BELLEVUE, Wash., Dec. 8, 2005 — Esterline Corporation (NYSE/ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fourth quarter income from continuing operations of $15.4 million, or $.60 per diluted share, on sales of $224.1 million. In the same period last year, income from continuing operations was $14.4 million, or $.66 per diluted share, on $190.3 million sales.
Full year 2005 income from continuing operations was $51.0 million, or $2.02 per diluted share. The prior year’s income from continuing operations was $29.4 million, or $1.37 per diluted share. Sales in fiscal 2005 were $835.4 million compared with last year’s sales of $613.6 million. Results for the fourth quarter and full fiscal year 2005 reflect a change in accounting for stock options resulting from Esterline's determination during the fourth quarter that certain stock option grants required variable rather than fixed accounting under APB No. 25. The results from prior periods, including the fourth quarter and full fiscal year 2004, have been restated to conform to this change. The restatement has no impact on the company’s net cash flow or liquidity.
Robert W. Cremin, Esterline CEO, said the company’s fourth quarter results reflect “…another solid performance, continuing the trend of the past several quarters.” Cremin said, “…our acquisition efforts are paying off, and equally important, our year-over-year organic growth rate was nearly 16%. Our strong growth positions us well to be a more active Tier I partner with our customers, which in turn enables future growth.” Looking toward that future, Cremin said he is optimistic about fiscal 2006, anticipating earnings per share in the range of $2.15 to $2.35.
Cremin said that Esterline’s success at winning Tier I contracts led to increased research, development and engineering spending during the year. R&D spending climbed to $42.2 million, or 5.1% of sales, in fiscal 2005 compared with $25.9 million, or 4.2% of sales, for fiscal 2004. Cremin expects R&D expenditures to increase again during fiscal 2006 “…to the 6.5% level, then begin to return to more normalized historic levels.” He said Esterline “...has never shied away from making investments in research and new product development—it’s what sustains us. Being well positioned on the major new programs—787, A380, A400M, JSF and others—is what will drive organic growth going forward.” He emphasized that Esterline’s consistent investment in R&D has paid off in the past, and he expects the return on this round of investment to be high.
Cremin said, “…we continue on the acquisition trail and are currently reviewing several good-fit strategic opportunities.” The company has completed two strategic acquisitions in the past 15 months: Leach International Corporation, a manufacturer of sophisticated relays and power distribution equipment for aerospace and defense applications, and Palomar Products, a developer of secure military communications systems. He said, “…these companies are a solid fit with our customers’ needs,adding significantly to the toolkit of solutions we bring to them.”
Cremin noted that Esterline’s growing capabilities are opening up more opportunities. In addition to the company’s previously announced Tier I win to design and manufacture all of the overhead panels for the new Boeing 787, he said, “…we will also supply the sensors for the aircraft’s environmental control system and an additional 14 cockpit panels as well as develop the embedded software for these products.” He added that the company has also secured Tier I positions with Airbus for its new A400M military transport’s primary power distribution system, and with Rolls Royce for the complete suite of sensors for the A400M’s huge turboprop engines.
Including results from discontinued operations, fiscal 2005 net earnings were $58.0 million, or $2.29 per diluted share, compared with $39.6 million, or $1.84 per diluted share, a year ago. Fiscal 2005 income from discontinued operations principally reflect the sale of the company’s Fluid Regulators subsidiary. That sale resulted in a gain of approximately $7.0 million, net of tax of $2.4 million, or $.27 per diluted share, in the first quarter of 2005. Fiscal 2004 income from discontinued operations principally reflected the earnings of discontinued operations and the gain on the sale of W.A. Whitney. Including results from discontinued operations, net earnings in the fourth quarter of fiscal 2005 and fiscal 2004 were $15.4 million, or $.60 per diluted share, and $22.9 million, or $1.05 per diluted share, respectively.
Backlog at year end was $482.8 million compared with $423.8 million at the end of the prior-year period.
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.
EDITOR: See attached Consolidated Statement of Operations, Consolidated Balance Sheet, Restatement for Stock Option Accounting, and Reconciliation of Non-GAAP Financial Measure.
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