SOURCE: Esterline Technologies Corporation

Esterline Technologies Corporation

September 02, 2010 16:00 ET

Esterline Reports 23% Earnings Improvement; Raises Full-Year EPS Guidance to $3.85 - $3.95

Earnings From Continuing Operations $39.9 Million, or $1.30 per Share, on $383.5 Million Sales

BELLEVUE, WA--(Marketwire - September 2, 2010) - Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2010 third quarter (ended July 30) income from continuing operations of $39.9 million, or $1.30 per diluted share, on sales of $383.5 million. Year-ago income from continuing operations was $32.5 million, or $1.09 per diluted share, on sales of $361.5 million.

Brad Lawrence, Esterline's CEO, said the solid performance -- year-over-year sales up 6% and earnings from continuing operations up nearly 23% -- reflected strength from the company's Avionics & Controls business segment, where "...sales to new and retrofit military cockpit programs are providing a significant boost to Esterline."

"This performance improvement reflects increasing production demand for the Hawker Beechcraft T-6B military trainer," Lawrence said. "Esterline provides the aircraft's full integrated cockpit solution -- from flight management system to head-up display (HUD)."

Lawrence said that continued success in the international market for C-130 cockpit upgrades is incremental to our solid base of military retrofit business, such as a recently announced $23.6 million contract extension from Sikorsky. That contract covers upgraded flight management systems and emergency control panels for U.S. Army and international Black Hawk helicopters through 2012.

Also in the Avionics & Controls segment is the company's interface technologies operation. Lawrence pointed out that this business is benefiting from increased demand from the medical imaging market due to higher equipment utilization rates and a growing need for the replacement of older systems. "This is a good example of how Esterline leverages its core aerospace technologies into other high-end applications," he said.

"On the commercial aerospace side, we're beginning to see activity in preparation for the previously announced production increases on the Airbus A320 and Boeing 737 lines," Lawrence said. "This improving OEM business is particularly beneficial to our Advanced Materials and Sensors & Systems business segments."

Based on the improving outlook, the company is raising its full-year earnings per share guidance range to $3.85 to $3.95 -- up from the earlier range of $3.45 to $3.65. "At the beginning of the year, we expected our base business to hold steady with growth coming from new programs," Lawrence said. "We are now seeing even better than expected performance on both fronts." Lawrence said Esterline's consistent investment in R&D and good-fit acquisitions "...is clearly shaping our performance. The results we're generating today illustrate the power of that strategy."

Commercial spare parts business at Esterline is showing "...some signs of improvement," Lawrence said, noting that Asian demand is strong and improving, while U.S. demand has flattened from gains made early in the year, and European markets show little sign of recovery.

Consolidated gross margin in the quarter was 34.3% compared with 32.4% a year ago. The increase in gross margin mainly reflected cost control measures, improved recovery of fixed costs due to higher sales volumes, and a favorable sales mix of military and commercial aerospace products, particularly cockpit integration systems.

Selling, general and administrative expenses (SG&A) as a percent of sales were 16.8% in the quarter compared with 16.5% in the prior-year period. The increase in the amount of SG&A expenses was due principally to a reduction in foreign currency exchange gain on forward contracts, and increased incentive compensation accruals due to the improved financial performance.

Research, development and engineering expense for the quarter was 4.6% of sales compared with 4.1% a year ago. Lawrence said that Esterline's R&D expense has stabilized in the 4.5% to 5% range.

For the quarter, the income tax rate was 4.2% compared with 8.5% a year ago. This quarter benefited from a $7.6 million discrete tax benefit, principally due to the expiration of a statute of limitations, compared with a $3.2 million discrete tax benefit in the prior-year period.

For the first nine months of fiscal 2010, Esterline reported income from continuing operations and net income of $82.2 million, or $2.71 per diluted share, on sales of $1.1 billion. Income from continuing operations in the same period last year was $69.3 million, or $2.32 per diluted share. Income from discontinued operations in the first nine months of 2009 was $.54 per diluted share. Net income in that period was $85.3 million, or $2.86 per diluted share, on $1.0 billion in sales.

Backlog at quarter-end totaled $1.2 billion, about 9% ahead of last year. New orders in the first nine months of fiscal 2010 totaled $1.2 billion, up more than 18% compared with the same period a year ago.

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 30,     July 31,     July 30,    July 31,
                            2010         2009         2010        2009
                        -----------  -----------  -----------  -----------
Net Sales               $   383,486 $    361,486  $ 1,110,466  $ 1,030,705

Cost of Sales               251,778      244,339      745,031      698,808
                        -----------  -----------  -----------  -----------
                            131,708      117,147      365,435      331,897
Expenses
  Selling, general and
   administrative            64,503       59,694      192,112      174,038
  Research, development
   and engineering           17,763       14,868       53,287       50,560
  Other (income) expense         (8)         218           (5)       7,946
                        -----------  -----------  -----------  -----------
  Total Expenses             82,258       74,780      245,394      232,544
                        -----------  -----------  -----------  -----------

Operating Earnings From
 Continuing Operations       49,450       42,367      120,041       99,353
  Interest income              (248)        (168)        (651)        (949)
  Interest expense            8,082        7,024       23,391       21,370
                        -----------  -----------  -----------  -----------

Income From Continuing
 Operations Before
 Income Taxes                41,616       35,511       97,301       78,932
Income Tax Expense            1,728        3,009       14,962        9,493
                        -----------  -----------  -----------  -----------
Income From Continuing
 Operations Including
 Noncontrolling Interests    39,888       32,502       82,339       69,439
Income Attributable to
 Noncontrolling Interests       (30)         (24)        (108)        (136)
                        -----------  -----------  -----------  -----------
Income From Continuing
 Operations                  39,858       32,478       82,231       69,303

Income From Discontinued
 Operations, Net of Tax          --          163           --       15,994
                        -----------  -----------  -----------  -----------

Net Earnings            $    39,858  $    32,641  $    82,231  $    85,297
                        ===========  ===========  ===========  ===========

Earnings Per Share
 - Basic:
  Continuing Operations $      1.33  $      1.09  $      2.75  $      2.33
  Discontinued Operations        --          .01           --          .54
                        -----------  -----------  -----------  -----------

Earnings Per Share
 - Basic                $      1.33  $      1.10  $      2.75  $      2.87
                        ===========  ===========  ===========  ===========

Earnings Per Share
 - Diluted:
  Continuing Operations $      1.30  $      1.09  $      2.71  $      2.32
  Discontinued Operations        --          .00           --          .54
                        -----------  -----------  -----------  -----------

Earnings Per Share
 - Diluted              $      1.30  $      1.09  $      2.71  $      2.86
                        ===========  ===========  ===========  ===========

Weighted Average Number
 of Shares Outstanding
- Basic                      30,043      29,736        29,913       29,701

Weighted Average Number
 of Shares Outstanding
 - Diluted                   30,558      29,870        30,394       29,855






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

                           Three Months Ended        Nine Months Ended
                        ------------------------  ------------------------
                          July 30,    July 31,     July 30,     July 31,
                            2010        2009         2010         2009
                        -----------  -----------  -----------  -----------

Segment Sales
  Avionics & Controls   $   194,300  $   171,027  $   563,276  $   468,606
  Sensors & Systems          79,247       84,460      234,335      255,770
  Advanced Materials        109,939      105,999      312,855      306,329
                        -----------  -----------  -----------  -----------

Net Sales               $   383,486  $   361,486  $ 1,110,466  $ 1,030,705
                        ===========  ===========  ===========  ===========

Income from Continuing
 Operations
  Avionics & Controls   $   30,464   $    27,076  $    78,357  $    63,236
  Sensors & Systems         10,557         6,976       24,346       27,127
  Advanced Material         19,175        16,101       45,032       40,434
                        -----------  -----------  -----------  -----------
                            60,196        50,153      147,735      130,797

  Corporate expense        (10,754)       (7,568)     (27,699)     (23,498)
  Other income (expense)         8          (218)           5       (7,946)
  Interest income              248           168          651          949
  Interest expense          (8,082)       (7,024)     (23,391)     (21,370)
                        -----------  -----------  -----------  -----------

Income From Continuing
 Operations Before Income
 Taxes                  $    41,616  $    35,511  $    97,301  $    78,932
                        ===========  ===========  ===========  ===========





ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands
                                                  July 30,      July 31,
                                                    2010          2009
                                                ------------  ------------
Assets
Current Assets
  Cash and cash equivalents                     $    282,910  $    148,807
  Accounts receivable, net                           272,529       248,476
  Inventories                                        266,974       296,398
  Income tax refundable                               11,691         9,453
  Deferred income tax benefits                        38,313        36,266
  Prepaid expenses                                    17,350        17,013
  Other current assets                                13,023        19,240
                                                ------------  ------------
     Total Current Assets                            902,790       775,653

Property, Plant and Equipment, Net                   274,207       243,955

Other Non-Current Assets
  Goodwill                                           733,537       743,864
  Intangibles, net                                   392,183       435,433
  Debt issuance costs, net                             5,706         7,612
  Deferred income tax benefits                        83,727        65,518
  Other assets                                        10,143         8,541
                                                ------------  ------------
                                                $  2,402,293  $  2,280,576
                                                ============  ============
Liabilities and Shareholders' Equity
Current Liabilities
  Accounts payable                              $     79,588  $     70,754
  Accrued liabilities                                200,343       211,208
  Credit facilities                                    2,196         3,798
  Current maturities of long-term debt                10,008           798
  Deferred income tax liabilities                      7,139         7,630
  Federal and foreign income taxes                     3,310         4,372
                                                ------------  ------------
     Total Current Liabilities                       302,584       298,560

Long-Term Liabilities
  Long-term debt, net of current maturities          531,698       509,776
  Deferred income tax liabilities                    128,327       129,006
  Pension and post-retirement obligations             88,126        79,554
  Other liabilities                                   18,347        19,003


Shareholders' Equity                               1,333,211     1,244,677
                                                ------------  ------------
                                                $  2,402,293  $  2,280,576
                                                ============  ============