Earnings $25.3 Million, or $.85 per Share, on $359.5 Million Sales
BELLEVUE, Wash., May 28, 2009 — Esterline Corporation, (NYSE: ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2009 second quarter (ended May 1) income from continuing operations of $25.3 million, or $.85 per diluted share, on sales of $359.5 million. Year-ago income from continuing operations was $23.9 million, or $.80 per diluted share, on sales of $358.0 million.
Robert W. Cremin, Esterline CEO, said “…earnings came in about where our January forecast projections indicated.” Cremin credited “sticking with our battle-tested business plan” for the solid performance. “We can move quite quickly to adjust to economic conditions,” he said, “but we aren’t going to sacrifice our long-term goals for short-term results. We’ve been making adjustments and we are prepared to take additional steps depending on circumstances.”
Citing the current uncertainty in the industry, Cremin reduced the company’s full-year earnings per share guidance range to $3.00 to $3.20, saying that a declining order rate in the second quarter dampened Esterline’s outlook for the second half. Cremin said, “…our customers are reducing inventory levels, which is a clear change from just three months ago.” He also noted potential timing issues with foreign shipments of countermeasure flares, declining business jet and spare parts demand, and the overall economic slowdown as contributing factors to ratcheting back the company’s forecast for the second half of the year.
However, he emphasized that the company’s backlog exceeds $1 billion and R&D expense is coming down as forecasted following a ramp-up over the last several years that locked in important positions on significant new programs. “The 787, the Joint Strike Fighter and the T-6B military trainer will be successful programs for Esterline,” he said.
Research, development and engineering spending was $18.3 million, or 5.1% of sales, for the second quarter compared with $25.0 million, or 7.0% of sales, a year ago.
Overall, gross margin as a percentage of sales was 31.3% in the quarter, compared to 33.9% in the same period a year ago. The gross margin decline was due to several factors, including currency-related mark-to-market accounting requirements, adjustments to long-term contracts, and the impact of starting up another manufacturing facility in Mexico.
Selling, general and administrative expenses were 15.2% of sales in the quarter compared with 16.1% of sales last year. The effective income tax rate for the second quarter was 12.2% (before a $0.7 million tax expense) compared with 23.0% (before a $0.7 million tax expense) for the prior-year period. The effective tax rate differed from the statutory rate in the second quarters of 2009 and 2008, as both years benefited from various tax credits and certain foreign interest expense deductions.
Income from discontinued operations in the second quarter of 2009 was $.01 per diluted share, compared with $.04 per diluted share in the prior-year period. Net income was $25.7 million, or $.86 per diluted share, compared with $25.2 million, or $.84 per diluted share, in the prior-year period.
For the first half of fiscal 2009, Esterline reported net earnings from continuing operations of $36.8 million, or $1.23 per diluted share, on sales of $669.2 million, compared with net earnings from continuing operations of $53.7 million, or $1.80 per diluted share, on $715.4 million in sales in 2008. Income from discontinued operations in the first half of 2009 was $.53 per diluted share, compared with $.08 per diluted share in the prior-year period. Net income was $52.7 million, or $1.76 per diluted share, compared with $56.2 million, or $1.88 per diluted share, in the prior-year period.
New orders for the first six months of 2009 were $676.3 million compared with $788.1 million for the same period in 2008. Orders in the first six months of 2009 include $41.0 million in backlog acquired in the Racal and NMC transactions. New orders declined by $152.8 million if the Racal and NMC acquired backlog is excluded. The decline in new orders principally reflects the timing of receiving orders and a decrease in commercial aviation demand. Backlog was $1.1 billion compared with $1.0 billion at the end of the prior-year period and $1.1 billion at the end of fiscal 2008.
Esterline is a leading world-wide supplier to the aerospace and defense industry specializing in three core areas: Avionics & Controls, Sensors & Systems, and Advanced Materials.
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.
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