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29 Oct 21. L3Harris Technologies Reports Third Quarter 2021 Results.
• Orders and revenue
o Orders of $4.5bn; funded book-to-bill of 1.07
o Revenue of $4.2bn, down 5% versus prior year, and down 1% on an organic basis; impacted by global electronic component shortages
• Margins and earnings
o GAAP net income margin of 11.3%; GAAP earnings per share from continuing operations (EPS) of $2.39, up 20%
o Non-GAAP adjusted earnings before interest and taxes (EBIT) margin of 19.6%; non-GAAP EPS of $3.21, up 13%
• Cash flow and capital deployment
o Operating cash flow of $484m; adjusted free cash flow (FCF) of $673 m
o Returned $1.5 bn to shareholders
• Updated 2021 financial outlook

L3Harris Technologies, Inc. (NYSE: LHX) reported third quarter 2021 revenue of $4.2bn, down 5% versus prior year, and down 1% on an organic1 basis. GAAP net income was $479m, up 11% versus prior year. Adjusted EBIT2 was $830m, up 4% versus prior year, and adjusted EBIT margin2 expanded 170 basis points (bps) to 19.6%. GAAP EPS was $2.39, up 20%, and non-GAAP EPS2 was $3.21, up 13% versus prior year.

“The L3Harris team delivered solid bookings, margins, and bottom-line results in the quarter, overcoming revenue headwinds due to supply chain delays and award timing. And in spite of unprecedented global supply chain disruptions that are reducing our organic revenue growth guidance for the year, we’re positioned to meet our earnings and cash flow commitments,” said Christopher E. Kubasik, Vice Chair and Chief Executive Officer. “We ultimately view these pandemic-related impacts as temporary and remain focused on creating value for our stakeholders over the long term.”
Summary Financial Results

Third quarter revenue decreased 5% versus prior year primarily due to strategic divestitures, ISR aircraft award timing in Integrated Mission Systems, and supply chain-related constraints within Communication Systems, which also contributed to a 1% decline on an organic basis. At the segment level, the organic revenue decline was driven by Communication Systems and Integrated Mission Systems, down 5% and 3%, respectively, partially offset by 3% growth in Space and Airborne Systems and 1% growth in Aviation Systems. Funded book-to-bill3 was 1.07 for the quarter and 1.06 year-to-date.
Third quarter net income margin expanded 170 bps and adjusted EBIT margin expanded 170 bps to 19.6% versus prior year. GAAP EPS increased 20% versus prior year driven by e3 performance, integration benefits, cost management, and a lower share count, along with lower acquisition-related amortization, net of supply chain impacts. Non-GAAP EPS increased 13% versus prior year driven by e3 performance, integration benefits, cost management, and a lower share count, more than offsetting supply chain and divestiture-related impacts.
Segment Results

Integrated Mission Systems

Third quarter revenue decreased 3% due to timing of aircraft awards in ISR and product deliveries in Electro Optical, partially offset by a ramp on key platforms in Maritime. Third quarter operating income increased 4% to $222 m, and operating margin expanded 110 bps to 16.6% versus prior year from operational excellence, integration benefits, and higher pension income.
Segment funded book-to-bill was 1.04 and 1.05 for the quarter and year-to-date, respectively.
ISR received several key orders that strengthen its domestic and international presence, including:
• Approximately $400m in orders for advanced capabilities across incumbent platforms, such as the Rivet Joint reconnaissance, National Command Authority, Compass Call and classified aircraft, further solidifying the company’s position as a partner of choice with the U.S. Air Force
• $173m, five-year, sole-source IDIQ contract to operate and sustain airborne sensor equipment for the U.S. Missile Defense Agency’s High Altitude Observatory aircraft, with an initial $23m task order
• More than $120m contract to design and produce an integrated mission system for the United Arab Emirates B-250 aircraft
• More than $100m in follow-on orders to provide additional ISR aircraft to a NATO customer
Within the Maritime business, key awards solidified its position as a leading provider of global solutions, including:
• Approximately $400m contract for the design and installation of the U.S. Navy’s Undersea Warfare Training Range Increments II / III program, following successful execution on Increment I and maintaining L3Harris’ prime incumbency on the program
• More than $30m follow-on award to provide subsystems and system integration for the U.S. Navy’s Constellation (FFG-62) class frigate, with significant follow-on opportunity
• Multi-m-dollar contract for in-service support of the integrated platform management system on the Royal Canadian Navy’s Halifax-class frigate
In Electro Optical, demand for the company’s WESCAM sensors remained strong with a multi-million-dollar order to deliver sighting systems in support of the U.S. Army’s land-based Initial Maneuver Short-Range Air Defense capability, as well as approximately $100m in orders for airborne, maritime and ground sensor systems from customers primarily in the European and Middle Eastern regions, further reinforcing L3Harris’ international position.

Space and Airborne Systems

Third quarter revenue increased 3% versus prior year driven by Space, including a ramp on missile defense and other responsive programs. Growth from these drivers was reduced by the transition from development to production on the F-35 Technology Refresh 3 program in Mission Avionics, as well as program timing in Electronic Warfare and Intel & Cyber. Third quarter operating income increased 5% to $242m, and operating margin expanded 30 bps to 18.8% versus prior year from e3 performance, increased pension income, and integration benefits, net of higher R&D investments and mix impacts from growth programs.
Segment funded book-to-bill was 0.98 and 1.05 for the quarter and year-to-date, respectively.
The Space business received key classified responsive and exquisite awards totaling more than $225m, potentially leading to multi-bn-dollar follow-on opportunities. The company also was awarded a multi-m-dollar study contract for next-generation weather sounders in support of the U.S. National Oceanic and Atmospheric Administration’s future Geostationary and Extended Observations satellite system, with significant follow-on opportunity.
Within the Mission Avionics, Electronic Warfare, and Intel & Cyber businesses, key awards included:
• More than $150m in orders on the F-35 platform, primarily for the next production lot of avionics components and release systems, increasing total orders for the year to more than $600m
• Multi-million-dollar award for the next production lot of the modernized open mission systems processor for the F/A-18 and EA-18G, a key element of platform upgrades and with significant follow-on opportunity
• $947m, 10-year, sole-source IDIQ contract from the U.S. Air Force to provide engineering services and upgraded countermeasure electronic warfare systems for the B-52, potentially expanding L3Harris’ content on the platform
• Over $200m in classified orders primarily for complex mission solutions for domestic and international customers
• $85m sole-source IDIQ contract from the U.S. Air Force to produce up to 170 T7™ robots in support of explosive ordnance disposal (EOD) missions, following successful delivery of the company’s initial robotic EOD program to the United Kingdom’s Ministry of Defence

Communication Systems

Third quarter revenue decreased 6% versus prior year and 5% on an organic basis due to product delivery delays from supply chain-related constraints mainly within Tactical Communications, lower volume on legacy unmanned platforms in Broadband Communications, delivery timing within Integrated Vision Solutions, and contract roll-offs in Global Communications Solutions. The decline from these drivers was partially offset by strong radio sales in Public Safety. Third quarter operating income decreased 1% to $271 m, and operating margin expanded 130 bps to 26.3% versus prior year from operational excellence, including program performance, favorable mix, and integration benefits, net of supply chain impacts and higher R&D investments.
Segment funded book-to-bill was 1.20 and 1.13 for the quarter and year-to-date, respectively.
Tactical Communications received several key orders that strengthen its global leadership, including:
• $132m and $72m, majority share, initial full-rate production awards under the U.S. Army’s $12.7bn HMS Manpack and $3.9bn two-channel Leader radio IDIQ contracts, respectively, reflecting key milestones in the Army’s multi-year modernization strategy
• $131m to provide modernized software-defined vehicular and dismount radios to a country in the Middle East, reflecting a key revenue synergy for the company
• $64m for the continued supply of secure, resilient Falcon III® radios to a European country
The Integrated Vision Solutions business received key awards from the U.S. Army for its next-generation systems, including a $100m order for the Enhanced Night Vision Goggle – Binocular (ENVG-B) system, marking the second delivery order received under the $442 m ENVG-B Program of Record. L3Harris also was awarded a $92m, four-year contract to provide advanced helmet-mounted image technology in support of the Aviator’s Night Vision Imaging System III program.
Within Broadband Communications, L3Harris received a $36m follow-on award to provide advanced Manned-Unmanned Teaming airborne data link systems to the U.S. Army and international parties, increasing inception-to-date awards on the Apache platform to over $250m.

Aviation Systems

Third quarter revenue decreased 21% versus prior year due to the divestitures of the Military Training and Combat Propulsion Systems businesses, and increased 1% on an organic basis driven by recovering training and avionics product sales within the commercial aerospace business. Organic growth from these drivers was reduced by flat sales in Mission Networks and lower Fuzing and Ordnance Systems volume due to contract roll-offs and delayed awards within Defense Aviation. Third quarter GAAP and non-GAAP operating income decreased 10% and 13%, respectively, to $90 m primarily due to divestitures. Third quarter GAAP and non-GAAP operating margin expanded 180 bps and 140 bps, respectively, to 14.4% versus prior year as expense management, commercial aerospace recovery, and integration benefits more than offset divestiture-related headwinds.
Segment funded book-to-bill was 1.10 and 0.94 for the quarter and year-to-date, respectively.
Mission Networks recorded more than $175m in orders on long-term air traffic management contracts, including for the FAA Telecommunications Infrastructure and Automatic Dependent Surveillance-Broadcast programs. L3Harris also leveraged its incumbency with the FAA in order to capture a 10-year, potential $343m contract to modernize Airservices Australia’s enterprise-wide telecommunications network, with an initial award for the planning and design phase.
Defense Aviation received several awards for precision weapon systems and components, including a multi-vendor, $46bn, 10-year IDIQ contract to provide future advanced weapons systems to the U.S. Air Force leveraging digital engineering, agile processes and open-systems architecture. In addition, the company received a $23m initial full-rate production award under the U.S. Navy’s Advanced Low-cost Munitions Ordnance program, increasing inception-to-date development and production awards to more than $250m.
Demand for L3Harris’ commercial full-flight simulators increased in the quarter with orders from both domestic and international airlines.
Cash Generation and Capital Deployment
In the third quarter of fiscal 2021, L3Harris generated $484m in operating cash flow and $673m in adjusted free cash flow2, and returned $1.5bn to shareholders through $1.3bn in share repurchases and $202 m in dividends. On a year-to-date basis, the company returned $3.5bn to shareholders through $2.9bn in share repurchases and $618 m in dividends.
L3Harris also completed the divestiture of the Electron Devices business, with total gross proceeds in the quarter of $185m. In addition, L3Harris entered into definitive agreements to sell its ESSCO and Narda-MITEQ businesses for a combined $130m, bringing total gross proceeds from completed and announced divestitures since the merger to approximately $2.8bn. The divestitures are subject to customary closing conditions, including receipt of regulatory approvals, and are expected to close in the fourth quarter of 2021. (Source: BUSINESS WIRE)

 

29 Oct 21. Oshkosh Expects Lower Defense Revenue As JLTV Buying Slows. Company executives said that JLTV program is a good “base” for Oshkosh to win “adjacent” vehicle contracts.
Vehicle-maker Oshkosh Corp. executives said Thursday that they expect the company’s defense revenue to slip in coming months because of fewer purchases of Joint Light Tactical Vehicles.
The expected slowdown comes as the company, which has produced JLTV since 2015, prepares for the US Army to reopen the vehicle contract, with several companies hoping to knock off Oshkosh.
“As we look at 2022, as we’ve been saying over the last couple of years, we do expect that JLTV volumes are going to be lower,” Michael Pack, executive vice president and chief financial officer of OshKosh, told analysts on its quarterly earnings call. “That is going to put downward pressure on defense’s revenues.”
Oshkosh Defense’s net sales totaled $650m in the fourth quarter of fiscal 2021, up 5.1%, which the company attributed to higher demand for JLTV. Oshkosh maintains that it is well-positioned to win the Army vehicle contract. Its chances are certainly boosted by the fact that the company has built 10,000 of the vehicles for a lower price that the Army originally projected. The initial contract in 2015 has a maximum value of $6.7bn for the delivery of 16,901 vehicles. In December last year, the service awarded another $911mcontract to Oshkosh for more than 2,700 JLTVs.
Fiscal 2022 budget documents show that the Army plans to buy 2,744 JLTV trucks and trailers, down from 3,398 the year prior. But the next big, long-term JLTV contract is expected to be worth some $12bn.
Offered in response to the Air Force’s KC-Y Program, Lockheed Martin’s American-built LMXT offers impressive capabilities and proven track-record.
Whatever happens, the JLTV program is a great “base” for the company for years into the future, according to John Pfeifer, Oshkosh’s president and CEO. Both the Army and Marine Corps buy thousands of vehicles from Oshkosh Defense every year.
“This JLTV program will go well into the 2040s, beyond 2040,” Pfeifer said. “That’s why I say this is a great base business. Now there’s going to be up years and there’s going to be down years based on presidential budgets and priorities and so forth and what’s happening around the world, but these are fundamental programs for the Army and the Marines to operate.”
From that base, the company expects to compete for “adjacent” competitions, Pfeifer said, like it did with the Stryker’s Medium Caliber Weapon System after its acquisition of Pratt Miller earlier in 2021. Pfeifer said other adjacent programs include the Cold Weather All-Terrain Vehicle, Optionally Manned Fighting Vehicle and the Enhanced Heavy Equipment Transporter. (Source: Breaking Defense.com)

 

28 Oct 21. ATI Announces Third Quarter 2021 Results.  Return to profitability fueled by aerospace market recovery and business transformation

– Sales of $726 m increased 18% over second quarter 2021

– Net income attributable to ATI of $48.7m, or $0.35 per share

— Adjusted EPS of $0.05 excluding postretirement medical benefits gain, strike-related costs, and other special items

– Adjusted EBITDA of $79.9 m increased 49% sequentially

– Extended debt maturity profile and reduced annual interest expense by ~$6m

— Issued $325 m 4.875% Notes due 2029, $350 m 5.125% Notes due 2031

— Redeemed $500 m 2023 Notes bearing 7.875% interest in Oct. 2021

Technologies Incorporated (NYSE: ATI) reported third quarter 2021 results, with sales of $726 m and net income attributable to ATI of $48.7m, or $0.35 per share. Excluding pretax gains of $64.9 m for postretirement medical benefits and $13.7m for the sale of the Flowform Products business, $2.3m of prior restructuring charge reversals, and charges of $22.9 m for strike-related costs, adjusted net income attributable to ATI was $6.2 m, or $0.05 per share.  Adjusted EBITDA was $79.9m, or 11.0% of sales.

Sales in the second quarter 2021 were $616m, and the net loss attributable to ATI was $49.2m, or $(0.39) per share.  Excluding $40.3m of strike-related costs and $6.2m of income from reduced restructuring charge reserves, adjusted net loss attributable to ATI for the second quarter 2021 was $15.1m, or $(0.12) per share.  Adjusted EBITDA was $53.7m, or 8.7% of sales.

“We delivered profitable third quarter results that exceeded our expectations. We are laser-focused, locking in our cost structure improvements as our end markets begin to show signs of sustained recovery. Our end-market diversity fuels our ability to maximize gains in this unbalanced economic recovery,” said Robert S. Wetherbee, Board Chair, President and CEO.  “Our Specialty Rolled Products business accelerated its production rates to pre-strike levels to take advantage of strong demand and favorable pricing in most end-markets, especially energy and industrial applications. Showing ongoing signs of recovery, commercial aerospace continues to expand unevenly across our product portfolio. Jet engine forgings demand remained strong, bolstered by our 2021 share gains. Demand for our jet engine specialty materials was mixed, varying by customer and product largely due to uneven supply chain inventory levels and customer order patterns. We continue to strengthen and de-risk our balance sheet. We significantly improved our debt maturity profile through early redemption of our 2023 notes and by issuing two new notes with 8 and 10 year maturities, respectively, with significantly lower interest rates,” concluded Wetherbee.

ATI’s third quarter results include negative impacts primarily on our Specialty Rolled Products (SRP) business from an employee strike which concluded on July 13, 2021.

• HPMC’s third quarter 2021 sales were in-line with the second quarter 2021 as demand from the energy markets increased 19%, led by growth in materials for specialty energy applications, which offset lower defense sales. Commercial aerospace sales were flat, with higher forgings sales offsetting lower specialty materials. Sales improved 36% compared to the third quarter 2020, reflecting higher commercial jet engine and energy markets sales.
• HPMC segment EBITDA was $37.4m, or 12.5% of sales, also in-line with second quarter 2021 results. Strike-related costs of $1.4m for the third quarter 2021 and $2.1 m for the second quarter 2021 were excluded from HPMC segment results. Compared to the prior year period, results more than doubled, reflecting improved operating margins from higher production volumes, aided by share gains and the ongoing benefits of 2020 cost cutting actions.
• AA&S third quarter 2021 sales increased 35% compared to the second quarter 2021 and were 13% higher year-over-year. Compared to the second quarter 2021, sales increased primarily due to reduced strike-related impacts. Segment sales were higher to nearly all end markets compared to the second quarter 2021 as production rates returned to pre-strike levels by quarter end, led by deliveries for a large offshore oil & gas project. Higher selling prices, including effects from raw material pass-through mechanisms, also drove revenue increases.
• AA&S segment EBITDA was $56.8m, or 13.3% of sales. Strike-related costs of $21.5m and $38.2m, primarily related to lower productivity and utilization levels, were excluded from AA&S segment third and second quarter 2021 results, respectively. Raw material price changes had a minimal EBITDA benefit compared to the second quarter 2021. Improved EBITDA margins compared to the third quarter 2020 reflect a richer product mix, including a smaller proportion of standard stainless products, a $21m benefit from raw material price changes and benefits from actions taken in 2020 to structurally reduce costs.

Corporate Items and Cash

• Third quarter 2021 results include a $64.9m gain related to a plan termination that eliminated certain postretirement medical benefit liabilities. This was effective upon the July 2021 ratification of the new Specialty Rolled Products collective bargaining agreement.
• In August 2021, the company completed the sale of its Flowform Products business within the HPMC segment for $55.0m, and recognized a $13.7m gain in the third quarter 2021.
• Strike-related costs were $22.9m in the third quarter 2021, and were excluded from segment results. These items primarily consisted of overhead costs recognized in the period due to below-normal operating rates, higher costs for outside conversion activities, and signing bonuses for represented employees.
• Restructuring charges for the third quarter 2021 were a net credit of $2.3m, primarily related to lowered severance-related reserves for laid-off employees due to attrition. Restructuring charges of $2.3 m for the third quarter 2020 related to voluntary and involuntary severance programs.
• Corporate expenses in the third quarter 2021 were $12.9 m, compared to $15.9m in the second quarter 2021, and $10.2 m for the prior year quarter. When compared to both prior periods, changes primarily related to expenses for incentive compensation programs.
• Third quarter 2021 results include $22.0m of income tax expense, primarily comprised of $15.5m in discrete tax effects related to the postretirement medical benefits gain. ATI maintains a valuation allowance on its U.S. deferred tax assets and does not expect to pay any significant U.S. federal or state income taxes for the next several years due to net operating loss carryforwards.
• For the first nine months of 2021, cash used in operating activities was $244.8m, primarily due to a $242.5m increase in managed working capital related to higher operating levels in most operations, resulting in increased accounts receivable balances and higher overall inventory values in part due to rising raw material costs and the lingering strike impacts. Cash used in investing activities for the first nine months of 2021 was $48.5m, as $104 m for capital expenditures was offset by proceeds from the Flowform Products sale.
• Cash on hand at September 30, 2021 was $1,006.8m, and available additional liquidity under the asset-based lending credit facility was approximately $365m. We issued $675 m of new debt in September 2021, with $571m of proceeds primarily used in October 2021 to retire $500 m of higher cost debt due in 2023, along with accrued interest and the make-whole premium. ATI will recognize a $66m debt extinguishment charge in fourth quarter 2021 results.
• A $50m voluntary cash contribution to the ATI Pension Plan in the third quarter of 2021 improved the plan’s funded position.

Outlook

“Looking ahead to the fourth quarter, we anticipate sequential revenue and earnings growth primarily driven by the ongoing commercial aerospace recovery in our HPMC segment.  Significant managed working capital reductions will fuel fourth quarter cash generation,” said Wetherbee. “As our business transformation actions near completion in the AA&S segment, we’ll temporarily curtail some early stage manufacturing activities to better align our inventory levels with market demand and have planned extended equipment outages to complete transformational upgrades. These actions will likely result in unfavorable cost absorption impacts in the quarter.” (Source: BUSINESS WIRE)

 

28 Oct 21. H3 Dynamics Secures $26m Series B Funding. Advanced aerial mobility company H3 Dynamics has secured $26m in Series B funding that it will use to accelerate its work to use hydrogen technology in its drones rather than the standard battery-powered model.

“Air mobility contributes to just 6 percent of the total CO2 emissions in the world. That being said, when surveying the logistics space, we realized some of the major participants have a great majority of their emissions coming from aerial transport; up to 66 percent of all CO2 emitting activities,” founder and CEO Taras Wankewycz told Modern Shipper.

“With continued e-commerce growth, and the growing challenges in international maritime shipping, air cargo is a fast-growing logistics segment meaning carbon emissions are going to be an equally fast-growing issue.

“Hydrogen electric unmanned aerial systems can fly several times further than a battery-electric equivalent,” Wankewycz continued. “If stored in gaseous form, it can be up to six times the duration of a battery drone—if liquid, that could be over 10 times.”

The funding round for the Singapore-based company was led by Japan’s Mirai Creation Fund, which is backed by Toyota Motor Corp. and Sumitomo Mitsui Banking Corp. Other investors included:

• ACA Investors
• Capital Management Group
• Ascent Hydrogen Fund
• The venture arm of Singapore’s Economic Development Board

“We are delighted to welcome such an experienced and supportive group of investors as we embark on the next stage of our journey,” Wankewycz said. “Our investors share our big-impact vision and how we get there safely. They recognize that this is a long journey and that we must first address our immediate markets while solving key technical and regulatory challenges – before adding more complexity.”

Wankewycz has flirted with hydrogen-powered flight since 2006, working alongside NASA, Germany’s DLR and dozens of other research programs around the world. He formed H3 Dynamics in 2015 with the goal of constructing an autonomous charging infrastructure for battery-powered drones. Now, he plans to use that same infrastructure to enable autonomous, zero-emissions hydrogen technology.

Why This Matters

Aviation accounts for about 12 percent of all carbon emissions from transport, a fraction of the 74 percent of emissions pumped out by road transport. In fact, today’s aircraft have about twice the fuel efficiency as the earliest jet airliners from the 1960s.

But there’s a problem—demand is through the roof.

Air cargo is, both literally and figuratively, taking off. According to the International Air Transport Association, taking shipping to the skies has resulted in a projected $175 billion in air cargo revenue for 2021, topping last year’s record-setting $128 billion.

Even with leaps in fuel efficiency, a steadily rising demand for commercial air transport has the United Nations forecasting triple the current aviation emissions by 2050. Meanwhile, researchers from the International Council on Clean Transportation expect emissions to rise more than 1.5 times faster than the U.N. estimate. (Source: UAS VISION/Flying)

 

28 Oct 21. Textron Inc. (NYSE: TXT) today reported third quarter 2021 income from continuing operations of $0.82 per share. Adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $0.85 per share for the third quarter of 2021, compared to $0.53 per share in the third quarter of 2020.

“In the quarter, we saw solid execution, higher manufacturing margin and continued strong cash generation,” said Textron Chairman and CEO Scott C. Donnelly. “At Textron Aviation, we continued to see signs of a strong recovery in the general aviation market with a 49% increase in revenues over last year’s third quarter and a $721m increase in backlog.”

Cash Flow

Net cash provided by operating activities of continuing operations of the manufacturing group for the third quarter was $333m, compared to $368m last year. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $271m for the third quarter, compared to $344m last year. Year to date, manufacturing cash flow before pension contributions totaled $851m.

In the quarter, Textron returned $299m to shareholders through share repurchases. Year to date, share repurchases totaled $586m.

Outlook

Textron now expects 2021 earnings per share from continuing operations to be in a range of $3.17 to $3.29, or $3.20 to $3.30 on an adjusted basis. Textron also expects cash flow from continuing operations of the manufacturing group before pension contributions to be in a range of $1bn to $1.1bn with planned pension contributions of about $50m.

Third Quarter Segment Results

Textron Aviation

Revenues at Textron Aviation of $1.2bn were up $386m from the third quarter of 2020, largely due to higher Citation jet volume of $290m, aftermarket volume of $62m and commercial turboprop volume of $48m.

Textron Aviation delivered 49 jets, up from 25 last year, and 35 commercial turboprops, up from 21 last year.

Segment profit was $98m in the third quarter, up $127m from a year ago, largely due to the higher volume and mix of $96m and favorable pricing, net of inflation of $22m.

Textron Aviation backlog at the end of the third quarter was $3.5bn.

Bell

Bell revenues were $769m, down $24m from last year, largely reflecting lower military revenues.

Bell delivered 33 commercial helicopters in the quarter, down from 41 last year.

Segment profit of $105m was down $14m, primarily due to lower military revenues.

Bell backlog at the end of the third quarter was $4.1bn.

Textron Systems

Revenues at Textron Systems were $299m, down $3m from last year’s third quarter due to lower volume of $39m in the Air Systems product line which primarily reflected the impact from the U.S. Army’s withdrawal from Afghanistan on the product line’s fee-for-service contracts, partially offset by higher volume in the Other product line.

Segment profit of $45m was up $5m from a year ago, largely due to a favorable impact from performance and other.

Textron Systems’ backlog at the end of the third quarter was $2.2bn.

Industrial

Industrial revenues were $730m, down $102m from last year, reflecting lower volume and mix of $156m, largely in the Fuel Systems and Functional Components product line reflecting order disruptions related to the global auto OEM supply chain shortages, partially offset by a favorable impact of $44m from pricing, largely in the Specialized Vehicles product line.

Segment profit of $23m was down $35m from the third quarter of 2020, primarily due to the lower volume and mix described above partially offset by higher pricing, net of inflation in the Specialized Vehicles product line.

Finance

Finance segment revenues were $11m, and profit was $8m.

 

28 Oct 21. Northrop Grumman Reports Third Quarter 2021 Financial Results.

• Sales of $8.7bn; Organic Sales Increase 3 percent
• Operating Margin Rate of 12.0 Percent, Segment Operating Margin Rate1 of 11.9 Percent
• EPS Increase 13 Percent to $6.63; Year to Date EPS Increase 56 Percent to $26.55 and Transaction-Adjusted EPS1 Increase 15 Percent to $19.62
• 2021 Transaction-adjusted EPS1 Guidance Increased by $0.80 to a Range of $25.20 to $25.60 Based on Continued Strong Performance

Northrop Grumman Corporation (NYSE: NOC) reported third quarter 2021 sales decreased 4 percent to $8.7bn from $9.1bn in the third quarter of 2020 and third quarter 2021 organic sales1 increased 3 percent to $8.7bn from $8.5bn in the third quarter of 2020. Third quarter 2021 net earnings increased 8 percent to $1.1bn, or $6.63 per diluted share from $1.0bn, or $5.89 per diluted share, in the third quarter of 2020.

“Our third quarter results reflect strong program performance and the continued focus on operational excellence by the Northrop Grumman team,” said Kathy Warden, chairman, chief executive officer and president. “While we did see some labor related and supply chain challenges stemming from the COVID-19 pandemic on our operations, we delivered solid organic growth, outstanding segment operating margins and strong transaction-adjusted free cash flow in the quarter. We are raising our full year earnings guidance and continue to expect strong organic sales growth.”

Transaction-adjusted Net Earnings and Transaction-adjusted EPS Year to date 2021 net earnings benefited from a gain on the sale of the company’s IT services business. Excluding the gain on sale of the business, associated federal and state income tax expenses, transaction costs, as well as the make-whole premium for early debt redemption, year to date transaction-adjusted net earnings1 increased 11 percent and transaction-adjusted EPS1 increased 15 percent. Third quarter 2021 net earnings do not include any transaction-related adjustments. Transaction-adjusted net earnings1 and transaction adjusted EPS1 are measures the company uses to compare performance to prior periods and for EPS guidance.

Sales

Third quarter 2021 sales decreased $363m, or 4 percent, due to lower sales at Defense Systems and Missions Systems, principally due to the impact of the IT services divestiture, and lower sales at Aeronautics Systems, partially offset by 22 percent sales growth at Space Systems.  Third quarter 2021 sales were affected by the impact of COVID-19 on the broader economic environment, including a tight labor market, elevated levels of employee leave, and supply chain challenges. Third quarter 2021 organic sales increased $239m, or 3 percent.

Operating Income and Margin Rate

Third quarter 2021 operating income increased $58m, or 6 percent, primarily due to lower unallocated corporate expense, including a $60m benefit related to insurance settlements, partially offset by a lower FAS/CAS operating adjustment. Third quarter 2021 operating margin rate increased to 12.0 percent reflecting a higher segment operating margin rate in addition to the items above.

Segment Operating Income and Margin Rate

Third quarter 2021 segment operating income decreased $14m, or 1 percent, due to lower sales, partially offset by a higher segment operating margin rate. Third quarter 2020 segment operating income from the IT services business was $69m. Lower operating income at Defense Systems, principally due to the impact of the IT services divestiture, and Aeronautics Systems was partially offset by higher operating income at Space Systems. Segment operating margin rate increased to 11.9 percent from 11.5 percent due to higher operating margin rates at Mission Systems, Defense Systems and Space Systems, partially offset by a lower operating margin rate at Aeronautics Systems. Federal and Foreign Income Taxes The third quarter 2021 effective tax rate increased to 16.6 percent from 15.5 percent in the prior year period primarily due to lower benefits from foreign-derived intangible income. Cash Flows Third quarter cash provided by operating activities decreased $196m from the prior year period due to $198m of federal and state taxes paid related to the IT services divestiture. Year to date 2021 cash provided by operating activities decreased $578m principally due to $588m of federal and state taxes paid related to the IT services divestiture.  Third quarter and year to date 2021 transaction-adjusted free cash flow increased $70m and $279m, respectively, due to improved trade working capital.

Awards and Backlog

Third quarter and year to date 2021 net awards totaled $6.9bn and $22.3bn, respectively, and backlog totaled $74.8bn. Significant third quarter new awards include $1.8bn for restricted programs, principally at Space and Mission Systems, $0.9bn for NASA’s Habitation and Logistics Outpost (HALO) module and $0.5bn for F-35.

Segment Operating Results

AERONAUTICS SYSTEMS

Sales

Third quarter 2021 sales decreased $189 m, or 6 percent due to lower volume in both Manned Aircraft and Autonomous Systems, including restricted programs, F-35, the B-2 Defensive Management Systems Modernization program and certain Global Hawk programs. Operating Income Third quarter 2021 operating income decreased $29 m, or 10 percent, due to lower sales and a lower operating margin rate. Operating margin rate decreased to 9.7 percent from 10.1 percent principally due to a $42 m unfavorable EAC adjustment on F-35 due to labor-related production inefficiencies largely driven by COVID-19-related impacts on the labor market and employee leave. This was partially offset by higher net favorable EAC adjustments at Autonomous Systems.

DEFENSE SYSTEMS

Sales

Third quarter 2021 sales decreased $450 m, or 24 percent, primarily due to a $425m reduction in sales related to the IT services divestiture. Third quarter 2021 organic sales1 decreased $25m, or 2 percent, principally due to the close-out of the contract at the Army’s Lake City ammunition plant, partially offset by higher volume on several Mission Readiness programs, including the U.S. Customs and Border Protection P-3 program. Operating Income Third quarter 2021 operating income decreased $42 m, or 19 percent, primarily due to the impact of the IT services divestiture. Operating margin rate increased to 12.4 percent from 11.7 percent and reflects improved performance at Battle Management and Missile Systems due to changes in mix as a result of recent contract completions, partially offset by lower net favorable EAC adjustments.

MISSION SYSTEMS

Sales Third quarter 2021 sales decreased $115m, or 5 percent, due to a $133m reduction in sales related to the IT services divestiture. Third quarter 2021 organic sales increased $18m, or 1 percent. Navigation, Targeting and Survivability sales increased primarily due to higher intercompany volume on the ramp up of the Ground Based Strategic Deterrent (GBSD) program. Maritime/Land Systems and Sensors sales increased principally due to higher volume on land systems, including the Ground/Air Task-Oriented Radar program. Networked Information Solutions sales decreased primarily due to lower volume on F-35 and restricted programs, partially offset by higher volume on the Joint Counter Radio-Controlled Improvised Explosive Device Electronic Warfare program. Operating Income Third quarter 2021 operating income was consistent with the prior year period and reflects a higher operating margin rate and lower sales. Operating margin rate increased to 15.3 percent from 14.5 percent principally due to improved performance and changes in contract mix toward more fixed-price content, largely as a result of the IT services divestiture, partially offset by lower net favorable EAC adjustments.

SPACE SYSTEMS

Sales

Third quarter 2021 sales increased $483m, or 22 percent, due to higher sales in both the Launch & Strategic Missiles and Space business areas, partially offset by a $48 m reduction in sales related to the IT services divestiture. Third quarter 2021 organic sales1 increased $531 m, or 25 percent. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, such as GBSD and the Next Generation Interceptor program. Space sales were driven by higher volume on restricted programs. Operating Income Third quarter 2021 operating income increased $64m, or 29 percent, due to higher sales volume and a higher operating margin rate. Operating margin rate increased to 10.7 percent from 10.2 percent principally due to higher net favorable EAC adjustments, which were largely driven by improved performance on restricted programs.

Guidance

Financial guidance, as well as outlook, trends, expectations and other forward looking statements provided by the company for 2021 and beyond, reflect the company’s judgment based on the information available to the company at the time of this release. The company’s 2021 financial guidance and outlook beyond 2021 reflect what the company currently anticipates will be the impacts on the company from the global COVID-19 pandemic (including related effects on the broader economic environment), based on what the company understands today and what the company has experienced to date. However, the company cannot predict how the pandemic will evolve or what impact it will continue to have, and there can be no assurance that the company’s underlying assumptions are correct. As discussed more fully in the company’s Form 10-K and in the recent Form 10-Q, and among other factors, disruptions to the company’s operations or those of its customers, supply chain challenges, effects on the labor market and our workforce, vaccine mandates and other evolving government requirements, additional liabilities, disruptions in the financial markets and inflation, and impacts on programs or payments relating to the global COVID-19 pandemic, today and as it may evolve, can be expected to affect the company’s ability to achieve guidance or meet expectations. In addition, the government budget, appropriations and procurement priorities and processes can impact our customers, programs and financial results. These priorities and processes, including the timing of appropriations and the occurrence of an extended continuing resolution and/or prolonged government shutdown, as well as a breach of the debt ceiling, extraordinary measures taken in connection with a breach, changes in support for our programs, or changes in federal corporate tax laws and regulations, can impact the company’s ability to achieve guidance or meet expectations. Effective Jan. 30, 2021, Northrop Grumman completed the divestiture of its IT services business for approximately $3.4bn in cash.

 

28 Oct 21. Meggitt PLC – Third quarter trading statement and outlook for full year 2021 Meggitt PLC (“Meggitt” or “the Group”), a leading international company specialising in high performance components and sub-systems for the aerospace, defence and energy markets, today issues a trading update for the third quarter ended 30 September 2021 and outlook for the full year. All figures and growth rates are presented on an organic basis unless otherwise stated. Summary

• Good order intake, with year to date book to bill of 1.03x in Civil Aftermarket and 1.19x in Energy
• Group revenue up 5% in the third quarter; strong growth in Civil Aftermarket up 44% year on year and up 12% sequentially
• Continuation of first half trends in Defence with revenue 12% lower in the quarter • Strong cash performance reflecting tight management of working capital and lower capex • Supply chain disruption and softer defence constrain third quarter profit and full year outlook
• Recommended offer by Parker-Hannifin approved by shareholders on 21 September 2021 Tony Wood, Group CEO, commented: “We are pleased to have delivered another period of sequential Group revenue improvement. Within this, the continued recovery in civil aerospace is encouraging with further positive signs emerging. However, the trends we saw during the first half in defence have continued in the third quarter. During the period, we have experienced the effects of the well documented global supply chain disruption. Thanks to the performance of our teams we have managed to partially mitigate this; but these headwinds, combined with lower defence revenue, have constrained Group profitability. While forecasting the pace and shape of the civil aftermarket recovery remains difficult, looking further ahead, our strong technology, leading market positions and diverse end market exposure underpin our confidence as the recovery in civil aerospace strengthens.” Group third quarter performance The revenue performance of the Group in the third quarter reflects the trends seen across our end markets with Group revenue up 5% year-on-year and up 4% sequentially. Civil aerospace revenue grew by 29% in the period, with Civil OE up 10% and strong aftermarket growth of 44%. Sequentially, Civil OE and Civil aftermarket revenue grew by 4% and 12% respectively. Defence revenue was 12% lower, reflecting a reduction in orders from the US Defense Logistics Agency and longer lead times in the supply chain. In Energy, conditions in our end markets remained stable. The prospects for our energy business remain good, underpinned by a robust order book and a number of customer order wins during the period. We are making good prog

We are making good progress with the transition to Ansty Park, with customer approvals scheduled for the fourth quarter. While we are pleased to see signs of the civil recovery across our business, the supply chain disruption and the softer defence trends we have experienced in the third quarter are expected to continue throughout our historically strongest, fourth quarter. For the full year, we now expect the Group to deliver:

• Revenue around 5% lower than 2020 on an organic basis
• Underlying operating profit to be in a range of £170m to £190m
• Positive free cash flow Although we face headwinds in the short-term, the underlying fundamentals of the business remain strong.

 

28 Oct 21. Bombardier quarterly loss narrows as business jet demand rebounds. Canadian business jet maker Bombardier Inc (BBDb.TO) posted a smaller third-quarter loss on Thursday as demand for private jets returned after the pandemic hurt sales last year. Easing travel restrictions and the lure of private flights have led to a surge in business aviation traffic, filling seats for private operators and expanding order backlogs for corporate planemakers like Bombardier and its rivals. Bombardier generated $100 m in free cash from operations in the quarter ended Sept. 30, a metric closely watched by investors, reversing negative usage from last year. Business jet revenue jumped 17% to $1.4bn on higher deliveries of large aircraft, compared with the $1.37bn that analysts were expecting, according to Refinitiv. Revenue from business aircraft services also rose due to increased fleet flight hours, which have surpassed 2019 levels, Bombardier said. Business jet utilization in the United States rose 42.5% year-on-year in the first eight months of 2021. Bombardier recently unveiled an upscale variant of its Challenger 350 business jet as it vies to protect its dominant market share in the segment. The Montreal-based group posted an adjusted net loss of $95m, or 4 cents per share, in the quarter, compared with a loss of $210m, or 9 cents, a year earlier. Analysts were expecting a loss of 5 cents per share, according to Refinitiv. Revenue rose 3% to $1.45 bn. Among its rivals, Cessna business jet maker Textron (TXT.N) on Thursday raised its full-year earnings per share and cash guidance, while General Dynamics Corp’s (GD.N) Gulfstream Aerospace said on Wednesday business jet backlog reached a six-year high. read more

“We continued to see signs of a strong recovery in the general aviation market, with a 49% increase in revenues over last year’s third quarter and a $721m increase in backlog,” said Textron Chief Executive Scott Donnelly in a release. (Source: Reuters)

 

27 Oct 21. Graham Corporation Reports Sales Grew 22% for Second Quarter Fiscal 2022.

• Defense industry represented 58% of quarterly revenue and 49% year-to-date validating strategic expansion into the defense industry
• Revenue of $34.1m, up 22% driven by acquisition
• Orders increased to $31.4m, up 50% sequentially
• Backlog at quarter-end was $233.2m; 78% from the defense industry
• Profits and margins heavily impacted by timing of lower margin defense projects

Graham Corporation (NYSE: GHM), a global business that designs, manufactures and sells critical equipment for the defense/space, energy/new energy and chemical/petrochemical industries, today reported financial results for its second quarter and six months ended September 30, 2021, of the fiscal year ending March 31, 2022 (“fiscal 2022”). Financial results include those of Barber-Nichols (“BN”) as of the date it was acquired on June 1, 2021.

Daniel J. Thoren, President and CEO, commented, “We believe that our strategic expansion into a defense industry business was clearly demonstrated in the quarter. The addition of Barber Nichols is anticipated to help to offset the challenges which our energy and petrochemical business has been experiencing. We expect our energy and chemical markets to recover over the next twelve to twenty-four months. In addition, we will focus on growth opportunities in defense, renewable energy and commercial space.”

Second Quarter Fiscal 2022 Sales Summary

Net sales of $34.1m increased $6.2m, or 22%, driven by $16.5m in sales associated with the acquisition of BN which offset lower sales to commercial energy markets. The fiscal 2022 second quarter’s results include a full quarter of BN. Fluctuations in Graham’s sales among geographic locations and industries can vary measurably from quarter-to-quarter based on the timing and magnitude of projects. Graham does not believe that such quarter-to-quarter fluctuations are indicative of business trends.

Second Quarter Fiscal 2022 Performance Review

Gross margin was lower due to a competitively bid first article defense order flowing through production. In addition, gross margin reflected a fabrication order whose material content and related profit was recognized in previous periods. The prior-year period had benefitted from a large, onetime, material only order with a defense customer.

Selling, general and administrative (“SG&A”) expenses were $5.2 m, up $1.0m, or 23%. BN accounted for $1.3m of the increase, including intangible asset amortization, which was partly offset by lower commissions in China. SG&A, as a percent of sales for the three-month periods ended September 30, 2021 and 2020 were 15.4% and 15.2%, respectively.

Net loss per diluted share was $0.05. On a non-GAAP basis, which excludes intangible amortization, other costs related to the acquisition, and other nonrecurring (income) expenses, adjusted loss per share was $0.06.

First Half Fiscal 2022 Performance Review (Compared with the prior-year period unless noted otherwise)

Net sales of $54.3m were up $9.6m, or 22%, and included four full months of contributions from BN which was $20.0. The increase was driven by the defense market where sales increased $14.0 m, or 108%, representing 49% of total revenue. The expansion in defense was partially offset by declines in the commercial energy markets.

Sales to the U.S. increased to $40.1m, or 74%, of first half net sales in fiscal 2022, up from $26.7 m, or 60%, of fiscal 2021 first half net sales reflecting the impact of the BN acquisition. International sales were $14.2 m and represented 26% of total sales, compared with $18.0 m, or 40%, of sales in the same prior-year period.

Gross profit and margin were down compared with the prior-year period due to the same factors which impacted the quarter. The flow of lower margin defense projects through the Batavia operations was more heavily weighted to the first half of fiscal 2022 and are expected to be completed by the end of the fiscal year. As a result, the Company expects that gross margin in the second half of fiscal 2022 will be significantly higher than the first half of the fiscal year.

SG&A was $10.2 m, up 25%, or $2.0m, including $1.9m related to the acquisition including intangible asset amortization. Higher SG&A also included $0.3m in acquisition-related expenses. As a percent of sales, SG&A was 18.7% in the first half of fiscal 2022, up from 18.3% in the same prior-year period.

Jeffrey F. Glajch, Chief Financial Officer, commented, “Barber Nichols has proven to be an excellent addition to Graham. Since we acquired the business in June, it has outperformed our revenue and EBITDA margin expectations. Importantly, it is a critical element of our strategic expansion into the defense industry and provides the platform from which we can further diversify into renewable energy and commercial space.”

Strong Balance Sheet

Cash, cash equivalents and investments at September 30, 2021 were $16.5m compared with $65.0 m at March 31, 2021. In the first quarter of fiscal 2022, in connection with the acquisition of BN, the Company utilized $41.1m of cash, cash equivalents and investments, and incurred debt of $20m pursuant to a 5-year term loan.

Net cash used by operating activities for the first half of fiscal 2022 was $8.7 m compared with cash used of $2.3m in the prior-year period. The change in cash usage reflects increases in working capital somewhat mitigated by reduced inventories.

Year-to-date capital spending was $1.2m. The Company continues to expect capital expenditures for fiscal 2022 to be between $3.0 m and $3.5m.

Orders and Backlog

Orders of $31.4m increased 50% sequentially, although were down 10% compared with prior-year period. The sequential increase was primarily across the defense and chemical/petrochemical markets. Orders from BN during the quarter were $15.8m. Domestic orders were 80% of total net orders in the second quarter of fiscal 2022 compared with 46% in the prior-year period, reflecting demand from the defense industry

Backlog at the end of the quarter was $233.2m, inclusive of BN backlog of $93.8m.

Backlog by industry at September 30, 2021 was approximately:

• 78% for defense projects
• 11% for refinery projects
• 4% for chemical/petrochemical projects
• 3% for space projects
• 4% for other industrial applications

The Company expects approximately 30% to 35% of backlog will convert to revenue in the last half of fiscal 2022. Approximately $35m to $40m of backlog related to the defense industry is expected to convert to sales in fiscal 2022. Approximately 45% to 50% of orders currently in backlog are expected to be converted to sales within one year. The remaining backlog expected to convert beyond the next twelve months is primarily related to the defense industry.

Fiscal 2022 Guidance Remains Unchanged

Revenue in fiscal 2022 is expected to be $130m to $140m with 45% to 50% associated with the defense industry. Revenue expectations are inclusive of BN’s 10-month revenue contribution for the fiscal year which is expected to be between $45m to $48m. Adjusted EBITDA* is expected to be approximately $7m to $8m in fiscal 2022.

The Company expanded its fiscal 2022 guidance to include expected gross margin of 17% to 18% and SG&A to be approximately 15% to 16% of sales. The expected effective tax rate for the year is 24% to 25%. (Source: BUSINESS WIRE)

 

27 Oct 21. VSE Corporation Announces Third Quarter 2021 Results.

VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a leading provider of aftermarket distribution and maintenance, repair and overhaul (MRO) services for land, sea and air transportation assets for government and commercial markets, today announced results for the third quarter 2021.

THIRD QUARTER 2021 RESULTS

(As compared to the Third Quarter 2020)

• Total Revenues of $200.6m increased 21.2%
• GAAP Net Income of $9.0m increased 11.3%
• Adjusted Net Income of $9.7m increased 42.5%
• Adjusted EBITDA of $21.4m increased 18.7%

For the three months ended September 30, 2021, the Company reported total revenue of $200.6m, versus $165.5m for the same period of 2020. Excluding a non-recurring order for pandemic-related personal protective equipment (PPE) in the third quarter 2020, total revenue increased 26.6% on a year-over-year basis in the third quarter 2021, the highest quarterly revenue run-rate since the fourth quarter 2016. The Company reported adjusted net income of $9.7m or $0.76 per adjusted diluted share, compared to $6.8m or $0.62 per adjusted diluted share in the prior-year period.

Adjusted EBITDA increased to $21.4 m in the third quarter 2021, versus $18.0m for the same period in 2020. The Company generated total free cash flow, as defined by operating cash flow less total capital expenditures, of $21.0m in the third quarter 2021, versus $11.3 m in the same period of 2020.

Aviation segment revenue increased 101.9% on a year-over-year basis, driven by organic growth within both distribution and MRO markets, initial contributions from program implementation of recent contract wins, and market share gains within the business and general aviation (B&GA) market, supported by the acquisition of Global Parts Group completed in July 2021. Aviation distribution and MRO revenue increased 187% and 8%, respectively, in the third quarter 2021 versus the prior-year period, with distribution revenue currently above pre-pandemic levels.

Fleet segment revenue increased 6.4% on a year-over-year basis, excluding a non-recurring order for pandemic-related PPE fulfilled in the prior-year period. Fleet segment growth was driven by higher commercial fleet and e-commerce fulfillment sales, while U.S. Postal Service-related revenue was flat in the period.

Federal & Defense segment revenue increased 2.5% on a year-over-year basis, given contributions from the March 2021 acquisition of HAECO Special Services and recent contract wins.

STRATEGIC UPDATE

VSE continued to successfully execute on its multi-year business transformation and organic and inorganic growth plans during the third quarter. The management team remains focused on accelerating the business transformation through new business wins, product line and service expansion, execution on new program awards, and accretive bolt-on acquisitions supporting and accelerating the strategy.

Aviation segment’s B&GA focus driving sustained revenue growth and margin expansion. During the past twelve months, VSE Aviation expanded its base of small and medium sized business jet customers from approximately 100 to more than 3,000 through a combination of new contract wins and complementary, bolt-on acquisitions. These actions have contributed to significant sustaining growth in Aviation segment revenue, together with opportunity for margin expansion. VSE Aviation expects to gain further traction in this market as both new and existing business jet customers leverage the full breadth of the Company’s combined repair and distribution capabilities.

Aviation segment executing multiple program implementations in support of new contract wins. On a year-to-date basis, VSE Aviation has announced more than $100m of new annualized contract revenue from multi-year distribution agreements with leading global OEMs. During June 2021, VSE Aviation commenced implementation of a 15-year, $1bn engine accessories distribution agreement in support of B&GA engine operators and maintenance providers located throughout the United States. To date, program implementation and revenue are in line with initial expectations.

Aviation segment continues to secure multi-year contract extensions with OEM customers. In October 2021, VSE Aviation announced a 5-year extension of an existing distribution agreement valued at approximately $125m with a global aircraft engine manufacturer. Under the terms of the agreement, VSE Aviation will remain the distributor of new fuel control systems and associated spare parts to the B&GA and rotorcraft markets for this leading global OEM. The agreement, which was initially scheduled to terminate in 2024, has been extended through 2029 and builds on VSE Aviation’s multi-year pipeline of higher-value contractual revenue with both new and existing partners.

Fleet segment continues to generate strong revenue growth and diversification across commercial fleet and eCommerce fulfillment businesses. During a period of global supply chain disruption and part shortages, commercial fleets have increased their reliance on VSE’s Wheeler Fleet Solutions subsidiary as a critical supplier of parts, including higher-margin private label brands. This dynamic, coupled with strong e-commerce demand, resulted in a 65.9% year-over-year increase in total Fleet segment commercial revenue during the third quarter 2021, as compared to the prior-year period. Commercial revenue represented 34.3% of total Fleet revenue in the third quarter 2021, versus 22.0% in the prior-year period when excluding the non-recurring PPE order, in line with the continued revenue diversification strategy.

Federal & Defense segment building funded backlog through new foreign military sales wins, contract extensions. In conjunction with a programmatic business development focus, Federal & Defense segment has expanded its bidding activity with both the U.S. armed forces and allied foreign militaries. These actions contributed to a 23% year-over-year increase in funded backlog during the third quarter 2021 and a strong qualified pipeline of new business opportunities.

MANAGEMENT COMMENTARY

“We continued to execute on our aftermarket distribution and MRO strategies during the third quarter, while positioning the business to generate above-market revenue growth in higher-margin, niche verticals that leverage our unique value proposition,” stated John Cuomo, President and CEO of VSE Corporation. “New contract wins, long-term program extensions, strong program execution, commercial e-commerce growth, together with contributions from recently completed acquisitions, have created a strong, recurring base of business driving continued growth and margin expansion opportunities for VSE.”

“Our Aviation segment had a strong third quarter, as revenue increased more than 100% versus the prior year period, while Adjusted EBITDA margins grew materially on both a sequential and year-over-year basis, driven by new program wins and improved demand across both our distribution and MRO businesses,” continued Cuomo. “In June, we commenced service under our 15-year, $1bn engine accessories distribution agreement. This program is currently performing in line with our previously communicated forecasts, driven by strong B&GA customer demand and solid execution from the VSE Aviation team.”

“We remain committed to building upon existing, long-term customer relationships that align with our broader commercial strategy,” continued Cuomo. “In October, we announced VSE Aviation won a five-year extension to an existing distribution agreement valued at approximately $125m with a global aircraft engine manufacturer. Our ability to both retain and expand upon decades-long partnerships that provide higher-value, multi-year contractual revenue streams is integral to the continued success of our long-term organic growth strategy.”

“Our Fleet segment generated strong revenue growth across commercial and e-commerce channels during the third quarter, serving as a reliable partner to customers during a period of global supply chain disruption,” continued Cuomo. “Fleet adjusted EBITDA margins increased 80 basis points sequentially. Within our Federal and Defense segment, revenue increased year-over-year on several new program awards and extensions, while funded backlog increased more than 20% versus the prior-year period. Our business development teams have built a strong qualified pipeline of high-margin, niche capability opportunities to support the future of this segment,” concluded Cuomo.

“VSE remains focused on improving profitability as we execute our strategic growth initiatives. Our EBITDA margin was 10.7% in the third quarter as the Aviation Segment margin rate grew to 10.0%, up 340 basis points versus the prior year period. VSE generated strong free cash flow in the third quarter of $21m and ended the period with more than $117m of liquidity,” stated Stephen Griffin, CFO of VSE Corporation. We remain focused on growing the business both organically and inorganically, and are pleased with the early progress made with the recently completed Global Parts acquisition. We continue to stay focused on achieving our net leverage target of 2.5x by year-end 2022 through meaningful growth in EBITDA as a result of the recent investments in working capital made throughout 2021.”

SEGMENT RESULTS

AVIATION

Distribution & MRO Services

VSE’s Aviation segment provides aftermarket MRO and distribution services to commercial, business and general aviation, cargo, military/defense and rotorcraft customers globally. Core services include parts distribution, component and engine accessory MRO services, rotable exchange and supply chain services.

VSE Aviation segment revenue increased 101.9% year-over-year to $73.1m in the third quarter 2021. The year-over-year revenue improvement was attributable to contributions from recently announced contract wins and market share gains, specifically within the B&GA markets, as well as contributions from the acquisition of Global Parts. The Aviation segment reported operating income of $3.7m in the third quarter, compared to $1.6m in the same period of 2020. Segment Adjusted EBITDA more than doubled on a year-over-year basis to $7.3m in the third quarter 2021, versus $2.4m in the prior-year period. Aviation segment Adjusted EBITDA margins were 10.0%, up 340 basis points versus the period year period as the aviation industry recovers and new programs materialize into incremental revenue.

FLEET

Distribution & Fleet Services

VSE’s Fleet segment provides parts, inventory management, e-commerce fulfillment, logistics, supply chain support and other services to the commercial aftermarket medium- and heavy-duty truck market, the United States Postal Service (USPS), and the United States Department of Defense. Core services include parts distribution, sourcing, IT solutions, customized fleet logistics, warehousing, kitting, just-in-time supply chain management, alternative product sourcing, engineering and technical support.

VSE Fleet segment revenue increased 6.4% year-over-year to $60.3m in the third quarter 2021, excluding a $7.1m non-recurring order for pandemic-related PPE fulfilled in the prior-year period. Revenues from commercial customers increased 66% on a year-over-year basis, driven by growth in commercial fleet demand and the e-commerce fulfillment business. Segment Adjusted EBITDA declined 13.8% year-over-year in the third quarter 2021 to $7.7m, given lower contributions from USPS-related business, but increased by $0.7m on a sequential, quarter-over-quarter basis. Fleet segment Adjusted EBITDA margins grew to 12.8%, up 70 basis points versus the second quarter 2021 as the business continues to scale for commercial growth.

FEDERAL & DEFENSE

Logistics & Sustainment Services

VSE’s Federal & Defense segment provides aftermarket MRO and logistics services to improve operational readiness and extend the lifecycle of military vehicles, ships and aircraft for the U.S. Armed Forces, federal agencies and international defense customers. Core services include base operations support, procurement, supply chain management, vehicle, maritime and aircraft sustainment services, IT and data management services and energy consulting.

VSE Federal & Defense segment revenue increased 2.5% year-over-year to $67.2m in the third quarter 2021, driven by contributions from the recent acquisition of HAECO Special Services, contract wins and successful recompetes. Segment Adjusted EBITDA declined 12.0% year-over-year to $6.5m in the period, in line with previously communicated expectations, as a result of a favorable mix of fixed priced awards in the third quarter 2020. VSE Federal & Defense funded backlog increased 23.2% year-over-year to $218.0m, as the business continues to execute and focus on higher margin, more technical services.

FINANCIAL RESOURCES AND LIQUIDITY

As of September 30, 2021, the Company had $116.5m in cash and unused commitment availability under its $350 m revolving credit facility maturing in 2024. The business generated $21.0m of free cash flow in the quarter and, on a year-to-date basis, has invested more than $50m in new programs, primarily within the Aviation segment to support long-term growth. As of September 30, 2021, VSE had total net debt outstanding of $294m and $73.1m of trailing-twelve months Adjusted EBITDA, which excludes full-year contributions from the recently completed HAECO Special Services and Global Parts acquisitions. (Source: BUSINESS WIRE)

 

27 Oct 21. CACI Reports Results for Its Fiscal 2022 First Quarter.

Revenues of $1.5bn

Net income of $88.1 m and Diluted EPS of $3.70

Adjusted net income of $101.1 m and Adjusted diluted EPS of $4.24

Adjusted EBITDA of $160.9 m and Adjusted EBITDA margin of 10.8%

Robust cash flow from operations and free cash flow

Contract awards of $2.4bn

CACI International Inc (NYSE: CACI), a leading provider of expertise and technology to government enterprise and mission customers, announced results today for its fiscal first quarter ended September 30, 2021.

CEO Commentary and Outlook

John Mengucci, CACI’s President and CEO, said, “Our first quarter results are a great start to fiscal year 2022. We delivered another quarter of solid organic revenue growth with strong profitability and robust cash flow. We are investing ahead of customer need, driving healthy contract awards and backlog growth. We continued to execute on our flexible and opportunistic capital deployment strategy, making two acquisitions and completing the $500m accelerated share repurchase we announced in March. In short, we are delivering on our commitments with a focus on generating long-term shareholder value.”

First Quarter Results

Revenues in Q1 FY22 increased 2 percent year-over-year organically. The year-over-year decrease in income from operations was driven primarily by unusually high profitability in the year-ago quarter, which was due to low cost of delivery on a fixed-price program and lower medical expenses, both as a result of COVID-19. Diluted earnings per share and adjusted diluted earnings per share increased due to a lower share count as a result of the $500 m accelerated share repurchase announced in March 2021, partially offset by lower net income and lower adjusted net income. The decrease in cash from operations, excluding MARPA, was driven primarily by the benefit of deferred payroll taxes under the CARES Act in the year ago quarter, partially offset by strong collections.

First Quarter Contract Awards

Contract awards in Q1 FY22 totaled $2.4 bn, with approximately 50 percent for new business to CACI. Awards exclude ceiling values of multi-award, indefinite delivery, indefinite quantity (IDIQ) contracts. Some notable awards during the quarter were:

• A five-year, single-award task order, with a ceiling value of $785m, to provide mission expertise in integrated information warfare and electronic warfare solutions, training, readiness, and modernization to advance customer missions.
• A five-year, single-award task order for $209m to continue providing agile development, systems integration, and cloud migration for accounting and financial management systems of one of the armed services.
• A five-year, single-award task order, with a ceiling value of $54m, to provide mission expertise to support the customer in the areas of mathematical, statistical, engineering, physical, and life sciences analysis, and program management.
• First quarter contract awards include $536m of previously unannounced awards on classified contracts. These awards contain a significant amount of cyber-related work, including a multi-hundred-m-dollar contract to provide offensive cyber capabilities to an intelligence customer.
• A prime contract position in all 10 pools on the General Services Administration (GSA) ASTRO indefinite delivery/indefinite quantity contract. ASTRO is a 10-year, multiple-award contract sponsored by the Department of Defense and managed by GSA’s Federal Systems Integration and Management Center. The GSA ASTRO pools include data operations; mission operations; aviation; space; maritime; ground; systems integration and development; research and development; support services; and training services.
• A prime position on a six-year multiple-award, indefinite delivery, indefinite quantity contract, with a ceiling value of $575 m, by the U.S. Deputy Chief of Naval Operations. Under the U.S. Navy’s Technical Support Services (TSS) contract supporting Manpower, Personnel, Training and Education (MPT&E), CACI will provide enterprise expertise to ensure sailor readiness and help implement a broad transformation of the MyNavy HR information system.

Total backlog as of September 30, 2021 was $23.9bn compared with $21.9bn a year ago, an increase of 9 percent. Funded backlog as of September 30, 2021 was $3.5bn compared with $3.4bn a year ago, an increase of 3 percent.

Additional First Quarter Highlights

• CACI acquired two companies that provide mission technology to sensitive government customers. Their capabilities include open-source intelligence solutions, specialized cyber, and satellite communications.
• CACI released its latest technologies to mitigate threats from unmanned aircraft systems. The next generation CORIAN 2.0 system and new CORIAN Tactical system, are part of CACI’s SkyTracker® Suite of counter-unmanned aircraft system (C-UAS) technology, combining the latest generation of sensors and effectors for a complete range of autonomous threat coverage.
• CACI launched its AVT CM62 Micro Gimbal, a multi-sensor imaging system that combines high definition electro-optical imagery and a custom long-wave infrared core in a 260g, compact system. The CM62 Micro Gimbal is a multi-sensor imaging system that combines high definition electro-optical (EO) imagery and a custom long-wave infrared (LWIR) core in a 260g, compact system. The CM62 offers high performance intelligence, surveillance, and reconnaissance (ISR), in a small, lightweight, and low-power system to enhance future small unmanned aerial system (sUAS) operations.
• CACI announced that it has joined the GitLab Partner Program as the first federal system integrator. This program enables CACI to best leverage GitLab’s DevOps platform to deliver software faster (velocity) and more efficiently, while strengthening security and compliance. GitLab provides the DevOps platform that can shorten the system development lifecycle and provide continuous delivery of high-quality, secure software.
• CACI was named a 2021 Top Workplace in San Antonio, Texas for the fourth consecutive year. The surveys are administered by Energage and honorees are chosen based solely on employee feedback gathered through an employee engagement survey.
• CACI received the 2021 Trailblazer Award from the Virginia Department of Veterans Services for the company’s “exemplary investment in veterans and military spouses.” Specifically, the honor recognized the company’s “Continue Your Mission” veterans outreach campaign and Military Veterans Advocacy program, as well as CACI’s overall “investment and support for veterans.” The award was presented during the virtual Virginia Veterans & Military Affairs Conference hosted by Gov. Ralph Northam and sponsored by the Virginia Chamber of Commerce.
• CACI Board Member, The Honorable Susan M. “Sue” Gordon, received the Intelligence and National Security Alliance’s (INSA) 2021 William Oliver Baker Award, in recognition of her extraordinary contribution to U.S. intelligence and national security affairs. The Baker Award recognizes individuals who have made sustained contributions or single achievements of extraordinary merit to the intelligence and national security affairs of the United States. Ms. Gordon was recognized at the 2021 William Oliver Baker Award Dinner.
• CACI hosted the 14th symposium in the Asymmetric Threat Symposium series on national security challenges, titled “Competing Revolutions in Military Affairs: Artificial Intelligence, Machine Learning, and Information Age Conflict,” on Oct. 19, 2021.

Reaffirming FY22 Guidance.  (Source: BUSINESS WIRE)

 

27 Oct 21. Teledyne Technologies Reports Third Quarter Results.

• Record sales of $1,311.9m, an increase of 75.2% compared with last year
• Third quarter GAAP diluted earnings per share of $2.81, an increase of 13.3% compared with last year
• Third quarter non-GAAP diluted earnings per share of $4.34, excluding acquisition-related pretax transaction and purchase accounting expenses of $92.3m and related tax matters ($1.53 per share)
• Third quarter GAAP operating margin of 14.5% and non-GAAP operating margin of 21.5%
• Record third quarter cash flow from operations
• Increasing full year 2021 GAAP earnings outlook to $9.13 to $9.29 per share, compared with the prior outlook of $8.05 to $8.45 per share and full year 2021 non-GAAP earnings outlook to $16.35 to $16.45 per share, compared with $15.25 to $15.50 per share, which excludes acquisition-related transaction and purchase accounting expenses and related tax matters

Teledyne today reported third quarter 2021 net sales of $1,311.9m, compared with net sales of $749.0m for the third quarter of 2020, an increase of 75.2%. Net income was $134.1m ($2.81 diluted earnings per share) for the third quarter of 2021, compared with $93.9 m ($2.48 diluted earnings per share) for the third quarter of 2020, an increase of 42.8%. The third quarter of 2021 net sales included $473.6m in incremental net sales from the acquisition of FLIR Systems, Inc.​ (“FLIR”). In connection with the FLIR acquisition, in the third quarter of 2021, Teledyne incurred pretax expenses of $82.6m, which included $45.6 m in acquired intangible asset amortization expense, $35.2m in acquired inventory step-up expense and $1.8m of transaction and integration-related costs. The third quarter of 2021 also included $9.7m of acquired intangible asset amortization expense for transactions completed in prior periods. Excluding these charges and related tax matters, non-GAAP net income for the third quarter of 2021 was $207.2m ($4.34 per share). The third quarter of 2020 included pretax charges of $13.8m which included $9.9 m in acquired intangible asset amortization expense and $3.9m in severance, facility consolidation and other costs. Excluding acquired intangible asset amortization expense, non-GAAP net income for the third quarter of 2020 was $101.5 m ($2.68 per share). Operating margin was 14.5% for the third quarter of 2021, compared with 16.4% for the third quarter of 2020. Excluding acquisition-related transaction and purchase accounting expenses, non-GAAP operating margin for the third quarter of 2021 was 21.5%, compared with 17.7% for the third quarter of 2020. The third quarter of 2021 reflected net discrete income tax benefits of $6.3m compared with net discrete income tax benefits of $1.2m for the third quarter of 2020.

“Our record sales in the third quarter included organic growth just under 12 percent and operating margin increased 380 basis points excluding acquisition-related costs,” said Robert Mehrabian, Chairman, President and Chief Executive Officer. “Cash flow was a third quarter record, allowing repayment of $300.0 m of debt, while our leverage ratio declined to 3.3x from 3.7x at the end of the second quarter. Sales increased in every major business category but were especially strong in our commercial imaging and electronic test and measurement instrumentation businesses. Our government businesses continued to grow, and we are beginning to see a recovery in some of our longer-cycle commercial markets such as aerospace and energy. We are also very pleased with the integration of Teledyne FLIR, as well as its performance in the first full quarter as part of Teledyne. Finally, while Teledyne is not immune to supply chain challenges and the current operating environment, we have been successfully navigating and managing these issues.”

Review of Operations

Comparisons are with the third quarter of 2020, unless noted otherwise.

Digital Imaging

The Digital Imaging segment’s third quarter 2021 net sales were $760.6m, compared with $239.7m, an increase of 217.3%. Operating income was $94.9m for the third quarter of 2021, compared with $45.5m, an increase of 108.6%.

The third quarter 2021 net sales increase included $473.6m of incremental net sales from the FLIR acquisition as well as organic sales growth from industrial and scientific sensors and cameras, x-ray products and micro-electro-mechanical systems (“MEMS”), partially offset by lower sales for geospatial imaging systems. The increase in operating income in the third quarter of 2021 reflected the contribution from the FLIR acquisition, partially offset by $82.3m of FLIR acquisition-related transaction and purchase accounting expenses, which included $45.6 m in acquired intangible asset amortization expense, $35.2m in inventory step-up expense and $1.5 m of integration-related costs. The increase in operating income also reflected the impact of organic sales growth.

Instrumentation

The Instrumentation segment’s third quarter 2021 net sales were $287.1m, compared with $263.5m, an increase of 9.0%. Operating income was $63.0 m for the third quarter of 2021, compared with $50.7m, an increase of 24.3%.

The third quarter 2021 net sales increase resulted from higher sales of test and measurement instrumentation, environmental instrumentation and marine instrumentation. Sales of test and measurement instrumentation increased $12.8m, environmental instrumentation increased $7.6m and marine instrumentation increased $3.2m. The increase in operating income reflected the impact of higher sales and improved margins across most product categories resulting from ongoing margin improvement initiatives.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s third quarter 2021 net sales were $161.8m, compared with $144.8m, an increase of 11.7%. Operating income was $35.9m for the third quarter of 2021, compared with $26.7m, an increase of 34.5%.

The third quarter 2021 net sales reflected $9.9m of higher sales for defense and space electronics as well as higher sales of $7.1m for aerospace electronics. Operating income in the third quarter of 2021 reflected the impact of higher sales and a lower cost structure due to actions taken in 2020 and lower research and development costs. Research and development expense was lower by $2.8m in the third quarter of 2021, and primarily reflected lower spending for aerospace electronics.

Engineered Systems

The Engineered Systems segment’s third quarter 2021 net sales were $102.4m, compared with $101.0m, an increase of 1.4%. Operating income was $11.5m for the third quarter of 2021, compared with $12.5m, a decrease of 8.0%.

The third quarter 2021 net sales primarily reflected higher sales of $7.8m of engineered products, partially offset by lower sales of $6.3m for turbine engines. The higher sales for engineered products primarily reflected increased sales from medical modeling and analysis, missile defense and marine manufacturing programs. Teledyne exited the turbine engine business in the first quarter of 2021.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $192.8 m for the third quarter of 2021, compared with $150.3 m. The higher cash flow from operating activities for the third quarter of 2021 reflected the impact of higher net income, the cash flow contribution from FLIR and lower income tax payments, partially offset by semi-annual interest payments. At October 3, 2021, net debt was $3,889.9m and comprised of cash and cash equivalents of $551.8m and total debt of $4,441.7m. At January 3, 2021, net debt was $105.4m and comprised of cash and cash equivalents of $673.1m and total debt of $778.5m. The higher debt balance at October 3, 2021, included the debt incurred to fund the cash portion of the FLIR acquisition. In the third quarter of 2021, Teledyne repaid $300.0m against the $1.0bn Term Loan Credit Agreement. At October 3, 2021, approximately $751.1 m was available under the $1,150m credit facility, after reductions of $125.0 m in borrowings and $273.9m in outstanding letters of credit. The outstanding letters of credit include a $253.6m letter of credit to the Swedish Tax Authority, related to a disputed pre-acquisition 2018 tax reassessment issued to a FLIR subsidiary in Sweden. The Company received $5.5m from the exercise of stock options in the third quarter of 2021 compared with $1.3m. Capital expenditures for the third quarter of 2021 were $29.2 m compared with $15.2m. Depreciation and amortization expense for the third quarter of 2021 was $90.2m, which includes acquired intangible asset amortization expense of $45.6m related to FLIR, compared with $29.2m. Non-cash inventory step-up expense related to FLIR was $35.2m for the third quarter of 2021.

Income Taxes

The effective tax rate for the third quarter of 2021 was 20.1%, compared with 21.5%. The third quarter of 2021 reflected net discrete income tax benefits of $6.3m, which included a $3.0m income tax benefit related to share-based accounting and an income tax benefit of $4.9m primarily related to research and development and foreign tax credits. The third quarter of 2020 reflected net discrete income tax benefits of $1.2m which included $0.7m in income tax benefit related to share-based accounting. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.9% for the third quarter of 2021, compared with 22.5%.

Other

Stock option expense was $5.8m for the third quarter of 2021 compared with $5.7m. Stock option expense for fiscal year 2021 is currently expected to be $20.5m, compared with $24.7m for fiscal year 2020. Restricted stock unit expense for FLIR employees was $1.8m in the third quarter of 2021 and is expected to be $7.9m for fiscal year 2021 and is included in the Digital Imaging segment results. Non-service retirement benefit income was $2.8m for the third quarter of 2021, compared with $3.2m. Interest expense, net of interest income, increased to $23.8 m for the third quarter of 2021 compared with $4.1m. The higher 2021 amount included interest and debt expense on the debt incurred to fund the FLIR acquisition. Corporate expense increased to $15.7m for the third quarter of 2021, compared with $12.9m. The higher 2021 amount included higher compensation and professional fees expense. Other income and expense, was expense of $0.7m for the third quarter of 2021, compared with expense of $1.9m.

Outlook

Based on its current outlook, the company’s management believes that fourth quarter 2021 GAAP diluted earnings per common share will be in the range of $2.53 to $2.69 and full year 2021 GAAP diluted earnings per common share will be in the range of $9.13 to $9.29. The company’s management further believes that fourth quarter 2021 non-GAAP diluted earnings per common share will be in the range of $4.07 to $4.17 and full year 2021 non-GAAP diluted earnings per common share will be in the range of $16.35 to $16.45. The non-GAAP outlook excludes certain costs related to the FLIR acquisition, such as acquired intangible asset amortization, inventory step-up expense, bridge loan and debt extinguishment fees, transaction and integration costs and acquisition-related foreign tax matters. This outlook also excludes acquired intangible asset amortization from prior acquisitions. The company’s annual expected tax rate for 2021 is 23.9%, before discrete tax items. In addition, we currently expect less discrete tax items in 2021 compared with 2020. (Source: BUSINESS WIRE)

 

28 Oct 21. Airbus raises targets, rejigs near-term production goals. Europe’s Airbus (AIR.PA) raised full-year financial targets after a narrower-than-expected dip in third-quarter profits, and stuck to a goal of delivering 600 jetliners this year after driving down costs during the pandemic.

The world’s largest commercial planemaker posted a 19% drop in third-quarter operating profit to 666 m euros ($772.7 m) as revenues slipped 6% to 10.518 bn.

It said it was looking for full-year operating profit of 4.5 bn euros and free cashflow of 2.5 bn, up from previous targets of 4 bn and 2 bn respectively.

Analysts were on average expecting quarterly operating profit of 623 m euros on revenues of 10.651 bn, according to a company-compiled consensus.

Airbus delayed some planned production increases after a week in which several aerospace firms warned of supply shortages but rounded up its main A320-family narrowbody production target to 65 a month by summer 2023, slightly later than planned.

In May, Airbus said it was calling on suppliers to secure a firm rate of 64 a month by second-quarter 2023.

A quarterly earnings statement made no mention of studies on potential increases to 70 or 75 a month which it had announced in May. Leasing companies, engine makers and other suppliers have questioned whether there is enough demand for this.

An industry source said Airbus continues to study higher production rates, while others said there was no agreement so far with key suppliers.

In other programmes, Airbus said on Thursday it would lift A330 output from 2 a month to almost 3 at the end of 2022, following recent sales to airlines such as Germany’s Condor.

It reiterated it would increase production of the newer A350 wide-body jet from 5 to 6 a month, but delayed implementation to early 2023 from autumn 2022. (Source: Reuters)

 

28 Oct 21. Kleos Space Accelerates towards EBITDA.

Highlights:

• Fully funded to forecasted EBITDA positive status in mid ‘22
• Kleos processing system delivering exceptionally accurate geolocation capability, locating low power transmitter to within 300 metres
• Converting the global pipeline & growing by 30% to over 220 qualified deals including:

o 52 Guardian LOCATE data evaluation contracts in place representing U$4.7m ARR opportunity post trial periods at lowest subscription level

o 5 contract proposals in negotiation representing U$2.9m ARR

• Second satellite cluster, progressing through in-orbit commissioning
• Third satellite cluster, on track to launch January 2022 on SpaceX Falcon 9
• Build and launch contracts signed for fourth cluster, Observer Mission (KSF3), targeting mid-2022 launch

o Adding up to a further 119 million km2 collect capacity per day over key areas across multiple payloads.

Kleos Space (ASX: KSS, Frankfurt: KS1), a space-powered Radio Frequency Reconnaissance data-as-a-service company, provides the following update for the quarter ending 30 September 2021 (Q3 2021).

Commenting on the Company’s September quarter progress, Kleos Space CEO Andy Bowyer said:

Kleos continues to commercialise its geolocation data while preparing for future growth, rapidly building its satellite constellation to increase data volume and value and scaling its data-as-a-service operations to meet growing customer demand.

Successful testing of our data collection and processing systems with early adopter customers has validated and de-risked our technology. Evaluation of our first data products by subscribers is converting to repeating subscription revenues.

We are the first company in the World to fly clusters of four satellites, with data from our Scouting Mission satellites delivering unprecedented, proven, precision geolocation capability of very low power transmitters to within 300 metres

The team has built and proven a World leading technology producing unique and valuable data and a large, growing customer base ready to buy it.  Increased data volumes are converting the customer pipeline from evaluation to revenue generation, bringing exceptional revenue opportunities in the coming quarters.

COMMERCIAL PROGRESS

Kleos’ precision geolocation data is sold as a service (DaaS) to government and commercial entities around the Globe on a volume basis i.e. million km2/month collected

In Q3 the Company has grown the customer base, with the geographically diverse pipeline comprising:

• 223 qualified deals (30% growth from Q2)

o 74 Defence and security entities

o 12 Resellers

o 137 Integrators

• 71 signed agreements with resellers, integrators, and end users
• 52 signed evaluation contracts for Guardian LOCATE data in place representing U$4.7m ARR opportunity post trial periods (2 months) at lowest subscription level (US$7500/month)
• 15 customers currently reviewing data
• 5 contract proposals in negotiation representing U$2.9m ARR

Kleos is moving toward repeating revenues from Q3 to Q4 2021, and is now onboarding subscribers with its initial Scouting Mission data, increasing revenue contribution from existing subscribers and over time as higher-value datasets from additional and more capable satellites become available. Subscribers will be able to access data collected by the Scouting Mission and Vigilance Mission satellites in Q4, with each new satellite launch increasing not just the volume but also the value of Kleos’ data. Kleos’ business model has a low operational cost base, enabling the Company to generate scalable recurring revenue and achieve EBITDA positive status before the end of H2 2022.

Scouting Mission (KSM1):

Kleos was proud to release a white paper that described our geolocation capabilities during the GEOINT 2021 conference. The whitepaper included descriptions of the algorithms Kleos uses to geolocate transmitters along with information about the cluster formation and an example of geolocation data captured during the commissioning of the KSM1 payloads. Full production level, processed data from the cluster is available via the Kleos API in Q4 fulfilling customer orders and starting contractual revenue booking in 2021.

Vigilance Mission (KSF1):

Commissioning activity on KSF1 is progressing, with satellite hardware check out proceeding successfully. The improvements being made to flight software used on KSF1 satellites is applicable to KSF2 & KSF3 missions, therefore the work currently being performed reduces commissioning times for those future missions.

Patrol Mission (KSF2):

The assembly, integration, and test of the four satellites of the KSF2 cluster continues as planned. The satellites will be ready to launch on the Transporter-3 SpaceX mission scheduled to launch in January 2022.

Observer Mission (KSF3):

Contracts for the construction and launch of the next cluster of satellites have been signed. The satellites are targeting a mid-2022 launch.

OUTLOOK

Kleos remains focused on continuing to grow subscribers by the end of the year and delivering recurring revenue.

Kleos has a large addressable market, providing a cost-effective intelligence, surveillance, and reconnaissance (ISR) solution for global economic, societal and security challenges. Its global activity-based data improves the detection of illegal activity, including drug and people smuggling, illegal fishing, border challenges and piracy.

 

28 Oct 21. Airbus reports Nine-Month (9m) 2021 results.

• 424 commercial aircraft delivered in 9m 2021
• 9m financials reflect deliveries as well as efforts on cost containment and competitiveness
• Revenues € 35.2bn; EBIT Adjusted € 3.4bn
• EBIT (reported) € 3.4bn; EPS (reported) € 3.36
• Free cash flow before M&A and customer financing € 2.3bn
• 2021 guidance unchanged for commercial aircraft deliveries, updated for EBIT Adjusted and FCF before M&A and customer financing

Amsterdam, 28 October 2021 – Airbus SE (stock exchange symbol: AIR) reported consolidated financial results for the nine months ended 30 September 2021.

“The nine-month results reflect a strong performance across the company as well as our efforts on cost containment and competitiveness. As the global recovery continues, we are closely monitoring potential risks to our industry. We are focused on securing the A320 Family ramp up and striving to ensure the right industrial and supply chain capabilities are in place,” said Airbus Chief Executive Officer Guillaume Faury. “Based on our nine-month performance, we have updated our 2021 earnings and cash guidance. We are strengthening the balance sheet to secure investment for our long-term ambitions.”

Gross commercial aircraft orders totalled 270 (9m 2020: 370 aircraft) with net orders of 133 aircraft after cancellations (9m 2020: 300 aircraft). The order backlog was 6,894 commercial aircraft on 30 September 2021. Airbus Helicopters booked 185 net orders (9m 2020: 143 units), including 10 helicopters of the Super Puma Family. Airbus Defence and Space’s order intake by value was € 10.1bn (9m 2020: € 8.2bn) with third quarter orders including 56 C295 aircraft for India, two A400Ms for Kazakhstan and support and spares contract renewals for the German and Spanish Eurofighter fleets.

Consolidated revenues increased 17 percent to € 35.2bn (9m 2020: € 30.2bn), mainly reflecting the higher number of commercial aircraft deliveries compared to 9m 2020. A total of 424 commercial aircraft were delivered (9m 2020: 341 aircraft), comprising 34 A220s, 341 A320 Family, 11 A330s(1) , 36 A350s and 2 A380s. Revenues generated by Airbus’ commercial aircraft activities increased 21 percent, largely reflecting the delivery performance compared to 2020 which was strongly impacted by COVID-19. Airbus Helicopters delivered 194 units (9m 2020: 169 units) with revenues up 14 percent reflecting growth in services as well as the higher deliveries, notably more helicopters from the Super Puma family. Revenues at Airbus Defence and Space were broadly stable year-on-year with four A400M military airlifters delivered in 9m 2021.

Consolidated EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – was € 3,369m (9m 2020: € -125 m).

The EBIT Adjusted related to Airbus’ commercial aircraft activities totalled € 2,739m (9m 2020: € -641m), mainly driven by the operational performance linked to deliveries and efforts on cost containment and competitiveness.

The A220 production rate, which is currently at 5 aircraft a month, is expected to increase to around rate 6 per month in early 2022, with a monthly production rate of 14 envisaged by the middle of the decade. On the A320 Family programme, the Company is working to secure the ramp up and is on trajectory to achieve a monthly rate of 65 aircraft by summer 2023. The recent commercial successes of the A330 programme enable a monthly rate increase from around 2 to almost 3 aircraft at the end of 2022. The A350 programme is expected to increase from around 5 to around 6 aircraft a month in early 2023.

Airbus Helicopters’ EBIT Adjusted increased to € 314m (9m 2020: € 238m), driven by services, programme execution and lower spending on Research & Development (R&D).

EBIT Adjusted at Airbus Defence and Space increased to € 284m (9m 2020: € 266m), mainly reflecting the Division’s efforts on cost containment and competitiveness.

Consolidated self-financed R&D expenses totalled € 1,919m (9m 2020: € 2,032m).

Consolidated EBIT (reported) amounted to € 3,437 m (9m 2020: € -2,185m), including net Adjustments of € +68m.

These Adjustments comprised:

• € +190m related to the A380 programme, of which € +45m were booked in Q3;
• € -165m related to the dollar pre-delivery payment mismatch and balance sheet revaluation, of which € +5 m were in Q3;
• € +43m of other Adjustments, including compliance costs, of which € -6m were in Q3.

The financial result was € -172m (9m 2020: € -712m). It mainly reflects the net interest result of € -233m partly offset by € +63m related to the revaluation of the Dassault Aviation equity stake. Consolidated net income(2) was € 2,635 m (9m 2020 net loss: € -2,686 m) with consolidated reported earnings per share of € 3.36 (9m 2020 loss per share: € -3.43).

Consolidated free cash flow before M&A and customer financing was € 2,260m (9m 2020: € -11,798m), reflecting efforts on cash containment and also included a positive phasing impact from working capital. Consolidated free cash flow was € 2,308m (9m 2020: € -12,276m).

On 30 September 2021, the gross cash position stood at € 21.7bn (year-end 2020: € 21.4bn) with a consolidated net cash position of € 6.7bn (year-end 2020: € 4.3bn). The Company’s liquidity position remains strong, standing at € 27.7bn at the end of September 2021. Given the increase in the net cash position and the robust liquidity, a decision was taken not to renew the undrawn € 6.2bn Supplemental Liquidity Line which matured in September. In the meantime, the maturity of the € 6 bn Revolving Syndicated Credit Facility has been extended by a year.

Outlook

As the basis for its 2021 guidance, the Company assumes no further disruptions to the world economy, air traffic, the Company’s internal operations, and its ability to deliver products and services.

The Company’s 2021 guidance is before M&A.

On that basis, the Company has updated its 2021 guidance and now targets to achieve in 2021 around:

• 600 commercial aircraft deliveries;
• EBIT Adjusted of € 4.5bn;
• Free Cash Flow before M&A and Customer Financing of € 2.5bn.

 

27 Oct 21. Boeing shares down slightly on 787, Starliner costs. Boeing Co (BA.N) reported a quarterly net loss after fresh charges on its problem-plagued 787 and Starliner spacecraft programs, masking a small underlying profit as air travel recovers from the pandemic.

The 737 MAX and 787 are integral to Boeing’s ability to rebound from the pandemic and a safety scandal caused by two fatal crashes, while its Starliner has fallen behind dominating space rival Elon Musk’s SpaceX.

Boeing shares were down 1.6% to $206.40 in midday trading, against a fractionally lower Dow Jones Industrial Average (.DJI).

“We have a clear line of sight to the steps ahead” on resuming 787 deliveries, Calhoun told analysts on a conference call but gave no specific timeline pending regulatory approvals.

Boeing said the price tag for inspections and repairs due to 787 structural defects amassed over the last two years would be roughly $1 billion – or $183 million in the quarter, confirming for the first time estimates reported by Reuters in February.

It has twice halted 787 deliveries, with the latest stoppage ongoing since May and resulting in an inventory of more than 100 jets worth $9 billion cash. read more

Boeing also booked a charge of $185m on its long-delayed Starliner astronaut capsule for NASA’s Commercial Crew Program, due to delays and repairs from faulty fuel valves that sidelined the spacecraft after its August flight attempt.

Meanwhile, SpaceX’s Dragon capsule has ferried astronauts and supplies to orbit four times.

Revenue rose 8% to about $15.3bn, fueled by 737 MAX deliveries and growth in Boeing’s services unit as it sees recovery in the air travel market.

Boeing delivered 62 of its 737s in the quarter, with some 370 of its 737 MAX jets in inventory, a third of which were for customers in China, executives said.

It is meanwhile building 19 of the jets monthly, up from 16 in last quarter, with ongoing plans to push to 31 per month in early 2022.

On the prospect of ramping to 50 or more jets monthly, Calhoun said, “The wild card in this one isn’t demand. It’s all about the supply chain. Whether it’s two, three or four years, I’m not sure. I do think we get there.”

Rival Airbus SE (AIR.PA) is charging forward with planned production increases to a record 64 per month by second-quarter 2023, with possible further increases beyond that. Its plans have produced a backlash from suppliers and leasing companies.

Calhoun struck a cautious note, telling analysts the whole industry would face narrowbody supply constraints from the second half of 2022 and lasting through 2023.

Boeing has been producing about two 787 jets monthly at its South Carolina factory with plans to go back to an already slow rate of five a month at some future point – analysts expect that to take a year.

On forthcoming jets, Boeing began engine performance flight tests earlier this month on its already years-delayed 777X mini-jumbo, and still expects a first delivery in late 2023, and is evaluating the launch timing of a freighter version, Calhoun said.

Chicago-based Boeing reported a net loss of $132m, compared with a loss of $466m a year ago, but a core operating profit of $59m. An adjusted loss of 60 cents per share compared with analysts’ average estimate of 20 cents per share, according to Refinitiv data. Quarterly free cash flow of negative $507m compared with negative $5bn a year ago, while Boeing’s mountain of debt fell to $62.4bn from $63.6bn. (Source: Reuters)

 

27 Oct 21. General Dynamics lowers revenue outlook as profit rises on marine, aero sales. Defense contractor General Dynamics Corp (GD.N) posted a 3% rise in third-quarter profit on Wednesday, boosted by higher sales in the unit that makes U.S. Navy ships and its aerospace division, which makes Gulfstream business jets, but trimmed its annual revenue target by $400m.

“This quarter revenues decrease will impact the year, and we now expect revenue to be around $12.6bn or $400 m less than our second-quarter update,” General Dynamics Chief Executive Phebe Novakovic said on a post-earnings conference call. Previous annual earnings per share guidance of $11.50 was unchanged.

Revenue rose 1.5% to $9.57bn in the quarter, but missed an average analyst estimate of $9.85bn, according to Refinitiv data.

Business aviation has picked up from pandemic lows as easing travel curbs and the lure of private flights fills order books for new corporate aircraft. On the call Novakovic said Gulfstream has seen “some upward pressure on pricing” for the jets with backlog reaching a six-year high.

Novakovic said about 75% of her workforce had “either full or partial” vaccination with a government-contractor deadline coming on Dec. 8.

General Dynamics shares were 1% higher in midday trading.

The results follow yesterday’s 11% stock drop at weapons maker Lockheed Martin Corp after it lowered its full-year revenue target, citing supply-chain issues, and figures from Raytheon Technologies (RTX.N), which makes a mix of weapons and commercial aerospace components and which raised its forecast for full-year adjusted profit on encouraging signs in the commercial air travel space.

Novakovic said chip shortages impacted the company’s Mission Systems unit, which makes tanks, and while being mitigated – could last into next year.

Sales in General Dynamics’ Marine Systems unit, which makes nuclear-powered submarines and surface ships for the U.S. Navy, rose 9.6% to $2.64 bn, while aerospace sales rose 4.6% to $2.07bn.

The company delivered 31 Gulfstreams versus 32 a year ago, and said it planed to deliver 40 in the fourth quarter.

General Dynamics earlier this month announced two new jets, with its larger Gulfstream G800 set to compete with Bombardier Inc’s (BBDb.TO) Global 7500 and Dassault Aviation SA’s (AM.PA) 10X.

Net earnings rose to $860m, or $3.07 per share, beating an average analyst estimate of $2.98 for the quarter ended Oct. 3, up from $834m, or $2.90 per share, a year earlier. (Source: Reuters)

 

27 Oct 21. General Dynamics Reports Third-Quarter 2021 Financial Results.

• Net earnings of $860m on revenue of $9.6bn
• Diluted EPS of $3.07, up 5.9% from year-ago quarter
• $1.5bn in cash provided by operating activities
• Significant Gulfstream order activity continues

General Dynamics (NYSE: GD) today reported third-quarter 2021 net earnings of $860m on revenue of $9.6bn. Diluted earnings per share (EPS) were $3.07.

EPS grew 5.9% from the year-ago quarter and 17.6% sequentially as company-wide operating margin expanded to 11.3%, up 90 basis points from the previous quarter. Margins were up sequentially in all four segments.

“The company delivered solid third-quarter results, generating very strong cash flow and attractive margins,” said Phebe N. Novakovic, chairman and chief executive officer. “We continue to focus on delivering solid program performance and ensuring the well-being of our people, who are rising above the challenges of the pandemic to support our customers.”

Cash

Net cash provided by operating activities in the quarter totaled $1.5bn. Free cash flow from operations was $1.3bn.

Backlog

Backlog at the end of the quarter was $88.1bn, up 8.1% from the year-ago quarter. Estimated potential contract value, representing management’s estimate of value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $41.5bn. Total estimated contract value, the sum of all backlog components, was $129.6bn at the end of the quarter.

Orders in the Aerospace segment were strong, with backlog up 22.8% over the year-ago quarter to $14.7bn.

Significant awards in the quarter for the Defense segments included $475 million from the U.S. Navy to provide ongoing lead yard services for the Columbia-class submarine program; $195 million from the Navy to provide engineering, technical, design and planning yard support services for operational strategic and attack submarines; a contract to provide cloud support services to the U.S. Patent and Trademark Office with a maximum potential value of $190 million; $165 million to produce various munitions, ordnance and missile subcomponents for the U.S. Army; $160 million from the Navy to provide maintenance and repair services for the Arleigh Burke-class destroyer, Nimitz-class aircraft carrier, San Antonio-class amphibious transport dock and Whidbey Island-class dock landing ship programs; $150m from the Navy for Advanced Nuclear Plant Studies in support of the Columbia-class submarine program and options totaling $570m of additional potential value; and $540m for several key contracts for classified customers and additional classified IDIQ awards with a maximum potential value of $4.2bn among multiple awardees.

 

26 Oct 21. Lockheed predicts Aerojet acquisition will close next quarter. Lockheed Martin’s $4.4bn acquisition of Aerojet Rocketdyne is expected to close in the first quarter of 2022, one quarter later than expected, Lockheed chief executive Jim Taiclet said Tuesday on the company’s earnings call.

“The Aerojet Rocketdyne transaction continues moving through the regulatory approval process. And we now anticipate closing in the first quarter of 2022,” Taiclet said.

Since the Bethesda, Md.-based Lockheed announced the deal late last year, it’s seen pushback because it would allow the country’s largest defense contractor to absorb a key supplier of solid-fuel rocket motors.

Waltham, Mass.-based Raytheon Technologies came out against the transaction, while congressional sentiment on the deal has been mixed. Sen. Elizabeth Warren, D-Mass., asked the Federal Trade Commission to apply deeper scrutiny to the deal and its impact on competition, though a group of 13 lawmakers said they support it.

Overall, the company lowered revenue projections by 2.5 percent in 2021 due to plans for fewer F-35 jets, the U.S. withdrawal from Afghanistan and pandemic-related supply chain problems.

Company officials said they see growth coming through its share of the Pentagon’s hypersonic programs and potentially some classified work ― as well as existing programs like the CH-53K King Stallion program and the expanding Next-Generation Interceptor effort. (Source: Defense News)

 

27 Oct 21. Boeing Reports Third-Quarter Results.

• Continued progress on global safe return to service of 737 MAX and focus on operational stability
• Revenue of $15.3bn, GAAP loss per share of ($0.19) and core (non-GAAP)* loss per share of ($0.60)
• Operating cash flow of ($0.3)bn; cash and marketable securities of $20.0bn
• Commercial Airplanes backlog of $290bn and added 93 net orders

The Boeing Company [NYSE: BA] reported third-quarter revenue of $15.3 bn, driven by higher commercial airplanes and services volume. GAAP loss per share of ($0.19) and core loss per share (non-GAAP)* of ($0.60) primarily reflects higher commercial volume (Table 1). Boeing recorded operating cash flow of ($0.3)bn.

“We are driving stability across our operations, investing in our future and positioning our teams to deliver for our customers as the market recovers,” said Boeing President and Chief Executive Officer David Calhoun. “Commercial market demand continues to gain traction with broad-based vaccine distribution and border protocols beginning to open. Going forward, supply chain capacity and global trade will be key drivers of our industry and the broader economy’s recovery. Our portfolio across commercial, defense, space and services is well positioned, and we’re focused on improving performance, while advancing technologies and digital manufacturing capabilities to drive our next generation of products and a sustainable future.”

Operating cash flow improved to ($0.3)bn in the quarter, reflecting higher commercial deliveries, higher order receipts, and lower expenditures. Operating cash flow was also favorably impacted by a $1.3bn income tax refund in the quarter.

Cash and investments in marketable securities decreased to $20.0bn, compared to $21.3bn at the beginning of the quarter, primarily driven by debt repayment and operating cash outflows. Debt was $62.4bn, down from $63.6bn at the beginning of the quarter due to the repayment of maturing debt.

Total company backlog at quarter-end was $367bn.

Segment Results

Commercial Airplanes

Commercial Airplanes third-quarter revenue increased to $4.5bn primarily driven by higher 737 deliveries, partially offset by lower 787 deliveries. Third-quarter operating margin improved to (15.5) percent primarily due to higher deliveries.

Boeing is continuing to make progress on the global safe return to service of the 737 MAX. Since the FAA’s approval to return the 737 MAX to operations in November 2020, Boeing has delivered more than 195 737 MAX aircraft and airlines have returned more than 200 previously grounded airplanes to service. 31 airlines are now operating the 737 MAX, safely flying over 206,000 revenue flights totaling more than 500,000 flight hours (as of October 24, 2021). The 737 program is currently producing at a rate of 19 per month and continues to progress towards a production rate of 31 per month in early 2022, and the company is evaluating the timing of further rate increases.

The company continues to focus 787 production resources on conducting inspections and rework and continues to engage in detailed discussions with the FAA regarding required actions for resuming delivery. The current 787 production rate is approximately two airplanes per month. The company expects to continue at this rate until deliveries resume and then return to five per month over time. The low production rates and rework are expected to result in approximately $1 bn of abnormal costs, of which $183 m was recorded in the quarter.

Commercial Airplanes secured orders for 70 737 MAX, 24 freighter, and 12 787 airplanes. Commercial Airplanes delivered 85 airplanes during the quarter and backlog included over 4,100 airplanes valued at $290bn.

Defense, Space & Security

Defense, Space & Security third-quarter revenue decreased to $6.6bn and third-quarter operating margin decreased to 6.6 percent, primarily due to a $185m earnings charge on the Commercial Crew program driven by the second uncrewed Orbital Flight Test now anticipated in 2022 and the latest assessment of remaining work.

During the quarter, Defense, Space & Security secured awards for five P-8A Poseidon aircraft for the German Navy and four CH-47F Block II Chinook helicopters for the U.S Army, as well as a Joint Direct Attack Munition contract for the U.S. Air Force. Defense, Space & Security also conducted the MQ-25 unmanned aerial refueling of a U.S. Navy E-2D and F-35C, and delivered a total of 37 aircraft during the quarter, including the first CH-47F Chinook to the Royal Australian Army.

Backlog at Defense, Space & Security was $58bn, of which 33 percent represents orders from customers outside the U.S.

Global Services

Global Services third-quarter revenue increased to $4.2 bn and third-quarter operating margin increased to 15.3 percent primarily driven by higher commercial services volume. Operating margin was also favorably impacted by lower severance costs and mix of products and services.

During the quarter, Global Services captured orders for 12 additional 737-800 converted freighters for BBAM, an award for performance-based logistics support of the global C-17 fleet, and a modification award for Chinook infra-red suppression systems for the U.K. Armed Forces. Global Services also announced a partnership to expand capacity for 767-300 Boeing Converted Freighters and was selected to provide training to the United Aviate Academy.

Additional Financial Information

At quarter-end, Boeing Capital’s net portfolio balance was $1.8bn. The earnings from FAS/CAS service cost adjustment primarily reflects an increase in the CAS discount rate driven by pension relief provisions in the American Rescue Plan Act of 2021. Interest and debt expense increased due to higher debt balances. The change in other income was driven by a pension settlement charge recorded during the quarter. The third quarter 2021 effective tax rate primarily reflects a lower pre-tax loss compared to the prior period, as well as benefits from R&D tax credits.

Non-GAAP Measures Disclosures

We supplement the reporting of our financial information determined under Generally Accepted Accounting Principles in the United States of America (GAAP) with certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures provide investors with additional insight into the company’s ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. The following definitions are provided:

Core Operating Earnings, Core Operating Margin and Core Earnings Per Share

Core operating earnings is defined as GAAP earnings from operations excluding the FAS/CAS service cost adjustment. The FAS/CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. Core operating margin is defined as core operating earnings expressed as a percentage of revenue. Core earnings per share is defined as GAAP diluted earnings per share excluding the net earnings per share impact of the FAS/CAS service cost adjustment and Non-operating pension and postretirement expenses. Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost. Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to Commercial Airplanes and BGS businesses supporting commercial customers. Pension costs allocated to BDS and BGS businesses supporting government customers are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid. Management uses core operating earnings, core operating margin and core earnings per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as they exclude non-service pension and post-retirement costs, which primarily represent costs driven by market factors and costs not allocable to government contracts.

Free Cash Flow

Free cash flow is GAAP operating cash flow reduced by capital expenditures for property, plant and equipment. Management believes free cash flow provides investors with an important perspective on the cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to support ongoing business operations and long term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow as a measure to assess both business performance and overall liquidity.

 

27 Oct 21. Demand for IFS Cloud™ drives strong Q3 performance for IFS with cloud revenue up 104% YoY. IFS, the global cloud enterprise applications company, today announced its Q3 2021 year-to-date (YTD) financial results, ending September 30, 2021.

Driving strong performance in Q3 was the increase in customer demand for IFS Cloud™, with cloud revenue up 104% year-on-year (YoY). In line with this, recurring revenue now constitutes 81% of software revenue, representing a 19% increase YoY.

With customers achieving faster time-to-value because of the improved deployment capabilities of IFS Cloud, as well as more partners implementing IFS solutions, the contribution of software revenue now represents 72% of total IFS revenue, up 17% YoY.

The improvements against every leading KPI demonstrate IFS’s continued growth as well as an impressive revenue mix that is delivering consistency and predictability. Combining this with IFS’s differentiated proposition for companies managing asset and service needs, provides a headwind for a strong end of year.

In Q3, IFS also added depth to its offering with the acquisition of Customerville. Customerville is an award-winning platform that elevates feedback and listening across the entire customer journey thanks to its unique design-driven approach. It enables companies to get a better understanding of their customers, address issues and unearth new opportunities so that they can ultimately deliver amazing Moments of Service™.

Testament to IFS’s leadership in Service Management is recognition from Gartner who named IFS a Leader, for the sixth consecutive time, in the Magic Quadrant for Field Service Management. In Q3, IFS also won competitive tenders with its industrial asset and service proposition, adding one of the world’s largest packaging and one of the world’s largest telecoms companies as customers.

Commenting on the results, Darren Roos, CEO of IFS, said: “At heart, IFS is a technology-driven software company and the investments we have – and continue to make – into the IFS Cloud platform and our customer-facing services evidence themselves in these stellar results. The strong growth in software revenue is testament to us attracting new customers, but also in our commitment to our current customers whose ongoing success is of paramount importance to us. I’m proud of the work that our team has done to create market differentiation with our industrial asset and service capabilities, which continues to create positive momentum.”

IFS CFO, Constance Minc, added: “It is hugely impressive for a business of our size to be growing at such a pace, while at the same time building resilience and consistency into our revenue mix. We are continuing to deliver to plan which provides us full confidence in how we will close out the year.”

Summary of the financial highlights from Q3 2021 YTD:

• Software revenue was SEK 3.4bln, an increase of 17% Year on Year
• Recurring revenue was SEK 2.75bln, an increase of 19% Year on Year and representing 81% of software revenue
• Cloud revenue increased 104% Year on Year representing more than 29% of software revenue

* Note: all figures based in Swedish Krona and reported in constant currency.

In line with WorkWave establishing itself as a standalone business at the end of Q2 2021, the performance reported above excludes WorkWave’s contribution to the IFS Group. Performance including WorkWave saw software revenue grow at 24% YTD. The IFS Group is on track to achieve $1bln USD revenue in 2021.

 

26 Oct 21. Sev1Tech Acquires Geocent, Bolstering Mission-Focused Services. Sev1Tech, LLC, a leading provider of IT modernization, cybersecurity, and cloud services to both federal and commercial customers, announced today that it completed the acquisition of Geocent, LLC. Geocent serves the U.S. federal government through its strong reputation as an innovator in DevSecOps and engineering services, supporting critical missions across agencies.

Both Sev1Tech and Geocent are familiar and valued partners to the government agencies and commercial organizations that have, through these shared core values and collaborations, transformed and streamlined to better serve citizens, more effectively compete in the marketplace and improve national security.

“With a mutual, customer-first, employee-centric culture and commitment to meaningful outcomes, this acquisition is a milestone in our growth journey. We’ve strategically aligned our customer bases and we’re incorporating in-demand offerings into our integrated services,” said Bob Lohfeld, Sev1Tech CEO. “Geocent’s leadership in DevSecOps and the scientific space domain dovetails with Sev1Tech’s growing influence in space modernization. Furthermore, this fortifies our common Department of Homeland Security presence. Our combined capabilities will amplify our missions, from the tactical edge to the enterprise to the end user.”

The acquisition strengthens scalability and solutions for meeting today’s emerging demands and the increasing sophistication of government IT needs. The partnership links deep experience serving federal clients and driving digital transformation—a valuable addition for existing and future contract opportunities.

“Together we’ll enhance the design, development and delivery of innovative solutions to support the mission of our federal customers by combining robust technologies, engineering and data integration services,” said Dr. Bobby Savoie, Geocent CEO. “Market-leading applications and development capabilities, cybersecurity, artificial intelligence and machine learning—these all sharpen our competitiveness, unleash new offerings and augment service delivery across our partner ecosystem.”

Sev1Tech backer DFW Capital agrees. “The combination of these management teams and the service synergies created will allow Sev1Tech to deliver even more complex solutions to an incredibly mission-driven customer base. We are proud of this team and our partnership that continues to accelerate Sev1Tech on its growth journey,” noted Doug Gilbert, a partner at DFW Capital. In addition, Enlightenment Capital is an investor in Sev1Tech, alongside DFW Capital.

About Sev1Tech

Sev1Tech provides IT modernization, cloud, cybersecurity, engineering, training and program support services to U.S. government agencies and major commercial organizations. Headquartered in the Washington D.C. metro area, Sev1Tech is a trusted contractor supporting critical missions across the defense, intelligence, homeland security, space, and health markets. Sev1Tech delivers excellence through highly qualified people, CMMI SVC 3, ISO 9001, ISO 20000, ISO 27001 and ISO 27017 certified processes, and cutting-edge technology. To learn more, visit www.sev1tech.com. (Source: BUSINESS WIRE)

 

26 Oct 21. GE lifts 2021 earnings forecast, flags ‘challenging’ operating environment. General Electric Co (GE.N) raised its full-year earnings forecast on Tuesday after a recovery in its jet-engine business helped it report higher-than-expected quarterly profit.

The industrial conglomerate, however, said it faced a “challenging” operating environment because of global supply chain disruptions and uncertainty over whether production tax credits for onshore wind investments will be extended over the long term in U.S. President Joe Biden’s infrastructure bill.

GE, like other manufacturers, is grappling with a labor crunch and shortages of raw materials such as semiconductor chips and resins. It expects the supply constraints to persist through the rest of the year and in 2022, hurting profit in its healthcare business.

“I’m not sure we’re yet at a place where we would say that things are stable,” Chief Executive Larry Culp told investors on an earnings call. “It really is akin to playing a whack-a-mole.”

The company expects inflationary pressure to intensify next year, adversely impacting its onshore wind business due to the rising cost of transportation and commodities like steel.

To mitigate that impact, it is trying to improve productivity, source alternative parts and redesign product configurations.

The uncertainty over production tax credits, meanwhile, is weighing on its onshore wind business. If the incentives are extended, customers may defer investments, and as a result, GE expects its renewable energy unit to burn cash this year.

The Boston-based company expects 2021 adjusted profit in the range of $1.80 to $2.10 per share, compared with $1.20 to $2.00 estimated previously.

GE said it expects revenue growth, margin expansion, and higher free cash flow next year. However, it narrowed free cash flow estimates for 2021 to $3.75bn-$4.75bn from $3.5bn-$5.0bn forecast earlier.

Shares were up 0.7% at $106.01 in morning trading.

Adjusted profit for the third quarter was 57 cents a share. Analysts on average expected 43 cents per share, according to Refinitiv data.

It generated $1.7 billion in free cash flow from industrial operations during the quarter, compared with $514m a year ago. (Source: Reuters)

 

26 Oct 21. Raytheon raises profit forecast on commercial aero demand. Raytheon Technologies Corp (RTX.N) raised its forecast for full-year adjusted profit on Tuesday, as rising commercial air travel boosted demand for the aerospace and defense firm’s engines, spare parts and aftermarket services. But in an interview with CNBC Raytheon’s Chief Executive Greg Hayes warned the U.S. aerospace and defense firm will lose “several thousand” employees after they refused COVID-19 vaccinations. Separately, Hayes, in a post-earnings conference call with analysts, said he expects U.S. President Joe Biden’s vaccine mandate to cause “some disruption” in the supply chain.

Shares fell about 1.5% in early trading.

Recovering demand for air travel with the holiday season on the horizon has helped drive demand for Raytheon’s aircraft cabin interiors and engines as the U.S. government’s decision to open its borders to vaccinated individuals from abroad points to a recovery of the wide-body aerojet aftermarket, Raytheon Chief Financial Officer Neil Mitchill told Reuters in an interview.

While the company faces supply chain challenges among its 13,000 suppliers, Mitchill said “it comes down to some very acute issues” with labor shortages having some impact.

“We’re seeing some shortfalls in electronic components, connectors, things like that. We’re not as exposed like the auto industry is to the chips,” Mitchill said.

The pandemic has crippled many companies’ ability to send and receive the parts and supplies they need to produce a wide range of products, creating shortages, reducing inventories and hammering profits.

Raytheon, whose Pratt and Whitney unit supplies aircraft engines to companies like Boeing Co (BA.N)and Airbus SE (AIR.PA), said it expects 2021 adjusted profit per share to be between $4.10 to $4.20, up from its prior forecast of $3.85 to $4.00 per share.

Hayes told Wall Street analysts that while he welcomed the commercial market rebound, he was “skeptical” that the production rate of Boeing 737s would reach 50 per month, or that Airbus A320s would reach 75 per month. Adding that Raytheon’s “5-year plans do not anticipate getting to that kind of rate by 2024 or 2025.”

The maker of Tomahawk missiles reported that net income rose to $1.39bn, or 93 cents per share, in the third quarter ended Sept. 30 from $264m, or 17 cents per share, a year earlier.

Raytheon’s quarterly revenue rose 9.9% to $16.21bn. (Source: Reuters)

 

26 Oct 21. Raytheon Technologies Reports Third Quarter 2021 Results; Raises 2021 Adjusted EPS Outlook.

Exceeded expectations on adjusted EPS; Repurchased $1.0bn of shares

Raytheon Technologies Corporation (NYSE: RTX) reported third quarter 2021 results.

Third quarter 2021

• Sales of $16.2bn
• GAAP EPS from continuing operations of $0.93, which included $0.33 of acquisition accounting adjustments and net significant and/or non-recurring charges
• Adjusted EPS of $1.26
• Operating cash flow from continuing operations of $1.9bn; Free cash flow of $1.5bn
• Company backlog of $156.1 bn; including defense backlog of $65.0 bn
• Achieved approximately $165 m of incremental RTX gross cost synergies
• Repurchased $1.0 bn of RTX shares

Raytheon Technologies updates its 2021 outlook and now anticipates the following:

Outlook for full year 202

• Sales of ~$64.5bn, from $64.4 – $65.4bn
• Adjusted EPS of $4.10 – $4.20, from $3.85 – $4.00
• Free cash flow of ~$5.0bn, from $4.5 – $5.0bn

“Our performance this quarter clearly demonstrates our ability to capitalize on the increased demand across our commercial aerospace and defense businesses, and our intense focus on cost reduction and operational execution,” said Raytheon Technologies Chairman and Chief Executive Officer Greg Hayes.

“During the quarter, we announced strategic acquisitions that advance our technology focus areas and made significant progress on several key programs, as evidenced by the successful completion of the first flight test of a scramjet-powered Hypersonic Air-breathing Weapon Concept (HAWC) for DARPA and the U.S. Air Force. Our strong performance this year along with the positive trends in our end markets gives us the confidence to again raise our 2021 adjusted EPS outlook.”

Raytheon Technologies reported third quarter sales of $16.2bn. GAAP EPS from continuing operations was $0.93 and included $0.33 of acquisition accounting adjustments and net significant and/or non-recurring charges. This included $0.30 of acquisition accounting adjustments primarily related to intangible amortization, $0.02 related to debt extinguishment and $0.01 of restructuring. Adjusted EPS was $1.26. GAAP and adjusted EPS also included $0.16 of tax benefit from actions taken to optimize the company’s legal entity and operating structure in the quarter.

The company recorded net income from continuing operations in the third quarter of $1.4 bn, which included $496m of acquisition accounting adjustments and net significant and/or nonrecurring charges. Adjusted net income was $1.9bn. Operating cash flow from continuing operations in the third quarter was $1.9bn. Capital expenditures were $433m, resulting in free cash flow of $1.5bn.

Backlog and Bookings

Backlog at the end of the third quarter was $156.1bn, of which $91.1bn was from commercial aerospace and $65.0bn was from defense.

Notable defense bookings during the quarter included:

• $962m of classified bookings at Raytheon Intelligence & Space (RIS)
• $570m for Advanced Medium-Range Air-to-Air Missile (AMRAAM) for the U.S. Air Force, Navy and international customers at Raytheon Missiles & Defense (RMD)
• $543m for two F-135 sustainment contracts at Pratt & Whitney
• $432 m to provide Guidance Enhanced Missiles (GEM-T) for an international customer at RMD
• $358m for Evolved Sea Sparrow Missile (ESSM) for the U.S. Navy and international customers at RMD
• $291m for Stinger missiles for international customers at RMD
• $212m for F100 engines for an international customer at Pratt & Whitney

Segment Results

The company’s reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).

Collins Aerospace had third quarter 2021 adjusted sales of $4,592m, up 7 percent versus the prior year. The increase in sales was driven by a 38 percent increase in commercial aftermarket which more than offset a 3 percent decline in commercial OE and a 5 percent decline in military. Excluding the impact of the prior year Military GPS and Space ISR divestitures, military was down 1 percent in the quarter. The increase in commercial sales was driven primarily by the recovery of commercial air traffic which has resulted in higher flight hours, aircraft fleet utilization and narrowbody OE volume, which was partially offset by lower 787 OE volume.

Collins Aerospace recorded adjusted operating profit of $480m in the quarter, up 558 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume and favorable mix. This was partially offset by the impact of the Military GPS and Space ISR divestitures.

Pratt & Whitney

Pratt & Whitney had third quarter 2021 adjusted sales of $4,725m, up 25 percent versus the prior year. The increase in sales was driven by a 56 percent increase in commercial aftermarket, a 22 percent increase in commercial OE and a 2 percent increase in military. The increase in commercial sales was primarily due to higher shop visits and related spare part sales and commercial engine deliveries principally driven by the recovery in commercial air traffic. The increase in military sales was primarily driven by growth in F-135 sustainment.

Pratt & Whitney recorded adjusted operating profit of $189m in the quarter. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume, that was partially offset by higher commercial OE volume and higher SG&A and E&D expense.

Raytheon Intelligence & Space

RIS had third quarter 2021 adjusted sales of $3,740m, in-line versus the prior year.

RIS recorded adjusted operating profit of $391m, up 12 percent versus the prior year. The increase in adjusted operating profit was primarily driven by productivity across various programs.

RMD had third quarter 2021 adjusted sales of $3,902 m, up 7 percent versus prior year. The increase in sales was primarily driven by growth on an international National Advanced Surface to Air Missile System (NASAMS) program and on the Advanced Medium-Range Air-to-Air Missile (AMRAAM) program.

RMD recorded adjusted operating profit of $490m, up 14 percent versus the prior year. The increase in adjusted operating profit was driven by higher sales volume.

Raytheon Technologies updates its 2021 outlook and now anticipates the following:

Outlook for full year 2021

• Sales of ~$64.5bn, from $64.4 – $65.4bn
• Adjusted EPS of $4.10 – $4.20, from $3.85 – $4.00
• Free cash flow of ~$5.0bn, from $4.5 – $5.0bn

 

26 Oct 21. Why Lockheed Martin Stock Just Crashed by 12%.

Lockheed Martin did beat expectations on earnings — but they still fell by 65%.

What happened

Shares of defense industry giant Lockheed Martin (NYSE:LMT) tanked Tuesday morning, trading down by 12.1% as of 12:32 p.m. EDT even though the company reported a sizable earnings beat.

It wasn’t the bottom line that investors cared about, you see. It was the revenues.

So what

Lockheed Martin’s earnings plunged by 65% year over year to $2.21 per share in the third quarter — a result that easily surpassed analysts’ consensus projection for earnings of $1.97 per share. The decline was due to the company taking a $1.7bn noncash pension settlement charge, which depressed its net income by $4.72 per share. Without that charge, it would have earned nearly $7 a share and grown its earnings nearly 11% when calculated according to generally accepted accounting principles (GAAP).

But again, earnings weren’t the issue here. The real problem was that analysts had forecast that Lockheed would report $17.1 billion in sales for the quarter — but it only had $16 billion.

Sales declined in all four of Lockheed’s main business segments, with space revenues falling by 5%, for example, and missiles and fire control revenues declining by 6%. On the plus side, operating profits grew in all four segments.

Now what

Lockheed management poured salt into the wound when it warned of further sales decelerations ahead. The company’s latest guidance is for full-year revenue of only $67bn. That would still amount to growth of 2.4% from 2020. But its earlier guidance range was for revenues of $67.3bn to $68.7bn, so this is slower growth than investors had hoped to see.

Meanwhile, earnings, now hindered by the pension charge, are expected to fall by 8% from last year to $22.45 per share. (Admittedly, that’s better than the previous projection, when the top of the range was set at $22.25 per share.) And cash from operations will fall short of management’s hoped-for $8.6bn, coming in closer to $8.3bn.

If there’s any good news to report from Lockheed’s report, it’s this: Management says that with revenue growth drying up, “we are adjusting our capital allocation strategy with two major objectives,” one of which is that “over the short-, mid- and long-term, we will strive to maximize cash flow per share dynamically,” including by buying back shares.

Lucky for Lockheed, those shares just got a whole lot cheaper to repurchase. (Source: News Now/Motley Fool)

 

26 Oct 21. Lockheed tumbles 12% as supply chain woes hammer forecast.

Lockheed Martin Corp (LMT.N) dramatically lowered its sales expectations for this year and next on Tuesday as the COVID-19 pandemic severely hobbled the top U.S. defense contractor’s supply chain, sending its shares down 12%.

The pandemic has crippled many companies’ ability to send and receive the parts and supplies they need to produce a wide range of products, creating shortages, reducing inventories and hammering profits.

Lockheed’s chief financial officer said the problem worsened for them over the last two months, as the maker of the F-35 fighter jet lowered its 2021 revenue expectations by 2.5% to $67bn and said next year’s revenue could fall to $66bn.

Lockheed’s poor outlook, just 66 days from year-end, came after it reassessed its five-year business plan “given recent external and programmatic events,” Chief Executive Jim Taiclet said in the earnings report that dashed hopes the United States’ largest arms maker could muscle its way through the pandemic.

Shares of defense stocks fell after the report, with the Dow Jones U.S. Defense index down nearly 6% at midday.

The defense company’s CFO said on a call with analysts that its suppliers “are still dealing with the financial stress caused by the global pandemic.”

A company executive noted suppliers that serve the commercial market as well as the defense market were struggling the most. The combination of fixed costs and falling revenue – the aviation industry in particular has struggled during COVID-19 with the huge drop in travel – hurt the suppliers that serve both markets.

“Management laid out a meaningfully lower growth profile than previously indicated, and growth is a key metric in defense right now,” Seth Seifman, a JP Morgan analyst said in a research note, adding, “the potential silver lining the market may ultimately begin looking for here is that today’s hit to the outlook is drastic enough to set up potential beats going forward.”

On the call with analysts, Taiclet said the company’s sales would go up again in 2023 and increase steadily through 2026.

He also said Lockheed now sees its planned purchase of rocket maker Aerojet Rocketdyne Holdings Inc (AJRD.N) closing in the first quarter of 2022, a bit later than previously expected.

Support for the defense industry could be on the way as congressional committees are set to start their conference on the Biden administration’s 2022 defense policy bill that outlines increased spending.

Lockheed raised its earnings-per-share guidance for 2021 to $22.45, more than analyst estimates of $22.19, as operating profits rose 6.6% versus the same period last year.

The third quarter which ended on Sept. 26 showed sales at Lockheed’s largest unit, aeronautics – which makes the F-35 fighter jet – down 2% from a year earlier, when the pandemic locked down many parts of the defense industry’s supply chain.

Through Sept. 26, the unit made 90 F-35 deliveries, with 36 occurring in the third quarter. Lockheed aims to deliver 133 to 139 of the stealthy jets this year.

In 2022, Lockheed plans to deliver 151 to 153 of the fighter aircraft. read more

Lockheed’s third-quarter revenue was $16 billion, 6.6% below analyst revenue estimate of $17.1bn, Refinitiv data showed. (Source: Reuters)

 

26 Oct 21. Lockheed Martin Reports Third Quarter 2021 Financial Results,

– Net sales of $16.0bn

– Net earnings from continuing operations of $614m, or $2.21 per share, after noncash pension settlement charge of $1.7bn ($1.3bn, or $4.72 per share, after-tax)

– Generated cash from operations of $1.9bn

– Increased share repurchase authority by $5.0bn and quarterly dividend rate to $2.80 per share

– Revises 2021 financial outlook and provides 2022 financial trends

Lockheed Martin Corporation [NYSE: LMT] today reported third quarter 2021 net sales of $16.0bn, compared to $16.5bn in the third quarter of 2020. Net earnings from continuing operations in the third quarter of 2021 were $614m, or $2.21 per share, compared to $1.8bn, or $6.25 per share, in the third quarter of 2020. Cash from operations was $1.9bn in the third quarter of 2021 and 2020.

“During the third quarter, the men and women of Lockheed Martin continued to deliver essential products and capabilities for domestic and allied national defense, and for pioneering civil space endeavors,” said Lockheed Martin Chairman, President and CEO James Taiclet. “At the same time, we continued to advance the state of the art and innovation across key technologies, including Future Vertical Lift, Integrated Air and Missile Defense, hypersonic weapon systems, next generation satellites, and many others.

“In addition, we have recently undertaken a reassessment of our five-year business plan given recent external and programmatic events. Our conclusions, which are reflected in our updated 2021 guidance and subsequent trend information, reflect continuing strong cash flow generation, but a slight reduction in revenue in 2022 and roughly flat to low-single-digit growth rates in both revenue and segment operating profit over the next few years, with increasing growth opportunities in the years that follow.

“Consequently, we are adjusting our capital allocation strategy with two major objectives. First, to expand further our robust reinvestment in the company to serve our customers’ evolving needs through capital projects and independent research and development for mid- to long-term enhanced growth performance. Simultaneously, we plan to reward shareholders with continued dividend growth and meaningful increases to the scale and rate of our share repurchase program. Over the short-, mid- and long-term, we will strive to maximize cash flow per share dynamically, based on revenue growth opportunities, inorganic investments, and share repurchases to take full advantage of our significant cash flow generation and strong balance sheet.”

Third quarter 2021 net earnings include a noncash pension settlement charge of $1.7bn ($1.3bn, or $4.72 per share, after-tax) related to the purchase of group annuity contracts to transfer $4.9bn of gross pension obligations and related plan assets to an insurance company, and unrealized gains of $98m ($74m, or $0.27 per share, after-tax) due to increases in the fair value of investments held in the Lockheed Martin Ventures Fund.

2021 Financial Outlook

The following table and other sections of this news release contain forward-looking statements, which are based on the company’s current expectations. Actual results may differ materially from those projected. It is the company’s practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, ventures, pension risk transfer transactions, changes in law, or new accounting standards until such items have been consummated, enacted or adopted. For additional factors that may impact the company’s actual results, refer to the “Forward-Looking Statements” section in this news release.

2022 Financial Trends

The company expects 2022 net sales to decline from expected 2021 levels to approximately $66bn and 2022 total business segment operating margin to be approximately 11.0%. Cash from operations in 2022 is expected to be greater than or equal to $8.4bn, which excludes a potential decrease in 2022 cash from operations of up to $2.0bn if the provisions in the Tax Cuts and Jobs Act of 2017 that eliminate the option to immediately deduct research and development expenditures in the period incurred and requires companies to amortize such expenditures over five years is not modified or repealed by Congress before it takes effect on Jan. 1, 2022. Although the company continues to have ongoing discussions with members of Congress, both on its own and with other industries through coalitions, it has no assurance that these provisions will be modified or repealed.

The preliminary outlook for 2022 also assumes continued support and funding of our programs, a statutory tax rate of 21%, known impacts of COVID-19, and the continued acceleration of supplier payments at current levels. No additional impacts to the company’s operations, supply chain, or financial results as a result of continued COVID-19 disruption or implementation of the vaccine executive order have been incorporated into the company’s preliminary outlook for 2022 as the company cannot predict how the pandemic will evolve or what impact it will continue to have. The ultimate impacts of COVID-19 on the company’s financial results beyond the time of this news release remain uncertain and there can be no assurance that the company’s underlying assumptions are correct. Additionally, the company’s preliminary outlook for 2022 assumes no significant reduction in customer budgets, changes in funding priorities and that the U.S. Government will not operate under a continuing resolution for an extended period in which new contract and program starts are restricted. It also does not incorporate the pending acquisition of Aerojet Rocketdyne Holdings, Inc. Changes in circumstances may require the company to revise its assumptions, which could materially change its current estimate of 2022 net sales, business segment operating margin, and cash flows.

The company currently expects a total net FAS/CAS pension benefit of approximately $2.2bn in 2022, which includes total expected U.S. Government cost accounting standards (CAS) pension cost of approximately $1.8bn and total expected financial accounting standards (FAS) pension income of approximately $400m. The estimated FAS pension income amount assumes a 2.75% discount rate (the same rate used for the remeasurement of the defined benefit pension plans impacted by the pension risk transfer transaction in the third quarter of 2021), a 10.0% return on plan assets in 2021, and a 6.5% expected long-term rate of return on plan assets in future years, among other assumptions. A change of plus or minus 25 basis points to the assumed discount rate, with all other assumptions held constant, would result in an incremental increase or decrease of approximately $10m to the estimated net 2022 FAS/CAS pension benefit. A change of plus or minus 100 basis points to the return on plan assets in 2021 only, with all other assumptions held constant, would result in an incremental increase or decrease of approximately $15m to the estimated net 2022 FAS/CAS pension benefit. The company does not expect to make any contributions to its qualified defined benefit pension plans in 2022. The company will complete the annual remeasurement of its postretirement benefit plans and update its estimated 2022 FAS/CAS pension adjustment on Dec. 31, 2021. The final assumptions, including the discount rate and actual investment return for 2021, may differ materially from those discussed above.

Cash Deployment Activities

The company’s cash deployment activities in the third quarter of 2021, included the following:

• accelerating $1.5bn of payments to suppliers in the third quarter of 2021 that were due in the fourth quarter of 2021; compared to accelerating $1.8bn of payments to suppliers in the third quarter 2020 that were due in the fourth quarter of 2020;
• making capital expenditures of $316m, compared to $408m in the third quarter of 2020;
• paying cash dividends of $718m, compared to $672m in the third quarter of 2020;
• repurchasing 1.4m shares for $500m pursuant to an accelerated share repurchase agreement (ASR); compared to repurchasing 0.2m shares for $85 mn in the third quarter of 2020, which includes $26m paid for shares repurchased in the second quarter of 2020; and
• making a scheduled repayment of $500m of long-term debt in the third quarter of 2021; compared to no proceeds or repayments of long-term debt in the third quarter of 2020.

As previously announced on Sept. 23, 2021, the company increased its quarterly dividend by $0.20 per share, to $2.80 per share, beginning with the dividend payment in the fourth quarter of 2021. Additionally, the company repurchased $2.0bn in common stock during the first nine months of 2021 and increased its share repurchase authority by $5.0bn with $6.0bn in total remaining authorization for future repurchases of common stock under the program as of Sept. 26, 2021.

Segment Results

The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space.

Net sales and operating profit of the company’s business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation. Operating profit of the company’s business segments includes the company’s share of earnings or losses from equity method investees as the operating activities of the investees are closely aligned with the operations of its business segments.

Operating profit of the company’s business segments also excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, and other miscellaneous corporate activities.

The company recovers CAS pension cost through the pricing of its products and services on U.S. Government contracts and, therefore, recognizes CAS pension cost in each of its business segments’ net sales and cost of sales. The company’s consolidated financial statements must present pension and other postretirement benefit plan income calculated in accordance with FAS requirements under U.S. generally accepted accounting principles. The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension (expense) income and total CAS pension cost. The non-service FAS pension (expense) income component is included in other non-service FAS pension (expense) income in our consolidated statements of earnings. The net FAS/CAS pension adjustment increases or decreases CAS pension cost to equal total FAS pension income (both service and non-service).

Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. In addition, comparability of the company’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the company’s contracts for which it recognizes revenue over time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes.

Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets.

The company’s consolidated net adjustments not related to volume, including net profit booking rate adjustments, represented approximately 31% of total segment operating profit in the third quarter of 2021, compared to 24% in the third quarter of 2020.

Aeronautics

Aeronautics’ net sales during the third quarter of 2021 decreased $112m, or 2%, compared to the same period in 2020. The decrease was primarily attributable to lower net sales of approximately $220m for the F-35 program due to lower volume on development contracts and lower volume and risk retirements on production contracts. This decrease was partially offset by an increase in sales of about $35m for the F-16 program due to higher production volume that was partially offset by lower sustainment volume; and approximately $30m for classified development contracts due to higher risk retirements.

Aeronautics’ operating profit during the third quarter of 2021 increased $9m, or 1%, compared to the same period in 2020. The increase was primarily attributable to higher operating profit of approximately $45m for classified development contracts due to higher risk retirements; about $25m for the C-130 program primarily due to higher risk retirements on sustainment activities; and about $15m for the F-16 program due to higher risk retirements on sustainment contracts and higher production volume. These increases were partially offset by lower operating profit of approximately $75m for the F-35 program due to lower risk retirements and volume on production and development contracts that were partially offset by higher risk retirements on sustainment contracts. Adjustments not related to volume, including net profit booking rate adjustments, were $15m higher in the third quarter of 2021 compared to the same period in 2020.

Missiles and Fire Control

MFC’s net sales during the third quarter of 2021 decreased $190m, or 6%, compared to the same period in 2020. The decrease was primarily attributable to lower net sales of approximately $130m for tactical and strike missile programs due to lower volume (Guided Multiple Launch Rocket Systems (GMLRS) and Hellfire); and a net decrease of about $50m for sensors and global sustainment programs due to lower volume (primarily Sniper Advanced Targeting Pod (SNIPER®) and Infrared Search and Track (IRST)) that was partially offset by higher risk retirements due to close out activities related to the Warrior Capability Sustainment Program (Warrior) that was terminated by the customer in March 2021.

MFC’s operating profit during the third quarter of 2021 increased $8m, or 2%, compared to the same period in 2020. Operating profit increased approximately $20m on integrated air and missile defense programs due to higher risk retirements (primarily PAC-3), and about $15m for sensors and global sustainment programs primarily due to the reversal of a portion of previously recorded losses on the Warrior program in the third quarter of 2021 that are no longer expected to be incurred as a result of the program being terminated that was partially offset by lower volume (primarily IRST and SNIPER). These increases were offset by charges of approximately $25m for performance issues on an energy program. Operating profit for tactical and strike missile programs was comparable as lower volume (primarily GMLRS and Hellfire) was offset by higher risk retirements (primarily Hellfire). Adjustments not related to volume, including net profit booking rate adjustments, were approximately $70m higher in the third quarter of 2021 compared to the same period in 2020.

Rotary and Mission Systems

RMS’ net sales during the third quarter of 2021 were comparable with the same period in 2020. Net sales decreased by approximately $50m for integrated warfare systems and sensors (IWSS) programs due to lower volume on radar surveillance systems (primarily TPQ-53) and the Littoral Combat Ship (LCS) program; about $45m for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to lower volume; and about $30m for various training and logistics solutions programs primarily due to lower risk retirements and volume. These decreases were offset by higher net sales of approximately $120m for Sikorsky helicopter programs due to higher risk retirements (Black Hawk, Seahawk and CH-53-K) and higher production volume (Combat Rescue Helicopter (CRH) and Seahawk).

RMS’ operating profit during the third quarter of 2021 increased $55m, or 14%, compared to the same period in 2020. The increase was primarily attributable to higher operating profit of approximately $75 mn for Sikorsky helicopter programs due to higher risk retirements (Black Hawk, Seahawk and CH-53K) and higher production volume (CRH). This increase was partially offset by a decrease of approximately $20m for training and logistics solutions programs primarily due to lower risk retirements and volume; and about $15m for IWSS programs due to charges that were $30m higher on a ground-based radar program partially offset by higher risk retirements on Vertical Launching System (VLS) programs. Operating profit for C6ISR programs was comparable as lower volume was offset by lower charges on certain programs (primarily undersea combat systems programs). Adjustments not related to volume, including net profit booking rate adjustments, were $50m higher in the third quarter of 2021 compared to the same period in 2020.

Space

Space’s net sales during the third quarter of 2021 decreased $147m, or 5%, compared to the same period in 2020. The decrease was primarily attributable to lower net sales of approximately $340m due to the renationalization of the Atomic Weapons Establishment (AWE) program, which is no longer included in the company’s financial results beginning in the third quarter of 2021. This decrease was partially offset by higher sales of about $140 mn for strategic and missile defense programs due to higher volume (hypersonic development, Fleet Ballistic Missile (FBM) and Next Generation Interceptor (NGI) programs); and about $70 mn for national security space programs due to higher risk retirements and volume (primarily Next Generation Overhead Persistent Infrared (Next Gen OPIR)).

Space’s operating profit during the third quarter of 2021 increased $16 mn, or 6%, compared to the same period in 2020. The increase was primarily attributable to higher operating profit of approximately $30 mn for strategic and missile defense programs due to higher risk retirements (primarily FBM programs) and higher volume (primarily hypersonic development). This increase was partially offset by a decrease of approximately $10 mn due to the renationalization of the AWE program. Operating profit for national security space programs was comparable as higher volume and risk retirements (primarily Next Gen OPIR) were offset by a charge of $45 mn on a commercial ground solutions program. Adjustments not related to volume, including net profit booking rate adjustments, were $30 mn higher in the third quarter of 2021 compared to the same period in 2020.

Total equity earnings (primarily United Launch Alliance (ULA)) recognized in Space’s operating profit were not significant during the third quarters of 2021 and 2020.

 

26 Oct 21. Amentum to acquire PAE.  Amentum plans to bolster its intelligence and technology portfolio by acquiring fellow US government services provider PAE for USD1.9bn in cash, the two companies announced on 25 October.

The combined business will have more than USD9 billion in annual revenue, making it one of the largest providers of services to US and allied governments, Amentum said. It will have “capabilities spanning synthetic training, sensor-based technologies, intelligence, cyber and IT, spectrum and electronic warfare, space operations, environmental solutions, asset management, and mission support”, Amentum said.

While the acquisition agreement allows PAE to solicit alternative offers through 29 November, PAE’s board of directors unanimously endorsed Amentum’s proposal, which calls for PAE shareholders to receive a 70% premium on their company’s 22 October closing stock price.

The proposed combination “will benefit our customers and create increased opportunities for our employees while maximising shareholder value”, said Charles Peiffer, PAE’s interim CEO.

Amentum said it expects to complete the deal by the end of the first quarter of 2021 after receiving the approval of regulators and PAE shareholders.

Both companies have previously been active on the acquisition front. Amentum boosted its annual revenue to more than USD6 billion by acquiring DynCorp International for an undisclosed sum in November 2020. PAE bought intelligence analysis providers CENTRA Technology and Metis Solutions for USD208 million and USD92 million, respectively, last year.

Amentum and PAE are both based in the Washington, DC, area. Amentum has more than 34,000 employees, and is owned by US private equity firms American Securities and Lindsay Goldberg. PAE has about 20,000 employees and became a public company in early 2020. (Source: Janes)

 

26 Oct 21. Thales reports its order intake and sales at 30 September 2021.

• Order intake: €10.7bn, up 28% on an organic basis1 (total change: +27%)
• Sales: €11.2bn, up 6.2% on an organic basis (total change: +5.7%)
• Confirmation of all 2021 financial objectives

Thales (Euronext Paris: HO) reported today its order intake and sales for the period ending 30 September 2021.

As announced on 4th August 2021, following the launch of exclusive negotiations with Hitachi Rail for the disposal of the “Ground Transportation Systems” business, the Transport operating segment is now treated as discontinued operations (IFRS 5 standard). All values that appear in this press release therefore exclude the Transport business, both in 2020 and in 2021.

“Thanks to its teams mobilising all over the world, Thales has had very good commercial momentum over the first nine months of 2021, with order intake up by more than 25% and sales up by 6%.

We confirm all our full year financial targets. The slight decrease in sales in the third quarter is due to a high basis of comparison: Q3 2020 benefited from the rebound of activity following the end of the first Covid-19-related lockdowns in Q2 2020.

In parallel, we are continuing to implement the proposed sale of our rail transport business. This important strategic move will enable us to focus on the development of three major long-term growth businesses in which Thales holds leadership positions: Aerospace, Defence & Security, and Digital Identity & Security.”

Patrice Caine, Chairman and Chief Executive Officer

Order intake

In the first nine months of 2021, order intake stood at €10,656m, up 28% organically compared to the first nine months of 2020 (up 27% in total change). Over this period, Thales booked nine large orders with a unit value of over €100m, representing a total amount of €2,024m:

• 4 large orders booked in Q1 2021:

o 2 contracts related to the supply of Rafale combat aircraft to Greece and France

o the new generation of the French-Italian SAMP/T NG ground-based air defence system

o SATRIA, a telecommunications satellite aimed at reducing the digital divide in Indonesia

• 3 large orders booked in Q2 2021:

o the second generation of Europe’s Galileo navigation satellites

o two secure telecommunications satellites for Italy (SICRAL 3)

o the modernisation and support of three tactical control radars in Canada

• 2 large orders booked in Q3 2021:

o a contract for the security facility and mission segment of Galileo

o a contract to support the French air defence system

At €8,633m, orders with a unit value of less than €100m posted growth of 15% over the first nine months of 2020, with a sharp increase of 39% in orders with a unit value of between €10m and €100m. Orders of less than €10m were up 5% over nine months; despite the ongoing effects of the health crisis on the civil aeronautics and biometrics markets, they grew 9% in the third quarter.

From a geographical standpoint6, order intake in emerging markets stood at €1,988m, representing an organic growth of 4%. At €8,669m, order intake in mature markets recorded organic growth of 35%, driven particularly by five large military contracts in Europe and North America and by three large space contracts in Europe.

Order intake in the Aerospace segment stood at €3,676m versus €2,268m over the first nine months of 2020 (+63% at constant scope and currency). This strong growth was driven by the commercial successes of Thales Alenia Space since the beginning of the year, with an additional large contract in the third quarter, as well as a gradual recovery in the civil aeronautics aftermarket.

At €4,826m compared with €3,853m over the first nine months of 2020, order intake in the Defence & Security segment rose by 24% at constant scope and currency.  This solid performance was due to both the booking of five contracts of over €100m since the beginning of the year and to easy comps in 2020 (impacted by the health crisis).

At €2,105 m, order intake in the Digital Identity & Security segment was as usual in line with sales, with most of the businesses in this segment operating over short cycles.

Sales

Sales over the first nine months of 2021 stood at €11,222m, compared to €10,613m over the same period in 2020, an increase of 6.2% at constant scope and currency, despite civil aeronautics and biometrics businesses still being affected by travel restrictions.

The organic decline by 1.4% in the third quarter essentially reflects the rebound during the third quarter last year, at the end of the lockdown phase, which heavily impacted operations in certain countries in the second quarter of 2020, during the peak of the health crisis.

From a geographical7 standpoint, the increase in sales was driven by mature markets (+7.5% on an organic basis), primarily thanks to France and the major contracts that entered the order book in the last twelve months, both in the defence and in the space domains, despite the impact of the decrease in aeronautics. Emerging markets grew +2.5% on an organic basis over the period, notably supported by a 5% recovery in Asia.

Sales in the Aerospace segment amounted to €3,108m, up 8.1% over the first nine months of 2020 at constant scope and currency. The segment has benefitted from the solid momentum of the space businesses since the beginning of 2021. As expected, civil aeronautics is seeing only a gradual improvement at this stage.

Sales in the Defence & Security segment reached €5,948m, up 7.9% compared with the first nine months of 2020 at constant scope and currency, underlining the solid momentum of the Group’s solutions. The organic decline by 5.3% in the third quarter essentially reflects the strong rebound in the business during the summer of 2020, at the end of the lockdown period that severely disrupted operations in some countries. The outlook for this segment is unchanged, driven in particular by a record order book, up 13% over one year.

At €2,105 m, sales in the Digital Identity & Security segment were down 1.3% at constant scope and currency. This decrease reflects the impact of the health crisis on passport demand, as well as a high basis of comparison in EMV payment cards, which recorded solid momentum in the first half of 2020. In the third quarter, sales showed slight organic growth due to the start of a recovery in biometrics and the continued steady momentum in cybersecurity. Q3 sales were however affected by delivery delays due to the semiconductor shortage.

Outlook

The public health and macro-economic context remains highly uncertain in the short term and could affect the pace of air traffic recovery and the investment plans of our customers.

The social processes required within the framework of the proposed disposal of the Transport business are progressing as planned and should enable the signing of a definitive agreement in the first quarter of 2022.

Consequently, assuming an economic and public health situation that does not experience any new major disruptions, and no further deterioration of global semiconductor supply chains, the Group confirms its full year financial outlook as it was updated on 4th August of this year in order to integrate the treatment of Transport as discontinued operations:

• As in 2019 and 2020, a book-to-bill ratio above 1;
• Sales between €15.8 et €16.3bn8,
• An EBIT margin between 9.8% and 10.3%, an increase of 180 to 230 basis points over 2020.

This press release contains forward-looking statements. Although Thales believes that these declarations are based on reasonable assumptions, actual results may differ significantly from the forward-looking statements due to various risks and uncertainties, as described in the Company’s Universal Registration Document, which has been filed with the French financial markets authority (Autorité des marchés financiers – AMF).

1 In this press release, “organic” means “at constant scope and currency”.

2 Mature markets: Europe, North America, Australia, New Zealand. Emerging markets: all other countries.

3 Mature markets: Europe, North America, Australia, New Zealand. Emerging markets: all other countries.

4 Mature markets: Europe, North America, Australia, New Zealand. Emerging markets: all other countries.

5 Mature markets: Europe, North America, Australia, New Zealand. Emerging markets: all other countries.

8 Based on the August 2021 scope and exchange rates.

 

25 Oct 21. AM General’s interest in acquisitions grows. AM General plans to put greater emphasis on buying or partnering with other companies to help fuel its growth, according to the new chief executive officer (CEO) of the US ground vehicle manufacturer.

US private equity firm KPS Capital Partners, which acquired AM General a year ago, has a dedicated fund to support acquisitions and joint ventures by the companies it owns, said Jim Cannon, who became AM General’s CEO on 20 September. AM General is exploring how to tap into that fund.

“The sky’s the limit there,” Cannon told Janes on 21 October.

AM General avoided acquisitions in the past, with a notable exception being its purchase of a minority stake in US artillery technology developer Mandus Group in 2018. The US Army is testing recoil-dampening technology that AM General and Mandus integrated on to a Humvee to allow the light military truck to carry a howitzer on its back instead of having to tow it.

Cannon brings plenty of acquisition experience to AM General, having overseen the purchase of several unmanned aerial and ground vehicle companies while he was CEO of US sensor manufacturer FLIR Systems for four years.

“While I was at FLIR, we deployed USD800 million to build out one of the largest unmanned platforms in the marketplace,” Cannon said.

FLIR’s executive officers, including Cannon, departed when the company was acquired by US industrial conglomerate Teledyne Technologies in May.

Acquisitions are one of several priorities for Cannon at AM General. He also wants his new employer to improve its main product, the Humvee; develop new products; and compete aggressively in new and existing markets. (Source: Janes)

 

25 Oct 21. Orolia Signs an Agreement to Acquire Seven Solutions and Advances Its Positioning, Navigation and Timing Products and Technology.

Merger to Deliver High-End Performance and Ultra-Accurate Time and Frequency Products for Commercial, Critical Infrastructure, and Military Markets Worldwide.

Orolia, the world leader in Resilient Positioning, Navigation and Timing (PNT) solutions, announced today that it has entered into a definitive agreement to acquire Seven Solutions, a global innovator in White Rabbit sub-nanosecond time transfer and synchronization technology. This transaction is subject to customary closing conditions and approvals required by the Spanish government and is expected to close before the end of the year.

The merger with the tech company based in Granada, Spain will enhance Orolia’s portfolio for defense, aerospace, data centers, telecom, financial services, smart grids, and other critical infrastructure industries and will enable the next generation applications dependent on ultra-precise, resilient timing and frequency technology.

“Orolia and Seven Solutions under one umbrella will combine our world-leading technologies to draw a new frontier in network timing to sub-nanosecond levels, delivering the most robust and accurate Resilient PNT solutions for our customers,” said Orolia CEO Jean-Yves Courtois. “Seven Solutions’ long history of delivering cutting-edge time distribution solutions to sectors like telecommunications, smart-grid, aerospace, defense and scientific facilities aligns perfectly with Orolia’s DNA.   It will add to the list of industry-first capabilities that Orolia regularly brings to market to unlock new possibilities for our customers, including to further protect their critical applications against threats, disruption, manipulation of PNT services, such as GPS/GNSS jamming, spoofing and outages.”

Orolia and Seven Solutions will integrate global sales, marketing, product development and operations.  Orolia presents an unparalleled full-scale and modular approach to Resilient PNT, which includes atomic clocks with a combination of GNSS signals protected with Interference Detection and Mitigation (IDM) technology, together with Low Earth Orbit (LEO) secure alternative signals. The addition of Seven Solutions products will deliver terrestrial sub-nanosecond time distribution from distant and potentially redundant locations.

“We believe the union of our companies will produce the future of time transfer and frequency distribution solutions in terms of accuracy, reliability and interoperability,” said Rafael Rodriguez, chief technology officer and co-founder of Seven Solutions. “Finance, 5G telecommunications, datacenters and hyperscalers have new and upgraded functionalities requiring ultra-accurate time distribution accuracy. To maximize interoperability, our solution for time transfer is based on the White Rabbit concept that has been pushed over the last decade to become the basis of the standard High Accuracy time transfer profile (within the recent release of IEEE 1588 of precision time protocol).”

Orolia and Seven Solutions are members of the Open PNT Industry Alliance. The international organization focuses on market concepts that strengthen economic and national security by supporting government efforts to implement Resilient PNT capabilities for critical infrastructure.

About Orolia

Orolia is the world leader in Resilient Positioning, Navigation and Timing (R-PNT) solutions that improve the reliability, performance, and safety of critical, remote, or high-risk operations, even in GNSS-denied environments. Orolia provides virtually fail-safe GNSS and PNT solutions for military and commercial applications worldwide. www.orolia.com

 

25 Oct 21. ABL Space raises $200m of fresh capital, increases valuation to $2.4bn. ABL Space Systems has closed a $200m expansion of its Series B investment round, bringing the company’s valuation to $2.4bn. The round was led by and comprised of ABL’s existing investor syndicate. ABL has now raised a total of $420m since founding. ABL is serving a large manifest of active contracts with fourteen distinct customers across the commercial, defense, intelligence, and science sectors totaling over 75 launches, not including non-binding memoranda or letters of interest. The funding will be used to scale production of the RS1 launch vehicle and to conduct research and development of future systems.

About ABL Space Systems

Founded in 2017, ABL develops low-cost launch vehicles and launch systems for the small satellite industry. ABL is headquartered in El Segundo, California, U.S. To learn more, visit www.ablspacesystems.com.  (Source: PR Newswire)

 

25 Oct 21. Honeywell Delivers 9% Sales Growth And Expands Operating Margin By 180 Basis Points.

– Earnings Per Share of $1.80, Adjusted Earnings Per Share(1) of $2.02, at High End of Guidance

– Organic Sales up 8%; Second Straight Quarter of Sales Growth in All Four Segments

– Operating Margin up 180 Basis Points to 18.6%; Segment Margin up 130 Basis Points to 21.2%

– Deployed $1.5bn in Capital to Share Repurchases, Dividends, Capital Expenditures, and Acquisitions

– Orders up High Single Digits, up Double Digits Ex-COVID Mask Demand; Backlog up 7% to $27.5bn

Honeywell (NASDAQ: HON) today announced outstanding results for the third quarter that met or exceeded the company’s guidance.

“The third quarter was another strong one for Honeywell, with sales growth in all four segments, significant margin expansion, and exceptional execution even as we faced tough challenges in the supply chain environment,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Organic sales grew 8%, led by 38% growth in Aerospace commercial aftermarket, 21% growth in Safety and Productivity Solutions, and 29% growth in UOP and 14% growth in advanced materials within Performance Materials and Technologies. Our focus on operational and commercial excellence enabled us to expand segment margin by 130 basis points to 21.2%, exceeding the high end of our guidance range by 60 basis points. As a result, we delivered adjusted earnings per share1 of $2.02, up 29% year over year, achieving the high end of our third-quarter guidance range. Our cash performance was strong, and we remain on track to meet our cash flow commitments for the year. We continued to execute on our capital deployment strategy, repurchasing $0.7 bn in shares, announcing our 12th dividend increase in the past 11 years, and completing the acquisition of Performix Inc. to expand our portfolio of automation solutions for the life sciences industry.”

Adamczyk continued, “Our disciplined approach to productivity and pricing helped deliver a strong third quarter despite an uncertain global environment marked by supply chain constraints, increasing raw material inflation, and labor market challenges. We continue to focus on mitigating these challenges in the fourth quarter, while capitalizing on near-term growth opportunities across our portfolio.”

Honeywell updated its full-year guidance to reflect the persistent effects of the macro-challenged environment as well as the third-quarter results. Full-year sales are now expected to be in the range of $34.2bn to $34.6bn with organic sales growth in the range of 4% to 5% due to supply chain constraints. Segment margin is expected to be in the range of 20.9% to 21.1%. Adjusted earnings per share2 is expected to be $8.00 to $8.10. Operating cash flow is still expected to be in the range of $5.9 bn to $6.2 bn and free cash flow is still expected to be in the range of $5.3bn to $5.6bn.

Third-Quarter Performance

Honeywell sales for the third quarter were up 9% on a reported basis and up 8% on an organic basis.

Aerospace sales for the third quarter were up 2% on an organic basis driven by an ongoing recovery in commercial aftermarket demand as flight hours continued to increase as well as by strong growth in business and general aviation original equipment, partially offset by lower defense volumes, which were impacted by supply chain constraints. Commercial aftermarket sales were up 38% year over year and air transport aftermarket sales were up double digits sequentially from the second quarter, demonstrating momentum in the aftermarket recovery. Segment margin expanded 390 basis points to 27.1% driven by commercial excellence, favorable sales mix, and productivity net of inflation.

Honeywell Building Technologies sales for the third quarter were up 3% on an organic basis driven by strength across the building products portfolio and continued growth in building solutions services. Orders were up double digits year over year, driven by strong demand for building projects and products. The services backlog was up over 35% driven by strong global bookings, positioning the business for continued growth. Segment margin expanded 190 basis points to 23.5% driven by commercial excellence and productivity, partially offset by inflation.

Performance Materials and Technologies sales for the third quarter were up 9% on an organic basis driven by demand for process solutions services and thermal solutions, petrochemical catalyst shipments and equipment volumes in UOP, and continued double-digit growth in advanced materials driven by strong demand across the portfolio. Robust demand for services, automation projects, gas processing, and advanced materials drove double-digit orders growth year over year for the second consecutive quarter. Segment margin expanded 260 basis points to 22.2% driven by commercial excellence and productivity, partially offset by inflation.

Safety and Productivity Solutions sales for the third quarter were up 21% on an organic basis driven by another quarter of double-digit growth in the warehouse and workflow solutions, productivity solutions and services, and gas analysis businesses, partially offset by lower personal protective equipment volumes. Orders were up double digits year over year driven by over 50% orders growth in warehouse and workflow solutions, productivity solutions and services, and advanced sensing, which should drive continued growth. Segment margin contracted 70 basis points to 13.2% driven by unfavorable business mix and Intelligrated supply chain challenges, partially offset by commercial excellence. (Source: PR Newswire)

 

20 Oct 21. Rogue Space Completes Several Milestones, Including The Closing Of Their Initial Investment Round. Rogue Space Systems Corporation, a U.S. company developing a smart spacecraft program and planning to offer transport and in-space services to the growing space market, has closed their initial round of investment to support the development of their spacecraft programs. Rogue’s first generation of orbital servicing vehicles, (Orbots™) Laura, Charlie, Fred, and Bob, are all equipped with highly sophisticated sensors, cameras, robotics, and Artificial Intelligence (AI) software.

Rogue successfully completed several major milestones in less than a year since establishing their operations and entering the space industry. The total raise of $1.6 million consists of $500,000.00 in cash, and a Cooperative Research and Development Agreement (CRADA) with the Air Force Research Lab (AFRL) valued at $1.1 million of in-kind services, which was announced in December of 2020. One of the major milestones achieved was attaining AFRL’s sponsorship of their demonstration mission next fall in 2022 on a launch through the DoD Space Test Program.

In June of 2021, Rogue Space signed its first customer, Orbital Assembly Corporation (OAC), the world’s first large-scale space construction company. OAC will lease two Laura Orbital Robot (Orbots™) spacecrafts to Orbital Assembly for their P-STAR Mission to launch construction technologies for the first low gravity space hotel.

Laura will provide observation and inspection services to Orbital Assembly, marking the first time a mission of this type has been conducted between two commercial organizations. Laura will accompany the P-STAR system on its launch planned for 2023. Once the launch vehicle reaches the deployment location, the Orbots™ will take position to monitor the P-STAR deployment. After deployment, the Orbots™ will perch in various stand-off locations around P-STAR to record the complete demonstration.

“Rogue is squarely on course to deliver our demonstration mission with our Laura Orbot leading the way. Laura is being designed, engineered, built, and delivered to space in an unparalleled timeframe, all during and through the COVID-19 pandemic. I believe this accomplishment speaks volumes about the talent, fortitude, and dynamic capabilities of our team. Rogue is now looking to the future to scale our engineering and operations by seeking institutional investors. This new round of funding will take us through and beyond our demonstration mission, and into our first revenues projected to begin early next year,” said Jeromy Grimmett, Rogue Space CEO. “We are on the path to becoming the premier provider, and leader of in-space robotic and transport services for the space industry.”

Rogue Space Systems Corporation is a Laconia, New Hampshire-based company that designs satellite vehicles and subsystems to provide on-orbit services to satellite operators. Founded in 2020, the Rogue team is building a fleet of Orbital Robots (Orbots™) that will perform a variety of services for orbital assets in LEO, MEO, and GEO including inspection, maintenance, repair, transport, and more. The fleet is supported by a first-of-its-kind AI-enabled sensory observation platform. (Source: Satnews)

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TCI International, Inc., is a wholly-owned subsidiary of SPX Corporation. TCI provides turn-key solutions for spectrum management and monitoring, direction finding, geolocation and communications intelligence to civilian, government, military and intelligence agencies as well as antennas for communications and high-power radio broadcasting. TCI is headquartered in Fremont, California, USA. For more information, visit www.tcibr.com.

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