EPS of $.40 Includes $.09 Gain from Currency Hedging Associated with Recent Acquisition
BELLEVUE, Wash., Sept. 4, 2003 — Esterline Technologies (NYSE/ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported third quarter (ended August 1) performance in line with earlier forecasts. Income from continuing operations was $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. Midway through the quarter, Esterline acquired Weston Aerospace from The Roxboro Group PLC for £55.0 million (approximately $95.3 million at the closing exchange rate, including acquisition costs). The foreign currency gain resulted when Esterline hedged the purchase price using foreign currency forward contracts. Year-ago income from continuing operations was $6.9 million, or $.33 per diluted share, on $112.4 million sales.
Robert W. Cremin, Esterline CEO, said that operating performance in the quarter was in line with the company’s earlier published full-year guidance of $1.20. Cremin said, “…considering the foreign currency gain, full-year diluted EPS from continuing operations should now be about $1.30.” He said that although a favorable product mix during the quarter improved gross margins, he remained cautious about predicting any short-term upward trend. “The commercial aerospace down cycle and its impact on our spare parts business continues to be a factor,” he said.
However, Cremin emphasized that Esterline is well positioned in defense and other high-end specialty markets where business is relatively strong. The company also continues to invest in new product development and good-fit acquisitions. Research and development spending in the third quarter was 4.4% of sales compared with 3.9% a year ago, and on the acquisition front, Cremin said the company is “…just beginning to feel the advantage gained from integrating acquisitions completed 12 to 15 months ago.”
As previously reported, Esterline sold substantially all the assets of its discontinued Excellon Automation subsidiary during the quarter to a private party. The sale was part of a formal plan adopted on July 25, 2002, to sell its Automation segment, which included Excellon. As part of this decision, the Automation segment was recorded as a “discontinued operation” as defined by GAAP (Generally Accepted Accounting Principles) in the company’s fiscal third quarter of 2002 ended July 26. Esterline continues to report the one remaining business in this segment as a “discontinued operation.”
Year-to-date income from continuing operations was $20.3 million, or $.97 per diluted share, on sales of $402.1 million. This performance compared with the prior-year period’s income from continuing operations of $20.8 million, or $.99 per diluted share on sales of $309.9 million.
Including charges for losses in its discontinued operations, year-to-date net earnings were $14.5 million, or $.69 per diluted share, compared to a loss of $8.9 million, or ($.42) per diluted share, in the prior-year period. The year-to-date period includes a $5.8 million charge, net of a $3.5 million tax benefit, recorded in the second quarter for losses in excess of earlier estimates in its discontinued operations. The year-ago period included a loss from discontinued operations of $22.1 million, or ($1.05) per diluted share, and a $7.6 million charge, or ($.36) per diluted share, for the cumulative effect of an accounting change as a result of the adoption of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” in the first quarter of fiscal 2002.
Orders received in the third quarter totaled $147.4 million compared with $131.0 million a year ago. Backlog at August 1, 2003, was $321.2 million compared with $251.4 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 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 or because of current uncertainties associated with 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 25, 2002.
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