the group is driving hard to mitigate the headwinds; a delicate balance between operational focus, right sizing for the market and continuing to invest for the long-term future will be key to maintaining a sustainable robust business”
Roger Johnston, analyst at Edison Investment Research said, “Many themes are now emerging that are contributing to Rolls Royce’ current headwinds: while order intake was boosted by the record order from Emirates for Trent 900s the continued decline in marine orders signals ongoing weakness in this market which has also impacted revenue; underlying revenue, PBT and EPS were all down due to the impact of transition from high margin mature engine programmes, particularly the rapid adjustment in Trent 700s, to early stage production programmes as several concurrent new aircraft builds ramp up; the accounting effect of a move from linked to unlinked aftermarket sales has deferred the timing of profit recognition; the necessary build-up of utilisation from of new facilities from a low base that provide capacity to deliver the £76bn order book. With actions being taken to right-size marine and enhance operational performance, the group is driving hard to mitigate the headwinds. We expect to hear further thoughts from new CEO Warren East and anticipate that he will point to the fact that the fundamentals of the group are strong with substantial future growth and increasing market share to come but that the mechanical process of the transition to get there will continue to provide turbulence over the next few years. A delicate balance between operational focus, right sizing for the market and continuing to invest for the long-term future will be key to maintaining a sustainable robust business. Whether even bolder moves occur remains to be seen with an ongoing operational review being undertaken, but we feel it is too early days for more on that to be revealed.”
28 Jul 15. Textron Inc. (NYSE: TXT) (Source: Yahoo!/BUSINESS WIRE)
reported second quarter 2015 income from continuing operations of $0.60 per share, up 17.6 percent from $0.51 per share in the second quarter of 2014.
Revenues in the quarter were $3.2bn, down 7.4 percent compared to $3.5bn in the second quarter of 2014. Textron segment profit in the quarter was $306m, up $2m from the second quarter of 2014. Second quarter manufacturing cash flow before pension contributions was $106m compared to $271m during last year’s second quarter.
“Revenues were down in the quarter, as expected, but the company remains on track for growth in the second half of the year,” said Textron Chairman and CEO Scott C. Donnelly. “Furthermore, good margin results at Textron Aviation, Bell and Industrial contributed to solid overall financial performance in the quarter, despite the decrease in revenues.”
Textron confirmed its 2015 earnings per share from continuing operations guidance of $2.30 to $2.50 and its expectation for cash flow from continuing operations of the manufacturing group before pension contributions of $550 to $650 m with planned pension contributions of about $80m.
Second Quarter Segment Results
Revenues at Textron Aviation were down $59m, primarily reflecting a change in the mix of jets delivered in the quarter. Textron Aviation delivered 36 new Citation jets and 30 King Air turboprops in the quarter, compared to 36 Citations and 34 King Airs in last year’s second quarter.
Textron Aviation recorded a segment profit of $88m in the second quarter compared to $28m a year ago. The increase is primarily due to improved performance, reflecting a $27 m lower fair value step-up adjustment and the benefit of the integrated cost structure of Beechcraft and Cessna.
Textron Aviation backlog at the end of the second quarter was $1.4bn, up $145m from the end of the first quarter.
Bell revenues decreased $269m, primarily the result of lower aircraft deliveries and a $41m impact from the settlement of the SDD phase of the ARH program in last year’s second quarter.
Bell delivered 6 V-22’s and 6 H-1’s in the quarter, compared to 10 V-22’s and 8 H-1’s in last year’s second quarter and 39 commercial helicopters, compared to 46 units last year.
Segment profit decreased $40m primarily due to the lower aircraft deliveries and a $16m favorable impact in 2014 related to the ARH program, partially offset by favorable performance.
Bell backlog at the end of the second quarter was $4.8bn, down $477m from the end of the first quarter.
Revenues at Textron Systems increased $40m, primarily due to higher Unmanned Systems and Marine and Land Systems volumes, partially offset by lower Weapons and Sensors volume.
Segment profit was down $13m, reflecting an unfavorable product mix during the quarter.
Textron Systems’ backlog at the end of the second quarter was $2.7bn, down $218 m from the end of the first quarter.
Industrial revenues increased $33m due to higher overall volumes, partially offset by a $69m unfavorable year-over-year impact from foreign exchange. Segment profit decreased $8m reflecting lower performance partially offset by the impact of the higher volumes.
Finance segment revenues decreased $3m and segment profit increased $3m.
* Avionics sales increased due to higher hardware deliveries for rotary wing aircraft and higher KC-10 retrofit sales, partially offset by lower simulation and training sales.
* Communication products sales were flat with the prior year, primarily driven by higher data link development program sales offset by lower deliveries of Joint Tactical Radio System Manpack radios.
* Surface solutions sales decreased due to lower deliveries of Firestorm targeting systems and lower development sales for the Common Range Integrated Instrumentation System program.
* Navigation products sales increased primarily due to development effort on modernized GPS products.
* Changes in foreign currency rates, primarily the strengthening of the U.S. dollar, resulted in a $12m reduction to Government Systems sales for the third quarter of fiscal year 2015 when compared to the same quarter in the prior year. The $12m reduction is included within the Government Systems sales categories above.
* Operating earnings and operating margin decreased due to lower sales as well as higher investment in company-funded R&D expense and higher bid and proposal costs.
Information Management Services
Information Management Services (IMS) enables mission-critical data and voice communications throughout the world to customers including the U.S. Federal Aviation Administration (FAA), commercial airlines, business aircraft operators, airport and critical infrastructure operators and major passenger and freight railroads. These communications are enabled by the Company’s high-performance, high-quality and high-assurance proprietary radio and terrestrial networks, enhancing customer efficiency, safety and connectivity. Results from the third quarter of 2015 are summarized below.
IMS sales increased primarily due to 8% growth in aviation related businesses including GLOBALinkSM and ARINCDirectSM, partially offset by lower sales due to the exit of certain government programs.
* IMS operating earnings and operating margin increased primarily due to the higher sales volume and the absence of certain licensing costs incurred in the prior year, partially offset by higher business development costs.
Corporate and Financial Highlights
The company’s effective income tax rate was 24.9% for the third quarter of 2015 compared to a rate of 28.8% for the same period last year. The lower current year effective income tax rate from continuing operations was primarily due to favorable adjustments related to the remeasurement of certain prior year tax positions.
Cash provided by operating activities was $341m for the first nine months of fiscal year 2015, compared to $265m in the first nine months of fiscal year 2014. The increase in cash provided by operating activities was due primarily to higher earnings and lower income tax payments.
During the third quarter of 2015, the company repurchased 0.9m shares of common stock at a total cost of $88m. The company also paid a dividend on its common stock of 33 cents per share, or $43m, in the third quarter of 2015.