OREANDA-NEWS. August 05, 2016. Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving the global aerospace and defense markets, today reported results for the third fiscal quarter ended July 1, 2016. During the third quarter of fiscal 2016, the company grew consolidated revenue to \\$517.1 million, an increase of 6.7% compared with the year-ago period results of \\$484.7 million. This revenue growth was driven by strength in various end markets for the company's Avionics & Controls and Sensors & Systems business segments. In order to provide meaningful comparisons to prior-year periods, the results for our 2015 fiscal year have been recast to the twelve months ended October 2, 2015.

Curtis Reusser, Esterline's Chief Executive Officer, said, "We are pleased to report a strong third quarter, delivering on commitments to our stakeholders despite market fluctuations. Our teams are executing well and making good progress against our objectives for growth, backlog, and profitability, while also continuing to drive a range of operational improvement initiatives."

Earnings from continuing operations in the third quarter of fiscal 2016 increased to \\$38.0 million, or \\$1.28 per diluted share, compared with prior-year earnings from continuing operations of \\$28.2 million, or \\$0.90 per diluted share. Adjusted earnings from continuing operations for the third fiscal quarter of 2016 were \\$40.9 million, or \\$1.38 per diluted share. In the comparable period of the prior year, adjusted earnings from continuing operations were \\$36.0 million, or \\$1.15 per diluted share. For the third fiscal quarter of 2016, adjusted earnings exclude \\$0.19 per diluted share of costs related to previously identified integration, restructuring and compliance activities partially offset by \\$0.09 per diluted share of a one-time benefit related to long-term contract adjustments (see Table 1).

Including discontinued operations, net earnings for the third fiscal quarter of 2016 were \\$29.4 million, or \\$0.99 per diluted share, compared with \\$27.7 million, or \\$0.88 per diluted share, in the comparable fiscal period in 2015. Net earnings in the third fiscal quarter of 2016 included an \\$8.7 million loss from discontinued operations, while the prior year included a \\$0.6 million loss from discontinued operations.

New orders in the third fiscal quarter of 2016 were \\$552.1 million, compared with \\$467.4 million in the comparable prior-year period; the company's book-to-bill ratio for the third quarter and first nine months of fiscal 2016 was 1.1. The Avionics & Controls segment accounted for most of the increase in fiscal 2016 third quarter orders. Backlog at the end of the third quarter of 2016 was \\$1.4 billion, compared with \\$1.2 billion at the end of the third fiscal quarter of 2015.

Gross profit in the third fiscal quarter of 2016 was \\$173.6 million, compared with \\$165.3 million in the prior-year period. Reported gross margin as a percentage of sales in the third fiscal quarter of 2016 was 33.6% compared with 34.1% in the prior-year period. On an adjusted basis, excluding the discrete items consistent with adjusted earnings, the company reported gross margin of \\$173.0 million, or 33.5% of sales, in the third fiscal quarter of 2016, compared with adjusted gross margin of \\$169.3 million, or 34.9% of sales, in the prior-year period.

Selling, general and administrative (SG&A) expenses during the third fiscal quarter of 2016 were \\$96.8 million, or 18.7% of sales, compared with \\$92.0 million, or 19.0% of sales, in the prior-year period.

Research, development and engineering (R&D) spending in the third fiscal quarter of 2016 was \\$22.2 million, or 4.3% of sales, compared with \\$26.4 million, or 5.4% of sales, in the prior-year period. This change was primarily attributable to a change in mix of engineering expenses with greater customer funded and sustaining projects than in the prior-year period. The company continues to expect full-year R&D spending to be approximately 5% of sales.

The company's income tax rate in the third fiscal quarter of 2016 was 17.2% compared with 19.2% in the prior-year period. The higher tax rate in the prior-year period was primarily due to non-deductible compliance expenses. For the full year, the company expects a tax rate in the range of 15% to 17%.

For the nine months of fiscal 2016 ended July 1, year-to-date (YTD) sales were \\$1.45 billion, roughly even with the same period in the prior year. Fiscal 2016 YTD GAAP earnings from continuing operations were \\$64.9 million, or \\$2.18 per diluted share, compared with the prior-year period results of \\$87.6 million, or \\$2.76 per diluted share. Excluding the discrete costs described in Table 2 below, adjusted earnings from continuing operations in the first nine months of fiscal 2016 were \\$86.6 million, or \\$2.91 per diluted share, compared with the prior-year period results of \\$113.1 million, or \\$3.57 per diluted share.

Cash flow from operations for the nine months ended July 1, 2016, was \\$114.7 million, compared with \\$117.2 million in the prior-year period. After capital expenditures of \\$58.5 million, free cash flow was \\$56.2 million in the first nine months of fiscal 2016. In the prior-year period, free cash flow was \\$80.9 million. Capital expenditures in fiscal 2016 are higher than the prior year due to approximately \\$15 million used to purchase and improve the primary facility of the DAT business. Additionally, during the third fiscal quarter of 2016, the company repurchased 102,267 of its shares for approximately \\$6.7 million. This brings the total number of shares repurchased since the inception of the company's share repurchase program in the third fiscal quarter of 2014 to 3.1 million shares for a total purchase amount of \\$308.5 million. A total of \\$91.5 million remains under the \\$400 million share repurchase authorization. 

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