Chief Executive Officer Comments
Mr. Berges commented, “This was another strong quarter, especially in commercial aerospace as we benefited from increased airplane build rates and the ramp-up of new programs. Solid gross margin performance coupled with our good operating expense control efforts, resulted in a 14% operating margin (our highest in history) and a 39% increase in adjusted diluted EPS compared to last year.”
Looking ahead, Mr. Berges said, “Thanks to the strong first half of the year and our current outlook, we are increasing our 2011 adjusted diluted EPS guidance to $1.05 - $1.12 (from $0.95 - $1.05). We are also raising our sales guidance for the year to $1,325 million - $1,375 million (from $1,275 million - $1,350 million).”
- Commercial Aerospace sales of $207.8 million increased 29.1% (26.7% in constant currency) for the quarter as compared to the second quarter 2010. Revenues attributed to new aircraft programs (A380, A350, B787, B747-8) increased more than 30% versus the same period last year and continue to comprise more than 25% of Commercial Aerospace sales. Airbus and Boeing legacy aircraft related sales for the quarter were up over 25% compared to the second quarter of 2010 as we see the additional demand of upcoming line-rate increases.
- Sales to “Other Commercial Aerospace,” which include regional and business aircraft customers, were up over 20% compared to the same period last year, maintaining their improved level of the first quarter of 2011. We are encouraged with the modest recovery in this sub-market.
- Space & Defense sales of $81.7 million were 2.9% higher (0.2% in constant currency) than the second quarter of 2010. We continue to benefit from rotorcraft related growth as new programs and blade retrofit programs are increasingly composites based.
- Total Industrial sales of $64.2 million for the second quarter of 2011 were 0.8% lower (8.9% in constant currency) than the second quarter of 2010. Wind sales were down about 10% from the same period last year, but up more than 10% sequentially and remained in line with the average of the last twelve months.
- Gross margin was 24.6% of net sales for the quarter as compared to 25.7% in the second quarter of 2010. This year’s results include increased spending for new line start-ups, higher acrylonitrile costs and the disruption caused by April’s Decatur, Alabama tornado. Selling, general and administrative expenses were flat compared to last year, but were 4% lower in constant currency. Combined with the higher sales volume, adjusted operating income was 14% for the quarter compared to 13.3% for the second quarter of 2010.
- The tax provision was $9.3 million for the second quarter of 2011, an effective tax rate of 20%. The current quarter included the release of $5.5 million of reserves primarily for uncertain tax positions as a result of an audit settlement. Excluding this benefit, our effective tax rate would have been 31.8%, in line with our guidance for the year. Last year’s second quarter tax provision was $10.6 million, a 31.7% effective tax rate.
- Free cash flow for the first half of 2011 was $9.5 million versus $11.6 million in the first half of 2010, as higher earnings and lower working capital increases were offset by increased capital spending. Free cash flow is defined as cash provided from operating activities less cash paid for capital expenditures. Total debt, net of cash as of June 30, 2011 was $195.5 million, a decrease of $19.5 million from December 31, 2010. Our accrual based capital expenditures were $55.1 million for the first half of 2011, and we still expect these expenditures for 2011 to be $150 - $175 million. We target free cash flow to be break-even by the end of the year.
- Interest expense for the second quarter was $2.9 million compared to $7.1 million last year. The decrease reflects the lower borrowing rate as a result of the July 2010 refinancing and the February 1, 2011 bond redemption, as well as lower outstanding debt.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV