Net Earnings $38.8 Million, or $1.49 per Share, on $326.4 Million Sales
BELLEVUE, Wash., August 30, 2007 — Esterline Corporation (NYSE/ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2007 third quarter (ended July 27) net earnings of $38.8 million, or $1.49 per diluted share, including $23.0 million after tax, or $.88 per share, from a previously announced insurance recovery. Sales in the third quarter of FY07 were $326.4 million, including $40.9 million from recently acquired CMC Electronics. Year-ago net earnings were $11.2 million, or $.43 per diluted share, on sales of $248.4 million.
Robert W. Cremin, Esterline CEO, characterized the quarter as “…another solid performance for Esterline, with organic sales up 15% and earnings from operations up 41% over last year.” Cremin added that on a year-over-year-basis, “…all three Esterline business segments contributed to the growth.” He also emphasized that the quarter’s performance absorbed nearly $3.4 million of acquisition-related accounting expense associated with the CMC acquisition. “We like the way the quarter came together, and more importantly, many elements are now in place for an excellent fourth quarter.” On that note, the company raised its full-year operating earnings guidance by $.05 to a range of $2.55 to $2.65 per share, excluding the insurance recovery of $.88 in the third quarter.
Regarding CMC, Cremin said that the final impact of acquisition accounting “…was booked in the third quarter, so the purchase accounting anomalies are now behind us.” He added that since the date of the acquisition, the company has reduced its term loan credit facility by $35 million, “…reflecting Esterline’s strong cash flow generation.”
Backlog at quarter end totaled $978 million. Cremin said, “…at this point, the backlog number includes only a few million dollars from such high-profile new programs as the 787, A400M or A380. What this says to me is regardless of what may or may not happen to the schedules of these platforms, we have plenty of good things happening on hundreds of other programs.”
Consolidated gross margin in the quarter was 30.5% compared with 30.3% a year ago. The primary reason for the level margin performance was the purchase accounting effect on inventory costs associated with the acquisition of CMC. Selling, general and administrative expenses (SG&A) as a percent of sales were 17.0% in the third quarter of 2007 compared with 16.7% in the prior-year period. Cremin said, “…the company’s operations have done a good job keeping our overhead slim and a lid on our capital spending.”
Cremin noted that, “…as anticipated, research, development and engineering expense during the quarter declined to 5.2% of sales. That level compares with 6.1% last quarter and 5.8% a year ago.” He said he anticipates R&D spending to continue to decline as the 787 and A400M programs move closer to production. R&D spending in the company’s fourth fiscal quarter is anticipated to be about 5% of sales.
The insurance recovery relates to property damage and business interruption claims related to last year’s explosion at Esterline’s UK-based countermeasure flares operation. During the third quarter of fiscal 2007, the company recorded insurance recoveries of $23.0 million, net of tax of $9.9 million. Year-to-date, insurance recoveries totaled $26.1 million, net of tax of $11.2 million. The insurance recovery reimburses Esterline for damage and the loss of earnings at the affected facility. The company expects the damaged facility to be back in operation at the end of its fiscal 2008.
Interest expense for the third fiscal quarter of 2007 was $10.8 million compared with $5.6 million a year ago, reflecting increased borrowings to finance acquisitions and working capital requirements.
Year-to-date net earnings were $71.4 million, or $2.74 per diluted share, on sales of $895.9 million, compared with $37.2 million, or $1.44 per diluted share, on sales of $702.0 million last year.
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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