-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, sGVVVHKAE1jLtUlaMfioq1lUmMf8y6NBoiMKXGad6CcczwgvE5Ncm7abvAxZrmuu MDdpV9PlSTF8bCljhZhFfw== 0000033619-95-000002.txt : 19950608 0000033619-95-000002.hdr.sgml : 19950608 ACCESSION NUMBER: 0000033619-95-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19941031 FILED AS OF DATE: 19950127 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESTERLINE TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000033619 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 132595091 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06357 FILM NUMBER: 95503365 BUSINESS ADDRESS: STREET 1: 10800 NE 8TH ST STREET 2: STE 600 CITY: BELLEVUE STATE: WA ZIP: 98004 BUSINESS PHONE: 2064539400 MAIL ADDRESS: STREET 1: 10800 N E 8TH STREET CITY: BELLEVUE STATE: WA ZIP: 98004 FORMER COMPANY: FORMER CONFORMED NAME: ESTERLINE CORP DATE OF NAME CHANGE: 19910317 FORMER COMPANY: FORMER CONFORMED NAME: BOYAR SCHULTZ INC DATE OF NAME CHANGE: 19671101 10-K 1 ESTERLINE TECHNOLOGIES CORPORATION FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended October 31, 1994 Commission file number 1-6357 ESTERLINE TECHNOLOGIES CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 13-2595091 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 10800 NE 8th Street Bellevue, Washington 98004 (Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 206/453-9400 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock ($.20 par value) New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --------------- As of January 9, 1995, 6,516,975 shares of the Registrant's common stock were outstanding. The aggregate market value of such common stock held by non-affiliates at such date (based upon the closing sale price) was $92,247,538. DOCUMENTS INCORPORATED BY REFERENCE Portions of Annual Report to Shareholders for Fiscal Year ended October 31, 1994--Parts I, II and IV. Portions of Proxy Statement relating to the 1995 Annual Meeting of Shareholders, to be held on March 8, 1995--Part III. - ----------------------------------------------------------------------- Page 1 of 67 pages Exhibit index at page 20 2 PART I ITEM 1. BUSINESS (a) General Development of Business. Esterline Technologies Corporation (the "Company") conducts business through 13 principal domestic and foreign subsidiaries in three business segments described in sub-item (c) below. The Company was organized in August 1967. On March 30, 1992 the Company sold substantially all of the assets of Hollis Automation Co., an Esterline subsidiary which was not significant to the Company in terms of operations or financial condition. Hollis was in the Company's Automation Group. In the fourth quarter of 1993, the Company recorded a $40.6 million restructuring charge ($27.2 million net of income tax effect). It provided for the sale or shutdown of certain small operations in each of the Company's three business segments. On a pretax basis, $21.1 million of the restructuring charge related to the Aerospace and Defense Group, $8.9 million to the Instrumentation Group and $8.4 million to the Automation Group. The affected operations represented approximately 10% of the Company's fiscal 1993 sales. The charge further provided for the consolidation of plants and product lines, including employees' severance, write-off of intangible assets which no longer had value and the write-down and sale of two vacant facilities. Actions completed through fiscal 1994 associated with the restructuring included the sale of Republic Electronics Co. (an Aerospace and Defense Group operation), the sale of a vacant facility in Torrance, California (an Automation Group property), most elements of employees' severance, and the intangibles write-off, and comprised $19.1 million (before tax) of the recorded provision. (b) Financial Information About Industry Segments. A summary of net sales to unaffiliated customers, operating earnings and identifiable assets attributable to the Company's business segments for the fiscal years ended October 31, 1994, 1993 and 1992 is incorporated herein by reference to Note 12 to the Company's Consolidated Financial Statements on pages 41 and 42 of the Annual Report to Shareholders for the fiscal year ended October 31, 1994. (c) Narrative Description of Business. The Company consists of 13 individual businesses whose results can vary widely based on a number of factors, including domestic and foreign economic conditions and developments affecting the specific industries and customers they serve. The products sold by most of these businesses represent capital investment by either the initial customer or the ultimate end user. Also, a significant portion of the sales and profitability of some Company businesses is derived from defense and other government contracts or the commercial aircraft industry. Changes in general economic conditions or conditions in specific industries, capital acquisition cycles, and government policies, collectively or individually, can have a significant effect on the Company's performance. Specific comments covering all of the Company's fiscal 1994 business segments and operating units are set forth below. 3 AUTOMATION GROUP This Group produces and markets automated drilling equipment for the printed circuit board (PCB) manufacturing industry (principally computer, telecommunications and automotive equipment); and automated metal fabrication equipment for transportation, heavy equipment and other related markets. Excellon Automation produces automated drilling equipment for the PCB manufacturing industry. Excellon's products emphasize productivity and are designed to provide a highly efficient automated production system for PCB manufacturers. Excellon's latest product development combines multiple spindle microdrilling of circuit boards, automatic board loading and unloading, and fully integrated material handling capabilities. During fiscal 1994, Excellon acquired Amtech, a manufacturer of unique material handling systems used in PCB production. Excellon products are sold worldwide to the PCB manufacturing industry, including both large and small electronics equipment manufacturers as well as component manufacturers, independent circuit board fabricators and custom drilling operations. In fiscal 1994, 1993 and 1992, printed circuit board drilling equipment accounted for 18%, 16% and 12%, respectively, of the Company's consolidated net sales. Tulon produces tungsten carbide drill and router bits, commonly ranging in size from 5.6mm down to .25mm--some as small as .10mm--for use in PCB drilling equipment. Tulon utilizes computerized equipment which automatically inspects drill bits and provides the product consistency customers need for higher-technology drilling. W.A. Whitney produces automated equipment for the fabrication of structural steel, sheet metal and plate components and related material-handling equipment. This equipment performs such functions as punching, cutting, shearing and tapping. W.A. Whitney historically has specialized in equipment for punching and cutting mid- to heavy-guage plate metal, utilizing plasma-arc air torch systems and hydraulic punching. Its customers consist principally of large metal fabricators, such as truck, farm implement and construction equipment manufacturers, and a wide range of independent fabricators. W.A. Whitney also produces a line of specialized screw machine and turret lathe tooling attachments under the Boyar-Schultz name. These products are sold to a wide range of customers primarily for use in tool room and production operations. Equipment Sales Co. acts as a sales representative for various manufacturers' products sold to the PCB assembly industry, including high-speed assembly equipment. At October 31, 1994, the backlog of the Automation Group (all of which is expected to be filled during fiscal 1995) was $29.9 million compared with $9.2 million one year earlier. The increase was primarily attributable to strengthening markets and strong customer acceptance of newer products at key Group companies. 4 AEROSPACE AND DEFENSE GROUP This Group provides a broad range of measuring and sensing devices, high-performance elastomers and clamping systems, and specialized metal finishing principally for commercial aircraft and jet engine manufacturers; also combustible ammunition components and electronic and electrical cable assemblies for both domestic and foreign defense agencies and contractors. During fiscal 1994, a group operating company, Republic Electronics Co., was sold in connection with the Company's 1993 restructuring plan. Armtec Defense Products manufactures molded fiber cartridge cases, mortar increments, igniter tubes and other combustible ammunition components for the United States armed forces and domestic and foreign defense contractors. Armtec currently is the sole U.S. producer of combustible ordnance, including the 120mm combustible case used on the main armament system on the Army's M-1A1 tank and of 120mm, 81mm and 60mm combustible mortar increments for the U.S. Army. The majority of Armtec's sales are to ordnance suppliers to the U.S. Armed Forces. In fiscal 1994, 1993 and 1992, combustible ordnance components accounted for 9%, 9% and 12%, respectively, of the Company's consolidated net sales. Auxitrol, headquartered in France, manufactures temperature and pressure sensors for use in aerospace and aviation applications, liquid level measurement devices for ships and storage tanks, pneumatic accessories (including pressure gauges and regulators) and industrial alarms, as well as electrical penetration devices and alarm systems for European and other foreign nuclear power plants. This subsidiary also distributes products manufactured by others, including valves, temperature and pressure switches and flow gauges. The markets served by Auxitrol principally consist of jet engine manufacturers, aerospace equipment manufacturers, shipbuilders, petroleum companies, process industries and electric utilities. Auxitrol has a joint venture with a Russian company to facilitate use of Auxitrol technology in retrofitting the aging nuclear plants in Eastern Europe. Exhaust gas temperature sensing equipment for a jet engine manufacturer constitute a significant portion of Auxitrol's sales. Hytek Finishes provides specialized metal finishing and inspection services, including plating, anodizing, polishing, non-destructive testing and organic coatings, primarily to the commercial aircraft, aerospace and electronics markets. Hytek also has an automated tin-lead plating line, employing the latest automated plating technology, to serve the semi- conductor industry. Midcon Cables manufactures electronic and electrical cable assemblies and cable harnesses for the military, government contractors and the commercial electronics market, offering both product design services and assembly of product to customer specifications. TA Mfg. designs and manufactures specialty clamps and elastomeric compounds in custom molded shapes for wiring and tubing installations for airframe and jet engine manufacturers as well as military and commercial airline aftermarkets. TA's products include elastomers which are specif- ically formulated for various applications, including high-temperature environments. At October 31, 1994, the backlog of the Aerospace and Defense Group (of which $4.1 million is expected to be filled after fiscal 1995) was $38.9 million, compared with $40.8 million one year earlier. 5 INSTRUMENTATION GROUP This Group designs and manufactures a variety of meters, gauges and measurement and analysis equipment for public utilities and industrial manufacturers; also lighted indicators, switches and control components for the commercial aerospace and defense industries. Korry Electronics designs and manufactures illuminated information and control components, and integrated thin-panel data systems, such as switches, indicators, panels and keyboards which act as man-machine interfaces in a broad variety of control and display applications. Korry's customers include original equipment manufacturers and the aftermarkets (equipment operators and spare parts distributors), primarily in the commercial aviation, general aviation, military airborne, ground- based military equipment and shipboard military equipment markets. A significant portion of Korry's sales are to suppliers of military equipment to the U.S. Government and to a commercial aircraft manufacturer. Federal Products manufactures a broad line of high-precision analog and digital dimensional and surface measurement and inspection instruments and systems for a wide range of industrial quality control and scientific applications. Federal also distributes certain products which complement its manufactured product lines. These products constitute three major business segments: gauging, which includes dial indicators, air gauges and other precision gauges; instrumentation, which includes electronic gauges for use where ultra-precision measurement is required; and engineered products, which include custom-built and dedicated semi- automatic and automatic gauging systems. Distributed products manufac- tured by others include laser interferometer systems used primarily to check machine tool calibrations. Federal Products' equipment is used extensively in precision metal working. Its customers include the automotive, farm implement, construction equipment, aerospace, ordnance and bearing industries. In each of fiscal years 1994, 1993 and 1992, gauge products manufac- tured by Federal Products accounted for 13% of the Company's consolidated net sales. Scientific Columbus (formerly Jemtec Electronics) produces analog and digital meters, electrical transducers and instruments for the monitoring, controlling and billing of electrical power. Included among these products are solid-state devices for calibration of electric utility instrumentation and a line of solid state-meters, including programmable multi-function billing meters. The latest products of Scientific Columbus are multi- function, microprocessor-based meters which offer a broad range of features on a modular basis. Scientific Columbus' products are sold to electrical utilities and industrial power users. Angus Electronics manufactures recording instruments together with other analytical and process and environmental monitoring instrumentation. These include analog strip chart and digital printout recorders as well as electronic and multi-channel microprocessor-based recording equipment. Customers of Angus Electronics include industrial equipment manufacturers, electric utilities, scientific laboratories, pharmaceutical manufacturers and process industries. At October 31, 1994, the backlog of the Instrumentation Group (of which $7.2 million is expected to be filled after fiscal 1995) was $28 million compared with $24.4 million one year earlier. 6 MARKETING AND DISTRIBUTION Automation Group products manufactured by Excellon are marketed domestically principally through employees and in foreign markets through employees, independent distributors, and affiliated distributors. Tulon products are marketed in the United States through employees and independent distributors and elsewhere principally through independent distributors. W.A. Whitney products are sold principally through independent distributors and representatives. Aerospace and Defense Group products manufactured by Auxitrol are marketed through employees, independent representatives, and an affiliated U.S. distributor. The products of Armtec Defense Products are marketed domestically and abroad by employees and independent representatives. Midcon Cables' products are marketed domestically by employees and independent representatives. Hytek's services are marketed domestically through employees. TA Mfg. products are marketed domestically and abroad by employees and independent representatives. Instrumentation Group products manufactured by Angus Electronics are marketed domestically through employees, independent representatives and distributors, and abroad through independent representatives and employees of Esterline's Auxitrol subsidiary. Scientific Columbus' products are sold through independent representatives. The products of Federal Products are marketed domestically principally through employees, and in foreign markets through both employees and independent representatives. Korry Electronics' products are marketed domestically and abroad principally through employees and independent representatives. For most of the Company's products, the maintenance of a service capability is an integral part of the marketing function. RESEARCH AND DEVELOPMENT The Company's subsidiaries conduct product development and design programs with approximately 175 professional engineers, technicians and support personnel, supplemented by independent engineering and consulting firms when needed. In fiscal 1994, approximately $13.7 million was expended for research, development and engineering, compared with $14 million in 1993 and $13.4 million in 1992. FOREIGN OPERATIONS The Company's principal foreign operations consist of manufacturing facilities of Auxitrol located in France and Spain, a manufacturing facility of Tulon located in Mexico, sales and service operations of Excellon located in England, Germany and Japan, and sales offices of TA Mfg and Korry Electronics located in England and France, respectively. In addition, W.A. Whitney has a small manufacturing and distribution facility in Italy. For information as to sales, operating results and assets by geographic area and export sales, reference is made to Note 1 to the Consolidated Financial Statements on page 33, and Note 12 to the Consolidated Financial Statements on pages 41, 42 and 43, of the Company's Annual Report to Shareholders for the fiscal year ended October 31, 1994, which is incorporated herein by reference. EMPLOYEES During fiscal 1994, restructuring plan actions included the sale of a small operating company and most elements of employees' severance, as discussed earlier in this report. Notwithstanding these actions, the Company and its subsidiaries had approximately 2,800 employees at October 31, 1994, level with the prior year. 7 COMPETITION AND PATENTS The Company's subsidiaries experience varying degrees of competition with respect to all of their products and services. Most subsidiaries are in specialized market niches with relatively few competitors. In automated drilling equipment for printed circuit board manufacturing, Excellon Automation is a leader in its field and believes it has the largest installed base in the world of automated drilling machines for the production of printed circuit boards. In molded fiber cartridge cases, mortar increments and other combustible ammunition components, Armtec currently is the sole supplier to the U.S. Army. In addition, Hytek is one of the largest metal finishers on the West Coast, and Korry Electronics, Federal Products, W.A. Whitney, and TA Mfg. are among the leaders in their respective markets. The Company's subsidiaries generally compete with many larger companies with substantially greater volume and financial resources. The Company believes the main competitive factors for the Company's products is product performance and service. Overall, the Company believes its ongoing product development and design programs, coupled with a strong customer service orientation, keep its various product groups competitive in the marketplace. The subsidiaries hold a number of patents but in general rely on technical superiority, exclusive features in their equipment and marketing and service to customers to meet competition. Licenses which help maintain a significant advantage over competition include a long- term license agreement under which Auxitrol manufactures and sells electrical penetration assemblies. SOURCES AND AVAILABILITY OF RAW MATERIALS AND COMPONENTS The Company's subsidiaries are not materially dependent for their raw materials and components upon any one source of supply except for certain components and supplies such as hydraulic components purchased by W.A. Whitney and certain other raw materials and components purchased by other subsidiaries. In such instances, ongoing efforts are conducted to develop alternative sources or designs to help avoid the possibility of any business impairment. (d) Financial Information About Foreign and Domestic Operations and Export Sales. See "Foreign Operations" above. 8 ITEM 2. PROPERTIES The following table summarizes the principal properties (in excess of 15,000 square feet) owned or leased by the Company and its subsidiaries as of October 31, 1994:
Approximate Type of Number of Owned Location Facility Square Feet or Leased - -------- ----------------- ----------- ---------- Coachella, CA Office and Plant (D) 110,000 Owned Columbus, OH Office and Plant (I) 40,000 Owned Gardena, CA Office and Plant (A) 18,000 Leased Glendale, CA Office and Plant (D) 45,000 Leased Indianapolis, IN Office and Plant (I) 63,000 Owned Joplin, MO Office and Plant (D) 92,000 Owned Kent, WA Office and Plant (D) 93,000 Owned Rancho Cucamonga, CA Office and Plant (A) 33,000 Owned Providence, RI Office and Plant (I) 166,000 Owned Rockford, IL Office and Plant (A) 257,000 Owned Seattle, WA Office and Plant (I) 100,000 Leased Torrance, CA Office and Plant (A) 150,000 Leased Bourges, France Plant (D) 69,000 Owned Dietzenbach, Germany Office and Service Facility (A) 32,000 Leased Rustington, England Office and Service Facility(A) 18,000 Leased Guadalajara, Mexico Office and Plant (A) 40,000 Leased Torino, Italy Office and Plant (A) 20,000 Leased Torrejon de Ardoz, Spain Office and Plant (D) 17,000 Owned
- ----------------- The Company group (business segment) operating each facility described above is indicated by the letter following the description of the facility, as follows: (A) - Automation (D) - Aerospace and Defense (I) - Instrumentation In addition to the properties listed above, a 64,000 square foot facility in Nashua, NH is owned by the Company and planned for sale. Liabilities have been accrued for environmental remediation costs expected to be incurred in the disposition of this facility. In the opinion of the management of the Company, the subsidiaries' plants and equipment are in good condition, adequate for current operations and provide sufficient capacity for up to 25% expansion at most locations. ITEM 3. LEGAL PROCEEDINGS The Company has various lawsuits and claims, both offensive and defensive, and contingent liabilities arising from the conduct of business, including those associated with government contracting activities, none of which, in the opinion of management, is expected to have a material effect on the Company's financial position or results of operations. 9 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year ended October 31, 1994. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The following information which appears in the Company's Annual Report to Shareholders for fiscal 1994 is hereby incorporated by reference: (a) The high and low market prices of the Company's common stock for each quarterly period during the fiscal years ended October 31, 1994 and 1993, respectively (page 28 of the Annual Report to Shareholders). (b) The approximate number of holders of common stock (page 28 of the Annual Report to Shareholders). (c) Restrictions on the ability to pay future cash dividends (Note 4 to Consolidated Financial Statements, pages 34 and 35 of the Annual Report to Shareholders). No cash dividends were paid during the fiscal years ended October 31, 1994 and 1993 as the Company continued its policy of retaining all internally generated funds to support the long-term growth of the Company and to retire debt obligations. The principal market for the Company's common stock is the New York Stock Exchange. ITEM 6. SELECTED FINANCIAL DATA The Company hereby incorporates by reference the Selected Financial Data of the Company which appears on page 28 of the Company's Annual Report to Shareholders for fiscal 1994. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company hereby incorporates by reference Management's Discussion and Analysis of Results of Operations and Financial Condition which is set forth on pages 25, 26 and 27 of the Company's Annual Report to Shareholders for fiscal 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company hereby incorporates by reference the Consolidated Financial Statements and the report thereon of Deloitte & Touche LLP, dated December 5, 1994, which appear on pages 29 - 44 of the Company's Annual Report to Shareholders for fiscal 1994, including Note 13, page 43, which contains unaudited quarterly financial data. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 10 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Directors. The Company hereby incorporates by reference the information set forth under "Election of Directors" in the definitive form of the Company's Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 8, 1995, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 13, 1995. (b) Executive Officers. The names and ages of all executive officers of the Company and the positions and offices held by such persons as of January 25, 1995 are as follows:
Name Age Position with the Company ---- --- ------------------------- Wendell P. Hurlbut 63 Chairman, President and Chief Executive Officer Robert W. Stevenson 55 Executive Vice President and Chief Financial Officer, Secretary and Treasurer Robert W. Cremin 54 Senior Vice President and Group Executive Larry A. Kring 54 Group Vice President Stephen R. Larson 50 Group Vice President Marcia J. M. Greenberg 42 Vice President, Human Relations
Mr. Hurlbut has been Chairman, President and Chief Executive Officer since January 1993. From February 1989 through December 1992, he was President and Chief Executive Officer. Mr. Stevenson has been Executive Vice President and Chief Financial Officer, Secretary and Treasurer since October 1987. Mr. Cremin has been Senior Vice President and Group Executive since December 1990. From October 1987 to December 1990, he was Group Vice President. Mr. Kring has been Group Vice President since August 1993. For more than five years prior to that date, he was President of Heath Tecna Aerospace Co., a unit of Ciba Composites Division, Anaheim, California. Mr. Larson has been Group Vice President since April 1991. For more than five years prior to that date, he held various executive positions with Korry Electronics, including President and Executive Vice President, Marketing. Ms. Greenberg has been Vice President, Human Relations since March 1993. For more than five years prior to that date, she was a partner in the law firm of Bogle & Gates, Seattle, Washington. ITEM 11. EXECUTIVE COMPENSATION The Company hereby incorporates by reference the information set forth under "Executive Compensation" in the definitive form of the Company's Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 8, 1995, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 13, 1995. 11 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company hereby incorporates by reference the information with respect to stock ownership set forth under "Security Ownership of Certain Beneficial Owners and Management" in the definitive form of the Company's Proxy Statement, relating to its Annual Meeting of Shareholders to be held on March 8, 1995, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 13, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) Financial Statements. The following consolidated financial statements, together with the report thereon of Deloitte & Touche LLP, dated December 5, 1994, appearing on pages 29 - 44 of the Company's Annual Report to Shareholders for fiscal 1994, are hereby incorporated by reference:
Annual Report Page Number ------------- Report of Independent Auditors.................. 44 Consolidated Balance Sheet--October 31, 1994 and 1993... 30 Consolidated Statement of Operations--Years ended October 31, 1994, 1993 and 1992......................... 29 Consolidated Statement of Shareholders' Equity--Years ended October 31, 1994, 1993 and 1992......................... 32 Consolidated Statement of Cash Flows--Years ended October 31, 1994, 1993 and 1992......................... 31 Notes to Consolidated Financial Statements.............. 33 - 43
(a) (2) Financial Statement Schedules. The following additional financial data should be read in conjunction with the consolidated financial statements in the Annual Report to Shareholders for the fiscal year ended October 31, 1994: Independent Auditors' Report Schedule VIII-- Valuation and Qualifying Accounts and Reserves 12 (a) (3) Exhibits.
Exhibit Number Exhibit ------- ------- 3.1 Composite Restated Certificate of Incorporation of the Company as amended by Certificate of Amendment dated March 14, 1990. (Incorporated by reference to Exhibit 19 to 10-Q Report for the quarter ended July 31, 1990.) 3.2 By-laws of the Company, as amended and restated December 15, 1988. (Incorporated by reference to Exhibit 3.2 to 10-K Report for the fiscal year ended October 31, 1988.) 4.1 Indenture, dated as of October 1, 1980, among Esterline International Finance N.V., the Company and Manufacturers Hanover Trust Company, relating to 8-1/4% Convertible Sub- ordinated Guaranteed Debentures due 1995 of Esterline Inter- national Finance N.V., convertible into Common Stock of the Company. (Incorporated by reference to Exhibit 4.1 to 10-K Report for the fiscal year ended October 31, 1980.) Registrant undertakes to furnish to the Commission, upon request, a copy of any other instrument defining the rights of long-term debt of the Registrant and all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. 4.2 Form of Rights Agreement, dated as of December 9, 1992, between the Company and Chemical Bank, which includes as Exhibit A thereto the form of Certificate of Designation, Preferences and Rights of Series A Serial Preferred Stock and as Exhibit B thereto the form of Rights Certificate (Incorporated by reference to Exhibit 1 to the Registration Statement to Form 8-A filed December 17, 1992.) 10.1 Amendment of Lease and Agreement, dated March 11, 1959, between the City of Torrance, California, and Longren Aircraft Company, Inc., as original lessee; Lease, dated July 1, 1959, between the City of Torrance and Aeronca Manufacturing Corporation, as original lessee; and Assignment of Ground Lease, dated September 26, 1985, from Robert G. Harris, as successor lessee under the foregoing leases, to Excellon Industries, Inc., relating to principal manufacturing facility of Excellon at 24751 Crenshaw Boulevard, Torrance, California. (Incorporated by reference to Exhibit 10.1 to 10-K Report for fiscal year ended October 31, 1986.) 10.4 Industrial Lease dated July 17, 1984 between 901 Dexter Associates and Korry Electronics Co., First Amendment to Lease dated May 10, 1985, Second Amendment to Lease dated June 20, 1986, Third Amendment to Lease dated September 1, 1987, and Notification of Option Exercise dated January 7, 1991, relating to the manufacturing facility of Korry Electronics at 901 Dexter Avenue N., Seattle, Washington. (Incorporated by reference to Exhibit 10.4 to 10-K Report for the fiscal year ended October 31, 1991.)
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Exhibit Number Exhibit ------- ------- 10.4a Fourth Amendment dated July 27, 1994 to Industrial Lease dated July 17, 1984 between Houg Family Partnership, as successor to 901 Dexter Associates, and Korry Electronics Co. 10.5 Industrial Lease dated July 17, 1984 between 801 Dexter Associates and Korry Electronics Co., First Amendment to Lease dated May 10, 1985, Second Amendment to Lease dated June 20, 1986, Third Amendment to Lease dated September 1, 1987, and Notification of Option Exercise dated January 7, 1991, relating to the manufacturing facility of Korry Electronics at 801 Dexter Avenue N., Seattle Washington. (Incorporated by reference to Exhibit 10.5 to 10-K Report for the fiscal year ended October 31, 1991.) 10.5a Fourth Amendment dated March 28, 1994 to Industrial Lease dated July 17, 1984 between Michael Maloney and the Bancroft & Maloney general partnership, as successor to 801 Dexter Associates, and Korry Electronics Co. 10.7 Amended and Restated Credit Agreement executed as of January 25, 1991 dated and effective as of September 18, 1989 between Esterline Corporation, certain of its subsidiaries, various financial institutions and Continental Bank N.A. as Agent. (Incorporated by reference to Exhibit 10.7 to 10-K Report for the fiscal year ended October 31, 1990.) 10.8 Amendment, dated as of August 6, 1992, among Esterline Technologies Corporation, certain of its subsidiaries, various financial institutions and Continental Bank N.A., as agent, to that certain Amended and Restated Credit Agreement, executed as of January 25, 1991 and dated and effective as of September 18, 1989, among Esterline Corporation, certain of its subsidiaries, certain financial institutions and Continental Bank N.A., as agent. (Incorporated by reference to Exhibit 10.8 to 10-Q Report for the quarter ended July 31, 1992.) 10.8a Amendment, dated as of October 31, 1993, among Esterline Technologies Corporation, certain of its subsidiaries, various financial institutions and Continental Bank N.A., as agent, to that certain Amended and Restated Credit Agreement, executed as of January 25, 1991 and dated and effective as of September 18, 1989 and amended August 6, 1992, among Esterline Corporation, certain of its subsidiaries, certain financial institutions and Continental Bank N.A., as agent. (Incorporated by reference to Exhibit 10.8a to 10-K Report for the fiscal year ended October 31, 1993.) 10.9 Note Agreement, dated as of July 15, 1992, among Esterline Technologies Corporation, certain of its subsidiaries, The Northwestern Mutual Life Insurance Company and New England Mutual Life Insurance Company relating to 8.75% Senior Notes due July 30, 2002 of Esterline Technologies Corporation and certain of its subsidiaries. (Incorporated by reference to Exhibit 10.9 to 10-Q Report for the quarter ended July 31, 1992.)
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Exhibit Number Exhibit ------- ------- 10.9a Amendment to Note Agreement, executed as of October 31, 1993, to that certain Note Agreement, dated and effective as of July 15, 1992 , among Esterline Technologies Corporation, certain of its subsidiaries, The Northwestern Mutual Life Insurance Company and New England Mutual Life Insurance Company relating to 8.75% Senior Notes due July 30, 2002 of Esterline Technologies Corporation and certain of its subsidiaries. (Incorporated by reference to Exhibit 10.9a to 10-K Report for the fiscal year ended October 31, 1993.) 10.10 Compensation of Directors. (Incorporated by reference to first paragraph under "Other Information as to Directors" in the definitive form of the Company's Proxy Statement, relating to its 1995 Annual Meeting of Shareholders to be held on March 8, 1995, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 13, 1995.) 10.14 Stock Option Plan for Carroll M. Martenson. (Incorporated by reference to Exhibit B to the Company's Proxy Statement dated February 9, 1988.) 10.14a Certificate of Grant of Option pursuant to Stock Option Plan for Carroll M. Martenson. (Incorporated by reference to Exhibit 10.14a to 10-K Report for the fiscal year ended October 31, 1991.) 10.14b Amendment to Certificate of Grant of Option pursuant to Stock Option Plan for Carroll M. Martenson. (Incorporated by reference to Exhibit 10.14b to 10-K Report for the fiscal year ended October 31, 1991.) 11 Schedule setting forth computation of earnings per share for the five fiscal years ended October 31, 1994. 13 Annual Report to Shareholders for the fiscal year ended October 31, 1994. (Not filed as part of this Report except for those portions thereof incorporated by reference herein.) 21 List of subsidiaries. 23.1 Consent of Deloitte & Touche LLP.
Exhibit Number Management Contracts or Compensatory Plans or Arrangements ------- ---------------------------------------------------------- 10.13 Amended and Restated 1987 Stock Option Plan. (Incorporated by reference to Exhibit 10.13 to 10-Q Report for the quarter ended January 31, 1992.) 10.15 Esterline Corporation Supplemental Retirement Income Plan for Key Executives. (Incorporated by reference to Exhibit 10.15 to 10-K Report for the fiscal year ended October 31, 1989.) 10.16b Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal Years 1992 through 1995. (Incorporated by reference to Exhibit 10.16b to 10-K Report for the fiscal year ended October 31, 1992.)
15
Exhibit Number Management Contracts or Compensatory Plans or Arrangements ------- ---------------------------------------------------------- 10.16c Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal Years 1993 through 1996. (Incorporated by reference to Exhibit 10.16c to 10-K Report for the fiscal year ended October 31, 1993.) 10.16d Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal Years 1994 through 1997. 10.19 Executive Officer Termination Protection Agreement. (Incorporated by reference to Exhibit 10.19 to 10-K Report for the fiscal year ended October 31, 1992.) 10.20b Esterline Technologies Corporation Corporate Management Incentive Compensation Plan for fiscal year 1994.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the fourth quarter of fiscal 1994. 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. ESTERLINE TECHNOLOGIES CORPORATION (Registrant) By /s/ Robert W. Stevenson ---------------------------- Robert W. Stevenson Executive Vice President and Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer) Dated: January 27, 1995 ---------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Wendell P. Hurlbut Director, Chairman, President and January 27, 1995 - ---------------------- ---------------- (Wendell P. Hurlbut) Chief Executive Officer (Principal Executive Officer) /s/ Robert W. Stevenson Executive Vice President January 27, 1995 - ----------------------- ---------------- (Robert W. Stevenson) and Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer)
17 /s/ Gilbert W. Anderson Director January 18, 1995 - ----------------------- ---------------- (Gilbert W. Anderson) /s/ John F. Clearman Director January 12, 1995 - -------------------- ---------------- (John F. Clearman) /s/ Edwin I. Colodny Director January 18, 1995 - -------------------- ---------------- (Edwin I. Colodny) /s/ E. John Finn Director January 12, 1995 - ---------------- ---------------- (E. John Finn) /s/ Robert F. Goldhammer Director January 13, 1995 - ------------------------ ---------------- (Robert F. Goldhammer) /s/ Jerome J. Meyer Director January 13, 1995 - ------------------- ---------------- (Jerome J. Meyer) /s/ Paul G. Schloemer Director January 13, 1995 - --------------------- ---------------- (Paul G. Schloemer) /s/ Malcolm T. Stamper Director January 16, 1995 - ---------------------- ---------------- (Malcolm T. Stamper)
18 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders Esterline Technologies Corporation Bellevue, Washington We have audited the consolidated financial statements of Esterline Technologies Corporation as of October 31, 1994 and 1993, and for each of the three years in the period ended October 31, 1994, and have issued our report thereon dated December 5, 1994; such financial statements and report are included in your 1994 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedules of Esterline Technologies Corporation, listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP - ------------------------- Seattle, Washington December 5, 1994 19 ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (in thousands) For Years Ended October 31, 1994, 1993 and 1992
Deduction for Balance at Additions Purpose for Balance Beginning Charged which Reserve at End Description of Year to Income was Created of Year ----------- ---------- --------- ------------- -------- Reserve for doubtful accounts receivable Year Ended October 31 - --------------------- 1994 $ 2,417 $ 117 $ (333) $ 2,201 ========== ======== ============ ======== 1993 $ 2,314 $ 668 $ (565) $ 2,417 ========== ======== ============ ======== 1992 $ 2,078 $ 916 $ (680) $ 2,314 ========== ======== ============ ======== Restructuring reserves related to accounts receivable and inventory Year Ended October 31 - --------------------- 1994 $ 3,890 $ --- $ (344) $ 3,546 ========= ======= ============ ======== 1993 $ --- $ 3,890 $ --- $ 3,890 ========= ======= ============ ======== 1992 $ --- $ --- $ --- $ --- ========= ======= ============ ========
20 ESTERLINE TECHNOLOGIES CORPORATION Form 10-K Report for Fiscal Year Ended October 31, 1994 INDEX TO EXHIBITS -----------------
Exhibit Number Exhibit Page No. ------- ------- -------- 3.1 Composite Restated Certificate of Incorporation of the Company as amended by Certificate of Amendment dated March 14, 1990. (Incorporated by reference to Exhibit 19 to 10-Q Report for the quarter ended July 31, 1990.) 3.2 By-laws of the Company, as amended and restated December 15, 1988. (Incorporated by reference to Exhibit 3.2 to 10-K Report for the fiscal year ended October 31, 1988.) 4.1 Indenture, dated as of October 1, 1980, among Esterline International Finance N.V., the Company and Manufacturers Hanover Trust Company, relating to 8-1/4% Convertible Subordinated Guaranteed Debentures due 1995 of Esterline International Finance N.V., convertible into Common Stock of the Company. (Incorporated by reference to Exhibit 4.1 to 10-K Report for the fiscal year ended October 31, 1980.) Registrant undertakes to furnish to the Commission, upon request, a copy of any other instrument defining the rights of long-term debt of the Registrant and all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. 4.2 Form of Rights Agreement, dated as of December 9, 1992, between the Company and Chemical Bank, which includes as Exhibit A thereto the form of Certificate of Designation, Preferences and Rights of Series A Serial Preferred Stock and as Exhibit B thereto the form of Rights Certificate (Incorporated by reference to Exhibit 1 to the Registration Statement to Form 8-A filed December 17, 1992.)
21
Exhibit Number Exhibit Page No. ------- ------- -------- 10.1 Amendment of Lease and Agreement, dated March 11, 1959, between the City of Torrance, California, and Longren Aircraft Company, Inc., as original lessee; Lease, dated July 1, 1959, between the City of Torrance and Aeronca Manufacturing Corporation, as original lessee; and Assignment of Ground Lease, dated September 26, 1985, from Robert G. Harris, as successor lessee under the foregoing leases, to Excellon Industries, Inc., relating to principal manufacturing facility of Excellon at 24751 Crenshaw Boulevard, Torrance, California. (Incorporated by reference to Exhibit 10.1 to 10-K Report for fiscal year ended October 31, 1986.) 10.4 Industrial Lease dated July 17, 1984 between 901 Dexter Associates and Korry Electronics Co., First Amendment to Lease dated May 10, 1985, Second Amendment to Lease dated June 20, 1986, Third Amendment to Lease dated September 1, 1987, and Notification of Option Exercise dated January 7, 1991, relating to the manufacturing facility of Korry Electronics at 901 Dexter Avenue N., Seattle, Washington. (Incorporated by reference to Exhibit 10.4 to 10-K Report for the fiscal year ended October 31, 1991.) 10.4a Fourth Amendment dated July 27, 1994 to Industrial Lease dated July 17, 1984 between Houg Family Partnership, as successor to 901 Dexter Associates, and Korry Electronics Co. 25 10.5 Industrial Lease dated July 17, 1984 between 801 Dexter Associates and Korry Electronics Co., First Amendment to Lease dated May 10, 1985, Second Amendment to Lease dated June 20, 1986, Third Amendment to Lease dated September 1, 1987, and Notification of Option Exercise dated January 7, 1991, relating to the manufacturing facility of Korry Electronics at 801 Dexter Avenue N., Seattle, Washington. (Incorporated by reference to Exhibit 10.5 to 10-K Report for the fiscal year ended October 31, 1991.) 10.5a Fourth Amendment dated March 28, 1994 to Industrial Lease dated July 17, 1984 between Michael Maloney and the Bancroft & Maloney general partnership, as successor to 801 Dexter Associates, and Korry Electronics Co. 28
22
Exhibit Number Exhibit Page No. ------- ------- -------- 10.7 Amended and Restated Credit Agreement executed as of January 25, 1991 dated and effective as of September 18, 1989 between Esterline Corporation, certain of its subsidiaries, various financial institutions and Continental Bank N.A. as Agent. (Incorporated by reference to Exhibit 10.7 to 10-K Report for the fiscal year ended October 31, 1990.) 10.8 Amendment, dated as of August 6, 1992, among Esterline Technologies Corporation, certain of its subsidiaries, various financial institutions and Continental Bank N.A., as agent, to that certain Amended and Restated Credit Agreement, executed as of January 25, 1991 and dated and effective as of September 18, 1989, among Esterline Corporation, certain of its subsidiaries, certain financial institutions and Continental Bank N.A., as agent. (Incorporated by reference to Exhibit 10.8 to 10-Q Report for the quarter ended July 31, 1992.) 10.8a Amendment, dated as of October 31, 1993, among Esterline Technologies Corporation, certain of its subsidiaries, various financial institutions and Continental Bank N.A., as agent, to that certain Amended and Restated Credit Agreement, executed as of January 25, 1991 and dated and effective as of September 18, 1989 and amended August 6, 1992, among Esterline Corporation, certain of its subsidiaries, certain financial institutions and Continental Bank N.A., as agent. (Incorporated by reference to Exhibit 10.8a to 10-K Report for the fiscal year ended October 31, 1993.) 10.9 Note Agreement, dated as of July 15, 1992, among Esterline Technologies Corporation, certain of its subsidiaries, The Northwestern Mutual Life Insurance Company and New England Mutual Life Insurance Company relating to 8.75% Senior Notes due July 30, 2002 of Esterline Technologies Corporation and certain of its subsidiaries. (Incorporated by reference to Exhibit 10.9 to 10-Q Report for the quarter ended July 31, 1992.)
23
Exhibit Number Exhibit Page No. ------- ------- -------- 10.9a Amendment to Note Agreement, executed as of October 31, 1993, to that certain Note Agreement, dated and effective as of July 15, 1992, among Esterline Technologies Corporation, certain of its subsidiaries, The Northwestern Mutual Life Insurance Company and New England Mutual Life Insurance Company relating to 8.75% Senior Notes due July 30, 2002 of Esterline Technologies Corporation and certain of its subsidiaries. (Incorporated by reference to Exhibit 10.9a to 10-K Report for the fiscal year ended October 31, 1993.) 10.10 Compensation of Directors. (Incorporated by reference to first paragraph under "Other Information as to Directors" in the definitive form of the Company's Proxy Statement, relating to its 1995 Annual Meeting of Shareholders to be held on March 8, 1995, filed with the Securities and Exchange Commission and the New York Stock Exchange on January 13, 1995.) 10.14 Stock Option Plan for Carroll M. Martenson. (Incorporated by reference to Exhibit B to the Company's Proxy Statement dated February 9, 1988.) 10.14a Certificate of Grant of Option pursuant to Stock Option Plan for Carroll M. Martenson. (Incorporated by reference to Exhibit 10.14a to 10-K Report for the fiscal year ended October 31, 1991.) 10.14b Amendment to Certificate of Grant of Option pursuant to Stock Option Plan for Carroll M. Martenson. (Incorporated by reference to Exhibit 10.14b to 10-K Report for the fiscal year ended October 31, 1991.) 11 Schedule setting forth computation of earnings per share for the five fiscal years ended October 31, 1994. 35 13 Annual Report to Shareholders for the fiscal year ended October 31, 1994. (Not filed as part of this Report except for those portions thereof incorporated by reference herein.) 37 21 List of subsidiaries. 57 23.1 Consent of Deloitte & Touche LLP. 58
24
Exhibit Management Contracts or Compensatory Plans or Number Arrangements Page No. ------- -------------------------------------------- -------- 10.13 Amended and Restated 1987 Stock Option Plan. (Incorporated by reference to Exhibit 10.13 to 10-Q Report for the quarter ended January 31, 1992.) 10.15 Esterline Corporation Supplemental Retirement Income Plan for Key Executives. (Incorporated by reference to Exhibit 10.15 to 10-K Report for the fiscal year ended October 31, 1989.) 10.16b Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal Years 1992 through 1995. (Incorporated by reference to Exhibit 10.16b to 10-K Report for the fiscal year ended October 31, 1992) 10.16c Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal Years 1993 through 1996. (Incorporated by reference to Exhibit 10.16c to 10-K Report for the fiscal year ended October 31, 1993.) 10.16d Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal Years 1994 through 1997 59 10.19 Executive Officer Termination Protection Agreement. (Incorporated by reference to Exhibit 10.19 to 10-K Report for the fiscal year ended October 31, 1992.) 10.20b Esterline Technologies Corporation Corporate Management Incentive Compensation Plan for fiscal year 1994. 65
EX-10.4A 2 EXHIBIT-10.4A 1 EXHIBIT 10.4A FOURTH AMENDMENT TO LEASE (901 Lease) This Fourth Amendment to Lease (this "Agreement") is entered into this 27 day of July, 1994, by and between Korry Electronics Co., a Delaware corporation ("Korry") and Houg Family Partnership ("HFP"), a Washington limited partnership. RECITALS a. HFP's predecessor, 901 Dexter Avenue Associates, and Korry's predecessor, Criton Technologies ("CT"), a Delaware general partnership, entered into an industrial lease agreement (the "Original Lease") dated July 17, 1974, under the terms of which CT, as tenant, leased certain property (the "Premises") located at 901 Dexter Avenue North, Seattle, Washington. The Original Lease has been amended by three amendments, dated respectively May 10, 1985 (the "First Amendment"), June 20, 1986 (the "Second Amendment"), and September 1, 1987 (the "Third Amendment"). The Original Lease, as amended by these three amendments, is hereinafter designated as the "Amended Lease." b. HFP succeeded to the landlord's interest under the Amended Lease on it acquired title to the Premises on April 17, 1989. Korry succeeded to the lessee's interest under the Amended Lease pursuant to an assignment dated September 27, 1989. c. The parties wish to amend the Amended Lease under the terms and conditions set forth below. TERMS AND CONDITIONS 1. Term of Occupancy; Termination. The Lease term is hereby extended ------------------------------- to July 31, 2011, and Korry shall have the sole and exclusive right to peaceful and quiet enjoyment of the Premises, and to occupy the Premises without interruption or interference for the entire remainder of the term as extended hereby. However, Korry shall have the right to terminate the Lease at any time by giving written notice to HFP at least two years in advance of the termination date. Korry shall not be liable for any obligations arising under or in connection with the Lease following the date specified as the termination date. 2. Notices. Paragraph 19 of the Original Lease is hereby deleted -------- and replaced by the following: a. Notice Addresses. Any notice, keys, drawings, or other item ----------------- or items that may or shall be delivered pursuant to the terms of this Lease shall be delivered to the following addresses: 2 If to Landlord, to the following: Houg Family Partnership c/o Dr. Andrew Houg 11066 5th Avenue N.E. Seattle, WA 98125 If to Tenant, to the following: Korry Electronics Co. 901 Dexter Avenue North Seattle, WA 98109 Attn: Director of Finance b. Form of Notice and Delivery. Any and all notices shall be in writing ---------------------------- and either delivered by hand or mailed, via certified United States mail, postage prepaid, to the addresses of the respective recipient as set forth above. Delivery shall be deemed complete and effective upon receipt by the addressee or upon the third business day following mailing, whichever shall first occur. c. Covenant to Accept Notice. Neither party shall refuse or otherwise -------------------------- attempt to avoid delivery of any notice. d. Change of Notice Address. Either party may change its notice ------------------------- address by giving written notice of a new address in accordance with the foregoing notice provisions. 3. Continuation of Unmodified Terms. Except as modified by this Agreement, --------------------------------- the terms of the Amended Lease remain in full force and effect. In the event of conflict or inconsistency between the provisions of the Amended Lease and the provisions of this Agreement, this Agreement will control. 4. Binding Effect. The terms and conditions of this Agreement shall be --------------- binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 5. Entire Agreement. This Agreement contains the entire understanding ----------------- between and among the undersigned parties in connection with the subject matter addressed herein. It supersedes and replaces any and all prior negotiations, agreements, discussions, representations, statements and promises, whether oral or written. Each party hereby acknowledges that no promise, representation or warranty whatsoever, express or implied, has been made by any other party or agent or attorney of any other party to induce it to execute this document, other than the terms expressly stated in this written Agreement. 3 6. Construction of this Agreement. ------------------------------- a. This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. b. The paragraph headings used in this Agreement are inserted for convenience only and are not intended to be a part of this Agreement or to affect its construction. c. When used in this Agreement, terms such as "herein," "hereto, " and "hereof" refer to the entire Agreement, and are not limited to any portion or portions hereof. d. The language of this Agreement, including without limitation any ambiguities, shall not be construed in favor of any party or against any other party. e. Time is of the essence in this Agreement. f. This Agreement is exclusively for the benefit of the undersigned parties, and no intent to benefit any third person or entity shall be inferred, implied, or presumed in construing this Agreement. 7. Signing Authority. Each of the individuals signing below on behalf ------------------ of one of the parties warrants that he is authorized to sign this Agreement on that party's behalf and that his signature binds that party to this Agreement. Dated the day and year first set forth above. KORRY ELECTRONICS CO. HOUG FAMILY PARTNERSHIP by /s/ David Elkins by /s/ Andrew Houg ------------------- ------------------ David Elkins Andrew Houg President Managing General Partner ESTERLINE TECHNOLOGIES, INC. by /s/ R. W. Stevenson --------------------- R. W. Stevenson - Chief Financial Officer EX-10.5A 3 EXHIBIT 10.5A 1 EXHIBIT 10.5A FOURTH AMENDMENT TO LEASE (801 LEASE) This Fourth Amendment to Lease (this "Agreement") is entered into this 28 day of March, 1994, by and between Korry Electronics Co., a Delaware corporation ("Korry"), Esterline Technologies, Inc., a Delaware corporation ("Esterline"), and Michael Maloney ("Maloney"), a single man, acting individually and as managing partner for the Bancroft & Maloney general partnership. RECITALS a. Maloney's predecessor, 801 Dexter Associates, and Korry's predecessor, Criton Technologies ("CT"), a Delaware general partnership, entered into an industrial lease agreement (the "Original Lease") dated July 17, 1974, under the terms of which CT, as tenant, leased certain property (the "Premises") located at 801 Dexter Avenue North, Seattle, Washington. The lease has been amended by three amendments, dated respectively May 10, 1985 (the "First Amendment"), June 20, 1986 (the "Second Amendment"), and September 1, 1987 (the "Third Amendment"). The Original Lease, as amended by these three amendments, is hereinafter designated as the "Amended Lease." b. Maloney succeeded to the landlord's interest under the Lease pursuant to an assignment dated August 30, 1988. Korry succeeded to the lessee's interest under the Lease pursuant to an assignment dated September 27, 1989, which assignment has been and is hereby recognized and consented to by Maloney as being effective as of September 27, 1989. c. The parties wish to amend the Amended Lease under the terms and conditions set forth below. TERMS AND CONDITIONS 1. Esterline's Agreement to be Bound by Amended Lease. --------------------------------------------------- Esterline agrees to be bound as tenant by all terms and covenants of the Amended Lease, including this Agreement and any and all subsequent amendments or modifications to the Amended Lease which Korry and Esterline sign hereafter. 2. Landlord's Maintenance Obligations. Paragraph 2 of the Third ----------------------------------- Amendment is hereby deleted and replaced with the following, to be effective as of the date of this Agreement: 2 The Landlord's maintenance and replacement obligations under the Lease shall hereafter be limited to the costs of the maintenance of the utilities located outside of the leased premises, the foundations, and the exterior side of the exterior walls, and heat pump/compressor replacement costs; provided, that the Tenant shall be solely responsible for paying the first $5,000 of the costs incurred in the aggregate in connection with these items during any Lease year (as that term is defined below), and Tenant and Landlord shall each pay one-half of all additional costs incurred in connection with these items in excess of $5,000 during each Lease year. As used herein, the term "Lease year" means any period commencing with August 1 of any given year during which the Lease remains in effect and continuing through July 31 of the following year or such earlier date as the Lease may terminate. 3. Rental Adjustments. Paragraph 1.3 of the First Amendment is ------------------- hereby deleted and replaced with the following: a. The monthly rent for the period 8/1/93 through 7/31/95 (the "Base Period") is and shall continue to be $27,444. b. The monthly rent for the two-year period 8/1/95 through 7/31/97 and for each successive two-year period during the term of this lease shall be equal to the monthly rent payable during the prior two-year period, increased by a percentage equal to the percentage increase in the Index (defined below) during the prior two-year period, up to a maximum percentage increase of two and one-half percent in any one year, for a maximum of a five percent increase for each two-year period. c. As used herein, the term "Index" means the Consumer Price Index for all Urban Consumers - All Items, for the Seattle Metropolitan Area, as published by the U.S. Department of Labor's Bureau of Labor Statistics. d. In addition to the rental adjustments described above, and not in lieu thereof, a rent adjustment shall be made on August 1, 2001, which shall be an amount equal to one-half of the sum of Monthly Excess Amounts (defined below) computed at the end of each of the following two-year periods: 8/1/93 through 7/31/95, 8/1/95 through 7/31/97, 8/1/97 through 7/31/99, and 8/1/99 through 7/31/01. e. As used herein, the term "Monthly Excess Amount" means the difference between (a) the monthly rent increase that would have been made for the upcoming two-year period if the two and one-half percent annual limit were not in effect, and (b) the monthly rent 3 increase actually payable (i.e., with the two and one-half percent annual limit in effect). f. In addition to the rental adjustments described above, and not in lieu thereof, a rent adjustment shall be made on August 1, 2005, which shall be an amount equal to one-half of the sum of the Monthly Excess Amounts computed at the end of each of these two-year periods: 8/1/01 through 7/31/03 and 8/1/03 through 7/31/05. g. By way of illustration only, if the Index were to increase by four percent during the first twelve months of the Base Period and one percent during the second twelve months of the Base Period, the monthly rent for the following two-year period (8/1/95 through 7/31/97) would be $28,404.54 (i.e., the Base Period monthly rent of $27,444 plus three and one-half percent of $27,444, or $960.54, based on the two and one-half percent limit for the first twelve months and the actual one percent increase during the second twelve months). The Monthly Excess Rent at the end of the Base Period would be $411.66 (calculated by multiplying the Base Period monthly rent of $27,444 by one and one-half percent, or .015, which is the difference between the five percent increase in the Index during the Base Period and the three and one-half percent increase actually applied to the rent adjustment for the following period.) The Monthly Excess Amount for the period from 8/1/95 through 7/31/97 would be calculated based on a beginning monthly rent of $28,404.54. A similar calculation will be made for each successive two-year period. h. If the Index is discontinued, the parties shall substitute a comparable index of consumer prices. 4. Term of Occupancy; Last Month's Rent. The Lease term is hereby ------------------------------------- extended to July 31, 2011, and Tenant shall have the sole and exclusive right to peaceful and quiet enjoyment of the Premises, and to occupy the Premises without interruption or interference for the entire remainder of the term as extended hereby. However, Tenant shall have the right to terminate the Lease at any time by giving written notice to Landlord at least two years in advance of the termination date. Tenant shall not be liable for any obligations arising under or in connection with the Lease following the date specified as the termination date. Maloney, Korry, and Esterline agree that a termination notice shall be binding and no party will apply to a Court in equity or otherwise to extend the term of the Amended Lease beyond the date specified in the termination notice. The parties recognize Maloney is not holding the last month's rent. Upon termination of the Amended Lease no rent prepaid prior to the date of this Agreement will be returned. 4 5. Improvements to the Property. Paragraph 7.5(a) of the Original ----------------------------- Lease is hereby deleted and replaced by the following: a. Tenant shall not make any alterations, improvements, or additions in, on, or about the Premises, except (i) non-structural alterations not exceeding $5,000 in cost and/or (ii) in the case of an emergency, to protect life or property, without first obtaining Landlord's consent, which consent shall not be unreasonably withheld. As a condition of giving such consent, Landlord may require Tenant to remove any such alterations, improvements, additions, or utility installations hereafter installed at the expiration of the Lease term or any prior termination thereof, and to restore the Premises to their condition just prior to making the requested alteration, improvement, or addition. Landlord's consent to Tenant's request for such consent shall be implied as given, and Tenant shall be entitled to make such alterations, improvements, or additions as have been described in a notice issued to Landlord, if Landlord does not object to the alter- ations, improvements, or additions within fifteen days after actual receipt of such notice from Tenant. Notice and objections under this paragraph must be made in accordance with the notice provisions of paragraph 6 of this Agreement; provided, however, that the requirement of receipt of any fifteen-day notice sent by Tenant may be met by actual receipt of the notice by either of the notice recipients for Landlord identified in paragraph 6.a. of this Agreement, rather than both. b. Any and all requests for alterations, improvements, or additions affecting exterior or load bearing walls or the foundation of the building located on the Premises, or which involve cutting holes through floors in the building, shall be accompanied by a writing from a licensed structural engineer, certifying that, in the opinion of the structural engineer, the structural integrity of the building would not be impaired by the proposed alterations, improvements, or additions. 6. Notices. Paragraph 19 of the Original Lease is hereby deleted -------- and replaced by the following: a. Notice Addresses. Any notice, keys, drawings, or other ----------------- item or items that may or shall be delivered pursuant to the terms of this Lease shall be delivered to the following addresses: 5 If to Landlord, to both of the following: Michael Maloney P.O. Box 33007 Seattle, WA 98133 Ryan Swanson & Cleveland Suite 3400, 1201 Third Avenue Seattle, WA 98101 Attn: Roger J. Kindley Barbara J. Duffy If to Tenant, to both of the following: Korry Electronics Co. 901 Dexter Avenue North Seattle, WA 98109 Attn: Director of Finance Esterline Technologies, Inc. 10800 N.E. 8th Bellevue, WA 98004 Attn: Chief Financial Officer b. Form of Notice and Delivery. Any and all notices shall be ---------------------------- in writing and either delivered by hand or mailed, via certified United States mail, postage prepaid, to the addresses of the respective recipient as set forth above. Delivery shall be deemed complete and effective upon receipt by the recipient or upon the third business day following mailing, whichever shall first occur. c. Covenant to Accept Notice. No party shall refuse or -------------------------- otherwise attempt to avoid delivery of any notice. d. Change of Notice Address. Any party may change its notice ------------------------- address by giving written notice of a new address in accordance with the foregoing notice provisions. 7. Continuation of Unmodified Terms. Except as modified by this --------------------------------- Agreement, the terms of the Amended Lease remain in full force and effect. In the event of conflict or inconsistency between the provisions of the Amended Lease and the provisions of this Agreement, this Agreement will control. 6 8. Binding Effect. The terms and conditions of this Agreement shall --------------- be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, personal representatives, and permitted assigns. 9. Entire Agreement. This Agreement contains the entire understanding ----------------- between and among the undersigned parties in connection with the subject matter addressed herein. It supersedes and replaces any and all prior negotiations, agreements, discussions, representations, statements and promises, whether oral or written. Each party hereby acknowledges that no promise, representa- tion or warranty whatsoever, express or implied, has been made by any other party or agent or attorney of any other party to induce it to execute this document, other than the terms expressly stated in this written Agreement. 10. Construction of this Agreement. ------------------------------- a. This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. b. The paragraph headings used in this Agreement are inserted for convenience only and are not intended to be a part of this Agreement or to affect its construction. c. When used in this Agreement, terms such as "herein," "hereto," and "hereof" refer to the entire Agreement, and are not limited to any portion or portions hereof. d. This Agreement has been negotiated by counsel for all parties, and the language hereof, including without limitation any ambiguities, shall not be construed in favor of any one or more parties or against any one or more other parties. e. Time is of the essence in this Agreement. f. This Agreement is exclusively for the benefit of the undersigned parties, and no intent to benefit any third person or entity shall be inferred, implied, or presumed in construing this Agreement. 11. Signing Authority. Each of the individuals signing below on ------------------ behalf of Korry and Esterline hereby warrants that he is authorized to sign this Agreement on that party's behalf and that his signature binds that party. Maloney hereby warrants that he is authorized to sign this Agreement on behalf of the Bancroft & Maloney partnership as well as on his own behalf, and that he and the partnership are bound thereby. 7 Dated the day and year first set forth above. KORRY ELECTRONICS CO. MICHAEL MALONEY by /s/ David Elkins by /s/ Michael Maloney ---------------- ------------------- David Elkins Michael Maloney, individually President and as managing partner of Bancroft & Maloney, a general partnership ESTERLINE TECHNOLOGIES, INC. By /s/ R. W. Stevenson ------------------- R. W. Stevenson Chief Financial Officer EX-11 4 EXHIBIT 11 1 EXHIBIT 11 Page 1 ESTERLINE TECHNOLOGIES CORPORATION Computation of Primary Earnings Per Common Share (in thousands, except per share amounts)
1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Net Earnings $ 7,563 $ (25,635) $ 5,094 $ 7,315 $ 7,058 ======== ========== ======= ======= ======= Average Number of Common Shares Outstanding 6,513 6,512 6,506 6,502 6,501 Net Shares Assumed to be Issued for Stock Options 58 67 161 41 34 -------- -------- ------ ------ ------ Total 6,571 6,579 6,667 6,543 6,535 ======== ======== ====== ====== ====== Earnings Per Common Share - Primary Basis $ 1.15 $ (3.90) $ .76 $ 1.12 $ 1.08 ======== ======== ====== ======= =======
2 Exhibit 11 Page 2 ESTERLINE TECHNOLOGIES CORPORATION Computation of Fully Diluted Earnings Per Common Share (in thousands, except per share amounts)
1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Net Earnings $ 7,563 $ (25,635) $ 5,094 $ 7,315 $ 7,058 ======= ========= ======= ======= ======= Average Number of Common Shares Outstanding 6,513 6,512 6,506 6,502 6,501 Net Shares Assumed to be Issued for Stock Options 269 67 161 180 34 ------- --------- ------- ------- ------- Total Common Shares on a Fully Diluted Basis 6,782 6,579 6,667 6,682 6,535 ======= ========= ======= ======= ======= Earnings Per Common Share - Fully Diluted Basis $ 1.12 $ (3.90) $ .76 $ 1.09 $ 1.08 ======= ========= ====== ======= ======= Earnings Per Common Share - Primary Basis $ 1.15 $ (3.90) $ .76 $ 1.12 $ 1.08 ======= ========= ====== ======= ======= Dilutive Effect Per Common Share $ .03 None None $ .03 None ======= ========= ====== ======= =======
EX-13 5 EXHIBIT 13 1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following commentary discusses the Company's operations for the fiscal years ended October 31, 1994 and 1993 and its financial condition at the end of fiscal 1994. 1994 FISCAL YEAR Net earnings in 1994 were $7.6 million, or $1.15 per share on sales of $294 million, compared with a net loss of $25.6 million, or $3.90 per share on sales of $285 million in 1993. Net earnings in 1994 reflect a $2 million tax benefit recorded in the fourth quarter resulting from a settlement with the Internal Revenue Service of audits of certain federal income tax returns. Net earnings in 1993 included a $27.2 million after tax ($40.6 million before tax) restructuring provision. Without the restructuring charge, 1993 net earnings would have been $1.6 million, or $.24 per share. Net earnings in 1994 reflect full-year effects of the restructuring plan, which provided for the sale or shutdown of certain small operations, the writeoff of intangible assets, anticipated losses on the sale of vacant facilities, employees' severance and consolidation of facilities for increased efficiency. Savings in 1994 associated with the restructuring plan included a $2.6 million (before tax) reduction in the amount of depreciation and amortization expense incurred. Restructuring actions completed through 1994 included the sale of one small subsidiary (Republic Electronics Co.), the sale of a vacant facility in Torrance, California, employees' severance and the intangibles write-off, and comprised $19.1 million (before tax) of the recorded provision. The restructuring plan's anticipated two-year time frame is on schedule and management believes that provisions remain adequate to cover future actions based on current estimates. Remaining actions include either the sale or shutdown of certain small operations without strong market potential, the sale or consolida- tion of facilities and employees' severance. The 1994 sales improvement was attributable to the Automation Group, where sales increased $14.2 million (15%) to $109 million. Strengthening of domestic markets coupled with strong customer acceptance of newer products at key Group companies contributed to the sales growth. Instrumentation Group sales stabilized and were virtually level with the prior year at $92 million, while sales in the 2 Aerospace and Defense Group decreased $6 million (6%) to $93 million. The sale of Republic Electronics Co. in the second quarter of 1994 accounted for approxi- mately two-thirds of this decrease. Including export sales by domestic operations, sales to foreign buyers totaled $91 million and $89 million in 1994 and 1993, respectively, and accounted for 31% of the Company's total sales in each year. Operating earnings in 1994 improved in all three of the Company's business segments and totaled $23.3 million, compared with $16.1 million in the prior year. The improvement was primarily attributable to the Automation Group where earnings advanced $4 million over the prior year. Overall, operating earnings reflect the $2.6 million reduction in depreciation and amortization expense as a result of the 1993 restructuring, and continued cost containment measures. Gross margin as a percent of sales increased slightly to 39% in 1994 from 38% in 1993. Gross margin percentages by business segment increased in the current year in both the Aerospace and Defense and Instrumenta- tion Groups, and were approximately level in the Automation Group. In 1994, group margins ranged from 38% to 42%, compared with 37% to 40% in the prior year. Selling, general and administrative expenses in 1994 were level with the prior year at $101 million. However, they decreased slightly as a percent of sales from 35.5% to 34.3%. The research, development and engineering costs segment of SG&A amounted to $13.7 million in 1994, compared with $14 million in 1993, reflecting the Company's continuing commitment to invest in strategic product development programs. Orders for the year ended October 31, 1994 totaled $319 million, up more than 20% from the prior year. Company-wide backlog at the end of 1994 was $97 million compared with $74 million a year earlier. The increases were primarily attributable to the Automation Group, where year-end backlog levels of $30 million were more than triple the prior-year amount, reflecting strengthening markets. Backlog at the Company's two other groups were relatively consistent with prior-year levels. Approximately $11 million of 1994's Company-wide backlog was scheduled to be shipped after fiscal 1995. Net interest expense decreased from $6.3 million in 1993 to $6 million in 1994 due to reduced debt levels, offset by increases in interest rates. Income tax expense in 1994 was $1.3 million, reflect- ing the $2 million benefit recorded in the fourth quarter of 1994, compared with an income tax benefit of $12.4 million recorded in 1993. 3 1993 FISCAL YEAR Sales in 1993 were $285 million, compared with $305 million in 1992. The $20 million decrease was almost equally divided between two business segments: Aerospace and Defense Group, and Instrumentation Group. Sales in the Automation Group increased $3 million over 1992, from $91 million to $94 million. Aerospace and Defense Group sales decreased 11% from 1992, from $111 million to $99 million. The commercial aircraft and defense markets served by this group faced significant downturns during 1993, resulting in the sales decrease. Sales in the Instrumentation Group (which decreased 10% from 1992, from $102 million to $92 million) also were affected by the commercial aircraft market down turn as well as reduced capital spending by industrial and utilities customers for the types of products produced by the group operating units. In the Automation Group, some market improvement together with new products produced the increased sales. However, orders in the group's drilling machine operation had fallen off significantly in late fiscal 1993, presenting a cloudy outlook for early fiscal 1994. Including exports, sales to foreign buyers as a percent of total 1993 sales remained approximately level with the prior year at 31%. A net loss of $25.6 million, or $3.90 per share, was reported for 1993, resulting from a fourth quarter after-tax restructuring charge of $27.2 million ($40.6 million before tax). Without the restructuring charge the Company's net earnings for 1993 would have been $1.6 million, or $.24 per share. In 1992, net earnings were $5.1 million, or $.76 per share. The objective of the restructuring plan was to strengthen the Company for long-term growth and permit management to focus on operations with strong market positions. It was an extension of the Company's efforts to meet market conditions in an effective manner and structure operations to maintain profitability. The continued weakness in capital goods markets served by the Company together with a drop in the commercial aircraft industry and shrinking defense budgets caused management to make the restructuring plan effective in the fourth quarter of 1993. The plan contemplated a number of actions including either sale or shutdown of certain small operations with weak market potential. These operations re- presented approximately 10% of the Company's fiscal 1993 sales. Other items included write- off of intangible assets, anticipated losses on 4 the sale of vacant facilities, employees' severance and consolidation of facilities for increased efficiency. The restructuring provision was based on management's estimate of the effects of the contemplated actions. On a pretax basis, $21.1 million of the restructuring charge related to the Aerospace and Defense Group, $8.9 million to the Instrumentation Group and $8.4 million to the Automation Group. Company-wide backlog at October 31, 1993 was $74 million compared with $97 million at October 31, 1992. The decrease was primarily in the Aerospace and Defense Group and was due to the timing of the release of orders by customers together with the downturn in the commercial aircraft and defense markets. Automation Group backlog at the end of 1993 was also somewhat lower than at the end of 1992 due to low order levels for printed circuit board drilling machines. Of 1993's year-end backlog, $14 million was scheduled to be shipped after fiscal 1994. Gross margin as a percent of sales remained approxi- mately level from 1992 (38% in 1993 and 39% in 1992) despite reduced sales. This was the result of sign- ificant cost containment efforts throughout the Company. Gross margin percentages increased in the Automation Group and decreased in the Aerospace and Defense and Instrumentation Groups. In 1993, group margins ranged from 37% to 40%, compared with 35% to 40% in the prior year. Research, development and engineering costs increased slightly to $14 million in 1993 from $13.4 million the prior year, reflecting the Company's continued commit- ment to strong product development programs. Although selling, general and administrative expenses decreased by $2 million from 1992 to 1993, they increased as a percent of sales from 33.5% to 35.3%. The Company continued its emphasis on sales and marketing despite decreased sales volumes in some segments. Operating earnings, prior to the restructuring charge, decreased overall from $23.3 million in 1992 to $16.1 million in 1993. The decrease was primarily due to lower sales volumes in the Aerospace and Defense and Instrumentation Groups and the resultant reduced profitability levels. Operating earnings in the Aerospace and Defense Group decreased by 51%, from $14.9 million in 1992 to $7.3 million, and Instrumen- tation Group earnings dropped to $900,000 from $7.5 million in 1992. In the Automation Group, operating earnings increased from $1 million in 1992 to $7.9 million in 1993 based on some market improvement and increased sales coupled with significant cost reductions at a key operation. 5 Net interest expense decreased from $7.2 million in 1992 to $6.3 million in 1993 due to the reduced debt level. A net tax benefit of $12.4 million was recorded in 1993 compared to a $3.1 million expense recorded in 1992. The 1993 net benefit reflects an estimated $13.4 million realizable tax benefit from restructuring. FINANCIAL CONDITION Cash and equivalents on hand increased $5.9 million during the year to $9.1 million at October 31, 1994. Debt at the end of 1994 was $62.4 million, $12.1 million less than at the same time last year. More than three-fourths of this $18 million combined cash increase and debt reduction in 1994 was generated from operations; the remaining amount was the net effect of restructuring plan actions. The Company's year-end debt-to-equity ratio was .95:1, down from 1.3:1 at the end of fiscal 1993. This improve- ment was attributable equally to debt paydown and earnings. During 1994 the Company continued its policy of retaining all internally generated funds to support operations and to retire debt. Capital expenditures were $11.3 million in 1994 and are expected to approximate $12 million in 1995. Cash requirements of future actions associated with the 1993 restructuring, net of anticipated proceeds from asset sales, are not expected to have a material effect on the Company's cash flows. Working capital at October 31, 1994 increased slightly to $10.5 million from $9.1 million at the end of 1993, although certain elements of working capital changed significantly. Receivables at October 31, 1994 increased to $63.7 million from $45.8 million at the end of the prior year primarily due to an exceptionally strong fourth quarter 1994 sales volume. Year-end inventories were significantly lower than at the same time last year primarily due to improved manufacturing techniques and to the strong fourth quarter sales level. Current maturities of long-term debt at October 31, 1994 included the Company's $20 million convertible debenture issue. Management believes cash on hand, funds generated from operations, and available bank credit lines at October 31, 1994 of approximately $38 million will adequately service cash requirements. At October 31, 1994 a net deferred tax asset totaling $13.7 million remains primarily as a result of the 1993 restructuring. This asset will be realized in the form of tax deductions when future restructuring steps are taken and as sufficient profitability is achieved. 6 SELECTED FINANCIAL DATA In thousands, except per share amounts, for the years ended October 31,
1994 1993 1992 1991 1990 OPERATING RESULTS Net sales $ 294,044 $ 285,152 $ 304,827 $ 350,934 $ 389,109 Cost of sales 178,397 175,568 187,235 214,415 241,235 Selling, general and administrative 100,845 100,669 102,202 111,858 118,618 Restructuring provision -- 40,626 -- -- -- Interest expense, net 5,985 6,324 7,246 12,709 17,350 Income tax expense (benefit) 1,254 (12,400) 3,050 4,637 4,848 Net earnings (loss) 7,563 (25,635) 5,094 7,315 7,058 Net earnings (loss) per share 1.15 (3.90) .76 1.12 1.08 FINANCIAL STRUCTURE Total assets $ 215,975 $ 205,672 $ 232,024 $ 256,384 $ 289,667 Long-term debt, net 41,714 62,267 68,622 87,011 99,393 Shareholders' equity 65,491 55,323 82,622 77,377 71,441 Average number of shares outstanding 6,571 6,579 6,667 6,543 6,535
MARKET PRICE OF ESTERLINE COMMON STOCK Principal Market-- New York Stock Exchange For the years ended October 31,
QUARTER 1994 1993 High Low High Low First $ 8.13 $ 7.25 $ 13.00 $ 9.63 Second 9.00 7.13 11.88 8.50 Third 10.00 6.38 10.00 7.63 Fourth 12.38 9.50 8.63 7.50
At October 31, 1994 there were approximately 1,200 holders of record of the Company's common stock. Certain of the Company's financing arrangements impose restrictions on the payment of dividends. (See Note 4 of Notes to Consolidated Financial Statements.) 7 CONSOLIDATED STATEMENT OF OPERATIONS In thousands, except per share amounts, for the years ended October 31,
1994 1993 1992 Net Sales $ 294,044 $ 285,152 $ 304,827 Costs and Expenses Cost of sales 178,397 175,568 187,235 Selling, general and administrative 100,845 100,669 102,202 Restructuring provision -- 40,626 -- Interest expense, net 5,985 6,324 7,246 --------- --------- --------- 285,227 323,187 296,683 --------- --------- --------- Earnings (Loss) Before Income Taxes 8,817 (38,035) 8,144 Income Tax Expense (Benefit) 1,254 (12,400) 3,050 --------- --------- --------- Net Earnings (Loss) $ 7,563 $ (25,635) $ 5,094 ========= ========== ========= Net Earnings (Loss) Per Share $ 1.15 $ (3.90) $ .76 ========= ========== =========
See Notes to Consolidated Financial Statements 8 CONSOLIDATED BALANCE SHEET In thousands, October 31,
1994 1993 ASSETS Current Assets Cash and equivalents $ 9,076 $ 3,218 Accounts receivable, net of allowances of $2,201 and $2,417 for doubtful accounts 63,685 45,778 Inventories 31,673 38,430 Deferred income taxes 13,002 7,882 Prepaid expenses 1,876 1,838 ------- ------- Total Current Assets 119,312 97,146 9 PROPERTY, PLANT AND EQUIPMENT Land 3,901 4,833 Buildings 43,137 44,317 Machinery and equipment 98,635 91,741 ------- ------- 145,673 140,891 Accumulated depreciation 94,070 84,326 ------- ------- 51,603 56,565 Cost in Excess of Net Assets Acquired 22,960 23,802 Intangibles and Other 21,437 23,679 Deferred Income Taxes 663 4,480 ------- ------- $ 215,975 $ 205,672 ========= =========
10 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 18,927 $ 14,647 Accrued liabilities 67,877 60,063 Notes payable 58 5,157 Current maturities of long-term debt 20,588 7,062 Federal and foreign income taxes 1,320 1,153 -------- -------- Total Current Liabilities 108,770 88,082 Long-Term Debt, net of current maturities 41,714 62,267 Shareholders' Equity Common stock, par value $.20 per share, authorized 30,000,000 shares, issued and outstanding 6,513,057 and 6,512,641 shares 1,302 1,302 Capital in excess of par value 10,482 10,482 Retained earnings 54,951 47,388 Cumulative translation adjustment (1,244) (3,849) ------- ------- Total Shareholders' Equity 65,491 55,323 ------- ------- $ 215,975 $ 205,672 ========= =========
See Notes to Consolidated Financial Statements 11 CONSOLIDATED STATEMENT OF CASH FLOWS In thousands, for the years ended October 31,
1994 1993 1992 Cash Flows Provided (Used) by Operating Activities Net earnings (loss) $ 7,563 $ (25,635) $ 5,094 Restructuring provision -- 40,626 -- Depreciation and amortization 16,414 19,259 19,823 Deferred income taxes (1,303) (16,558) 331 Working capital changes Accounts receivable (17,907) 3,432 3,584 Inventories 6,757 1,817 7,541 Prepaid expenses (38) (150) (124) Accounts payable 4,280 (2,563) (580) Accrued liabilities 7,814 1,577 (2,042) Federal and foreign income taxes 167 (1,834) 204 Other, net (55) (1,845) (396) -------- -------- -------- 23,692 18,126 33,435 -------- -------- -------- Cash Flows Provided (Used) by Investing Activities Capital expenditures (11,288) (9,556) (10,762) Capital dispositions, net 2,975 496 5,528 -------- -------- -------- (8,313) (9,060) (5,234) -------- -------- -------- Cash Flows Provided (Used) by Financing Activities Net change in notes payable (5,099) 2,314 (9,200) Repayment of long-term debt (7,027) (9,612) (58,318) Proceeds from sale of senior notes -- -- 40,000 Cumulative translation adjustment 2,605 (1,667) 115 -------- -------- -------- (9,521) (8,965) (27,403) -------- -------- -------- Net Increase in Cash and Equivalents 5,858 101 798 Cash and Equivalents - Beginning of Year 3,218 3,117 2,319 -------- -------- -------- Cash and Equivalents - End of Year $ 9,076 $ 3,218 $ 3,117 ======== ======== ======== Supplemental Cash Flow Information Cash paid during the year for Interest expense $ 6,033 $ 6,271 $ 7,836 Income taxes 2,212 2,264 1,436
See Notes to Consolidated Financial Statements 12 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY In thousands, for the years ended October 31,
1994 1993 1992 Common Stock, par value $.20 per share Beginning of year $ 1,302 $ 1,301 $ 1,300 Stock issued under stock option plans -- 1 1 ------- ------- ------- End of year 1,302 1,302 1,301 ------- ------- ------- Capital in Excess of Par Value Beginning of year 10,482 10,480 10,445 Stock issued under stock option plans -- 2 35 ------- ------- ------- End of year 10,482 10,482 10,480 ------- ------- ------- Retained Earnings Beginning of year 47,388 73,023 67,929 Net earnings (loss) 7,563 (25,635) 5,094 ------- ------- ------- End of year 54,951 47,388 73,023 ------- ------- ------- Cumulative Foreign Currency Translation Adjustment Beginning of year (3,849) (2,182) (2,297) Aggregate adjustment resulting from foreign currency translation 2,605 (1,667) 115 ------- ------- ------- End of year (1,244) (3,849) (2,182) ------- ------- ------- Shareholders' Equity $ 65,491 $ 55,323 $ 82,622 ======== ======== ========
See Notes to Consolidated Financial Statements 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of Esterline Technologies Corporation and its subsidiaries. All significant inter- company accounts and transactions have been eliminated. Foreign Currency Translation: Foreign currency assets and liabilities are translated into their U.S. dollar equivalents based on year-end exchange rates. Revenue and expense accounts are generally translated at average exchange rates. Aggregate exchange gains and losses arising from the translation of foreign assets and liabilities are included in shareholders' equity. Trans- action gains and losses are included in income and have not been significant in amount. Inventories: Most inventories are stated at the lower of cost (first in, first out) or market. Two subsidiaries state their inventories at the lower of cost (last in, first out) or market. Inventory cost includes material, labor and factory overhead. Research, Development and Engineering Costs: Research, development and engineering costs approximated $13,711,000, $14,007,000 and $13,441,000 in 1994, 1993 and 1992, respectively, and are generally expensed as incurred. Property, Plant and Equipment and Depreciation: Property, plant and equipment is carried at cost and includes expenditures for major improvements which increase useful lives. Depreciation is provided generally on the straight-line method. For income tax purposes, depreciation is computed using various accelerated methods. Cost in Excess of Net Assets Acquired: The cost of purchased businesses in excess of amounts assigned to tangible and intangible assets is being amortized over periods of 30 to 40 years. Accumulated amorti- zation at October 31, 1994 and 1993 was $7,639,000 and $6,784,000, respectively. Excess value arising from companies purchased prior to October 31, 1970 amounted to $2,800,000, and is not being amortized as in the opinion of management there has been no diminution in the value thereof. Intangibles: Intangibles, arise primarily from acquisi- tions and are being amortized over estimated lives of up to 20 years. Accumulated amortization at October 31, 1994 and 1993 was $9,535,000 and $7,844,000, respectively. Asset Valuation: The carrying amount of long-life assets is reviewed periodically. If the asset carrying amount is not recoverable, the asset is considered to be impaired and the value is adjusted. Environmental: Environmental exposures are provided for in total at the time they are known to exist or are considered reasonably probable. Earnings per Share: Earnings per share are computed using the average number of common and common equivalent shares outstanding during each year (6,571,000 shares in 1994, 6,579,000 shares in 1993 and 6,667,000 shares in 1992). The effect of the convertible debentures upon earnings per share is antidilutive. Cash Equivalents: Investments maturing in three months or less are classified as cash equivalents. 14 Financial Instruments: The Company's financial instruments include cash and equivalents, accounts receivable and accounts payable, for which the fair value approximates carrying value, and notes payable and long-term debt. The fair values of notes payable and long-term debt (see Note 4) were estimated using interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities. Concentrations of Credit Risk: Concentrations of credit risk with respect to accounts receivable are generally diversified due to the large number of entities comprising the Company's customer base and their dispersion across many different industries and geographies. The Company performs ongoing credit evaluations of its customers' financial condition and, in certain circumstances, utilizes letters of credit and bank guarantees to minimize credit risk. 2. INVENTORIES Inventories at October 31 consisted of the following: In thousands
1994 1993 Finished goods $ 6,016 $ 9,508 Work in process 16,887 17,340 Raw materials and purchased parts 8,770 11,582 ------- ------- $ 31,673 $ 38,430 ======== ========
At October 31, 1994 and 1993, $8,500,000 and $9,000,000, respectively, of the Company's total inventories were stated under the last in, first out inventory method. Had the first in, first out method been used, these inventories would have been $3,386,000 and $2,995,000 higher than reported at October 31, 1994 and 1993, respectively. 3. ACCRUED LIABILITIES Accrued liabilities at October 31 consisted of the following: In thousands 15
1994 1993 Payroll and other compensation $ 18,905 $ 13,893 Self-insurance provisions 7,886 6,912 Interest 2,770 4,187 Warranties 3,495 2,426 State and other tax accruals 7,048 6,508 Accrued restructuring cost 13,698 15,261 Other 14,075 10,876 -------- -------- $ 67,877 $ 60,063 ======== ========
4. DEBT Long-term debt at October 31 consisted of the following: In thousands
1994 1993 8.75% senior notes, due 2002 $ 40,000 $ 40,000 8.25% convertible subordinated guaranteed debentures, due 1995 20,000 20,000 Variable rate term loan -- 6,621 Other 2,302 2,708 -------- -------- 62,302 69,329 Less current maturities 20,588 7,062 -------- -------- $ 41,714 $ 62,267 ======== ========
The 8.75% senior notes are unsecured and payable in equal annual installments beginning in fiscal 1996. Interest is payable semi-annually in January and July of each year. The 8.25% convertible debentures were issued by Esterline International Finance N.V., a subsidiary of the Company, and require annual interest payments. The debentures are convertible into common stock of the Company at $39.6667 per share, subject, in certain events, to adjustment. The debentures are guaranteed, on a subordinated basis, as to payment of interest and principal by the Company. The variable rate term loan, together with a $35,000,000 line of credit, are unsecured and are with a group of banks. Alternative interest rates are available based on LIBOR, or the lead bank's prime rate, at the Company's option. The term loan was repaid during fiscal 1994 and at October 31, 1994 there were no amounts borrowed under the line of credit. The loan agreements contain various restrictions, including maintenance of net worth, payment of dividends, interest coverage, and limitations on additional borrowings. The fair value of the Company's notes payable and long-term debt was estimated at $61,088,000 and $75,886,000 at October 31, 1994 and 1993, respectively. 16 Maturities of long-term debt are as follows: In thousands 1995 $ 20,588 1996 6,422 1997 6,215 1998 6,136 1999 5,796 2000 and thereafter 17,145 -------- $ 62,302 ========
At October 31, 1994, the Company had lines of credit with domestic and foreign banks as follows: In thousands
1994 1993 Outstanding Balance Domestic $ -- $ -- Foreign 58 5,157 ------- ------ $ 58 $ 5,157 ======= ======= Credit Lines Domestic $ 35,000 $ 35,000 Foreign 10,000 10,000 Average Borrowings Domestic 500 400 Foreign 4,500 3,700 Average Interest Rates Domestic 6.8% 6.6% Foreign 7.5% 9.5%
Available credit lines were reduced by outstanding letters of credit of approximately $6,965,000 at October 31, 1994. 18 5. RETIREMENT BENEFITS Pension benefits are provided for substantially all U.S. employees under contributory and non-contributory pension and other plans, and are based on years of service and five-year average compensation. The Company makes actuarially computed contri- butions as necessary to adequately fund benefits. The actuarial computations assumed discount rates on benefit obligations and expected long-term rates of return on plan assets of 7.5% and annual compensation increases of 5%. Investments of the plans primarily consist of U.S. Government obligations, publicly traded common stocks, mutual funds and insurance contracts. Pension expense for the years ended October 31 consisted of the following: In thousands
1994 1993 1992 Service cost-benefits earned during the year $ 2,322 $ 2,106 $ 1,755 Interest cost on projected benefit obligation 4,457 4,248 4,125 Actual return on plan assets-investment losses (gains) (2,827) (10,467) (6,231) Net amortization and deferral (3,515) 4,487 308 ------- ------- ------- Net pension expense (credit) $ 437 $ 374 $ (43) ======= ======= =======
Combined funded status of the plans at October 31 was as follows: In thousands
1994 1993 Plan assets at fair market value $ 75,457 $ 77,642 Projected benefit obligation for service rendered to date 62,278 59,485 Plan assets in excess of projected benefit obligations 13,179 18,157 Unrecognized prior service cost 481 -- Unrecognized net gain (761) (4,423) Unrecognized net asset at November 1, 1985 (2,162) (2,562) -------- -------- Prepaid pension expense $ 10,737 $ 11,172 ======== ======== Actuarial present value of accumulated benefit obligation, including vested benefits of $ 52,931 and $ 49,730 $ 54,044 $ 50,305 ======== ========
19 Provision for all retirement benefits for the years ended October 31 consisted of the following: In thousands
1994 1993 1992 Pension plans $ 1,232 $ 464 $ 649 Profit-sharing and other plans -- 72 246 ------- ----- ----- $ 1,232 $ 536 $ 895 ======= ===== =====
6. INCOME TAXES During 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The cumulative effect of the change was not material and prior years' financial statements have not been restated. During 1994, the Internal Revenue Service completed an examin- ation of certain federal income tax returns and reached agreement with the Company on various filing positions. As a result, the Company recorded a $2 million tax benefit in the fourth quarter of 1994. Income tax expense (benefit) for the years ended October 31 consisted of the following: In thousands
1994 1993 1992 Current U.S. Federal $ 1,210 $ 836 $ 959 Foreign 762 681 1,317 State and local 585 178 443 Deferred (1,303) (14,095) 331 ------- ------ ------ $ 1,254 $ (12,400) $ 3,050 ======= ========= =======
Primary components of the Company's deferred tax assets and (liabilities) for the years ended October 31 resulted from temporary tax differences associated with the following: 20 In thousands
1994 1993 Reserves and liabilities $ 10,660 $ 9,026 Employee benefits 5,357 3,779 Tax credits 751 1,234 Restructuring accruals 4,863 5,418 -------- ------- Total deferred tax assets 21,631 19,457 Depreciation and amortization (4,110) (3,061) Retirement benefits (3,856) (4,034) -------- ------- Total deferred tax liabilities (7,966) (7,095) -------- ------- $ 13,665 $ 12,362 ======== ========
A valuation allowance was not required due to the nature of and circumstances associated with the temporary tax differences. A reconciliation of the United States federal statutory income tax rate to the effective income tax rate was as follows:
1994 1993 1992 U.S. statutory income tax rate 34.0% (34.0)% 34.0% State income taxes 6.6 (1.1) 3.6 Foreign tax rates 2.5 .7 (2.8) Tax settlement (22.7) -- -- Other, net (6.2) 1.8 2.7 ----- ----- ---- Effective income tax rate 14.2% (32.6)% 37.5% ====== ======= =====
No provision for federal income taxes has been made on accumulated earnings of foreign subsidiaries, since such earnings have either been permanently reinvested or would be substantially offset by foreign tax credits. Foreign earnings before income taxes were $1,605,000, $1,157,000 and $4,555,000 in 1994, 1993 and 1992, respectively. 21 The deferred portion of income tax expense for 1992 was as follows: In thousands
1992 Depreciation and amortization $ (201) Accrued expenses 534 Alternative minimum tax 227 All other, net (229) ------ $ 331 ======
7. CONTINGENCIES The Company has various lawsuits and claims, both offensive and defensive, and contingent liabilities arising from the conduct of business, including those associated with Government contracting activities, none of which, in the opinion of management, is expected to have a material effect on the Company's financial position or results of operations. Liabilities have been accrued for environmental remediation costs expected to be incurred in the disposition of manufacturing facilities. No provision has been recorded for environmental remediation costs which could result from changes in laws or other circumstances currently not contemplated by the Company. 8. OPERATING LEASES Net rental expense for operating leases amounted to approximately $3,170,000, $3,241,000 and $3,748,000 in 1994, 1993 and 1992, respectively. 22 The Company's rental commitments for noncancelable operating leases with a duration in excess of one year are as follows: In thousands 1995 $ 2,706 1996 2,266 1997 2,076 1998 2,006 1999 2,021 2000 and thereafter 1,815 -------- $ 12,890 ========
9. STOCK OPTION PLANS At October 31, 1994, the Company had 1,079,625 shares of common stock reserved for issuance to officers, directors and key employees under its stock option plans, of which 41,125 shares were available for future grant. Options granted under the plans are exercisable over a period of four years following the date of grant and expire not later than the tenth anniversary of the grant. The option prices are at fair market value on the date of grant. 23 The following summarizes the changes in outstanding options granted under the Company's stock option plans:
Option Prices Shares Per Share Balance - October 31, 1991 660,550 $ 8.00 - $ 18.00 Granted 277,500 11.00 - 11.25 Canceled (12,050) 8.00 - 18.00 Exercised (14,375) 8.00 ------- ---------------- Balance - October 31, 1992 911,625 8.00 - 11.25 Granted 117,500 7.63 - 9.38 Canceled (25,625) 8.00 - 11.25 Exercised (25,000) 8.00 ------- ---------------- Balance - October 31, 1993 978,500 7.63 - 11.25 Granted 119,000 7.38 - 9.88 Canceled (54,000) 7.38 - 11.25 Exercised (5,000) 9.00 ------- --------------- Balance - October 31, 1994 1,038,500 $ 7.38 - $ 11.25 ========= ================ Exercisable at October 31, 1994 734,500 $ 7.63 - $ 11.25 ========= ================
10. CAPITAL STOCK The authorized capital stock of the Company consists of 500,000 shares of preferred stock, including 25,000 shares ($100 par value) and 475,000 shares ($1.00 par value) issuable in series, and 30,000,000 shares of common stock ($.20 par value). At October 31, 1994, there were no shares of preferred stock outstanding, 504,201 shares of common stock were reserved for issuance upon conversion of the 8.25% convertible debentures and 1,079,625 shares of common stock were reserved for issuance under the Company's stock option plans. On December 9, 1992, the Board of Directors adopted a Shareholder Rights Plan providing for the distribution of one Preferred Stock Purchase Right for each share of common stock held on December 23, 1992. Each Right entitles the holder to purchase one-one hundredth of a share of Series A Serial Preferred Stock at an exercise price of $56. The Rights expire December 23, 2002. The Rights will be exercisable and transferable apart from the common stock only if a person or group acquires beneficial ownership of 10% or more of the Company's common stock or commences a tender offer or exchange offer which would result in a person or group beneficially owning 10% or more of the Company's common stock. The Rights will be redeemable by the Company for $.01 each at any time prior to the tenth day after an announcement that a person or group beneficially owns 10% or more of the common stock. 24 Upon the occurrence of certain events, the holder of a Right can purchase, for the then current exercise price of the Right, shares of common stock of the Company (or under certain circumstances, as determined by the Board of Directors, cash, other securities or property) having a value of twice the Right's exercise price. Upon the occurrence of certain other events, the holder of each Right would be entitled to purchase, at the exercise price of the Right, shares of common stock of a corporation or other entity acquiring the Company or engaging in certain transactions involving the Company, that has a market value of twice the Right's exercise price. 11. RESTRUCTURING PROVISION In the fourth quarter of 1993 the Company recorded a $40.6 million restructuring charge ($27.2 million net of income tax effect), based on management's estimate of the effects of the contemplated actions. The provision provided for sale or shutdown of certain small operating companies, consolidation of plants and product lines, employees' sever- ance, write-off of intangible assets which no longer had value and the write-down and sale of two vacant facilities. The charges reduced 1993 earnings per share by $4.14. Restructuring actions completed through 1994 included the sale of one small subsidiary, the sale of a vacant facility, employees' severance and the intangibles write-off, and comprised $19.1 million (before tax) of the recorded provision. 12. BUSINESS SEGMENT INFORMATION Details of the Company's operations by business segment for the years ended October 31 were as follows: 25 BUSINESS SEGMENT In thousands
1994 1993 1992 Net Sales Automation $ 108,642 $ 94,460 $ 91,449 Aerospace and Defense 93,370 99,071 111,077 Instrumentation 92,032 91,621 102,301 --------- -------- -------- $ 294,044 $ 285,152 $ 304,827 ========= ========= ========= Earnings (Loss) Before Income Taxes Automation $ 11,913 $ 7,887 $ 957 Aerospace and Defense 9,809 7,259 14,856 Instrumentation 1,537 935 7,509 --------- --------- --------- Operating Earnings 23,259 16,081 23,322 --------- --------- --------- Corporate expense (8,457) (7,166) (7,932) Restructuring provision(1) -- (40,626) -- Interest expense, net (5,985) (6,324) (7,246) --------- --------- --------- $ 8,817 $ (38,035) $ 8,144 ========== ========= ========= Identifiable Assets Automation $ 49,540 $ 41,752 $ 52,853 Aerospace and Defense 76,681 77,419 96,248 Instrumentation 49,822 55,744 67,818 Corporate(2) 39,932 30,757 15,105 ---------- --------- --------- $ 215,975 $ 205,672 $ 232,024 ========== ========= ========= Capital Expenditures Automation $ 4,214 $ 2,402 $ 3,788 Aerospace and Defense 3,158 4,125 3,821 Instrumentation 3,847 2,935 3,063 Corporate 69 94 90 ---------- --------- --------- $ 11,288 $ 9,556 $ 10,762 ========== ========= ========= Depreciation and Amortization Automation $ 3,546 $ 3,982 $ 4,335 Aerospace and Defense 6,128 7,829 7,129 Instrumentation 6,257 7,158 7,984 Corporate 483 290 375 ---------- --------- --------- $ 16,414 $ 19,259 $ 19,823 ========== ========= =========
(1) Automation Group ($8,429), Aerospace and Defense Group ($21,117), Instrumentation Group ($8,866), Non-Group related ($2,214). (2) Primarily prepaid pension expense (see Note 5) and cash. Also, 1994 and 1993 include net deferred tax assets (see Note 6). 26 12. BUSINESS SEGMENT INFORMATION (CONTINUED) Details of the Company's operations by geographic area for the years ended October 31 were as follows: GEOGRAPHIC AREA In thousands
1994 1993 1992 Sales Domestic Unaffiliated customers - U.S. $ 203,010 $ 195,808 $ 211,313 Unaffiliated customers - export 34,248 33,163 33,126 Intercompany 6,231 4,163 4,300 --------- --------- --------- $ 243,489 $ 233,134 $ 248,739 --------- --------- --------- Foreign Unaffiliated customers $ 56,786 $ 56,181 $ 60,388 Intercompany 628 29 -- --------- --------- --------- $ 57,414 $ 56,210 $ 60,388 --------- --------- --------- Eliminations $ (6,859) $ (4,192) $ (4,300) --------- --------- --------- Net Sales $ 294,044 $ 285,152 $ 304,827 ========= ========= ========= Operating earnings (1) Domestic $ 20,449 $ 13,042 $ 18,888 Foreign 2,994 2,833 3,864 Eliminations (184) 206 570 --------- --------- --------- $ 23,259 $ 16,081 $ 23,322 ========= ========= ========= Identifiable assets (2) Domestic $ 133,200 $ 142,644 $ 187,860 Foreign 42,843 33,604 29,059 --------- --------- --------- $ 176,043 $ 176,248 $ 216,919 ========= ========= =========
(1) Before 1993 restructuring provision, shown on page 41. (2) Excludes Corporate, shown on page 41. The above sales are based upon geographic origin of sale. Intercompany sales are made at selling prices comparable to those to unaffiliated customers. Sales to any single customer or government entity did not exceed 10% of consolidated sales. Operating earnings are net sales less operating expenses. 27 Product lines contributing more than 10% of total sales in any of the years ended October 31 were as follows:
1994 1993 1992 Printed circuit board drilling equipment 18% 16% 12% Gauge products 13% 13% 13% Combustible ordnance components 9% 9% 12%
13. QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of unaudited quarterly financial information: In thousands, except per share amounts
YEAR ENDED October 31, 1994 FOURTH THIRD SECOND FIRST Net sales $ 93,629 $ 71,676 $ 70,867 $ 57,872 Gross margin 37,559 28,496 27,867 21,725 Net earnings (loss) 5,298 1,515 1,154 (404) Net earnings (loss) per share $ .80 $ .23 $ .18 $ (.06)
YEAR ENDED October 31, 1993 Net sales $ 77,109 $ 69,131 $ 71,588 $ 67,324 Gross margin 30,155 26,730 27,288 25,411 Net earnings (loss) (26,853) 404 483 331 Net earnings (loss) per share $ (4.08) $ .06 $ .07 $ .05
28 REPORT OF INDEPENDENT AUDITORS To the Shareholders and the Board of Directors Esterline Technologies Corporation Bellevue, Washington We have audited the accompanying consolidated balance sheets of Esterline Technologies Corporation and its subsidiaries as of October 31, 1994 and 1993, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended October 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Esterline Technologies Corporation and its subsidiaries as of October 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1994 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP - ------------------------- Seattle, Washington December 5, 1994 EX-21 6 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES The subsidiaries of the Company as of October 31, 1994 are as follows:
Jurisdiction of Name of Subsidiary Incorporation - ------------------ -------------- Angus Electronics Co. Delaware Armtec Defense Products Co. Delaware Auxitrol Co. Delaware Equipment Sales Co. Connecticut Esterline International Finance N.V. Netherlands Antilles Excellon Automation Co. California Tulon Co. California Excellon U.K. California Excellon Europa GmbH Germany Amtech Utah Federal Products Co. Delaware Federal Products U.K. Delaware Hytek Finishes Co. Delaware Scientific Columbus Co. Delaware Korry Electronics Co. Delaware Midcon Cables Co. Delaware TA Mfg. Co. California W.A. Whitney Co. Illinois Auxitrol Technologies S.A. France Auxitrol S.A. France
The above list excludes certain subsidiaries that in the aggregate would not constitute a significant subsidiary as of the fiscal year ended October 31, 1994. EX-23.1 7 EXHIBIT 23.1 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT ----------------------------- We consent to the incorporation by reference in Registration Statement No. 2-89293, No. 33-22321, No. 33-22322, No. 33-37134 and No. 33-52851 of Esterline Technologies Corporation on Form S-8 of our report dated December 5, 1994 appearing in this Annual Report on Form 10-K of Esterline Technologies Corporation for the year ended October 31, 1994. /s/ Deloitte & Touche LLP - ------------------------- Seattle, Washington January 25, 1995 EX-10.16D 8 EXHIBIT-10.16D 1 ESTERLINE TECHNOLOGIES CORPORATION EXHIBIT 10.16D ---------------------------------- LONG-TERM INCENTIVE COMPENSATION PLAN--CYCLE IV ----------------------------------------------- FISCAL YEARS 1994 through 1997 ------------------------------ PURPOSE OF PLAN --------------- This Plan is for the fiscal years 1994 through 1997 and is intended to provide a program to retain and compensate Esterline officers based on the long-term performance of Esterline Technologies. The Plan is designed to reward successful management employment of Esterline's resources to achieve superior performance, measured by: (1) continuous increase in Esterline earnings, and (2) increase in the long-term return on shareholders' equity. MEMBERSHIP IN PLAN ------------------ Esterline officers shall be eligible for membership in the Plan after appointment and return of a signed acceptance of the appointment letter specifying the member's award level. The Plan may be modified, amended or terminated at any time; but any such modification, amendment or termination shall not, without a member's written consent, affect his/her incentive compensation accrued prior to such modification, amendment or termination of the Plan. Nothing in this Plan limits Esterline from exercising the right to terminate an employee at any time for any reason. APPOINTMENTS AND PERFORMANCE TARGETS ------------------------------------ Each appointee to the Plan shall be entitled to incentive compensation based on Esterline's combined performance on two equally weighted specific criteria adjusted for relative industry performance of Esterline's "industry peer group" (see Exhibit 1). Additionally, if directed, the above computed awards for officers may be further adjusted, up or down, by the Compensation & Stock Option Committee of the Board of Directors by an amount not to exceed the greater of 25% of the computed award or target award, whichever is greater. 2 The industry peer group criteria are: A. Cumulative earnings per share for the four years ending ------------------------------------------------------- October 31, 1997, excluding any gains or losses from the -------------------------------------------------------- divestiture of any primary operating subsidiary. ------------------------------------------------ All earnings per share computations shall be adjusted for stock dividends, splits or reverse splits. The four-year earnings per share target is $5.66 if the average annualized growth rate achieved by Esterline's industry peer group is 9% to 13%. (See Attachment A for other targets for varying levels of industry peer group performance.) B. Average return on common shareholders' equity for the four ---------------------------------------------------------- years ending October 31, 1997. ------------------------------ The four-year mathematical average shall be based on each year's audited beginning and ending common shareholders' equity, excluding any amounts for any preferred shares. * The minimum return on equity criteria is three percentage points less than the four-year return on shareholders' equity of Esterline's industry peer group. * The target return on equity criteria is one percentage point more than the four-year return on shareholders' equity of Esterline's industry peer group. * The maximum return on equity criteria is four percentage points more than the four-year return on shareholders' equity of Esterline's industry peer group. No award will be earned for a target if the performance is less than minimum. No additional award will be earned for any performance above the maximum. Awards will be prorated for other performance levels. COMPUTATION OF FOUR-YEAR AWARDS ------------------------------- Esterline's performance is calculated relative to each performance target individually. Achievement of each criteria at the target level earns 100% of the individual's total award--50% for each performance target. (See Attachment B for award percentages at the target, less than minimum, minimum and maximum levels for each performance target.) Awards for performance between a target and its minimum or between a target and its maximum will be prorated. 3 BASIS FOR COMPUTATION OF PARTIAL PAYMENTS -----------------------------------------
Cumulative Four-Year Relative Earned Performance Performance Basis of Four-Year Award Level ------------------ ------------------------ Estimated based on 1/3 FY 1994 & 1995 Estimated based on FY 1994, 1995 & 1996 2/3
PAYMENT OF AWARDS ----------------- Payment shall be made at three intervals in the cycle. Partial payment shall be computed based on the latest estimate of the four-year outcome and shall be paid after completion of fiscal 1995 and 1996; these payments shall be made no later than March 1, 1996 and March 1, 1997, respectively. Final payment shall be made after completion of fiscal 1997, and no later than March 1, 1998. The amount of each payment, if any, shall be the amount earned for the cumulative performance for the cycle-to-date period less any amounts previously paid. Partial payments, once paid, are not refundable to Esterline Technologies. A Plan member must be an employee on October 31, 1995, 1996 or 1997 to receive payment related to that portion of the Cycle. However, if an employee's participation in the Plan is terminated during any Plan year due to normal retirement, death or disability, a pro rata share of his/her award will be determined after completion of fiscal 1997, and paid no later than March 1, 1998. In the case of death, payments shall be made to his/her estate. /s/ W. P. Hurlbut _____________________________________ W. P. Hurlbut Chairman, President and Chief Executive Officer 4 ATTACHMENT A ESTERLINE TECHNOLOGIES CORPORATION LONG-TERM INCENTIVE COMPENSATION PLAN--CYCLE IV ADJUSTMENTS FOR VARYING LEVELS OF INDUSTRY PEER GROUP PERFORMANCE EPS PERFORMANCE TARGETS(A)
Average Annual EPS Minimum EPS Maximum EPS Compounded EPS Growth Rate Performance Performance Performance of Industry Peer Group Targets Targets Targets - -------------------------- ----------- ----------- ----------- Less than 4% $4.66 $3.65 $6.37 4 - 9% 5.16 4.15 6.87 9 - 13%(B) 5.66 4.65 7.37 More than 13% 6.16 5.15 7.87
(A)As amended 12/6/94. (B)Esterline base EPS target. 5 EXHIBIT 1 ESTERLINE TECHNOLOGIES CORPORATION LONG-TERM INCENTIVE COMPENSATION PLAN--CYCLE IV INDUSTRY PEER GROUP Value Line Industry Group* --------------- Machine Tool Computer and Peripherals Electronics Aerospace/Defense *As reported by Value Line in their latest report at time of calculation of awards under the cycle. 6 ATTACHMENT B ESTERLINE TECHNOLOGIES CORPORATION LONG-TERM INCENTIVE COMPENSATION PLAN--CYCLE IV PERCENTAGE OF APPOINTEE'S AWARD EARNED AT VARYING LEVELS OF COMPANY PERFORMANCE
Performance Relative to % of Award % of Award Total % of Appointee's Target Level from ROE Target from EPS Target Award Earned - ------------ --------------- --------------- ---------------------- Less than Minimum 0% 0% 0% Minimum Level 12.5 12.5 25 Target Level 50 50 100 Maximum Level 100 100 200
EX-10.20B 9 EXHIBIT 10.20B 1 EXHIBIT 10.20B ESTERLINE TECHNOLOGIES CORPORATION ---------------------------------- CORPORATE MANAGEMENT INCENTIVE COMPENSATION PLAN ------------------------------------------------ FISCAL YEAR 1994 ---------------- PURPOSE OF PLAN - --------------- This Plan is intended to reward eligible officers and key employees of Esterline's corporate staff for successful management in fiscal year 1994. It is believed that the Plan will provide incentives to put forth maximum efforts to employ Esterline's assets effectively. MEMBERSHIP IN PLAN - ------------------ Officers and key employees of the Esterline corporate staff shall be eligible for membership in the Plan after appointment and return of a signed acceptance of the appointment letter. The Plan may be modified, amended or terminated at any time; but any such modification, amendment or termination shall not, without a member's written consent, affect his/her incentive compensation accrued prior to such modification, amendment or termination of the Plan. Nothing in this Plan limits Esterline from exercising the right to terminate an employee at any time for any reason. TERMS AND CONDITIONS - -------------------- 1. Individual participants payouts will vary from 10% to 60%, as stipulated in his/her appointment letter, of fiscal year-end salary. These target nomination awards will be earned if earnings per share of $1.00 are achieved. 2. Actual earnings per share will be as audited before extraordinary items for the year ending October 31, 1994. 3. Awards will be pro-rated for performance and will be interpolated on the following basis.
EPS Award --------------------- ------------------------------ Below $1.00 Pro-rata share of target award At $1.00 performance 100% of target award 120% or more of $1.00 150% of target award
4. Actual individual payouts earned from earnings per share computations are limited to 150% of target nomination. 2 5. If directed, computed awards for officers may be further adjusted, up or down, by the Compensation & Stock Option Committee of the Board of Directors by an amount not to exceed greater than 25% of the computed award or target award for the Plan, whichever is greater. 6. Payout of awards will be no later than March 1, 1995. 7. If a Plan member is terminated for any reason other than death or disability prior to the end of fiscal 1994, he/she shall not receive the benefits provided by the Plan. (However, Esterline retains the right to grant a pro-rata award to a terminated employee, based upon salary earned prior to termination, except those terminated for cause.) a. If the company in its sole discretion specifically determines that the employment of a Plan member has been terminated prior to the end of such fiscal year because of disability, the Plan member will be paid a pro-rata amount based on the time he/she was a Plan member prior to his/her termination for disability. b. For any Plan member who dies prior to the end of Esterline's fiscal 1994, a pro-rata amount based on the time he/she was a Plan member prior to the date of death will be paid to his/her estate. 8. An employee who becomes a Plan member as of a date after the beginning of Esterline's fiscal 1994 will be paid a pro-rata amount based on the time the employee participates in the Plan. /s/ W. P. Hurlbut - --------------------------- Wendell P. Hurlbut Chairman, President and Chief Executive Officer 3 ESTERLINE TECHNOLOGIES CORPORATION PAYOUT AS A % OF TARGET AWARD FOR VARIOUS EARNINGS PER SHARE CORPORATE MANAGEMENT FISCAL 1994 ANNUAL INCENTIVE COMPENSATION PLAN Payout as a % of Target Award The following is a narrative description of graphic material contained in the paper format document: The graph illustrates the appropriate payout under the Corporate Management Fiscal 1994 Annual Incentive Compensation Plan as a percent of target award for various earnings per share levels. Earnings per share ranging from $0.00 per share to $3.00 per share is depicted on the "x" axis. Payout as a percent of target award ranging from 0% to 160% is depicted on the "y" axis. At $0.00 earnings per share, payout is 0% of target award. At $1.00 earnings per share, payout is 100% of target award. Payouts on earnings per share levels between $0.00 earnings per share and $1.00 earnings per share are plotted on a straight line. At $1.20 earnings per share (120% of target earnings per share), payout is 150% of target award (the maximum payout possible under the plan). Payouts on earnings per share levels between $1.00 earnings per share and $1.20 earnings per share are also plotted on a straight line. - - EPS is before extraordinary items - - Payout based on audited results but no later than March 1, 1996 - - Awards will be pro-rated for performance and will be interpolated on the following basis.
EPS Award ------------------- ------------------------------ Below $1.00 Pro-rata share of target award At $1.00 performance 100% of target award 120% or more of $1.00 150% of target award
- - If directed, computed awards may be further adjusted, up or down, by the Compensation & Stock Option Committee of the Board of Directors by an amount not to exceed greater than 25% of the computed award or 25% of the target award for the Plan, whichever is greater. 4 ESTERLINE TECHNOLOGIES CORPORATION FORM 10-K REPORT FOR FISCAL YEAR ENDED October 31, 1994 APPENDIX -------- GRAPHIC AND IMAGE INFORMATION ----------------------------- Refer to narrative description of graphic material contained in Exhibit 10.20b to the above report, in accordance with Section 232.304 of Regulation S-T. EX-27 10 ARTICLE 5 FDS FOR ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED OCTOBER 31, 1994.
5 The schedule contains summary financial information extracted from the Esterline Technologies Corporation Consolidated Balance Sheet at October 31, 1994 and the related Consolidated Statement of Operations for the year then ended and is qualified in its entirety by reference to such financial statements. 1,000 OCT-31-1994 NOV-01-1993 OCT-31-1994 YEAR 9,076 0 65,886 2,201 31,673 119,312 145,673 94,070 215,975 108,770 41,714 0 0 1,302 64,189 215,975 294,044 294,044 178,397 178,397 100,845 0 5,985 8,817 1,254 7,563 0 0 0 7,563 1.15 1.15
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