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FOR IMMEDIATE RELEASE
February 23, 2006
Esterline Reports 1Q Results From Continuing Operations; Income $8.4 Million, or $.33 Per Share, on $205.7 Million Sales
Company Increases Full-Year Earnings Per Share Guidance to a Range of $2.20 - $2.40
BELLEVUE, Wash., Feb. 23, 2006 — Esterline Technologies (NYSE/ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2006 first quarter (ended January 27) income from continuing operations of $8.4 million, or $.32 per diluted share, on $205.7 million sales. Year-ago income from continuing operations was $10.1 million, or $.41 per share, on sales of $189.8 million. (The year-ago results do not include $7.5 million, or $.31 per share, principally from the gain on the sale of the company’s Fluid Regulators subsidiary, accounted for as a discontinued operation. Including this divestiture, first quarter 2005 net earnings were $17.6 million, or $.72 per diluted share.)
Robert W. Cremin , Esterline CEO, said that the performance beat the company’s budgeted expectations, and he emphasized that “…all of our markets are solid, new order input is very strong, and our growth prospects for the year remain right on track.” Cremin noted that, “…the results are typical of the company’s seasonally affected starts to fiscal years.”
During the quarter, Esterline completed the acquisition of Darchem Engineering, a $70 million U.K. manufacturer of thermally engineered aerospace components. Cremin said that the integration process “…has gone very smoothly during the first few months of operation, though early results will be influenced by purchase accounting rules necessitating inventories be grossed up to acquired value.” Cremin added that Darchem “…significantly expands the global reach for our already market-leading advanced materials capabilities, and will provide new opportunities for additional bolt-on acquisitions.” He said he expects continuing improvement from this acquisition, saying that the operation should add “…at least $.05 to our full-year EPS, which we now expect to be in the $2.20 to $2.40 range.”
Cremin pointed to a number of factors that he said “…make for difficult year-over-year comparisons of first quarter results. For example, increased sales volumes of cockpit control components in our Avionics & Controls segment were offset by one medical device customer’s decision to source its components from a low-cost country.” He said that the lost business is being replaced with new customers that “…better fit our manufacturing profile.” Cremin added that both the Advanced Materials and Sensors & Systems segments were wrapping up highly profitable retrofit programs in last year’s first quarter, while in the most recent quarter “…we experienced some production inefficiencies surrounding start-up programs, not to mention the first few months’ ‘low calorie’ shipments associated with the acquisition of Darchem that I mentioned earlier.”
Selling, general and administrative expenses (SG&A) also increased, primarily due to stock option and employee stock purchase plan expense associated with the adoption of FAS 123(R), as well as increased compliance costs and acquired SG&A related to Darchem and Palomar.
Research, development and engineering expense during the quarter was $10.3 million, or 5.0% of sales, compared with $9.2 million, or 4.9% of sales in the year-ago quarter. The most recent quarter reflects a $1.8 million R&D subsidy from the French government.
During the quarter, the company prepaid its $40.0 million 6.77% Senior Notes, incurring a $2.1 million early call make-whole provision, but significantly reducing the overall cost of borrowing on a go-forward basis.
The effective tax rate for the first fiscal quarter of 2006 was 31.2%, before a $0.9 million reduction in previously estimated tax liabilities, the result of a favorable tax audit concluded on December 23, 2005. The year-ago tax rate was 28.3%.
Backlog at the end of the first quarter was $546.2 million compared with $437.7 million at the end of the prior-year period, and $482.8 million at the end of fiscal 2005.
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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