Esterline Reports Fiscal 2013 First Quarter Results
Net Income of $25.1 Million, or $0.80 per Share, on Sales of $458.0 Million
BELLEVUE, WA -- (Marketwire) -- 02/28/13 --
Esterline Corporation (NYSE:ESL) (www.esterline.com), a leading specialty manufacturer serving the global aerospace/defense markets, today reported fiscal 2013 first quarter (ended January 25) net income of $25.1 million, or $0.80 per diluted share, on sales of $458.0 million. Earnings in the quarter included about $0.11 per diluted share of income tax benefits due to the extension of U.S. federal research & development tax credits and the settlement of uncertain tax positions related to U.S. and global tax examinations. Year-ago first quarter net income was $22.8 million, or $0.73 per diluted share, on $470.9 million in sales.
Brad Lawrence, Esterline's Chief Executive Officer, said the company posted, "...a solid quarter -- somewhat better than expected." Looking forward, Lawrence said he would expect the current uncertainty surrounding U.S. defense spending to "...dampen our second quarter a bit," but reiterated the company's fiscal 2013 earnings per diluted share guidance of $5.45 - $5.80, saying, "...there is still a lot of the year left to cover and our full-year revenues in the $2.1 billion range continue to look solid." He said, "...at this point we believe we are right where we need to be."
The current strength of commercial aerospace underscores Esterline's long-term strategy of a balanced global approach to commercial and defense markets. Lawrence said that the company's current view of fiscal 2013 includes "...strengthening commercial aerospace and our best analysis of the impact of anticipated U.S. defense spending reductions."
He emphasized that Esterline's diversification efforts over the years have reduced the company's percentage of total revenues from U.S. defense customers to approximately 25%. He said, "Esterline is strategically designed to perform through the cyclicality in our markets."
Lawrence highlighted healthy year-over-year backlog growth as a positive sign for continued business strength through the year. He said that fiscal 2013 is "...shaping up much like last year, with a slow start ramping up to a very strong fourth quarter, thanks in part to improvement in build rates for several programs late in the year."
The company saw increased order activity in the first quarter of fiscal 2013 compared with the same period last year for the Avionics & Controls and Sensors & Systems segments, mainly as a result of the ongoing strong commercial aerospace cycle.
In the company's technology-driven adjacent industrial markets, Lawrence noted there are several significant opportunities for growth, including high-speed rail projects in China, nuclear power initiatives in the U.K., and casino gaming console installations worldwide. The last opportunity mentioned is enhanced by a promising new gaming acquisition that closed in early February. Lawrence said that "...we believe these adjacent market segments, while small relative to our aerospace and defense business, will experience the fastest rate of growth in 2013."
Gross margin in the first quarter of fiscal 2013 was 35.0%, up 1.4% compared with 33.6% in the same period last year, though the prior-year margins were compressed by approximately $12 million in Souriau purchase accounting adjustments.
Selling, general and administrative (SG&A) expenses as a percent of sales were 21.5% in the first quarter of fiscal 2013, compared with 20.1% a year ago. Lawrence said the spending was at the level expected and the percent of sales increase "...is more a reflection of lower first quarter sales."
Research, development and engineering (R&D) expenses were 5.0% of sales in the first quarter compared with 5.6% in the same period of 2012. Lawrence said the reduction in the year-over-year R&D level "...came from significant program progress in certain business lines within our Control Systems platform." Full-year R&D expense as a percent of sales is expected to settle at about 5%.
The income tax rate for the first quarter of fiscal 2013 was 8.5% compared with 10.1% in the same period last year.
Lawrence noted that the company's cash flow was exceptional. Cash flow from operations in the quarter was $86.5 million, compared with last year's $46.6 million.
New orders for the first quarter of 2013 were $473.6 million, compared with $467.8 million in the same period last year. Backlog was $1.3 billion at the end of the first quarter of fiscal 2013, compared with $1.2 billion at the end of the prior-year period and $1.3 billion at the end of 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 866-804-6927; outside the U.S., use 857-350-1673. The pass code for the call is: 96814855.
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 25, Jan 27,
2013 2012
---------- ----------
Segment Sales
Avionics & Controls $ 174,570 $ 179,572
Sensors & Systems 171,810 171,672
Advanced Materials 111,582 119,638
---------- ----------
Net Sales 457,962 470,882
Cost of Sales 297,617 312,801
---------- ----------
160,345 158,081
Expenses
Selling, general and administrative 98,611 94,697
Research, development and engineering 23,076 26,395
---------- ----------
Total Expenses 121,687 121,092
---------- ----------
Operating Earnings 38,658 36,989
Interest Income (101) (95)
Interest Expense 10,444 11,528
---------- ----------
Income Before Income Taxes 28,315 25,556
Income Tax Expense 2,394 2,576
---------- ----------
Income Including Noncontrolling Interests 25,921 22,980
Income Attributable to Noncontrolling Interests (810) (192)
---------- ----------
Net Earnings $ 25,111 $ 22,788
========== ==========
Earnings per Share - Basic $ .81 $ .74
========== ==========
Earnings per Share - Diluted $ .80 $ .73
========== ==========
Weighted Average Number of Shares Outstanding -
Basic 30,904 30,631
Weighted Average Number of Shares Outstanding -
Diluted 31,423 31,157
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Sales and Income from Operations by Segment (unaudited)
In thousands
Three Months Ended
----------------------
Jan 25, Jan 27,
2013 2012
---------- ----------
Segment Sales
Avionics & Controls $ 174,570 $ 179,572
Sensors & Systems 171,810 171,672
Advanced Materials 111,582 119,638
---------- ----------
Net Sales $ 457,962 $ 470,882
========== ==========
Income from Operations
Avionics & Controls $ 18,589 $ 20,063
Sensors & Systems 19,001 6,815
Advanced Materials 17,644 23,073
---------- ----------
Segment Earnings 55,234 49,951
Corporate Expense (16,576) (12,962)
Interest Income 101 95
Interest Expense (10,444) (11,528)
---------- ----------
Income Before Income Taxes $ 28,315 $ 25,556
========== ==========
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands
Jan 25, Jan 27,
2013 2012
----------- -----------
Assets
Current Assets
Cash and cash equivalents $ 202,776 $ 193,289
Cash in escrow 5,017 5,017
Accounts receivable, net 331,335 350,080
Inventories 421,626 395,050
Income tax refundable 6,516 10,811
Deferred income tax benefits 47,430 45,161
Prepaid expenses 27,207 21,098
Other current assets 6,083 3,221
----------- -----------
Total Current Assets 1,047,990 1,023,727
Property, Plant and Equipment, Net 356,973 360,368
Other Non-Current Assets
Goodwill 1,105,656 1,130,489
Intangibles, net 599,396 655,642
Debt issuance costs, net 8,349 10,226
Deferred income tax benefits 97,758 82,891
Other assets 19,282 24,420
----------- -----------
$ 3,235,404 $ 3,287,763
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 103,315 $ 111,934
Accrued liabilities 259,014 265,080
Credit facilities 82 223
Current maturities of long-term debt 10,953 13,098
Deferred income tax liabilities 5,620 2,943
Federal and foreign income taxes 4,326 12,420
----------- -----------
Total Current Liabilities 383,310 405,698
Long-Term Liabilities
Credit facilities 225,000 335,000
Long-term debt, net of current maturities 578,329 656,448
Deferred income tax liabilities 204,509 229,375
Pension and post-retirement obligations 143,475 104,513
Other liabilities 35,519 20,647
Total Shareholders' Equity 1,665,262 1,536,082
----------- -----------
$ 3,235,404 $ 3,287,763
=========== ===========
Source: Esterline Technologies
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