Esterline Technologies Executive Insights: European Markets, Souriau Growth

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On Thursday, Esterline Technologies (NYSE:ESL) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

European Markets

Michael Ciarmoli – KeyBanc Capital Markets: Maybe on, it sounded like Souriau did well, can you give us sort of a real time read on what maybe some of the shorter cycle markets looks like in Europe right now? I remember last quarter you said the business was tracking to plan, there were some programmatic changes, maybe you are getting some new starts like the solar and some other programs were maybe sliding, can you just give us an update on what’s happening there with Europe in kind of the context?

R. Brad Lawrence – President and CEO: I’m glad you gave us an opportunity to talk a little bit more about Souriau. Surprisingly we’re seeing the returns of the strength in the industrial markets in Europe. Speculating a little bit here, I believe what happened was that the industrial distributors in Europe were a bit nervous about the economy and did a little bit of destocking for a bit, that lasted for most of the quarter and then came back nicely. So we’re seeing Souriau, right now really hitting on all cylinders.

Michael Ciarmoli – KeyBanc Capital Markets: That’s good to know. Then just the guidance, any changes from last quarter to the specific segment revenue and operating margin target that you guys had out there for the full year?

R. Brad Lawrence – President and CEO: No, that pretty much holds.

Michael Ciarmoli – KeyBanc Capital Markets: Okay so the same revenues as last year. Just in terms of, I’ll sneak one last one in here on the Hawker. You were doing for per month, I guess, $2.4 million, what sort of contemplated? How does that kind of change in the back half of the year here?

R. Brad Lawrence – President and CEO: We’re still uncertain as to exactly what the demand is going to be and as you might imagine, with the receivable situation at Hawker Beechcraft, we changed our mode of operation and really responded to them shipping only critical items. So, the pattern that we’ve seen in the past is a bit disruptive right now and a bit difficult to anticipate. I think the good news here is, there is still strong demand from their customer, the U.S. Navy for those T6B aircrafts. So, we think we’re going to get through this process shortly and seeing us being able resume a more early shipping pattern.

Souriau Growth

Howard Rubel – Jefferies & Company Inc.: I want to go back and ask a couple of clarifying questions. One is, Bob, I think you said that growth in the quarter on a year-over-year basis was all Souriau. Was that correct, that would sort of imply $70 million, that seems a little light frankly?.

Robert D. George – VP and CFO, Corporate Development and Secretary: You’re absolutely correct, Howard. I did say that the growth was all due to Souriau. I was giving credibility to your question last quarter with respect to the organic growth. The actual revenue number four Souriau was greater than that $70 million as you imply.

Howard Rubel – Jefferies & Company Inc.: You want to help me with what it would be?

Robert D. George – VP and CFO, Corporate Development and Secretary: It is in line with our expectations for the quarter. For the quarter we were near $90 million.

Howard Rubel – Jefferies & Company Inc.: That’s pretty good. That in fact comes despite probably a little bit of currency headwind. Could you address sort of — some of your business is dollar denominated, some of its euro denominated, was that also factored into your outlook for the balance of the year?

Robert D. George – VP and CFO, Corporate Development and Secretary: As you correctly imply the euro’s weakness right now is influencing our continental European-based businesses. We’re hedged in many cases. In Souriau’s case they have less dollar content as you know from previous calls than many of our other businesses, so it’s euro for euro for the most part.

Howard Rubel – Jefferies & Company Inc.: The other question is it’s nice to see a really strong book-to-bill and while I know Brad you sort of talked about it a little bit in some broader brush terms. Could you be a little more specific? Was a chunk of it is in Advanced Materials and does that raise your confidence and where you think that business will be for the year? It’s kind of showing some terrific life and the same in sensors or is it Souriau and so on?

R. Brad Lawrence – President and CEO: I’m glad you recognized the strength in Advance Materials and we’re delighted to see some of the structural items that we’ve been working on there for some time beginning to make significant contributions, but I think you’re going to see that the impact is going to be broadly across the business going forward.

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