Income from continuing operations — $.38 per share
Full-year EPS guidance maintained — $3.70 to $3.90
Two acquisitions completed in the quarter
Gross margin 33.0% compared with 32.2% a year ago
Sales $309.7 million — $357.3 million a year ago
Backlog — $1.15 billion
BELLEVUE, Wash., Feb. 26, 2009 — Esterline Corporation, (NYSE:ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2009 first quarter (ended January 30) income from continuing operations of $11.5 million, or $.38 per diluted share, on sales of $309.7 million. Year-ago income from continuing operations was $29.7 million, or $1.00 per diluted share, on sales of $357.3 million. Income from discontinued operations was $.52 per diluted share, compared with $.04 per diluted share in the prior-year period, reflecting gains on the sale of a U.K.-based operation in November 2008. Net income was $26.9 million, or $.90 per diluted share, compared with $31.0 million, or $1.04 per diluted share, in the prior-year period.
Robert W. Cremin, Esterline CEO, said, “…operationally, quarterly results were somewhat better than we anticipated,” and he reiterated the company’s full-year earnings per share guidance range of $3.70 to $3.90. Cremin said, “…Esterline is affected by market dynamics just like everybody else in the industry, but we completed a couple of great-fit acquisitions in the quarter that we expect to contribute to the second half of the year, so we’re holding to our full-year guidance.”
Regarding the first quarter, Cremin said, “we expected to be slow out of the gate, and we said as much in our December conference call.” He said that “…although the first quarter performance was better than our internal projections, several issues that we discussed on that call influenced the quarter, including the aftermath of the Boeing strike, a slowdown in airline spares sales, foreign exchange issues and extended holiday plant closures.”
Cremin said that Esterline’s commercial aftermarket business was soft in the first quarter due primarily to slowing air traffic, airlines de-stocking inventories and deferred retrofits. In addition, the quarter absorbed a pretax foreign currency loss of $7.9 million ($1.7 million after tax or $.06 per diluted share) related to the funding of an acquisition.
Cremin also noted that the comparable year-ago quarter was an anomaly. He pointed out that “…not only was last year’s first quarter extraordinarily strong operationally due in part to the timing of a large defense shipment, it also included $6.9 million in one-time tax benefits, and an extra shipping week due to our fiscal calendar.”
Cremin cited gross margin strength as an encouraging metric in the quarter. Gross margin was 33.0% compared with 32.2% last year. He said, “…the improvement is particularly noteworthy given the softness in our spares business, and reflects the inherent value of our specialized niche businesses.”
Selling, general and administrative expenses (SG&A) held even with last year, totaling $59.7 million in the first quarter of 2009, compared with $59.4 million a year ago.
Research, development and engineering (R&D) expenses continued to ratchet down from the mid-2008 peak. R&D spending in the first quarter was $17.4 million compared with $21.6 million a year ago. Cremin said Esterline surged R&D in 2007 and 2008 to secure Tier 1 positions on several major new airframes, including such programs as the F-35 joint strike fighter, T-6B military trainer, and the new Boeing 787. He said that “…with our R&D investments on these programs largely expensed, we will begin to see significant benefit in coming years as we move into production.” During the quarter, Esterline received a production order for the first 35 T-6B integrated cockpits following successful first flight tests. The first cockpit is scheduled for delivery in late 2009.
The effective income tax rate for the first fiscal quarter of 2009 was 18.9% (before a $.4 million tax benefit) compared with 22.1% (before a $6.9 million tax benefit) for the prior-year period.
New orders for the first quarter of 2009 were $370.2 million compared with $348.4 million for the same period in 2008. Orders include $65.2 million in acquired backlog from the Racal and NMC acquisitions in the first fiscal quarter of 2009. Backlog was $1.2 billion compared with $949.1 million 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.
For the full release* including the Consolidated Statement of Operations and the Consolidated Balance Sheet Click Here
Requires the Free Adobe Acrobat Reader