<PAGE> 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, 1993 Commission file number 1-6357
ESTERLINE TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code 206/453-9400
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
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
</TABLE>
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 21, 1994, 6,512,641 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
$48,057,645.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Annual Report to Shareholders for Fiscal Year ended October 31,
1993--Parts I, II and IV.
Portions of Proxy Statement relating to the 1994 Annual Meeting of
Shareholders, to be held on March 30, 1994--Part III.
Page 1 of 81 pages
Exhibit index at page 24
<PAGE> 2
PART I
ITEM 1. BUSINESS
(a) General Development of Business.
Esterline Technologies Corporation (the "Company") conducts business
through 14 principal domestic and foreign subsidiaries in three business
segments described in sub-item (c) below. The Company was organized in August
1967.
On September 27, 1989 the Company acquired six commercial aerospace
and defense companies (The "Acquired Companies") from The Dyson-Kissner-Moran
Corporation and certain of its affiliates together with 1,946,748 shares of
common stock of Esterline (the "Shares"). The purchase price for the combined
transactions was $153 million, including expenses, plus assumption of $3.2
million in debt. $27 million of the purchase price was related to the purchase
of the Shares.
The Acquired Companies primarily are in the commercial aerospace and
defense industry and include Armtec Defense Products Co., Hytek Finishes Co.,
Midcon Cables Co., Republic Electronics Co. and TA Mfg. Co., which are in the
Company's Aerospace and Defense Group, and Korry Electronics Co., which is in
the Instrumentation Group. For additional discussion of the September 27, 1989
acquisition, see the Company's Form 8-K dated September 27, 1989 and the
amendment thereto on Form 8 dated November 22, 1989.
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 as a whole 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 provides for the consolidation of plants and product lines,
including employee severance, write-off of intangible assets which no longer
have value and the write-down and sale of two vacant facilities.
(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, 1993, 1992 and 1991 is incorporated herein by
reference to Note 12 to the Company's Consolidated Financial Statements on
pages 28 and 29 of the Annual Report to Shareholders for the fiscal year ended
October 31, 1993.
(c) Narrative Description of Business.
The Company consists of 14 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 1993 business
segments and operating units are set forth below.
<PAGE> 3
AUTOMATION GROUP
This Group produces and markets automated manufacturing equipment for
the printed circuit board 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 equipment for fabrication of
printed circuit boards for the electronics industry. Its products are
primarily drilling machines, driller/routers, programmers and editors, and
networking systems. Excellon's products emphasize productivity and are
designed to provide a highly efficient automated production system for printed
circuit board manufacturers. Excellon's latest development involves autoload
systems for its equipment which integrates multiple spindle microdrilling of
circuit boards with automatic board loading and unloading capabilities.
Excellon products are sold worldwide to the printed circuit board
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 1993, 1992 and 1991, printed circuit board drilling
equipment accounted for 16%, 12% and 12%, respectively, of the Company's
consolidated net sales.
Tulon produces tungsten carbide drill and router bits for use in
printed circuit board 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 heavier 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 has also developed machines for the lighter gauge
market which includes industries such as food service equipment, medical
equipment and computer manufacturers.
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 principally for a
manufacturer of high-speed assembly equipment for the printed circuit board
industry.
At October 31, 1993, the backlog of the Automation Group (of which
$600,000 is expected to be filled after fiscal 1994) was $9.2 million compared
with $14.8 million one year earlier. The decrease is primarily due to low
incoming order levels in recent months at Excellon Automation.
<PAGE> 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 warfare and radar
simulation equipment for both domestic and foreign defense agencies.
Armtec Defense Products manufactures molded fiber cartridge cases,
mortar increments 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 1993, 1992 and 1991, combustible ordnance components
accounted for 9%, 12% and 10%, respectively, of the Company's consolidated net
sales.
Auxitrol, headquartered in France, manufactures aviation and
industrial thermocouple-based products, 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 aircraft manufacturers, shipbuilders, petroleum
companies, process industries and electric utilities. During the year,
Auxitrol acquired the temperature and pressure sensing product lines of a
competitor increasing its market share, and added pressure sensing technology
to its product line. 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 complete 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 recently has installed 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 wiring harnesses for the military, government contractors and the
commercial electronics market, offering both product design services and
assembly of product to customer specifications.
Republic Electronics manufactures radar environmental simulators,
tactical air navigation (TACAN) test equipment, identification friend or foe
(IFF) interrogator test equipment, precision distance measuring equipment
(PDME) test set simulators, electronic warfare simulators, and related support
equipment for both U.S. and foreign commercial and military customers.
TA Mfg. designs and manufactures systems installation components such
as clamps, line blocks and brackets for airframe and engine manufacturers as
well as military and commercial airline aftermarkets. TA's products include
elastomers which are specifically formulated for various applications,
including high-temperature environments.
At October 31, 1993, the backlog of the Aerospace and Defense Group
(of which $9.2 million is expected to be filled after fiscal 1994) was $40.8
million, compared with $58.9 million one year earlier. The decrease occurred
primarily at Armtec Defense Products and Auxitrol and was due to the timing of
the receipt of orders at both companies coupled with reduced levels of U.S.
Army ordnance purchases.
<PAGE> 5
INSTRUMENTATION GROUP
This Group designs and manufactures a variety of sophisticated meters,
switches and indicators, panels and keyboards, gauges, control components, and
measurement and analysis equipment for public utilities, industrial
manufacturers, and suppliers and operators of commercial and military aircraft
components.
Angus Electronics manufactures recording instruments together with
other analytical and process 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.
Korry Electronics manufactures high-reliability, lighted
electromechanical components such as switches and indicators, and 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.
Korry established a sales office in France during the year.
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.
Federal Products manufactures a broad line of 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 manufactured 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 fiscal 1993, 1992 and 1991, gauge products manufactured by Federal
Products accounted for 13%, 13% and 12%, respectively, of the Company's
consolidated net sales.
At October 31, 1993, the backlog of the Instrumentation Group (of
which $4.6 million is expected to be filled after fiscal 1994) was $24.4
million compared with $23.9 million one year earlier.
<PAGE> 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. Republic Electronics' products are marketed domestically by
employees and abroad by 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 1993, approximately $14 million was expended for research,
development and engineering, compared with $13.4 million in 1992 and $16.6
million in 1991.
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, and sales and service operations of Excellon located
in England, Germany and Japan. 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 20, and Note 12
to the Consolidated Financial Statements on pages 28 and 29, of the Company's
Annual Report to Shareholders for the fiscal year ended October 31, 1993, which
is incorporated herein by reference.
EMPLOYEES
The Company and its subsidiaries had approximately 2,800 employees at
October 31, 1993, a decrease of approximately 300 employees from October 31,
1992.
<PAGE> 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. Patents and licenses which help
maintain a significant advantage over competition include the patents covering
a switch mechanism which Korry uses in its integrated panel product line, and 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 plasma torches, CNC controls and 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.
<PAGE> 8
ITEM 2. PROPERTIES
The following table summarizes the principal properties owned or
leased by the Company and its subsidiaries as of October 31, 1993:
<TABLE>
<CAPTION>
Approximate
Type of Number of Owned
Location Facility Square Feet or Leased
- -------- ------------------- ----------- ---------
<S> <C> <C> <C>
Coachella, CA Office and Plant (D) 108,000 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
Hauppauge, NY Office and Plant (D) 50,000 Owned
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) 149,000 Leased
Bourges, France Plant (D) 57,000 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
</TABLE>
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 44,000 square foot
facility in Torrance, CA and a 64,000 square foot facility in Nashua, NH are
owned by the Company and planned for sale. Liabilities have been accrued for
environmental remediation costs expected to be incurred in the disposition of
the Nashua 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.
<PAGE> 9
ITEM 3. LEGAL PROCEEDINGS
In late 1992, Korry Electronics received a subpoena for records from
the Department of Defense, Office of the Inspector General, and became aware of
a government investigation focusing on whether Korry properly certified that
certain switches used in military equipment were in compliance with applicable
specifications and testing standards. The Company has supplied records
requested in the subpoena and is engaged in discussions with government
officials. The investigation remains open, but the Company currently believes
that this matter will not have a material adverse affect on its financial
position or results of operations.
The Company has various lawsuits, claims, investigations 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.
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, 1993.
<PAGE> 10
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of all executive officers of the Company and the
positions and offices held by such persons as of January 21, 1994 are as
follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Wendell P. Hurlbut 62 Chairman of the Board, President and Chief Executive Officer
Robert W. Stevenson 54 Executive Vice President and Chief Financial
Officer, Secretary and Treasurer
Robert W. Cremin 53 Senior Vice President and Group Executive
Larry A. Kring 53 Group Vice President
Stephen R. Larson 49 Group Vice President
Lee Zuker 60 Group Vice President
Marcia J. M. Greenberg 41 Vice President, Human Relations
Harold S. Meden 65 Vice President, Corporate Development
Victor Thompson 59 Vice President and Controller
</TABLE>
Mr. Hurlbut has been Chairman of the Board, President and Chief
Executive Officer since January 1993. From February 1989 to December 1992, he
was President and Chief Executive Officer. From May 1988 to February 1989, he
was President and Chief Operating 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.
Mr. Zuker has been Group Vice President since March 1988.
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.
Mr. Meden has been Vice President, Corporate Development since October
1987.
Mr. Thompson has been Vice President and Controller since October 1987.
<PAGE> 11
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 1993 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, 1993 and 1992, respectively (page 15 of the Annual
Report to Shareholders).
(b) The approximate number of holders of common stock (page 15 of
the Annual Report to Shareholders).
(c) Restrictions on the ability to pay future cash dividends (Note
4 to Consolidated Financial Statements, pages 21 and 22 of the
Annual Report to Shareholders).
No cash dividends were paid during the fiscal years ended October 31,
1993 and 1992 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 15 of the Company's Annual Report to
Shareholders for fiscal 1993.
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 12, 13 and 14 of the Company's Annual Report to Shareholders for
fiscal 1993.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company hereby incorporates by reference the Consolidated
Financial Statements and the report thereon of Deloitte & Touche, dated
December 17, 1993, which appear on pages 16 - 31 of the Company's Annual Report
to Shareholders for fiscal 1993, including Note 13, page 30, which contains
unaudited quarterly financial data.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE> 12
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
30, 1994, to be filed with the Securities and Exchange Commission and the New
York Stock Exchange on or before February 10, 1994.
(b) Executive Officers.
Information concerning the Company's executive officers may be found
in Part I of this Report following Item 4.
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
30, 1994, to be filed with the Securities and Exchange Commission and the New
York Stock Exchange on or about February 10, 1994.
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
30, 1994, to be filed with the Securities and Exchange Commission and the New
York Stock Exchange on or about February 10, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
<PAGE> 13
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, dated December 17, 1993, appearing on
pages 16 - 31 of the Company's Annual Report to Shareholders for fiscal 1993,
are hereby incorporated by reference:
<TABLE>
<CAPTION>
Annual Report
Page Number
-------------
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . 31
Consolidated Balance Sheet--October 31, 1993 and 1992 . . . . 17
Consolidated Statement of Operations--Years ended
October 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . 16
Consolidated Statement of Shareholders' Equity--Years ended
October 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . 19
Consolidated Statement of Cash Flows--Years ended
October 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . 18
Notes to Consolidated Financial Statements . . . . . . . . . . 20 - 30
(a) (2) Financial Statement Schedules.
</TABLE>
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, 1993:
Independent Auditors' Report
Schedule V -- Property, Plant and Equipment
Schedule VI -- Accumulated Depreciation of Property, Plant
and Equipment
Schedule VIII -- Valuation and Qualifying Accounts and Reserves
Schedule IX -- Short-Term Borrowings
Schedule X -- Supplementary Income Statement Information
<PAGE> 14
(a) (3) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
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.)
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.)
10.2 Asset Purchase Agreement dated September 8, 1989 relating to the purchase by Esterline of the
Acquired Companies. (Incorporated by reference to Exhibit 2.1 to Form 8-K dated September
27, 1989).
10.3 Stock Purchase Agreement dated September 8, 1989 relating to the purchase by Esterline of shares
of its common stock from a group of affiliated shareholders. (Incorporated by reference
to Exhibit 2.2 to Form 8-K dated September 27, 1989.)
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
10.4 Industrial Lease dated July 17, 1984 between Dexter Avenue 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.)
10.5 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.)
10.7 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.
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.)
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.
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
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 1994 Annual Meeting of Shareholders to be held on March 30, 1994, to be
filed with the Securities and Exchange Commission and the New York Stock Exchange on or
before February 10, 1994.)
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, 1993.
13 Annual Report to Shareholders for the fiscal year ended October 31, 1993. (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.
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.)
10.16a Esterline Corporation Long-Term Incentive Compensation Plan, Fiscal Years 1990 through
1993, as amended September 1991. (Incorporated by reference to Exhibit 10.16a to 10-K
Report for the fiscal year ended October 31, 1992.)
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.
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Exhibit
Number Management Contracts or Compensatory Plans or Arrangements
------ ----------------------------------------------------------
<S> <C>
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.)
10.20a Esterline Technologies Corporation Corporate Management Incentive Compensation Plan for
fiscal year 1993.
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of fiscal
1993.
<PAGE> 18
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 31, 1994
-----------------
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.
<TABLE>
<S> <C> <C>
/s/ Wendell P. Hurlbut January 31, 1994
- ---------------------- Director, Chairman of the ----------------
(Wendell P. Hurlbut) Board, President and
Chief Executive Officer
(Principal Executive
Officer)
/s/ Robert W. Stevenson January 31, 1994
- ----------------------- Executive Vice President ----------------
(Robert W. Stevenson) and Chief Financial
Officer, Secretary and
Treasurer (Principal
Financial and Accounting
Officer)
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C>
/s/ Gilbert W. Anderson Director January 31, 1994
- ----------------------- ----------------
(Gilbert W. Anderson)
/s/ John F. Clearman Director January 31, 1994
- -------------------- ----------------
(John F. Clearman)
/s/ Edwin I. Colodny Director January 31, 1994
- -------------------- ----------------
(Edwin I. Colodny)
/s/ Edward H. Cooley Director January 31, 1994
- -------------------- ----------------
(Edward H. Cooley)
/s/ E. John Finn Director January 31, 1994
- ---------------- ----------------
(E. John Finn)
/s/ Robert F. Goldhammer Director January 31, 1994
- ------------------------ ----------------
(Robert F. Goldhammer)
/s/ Jerome J. Meyer Director January 31, 1994
- ------------------- ----------------
(Jerome J. Meyer)
/s/ Paul G. Schloemer Director January 31, 1994
- --------------------- ----------------
(Paul G. Schloemer)
/s/ Malcolm T. Stamper Director January 31, 1994
- ---------------------- ----------------
(Malcolm T. Stamper)
</TABLE>
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Esterline Technologies Corporation
Bellevue, Washington
We have audited the financial statements of Esterline Technologies Corporation
as of October 31, 1993 and 1992, and for each of the three years in the period
ended October 31, 1993, and have issued our report thereon dated December 17,
1993; such financial statements and report are included in your 1993 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
- ----------------------
Deloitte & Touche
Seattle, Washington
December 17, 1993
<PAGE> 21
ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
(in thousands)
For Years Ended October 31, 1993 and 1992
<TABLE>
<CAPTION>
Balance at Retirements Balance at
Classification October 31, 1992 Additions and Other (1) October 31, 1993
- -------------- ---------------- --------- ------------- ----------------
<S> <C> <C> <C> <C>
Land $ 6,905 $ -- $ (2,072) $ 4,833
Buildings 49,365 878 (5,926) 44,317
Machinery and Equipment 90,418 8,678 (7,355) 91,741
-------- ------- --------- --------
$146,688 $ 9,556 $ (15,353) $140,891
======== ======= ========== ========
</TABLE>
<TABLE>
<CAPTION>
Balance at Retirements Balance at
Classification October 31, 1991 Additions and Other October 31, 1992
- -------------- ---------------- --------- ------------- ----------------
<S> <C> <C> <C> <C>
Land $ 8,281 --- $ (1,376) $ 6,905
Buildings 52,140 1,014 (3,789) 49,365
Machinery and Equipment 87,978 9,748 (7,308) 90,418
-------- -------- -------- --------
$148,399 $10,762 $(12,473) $146,688
======== ======= ======== ========
</TABLE>
(1) Includes the related effects of the FY 1993 restructuring.
ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(in thousands)
For Years Ended October 31, 1993 and 1992
<TABLE>
<CAPTION>
Additions
Balance at Charged Retirements Balance at
Classification October 31, 1992 to Income and Other October 31, 1993
- -------------- ---------------- ---------- -------------- ----------------
<S> <C> <C> <C> <C>
Buildings $ 19,172 $ 2,091 $ (302) $ 20,961
Machinery and Equipment 55,694 11,668 (3,997) 63,365
-------- ------- -------- --------
$ 74,866 $13,759 $ (4,299) $ 84,326
======== ======= ======== ========
Additions
Balance at Charged Retirements Balance at
Classification October 31, 1992 to Income and Other October 31, 1993
- -------------- ---------------- ---------- -------------- ----------------
Buildings $ 18,248 $ 2,126 $ (1,202) $ 19,172
Machinery and Equipment 49,524 11,913 (5,743) 55,694
-------- ------- -------- --------
$ 67,772 $14,039 $ (6,945) $ 74,866
======== ======= ======== ========
</TABLE>
<PAGE> 22
ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands)
For Years Ended October 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Deduction for
Balance at Additions Purpose for Balance
Beginning Charged which Reserve at End
Description of Year to Income was Created of Year
----------- ---------- ----------- -------------- -------
<S> <C> <C> <C> <C>
Reserve for doubtful
accounts receivable
Year Ended October 31
---------------------
1993 $2,314 $ 668 $(565) $2,417
====== ====== ===== ======
1992 $2,078 $ 916 $(680) $2,314
====== ====== ===== ======
1991 $2,308 $ 621 $(851) $2,078
====== ====== ===== ======
Restructuring reserves related to
accounts receivable and inventory
Year Ended October 31
- ---------------------
1993 $ --- $3,890 $ --- $3,890
====== ====== ====== ======
1992 $ --- $ --- $ --- $ ---
====== ====== ====== ======
1991 $ --- $ --- $ --- $ ---
====== ====== ====== ======
</TABLE>
<PAGE> 23
ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
(in thousands)
<TABLE>
<CAPTION>
October 31, 1993 Year Ended October 31, 1993
----------------------------- ---------------------------------------------------
Weighted Maximum Average Weighted
Balance Average Amount Amount Average
Category Outstanding Interest Rate Outstanding Outstanding(3) Interest Rate(4)
-------- ----------- ------------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Domestic banks (1) $ --- N/A $ 3,500 $ 400 6.6%
Foreign banks (2) 5,157 8.8% 5,200 3,700 9.5%
------
$5,157
======
</TABLE>
<TABLE>
<CAPTION>
October 31, 1992 Year Ended October 31, 1992
----------------------------- ---------------------------------------------------
Weighted Maximum Average Weighted
Balance Average Amount Amount Average
Category Outstanding Interest Rate Outstanding Outstanding(3) Interest Rate(4)
-------- ----------- ------------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Domestic banks (1) $ --- N/A $12,000 $6,700 6.6%
Foreign banks (2) 2,843 10.1% 5,600 4,300 11.7%
-------
$2,843
======
</TABLE>
(1) Borrowings are under a line of credit of $35 million.
(2) Borrowings are made by foreign subsidiaries from a number of banks
located in countries in which the subsidiaries have operations.
(3) Determined by averaging the borrowings outstanding at each month-end
during the fiscal year.
(4) Determined by averaging interest rates at each month-end during the
fiscal year.
ESTERLINE TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SCHEDULE X-- SUPPLEMENTARY INCOME STATEMENT INFORMATION
(in thousands)
The following items have been charged to costs and expenses as stated:
<TABLE>
<CAPTION>
For the Years Ended October 31,
-------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs $3,816 $4,493 $4,942
Amortization of intangibles
and other assets 5,500 5,784 5,501
</TABLE>
The following items have been charged to costs and expenses but do not
individually exceed one per cent of net sales:
Taxes, other than payroll and income taxes
Royalties
Advertising costs
<PAGE> 24
ESTERLINE TECHNOLOGIES CORPORATION
Form 10-K Report for Fiscal Year Ended
October 31, 1993
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page No.
------ ------- --------
<S> <C> <C>
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.)
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page No.
------ ------- --------
<S> <C>
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.)
10.2 Asset Purchase Agreement dated September 8, 1989
relating to the purchase by Esterline of the
Acquired Companies. (Incorporated by reference
to Exhibit 2.1 to Form 8-K dated September 27,
1989.)
10.3 Stock Purchase Agreement dated September 8, 1989
relating to the purchase by Esterline of shares
of its common stock from a group of affiliated
shareholders. (Incorporated by reference to
Exhibit 2.2 to Form 8-K dated September 27, 1989.)
10.4 Industrial Lease dated July 17, 1984 between Dexter
Avenue 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.)
10.5 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.)
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page No.
------ ------- --------
<S> <C> <C>
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. 29
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
10Q Report for the quarter ended July 31, 1992.)
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. 39
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page
------ ------- ---
<S> <C> <C>
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 1994 Annual Meeting of
Shareholders to be held on March 30, 1994,
to be filed with the Securities and Exchange
Commission and the New York Stock Exchange
on or before February 10, 1994.)
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, 1993. 54
13 Annual Report to Shareholders for the fiscal
year ended October 31, 1993. (Not filed as
part of this Report except for those portions
thereof incorporated by reference herein.) 56
21 List of subsidiaries. 79
23.1 Consent of Deloitte & Touche. 80
</TABLE>
<TABLE>
<CAPTION>
Exhibit Management Contracts or Compensatory Plans
Number or Arrangements Page
- ------ ------------------------------------------ ----
<S> <C> <C>
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.)
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit Management Contracts or Compensatory Plans
Number or Arrangements Page
- ------ ------------------------------------------ ----
<S> <C> <C>
10.16a Esterline Corporation Long-Term Incentive
Compensation Plan, Fiscal Years 1990
through 1993, as amended September 1991.
(Incorporated by reference to Exhibit
10.16a to 10-K Report for the fiscal year
ended October 31, 1992.)
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. 46
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.)
10.20a Esterline Technologies Corporation Corporate
Management Incentive Compensation Plan for
fiscal year 1993. 51
</TABLE>
<PAGE> 1
CONFORMED COPY
AMENDMENT
THIS AMENDMENT is dated as of October 31, 1993 (hereinafter referred
to as this "Amendment") entered into by and among ESTERLINE TECHNOLOGIES
CORPORATION, a Delaware corporation (hereinafter referred to as "Esterline");
the Subsidiaries (this and other capitalized terms used hereinafter having the
meaning assigned thereto in the Credit Agreement referred to below) listed on
the signature pages hereof, the financial institutions listed on the signature
pages hereto (such financial institutuions being hereinafter collectively
called the "Banks" and individually called a "Bank"), and CONTINENTAL BANK N.A.
("Continental") as agent for the Banks (in such capacity, together with any
successor in such capacity, the "Agent").
BACKGROUND:
A. Esterline and certain of its Subsidiaries (herein called the
"Original Companies"), the Banks and the Agent have entered into that certain
Amended and Restated Credit Agreement, executed as of January 25, 1991 and
dated and effective as of September 18, 1989 and heretofore amended (as so
amended, the "Original Credit Agreement"). The Original Credit Agreement was
an amendment and restatement of that certain Credit Agreement dated as of
September 18, 1989 (the "1989 Credit Agreement") among the Original Companies,
the Banks and the Agent.
B. The Companies desire to further amend the Original Credit
Agreement so as to, among other things, revise certain covenants and the
commitments of the Banks.
C. The Banks and the Agent are willing to agree to such amendments on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the covenants
and conditions contained herein and for other good and valuable consideration
(the receipt of which is hereby acknowledged), the parties hereto, intending
legally to be bound, agree as follows:
SECTION 1. New Definition.
The following new defined term is hereby added to Appendix X to the
Original Credit Agreement, to be placed in the proper alphabetical order:
"Restructuring Charge" shall mean the restructuring provision
(in the amount of $40,626,000) shown in the consolidated statement of
operations for Esterline and its
<PAGE> 2
Subsidiaries dated as of October 31, 1993, a copy of which has been
delivered to each Banks.
SECTION 2. Amendments to Definitions.
The following defined terms in Appendix X to the Original Credit
Agreement are hereby amended and restated in their entireties to read as
follows:
"Consolidated Income Available for Fixed Charges" shall mean
for any period, the sum of (i) Consolidated Net Income for such
period, plus (to the extent deducted in determining Consolidated Net
Income), (ii) all provisions for any federal, state, or other income
taxes made by Esterline and its Subsidiaries during such period, (iii)
Fixed Charges for such period, (iv) amortization during such period of
goodwill and intangibles resulting solely from Esterline's acquisition
on September 27, 1989 of six Criton Technologies operating companies
from The Dyson-Kissner-Moran Corporation, and (v) the Restructuring
Charge.
"Funded Debt" shall mean (x) the consolidated Ratio
Indebtedness of Esterline and its Subsidiaries, determined in
accordance with generally accepted accounting principles, owed or
guaranteed which by its terms matures more than one year from the date
of creation (including any portion thereof payable within a year) or
which may be renewed or extended at the option of the obligor for more
than one year from such date whether or not theretofore renewed or
extended, excluding Ratio Indebtedness which may be payable on demand
(or within one year of creation) but which is incurred or issued under
a revolving credit or similar agreement providing for borrowings (or
renewables or extendibles) over a period of more than one year, unless
such Ratio Indebtedness is required to be reflected on the balance
sheet of the obligor as Funded Debt by generally accepted accounting
principles, and (y) the consolidated Ratio Indebtedness of Esterline
and its Subsidiaries, determined in accordance with generally accepted
accounting principles, owed or guaranteed which by its terms matures
less than one year from the date of creation unless (during the
Adjusted Twelve-Month Period with respect to which Funded Debt is
being calculated) there shall have been a period of 60 consecutive
days during which no such Ratio Indebtedness was outstanding.
"Interest Coverage Ratio" shall mean, as of any End Date, the
ratio of (x) the excess of (i) Consolidated Net Income determined
without deducting interest, depreciation, amortization, tax expense
and (if applicable) the Restructuring Charge for the Adjusted
Twelve-Month Period
<PAGE> 3
ending on such End Date, over (ii) Capital Expenditures made by
Esterline and the Subsidiaries during such Adjusted Twelve-Month
Period, to (y) Interest Outlay for such Adjusted Twelve-Month Period.
"EBIT/I Ratio" shall mean, as of any End Date, the ratio (x)
consolidated Net Income of Esterline and the Subsidiaries determined
without deducting interest and tax expense for the Adjusted Twelve
Month Period ending on such End Date, to (y) Interest Outlay for such
Adjusted Twelve Month Period; provided, however, for purposes of
calculating the Original Margins under Section 3.2 and the Letter of
Credit Fee pursuant to Section 4.4 with respect to any Adjusted
Twelve-Month Period that includes Esterline's fourth fiscal quarter of
1993, Consolidated Net Income of Esterline and the Subsidiaries shall
be determined without deducting interest and tax expense for the
Adjusted Twelve-Month Period ending on the relevant End Date and
without deducting the Restructuring Charge.
Section 3. Reduction of Facility A Commitments. The Banks
acknowledge that the Facility A Borrowers have permanently reduced the
aggregate amount of the Facility A Commitments to $35,000,000.
Section 4. Amendment to Net Worth Covenant. The first sentence of
Section 10.5(a) of the Original Credit Agreement shall be amended and restated
(except with respect to any period ending prior to the date hereof) in its
entirety to read as follows:
Not permit Adjusted Consolidated Net Worth to be less than the
greater of (x) the Net Worth Minimum (as defined in the next
sentence), and (y) the sum of $41,300,000 plus 50% of Consolidated Net
Income (without reduction for losses) from and including the first day
following the October, 1990 End Date to the date of calculation.
The second sentence of Section 10.5(a) of the Original Credit Agreement is
amended by deleting the figure "77,000,000" where it appears in clause (v)
thereof, and substituting therefor the figure "$49,800,000" and by deleting the
figure "$80,000,000" where it appears in clause (vi) thereof, and substituting
therefor the figure "$52,800,000".
SECTION 5. Senior Note Agreement Amendment. The Banks waive Section
10.30 of the Original Credit Agreement to the extent necessary to permit the
Companies to execute and deliver an amendment to the Senior Note Agreement
substantially in the form of Schedule I hereto.
SECTION 6. Assignments Commitments. The Parties acknowledge that
effective immediately prior to the effectiveness
<PAGE> 4
hereof, (i) National Canada Corporation has assigned all of its rights and
obligations under the Original Credit Agreement to Seafirst Bank, and (ii)
Pittsburgh National Bank has assigned all of its rights and obligations under
the Original Credit Agreement to Continental Bank, N.A. Each such Bank agrees
to enter into such assignment documents as the Agent shall direct to cause the
Commitments and outstanding Loans held by each Bank to reflect it adjusted
Percentages.
SECTION 7. Conditions Precedent. This Amendment shall be effective
from and after the later of (i) December 17, 1993 or (ii) the date upon which
all of the conditions precedent specified below have been satisfied (the
"Effective Date"); provided, however, the amendments referencing any time
period shall only be effective as to such periods commencing on or after the
Effective Date. The conditions precedent are:
(a) The Remaining Companies shall have paid to the Agent, for
the account of each Bank, an amendment fee equal to one quarter of one
percent on such Bank's Commitments.
(b) The representations and warranties of the companies set
forth in Section 8 shall be true and correct, and the Agent shall have
received the certificate of an appropriate officer of Esterline to the
effect that such representations and warranties are true and correct.
(c) All documents executed or submitted pursuant hereto by or
on behalf of the companies shall be satisfactory in form and substance
to the Agent and each Bank, and the Agent shall have received all
other information, documents, and instruments as any Bank shall have
reasonably requested.
SECTION 8. Representations and Warranties. Each of the Companies
represents and warrants to the Banks that:
(a) The execution and delivery by it of this Amendment, and
the performance of its obligations under the Original Credit Agreement
as amended by this Amendment (as so amended, the "Amended Agreement"),
are within its corporate powers, have been duly authorized by all
necessary corporate action, have received all necessary governmental
approvals (if any shall be required) and other consents or approvals
and do not and will contravene or conflict with, or create a lien
under, (i) any provision of law, (ii) its constituent documents, (iii)
any court or administrative degree applicable to it, or (iv) any
contractual restriction binding upon it or its property.
<PAGE> 5
(b) This Amendment has been duly executed and delivered by
it, and the Amended Agreement is its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
(c) The warranties of the Companies set forth in the Original
Credit Agreement are true and correct as of the date hereof, except to
the extent that such warranties specifically relate to an earlier
date.
(d) After giving effect to this Amendment, no Event of
Default or Unmatured Event of Default shall have occurred and be
continuing.
SECTION 9. Miscellaneous.
(a) Section captions used in this Amendment are for
convenience only, and shall not affect the construction of this
Amendment.
(b) This Amendment shall be a contract made under and
governed by the internal laws of the State of Illinois without regard
to conflict of law principles.
(c) This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same amendment.
(d) Any reference to the Original Credit Agreement or the
1989 Credit Agreement contained in any notice, request, certificate or
other document executed concurrently with or after the Effective Date
shall be deemed to be a reference to the Amended Agreement. Except as
expressly modified hereby, the Loan Documents are hereby ratified and
confirmed by the Companies. The Amended Agreement and the other Loan
Documents remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute this Amendment as of the day and year first
above written.
<PAGE> 6
CONTINENTAL BANK N.A.
as Agent and individually
By: /s/ Elizabeth M. Nolan
-------------------------------
Name: Elizabeth M. Nolan
-----------------------------
Its: Vice President
ESTERLINE TECHNOLOGIES CORPORATION
By: /s/ Robert W. Stevenson
-------------------------------
Robert W. Stevenson
Its: Executive Vice President
ARMTEC DEFENSE PRODUCTS CO.
By: /s/ Robert W. Stevenson
------------------------------
Robert W. Stevenson
Its: Vice President
AUXITROL U.S.A., INC.
By: /s/ Robert W. Stevenson
-------------------------------
Robert W. Stevenson
Its: Vice President
AUXITROL CO.
By: /s/ Robert W. Stevenson
-------------------------------
Robert W. Stevenson
Its: Vice President
EQUIPMENT SALES CO.
By: /s/ Robert W. Stevenson
-------------------------------
Robert W. Stevenson
Its: Vice President
<PAGE> 7
ANGUS ELECTRONICS CO.
By: /s/ Robert W. Stevenson
-------------------------------
Robert W. Stevenson
Its: Vice President
EXCELLON AUTOMATION CO.
By: /s/ Robert W. Stevenson
-------------------------------
Robert W. Stevenson
Its: Vice President
EXCELLON U.K.
By: /s/ Robert W. Stevenson
-------------------------------
Robert W. Stevenson
Its: Vice President
FEDERAL PRODUCTS CO.
By: /s/ Robert W. Stevenson
-------------------------------
Robert W. Stevenson
Its: Vice President
FEDERAL PRODUCTS U.K. LTD.
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: Vice President
H.A. SALES CO., formerly known as
HOLLIS AUTOMATION CO.
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: President
<PAGE> 8
HYTEK FINISHES CO.
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: Vice President
KORRY ELECTRONICS CO.
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: Vice President
MIDCON CABLES CO.
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: Vice President
REPUBLIC ELECTRONICS CO.
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: Vice President
TA MFG. CO.
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: Vice President
TULON CO.
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: Vice President
<PAGE> 9
W.A. WHITNEY CO
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: Vice President
SCIENTIFIC COLUMBUS CO., formerly
known as JEMTEC ELECTCRONICS CO.
By: /s/ Robert W. Stevenson
-----------------------------
Robert W. Stevenson
Its: Vice President
NATIONAL CANADA CORPORATION
By:
----------------------------
Its:
...---------------------------
U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION
By: /s/ Mathew S. Thoreson
-----------------------------
Its: Vice President
-----------------------------
THE BANK OF TOKYO, LTD.
By: /s/ M. Tomi
-----------------------------
Its: General Manager
-----------------------------
FIRST INTERSTATE BANK OF
WASHINGTON, N.A.
By: /s/ Louise A. Kapustka
-----------------------------
Its: Vice President
-----------------------------
<PAGE> 10
PNC BANK, NATIONAL ASSOCIATION formerly
PITTSBURGH NATIONAL BANK
By: /s/ J. Gregory Seibly
-----------------------------
Its: Vice President
-----------------------------
SEAFIRST BANK
By: /s/ Kevin S. Berry
-----------------------------
Its: Vice President
-----------------------------
<PAGE> 1
ESTERLINE TECHNOLOGIES CORPORATION
ANGUS ELECTRONICS CO.
ARMTEC DEFENSE PRODUCTS CO.
AUXITROL CO.
AUXITROL U.S.A., INC.
EQUIPMENT SALES CO.
EXCELLON AUTOMATION CO.
EXCELLON U.K.
FEDERAL PRODUCTS CO.
FEDERAL PRODUCTS U.K. LTD.
H. A. SALES CO.
HYTEK FINISHES CO.
SCIENTIFIC COLUMBUS CO.
KORRY ELECTRONICS CO.
MIDCON CABLES CO.
REPUBLIC ELECTRONICS CO.
TA MFG. CO.
TULON CO.
W.A. WHITNEY CO.
AMENDMENT TO NOTE AGREEMENT
Re:
$40,000,000 Original Principal Amount of
8.75% Senior Notes Due July 30, 2002
Dated as of
October 31, 1993
The Northwestern Mutual Life
Insurance Company
New England Mutual Life
Insurance Company
Ladies and Gentlemen:
Reference is made to the Note Agreement dated as of July 15, 1992 (the
"Note Agreement") between Esterline Technologies Corporation, a Delaware
corporation (the "Company"); and Angus Electronics Co., a Delaware corporation;
Armtec Defense Products Co., a Delaware corporation, Auxitrol Co., a Delaware
corporation; Auxitrol U.S.A., Inc., a Delaware corporation; Equipment Sales
Co., a Connecticut corporation; Excellon Automation Co., a California
corporation; Excellon U.K., a California corporation; Federal Products Co., a
Delaware corporation; Federal Products U.K. Ltd., a Delaware corporation; H. A.
Sales Co.
<PAGE> 2
(formerly known as Hollis Automation Co.), a Delaware corporation; Hytek
Finishes Co., a Delaware corporation; Scientific Columbus Co. (formerly known
as Jemtec Electronics Co.), a Delaware corporation; Korry Electronics Co., a
Delaware corporation; Midcon Cables Co., a Delaware corporation; Republic
Electronics Co., a Delaware corporation; TA Mfg. Co., a California corporation;
Tulon Co., a California corporation; W.A. Whitney Co., an Illinois corporation
(each of the foregoing being a direct or indirect Subsidiary of the Company and
hereinafter referred to individually as a "Co-Obligor" and collectively as
"Co-Obligors"), and you (the "Holders") pursuant to which the Company and the
Co-Obligors issued $40,000,000 original principal amount of their 8.75% Senior
Notes. Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to such terms in the Note Agreement.
In consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which are acknowledged by the
Holders, the Company and the Co-Obligors request an amendment of certain terms
of the Note Agreement as hereinafter provided.
SECTION 1. AMENDMENTS.
1.1. The definition of "Consolidated Net Income" in Section 5.1 of
the Note Agreement is amended to add at the end: "Notwithstanding the
foregoing, the Company's $27,200,000 after tax charge taken in fiscal year 1993
shall be deemed to be excluded from the definition of Consolidated Net Income"
and to read in its entirety as follows:
"Consolidated Net Income. For any period, the consolidated net income
(or deficit) of the Company and its Subsidiaries after deducting, without
duplication, all operating expenses, provisions for all taxes and reserves
(including reserves for deferred income taxes) and all other proper deductions,
all determined in accordance with generally accepted accounting principles and
after deducting portions of income properly attributable to outside minority
interests, if any, in Subsidiaries; provided, however, that there shall be
excluded (i) any income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary or merges into or consolidates with the Company or another
Subsidiary, (ii) the income (or deficit) of any Person (other than a
Subsidiary) in which the Company or any Subsidiary has any ownership interest,
except to the extent that any such income has been actually received by the
Company or such Subsidiary in the form of cash dividends or similar
distributions, (iii) the aggregate gains or losses during such period arising
from the sale, exchange or other distribution of any fixed or capital assets
(including any inventory sold in conjunction therewith) or securities outside
the ordinary course of business and (iv) any gains or losses, or other income,
properly classified as extraordinary, nonrecurring or unusual in accordance
with generally accepted accounting principles. Notwithstanding the foregoing,
the Company's $27,200,000 after tax charge taken in fiscal year 1993 shall be
deemed to be excluded from the definition of Consolidated Net Income."
1.2. Section 7.1 of the Note Agreement is amended to change the
$70,000,000 therein to "$42,800,000" and to read in its entirety as follows:
"Adjusted Net Worth. Each of the Company and the Co-Obligors will not
permit Adjusted Consolidated Net Worth at any time to be less than $42,800,000
plus the cumulative
<PAGE> 3
sum of 50% of Consolidated Net Income (without reduction
for any losses) for each of the fiscal quarters ending after October 31, 1991."
SECTION 2. REPRESENTATIONS AND WARRANTIES.
To induce the Holders to enter into this Amendment to Note Agreement,
the Company and the Co-Obligors, jointly and severally, represent and warrant
to the Holders that:
2.1. Accuracy of Note Agreement. The representations and
warranties set forth in Section 3.1 of the Note Agreement are correct and
complete on the date hereof as if made on and as of the date hereof and there
exists no Event of Default, or event which with notice or lapse of time or both
would constitute an Event of Default, on the date hereof, except any Event of
Default or any such event that required the amendments set forth in Section 1.
2.2. Authorization. The execution and delivery by the Company and
the Co-Obligors of this Amendment to Note Agreement and consummation of the
transactions contemplated hereby have been duly authorized by the Company and
the Co-Obligors by all necessary corporate action and this Amendment to Note
Agreement, and the Note Agreement constitute legal, valid and binding
obligations of the Company and the Co-Obligors enforceable against the Company
and the Co-Obligors in accordance with their respective terms, except to the
extent that enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles, regardless of whether enforcement is sought in equity or
at law.
2.3. No Conflict. Neither the execution and delivery by the
Company and the Co-Obligors of this Amendment to Note Agreement nor compliance
with the provisions hereof will violate any provisions of any law or
regulation, or order, writ, judgment, injunction, decree or award of any court,
governmental authority or agency binding on the Company or the Co-Obligors and
will not result in any breach of any of the provisions of, or constitute a
default under, or result in the creation of any Lien on any property of the
Company or any Subsidiary under the provisions of, any charter document,
by-law, loan agreement or other agreement or instrument to which the Company or
any Subsidiary is a party or by which any of them or their property may be
bound.
2.4. Credit Agreement. The Credit Agreement, as amended on the
effective date hereof consistent with the changes set forth in this Amendment
to Note Agreement, does not contain any covenants or other provisions that are
more restrictive on the Company and the Subsidiaries than the Credit Agreement
as amended and in effect on August 6, 1992, and the only fees, commissions or
other charges paid by the Company or any Subsidiary to the Financial
Institutions that are parties thereto or to Continental Bank N. A. in
connection with the current amendment are a commitment fee to such Financial
Institutions in the aggregate amount of $87,500 (being 1/4 of 1% of the revised
amount committed by such Financial Institutions for the Facility A Loans under
the Credit Agreement, as amended) and an advisory fee to Continental Bank, N.A.
<PAGE> 4
SECTION 3. EFFECTIVE DATE.
This Amendment to Note Agreement shall become effective as of the date
first above written upon satisfaction of the following conditions:
(a) The Holders shall have received a counterpart of this
Amendment to Note Agreement duly executed by the Company and the Co-Obligors;
and
(b) The Holders shall have received a certificate of the
Secretary or an Assistant Secretary of the Company (i) as to the resolutions,
copies of which shall be attached thereto, of the Board of Directors of the
Company and the Co-Obligors authorizing this Amendment to Note Agreement and
the transactions contemplated hereby and (ii) as to the incumbency and
signatures of the officers signing this Amendment to Note Agreement and any
other documents delivered in connection herewith.
(c) The Holders shall have received a copy of the Credit
Agreement, as amended on the date hereof consistent with the changes set forth
in this Amendment to Note Agreement.
(d) The Holders shall have received a fee in the
aggregate amount of $100,000 (being 1/4 of 1% of the outstanding principal
amount of the Notes), to be allocated pro rata to the Holders.
SECTION 4. MISCELLANEOUS.
4.1. Ratification. The terms and provisions of the Note Agreement,
except to the extent amended hereby, shall remain in full force and effect and
are ratified, confirmed and approved in all respects.
4.2. Expenses. The Company and the Co-Obligors shall pay all
reasonable fees, expenses, costs and charges, including the reasonable fees and
expenses of Gardner, Carton & Douglas, your special counsel, incurred by you
incident to the proceedings in connection with this Amendment to Note
Agreement.
4.3. Successors and Assigns. This Amendment to Note Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns.
4.4. Governing Law. This Amendment to Note Agreement shall be
governed by and construed in accordance with the laws of the State of Illinois.
4.5. Counterparts. This Amendment to Note Agreement may be
executed in one or more counterparts, each executed counterpart constituting an
original but altogether only one instrument.
<PAGE> 5
IN WITNESS WHEREOF, the Company, the Co-Obligors and the Holders have
caused this Amendment to Note Agreement to be executed and delivered by their
respective officer or officers thereunto duly authorized.
ESTERLINE TECHNOLOGIES CORPORATION
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Executive Vice President
-----------------------------------
ANGUS ELECTRONICS CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
ARMTEC DEFENSE PRODUCTS CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
AUXITROL CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
AUXITROL U.S.A., INC.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
EQUIPMENT SALES CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
EXCELLON AUTOMATION CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
<PAGE> 6
EXCELLON U.K.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
FEDERAL PRODUCTS CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
FEDERAL PRODUCTS U.K. LTD.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
H. A. SALES CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: President
-----------------------------------
HYTEK FINISHES CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
SCIENTIFIC COLUMBUS CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
KORRY ELECTRONICS CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
MIDCON CABLES CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
<PAGE> 7
REPUBLIC ELECTRONICS CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
TA MFG. CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
TULON CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
W.A. WHITNEY CO.
By: /s/ Robert W. Stevenson
--------------------------------------
Title: Vice President
-----------------------------------
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By:
--------------------------------------
Title:
-----------------------------------
NEW ENGLAND MUTUAL LIFE INSURANCE
COMPANY
By:
--------------------------------------
Title:
-----------------------------------
<PAGE> 1
ESTERLINE TECHNOLOGIES CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN--CYCLE III
FISCAL YEARS 1993 through 1996
PURPOSE OF PLAN
This Plan is for the fiscal years 1993 through 1996 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). The criteria are:
A. Cumulative earnings per share for the four years ending October 31,
1996, 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 $6.66, but ranges from a minimum of $4.15 to a maximum of
$9.37, depending on the average annual growth rate achieved by
Esterline's industry peer group. (See Attachment A.)
B. Average cumulative return on average common shareholders' equity for
the four years ending October 31, 1996.
<PAGE> 2
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 median of the 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 median of the 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.
BASIS FOR COMPUTATION OF PARTIAL PAYMENTS
<TABLE>
<CAPTION>
Cumulative
Four-Year Relative Earned Performance
Performance Basis of Four-Year Award Level
------------------ ------------------------
<S> <C>
Estimated based on 1/3
FY 1993 & 1994
Estimated based on
FY 1993, 1994 & 1995 2/3
</TABLE>
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 1994 and 1995; these payments shall be made no
later than March 1, 1995 and March 1, 1996, respectively. Final payment shall
be made after completion of fiscal 1997, and no later than March 1, 1997.
The amount of each payment, if any, shall be the amount earned for the
cumulative performance for the cycle-to-date period less
<PAGE> 3
any amounts previously paid. Partial payments, once paid, are not refundable
to Esterline Technologies.
A Plan member must be an employee on October 31, 1994, 1995 or 1996 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 1996, and paid no later than March 1,
1997. 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
<PAGE> 4
ATTACHMENT A
ESTERLINE TECHNOLOGIES CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN--CYCLE III
ADJUSTMENTS FOR VARYING LEVELS OF
INDUSTRY PEER GROUP PERFORMANCE
EPS PERFORMANCE TARGETS
<TABLE>
<CAPTION>
Average Annual EPS Minimum EPS Maximum EPS
Compounded EPS Growth Rate Performance Performance Performance
of Industry Peer Group Targets Targets Targets
--------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Less than 4% $5.66 $4.15 $7.87
4 - 9% 6.16 4.65 8.37
9 - 13% 6.66* 5.15 8.87
More than 13% 7.16 5.65 9.37
</TABLE>
* Esterline base EPS target.
<PAGE> 5
ATTACHMENT B
ESTERLINE TECHNOLOGIES CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN--CYCLE III
PERCENTAGE OF APPOINTEE'S AWARD EARNED AT VARYING
LEVELS OF COMPANY PERFORMANCE
<TABLE>
<CAPTION>
Performance
Relative to % of Award % of Award Total % of Appointee's
Target Level from ROE Target from EPS Target Award Earned
- ------------------ --------------- --------------- ----------------------
<S> <C> <C> <C>
Less than Minimum 0 % 0 % 0%
Minimum Level 12.5 12.5 25
Target Level 50 50 100
Maximum Level 100 100 200
</TABLE>
<PAGE> 1
ESTERLINE TECHNOLOGIES CORPORATION
CORPORATE MANAGEMENT INCENTIVE COMPENSATION PLAN
FISCAL YEAR 1993
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 1993. 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
$1.30 are achieved.
2. Actual earnings per share will be as audited before extraordinary
items for the year ending October 31, 1993.
3. Awards will be pro-rated for performance and will be interpolated on
the following basis.
<TABLE>
<CAPTION>
EPS Award
--------------------- ------------------------------
<S> <C>
Below $1.30 Pro-rata share of budget award
At $1.30 performance 100% of target award
120% or more of $1.30 150% of target award
</TABLE>
4. Actual individual payouts earned from earnings per share computations
are limited to 150% of target nomination.
5. Payout of awards will be no later than March 1, 1994.
<PAGE> 2
6. If a Plan member is terminated for any reason other than death or
disability prior to the end of fiscal 1993, 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 1993, 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.
7. An employee who becomes a Plan member as of a date after the beginning
of Esterline's fiscal 1993 will be paid a pro-rata amount based on the
time the employee participates in the Plan.
/s/ W. P. Hurlbut
- ------------------
W. P. Hurlbut
Chairman, President
and Chief Executive Officer
<PAGE> 3
ESTERLINE TECHNOLOGIES CORPORATION
PAYOUT AS A % OF TARGET AWARD FOR VARIOUS EARNINGS PER SHARE
CORPORATE MANAGEMENT FISCAL 1993 ANNUAL INCENTIVE COMPENSATION PLAN
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 1993 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 $2.00 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 $1.30
earnings per share, payout is 100% of target award. Payouts on
earnings per share levels between $0.00 earnings per share and $1.30
earnings per share are plotted on a straight line. At $1.56 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 $1.30 earnings per share and $1.56
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, 1994
* No debt reduction kicker applies to fiscal 1993
<PAGE> 4
ESTERLINE TECHNOLOGIES CORPORATION
Form 10-K Report for Fiscal Year Ended
October 31, 1993
APPENDIX
--------
GRAPHIC AND IMAGE INFORMATION
-----------------------------
Refer to narrative description of graphic material contained in Exhibit 10.20a
to the above report, in accordance with Section 232.304 of Regulation S-T.
<PAGE> 1
Exhibit 11
Page 1
ESTERLINE TECHNOLOGIES CORPORATION
Computation of Primary Earnings Per Common Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
--------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings Before
Extraordinary Item $(25,635) $5,094 $7,315 $7,058 $7,869
-------- ------ ------ ------ ------
Extraordinary Item --- --- --- --- 723
-------- ------ ------ ------ ------
Net Earnings $(25,635) $5,094 $7,315 $7,058 $8,592
======== ====== ====== ====== ======
Average Number of Common
Shares Outstanding 6,512 6,506 6,502 6,501 8,296
Net Shares Assumed to be
Issued for Stock Options 67 161 41 34 68
-------- ------ ------ ------ ------
Total 6,579 6,667 6,543 6,535 8,364
======== ====== ====== ====== ======
Earnings Per Common Share -
Primary Basis
Before Extraordinary Item $ (3.90) $ .76 $ 1.12 $ 1.08 $ .94
Extraordinary Item --- --- --- --- .09
-------- ------ ------ ------ ------
Total $ (3.90) $ .76 $ 1.12 $ 1.08 1.03
======== ====== ====== ====== ======
</TABLE>
<PAGE> 2
Exhibit 11
Page 2
ESTERLINE TECHNOLOGIES CORPORATION
Computation of Fully Diluted Earnings Per Common Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings Before Interest on
Convertible Debentures
and Extraordinary Item $(25,635) $5,094 $7,315 $7,058 $7,869
Interest on Convertible
Debentures Net of Federal
Income Tax 1,073 1,089 1,089 1,089 1,089
-------- ------ ------ ------ ------
Earnings Before
Extraordinary Item (24,562) 6,183 8,404 8,147 8,958
Extraordinary Item --- --- --- --- 723
-------- ------ ------ ------ ------
Net Earnings on a Fully
Diluted Basis $(24,562) $6,183 $8,404 $8,147 $9,681
======== ====== ====== ====== ======
Average Number of Common
Shares Outstanding 6,512 6,506 6,502 6,501 8,296
Shares Assumed to be
Issued on Conversion of
Convertible Debentures 504 504 504 504 504
Net Shares Assumed to
be Issued for Stock Options 67 161 180 34 90
-------- ------ ------ ------ ------
Total Common Shares on a
Fully Diluted Basis 7,083 7,171 7,186 7,039 8,890
======== ====== ====== ====== ======
Earnings Per Common Share -
Fully Diluted Basis
Before Extraordinary Item $ (3.47) $ .86 $ 1.17 $ 1.16 $ 1.01
Extraordinary Item --- --- --- --- .08
-------- ------ ------ ------ ------
Total $ (3.47) $ .86 $ 1.17 $ 1.16 $ 1.09
======== ====== ====== ====== ======
Earnings Per Common Share -
Primary Basis $ (3.90) $ .76 $ 1.12 $ 1.08 $ 1.03
======== ====== ====== ====== ======
Dilutive Effect Per Common Share None None None None None
======== ====== ====== ====== ======
</TABLE>
<PAGE> 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, 1993 and 1992 and its financial condition at the end of
fiscal 1993.
1993 FISCAL YEAR
Sales in 1993 were $285 million, compared with $305 million in 1992. The $20
million decrease is 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 the year, resulting in the sales
decreases. Sales in the Instrumentation Group (which decreased 10% from 1992,
from $102 million to $92 million) also were affected by the commercial aircraft
market as well as reduced capital spending by industrial and utilities
customers for the types of products produced by the group operating units. The
Company does not expect a strong upturn in any of its markets in the near
future.
In the Automation Group, some market improvement together with new
products produced the increased sales. However, orders in the group's drilling
machine operation have fallen off significantly in recent months, 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 the year would have been $1.6 million, or $.24 per
share. In the prior year, net earnings were $5.1 million, or $.76 per share.
The objective of the restructuring plan is to strengthen the Company
for long-term growth and permit management to focus on operations with strong
market positions. It is an extension of the Company's efforts to meet market
conditions in an effective manner and structure operations to maintain
profitability. The continuing 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 contemplates a number of actions including either sale or
shutdown of certain small operations with weak market potential. These
operations represented approximately 10% of the Company's fiscal 1993 sales.
Other items include write-off of intangible assets, anticipated losses on the
sale of vacant facilities, employee severance, and consolidation of
<PAGE> 2
facilities for increased efficiency. The restructuring provision is based on
management's current best 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 the prior year. 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 was also somewhat lower than a year ago due to recent
low order levels for printed circuit board drilling machines. Of the year-end
backlog, $14 million is scheduled to be shipped after fiscal 1994.
Gross margin as a percent of sales remained approximately level from
1992 (38% in 1993 and 39% in 1992) despite reduced sales. This was the result
of significant 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 Esterline's
continued commitment 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 has 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 Instrumentation 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.
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 current year net benefit reflects
an estimated $13.4 million realizable tax benefit from restructuring. (See
Financial Condition, below.)
<PAGE> 3
1992 FISCAL YEAR
Sales in 1992 were $305 million, compared with $351 million in 1991.
Approximately three-fourths of the decrease was attributable to the Automation
Group, where depressed business levels continued, resulting in sales of fewer
units and competitive pricing. This group's fiscal 1992 sales decreased 27%
from 1991, from $125 million to $91 million. The sale of substantially all of
the assets of Hollis Automation Co. in the second quarter of fiscal 1992 (an
Esterline subsidiary which was not significant to the Company in terms of
operations or financial condition) accounted for less than one-third of the
decrease in group sales. The capital equipment markets served by this group,
particularly the electronics segment, had been depressed for several years.
Although improvements were noted toward the end of fiscal 1992 and year-end
backlog was more than 50% above October 1991, the Company believed a near-term
return to pre-recession sales levels in this group was unlikely. In the
Instrumentation Group, 1992's sales declined 9%, as this group also was
affected by the economy and depressed capital equipment markets. Sales in the
Aerospace and Defense Group were virtually level compared with the prior year,
reflecting stability in the markets served by this group. However,
uncertainties in the commercial aerospace and defense industries continued to
cloud the outlook somewhat. Company-wide backlog at October 31, 1992 was $97
million, compared with $83 million a year ago. Of the $97 million, $8.5
million was expected to be filled after fiscal 1993.
Including exports, sales to foreign buyers in 1992 as a percent of
total sales were approximately level with the prior year at 31%. The continued
soft European market was offset by a weaker U.S. dollar, making prices on U.S.
goods more attractive overseas.
The Company's gross margin percentage remained approximately level
from 1991 to 1992 at 39%, reflecting the significant cost containment efforts,
internal efficiency improvements and work force reductions undertaken to
compensate for lower sales volumes and competitive pressures. On a segment
basis, margin percentages decreased in the Automation Group, held level in the
Aerospace and Defense Group, and increased slightly in the Instrumentation
Group.
The Company remained committed to new product development and to the
enhancement of existing products and product lines. Though fiscal 1992
research, development and engineering expenditures of $13.4 million were down
from 1991's $16.6 million, management believes these efforts were more
efficient in the 1992 year. Also, research, development and engineering
expenditures were reduced by the sale of Hollis Automation discussed above.
Research, development and engineering expenditures in 1992 were level with 1991
in the Aerospace and Defense Group, and lower in both the Automation and
Instrumentation Groups.
Selling, general and administrative expenses decreased nearly $10
million in 1992, from $112 million in the prior year, primarily due to reduced
selling expenses in support of lower sales volumes. Cost savings resulted from
the Company's continued emphasis on operating efficiencies, including resizing
of operations to meet lower demand. As a result, selling, general and
administrative expenses as a percent of sales increased only slightly to 33.5%,
compared with 31.9% in 1991.
<PAGE> 4
Earnings from operations were $23 million in 1992 compared with $33
million in 1991. The decrease was primarily in the Automation Group, where
earnings decreased from $6.4 million in 1991 to $1.0 million in 1992,
reflecting the decline in group sales. Earnings in the Aerospace and Defense
Group were slightly lower than the prior year while in the Instrumentation
Group, earnings declined $2.3 million (23%) as a result of lower sales.
Net interest expense decreased by $5.5 million, from $12.7 million in
1991 to $7.2 million in 1992. This savings was due to progressively decreasing
debt balances throughout the year, and an overall reduction in interest rates
of approximately two percentage points.
The effective income tax rate was 37.5% in 1992 compared to 38.8% in
1991. This slight decrease was due primarily to the availability of offsets to
foreign tax liabilities.
FINANCIAL CONDITION
Debt at October 31, 1993 totaled $74.5 million, down from $81.8 million at
October 31, 1992. The reduction was financed by cash generated from
operations. The year-end debt-to-equity ratio was 1.3:1, up from 1.1:1 at the
end of last year due to the effect of the restructuring charge on shareholders'
equity. During 1993, the Company continued its policy of retaining all
internally generated funds to support operations and to retire debt.
Effective October 31, 1993, certain covenants and compliance ratios
covering both the Company's credit facility with a group of banks and the 8.75%
senior notes were amended to accommodate the restructuring charge. The
revolving portion of the credit facility was simultaneously reduced from $75
million to $35 million. There was no borrowing under the revolving credit
facility at October 31, 1993, although a $6.6 million term loan with the same
group of banks remained payable at $2.5 million per quarter.
Working capital at the end of 1993 totaled $9.1 million, down from
$21.7 million at the end of 1992, reflecting the accrued liability portion of
the restructuring charge partially offset by the deferred tax asset. Also,
trade receivables and inventories decreased from 1992 by $4.3 and $4.8 million,
respectively. These decreases were due primarily to lower sales levels in the
current year.
No significant funds requirement is anticipated as a result of the
Company's restructuring plan. Proceeds from liquidation of assets are
anticipated to cover out-of-pocket restructuring costs.
Total available funds at October 31, 1993 consisted of cash and
equivalents of $3.2 million and approximately $34 million available under
short-term commitments with domestic and foreign banks. Capital expenditures
were $9.6 million in 1993 and are expected to approximate $10 million in 1994.
<PAGE> 5
During 1993, the Company adopted SFAS 109, "Accounting for Income
Taxes", with no material effect on the financial statements. Under this
standard a net deferred tax asset was recorded as a result of the fourth
quarter restructuring. This asset will be realized in the form of tax
deductions when the anticipated restructuring steps are taken and sufficient
profitability is achieved.
Also during 1993, the Company adopted SFAS 106, "Employer's Accounting
for Postretirement Benefits Other Than Pensions", and SFAS 112, "Employer's
Accounting for Postemployment Benefits", with no material effect.
<PAGE> 6
SELECTED FINANCIAL DATA
In thousands, except per share amounts, for the years ended October 31,
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $ 285,152 $ 304,827 $ 350,934 $ 389,109 $ 284,189
Cost of sales 175,568 187,235 214,415 241,235 170,424
Selling, general and administrative 100,669 102,202 111,858 118,618 96,557
Restructuring provision 40,626 --- --- --- ---
Interest expense, net 6,324 7,246 12,709 17,350 3,505
Income tax expense (benefit) (12,400) 3,050 4,637 4,848 5,834
Earnings (loss) before extraordinary item (25,635) 5,094 7,315 7,058 7,869
Extraordinary item --- --- --- --- 723
Net earnings (loss) (25,635) 5,094 7,315 7,058 8,592
Per Share
Earnings (loss) before extraordinary
item (3.90) .76 1.12 1.08 .94
Extraordinary item --- --- --- --- .09
Net earnings (loss) (3.90) .76 1.12 1.08 1.03
FINANCIAL STRUCTURE
Total assets $ 205,672 $ 232,024 $ 256,384 $ 289,667 $ 304,162
Long-term debt, net 62,267 68,622 87,011 99,393 110,010
Shareholders' equity 55,323 82,622 77,377 71,441 62,759
Average number of shares outstanding 6,579 6,667 6,543 6,535 8,364
</TABLE>
MARKET PRICE OF ESTERLINE COMMON STOCK
Principal Market--New York Stock Exchange
For the years ended October 31,
<TABLE>
<CAPTION>
1993 1992
QUARTER High Low High Low
<S> <C> <C> <C> <C>
First $ 13.00 $ 9.63 $ 16.88 $ 10.00
Second 11.88 8.50 17.38 9.75
Third 10.00 7.63 11.00 7.50
Fourth 8.63 7.50 10.25 8.13
</TABLE>
At October 31, 1993, there were approximately 1,300 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.)
<PAGE> 7
CONSOLIDATED STATEMENT OF OPERATIONS
In thousands, except per share amounts, for the years ended October 31,
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Net Sales $285,152 $304,827 $350,934
Costs and Expenses
Cost of sales 175,568 187,235 214,415
Selling, general and administrative 100,669 102,202 111,858
Restructuring provision 40,626 --- ---
Interest expense, net 6,324 7,246 12,709
-------- -------- --------
323,187 296,683 338,982
-------- -------- --------
Earnings (Loss) before income taxes (38,035) 8,144 11,952
Income tax expense (benefit) (12,400) 3,050 4,637
-------- -------- --------
Net Earnings (Loss) $(25,635) $ 5,094 $ 7,315
======== ======== ========
Net Earnings (Loss) Per Share $ (3.90) $ .76 $ 1.12
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 8
CONSOLIDATED BALANCE SHEET
In thousands, October 31,
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents $ 3,218 $ 3,117
Accounts receivable, net of allowances of
$2,417 and $2,314 for doubtful accounts 45,778 50,127
Inventories 38,430 43,220
Deferred income taxes 7,882
Prepaid expenses 1,838 1,841
-------- --------
Total Current Assets 97,146 98,305
Property, Plant and Equipment
Land 4,833 6,905
Buildings 44,317 49,365
Machinery and equipment 91,741 90,418
-------- --------
140,891 146,688
Accumulated depreciation 84,326 74,866
-------- --------
56,565 71,822
Cost in Excess of Net Assets Acquired 23,802 26,913
Intangibles and Other 23,679 34,984
Deferred Income Taxes 4,480 ---
-------- --------
$ 205,672 $ 232,024
========= =========
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 14,647 $ 17,210
Accrued liabilities 60,063 43,225
Notes payable 5,157 2,843
Current maturities of long-term debt 7,062 10,319
Federal and foreign income taxes 1,153 2,987
-------- --------
Total Current Liabilities 88,082 76,584
Long-Term Debt, net of current maturities 62,267 68,622
Deferred Income Taxes --- 4,196
Shareholders' Equity
Common stock, par value $.20 per share,
authorized 30,000,000 shares, issued and
outstanding 6,512,641 and 6,506,789 shares 1,302 1,301
Capital in excess of par value 10,482 10,480
Retained earnings 47,388 73,023
Cumulative translation adjustment (3,849) (2,182)
-------- --------
Total Shareholders' Equity 55,323 82,622
-------- --------
$205,672 $232,024
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 10
CONSOLIDATED STATEMENT OF CASH FLOWS
In thousands, for the years ended October 31,
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss) $(25,635) $ 5,094 $ 7,315
Restructuring provision 40,626 --- ---
Depreciation and amortization 19,259 19,823 19,145
Deferred income taxes (16,558) 331 1,207
Working capital changes
Accounts receivable 3,432 3,584 11,499
Inventories 1,817 7,541 13,124
Prepaid expenses (150) (124) 166
Accounts payable (2,563) (580) (3,302)
Accrued liabilities 1,577 (2,042) 3,764
Federal and foreign income taxes (1,834) 204 933
Other, net (1,845) (396) (2,217)
-------- -------- --------
18,126 33,435 51,634
-------- -------- --------
Cash Flows Provided (Used) by Investing Activities
Capital expenditures (9,556) (10,762) (9,238)
Capital dispositions, net 496 5,528 2,017
-------- -------- --------
(9,060) (5,234) (7,221)
-------- -------- --------
Cash Flows Provided (Used) by Financing Activities
Net change in notes payable 2,314 (9,200) (28,437)
Repayment of long-term debt (9,612) (58,318) (13,384)
Proceeds from sale of senior notes --- 40,000 ---
Cumulative translation adjustment (1,667) 115 (1,379)
-------- -------- --------
(8,965) (27,403) (43,200)
-------- -------- --------
Net Increase (Decrease) in Cash and Equivalents 101 798 1,213
Cash and Equivalents - Beginning of Year 3,117 2,319 1,106
-------- -------- --------
Cash and Equivalents - End of Year $ 3,218 $ 3,117 $ 2,319
======== ======== ========
Supplemental Cash Flow Information
Cash paid during the year for
Interest expense $ 6,271 $ 7,836 $ 12,195
Income taxes 2,264 1,436 2,525
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 11
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
In thousands, for the years ended October 31,
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Common Stock, par value $.20 per share
Beginning of year $ 1,301 $ 1,300 $ 1,300
Stock issued under stock option plans 1 1 ---
-------- -------- --------
End of year 1,302 1,301 1,300
-------- -------- --------
Capital in Excess of Par Value
Beginning of year 10,480 10,445 10,445
Stock issued under stock option plans 2 35 ---
-------- -------- --------
End of year 10,482 10,480 10,445
-------- -------- --------
Retained Earnings
Beginning of year 73,023 67,929 60,614
Net earnings (loss) (25,635) 5,094 7,315
-------- -------- --------
End of year 47,388 73,023 67,929
-------- -------- --------
Cumulative Foreign Currency Translation Adjustment
Beginning of year (2,182) (2,297) (918)
Aggregate adjustment resulting from
foreign currency translation (1,667) 115 (1,379)
-------- -------- --------
End of year (3,849) (2,182) (2,297)
-------- -------- --------
Shareholders' Equity $ 55,323 $ 82,622 $ 77,377
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 12
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 intercompany 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. Transaction 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 $14,007,000, $13,441,000 and $16,618,000 in
1993, 1992 and 1991, 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 amortization at
October 31, 1993 and 1992 was $6,784,000 and $6,435,000, 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, arising primarily from acquisitions,
include engineering drawings, covenants not to compete and other intangibles.
Intangibles are being amortized over estimated lives of 2.5 to 22 years.
Accumulated amortization at October 31, 1993 and 1992 was $7,844,000 and
$10,017,000, 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
(6,579,000 shares in 1993, 6,667,000 shares in 1992 and 6,543,000 shares in
1991). 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.
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.
<PAGE> 13
2. INVENTORIES
Inventories at October 31 consisted of the following:
In thousands
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Finished goods $ 9,508 $ 11,758
Work in process 17,340 17,138
Raw materials and purchased parts 11,582 14,324
-------- --------
$ 38,430 $ 43,220
======== ========
</TABLE>
At October 31, 1993 and 1992, $9,000,000 and $10,100,000,
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 $2,995,000 and $2,984,000 higher than
reported at October 31, 1993 and 1992, respectively.
3. ACCRUED LIABILITIES
Accrued liabilities at October 31 consisted of the following:
In thousands
<TABLE>
<CAPTION> 1993 1992
<S> <C> <C>
Payroll and other compensation $ 13,893 $ 14,877
Self-insurance provisions 6,912 7,513
Interest 4,187 3,909
Warranties 2,426 2,742
State and other tax accruals 6,508 2,713
Accrued restructuring cost 15,261 ---
Other 10,876 11,471
-------- --------
$ 60,063 $ 43,225
======== ========
</TABLE>
4. DEBT
Long-term debt at October 31 consisted of the following:
- --------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
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, due 1997 6,621 16,621
Other 2,708 2,320
-------- --------
69,329 78,941
Less current maturities 7,062 10,319
-------- --------
$ 62,267 $ 68,622
======== ========
</TABLE>
<PAGE> 14
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 pay-
ments. 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
at October 31, 1993, 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. At October 31, 1993 the interest rate was 4.94%. The
term loan is payable in quarterly installments of $2.5 million.
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 $75,886,000 as of October 31, 1993.
Maturities of long-term debt are as follows:
In thousands
<TABLE>
<S> <C>
1994 $ 7,062
1995 20,810
1996 6,227
1997 6,181
1998 6,087
1999 and thereafter 22,962
--------
$ 69,329
========
</TABLE>
At October 31, 1993, the Company had lines of credit with domestic and foreign
banks as follows:
In thousands
<TABLE>
<CAPTION> 1993 1992
<S> <C> <C>
Outstanding Balance
Domestic $ --- $ ---
Foreign 5,157 2,843
-------- --------
$ 5,157 $ 2,843
======== ========
Credit Lines
Domestic $ 35,000 $ 75,000
Foreign 10,000 12,000
Average Borrowings
Domestic 400 6,700
Foreign 3,700 4,300
Average Interest Rates
Domestic 6.6% 6.6%
Foreign 9.5% 11.7%
</TABLE>
Available credit lines were reduced by outstanding letters of credit of
approximately $6,115,000 at October 31, 1993.
<PAGE> 15
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 contributions 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% in 1993 and 8% in
1992, and annual compensation increases of 5% in 1993 and 6% in 1992.
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
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 2,106 $ 1,755 $ 1,807
Interest cost on projected benefit obligation 4,248 4,125 3,935
Actual return on plan assets - investment losses (gains) (10,467) (6,231) (9,521)
Net amortization and deferral 4,487 308 2,911
-------- ------- -------
Net pension expense (credit) $ 374 $ (43) $ (868)
======== ======= =======
</TABLE>
Combined funded status of the plans at October 31 was as follows:
In thousands
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Plan assets at fair market value $ 77,642 $ 72,643
Projected benefit obligation for service rendered to date 59,485 54,341
-------- --------
Plan assets in excess of projected benefit obligations 18,157 18,302
Unrecognized net gain (4,423) (3,794)
Unrecognized net asset at November 1, 1985 (2,562) (2,962)
-------- --------
Prepaid pension expense $ 11,172 $ 11,546
======== ========
Actuarial present value of accumulated benefit obligation,
including vested benefits of $49,730 and $42,169 $ 50,305 $ 42,758
======== ========
</TABLE>
Provision for all retirement benefits for the years ended October 31 consisted
of the following:
In thousands
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Pension plans $ 464 $ 649 $ 231
Profit-sharing and other plans 72 246 ---
----- ----- -----
$ 536 $ 895 $ 231
===== ===== =====
</TABLE>
The Company generally does not provide postretirement benefits other
than pension benefits, and has adopted Statement of Financial Accounting
Standards No. 106 together with No. 112 (Employer's Accounting for
Postemployment Benefits) with no material effect.
<PAGE> 16
6. INCOME TAXES
During the year 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.
Income tax expense (benefit) for the years ended October 31 consisted of the
following:
In thousands
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Current U.S. Federal $ 836 $ 959 $1,783
Foreign 681 1,317 1,034
State and local 178 443 547
Deferred (14,095) 331 1,273
--------- ------ ------
$(12,400) $3,050 $4,637
========= ====== ======
</TABLE>
Deferred income taxes on the consolidated balance sheet reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income
tax purposes, including $13.4 million related to the 1993 restructuring charge.
The primary components of the company's deferred tax assets and (liabilities)
at October 31, 1993, were as follows:
In thousands
<TABLE>
<S> <C>
Reserves and liabilities $ 9,026
Employee benefits 3,779
Tax credits 1,234
Restructuring accruals 5,418
------
Total deferred tax assets 19,457
Depreciation and amortization (3,061)
Retirement benefits (4,034)
-------
Total deferred tax liabilities (7,095)
-------
$12,362
=======
</TABLE>
A reconciliation of the United States federal statutory income tax rate to the
effective income tax rate was as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
U.S. statutory income tax rate (34.0)% 34.0% 34.0%
State income taxes (1.1) 3.6 3.0
Foreign tax rates .7 (2.8) 1.0
Other, net 1.8 2.7 0.8
------- ----- -----
Effective income tax rate (32.6)% 37.5% 38.8%
======= ===== =====
</TABLE>
<PAGE> 17
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 $1,157,000, $4,555,000 and $2,156,000
in 1993, 1992 and 1991, respectively.
The deferred portion of income tax expense for prior periods was as follows:
In thousands
<TABLE>
<CAPTION> 1992 1991
<S> <C> <C>
Depreciation and amortization $(201) $2,123
Accrued expenses 534 424
Alternative minimum tax 227 (925)
All other, net (229) (349)
----- ------
331 $1,273
===== ======
</TABLE>
7. CONTINGENCIES
The Company has various lawsuits, claims 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 $3,241,000,
$3,748,000, and $4,314,000 in 1993, 1992 and 1991, respectively.
The Company's rental commitments for noncancelable operating leases with a
duration in excess of one year are as follows:
In thousands
<TABLE>
<S> <C>
1994 $ 2,660
1995 2,230
1996 1,506
1997 1,453
1998 1,370
1999 and thereafter 1,141
-------
$10,360
=======
</TABLE>
<PAGE> 18
9. STOCK OPTION PLANS
At October 31, 1993, the Company had 1,084,625 shares of common stock reserved
for issuance to officers, directors and key employees under its stock option
plans, of which 106,125 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.
The following summarizes the changes in outstanding options granted under the
Company's stock option plans:
<TABLE>
<CAPTION>
Option Prices
Shares Per Share
<S> <C> <C>
Balance - October 31, 1990 628,550 $ 8.00 - $19.00
Granted 40,000 9.00
Canceled (8,000) 8.00 - 19.00
------- ---------------
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
======= ===============
Exercisable at October 31, 1993 614,000 $ 8.00 - $11.25
======= ===============
</TABLE>
<PAGE> 19
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, 1993, 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 1,084,625 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.
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 current best estimate of the effects of the contemplated actions.
The provision provides for sale or shutdown of certain operating companies,
consolidation of plants and product lines, including employee severance,
write-off of intangible assets which no longer have value and the write-down
and sale of two vacant facilities. The charges reduced earnings per share by
$4.14.
<PAGE> 20
12. BUSINESS SEGMENT INFORMATION
Details of the Company's operations by business segment for the years ended
October 31 were as follows:
BUSINESS SEGMENT
In thousands
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Net Sales
Automation $ 94,460 $ 91,449 $ 125,263
Aerospace and Defense 99,071 111,077 113,335
Instrumentation 91,621 102,301 112,336
--------- --------- ---------
$ 285,152 $ 304,827 $ 350,934
========= ========= =========
Earnings (Loss) Before Income Taxes
Automation $ 7,887 $ 957 $ 6,432
Aerospace and Defense 7,259 14,856 16,575
Instrumentation 935 7,509 9,804
--------- --------- ---------
Operating Earnings 16,081 23,322 32,811
--------- --------- ---------
Corporate expense (7,166) (7,932) (8,150)
Restructuring provision(1) (40,626) --- ---
Interest expense, net (6,324) (7,246) (12,709)
--------- --------- ---------
$ (38,035) 8,144 $ 11,952
========= ========= =========
Identifiable Assets
Automation $ 41,752 $ 52,853 $ 67,516
Aerospace and Defense 77,419 96,248 98,326
Instrumentation 55,744 67,818 75,740
Corporate(2) 30,757 15,105 14,802
--------- --------- ---------
$ 205,672 $ 232,024 $ 256,384
========= ========= =========
Capital Expenditures
Automation $ 2,402 $ 3,788 $ 2,750
Aerospace and Defense 4,125 3,821 3,434
Instrumentation 2,935 3,063 3,001
Corporate 94 90 53
--------- --------- ---------
$ 9,556 $ 10,762 $ 9,238
========= ========= =========
Depreciation and Amortization
Automation $ 3,982 $ 4,335 $ 4,836
Aerospace and Defense 7,829 7,129 6,557
Instrumentation 7,158 7,984 7,336
Corporate 290 375 416
--------- --------- ---------
$ 19,259 $ 19,823 $ 19,145
========= ========= =========
</TABLE>
(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 1993
includes a net deferred tax asset (see Note 6).
<PAGE> 21
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
<TABLE>
<CAPTION>
DOMESTIC FOREIGN ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
1993
Outside sales $228,971 $56,181 $ --- $285,152
Intercompany sales 4,163 29 (4,192) ---
-------- ------- ------- --------
$233,134 $56,210 $(4,192) $285,152
======== ======= ======= ========
Operating earnings(1) $ 13,042 $ 2,833 $ 206 $ 16,081
======== ======= ======= ========
Identifiable assets(2) $142,644 $33,604 $ --- $176,248
======== ======= ======= ========
1992
Outside sales $244,439 $60,388 $ --- $304,827
Intercompany sales 4,300 --- (4,300) ---
-------- ------- ------- --------
$248,739 $60,388 $(4,300) $304,827
======== ======= ======= ========
Operating earnings $ 18,888 $ 3,864 $ 570 $ 23,322
======== ======= ======= ========
Identifiable assets(2) $187,860 $29,059 $ --- $216,919
======== ======= ======= ========
1991
Outside sales $276,018 $74,916 $ --- $350,934
Intercompany sales 6,375 --- (6,375) ---
-------- ------- ------- --------
$282,393 $74,916 $(6,375) $350,934
======== ======= ======= ========
Operating earnings $ 30,624 $ 2,208 $ (21) $ 32,811
======== ======= ======= ========
Identifiable assets(2) $213,288 $28,294 $ --- $241,582
======== ======= ======= ========
</TABLE>
(1) Before restructuring provision, shown on page 28. By geographic area, the
provision related to Domestic ($35,612) and Foreign ($2,800).
(2) Excludes Corporate, shown on page 28.
<PAGE> 22
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.
Export sales amounted to $33,200,000, $33,100,000, and $37,500,000 in 1993,
1992 and 1991, respectively.
Product lines contributing more than 10% of total sales for each of the years
ended October 31 were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Printed circuit board drilling equipment 16% 12% 12%
Gauge products 13% 13% 12%
Combustible ordnance components 9% 12% 10%
</TABLE>
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial information:
In thousands, except per share amounts
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1993
FOURTH THIRD SECOND FIRST
<S> <C> <C> <C> <C>
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
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1992
FOURTH THIRD SECOND FIRST
<S> <C> <C> <C> <C>
Net sales $ 82,283 $ 73,457 $ 77,003 $ 72,084
Gross margin 32,689 29,242 29,202 26,459
Net earnings 2,333 1,546 1,025 190
Net earnings per share $ .35 $ .23 $ .15 $ .03
-------- -------- -------- --------
</TABLE>
<PAGE> 23
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, 1993 and 1992,
and the related consolidated statements of operations, shareholders' equity,
and cash flows for each of the three years in the period ended October 31,
1993. 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, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended October 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Note 6 to the consolidated financial statements, in
fiscal year 1993 the Company changed its method of accounting for income taxes.
/s/ Deloitte & Touche
- ---------------------
Deloitte & Touche
Seattle, Washington
December 17, 1993
<PAGE> 1
Exhibit 21
SUBSIDIARIES
The subsidiaries of the Company as of October 31, 1993 are as follows:
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
- ------------------ ---------------
<S> <C>
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
Federal Products Co. Delaware
Federal Products U.K. Delaware
Hytek Finishes Co. Delaware
Scientific Columbus Co. Delaware
(formerly Jemtec Electronics Co.)
Korry Electronics Co. Delaware
Midcon Cables Co. Delaware
Republic Electronics Co. Delaware
TA Mfg. Co. California
W.A. Whitney Co. Illinois
Auxitrol Technologies S.A. France
Auxitrol S.A. France
</TABLE>
The above list excludes certain subsidiaries that in the aggregate
would not constitute a significant subsidiary as of the fiscal year ended
October 31, 1993.
<PAGE> 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 and No. 33-37134 of Esterline Technologies
Corporation on Form S-8 of our report dated December 17, 1993 appearing in this
Annual Report on Form 10-K of Esterline Technologies Corporation for the year
ended October 31, 1993.
/s/ Deloitte & Touche
- ---------------------
Deloitte & Touche
Seattle, Washington
January 31, 1994
