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29 Jan 23. Rheinmetall moving towards order backlog of 30bn euros, CEO says. German arms maker Rheinmetall (RHMG.DE) had a record year in 2022 and is approaching an order backlog of 30 bn euros, CEO Armin Papperger told Reuters in an interview.
“In 2022, we had a very good year, a record year,” he said, saying that the fourth quarter would even beat good third quarter results.
“We are approaching an order backlog of 30 bn euros, and I expect to see an order backlog of 40 bn euros next year,” said the CEO of the company, which sells a whole range of defence products but is probably most famous for supplying the 120mm gun of the Leopard 2 tank.
Papperger said he expected to see at least 15% to 20% growth in Rheinmetall’s defence division over the coming years, with the civilian business likely to account for only 20% of sales in 2025.
On Tuesday, Papperger had nudged up the group’s mid-term sales outlook in anticipation of a windfall from higher defence spending due to the war in Ukraine.
Rheinmetall expects sales to grow to 11bn-12bn euros ($12bn -$13bn) in 2025, he told German magazine Stern.
The projection is higher than the 10 bn-11 bn euro range Rheinmetall gave during its capital markets day in November. For 2022, the company expects 6.5bn euros in sales.
Rheinmetall is seen as a strong candidate for moving up into Germany’s main stock index DAX. ($1 = 0.9205 euros) (Source: Reuters)
29 Jan 23. Rheinmetall eyes boost in munitions output, HIMARS production in Germany. German arms-maker Rheinmetall is ready to greatly boost the output of tank and artillery munitions to satisfy strong demand in Ukraine and the West, and may start producing HIMARS multiple rocket launchers in Germany, CEO Armin Papperger told Reuters.
He spoke days before Germany’s defence industry bosses are due to meet new defence minister Boris Pistorius for the first time, though the exact date has yet to be announced.
With the meeting, Pistorius aims to kick off talks on how to speed up weapons procurement and boost ammunitions supplies in the long term after almost a year of arms donations to Ukraine has depleted the German military’s stocks.
Rheinmetall (RHMG.DE) makes a range of defence products but is probably most famous for manufacturing the 120mm gun of the Leopard 2 tank.
“We can produce 240,000 rounds of tank ammunition (120mm) per year, which is more than the entire world needs,” Papperger said in an interview with Reuters.
The capacity for the production of 155mm artillery rounds can be ramped up to 450,000 to 500,000 per year, he added, which would make Rheinmetall the biggest producer for both kinds of ammunition.
In 2022, Rheinmetall made some 60,000 to 70,000 rounds each of tank and artillery shells, according to Papperger, who said production could be boosted immediately.
Demand for these munitions has soared since Russia’s invasion of Ukraine last February, not only due to their massive use on the battlefield but also as Western militaries backfill their own stocks, bracing for what they see as a heightened threat from Moscow.
Papperger said a new production line for medium calibre ammunition, used by German-built Gepard anti-aircraft tanks in Ukraine for example, would go live by mid-year.
Germany has been trying for months to find new munitions for the Gepard that its own military had decomissioned in 2010.
HIMARS PRODUCTION LINE IN GERMANY?
At the same time, Rheinmetall is in talks with Lockheed Martin(LMT.N), the U.S. company manufacturing the HIMARS (High Mobility Artillery Rocket System) multiple rocket launchers in heavy use with Ukrainian troops, Papperger said.
“At the Munich Security Conference, we aim to strike an agreement with Lockheed Martin to kick off a HIMARS production (in Germany),” he said, referring to an annual gathering of political and defence leaders in mid-February.
“We have the technology for the production of the warheads as well as for the rocket motors – and we have the trucks to mount the launchers upon,” Papperger said, adding a deal may prompt investments of several hundred million euros of which Rheinmetall would finance a major part.
Rheinmetall also eyes the operation of a new powder plant, possibly in the eastern German state of Saxony, but the investment of 700 to 800m euros would have to be footed by the government in Berlin, he said.
“The state has to invest, and we contribute our technological know-how. In return, the state gets a share of the plant and the profits it makes,” Papperger suggested.
“This is an investment that is not feasible for the industry on its own. It is an investment into national security, and therefore we need the federal state,” he said.
The plant is needed as shortages in the production of special powders could turn out to be a bottleneck, hampering efforts to boost the output of tank and artillery shells, he noted.
A few days before the meeting with the new defence minister, Papperger pushed for an increase of Germany’s defence budget.
“The 51bn euros in the defence budget will not suffice to purchase everything that is needed. And the money in the 100 bn euro special funds has already been earmarked – and partially been eaten up by inflation,” he said.
“100 bn euros sounds like a giant sum but we would actually need a 300 bn euro package to order everything that’s needed,” he added, noting that the 100bn special fund does not include ammunitions purchases.
Even before Russia’s invasion of Ukraine, Germany was 20 bn euros short of reaching NATO’s target for ammunitions stockpiling, according to a defence source.
To plug the munitions gap alone, Papperger estimates the Bundeswehr (German armed forces) would need to invest three to four bn euros per year.
In the talks with the minister, the defence boss hopes for a turn towards a more sustainable long-term planning in German procurement, stretching several years into the future, as the industry needed to be able to make its arrangements in time.
“What we are doing at the moment is actually war stocking: Last year, we prefinanced 600 to 700m euros for goods,” Papperger said. “We must move away from this crisis management – it is crisis management when you buy (raw materials and other things) without having a contract – and get into a regular routine.” (Source: Reuters)
27 Jan 23. U.S. Senator Warren urges FTC to stop L3Harris deal to buy Aerojet. U.S. Senator Elizabeth Warren, who has expressed concern about a broad range of corporate consolidation, wrote to the U.S. Federal Trade Commission to urge it to oppose U.S. defense contractor L3Harris Technologies’ (LHX.N) deal to buy Aerojet Rocketdyne Holdings Inc (AJRD.N), her office said.
L3Harris had announced the planned acquisition in mid-December, saying it would buy Aerojet for $4.7 billion in cash as it looks to tap into rising demand for missiles amid the Ukraine conflict. read more It has said that it expects to complete the deal this year.
Warren said the deal was the latest buy in decades of consolidation among defense contractors. She had also opposed Lockheed Martin Corp’s (LMT.N) purchase of Aerojet, a deal that was abandoned after the Federal Trade Commission moved to to block it in late-January on the grounds that it would allow Lockheed to use its control of Aerojet to hurt other defense contractors. read more
Warren said in her letter dated Jan. 26 “This deal between Aerojet and L3Harris would reduce competition in the shrinking defense industry to a new low, and I encourage the FTC to oppose this dangerous transaction.”
The letter was addressed to FTC Chair Lina Khan and Commissioners Alvaro Bedoya and Rebecca Slaughter. All are Democrats.
Rocket motors like those made by Aerojet are used in everything from the homeland defensive missile system to Stinger missiles.
Aerojet develops and manufactures liquid and solid rocket propulsion, air-breathing hypersonic engines and electric power and propulsion for space, defense, civil and commercial applications. Its customers include the Pentagon, NASA, Boeing BA.N, Lockheed Martin, Raytheon and the United Launch Alliance. (Source: Reuters)
26 Jan 23. Olin Announces Fourth Quarter 2022 Results.
Highlights
- Fourth quarter 2022 net income of $196.6m, or $1.43 per diluted share
- Quarterly adjusted EBITDA of $441.8m
- Share repurchases of $1.35bn in 2022
- Expect 2023 adjusted EBITDA of $1.5 to $2.0bn
Olin Corporation (NYSE: OLN) announced financial results for the fourth quarter ended December 31, 2022. Fourth quarter 2022 reported net income was $196.6m, or $1.43 per diluted share, which compares to fourth quarter 2021 reported net income of $306.6m, or $1.89 per diluted share. Fourth quarter 2022 adjusted EBITDA of $441.8m excludes depreciation and amortization expense of $148.5m and restructuring charges and other items of $10.0m. Fourth quarter 2021 adjusted EBITDA was $686.7m. Sales in the fourth quarter 2022 were $1,977.0m compared to $2,430.4m in the fourth quarter 2021. Full year 2022 reported net income was $1,326.9m, or $8.94 per diluted share, which compares to full year 2021 reported net income of $1,296.7m, or $7.96 per diluted share.
Scott Sutton, Chairman, President, and Chief Executive Officer, said, “In 2022, we repurchased approximately 16% of our outstanding shares from available cash flow, while also reducing our net debt level. With our confidence in our ability to generate meaningful earnings and cash flow even in recessionary economic conditions, we expect to continue our capital allocation strategy, while committing to maintain an investment-grade balance sheet and achieve investment-grade credit ratings. Our 2022 performance continued to demonstrate how our winning model adapted in real-time to emphasize ‘value first’ versus a volume maximization approach. Despite the recessionary global economic conditions that developed during 2022, we generated over $1.3bn of net income and over $2.4bn of adjusted EBITDA.
“We expect the challenging global economic conditions to continue in 2023. Overall, we expect full year 2023 adjusted EBITDA to be in the $1.5 to $2.0bn range, demonstrating the resiliency of our winning model that should dramatically improve our recessionary trough level of adjusted EBITDA compared to Olin’s historical strategy and performance.
“In early 2023, we expect our chemical businesses to continue to be tested by European and North American epoxy demand weakness and vinyls intermediate demand weakness, aggravated by elevated levels of Chinese exports caused by lingering weak Chinese domestic demand. Our chemical businesses expect to continue at reduced operating rates as we refrain from selling incremental volume into poor-quality markets. We expect the first quarter 2023 results from our Chemical businesses to be slightly lower than fourth quarter 2022 levels. We expect our Winchester business first quarter 2023 results to increase sequentially from fourth quarter 2022 but to be lower than first quarter 2022 levels due to lower commercial ammunition shipments. Overall, we expect Olin’s first quarter 2023 adjusted EBITDA to decline slightly from fourth quarter 2022 levels.”
SEGMENT REPORTING
Olin defines segment earnings as income (loss) before interest expense, interest income, other operating income (expense), non-operating pension income, other income, and income taxes.
CHLOR ALKALI PRODUCTS AND VINYLS
Chlor Alkali Products and Vinyls sales for the fourth quarter 2022 were $1,172.8 m compared to $1,244.1m in the fourth quarter 2021. The decrease in Chlor Alkali Products and Vinyls sales was primarily due to 29% lower volumes, partially offset by higher pricing. Fourth quarter 2022 segment earnings were $252.3m compared to $294.8m in the fourth quarter 2021. The $42.5m decrease in segment earnings was primarily due to lower volumes and higher raw material and operating costs, mainly increased natural gas and electrical power costs, partially offset by higher pricing across all products except vinyls intermediates, which declined. Chlor Alkali Products and Vinyls fourth quarter 2022 results included depreciation and amortization expense of $117.6m compared to $119.4m in the fourth quarter 2021.
EPOXY
Epoxy sales for the fourth quarter 2022 were $484.2m compared to $795.7m in the fourth quarter 2021. The decrease in Epoxy sales was primarily due to 36% lower volumes. Fourth quarter 2022 segment earnings were $30.5m compared to $170.8m in the fourth quarter 2021. The $140.3m decrease in Epoxy segment earnings was primarily due to lower volumes and higher operating costs, mainly increased natural gas and electrical power costs. Epoxy fourth quarter 2022 results included depreciation and amortization expense of $22.4m compared to $22.6m in the fourth quarter 2021.
WINCHESTER
Winchester sales for the fourth quarter 2022 were $320.0m compared to $390.6m in the fourth quarter 2021. The decrease in Winchester sales was primarily due to lower commercial ammunition shipments, partially offset by higher commercial ammunition pricing and higher military and law enforcement shipments. During 2022, Winchester experienced a transition in its commercial ammunition business from refilling depleted supply chains to filling inventories at the rate of its customers’ sales. In some cases, customers’ inventories became too high so Winchester chose to preserve value by manufacturing and selling less commercial ammunition. Fourth quarter 2022 segment earnings were $45.7m compared to $101.8m in the fourth quarter 2021. The $56.1m decrease in segment earnings was primarily due to lower commercial ammunition shipments and higher commodity and other materials costs partially offset by higher commercial ammunition pricing and higher military and law enforcement sales. Winchester fourth quarter 2022 results included depreciation and amortization expense of $6.4m compared to $6.5m in the fourth quarter 2021.
CORPORATE AND OTHER COSTS
Other corporate and unallocated costs in the fourth quarter of 2022 increased $4.3m compared to the fourth quarter 2021 primarily due to unfavorable foreign currency impacts.
LIQUIDITY AND SHARE REPURCHASES
The cash balance on December 31, 2022, was $194.0m and we ended the year with net debt of approximately $2.4bn and a net debt to adjusted EBITDA ratio of 1.0 times. During 2022, Olin repaid $201.1m of debt, which followed a $1,103.1m debt reduction in 2021. On December 31, 2022, Olin had approximately $1.5bn of available liquidity.
During fourth quarter 2022, approximately 4.9m shares of common stock were repurchased at a cost of $250.1m. During 2022, approximately 25.7 m shares of common stock were repurchased at a cost of $1,350.7m. For the full year 2021, Olin repurchased approximately 4.7m shares of common stock at a cost of $251.9m. On December 31, 2022, Olin had approximately $1.7bn available under its current share repurchase authorization. (Source: PR Newswire)
26 Jan 23. AE Industrial Partners Acquires a Significant Stake in REDLattice. AE Industrial Partners, LP (“AEI”), a U.S.-based private equity firm specializing in aerospace, defense & government services, space, power & utility services, and specialty industrial markets, announced today that it has acquired a significant stake in REDLattice Incorporated (or the “Company”), a pure-play cyber technology company providing full spectrum cyber capabilities for customers in the U.S. national security, defense and commercial communities. Terms of the transaction were not disclosed.
REDLattice serves as a new platform investment for AEI in the advanced cyber technology space. The acquisition of REDLattice represents AEI’s second platform investment from AE Industrial Partners Fund III, LP which launched in November 2022. John Ayers, REDLattice founder and CEO, and Kevin Rummel, President and COO, will both remain with the Company. The existing management will reinvest alongside AEI and retain a significant stake in the Company.
“We are excited to be partnering with the team at REDLattice as we embark on our vision of building the best technology-enabled cyber platform of scale in the market,” said Jeffrey Hart, Principal at AEI. “The offensive cyber domain is evolving dramatically, and REDLattice’s exquisite capabilities and outstanding reputation will afford us a differentiator as we look to execute on our strategy.”
Founded in 2012, REDLattice is headquartered in Chantilly, VA, with operations also in Maryland and Florida. The Company is known for its work in Vulnerability Research (VR), Reverse Engineering (RE), cyber tool development, and a suite of proprietary tools enabling cyber operations. The Company has systematically built an agile, cutting-edge technology company that develops and deploys end-to-end cyber capabilities and innovative solutions that create mission advantages and bring state of the art solutions to the battlespace.
“We are excited for the next step in our evolution as a company. The shared vision we have of disruptive innovation and technology integration into our existing capabilities present a massive opportunity to change the landscape in which we operate,” said Mr. Ayers. “Our partnership with AEI will bring the resources and expertise to help achieve those goals, dramatically impacting the capabilities we deliver to address our customers’ ever-evolving needs.”
“REDLattice is defined by our ability to rapidly design, develop, and solve the next generation of challenges in the cyber domain,” said Mr. Rummel. “Joining with AEI gives us the opportunity to leverage their industry insight and expertise to keep doing what we do best, on a much larger scale.”
“REDLattice has assembled an unmatched team of experts who strive every day to solve the most complex cyber and intelligence challenges faced by their customers with a tactical advantage and competitive edge,” said Graham Kantor, Vice President at AEI. “We are excited to work with John, Kevin, and their outstanding team to further advance a formidable player in the full spectrum cyber domain.”
Kirkland & Ellis served as legal advisor and Ernst & Young served as financial advisor to AEI. Miles & Stockbridge and Integral Business Counsel served as the legal advisors and Baird served as financial advisor to REDLattice.
About REDLattice
REDLattice is a mission-focused provider of full spectrum cyber capabilities and technology solutions for customers in the U.S. national security, defense and commercial communities. Since 2012, REDLattice has helped its customers deliver mission success by rapidly designing, developing, and implementing cutting edge applications and engineering solutions for some of their most complex challenges. The Company’s subject matter experts in vulnerability research (VR), reverse engineering (RE), tool development, malware analysis, and advanced operational capabilities help to develop the next generation of cyber tools and solutions to the battlespace. For more information, please visit https://redlattice.com.
About AE Industrial Partners
AE Industrial Partners is a private equity firm specializing in aerospace, defense & government services, space, power & utility services, and specialty industrial markets. AE Industrial Partners invests in market-leading companies that can benefit from our deep industry knowledge, operating experience, and relationships throughout our target markets. AE Industrial Partners is a signatory to the United Nations Principles for Responsible Investment and the ILPA Diversity in Action initiative. Learn more at www.aeroequity.com. (Source: PR Newswire)
27 Jan 23. Avon Protection sales flat in first quarter as new CEO starts.
Avon Protection PLC (LSE:AVON) said revenues from its core business were flat in its first quarter and that revenue is expected to be weighted to the second half of the year. The top line was up roughly 6% in the quarter to the end of January, lifted by sales of armour products, a market that the group plans to fully withdraw from by the end of the year, with plans to stop production in the third quarter.
Quarterly revenue from its core business of military headwear and gas masks was roughly flat compared to the previous year.
New chief executive Jos Sclater joined at the start of this month, formerly finance chief at defence and aerospace groups Ultra Electronics and GKN.
He takes over following a dramatic rise and fall of the company over the past four years after it narrowed its focus to become solely a defence supplier, with acquisitions of 3M’s helmet and armour business and headgear maker Team Wendy in 2019 and 2020.
In a statement ahead of the group’s annual shareholder meeting, chair Bruce Thompson said: “We look forward to making further progress on our key operational and strategic initiatives as we enter a new chapter.”
Avon said it has a “strong” order pipeline for its respiratory products and expects “further growth in demand” for head protection.
It is ramping up production of the next-generation IHPS helmet ahead of the first deliveries expected in the second half of the year, with initial revenue of the US Army’s ACH GEN II helmet anticipated in the first half of next year, with testing “progressing well”.
Shares were unsure of direction in early trading, rising, then falling, then flat at 1,013.32p.
Broker Peel Hunt said the focus in the 2023 fiscal year, in its view, “remains to ramp up production of next-generation IHPS helmets and successfully wind down and exit body armour”, with both projects seemingly “progressing well”.
“It remains early in the year to have a clear picture of the FY outcome, especially with a typical weighting to 2H, but we are encouraged by this short update.
“New CEO Jos Sclater has now joined the group, and we share the board’s confidence in his ability to make further progress on Avon’s key operational and strategic initiatives.” (Source: Google/proactiveinvestors.co.uk)
27 Jan 23. Embraer invests in a fund managed by MSW and strengthens its Corporate Venture Capital program. The company joins Moura Batteries, BB Seguros, and Age-Rio at MSW MultiCorp2 to boost startups that operate in the aerospace, agro, and cargo-logistics markets. Embraer announced today an initial investment in the MSW MultiCorp 2 of R$ 20m (around US$ 4m), to attract and boost innovative Brazilian startups that synergize with the company’s innovation strategy. Embraer has strengthened its role in promoting entrepreneurship in the Brazilian ecosystem, not only by making investments but creating partnerships with entrepreneurs interested in working collaboratively.
MSW MultiCorp 2 is managed by MSW Capital, a Venture Capital manager and a pioneer in Brazil specialized in Corporate Venture Capital. This is MSW’s second Multi-Corporate Venture fund. The model developed by the manager allows large corporations to invest in startups in a strategic and structured way. Upon entering the fund, Embraer joins Moura Baterias and BB Seguros in expanding the fund’s investment focus areas in Insurance and Energy for startups with digital and platform solutions for the aerospace, agro, and cargo-logistics sectors.
“Our mission is to co-create the future of Embraer, the invested, and the ecosystem through jointly designed innovation. In this way, via Embraer Ventures, we seek to leverage the company’s innovation strategy and we are excited to be able to collaborate even more with the country’s entrepreneurial force,” said Daniel Moczydlower, Head of Innovation at Embraer and CEO of Embraer-X.
MSW MultiCorp 2 will always invest as a minority in startups in seed and series-A stages with checks between R$3 million and R$15 million in businesses where it is possible to generate value with the impetus of Embraer and/or other investors in the fund. An Impulse Plan will be carried out for every investee company, a way in which the fund leverages the startup business and brings innovation to the corporations. Startups that fit this profile and in the indicated markets can send their decks directly to the manager.
From Richard Zeiger, co-founder at MSW: “Embraer is one of Brazilian companies that best represents entrepreneurship and innovation on a global scale. Having the opportunity to strengthen the company’s CVC program is a very important milestone for MSW and a privilege. This investment consolidates our MultiCoporate model, where we gather more than one corporation into a venture capital fund. And we go in search of the best entrepreneurs who are creating solutions in the markets in which corporations operate or aim to operate at some point.”
Embraer Ventures Fund
Embraer sees its Corporate Venture Capital Program (CVC) as an approach that allows for the promotion of adjacent and transformational initiatives, in an agile way, leveraging external resources and sharing risks to explore new business models and accelerate the development of emerging technologies.
Embraer Ventures allows the company to strategically invest in minority stakes in startups. In 2014, the company started the first CVC fund, FIP Aeroespacial, which has already been fully invested, and in 2018, the company invested in the Catapult Ventures Fund, headquartered in Silicon Valley, in the United States, expanding the geographic reach of investments in high technology and innovation. The investment in MSW MultiCorp 2 came to further strengthen the company’s CVC program as a whole, mainly in Brazil in investments in startups in earlier stages.
About Embraer
A global aerospace company headquartered in Brazil, Embraer (NYSE: ERJ) has businesses in Commercial and Executive Aviation, Defense & Security, and Agricultural Aviation. The company designs, develops, manufactures, and markets aircraft and systems, providing after-sales service and support to customers. Since it was founded in 1969, Embraer has delivered more than 8,000 aircraft.
On average, every 10 seconds an aircraft manufactured by Embraer takes off somewhere in the world, transporting more than 145 million passengers a year. Embraer is the main manufacturer of commercial jets with up to 150 seats and the main exporter of high value-added goods in Brazil. The company maintains industrial units, offices, service centers, and parts distribution, among other activities, in the Americas, Africa, Asia, and Europe.
About MSW Capital
MSW Capital is a venture capital manager specialized in Corporate Venture Capital that invests in early stage startups. It is the first manager in Brazil to look to corporations as business partners and to structure and manage multi-corporate or proprietary corporate venture capital funds. Dedicated to enhancing the relationship between corporations and startups, based on a relationship of trust and aimed at generating value for both. Among its main clients/investors are corporations such as Banco do Brasil, Microsoft, Bayer, Algar, Moura Batteries, Banco BV, Qualcomm, Monsanto, Age-Rio, BB Seguros and Embraer. And, among its main portfolio companies are Olivia, Car10, Carflix, Tbit, Árvore Educação, Taranis, and Fabric.
27 Jan 23. French Development Agency Invests $40m to Boost Rwanda’s Drone Industry. The government of Rwanda has secured €37m (approx. Rwf41bn) loan from the French Development Agency (AFD) to transform more public services digitally and develop the country’s drone industry.
The related agreement is also complemented with a €1.2m grant to mobilize French expertise in project implementation.
Providing quality services and customer care across public and private sectors has been of priority as outlined under the economic transformation pillar of the National Strategy for Transformation (NST1), the medium term national strategy (2017 – 2024). But more needs to be done in terms of necessary infrastructure.
Besides improving public services that are still hampered by old local computer networks at central and local administration levels, the loan will also help the country to tap into the potential for using geospatial data – information recorded in conjunction with geographic indicators.
After signing the deal, Uzziel Ndagijimana, the Minister of Finance and Economic Planning, said:
“It will help in unlocking drone private sector development and supporting policy design, monitoring, and evaluation across government. It will also support innovation and economic development based on geospatial and drone-generated databases.”
The Minister indicated that the loan will be used to finance the construction of a Drone Operations Center of excellence, in Huye District. The latter will be a place to test new-use cases for the industry as well as the operationalization of a geospatial hub (GeoHub), centralized geospatial data infrastructure and services.
The hub seeks to improve evidence-based development, planning, monitoring and evaluation of public policies of the country in various fields such as urban planning, response to natural disasters, health, and agriculture, among others.
A private company will manage the DOC while the Rwanda Space Agency will manage the GeoHub.
Arthur Germond, AFD’s Director in Rwanda, said this was the agency’s first financing to the digital sector of Rwanda.
“This project will help reduce the access gap between the capital and the rest of the country. It will also make the country more attractive and create economic opportunities in Huye District thanks to support for the drone industry,” he noted.
In Rwanda, drones are being used to deliver blood supplies, support precision agriculture, inspect power lines, conduct aerial mapping of land, and most recently, in fighting mosquitoes.
The government also partnered with a US-based global drone firm, Auterion, to establish its hub in the country with the objective of collaborating in rolling out services in areas such as freight and postal cargo, health and humanitarian aid. (Source: UAS VISION/The New Times)
26 Jan 23. OSI Systems Reports Fiscal 2023 Second Quarter Financial Results.
- Q2 Revenues of $296m
- Q2 Earnings Per Diluted Share
o GAAP EPS of $0.96
o Adjusted EPS of $1.19
- Q2 Book-to-Bill Ratio of 1.7
- Record Q2 Ended Backlog of $1.5bn (21% increase from June 30, 2022)
- Company Reiterates FY 2023 Adjusted EPS Guidance and Narrows Range of Revenue Guidance
o H2 Year-Over-Year Revenue Growth of 8% – 12%
o H2 Year-Over-Year Adjusted EPS Growth of 17% – 23%
OSI Systems, Inc. (the “Company” or “OSI Systems”) (NASDAQ: OSIS) today announced its financial results for the three and six months ended December 31, 2022.
Deepak Chopra, OSI Systems’ Chairman and Chief Executive Officer, stated: “Overall, our second quarter performance was solid in an economy that continues to be challenged by supply chain constraints, inflationary pressures, and rising interest rates. Our Q2 bookings were outstanding as we were awarded multiple significant new contracts leading to record backlog. Given our significant backlog and pipeline of opportunities, we anticipate strong revenue and adjusted earnings growth for the balance of fiscal 2023.”
For the second quarter of fiscal 2023, the Company reported revenues of $295.6m, a 7% increase compared to the $276.7m reported for the second quarter of fiscal 2022. Net income for the second quarter of fiscal 2023 was $16.4m, or $0.96 per diluted share, compared to net income of $19.8 m, or $1.09 per diluted share, for the second quarter of fiscal 2022. Non-GAAP net income for the second quarter of fiscal 2023 was $20.4m, or $1.19 per diluted share, compared to non-GAAP net income for the second quarter of fiscal 2022 of $23.2m, or $1.28 per diluted share.
For the six months ended December 31, 2022, revenues were $563.7m compared to $555.9 m in the same period a year ago. Net income for the six months ended December 31, 2022 was $27.6 m, or $1.61 per diluted share, compared with $38.8m, or $2.13 per diluted share, for the same period a year ago. Non-GAAP net income for the six months ended December 31, 2022 was $35.3m, or $2.06 per diluted share, compared with non-GAAP net income of $44.4m, or $2.44 per diluted share, for the comparable prior-year period.
For the three months ended December 31, 2022, the Company’s book-to-bill ratio was 1.7. As of December 31, 2022, the Company’s backlog was $1.5bn, representing an increase of 21% from the Company’s backlog as of June 30, 2022. During the quarter ended December 31, 2022, operating cash flow was negative $9.1m due to changes in working capital compared to operating cash flow of $14.5m for the same quarter of the prior year. Capital expenditures were $3.6m and $3.7m for the three months ended December 31, 2022 and 2021, respectively.
Mr. Chopra commented, “The Security division’s revenues for the second quarter increased 15% year-over-year, which contributed to operating margin expansion. Bookings were again very strong, leading to a record quarter-end backlog. A major win during the quarter was our recently announced $200m+ international award that highlights our leadership position in the industry. We anticipate that our strong backlog will drive significant revenue growth and higher operating margins for the second half of the fiscal year.”
Mr. Chopra continued, “Our Optoelectronics and Manufacturing division delivered record Q2 revenue along with a solid operating margin and bookings. This division continues to see robust global demand from existing customers and from new customers that we believe are drawn to suppliers with a proven global manufacturing and fulfillment footprint.”
Mr. Chopra concluded, “Our Healthcare division continued to be impacted during the second fiscal quarter by general market conditions, leading to lower year-over-year revenues and operating income. We have recently bolstered the management team with new talent and expect to strengthen the division’s offerings with new product development, principally in our patient monitoring portfolio.”
Fiscal Year 2023 Outlook
The Company is reiterating its fiscal 2023 non-GAAP diluted earnings per share guidance of $6.02 – $6.25 and narrowing the range of its fiscal 2023 revenues guidance from $1.240bn – $1.275bn to $1.240bn – $1.265bn. Actual revenues and adjusted diluted earnings per share could vary from this guidance due to factors discussed under “Forward-Looking Statements” or other factors.
The Company’s fiscal 2023 diluted earnings per share guidance is provided on a non-GAAP basis only. The Company does not provide a reconciliation of guidance for adjusted diluted EPS to GAAP diluted EPS (the most directly comparable GAAP measure) on a forward-looking basis because the Company is unable to provide a meaningful or accurate compilation of reconciling items and certain information is not available. This is due to the inherent difficulty and complexity in accurately forecasting the timing and amounts of various items included in the calculation of GAAP diluted EPS but excluded in the calculation of adjusted diluted EPS, such as acquisition costs and other non-recurring items that have not yet occurred, are out of the Company’s control, or cannot otherwise reasonably be predicted. For the same reasons, the Company is unable to address the significance of unavailable information which may be material and therefore could result in GAAP diluted EPS, the most directly comparable GAAP financial measure, being materially different from projected adjusted diluted EPS. (Source: BUSINESS WIRE)
27 Jan 23. L3Harris Results. The ongoing conflict in Ukraine alongside continued pressure from global threats – most notably, China and Russia – spurred Congress to increase the GFY23 Defense budget by 10% versus GFY22. The omnibus appropriations bill that was signed by the President on December 29, 2022, includes increases to the RDT&E, Procurement and Operations & Maintenance accounts. In response to the threat environment, key international partners and allies in Europe and the Indo-Pacific have likewise increased their budgets in terms of dollars and relative to GDP. Internally, we remain focused on addressing the impacts of ongoing global challenges to supply chain, labor mobility and inflation in order to improve performance, achieve commitments and position L3Harris to meet the increasing demand for defense systems. Our momentum continued with a second consecutive quarter of top-line growth. We succeeded in accelerating the strategic ViaSat Tactical Data Links (TDL) acquisition, closing the deal in approximately 90 days. Shortly before the TDL closing, we signed a definitive agreement to acquire Aerojet Rocketdyne (AJRD), a national asset providing rocket motors for critical defense munitions and space programs. These acquisitions will strengthen our trusted position as an industry leading merchant supplier, providing rapid and innovative solutions aligned with the National Defense Strategy, while creating long-term value for shareholders. In addition to growing our business and expanding our portfolio, we continue to attract top talent and experienced industry executives. We begin 2023 with two new segment presidents and several other new executives in key positions throughout our company. Performance first: Our strategic priorities remain growth, innovation and performance. For 2023, “Performance First” is our primary focus. We will continue to invest, consistent with growth opportunities, and sustain our culture of innovation, but delivering on our commitments to investors, customers and on every contract is paramount. We will accomplish this by: – Relentlessly focusing on program execution and continuous improvement; – Strengthening the risk management culture developed over the highly-volatile past three years; – Seamlessly integrating TDL and closing the AJRD acquisition; and – Attracting, developing and retaining the skilled workforce key to our role as the Trusted Disruptor. Macroeconomic environment remains dynamic: We’ve worked closely with our second and third tier suppliers to enhance demand management and resilience in our supply chain and, when combined with market improvements, we experienced increased electronic component availability and supplier predictability in the recent quarter. This, alongside ongoing efforts to retain our skilled workforce, was key to our fourth quarter performance. Looking forward, we are accounting for inflation within future contracts and poised to deploy further mitigation measures, as needed, in these uncertain times. Results and guidance consistent with prior commentary: Demand for our products remains strong as we delivered a funded book-to-bill1 of 1.08x for the full year and expanded backlog mid-single-digits. Fourth quarter revenue was ahead of our October guidance, up 5% and 6% organically, driven by our Communication Systems and Space & Airborne Systems segments. GAAP and non-GAAP EPS1 were $2.17 and $3.27, respectively. We reported cash flow from operating activities of $782m and adjusted free cash flow1 of $748m. Our 2023 outlook is consistent with prior commentary and includes TDL. We anticipate 2023 revenue of $17.4bn to $17.8bn and segment operating income of $2.7 bn to $2.8bn, reflecting growth year-over-year. Expected non GAAP EPS1 will be in the range of $12.00 to $12.50, including pension headwinds of $0.71 per share. Turning to capital allocation, we will continue to support annual dividend increases to remain competitive on both a yield and pay-out ratio; however, share repurchases will be moderated in the near-term to sustain solid investment grade credit ratings. I’m encouraged by our momentum and our team is focused on performance as we start the new year. I want to welcome the TDL team and all of our new employees to L3Harris and thank the entire workforce for their resiliency and commitment to our important mission. Christopher E. Kubasik Chair and Chief Executive Officer.
Orders and Revenue > 2022 funded book-to-bill1 of 1.08x; 4Q22 funded book-to-bill1 of 1.0x > Total backlog growth of 5% versus prior year > 2022 revenue of $17.1bn, down 4% versus prior year and 1% on an organic1 basis; 4Q22 revenue of $4.6bn, up 5% versus prior year and 6% on an organic1 basis Margin and Earnings > 2022 net income margin of 6.2% and earnings per share (EPS) of $5.49; 4Q22 net income margin of 9.1% and EPS of $2.17 > 2022 segment operating margin1 of 15.4% and non-GAAP EPS1 of $12.90; 4Q22 segment operating margin1 of 14.6% and non-GAAP EPS1 of $3.27 Cash Flow and Capital Deployment > 2022 operating cash flow of $2.2bn and adjusted free cash flow1 (FCF) of $2.0bn; 4Q22 operating cash flow1 of $782m and adjusted FCF1 of $748 m > Returned $1.9bn and $397m to shareholders in share repurchases and dividends in 2022 and 4Q22, respectively. (Source: BUSINESS WIRE)
26 Jan 23. The new chief executive of Rolls-Royce has given a brutal assessment of Britain’s flagship engineering group, telling employees it must transform the way it operates or it will not survive. In a global address broadcast to staff, parts of which were shared with the Financial Times, Tufan Erginbilgic warned investors were losing patience with the FTSE 100 group. “Every investment we make, we destroy value,” he told employees, adding that financially, “we underperform every key competitor out there”. Erginbilgic’s stark appraisal was designed to pave the way for a big shake-up at the 117-year-old group, according to one person familiar with the address. The Turkish-British national took over from Warren East at the start of January with a brief to improve Rolls-Royce’s performance. It has traditionally achieved profit margins far below those of its bigger competitors, such as General Electric of the US. Speaking at Rolls-Royce’s UK manufacturing site at Derby, Erginbilgic described the company as a “burning platform”. The phrase evoked comments made more than a decade ago by Nokia’s then-chief executive Stephen Elop, who also warned staff the company was standing on a “burning platform”. Less than three years later, the Finnish company’s mobile phone business was sold to Microsoft. Addressing staff, Erginbilgic said: “We do have a burning platform, not because I say so but because of what I am going to share with you.” (Source: FT.com)
25 Jan 23. Artemis (“the Firm”), a Boston-based private equity firm focused exclusively on partnering with differentiated Industrial Tech manufacturers, has completed the sale of KCB Solutions (“KCB”, or “the Company”), a manufacturer of specialty high reliability RF and Microwave technologies, to Micross Components (“Micross”), a provider of high reliability microelectronic product and service solutions for Aerospace, Defense, Space, Medical, Industrial, and other applications.
For 20 years, KCB has been applying its company culture of innovation, precision, and quality proprietary technology to the manufacturing of highly engineered switches, amplifiers, and attenuators. KCB’s customers in Defense and Space rely on KCB’s advanced microwave semiconductor technologies to serve mission-critical applications that require the highest levels of reliability, accuracy, and ruggedness.
KCB was one of Artemis’ first RF and Microwave-driven investments and represented a unique opportunity for the firm to prove operational expertise navigating deeply entrenched end-markets – like Aerospace and Defense – from a lower-middle market perspective. Sharing a commitment to innovation and excellence, Artemis Team members, Peter Hunter, James Ward, Euan Milne, Nick Reyes and Lukas Buckley – alongside KCB President & CEO, Ralph Nilsson, helped develop the company into the asset it is today.
Artemis’ Managing Director and former KCB Board Member, Peter Hunter, spoke to KCB saying, “KCB’s components serve the intersection of two of the most demanding and essential end-markets, Defense and Space. We are proud to have partnered with Ralph and the KCB team to grow the business over the past several years. As part of Micross, KCB is well positioned for continued growth.”
Micross Chairman & CEO, Vincent Buffa, commented on the acquisition rationale saying, “The acquisition of KCB Solutions will greatly expand Micross’ proprietary portfolio of high reliability RF and Microwave products, which will enhance overall product performance and reduce supply chain risk for the benefit of our customers. In addition, Micross will leverage the capabilities of its design, packaging, and test services to provide our RF and Microwave customers with greater value from our ‘one source-one solution’ business model that will provide them with the most advanced microelectronic solutions available.”
TCF Law Group served as legal counsel to Artemis and KCB in this transaction.
About KCB
Founded in 2003, KCB Solutions has grown into a leading manufacturer of RF and Microwave surface mount microcircuits and hybrids, focused on space, aerospace, and defense applications. Based on our commitment to product quality and an exceptionally high level of customer service, we have become a partner and sole source supplier to some of the largest OEMs in the world. For more information, please visit www.kcbsolutions.com
About Micross Components, Inc
Micross is a leading global provider of mission-critical microelectronic components and services for high-reliability markets. Micross provides a wide range of product and service solutions to customers, including Die & Wafer services, Advanced Interconnect Technology, Custom Packaging & Assembly, Component Modification Services, Electrical & Environmental Testing and other high-reliability products and services. In business for more than 40 years, Micross’ extensive high-reliability capabilities serve the aerospace & defense, space, medical and industrial markets, among others. For more information about Micross, please visit www.micross.com.
About Artemis
Headquartered in Boston, MA, Artemis is a specialized private equity firm focused on partnering with differentiated Industrial Tech companies, whose people and products enable a healthier, safer, more connected, productive, and equitable world. For more information, please visit: www.artemislp.com. (Source: PR Newswire)
24 Jan 23. Terra Drone Raises $14m from Aramco’s Wa’ed Ventures.
- Terra Drone is the first Asian startup to raise funding from Wa’ed Ventures, the venture capital of the 2nd biggest company in the world by market cap, Aramco
- The company will establish a new subsidiary for its operations in Saudi Arabia to conduct drone survey, inspection and unmanned traffic management (UTM) in Saudi Arabia
Terra Drone Corporation, a leading drone and Urban Air Mobility (UAM) technology provider, has raised $14m in funding from Wa’ed Ventures, the venture capital arm of the biggest oil producer in the world, Aramco. With this financing, Terra Drone will set up a new subsidiary in the Kingdom of Saudi Arabia, Terra Drone Arabia, in line with the Saudi government’s “Vision 2030.”
First announced in 2016, the Vision 2030 reform plan aims to stimulate economic transformation in Saudi Arabia by reducing the country’s dependence on hydrocarbons. Technology is at the heart of this initiative and the Saudi government is focusing its efforts to promote the use of drones in services such as asset inspections.
Wa’ed Ventures was founded in 2013 and specializes in fostering innovation by investing in startups to develop the Saudi Arabian economy. This is the first time Wa’ed Ventures is investing in an Asian startup, which is a testament to Terra Drone’s vision, state-of-the-art digital solutions, and cutting-edge drone technologies. Terra Drone will support a new subsidiary by taking advantage of whole business experiences of Terra Drone in Global, No.1 drone solution provider in the world in the fields of survey, inspection and unmanned traffic management (UTM).
With the establishment of Terra Drone Arabia. Terra drone will provide oil-gas inspection services, The new subsidiary will also help Terra Drone, which is counted among the top two drone service providers in the world, to further its expansion globally. At present, Terra Drone provides drone and UAM solutions in 10 countries across the world.
Unifly is the leading UTM technology provider in the world, having strong presence in Europe and North America. Terra Drone is the largest shareholder of Unifly. The new subsidiary Terra Drone Arabia will further promote drone inspections to support the Saudi economy, ensure safe and efficient UAM in the country, and invest in the growth of both verticals. (Source: PR Newswire)
23 Jan 23. Defense firms set to post higher sales, McCarthy’s election clouds outlook. Defense companies are expected to post higher fourth-quarter sales, according to analysts, bolstered by easing supply chain bottlenecks and increased defense outlays as the Pentagon and its allies step up spending to aid Ukraine in its conflict against Russia.
However, Republican Kevin McCarthy’s election as the speaker of the U.S. House of Representatives and his promise to curb spending have clouded the near-term outlook for weapon makers, analysts have said.
A slew of analysts has cut price targets on defense contractors since the beginning of the year, with some flagging a risk to defense outlay after House Republicans won a thin majority in the mid-term elections.
Goldman Sachs’ Noah Poponak in a note about the defense budget over the past few years said, “mathematically maintaining a high growth rate is hard, and declining slightly is easy”.
“U.S. fiscal policy could increasingly become a downward pressure given the significant increase in the deficit post-pandemic and recent political developments with increased pressure,” Poponak said, adding that “there are geopolitical upward pressures” as well.
THE CONTEXT
Defense stocks have benefited from higher outlay on weapons by the United States and its allies due to the Ukraine war, but companies have struggled with supply snags, higher costs and labor shortages.
A cut to the defense budget would negatively impact prime defense contractors such as Lockheed Martin Corp (LMT.N), Raytheon Technologies Corp, General Dynamics Corp (GD.N) and Northrop Grumman Corp (NOC.N), which rely on the government for a huge chunk of their revenue.
“Defense Q4’s look solid but DoD budget debate overhang” is a headwind, Cowen analyst Cai von Rumohr said.
Lockheed and Raytheon kick off fourth-quarter earnings on Jan. 24, with General Dynamics and Northrop set to report later in the week.
THE FUNDAMENTALS
** Lockheed is set to report quarterly revenue of $18.27bn and a profit of $7.37 per share, according to Refinitiv data.
** Raytheon is expected to post quarterly revenue of $18.15bn and a profit of 92 cents a share.
** General Dynamics is estimated to report quarterly revenue of $10.69bn and a profit of $3.55 per share.
** Northrop is expected to report quarterly revenue of $9.66bn and a profit of $6.58 per share.
WALL STREET SENTIMENT
** Analysts’ average rating on Lockheed shares is “Hold”. Median 12-month price target is $495.
** Analysts’ average rating on Raytheon shares is “Buy”. Median 12-month price target is $107.
** Analysts’ average rating on General Dynamics shares is “Buy”. Median 12-month price target is $285.
** Analysts’ average rating on Northrop shares is “Buy”. Median 12-month price target is $566. (Source: Reuters)
25 Jan 23. Boeing reports loss, but first positive free cash flow since 2018. Boeing Co (BA.N) losses widened for 2022 on weakness in its defense unit as it warned of further supply chain issues, but the U.S. planemaker reported its first yearly positive cash flow since 2018.
The U.S. planemaker missed Wall Street expectations on revenue and earnings per share in the final quarter of the year. Boeing shares, which have risen by more than 70% since September, fell 1% Wednesday.
Boeing Chief Executive Dave Calhoun told analysts the planemaker still faces “a difficult, difficult supply chain and while average deliveries met our objectives, we continue to face a few too many stoppages in our lines … So those stoppages, while they are coming down, are not where they need to be.”
Chief Financial Officer Brian West said the company was increasing its abnormal accounting estimate by about $600m as it expects 787 production to remain lower for “a bit longer than expected due to a supplier constraint,” but still expects to raise its production rate to five per month later this year.
Boeing affirmed plans to deliver up to 450 737 MAX narrowbody aircraft and 70 to 80 widebody 787 Dreamliners in 2023. The company reiterated it expects to generate $3bn to $5bn in free cash flow in 2023.
Those numbers do not include the much-anticipated restart of Boeing jetliner deliveries to China. Calhoun declined to comment on when Chinese airlines could begin accepting aircraft from Boeing.
“Within China, they need the MAX to fly to satisfy those demands,” said Calhoun, who called the potential opening of the Chinese market a “serious bump” for the entire aviation industry.
Boeing previously expressed interest in remarketing a portion of the Chinese 737 MAX planes, but Calhoun said Wednesday Boeing would “pause” its efforts “so that we can discern what China wants to do.”
China Southern Airlines (600029.SS) began flying the 737 MAX earlier this month after an almost four-year pause.
About 138 of the 200 737 MAX planes in storage are meant for Chinese customers.
The supply chain issues come as Boeing is working to stabilize and ramp up production.
‘SIGNIFICANT PROGRESS’
Third Bridge analyst Peter McNally said Boeing in 2022 was “showing some significant progress in key areas, although the reported financial results were mixed.”
Boeing said net losses rose to $5bn for all of 2022 from $4.3bn in 2021, while losses from operations rose to $3.5bn in 2022 from $2.9bn.
Boeing generated $3.1bn in free cash flow in the final quarter of 2022. It had forecast about $2.5bn in free cash flow for the fourth quarter. Boeing reported $2.3bn for all of 2022.
Boeing reported fourth-quarter revenue of $20bn, up from $14.79bn in 2022, and a loss per share of $1.75. Boeing had been expected to report $20.38bn in revenue in the quarter and a gain of 26 cents a share, according to Refinitiv data.
While supply chain bottlenecks could continue to be a struggle for the aerospace industry at large, McNally pointed out that jetliner demand from airlines remains strong and Boeing has demonstrated an improved ability to ramp up deliveries.
“We haven’t had a hiccup in some time in the supply chain and deliveries are directionally improving, and they affirmed the (delivery) guidance,” he said. “As of right now … I don’t really have a good reason to doubt their ability to hit these numbers because customer demand is there.”
Last month, Boeing won approval from Congress to lift a deadline imposing a new safety standard for modern cockpit alerts for two new versions of 737 MAX aircraft. Without a waiver, the planemaker had said the MAX 7 and MAX 10 airplanes were at risk.
Calhoun said he thinks the MAX 7 will have its first flights this year and the MAX 10 “probably” next year.
Congress said Boeing must retrofit existing MAX airplanes with safety enhancements as part of that waiver. West said the provision to account for retrofits costs was “small.” (Source: Reuters)
25 Jan 23. Boeing Reports Fourth-Quarter Results.
Fourth Quarter 2022
- Generated $3.5bn of operating cash flow and $3.1bn of free cash flow (non-GAAP); cash and marketable securities of $17.2bn
- Certification efforts continue on 737-7 and 737-10
- Delivered 152 commercial airplanes and recorded 376 net orders
Full Year 2022
- Generated $3.5bn of operating cash flow and $2.3bn of free cash flow (non-GAAP)
- Delivered 480 commercial airplanes and recorded 808 net orders
- Total company backlog grew to $404bn; including over 4,500 commercial airplanes
The Boeing Company [NYSE: BA] recorded fourth-quarter revenue of $20.0 bn, GAAP loss per share of ($1.06), and core loss per share (non-GAAP)* of ($1.75). Boeing also generated $3.5bn of operating cash flow and $3.1bn of free cash flow (non-GAAP). Results improved on commercial volume and performance.
“We had a solid fourth quarter, and 2022 proved to be an important year in our recovery,” said Dave Calhoun, Boeing President and Chief Executive Officer. “Demand across our portfolio is strong, and we remain focused on driving stability in our operations and within the supply chain to meet our commitments in 2023 and beyond. We are investing in our business, innovating and prioritizing safety, quality and transparency in all that we do. While challenges remain, we are well positioned and are on the right path to restoring our operational and financial strength.”
Cash and investments in marketable securities increased to $17.2 bn, compared to $14.3bn at the beginning of the quarter, primarily driven by cash from operations. The company has access to credit facilities of $12.0bn, which remain undrawn.
Total company backlog at quarter-end was $404bn.
Segment Results
Commercial Airplanes
Commercial Airplanes fourth-quarter revenue increased to $9.2bn driven by higher 737 and 787 deliveries, partially offset by 787 customer considerations. Operating margin of (6.8) percent also reflects abnormal costs and period expenses, including research and development.
The 737 program is stabilizing production rate at 31 per month with plans to ramp production to approximately 50 per month in the 2025/2026 timeframe. Additionally, the 787 program continues at a low production rate with plans to ramp production to five per month in late 2023 and to 10 per month in the 2025/2026 timeframe.
During the quarter, the company secured net orders for 376 aircraft, including an order from United Airlines for 100 737 MAX and 100 787 airplanes. Commercial Airplanes delivered 152 airplanes during the quarter and backlog included over 4,500 airplanes valued at $330bn.
Defense, Space & Security
Defense, Space & Security fourth-quarter revenue was $6.2bn. Fourth-quarter operating margin of 1.8 percent reflects the continued operational impact of labor instability and supply chain disruption.
Defense, Space & Security delivered 45 aircraft and three satellites, including the first P-8A Poseidon to New Zealand. Also in the quarter, the Boeing-built Space Launch System core stage powered the first Artemis I mission to the moon and the T-7A program completed engine testing.
During the quarter, Defense, Space & Security captured awards from Japan for two KC-46A Tankers and from the Egyptian Air Force for 12 CH-47F Chinook helicopters. Backlog at Defense, Space & Security was $54bn, of which 28 percent represents orders from customers outside the U.S.
Global Services
Global Services fourth-quarter revenue of $4.6bn and operating margin of 13.9 percent reflect higher commercial volume, partially offset by lower government volume.
During the quarter, Global Services finalized the U.S. Air Force F-15 depot support order and opened the Germany Distribution Center to serve 6,000+ customers with chemicals and specialty materials.
At quarter-end, Boeing Capital’s net portfolio balance was $1.5bn. The increase in loss from other unallocated items and eliminations was driven by timing of allocations, share based compensation and deferred compensation expense. The change in other income was primarily due to increased interest rates driving increased investment income. The fourth quarter effective tax rate primarily reflects tax expense driven by an increase in the valuation allowance.
25 Jan 23. General Dynamics forecasts weak 2023 as supply, labor challenges persist. U.S. defense contractor General Dynamics Corp (GD.N) on Wednesday forecast lower-than-expected 2023 results, as the industry struggles with labor and supply shortages, though strong demand for weapons helped it beat quarterly estimates.
An “abnormally high retirement” of workers has impacted General Dynamics’ electric boat unit, which assembles nuclear-powered submarines, company executives said on an investor call.
General Dynamics said it was working with the U.S. Navy to mitigate the effect of worker shortages, which plagued the defense industry in 2022. Shares of the company fell 4% in early trade amid broader market declines.
“We think the challenge here is the production ramp at Electric Boat,” J.P. Morgan analyst Seth Seifman said.
The company forecast 2023 revenue of $41.2bn to $41.3bn, below expectations of $41.98bn, and profit between $12.6 to $12.65 per share, compared with estimates of $13.91, as per Refinitiv data.
Rival Lockheed Martin Corp (LMT.N) also forecast annual profit below Street expectations on Tuesday, hurt by supply bottlenecks and higher costs.
According to industry experts, Republican Kevin McCarthy’s election as the U.S. House Speaker has clouded near-term prospects for defense contractors.
Meanwhile, GD’s unit that makes Gulfstream jets reported a 4% fall in fourth-quarter revenue.
However, the impact was offset by a strong performance in its combat systems unit that makes Abrams tanks and other land warfare systems.
U.S. defense contractors have benefited from the United States and its allies ramping up their defense spend and supporting Ukraine with bns of dollar in military aid after Russia invaded the country last year.
“We’re seeing demand signals resulting from the war in Ukraine, but we’ve only just begun to see that manifest in our backlog,” General Dynamics Chief Executive Phebe Novakovic said.
The company’s fourth-quarter net earnings rose to $3.58 per share and revenue to $10.85bn, beating expectations of a profit of $3.54 per share on $10.69bn in sales. (Source: Reuters)
25 Jan 23. General Dynamics Reports Fourth-Quarter and Full-Year 2022 Financial Results. General Dynamics (NYSE: GD) today reported quarterly net earnings of $992m, up 4.2% from the year-ago quarter, or $3.58 diluted earnings per share (EPS), up 5.6% from the year-ago quarter. Revenue of $10.9bn was up 5.4% over the year-ago quarter.
For the full year, net earnings were $3.4bn, up 4.1% from 2021, or $12.19 per diluted share, up 5.5% from 2021. Full-year revenue was $39.4bn, a 2.4% increase from 2021. Operating margin was 11.3% for the quarter and 10.7% for the full year.
“We enjoyed a strong fourth quarter, capping a good 2022,” said Phebe N. Novakovic, chairman and chief executive officer. “We had good backlog growth, with robust demand at Gulfstream. Operating performance was solid, led by excellent execution at Combat Systems. We also had another very strong cash year.”
Cash
Net cash provided by operating activities in the quarter totaled $669m. For the year, net cash provided by operating activities totaled a record-high $4.6bn, or 135% of net earnings. During the year, the company reduced debt by $1bn, invested $1.1bn in capital expenditures, paid $1.4bn in dividends, and used $1.2bn to repurchase shares, ending 2022 with $1.2bn in cash and equivalents on hand.
Backlog
Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1.2-to-1 for the quarter and 1.1-to-1 for the year. Backlog of $91.1bn was the highest in the company’s history. In addition to backlog, estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $36.6bn at year end. Total estimated contract value, the sum of all backlog components, was $127.7bn at the end of the year.
In the Aerospace segment, backlog grew in the quarter to $19.5bn, up 19.8% from the year-ago quarter. Aerospace book-to-bill was 1.2-to-1 for the quarter and 1.5-to-1 for the year.
Significant awards in the quarter for the three defense segments included $5.1bn from the U.S. Navy for Columbia-class submarine advance procurement, advance construction, submarine industrial base development, maintenance and support, and options totaling $585m of additional potential contract value; an IDIQ contract from the U.S. Army with a maximum potential value of $580m to develop and field adversarial electronic warfare threat systems and capabilities in support of the Army’s test and training communities; $535m from the Navy for lead yard support, development studies and design efforts related to Virginia-class submarines, and options totaling $320m of additional potential contract value; $320m to upgrade Ulan tracked vehicles for Austria; $260m for various munitions and ordnance; and $525m for several key classified contracts and options.
24 Jan 23. Lockheed Martin profit outlook disappoints as supply, labor squeeze persists. U.S. weapons maker Lockheed Martin Corp (LMT.N) on Tuesday forecast annual profit below Street expectations, hurt by lingering supply bottlenecks and higher costs, though a generous defense budget helped it beat fourth-quarter estimates.
The defense contractor said it expected a profit of $26.60 to $26.90 per share in 2023. The average analysts’ estimate has been $26.96, according to Refinitiv.
Shares were little changed in pre-market trading, up 1% to $446.69.
“We signaled way ahead of time that 2023 was going to be kind of a steady state year from a revenue perspective,” Lockheed Chief Executive Jim Taiclet said in an interview, adding that he aimed to grow free cash flow per share by 5% in 2023.
Supply chain snags brought on by the pandemic have squeezed margins at defense suppliers, although those constraints are now easing even as the companies continue to grapple with labor shortages.
Analysts have warned that defense spending could slow in 2023 after it reached peak levels as the United States and its allies bulked up budgets following Russia’s invasion of Ukraine last year.
The election of Kevin McCarthy as the U.S. House speaker and his promise to curb spending has also raised concerns about the near-term outlook for defense companies such as Lockheed, Raytheon Technologies Corp (RTX.N) and Northrop Grumman Corp (NOC.N), which derive much of their revenues from the U.S. government.
Lockheed forecast 2023 revenue between $65bn and $66bn, compared with market estimates of $65.74bn.
Net sales at the aeronautics unit – Lockheed Martin’s largest, which makes the F-35 – jumped 7% to $7.64bn in the fourth quarter, but the segment’s operating margin shrank to 10.7% from 11.5% a year earlier.
Bethesda, Maryland-based Lockheed Martin posted adjusted net income of $7.79 per share for the three months ended Dec. 31, compared with analysts’ estimate of $7.39 per share. It reported fourth-quarter net sales of $18.99bn, above expectations of $18.27bn. (Source: Reuters)
24 Jan 23. Lockheed Martin Reports Fourth Quarter and Full Year 2022 Financial Results.
- Net sales of $19.0bn in the fourth quarter and $66.0bn in 2022
- Net earnings of $1.9bn, or $7.40 per share, inclusive of non-operational charges of $129m ($101m, or $0.39 per share, after-tax) in the fourth quarter
- Net earnings of $5.7bn, or $21.66 per share, inclusive of non-operational charges of $1.9bn ($1.5bn, or $5.57 per share, after-tax) in 2022
- Cash from operations of $1.9bn in the fourth quarter and $7.8bn in 2022; free cash flow of $1.2bn in the fourth quarter and $6.1bn in 2022
- Returned $5.0bn of cash to shareholders through share repurchases and dividends in the fourth quarter, and $10.9bn in 2022
- Increased backlog 11% to $150bn compared to fourth quarter 2021
- 2023 financial outlook provided
Lockheed Martin Corporation [NYSE: LMT] today reported fourth quarter 2022 net sales of $19.0bn, compared to $17.7bn in the fourth quarter of 2021. Net earnings in the fourth quarter of 2022 were $1.9bn, or $7.40 per share, compared to $2.0bn, or $7.47 per share, in the fourth quarter of 2021. Net earnings for the fourth quarter of 2022 include certain non-operational items of $129m, or $0.39 per share, compared to $(92)m, or $(0.25) per share in the fourth quarter of 2021. Cash from operations was $1.9bn in the fourth quarter of 2022, compared to $4.3bn in the fourth quarter of 2021. Free cash flow was $1.2bn in the fourth quarter of 2022, compared to $3.7bn in the fourth quarter of 2021.
Net sales in 2022 were $66.0bn, compared to $67.0bn in 2021. Net earnings in 2022 were $5.7bn, or $21.66 per share, compared to $6.3bn, or $22.76 per share, in 2021. Net earnings for 2022 include certain non-operational items of $1.9bn, or $5.57 per share, compared to $1.4bn, or $3.99 per share in 2021. Cash from operations in 2022 was $7.8bn, compared to $9.2bn in 2021. Free cash flow in 2022 was $6.1bn, compared to $7.7bn in 2021.
“Lockheed Martin’s stronger than expected finish to the year demonstrated the company’s reliability and resiliency to meet commitments in challenging environments, while leading the industry’s critical security advancements for our nation and allies,” said Chairman, President and CEO James Taiclet. “Our ongoing expansion of 21st Century capabilities and commercial partnerships are delivering deterrence solutions and value enhancing growth opportunities across our businesses. As we track toward our objective of growth resumption in 2024, we will continue to execute our dynamic and disciplined capital allocation program, by reinvesting in our business and pursuing growth opportunities, and returning capital to shareholders. We remain confident in our plans to enable our customers to stay ahead of ready and to deliver sustainable economic value.”
During the fourth quarter of 2022, the company recorded charges totaling $100m ($79m, or $0.31 per share, after-tax) that relate to actions at its Rotary and Mission Systems (RMS) business segment, which include severance costs for reduction of positions and asset impairment charges. After a strategic review of RMS, these actions will improve the efficiency of its operations, better align the organization and cost structure with changing economic conditions, and changes in program lifecycles.
Severance and other charges for the quarter and year ended Dec. 31, 2022 include $100m ($79m, or $0.31 per share, after-tax)
related to certain actions at the company’s RMS business segment, which included severance costs for the planned reduction of certain
positions and asset impairment charges. Severance and other charges for the year ended Dec. 31, 2021 include $36m ($28m, or
$0.10 per share, after-tax) for actions at the company’s RMS business segment recognized in the first quarter of 2021.
2023 Financial Outlook
The company’s current 2023 financial outlook does not include any future gains or losses related to changes in valuations of the company’s net assets and liabilities for deferred compensation plans or mark-to-market investments. The outlook assumes continued accelerated payments to suppliers, with a focus on small and at-risk businesses. In addition, the outlook reflects no significant reduction in customer budgets or changes in priorities, continued support and funding of the company’s programs, and a statutory tax rate of 21%. It also includes known impacts to the company and broader defense supply chain from the COVID-19 pandemic based on the company’s understanding at the time of this news release and its experience to date.
Cash Flows and Capital Deployment Activities
Cash from operations in the fourth quarter of 2022 was $1.9bn. Capital expenditures were $693m, resulting in free cash flow of $1.2bn. The decrease in operating and free cash flows in the fourth quarter of 2022 was primarily due to timing of production and billing cycles impacting contract assets (primarily F-35).
Cash from operations in 2022 was $7.8bn. Capital expenditures were $1.7bn, resulting in free cash flow of $6.1bn in 2022. The decrease in operating and free cash flows in 2022 was primarily due to timing of production and billing cycles impacting contract assets and receivables, timing of liquidation of inventories (primarily TLS and Sikorsky helicopter programs in the company’s RMS business segment), and higher federal tax payments (including $610m in payments attributable to the elimination in 2022 of the option to deduct R&D expenses immediately), all of which were partially offset by the deferral of cash payments for accounts payable (primarily Aeronautics).
The company’s cash activities in the quarter and year end Dec. 31, 2022, included the following:
- paying cash dividends of $766m and $3.0bn during the quarter and year ended Dec. 31, 2022;
- paying $4.2bn to repurchase 7.2m shares, and $7.9bn to repurchase 18.4m shares (excluding, in each period, shares to be received upon final settlement of the fourth quarter 2022 accelerated share repurchase agreement (ASR) in the first half of 2023) during the quarter and year ended Dec. 31, 2022;
- receiving $3.9bn and $6.2bn of net proceeds from the issuance of debt during the quarter and year ended Dec. 31, 2022; and
- repayment of $2.3bn of long-term debt during the year ended Dec. 31, 2022.
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. The following table presents summary operating results of the company’s business segments and reconciles these amounts to the company’s consolidated financial results.
Net sales and operating profit of our business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation and not included in management’s evaluation of performance of each segment. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.
Business segment operating profit excludes the FAS/CAS pension operating adjustment, 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. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit.
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. Increases in profit booking rates, typically referred to as favorable profit adjustments, 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 and are typically referred to as unfavorable profit adjustments. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes.
The company’s consolidated net favorable profit booking rate adjustments represented approximately 25% of total segment operating profit in both the quarter and year ended Dec. 31, 2022, as compared to 29% and 28% in the quarter and year ended Dec. 31, 2021.
Aeronautics
Aeronautics’ net sales during the fourth quarter of 2022 increased $508m, or 7%, compared to the same period in 2021. Net sales increased by approximately $275m for the F-35 program due to higher volume on production contracts that was partially offset by lower volume on sustainment contracts; about $75m for the C-130 program due to higher volume on production contracts; approximately $65m on classified contracts due to higher volume that was partially offset by both an unfavorable profit adjustment of $20m on a classified program and lower net favorable profit adjustments; and about $55m for the F-16 program due to higher volume on production contracts.
Aeronautics’ operating profit during the fourth quarter of 2022 was comparable to the same period in 2021. Operating profit decreased approximately $55m on classified contracts primarily due to lower net favorable profit adjustments and an unfavorable profit adjustment of $20m on a classified program that were both partially offset by higher volume. This decrease was offset by an increase of approximately $45m for the F-35 program due to higher volume and net favorable profit adjustments on production contracts. Net favorable profit booking rate adjustments were $45m lower in the fourth quarter of 2022 compared to the same period in 2021.
Aeronautics’ net sales in 2022 increased $239m, or 1%, compared to 2021. Net sales increased by approximately $375m on classified contracts primarily due to higher volume; about $80m for the F-22 program due to higher net favorable profit adjustments; and approximately $55m for the F-16 program due to higher volume on production contracts that was partially offset by lower volume on sustainment contracts and unfavorable profit adjustments on a production contract and modernization contracts. These increases were partially offset by a decrease of about $310m for the F-35 program due to lower volume and favorable profit adjustments on sustainment and production contracts that were partially offset by higher volume on development contracts.
Aeronautics’ operating profit in 2022 increased $67m, or 2%, compared to 2021. Operating profit increased approximately $145m on classified contracts primarily due to lower unfavorable profit adjustments on a classified program ($45m in 2022 compared to $225m in 2021) that were partially offset by lower favorable profit adjustments; and about $100m for the F-22 program due to higher net favorable profit adjustments. These increases were partially offset by lower operating profit of approximately $110m for the F-16 program due to unfavorable profit adjustments in 2022 on a production contract and modernization contracts; and about $80m for the F-35 program due to lower net favorable profit adjustments on production and sustainment contracts and volume on sustainment contracts. Net favorable profit booking rate adjustments were $30m higher in 2022 compared to 2021.
Missiles and Fire Control
MFC’s net sales during the fourth quarter of 2022 increased $68m, or 2%, compared to the same period in 2021. The increase was primarily attributable to higher net sales of approximately $115m for tactical and strike missile programs due to higher volume (Precision Strike Missile (PrSM) and Guided Multiple Launch Rocket Systems (GMLRS®)). This increase was partially offset by a decrease of about $50m for integrated air and missile defense programs due to lower volume (THAAD).
MFC’s operating profit during the fourth quarter of 2022 increased $13m, or 3%, compared to the same period in 2021. The increase was primarily attributable to higher operating profit of approximately $15m for tactical and strike missile programs due to higher net favorable profit adjustments on an international tactical and strike missile program that were partially offset by an unfavorable profit adjustment of about $25m on an air-to-ground missile program. Net favorable profit booking rate adjustments were $10m higher in the fourth quarter of 2022 compared to the same period in 2021.
MFC’s net sales in 2022 decreased $376m, or 3%, compared to 2021. The decrease was primarily attributable to lower net sales of approximately $280m for sensors and global sustainment programs due to lower volume on SOF GLSS as a result of changes in mission requirements and lower volume on Sniper Advanced Targeting Pod (SNIPER®); and about $60m for integrated air and missile defense programs due to lower volume (THAAD) and lower net favorable profit adjustments (PAC-3) that were partially offset by higher volume (PAC-3). Net sales for tactical and strike missile programs were comparable as higher volume (PrSM) was offset by lower volume (air dominance weapon systems).
MFC’s operating profit in 2022 decreased $13m, or 1%, compared to 2021. The decrease was primarily attributable to lower operating profit of approximately $85 m for integrated air and missile defense programs due to lower net favorable profit adjustments for the PAC-3 program and an unfavorable profit adjustment of about $40m on an air and missile defense development program. This decrease was partially offset by an increase of about $50m for tactical and strike missile programs due to contract mix and higher net favorable profit adjustments (an international tactical and strike missile program and HIMARS®) that were partially offset by an unfavorable profit adjustment of about $25m on an air-to-ground missile program. There also were unfavorable profit adjustments of approximately $25m on an energy program in 2021 that did not recur in 2022. Operating profit for sensors and global sustainment programs was comparable as both contract mix and the net effect of favorable profit adjustments on an international program in 2022 were offset by the closeout activities related to the Warrior program in 2021 that did not recur in 2022. Net favorable profit booking rate adjustments were $45m lower in 2022 compared to 2021.
Rotary and Mission Systems
RMS’ net sales during the fourth quarter of 2022 increased $343m, or 8%, compared to the same period in 2021. The increase was primarily attributable to higher net sales of approximately $260m for integrated warfare systems and sensors (IWSS) programs due to higher volume (Aegis, TPY-4 and TPQ-53); and about $130m for Sikorsky helicopter programs due to higher production volume (CH-53K and Combat Rescue Helicopter (CRH)) that was partially offset by lower production volume (Black Hawk). These increases were partially offset by a decrease of approximately $65m for various C6ISR programs due to lower volume.
RMS’ operating profit during the fourth quarter of 2022 increased $60m, or 13%, compared to the same period in 2021. The increase was primarily attributable to approximately $25m for Sikorsky helicopter programs due to higher net favorable profit adjustments (Seahawk) and production volume (CH-53K) that were partially offset by lower production volume (Black Hawk); about $25m for IWSS programs due to higher net favorable profit adjustments (Littoral Combat Ship (LCS); and approximately $20m for TLS programs due to higher net favorable profit adjustments. Net favorable profit booking rate adjustments were $30m higher in the fourth quarter of 2022 compared to the same period in 2021.
RMS’ net sales in 2022 decreased $641m, or 4%, compared to 2021. The decrease was primarily attributable to lower net sales of approximately $280m for TLS programs primarily due to the delivery of an international pilot training system in the first quarter of 2021 that did not recur in 2022; about $205m for various C6ISR programs due to lower volume; and approximately $170m for Sikorsky helicopter programs due to lower production volume (Black Hawk) that was partially offset by higher production volume (CH-53K).
RMS’ operating profit in 2022 decreased $125m, or 7%, compared to 2021. The decrease was primarily attributable to approximately $70m for Sikorsky helicopter programs due to lower production volume and net favorable profit adjustments (Black Hawk) that were partially offset by higher net favorable profit adjustments (CRH); about $50m for various C6ISR programs due to lower net favorable profit adjustments; and approximately $15m for IWSS programs due to lower net favorable profit adjustments (TPQ-53 and Aegis) that were partially offset by $30m of unfavorable profit adjustments on a ground-based radar program in 2021 that did not recur in 2022. These decreases were partially offset by an increase of approximately $35m for TLS programs due to higher net favorable profit adjustments that were partially offset by lower volume due to the delivery of an international pilot training system in the first quarter of 2021 that did not recur in 2022. Net favorable profit booking rate adjustments were $65m lower in 2022 compared to 2021.
Space
Space’s net sales during the fourth quarter of 2022 increased $343m, or 12%, compared to the same period in 2021. The increase was primarily attributable to higher net sales of approximately $210m for national security space programs due to higher development volume (classified programs); about $110m for strategic and missile defense programs due to higher development volume (Next Generation Interceptor (NGI)); and approximately $40m for commercial civil space programs due to higher volume (Orion).
Space’s operating profit during the fourth quarter of 2022 decreased $77m, or 25%, compared to the same period in 2021. The decrease was primarily attributable to approximately $40m for national security space programs primarily due to lower net favorable profit adjustments (classified programs) and higher net unfavorable profit adjustments of $25m on a ground solutions program; about $15m due to lower equity earnings from the corporation’s investment in United Launch Alliance (ULA) due to lower launch volume; and approximately $10m for strategic and missile defense programs due to lower net favorable profit adjustments (Fleet Ballistic Missile (FBM)). Net favorable profit booking rate adjustments were $80m lower in the fourth quarter of 2022 compared to the same period in 2021.
Space’s net sales in 2022 decreased $282m, or 2%, compared to 2021. The decrease was primarily attributable to lower net sales of approximately $885m due to the renationalization of the AWE program on June 30, 2021, which was no longer included in the company’s financial results beginning in the third quarter of 2021; and about $125m for commercial civil space programs due to lower volume (Orion). These decreases were partially offset by higher net sales of about $495m for strategic and missile defense programs due to higher development volume (NGI); and about $245 m for national security space programs due to higher development volume (classified programs).
Space’s operating profit in 2022 decreased $89m, or 8%, compared to 2021. The decrease was primarily attributable to approximately $85m for national security space programs primarily due to lower net favorable profit adjustments (classified programs and SBIRS) that were partially offset by lower net unfavorable profit adjustments of $25m on a ground solutions program; and about $40m for commercial civil space programs due to lower net favorable profit adjustments (Human Lander System (HLS)) and lower volume (Orion). These decreases were partially offset by higher equity earnings of approximately $35m from the company’s investment in ULA due to higher launch volume and launch mix; and about $20m for strategic and missile defense programs due to higher net favorable profit adjustments (primarily NGI). Operating profit for the AWE program was comparable as its operating profit in 2021 was mostly offset by accelerated amortization expense for intangible assets as a result of the renationalization. Net favorable profit booking rate adjustments were $150m lower in 2022 compared to 2021.
Total equity earnings (primarily ULA) represented approximately $15m, or 6%, and $100m, or 10%, of Space’s operating profit during the quarter and year ended Dec. 31, 2022, compared to approximately $30m, or 10%, and $65m, or 6%, in the quarter and year ended Dec. 31, 2021.
Income Taxes
The company’s effective income tax rate was 12.7% and 14.2% for the quarter and year ended Dec. 31, 2022, compared to 17.7% and 16.4% in the quarter and year ended Dec. 31, 2021. The rate for the quarter ended Dec. 31, 2022 was lower than the rate for the quarter ended Dec. 31, 2021 primarily due to increased tax deductions for foreign derived intangible income and research and development tax credits. The rate for the year ended Dec. 31, 2022 was lower than the rate for the year ended Dec. 31, 2021 primarily due to increased research and development tax credits. The rates for all periods benefited from tax deductions for foreign derived intangible income, dividends paid to the company’s defined contribution plans with an employee stock ownership plan feature, and employee equity awards.
26 Jan 23. Northrop Grumman Reports Fourth Quarter and Full-Year 2022 Financial Results.
- Q4 Sales increase 16 percent to $10.0bn
- 2022 Sales of $36.6bn; 2022 Organic Sales increase 3 percent
- Q4 Diluted EPS of $13.46 including per share MTM benefit of $5.96; Q4 Transaction; Adjusted EPS1 increase 25 percent to $7.50
- 2022 Diluted EPS of $31.47; 2022 Transaction-Adjusted EPS1 of $25.54
- 2022 Net cash provided by operating activities of $2.9bn; 2022 Transaction-Adjusted Free Cash Flow1 of $1.6bn
- 2022 Book to Bill of 1.07
- Guidance reflects improved expectations for 2023 Sales of $38.0 to $38.4bn, and strong multi-year Cash Flow Outlook with over 20 percent CAGR through 2025
Northrop Grumman Corporation (NYSE: NOC) reported fourth quarter 2022 sales increased 16 percent to $10.0bn, as compared with $8.6bn in the fourth quarter of 2021. Sales increased 3 percent to $36.6bn in 2022, as compared with $35.7bn in 2021. Fourth quarter 2022 sales reflect strong demand, the timing of material receipts and continued improvement in labor availability trends. Fourth quarter 2022 net earnings were $2.1bn, including a $922m after-tax mark-tomarket pension and OPB (“MTM”) benefit. Fourth quarter 2022 transaction-adjusted net earnings1 were $1.2bn, or $7.50 per diluted share. 2022 net earnings were $4.9bn, or $31.47 per diluted share, and include the noted MTM benefit. 2022 transaction-adjusted net earnings1 were $4.0bn, or $25.54 per diluted share, and reflect an $85m, or $0.55 per diluted share, reduction for negative returns on marketable securities related to our non-qualified benefit plans and other non-operating assets.
“The Northrop Grumman team continues to deliver strong financial and operating performance, further positioning our company for near and long-term growth. We’re providing differentiated solutions for our customers’ highest priority missions, driving a strong global demand signal for our products and maintaining a healthy backlog,” said Kathy Warden, chair, chief executive officer and president. Given our proven ability to competitively win, hire and perform, we’re raising our sales outlook for 2023 and expect to deliver strong multi-year cash flow growth. We are focused on executing our strategy, investing in the capabilities and capacity our customers need, and returning a significant portion of our growing cash flows to our shareholders.”
Transaction-adjusted Net Earnings and EPS 2022 net earnings reflect a MTM benefit of $922m, net of tax. 2021 net earnings reflect a MTM benefit of $1.8bn, net of tax, and 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 and the make-whole premium for early debt redemption, as well as the impact of the MTM benefit and related tax impacts, 2022 transaction-adjusted net earnings decreased 4 percent and transaction-adjusted EPS1 was comparable with the prior year. Net earnings during 2022 and the fourth quarter of 2021 were not impacted by the sale of the company’s IT services business and 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. Lower total pension benefits, including MTM and non-MTM impacts, reduced fourth quarter 2022 diluted EPS by $5.48 and 2022 diluted EPS by $6.19 as compared with the prior year periods. See Schedule 6 at the end of this release for further information.
Sales
Fourth quarter 2022 sales increased $1.4bn, or 16 percent, due to higher sales volume at all four sectors. Fourth quarter 2022 sales reflect strong demand, the timing of material receipts and continued improvement in labor availability trends. 2022 sales increased $935m and 2022 organic sales increased $1.1bn, or 3 percent, due to higher sales at Space Systems and Mission Systems, partially offset by lower sales at Aeronautics Systems and Defense Systems. 2022 sales reflect strong demand, the timing of material receipts and improving trends in labor availability during the second half of the year. Operating Income and Margin Rate Fourth quarter 2022 operating income increased $164m, or 22 percent, primarily due higher sales and a higher operating margin rate. Fourth quarter 2022 operating margin rate increased to 9.0 percent primarily due to lower unallocated corporate expense, driven by a lower MTM-related deferred state tax expense, and a higher segment operating margin rate, partially offset by an $80m reduction in the FAS/CAS operating adjustment. 2022 operating income decreased $2.1bn, or 36 percent, primarily due to a $2.0 bn pre-tax gain on sale and $192m of unallocated corporate expenses recognized in the prior year associated with the IT services divestiture. Operating income also decreased due to a $330m reduction in the FAS/CAS operating adjustment, which more than offset higher segment operating income and lower non-divestiture-related unallocated corporate expense. 2022 operating margin rate declined to 9.8 percent from 15.8 percent reflecting the items above. Segment Operating Income and Margin Rate Fourth quarter 2022 segment operating income increased $166m, or 17 percent primarily due to higher sales. Fourth quarter 2022 segment operating margin rate increased to 11.3 percent from 11.2 percent due to a higher operating margin rate at Aeronautics Systems, which more than offset lower operating margin rates at the other sectors.
2022 segment operating income increased $36m, or 1 percent, due to higher operating income at Mission Systems, Space Systems and Aeronautics Systems, partially offset by lower operating income at Defense Systems due, in part, to the impact of the IT services divestiture. 2021 segment operating income included $20m from the IT services business, as well as a benefit of approximately $100m due to the impact of lower overhead rates on the company’s fixed price contracts. Segment operating margin rate decreased to 11.6 percent from 11.8 percent principally due to lower net EAC adjustments due, in part, to macroeconomic impacts, including inflationary pressures and supply chain challenges. Federal and Foreign Income Taxes The fourth quarter 2022 effective tax rate (ETR) decreased to 15.2 percent from 19.0 percent principally due to an $86m benefit resulting from the resolution of the IRS examination of certain legacy Orbital ATK tax returns. The 2022 ETR decreased to 16.1 percent from 21.6 percent primarily due to the $86 m benefit described above, as well as additional federal income taxes in the prior year resulting from the IT services divestiture. The company’s 2022 MTM benefit increased the 2022 ETR by 1.2 percentage points; however, the 2021 MTM benefit did not significantly impact the 2021 ETR.
Cash Flows
Fourth quarter 2022 net cash provided by operating activities increased $809m and fourth quarter 2022 transaction-adjusted free cash flow increased $768m principally due to improved trade working capital. 2022 cash provided by operating activities decreased $666m principally due to lower CAS pension recoveries and changes in trade working capital, including approximately $900m of federal tax payments related to Section 174 tax legislation. The prior year included $785m of tax payments related to the IT services divestiture. 2022 transaction-adjusted free cash flow1 decreased $1.4bn principally due to lower CAS pension recoveries and changes in trade working capital, including the approximately $900m of federal tax payments related to Section 174. Awards and Backlog Fourth quarter and year to date 2022 net awards totaled $9.1bn and $39.3bn, respectively, and backlog totaled $78.7bn. Significant fourth quarter 2022 new awards include $3.2bn for restricted programs (primarily at Aeronautics Systems, Space Systems and Mission Systems), $0.7bn for F-35 and $0.4bn for Integrated Air and Missile Defense Battle Command System (IBCS). Significant 2022 new awards include $10.6bn for restricted programs (principally at Aeronautics Systems, Mission Systems and Space Systems), $5.3bn for F-35, $2.1bn for GEM63 solid rocket boosters, largely related to Amazon’s Project Kuiper, $1.5bn for the Space Development Agency (SDA) Tranche 1 Transport and Tracking Layer programs, $1.3bn for Commercial Resupply Services (CRS) missions and $1.3bn for Ground-based Midcourse Defense (GMD).
Segment Operating Results
AERONAUTICS SYSTEMS
Sales
Fourth quarter 2022 sales increased $126m, or 5 percent, due to higher volume in Manned Aircraft, partially offset by lower volume in Autonomous Systems. Manned Aircraft sales reflect $101m of higher F-35 sales and higher volume on restricted programs, including the impact of higher net EAC adjustments. These increases were partially offset by lower volume on the Joint Surveillance and Target Attack Radar System (JSTARS) program as it nears completion. Autonomous Systems sales principally reflect lower volume on the Global Hawk program. 2022 sales decreased $728m, or 6 percent, due to lower volume in both Manned Aircraft and Autonomous Systems, including restricted programs, a $180m decrease on the Global Hawk program, a $159m decrease on the E-2 program and a $119m decrease on the JSTARS program as it nears completion.
Operating Income
Fourth quarter 2022 operating income increased $69m, or 31 percent, due to a higher operating margin rate and higher sales. Operating margin rate increased to 10.5 percent from 8.4 percent primarily due to higher net EAC adjustments, including a $66m positive adjustment on the engineering, manufacturing and development (EMD) phase of the B-21 program largely related to an increase in the amount of performance incentives we expect to earn. The prior year operating margin rate reflects a $93m unfavorable EAC adjustment on F-35 and a $21m benefit associated with favorable overhead rate performance.
2022 operating income increased $23m, or 2 percent, due to a higher operating margin rate, partially offset by lower sales. 2022 operating margin rate increased to 10.6 percent from 9.7 percent primarily due to higher net favorable EAC adjustments and a $38m gain on a property sale. Higher net favorable EAC adjustments reflect $133m of positive adjustments on the EMD phase of the B-21 program, partially offset by lower net EAC adjustments associated with other restricted work, as well as $135m of unfavorable EAC adjustments on F-35 in the prior year. The prior year operating margin rate also reflects a $21m benefit associated with favorable overhead rate performance.
DEFENSE SYSTEMS
Sales
Fourth quarter 2022 sales increased $279m, or 20 percent, primarily due to the timing of material receipts on several programs. Sales increased $115m on the IBCS program principally due to supplier ramp-up for low-rate initial production. Sales also increased due to higher volume on the Special Ammunition and Weapon Systems (SAWS) program. 2022 sales decreased $197m, or 3 percent, due, in part, to a $106m reduction in sales related to the IT services divestiture. 2022 organic sales decreased $91m, or 2 percent, principally due to a $154m decrease from lower scope on an international training program, completion of a Joint Services support program and wind-down of the UKAWACS and JSTARS programs, partially offset by a $144m increase from ramp-up on the IBCS program, as well as higher volume on the SAWS and NATO Alliance Ground Surveillance InService Support (NATO AGS ISS) programs. Operating Income Fourth quarter 2022 operating income increased $16m, or 10 percent, primarily due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 11.0 percent from 12.1 percent primarily due to the write-down of an unconsolidated joint venture investment and lower net favorable EAC adjustments. 2022 operating income decreased $32m, or 5 percent, due, in part, to a $14m reduction in operating income related to the IT services divestiture, as well as lower sales. Operating margin rate was comparable with the prior year.
MISSION SYSTEMS
Sales
Fourth quarter 2022 sales increased $406m, or 16 percent, primarily due to the timing of material receipts and improved labor availability. Higher sales include restricted sales growth in the Networked Information Solutions business area, $115m of higher volume on airborne radar programs, and higher volume on the Surface Electronic Warfare Improvement Program (SEWIP). 2022 sales increased $262m, or 3 percent, and includes a $42m reduction in sales related to the IT services divestiture. 2022 organic sales increased $304m, or 3 percent, primarily due to higher restricted sales in the Networked Information Solutions business area, $107m of higher volume on airborne radar programs and a $107m increase on SEWIP. These increases were partially offset by a $231m decrease on Navigation, Targeting and Survivability programs and a $118m decrease on the Joint Counter RadioControlled Improvised Explosive Device Electronic Warfare (JCREW) program.
Operating Income
Fourth quarter 2022 operating income increased $50m, or 12 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 15.4 percent from 15.9 percent principally due to lower net EAC adjustments, largely in the Maritime/ Land Systems & Sensors and Airborne Multifunction Sensors business areas, partially offset by improved performance on restricted programs at Networked Information Solutions. 2022 operating income increased $39m, or 2 percent, due to higher sales. Operating margin rate was comparable with the prior year and reflects a $33m benefit recognized in connection with a contract-related legal matter, partially offset by the previously described overhead rate benefit to fixed price contracts in the prior year.
SPACE SYSTEMS
Sales
Fourth quarter 2022 sales increased $620m, or 23 percent, due to higher sales in both business areas. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, including a $128m increase on the Ground Based Strategic Deterrent (GBSD) program and a $93m increase on the Next Generation Interceptor (NGI) program, as well as higher volume on the GEM63 program in support of Amazon’s Project Kuiper. Sales in the Space business area were driven by a $112m increase due to ramp-up on the SDA Tranche 1 Transport and Tracking Layer programs awarded earlier this year, as well as higher volume on restricted programs and CRS missions. 2022 sales and organic sales increased $1.7bn, or 16 percent, due to higher sales in both business areas. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, including a $454m increase on GBSD and a $449m increase on NGI, as well as higher volume on the GEM63 program in support of Amazon’s Project Kuiper. Sales in the Space business area were driven by a $320m increase due to ramp-up on the SDA Tranche 1 Transport and Tracking Layer programs, higher volume on restricted programs and a $134m increase in sales on CRS, partially offset by a $149m decrease in sales for the James Webb Space Telescope after its successful launch in December 2021.
Operating Income
Fourth quarter 2022 operating income increased $41m, or 16 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 9.1 percent from 9.6 percent primarily due to lower net EAC adjustments and a $45m writedown of commercial inventory, partially offset by a $96m gain recognized in connection with a land exchange transaction. 2022 operating income increased $37m, or 3 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 9.4 percent from 10.6 percent primarily due to lower net EAC adjustments and the noted write-down of commercial inventory, partially offset by the land exchange gain described above.
Guidance
Financial guidance, as well as outlook, trends, expectations and other forward looking statements provided by the company for 2023 and beyond, reflect the company’s judgment based on the information available to the company at the time of this release. The company’s financial guidance and outlook for 2023 and beyond reflect what the company currently anticipates will be the impacts on the company from, among other factors, the global macroeconomic, health, security, and political/budget environments, including the impacts from inflationary pressures and labor and supply chain challenges; the COVID-19 pandemic; changes in the threat environment; changes in government budget, appropriations and procurement priorities and processes; a potential extended continuing resolution and/or prolonged breach of the debt ceiling or government shutdown; changes in the regulatory environment; and changes in support for our programs. However, the company cannot predict how these factors will evolve or what impacts they will have, and there can be no assurance that the company’s current expectations or underlying assumptions are correct. These factors can affect the company’s ability to achieve guidance or meet expectations.
24 Jan 23. Aerospace major Raytheon beats profit estimates on strong travel demand. Stinger missile maker Raytheon Technologies Corp (RTX.N) on Tuesday beat analysts’ estimates for fourth-quarter profit, as the aerospace and defense company fed off strong travel demand across the globe that boosted demand for its jet engines, parts and services. Strong travel demand and supply chain disruptions have forced airlines to fly older planes for a longer period, boosting demand for high-margin after-market services at companies such as Raytheon, which counts Boeing Co (BA.N) and Airbus SE (AIR.PA) among its customers.
Raytheon reported an adjusted net income of $1.27 per share in the quarter ended Dec. 31, above analysts’ average estimate of $1.24 per share, according to Refinitiv data.
“As I look back 12 months ago, we set some expectations. And I would say the commercial aerospace recovery was right in line with the high end of those expectations,” Neil Mitchell, the company’s chief financial officer, said in an interview, but in 2023 he expects headwinds from taxes and pensions.
Raytheon’s shares were up slightly in early trading to $96.59.
The company expects to see about $2bn worth of labor and material inflation in 2023, Mitchell told Wall Street analysts on a post-earnings conference call. He added that in the year the company expects a 20% boost in commercial aftermarket revenue across its aerospace business.
The maker of Tomahawk missiles forecast 2023 adjusted profit in the range of $4.90 to $5.05 per share, compared with analysts’ average estimate of $5.03 per share.
The Arlington, Virginia-based company’s avionics unit, Collins Aerospace, reported a 14.6% increase in its quarterly sales and a 60.7% jump in operating profit in the reported quarter.
Net sales were up 6.2% at $18.09bn, but missed analysts’ average estimate of $18.15bn.
The defense industry, even though hit by supply chain snarls, has gained from geopolitical tensions since Russia’s invasion of Ukraine 11 months ago, pushing countries to ramp up defense budgets.
Raytheon’s missiles and defense unit’s sales were up 6.2% to $4.1bn in the fourth quarter.
The company expects share repurchases of $3 bn in 2023 and said it will realign its portfolio to three business segments including Collins Aerospace, Pratt & Whitney and Raytheon, down from four segments. (Source: Reuters)
24 Jan 23. Raytheon Technologies Reports 2022 Results, Announces 2023 Outlook and Plan to Realign into Three Business Segments. RTX expects continued sales and earnings growth in 2023; will more fully leverage scale with streamlined business operations
Raytheon Technologies Corporation (NYSE: RTX) reported fourth quarter 2022 results and announced its 2023 outlook and plan to realign its business units into three segments.
Fourth quarter 2022
- Sales of $18.1bn
- GAAP EPS from continuing operations of $0.96, which included $0.31 of acquisition accounting adjustments and net significant and/or non-recurring charges
- Adjusted EPS of $1.27
- Operating cash flow from continuing operations of $4.6bn; Free cash flow of $3.8bn
- Achieved approximately $130m of incremental RTX gross cost synergies
- Company backlog of $175bn; including defense backlog of $69bn
- Repurchased $408m of RTX shares
Full year 2022
- Sales of $67.1bn
- GAAP EPS of $3.51
- Adjusted EPS of $4.78
- Operating cash flow from continuing operations of $7.2bn; Free cash flow of $4.9bn
- Achieved approximately $405m of incremental RTX gross cost synergies
- Repurchased $2.8bn of RTX shares
Outlook for full year 2023
- Sales of $72.0 – $73.0bn
- Adjusted EPS of $4.90 – $5.05
- Free cash flow of approximately $4.8bn
- Share repurchase of $3.0bn of RTX shares
“Raytheon Technologies delivered solid full-year results with strong free cash flow that exceeded our expectations,” said Raytheon Technologies Chairman and CEO Greg Hayes. “We effectively supported the rapid commercial aerospace recovery and delivered critical platforms and advanced technologies for customers to meet their increasingly complex needs, while achieving $86bn in new awards in 2022 and ending the year with a total backlog of $175bn.”
“Our portfolio is well positioned to capture growing demand and we expect to deliver sales growth and margin expansion, along with strong free cash flow generation, in 2023. We are deploying capital investments to bring new technologies to market and accelerate productivity improvement, all while remaining committed to returning at least $20bn to our shareowners post-merger through early 2024.”
Portfolio Realignment
On track to surpass all merger-related goals, the company plans to strengthen its market position and generate additional revenue and technology synergies by realigning its business units. Christopher Calio, whose role has been expanded to President and Chief Operating Officer of Raytheon Technologies, effective March 1, will oversee the business transformation initiative.
“In 2023 we will further align our market-leading franchises with customer needs to drive operational agility and excellence,” said Christopher Calio, Chief Operating Officer, Raytheon Technologies. “By more fully leveraging our scale, we will deliver enhanced customer solutions and unlock cost savings opportunities with improved resource allocation and a streamlined footprint.”
The three focused business segments will be Collins Aerospace, Pratt & Whitney, and Raytheon. The company plans to implement the reorganization during the second half of 2023 and will provide additional updates on its progress over the coming months.
Additionally, the company announced that Roy Azevedo, President of Raytheon Intelligence & Space (RIS), will retire from his role and serve as an advisor to Christopher Calio, Chief Operating Officer, to help with the transformation.
Fourth quarter 2022
Raytheon Technologies reported fourth quarter sales of $18.1bn, up 6 percent over the prior year. GAAP EPS from continuing operations of $0.96 was up 109 percent versus the prior year and included $0.31 of acquisition accounting adjustments and net significant and/or non-recurring charges. Adjusted EPS of $1.27 was up 18 percent versus the prior year. Both GAAP and Adjusted EPS included about 6 cents of a tax benefit associated with legal entity and operational reorganizations.
The company recorded net income from continuing operations attributable to common shareowners in the fourth quarter of $1.4bn, up 108 percent versus the prior year which included $446m of acquisition accounting adjustments and net significant and/or non-recurring charges. Adjusted net income was $1.9bn, up 16 percent versus prior year. Operating cash flow from continuing operations in the fourth quarter was $4.6bn. Capital expenditures were $855m, resulting in free cash flow of $3.8bn.
Backlog and Bookings
Backlog at the end of the fourth quarter was $175bn, of which $106bn was from commercial aerospace and $69bn was from defense.
Notable defense bookings during the quarter included:
- $1.0bn to manufacture and deliver Guidance Enhanced Missile (GEM-T) for an international customer at Raytheon Missiles & Defense (RMD)
- $1.0bn of classified bookings at Raytheon Intelligence & Space (RIS)
- $698m for National Advanced Surface-to-Air Missile System (NASAMS) for Ukraine at RMD
- $638m for F135 production at Pratt & Whitney
- $512m for F135 sustainment at Pratt & Whitney
- $415m for Evolved Seasparrow Missile (ESSM) production for the U.S. Navy and international customers at RMD
- $405m for maintenance and support of a Surveillance Radar Program (SRP) for an international customer at RMD
- $317m for AIM-9X Sidewinder production lot 23 for the U.S. Air Force and international customers at RMD
- $247m for MIR replenishment for an international customer at RMD
- $210m for F117 sustainment 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
Collins Aerospace had fourth quarter 2022 sales of $5,662m, up 15 percent versus the prior year. The increase in sales was driven by a 21 percent increase in commercial aftermarket, a 20 percent increase in commercial OE and a 5 percent increase in military. The increase in commercial sales was driven primarily by the recovery of commercial air traffic, which resulted in higher flight hours, aircraft fleet utilization, and narrowbody deliveries.
Collins Aerospace recorded operating profit of $741m, up 61 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket volume and lower R&D expense, which more than offset higher SG&A expense. Adjusted operating profit of $743m in the quarter was up 58 percent versus the prior year.
Pratt & Whitney
Pratt & Whitney had fourth quarter sales of $5,652m, up 10 percent versus the prior year. The increase in sales was driven by a 37 percent increase in commercial OE and an 11 percent increase in commercial aftermarket which more than offset a 2 percent decrease in military sales. The increase in commercial sales was primarily due to favorable OE engine volume and mix, and higher shop visits and related spare part sales. The decrease in military sales was driven primarily by lower military legacy aftermarket sales.
Pratt & Whitney recorded operating profit of $306m, up 127 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket sales, which included a favorable customer contract adjustment, and was partially offset by higher SG&A and R&D expense. Pratt & Whitney recorded adjusted operating profit of $321m in the quarter, up 98 percent versus the prior year.
Raytheon Intelligence & Space
RIS had fourth quarter 2022 sales of $3,544m, down 8 percent versus the prior year. The decrease in sales was driven by the impact of the prior year Global Training and Services divestiture. Excluding the impact of acquisitions and divestitures and FX, sales were down 5 percent versus prior year driven by Command, Control and Communications, Cyber, Training and Services, and Sensing and Effects.
RIS recorded operating profit of $278m, down 56 percent versus the prior year. The decrease in operating profit was driven in part by the impact of the prior year Global Training and Services divestiture and the related gain on sale, as well as unfavorable mix, lower net program efficiencies and lower volume. On an adjusted basis, operating profit was down 31 percent versus the prior year.
RMD had fourth quarter 2022 sales of $4,100m, up 6 percent versus prior year. The increase in sales was primarily driven by higher net sales in Naval Power including SPY-6, Strategic Missile Defense including NGI, and Advanced Technology programs.
RMD recorded operating profit of $376m, down 23 percent versus the prior year. The decrease in operating profit was driven primarily by unfavorable program mix and lower net program efficiencies, and a charge associated with a divestiture, partially offset by higher volume. RMD recorded adjusted operating profit of $418m, down 14 percent versus the prior year.
25 Jan 23. Textron posts quarterly revenue beat on strong business jet demand. Cessna jet maker Textron Inc (TXT.N) reported a better-than-expected revenue on Wednesday, as a pandemic-driven demand for private jets shows little signs of cooling. The spread of the COVID-19 pandemic drove up demand for private plane travel from the ultra rich, boosting results at business jet makers in North America.
Textron reported a fourth-quarter revenue of $3.64bn, compared with analysts’ average estimate of $3.61bn, as per Refinitiv data.
Revenue at Textron Aviation, the company’s biggest unit, came in at $1.6bn in the quarter ended Dec. 31, up $223m, on higher prices and sales volume.
The business jet maker also forecast an adjusted profit per share of $5 to $5.20 for 2023. Analysts expect a profit of $4.51 apiece. It was not immediately clear if the figures were comparable. Textron forecast a 2023 revenue of about $14.0bn, up from $12.9 bn in the year-ago period.
(Source: Reuters)
25 Jan 23. Textron Inc. (NYSE: TXT) today reported fourth quarter 2022 income.
- EPS from continuing operations of $1.07, up $0.14 from the fourth quarter of 2021
- Full-year manufacturing net cash from continuing operating activities of $1.5bn
- Aviation backlog of $6.4bn at year-end 2022, up $2.3 bn from year-end 2021
- 2023 full-year EPS outlook of $4.40 to $4.60, full year adjusted EPS non-GAAP outlook of $5.00 to $5.20
Textron Inc. (NYSE: TXT) today reported fourth quarter 2022 income from continuing operations of $1.07 per share, compared with $0.93, or $0.94 per share of adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, in the fourth quarter of 2021.
Full year 2022 income from continuing operations was $4.01 per share up from $3.30 in 2021.
“2022 was a strong year at Textron with solid revenue growth, order flow and execution at Aviation, new program awards at Systems, higher revenues and operating profit at Industrial and the contract award for the U.S. Army’s Future Long Range Assault Aircraft program at Bell,” said Textron Chairman and CEO Scott C. Donnelly.
Cash Flow
Net cash provided by operating activities of continuing operations of the manufacturing group for the full year was $1.5bn. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $1.2bn for the full year, up $29m from 2021.
In the quarter, Textron returned $228m to shareholders through share repurchases. Full year 2022 share repurchases totaled $867m.
Outlook
For 2023, Textron will begin reporting earnings per share on an adjusted basis to exclude LIFO inventory provision and intangible amortization expense, both non-cash items, effective with the first quarter 2023 financial results.
Textron is forecasting 2023 revenues of approximately $14.0bn, up from $12.9bn. Textron expects full-year 2023 GAAP earnings per share from continuing operations will be in the range of $4.40 to $4.60, or $5.00 to $5.20 on an adjusted basis as described above, which is reconciled to GAAP in an attachment to this release.
The company is estimating net cash provided by operating activities of continuing operations of the manufacturing group will be between $1.3bn and $1.4bn and manufacturing cash flow before pension contributions, a non-GAAP measure, will be between $0.9bn and $1.0bn, with planned pension contributions of about $50m.
“The 2023 outlook reflects higher revenues, increased profit and operating margin expansion with a continuation of our growth strategy of ongoing investments in new products and programs to drive increases in long-term shareholder value,” Donnelly concluded.
Fourth Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation of $1.6bn were up $223m from the fourth quarter of 2021, reflecting higher volume and mix of $154m and higher pricing of $69m. The increase in volume and mix was largely due to higher Citation jet and defense volume.
Textron Aviation delivered 52 jets in the quarter, up from 46 last year, and 47 commercial turboprops, up from 43 last year.
Segment profit was $169m in the fourth quarter, up $32m from a year ago, reflecting a favorable impact from pricing, net of inflation of $29m and higher volume and mix as described above, partially offset by an unfavorable impact of $16m from performance. Performance includes unfavorable manufacturing performance, largely related to inefficiencies from supply chain disruptions and increased staffing associated with higher production, partially offset by lower selling and administrative costs.
Textron Aviation backlog at the end of the fourth quarter was $6.4bn.
Bell
Bell revenues were $816m, down $42m from last year’s fourth quarter, reflecting lower military revenues primarily in the H-1 program due to lower aircraft and spares volume, partially offset by higher commercial revenues.
Bell delivered 71 commercial helicopters in the quarter, up from 59 last year.
Segment profit of $71m was down $17m from a year ago, primarily reflecting lower volume and mix, partially offset by a favorable impact from performance.
Bell backlog at the end of the fourth quarter was $4.8bn.
Textron Systems
Revenues at Textron Systems were $314m, compared to $313m in last year’s fourth quarter.
Segment profit of $40m was down $5m from a year ago.
Textron Systems’ backlog at the end of the fourth quarter was $2.1bn.
Industrial
Industrial revenues were $907m, up $126m from last year’s fourth quarter, reflecting higher volume and mix of $95m, and a $59m favorable impact from pricing, largely in the Specialized Vehicles product line, partially offset by an unfavorable impact of $28m from foreign exchange rate fluctuations.
Segment profit of $42m was up $4m from the fourth quarter of 2021, primarily due to higher volume and mix, partially offset by an unfavorable impact from performance.
Textron eAviation
Textron eAviation segment revenues were $6m and segment loss was $10m in the fourth quarter of 2022, which reflected the operating results of Pipistrel along with research and development costs for initiatives related to the development of sustainable aviation solutions.
Finance
Finance segment revenues were $11m, and profit was $5m in the fourth quarter of 2022.
25 Jan 23. Airbus eyes shallower industrial recovery after snags – sources. Airbus (AIR.PA) is tempering the pace of planned production increases due in part to the limited availability of engines for new airplane production, industry sources said on Wednesday.
The planemaker, which softened output goals last month, now expects to reach an interim production target of 65 single-aisle jets a month in late 2024 and an ultimate target of 75 a month in 2026, months later than originally planned, they said.
The shallower “hockey stick” recovery would allow Airbus’ COVID 19-wounded supply chain to reset and prepare a more reliable catch-up from mid-decade following widespread snags.
The conservative strategy suggests a realistic delivery goal for 2023 may not significantly exceed the 720 units originally slated for 2022 – a target eventually abandoned in December, a senior industry source said.
Another said there was still room for some further increase.
An Airbus spokesperson declined to comment.
Airbus last year posted 661 jet deliveries, though the best gauge of its industrial capacity was the slightly higher number of 663 physical deliveries before an accounting adjustment.
Engine makers are under pressure to divert engines to their existing fleets to cope with a sharp rebound in travel demand, often at the expense of supplies for new jet production.
Although engine factories are raising output, planemakers have received sober estimates in recent weeks of the available growth in supplies earmarked for new planes, the sources said.
In December, Airbus reaffirmed an interim production goal of 65 A320neo-family jets a month but withdrew its implementation date, saying it would adjust the ramp-up during 2023 and 2024.
It also softened the deadline for an ultimate target of 75 a month to the “middle of the decade” from 2025.
The brake on output in the face of rising demand is a headache Chief Executive Guillaume Faury, who reaffirmed on Tuesday that “we plan to ramp up production of our A320 family to 75 aircraft each month by the middle of the decade”.
Airbus has told some suppliers that this still implies the goal will not be reached before 2026, the sources said.
The slower production ramp-up means delaying taking new parts while Airbus stabilises a network of 3,000 suppliers – a move likely to rattle small suppliers forced to hold more inventory while they keep their own machines running. (Source: Reuters)
25 Jan 23. Airbus Helicopters performed steadily in a complex 2022. In 2022, Airbus Helicopters logged 374 gross orders (net: 362), highlighting the ongoing market recovery with an impressive 216 light single engine helicopters sold. Deliveries increased from 338 in 2021 to 344 in 2022, contributing to Airbus Helicopters’ preliminary 52% share of the civil and parapublic market . Airbus’ helicopter fleet flight hours are now back to pre-COVID 2019 levels.
“2022 was a year in which Airbus Helicopters solidified its recovery, in a context of instability with the war in Ukraine and a fragile supply chain. I’d like to thank our customers for their continued trust in Airbus Helicopters. Our teams will continue to work hard to meet their needs and deliver on our commitments in 2023,” said Bruno Even, Airbus Helicopters CEO. “Our orders came from 203 customers in 48 countries, underlining the importance of our global network as well as showing that in uncertain times, the role of helicopters is more essential than ever.”
New ground was broken, with important first deliveries.The first ACH160 was delivered to a Brazilian customer, transported by an Airbus Beluga, in July 2022. Shortly after, All Nippon Helicopter’s H160 entered into service in Japan and the French Navy took delivery of the first H160 for SAR operations. In October, the Company delivered the first H135s to the Spanish Ministry of Interior following the major order just ten months prior.
Significant support and services contracts were signed for both the civil and military range. Highlights include an NHIndustries contract with NAHEMA for the French and German NH90s, a follow-on contract with the US Army for more than 480 UH-72A and UH-72B Lakota helicopters. The Helicopter Company signed In-Service HCare contracts for its fleet of 20 H145s and six ACH160s.
“It is no surprise that security is currently a priority for many countries. This is reflected in our order book with an important contract for 27 H125s with our longstanding partner, the Brazilian armed forces. We launched a major upgrade of the Tiger helicopter for the French and Spanish armies and we are also progressing with the design of the H175M assembly line in Broughton should we win the New Medium Helicopter campaign in the UK,” continued Even.
Airbus Helicopters also continued to make inroads on its decarbonisation roadmap which is based on a threefold approach using SAF, hybridisation, and electrification.
”The unveiling of our DisruptiveLab demonstrator at the Airbus Summit is another significant step to decarbonising vertical lift. The aircraft that took flight on 13 January will demonstrate our capability to reduce CO2 emissions by 50%. Our commitment to sustainability also saw us forge more partnerships that will support the optimal entry into service of the CityAirbus NextGen, our eVTOL prototype,” continued Even.
Airbus Helicopters continued to innovate for the military market as well. The Company furthered the development of its own unmanned aerial system (UAS), the VSR700, which began trialing autonomous take-off and landing capabilities at sea. In June 2022, Airbus Helicopters was named coordinator of the “EU Next Generation Rotorcraft Technologies Project” (ENGRT) which is a Research and Technology project funded by the European Defence Fund, paving the way for the next generation of military rotorcraft in Europe.
The 2022 full year financial results will be disclosed on 16 February 2023.
25 Jan 23. Geollect joins the Roke family. Roke, a leading UK innovator in science and engineering, can confirm the acquisition of Geollect by Chemring Group PLC. Based in Bristol, Geollect will work as part of a new business unit – Roke Intelligence as a Service – which will provide customers with access to, and analysis of, open-source intelligence (OSINT).
Founded in 2017, Geollect provides a subscription-based platform that enables geospatial gathering, presentation, and analysis of datasets. The platform can ingest over 250 sets of open-source data, analysing and drawing insight which is presented on a geolocated basis.
Geollect’s capabilities in OSINT will complement Roke’s constantly developing offerings in data ingestion, artificial intelligence, machine learning and data science, and can be immediately deployed to projects for existing Roke customers.
Geollect currently offers three subscription-based data agnostic platforms:
- Centri – A centralised intelligence platform that visualises data in one place. It reveals dynamic relationships and patterns often hidden in large volumes of data.
- Geonius – A platform that tracks assets, enabling geospatial data analysis and investigations.
- Infosight – A version of Centri designed specifically for the Royal Navy to monitor, analyse, characterise, assess, and visualise the information environment.
Geollect provides alerts and reports linked to specified assets or locations, with a continuous human to automation lifecycle of product and capability development.
As well as these market-beating geospatial platforms, the acquisition brings 25 new specialist engineers to Roke, and access to new and adjacent markets including maritime, insurance, critical national infrastructure, UK Special Forces, and investigatory tradecraft.
This acquisition is part of Roke’s ongoing business strategy to facilitate Intellectual Property (IP) led growth, building on the continued investment in people, infrastructure, and product development. In June 2021, Roke made its first acquisition through Cubica, a specialist in artificial intelligence, machine learning, data fusion and autonomy. All Cubica’s employees joined Roke at this time, its products and their capabilities are now used widely on Roke projects across multiple markets.
Over 850 engineers and business professionals work at hubs in Manchester, Woking, Gloucester, and from Roke’s headquarters in Romsey, Hampshire. The business is continuing to grow significantly, introducing The Roke Academy earlier in 2022 – a centre of excellence for learning and development, focusing on non-traditional areas of recruitment to embrace undiscovered talent who may not have previously had the opportunity to enter the tech field.
Paul MacGregor, Managing Director of Roke commented:
“We’re delighted to welcome Geollect to the Roke family. With a focus on innovative geolocation technologies and outstanding delivery in support its customers, this acquisition is a valuable addition to Roke and will further accelerate our growth as a business.
“Specialising in open-source intelligence and geolocation, Geollect is a perfect strategic and cultural fit, and offers significant expertise as we invest in next generation technologies and expand our product, service and capability offerings.”
Cate Gwilliam, CEO and Co-Founder of Geollect said: “When I sat down with my Co-Founder six years ago to outline the vision of Geollect, our primary mission was to build a global leader in geospatial intelligence and analysis. We were both very clear on the culture and the people we needed to make this happen. It was about putting people first and ensuring there were similar ambitions to be sector leaders. Most importantly, we wanted everyone to have fun. I truly believe we have gone a long way to achieving those early strategic goals.
Roke’s acquisition of Geollect is aligned with that initial vision. We knew that to fulfil our true potential, we needed an organisation that had shared values and aspirations. Roke is the ideal fit for Geollect. Its vision and strategy align perfectly with our own, and I have no doubt that Roke will enable our team to operate to their full potential. The combined talents from Roke and Geollect will produce a global leader in OSINT and GEOINT and I am really excited to be part of this journey.”
25 Jan 23. IFS performance outpaces competitors with 5th consecutive year of double-digit growth.
- Annual Recurring Revenue (ARR) up 57% YoY driven by bookings from new customers
- Cloud revenue up 80% YoY driven by existing and new customers switching to IFS Cloud
- Click here for hi-res image
25 January, 2023 – IFS, the global cloud enterprise applications company, today announced its financial results for the full year ending 31 December, 2022. The company posted exceptional results with software revenue growth at 28 percent year-on-year and cloud revenue growth up 80 percent as existing customers and new customers switch to IFS Cloud.
The 2022 results mark the fifth consecutive year IFS has secured strong double-digit revenue growth, demonstrating unparalleled robustness in its strategy and ability to execute globally. Throughout 2022, cloud and digital technology remained high on company agendas and IFS customers sought to build operational agility and leverage innovation to build competitive advantage.
Since its initial release, IFS Cloud continues to deliver value with an Evergreen model. The twice-yearly release cycle has become an integral part of business as usual with customers adopting regular updates and negating the need for costly upgrades. New customers are experiencing considerably faster time to value with IFS, at an average of 9.5 months from contract to value.
Some of the key milestones for IFS in 2022 included:
- IFS launched its Partner Success programme in Q1 to further underpin and accelerate its partner strategy.
- In March 2022, HG Capital became a significant minority investor in a transaction valuing IFS & WorkWave at $10bn.
- In April 2022, IFS launched Arcwide, a joint venture with BearingPoint designed to accelerate the pace of IFS Cloud deployments.
- IFS retained its leadership positions across core product categories with continued recognition by analyst firms*.
- In July 2022, IFS acquired EAM Software solutions provider Ultimo Software Solutions.
- IFS secured awards** for individual leadership, as well as its products, its innovations and customer experience.
- In September, IFS signed an agreement to sponsor the London Cable Car, as part of a brand activation campaign.
- IFS Unleashed, the rebranded global IFS community event for prospects, customers and partners, took place in October with over 2,500 in-person attendees and thousands more online.
IFS CEO Darren Roos commented: “For IFS, 2022 was a year characterised by acceleration. We increased our headcount to over 5,900 employees, reached a significant landmark in revenue at $1bn and outpaced our competitors by delivering double-digit growth for the 5th consecutive year.” Roos added: “Quarter after quarter, our leadership in capabilities and in time to value enabled us to build on our performance.” Roos concluded: “2023 will be an exciting year as we continue to bring together our employees, our partners and our products and industry expertise across FSM, EAM, and ERP so that our customers can create value faster and deliver their best to their customers when it matters most, at the Moment of Service™.”
IFS Chief Financial Officer, Constance Minc, added, “In 2022, IFS has shown resilience and consistency; despite the macroeconomic headwinds we have accelerated our growth across our key metrics for the group. Growing our cloud revenue at 80 percent year-on-year and our annual recurring revenue at 57 percent year-on-year in challenging market conditions demonstrates a level of robustness and reliability that’s a testament to our relevance and customer focus.”
Throughout the year, IFS has continued to nurture its customer-first culture by strengthening its service organisation and its partner ecosystem, as well as maintaining an active involvement in the work delivered by the IFS Foundation in Sri Lanka, a nation that is home to over 2,200 IFS employees.
Financial and Operational Highlights* for FY 2022, growth YoY:
- FY2022 software revenue was SEK 6.6bn, an increase of 28 percent versus 2021
- FY2022 recurring revenue was SEK6.1bn, an increase of 44 percent versus 2021
- FY2022 net revenue was SEK8.4bn, an increase of 19 percent versus 2021
Additional highlights:
- IFS added over 250 new logos across its core industries, including Väderstad, Konica Minolta, Xcel Energy, and Bosch Thermotechnik.
- The IFS partner Ecosystem grew 65 percent year-on-year and participated in over 50 percent of implementations, with over two-thirds of its largest partners signing up to the Partner Success program.
- *IFS extended its leader status in the Gartner Magic Quadrant for Field Service Management, maintaining this position every year since 2014. Also in 2022, IFS was named a Leader in the IDC MarketScape for SaaS and Cloud-Enabled Manufacturing ERP Applications, a Leader in the IDC MarketScape for Manufacturing Field Service Management Applications, a Leader in the IDC MarketScape for Manufacturing Service Life-Cycle Management, a Leader in the IDC MarketScape for Field Service Management Solutions for Utilities, a Gartner Peer Insights Customer Choice for EAM Applications, and listed #1 in Gartner Global EAM Market Share 2021 By Revenue.
- ** IFS collected a significant number of awards: ERP Software of the Year Nov 2022, Asset Management Product of the Year Nov 2022, The Software Report Darren Roos No1 Top SaaS CEO Oct 2022, The Software Report Marne Martin No2 Top Women in SaaS Nov 2022, Artificial Intelligence Award – Reactive machines: automated planning and scheduling Mar 2022, Cloud Award Sep 2022, Sustainability Award Sep 2022, Excellence in Customer Service Award Apr 2022, Fortress Cyber Security Award Jun 2022, Indirect IT Channel Solutions Mar 2022.
*Financial and Operational reporting will move to Euros from March 2023.
25 Jan 23. Teledyne Technologies Reports Fourth Quarter Results.
- Record quarterly sales of $1,418.2m, an increase of 3.1% compared with last year
- Record quarterly GAAP diluted earnings per share of $4.74 and non-GAAP diluted earnings per share of $4.94
- Record quarterly GAAP operating margin of 19.3%
- Fourth quarter non-GAAP operating margin of 22.4%
- Record annual sales of $5,458.6m, an increase of 18.3% compared with last year
- Record full year GAAP diluted earnings per share of $16.53 and non-GAAP diluted earnings per share of $18.19
- Completed the acquisition of ETM; quarter-end Consolidated Leverage Ratio declined to 2.4x
- Issuing full year 2023 GAAP diluted earnings outlook of $15.80 to $16.10 per share and full year 2023 non-GAAP earnings outlook of $19.00 to $19.20 per share
- Acquired ChartWorld International after year-end on January 3, 2023
Teledyne today reported fourth quarter 2022 net sales of $1,418.2m, compared with net sales of $1,375.7m for the fourth quarter of 2021, an increase of 3.1%. Net income attributable to Teledyne was $226.4m ($4.74 diluted earnings per share) for the fourth quarter of 2022, compared with $161.8m ($3.39 diluted earnings per share) for the fourth quarter of 2021, an increase of 39.9%. The fourth quarter of 2022 included $47.9m of pretax acquired intangible asset amortization expense, $4.0m of pretax income related to the favorable resolution of certain FLIR integration-related costs and $24.1m of acquisition related discrete income tax benefits. Excluding these charges, non-GAAP net income attributable to Teledyne for the fourth quarter of 2022 was $236.1m ($4.94 diluted earnings per share). In the fourth quarter of 2021, Teledyne incurred pretax expenses of $100.0m, which included $51.4m in acquired intangible asset amortization expense, $47.8m in acquired inventory step-up expense and $0.8m of transaction and integration-related costs. In the fourth quarter of 2021, Teledyne also incurred $21.4m of acquisition related discrete income tax benefits. Excluding these charges, non-GAAP net income attributable to Teledyne for the fourth quarter of 2021 was $217.4m ($4.56 diluted earnings per share). Operating margin was 19.3% for the fourth quarter of 2022, compared with 14.2% for the fourth quarter of 2021. Excluding acquisition-related transaction and purchase accounting expenses, non-GAAP operating margin for the fourth quarter of 2022 was 22.4%, compared with 21.5% for the fourth quarter of 2021.
“We were pleased to conclude 2022 with all-time record quarterly and full year sales and earnings per share,” said Robert Mehrabian, Chairman, President and Chief Executive Officer. “During 2022, Teledyne, as many other companies, found itself challenged by the external forces of inflation, a strong dollar and parts shortages. Nevertheless, we continued our long history of navigating these market environments, and we ultimately delivered earnings in excess of our own expectations. Fourth quarter sales growth was 3.1% despite approximately 2.6% of foreign currency translation headwind, and non-GAAP operating margin of 22.4% increased 95 basis points from last year. While we completed the acquisition of ETM, our quarter-end leverage ratio continued to decline. Our acquisition pipeline remains healthy, as evidenced by the recent addition of ChartWorld, whose maritime navigation software and hardware tools bridge a product and technology gap between our Teledyne Marine and Raymarine businesses.”
Full Year
Full year sales for 2022 were $5,458.6m, compared with $4,614.3m for 2021, an increase of 18.3%. Net income attributable to Teledyne was $788.6m ($16.53 diluted earnings per share) for fiscal year 2022, compared with $445.3m ($10.05 diluted earnings per share) for fiscal year 2021, an increase of 77.1%.
Full year 2022 net sales included $593.7m in incremental net sales from current and prior year acquisitions. The full year of 2022 included $201.7m of pretax acquired intangible asset amortization expense, $4.0m of pretax income related to the favorable resolution of certain FLIR integration-related costs and $72.7m of acquisition related discrete income tax benefits. Excluding these charges, non-GAAP net income attributable to Teledyne for the full year of 2022 was $867.8m ($18.19 diluted earnings per share). The full year of 2021 included $149.3m in pretax acquired intangible asset amortization expense, $106.4m in pretax acquired inventory step-up expense, $103.0m of pretax transaction and integration-related costs, $30.6m in pretax bridge loan and debt extinguishment fees and $7.3m of related discrete tax expense. Excluding these charges and related tax matters, non-GAAP net income for 2021 was $746.9m ($16.86 diluted earnings per share). Operating margin was 17.8% for 2022, compared with 13.5% for 2021. Excluding acquisition-related transaction and purchase accounting expenses, non-GAAP operating margin for 2022 was 21.4%, compared with 21.3% for 2021. Full year 2022 reflected net discrete income tax benefits of $86.7m compared with net discrete income tax benefits of $34.7m for 2021.
Review of Operations
Comparisons are with the fourth quarter of 2021, unless noted otherwise. In the current year, gain (loss) on debt extinguishment was presented as a separate line item on the income statement. Prior year amounts were reclassified to conform to current year presentation.
Digital Imaging
The Digital Imaging segment’s fourth quarter 2022 net sales were $806.7m, compared with $809.5m, a decrease of 0.3%. Operating income was $152.0m for the fourth quarter of 2022, compared with $94.1m, an increase of 61.5%.
The fourth quarter of 2022 net sales decrease primarily resulted from lower sales of surveillance and unmanned ground systems for defense applications, partially offset by greater sales of industrial and scientific cameras, X-ray products, and commercial infrared imaging solutions. The increase in operating income was primarily due to lower inventory step-up and acquired intangible amortization expense in the fourth quarter of 2022. The fourth quarter of 2021 included $47.8m in FLIR inventory step-up expense, with no comparable amount in the fourth quarter of 2022. Acquired intangible amortization expense for the fourth quarter of 2022 was $44.1m compared with $46.3m.
Instrumentation
The Instrumentation segment’s fourth quarter 2022 net sales were $326.2m, compared with $302.2m, an increase of 7.9%. Operating income was $79.0m for the fourth quarter of 2022, compared with $66.7m, an increase of 18.4%.
The fourth quarter of 2022 net sales increase resulted from higher sales across all external product lines. Sales of marine instrumentation increased $11.0m, sales of environmental instrumentation increased $10.0m, and sales of test and measurement instrumentation increased $3.0m, respectively. The increase in operating income primarily reflected the impact of higher sales and favorable product mix.
Aerospace and Defense Electronics
The Aerospace and Defense Electronics segment’s fourth quarter 2022 net sales were $177.9m, compared with $163.3m, an increase of 8.9%. Operating income was $52.8m for the fourth quarter of 2022, compared with $40.6m, an increase of 30.0%.
The fourth quarter of 2022 net sales reflected higher sales of $11.9m for defense electronics and $2.7m for aerospace electronics. Operating income in the fourth quarter of 2022 reflected the impact of higher sales and improved margins across most defense electronics product categories.
Engineered Systems
The Engineered Systems segment’s fourth quarter 2022 net sales were $107.4m, compared with $100.7m, an increase of 6.7%. Operating income was $9.3m for the fourth quarter of 2022, compared with $11.2m, a decrease of 17.0%. The fourth quarter 2022 net sales reflected higher sales of $4.7m for energy systems and $2.0m for engineered products. Operating income in the fourth quarter of 2022 primarily reflected the impact of lower margins for electronic manufacturing services products.
Additional Financial Information
Cash Flow
Cash provided by operating activities was $237.7m for the fourth quarter of 2022, compared with $295.6m. The fourth quarter of 2022 reflected greater interest payments due to the timing of fixed rate bond interest and increased inventory purchases compared with the fourth quarter of 2021. Depreciation and amortization expense for the fourth quarter of 2022 was $81.8m compared with $86.2m. Non-cash inventory step-up expense related to FLIR was $47.8m for the fourth quarter of 2021, and there was no comparable amount recorded in the fourth quarter of 2022.
Capital expenditures for the fourth quarter of 2022 were $34.1m compared with $34.0m. Teledyne received $5.2m from the exercise of stock options in the fourth quarter of 2022 compared with $4.0m.
As of January 1, 2023, net debt was $3,282.5m which is calculated as total debt of $3,920.6 m, net of cash and cash equivalents of $638.1m. As of January 2, 2022, net debt was $3,624.7m and included total debt of $4,099.4m, net of cash and cash equivalents of $474.7m. As of January 1, 2023, approximately $1,003.7m was available under the $1.15 bn credit facility, after reductions of $125.0m in outstanding borrowings and $21.3m in outstanding letters of credit. (Source: BUSINESS WIRE)
25 Jan 23. Hexcel Reports 2022 Fourth Quarter and Full Year Results.
- Q4 2022 GAAP diluted EPS of $0.43 and adjusted diluted EPS of $0.40, compared to Q4 2021 GAAP diluted EPS of $0.22 and adjusted diluted EPS of $0.16.
- Q4 2022 Sales were $429m, compared to $360m in Q4 2021.
- FY 2022 GAAP diluted EPS of $1.49 and adjusted diluted EPS of $1.28, compared to FY 2021 GAAP diluted EPS of $0.19 and adjusted diluted EPS of $0.27.
- FY 2022 sales were $1,578 m, compared to $1,325m for FY 2021.
- Free Cash Flow of $97m in FY 2022.
- Quarterly dividend increased 25% to $0.125 from $0.10.
See Table C for reconciliation of GAAP and non-GAAP operating income, net income, earnings per share and operating cash flow to free cash flow. Free cash flow is cash from operations less capital expenditures.
Hexcel Corporation (NYSE: HXL):
Hexcel Corporation (NYSE: HXL) today reported fourth quarter 2022 results including net sales of $429 m and adjusted diluted EPS of $0.40 per share.
Chairman, CEO and President Nick Stanage said, “We delivered the strongest sales quarter of the year as we managed to drive higher production levels to support the continuing robust recovery in the commercial aerospace market and as our business benefits from broad global strength in our space and defense markets. We delivered double-digit adjusted operating margins for the fourth quarter and for fiscal year 2022 as we focus on throughput and operational efficiencies. Based on our growth outlook, we have re-commenced construction to complete a new carbon fiber line at our Decatur, Alabama facility, which we paused at the beginning of 2020. The new line should be aerospace qualified in 2025 and will provide needed capacity based on forecasted growth.”
Mr. Stanage continued, “Our markets are recovering strongly, and we are gaining new business as demand grows for lightweight composites that support enhanced performance while improving fuel efficiency and reducing emissions. Our 2023 financial guidance forecasts double-digit growth in both sales and adjusted earnings per share. Our cash generation profile remains compelling, and we are forecasting free cash flow above $140m in 2023. Across our global footprint, the Hexcel team is focused on innovation and operational excellence to continue to drive shareholder value.”
Markets
Sales in the fourth quarter of 2022 were $429.4m compared to $360.3m in the fourth quarter of 2022.
Commercial Aerospace
- Commercial Aerospace sales of $256.2m increased 28.3% (28.9% in constant currency) for the fourth quarter of 2022 compared to the fourth quarter of 2021 with growth in all the major platforms including the Airbus A350 and A320neo and the Boeing 787 and 737 MAX. Other Commercial Aerospace increased 44.6% for the fourth quarter of 2022 compared to the fourth quarter of 2021. Within Other Commercial Aerospace, business jet sales grew strongly along with growth in regional jets.
Space & Defense
- Space & Defense sales of $126.5m increased 19.5% (22.0% in constant currency) for the quarter compared to the fourth quarter of 2021 with broad global strength across the entire sector.
Industrial
- Total Industrial sales of $46.7m in the fourth quarter of 2022 decreased 14.6% (7.0% in constant currency) compared to the fourth quarter of 2021 as a result of lower wind energy sales.
Consolidated Operations
Gross margin for the fourth quarter of 2022 was 23.1% compared to 19.2% in the fourth quarter of 2021 as higher sales volume drove favorable operating leverage. As a percentage of sales, selling, general and administrative and R&T expenses for the fourth quarter of 2022 were 12.3% compared to 12.2% for the fourth quarter of 2021. Adjusted operating income in the fourth quarter of 2022 was $46.3m or 10.8% of sales, compared to $25.2m, or 7.0% of sales in 2021. Other operating expense for both the fourth quarter of 2022 and 2021 included restructuring costs. The impact of exchange rates on operating income as a percent of sales was favorable by approximately 40 basis points in the fourth quarter of 2022 compared to the fourth quarter of 2021.
FY 2022 Results
Sales for the full year of 2022 were $1,577.7m compared to $1,324.7m for 2021.
Commercial Aerospace (58% of sales)
- Commercial Aerospace sales of $911.8m increased 36.5% (37.4% in constant currency) for 2022 compared to 2021 led by growth from the Airbus A350 and A320neo programs. Other Commercial Aerospace increased 62.9% for 2022 compared to 2021 due to strong growth in business jets.
Space & Defense (29% of sales)
- Space & Defense sales of $465.2m increased 7.0% (8.9% in constant currency) for 2022 as compared to 2021, reflecting strength with fixed-wing aircraft globally, space, Sikorsky CH-53K, and civil helicopters, particularly in Europe. Lower legacy military rotorcraft sales partially offset the sales growth.
Industrial (13% of sales)
- Total Industrial sales of $200.7m decreased 9.4% (2.5% in constant currency) compared to 2021 as growth in recreation and other industrial markets was offset by lower wind energy sales.
Consolidated Operations
Gross margin for 2022 was 22.6% compared to 18.9% in the prior year strengthening on improved cost absorption from higher sales volume, partially offset by inflationary cost impacts. As a percentage of sales, selling, general and administrative and R&T expenses for 2022 were 12.3% compared to 13.6% for 2021. Adjusted operating income for 2022 was $163.3m or 10.4% of sales, compared to $70.0 m, or 5.3% of sales in 2021. Other operating income for 2022 included a pre-tax net gain of $19.4 m from the previously announced sale of a facility in Dublin, California, partially offset by restructuring costs. Other operating expenses for 2021 included expenses primarily related to severance and restructuring. The impact of exchange rates on operating income as a percent of sales was favorable by approximately 30 basis points for 2022 compared to 2021.
Cash and other
- The fourth quarter and full year tax expense for 2022 was $7.4m and $31.6m, respectively. The fourth quarter income tax expense included a tax benefit of $1.1m resulting from a change in the jurisdictional mix of income compared to what was previously projected. The 2022 full year tax expense included a net discrete tax charge of $1.0m primarily resulting from a true up of a deferred tax item partially offset by a discrete tax benefit from the adjustment to a provision based on the finalization of prior year tax returns. The fourth quarter and full year 2021 income tax expense was $4.3m and $5.9m, respectively. The 2021 full year tax expense included a net discrete charge primarily resulting from the revaluation of U.S. and foreign deferred tax liabilities.
- Net cash provided by operating activities for 2022 was $173.1m, compared to $151.7m for 2021. Working capital was a cash use of $72.7m for 2022 compared to $18.3m for 2021. The increase in working capital is principally driven by our decision to hold higher raw material inventory buffer or safety stock to compensate for supply chain disruptions, in order to protect our customers and support their strong demand. The higher level of sales in the quarter also led to an increase in receivables. Capital expenditures on a cash basis were $76.3m for 2022 compared to $27.9m for 2021 with the increase reflecting two previously announced ongoing construction projects, including a new research and technology innovation center in Salt Lake City, Utah and the expansion of Hexcel’s engineered core operations in Morocco. Net cash used for investing activities for 2022, included the net proceeds of $21.2m received from the sale of a facility in Dublin, California. Free cash flow was $96.8m for 2022 compared to $123.8m for 2021. Free cash flow is defined as cash generated from operating activities less cash paid for capital expenditures. Capital expenditures on an accrual basis were $69.8m for 2022 compared to $41.4m in 2021.
- The Company did not repurchase any common stock during 2022. The remaining authorization under the share repurchase program on December 31, 2022, was $217m.
- As announced today, the Board of Directors declared a quarterly dividend of $0.125 per share payable to stockholders of record as of February 10, 2023, with a payment date of February 17, 2023.
2023 Guidance
- Sales of $1.725bn to $1.825bn
- Adjusted diluted earnings per share of $1.70 to $1.90
- Free cash flow of greater than $140m
- Accrual basis capital expenditures of approximately $90m
- Underlying effective tax rate is estimated to be 23% (Source: BUSINESS WIRE)
23 Jan 23. Crane Holdings, Co. Reports 2022 Results.
Fourth Quarter 2022 Highlights
- Continued progress towards previously announced separation; Remain on-track to complete separation in early April 2023.
- Fourth quarter GAAP earnings per diluted share (EPS) increased 53% to $1.87 per share compared to 2021; Fourth quarter adjusted EPS increased 63% to a record $2.13 per share compared to 2021.
- Fourth quarter GAAP operating profit margin was 15.7%, an increase of 440 basis points from last year; adjusted operating margin was a record 18.6% compared to 12.0% last year.
- Fourth quarter core sales increased 11% compared to last year, core orders increased 15%, and core backlog increased 28%.
- Crane issues guidance for 2023 for post-separation Crane Company and Crane NXT; guidance details are included in the presentation that accompanies this earnings release that is available on our website at www.craneco.com under Investors, Events & Presentations.
Crane Holdings, Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, reported fourth quarter and full year 2022 financial results.
Max Mitchell, Crane Holdings, Co. President and Chief Executive Officer stated: “Another outstanding quarter of execution by our global team, along with continued progress toward our planned separation. Preparations for the separation are progressing smoothly, and we remain on-track for completion in April 2023. Both organizations continue to build out strong teams that will position both Crane Company and Crane NXT to deliver consistent, differentiated execution. Further, we continue to believe that the transaction will permit each post-separation company to optimize its investments and capital allocation policies to further accelerate growth and unlock shareholder value.”
Mr. Mitchell continued: “Operationally, we had a very strong fourth quarter, with record quarterly adjusted EPS of $2.13 and a record adjusted operating margin of 18.6% driven, in part, by 11% core sales growth with strength across all three of our global strategic growth platforms. Leading indicators also remain strong, with core orders up 15% and core backlog up 28% compared to last year. However, despite strength of those metrics, based on broader macroeconomic trends and general uncertainty, we are planning for somewhat constrained and mixed activity in 2023 paired with gradual supply chain relief throughout the year. That said, we are confident that we are positioned to drive above-market growth in any potential environment, and we are prepared to respond quickly to capitalize on any demand above our current outlook.”
Full Year 2022 Results
Full year 2022 GAAP EPS of $7.18 compared to $7.36 in the prior year. Full year 2022 adjusted EPS of $7.88 increased 15% compared to $6.88 in the prior year. (Please see the attached Non-GAAP Financial Measures tables for a detailed reconciliation of reported results to adjusted measures.)
Full year 2022 sales were $3,375m, a decrease of $33m, or 1%, compared to full year 2021. Core sales growth of $220m, or 6%, was more than offset by the $139m, or 4%, impact from the May divestiture of Crane Supply, and a $114m, or 3%, impact from unfavorable foreign exchange.
Full year order growth of 5% was driven by 13% core order growth, partially offset by a 4% divestiture impact and a 4% impact from unfavorable foreign exchange. Full year backlog growth of 23% was driven by 28% core backlog growth, partially offset by a 4% impact from unfavorable foreign exchange and a 2% divestiture impact.
Full year GAAP operating profit margin declined to 10.9%, from 15.5% last year, driven primarily by a loss on the August divestiture of asbestos-related assets and liabilities and related items. Full year 2022 adjusted operating profit margin was 17.7%, compared to 15.5% last year, driven primarily by pricing actions and productivity that more than offset inflation and the impact of lower volumes. Full Year 2022 Cash Flow and Other Financial Metrics
Cash used for operating activities in 2022 was $152m, compared to cash provided by operating activities of $499m in 2021. Cash used for operating activities in 2022 included outflows of $605m related to the August divestiture of asbestos-related assets and liabilities and other portfolio actions. Capital expenditures in 2022 were $58m, compared to $54m last year. Free cash flow (cash provided by operating activities less capital spending) in 2022 was negative $210m, compared to positive $445m last year. Adjusted free cash flow (free cash flow less the cash outflows associated with the divestiture of asbestos-related assets and liabilities and other portfolio actions) in 2022 was $395m, compared to $445m last year.
The Company held cash of $658 m as of December 31, 2022, compared to $479m as of December 31, 2021. Total debt was $1,243 m as of December 31, 2022, compared to $842 m as of December 31, 2021, with the increase related to the August asbestos divestiture transaction.
Fourth Quarter 2022 Results
Fourth quarter 2022 GAAP EPS of $1.87 compared to EPS of $1.22 in the fourth quarter of 2021. Fourth quarter 2022 adjusted EPS was $2.13, compared to $1.31 in the fourth quarter of 2021.
Fourth quarter 2022 sales were $824m, a slight decline compared to $825 m in the fourth quarter of 2021. Core sales growth of $90m, or 11%, was more than offset by a $58m, or 7%, divestiture impact, and a $33m, or 4%, impact from unfavorable foreign exchange.
Core year-over-year order growth of 15% in the fourth quarter was partially offset by a 7% divestiture impact and a 5% impact from unfavorable foreign exchange. Total year-over-year backlog growth of 23% was driven by 28% core backlog growth, partially offset by a 4% impact from unfavorable foreign exchange and a 2% divestiture impact.
Fourth quarter GAAP operating profit margin was 15.7%, compared to 11.3% last year, with the increase driven primarily by pricing actions, and to a lesser extent productivity and higher volumes. Fourth quarter 2022 adjusted operating profit margin was 18.6%, compared to 12.0% last year.
Fourth Quarter 2022 Segment Results
All comparisons detailed in this section refer to operating results for the fourth quarter 2022 versus the fourth quarter 2021.
Aerospace & Electronics
Sales of $181m increased $23m, or 15%, compared to the prior year. GAAP operating profit margin of 19.8% compared to 13.1% last year, driven primarily by pricing actions, higher volumes, and productivity. Adjusted operating profit margin of 20.6% compared to 13.1% last year. Aerospace & Electronics’ core orders increased 45% in the quarter compared to the prior year, and its order backlog was $613m as of December 31, 2022 compared to $592m as of September 30, 2022, and $460m as of December 31, 2021.
Process Flow Technologies
Sales of $252m decreased $47m, or 16%, driven by a $58m, or 19%, impact from the divestiture of Crane Supply and a $14m, or 5%, impact from unfavorable foreign exchange, partially offset by $25m, or 8%, of core growth. Operating profit margin increased to 14.8%, compared to 13.9% last year, primarily reflecting pricing actions and productivity, partially offset by unfavorable mix and lower volumes. Adjusted operating margin was 16.1%, compared to 14.3% last year. Process Flow Technologies’ orders decreased 17% in the quarter compared to the prior year, with 9% core order growth more than offset by a 21% divestiture impact and a 5% impact from unfavorable foreign exchange. Order backlog increased 3% in the quarter compared to the prior year, with 14% core backlog growth partially offset by an 8% divestiture impact and a 4% impact from unfavorable foreign exchange. Process Flow Technologies order backlog was $369m as of December 31, 2022, $354m as of September 30, 2022, and $358m as of December 31, 2021.
Payment & Merchandising Technologies
Sales of $338m increased $25m, or 8%, compared to the fourth quarter of 2021, driven by a $44m, or 14%, increase in core sales, partially offset by a $19m, or 6%, impact from unfavorable foreign exchange.
Operating profit margin increased to 24.1%, from 19.1% last year, primarily reflecting pricing actions, higher volumes and productivity. Adjusted operating profit margin of 25.9% compared to 18.5% last year. Payment & Merchandising Technologies’ orders increased 4% in the quarter compared to the prior year, with 12% core order growth partially offset by an 8% impact from unfavorable foreign exchange. Order backlog increased 29% compared to the prior year, with 36% core backlog growth, partially offset by a 7% impact from unfavorable foreign exchange. Payment & Merchandising Technologies’ order backlog was $566 m as of December 31, 2022, $500m as of September 30, 2022, and $438 m as of December 31, 2021.
Newly appointed Crane NXT President and CEO Aaron Saak commented: “I am incredibly excited about the opportunity to share our path for value creation with investors at our upcoming Investor Day event. Along with my new team, I am honored to be the steward of these incredible businesses as we leverage global secular growth trends while pursuing new vectors for accelerated growth.”
Engineered Materials
Sales of $52m decreased $2m, or 4%, compared to the prior year. Operating profit margin decreased to 11.0%, from 11.3%. Adjusted operating profit margin increased to 11.8%, from 11.3%. (Source: BUSINESS WIRE)
23 Jan 23. Airbus’ High Altitude Platform Station (HAPS) Connectivity Business becomes AALTO HAPS. Airbus’ record-breaking High Altitude Platform Station (HAPS) connectivity business has become AALTO HAPS (AALTO) ahead of an entry into service by the end of 2024.
In 2022, following the successful connectivity flight trial completed a year earlier for NTT Docomo using its lightweight Zephyr aircraft, Airbus carved-out the business as a 100% owned subsidiary to evolve the Zephyr programme into a fully-fledged services business.
The unveiling of the AALTO brand is a significant step towards that objective. AALTO will deliver mobile connectivity and earth observations solutions for commercial and government customers, using the record-breaking 100% solar-electric Zephyr platform.
Samer Halawi, AALTO’S CEO said: “AALTO’s Zephyr aircraft is the only HAPS platform that delivers long-lasting, environmentally-friendly low latency 5G Direct-to-Device (D2D) connectivity solutions, allowing MNOs (mobile network operators) to extend their coverage in a profitable way to rural and remote areas. Furthermore, our earth observation solutions will support the management of forest fires, the protection of borders, and will enable precision agriculture, amongst other applications. For AALTO, the future is stratospheric”.
The Zephyr platform has evolved dramatically over the past 20 years, with development accelerating in the past few years. With deep expertise from Airbus, the design of the aircraft has enabled it to break multiple world records, most importantly for unrefuelled flight duration. On its last flight campaign in 2022, Zephyr flew for over 64 days, non-stop, in the stratosphere, at around 70,000 feet (21,336 metres) and for a distance that is equivalent to two thirds of the distance to the Moon. Zephyr has established itself as the world’s leading HAPS platform, and to this day remains the only fixed-wing HAPS to have proven day and night longevity in the stratosphere.
20 Jan 23. Kaman to close K-MAX production line. Kaman Corporation announced it will end the K-MAX production line, citing “low demand and variation in annual deliveries, coupled with low profitability and large working capital inventory requirements”, according to an 18 January statement. The line is scheduled to close in the first quarter of the fiscal year (FY) 2023, after a 60-platform production run of the specialised cargo helicopter. In 2010, the US Marine Corps (USMC) purchased two K-MAXs, modified by Lockheed Martin to be optionally manned and designated CQ-24A. From 2011 to 2014, the USMC deployed the K-MAXs to southern Afghanistan, where they flew thousands of resupply missions to deliver 4.5mlb (2.04m kg) of cargo to isolated outposts, according to Lockheed Martin. Though retired after their return from Afghanistan, the USMC reactivated the K-MAXs in 2021 “to support future unmanned efforts”, said Kaman at the time. The USMC had not responded to Janes questions on K-MAX at the time of publication. (Source: Janes)
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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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