By Ann Roosevelt
Northstar Aerospace Inc.’s subsidiary, Northstar Aerospace (Canada) Inc. yesterday announced it received a four year, potential $26 million contract from Boeing [BA] to complete the development and flight certification of an innovative transmission that will be used in the Army’s Block III AH-64D Apache Longbow helicopter modernization program.
The contract provides for annual funding awards. Northstar received individual contracts of more than $3 million for the past two fiscal years, the company said. (Defense Daily, March 1, 2005).
“This contract will allow Northstar to complete the development work on the innovative transmission technology that will be used in the U.S. Army’s Block III AH-64D Apache Longbow helicopter modernization program, Mark Emery, president and CEO Northstar, said in a statement. “The opportunity to support the Block III program is significant to Northstar due to its revenue potential and longer-term value to position Face Gear technology as the industry standard for transmission design.”
The Apache Block III modernization program includes the development, test and certification of drive system components. It is expected to lead to production of transmission kits for 634 aircraft with deliveries beginning in 2011.
In 2006, Boeing and the Army signed the system development and demonstration phase contract valued at more than $600 million.
The program will be the first aerospace application of a transmission using Face Gear technology. Face Gears, in a split-torque design, facilitate more horsepower without the penalty of added weight.
Boeing designed and developed the Face Gear split-torque application. Northstar developed the supporting manufacturing technology. Northstar holds manufacturing patents for Face Gear technology.
Also yesterday, Northstar Aerospace reported record revenue for the third consecutive quarter of 2007. Revenue totaled $41.7 million for the three months ended Sept. 30, 2007 compared to $36.9 million in 2006, an increase of $4.8 million. Revenue year-to-date is $121.5 million compared to $109.9 million in 2006.
Revenue was driven by a $2.7 million increase in the defense sector, including year-on-year growth in the CH-47 Chinook helicopter, produced by Boeing, and F-22 Raptor, produced by Lockheed Martin [LMT], programs. Year-to-date defense sector revenue increased $4.6 million year-on-year.
Commercial revenue increased $2.1 million in the three months ended Sept. 30, 2007 compared to 2006 as a result of volume increases with Rolls-Royce and the General Electric [GE] Aviation CF-34-3 revenue sharing program. Commercial sector revenue increased $7.0 million.
Margins as a percentage of revenue were 24.4 percent in the three months ended September 30, 2007 compared to 22.2 percent in the same period 2006.
Defense sector margins increased from 22.9 percent to 25.2 percent. Commercial sector margins increased from 21 percent to 23 percent. Margins as a percentage of revenue for the first nine months of 2007 were 22.7 percent up from 22 percent in 2006.
In September 2007, the company recorded a $0.3 million reduction to revenue, and $0.2 million reduction to margins and earnings as a result of the strengthening Canadian dollar. Year-to-date, the Company has reduced revenue by $0.9 million and margin by $0.7 million to reflect the impact of the stronger Canadian dollar on long-term contracts accounted for under the percentage-of-completion accounting method.
Earnings before interest, taxes, depreciation, amortization, gains (losses) on foreign exchange and forward contracts, and unusual items were $6.7 million for the three months ended Sept. 30, 2007 compared to $5.1 million in 2006.
The net income for the three months ended September 30, 2007 was $0.3 million or $0.01 per share compared to $0.7 million or $0.02 per share for the same period in 2006. The net income in the quarter includes an income tax provision of $0.8 million, which represents the effective tax rate applied to the U.S. operations.
The company does not record an income tax benefit for its losses from the Canadian operations, consistent with 2006 year-end and first quarter 2007 disclosures.
The backlog increased to $380 million at Sept. 30 from $367 million at June 30 and $222 million at Dec. 31, 2006.
Additionally, Northstar Aerospace Inc. announced that Mark Emery will resign effective Dec. 31. Donald Jackson will continue in his role as executive chairman and serve as interim CEO. Emery will be joining The Jordan Company L.P., a private equity firm, as president, U.S. Operations Management, beginning in January 2008.
Northstar also announced that Michael Tkach has joined the Board of Directors as non-executive director. Tkach recently retired as vice president and general manager, Boeing Rotorcraft Systems, where he was responsible for all rotorcraft systems programs, including the AH-64D Apache Longbow and CH-47F/MH-47G Chinook, and Boeing-Bell Helicopter Textron [TXT] V-22 Osprey tiltrotor aircraft.