Welcome!

News Feed Item

Esterline Reports Third Quarter 2014 Results on Track; GAAP EPS of $1.19 / Adjusted EPS of $1.38 on $531.1 Million Sales

BELLEVUE, WA -- (Marketwired) -- 09/04/14 -- Esterline Corporation (NYSE: ESL)

Highlights:

  • Fiscal 3Q sales up 11.1% over prior year; 9.0% organic growth
  • Share repurchase plan initiated
  • Plan announced to divest business units to better focus operating portfolio

Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving global aerospace and defense markets, today reported fiscal 2014 third quarter (ended August 1, 2014) earnings from continuing operations of $38.9 million, or $1.19 per diluted share, on sales of $531.1 million. Excluding charges associated with the company's previously announced integration activities and incremental compliance costs, adjusted earnings from continuing operations in the quarter were $44.9 million, or $1.38 per diluted share.

Curtis Reusser, Esterline's Chief Executive Officer, said, "We posted solid results while making significant progress on our integration activities during the quarter." Reusser added that, "...our outlook for the full year remains consistent with our previous expectations. Teams are continuing to execute well and capture opportunities for the future while pushing forward on our strategic integration process."

Reusser noted that "...a key focus of the strategic plan is tighter alignment and integration of Esterline's businesses. After a thorough evaluation of all operations, subsequent to the quarter's close, we decided to move forward with the proposed divestiture of three business units: Eclipse Electronic Systems, Pacific Aerospace & Electronics, and Wallop Defence Systems, as well as a small distribution operation." Reusser said that while all of the operations are good businesses in their own right, "...we were not able to build around them, and we believe each will benefit from a closer strategic alignment with a different owner."

Beginning in the fourth fiscal quarter of 2014, the above businesses will be reported as discontinued operations. At that time, based on the allocation of goodwill, the company expects to record a non-cash, after-tax write-down on discontinued operations of between $55 million and $75 million.

Reusser said that for the full year, excluding integration costs and specific incremental compliance program expenses, "...our guidance remains unchanged at $5.40 to $5.70 per share. However, excluding these discontinued operations, our full-year adjusted earnings from continuing operations are now expected to be within a range of $5.70 to $6.00 per diluted share."

Integration and Compliance Activities

During the third fiscal quarter, the company continued its progress on previously announced integration plans. These activities include improved cost efficiency through the consolidation of certain facilities and shared support services in sales, general and administrative functions. During the quarter, the company incurred integration and incremental compliance costs of $7.7 million, of which $3.4 million was reported as restructuring charges on the company's income statement, $2.3 million was listed in selling, general, and administrative (SG&A) expense, and $2.0 million was reflected in consolidated gross margin. The company continues to expect total integration costs related to the announced initiatives to approximate $40 million. Anticipated expenditures of $5 million to $10 million in the fourth quarter of fiscal 2014 will result in a full-year expense range of $20 million to $25 million, the balance occurring in fiscal 2015. The company also continues to expect these activities to create savings in excess of $15 million annually starting in fiscal 2016.

Consolidated Results of Operations

In the third fiscal quarter of 2014, sales increased 11.1% -- 9.0% organically -- to $531.1 million, compared with $478.1 million in the prior-year period. This reflects growth in all three operating segments. The Sunbank acquisition, which was completed in December of 2013 and is reported within the Sensors & Systems segment, generated sales of approximately $10 million in revenue during the quarter.

GAAP earnings from continuing operations in the third fiscal quarter of 2014 were $38.9 million, or $1.19 per diluted share, compared with prior-year-period results of $39.2 million, or $1.23 per diluted share. Third quarter 2013 GAAP results reflected an unusually low tax rate due to the recognition of $8.7 million of discrete tax benefits, principally the release of income tax reserves related to the expiration of applicable statutes of limitations, and a reduction in the U.K. statutory income tax rate. The effect of this unusual tax rate was $0.27 per diluted share.

Adjusted earnings from continuing operations in the third fiscal quarter of 2014 were $44.9 million, or $1.38 per diluted share, excluding charges related to the company's integration and incremental compliance activities. This compares with $52.7 million, or $1.65 per diluted share, in the prior year, which was adjusted for a $10 million charge related to a DDTC matter and a $3.5 million goodwill impairment charge, for an aggregate impact of $0.42 per diluted share in that period. Virtually all of the year-over-year difference in earnings per share is due to the $8.7 million of discrete tax benefits recorded in last year's third quarter.

For the first nine months of fiscal 2014, the company reported earnings from continuing operations of $106.2 million, or $3.28 per diluted share, compared with results in the prior-year period of $99.8 million, or $3.15 per diluted share. Net earnings for the first nine months of fiscal 2014 were $105.9 million, or $3.27 per diluted share, compared with $98.9 million, or $3.12 per diluted share, in the prior-year period. Net sales in the first nine months of fiscal 2014 were $1.57 billion compared with $1.44 billion in the first nine months of fiscal 2013. The first nine months of fiscal 2014 included an extra week in the first quarter.

Gross margin in the third quarter of fiscal 2014 was 34.4%, compared with 37.4% in the prior year. The year-over-year decrease in gross margin was primarily related to impacts in the third quarter of fiscal 2014, including $2.0 million recorded in restructuring charges, a lower mix of high-margin aftermarket products, and sales mix and yield impacts on countermeasure flare products.

Third fiscal quarter SG&A expense as a percent of sales was 17.9%, or $95.3 million, in 2014, an improvement of 340 basis points from the prior-year level of 21.3%. The year-over-year decrease in SG&A reflected a $10 million compliance charge in the prior-year period and improved leverage on higher sales volume in the 2014 third quarter. Reusser noted, "We also are beginning to see some benefit from integration activities completed early in the year."

Research, development and engineering (R&D) spending in the third quarter of fiscal 2014 was $25.1 million, or 4.7% of sales, compared with $24.1 million, or 5.0% of sales, in the year-ago period. The company expects R&D to remain around 5% of sales for the full year.

The company's income tax rate in the third fiscal quarter of 2014 was 22.7% compared with 2.8% for the prior-year period. The prior-year period included $8.7 million of discrete tax benefits principally related to the release of tax reserves and a reduction in the U.K. corporate tax rate.

Cash flow from operations was $134.7 million through the first nine months of fiscal 2014, or 127% of net income. Reusser said, "This strong cash flow gives us confidence in our ability to fund our future growth while returning cash to shareholders." Commenting on the company's recently initiated share repurchase program, he said, "...the plan is designed to work in concert with our integration activities to enhance our return on invested capital." During the quarter, the company repurchased 45,979 shares for $5.2 million.

New orders in the third fiscal quarter of 2014 increased 15.4% to $534.4 million over the prior year. New orders for the first nine months of fiscal 2014 were $1.6 billion compared with $1.4 billion for the same period last year. Total backlog at August 1, 2014, was $1.30 billion compared with $1.31 billion at the end of the third fiscal quarter of 2013. The decrease in order backlog primarily reflects the gradual runoff of large, long-term avionics orders booked in fiscal 2012. This was partially offset by higher order rates during the third quarter of fiscal 2014.

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 866-713-8563; outside the U.S., use 617-597-5311. The pass code for the call is: 49595697.

Non-GAAP Financial Information

This press release includes non-GAAP financial measures -- adjusted earnings from continuing operations and adjusted earnings from continuing operations per diluted share -- that have not been calculated in accordance with generally accepted accounting principles in the U.S. (GAAP). Adjusted earnings from continuing operations consist of earnings from continuing operations attributable to Esterline plus the costs associated with certain integration activities -- including restructuring charges -- and incremental compliance costs incurred in each period presented. The prior-year period was adjusted for the $10 million charge related to the DDTC matter and the $3.5 million goodwill impairment charge. Adjusted earnings from continuing operations per diluted share divide each element of adjusted earnings from continuing operations by the weighted average number of shares outstanding, diluted for each period presented.

In accordance with the SEC's requirement, below is the reconciliation of the non-GAAP measures to the comparable GAAP financial measures.



Reconciliation of Non-GAAP Financial Measures
In thousands, except per share amounts

                                      Three Months Ended  Nine Months Ended
                                        August 1, 2014      August 1, 2014
                                     ------------------- -------------------
                                                     Per                 Per
                                                 Diluted             Diluted
                                                   Share               Share

Earnings From Continuing Operations
  Attributable to Esterline (GAAP),
   Net of Tax                        $  38,908 $    1.19 $ 106,233 $    3.28
  Restructuring Costs, Net of Tax
   Benefit of $1,224 and $2,950          4,168       .13    11,367       .35
  Compliance Costs, Net of Tax
   Benefit of $523 and $1,428            1,787       .06     5,510       .17
                                     --------- --------- --------- ---------
Adjusted Earnings From Continuing
 Operations
  (Non-GAAP), Net of Tax             $  44,863 $    1.38 $ 123,110 $    3.80
                                     ========= ========= ========= =========

The company provides non-GAAP financial measures as supplemental information to our GAAP financial measures. Management uses adjusted earnings from continuing operations and adjusted earnings from continuing operations per diluted share to (a) evaluate the company's historical and prospective financial performance and its performance relative to its competitors, (b) allocate resources, and (c) measure the operational performance of the company's business units.

In addition, management believes investors' and financial analysts' understanding of the company's performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing the company's historical results of operations.

These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the comparable GAAP measures. There are limitations to these non-GAAP financial measures, because they are not prepared in accordance with GAAP and may not be comparable to similarly titled measures of other companies due to potential differences in methods of calculation and items that comprise the calculation. The company compensates for these limitations by using these non-GAAP financial measures as a supplement to the GAAP measures and by providing reconciliations of the non-GAAP and comparable GAAP financial measures. The non-GAAP financial measures should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP.

Safe Harbor Disclosure

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
                             ----------------------  ----------------------
                               Aug 1,      Jul 26,     Aug 1,      Jul 26,
                                2014        2013        2014        2013
                             ----------  ----------  ----------  ----------
Segment Sales
  Avionics & Controls        $  200,109  $  179,572  $  596,149  $  546,272
  Sensors & Systems             198,106     175,864     595,929     524,638
  Advanced Materials            132,909     122,632     373,600     364,682
                             ----------  ----------  ----------  ----------

Net Sales                       531,124     478,068   1,565,678   1,435,592

Cost of Sales                   348,651     299,166   1,027,565     914,969
                             ----------  ----------  ----------  ----------
                                182,473     178,902     538,113     520,623
Expenses
  Selling, general and
   administrative                95,293     101,822     289,969     298,711
  Research, development and
   engineering                   25,134      24,103      78,441      72,837
  Restructuring charges           3,405           -      10,279           -
  Goodwill impairment                 -       3,454           -       3,454
                             ----------  ----------  ----------  ----------
    Total Expenses              123,832     129,379     378,689     375,002
                             ----------  ----------  ----------  ----------

Operating Earnings From
 Continuing Operations           58,641      49,523     159,424     145,621

Interest Income                    (146)       (132)       (403)       (381)
Interest Expense                  7,870       9,050      24,939      30,976
Loss on Extinguishment of
 Debt                               533           -         533         946
                             ----------  ----------  ----------  ----------

Earnings From Continuing
 Operations Before Income
 Taxes                           50,384      40,605     134,355     114,080
Income Tax Expense               11,430       1,151      27,693      13,027
                             ----------  ----------  ----------  ----------
Earnings From Continuing
 Operations Including
 Noncontrolling Interests        38,954      39,454     106,662     101,053
Earnings Attributable to
 Noncontrolling Interests
                                    (46)       (241)       (429)     (1,207)
                             ----------  ----------  ----------  ----------
Earnings From Continuing
 Operations Attributable to
 Esterline, Net of Tax           38,908      39,213     106,233      99,846
Loss From Discontinued
 Operations, Attributable to
 Esterline, Net of Tax                -        (975)       (343)       (975)
                             ----------  ----------  ----------  ----------

Net Earnings Attributable to
 Esterline                   $   38,908  $   38,238  $  105,890  $   98,871
                             ==========  ==========  ==========  ==========

Earnings Per Share - Basic:
  Continuing Operations      $     1.22  $     1.25  $     3.34  $     3.21
  Discontinued Operations             -        (.03)       (.01)       (.03)
                             ----------  ----------  ----------  ----------

Earnings Per Share - Basic   $     1.22  $     1.22  $     3.33  $     3.18
                             ==========  ==========  ==========  ==========

Earnings Per Share -
 Diluted:
  Continuing Operations      $     1.19  $     1.23  $     3.28  $     3.15
  Discontinued Operations             -        (.03)       (.01)       (.03)
                             ----------  ----------  ----------  ----------

Earnings Per Share - Diluted $     1.19  $     1.20  $     3.27  $     3.12
                             ==========  ==========  ==========  ==========

Weighted Average Number of
 Shares Outstanding - Basic      31,995      31,297      31,818      31,100

Weighted Average Number of
 Shares Outstanding -
 Diluted                         32,591      31,870      32,427      31,663



ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Sales and Earnings From Continuing Operations by Segment
(unaudited)
In thousands

                               Three Months Ended       Nine Months Ended
                             ----------------------  ----------------------
                               Aug 1,      Jul 26,     Aug 1,      Jul 26,
                                2014        2013        2014        2013
                             ----------  ----------  ----------  ----------

Segment Sales
  Avionics & Controls        $  200,109  $  179,572  $  596,149  $  546,272
  Sensors & Systems             198,106     175,864     595,929     524,638
  Advanced Materials            132,909     122,632     373,600     364,682
                             ----------  ----------  ----------  ----------

    Net Sales                $  531,124  $  478,068  $1,565,678  $1,435,592
                             ==========  ==========  ==========  ==========

Earnings From Continuing
 Operations Before Income
 Taxes
  Avionics & Controls        $   29,055  $ 20,597 1  $   75,386  $ 60,651 1
  Sensors & Systems              18,196      21,584      61,533      63,792
  Advanced Materials             27,532      28,135      70,903      74,402
                              ---------   ---------   ---------   ---------
    Segment Earnings             74,783      70,316     207,822     198,845

  Corporate expense             (16,142)    (20,793)    (48,398)    (53,224)
  Interest income                   146         132         403         381
  Interest expense               (7,870)     (9,050)    (24,939)    (30,976)
  Loss on extinguishment of
   debt                            (533)          -        (533)       (946)
                             ----------  ----------  ----------  ----------

    Earnings From Continuing
     Operations Before
     Income Taxes            $   50,384  $   40,605  $  134,355  $  114,080
                             ==========  ==========  ==========  ==========

1 Includes a $3.5 million impairment charge against goodwill of Racal Acoustics, Ltd. (Racal Acoustics).



ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands

                                                      Aug 1,       Jul 26,
                                                       2014         2013
                                                   ------------ ------------
Assets
Current Assets
  Cash and cash equivalents                        $    210,456 $    199,248
  Cash in escrow                                              -        4,017
  Accounts receivable, net                              361,827      332,069
  Inventories                                           493,812      445,790
  Income tax refundable                                   7,681        9,084
  Deferred income tax benefits                           50,716       47,329
  Prepaid expenses                                       24,816       21,524
  Other current assets                                    4,286        3,774
                                                   ------------ ------------
    Total Current Assets                              1,153,594    1,062,835

Property, Plant and Equipment, Net                      363,205      363,155

Other Non-Current Assets
  Goodwill                                            1,132,987    1,106,867
  Intangibles, net                                      560,893      584,485
  Debt issuance costs, net                                4,637        6,637
  Deferred income tax benefits                           68,416       93,374
  Other assets                                           24,726        7,558
                                                   ------------ ------------
                                                   $  3,308,458 $  3,224,911
                                                   ============ ============

Liabilities and Shareholders' Equity
Current Liabilities
  Accounts payable                                 $    123,376 $    117,041
  Accrued liabilities                                   238,968      258,447
  Credit facilities                                     ―          109
  Current maturities of long-term debt                   12,822       21,939
  Deferred income tax liabilities                         3,205        1,215
  Federal and foreign income taxes                        2,309        1,954
                                                   ------------ ------------
    Total Current Liabilities                           380,680      400,705

Long-Term Liabilities
  Credit facilities                                     115,000      170,000
  Long-term debt, net of current maturities             513,119      562,444
  Deferred income taxes liabilities                     178,796      198,809
  Pension and post-retirement obligations                62,759      125,673
  Other liabilities                                      47,313       32,616

Total Shareholders' Equity                            2,010,791    1,734,664
                                                   ------------ ------------
                                                   $  3,308,458 $  3,224,911
                                                   ============ ============

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
"We are an all-flash array storage provider but our focus has been on VM-aware storage specifically for virtualized applications," stated Dhiraj Sehgal of Tintri in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
"We are a leader in the market space called network visibility solutions - it enables monitoring tools and Big Data analysis to access the data and be able to see the performance," explained Shay Morag, VP of Sales and Marketing at Niagara Networks, in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smart...
Complete Internet of Things (IoT) embedded device security is not just about the device but involves the entire product’s identity, data and control integrity, and services traversing the cloud. A device can no longer be looked at as an island; it is a part of a system. In fact, given the cross-domain interactions enabled by IoT it could be a part of many systems. Also, depending on where the device is deployed, for example, in the office building versus a factory floor or oil field, security ha...
An IoT product’s log files speak volumes about what’s happening with your products in the field, pinpointing current and potential issues, and enabling you to predict failures and save millions of dollars in inventory. But until recently, no one knew how to listen. In his session at @ThingsExpo, Dan Gettens, Chief Research Officer at OnProcess, discussed recent research by Massachusetts Institute of Technology and OnProcess Technology, where MIT created a new, breakthrough analytics model for s...
In IT, we sometimes coin terms for things before we know exactly what they are and how they’ll be used. The resulting terms may capture a common set of aspirations and goals – as “cloud” did broadly for on-demand, self-service, and flexible computing. But such a term can also lump together diverse and even competing practices, technologies, and priorities to the point where important distinctions are glossed over and lost.
"We are the public cloud providers. We are currently providing 50% of the resources they need for doing e-commerce business in China and we are hosting about 60% of mobile gaming in China," explained Yi Zheng, CPO and VP of Engineering at CDS Global Cloud, in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Events has announced today that Roger Strukhoff has been named conference chair of Cloud Expo and @ThingsExpo 2017 New York. The 20th Cloud Expo and 7th @ThingsExpo will take place on June 6-8, 2017, at the Javits Center in New York City, NY. "The Internet of Things brings trillions of dollars of opportunity to developers and enterprise IT, no matter how you measure it," stated Roger Strukhoff. "More importantly, it leverages the power of devices and the Internet to enable us all to im...
"We are a custom software development, engineering firm. We specialize in cloud applications from helping customers that have on-premise applications migrating to the cloud, to helping customers design brand new apps in the cloud. And we specialize in mobile apps," explained Peter Di Stefano, Vice President of Marketing at Impiger Technologies, in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
When it comes to cloud computing, the ability to turn massive amounts of compute cores on and off on demand sounds attractive to IT staff, who need to manage peaks and valleys in user activity. With cloud bursting, the majority of the data can stay on premises while tapping into compute from public cloud providers, reducing risk and minimizing need to move large files. In his session at 18th Cloud Expo, Scott Jeschonek, Director of Product Management at Avere Systems, discussed the IT and busin...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at 20th Cloud Expo, Ed Featherston, director/senior enterprise architect at Collaborative Consulting, will discuss the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...
What happens when the different parts of a vehicle become smarter than the vehicle itself? As we move toward the era of smart everything, hundreds of entities in a vehicle that communicate with each other, the vehicle and external systems create a need for identity orchestration so that all entities work as a conglomerate. Much like an orchestra without a conductor, without the ability to secure, control, and connect the link between a vehicle’s head unit, devices, and systems and to manage the ...
Financial Technology has become a topic of intense interest throughout the cloud developer and enterprise IT communities. Accordingly, attendees at the upcoming 20th Cloud Expo at the Javits Center in New York, June 6-8, 2017, will find fresh new content in a new track called FinTech.