Esterline Fiscal 2005 Earnings Per Share $2.09 Before Stock Option Expense; Sales $835 Million; FY05 EPS $2.02 after Restatement to Reflect a Change in Accounting for Stock Options.BELLEVUE Bellevue (bĕl`vy  ).1 City (1990 pop. 30,982), Sarpy co., E Nebr., a suburb of Omaha, on the Missouri River; inc. 1855. , Wash. -- Esterline Corporation (NYSE NYSE See: New York Stock Exchange :ESL (1) An earlier family of client/server development tools for Windows and OS/2 from Ardent Software (formerly VMARK). It was originally developed by Easel Corporation, which was acquired by VMARK. ) (www.esterline.com), a leading specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. manufacturer serving aerospace/defense markets, today reported fourth quarter income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $15.4 million, or $.60 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, on sales of $224.1 million. In the same period last year, income from continuing operations was $14.4 million, or $.66 per diluted share, on $190.3 million sales. Full year 2005 income from continuing operations was $51.0 million, or $2.02 per diluted share. The prior year's income from continuing operations was $29.4 million, or $1.37 per diluted share. Sales in fiscal 2005 were $835.4 million compared with last year's sales of $613.6 million. Results for the fourth quarter and full fiscal year 2005 reflect a change in accounting for stock options resulting from Esterline's determination during the fourth quarter that certain stock option grants required variable rather than fixed accounting under APB APB See Accounting Principles Board (APB). No. 25. The results from prior periods, including the fourth quarter and full fiscal year 2004, have been restated to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" this change. The restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. has no impact on the company's net cash flow or liquidity. Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. W. Cremin Cremin is a municipality in the district Moudon in the canton of Vaud in Switzerland. , Esterline CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , said the company's fourth quarter results reflect "...another solid performance, continuing the trend of the past several quarters." Cremin said, "...our acquisition efforts are paying off, and equally important, our year-over-year organic growth rate was nearly 16%. Our strong growth positions us well to be a more active Tier I partner with our customers, which in turn enables future growth." Looking toward that future, Cremin said he is optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about fiscal 2006, anticipating earnings per share in the range of $2.15 to $2.35. Cremin said that Esterline's success at winning Tier I contracts led to increased research, development and engineering spending during the year. R&D spending climbed to $42.2 million, or 5.1% of sales, in fiscal 2005 compared with $25.9 million, or 4.2% of sales, for fiscal 2004. Cremin expects R&D expenditures to increase again during fiscal 2006 "...to the 6.5% level, then begin to return to more normalized historic levels." He said Esterline "...has never shied shied 1 v. Past tense and past participle of shy1. shied Verb the past of shy1 or shy2 away from making investments in research and new product development -- it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have what sustains us. Being well positioned on the major new programs -- 787, A380, A400M, JSF (JavaServerFaces) A standard framework of components for building rich user interfaces for Java applications. JavaServer Faces run on the server, but are displayed on the client. JSF - JavaServer Faces and others -- is what will drive organic growth going forward." He emphasized em·pha·size tr.v. em·pha·sized, em·pha·siz·ing, em·pha·siz·es To give emphasis to; stress. [From emphasis.] Adj. 1. that Esterline's consistent investment in R&D has paid off in the past, and he expects the return on this round of investment to be high. Cremin said, "...we continue on the acquisition trail and are currently reviewing several good-fit strategic opportunities." The company has completed two strategic acquisitions in the past 15 months: Leach International Corporation, a manufacturer of sophisticated relays and power distribution equipment for aerospace and defense applications, and Palomar Pal·o·mar , Mount A peak, 1,868.4 m (6,126 ft) high, of southern California northeast of San Diego. It is the site of an observatory with one of the world's largest reflecting telescopes. Products, a developer of secure military communications Military communications, or Signals, is a field of military activities, tactics and equipment dealing with communications. First of all, military communications are battlefield (combat) communications, including intercommunication with a higher command or country's systems. He said, "...these companies are a solid fit with our customers' needs, adding significantly to the toolkit An integrated set of software routines or utilities (tools) that are used to develop and maintain applications and databases. There are toolkits for developing almost anything. See tool, developer's toolkit, library, class library and CASE. of solutions we bring to them." Cremin noted that Esterline's growing capabilities are opening up more opportunities. In addition to the company's previously announced Tier I win to design and manufacture all of the overhead panels for the new Boeing (language) BOEING - An early system on the IBM 1130. [Listed in CACM 2(5):16, May 1959]. 787, he said, "...we will also supply the sensors
A cockpit is the area usually nearer the front of a piloted aircraft from which a pilot controls the aircraft. panels as well as develop the embedded software Instructions that permanently reside in a ROM or flash memory chip. Embedded software may be immediately available to the CPU or, for faster execution, may be transferred to RAM first and then executed. for these products." He added that the company has also secured Tier I positions with Airbus for its new A400M military transport's primary power distribution system, and with Rolls Royce Rolls Royce the millionaire’s vehicle. [Trademarks: Brewer Dictionary, 928] See : Luxury for the complete suite of sensors for the A400M's huge turboprop turboprop: see turbine. turboprop Hybrid engine that provides jet thrust and also drives a propeller. It is similar to the turbojet except that an added turbine, behind the combustion chamber, works through a shaft and speed-reducing gears to turn a engines. Including results from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , fiscal 2005 net earnings were $58.0 million, or $2.29 per diluted share, compared with $39.6 million, or $1.84 per diluted share, a year ago. Fiscal 2005 income from discontinued operations principally reflect the sale of the company's Fluid Regulators subsidiary. That sale resulted in a gain of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $7.0 million, net of tax of $2.4 million, or $.27 per diluted share, in the first quarter of 2005. Fiscal 2004 income from discontinued operations principally reflected the earnings of discontinued operations and the gain on the sale of W.A. Whitney. Including results from discontinued operations, net earnings in the fourth quarter of fiscal 2005 and fiscal 2004 were $15.4 million, or $.60 per diluted share, and $22.9 million, or $1.05 per diluted share, respectively. Backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. at year end was $482.8 million compared with $423.8 million at the end of the prior-year period. This press release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology The terminology used in the computer and telecommunications field adds tremendous confusion not only for the lay person, but for the technicians themselves. What many do not realize is that terms are made up by anybody and everybody in a nonchalant, casual manner without any regard or 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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.
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Statement of Operations
In thousands, except per share amounts
Three months ended Fiscal year ended
Oct 28, Oct 29, 2004 Oct 28, Oct 29, 2004
2005 (as restated) 2005 (as restated)
---- ------------ ---- ------------
Segment Sales
Avionics &
Controls $ 68,715 $ 62,185 $ 261,550 $ 209,498
Sensors &
Systems 79,671 64,556 319,539 180,768
Advanced
Materials 75,760 63,605 254,314 223,344
----------- ----------- ---------- ------------
Net Sales 224,146 190,346 835,403 613,610
Cost of Sales 154,527 128,364 573,453 418,590
----------- ----------- ---------- ------------
69,619 61,982 261,950 195,020
Expenses
Selling,
general and
administrative 34,054 32,941 137,426 118,746
Research,
development and
engineering 12,122 8,503 42,238 25,856
----------- ----------- ---------- ------------
Total Expenses 46,176 41,444 179,664 144,602
----------- ----------- ---------- ------------
Operating
Earnings from
Continuing
Operations 23,443 20,538 82,286 50,418
Interest
income (1,310) (917) (4,057) (1,964)
Interest
expense 4,726 4,471 18,159 17,336
Other income
(expense) 176 65 514 (509)
Gain on sale of
product line -- (3,434) -- (3,434)
----------- ----------- ---------- ------------
Other Expense, Net 3,592 185 14,616 11,429
----------- ----------- ---------- ------------
Income from
Continuing
Operations
Before Income
Taxes 19,851 20,353 67,670 38,989
Income Tax
Expense 4,320 5,950 16,301 9,592
----------- ----------- ---------- ------------
Income from
Continuing
Operations
Before Minority
Interest 15,531 14,403 51,369 29,397
Minority Interest (165) (22) (335) (22)
----------- ----------- ---------- ------------
Income from
Continuing
Operations 15,366 14,381 51,034 29,375
Income from
Discontinued
Operations
Net of Tax 24 8,498 6,992 10,208
----------- ----------- ---------- ------------
Net Earnings $ 15,390 $ 22,879 $ 58,026 $ 39,583
=========== =========== ========== ============
Earnings Per
Share -- Basic:
Continuing
operations $ .61 $ .67 $ 2.05 $ 1.39
Discontinued
operations .00 .40 .28 .48
----------- ----------- ---------- ------------
Earnings Per
Share -- Basic $ .61 $ 1.07 $ 2.33 $ 1.87
=========== =========== ========== ============
Earnings Per
Share -- Diluted:
Continuing
operations $ .60 $ .66 $ 2.02 $ 1.37
Discontinued
operations .00 .39 .27 .47
----------- ----------- ---------- ------------
Earnings Per
Share -- Diluted $ .60 $ 1.05 $ 2.29 $ 1.84
=========== =========== ========== ============
Weighted Average
Number of Shares
Outstanding --
Basic 25,316 21,310 24,927 21,195
Weighted Average
Number of Shares
Outstanding --
Diluted 25,685 21,692 25,302 21,539
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet
--------------------------
In thousands
Oct 29,
Oct 28, 2004
2005 (as restated)
---------- -------------
Assets
Current Assets
Cash and cash equivalents $ 118,304 $ 29,479
Cash in escrow 11,918 8,511
Short-term investments 62,656 --
Accounts receivable, net 149,751 132,206
Inventories 130,469 119,054
Deferred income tax benefits 26,868 23,499
Prepaid expenses 7,533 9,441
Other current assets -- 435
---------- -----------
Total Current Assets 507,499 322,625
Property, Plant and Equipment, Net 138,214 145,135
Other Non-Current Assets
Goodwill 261,167 247,817
Intangibles, net 166,118 169,876
Debt issuance costs, net 5,144 5,818
Deferred income tax benefits 13,320 11,216
Other assets 23,786 32,861
---------- -----------
$1,115,248 $ 935,348
========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 41,453 $ 37,867
Accrued liabilities 119,115 97,038
Credit facilities 2,031 6,977
Current maturities of long-term debt 70,934 1,031
Federal and foreign income taxes 8,798 6,678
---------- -----------
Total Current Liabilities 242,331 149,591
Long-Term Liabilities
Long-term debt, net of current maturities 175,682 249,056
Deferred income taxes 46,421 43,443
Other Liabilities 27,237 29,852
Minority Interest 2,713 2,378
Shareholders' Equity 620,864 461,028
---------- -----------
$1,115,248 $ 935,348
========== ===========
ESTERLINE TECHNOLOGIES CORPORATION
Restatement, Stock Option Accounting
------------------------------------
(In thousands, except per share amounts)
Esterline has historically accounted for stock option grants as
fixed awards in accordance with Accounting Principles Board No. 25
(APB No. 25) and disclosed in the footnotes to the financial
statements the expense based upon the fair value of stock options
under Statement of Financial Accounting Standards No. 123 (Statement
No. 123). During our 2005 year-end closing process, we determined that
certain stock option grants required variable rather than fixed
accounting treatment under APB No. 25, because grantees were permitted
to exercise options by surrendering shares subject to the grant to pay
for the exercise price and statutory withholding. As a result, we
determined on December 8, 2005, the need to restate our financial
statements included in the Form 10-K for the fiscal year ended October
29, 2004 and in the Form 10-Q for the periods ended January 28, 2005,
April 29, 2005, and July 29, 2005. The restatement for variable
accounting has no impact on the company's net cash flow or liquidity.
A summary of the significant effects of the restatement for fiscal
years 2004, 2003 and 2002 is as follows:
2004 2003
As As As As
Reported Restated(a) Reported Restated(a)
--------- ----------- --------- -----------
Selling,general &
administrative
expenses
$117,689 $122,015 $107,797 $109,225
Income from
continuing
operations 33,374 30,402 29,741 28,643
Net income
(loss) 42,555 39,583 23,933 22,835
Income from continuing
operations
per share:
Basic $ 1.57 $ 1.43 $ 1.42 $ 1.37
Diluted 1.55 1.41 1.41 1.36
Net income
(loss) per share:
Basic $ 2.01 $ 1.87 $ 1.15 $ 1.09
Diluted 1.98 1.84 1.13 1.08
Deferred tax
asset benefits $ 20,984 $ 23,499 $ 16,529 $ 18,726
Shareholders'
Equity 458,513 461,028 393,872 396,069
2002
As As
Reported Restated(a)
--------- -----------
Selling, general &
administrative
expenses $ 79,086 $ 83,797
Income from
continuing
operations 31,284 28,252
Net income
(loss) (1,329) (4,361)
Income (loss)
from continuing
operations
per share:
Basic $ 1.51 $ 1.36
Diluted 1.49 1.34
Net income
(loss) per share:
Basic $ (.07) $ (.21)
Diluted (.06) (.21)
Deferred tax
asset benefits $ 25,069 $ 27,792
Shareholders'
Equity 354,441 357,164
(a) The as restated amounts do not reflect the reclassification
from continuing operations to discontinued operations of selling,
general & administrative expenses and earnings of principally Fluid
Regulators Corporation, which was accounted for as a discontinued
operation beginning in fiscal 2005. This reclassification is made in
fiscal year 2005 reporting.
ESTERLINE TECHNOLOGIES CORPORATION
Reconciliation of Non-GAAP Financial Measure
--------------------------------------------
Earnings per share from continuing operations before stock option
expense is a measurement not calculated in accordance with GAAP. We do
not intend earnings per share from continuing operations before stock
option expense to represent earnings per share from continuing
operations calculated in accordance with GAAP or as an indicator of
Esterline's operating performance. We believe that earnings per share
from continuing operations before stock option expense provides useful
information to investors because this is the first period we have
recorded stock option expense.
The following table reconciles earnings per share from continuing
operations to earnings per share before stock option expense for the
fiscal year ended October 28, 2005:
Earnings Per Share From Continuing
Operations $2.02
Stock Option Expense .07
-----
Earnings Per Share Before Stock Option Expense $2.09
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