SOURCE: Esterline Technologies

Esterline Technologies

February 26, 2009 16:00 ET

Esterline Reports Q1 2009 Earnings: Maintains Guidance for FY09

Acquisitions Keep Full-Year Earnings Goal of $3.70 to $3.90 on Track

BELLEVUE, WA--(Marketwire - February 26, 2009) -


--  Income from continuing operations - $.38 per share
--  Full-year EPS guidance maintained - $3.70 to $3.90
--  Two acquisitions completed in the quarter
--  Gross margin 33.0% compared with 32.2% a year ago
--  Sales $309.7 million - $357.3 million a year ago
--  Backlog - $1.15 billion
    

Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2009 first quarter (ended January 30) income from continuing operations of $11.5 million, or $.38 per diluted share, on sales of $309.7 million. Year-ago income from continuing operations was $29.7 million, or $1.00 per diluted share, on sales of $357.3 million. Income from discontinued operations was $.52 per diluted share, compared with $.04 per diluted share in the prior-year period, reflecting gains on the sale of a U.K.-based operation in November 2008. Net income was $26.9 million, or $.90 per diluted share, compared with $31.0 million, or $1.04 per diluted share, in the prior-year period.

Robert W. Cremin, Esterline CEO, said, " ...operationally, quarterly results were somewhat better than we anticipated," and he reiterated the company's full-year earnings per share guidance range of $3.70 to $3.90. Cremin said, " ...Esterline is affected by market dynamics just like everybody else in the industry, but we completed a couple of great-fit acquisitions in the quarter that we expect to contribute to the second half of the year, so we're holding to our full-year guidance."

Regarding the first quarter, Cremin said, "we expected to be slow out of the gate, and we said as much in our December conference call." He said that " ...although the first quarter performance was better than our internal projections, several issues that we discussed on that call influenced the quarter, including the aftermath of the Boeing strike, a slowdown in airline spares sales, foreign exchange issues and extended holiday plant closures."

Cremin said that Esterline's commercial aftermarket business was soft in the first quarter due primarily to slowing air traffic, airlines de-stocking inventories and deferred retrofits. In addition, the quarter absorbed a pretax foreign currency loss of $7.9 million ($1.7 million after tax or $.06 per diluted share) related to the funding of an acquisition.

Cremin also noted that the comparable year-ago quarter was an anomaly. He pointed out that " ...not only was last year's first quarter extraordinarily strong operationally due in part to the timing of a large defense shipment, it also included $6.9 million in one-time tax benefits, and an extra shipping week due to our fiscal calendar."

Cremin cited gross margin strength as an encouraging metric in the quarter. Gross margin was 33.0% compared with 32.2% last year. He said, " ...the improvement is particularly noteworthy given the softness in our spares business, and reflects the inherent value of our specialized niche businesses."

Selling, general and administrative expenses (SG&A) held even with last year, totaling $59.7 million in the first quarter of 2009, compared with $59.4 million a year ago.

Research, development and engineering (R&D) expenses continued to ratchet down from the mid-2008 peak. R&D spending in the first quarter was $17.4 million compared with $21.6 million a year ago. Cremin said Esterline surged R&D in 2007 and 2008 to secure Tier 1 positions on several major new airframes, including such programs as the F-35 joint strike fighter, T-6B military trainer, and the new Boeing 787. He said that " ...with our R&D investments on these programs largely expensed, we will begin to see significant benefit in coming years as we move into production." During the quarter, Esterline received a production order for the first 35 T-6B integrated cockpits following successful first flight tests. The first cockpit is scheduled for delivery in late 2009.

The effective income tax rate for the first fiscal quarter of 2009 was 18.9% (before a $.4 million tax benefit) compared with 22.1% (before a $6.9 million tax benefit) for the prior-year period.

New orders for the first quarter of 2009 were $370.2 million compared with $348.4 million for the same period in 2008. Orders include $65.2 million in acquired backlog from the Racal and NMC acquisitions in the first fiscal quarter of 2009. Backlog was $1.2 billion compared with $949.1 million 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
                                                     --------------------
                                                       Jan 30,    Feb 1,
                                                        2009       2008
                                                     ---------  ---------
Segment Sales
  Avionics & Controls                                $ 128,468  $ 142,908
  Sensors & Systems                                     84,555     93,541
  Advanced Materials                                    96,694    120,876
                                                     ---------  ---------

Net Sales                                              309,717    357,325

Cost of Sales                                          207,565    242,112
                                                     ---------  ---------
                                                       102,152    115,213
Expenses
  Selling, general and administrative                   59,725     59,428
  Research, development and engineering                 17,398     21,632
                                                     ---------  ---------
  Total Expenses                                        77,123     81,060

Other
  Other expense                                          5,014         --
                                                     ---------  ---------
  Total Other                                            5,014         --
                                                     ---------  ---------

Operating Earnings From Continuing Operations           20,015     34,153

  Interest income                                         (411)    (1,292)
  Interest expense                                       6,736      7,906
  Gain on derivative financial instrument                   --     (1,850)
                                                     ---------  ---------
Other Expense, Net                                       6,325      4,764
                                                     ---------  ---------

Income From Continuing Operations Before Income Taxes   13,690     29,389
Income Tax Expense (Benefit)                             2,168       (358)
                                                     ---------  ---------
Income From Continuing Operations Before Minority
 Interest                                               11,522     29,747
Minority Interest                                          (35)       (22)
                                                     ---------  ---------
Income From Continuing Operations                       11,487     29,725

Income From Discontinued Operations, Net of Tax         15,456      1,259
                                                     ---------  ---------

Net Earnings                                         $  26,943  $  30,984
                                                     =========  =========

Earnings Per Share - Basic:
  Continuing Operations                              $     .39  $    1.01
  Discontinued Operations                                  .52        .04
                                                     ---------  ---------

Earnings Per Share - Basic                           $     .91  $    1.05
                                                     =========  =========

Earnings Per Share - Diluted:
  Continuing Operations                              $     .38  $    1.00
  Discontinued Operations                                  .52        .04
                                                     ---------  ---------

Earnings Per Share - Diluted                         $     .90  $    1.04
                                                     =========  =========

Weighted Average Number of Shares
 Outstanding -- Basic                                   29,664     29,386

Weighted Average Number of Shares
 Outstanding -- Diluted                                 29,865     29,811




Consolidated Balance Sheet (unaudited)
In thousands                                       Jan 30,      Feb 1,
                                                    2009         2008
                                               ------------  ------------
Assets
Current Assets
  Cash and cash equivalents                    $     81,231  $    106,509
  Accounts receivable, net                          270,974       232,225
  Inventories                                       275,271       274,460
  Income tax refundable                               4,066        11,795
  Deferred income tax benefits                       34,781        31,171
  Prepaid expenses                                   15,141        15,658
  Other current assets                                  468           298
                                               ------------  ------------
    Total Current Assets                            681,932       672,116

Property, Plant and Equipment, Net                  201,562       215,037

Other Non-Current Assets
  Goodwill                                          696,624       655,887
  Intangibles, net                                  384,492       351,535
  Debt issuance costs, net                            7,213         8,782
  Deferred income tax benefits                       58,127        43,576
  Other assets                                       36,495        26,385
                                               ------------  ------------
                                               $  2,066,445  $  1,973,318
                                               ============  ============

Liabilities and Shareholders' Equity
Current Liabilities
  Accounts payable                             $     78,656  $     88,041
  Accrued liabilities                               201,716       155,328
  Credit facilities                                 118,858         5,911
  Current maturities of long-term debt                8,352         6,688
  Deferred income tax liabilities                     1,759            --
  Federal and foreign income taxes                    9,458        10,632
                                               ------------  ------------
    Total Current Liabilities                       418,799       266,600

Long-Term Liabilities
  Long-term debt, net of current maturities         382,446       396,623
  Deferred income tax liabilities                   112,932       125,479
  Other liabilities                                 118,711        51,255

Commitments and Contingencies                            --            --
Minority Interest                                     2,832         2,990

Shareholders' Equity                              1,030,725     1,130,371
                                               ------------  ------------
                                               $  2,066,445  $  1,973,318
                                               ============  ============