SOURCE: Esterline Technologies

Esterline Technologies

December 09, 2010 16:00 ET

Esterline Reports Record Performance for Fiscal 2010; Earnings Up 23.2% on 8.5% Sales Improvement

Income From Continuing Operations $130 Million, or $4.27 per Share, on $1.53 Billion Sales

BELLEVUE, WA--(Marketwire - December 9, 2010) - Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving aerospace/defense markets, today reported fiscal 2010 fourth quarter and full-year results for the period ended October 29, 2010. Income from continuing operations for the quarter was a record $49.3 million, or $1.60 per diluted share, on sales of $430.5 million. For the same period last year, income from continuing operations was $37.4 million, or $1.24 per diluted share, on sales of $390.1 million. (Continuing operations exclude results from Esterline's Pressure Systems subsidiary, divested on September 8, 2010, and its Muirhead Aerospace subsidiary, divested on November 3, 2008.)

For the full year ended October 29, 2010, Esterline reported income from continuing operations of $130.0 million, or $4.27 per diluted share, on sales of $1.53 billion -- an 8.5% improvement over last year, nearly all organic. FY2009 income from continuing operations was $105.6 million, or $3.52 per diluted share, on $1.41 billion in sales.

Brad Lawrence, Esterline CEO, said the record performance reflects several areas of strength over last year, principally new and retrofit military cockpit programs, control panels for medical capital equipment, and operating efficiency with countermeasure flares. Lawrence said, "Our Avionics & Controls business segment provided a significant boost for Esterline in FY2010. In this segment, demand for the new T-6B military trainer aircraft, as well as success in the international market for C-130 cockpit upgrades provided significant incremental new business for Esterline in 2010."

On the commercial aerospace side, in addition to seeing accelerating activity in preparation for increased narrow body aircraft production at Airbus and Boeing, Lawrence said, "our aftermarket spare parts business is beginning to show definite signs of improvement across all of our segments."

In the company's non-aerospace Interface Technologies operation, Lawrence said business is benefiting from increased demand for medical imaging equipment to replace older systems. New products, such as Esterline's programmable button panel, are also key growth ingredients for this business. "With our new OLED (organic light emitting diode) switches, customers now can create dynamic content and animation on each intelligent button -- a truly revolutionary step forward in casino gaming technology," he said.

Lawrence said Esterline's focus on operational excellence, consistent investment in R&D and good-fit acquisitions "...is clearly shaping our performance."

Gross margins in FY2010 were 33.8% compared with 32.2% last year, and selling, general and administrative expenses were essentially flat in FY2010 -- 16.9% of sales compared with 16.7% in FY2009.

Fourth quarter 2010 research, development and engineering (R&D) expense totaled $17.7 million, or 4.1% of sales, compared with $15.3 million, or 3.9% of sales, in the same quarter a year ago. Full-year 2010 R&D totaled $69.8 million, compared with $64.5 million -- 4.6% in both years. Lawrence said the rate reflects "...a return to more normalized R&D investment following several years of successful efforts to secure positions on a number of major programs." He added that, "...our constant technology advancements have enabled us to steadily increase our total dollar content per aircraft for the hundreds of active aircraft platforms flying today."

In October, Esterline entered into an agreement with L-3 Communications Avionics Systems (L-3) to acquire an exclusive license for SmartDeck® integrated cockpit technologies. Lawrence said "...by licensing these technologies we enable our avionics operation to expand its product portfolio and enhance its cockpit capabilities for both OEM and retrofit opportunities."

Backlog at fiscal year-end was $1.1 billion, up slightly from last year. Orders received in FY2010 totaled $1.6 billion -- up 11.2% compared with last year.

Fiscal 2010 income from discontinued operations was $0.39 per diluted share, compared with $0.48 per diluted share in fiscal 2009, reflecting the gain on the sale of Pressure Systems, Inc. in September 2010 and the sale of Muirhead Aerospace in November 2008. Fiscal 2010 net income was $141.9 million or $4.66 per diluted share, compared with net income of $119.8 million or $4.00 per diluted share in fiscal 2009.

FY2011 Outlook

Throughout FY2010, Esterline generated progressively stronger quarterly results following a soft first quarter. FY2011 is expected to unfold in much the same way, but at a higher level. Lawrence said he expects a relatively slow start to the year with performance gaining momentum as the year progresses. "Esterline's first fiscal quarter has always been the weakest of the year, due primarily to the shorter number of work days in November through January," he said. The company's FY2011 annual revenue should grow about 5% to 8% with fully diluted earnings per share in the range of $4.40 to $4.65. Lawrence noted that Esterline's effective tax rate for FY2011 is anticipated to be in the low- to mid-20% range, compared with the 15.8% rate in FY2010.

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 866.783.2140; outside the U.S., use 857.350.1599. The pass code for the call is: 66875837.

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 29,   Oct 30,    Oct 29,    Oct 30,
                                    2010      2009       2010       2009
                                  --------  --------  ---------  ---------
Segment Sales
        Avionics & Controls       $226,740  $204,222  $ 790,016  $ 672,828
        Sensors & Systems           78,539    79,377    298,559    321,753
        Advanced Materials         125,171   106,549    438,026    412,878
                                  --------  --------  ---------  ---------

Net Sales                          430,450   390,148  1,526,601  1,407,459

Cost of Sales                      272,501   262,423  1,010,390    954,161
                                  --------  --------  ---------  ---------
                                   157,949   127,725    516,211    453,298
Expenses
        Selling, general and
         administrative             69,708    64,638    258,290    235,483
        Research, development
         and engineering            17,741    15,255     69,753     64,456
        Other (income) expense          (3)       24         (8)     7,970
                                  --------  --------  ---------  ---------
           Total Expenses           87,446    79,917    328,035    307,909

Operating Earnings From
 Continuing Operations              70,503    47,808    188,176    145,389

        Interest income               (309)     (685)      (960)    (1,634)
        Interest expense             9,790     7,319     33,181     28,689
        Loss on extinguishment
         of debt                     1,206        --      1,206         --
                                  --------  --------  ---------  ---------

Income From Continuing Operations
 Before Income Taxes                59,816    41,174    154,749    118,334
Income Tax Expense                  10,427     3,712     24,504     12,549
                                  --------  --------  ---------  ---------
Income From Continuing Operations
 Including Noncontrolling Interests 49,389    37,462    130,245    105,785
Income Attributable to
 Noncontrolling Interests              (98)      (81)      (206)      (217)
                                  --------  --------  ---------  ---------

Income From Continuing Operations   49,291    37,381    130,039    105,568

Income (Loss) From Discontinued
 Operations, Net of Tax             10,398    (2,880)    11,881     14,230
                                  --------  --------  ---------  ---------

Net Earnings                      $ 59,689  $ 34,501  $ 141,920  $ 119,798
                                  ========  ========  =========  =========

Earnings Per Share - Basic:
        Continuing Operations     $   1.63  $   1.26  $    4.34  $    3.55
        Discontinued Operations        .35      (.10)       .39        .48
                                  --------  --------  ---------  ---------

Earnings Per Share - Basic        $   1.98  $   1.16  $    4.73  $    4.03
                                  ========  ========  =========  =========

Earnings Per Share - Diluted:
        Continuing Operations     $   1.60  $   1.24  $    4.27  $    3.52
        Discontinued Operations        .34      (.09)       .39        .48
                                  --------  --------  ---------  ---------

Earnings Per Share - Diluted      $   1.94  $   1.15  $    4.66  $    4.00
                                  ========  ========  =========  =========

Weighted Average Number of
 Shares Outstanding - Basic         30,151    29,763     29,973     29,717

Weighted Average Number of
 Shares Outstanding - Diluted       30,724    30,034     30,477     29,951




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

                                Three Months Ended     Fiscal Year Ended
                                ------------------  ----------------------
                                 Oct 29,   Oct 30,    Oct 29,     Oct 30,
                                  2010      2009       2010        2009
                                --------  --------  ----------  ----------

Segment Sales
        Avionics & Controls     $226,740  $204,222  $  790,016  $  672,828
        Sensors & Systems         78,539    79,377     298,559     321,753
        Advanced Materials       125,171   106,549     438,026     412,878
                                --------  --------  ----------  ----------

Net Sales                       $430,450  $390,148  $1,526,601  $1,407,459
                                ========  ========  ==========  ==========

Income from Continuing
 Operations
        Avionics & Controls     $ 47,531  $ 36,077  $  125,888  $   99,313
        Sensors & Systems         11,916     6,384      33,894      31,739
        Advanced Materials        23,753    13,168      68,785      53,602
                                --------  --------  ----------  ----------
                                  83,200    55,629     228,567     184,654

        Corporate expense        (12,700)   (7,797)    (40,399)    (31,295)
        Other income (expense)         3       (24)          8      (7,970)
        Interest income              309       685         960       1,634
        Interest expense          (9,790)   (7,319)    (33,181)    (28,689)
        Loss on extinguishment
         of debt                  (1,206)       --      (1,206)         --
                                --------  --------  ----------  ----------

Income From Continuing
 Operations Before Income Taxes $ 59,816  $ 41,174  $  154,749  $  118,334
                                ========  ========  ==========  ==========




ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands                                        Oct 29,      Oct 30,
                                                     2010         2009
                                                  -----------  -----------
Assets
Current Assets
   Cash and cash equivalents                      $   422,120  $   176,794
   Accounts receivable, net                           309,242      270,976
   Inventories                                        262,373      275,282
   Income tax refundable                               17,806        7,638
   Deferred income tax benefits                        37,539       31,434
   Prepaid expenses                                    16,264       17,425
   Other current assets                                11,241       17,048
                                                  -----------  -----------
      Total Current Assets                          1,076,585      796,597

Property, Plant and Equipment, Net                    273,770      263,251

Other Non-Current Assets
   Goodwill                                           739,730      736,808
   Intangibles, net                                   389,017      422,082
   Debt issuance costs, net                             7,774        7,136
   Deferred income tax benefits                        87,622       79,114
   Other assets                                        13,240        9,259
                                                  -----------  -----------
                                                  $ 2,587,738  $ 2,314,247
                                                  ===========  ===========

Liabilities and Shareholders' Equity
Current Liabilities
   Accounts payable                               $    82,275  $    82,304
   Accrued liabilities                                215,094      191,667
   Credit facilities                                    1,980        5,896
   Current maturities of long-term debt                12,646        5,409
   Deferred income tax liabilities                      7,155        7,294
   Federal and foreign income taxes                     5,227        1,669
                                                  -----------  -----------
      Total Current Liabilities                       324,377      294,239

Long-Term Liabilities
   Long-term debt, net of current maturities          598,972      520,158
   Deferred income taxes                              127,081      130,456
   Pension and post-retirement obligations            105,333       93,615
   Other liabilities                                   16,476       20,027

Total Shareholders' Equity                          1,415,499    1,255,752
                                                  -----------  -----------
                                                  $ 2,587,738  $ 2,314,247
                                                  ===========  ===========