Q4 2012 Earnings Call Transcript

Transcript Call Date 10/23/2012

Operator: Good afternoon and welcome ladies and gentlemen to the Esterline Technologies' Fourth Quarter and Fiscal 2012 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. Also a replay of today's call will be available for one week by calling this toll free number, 1-888-286-8010. You will need the following pin, 86849835. At the request of the Company, we will open the conference up for questions-and-answers after the presentation.

I will now turn the conference over to your host for today Mr. Brian Keogh. Please go ahead, sir.

Brian Keogh - IR: Thanks, Jeff. Thank you all for joining us. Brad Lawrence, Esterline's Chairman, President and CEO, and Bob George, our Chief Financial Officer, are here today to discuss Esterline's fiscal fourth quarter and 2012 full year. In addition to the number Jeff just gave you, you can also visit Esterline.com in the Investor Relations section to access a webcast replay of this call.

As usual, I need to remind you that our call today contains forward-looking statements within the meaning of the Private. Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. As you know, forward-looking statements always involve risk and uncertainty, which we detail on our public filings with the SEC.

As a final note, before we begin, I'll ask that when we get to the Q&A portion of today's call that you observe a two-question limit on the first round of questions, then we'll circle back for follow-up as time allows.

Thank you again for joining us. I will turn the call over to Brad.

R. Brad Lawrence - Chairman, President and CEO: Thanks, Brian. Good afternoon to everyone. Thank you all for joining us today to discuss Esterline's fourth quarter results and our continuing momentum into fiscal '13. As I indicated on our last call, we expected a strong fourth quarter to finish the year. Going in we knew we had the orders so the real business challenge was operational execution. Uniformly our business leaders met that challenge. In addition to pure operational execution as we pointed out in the release, we benefited from a few customer expedites on certain programs that while helped the fourth quarter, in fairness, will reduce our first quarter by a similar amount.

Also, we did indeed have as sometimes happens, several positive events break in our favor. But even without these items, the quarter was very solid operationally. There's a lot of positive momentum going into '13 and our outlook for next year is firming up nicely. We believe we are well positioned for subtle growth. A view that includes our best analysis of anticipated program by program defense spending impacts. I will come back to our forecast in a minute.

First, I would like to focus on the fourth quarter performance. We grew total revenues in the quarter to a record $531 million. Each of our segments contributed to the increase and each segment is showing solid order growth with total orders in the quarter, up over 23% versus the prior year. Gross margins were a big driver of our improved performance. Gross profit rose to 38.5% in the quarter, a result of better mix and scale on our revenue growth. We also worked hard to control expenses and we continue to hone that focus. SG&A as a percentage of sales in the quarter was 18.3%, a rate that are steadily decreased over the last several quarters.

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