SOURCE: Esterline Technologies

Esterline Technologies

September 03, 2009 16:00 ET

Esterline 3Q Earnings From Continuing Operatons $32.5 Million -- $1.09 per Share -- on $361.5 Million Sales

Third Quarter Tax Benefit Contributes About $.10 per Share

BELLEVUE, WA--(Marketwire - September 3, 2009) - Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2009 third quarter (ended July 31) income from continuing operations of $32.5 million, or $1.09 per diluted share, on sales of $361.5 million. Earnings include a tax benefit of approximately $.10 per share. Year-ago income from continuing operations was $18.4 million, or $.61 per diluted share, on sales of $363.5 million.

Robert W. Cremin, Esterline CEO, said, "...Esterline posted a very solid quarter, keeping us on pace with our full-year guidance despite continued uncertainty in the commercial airline industry." Esterline's full-year earnings guidance now stands at $3.10 to $3.30 per share, reflecting the third quarter tax benefit.

Cremin said, "...we feel good going into our fourth quarter, though our guidance range reflects some caution." He said commercial aviation spares sales appear to have bottomed as customers work to balance inventory levels, but he noted that "...these sales can be difficult to forecast accurately due to short lead times." The extent of the business jet market decline also continues to affect the performance of certain operations, especially in the company's Sensors & Systems segment.

Cremin reiterated comments he made last quarter regarding the timing of military countermeasure flares shipments. He said, "...the scarcity of specialized ships for transporting foreign orders of these products continues to be an issue. We know the orders will ship; we just aren't certain at this point if they'll ship in fiscal 2009 or push into 2010."

Gross margin improved in the quarter as a percentage of sales to 32.4%, compared to 31.2% in the same period a year ago. Cremin said the margin increase was due "...primarily to improved performance in our Avionics & Controls segment."

He said, "...we continue to focus on operational excellence -- making appropriate adjustments to individual business circumstances." He noted that the company has continued to tighten SG&A (selling, general and administrative) expenses. He also said that R&D spending "...is coming down to our more normalized level of 4.5%, following the ramp-up over the last several years to win positions on significant new programs, such as the JSF, 787 and T-6B."

"Investing in the future remains a cornerstone of our strategy," he said, adding that Esterline "...recently stepped up to partner with Rolls-Royce to develop the sensors for its new Trent XWB engine for the Airbus A350." He said, "...we're also in the midst of several important plant expansions to prepare for the growth we anticipate as new programs come on-line and economic conditions improve."

The effective income tax rate for the third quarter of 2009 was 8.5% including a reversal of prior expenses related to the application of certain foreign tax laws, and a tax benefit associated with the reconciliation of the prior year's tax returns. The tax rate excluding these two events was 17.5%. Last year's effective income tax rate was 25.3%.

Income from discontinued operations in the third quarter of 2009 was less than $.01 per diluted share, compared with $.07 per diluted share in the prior-year period. Net income was $32.6 million, or $1.09 per diluted share, compared with $20.5 million, or $.68 per diluted share, in the prior-year period.

For the first nine months of fiscal 2009, Esterline reported net earnings from continuing operations of $69.3 million, or $2.32 per diluted share, on sales of $1.03 billion. This compared with net earnings from continuing operations of $72.1 million, or $2.41 per diluted share, on $1.08 billion in sales for the same period in 2008. Income from discontinued operations in the first nine months of 2009 was $.54 per diluted share, compared with $.15 per diluted share in the prior-year period. Net income was $85.3 million, or $2.86 per diluted share, compared with $76.7 million, or $2.56 per diluted share, in the prior-year period.

New orders for the first nine months of 2009 were $1.01 billion compared with $1.15 billion for the same period in 2008. Backlog was $1.07 billion compared with $1.02 billion at the end of the prior-year period and $1.1 billion at the end of fiscal 2008.

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      Nine months ended
                             July 31,    August 1,   July 31,   August 1,
                               2009        2008        2009       2008
                            ----------  ----------  ----------  ----------
Segment Sales
  Avionics & Controls       $  171,027  $  147,926  $  468,606  $  438,008
  Sensors & Systems             84,460     103,320     255,770     294,193
  Advanced Materials           105,999     112,218     306,329     346,621
                            ----------  ----------  ----------  ----------

Net Sales                      361,486     363,464   1,030,705   1,078,822

Cost of Sales                  244,339     250,106     698,808     728,864
                            ----------  ----------  ----------  ----------
                               117,147     113,358     331,897     349,958
Expenses
  Selling, general and
   administrative               59,694      60,957     174,038     178,082
  Research, development and
   engineering                  14,868      21,460      50,560      68,138
                            ----------  ----------  ----------  ----------
  Total Expenses                74,562      82,417     224,598     246,220

Other
  Other expense                    218          --       7,946          86
                            ----------  ----------  ----------  ----------
  Total Other                      218          --       7,946          86
                            ----------  ----------  ----------  ----------

Operating Earnings From
 Continuing Operations          42,367      30,941      99,353     103,652

  Interest income                 (168)     (1,066)       (949)     (3,297)
  Interest expense               7,024       7,339      21,370      22,517
  Gain on derivative
   financial instruments            --          --          --      (1,850)
                            ----------  ----------  ----------  ----------
Other Expense, Net               6,856       6,273      20,421      17,370
                            ----------  ----------  ----------  ----------

Income From Continuing
 Operations Before Income
 Taxes                          35,511      24,668      78,932      86,282
Income Tax Expense               3,009       6,232       9,493      13,981
                            ----------  ----------  ----------  ----------
Income From Continuing
 Operations Before Minority
 Interest                       32,502      18,436      69,439      72,301
Minority Interest                  (24)        (36)       (136)       (229)
                            ----------  ----------  ----------  ----------

Income From Continuing
 Operations                     32,478      18,400      69,303      72,072

Income From Discontinued
 Operations, Net of Tax            163       2,082      15,994       4,579
                            ----------  ----------  ----------  ----------

Net Earnings                $   32,641  $   20,482  $   85,297  $   76,651
                            ==========  ==========  ==========  ==========


Earnings Per Share - Basic:
  Continuing Operations     $     1.09  $      .62  $     2.33  $     2.45
  Discontinued Operations          .01         .07         .54         .15
                            ----------  ----------  ----------  ----------

Earnings Per Share - Basic  $     1.10  $      .69  $     2.87  $     2.60
                            ==========  ==========  ==========  ==========

Earnings Per Share - Diluted:
   Continuing Operations    $     1.09  $      .61  $     2.32  $     2.41
   Discontinued Operations         .00         .07         .54         .15
                            ----------  ----------  ----------  ----------

Earnings Per Share
 - Diluted                  $     1.09  $      .68  $     2.86  $     2.56
                            ==========  ==========  ==========  ==========

Weighted Average Number of
 Shares Outstanding - Basic     29,736      29,575      29,701      29,466

Weighted Average Number of
 Shares Outstanding - Diluted   29,870      29,994      29,855      29,894




Consolidated Balance Sheet (unaudited)
In thousands                                   July 31,        August 1,
                                                 2009            2008
                                             ----------       ----------
Assets
Current Assets
        Cash and cash equivalents            $  148,807       $  162,552
        Accounts receivable, net                248,476          249,083
        Inventories                             296,398          298,461
        Income tax refundable                     9,453            6,495
        Deferred income tax benefits             28,636           31,907
        Prepaid expenses                         17,013           15,774
        Other current assets                     19,240               --
                                             ----------       ----------
                Total Current Assets            768,023          764,272

Property, Plant and Equipment, Net              243,955          215,909

Other Non-Current Assets
        Goodwill                                743,864          651,381
        Intangibles, net                        435,433          339,146
        Debt issuance costs, net                  7,612            7,957
        Deferred income tax benefits             65,518           46,041
        Other assets                              8,541           25,715
                                             ----------       ----------
                                             $2,272,946       $2,050,421
                                             ==========       ==========

Liabilities and Shareholders' Equity
Current Liabilities
        Accounts payable                     $   70,754       $   88,763
        Accrued liabilities                     211,208          181,583
        Credit facilities                         3,798            8,550
        Current maturities of long-term debt        798            8,649
        Federal and foreign income taxes          4,372           14,173
                                             ----------       ----------
                Total Current Liabilities       290,930          301,718

Long-Term Liabilities
        Long-term debt, net of current
         maturities                             509,776          390,221
        Deferred income taxes liabilities       129,006          118,307
        Other liabilities                        98,557           54,051

Commitments and Contingencies                        --               --
Minority Interest                                 2,933            2,643

Shareholders' Equity                          1,241,744        1,183,481
                                             ----------       ----------
                                             $2,272,946       $2,050,421
                                             ==========       ==========