Revenues up 20%; Earnings up 27% Compared with Last Year
BELLEVUE, Wash., May 29, 2008 — Esterline Corporation, (NYSE/ESL www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2008 second quarter (ended May 2) net earnings of $25.2 million, or $.84 per diluted share. Year-ago net earnings were $19.8 million, or $.76 per diluted share. Sales in the second quarter of 2008 were $374.0 million compared with $312.3 million a year ago.
Robert W. Cremin, Esterline CEO, said, “…the performance reflects not only solid industry fundamentals, but our customers recognizing the value of Esterline’s ability to deliver our extensive product offering.” Cremin noted that during the quarter, three Esterline operations received Supplier of the Year Awards, two from Gulfstream and one from Rockwell Collins.
Cremin said that solid margin improvement is coming from a combination of value pricing and “…the Esterline Performance System gaining traction.” He said the Esterline Performance System is “…our method of focusing our nearly 10,000 exceptional people on developing ways to improve production velocity and eliminate waste.” Cremin advised that the company was raising and narrowing its full-year earnings per share guidance range to $3.45 to $3.55, up from the previous guidance range of $3.35 to $3.50.
Cremin said that “…organic sales growth (excluding sales from the March 2007 acquisition of CMC Electronics) was nearly 15% in the quarter—well balanced between both military and commercial aftermarket and new original equipment.” He said that the company is benefitting from strong demand for military systems replacement and upgrade, particularly in the company’s Avionics & Controls segment.
Commenting on the improved operating results, Cremin noted that Esterline’s strategy over the last decade was to “…quickly build critical mass in our three selected niche business segments—CMC was the most recent of 30 acquisitions completed in that time frame.” He said, “We’ve paid our dues with acquisition accounting expenses and costs associated with closing and integrating plants. Now we’re in a position to focus more on operating performance and new product development.”
Research, development and engineering (R&D) expense during the quarter was $26.2 million, or 7.0% of sales, compared with $19.1 million, or 6.1% of sales, a year ago. Cremin said that the increased spending in the quarter was “…primarily driven by the T-6B military trainer program where our Canadian operation, CMC, is the cockpit integrator.” Cremin said that a factor influencing R&D expense as a percent of sales is the “…level of contributions we receive from government agencies around the world.” He explained that late last year, the Canadian government amended its technology contribution program. Cremin said, “We have presented investment proposals under the new program for funding support for technology programs currently under way.”
Backlog at the end of the second quarter was $1.1 billion compared with $954.4 million at the end of the prior-year period, and $985.1 million at the end of fiscal 2007.
Year-to-date net earnings were $56.2 million, or $1.88 per diluted share, on sales of $746.4 million. For the first six months of fiscal 2007, comparable earnings were $32.6 million, or $1.25 per diluted share, on sales of $569.5 million. The first half effective tax rate reflects $6.2 million in tax benefits principally related to two significant events in the first quarter. The first was the conclusion of an examination of the company’s U.S. federal income tax returns for fiscal years 2003, 2004 and 2005. The result was a $2.8 million reduction of previously estimated income tax liabilities. The second event was the reduction of Canadian statutory corporate income tax rates that will be phased in over the next several years. This resulted in a net reduction of deferred income tax liabilities in the amount of $4.1 million.
Esterline is a leading world-wide supplier to the aerospace and defense industry specializing in three core areas: Avionics & Controls, Sensors & Systems, and Advanced Materials.
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