SOURCE: Esterline Technologies

Esterline Technologies

March 01, 2012 16:00 ET

Esterline's First Quarter Results Stronger Than Expected

First Quarter Sales of $471 Million, EPS of $0.73

BELLEVUE, WA--(Marketwire - Mar 1, 2012) - Esterline Corporation (NYSE: ESL)

Highlights:

  • Strong performance from Advanced Materials segment
  • Souriau acquisition tracking to plan; associated tax benefit recorded
  • Full-year EPS guidance increased to $5.10 to $5.40

Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving the global aerospace/defense markets, today reported fiscal 2012 first quarter (ended January 27) income from continuing operations of $22.8 million, or $0.73 per diluted share, including about $0.25 per share of acquisition-related accounting charges to recognize the fair value of the Souriau acquired inventory as expense. Sales in the quarter were $470.9 million. Year-ago income from continuing operations was $30 million, or $0.97 per diluted share, on sales of $370.8 million.

Brad Lawrence, Esterline's Chief Executive Officer, said he was "...pleased with the solid first quarter performance and the relatively fast start to the year." Lawrence said that Esterline saw good growth in its commercial aerospace business, particularly from its Engineered Materials platform, and "...saw pockets of strength in certain defense-oriented businesses, despite the tough environment." Lawrence noted that Esterline's July 2011 acquisition -- its largest to date -- of French connector company, Souriau, is performing as expected and "...we're pushing ahead toward full integration, right on schedule." He pointed out that the tax benefit in the quarter was a direct result of the acquisition, and driven in part by "...how we structured the transaction, and partly by a recent change in French tax law."

Esterline raised its earnings guidance by $0.10, estimating full-year earnings to be in the range of $5.10 to $5.40 per share. Lawrence said that although he was pleased with the quarter's solid operational performance, the new guidance principally reflects the tax benefit. He said, "It's still early in the year and the defense budget process remains in front of us, so I think it's only prudent not to get ahead of ourselves." He emphasized, however, that the quarter's results "...certainly give us confidence that we remain in a position to report record sales and earnings at year-end."

As Esterline's December guidance to investors anticipated, gross margins in the first quarter were impacted by acquisition-related accounting and were 33.6%, down from last year's 35.6%. "Without the acquisition," Lawrence said, "...gross margin improved to 36.3%."

Selling, general and administrative (SG&A) expenses as a percent of sales were 20.1% in the first quarter of 2012, compared with 17.8% a year ago. Lawrence said that the increase was anticipated and "...is primarily a result of the expected sales dip in our Avionics & Controls segment due to a delay in foreign military retrofit work, and the somewhat higher than the Esterline average SG&A rate at Souriau."

Research, development and engineering (R&D) expenses were in line with our expectations at 5.6% of sales. This compares to 5.3% last year. Lawrence said "...the increase over last year reflects investments in new avionics programs, as well as the addition of Souriau."

The income tax rate for the first quarter of 2012 was 10.1% compared with 20.3% last year. The decrease primarily reflects the acquisition-related tax benefit described above. It is expected that the tax rate will return to the 20% level in future quarters.

New orders for the first quarter of 2012 were $467.8 million compared with $399.3 million for the same period last year. Backlog was $1.25 billion compared with $1.13 billion at the end of the prior-year period and $1.25 billion at the end of fiscal 2011.

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 866-277-1181; outside the U.S., use 617-597-5358. The pass code for the call is: 66554025.

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 27, Jan 28,
2012 2011
Segment Sales
Avionics & Controls $ 179,572 $ 192,467
Sensors & Systems 171,672 77,055
Advanced Materials 119,638 101,277
Net Sales 470,882 370,799
Cost of Sales 312,801 238,677
158,081 132,122
Expenses
Selling, general and administrative 94,697 66,092
Research, development and engineering 26,395 19,619
Total Expenses 121,092 85,711
Operating Earnings From Continuing Operations 36,989 46,411
Interest Income (95 ) (340 )
Interest Expense 11,528 9,137
Income From Continuing Operations Before Income Taxes 25,556 37,614
Income Tax Expense 2,576 7,654
Income From Continuing Operations Including Noncontrolling Interests 22,980 29,960
Income (Loss) Attributable to Noncontrolling Interests (192 ) 23
Income From Continuing Operations 22,788 29,983
Income From Discontinued Operations, Net of Tax -- 8
Net Earnings $ 22,788 $ 29,991
Earnings Per Share - Basic:
Continuing Operations $ .74 $ .99
Discontinued Operations -- --
Earnings Per Share - Basic $ .74 $ .99
Earnings Per Share - Diluted:
Continuing Operations $ .73 $ .97
Discontinued Operations -- --
Earnings Per Share - Diluted $ .73 $ .97
Weighted Average Number of Shares Outstanding - Basic 30,631 30,349
Weighted Average Number of Shares Outstanding - Diluted 31,157 31,011
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Sales and Income from Continuing Operations by Segment (unaudited)
In thousands
Three Months Ended
Jan 27, Jan 28,
2012 2011
Segment Sales
Avionics & Controls $ 179,572 $ 192,467
Sensors & Systems 171,672 77,055
Advanced Materials 119,638 101,277
Net Sales $ 470,882 $ 370,799
Income From Continuing Operations
Avionics & Controls $ 20,063 $ 31,004
Sensors & Systems 6,815 10,971
Advanced Materials 23,073 15,268
49,951 57,243
Corporate Expense (12,962 ) (10,832 )
Interest Income 95 340
Interest Expense (11,528 ) (9,137 )
Income From Continuing Operations Before Income Taxes $ 25,556 $ 37,614
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands
Three Months Ended
Jan 27, Jan 28,
2012 2011
Assets
Current Assets
Cash and cash equivalents $ 193,289 $ 351,481
Cash in escrow 5,017 14,000
Accounts receivable, net 350,080 263,666
Inventories 395,050 303,605
Income tax refundable 10,811 22,084
Deferred income tax benefits 45,161 38,644
Prepaid expenses 21,098 16,464
Other current assets 3,221 10,617
Total Current Assets 1,023,727 1,020,561
Property, Plant and Equipment, Net 360,368 280,349
Other Non-Current Assets
Goodwill 1,130,489 806,338
Intangibles, net 655,642 447,644
Debt issuance costs, net 10,226 7,413
Deferred income tax benefits 82,891 88,866
Other assets 24,420 10,677
$ 3,287,763 $ 2,661,848
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 111,934 $ 76,225
Accrued liabilities 265,080 228,378
Credit facilities 223 --
Current maturities of long-term debt 13,098 14,259
Deferred income tax liabilities 2,943 6,843
Federal and foreign income taxes 12,420 4,513
Total Current Liabilities 405,698 330,218
Long-Term Liabilities
Credit facilities 335,000 --
Long-term debt, net of current maturities 656,448 594,145
Deferred income tax liabilities 229,375 149,990
Pension and post-retirement obligations 104,513 107,047
Other liabilities 20,647 25,955
Total Shareholders' Equity 1,536,082 1,454,493
$ 3,287,763 $ 2,661,848