UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
November 10, 2016
Date of Report (Date of earliest event reported)
ESTERLINE TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware | 001-06357 | 13-2595091 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File No.) |
(IRS Employer Identification No.) | ||
500-108th Avenue NE, Bellevue, Washington | 98004 | |||
(Address of principal executive offices) | (Zip Code) |
(425) 453-9400
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On November 10, 2016, Esterline Technologies Corporation (Esterline) issued a press release announcing financial results for the three months and full fiscal year ended September 30, 2016. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. In addition, supplemental information regarding the financial results for periods presented in the press release is attached hereto as Exhibit 99.2. The press release and the supplemental financial information should be read in conjunction with the note regarding forward-looking statements, which is included in the text of the press release and as part of the supplemental financial information.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit No. |
Description | |
99.1 | Press release announcing financial results issued by Esterline Technologies Corporation dated November 10, 2016. | |
99.2 | Supplemental Financial Information dated November 10, 2016. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ESTERLINE TECHNOLOGIES CORPORATION | ||||||
Dated: November 10, 2016 | By: | /s/ ROBERT D. GEORGE | ||||
Name: | Robert D. George | |||||
Title: | Executive Vice President, Chief Financial Officer & Corporate Development |
EXHIBIT INDEX
Exhibit No. |
Description | |
99.1 | Press release announcing financial results issued by Esterline Technologies Corporation dated November 10, 2016. | |
99.2 | Supplemental Financial Information dated November 10, 2016. |
Exhibit 99.1
FOR IMMEDIATE RELEASE | ||
Contact: | Julie Albrecht | |
+1 425-453-9400 |
ESTERLINE REPORTS FISCAL 2016 FOURTH QUARTER AND FULL-YEAR FINANCIAL RESULTS
| Sales of $543.8 million in the fiscal fourth quarter |
| Earnings from continuing operations of $52.0 million in the fiscal fourth quarter; adjusted earnings from continuing operations of $58.2 million |
| GAAP earnings per diluted share from continuing operations of $1.75 in the fiscal fourth quarter; adjusted earnings per share of $1.96 |
| Fiscal 2016 full-year GAAP earnings per diluted share from continuing operations of $3.93, adjusted earnings per diluted share of $4.86 |
| Company issues fiscal 2017 guidance |
BELLEVUE, Wash., November 10, 2016 Esterline Corporation (NYSE:ESL) (www.esterline.com), a leading specialty manufacturer serving the global aerospace and defense markets, today reported results for the 2016 fiscal fourth quarter and full year ended September 30, 2016. The company generated consolidated revenue of $543.8 million in the fiscal fourth quarter, which was flat compared with the prior-year recast period. The Avionics & Controls segment had strong commercial aerospace and defense sales in the fiscal fourth quarter of 2016, which were offset by a sales decrease in Advanced Materials primarily related to a previously reported temporary plant shutdown. The results for our fiscal 2015 fourth quarter and fiscal year have been recast to the three months and twelve months ended October 2, 2015, respectively, in order to provide meaningful comparisons to prior-year periods.
Curtis Reusser, Esterlines Chief Executive Officer, said, We finished fiscal 2016 on a high note driven by strong volume and improved margins. We are pleased with the operational milestones reached during the year, including completion of the two remaining accelerated integration projects and substantial progress on our E3 initiatives. I am excited to enter a new fiscal year with a clear focus on execution, supported by solid order rates and backlog.
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Page 2 of 9 Esterline Reports Fiscal 2016 Fourth Quarter and Full-Year Financial Results
Earnings from continuing operations in the fiscal fourth quarter of 2016 increased 29.2% to $52.0 million, or $1.75 per diluted share, compared with $40.3 million, or $1.34 per diluted share, in the recast prior-year period results, primarily due to stronger operating earnings and receipt of a $5.0 million business interruption insurance payment. In addition, the recast prior-year period included a $9.2 million after-tax loss on early extinguishment of debt. Adjusted earnings from continuing operations for the fiscal fourth quarter of 2016 were $58.2 million, or $1.96 per diluted share. In the comparable recast period of the prior year, adjusted earnings from continuing operations were $66.0 million, or $2.20 per diluted share.
For the fiscal fourth quarter of 2016, adjusted earnings exclude $0.21 per diluted share of costs related to previously identified integration, restructuring and compliance activities (see Table 1).
Table 1: Effect of Certain Items on Fiscal 4th Quarter 2016 Earnings from Continuing Operations |
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$ Millions | EPS | |||||||
Earnings (GAAP) |
$ | 52.0 | $ | 1.75 | ||||
Accelerated Integration Costs |
3.2 | 0.11 | ||||||
Compliance Costs |
1.8 | 0.06 | ||||||
DAT Integration Costs |
1.2 | 0.04 | ||||||
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Adjusted Earnings (non-GAAP) |
$ | 58.2 | $ | 1.96 | ||||
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Including discontinued operations, net earnings for the fiscal fourth quarter of 2016 were $52.3 million, or $1.76 per diluted share, compared with $21.0 million, or $0.70 per diluted share, for the comparable recast period in 2015. Net earnings in the fiscal fourth quarter of 2016 included $0.2 million of earnings from discontinued operations, while the prior year included a $19.3 million loss from discontinued operations.
New orders in the fiscal fourth quarter of 2016 were $475.4 million, compared with $501.0 million in the comparable recast period of 2015. The companys book-to-bill ratio for the fiscal fourth quarter was 0.9. Backlog at the end of fiscal 2016 was $1.3 billion, compared with $1.2 billion at the end of fiscal 2015.
Gross profit in the fiscal fourth quarter of 2016 was $193.8 million, compared with $185.8 million in the prior-year recast period. Reported gross margin as a percentage of sales in the fiscal fourth quarter of 2016 was 35.6%, compared with 34.1% in the prior-year recast period. The companys adjusted gross profit, excluding the discrete items consistent with adjusted earnings, was $196.1 million, or 36.1% of sales, in the fiscal fourth quarter of 2016, compared with adjusted gross margin of $189.1 million, or 34.7% of sales, in the recast fourth quarter of 2015.
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Page 3 of 9 Esterline Reports Fiscal 2016 Fourth Quarter and Full-Year Financial Results
Selling, general and administrative (SG&A) expenses during the fiscal fourth quarter of 2016 were $102.0 million, or 18.8% of sales, compared with $94.6 million, or 17.4% of sales, in the prior-year recast period. Approximately $8 million in higher year-over-year SG&A expenses in the fiscal 2016 fourth quarter were due to bad debt expense within the Avionics & Controls segment. Excluding this expense, SG&A expenses were 17.3% of sales in the fourth quarter of fiscal 2016.
Research, development and engineering spending in the fiscal fourth quarter of 2016 was $23.2 million, or 4.3% of sales, compared with $25.4 million, or 4.6% of sales, in the prior-year period.
The companys income tax rate in the fiscal fourth quarter of 2016 was 17.6%, compared with 7.9% in the prior-year period. The lower tax rate in the fiscal fourth quarter of 2015 was principally the result of lower earnings and beneficial tax effects from the DAT acquisition.
For the full fiscal year ended September 30, 2016, sales were $1.99 billion, roughly flat with the prior-year period. Fiscal 2016 GAAP earnings from continuing operations were $117.0 million, or $3.93 per diluted share, compared with the prior-year period results of $127.9 million, or $4.10 per diluted share. Excluding the discrete costs described in Table 2 below, adjusted earnings from continuing operations in fiscal 2016 were $144.8 million, or $4.86 per diluted share, compared with the prior-year period results of $179.1 million, or $5.74 per diluted share.
Table 2: Effect of Certain Items on Full-Year Fiscal 2016 Earnings from Continuing Operations |
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$ Millions | EPS | |||||||
Earnings (GAAP) |
$ | 117.0 | $ | 3.93 | ||||
Accelerated Integration Costs |
7.4 | 0.24 | ||||||
Compliance Costs |
8.7 | 0.30 | ||||||
DAT Integration Costs |
10.1 | 0.34 | ||||||
Long-term Contract Adjustments |
1.6 | 0.05 | ||||||
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Adjusted Earnings (non-GAAP) |
$ | 144.8 | $ | 4.86 | ||||
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Cash flow from operations for fiscal 2016 was $167.2 million, compared with $193.7 million in the prior-year period. After capital expenditures of $68.5 million, free cash flow for fiscal 2016 was $98.7 million. In the recast 2015 full-year period, free cash flow was $138.3 million. Capital expenditures in fiscal 2016 were higher than the prior year due to approximately $15 million used to purchase and improve the primary facility of the DAT business. Fiscal 2016 EBITDA was $269.0 million, compared with $298.8 million in the recast prior-year period.
Additional information about fiscal 2016 fourth quarter and full-year operational and financial results is available in a presentation on the companys website (www.esterline.com) in the Investor Relations section under Presentations. The presentation is also included as Exhibit 99.2 to the companys report on Form 8-K, which is being submitted today to the SEC.
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Page 4 of 9 Esterline Reports Fiscal 2016 Fourth Quarter and Full-Year Financial Results
Guidance for Fiscal Year 2017
Revenues for the fiscal year ending on September 29, 2017, are expected to be in the range of $2.0 billion to $2.05 billion. Fiscal 2017 GAAP earnings from continuing operations are expected to be in the range of $4.30 to $4.70 per diluted share. Adjusted earnings per share from continuing operations, excluding certain compliance and integration costs, are expected to be in the range of $4.50 to $4.90 per diluted share. The companys tax rate is expected to increase from 16.0% in fiscal 2016 to 25.0% in fiscal 2017 driven by higher earnings, changes in international tax regulations and timing of discrete tax items. This change in effective tax rate is estimated to have an impact on fiscal 2017 earnings of ($0.55) per diluted share.
The company expects fiscal 2017 free cash flow to be in a range of $165 million to $185 million and EBITDA to be in a range of $295 million to $315 million.
Reusser said, Our teams will continue to execute within the Esterline Operating System, or E3, and capitalize on positive trends in the marketplace in fiscal 2017. While our business environment has a level of uncertainty in the coming year and our 2017 EPS will be impacted negatively by the increase in our tax rate, Im pleased that our outlook for EBITDA and free cash flow in fiscal 2017 shows strong improvements over 2016.
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: 98000160.
Non-GAAP Financial Information
This press release and the related presentation providing supplemental financial information include non-GAAP financial measuresadjusted earnings from continuing operations, adjusted earnings from continuing operations per diluted share, adjusted earnings before interest and tax (EBIT), operating earnings from continuing operations adjusted to exclude depreciation and amortization expense (EBITDA), adjusted gross margin, also referred to as gross profit, adjusted SG&A expense, and free cash flowthat have not been calculated in accordance with generally accepted accounting principles in the U.S. (GAAP). Adjusted earnings from continuing operations consist of earnings from continuing operations attributable to Esterline less the costs associated with certain integration activitiesincluding restructuring chargesand incremental compliance costs, discrete items associated with our acquisition of the DAT business in January 2015, as well as the other items further detailed in the tables below. 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 tables below. EBITDA is EBIT plus depreciation
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Page 5 of 9 Esterline Reports Fiscal 2016 Fourth Quarter and Full-Year Financial Results
and amortization of $98.9 million in fiscal 2016 and $99.6 million in fiscal 2015. Fiscal fourth quarter 2016 adjusted gross margin excludes the cost of certain integration activities, which increased GAAP gross margin by $2.3 million. Adjusted gross margin in the recast fourth quarter of 2015 excludes certain integration costs and purchase accounting charges totaling $3.2 million. In accordance with the SECs requirements, below is the reconciliation of the non-GAAP adjusted earnings from continuing operations to the comparable GAAP earnings from continuing operations and additional relevant reconciliations are included in the presentation providing supplemental financial information.
In millions, except per share amounts | ||||||||||||||||
Three | Recast Three | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
September 30, 2016 | October 2, 2015 | |||||||||||||||
Diluted | Diluted | |||||||||||||||
EPS | EPS | |||||||||||||||
Earnings from Continuing Operations Attributable to Esterline (GAAP), Net of Tax |
$ | 52.0 | $ | 1.75 | $ | 40.3 | $ | 1.34 | ||||||||
Accelerated Integration Costs, Net of Tax of $0.7 and $0.1 |
3.2 | 0.11 | 2.7 | 0.09 | ||||||||||||
Compliance Costs, Net of Tax of $0.5 and $0.9 |
1.8 | 0.06 | 6.7 | 0.23 | ||||||||||||
DAT Integration and Purchase Acctg Adjustments, Net of Tax of $0.4 and $1.1 |
1.2 | 0.04 | 7.1 | 0.23 | ||||||||||||
Bond Redemption Costs, Net of Tax of $1.9 |
| | 9.2 | 0.31 | ||||||||||||
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Adjusted Earnings from Continuing Operations (non-GAAP), Net of Tax |
$ | 58.2 | $ | 1.96 | $ | 66.0 | $ | 2.20 | ||||||||
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In millions, except per share amounts | ||||||||||||||||
Twelve | Recast Twelve | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
September 30, 2016 | October 2, 2015 | |||||||||||||||
Diluted | Diluted | |||||||||||||||
EPS | EPS | |||||||||||||||
Earnings from Continuing Operations Attributable to Esterline (GAAP), Net of Tax |
$ | 117.0 | $ | 3.93 | $ | 127.9 | $ | 4.10 | ||||||||
Accelerated Integration Costs, Net of Tax of $1.3 and $2.6 |
7.4 | 0.24 | 12.0 | 0.38 | ||||||||||||
Compliance Costs, Net of Tax of $1.7 and $3.3 |
8.7 | 0.30 | 15.7 | 0.50 | ||||||||||||
DAT Integration and Purchase Acctg Adjustments, Net of Tax of $1.9 and $2.8 |
10.1 | 0.34 | 13.3 | 0.43 | ||||||||||||
Long-term Contract Adjustments, Net of Tax of $0.3 and $2.2 |
1.6 | 0.05 | 7.7 | 0.24 | ||||||||||||
DAT Closing Expenses, Net of Tax of $1.3 |
| | 4.7 | 0.15 | ||||||||||||
Pension Expense, Net of Tax of $0.7 |
| | 2.3 | 0.07 | ||||||||||||
Bond Redemption Costs, Net of Tax of $1.9 |
| | 9.2 | 0.30 | ||||||||||||
Non-Income Tax Gain, Net of Tax of $4.4 |
| | (13.7 | ) | (0.43 | ) | ||||||||||
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Adjusted Earnings from Continuing Operations (non-GAAP), Net of Tax |
$ | 144.8 | $ | 4.86 | $ | 179.1 | $ | 5.74 | ||||||||
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Page 6 of 9 Esterline Reports Fiscal 2016 Fourth Quarter and Full-Year Financial Results
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 companys historical and prospective financial performance and its performance relative to its competitors, (b) allocate resources, and (c) measure the operational performance of the companys business units.
In addition, management believes including these non-GAAP financial measures enhances investors and financial analysts understanding of the companys performance as well as their ability to assess and compare the companys 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 companys 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 companys 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 Esterlines or its industrys actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Esterlines 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 Esterlines public filings with the Securities and Exchange Commission including its most recent Transition Report on Form 10-K.
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See attached Consolidated Statement of Operations, Consolidated Sales and Earnings from Continuing Operations by Segment, and Consolidated Balance Sheet
Page 7 of 9 Esterline Reports Fiscal 2016 Fourth Quarter and Full-Year Financial Results
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Statement of Operations (unaudited)
In thousands, except per share amounts
Three Months Ended | Twelve Months Ended | |||||||||||||||
Sept 30, | Oct 2, | Sept 30, | Oct 2, | |||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Recast) | (Recast) | |||||||||||||||
Segment Sales |
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Avionics & Controls |
$ | 253,001 | $ | 232,019 | $ | 860,494 | $ | 826,044 | ||||||||
Sensors & Systems |
181,196 | 184,989 | 696,032 | 714,965 | ||||||||||||
Advanced Materials |
109,555 | 128,241 | 436,105 | 461,784 | ||||||||||||
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Net Sales |
543,752 | 545,249 | 1,992,631 | 2,002,793 | ||||||||||||
Cost of Sales |
349,983 | 359,409 | 1,331,386 | 1,323,405 | ||||||||||||
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193,769 | 185,840 | 661,245 | 679,388 | |||||||||||||
Expenses |
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Selling, general and administrative |
101,991 | 94,607 | 395,274 | 384,156 | ||||||||||||
Research, development and engineering |
23,179 | 25,351 | 95,939 | 100,426 | ||||||||||||
Restructuring charges |
2,443 | 2,081 | 4,873 | 8,143 | ||||||||||||
Insurance recovery |
(5,000 | ) | | (5,000 | ) | | ||||||||||
Other expense (income) |
| 241 | | (12,503 | ) | |||||||||||
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Total Expenses |
122,613 | 122,280 | 491,086 | 480,222 | ||||||||||||
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Operating Earnings from Continuing Operations |
71,156 | 63,560 | 170,159 | 199,166 | ||||||||||||
Interest Income |
(156 | ) | (226 | ) | (367 | ) | (632 | ) | ||||||||
Interest Expense |
7,922 | 8,705 | 30,091 | 33,114 | ||||||||||||
Loss on extinguishment of debt |
| 11,122 | | 11,451 | ||||||||||||
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Earnings from Continuing Operations Before Income Taxes |
63,390 | 43,959 | 140,435 | 155,233 | ||||||||||||
Income Tax Expense |
11,177 | 3,481 | 22,535 | 26,911 | ||||||||||||
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Earnings from Continuing Operations Including Noncontrolling Interests |
52,213 | 40,478 | 117,900 | 128,322 | ||||||||||||
Earnings Attributable to Noncontrolling Interests |
(168 | ) | (211 | ) | (949 | ) | (427 | ) | ||||||||
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Earnings from Continuing Operations Attributable to Esterline, Net of Tax |
52,045 | 40,267 | 116,951 | 127,895 | ||||||||||||
Earnings (Loss) from Discontinued Operations, Attributable to Esterline, Net of Tax |
227 | (19,285 | ) | (15,266 | ) | (40,319 | ) | |||||||||
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Net Earnings Attributable to Esterline |
$ | 52,272 | $ | 20,982 | $ | 101,685 | $ | 87,576 | ||||||||
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Earnings (Loss) Per ShareBasic: |
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Continuing Operations |
$ | 1.77 | $ | 1.36 | $ | 3.97 | $ | 4.16 | ||||||||
Discontinued Operations |
.01 | (.65 | ) | (.52 | ) | (1.31 | ) | |||||||||
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Earnings (Loss) Per ShareBasic |
$ | 1.78 | $ | .71 | $ | 3.45 | $ | 2.85 | ||||||||
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Earnings (Loss) Per ShareDiluted: |
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Continuing Operations |
$ | 1.75 | $ | 1.34 | $ | 3.93 | $ | 4.10 | ||||||||
Discontinued Operations |
.01 | (.64 | ) | (.51 | ) | (1.29 | ) | |||||||||
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Earnings (Loss) Per ShareDiluted |
$ | 1.76 | $ | .70 | $ | 3.42 | $ | 2.81 | ||||||||
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Weighted Average Number of Shares OutstandingBasic |
29,410 | 29,543 | 29,490 | 30,729 | ||||||||||||
Weighted Average Number of Shares OutstandingDiluted |
29,691 | 29,901 | 29,764 | 31,215 |
Page 8 of 9 Esterline Reports Fiscal 2016 Fourth Quarter and Full-Year Financial Results
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Sales and Earnings From Continuing Operations by Segment (unaudited)
In thousands
Three Months Ended | Twelve Months Ended | |||||||||||||||
Sept 30, | Oct 2, | Sept 30, | Oct 2, | |||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Recast) | (Recast) | |||||||||||||||
Segment Sales |
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Avionics & Controls |
$ | 253,001 | $ | 232,019 | $ | 860,494 | $ | 826,044 | ||||||||
Sensors & Systems |
181,196 | 184,989 | 696,032 | 714,965 | ||||||||||||
Advanced Materials |
109,555 | 128,241 | 436,105 | 461,784 | ||||||||||||
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Net Sales |
$ | 543,752 | $ | 545,249 | $ | 1,992,631 | $ | 2,002,793 | ||||||||
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Earnings from Continuing Operations Before Income Taxes |
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Avionics & Controls |
$ | 37,777 | $ | 31,129 | $ | 78,356 | $ | 93,225 | ||||||||
Sensors & Systems |
26,098 | 27,553 | 87,768 | 84,235 | ||||||||||||
Advanced Materials |
22,805 | 25,796 | 74,515 | 91,334 | ||||||||||||
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Segment Earnings |
86,680 | 84,478 | 240,639 | 268,794 | ||||||||||||
Corporate expense |
(15,524 | ) | (20,677 | ) | (70,480 | ) | (82,131 | ) | ||||||||
Other income (expense) |
| (241 | ) | | 12,503 | |||||||||||
Interest income |
156 | 226 | 367 | 632 | ||||||||||||
Interest expense |
(7,922 | ) | (8,705 | ) | (30,091 | ) | (33,114 | ) | ||||||||
Loss on extinguishment of debt |
| (11,122 | ) | | (11,451 | ) | ||||||||||
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Earnings from Continuing Operations Before Income Taxes |
$ | 63,390 | $ | 43,959 | $ | 140,435 | $ | 155,233 | ||||||||
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Page 9 of 9 Esterline Reports Fiscal 2016 Fourth Quarter and Full-Year Financial Results
ESTERLINE TECHNOLOGIES CORPORATION
Consolidated Balance Sheet (unaudited)
In thousands
September 30, | October 2, | |||||||
2016 | 2015 | |||||||
Assets |
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Current Assets |
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Cash and cash equivalents |
$ | 258,520 | $ | 191,355 | ||||
Escrow cash |
1,125 | | ||||||
Accounts receivable, net |
422,073 | 380,748 | ||||||
Inventories |
450,206 | 446,768 | ||||||
Income tax refundable |
5,183 | 12,575 | ||||||
Deferred income tax benefits |
| 41,082 | ||||||
Prepaid expenses |
17,909 | 23,008 | ||||||
Other current assets |
5,322 | 5,427 | ||||||
Current assets of businesses held for sale |
15,450 | 27,851 | ||||||
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Total Current Assets |
1,175,788 | 1,128,814 | ||||||
Property, Plant and Equipment, Net |
338,034 | 309,399 | ||||||
Other Non-Current Assets |
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Goodwill |
1,024,667 | 1,041,991 | ||||||
Intangibles, net |
393,035 | 452,040 | ||||||
Deferred income tax benefits |
75,409 | 28,979 | ||||||
Other assets |
13,698 | 14,348 | ||||||
Non-current assets of businesses held for sale |
11,400 | 24,917 | ||||||
|
|
|
|
|||||
$ | 3,032,031 | $ | 3,000,488 | |||||
|
|
|
|
|||||
Liabilities and Shareholders Equity |
||||||||
Current Liabilities |
||||||||
Accounts payable |
$ | 121,816 | $ | 117,976 | ||||
Accrued liabilities |
238,163 | 259,734 | ||||||
Current maturities of long-term debt |
16,774 | 13,376 | ||||||
Federal and foreign income taxes |
10,932 | 2,404 | ||||||
Current liabilities of businesses held for sale |
10,813 | 17,106 | ||||||
|
|
|
|
|||||
Total Current Liabilities |
398,498 | 410,596 | ||||||
Long-Term Liabilities |
||||||||
Credit facilities |
155,000 | 160,000 | ||||||
Long-term debt, net of current maturities |
698,796 | 701,457 | ||||||
Deferred income tax liabilities |
53,798 | 73,849 | ||||||
Pension and post-retirement obligations |
92,520 | 75,019 | ||||||
Other liabilities |
21,968 | 29,367 | ||||||
Non-current liabilities of businesses held for sale |
320 | 2,409 | ||||||
Total Shareholders Equity |
1,611,131 | 1,547,791 | ||||||
|
|
|
|
|||||
$ | 3,032,031 | $ | 3,000,488 | |||||
|
|
|
|
Q4 2016 Supplemental Financial Information November 10, 2016 Exhibit 99.2
This presentation may contain "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 Transition Report on Form 10-K. This presentation also contains references to non-GAAP financial information subject to Regulation G. The reconciliations of each non-GAAP financial measure to its comparable GAAP measure as well as further information on management’s use of non-GAAP financial measures are included in Esterline’s press release dated November 10, 2016, included as Exhibit 99.1 to Form 8-K filed with the SEC on the same date, as well as in this presentation, including the Appendix.
Q4 2016 Financial Results Sales of $544 million, down 0.3%* Organic sales up $16 million Defense Technologies incident ($13) million Negative FX impact ($4) million Book to Bill = 0.9 GAAP EPS of $1.75 Adjusted EPS of $1.96** (excludes certain discrete items) * Comparison is to the recast three-month period ended October 2, 2015. ** See Page 1 regarding non-GAAP financial measures.
FY 2016 Financial Results Sales of $1,993 million, down 0.5%* Positive impact from full-year of DAT business $52 million Negative impacts from organic volumes ($19) million, FX ($25) million and Defense Technologies incident ($18) million Book to Bill = 1.03 GAAP EPS of $3.93 Adjusted EPS of $4.86** (excludes certain discrete items) Free cash flow of $99 million** * Comparison is to the recast twelve-month period ended October 2, 2015. ** See Page 1 regarding non-GAAP financial measures.
2016 Year-over-Year (YOY) Summary* Dollars in millions, except EPS Q4 2016 Q4 2015 Change FY 2016 FY 2015 Change Sales $ 544 $ 545 ($1) $ 1,993 $ 2,003 ($10) Gross margin $ 194 $ 186 $8 $ 661 $ 679 ($18) As a % of sales 35.6% 34.1% 1.5% 33.2% 33.9% (0.7%) Earnings from continuing operations $ 52 $ 40 $12 $ 117 $ 128 ($11) Earnings per diluted share from continuing ops $ 1.75 $ 1.34 $0.41 $ 3.93 $ 4.10 ($0.17) * Comparison is to the recast three-month and twelve-month periods ended October 2, 2015.
2016 Earnings Adjustment Dollars in millions, except EPS EPS adjustments are net of tax Q4 Earnings from Continuing Ops EPS FY Earnings from Continuing Ops EPS GAAP $ 52 $ 1.75 $ 117 $3.93 Accelerated integration costs 3 0.11 7 0.24 Compliance costs 2 0.06 9 0.30 DAT integration costs 1 0.04 10 0.34 Long-term contract adjustments - - 2 0.05 Adjusted* $ 58 $ 1.96 $ 145 $4.86 * See Page 1 regarding non-GAAP financial measures
2016 Sales Change (YOY)* Items Q4 Sales FY Sales 2015* $ 545 $ 2,003 Foreign currency translation (7) (31) FX forward contract gain 3 6 DAT incremental (acquired sales) - 52 Defense Technologies energetic incident (13) (18) Sales volume 16 (19) 2016 $ 544 $ 1,993 Dollars in millions * Comparison is to the recast three-month and twelve-month periods ended October 2, 2015.
2016 Segment Sales Change (YOY)* Q4 Total Change Q4 Organic¹ Q4 FX Q4 Other2 FY Total Change FY Organic¹ FY FX FY Other2 Avionics & Controls 9% 9% <1% - 4% (1%) <(1%) 6% Sensors & Systems (2%) (2%) <1% - (3%) (2%) (1%) - Advanced Materials (15%) <(1%) (4%) (10%) (6%) <1% (2%) (4%) Total <(1%) 3% <(1%) (2%) <(1%) <(1%) (1%) 2% 1 Organic sales growth represents the total reported increase within the company’s continuing operations less the impact of all foreign currency translation and hedging activities. 2 Other represents acquired sales (Avionics & Controls) and energetic incident (Advanced Materials). * Comparison is to the recast three-month and twelve-month periods ended October 2, 2015.
2016 Gross Margin Change (YOY)* Items Q4 Gross Margin FY Gross Margin 2015* $ 186 $ 679 FX Impact - (3) DAT purchase accounting and integration expenses 2 3 DAT incremental (acquired sales) - 21 Sales volume / mix 13 (11) Defense Technologies energetic incident (5) (7) Higher mfg. costs / Inventory reserves / EAC / Other adjustments (2) (21) 2016 $ 194 $ 661 Dollars in millions * Comparison is to the recast three-month and twelve-month periods ended October 2, 2015.
FY 2016 Free Cash Flow Reconciliation* * Comparison is to the recast twelve-month period ended October 2, 2015. ** See Page 1 regarding non-GAAP financial measures. FY 2016 FY 2015* Net Earnings $ 103 $ 88 Depreciation and amortization (Depreciation of $49M and $51M) 100 103 Change in working capital (A/R, Inventory, A/P) (43) (2) Other 7 5 Cash flow from operations $ 167 $ 194 Capital expenditures (68)¹ (55) Free cash flow** $ 99 $ 139 Dollars in millions; GAAP results ¹ 2016 Cap Ex includes ~ $15 million used to purchase and improve the primary facility of the DAT business.
FY 2016 EBITDA* * Comparison is to the recast twelve-month period ended October 2, 2015. ** See Page 1 regarding non-GAAP financial measures. FY 2016 FY 2015* Operating Earnings from Continuing Operations $ 170 $ 199 Depreciation and amortization 99 100 EBITDA from Continuing Operations ** $ 269 $ 299 Dollars in millions; GAAP results
Share Repurchase Update # Shares In thousands $ Value In millions $ Authorization Remaining In millions FY 2014 269 $ 30.3 FY 2015 2,562 259.5 Q1 2016 0 0 Q2 2016 203 12.0 Q3 2016 102 6.7 Q4 2016 0 0 Total since inception* 3,136 $ 308.5 $ 91.5 * $400 million total authorization for share repurchase.
2017 Guidance Guidance Sales $2.0B - $2.05B GAAP EPS (diluted, continuing ops) $4.30 - $4.70 Adjusted EPS* (diluted, continuing ops) $4.50 - $4.90 EBITDA* $295M - $315M Free Cash Flow* $165M - $185M Guidance 2017 Adjusted EPS GAAP EPS (diluted, continuing ops) $4.30 - $4.70 Compliance Costs $0.18 DAT Integration Costs $0.02 Adjusted EPS* (diluted, continuing ops) $4.50 - $4.90 * See Page 1 regarding non-GAAP financial measures.
Sales Growth and Outlook 2016 Sales Mix End Market 2017 Sales Growth* Comments ~50% Commercial Aerospace Low single digit Increased OE production rates: 737Max, A320Neo, 787, A350, C-Series ~30% Defense Flat New products / contracts: Avionics, Defense Technologies, Power Systems Lower production rates (legacy products) / New LTAs (lower pricing): Avionics, Defense Technologies, Engineered Materials ~20% Adjacent Markets Flat Growth in high-end medical offsets decreases in gaming Total Flat to 2% (excl ~$15M increase from Defense Tech incident recovery) * Organic sales growth, excluding impacts from FX and Defense Technologies recovery from May 2016 energetic incident (~ $15m).
2017 Adjusted EPS* Bridge 2016 Adj. EPS 2017 Gross Margin 2017 SG&A 2017 R&D 2017 Adj. EPS @ 16% Tax Rate EPS Impact of 25% Tax Rate 2017 Adj. EPS * See Page 1 regarding non-GAAP financial measures. 5% of sales vs 4.8% in ‘16 Normalized Inc Comp / Higher IT Supply chain, CI, Footprint
2017 Tax Changes Q4 2016 Supplemental Financial Information CA Audit Benefit (2016) 2016 Tax Expense Tax on Higher Income Loss of UK Benefits 2017 Tax Expense Blended rate of 31%
2017 Guidance Assumptions Interest expense ~$28 million Tax rate 25% Average diluted shares outstanding 29.690 million Depreciation / Amortization expense ~$100 million Cap Ex $55 - $60 million
Appendix
Year-Over-Year Sales Comparisons $millions * The recast Q1 2015 period includes a record year-end October 2014
Year-Over-Year Adj. EPS* Comparisons Earnings per Share * See Page 1 regarding non-GAAP financial measures. ** The recast Q1 2015 period includes a record year-end October 2014
2016 Income Statement* * See Page 1 regarding non-GAAP financial measures.
2016 Income Statement* * See Page 1 regarding non-GAAP financial measures.
2016 EPS – Adjustments* * See Page 1 regarding non-GAAP financial measures.
Q4 2016 Adjusted Gross Margin and EBIT* * See Page 1 regarding non-GAAP financial measures.
2016 Adjusted Gross Margin and EBIT* * See Page 1 regarding non-GAAP financial measures.
* Comparison is to the recast three-month and twelve-month periods ended October 2, 2015. 2015* Recast Income Statement** ** See Page 1 regarding non-GAAP financial measures
2015* Recast Income Statement** * Comparison is to the recast three-month and twelve-month periods ended October 2, 2015. ** See Page 1 regarding non-GAAP financial measures
2015* Recast EPS – Adjustments** * Comparison is to the recast three-month and twelve-month periods ended October 2, 2015. ** See Page 1 regarding non-GAAP financial measures
Q4 2015* Adjusted Gross Margin and EBIT** * Q4 2015 is the recast three-month period ended October 2, 2015. ** See Page 1 regarding non-GAAP financial measures.
2015* Adjusted Gross Margin and EBIT** * 2015 is the recast twelve-month period ended October 2, 2015. ** See Page 1 regarding non-GAAP financial measures.
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