Esterline's First Quarter Results Stronger Than Expected

First Quarter Sales of $471 Million, EPS of $0.73

Marketwired

BELLEVUE, WA--(Marketwire -03/01/12)- Esterline Corporation (NYSE: ESL - News)

Highlights:

  • Strong performance from Advanced Materials segment
  • Souriau acquisition tracking to plan; associated tax benefit recorded
  • Full-year EPS guidance increased to $5.10 to $5.40

Esterline Corporation (NYSE: ESL - News) (www.esterline.com), a leading specialty manufacturer serving the global aerospace/defense markets, today reported fiscal 2012 first quarter (ended January 27) income from continuing operations of $22.8 million, or $0.73 per diluted share, including about $0.25 per share of acquisition-related accounting charges to recognize the fair value of the Souriau acquired inventory as expense. Sales in the quarter were $470.9 million. Year-ago income from continuing operations was $30 million, or $0.97 per diluted share, on sales of $370.8 million.

Brad Lawrence, Esterline's Chief Executive Officer, said he was "...pleased with the solid first quarter performance and the relatively fast start to the year." Lawrence said that Esterline saw good growth in its commercial aerospace business, particularly from its Engineered Materials platform, and "...saw pockets of strength in certain defense-oriented businesses, despite the tough environment." Lawrence noted that Esterline's July 2011 acquisition -- its largest to date -- of French connector company, Souriau, is performing as expected and "...we're pushing ahead toward full integration, right on schedule." He pointed out that the tax benefit in the quarter was a direct result of the acquisition, and driven in part by "...how we structured the transaction, and partly by a recent change in French tax law."

Esterline raised its earnings guidance by $0.10, estimating full-year earnings to be in the range of $5.10 to $5.40 per share. Lawrence said that although he was pleased with the quarter's solid operational performance, the new guidance principally reflects the tax benefit. He said, "It's still early in the year and the defense budget process remains in front of us, so I think it's only prudent not to get ahead of ourselves." He emphasized, however, that the quarter's results "...certainly give us confidence that we remain in a position to report record sales and earnings at year-end."

As Esterline's December guidance to investors anticipated, gross margins in the first quarter were impacted by acquisition-related accounting and were 33.6%, down from last year's 35.6%. "Without the acquisition," Lawrence said, "...gross margin improved to 36.3%."

Selling, general and administrative (SG&A) expenses as a percent of sales were 20.1% in the first quarter of 2012, compared with 17.8% a year ago. Lawrence said that the increase was anticipated and "...is primarily a result of the expected sales dip in our Avionics & Controls segment due to a delay in foreign military retrofit work, and the somewhat higher than the Esterline average SG&A rate at Souriau."

Research, development and engineering (R&D) expenses were in line with our expectations at 5.6% of sales. This compares to 5.3% last year. Lawrence said "...the increase over last year reflects investments in new avionics programs, as well as the addition of Souriau."

The income tax rate for the first quarter of 2012 was 10.1% compared with 20.3% last year. The decrease primarily reflects the acquisition-related tax benefit described above. It is expected that the tax rate will return to the 20% level in future quarters.

New orders for the first quarter of 2012 were $467.8 million compared with $399.3 million for the same period last year. Backlog was $1.25 billion compared with $1.13 billion at the end of the prior-year period and $1.25 billion at the end of fiscal 2011.

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 866-277-1181; outside the U.S., use 617-597-5358. The pass code for the call is: 66554025.

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
                                                   ------------------------
                                                     Jan 27,      Jan 28,
                                                       2012         2011
                                                   -----------  -----------
Segment Sales
  Avionics & Controls                              $   179,572  $   192,467
  Sensors & Systems                                    171,672       77,055
  Advanced Materials                                   119,638      101,277
                                                   -----------  -----------

Net Sales                                              470,882      370,799

Cost of Sales                                          312,801      238,677
                                                   -----------  -----------
                                                       158,081      132,122
Expenses
  Selling, general and administrative                   94,697       66,092
  Research, development and engineering                 26,395       19,619
                                                   -----------  -----------
  Total Expenses                                       121,092       85,711
                                                   -----------  -----------

Operating Earnings From Continuing Operations           36,989       46,411
  Interest Income                                          (95)        (340)
  Interest Expense                                      11,528        9,137
                                                   -----------  -----------

Income From Continuing Operations Before Income
 Taxes                                                  25,556       37,614
Income Tax Expense                                       2,576        7,654
                                                   -----------  -----------
Income From Continuing Operations Including
 Noncontrolling Interests                               22,980       29,960
Income (Loss) Attributable to Noncontrolling
 Interests                                                (192)          23
                                                   -----------  -----------
Income From Continuing Operations                       22,788       29,983

Income From Discontinued Operations, Net of Tax             --            8
                                                   -----------  -----------

Net Earnings                                       $    22,788  $    29,991
                                                   ===========  ===========

Earnings Per Share - Basic:
  Continuing Operations                            $       .74  $       .99
  Discontinued Operations                                   --           --
                                                   -----------  -----------

Earnings Per Share - Basic                         $       .74  $       .99
                                                   ===========  ===========

Earnings Per Share - Diluted:
  Continuing Operations                            $       .73  $       .97
  Discontinued Operations                                   --           --
                                                   -----------  -----------

Earnings Per Share - Diluted                       $       .73  $       .97
                                                   ===========  ===========

Weighted Average Number of Shares Outstanding -
 Basic                                                  30,631       30,349

Weighted Average Number of Shares Outstanding -
 Diluted                                                31,157       31,011


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

                                                      Three Months Ended
                                                   ------------------------
                                                     Jan 27,      Jan 28,
                                                       2012         2011
                                                   -----------  -----------
Segment Sales
  Avionics & Controls                              $   179,572  $   192,467
  Sensors & Systems                                    171,672       77,055
  Advanced Materials                                   119,638      101,277
                                                   -----------  -----------

Net Sales                                          $   470,882  $   370,799
                                                   ===========  ===========

Income From Continuing Operations
  Avionics & Controls                              $    20,063  $    31,004
  Sensors & Systems                                      6,815       10,971
  Advanced Materials                                    23,073       15,268
                                                   -----------  -----------
                                                        49,951       57,243

  Corporate Expense                                    (12,962)     (10,832)
  Interest Income                                           95          340
  Interest Expense                                     (11,528)      (9,137)
                                                   -----------  -----------

Income From Continuing Operations Before Income
 Taxes                                             $    25,556  $    37,614
                                                   ===========  ===========


ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands

                                                        Three Months Ended
                                                     -----------------------
                                                       Jan 27,     Jan 28,
                                                         2012        2011
                                                     ----------- -----------
Assets
Current Assets
  Cash and cash equivalents                          $   193,289 $   351,481
  Cash in escrow                                           5,017      14,000
  Accounts receivable, net                               350,080     263,666
  Inventories                                            395,050     303,605
  Income tax refundable                                   10,811      22,084
  Deferred income tax benefits                            45,161      38,644
  Prepaid expenses                                        21,098      16,464
  Other current assets                                     3,221      10,617
                                                     ----------- -----------
    Total Current Assets                               1,023,727   1,020,561

Property, Plant and Equipment, Net                       360,368     280,349

Other Non-Current Assets
  Goodwill                                             1,130,489     806,338
  Intangibles, net                                       655,642     447,644
  Debt issuance costs, net                                10,226       7,413
  Deferred income tax benefits                            82,891      88,866
  Other assets                                            24,420      10,677
                                                     ----------- -----------
                                                     $ 3,287,763 $ 2,661,848
                                                     =========== ===========

Liabilities and Shareholders' Equity
Current Liabilities
  Accounts payable                                   $   111,934 $    76,225
  Accrued liabilities                                    265,080     228,378
  Credit facilities                                          223          --
  Current maturities of long-term debt                    13,098      14,259
  Deferred income tax liabilities                          2,943       6,843
  Federal and foreign income taxes                        12,420       4,513
                                                     ----------- -----------
    Total Current Liabilities                            405,698     330,218

Long-Term Liabilities
  Credit facilities                                      335,000          --
  Long-term debt, net of current maturities              656,448     594,145
  Deferred income tax liabilities                        229,375     149,990
  Pension and post-retirement obligations                104,513     107,047
  Other liabilities                                       20,647      25,955

Total Shareholders' Equity                             1,536,082   1,454,493
                                                     ----------- -----------
                                                     $ 3,287,763 $ 2,661,848
                                                     =========== ===========
View Comments (0)