Revenues up 26%; Earnings up 12% Compared with Last Year
BELLEVUE, Wash., May 31, 2007 — Esterline Corporation (NYSE/ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2007 second quarter (ended April 27) net earnings of $19.8 million, or $.76 per diluted share, on $312.3 million sales. Year-ago net earnings were $17.7 million, or $.68 per diluted share, on sales of $247.9 million.
Robert W. Cremin, Esterline CEO said, “…we really like the way fiscal 2007 is shaping up. The 12% earnings improvement in the quarter was particularly gratifying given a more than 50% year-over-year increase in interest expense associated with the financing of the recent CMC acquisition, and the initial impact of acquisition accounting that requires revaluing acquired inventories as of the acquisition date.”
Regarding the acquisition, Cremin said Esterline’s fiscal third quarter will be burdened with the majority of the acquisition accounting costs. However, he said “…the more exposure we have to CMC the more we like it, and more importantly, the combined strength of Esterline’s and CMC’s fourth quarter will absorb the short-term dilution of the CMC acquisition.” Underscoring this performance, the company increased its full-year earnings guidance to a range of $2.50 - $2.60 per share.
Backlog at quarter end totaled $954 million. Cremin said, “…backlog strength is one of the markers we use to judge forward momentum.” He noted that CMC contributed $252 million to backlog in the quarter, and pointed out that “…even without the CMC contribution, Esterline’s backlog grew 7% in the past three months and 11% compared to last year.” He noted that the company’s backlog reflects only fully funded orders with firm release dates.
Consolidated gross margin in the quarter was 31.7% compared with 32.6% a year ago. The purchase accounting costs associated with CMC were the primary cause of the change. Selling, general and administrative expenses (SG&A) totaled $50.4 million in the second quarter of 2007, compared with $41.0 million a year ago, again principally due to incremental SG&A expenses from acquisitions. As a percent of sales, SG&A continued to decline, dropping to 16.1% in the second quarter of 2007 compared with 16.5% in the prior-year period.
Research, development and engineering expense during the quarter was $19.1 million, or 6.1% of sales, reflecting CMC’s cockpit integration activity on the T-6 military trainer program, and a spike in activity levels on both the 787 and the A400M as Boeing and Airbus push toward critical program dates. R&D spending is expected to decline during the second half of fiscal 2007.
Interest expense for the second fiscal quarter of 2007 was $8.7 million compared with $5.8 million a year ago, reflecting increased borrowings to finance acquisitions and working capital requirements.
Year-to-date net earnings were $32.6 million, or $1.25 per diluted share, on sales of $569.5 million. For the first six months of fiscal 2006, comparable earnings were $26.0 million, or $1.01 per diluted share, on sales of $453.6 million.
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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