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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended January 31, 1994 Commission file number 1-6357
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ESTERLINE TECHNOLOGIES CORPORATION
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 13-2595091
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10800 NE 8th Street, Bellevue, Washington 98004
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code 206/453-9400
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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
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Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of February 25, 1994:
Common Stock, par value $.20 per share--6,512,641 shares.
Page 1 of 11 Pages
Exhibit Index at Page 10
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEET
As of January 31, 1994 and October 31, 1993
(In thousands)
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<CAPTION>
January 31, October 31,
1994 1993
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ASSETS (unaudited)
<S> <C> <C>
Current Assets
Cash and equivalents $ 178 $ 3,218
Accounts receivable, net of
allowances of $2,422
and $2,417 for doubtful
accounts 39,870 45,778
Inventories
Finished goods 10,307 9,508
Work in process 17,820 17,340
Raw materials and purchased parts 11,664 11,582
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39,791 38,430
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Deferred income taxes 7,882 7,882
Prepaid expenses 1,623 1,838
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Total Current Assets 89,344 97,146
Property, Plant and Equipment 143,121 140,891
Accumulated depreciation 87,262 84,326
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55,859 56,565
Cost in Excess of Net Assets Acquired 23,465 23,802
Intangibles & Other 23,429 23,679
Deferred Income Taxes 4,480 4,480
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$196,577 $ 205,672
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 11,362 $ 14,647
Accrued liabilities 56,511 60,063
Notes payable 6,103 5,157
Current maturities of long-term debt 4,566 7,062
Federal and foreign income taxes 885 1,153
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Total Current Liabilities 79,427 88,082
Long-Term Debt,
net of current maturities 62,186 62,267
Shareholders' Equity
Common stock, par value $.20 per
share, authorized 30,000,000
shares, issued and outstanding
6,512,641 shares 1,302 1,302
Capital in excess of par value 10,482 10,482
Retained earnings 46,984 47,388
Cumulative translation adjustment (3,804) (3,849)
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Total Shareholders' Equity 54,964 55,323
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$196,577 $ 205,672
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See Notes to Consolidated Financial Statements
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ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended January 31, 1994 and 1993
(Unaudited)
(In thousands, except per share amounts)
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<CAPTION>
Three Months Ended
January 31,
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<S> <C> <C>
1994 1993
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Net Sales $57,872 $67,324
Costs and Expenses
Cost of sales 36,147 41,913
Selling, general and administrative 20,885 23,290
Interest expense, net 1,466 1,569
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58,498 66,772
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Earnings (Loss) Before Income Taxes (626) 552
Income Tax Expense (Benefit) (222) 221
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Net Earnings (Loss) $ (404) $ 331
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Net Earnings (Loss) Per Share $ (0.06) $ 0.05
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See Notes to Consolidated Financial Statements
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ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended January 31, 1994 and 1993
(Unaudited)
(In thousands)
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<CAPTION>
Three Months Ended
January 31,
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<S> <C> <C>
1994 1993
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Cash Flows Provided (Used) by Operating Activities
Net earnings (loss) $ (404) $ 331
Depreciation and amortization 3,602 4,633
Deferred income taxes --- (139)
Working capital changes
Accounts receivable 5,908 6,167
Inventories (1,361) (1,765)
Prepaid expenses 215 (331)
Accounts payable (3,285) (2,315)
Accrued liabilities (3,552) (5,478)
Federal and foreign income taxes (268) (603)
Other, net (227) 58
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628 558
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Cash Flows Used by Investing Activities
Capital additions, net (2,082) (1,560)
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Cash Flows Provided (Used) by Financing Activities
Net change in notes payable 946 2,332
Repayment of long-term debt (2,577) (2,617)
Cumulative translation adjustment 45 (522)
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(1,586) (807)
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Net Increase (Decrease) in Cash
and Equivalents (3,040) (1,809)
Cash and Equivalents - Beginning of Period 3,218 3,117
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Cash and Equivalents - End of Period $ 178 $ 1,308
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Supplemental Disclosures of Cash Flow Information
Cash paid during the period for
Interest expense $ 205 $ 1,407
Income taxes 223 846
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See Notes to Consolidated Financial Statements
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ESTERLINE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended January 31, 1994 and 1993
1. The consolidated balance sheet as of January 31, 1994 and
the consolidated statements of operations and cash flows
for the three months ended January 31, 1994 and 1993 are
unaudited, but in the opinion of management all
adjustments necessary to present fairly the financial
statements referred to above have been made, none of
which were other than normal recurring accruals.
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Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
The first quarter of fiscal 1994 (ended January 31) resulted
in a net loss of $404,000, or $.06 per share, on sales of
$57.9 million. In the first quarter of fiscal 1993 the
Company reported net earnings of $331,000, or $.05 per share,
on sales of $67.3 million. The current quarter's net loss was
after a tax benefit of $222,000 and was primarily a result of
the reduced sales level.
The 14% sales decline from the prior-year quarter affected all
three of the Company's business groups, and ranged from 11.5%
in the Instrumentation Group to 15.9% in the Aerospace/Defense
Group. The declines resulted from: (a) the downturn in
commercial aircraft and defense markets in fiscal 1993,
affecting certain operations in both the Aerospace/Defense and
Instrumentation Groups, (b) also in the Instrumentation Group,
continued low spending by utilities for power generation-
related products as a result of industry emphasis on power
conservation, and reduced sales at a Group company primarily
resulting from shipment delays due to temporary production
difficulties, and (c) low order levels in late calendar 1993
at Automation Group's printed circuit board drilling machine
operation. Sales in other Automation Group companies
increased from last year, primarily because of some
improvement in certain capital equipment markets.
Current quarter operating earnings in the Automation Group
were improved compared with the prior-year period primarily
due to significant cost reductions in 1993 at the drilling
machine operation coupled with the increased sales at other
group companies. Performance at the group's operation
producing automated metal cutting and punching equipment
improved significantly from the same quarter last year.
Operating earnings for the first quarter of fiscal 1994 in the
Aerospace/Defense and Instrumentation Groups were
significantly lower than the year-ago quarter due to reduced
sales.
Gross margin as a percent of sales was 37.5% in the current
quarter, virtually level with the first quarter last year.
Selling, general and administrative expenses decreased by
$2.4 million from the prior-year quarter, but increased as a
percent of sales from 34.6% to 36.1% due to the lower sales
level in the current quarter. Interest expense was $103,000
less in the first quarter of fiscal 1994 due to lower debt
levels. The effective income tax rate was a 35.5% benefit
versus a 40% provision in the prior-year quarter.
Backlog at the end of the current quarter was $77.3 million,
up slightly from $74.4 million at the beginning of the quarter
but down from $92.5 million at the same time last year. At
January 31, 1994, Company-wide backlog expected to be filled
after fiscal 1994 was $16 million.
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The fourth quarter 1993 restructuring, which contemplated a
number of actions including the sale or shutdown of certain
small operations, is substantially on schedule. The Company
is actively engaged in negotiations for the sale of one small
company. Cost estimates associated with the restructuring
remain substantially unchanged.
Financial Condition
The Company has not yet incurred any significant cash
requirement in connection with the fourth quarter 1993
restructuring, and on an overall basis, no significant cash
requirement is anticipated.
The Company's total debt at January 31, 1994 was
$72.9 million, down $1.6 million from the Company's fiscal
year end (October 31). Working capital increased to
$9.9 million during the quarter ended January 31, 1994 from
$9.1 million at year end. Capital expenditures are
anticipated to be approximately $10 million during fiscal
1994, compared to $9.6 million in fiscal 1993. Capital
expenditures primarily consist of machinery and equipment and
computers. The Company expects to finance its foreseeable
working capital requirements and capital expenditures from
available cash resources, including bank credit lines and
funds generated from operations. Total available funds at
January 31, 1994 consisted of cash on hand of $178,000, plus
approximately $31 million available under short-term
commitments with domestic and foreign banks. The Company's
financing arrangements contain various restrictions, including
maintenance of net worth, payment of dividends, interest
coverage, and limitations on additional borrowings.
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<PAGE> 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In late 1992, Korry Electronics received a subpoena for
records from the Department of Defense, Office of the
Inspector General, relating to 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 settlement 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.
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<PAGE> 9
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Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits.
11. Schedule setting forth computation of earnings
per common share for the three months ended
January 31, 1994 and 1993.
(b) Reports on Form 8-K.
A current report on Form 8-K dated December 29, 1993
was filed with the Securities and Exchange Commission
with respect to the Company's public announcement of a
fourth quarter 1993 board-approved restructuring plan.
No financial statements were filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
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<S> <C>
Esterline Technologies Corporation
(Registrant)
Date: March 15, 1994 By: /s/ Robert W. Stevenson
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Robert W. Stevenson
Executive Vice President and
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
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<PAGE> 10
ESTERLINE TECHNOLOGIES CORPORATION
Form 10-Q Report for Fiscal Quarter Ended
January 31, 1994
INDEX TO EXHIBITS
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<CAPTION>
Exhibit Page
Number Exhibit Number
<S> <C> <C>
11. Schedule setting forth computation of 11
earnings per common share for the three
months ended January 31, 1994 and 1993.
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EXHIBIT 11
ESTERLINE TECHNOLOGIES CORPORATION
Computation of Earnings Per Common Share
For the Three Months Ended January 31, 1994 and 1993
(In thousands, except per share amounts)
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<CAPTION>
Three Months Ended
January 31,
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<S> <C> <C>
1994 1993
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Primary
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Net earnings (loss) $ (404) $ 331
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Average number of common shares
outstanding 6,513 6,510
Add - net shares assumed to be issued
for stock options --- 150
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Total average primary common
shares outstanding 6,513 6,660
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Primary net earnings (loss) per common share $ (0.06) $ 0.05
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Fully Diluted
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Net earnings (loss) $ (404) $ 331
Add - interest on convertible
debentures net of federal
income taxes 268 272
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Net earnings and interest on
convertible debentures, net $ (136) $ 603
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Average number of common shares
outstanding (above) 6,513 6,510
Add - net shares assumed to be issued
for stock options --- 150
Add - shares assumed to be issued on
conversion of convertible debentures 504 504
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Total average common shares on
a fully diluted basis 7,017 7,164
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Fully diluted net earnings (loss)
per common share $ (0.02) $ 0.08
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Primary net earnings (loss) per common share $ (0.06) $ 0.05
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Dilutive effect per common share None None
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Note: The computation of earnings per share on a fully
diluted basis results in earnings per share which are
anti-dilutive in all periods.
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