BELLEVUE, WA--(Marketwire - February 28, 2008) - Esterline Corporation (
NYSE:
ESL)
Highlights:
-- Segment earnings(1) $45.0 million vs. $28.3 million a year ago
-- Gross margin 32.2% -- 29.0% a year ago
-- Sales $372.4 million -- $257.2 million a year ago
-- Organic sales growth 24.7%
-- Diluted earnings per share $1.04 compared with $.49 a year ago
Esterline Corporation (
NYSE:
ESL) (
www.esterline.com), a leading specialty
manufacturer serving aerospace/defense markets, today reported fiscal 2008
first quarter (ended February 1) net earnings of $31.0 million, or $1.04
per diluted share. Year-ago net earnings were $12.8 million, or $.49 per
diluted share. First quarter 2008 net earnings include $6.9 million in tax
benefits and a $1.9 million gain associated with the termination of an
interest rate swap; first quarter 2007 net earnings included a $2.1 million
tax benefit. Sales in the 2008 first quarter were a record $372.4 million
compared with $257.2 million a year ago.
Robert W. Cremin, Esterline CEO, said the start to the year is encouraging
and showed strength in all business segments. Cremin said the company is
raising its full-year earnings per share guidance to a range of $3.35 to
$3.50 "...partly to account for the one-time benefits (noted above), but
also to reflect an improving outlook." Cremin said that revenues in the
quarter were "...somewhat better than anticipated" due to the timing of a
shipment of countermeasure flares, noting that the timing of certain
countermeasure deliveries "...can be hard to predict."
Cremin pointed to organic growth as another important metric. He said that
although acquisitions have been, and will remain, an important part of
Esterline's growth strategy, "...our first choice is to develop in house."
He said that "...organic growth was nearly 25% in the quarter -- well
balanced between both military and commercial aftermarket spares and new
original equipment."
Cremin cited gross margin improvement as the most encouraging metric in the
quarter. He said, "...our customers are increasingly recognizing the
value we bring to the table -- and not just for our highly engineered
solutions, but our capacity to deliver." Cremin explained that Esterline's
lean manufacturing efforts have enabled its operations to drive more work
through existing plants faster. "It's a velocity game," he said, "one that
creates capacity without the need for new bricks and mortar."
On the strength of both volume and margin improvement, segment earnings(1)
surged 59% to $45.0 million compared with $28.3 million last year. Cremin
said that all three Esterline business segments contributed to the growth.
He said the company's Sensors & Systems segment "...turned in a
particularly strong quarter, reporting earnings 2.5 times greater than last
year." Advanced Materials segment earnings were up 43%, and Avionics &
Controls segment earnings were up 27% despite essentially breakeven
performance at its CMC operation due principally to the relative valuation
between the Canadian and U.S. dollar.
Selling, general and administrative expenses (SG&A) totaled $61.6 million
in the first quarter of 2008, compared with $42.4 million a year ago,
primarily due to incremental SG&A expenses from CMC. As a percent of
sales, SG&A was 16.5% in both periods.
Research, development and engineering (R&D) expense during the quarter was
$22.7 million, or 6.1% of sales, compared with $13.6 million, or 5.3% of
sales a year ago. Cremin said that the 6.1% rate is "...somewhat higher
than the 5.5% level we expect for the full fiscal year." Cremin added that
the increase is due primarily to "...CMC's investment in a number of new
programs including the T-6B military trainer where they are the cockpit
integrator." He noted that R&D expense is "...mitigated over time through
a variety of tax credits received from the tax jurisdictions where we
operate our businesses."
Prior to the tax benefits noted above, Esterline's effective tax rate in
the first quarter was 22.2%. Cremin explained that the $6.9 million tax
benefit was related to two significant events. 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.
Backlog at the end of the first quarter was $976.6 million compared with
$656.5 million at the end of the prior-year period, and $985.1 million at
the end of fiscal 2007.
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.
(1) Segment earnings are operating earnings excluding corporate expenses
of $9.3 million and $8.0 million for the first quarter of fiscal 2008 and
2007, respectively, and other income or expense.
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Statement of Operations (unaudited)
In thousands, except per share amounts
Three months ended
------------------
Feb 1, Jan 26,
2008 2007
----------- -----------
Segment Sales
Avionics & Controls $ 138,526 $ 73,858
Sensors & Systems 113,027 87,838
Advanced Materials 120,876 95,548
----------- -----------
Net Sales 372,429 257,244
Cost of Sales 252,387 182,675
----------- -----------
120,042 74,569
Expenses
Selling, general and administrative 61,602 42,375
Research, development and engineering 22,725 13,551
----------- -----------
Total Expenses 84,327 55,926
Other
Other income -- (10)
Insurance recovery -- (1,647)
----------- -----------
Total Other -- (1,657)
----------- -----------
Operating Earnings 35,715 20,300
Interest income (1,385) (504)
Interest expense 7,906 5,524
Gain on derivative financial instrument (1,850) --
----------- -----------
Other Expense, Net 4,671 5,020
----------- -----------
Income Before Income Taxes 31,044 15,280
Income Tax Expense 38 2,385
----------- -----------
Income Before Minority Interest 31,006 12,895
Minority Interest (22) (94)
----------- -----------
Net Earnings $ 30,984 $ 12,801
=========== ===========
Earnings Per Share:
Basic $ 1.05 $ .50
Diluted $ 1.04 $ .49
Weighted Average Number
of Shares Outstanding - Basic 29,386 25,529
Weighted Average Number
of Shares Outstanding - Diluted 29,811 25,930
Consolidated Balance Sheet (unaudited)
In thousands Feb 1, Jan 26,
2008 2007
----------- -----------
Assets
Current Assets
Cash and cash equivalents $ 106,509 $ 48,264
Cash in escrow -- 4,460
Accounts receivable, net 232,225 174,139
Inventories 274,460 190,172
Income tax refundable 11,795 8,550
Deferred income tax benefits 31,171 29,984
Prepaid expenses 15,658 12,146
Other current assets 298 --
----------- -----------
Total Current Assets 672,116 467,715
Property, Plant and Equipment, Net 215,037 171,651
Other Non-Current Assets
Goodwill 655,887 370,755
Intangibles, net 351,535 243,315
Debt issuance costs, net 8,782 4,300
Deferred income tax benefits 43,576 14,790
Other assets 26,385 27,119
----------- -----------
$ 1,973,318 $ 1,299,645
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 88,041 $ 56,574
Accrued liabilities 155,328 102,810
Credit facilities 5,911 8,011
Current maturities of long-term debt 6,688 7,282
Federal and foreign income taxes 10,632 3,716
----------- -----------
Total Current Liabilities 266,600 178,393
Long-Term Liabilities
Long-term debt, net of current
maturities 396,623 283,320
Deferred income taxes 125,479 74,231
Other liabilities 51,255 24,462
Commitments and Contingencies -- --
Minority Interest 2,990 3,318
Shareholders' Equity 1,130,371 735,921
----------- -----------
$ 1,973,318 $ 1,299,645
=========== ===========
Contact Information: Contact:
Brian Keogh
425/453-9400