SOURCE: Esterline Technologies Corporation

Esterline Technologies Corporation

February 25, 2010 16:00 ET

Esterline First Quarter 2010 Net Earnings

$12.7 Million -- $.42 per Share -- on $339.4 Million Sales

BELLEVUE, WA--(Marketwire - February 25, 2010) - Esterline Corporation (NYSE: ESL)

Highlights:

--  Income from continuing operations up 10.8% year over year
--  Sales up 9.6% year over year
--  Full-year EPS guidance range maintained at $3.20 to $3.45
--  Backlog -- $1.1 billion

Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2010 first quarter (ended January 29) income from continuing operations and net income of $12.7 million, or $.42 per diluted share, on sales of $339.4 million. Year-ago income from continuing operations was $11.5 million, or $.38 per diluted share, including a pretax foreign currency loss of $7.9 million related to the funding of an acquisition. Income from discontinued operations in the prior-year period was $.52 per diluted share, reflecting gains on the sale of a U.K.-based operation in November 2008. Year-ago sales were $309.7 million.

Brad Lawrence, Esterline CEO, said, "...our quarterly results were essentially what we expected," and he reiterated the company's full-year earnings per share guidance range of $3.20 to $3.45. Lawrence said, "...a very solid performance from our Avionics & Controls segment was offset by softness in our Sensors & Systems segment and the effect of a significantly higher tax rate compared with last year."

He said, "...our Avionics & Controls segment benefited particularly from the T-6B military trainer cockpit production ramp-up, international C-130 cockpit retrofit programs, and solid demand for our military communications equipment." He also pointed to pockets of improved demand for commercial air transport spare parts in the segment. In addition, he said, "...we continue to explore adjacent markets for our user interface technologies. Most recently, demand for our custom input systems for casino gaming machines is running ahead of expectations."

Lawrence said Esterline's Sensors & Systems and Advanced Materials segments continue to be affected by sluggish commercial air transport and business jet activity, but he said, "...we are beginning to see signs of aftermarket improvement as global commercial airline capacity improves." He also said that the company's cost reduction measures taken over the last several quarters will lead to enhanced profitability going forward.

As the company's December guidance to investors anticipated, gross margins in the first quarter were impacted by the mix of products shipped during the period. Lawrence said, "...we expect margin performance to improve steadily as the year progresses." Gross margin was 30.8% compared with 33.0% last year.

Selling, general and administrative expenses as a percent of sales were 18.4% in the first quarter of 2010, compared with 19.3% a year ago.

Research, development and engineering (R&D) expenses continued to ratchet down from the mid-2008 peak of 7.0%. R&D spending in the first quarter of 2010 was $17.0 million, or 5.0% of sales, compared with $17.4 million, or 5.6% of sales a year ago. Lawrence said, "The programs we invested in over the last several years are beginning to pay off." He said, "T-6B production is ramping up rapidly for the U.S. Navy trainer program, and foreign military sales of this aircraft are accelerating." He said Esterline recently received an initial order from Hawker Beechcraft to supply the integrated avionics suite for twenty-four T-6C trainer aircraft for the Royal Moroccan Air Force.

Lawrence added, "Our investments in the development of open architecture integrated glass cockpits are creating opportunities in retrofit markets." During the quarter, the Chilean Air Force selected Esterline to upgrade the complete cockpit avionics systems of its C-130 fleet. As prime contractor, Esterline's Canada-based CMC Electronics subsidiary is responsible for delivery of the complete equipment suite, including the supply of turnkey installation kits as well as all in-country activities, including touch labor, training and support.

The income tax rate for the first quarter of 2010 was 27.2% compared with 15.8% last year. The increase primarily reflects a change in French tax law, the expiration of U.S. R&D credits and changes in the U.S.-Canada tax treaty. In addition, the prior-year period reflected a tax benefit associated with a foreign currency loss.

New orders for the first quarter of 2010 were $342.8 million compared with $370.2 million for the same period in 2009. Orders in the 2009 period included acquired backlog of $65.2 million. Backlog was $1.1 billion compared with $1.2 billion at the end of the prior-year period and $1.1 billion at the end of fiscal 2009.

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 29,     Jan 30,
                                                        2010        2009
                                                      --------    --------
Segment Sales
        Avionics & Controls                           $170,257    $128,468
        Sensors & Systems                               74,742      84,555
        Advanced Materials                              94,361      96,694
                                                      --------    --------

Net Sales                                              339,360     309,717

Cost of Sales                                          234,831     207,565
                                                      --------    --------
                                                       104,529     102,152
Expenses
        Selling, general and administrative             62,315      59,725
        Research, development and engineering           17,047      17,398
        Other expense                                       41       5,014
                                                      --------    --------
        Total Expenses                                  79,403      82,137
                                                      --------    --------

Operating Earnings From Continuing Operations           25,126      20,015
        Interest income                                   (383)       (411)
        Interest expense                                 7,961       6,736
                                                      --------    --------

Income From Continuing Operations Before Income
 Taxes                                                  17,548      13,690
Income Tax Expense                                       4,769       2,168
                                                      --------    --------
Income From Continuing Operations Including
 Noncontrolling Interests                               12,779      11,522
Income Attributable to Noncontrolling Interests            (54)        (35)
                                                      --------    --------
Income From Continuing Operations                       12,725      11,487

Income From Discontinued Operations, Net of Tax             --      15,456
                                                      --------    --------

Net Earnings                                          $ 12,725    $ 26,943
                                                      ========    ========

Earnings Per Share - Basic:
        Continuing Operations                         $    .43    $    .39
        Discontinued Operations                             --         .52
                                                      --------    --------

Earnings Per Share - Basic                            $    .43    $    .91
                                                      ========    ========

Earnings Per Share - Diluted:
        Continuing Operations                         $    .42    $    .38
        Discontinued Operations                             --         .52
                                                      --------    --------

Earnings Per Share - Diluted                          $    .42    $    .90
                                                      ========    ========

Weighted Average Number of Shares Outstanding
 - Basic                                                29,789      29,664

Weighted Average Number of Shares Outstanding
 - Diluted                                              30,218      29,865




Consolidated Balance Sheet (unaudited)
In thousands                                           Jan 29,     Jan 30,
                                                        2010        2009
                                                     ----------  ----------
Assets
Current Assets
        Cash and cash equivalents                    $  187,050  $   81,231
        Accounts receivable, net                        245,527     270,974
        Inventories                                     271,989     275,271
        Income tax refundable                             7,581       4,066
        Deferred income tax benefits                     31,059      34,781
        Prepaid expenses                                 19,291      15,141
        Other current assets                             11,635         468
                                                     ----------  ----------
                Total Current Assets                    774,132     681,932

Property, Plant and Equipment, Net                      270,367     201,562

Other Non-Current Assets
        Goodwill                                        731,792     696,624
        Intangibles, net                                409,204     384,492
        Debt issuance costs, net                          6,659       7,213
        Deferred income tax benefits                     79,593      58,127
        Other assets                                     12,307      36,495
                                                     ----------  ----------
                                                     $2,284,054  $2,066,445
                                                     ==========  ==========

Liabilities and Shareholders' Equity
Current Liabilities
        Accounts payable                             $   76,980  $   78,656
        Accrued liabilities                             172,636     201,716
        Credit facilities                                 1,439     118,858
        Current maturities of long-term debt              6,816       8,352
        Deferred income tax liabilities                   5,932       1,759
        Federal and foreign income taxes                    936       9,458
                                                     ----------  ----------
                Total Current Liabilities               264,739     418,799

Long-Term Liabilities
        Long-term debt, net of current maturities       525,737     382,446
        Deferred income taxes                           127,571     112,932
        Pension and post-retirement obligations          93,665      88,673
        Other liabilities                                21,984      30,038


Shareholders' Equity                                  1,250,358   1,033,557
                                                     ----------  ----------
                                                     $2,284,054  $2,066,445
                                                     ==========  ==========