Press release·01/24/2025 20:31:07

Financial Performance Overview

The company has reported its financial results for the first quarter of fiscal year 2025. Overall, the company saw solid revenue growth and profitability, though there were some mixed results across its business segments.

Total net sales increased 6% in the first quarter to $910 million, driven by strong demand in the Commercial Aircraft and Military Aircraft segments. However, the Industrial segment saw a 7% decline in sales due to the impact of portfolio shaping activities. Gross margin decreased slightly to 26.6% from 27.2% in the prior year quarter, impacted by an unfavorable sales mix and a warranty expense in Commercial Aircraft.

Operating profit increased across the Space and Defense, Military Aircraft, and Commercial Aircraft segments, but declined in Industrial due to restructuring charges. The company’s net earnings grew 11% to $53 million, or $1.64 per diluted share. The twelve-month backlog remained relatively flat at $2.5 billion.

Segment Performance

Space and Defense The Space and Defense segment saw an 8% increase in net sales to $248 million, driven by higher demand across both the defense and space markets. Operating profit increased 13% to $29 million, with the operating margin improving to 11.5% from 11.0% in the prior year quarter. The sales growth and improved profitability reflect the segment’s strong positioning in key defense and space programs.

Military Aircraft Military Aircraft net sales increased 15% to $213 million, with a 17% rise in operating profit to $23 million. The segment benefited from increased activity on the FLRAA program and lower research and development expenses, though this was partially offset by an unfavorable sales mix. The operating margin improved to 10.7% from 10.5% in the prior year.

Commercial Aircraft Commercial Aircraft net sales grew 14% to $221 million, with a 17% increase in operating profit to $24 million. The segment saw strong growth in both commercial OEM and aftermarket sales, though this was partially offset by an $8 million out-of-period warranty expense. The operating margin improved to 11.0% from 10.6% in the prior year quarter.

Industrial The Industrial segment experienced a 7% decline in net sales to $228 million, with operating profit decreasing 12% to $25 million. The sales decline was driven by the impact of portfolio shaping activities, particularly in industrial automation. Excluding the impact of restructuring charges, the adjusted operating margin improved to 13.2% from 12.6% in the prior year, reflecting the benefits of the company’s simplification initiatives.

Liquidity and Capital Resources

Cash flow from operations decreased significantly in the first quarter of 2025 compared to the prior year, primarily due to higher working capital requirements. Net cash used by operating activities was $132 million, compared to $60 million of cash provided in the prior year quarter.

Investing activities used $19 million of cash, including $33 million of capital expenditures partially offset by $13 million of proceeds from business divestitures. Financing activities provided $163 million of cash, mainly from $230 million of net borrowings on the company’s credit facilities.

At the end of the quarter, the company had $74 million in cash and cash equivalents, with $64 million held by foreign subsidiaries. The company has access to a $1.1 billion revolving credit facility, of which $515 million was unused at the end of the quarter. The company also has a $500 million senior notes offering and a $125 million receivables financing program.

The company remains in compliance with all covenants under its financing arrangements. It continues to focus on maintaining a balanced approach to capital allocation, including investing in organic growth, pursuing strategic acquisitions, and returning capital to shareholders through dividends and share repurchases.

Economic Conditions and Market Trends

The company operates across the aerospace and defense and industrial markets, which have seen mixed trends. In aerospace and defense, the defense market has benefited from increased military spending, while the commercial aircraft market is aligning with customer production plans. Within the industrial markets, the company has seen stronger order demand in areas like industrial automation, simulation and test, and energy.

A common theme across the company’s markets is the continued demand for technologically advanced products. In aerospace and defense, the company is focused on embedding its technologies within high-priority military programs and leveraging its large installed base to drive aftermarket sales. In the industrial markets, the company is benefiting from advances in medical technology and the need for precision control components and systems.

The company’s foreign currency exposure is relatively limited, with about one-sixth of sales denominated in foreign currencies. During the first quarter, foreign currency rates were generally flat compared to the prior year period, having minimal impact on the company’s results.

Outlook and Strategic Initiatives

Looking ahead, the company remains cautiously optimistic about its prospects, though it acknowledges the potential risks and uncertainties in its operating environment. The company is focused on executing its long-term strategies centered around pricing and simplification initiatives.

The pricing initiatives aim to ensure the company receives fair value for the technology and solutions it provides to customers. The simplification initiatives, including portfolio shaping, footprint rationalization, and investments in automation, are intended to improve operating efficiency and align the business with current and future market demands.

The company also plans to continue investing in organic growth opportunities, particularly in anticipation of several significant programs that are expected to drive long-term revenue growth in the coming years. Acquisitions and strategic partnerships will also be explored to expand the company’s capabilities and market reach.

Returning capital to shareholders remains a priority, with the company committed to its dividend policy and ongoing share repurchase program. The company believes it can create long-term value for shareholders through a balanced approach to capital allocation.

Conclusion

Overall, the company delivered a solid financial performance in the first quarter of fiscal year 2025, with revenue growth and improved profitability in key segments. However, the company faces some headwinds, particularly in the Industrial segment, and must navigate a complex and uncertain operating environment.

The company’s focus on pricing, simplification, and strategic investments positions it well to capitalize on growth opportunities in its aerospace, defense, and industrial markets. By maintaining a balanced approach to capital allocation and continuing to innovate, the company aims to drive long-term shareholder value.