BELLEVUE, Wash., September 2, 2004 — Esterline Corporation ( NYSE /ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2004 third quarter (ended July 30) income from continuing operations of $7.0 million, or $.33 per diluted share, on $150.6 million sales. Comparable earnings a year ago were $8.4 million, or $.40 per diluted share, including a foreign currency gain of approximately $2.0 million net of tax, or $.09 per share, on sales of $140.5 million.
Robert W. Cremin , Esterline CEO said that he continues to be encouraged by steady improvements in commercial aerospace markets. “Increases in the world airlines’ scheduled available seat miles, departures, and flight hours are having a positive impact on our business,” Cremin said.
Esterline’s defense business also remains solid. Revenue activity in the company’s combustibles and countermeasure operations was particularly strong; however, Cremin advised that the product mix was skewed toward lower margin components.
Cremin further indicated that expenses and production inefficiencies associated with acquisition integration activity also impacted the quarter. He noted that, “…in connection with a previous acquisition, we closed two plants in our Avionics & Controls segment during the quarter, and moved the operations into a single new facility. The new plant will enhance operating efficiencies going forward, but due to zoning and other similar regulatory issues, the move took longer and proved more disruptive than first anticipated.”
Responding to the practicality of offsetting these third quarter events by fiscal year end, Cremin said the company is reducing its full-year guidance to the range of $1.40 to $1.50 from its previous guidance of $1.50 to $1.60. Cremin emphasized, though, that fundamentally nothing has changed. “These kinds of timing issues have their way of smoothing themselves out in a few quarters,” he said. “Our solid backlog and order book are good indicators that longer term we remain firmly on track." Orders received in the third quarter totaled $151.9 million compared with $147.4 million a year ago. Year-to-date orders are up 5% to $463.7 million from $441.5 million a year ago. Backlog at July 30, 2004 , was $331.1 million compared with $321.2 million at the end of the prior year period, and $329.9 million at the end of last quarter.
Year-to-date income from continuing operations was $18.1 million, or $.84 per diluted share, on sales of $433.4 million. The results include a previously reported first quarter $1.9 million tax benefit and a $2.9 million after-tax severance expense. For the first nine months of fiscal 2003, income from continuing operations was $20.3 million, or $.97 per share, including the previously noted $.09 per share foreign currency gain, on sales of $402.1 million.
The company also reported $0.6 million in net income, or $.03 per diluted share, in the third quarter from a discontinued operation, W. A. Whitney. In July 2002, Esterline discontinued its Automation segment to focus on its core aerospace/defense business. On Tuesday, August 31, Esterline signed a definitive agreement for the sale of the Whitney operation. An after-tax gain of approximately $6 million is expected to be recorded in the fourth quarter.
Including discontinued operations, the company reported net earnings in the third quarter of fiscal 2004 of $7.6 million, or $.36 per diluted share, compared with $8.4 million, or $.40 per diluted share, in the prior year period. Year-to-date net earnings were $19.4 million, or $.90 per diluted share, compared with $14.5 million, or $.69 per diluted share, in the prior-year period. The year-ago period included a loss from discontinued operations of $5.8 million, or ($.28) per diluted share and the previously noted foreign currency gain.
Subsequent to the quarter close, Esterline finalized the acquisition of Leach Holding Corporation for approximately $145 million in cash. Leach is a leading producer of high-performance electromechanical relays, solid-state switching devices and advanced power distribution assemblies primarily for aerospace applications. The transaction brings more than 1,000 new employees to Esterline and is expected to add nearly $120 million to Esterline’s current annualized revenue base of $600 million. Cremin noted that, “…following a reasonable period of integration, the Leach business is expected to contribute significant positive results.”
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the current intent and expectations of the management of Esterline, are not guarantees of future performance, and involve risks and uncertainties that are difficult to predict. 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 changes in aerospace/defense industry demand and other risks detailed in the company's public filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year ended October 31, 2003.
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