Esterline Technologies Corp. (ESL, Financial) filed Quarterly Report for the period ended 2009-01-30.
Esterline Technologies Corporation is a specialized engineering and manufacturing company principally serving aerospace and defense markets. They design manufacture and market highly engineered products and systems for application within the industries they serve. Their products are found on most military and commercial aircraft helicopters and land-based systems. Their sales are diversified across three broad markets: defense commercial aerospace and general industrial. Esterline Technologies Corp. has a market cap of $1.02 billion; its shares were traded at around $21.3 with a P/E ratio of 7.9 and P/S ratio of 0.69. Esterline Technologies Corp. had an annual average earning growth of 3.5% over the past 10 years.
Income from continuing operations for the first fiscal quarter of 2009 includes a $2.0 million, or $0.07 per diluted share, reduction of previously recorded withholding tax liabilities as a result of the enactment of a U.S.-Canadian tax treaty and a $1.6 million, or $0.05 per diluted share, penalty due to a development with regard to certain foreign tax laws. Prior-year results include a $6.9 million, or $0.23 per diluted share, reduction of previously estimated income tax liabilities and a $4.1 million, or $0.14 per diluted share, net reduction in deferred income tax liabilities resulting from the enactment of tax laws reducing the Canadian statutory corporate income tax rate. Income from discontinued operations was $0.52 per diluted share, compared with $0.04 per diluted share in the prior-year period, reflecting the gain on sale of our U.K.-based Muirhead and Traxsys subsidiaries in November 2008. Net income was $26.9 million, or $0.90 per diluted share, compared with net income of $31.0 million, or $1.04 per diluted share, in the prior-year period.
The effective income tax rate for the first fiscal quarter of 2009 was 18.9% (before a $0.4 million tax benefit) compared with 22.1% (before a $6.9 million tax benefit) for the prior-year period. The $0.4 million tax benefit in the first fiscal quarter of 2009 was the result of two events. The first event was a $2.0 million reduction of previously recorded withholding tax liabilities as a result of the enactment of a U.S.-Canadian tax treaty. The second event was the recording of a $1.6 million penalty due to a development with regard to certain foreign tax laws. The $6.9 million tax benefit in the first fiscal quarter of 2008 was the result of two events. The first event was the settlement of an examination of the U.S. federal income tax returns for fiscal years 2003 through 2005, which resulted in a $2.8 million reduction of previously estimated income tax liabilities. The second event was the enactment of tax laws reducing the Canadian statutory corporate income tax rate, which resulted in a $4.1 million net reduction of deferred income tax liabilities. The effective tax rate differed from the statutory rate in the first fiscal quarters of 2009 and 2008, as both years benefited from various tax credits and certain foreign interest expense deductions.
New orders for the first fiscal quarter of 2009 were $370.2 million compared with $348.4 million for the same period in 2008. Orders in the first fiscal quarter of 2009 include $65.2 million in backlog acquired from the Racal and NMC acquisitions. New orders declined by $39.4 million if Racal and NMC acquired backlog is excluded. The decline in new orders principally reflects the effect of foreign exchange rates, the Boeing strike and the cancellation of certain industrial commercial orders. Backlog was $1.2 billion compared with $949.1 million at the end of the prior-year period and $1.1 billion at the end of fiscal 2008.
Cash and cash equivalents at January 30, 2009, totaled $81.2 million, a decrease of $79.4 million from October 31, 2008. Net working capital decreased to $263.1 million at January 30, 2009, from $456.2 million at October 31, 2008. Sources and uses of cash flows from operating activities principally consist of cash received from the sale of products and cash payments for material, labor and operating expenses. Cash flows provided by operating activities were $4.2 million and $35.5 million in the first fiscal quarter of 2009 and 2008, respectively. The decrease principally reflected lower income from continuing operations, increased payments to suppliers due to higher operating activity in our fourth quarter of fiscal 2008, and incentive compensation payments which are paid annually.
Cash flows used by investing activities were $195.3 million and $9.2 million in the first fiscal quarter of 2009 and 2008, respectively. Cash flows used by investing activities in the first fiscal quarter of 2009 primarily reflected approximately $254.3 million for the acquisitions of NMC and Racal, and $7.5 million in purchases of capital assets, partially offset by proceeds from the sale of Muirhead and Traxsys of $63.4 million. Cash flows used by investing activities in the prior-year period included $9.6 million in purchases of capital assets.
Read the The complete ReportESL is in the portfolios of David Dreman of Dreman Value Management, Kenneth Fisher of Fisher Asset Management, LLC.
Esterline Technologies Corporation is a specialized engineering and manufacturing company principally serving aerospace and defense markets. They design manufacture and market highly engineered products and systems for application within the industries they serve. Their products are found on most military and commercial aircraft helicopters and land-based systems. Their sales are diversified across three broad markets: defense commercial aerospace and general industrial. Esterline Technologies Corp. has a market cap of $1.02 billion; its shares were traded at around $21.3 with a P/E ratio of 7.9 and P/S ratio of 0.69. Esterline Technologies Corp. had an annual average earning growth of 3.5% over the past 10 years.
Highlight of Business Operations:
During the first fiscal quarter of 2009, the pound sterling weakened significantly against the U.S. dollar. With over 50% of our business operations based in non-U.S. locations and with a significant portion of our sales denominated in U.S. dollars, operating results were favorably impacted by the weakening of these currencies; however, we use forward contracts to hedge our U.S. dollar-denominated sales to reduce the volatility of foreign currency exchange movements and, accordingly, our 2009 first fiscal quarter results were impacted from hedging effected before the Canadian dollar, euro, and pound sterling weakened against the U.S. dollar. Income from continuing operations reflected a net foreign currency loss of $5.3 million or $3.7 million after tax, or $0.12 per diluted share, compared to a net gain in the prior-year period of $3.5 million or $2.4 million after tax, or $0.08 per diluted share, from forward currency exchange contracts, U.S. dollar-denominated accounts receivable and backlog. Income from continuing operations was also impacted by a foreign currency loss of $7.9 million or $1.7 million after tax, or $0.06 per diluted share, relating to the pound sterling-denominated funding of our acquisition of Racal in January 2009.Income from continuing operations for the first fiscal quarter of 2009 includes a $2.0 million, or $0.07 per diluted share, reduction of previously recorded withholding tax liabilities as a result of the enactment of a U.S.-Canadian tax treaty and a $1.6 million, or $0.05 per diluted share, penalty due to a development with regard to certain foreign tax laws. Prior-year results include a $6.9 million, or $0.23 per diluted share, reduction of previously estimated income tax liabilities and a $4.1 million, or $0.14 per diluted share, net reduction in deferred income tax liabilities resulting from the enactment of tax laws reducing the Canadian statutory corporate income tax rate. Income from discontinued operations was $0.52 per diluted share, compared with $0.04 per diluted share in the prior-year period, reflecting the gain on sale of our U.K.-based Muirhead and Traxsys subsidiaries in November 2008. Net income was $26.9 million, or $0.90 per diluted share, compared with net income of $31.0 million, or $1.04 per diluted share, in the prior-year period.
The effective income tax rate for the first fiscal quarter of 2009 was 18.9% (before a $0.4 million tax benefit) compared with 22.1% (before a $6.9 million tax benefit) for the prior-year period. The $0.4 million tax benefit in the first fiscal quarter of 2009 was the result of two events. The first event was a $2.0 million reduction of previously recorded withholding tax liabilities as a result of the enactment of a U.S.-Canadian tax treaty. The second event was the recording of a $1.6 million penalty due to a development with regard to certain foreign tax laws. The $6.9 million tax benefit in the first fiscal quarter of 2008 was the result of two events. The first event was the settlement of an examination of the U.S. federal income tax returns for fiscal years 2003 through 2005, which resulted in a $2.8 million reduction of previously estimated income tax liabilities. The second event was the enactment of tax laws reducing the Canadian statutory corporate income tax rate, which resulted in a $4.1 million net reduction of deferred income tax liabilities. The effective tax rate differed from the statutory rate in the first fiscal quarters of 2009 and 2008, as both years benefited from various tax credits and certain foreign interest expense deductions.
New orders for the first fiscal quarter of 2009 were $370.2 million compared with $348.4 million for the same period in 2008. Orders in the first fiscal quarter of 2009 include $65.2 million in backlog acquired from the Racal and NMC acquisitions. New orders declined by $39.4 million if Racal and NMC acquired backlog is excluded. The decline in new orders principally reflects the effect of foreign exchange rates, the Boeing strike and the cancellation of certain industrial commercial orders. Backlog was $1.2 billion compared with $949.1 million at the end of the prior-year period and $1.1 billion at the end of fiscal 2008.
Cash and cash equivalents at January 30, 2009, totaled $81.2 million, a decrease of $79.4 million from October 31, 2008. Net working capital decreased to $263.1 million at January 30, 2009, from $456.2 million at October 31, 2008. Sources and uses of cash flows from operating activities principally consist of cash received from the sale of products and cash payments for material, labor and operating expenses. Cash flows provided by operating activities were $4.2 million and $35.5 million in the first fiscal quarter of 2009 and 2008, respectively. The decrease principally reflected lower income from continuing operations, increased payments to suppliers due to higher operating activity in our fourth quarter of fiscal 2008, and incentive compensation payments which are paid annually.
Cash flows used by investing activities were $195.3 million and $9.2 million in the first fiscal quarter of 2009 and 2008, respectively. Cash flows used by investing activities in the first fiscal quarter of 2009 primarily reflected approximately $254.3 million for the acquisitions of NMC and Racal, and $7.5 million in purchases of capital assets, partially offset by proceeds from the sale of Muirhead and Traxsys of $63.4 million. Cash flows used by investing activities in the prior-year period included $9.6 million in purchases of capital assets.
Read the The complete ReportESL is in the portfolios of David Dreman of Dreman Value Management, Kenneth Fisher of Fisher Asset Management, LLC.
