Esterline Announces 2Q Net Earnings of $45.2 Million, or $1.44 per Share, on $504.8 Million Sales

Marketwired

BELLEVUE, WA--(Marketwire -05/31/12)- Esterline Corporation (ESL)

Highlights:

  • Discrete items add $0.15 per share (see Table 1)
  • FY12 guidance adjusted to reflect timing
  • Updated full-year guidance: $5.10 to $5.25
  • Orders solid; backlog growing
  • Souriau acquisition tracking to plan
  • Commercial aerospace markets strengthening; defense markets stronger than expected

Esterline Corporation (ESL) (www.esterline.com), a leading specialty manufacturer serving the global aerospace/defense markets, today reported fiscal 2012 second quarter (ended April 27) net income of $45.2 million, or $1.44 per diluted share. Sales in the quarter were $504.8 million. For the quarter, the company noted that results include the discrete items described in Table 1 below. These items total $0.15 per share, net of tax. Year-ago net income was $45.9 million, or $1.47 per diluted share, including a $5.5 million settlement related to 787 program scope changes. Sales in the year-ago quarter were $435.3 million.

 
Table 1: Effects of Discrete Items on 2nd Quarter 2012 EPS
(Estimated tax rate 20%; 31.3 million shares)

Earnings Per Share $ 1.44
==================================================================

Litigation Settlement 0.30
Customer Bankruptcy (0.07)
Contract Assertions (0.08)
------------------------------------------------------------------
Total Discrete Items $ 0.15
==================================================================

Brad Lawrence, Esterline's Chief Executive Officer, said that excluding the discrete items, Esterline's second quarter "...came in right about where we thought it would. We had solid performance by our Sensors & Systems and Advanced Materials segments, offset by anticipated timing issues in our Avionics & Controls segment. We're still expecting a strong finish to the year, weighted heavily to the fourth quarter." Lawrence noted that steadily growing commercial aircraft build rates will benefit the company as it moves into next fiscal year. "Our order book is growing and our backlog is solid," he said.

Lawrence noted that Souriau, Esterline's France-based connector company acquired in July 2011, is performing well, reflecting strong demand across its product lines and markets, including heavy industrial, oil and gas, and nuclear. He said the integration is going well. "I can say with confidence that the combination of Souriau and Esterline has strengthened relationships with both Airbus and Boeing. Given the early stage of the commercial build cycle, we believe the timing for growing these relationships is very good." He added that Esterline's "...strong cash flow has enabled us to pay down $115 million of debt in the nine months since the acquisition."

Lawrence said that although the company's defense-related businesses will not perform to last year's levels, "...we are seeing some unexpected pockets of strength. Our U.S. countermeasure business is looking to have a solid year, and we're seeing strong sales of embedded communication intercept receivers for signal intelligence applications."

He called the company's updated full-year guidance of $5.10 to $5.25 "...realistic given how the timing of key shipments -- including foreign countermeasures, military headsets, and avionics programs -- remains difficult to call."

One of these timing issues relates to the Hawker Beechcraft bankruptcy. Lawrence emphasized that there remains significant demand for Hawker's T-6B trainer aircraft with its Esterline glass cockpit. He said, "...we're encouraged to have received preferred supplier status during what appears to be an orderly reorganization." He noted, however, that the process is in the hands of the courts and "...until we have better visibility, it's only prudent to be cautious regarding our shorter term outlook."

Lawrence said that the company's 36.6% gross margin performance in the quarter was especially encouraging given the slowdown in the Avionics & Controls segment. Gross margin as a percent of sales in last year's second quarter was 37.0% and included exceptionally strong spare parts and retrofit program sales, and the retroactive price settlement related to the 787 program mentioned above. Selling, general and administrative (SG&A) expenses as a percent of sales were 19.6% in the second quarter of 2012, compared with 16.6% a year ago. Lawrence said that, similar to last quarter, the increase was anticipated and "...also is primarily a result of our Avionics segment's performance." The increase in research, development and engineering (R&D) expenses in the quarter to 5.9% of sales from 4.9% last year primarily reflects investments in new avionics programs. The income tax rate for the second quarter of 2012 was 19.7% compared with 20.5% last year. Lawrence pointed to the company's strong cash flow and reiterated his commitment to de-levering the balance sheet to the historic levels achieved prior to the Souriau acquisition.

New orders for the second quarter of 2012 were $566.0 million compared with $462.9 million for the same period last year. Backlog was $1.31 billion compared with $1.16 billion at the end of the prior-year period.

Conference Call Information
Esterline will host a conference call to discuss this announcement today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). The U.S. dial-in number is 866-202-0886; outside the U.S., use 617-213-8841. The pass code for the call is: 71749026.

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
-------------------- --------------------
Apr 27, Apr 29, Apr 27, Apr 29,
2012 2011 2012 2011
--------- --------- --------- ---------
Segment Sales
Avionics & Controls $ 195,025 $ 231,532 $ 374,597 $ 423,999
Sensors & Systems 184,683 85,181 356,355 162,236
Advanced Materials 125,123 118,564 244,761 219,841
--------- --------- --------- ---------

Net Sales 504,831 435,277 975,713 806,076

Cost of Sales 320,308 274,330 633,109 513,007
--------- --------- --------- ---------
184,523 160,947 342,604 293,069
Expenses
Selling, general and
administrative 98,950 72,409 193,647 138,501
Research, development and
engineering 29,545 21,251 55,940 40,870
Gain on settlement of
contingency (11,891) -- (11,891) --
--------- --------- --------- ---------
Total Expenses 116,604 93,660 237,696 179,371
--------- --------- --------- ---------

Operating Earnings From
Continuing Operations 67,919 67,287 104,908 113,698

Interest income (116) (430) (211) (770)
Interest expense 11,484 8,958 23,012 18,095
Loss on extinguishment of debt -- 831 -- 831
--------- --------- --------- ---------

Income From Continuing
Operations
Before Income Taxes 56,551 57,928 82,107 95,542
Income Tax Expense 11,138 11,848 13,714 19,502
--------- --------- --------- ---------
Income From Continuing
Operations Including
Noncontrolling Interests 45,413 46,080 68,393 76,040
Income Attributable to
Noncontrolling Interests (222) (129) (414) (106)
--------- --------- --------- ---------

Income From Continuing
Operations 45,191 45,951 67,979 75,934

Loss From Discontinued
Operations, Net of Tax -- (37) -- (29)
--------- --------- --------- ---------

Net Earnings $ 45,191 $ 45,914 $ 67,979 $ 75,905
========= ========= ========= =========

Earnings Per Share - Basic:
Continuing Operations $ 1.47 $ 1.51 $ 2.22 $ 2.50
Discontinued Operations .00 .00 .00 .00
--------- --------- --------- ---------

Earnings Per Share - Basic $ 1.47 $ 1.51 $ 2.22 $ 2.50
========= ========= ========= =========

Earnings Per Share - Diluted:
Continuing Operations $ 1.44 $ 1.47 $ 2.18 $ 2.44
Discontinued Operations .00 .00 .00 .00
--------- --------- --------- ---------

Earnings Per Share - Diluted $ 1.44 $ 1.47 $ 2.18 $ 2.44
========= ========= ========= =========

Weighted Average Number of
Shares Outstanding - Basic 30,669 30,496 30,650 30,422

Weighted Average Number of
Shares Outstanding - Diluted 31,319 31,160 31,238 31,086




ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Sales and Income from Continuing Operations by Segment
(unaudited)
In thousands

Three Months Ended Six Months Ended
-------------------- --------------------
Apr 27, Apr 29, Apr 27, Apr 29,
2012 2011 2012 2011
--------- --------- --------- ---------

Segment Sales
Avionics & Controls $ 195,025 $ 231,532 $ 374,597 $ 423,999
Sensors & Systems 184,683 85,181 356,355 162,236
Advanced Materials 125,123 118,564 244,761 219,841
--------- --------- --------- ---------

Net Sales $ 504,831 $ 435,277 $ 975,713 $ 806,076
========= ========= ========= =========

Income From Continuing
Operations
Avionics & Controls $ 18,251 $ 44,915 $ 38,314 $ 75,919
Sensors & Systems 24,710 11,595 31,525 22,566
Advanced Materials 26,160 22,979 49,233 38,247
--------- --------- --------- ---------
69,121 79,489 119,072 136,732

Corporate expense (13,093) (12,202) (26,055) (23,034)
Gain on settlement of
contingency 11,891 -- 11,891 --
Interest income 116 430 211 770
Interest expense (11,484) (8,958) (23,012) (18,095)
Loss on extinguishment of debt -- (831) -- (831)
--------- --------- --------- ---------

Income From Continuing
Operations Before Income Taxes $ 56,551 $ 57,928 $ 82,107 $ 95,542
========= ========= ========= =========




ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands Apr 27, Apr 29,
2012 2011
----------- -----------
Assets
Current Assets
Cash and cash equivalents $ 191,095 $ 391,514
Cash in escrow 5,012 5,000
Accounts receivable, net 361,304 308,103
Inventories 413,855 315,994
Income tax refundable 6,226 12,067
Deferred income tax benefits 49,199 38,232
Prepaid expenses 25,065 18,369
Other current assets 5,128 18,673
----------- -----------
Total Current Assets 1,056,884 1,107,952

Property, Plant and Equipment, Net 363,557 287,942

Other Non-Current Assets
Goodwill 1,141,347 835,167
Intangibles, net 652,457 456,648
Debt issuance costs, net 9,757 9,759
Deferred income tax benefits 83,381 95,048
Other assets 20,175 22,404
----------- -----------
$ 3,327,558 $ 2,814,920
=========== ===========

Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 114,386 $ 84,660
Accrued liabilities 259,168 233,727
Credit facilities -- 110,000
Current maturities of long-term debt 13,139 1,782
Deferred income tax liabilities 5,095 10,477
Federal and foreign income taxes 11,829 2,451
----------- -----------
Total Current Liabilities 403,617 443,097

Long-Term Liabilities
Credit facilities 300,000 --
Long-term debt, net of current maturities 660,935 495,719
Deferred income tax liabilities 228,603 153,660
Pension and post-retirement obligations 103,054 109,251
Other liabilities 13,809 27,568

Total Shareholders' Equity 1,617,540 1,585,625
----------- -----------
$ 3,327,558 $ 2,814,920
=========== ===========


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