EPS from Continuing Operations $0.29, Including Sale of Small Product Line
BELLEVUE, Wash., May 22, 2003--Esterline Technologies (NYSE/ESL www.esterline.com)a leading specialty manufacturer serving aerospace/defense markets, today reported second quarter (ended May 2) income from continuing operations of $6.0 million, or $.29 per share on a diluted basis, on sales of $135.3 million. This performance compared with the prior year period’s income from continuing operations of $7.2 million, or $.34 per share, on sales of $100.7 million. Backlog at the end of the period was $314.3 million compared with $232.8 million a year ago.
Robert W. Cremin, Esterline CEO, said, “…in April, we saw another dip in the commercial aerospace down cycle as world air traffic, particularly in Europe and Asia, declined sharply due to the conflict in Iraq and SARS.” Cremin said that the down cycle continues to impact gross margins, primarily due to lower sales of spare parts to airlines. He said the quarter also was affected by the temporary shutdown of its countermeasure flares operation in Camden, Arkansas. “We took the opportunity at this recently acquired operation to address some safety issues and to prepare the operation for increased production capacity,” he said.
Late in the quarter Esterline sold a non-core product line that will have little effect on the full-year performance. However, due to the timing of the transaction and GAAP requirements, the company recorded a $.03 per share gain on the sale in the second quarter, that will be offset by an estimated severance cost of $.03 per share in the third quarter.
Subsequent to the quarter end, Esterline announced an agreement to acquire the outstanding stock of UK-based Weston Group for approximately $88 million cash, to be funded with debt financing. The transaction significantly enhances Esterline’s position in high-end aerospace sensors, making it a market leader to the world’s jet engine manufacturers.
Year-to-date income from continuing operations was $11.9 million, or $.57 per diluted share, on sales of $261.6 million. This performance compared with the prior year period’s income from continuing operations of $13.9 million, or $.67 per share, before the cumulative effect of a change in accounting principle recorded in the first quarter of 2002; year-ago sales were $197.5 million.
The company also reported a $5.8 million charge, net of a $3.5 million tax benefit, in the second quarter for losses in its discontinued operations in excess of earlier estimates. Cremin said, “…the charge was precipitated by prolonged weakness in electronics, telecommunications and heavy equipment markets, which led to higher operating losses and longer-than-anticipated holding periods for the discontinued operations.”
Including the above, the company reported net earnings in the second quarter of fiscal 2003 of $0.2 million, or $.01 per diluted share, compared to $4.9 million, or $.23 per diluted share, in the prior year period. The year-ago period included a loss from discontinued operations of $2.3 million, or ($.11) per diluted share. Year-to-date net earnings were $6.1 million, or $.29 per diluted share, and $1.7 million, or $.08 per diluted share, in the prior year period. The year-ago period included a $4.6 million loss from discontinued operations, or ($.22) 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 Standard No. 142, “Goodwill and Other Intangible Assets” in the first quarter of fiscal 2002.
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 telecommunications and computer markets 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 25, 2002.
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