Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

 

Contact:

Investor Relations – John Hobbs

    

Media – Michelle DeGrand

    

+1 425-453-9400

ESTERLINE REPORTS FISCAL 2018 THIRD QUARTER FINANCIAL RESULTS

 

 

Fiscal 2018 Third Quarter Results

 

   

Sales of $499.9 million

 

   

Income from continuing operations of $29.7 million, or $1.00 per diluted share

 

   

Free cash flow of $80.1 million year-to-date

 

   

Reiterate FY18 full-year revenue, earnings and cash flow guidance

BELLEVUE, Wash., August 2, 2018 – Esterline Corporation (NYSE:ESL) (www.esterline.com), a leading specialty manufacturer serving global aerospace and defense markets, today reported results for the fiscal 2018 third quarter ended June 29, 2018.

Consolidated third quarter revenue was $499.9 million compared with the prior-year result of $504.1 million. Prior-year results included $23.4 million in sales from the recently divested Kirkhill business.

Consolidated earnings from continuing operations in the third fiscal quarter of 2018 were $29.7 million, or $1.00 per diluted share. The results for the third quarter period of 2017 were $31.8 million, or $1.06 per diluted share. Adjusted earnings from continuing operations for the third fiscal quarter of 2017 were $33.0 million, or $1.10 per diluted share, excluding discrete advanced displays integration and compliance costs.

“We completed the quarter ahead of our most recent expectations,” said Curtis Reusser, Esterline’s Chairman, President & Chief Executive Officer. “Our avionics team successfully mitigated a significant portion of the effect of a previously reported 13-day work stoppage in Montreal. We expect to recapture the balance of the impacted sales volume in the fiscal fourth quarter. In addition, other Esterline businesses fulfilled more orders in the third quarter than planned, shifting some sales from the fourth quarter into the third. We remain focused on driving revenue growth across our global operations, supported by a very healthy backlog and year-to-date book-to-bill ratio of 1.15.”

 

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Page 2 of 8    Esterline Reports Fiscal 2018 Third Quarter Financial Results

 

Third Quarter Results of Operations

The company reported consolidated operating earnings before interest and tax in the third quarter of fiscal 2018 of $48.3 million, or 9.7% of sales, compared with $49.9 million, or 9.9% of sales, reported in the prior year.

The Avionics & Controls segment reported fiscal third quarter operating earnings of $23.8 million on sales of $210.8 million. This compares with operating earnings of $22.5 million on sales of $209.2 million in the same period of fiscal 2017. Solid performance in the recent quarter across the businesses within this segment more than offset lower year-over-year sales and profits resulting from the previously mentioned strike. Segment R&D spending was lower in the 2018 period as the company’s efforts on the Embraer E2 family of airliners shift from development to production.

The Sensors & Systems segment reported fiscal third quarter operating earnings of $22.1 million on sales of $190.9 million. The segment’s operating earnings in the same period of 2017 were $25.6 million on sales of $184.8 million. The fiscal 2017 results benefited from strong sales and above-average margins on an FAA-mandated GFI retrofit program that ended in the fourth quarter of fiscal 2017. Segment operating profit moderated with the completion of the GFI program but has returned to growth over the last two quarters.

The Advanced Materials segment reported fiscal third quarter operating earnings of $21.2 million on sales of $98.2 million. During the same period of fiscal 2017, the segment reported operating earnings of $17.8 million on sales of $110.1 million. The fiscal 2017 performance includes the operating results from the Kirkhill business, which was divested in the second quarter of fiscal 2018. Excluding $23.4 million in sales and a $2.6 million operating loss from the Kirkhill operations, adjusted segment sales in the fiscal 2017 third quarter were $86.7 million and adjusted operating earnings were $20.4 million. Sales growth in the fiscal 2018 third quarter was driven by strong performance across the segment.

Year-to-Date Results of Operations

Consolidated operating results for the first nine months of fiscal 2018 include discrete tax expenses of $48.6 million, or $1.63 per diluted share, related to the U.S. Tax Cuts and Jobs Act of 2017 (TCJA). Including that impact, the company reported earnings from continuing operations for the first nine months of fiscal 2018 of $18.9 million, or $0.63 per diluted share. Excluding the discrete impact of the TCJA, the company generated adjusted earnings from continuing operations during the first nine months of this fiscal year of $67.5 million, or $2.26 per diluted share. Earnings from continuing operations for the first nine months of fiscal 2017 were $87.3 million, or $2.92 per diluted share. Adjusted earnings from continuing operations for the first nine months of fiscal 2017 were $92.4 million, or $3.09 per diluted share (see further details in the Non-GAAP Financial Information section below).

Cash flow from operations through the first nine months of fiscal 2018 was $119.4 million, compared with $138.9 million through the first nine months of fiscal 2017. Capital expenditures during the first

 

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Page 3 of 8    Esterline Reports Fiscal 2018 Third Quarter Financial Results

 

nine months of fiscal 2018 were $39.2 million, resulting in free cash flow of $80.1 million for the 2018 period compared with $96.7 million for the same period in 2017. The decline in free cash flow is primarily attributable to lower net earnings in the fiscal 2018 period.

Booking Activity

The company has booked more than $1.7 billion of new orders on a year-to-date basis, resulting in a year-to-date book-to-bill ratio of 1.15. The company’s backlog has increased over the past twelve months, standing at $1.47 billion at the end of the fiscal 2018 third quarter, compared with a $1.24 billion backlog at the end of the fiscal 2017 third quarter. The current backlog has greater depth with a higher proportion of system and sub-system orders, many with scheduled deliveries twelve months or more into the future.                

Capital Allocation

During the third quarter of fiscal 2018, the company paid down $23.1 million of U.S. debt, resulting in a leverage ratio of 2.7 as of the end of the quarter.

Fiscal 2018 Outlook

The company reiterated its guidance for fiscal year 2018, continuing to expect revenue in the range of $2.00 billion to $2.05 billion and anticipating fiscal 2018 earnings in the range of $3.65 to $3.85 per diluted share, excluding the $1.63 impact from the TCJA. The company expects to generate free cash flow between $115 million and $140 million for the full year.

Additional information about the company’s financial results is available in a presentation on the company’s website (www.esterline.com) in the Investor Relations section under “Presentations.” The presentation is also included as Exhibit 99.2 to the company’s report on Form 8-K, which is being submitted today to the SEC.

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 877-307-0078; outside the U.S., use 531-289-2890. The pass code for the call is: 9167058.

Non-GAAP Financial Information

This press release and the related presentation providing supplemental financial information may include non-GAAP financial measures—adjusted earnings from continuing operations, adjusted earnings from continuing operations per diluted share, adjusted operating earnings from continuing operations (EBIT), adjusted earnings before interest, tax, depreciation and amortization (EBITDA), adjusted segment sales, adjusted segment operating earnings (before income taxes) and free cash flow—that have not been calculated in accordance with generally accepted accounting principles

 

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Page 4 of 8    Esterline Reports Fiscal 2018 Third Quarter Financial Results

 

(GAAP) in the U.S. Adjusted earnings from continuing operations consist of earnings from continuing operations attributable to Esterline less the costs associated with incremental compliance costs (described further below), discrete items associated with our acquisition of the Advanced Displays business in January 2015, and the one-time expenses associated with the TCJA. 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. EBIT is defined as operating earnings from continuing operations. Adjusted EBIT excludes the same costs excluded from adjusted earnings from continuing operations set forth in the table below. EBITDA from continuing operations is defined as net earnings plus loss from discontinued operations plus earnings attributable to noncontrolling interests plus income tax expense less interest income plus interest expense plus depreciation & amortization (excluding amortization of debt issuance costs) of $25.2 million in the third quarter of fiscal 2018 and $25.5 million in the third quarter of fiscal 2017. Adjusted segment sales consist of net sales of our Advanced Materials segment reduced by the sales from our Kirkhill business. Adjusted segment operating earnings consist of operating earnings (before income taxes) of our Advanced Materials segment reduced by the operating earnings from our Kirkhill business. Free cash flow is defined as cash flow from operations of $119.4 million less capital expenditures of $39.2 million in the first nine months of fiscal 2018, and cash flow from operations of $138.9 million less capital expenditures of $42.2 million in the first nine months of fiscal 2017. 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. Additional relevant reconciliations are included in the presentation providing supplemental financial information.

In millions, except per share amounts

 

     Three Months Ended
June 29, 2018
     Three Months Ended
June 30, 2017
 
     Diluted EPS      Diluted EPS  

Earnings from Continuing Operations Attributable to Esterline (GAAP), Net of Tax

   $ 29.7      $ 1.00      $ 31.8      $ 1.06  

Advanced Displays Integration Costs, Net of Tax of $0.1

     —          —          0.1        0.00  

Compliance Costs1, Net of Tax of $0.4

     —          —          1.1        0.04  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Earnings from Continuing Operations (non-GAAP), Net of Tax

   $ 29.7      $ 1.00      $ 33.0      $ 1.10  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Page 5 of 8    Esterline Reports Fiscal 2018 Third Quarter Financial Results

 

In millions, except per share amounts

 

     Nine Months Ended
June 29, 2018
     Nine Months Ended
June 30, 2017
 
     Diluted EPS      Diluted EPS  

Earnings from Continuing Operations Attributable to Esterline (GAAP), Net of Tax

   $ 18.9      $ 0.63      $ 87.3      $ 2.92  

Advanced Displays Integration Costs, Net of Tax of $0.2

     —          —          0.9        0.03  

Compliance Costs1, Net of Tax of $1.1

     —          —          4.2        0.14  

Provisional Tax Expense Due to TCJA

     48.6        1.63        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Earnings from Continuing Operations (non-GAAP), Net of Tax

   $ 67.5      $ 2.26      $ 92.4      $ 3.09  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

¹

See explanation of these costs in Exhibit 99.2 to the company’s Form 8-K filed today with the SEC.

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” 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 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 Report on Form 10-K/A.

 

See attached Consolidated Statement of Operations, Consolidated Sales and

Earnings from Continuing Operations by Segment, and Consolidated Balance Sheet


Page 6 of 8    Esterline Reports Fiscal 2018 Third Quarter Financial Results

 

ESTERLINE TECHNOLOGIES CORPORATION

Consolidated Statement of Operations (unaudited)

In thousands, except per share amounts

 

     Three Months Ended     Nine Months Ended  
     June 29,
2018
    June 30,
2017
    June 29,
2018
    June 30,
2017
 

Segment Sales

        

Avionics & Controls

   $ 210,787     $ 209,168     $ 626,304     $ 615,143  

Sensors & Systems

     190,895       184,804       564,516       535,287  

Advanced Materials

     98,189       110,135       308,725       321,224  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Sales

     499,871       504,107       1,499,545       1,471,654  

Cost of Sales

     329,951       330,408       1,017,562       977,837  
  

 

 

   

 

 

   

 

 

   

 

 

 
     169,920       173,699       481,983       493,817  

Expenses

        

Selling, general and administrative

     98,895       93,615       299,817       286,649  

Research, development and engineering

     22,830       30,190       73,397       80,937  

Insurance recovery

     —         —         —         (7,789

License fee income

     —         —         (5,293     —    

Loss (Gain) on sale of business

     (97     —         5,213       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Expenses

     121,628       123,805       373,134       359,797  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Earnings from Continuing Operations

     48,292       49,894       108,849       134,020  

Interest Income

     (579     (150     (1,326     (346

Interest Expense

     7,902       7,299       23,673       22,645  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from Continuing Operations Before Income Taxes

     40,969       42,745       86,502       111,721  

Income Tax Expense

     11,094       10,703       66,962       23,320  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from Continuing Operations Including Noncontrolling Interests

     29,875       32,042       19,540       88,401  

Earnings Attributable to Noncontrolling Interests

     (158     (278     (684     (1,069
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from Continuing Operations Attributable to Esterline, Net of Tax

     29,717       31,764       18,856       87,332  

Gain (Loss) from Discontinued Operations, Attributable to Esterline, Net of Tax

     (1,894     (815     (2,137     (6,185
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Earnings Attributable to Esterline

   $ 27,823     $ 30,949     $ 16,719     $ 81,147  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (Loss) Per Share — Basic:

        

Continuing Operations

   $ 1.01     $ 1.07     $ 0.63     $ 2.94  

Discontinued Operations

     (0.06     (0.03     (0.07     (0.21
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (Loss) Per Share — Basic

   $ 0.95     $ 1.04     $ 0.56     $ 2.73  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (Loss) Per Share — Diluted:

        

Continuing Operations

   $ 1.00     $ 1.06     $ 0.63     $ 2.92  

Discontinued Operations

     (0.06     (0.03     (0.07     (0.21
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (Loss) Per Share — Diluted

   $ 0.94     $ 1.03     $ 0.56     $ 2.71  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Number of Shares Outstanding — Basic

     29,430       29,830       29,649       29,698  

Weighted Average Number of Shares Outstanding — Diluted

     29,548       30,068       29,775       29,953  


Page 7 of 8    Esterline Reports Fiscal 2018 Third Quarter Financial Results

 

ESTERLINE TECHNOLOGIES CORPORATION

Consolidated Sales and Earnings From Continuing Operations by Segment (unaudited)

In thousands

 

     Three Months Ended     Nine Months Ended  
     June 29,
2018
    June 30,
2017
    June 29,
2018
    June 30,
2017
 

Segment Sales

        

Avionics & Controls

   $ 210,787     $ 209,168     $ 626,304     $ 615,143  

Sensors & Systems

     190,895       184,804       564,516       535,287  

Advanced Materials

     98,189       110,135       308,725       321,224  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Sales

   $ 499,871     $ 504,107     $ 1,499,545     $ 1,471,654  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from Continuing Operations Before Income Taxes

 

     

Avionics & Controls

   $ 23,781     $ 22,496     $ 67,839     $ 61,185  

Sensors & Systems

     22,135       25,587       53,119       70,087  

Advanced Materials

     21,152       17,780       45,288       55,982  
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment Earnings

     67,068       65,863       166,246       187,254  

Corporate expense

     (18,776     (15,969     (57,397     (53,234

Interest income

     579       150       1,326       346  

Interest expense

     (7,902     (7,299     (23,673     (22,645
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from Continuing Operations Before Income Taxes

   $ 40,969     $ 42,745     $ 86,502     $ 111,721  
  

 

 

   

 

 

   

 

 

   

 

 

 


Page 8 of 8    Esterline Reports Fiscal 2018 Third Quarter Financial Results

 

ESTERLINE TECHNOLOGIES CORPORATION

Consolidated Balance Sheet (unaudited)

In thousands

 

     June 29, 2018      September 29,
2017
 

Assets

     

Current Assets

     

Cash and cash equivalents

   $ 351,039      $ 307,826  

Accounts receivable, net

     401,244        430,524  

Inventories

     479,494        477,969  

Income tax refundable

     18,503        12,814  

Prepaid expenses

     23,778        19,239  

Other current assets

     4,574        13,836  

Current assets of businesses held for sale

     4,052        6,501  
  

 

 

    

 

 

 

Total Current Assets

     1,282,684        1,268,709  

Property, Plant and Equipment, Net

     316,876        348,634  

Other Non-Current Assets

     

Goodwill

     1,031,234        1,053,573  

Intangibles, net

     318,169        359,166  

Deferred income tax benefits

     55,532        56,793  

Other assets

     17,323        19,804  

Non-current assets of businesses held for sale

     12,632        13,334  
  

 

 

    

 

 

 
   $ 3,034,450      $ 3,120,013  
  

 

 

    

 

 

 
Liabilities and Shareholders’ Equity      

Current Liabilities

     

Accounts payable

   $ 133,470      $ 138,595  

Accrued liabilities

     218,953        230,007  

Current maturities of long-term debt

     15,245        17,424  

U.S. and foreign income taxes

     7,151        582  

Current liabilities of businesses held for sale

     3,212        7,184  
  

 

 

    

 

 

 

Total Current Liabilities

     378,031        393,792  

Long-Term Liabilities

     

Credit facilities

     25,000        50,000  

Long-term debt, net of current maturities

     695,884        709,424  

Deferred income tax liabilities

     34,927        43,978  

Pension and post-retirement obligations

     65,443        66,981  

Long-term U.S. income taxes payable

     38,640        —    

Other liabilities

     17,703        18,838  

Non-current liabilities of businesses held for sale

     2,910        1,724  

Total Shareholders’ Equity

     1,775,912        1,835,276  
  

 

 

    

 

 

 
   $ 3,034,450      $ 3,120,013  
  

 

 

    

 

 

 

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