Esterline Technologies Corp.

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Esterline Reports Fiscal 2013 First Quarter Results

BELLEVUE, WA -- (Marketwire) -- 02/28/13 -- Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving the global aerospace/defense markets, today reported fiscal 2013 first quarter (ended January 25) net income of $25.1 million, or $0.80 per diluted share, on sales of $458.0 million. Earnings in the quarter included about $0.11 per diluted share of income tax benefits due to the extension of U.S. federal research & development tax credits and the settlement of uncertain tax positions related to U.S. and global tax examinations. Year-ago first quarter net income was $22.8 million, or $0.73 per diluted share, on $470.9 million in sales.

Brad Lawrence, Esterline's Chief Executive Officer, said the company posted, "...a solid quarter -- somewhat better than expected." Looking forward, Lawrence said he would expect the current uncertainty surrounding U.S. defense spending to "...dampen our second quarter a bit," but reiterated the company's fiscal 2013 earnings per diluted share guidance of $5.45 - $5.80, saying, "...there is still a lot of the year left to cover and our full-year revenues in the $2.1 billion range continue to look solid." He said, "...at this point we believe we are right where we need to be."

The current strength of commercial aerospace underscores Esterline's long-term strategy of a balanced global approach to commercial and defense markets. Lawrence said that the company's current view of fiscal 2013 includes "...strengthening commercial aerospace and our best analysis of the impact of anticipated U.S. defense spending reductions."

He emphasized that Esterline's diversification efforts over the years have reduced the company's percentage of total revenues from U.S. defense customers to approximately 25%. He said, "Esterline is strategically designed to perform through the cyclicality in our markets."

Lawrence highlighted healthy year-over-year backlog growth as a positive sign for continued business strength through the year. He said that fiscal 2013 is "...shaping up much like last year, with a slow start ramping up to a very strong fourth quarter, thanks in part to improvement in build rates for several programs late in the year."

The company saw increased order activity in the first quarter of fiscal 2013 compared with the same period last year for the Avionics & Controls and Sensors & Systems segments, mainly as a result of the ongoing strong commercial aerospace cycle.

In the company's technology-driven adjacent industrial markets, Lawrence noted there are several significant opportunities for growth, including high-speed rail projects in China, nuclear power initiatives in the U.K., and casino gaming console installations worldwide. The last opportunity mentioned is enhanced by a promising new gaming acquisition that closed in early February. Lawrence said that "...we believe these adjacent market segments, while small relative to our aerospace and defense business, will experience the fastest rate of growth in 2013."

Gross margin in the first quarter of fiscal 2013 was 35.0%, up 1.4% compared with 33.6% in the same period last year, though the prior-year margins were compressed by approximately $12 million in Souriau purchase accounting adjustments.

Selling, general and administrative (SG&A) expenses as a percent of sales were 21.5% in the first quarter of fiscal 2013, compared with 20.1% a year ago. Lawrence said the spending was at the level expected and the percent of sales increase "...is more a reflection of lower first quarter sales."

Research, development and engineering (R&D) expenses were 5.0% of sales in the first quarter compared with 5.6% in the same period of 2012. Lawrence said the reduction in the year-over-year R&D level "...came from significant program progress in certain business lines within our Control Systems platform." Full-year R&D expense as a percent of sales is expected to settle at about 5%.

The income tax rate for the first quarter of fiscal 2013 was 8.5% compared with 10.1% in the same period last year.

Lawrence noted that the company's cash flow was exceptional. Cash flow from operations in the quarter was $86.5 million, compared with last year's $46.6 million.

New orders for the first quarter of 2013 were $473.6 million, compared with $467.8 million in the same period last year. Backlog was $1.3 billion at the end of the first quarter of fiscal 2013, compared with $1.2 billion at the end of the prior-year period and $1.3 billion at the end of fiscal 2012.

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 866-804-6927; outside the U.S., use 857-350-1673. The pass code for the call is: 96814855.

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 our 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 Annual Report on Form 10-K.



ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Statement of Operations (unaudited)
In thousands, except per share amounts

                                                       Three Months Ended
                                                     ----------------------
                                                       Jan 25,     Jan 27,
                                                        2013        2012
                                                     ----------  ----------
Segment Sales
  Avionics & Controls                                $  174,570  $  179,572
  Sensors & Systems                                     171,810     171,672
  Advanced Materials                                    111,582     119,638
                                                     ----------  ----------

Net Sales                                               457,962     470,882

Cost of Sales                                           297,617     312,801
                                                     ----------  ----------
                                                        160,345     158,081
Expenses
  Selling, general and administrative                    98,611      94,697
  Research, development and engineering                  23,076      26,395
                                                     ----------  ----------
  Total Expenses                                        121,687     121,092
                                                     ----------  ----------

Operating Earnings                                       38,658      36,989
  Interest Income                                          (101)        (95)
  Interest Expense                                       10,444      11,528
                                                     ----------  ----------

Income Before Income Taxes                               28,315      25,556
Income Tax Expense                                        2,394       2,576
                                                     ----------  ----------
Income Including Noncontrolling Interests                25,921      22,980

Income Attributable to Noncontrolling Interests            (810)       (192)
                                                     ----------  ----------

Net Earnings                                         $   25,111  $   22,788
                                                     ==========  ==========

Earnings per Share - Basic                           $      .81  $      .74
                                                     ==========  ==========

Earnings per Share - Diluted                         $      .80  $      .73
                                                     ==========  ==========


Weighted Average Number of Shares Outstanding -
 Basic                                                   30,904      30,631


Weighted Average Number of Shares Outstanding -
 Diluted                                                 31,423      31,157



ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Sales and Income from Operations by Segment (unaudited)
In thousands

                                                       Three Months Ended
                                                     ----------------------
                                                       Jan 25,     Jan 27,
                                                        2013        2012
                                                     ----------  ----------

Segment Sales
  Avionics & Controls                                $  174,570  $  179,572
  Sensors & Systems                                     171,810     171,672
  Advanced Materials                                    111,582     119,638
                                                     ----------  ----------

Net Sales                                            $  457,962  $  470,882
                                                     ==========  ==========

Income from Operations
  Avionics & Controls                                $   18,589  $   20,063
  Sensors & Systems                                      19,001       6,815
  Advanced Materials                                     17,644      23,073
                                                     ----------  ----------
    Segment Earnings                                     55,234      49,951

  Corporate Expense                                     (16,576)    (12,962)
  Interest Income                                           101          95
  Interest Expense                                      (10,444)    (11,528)
                                                     ----------  ----------

Income Before Income Taxes                           $   28,315  $   25,556
                                                     ==========  ==========



ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands

                                                      Jan 25,      Jan 27,
                                                        2013         2012
                                                    -----------  -----------
Assets
Current Assets
  Cash and cash equivalents                         $   202,776  $   193,289
  Cash in escrow                                          5,017        5,017
  Accounts receivable, net                              331,335      350,080
  Inventories                                           421,626      395,050
  Income tax refundable                                   6,516       10,811
  Deferred income tax benefits                           47,430       45,161
  Prepaid expenses                                       27,207       21,098
  Other current assets                                    6,083        3,221
                                                    -----------  -----------
    Total Current Assets                              1,047,990    1,023,727

Property, Plant and Equipment, Net                      356,973      360,368

Other Non-Current Assets
  Goodwill                                            1,105,656    1,130,489
  Intangibles, net                                      599,396      655,642
  Debt issuance costs, net                                8,349       10,226
  Deferred income tax benefits                           97,758       82,891
  Other assets                                           19,282       24,420
                                                    -----------  -----------
                                                    $ 3,235,404  $ 3,287,763
                                                    ===========  ===========

Liabilities and Shareholders' Equity
Current Liabilities
  Accounts payable                                  $   103,315  $   111,934
  Accrued liabilities                                   259,014      265,080
  Credit facilities                                          82          223
  Current maturities of long-term debt                   10,953       13,098
  Deferred income tax liabilities                         5,620        2,943
  Federal and foreign income taxes                        4,326       12,420
                                                    -----------  -----------
    Total Current Liabilities                           383,310      405,698

Long-Term Liabilities
  Credit facilities                                     225,000      335,000
  Long-term debt, net of current maturities             578,329      656,448
  Deferred income tax liabilities                       204,509      229,375
  Pension and post-retirement obligations               143,475      104,513
  Other liabilities                                      35,519       20,647

Total Shareholders' Equity                            1,665,262    1,536,082
                                                    -----------  -----------
                                                    $ 3,235,404  $ 3,287,763
                                                    ===========  ===========

Source: Esterline Technologies

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