Third Quarter Conference Call -- Fiscal 2008
07 / 25 / 2008Highlights
Recent Conference Calls
Cash flow from operations was $38 million, continuing the pattern of improvement we have seen over the last couple of quarters. Working capital growth continued to moderate, helped by several customer advance payments received in the quarter. Capital expenditures were $22 million in Q3 while depreciation and amortization was $16 million. Interest payments totaled $5 million while our cash tax payments were $14 million.
We are maintaining our forecast for free cash flow for the year at positive $5 million. We believe our cash flow from operations will be slightly stronger than previously anticipated at $100 million balanced by higher capital expenditures of $95 million. I would remind you that we continue to assume that we will be successful in collecting $20 million from Boeing for our work on the 787.
Financing
In June we sold $200 million of High Yield bonds at a 7.25% interest rate. This follows the $150 million expansion of our revolving credit facility in the second quarter. Given the current turmoil in the credit markets we decided to avail ourselves of funds when the opportunities presented themselves. We now feel very comfortable that we have sufficient funds available to continue our internal growth and our acquisition strategy over the coming years.
Taxes
Our tax rate in the quarter was 29.6%. The rate was helped by the conclusion of our analysis for the 2007 R&D tax credit. For the year we are projecting a tax rate of 31.3%.
Other Items
Our non-cash stock compensation expense in the quarter was $1.4 million. Contract reserves increased by $2 million over the prior quarter, driven by the additional cost estimates in our aircraft book of business. At the end of March, our net debt to total capitalization stood at 38.5%.
Forecast for Fiscal '09
For fiscal '09 we are projecting an improvement in free cash flow to $55 million, a 40% conversion ratio. Stronger earnings, combined with better working capital utilization will drive this improvement. Capital expenditures will continue at the same level as fiscal '08, although as a percent of sales they will decrease by approximately 50 basis points. Depreciation and amortization will be $72 million.
We are anticipating a tax rate of 28.3% in '09. This rate reflects the benefits of implementing some international tax planning strategies, continued R&D tax credits as well as benefits from some foreign tax loss carry-forwards.
We are maintaining our forecast for free cash flow for the year at positive $5 million. We believe our cash flow from operations will be slightly stronger than previously anticipated at $100 million balanced by higher capital expenditures of $95 million. I would remind you that we continue to assume that we will be successful in collecting $20 million from Boeing for our work on the 787.
Financing
In June we sold $200 million of High Yield bonds at a 7.25% interest rate. This follows the $150 million expansion of our revolving credit facility in the second quarter. Given the current turmoil in the credit markets we decided to avail ourselves of funds when the opportunities presented themselves. We now feel very comfortable that we have sufficient funds available to continue our internal growth and our acquisition strategy over the coming years.
Taxes
Our tax rate in the quarter was 29.6%. The rate was helped by the conclusion of our analysis for the 2007 R&D tax credit. For the year we are projecting a tax rate of 31.3%.
Other Items
Our non-cash stock compensation expense in the quarter was $1.4 million. Contract reserves increased by $2 million over the prior quarter, driven by the additional cost estimates in our aircraft book of business. At the end of March, our net debt to total capitalization stood at 38.5%.
Forecast for Fiscal '09
For fiscal '09 we are projecting an improvement in free cash flow to $55 million, a 40% conversion ratio. Stronger earnings, combined with better working capital utilization will drive this improvement. Capital expenditures will continue at the same level as fiscal '08, although as a percent of sales they will decrease by approximately 50 basis points. Depreciation and amortization will be $72 million.
We are anticipating a tax rate of 28.3% in '09. This rate reflects the benefits of implementing some international tax planning strategies, continued R&D tax credits as well as benefits from some foreign tax loss carry-forwards.
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