BELLEVUE, WA--(Marketwired - Dec 5, 2013) - Esterline Corporation (
Highlights:
- FY13 sales $2.0 billion
- FY13 EPS $5.23; adjusted EPS of $5.65 excludes goodwill impairment and compliance settlement charges reported in Q3
- Announces accelerated integration initiatives for fiscal 2014
Esterline Corporation (
Curtis Reusser, Esterline's Chief Executive Officer, said, "As we expected, Esterline ended the year on a strong note, with record-high revenue and earnings. We were particularly pleased with these results given the challenging defense environment." He added that continuing strength in the commercial aircraft market and positive resolutions both to contract assertions and other matters offset expected weakness in certain domestic defense programs.
Reusser continued, "In the year ahead, it is essential that we continue to constantly strive to improve efficiency, streamline our operations, enhance our competitiveness and drive value into all aspects of our business."
The company announced it would accelerate plans to consolidate certain facilities, and create greater cost-efficiency through shared services in sales, general administrative and support functions. These integration activities are launching currently in each segment and are expected to result in one-time charges and expenses of approximately $40 million. The company expects to incur costs of $25 million to $30 million in fiscal 2014 to support these efforts, with the balance incurred in fiscal 2015. Expense savings on short-cycle activities will commence in fiscal 2014, with substantially more savings expected in fiscal 2015. The company expects these projects to build to anticipated savings in excess of $15 million annually starting in fiscal 2016. The projects have short payback periods of approximately two years with an internal rate of return nearing 100%.
Reusser noted that he is encouraged by Esterline's solid business mix that generated record cash flow in fiscal 2013, saying the company's "...proven ability to generate exceptional cash levels will fund our integration projects and allow us to continue making strategic, bolt-on acquisitions without compromising our investment-grade balance sheet metrics and sound capital allocation strategies." Esterline's cash flow from operations as a percent of net earnings has exceeded 125% since 2009 and was 152% in fiscal 2013.
Guidance
The company today provided guidance for full-year fiscal 2014. Revenues are expected to be in the range of $2.0 billion to $2.1 billion and adjusted earnings per share -- excluding the expected integration costs and specific expenses related to improving the company's compliance systems -- are expected to be in the range of $5.40 to $5.70 per diluted share.
Reusser said the 2014 guidance reflects a higher tax rate and continued limited visibility for defense markets, particularly in the U.S. He also noted that, in addition to the company's specific near-term compliance tasks undertaken to enhance export compliance systems, "...ongoing administrative costs associated with compliance activities are increasing -- that's a reality in today's industry." However, Reusser noted that there are still significant opportunities in defense, including increased sales of elastomer materials for military applications and continued strong contributions from key defense programs such as the A400M, F-35, P-8 and T-6B aircraft.
Fiscal Fourth Quarter and Full-Year 2013 Results
For the full fiscal year 2013, Esterline reported sales of $1.97 billion, with earnings from continuing operations of $166.0 million, or $5.23 per diluted share. Fiscal 2013 adjusted earnings from continuing operations were $179.5 million, or $5.65 per diluted share, excluding non-cash goodwill impairment and compliance charges of $13.5 million, or $0.42 per diluted share, recorded in the third fiscal quarter. In fiscal 2012, Esterline reported sales of $1.99 billion and earnings from continuing operations of $112.5 million, or $3.60 per diluted share. Fiscal 2012 adjusted earnings from continuing operations were $164.7 million, or $5.27 per diluted share, excluding a non-cash charge against goodwill of $52.2 million, or $1.67 per diluted share, recorded in the third fiscal quarter.
Gross margin as a percentage of sales in the fourth quarter of fiscal 2013 was 38.4%, on par with the prior-year's fourth quarter. Full-year gross margin was 36.9% compared with 36.1% in the prior year. In the first quarter of fiscal 2012, a purchase accounting adjustment related to the Souriau acquisition reduced that year's gross margin by 60 basis points.
Fiscal 2013 fourth quarter selling, general and administrative (SG&A) expenses as a percent of sales were 17.3%, compared with 18.3% in the prior-year period. Certain expense contingencies recorded in the fourth quarter of fiscal 2012 contributed to the higher rate in the prior year. Full-year SG&A expenses for fiscal 2013 were 19.9%, compared with 19.2% in fiscal 2012; the increase was principally due to incremental SG&A expenses related to a reserve taken in the fiscal third quarter for a pending compliance settlement.
Research, development and engineering (R&D) spending in the fourth quarter of fiscal 2013 was $22.9 million, or 4.3% of sales, compared with $24.6 million, or 4.6% of sales, in the prior-year period. For the full year, R&D expenses were $95.7 million, or 4.9% of sales, compared with $107.7 million, or 5.4% of sales, in fiscal 2012. Reusser said the company expects R&D expense levels "...to remain around 5% for the next few years."
The company's income tax rate in the fourth quarter of 2013 was 20.4% compared with 13.0% for the prior-year period. The lower rate in 2012 was related to various tax credits and foreign deductions. For the full fiscal years of 2013 and 2012, the company's tax rate was 15.2% and 20.9%, respectively, mainly reflecting the impact of fiscal 2012 expense associated with the Racal Acoustics impairment, which was not deductible for income tax purposes. The company is expecting a tax rate in fiscal 2014 in the range of 21% to 22%.
A loss from discontinued operations of $0.3 million, or $0.01 per diluted share, was recorded in the fourth quarter of fiscal 2013. For the full fiscal year of 2013, the loss from discontinued operations was $1.3 million, or $0.04 per diluted share. There was no income or loss from discontinued operations in the prior-year periods.
Net earnings in the fourth quarter of fiscal 2013 were $65.9 million, or $2.06 per diluted share, compared with $61.7 million, or $1.97 per diluted share, in the prior-year period. Fiscal 2013 full-year net earnings were $164.7 million, or $5.19 per diluted share, compared with $112.5 million, or $3.60 per diluted share, for fiscal 2012.
Backlog at October 25, 2013, was $1.28 billion compared with $1.32 billion at the end of the prior year. New orders in the fourth quarter of fiscal 2013 were $499 million compared with $607 million in the prior-year period, reflecting large, long-term orders booked in our avionics business in the fiscal 2012 period. Fiscal 2013 full-year new orders were $1.93 billion compared with $2.06 billion for fiscal 2012.
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 866-318-8612; outside the U.S., use 617-399-5131. The pass code for the call is: 88978364.
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 | Fiscal Year Ended | |||||||||||||||||
| Oct 25, | Oct 26, | Oct 25, | Oct 26, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| Segment Sales | ||||||||||||||||||
| Avionics & Controls | $ | 225,385 | $ | 220,359 | $ | 771,657 | $ | 790,015 | ||||||||||
| Sensors & Systems | 177,292 | 174,436 | 701,930 | 702,394 | ||||||||||||||
| Advanced Materials | 131,485 | 135,861 | 496,167 | 499,909 | ||||||||||||||
| Net Sales | 534,162 | 530,656 | 1,969,754 | 1,992,318 | ||||||||||||||
| Cost of Sales | 328,789 | 326,403 | 1,243,758 | 1,273,365 | ||||||||||||||
| 205,373 | 204,253 | 725,996 | 718,953 | |||||||||||||||
| Expenses | ||||||||||||||||||
| Selling, general and administrative | 92,436 | 97,371 | 391,147 | 382,887 | ||||||||||||||
| Research, development and engineering | 22,899 | 24,607 | 95,736 | 107,745 | ||||||||||||||
| Gain on sale of product line | (2,264 | ) | -- | (2,264 | ) | -- | ||||||||||||
| Gain on settlement of contingency | -- | -- | -- | (11,891 | ) | |||||||||||||
| Goodwill impairment | -- | -- | 3,454 | 52,169 | ||||||||||||||
| Other income | -- | -- | -- | (1,263 | ) | |||||||||||||
| Total Expenses | 113,071 | 121,978 | 488,073 | 529,647 | ||||||||||||||
| Operating Earnings From Continuing Operations | 92,302 | 82,275 | 237,923 | 189,306 | ||||||||||||||
| Interest income | (158 | ) | (145 | ) | (539 | ) | (465 | ) | ||||||||||
| Interest expense | 8,691 | 11,067 | 39,667 | 46,238 | ||||||||||||||
| Loss on extinguishment of debt | -- | -- | 946 | -- | ||||||||||||||
| Earnings From Continuing Operations | ||||||||||||||||||
| Before Income Taxes | 83,769 | 71,353 | 197,849 | 143,533 | ||||||||||||||
| Income Tax Expense | 17,058 | 9,281 | 30,085 | 29,958 | ||||||||||||||
| Earnings From Continuing Operations | ||||||||||||||||||
| Including Noncontrolling Interests | 66,711 | 62,072 | 167,764 | 113,575 | ||||||||||||||
| Earnings Attributable to Noncontrolling Interests | (523 | ) | (412 | ) | (1,730 | ) | (1,040 | ) | ||||||||||
| Earnings From Continuing Operations | ||||||||||||||||||
| Attributable to Esterline | 66,188 | 61,660 | 166,034 | 112,535 | ||||||||||||||
| Loss From Discontinued Operations, | ||||||||||||||||||
| Attributable to Esterline, Net of Tax | (325 | ) | -- | (1,300 | ) | -- | ||||||||||||
| Net Earnings Attributable to Esterline | $ | 65,863 | $ | 61,660 | $ | 164,734 | $ | 112,535 | ||||||||||
| Earnings Per Share - Basic: | ||||||||||||||||||
| Continuing Operations | $ | 2.11 | $ | 2.00 | $ | 5.32 | $ | 3.66 | ||||||||||
| Discontinued Operations | (.01 | ) | .00 | (.04 | ) | .00 | ||||||||||||
| Earnings Per Share - Basic | $ | 2.10 | $ | 2.00 | $ | 5.28 | $ | 3.66 | ||||||||||
| Earnings Per Share - Diluted: | ||||||||||||||||||
| Continuing Operations | $ | 2.07 | $ | 1.97 | $ | 5.23 | $ | 3.60 | ||||||||||
| Discontinued Operations | (.01 | ) | .00 | (.04 | ) | .00 | ||||||||||||
| Earnings Per Share - Diluted | $ | 2.06 | $ | 1.97 | $ | 5.19 | $ | 3.60 | ||||||||||
| Weighted Average Number of Shares Outstanding - Basic | 31,391 | 30,860 | 31,173 | 30,749 | ||||||||||||||
| Weighted Average Number of Shares Outstanding - Diluted | 31,964 | 31,330 | 31,738 | 31,282 | ||||||||||||||
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Sales and Earnings from Continuing Operations by Segment (unaudited)
In thousands
| Three Months Ended | Fiscal Year Ended | |||||||||||||||||
| Oct 25, | Oct 26, | Oct 25, | Oct 26, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| Segment Sales | ||||||||||||||||||
| Avionics & Controls | $ | 225,385 | $ | 220,359 | $ | 771,657 | $ | 790,015 | ||||||||||
| Sensors & Systems | 177,292 | 174,436 | 701,930 | 702,394 | ||||||||||||||
| Advanced Materials | 131,485 | 135,861 | 496,167 | 499,909 | ||||||||||||||
| Net Sales | $ | 534,162 | $ | 530,656 | $ | 1,969,754 | $ | 1,992,318 | ||||||||||
| Earnings From Continuing Operations | ||||||||||||||||||
| Before Income Taxes | ||||||||||||||||||
| Avionics & Controls | $ | 42,581 | $ | 42,214 | $ | 103,232 1 | $ | 54,917 2 | ||||||||||
| Sensors & Systems | 25,904 | 21,060 | 89,696 | 70,890 | ||||||||||||||
| Advanced Materials | 32,759 | 27,020 | 107,161 | 93,546 | ||||||||||||||
| Segment Earnings | 101,244 | 90,294 | 300,089 | 219,353 | ||||||||||||||
| Corporate expense | (8,942 | ) | (8,019 | ) | (62,166 | ) | (43,201 | ) | ||||||||||
| Other income | -- | -- | -- | 1,263 | ||||||||||||||
| Gain on settlement of contingency | -- | -- | -- | 11,891 | ||||||||||||||
| Interest income | 158 | 145 | 539 | 465 | ||||||||||||||
| Interest expense | (8,691 | ) | (11,067 | ) | (39,667 | ) | (46,238 | ) | ||||||||||
| Loss on extinguishment of debt | -- | -- | (946 | ) | -- | |||||||||||||
| Earnings From Continuing Operations | ||||||||||||||||||
| Before Income Taxes | $ | 83,769 | $ | 71,353 | $ | 197,849 | $ | 143,533 | ||||||||||
1 Includes a $3.5 million charge against goodwill of Racal Acoustics.
2 Includes a $52.2 million charge against goodwill of Racal Acoustics.
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands
| Oct 25, | Oct 26, | |||||||
| 2013 | 2012 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 179,178 | $ | 160,675 | ||||
| Cash in escrow | 4,018 | 5,016 | ||||||
| Accounts receivable, net | 383,666 | 383,362 | ||||||
| Inventories | 447,663 | 409,837 | ||||||
| Income tax refundable | 6,526 | 4,832 | ||||||
| Deferred income tax benefits | 47,277 | 46,000 | ||||||
| Prepaid expenses | 18,183 | 21,340 | ||||||
| Other current assets | 5,204 | 4,631 | ||||||
| Total Current Assets | 1,091,715 | 1,035,693 | ||||||
| Property, Plant and Equipment, Net | 371,197 | 356,401 | ||||||
| Other Non-Current Assets | ||||||||
| Goodwill | 1,128,977 | 1,098,962 | ||||||
| Intangibles, net | 580,949 | 609,045 | ||||||
| Debt issuance costs, net | 6,211 | 8,818 | ||||||
| Deferred income tax benefits | 71,840 | 97,952 | ||||||
| Other assets | 11,223 | 20,246 | ||||||
| $ | 3,262,112 | $ | 3,227,117 | |||||
| Liabilities and Shareholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 123,597 | $ | 108,689 | ||||
| Accrued liabilities | 253,561 | 269,553 | ||||||
| Current maturities of long-term debt | 21,279 | 10,610 | ||||||
| Deferred income tax liabilities | 2,307 | 5,125 | ||||||
| Federal and foreign income taxes | 7,348 | 2,369 | ||||||
| Total Current Liabilities | 408,092 | 396,346 | ||||||
| Long-Term Liabilities | ||||||||
| Credit facilities | 130,000 | 240,000 | ||||||
| Long-term debt, net of current maturities | 537,859 | 598,060 | ||||||
| Deferred income tax liabilities | 193,119 | 205,198 | ||||||
| Pension and post-retirement obligations | 68,102 | 132,074 | ||||||
| Other liabilities | 40,188 | 34,904 | ||||||
| Total Shareholders' Equity | 1,884,752 | 1,620,535 | ||||||
| $ | 3,262,112 | $ | 3,227,117 | |||||