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03 Sep 15. Esterline Reports Financial Results for Third Fiscal Quarter of 2015.
Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving the global aerospace and defense markets, reported results for the fiscal third quarter ended July 31, 2015. Consolidated revenue of $496.2m declined 2.0% compared with the year-ago period of $506.3 m. Foreign currency impacts were offset by sales from the Defense, Aerospace, and Training display business (DAT) acquired from Barco N.V. in the second quarter of fiscal 2015. Excluding these items, organic sales volume declined by 2.8%.
GAAP earnings from continuing operations in the third fiscal quarter of 2015 were $30.2m, or $0.97 per diluted share, compared with $39.8m, or $1.22 per diluted share, in the prior-year period. Adjusted earnings from continuing operations in the third quarter of fiscal 2015 were $41.2m, or $1.33 per diluted share. This excludes $0.26 per diluted share related to the company’s previously disclosed integration and compliance activities and $0.10 per diluted share from the impact of DAT purchase accounting and integration costs.
Curtis Reusser, Esterline’s Chief Executive Officer, said, “During the third quarter we continued our work to reshape Esterline into a stronger company with increased efficiencies that will bring added value to our stakeholders. Activities this quarter included an important restructuring of our executive team and further advancement of our E3 operational excellence program. We were pleased to see solid improvement in our operating margins in the third quarter compared with the first half of this fiscal year.” Reusser continued, “Our end markets are fundamentally healthy and commercial aerospace, in particular, is supported by strong orders at the OEM level and robust airline profitability. In the short term, early 2016 sales growth could remain challenged, as most commercial aerospace production rates have stabilized and energy and general industrial markets are still under pressure.”
Including discontinued operations, net earnings for the fiscal third quarter of 2015 were $28.5m, or $0.92 per diluted share, compared with $38.9m, or $1.19 per diluted share, in the prior-year period. Net earnings in the third quarter of fiscal 2015 included a $1.7m loss from discontinued operations, while the prior-year period included a $0.9m loss from discontinued operations.
New orders in the third quarter of fiscal 2015 were $508.7m, including $49.3m from DAT, compared with $515.1m in the year-ago period. Backlog at the end of the third quarter of fiscal 2015 was $1.28bn, compared with $1.25bn at the end of the third quarter of fiscal 2014. Third quarter backlog for 2015 includes $190.8m from DAT.
Gross margin as a percentage of sales in the third quarter of fiscal 2015 was 34.2%, compared with 35.0% in the prior-year period. The lower gross margin relative to the prior year primarily reflects lower sales volumes and unfavorable sales mix in Avionics & Controls and Advanced Materials.
Fiscal third quarter selling, general and administrative (SG&A) expense as a percentage of sales was 18.5%, compared with the prior-year level of 17.6%. Higher SG&A was attributable to the addition of DAT and increased compliance costs. On an adjusted basis that excludes incremental compliance costs and the DAT impact, fiscal third quarter 2015 SG&A expense as a percentage of sales was 16.4%, compared with an adjusted prior-year level of 17.1%. Foreign exchange translation drove part of this improvement.
During the fiscal third quarter the company incurred integration and certain pre-tax incremental compliance costs of $9.9m; $7.1m was reported in SG&A expense, $1.4m w