Third Quarter Tax Benefit Contributes About $.10 Per Share
BELLEVUE, Wash., September 3, 2009 ― Esterline Corporation, (NYSE: ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2009 third quarter (ended July 31) income from continuing operations of $32.5 million, or $1.09 per diluted share, on sales of $361.5 million. Earnings include a tax benefit of approximately $.10 per share. Year-ago income from continuing operations was $18.4 million, or $.61 per diluted share, on sales of $363.5 million.
Robert W. Cremin, Esterline CEO, said, “…Esterline posted a very solid quarter, keeping us on pace with our full-year guidance despite continued uncertainty in the commercial airline industry.” Esterline’s full-year earnings guidance now stands at $3.10 to $3.30 per share, reflecting the third quarter tax benefit.
Cremin said, “…we feel good going into our fourth quarter, though our guidance range reflects some caution.” He said commercial aviation spares sales appear to have bottomed as customers work to balance inventory levels, but he noted that “…these sales can be difficult to forecast accurately due to short lead times.” The extent of the business jet market decline also continues to affect the performance of certain operations, especially in the company’s Sensors & Systems segment.
Cremin reiterated comments he made last quarter regarding the timing of military countermeasure flares shipments. He said, “…the scarcity of specialized ships for transporting foreign orders of these products continues to be an issue. We know the orders will ship; we just aren’t certain at this point if they’ll ship in fiscal 2009 or push into 2010.”
Gross margin improved in the quarter as a percentage of sales to 32.4%, compared to 31.2% in the same period a year ago. Cremin said the margin increase was due “…primarily to improved performance in our Avionics & Controls segment.”
He said, “…we continue to focus on operational excellence—making appropriate adjustments to individual business circumstances.” He noted that the company has continued to tighten SG&A (selling, general and administrative) expenses. He also said that R&D spending “…is coming down to our more normalized level of 4.5%, following the ramp-up over the last several years to win positions on significant new programs, such as the JSF, 787 and T-6B.”
“Investing in the future remains a cornerstone of our strategy,” he said, adding that Esterline “…recently stepped up to partner with Rolls-Royce to develop the sensors for its new Trent XWB engine for the Airbus A350.” He said, “…we’re also in the midst of several important plant expansions to prepare for the growth we anticipate as new programs come on-line and economic conditions improve.”
The effective income tax rate for the third quarter of 2009 was 8.5% including a reversal of prior expenses related to the application of certain foreign tax laws, and a tax benefit associated with the reconciliation of the prior year’s tax returns. The tax rate excluding these two events was 17.5%. Last year’s effective income tax rate was 25.3%.
Income from discontinued operations in the third quarter of 2009 was less than $.01 per diluted share, compared with $.07 per diluted share in the prior-year period. Net income was $32.6 million, or $1.09 per diluted share, compared with $20.5 million, or $.68 per diluted share, in the prior-year period.
For the first nine months of fiscal 2009, Esterline reported net earnings from continuing operations of $69.3 million, or $2.32 per diluted share, on sales of $1.03 billion. This compared with net earnings from continuing operations of $72.1 million, or $2.41 per diluted share, on $1.08 billion in sales for the same period in 2008. Income from discontinued operations in the first nine months of 2009 was $.54 per diluted share, compared with $.15 per diluted share in the prior-year period. Net income was $85.3 million, or $2.86 per diluted share, compared with $76.7 million, or $2.56 per diluted share, in the prior-year period.
New orders for the first nine months of 2009 were $1.01 billion compared with $1.15 billion for the same period in 2008. Backlog was $1.07 billion compared with $1.02 billion at the end of the prior-year period and $1.1 billion at the end of fiscal 2008.
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