BELLEVUE, WA--(Marketwire - Sep 1, 2011) - Esterline Corporation (
Brad Lawrence, Esterline's Chief Executive Officer, said, "...overall, we're pleased with our third quarter. All three of Esterline's segments posted sales improvements, and consolidated gross margins improved nearly 100 basis points over last year." Lawrence reiterated comments he made last quarter regarding the anticipated moderation of the "...exceptional strength in our spare parts business that we have experienced over the last several quarters." He said airlines and distributors had been restocking depleted inventories, and the spare parts business now more accurately reflects air transport usage.
Lawrence, in commenting on the acquisition of Souriau, noted, "We closed the transaction on July 26th and we are excited with the prospects before us involving the largest acquisition we've made to date. Today, we have greater clarity on revenue synergy opportunities and have begun executing a number of important integration projects."
The company remains confident that the acquisition will be accretive within its first twelve months of ownership. As required by U.S. Generally Accepted Accounting Principles (GAAP), the company will write up inventories to fair value and recognize this non-cash adjustment over one inventory turn -- estimated to be four months. Including this adjustment, the acquisition will incur an estimated pre-tax, non-cash loss of $18 million, or $0.40 per share in the fourth quarter. The company reiterated the top end and narrowed the band of its prior EPS guidance of $4.80-$4.95 per share for operational performance. Therefore, on an as-reported basis, including the GAAP adjustment, the company expects earnings per share for the full year to be between $4.45 and $4.55 per share.
Lawrence commented that the "diversification and strong capabilities of the business are serving us well as we position ourselves for market growth and capture new programs." He noted that commercial jet build rates are ramping up and "...we are better positioned than in past upcycles because our content on new-builds is significantly higher than on legacy aircraft."
With regard to the defense market, Lawrence commented that, "while we can grow in this challenging environment, we are clearly facing budgetary issues and a reduction in operational tempo." Even so, he noted a need for U.S. and non-U.S. militaries to retrofit older platforms, including Blackhawk and C130. Further, the company's capture rate on key new platforms such as the F35, T-6B and A400M, as well as a good presence in the C4ISR category, will offer strength despite tighter defense budgets.
As it pertains to Esterline's rail, medical equipment and other industrial businesses, Lawrence noted that the company continued to have "good opportunities," particularly with respect to nuclear power applications and the extension of its high speed rail applications into new geographic markets.
Gross margin as a percentage of sales was 35.1% in the quarter versus the year-ago level of 34.1%. The increase in gross margin was due to several factors, including an increased mix of spare parts in a number of businesses, as well as strong demand for avionics systems. Lawrence commented that there has been a sequential slowdown in spares shipments which caused gross margins to moderate from the second quarter rate.
Selling, general and administrative (SG&A) expenses were 18.7% of sales in the quarter compared with 16.7% of sales last year. This 200 basis point increase was due to a number of factors, including $6.4 million of expenses associated with the Souriau acquisition, additional expenses from the addition of Eclipse, which was acquired in December 2010, and a $1.4 million environmental liability reserve added in the quarter.
Research, development and engineering spending in the quarter was $23.1 million, or 5.6% of sales, compared with $17.3 million, or 4.6% of sales, a year ago. The increase resulted largely from initiatives advancing the company's products for next-generation avionics systems.
The company's quarterly income tax rate was 6.9% compared with 3.4% for the third fiscal quarter of 2010. Both quarters -- last year and this year -- benefited from various tax credits and certain discrete items, as well as foreign interest expense deductions.
Net income in the quarter was $37.7 million, or $1.21 per diluted share, compared with $39.9 million, or $1.30 per diluted share, in the prior-year period, which includes income from discontinued operations of $0.02 per fully diluted share.
For the first nine months of fiscal 2011, Esterline reported net income of $113.6 million, or $3.65 per diluted share, on sales of $1.2 billion. This compares to net income of $82.2 million, or $2.71 per diluted share, on $1.1 billion in sales in the same period last year. Net income in the first nine months of fiscal 2010 reflected $1.5 million, or $0.05 per share, from discontinued operations.
New orders for the first nine months of fiscal 2011 were $1.4 billion compared with $1.2 billion for the same period in 2010. Backlog was $1.3 billion at July 29, 2011, compared with $1.2 billion at the end of the prior-year period. The increases principally reflect the acquired backlog of Souriau.
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 800-638-4817; outside the U.S., use 617-614-3943. The pass code for the call is: 12459945.
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 29, | July 30, | July 29, | July 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||
| Segment Sales | ||||||||||||||||||
| Avionics & Controls | $ | 208,021 | $ | 194,300 | $ | 632,020 | $ | 563,276 | ||||||||||
| Sensors & Systems | 88,605 | 74,110 | 250,841 | 220,020 | ||||||||||||||
| Advanced Materials | 112,886 | 109,939 | 332,727 | 312,855 | ||||||||||||||
| Net Sales | 409,512 | 378,349 | 1,215,588 | 1,096,151 | ||||||||||||||
| Cost of Sales | 265,973 | 249,394 | 778,980 | 737,889 | ||||||||||||||
| 143,539 | 128,955 | 436,608 | 358,262 | |||||||||||||||
| Expenses | ||||||||||||||||||
| Selling, general and administrative | 76,418 | 63,220 | 214,919 | 188,582 | ||||||||||||||
| Research, development and engineering | 23,075 | 17,262 | 63,945 | 52,012 | ||||||||||||||
| Other income | (6,366 | ) | (8 | ) | (6,366 | ) | (5 | ) | ||||||||||
| Total Expenses | 93,127 | 80,474 | 272,498 | 240,589 | ||||||||||||||
| Operating Earnings From Continuing Operations | 50,412 | 48,481 | 164,110 | 117,673 | ||||||||||||||
| Interest income | (658 | ) | (248 | ) | (1,428 | ) | (651 | ) | ||||||||||
| Interest expense | 10,286 | 8,082 | 28,381 | 23,391 | ||||||||||||||
| Loss on extinguishment of debt | -- | -- | 831 | -- | ||||||||||||||
| Income From Continuing Operations Before Income Taxes | 40,784 | 40,647 | 136,326 | 94,933 | ||||||||||||||
| Income Tax Expense | 2,821 | 1,364 | 22,323 | 14,077 | ||||||||||||||
| Income From Continuing Operations Including Noncontrolling Interests | 37,963 | 39,283 | 114,003 | 80,856 | ||||||||||||||
| Income Attributable to Noncontrolling Interests | (222 | ) | (30 | ) | (328 | ) | (108 | ) | ||||||||||
| Income From Continuing Operations | 37,741 | 39,253 | 113,675 | 80,748 | ||||||||||||||
| Income (Loss) From Discontinued Operations, Net of Tax | (46 | ) | 605 | (75 | ) | 1,483 | ||||||||||||
| Net Earnings | $ | 37,695 | $ | 39,858 | $ | 113,600 | $ | 82,231 | ||||||||||
| Earnings Per Share - Basic: | ||||||||||||||||||
| Continuing Operations | $ | 1.23 | $ | 1.31 | $ | 3.73 | $ | 2.70 | ||||||||||
| Discontinued Operations | .00 | .02 | .00 | .05 | ||||||||||||||
| Earnings Per Share - Basic | $ | 1.23 | $ | 1.33 | $ | 3.73 | $ | 2.75 | ||||||||||
| Earnings Per Share - Diluted: | ||||||||||||||||||
| Continuing Operations | $ | 1.21 | $ | 1.28 | $ | 3.65 | $ | 2.66 | ||||||||||
| Discontinued Operations | .00 | .02 | .00 | .05 | ||||||||||||||
| Earnings Per Share - Diluted | $ | 1.21 | $ | 1.30 | $ | 3.65 | $ | 2.71 | ||||||||||
| Weighted Average Number of Shares Outstanding - Basic | 30,579 | 30,043 | 30,475 | 29,913 | ||||||||||||||
| Weighted Average Number of Shares Outstanding - Diluted | 31,260 | 30,558 | 31,144 | 30,394 | ||||||||||||||
| ESTERLINE TECHNOLOGIES CORPORATION | |||||||||||||||||
| Consolidated Sales and Income from Continuing Operations by Segment (unaudited) | |||||||||||||||||
| In thousands | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| July 29, | July 30, | July 29, | July 30, | ||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| Segment Sales | |||||||||||||||||
| Avionics & Controls | $ | 208,021 | $ | 194,300 | $ | 632,020 | $ | 563,276 | |||||||||
| Sensors & Systems | 88,605 | 74,110 | 250,841 | 220,020 | |||||||||||||
| Advanced Materials | 112,886 | 109,939 | 332,727 | 312,855 | |||||||||||||
| Net Sales | $ | 409,512 | $ | 378,349 | $ | 1,215,588 | $ | 1,096,151 | |||||||||
| Income From Continuing Operations | |||||||||||||||||
| Avionics & Controls | $ | 28,604 | $ | 30,464 | $ | 104,523 | $ | 78,357 | |||||||||
| Sensors & Systems | 10,837 | 9,588 | 33,403 | 21,978 | |||||||||||||
| Advanced Materials | 18,797 | 19,175 | 57,044 | 45,032 | |||||||||||||
| 58,238 | 59,227 | 194,970 | 145,367 | ||||||||||||||
| Corporate expense | (14,192 | ) | (10,754 | ) | (37,226 | ) | (27,699 | ) | |||||||||
| Other income | 6,366 | 8 | 6,366 | 5 | |||||||||||||
| Interest income | 658 | 248 | 1,428 | 651 | |||||||||||||
| Interest expense | (10,286 | ) | (8,082 | ) | (28,381 | ) | (23,391 | ) | |||||||||
| Loss on extinguishment of debt | -- | -- | (831 | ) | -- | ||||||||||||
| Income From Continuing Operations Before Income Taxes | $ | 40,784 | $ | 40,647 | $ | 136,326 | $ | 94,933 | |||||||||
| ESTERLINE TECHNOLOGIES CORPORATION | ||||||||
| Consolidated Balance Sheet (unaudited) | ||||||||
| In thousands | July 29, | July 30, | ||||||
| 2011 | 2010 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 207,838 | $ | 282,910 | ||||
| Cash in escrow | 5,000 | -- | ||||||
| Accounts receivable, net | 364,303 | 272,529 | ||||||
| Inventories | 444,771 | 266,974 | ||||||
| Income tax refundable | 7,086 | 11,691 | ||||||
| Deferred income tax benefits | 49,342 | 38,313 | ||||||
| Prepaid expenses | 21,752 | 17,350 | ||||||
| Other current assets | 13,924 | 13,023 | ||||||
| Total Current Assets | 1,114,016 | 902,790 | ||||||
| Property, Plant and Equipment, Net | 340,453 | 274,207 | ||||||
| Other Non-Current Assets | ||||||||
| Goodwill | 1,190,506 | 733,537 | ||||||
| Intangibles, net | 728,642 | 392,183 | ||||||
| Debt issuance costs, net | 11,177 | 5,706 | ||||||
| Deferred income tax benefits | 93,276 | 83,727 | ||||||
| Other assets | 21,200 | 10,143 | ||||||
| $ | 3,499,270 | $ | 2,402,293 | |||||
| Liabilities and Shareholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 125,079 | $ | 79,588 | ||||
| Accrued liabilities | 289,630 | 200,343 | ||||||
| Credit facilities | -- | 2,196 | ||||||
| Current maturities of long-term debt | 13,174 | 10,008 | ||||||
| Deferred income tax liabilities | 22,335 | 7,139 | ||||||
| Federal and foreign income taxes | 11,415 | 3,310 | ||||||
| Total Current Liabilities | 461,633 | 302,584 | ||||||
| Long-Term Liabilities | ||||||||
| Credit facilities | 395,000 | -- | ||||||
| Long-term debt, net of current maturities | 675,290 | 531,698 | ||||||
| Deferred income taxes liabilities | 255,534 | 128,327 | ||||||
| Pension and post-retirement obligations | 91,072 | 88,126 | ||||||
| Other liabilities | 20,161 | 18,347 | ||||||
| Total Shareholders' Equity | 1,600,580 | 1,333,211 | ||||||
| $ | 3,499,270 | $ | 2,402,293 | |||||