BELLEVUE, Wash., June 1, 2011 – Esterline Corporation (NYSE: ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2011 second quarter (ended April 29) income from continuing operations of $46.0 million, or $1.47 per diluted share, on sales of $435.3 million.  This represents a 13.8% growth in sales over last year’s $382.5 million, and a 57.9% growth in income over last year’s $29.1 million.  Diluted earnings per share of $1.47 were up 50% over the prior year’s level of $0.96 per diluted share.

Brad Lawrence, Esterline’s Chief Executive Officer, said “…all three of our business segments continued to post solid performance improvement over last year due primarily to commercial aircraft market strength – including spare parts, retrofit programs and growing OEM positions.”  Lawrence said, “Our spare parts business was particularly strong in the first half of the year due to pent-up demand from airlines recovering from the downturn.”  He said, “Although spare parts business is difficult to forecast, we are expecting demand to moderate somewhat over the remainder of our fiscal year.”  He added that Esterline’s second quarter also benefitted from a retroactive price settlement regarding scope changes to the 787 program and two ongoing retrofit programs of Boeing 737s.

On the defense side of Esterline’s business, Lawrence said federal budget deliberations, which took place during the quarter, have affected several programs, particularly those not related to aircraft, namely “…our international countermeasure flares and military headset businesses.”  He said the company expects this trend to continue as these program delivery schedules “are clearly being stretched and moved to the right.”  He emphasized confidence, however, in Esterline’s strong overall defense sales funnel and solid order book for both new and retrofit aircraft.  “The new production F-35 Joint Strike Fighter and T-6B trainer programs should continue to be solid contributors to Esterline’s performance,” Lawrence said, “and the need to extend the life of older aircraft through avionic retrofits plays right to our strengths.” 

In addition to Esterline’s principal aerospace and defense business, Lawrence cited the relatively broad-based strength from applications of its core technology into such diverse end-markets as medical capital equipment and high-speed rail networks. 

“Overall,” Lawrence said, “as markets improve and new growth opportunities emerge, Esterline is in a very good position to benefit.”  He added that the company expects significantly improved performance this year over last year’s record levels, and raised full-year earnings guidance to the range of $4.80 to $4.95 per share.

During the quarter the company announced that it had entered into exclusive negotiations to purchase the Souriau Group, a leading global supplier of highly engineered connectors for harsh environments.  Subsequent to quarter-end, the company signed a definitive purchase agreement—an important formal step toward completing the transaction—and filed for approvals under Hart Scott Rodino and French and German regulatory authorities.

Overall, gross margin as a percentage of sales was 37.0% in the quarter, compared to 33.1% in the same period a year ago.  The increase in gross margin was due to several factors, including exceptionally strong spare parts sales, retrofit programs and the retroactive price settlement related to the 787 program.  Lawrence added that the company’s concentrated efforts on operational excellence also contributed to the strong margin performance.    

Selling, general and administrative expenses were 16.6% of sales in the quarter compared with 16.7% of sales last year. 

Research, development and engineering spending in the quarter was $21.3 million, or 4.9% of sales, compared with $18.0 million, or 4.7% of sales, a year ago.  

The effective income tax rate for the second quarter was 20.5% compared with 21.8% for the prior-year period.

Net income in the quarter was $45.9 million, or $1.47 per diluted share compared with $29.6 million or $0.98 per diluted share in the prior year period, which included $0.02 per diluted share of income from discontinued operations.

For the first half of fiscal 2011, Esterline reported net income of $75.9 million, or $2.44 per diluted share, on sales of $806.1 million, compared with net income of $42.4 or $1.40 per diluted share which included $0.03 from discontinued operations, on $717.8 million in sales in the same period last year. 

New orders for the first six months of 2011 were $862.1 million compared with $733.5 million for the same period last year.  Backlog at the end of the period was $1.16 billion compared with $1.09 billion a year ago. 

Conference Call Information

Esterline will host a conference call to discuss this announcement today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).  The U.S. dial-in number is 800-901-5241; outside the U.S., use 617-786-2963.  The pass code for the call is:  16002035.

Contact: Brian D. Keogh 425-453-9400