Michelle DeGrand 9/2/2010
BELLEVUE, Wash.--(September 2, 2010) - Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2010 third quarter (ended July 30) income from continuing operations of $39.9 million, or $1.30 per diluted share, on sales of $383.5 million. Year-ago income from continuing operations was $32.5 million, or $1.09 per diluted share, on sales of $361.5 million.
Brad Lawrence, Esterline's CEO, said the solid performance -- year-over-year sales up 6% and earnings from continuing operations up nearly 23% -- reflected strength from the company's Avionics & Controls business segment, where "...sales to new and retrofit military cockpit programs are providing a significant boost to Esterline."
"This performance improvement reflects increasing production demand for the Hawker Beechcraft T-6B military trainer," Lawrence said. "Esterline provides the aircraft's full integrated cockpit solution -- from flight management system to head-up display (HUD)."
Lawrence said that continued success in the international market for C-130 cockpit upgrades is incremental to our solid base of military retrofit business, such as a recently announced $23.6 million contract extension from Sikorsky. That contract covers upgraded flight management systems and emergency control panels for U.S. Army and international Black Hawk helicopters through 2012.
Also in the Avionics & Controls segment is the company's interface technologies operation. Lawrence pointed out that this business is benefiting from increased demand from the medical imaging market due to higher equipment utilization rates and a growing need for the replacement of older systems. "This is a good example of how Esterline leverages its core aerospace technologies into other high-end applications," he said.
"On the commercial aerospace side, we're beginning to see activity in preparation for the previously announced production increases on the Airbus A320 and Boeing 737 lines," Lawrence said. "This improving OEM business is particularly beneficial to our Advanced Materials and Sensors & Systems business segments."
Based on the improving outlook, the company is raising its full-year earnings per share guidance range to $3.85 to $3.95 -- up from the earlier range of $3.45 to $3.65. "At the beginning of the year, we expected our base business to hold steady with growth coming from new programs," Lawrence said. "We are now seeing even better than expected performance on both fronts." Lawrence said Esterline's consistent investment in R&D and good-fit acquisitions "...is clearly shaping our performance. The results we're generating today illustrate the power of that strategy."
Commercial spare parts business at Esterline is showing "...some signs of improvement," Lawrence said, noting that Asian demand is strong and improving, while U.S. demand has flattened from gains made early in the year, and European markets show little sign of recovery.
Consolidated gross margin in the quarter was 34.3% compared with 32.4% a year ago. The increase in gross margin mainly reflected cost control measures, improved recovery of fixed costs due to higher sales volumes, and a favorable sales mix of military and commercial aerospace products, particularly cockpit integration systems.
Selling, general and administrative expenses (SG&A) as a percent of sales were 16.8% in the quarter compared with 16.5% in the prior-year period. The increase in the amount of SG&A expenses was due principally to a reduction in foreign currency exchange gain on forward contracts, and increased incentive compensation accruals due to the improved financial performance.
Research, development and engineering expense for the quarter was 4.6% of sales compared with 4.1% a year ago. Lawrence said that Esterline's R&D expense has stabilized in the 4.5% to 5% range.
For the quarter, the income tax rate was 4.2% compared with 8.5% a year ago. This quarter benefited from a $7.6 million discrete tax benefit, principally due to the expiration of a statute of limitations, compared with a $3.2 million discrete tax benefit in the prior-year period.
For the first nine months of fiscal 2010, Esterline reported income from continuing operations and net income of $82.2 million, or $2.71 per diluted share, on sales of $1.1 billion. Income from continuing operations in the same period last year was $69.3 million, or $2.32 per diluted share. Income from discontinued operations in the first nine months of 2009 was $.54 per diluted share. Net income in that period was $85.3 million, or $2.86 per diluted share, on $1.0 billion in sales.
Backlog at quarter-end totaled $1.2 billion, about 9% ahead of last year. New orders in the first nine months of fiscal 2010 totaled $1.2 billion, up more than 18% compared with the same period a year ago.
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "should" or "will," or the negative of such terms, or other comparable terminology. These forward-looking statements are only predictions based on the current intent and expectations of the management of Esterline, are not guarantees of future performance or actions, and involve risks and uncertainties that are difficult to predict and may cause Esterline's or its industry's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Esterline's actual results and the timing and outcome of events may differ materially from those expressed in or implied by the forward-looking statements due to risks detailed in Esterline's public filings with the Securities and Exchange Commission including its most recent Annual Report on Form 10-K.
Contact: Brian Keogh 425-453-9400
ESTERLINE TECHNOLOGIES CORPORATION Consolidated Statement of Operations (unaudited) In thousands, except per share amounts Three Months Ended Nine Months Ended ------------------------ ------------------------ July 30, July 31, July 30, July 31, 2010 2009 2010 2009 ----------- ----------- ----------- ----------- Net Sales $ 383,486 $ 361,486 $ 1,110,466 $ 1,030,705 Cost of Sales 251,778 244,339 745,031 698,808 ----------- ----------- ----------- ----------- 131,708 117,147 365,435 331,897 Expenses Selling, general and administrative 64,503 59,694 192,112 174,038 Research, development and engineering 17,763 14,868 53,287 50,560 Other (income) expense (8) 218 (5) 7,946 ----------- ----------- ----------- ----------- Total Expenses 82,258 74,780 245,394 232,544 ----------- ----------- ----------- ----------- Operating Earnings From Continuing Operations 49,450 42,367 120,041 99,353 Interest income (248) (168) (651) (949) Interest expense 8,082 7,024 23,391 21,370 ----------- ----------- ----------- ----------- Income From Continuing Operations Before Income Taxes 41,616 35,511 97,301 78,932 Income Tax Expense 1,728 3,009 14,962 9,493 ----------- ----------- ----------- ----------- Income From Continuing Operations Including Noncontrolling Interests 39,888 32,502 82,339 69,439 Income Attributable to Noncontrolling Interests (30) (24) (108) (136) ----------- ----------- ----------- ----------- Income From Continuing Operations 39,858 32,478 82,231 69,303 Income From Discontinued Operations, Net of Tax -- 163 -- 15,994 ----------- ----------- ----------- ----------- Net Earnings $ 39,858 $ 32,641 $ 82,231 $ 85,297 =========== =========== =========== =========== Earnings Per Share - Basic: Continuing Operations $ 1.33 $ 1.09 $ 2.75 $ 2.33 Discontinued Operations -- .01 -- .54 ----------- ----------- ----------- ----------- Earnings Per Share - Basic $ 1.33 $ 1.10 $ 2.75 $ 2.87 =========== =========== =========== =========== Earnings Per Share - Diluted: Continuing Operations $ 1.30 $ 1.09 $ 2.71 $ 2.32 Discontinued Operations -- .00 -- .54 ----------- ----------- ----------- ----------- Earnings Per Share - Diluted $ 1.30 $ 1.09 $ 2.71 $ 2.86 =========== =========== =========== =========== Weighted Average Number of Shares Outstanding - Basic 30,043 29,736 29,913 29,701 Weighted Average Number of Shares Outstanding - Diluted 30,558 29,870 30,394 29,855 ESTERLINE TECHNOLOGIES CORPORATION Consolidated Sales and Income from Continuing Operations by Segment (unaudited) In thousands Three Months Ended Nine Months Ended ------------------------ ------------------------ July 30, July 31, July 30, July 31, 2010 2009 2010 2009 ----------- ----------- ----------- ----------- Segment Sales Avionics & Controls $ 194,300 $ 171,027 $ 563,276 $ 468,606 Sensors & Systems 79,247 84,460 234,335 255,770 Advanced Materials 109,939 105,999 312,855 306,329 ----------- ----------- ----------- ----------- Net Sales $ 383,486 $ 361,486 $ 1,110,466 $ 1,030,705 =========== =========== =========== =========== Income from Continuing Operations Avionics & Controls $ 30,464 $ 27,076 $ 78,357 $ 63,236 Sensors & Systems 10,557 6,976 24,346 27,127 Advanced Material 19,175 16,101 45,032 40,434 ----------- ----------- ----------- ----------- 60,196 50,153 147,735 130,797 Corporate expense (10,754) (7,568) (27,699) (23,498) Other income (expense) 8 (218) 5 (7,946) Interest income 248 168 651 949 Interest expense (8,082) (7,024) (23,391) (21,370) ----------- ----------- ----------- ----------- Income From Continuing Operations Before Income Taxes $ 41,616 $ 35,511 $ 97,301 $ 78,932 =========== =========== =========== =========== ESTERLINE TECHNOLOGIES CORPORATION Consolidated Balance Sheet (unaudited) In thousands July 30, July 31, 2010 2009 ------------ ------------ Assets Current Assets Cash and cash equivalents $ 282,910 $ 148,807 Accounts receivable, net 272,529 248,476 Inventories 266,974 296,398 Income tax refundable 11,691 9,453 Deferred income tax benefits 38,313 36,266 Prepaid expenses 17,350 17,013 Other current assets 13,023 19,240 ------------ ------------ Total Current Assets 902,790 775,653 Property, Plant and Equipment, Net 274,207 243,955 Other Non-Current Assets Goodwill 733,537 743,864 Intangibles, net 392,183 435,433 Debt issuance costs, net 5,706 7,612 Deferred income tax benefits 83,727 65,518 Other assets 10,143 8,541 ------------ ------------ $ 2,402,293 $ 2,280,576 ============ ============ Liabilities and Shareholders' Equity Current Liabilities Accounts payable $ 79,588 $ 70,754 Accrued liabilities 200,343 211,208 Credit facilities 2,196 3,798 Current maturities of long-term debt 10,008 798 Deferred income tax liabilities 7,139 7,630 Federal and foreign income taxes 3,310 4,372 ------------ ------------ Total Current Liabilities 302,584 298,560 Long-Term Liabilities Long-term debt, net of current maturities 531,698 509,776 Deferred income tax liabilities 128,327 129,006 Pension and post-retirement obligations 88,126 79,554 Other liabilities 18,347 19,003 Shareholders' Equity 1,333,211 1,244,677 ------------ ------------ $ 2,402,293 $ 2,280,576 ============ ============