Esterline Reports Fiscal 2013 Second Quarter and Year-to-Date Financial Results

Net Earnings $35.5 Million, or $1.12 per Share, on $499.6 Million Sales

Marketwired

BELLEVUE, WA--(Marketwired - May 30, 2013) -  Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving global aerospace/defense markets, today reported second fiscal quarter (ended April 26, 2013) net earnings of $35.5 million, or $1.12 per diluted share, on sales of $499.6 million. Net earnings in the second quarter of fiscal 2012 were $45.2 million, or $1.44 per diluted share including a $0.30 per share benefit from a litigation settlement. Sales in the year-ago quarter were $504.8 million. 

Brad Lawrence, Esterline's Chief Executive Officer, said the company's second quarter results "...reflect stable revenues, steady margins, controlled costs, and good performance in a variety of businesses and programs." Lawrence said he expects a solid second-half performance, despite headwinds in global defense markets and a slower-than-anticipated recovery of the European economy. He said the company "...adjusted full-year guidance to reflect these headwinds, but we're still expecting a strong finish to the year, especially in the fourth quarter," adding that a number of positive trends should be contributing factors. These include "...a steadily growing commercial aerospace market, solid margin performance, and a stable $1.3 billion backlog." He also emphasized the company's continued "...record cash flow from operations should exceed $200 million this fiscal year."

The updated full-year guidance puts earnings per share (EPS) in the range of $5.30 to $5.50 on sales of approximately $2.0 billion. Lawrence noted the midpoint of the guidance represents "...an increase of nearly 9% over last year's adjusted EPS and is realistic, especially in light of prolonged defense program uncertainty." He said defense customers continue to "...slide programs to the right in order to keep their options open. Beechcraft, for example, after implementing rolling furloughs earlier in the year, reduced the build rate for the T-6B Navy trainer by nearly 15%." Esterline makes the integrated glass cockpit for the T-6B.

Lawrence said the company's "...unrelenting focus on operational efficiencies" will be another key contributing factor to Esterline's second-half strength. Gross margin, at 36.3% in the second quarter of fiscal 2013, was steady with the fiscal 2012 second quarter level of 36.6%. Selling, general and administrative (SG&A) expenses as a percent of sales remained relatively unchanged at 19.7% in the second quarter of fiscal 2013, compared with 19.6% in the prior year's second quarter. R&D expenses were down in the second quarter of fiscal 2013 to 5.1% of sales compared with 5.9% in the same period last year. The income tax rate for the second fiscal quarter was 21.0% compared with 19.7% in last year's period. 

New orders for the second fiscal quarter of 2013 were $494.1 million compared with $566.0 million for the same period last year, primarily reflecting the reduced order rate for the defense and industrial programs mentioned above. This impact was felt primarily in the Avionics & Controls and Sensors & Systems segments. 

For the first half of fiscal 2013, Esterline reported net earnings of $60.6 million, or $1.92 per diluted share, on sales of $957.5 million, compared with net earnings of $68.0 million, or $2.18 per diluted share, on $975.7 million in sales in the same period last year. 

New orders for the first six months of fiscal 2013 were $967.7 million compared with $1.03 billion for the same period last year. Total backlog grew to $1.33 billion compared with $1.31 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 877-415-3186; outside the U.S., use 857-244-7329. The pass code for the call is: 73152565.

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 26,     Apr 27,     Apr 26,     Apr 27,  
    2013     2012     2013     2012  
Segment Sales                                
  Avionics & Controls   $ 192,130     $ 195,025     $ 366,700     $ 374,597  
  Sensors & Systems     176,964       184,683       348,774       356,355  
  Advanced Materials     130,468       125,123       242,050       244,761  
                                 
Net Sales     499,562       504,831       957,524       975,713  
                                 
Cost of Sales     318,186       320,308       615,803       633,109  
      181,376       184,523       341,721       342,604  
Expenses                                
  Selling, general and administrative     98,278       98,950       196,889       193,647  
  Research, development and engineering     25,658       29,545       48,734       55,940  
  Gain on settlement of contingency     --       (11,891 )     --       (11,891 )
    Total Expenses     123,936       116,604       245,623       237,696  
                                 
Operating Earnings     57,440       67,919       96,098       104,908  
                                 
Interest Income     (148 )     (116 )     (249 )     (211 )
Interest Expense     11,482       11,484       21,926       23,012  
Loss on Extinguishment of Debt     946       --       946       --  
                                 
Earnings Before Income Taxes     45,160       56,551       73,475       82,107  
Income Tax Expense     9,482       11,138       11,876       13,714  
                                 
Earnings Including Noncontrolling Interests     35,678       45,413       61,599       68,393  
Earnings Attributable to Noncontrolling Interests     (156 )     (222 )     (966 )     (414 )
                                 
Net Earnings Attributable to Esterline   $ 35,522     $ 45,191     $ 60,633     $ 67,979  
                                 
Basic Earnings Per Share   $ 1.14     $ 1.47     $ 1.96     $ 2.22  
                                 
Diluted Earnings Per Share   $ 1.12     $ 1.44     $ 1.92     $ 2.18  
                                 
Weighted Average Number of Shares Outstanding--Basic     31,100       30,669       31,002       30,650  
                                 
Weighted Average Number of Shares Outstanding--Diluted     31,696       31,319       31,559       31,238  
                                 
                                 
                                 
ESTERLINE TECHNOLOGIES CORPORATION  
Consolidated Sales and Earnings by Segment (unaudited)  
In thousands  
   
    Three Months Ended     Six Months Ended  
    Apr 26,     Apr 27,     Apr 26,     Apr 27,  
    2013     2012     2013     2012  
                                 
Segment Sales                                
  Avionics & Controls   $ 192,130     $ 195,025     $ 366,700     $ 374,597  
  Sensors & Systems     176,964       184,683       348,774       356,355  
  Advanced Materials     130,468       125,123       242,050       244,761  
                                   
    Net Sales   $ 499,562     $ 504,831     $ 957,524     $ 975,713  
                                 
Earnings Before Income Taxes                                
  Avionics & Controls   $ 21,465     $ 18,251     $ 40,054     $ 38,314  
  Sensors & Systems     23,207       24,710       42,208       31,525  
  Advanced Materials     28,623       26,160       46,267       49,233  
    Segment Earnings     73,295       69,121       128,529       119,072  
                                 
Corporate expense     (15,855 )     (13,093 )     (32,431 )     (26,055 )
  Gain on settlement of contingency     --       11,891       --       11,891  
  Interest income     148       116       249       211  
  Interest expense     (11,482 )     (11,484 )     (21,926 )     (23,012 )
  Loss on extinguishment of debt     (946 )     --       (946 )     --  
                                   
    Earnings Before Income Taxes   $ 45,160     $ 56,551     $ 73,475     $ 82,107  
                                     
                                     
                                     
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands   Apr 26,   Apr 27,
    2013   2012
Assets            
  Current Assets            
  Cash and cash equivalents   $ 169,177   $ 191,095
  Cash in escrow     4,017     5,012
  Accounts receivable, net     340,548     361,304
  Inventories     429,961     413,855
  Income tax refundable     7,170     6,226
  Deferred income tax benefits     46,046     49,199
  Prepaid expenses     23,310     25,065
  Other current assets     3,614     5,128
    Total Current Assets     1,023,843     1,056,884
             
Property, Plant and Equipment, Net     351,561     363,557
             
Other Non-Current Assets            
  Goodwill     1,107,514     1,141,347
  Intangibles, net     595,207     652,457
  Debt issuance costs, net     7,063     9,757
  Deferred income tax benefits     94,477     83,381
  Other assets     7,921     20,175
    $ 3,187,586   $ 3,327,558
             
Liabilities and Shareholders' Equity            
  Current Liabilities            
  Accounts payable   $ 111,399   $ 114,386
  Accrued liabilities     240,689     259,168
  Current maturities of long-term debt     20,844     13,139
  Deferred income tax liabilities     3,184     5,095
  Federal and foreign income taxes     2,886     11,829
    Total Current Liabilities     379,002     403,617
             
Long-Term Liabilities            
  Credit facilities     200,000     300,000
  Long-term debt, net of current maturities     558,586     660,935
  Deferred income tax liabilities     201,175     228,603
  Pension and post-retirement obligations     133,073     103,054
  Other liabilities     34,243     13,809
             
Total Shareholders' Equity     1,681,507     1,617,540
    $ 3,187,586   $ 3,327,558
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