mpared With Last Year
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.
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 including its
most recent Annual Report on Form 10-K.
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Statement of Operations (unaudited)
In thousands, except per share amounts
Three months ended Six months ended
May 2, April 27, May 2, April 27,
2008 2007 2008 2007
--------- --------- --------- ---------
Segment Sales
Avionics & Controls $ 142,514 $ 106,762 $ 281,040 $ 180,620
Sensors & Systems 117,914 99,675 230,941 187,513
Advanced Materials 113,527 105,843 234,403 201,391
--------- --------- --------- ---------
Net Sales 373,955 312,280 746,384 569,524
Cost of Sales 247,366 213,418 499,753 396,093
--------- --------- --------- ---------
126,589 98,862 246,631 173,431
Expenses
Selling, general and
administrative 60,019 50,401 121,621 92,776
Research, development and
engineering 26,207 19,082 48,932 32,633
--------- --------- --------- ---------
Total Expenses 86,226 69,483 170,553 125,409
Other
Other expense 86 27 86 17
Insurance recovery -- (2,810) -- (4,457)
--------- --------- --------- ---------
Total Other 86 (2,783) 86 (4,440)
--------- --------- --------- ---------
Operating Earnings 40,277 32,162 75,992 52,462
Interest income (1,002) (785) (2,387) (1,289)
Interest expense 7,272 8,728 15,178 14,252
Gain on derivative financial
instrument -- -- (1,850) --
--------- --------- --------- ---------
Other Expense, Net 6,270 7,943 10,941 12,963
--------- --------- --------- ---------
Income Before Income Taxes 34,007 24,219 65,051 39,499
Income Tax Expense 8,651 4,494 8,689 6,879
--------- --------- --------- ---------
Income Before Minority Interest 25,356 19,725 56,362 32,620
Minority Interest (171) 35 (193) (59)
--------- --------- --------- ---------
Net Earnings $ 25,185 $ 19,760 $ 56,169 $ 32,561
========= ========= ========= =========
Earnings Per Share:
Basic $ .86 $ .77 $ 1.91 $ 1.27
Diluted $ .84 $ .76 $ 1.88 $ 1.25
Weighted Average Number
of Shares Outstanding
- Basic 29,442 25,590 29,413 25,560
Weighted Average Number
of Shares Outstanding
Diluted 29,882 25,997 29,846 25,964
Consolidated Balance Sheet (unaudited)
In thousands
May 2, April 27,
2008 2007
----------- -----------
Assets
Current Assets
Cash and cash equivalents $ 109,626 $ 60,662
Cash in escrow -- 1,275
Short-term investments 12,050 --
Accounts receivable, net 248,708 238,878
Inventories 289,678 241,670
Income tax refundable 6,965 14,391
Deferred income tax benefits 30,986 31,183
Prepaid expenses 16,953 13,366
----------- -----------
Total Current Assets 714,966 601,425
Property, Plant and Equipment, Net 216,630 213,840
Other Non-Current Assets
Goodwill 652,965 583,054
Intangibles, net 345,236 374,315
Debt issuance costs, net 8,326 10,418
Deferred income tax benefits 44,375 13,465
Other assets 26,696 29,114
----------- -----------
$ 2,009,194 $ 1,825,631
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 93,423 $ 79,824
Accrued liabilities 160,226 168,311
Credit facilities 6,819 49,573
Current maturities of long-term debt 7,699 8,760
Federal and foreign income taxes 10,744 8,220
----------- -----------
Total Current Liabilities 278,911 314,688
Long-Term Liabilities
Long-term debt, net of current maturities 393,594 559,061
Deferred income taxes 122,394 115,708
Other liabilities 53,118 43,956
Commitments and Contingencies -- --
Minority Interest 3,161 3,283
Shareholders' Equity 1,158,016 788,935
----------- -----------
$ 2,009,194 $ 1,825,631
=========== ===========
Contact:
Brian Keogh
425/453-9400
