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Telephonics Corporation is well positioned for future growth, developing innovative solutions to satisfy emerging requirements in the defense, industrial, and international markets. For example, Telephonics is currently building next generation, totally secure, all-digital intercommunications systems required by the U.S. Department of Defense’s networked information technology warfare operations strategy. These advanced systems will transform the manner in which information is gathered and disseminated. A substantially improved military situational awareness across all services will result through better and faster access to critical information which will ultimately lead to greater mission success.
We hold leading market positions for maritime surveillance radar. As the maritime surveillance radar supplier of choice for the United States Coast Guard, Telephonics is developing a customized lightweight imaging radar under a program with Lockheed Martin. This system will be integrated on the Coast Guard’s HV-911 Vertical Takeoff Unmanned Aerial Vehicle, pictured above. The radar will provide the HV-911 with maritime surveillance, weather avoidance and search and rescue capabilities.
Net sales for the first quarter of fiscal 2005 increased to $340,174,000, up from $338,502,000 for the first quarter of last year. Income before income taxes was $19,555,000 compared to $25,658,000 last year. Net income was $10,452,000
in the current quarter compared to $13,115,000 last year. Diluted earnings per share for the quarter was $.34 compared to $.41 in last year’s first quarter.
Operating results in the
first quarter of fiscal 2005 reflected continued increases in raw material costs for both the specialty plastic films and garage doors segments. Higher selling prices in both segments moderated the effect of the raw material cost increases, but did not fully recover them. In garage doors, selling price increases to pass along increased raw material (steel) costs and favorable product mix resulted in higher net sales. Garage doors’ profitability was negatively impacted primarily by the net effect of the raw material cost increases. Specialty
plastic films experienced
reduced unit volume related to product design changes by its major customer that
were partly offset by higher selling prices due to raw material (resin) cost increases and the effect of a weaker U.S. dollar on foreign operations. Specialty plastic films’ profitability in the quarter was unfavorably impacted by the unit volume reduction and the effect
of the raw material cost increases. Lower sales and profits in installation services reflected the effects
of increased competition,
a weaker construction environment in certain of its markets and narrower margins due to higher costs of products with significant steel content (garage doors and fireplaces). The electronic information and
communication systems segment, Telephonics, reflected higher sales and profits principally due to growth in defense and international production programs.
The company also announced that Telephonics received two contract awards valued in excess of $7.3 million from Lockheed Martin to
develop radar systems for the United States Coast Guard’s CN-235 Maritime Patrol Aircraft and the HV-911 Vertical Takeoff Unmanned Aerial Vehicle.
The first contract award is for development of
an advanced version of Telephonics’ APS-143 radar, designated the APS-143C(V)3. When fielded, this high performance radar will be a major element of the CN-235 Maritime Patrol Aircraft. This flexible and versatile mission system can be adapted to any other fixed wing aircraft utilized by the Coast Guard.
The second contract award is for a customized version of Telephonics’ RDR-1700B lightweight imaging radar, which will be integrated on the Coast Guard’s HV-911 Vertical Takeoff Unmanned Aerial Vehicle.
The contract awards span an eighteen-month time
period, covering system development, non-recurring engineering, and the first engineering development models for the CN-235
MPA and the HV-911. The contracts were awarded under Deepwater, a critical multi-year, multi-billion
dollar program to modernize and replace the Coast Guard’s aging ships and aircraft, and improve command and control and logistics systems. It is the largest recapitalization effort in the history of the Coast Guard.
Cash flow from operations was $9,000,000 for the quarter, which together with existing cash balances, funded capital expenditures of $17,000,000, principally
for the specialty plastic films segment capital expansion programs.
Also, during the quarter $7,000,000 was used to
acquire approximately 300,000 shares of the company’s common stock under its buyback program. Additional purchases will be made from time to time, depending on market conditions, at prices deemed appropriate by management.
We continue to utilize the company’s financial resources to expand operations and to fund the stock repurchase program. While we have some operational issues to resolve, we are optimistic regarding the growth opportunities available to our businesses.
Harvey R. Blau
Chairman of the Board
Robert Balemian
President |
