Third Quarter Conference Call -- Fiscal 2008 Third Quarter Conference Call – Fiscal 2008
07 / 25 / 2008Highlights
Recent Conference Calls
The biggest quarter-to-quarter change is in the motion simulator business. Sales in the quarter were up over $10 million, or 92%, to a new total of over $21 million. We have robust deliveries underway to CAE and Flight Safety, but we're also delivering to Rockwell Collins and a number of other customers. The simulator market is an excellent example of sales growth coming from increased scope of supply. Many years ago, we sold only servovalves for use on customer supplied hydraulic actuators. Sales per simulator measured in tens of thousands. We then moved up to selling hydraulic servoactuators. We now supply a complete electric actuation system, including control electronics, and sales per simulator are measured in hundreds of thousands.
In power gen, sales were up almost $4 million to $13.8 million. Much of the growth is in Asia where we're delivering controls for gas turbines, steam turbines, and wind turbines to customers like Mitsubishi Heavy Industries, Toshiba, and Fuji. We're expecting that wind turbines will become an increasingly important market for our Company. In mid-June, we announced our investment in LTi REEnergy GmbH. This company specializes in the design and manufacture of servocontrollers and complete drive systems for rotor blade controls on electric wind turbines. The company has already delivered controls for over 7,500 wind turbine systems. In June, we acquired 40% ownership of the company with the expectation that we'll acquire the remaining 60% in 12 months time. This two-step process will allow the current owners to relocate the product line into a stand-alone facility, which won't need to share services with other of the companies that they own. In the fourth quarter of '08, our investment in LTi should provide about $.01 per share.
The metal-forming market continues its robust growth. Sales were up 35% to $13.9 million total. In Asia, there has been a continuing increase in auto-producing capacity. Japan built more cars last year than in any year in recent history. In Europe, we're providing controls for machines that handle scrap material and powdered metal.
Sales of gauge controls for steel mills continue their growth pattern. The quarter's sales were up 31% to $10.8 million. Major customers in Europe are Danieli in Italy, Thyssen, Krupp in Germany and NKMZ in the Ukraine. In Asia, our major customers are Mitsubishi and Hitachi.
Controls for plastic-making machinery continues to be our largest market. Sales were up 15% to $21.7 million. In this market unit volumes are relatively stable in both Europe and Asia and much of the sales increase was currency driven.
Lastly, we're happy to report that we had an excellent increase in aftermarket sales. A 33% increase took aftermarket revenues to $13.5 million.
We're asked regularly these days if we've seen any slowdown in our Industrial markets. One might expect that given what's happening in the US auto industry that ultimately we'd feel the effect in controls for metal-forming presses or plastic-making machinery. We're certainly on the watch for signs of weakness, but today we're able to report that incoming orders are strong. Because of the strong order book, we're forecasting a fourth quarter for Industrial of $135 million in spite of the fact that many of our European customers take much of August off. That forecast would result in an Industrial total for '08 of $531 million, a 22% increase over sales in '07.
Industrial Margins
Margins in our Industrial business continue to set new records. Margins for the quarter were 14.4%, up from 13.8% a year ago. This excellent margin performance is the result of a favorable product mix, improved efficiency in our manufacturing operations, and the benefit of increased volume. On a year-to-date basis, our Industrial margins are 14.3% and we're projecting a continuation of that level for the balance of '08.
Industrial Systems Forecast for '09
We typically forecast Industrial sales in a range around a midpoint. The range is intended to reflect the uncertainty of the Industrial market through a period that ends fourteen months from now and to reflect the possibility of currency fluctuation. For fiscal '09, we're currently forecasting sales in the range of $643 million to $663 million. Using the middle of the range, that's a 23% increase over our current forecast for '08. It does include $46 million of revenue that will be consolidated into our results when we complete the acquisition of LTi REEnergy. We expect that that will happen in June of 2009 and we'll have about four months of LTi sales. Our forecast midpoint not including LTi is $607 million, an increase of $76 million, or 14%, over fiscal '08. Let me provide a little color to that projection.
In power gen, sales were up almost $4 million to $13.8 million. Much of the growth is in Asia where we're delivering controls for gas turbines, steam turbines, and wind turbines to customers like Mitsubishi Heavy Industries, Toshiba, and Fuji. We're expecting that wind turbines will become an increasingly important market for our Company. In mid-June, we announced our investment in LTi REEnergy GmbH. This company specializes in the design and manufacture of servocontrollers and complete drive systems for rotor blade controls on electric wind turbines. The company has already delivered controls for over 7,500 wind turbine systems. In June, we acquired 40% ownership of the company with the expectation that we'll acquire the remaining 60% in 12 months time. This two-step process will allow the current owners to relocate the product line into a stand-alone facility, which won't need to share services with other of the companies that they own. In the fourth quarter of '08, our investment in LTi should provide about $.01 per share.
The metal-forming market continues its robust growth. Sales were up 35% to $13.9 million total. In Asia, there has been a continuing increase in auto-producing capacity. Japan built more cars last year than in any year in recent history. In Europe, we're providing controls for machines that handle scrap material and powdered metal.
Sales of gauge controls for steel mills continue their growth pattern. The quarter's sales were up 31% to $10.8 million. Major customers in Europe are Danieli in Italy, Thyssen, Krupp in Germany and NKMZ in the Ukraine. In Asia, our major customers are Mitsubishi and Hitachi.
Controls for plastic-making machinery continues to be our largest market. Sales were up 15% to $21.7 million. In this market unit volumes are relatively stable in both Europe and Asia and much of the sales increase was currency driven.
Lastly, we're happy to report that we had an excellent increase in aftermarket sales. A 33% increase took aftermarket revenues to $13.5 million.
We're asked regularly these days if we've seen any slowdown in our Industrial markets. One might expect that given what's happening in the US auto industry that ultimately we'd feel the effect in controls for metal-forming presses or plastic-making machinery. We're certainly on the watch for signs of weakness, but today we're able to report that incoming orders are strong. Because of the strong order book, we're forecasting a fourth quarter for Industrial of $135 million in spite of the fact that many of our European customers take much of August off. That forecast would result in an Industrial total for '08 of $531 million, a 22% increase over sales in '07.
Industrial Margins
Margins in our Industrial business continue to set new records. Margins for the quarter were 14.4%, up from 13.8% a year ago. This excellent margin performance is the result of a favorable product mix, improved efficiency in our manufacturing operations, and the benefit of increased volume. On a year-to-date basis, our Industrial margins are 14.3% and we're projecting a continuation of that level for the balance of '08.
Industrial Systems Forecast for '09
We typically forecast Industrial sales in a range around a midpoint. The range is intended to reflect the uncertainty of the Industrial market through a period that ends fourteen months from now and to reflect the possibility of currency fluctuation. For fiscal '09, we're currently forecasting sales in the range of $643 million to $663 million. Using the middle of the range, that's a 23% increase over our current forecast for '08. It does include $46 million of revenue that will be consolidated into our results when we complete the acquisition of LTi REEnergy. We expect that that will happen in June of 2009 and we'll have about four months of LTi sales. Our forecast midpoint not including LTi is $607 million, an increase of $76 million, or 14%, over fiscal '08. Let me provide a little color to that projection.
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