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CST: 11/12/2019 13:52:42   

Esterline Reports Fiscal 2019 First Quarter Financial Results

313 Days ago

  • Fiscal 2019 First Quarter Results
    • Sales of $485.0 million
    • GAAP income from continuing operations of $34.0 million, or $1.14 per diluted share
    • Adjusted income from continuing operations of $36.8 million, or $1.24 per diluted share, excludes $3.0 million, or $0.10 per diluted share, of expenses related to the company’s pending transaction with TransDigm

BELLEVUE, Wash., Jan. 31, 2019 (GLOBE NEWSWIRE) -- Esterline Corporation (NYSE:ESL) (www.esterline.com), a leading specialty manufacturer serving global aerospace and defense markets, today reported results for the fiscal 2019 first quarter ended December 28, 2018. 

On October 9, 2018, the company entered into a definitive agreement and plan of merger pursuant to which TransDigm Group Incorporated (TransDigm) will purchase all of the outstanding shares of Esterline common stock for $122.50 per share in cash. Esterline shareholders approved the transaction on January 17, 2019. The transaction is expected to close in March or April of 2019.

Consolidated GAAP first quarter revenue of $485.0 million compared favorably with the prior-year result of $482.0 million.

Consolidated GAAP earnings from continuing operations in the first quarter of fiscal 2019 were $34.0 million, or $1.14 per diluted share. These results included $3.0 million, or $0.10 per diluted share, of after-tax expenses directly related to Esterline’s pending transaction with TransDigm. Adjusted earnings from continuing operations were $36.8 million, or $1.24 per diluted share, excluding these transaction-related expenses.

In the first quarter of fiscal 2018, the company recorded a consolidated GAAP loss from continuing operations of $34.8 million, or $1.16 per diluted share. Enactment of the U.S. Tax Cuts and Jobs Act (TCJA) of 2017 resulted in a provisional one-time, non-cash tax expense of $48.6 million, or $1.62 per diluted share, during the period. Excluding the discrete impact of the TCJA, the company generated adjusted earnings from continuing operations of $13.8 million, or $0.46 per diluted share, during the first fiscal quarter of 2018.

First Quarter Results of Operations

The company reported consolidated operating earnings before interest and tax in the first quarter of fiscal 2019 of $49.0 million, or 10.1% of sales, compared with $24.9 million, or 5.2% of sales, reported in the prior year. The improvement in operating earnings was driven primarily by gross margin expansion in each of the business segments and lower levels of R&D expenditures in fiscal 2019 as certain aircraft programs moved into production over the course of fiscal 2018.

The Avionics & Controls segment reported fiscal 2019 first quarter operating earnings of $29.3 million, or 13.9% of sales, on sales of $210.7 million. This compares with operating earnings of $19.2 million, or 9.5% of sales, on sales of $202.7 million in the same period of fiscal 2018. The earnings improvement resulted from a 2.4 percentage point expansion of gross margins in the segment and lower R&D expense. Each business platform within the segment contributed to the gross margin expansion.

The Sensors & Systems segment reported fiscal first quarter operating earnings of $23.1 million, or 12.8% of sales, on sales of $179.4 million. The segment’s operating earnings in the same period of 2018 were $11.5 million, or 6.6% of sales, on sales of $175.5 million. Sensors & Systems segment operating profit and margins have expanded significantly over the course of the past year. Modestly higher sales, a 2.9 percentage point expansion of gross margins and lower overhead costs were the key drivers of the significant increase in profitability.

The Advanced Materials segment reported fiscal first quarter operating earnings of $20.1 million, or 21.2% of sales, on sales of $94.8 million. During the same period of fiscal 2018, the segment reported operating earnings of $13.9 million, or 13.4% of sales, on sales of $103.9 million. The fiscal 2018 first quarter performance included $19.5 million of sales and an operating loss of $6.0 million from the Kirkhill business, which Esterline divested in the second fiscal quarter of 2018.

The company ended the quarter with a cash balance of $391 million, up approximately $19 million from the end of fiscal 2018.

In light of the previously announced agreement with TransDigm, the company will not hold a first quarter earnings conference call or provide financial guidance for fiscal 2019.

Non-GAAP Financial Information

This press release may include 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 (GAAP) in the U.S. Adjusted earnings from continuing operations consist of earnings from continuing operations attributable to Esterline less the one-time expenses associated with the TCJA and the expenses related to the proposed transaction with TransDigm (described further in the tables below). Adjusted earnings from continuing operations per diluted share divides each element of adjusted earnings from continuing operations by the weighted average number of shares outstanding, diluted for the periods presented. In accordance with the SEC’s requirements, below is the reconciliation of the non-GAAP adjusted earnings from continuing operations to the comparable GAAP earnings from continuing operations in the applicable periods.

In millions, except per share amounts                  
    Three Months Ended
  Three Months Ended
 
    December 28, 2018
  December 29, 2017
 
    Diluted
EPS
  Diluted
EPS
 
                   
Earnings (Loss) from Continuing Operations Attributable to Esterline (GAAP), Net of Tax   $             34.0   $ 1.14   $ (34.8)   $ (1.16)  
Provisional Tax Expense (Benefit) Due to TCJA   (0.2)   0.00   48.6   1.62  
Expenses Related to Proposed Transaction, Net of Tax of $1.0
  3.0   0.10        −    −  
 Adjusted Earnings from Continuing Operations (non-GAAP), Net of Tax
  $ 36.8   $ 1.24   $ 13.8   $ 0.46  
                   

The company provides these non-GAAP financial measures as supplemental information to the GAAP financial measures. Management uses these non-GAAP financial measures 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 including these non-GAAP financial measures enhances investors’ and financial analysts’ understanding of the company’s performance as well as their ability to assess and compare 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, and free cash flow is not necessarily indicative of amounts available for discretionary use. 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.

This press release contains “forward-looking statements,” including statements regarding the proposed acquisition of Esterline by TransDigm, within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or the company’s 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, including the proposed transaction with TransDigm, 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 the definitive proxy statement filed with the SEC in connection with the proposed transaction with TransDigm and Esterline’s most recent Report on Form 10-K.



ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Statement of Operations (unaudited)
In thousands, except per share amounts
 
        Three Months Ended
        December 28,   December 29,
        2018     2017  
             
Segment Sales            
Avionics & Controls       $ 210,744     $ 202,703  
Sensors & Systems       179,448     175,468  
Advanced Materials       94,795     103,874  
             
Net Sales       484,987     482,045  
             
Cost of Sales       318,857     334,316  
        166,130     147,729  
Expenses            
Selling, general and administrative       92,738     99,897  
Research, development and engineering       20,404     25,966  
License fee income           (3,025 )
Transaction costs       4,021      
Total Expenses       117,163     122,838  
             
Operating Earnings from Continuing Operations       48,967     24,891  
Interest Income       (827 )   (298 )
Interest Expense       6,774     7,604  
Other Income       (2,143 )   (1,742 )
             
Earnings from Continuing Operations Before Income Taxes       45,163     19,327  
Income Tax Expense       11,280     53,789  
Earnings (Loss) from Continuing Operations Including Noncontrolling Interests       33,883     (34,462 )
Loss (Earnings) Attributable to Noncontrolling Interests       71     (353 )
Earnings (Loss) from Continuing Operations Attributable to Esterline, Net of Tax       33,954     (34,815 )
Loss from Discontinued Operations Attributable to Esterline, Net of Tax       (156 )   (166 )
Net Earnings (Loss) Attributable to Esterline       $ 33,798     $ (34,981 )
             
Earnings (Loss) Per Share — Basic:            
Continuing Operations       $ 1.15     $ (1.16 )
Discontinued Operations         (.01 )       (.01 )
Earnings (Loss) Per Share — Basic       $ 1.14     $ (1.17 )
             
Earnings (Loss) Per Share — Diluted:            
Continuing Operations       $ 1.14     $ (1.16 )
Discontinued Operations         (.01 )       (.01 )
Earnings (Loss) Per Share — Diluted       $ 1.13     $ (1.17 )
             
             
Weighted Average Number of Shares Outstanding — Basic       29,530     29,903  
             
Weighted Average Number of Shares Outstanding — Diluted     29,887     29,903  


ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Sales and Earnings from Continuing Operations by Segment (unaudited)
In thousands
 
        Three Months Ended
        December 28,   December 29,
        2018     2017  
             
Segment Sales            
Avionics & Controls       $ 210,744     $ 202,703  
Sensors & Systems       179,448     175,468  
Advanced Materials       94,795     103,874  
Net Sales       $ 484,987     $ 482,045  
             
Earnings from Continuing Operations Before Income Taxes            
Avionics & Controls       $ 29,293     $ 19,181  
Sensors & Systems       23,053     11,522  
Advanced Materials       20,125     13,898  
Segment Earnings       72,471     44,601  
             
Corporate expense       (23,504 )   (19,710 )
Interest income       827     298  
Interest expense       (6,774 )   (7,604 )
Other income       2,143     1,742  
             
Earnings from Continuing Operations Before Income Taxes       $ 45,163     $ 19,327  


ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet
In thousands
 
        December 28,   September 28,
        2018   2018
Assets       (unaudited)    
Current Assets            
Cash and cash equivalents       $ 391,182   $ 372,406
Accounts receivable, net       439,401   441,696
Inventories       452,190   457,226
Income tax refundable       10,697   9,077
Prepaid expenses       24,393   19,975
Other current assets       4,272   3,497
Total Current Assets       1,322,135   1,303,877
             
Property, Plant and Equipment, Net       309,734   314,806
             
Other Non-Current Assets            
Goodwill       1,013,461   1,030,667
Intangibles, net       289,869   306,085
Deferred income tax benefits       44,873   44,008
Other assets       37,309   33,249
Non-current assets of businesses held for sale         4,225
Total Assets       $ 3,017,381   $ 3,036,917
Liabilities and Shareholders’ Equity            
Current Liabilities            
Accounts payable       $ 123,979   $ 147,438
Accrued liabilities       228,865   232,730
Current maturities of long-term debt       17,439   17,546
Federal and foreign income taxes       7,763   5,160
Current liabilities of businesses held for sale         144
Total Current Liabilities       378,046   403,018
             
Long-Term Liabilities            
Long-term debt, net of current maturities       646,845   654,922
Deferred income tax liabilities       26,095   28,899
Pension and post-retirement obligations       56,909   57,755
Long-term taxes payable       33,204   32,902
Other liabilities       18,776   16,294
             
Total Shareholders’ Equity       1,857,506   1,843,127
Total Liabilities and Shareholders’ Equity       $ 3,017,381   $ 3,036,917
             


Contact:
Investor Relations – John Hobbs
Media – Michelle DeGrand
+1 425-453-9400

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