<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1995
REGISTRATION NO. 33-62625
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
ESTERLINE TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 13-2595091
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
10800 NE 8TH STREET
BELLEVUE, WASHINGTON 98004
(206) 453-9400
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
ROBERT W. STEVENSON
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER
10800 NE 8TH STREET
BELLEVUE, WASHINGTON 98004
(206) 453-9400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
-------------------
COPIES TO:
<TABLE>
<S> <C>
GREGG A. NOEL, ESQ. ERIC H. SCHUNK, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM MILBANK, TWEED, HADLEY & MCCLOY
300 SOUTH GRAND AVENUE, SUITE 3400 601 SOUTH FIGUEROA STREET, 30TH FLOOR
LOS ANGELES, CALIFORNIA 90071 LOS ANGELES, CALIFORNIA 90017
(213) 687-5000 (213) 892-4000
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
-------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment
plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ____________
If this Form is a post-effective amendment filed pursuant to Rule 426(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers the registration of shares of Common
Stock to be offered in the United States and Canada (the "U.S. Offering") and
shares of Common Stock to be offered in a concurrent offering outside the United
States and Canada (the "International Offering"). The complete form of
prospectus relating to the U.S. Offering (the "U.S. Prospectus") follows
immediately after this explanatory note. The form of prospectus relating to the
International Offering (the "International Prospectus") will be identical in all
respects to the U.S. Prospectus, except that the International Prospectus will
contain different front and back cover pages and Underwriting section and will
contain an additional section entitled "Certain United States Federal Tax
Consequences for Non-United States Holders." The form of the U.S. Prospectus
included herein is followed by those pages to be used in the International
Prospectus which differ from those in the U.S. Prospectus. Each of such pages
included herein is labeled "Alternative Page for International Prospectus."
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION,
PRELIMINARY PROSPECTUS DATED SEPTEMBER 26, 1995
1,800,000 SHARES
[LOGO]
ESTERLINE TECHNOLOGIES CORPORATION
COMMON STOCK
----------------
All of the shares of Common Stock offered hereby are being sold by Esterline
Technologies Corporation, a Delaware corporation (the "Company"). Of the
1,800,000 shares of Common Stock offered, 1,440,000 shares are being offered
hereby in the United States and Canada (the "U.S. Shares") and 360,000 shares
are being offered in a concurrent international offering outside the United
States and Canada. The price to the public and aggregate underwriting discounts
and commissions per share will be identical for both offerings. See
"Underwriting."
The Company's Common Stock is traded on the New York Stock Exchange ("NYSE")
under the trading symbol "ESL." On September 25, 1995, the last reported sale
price of the Common Stock as reported by the New York Stock Exchange was $27.875
per share. See "Price Range of Common Stock."
-------------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" ON PAGE 6 IN THIS PROSPECTUS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share......................... $ $ $
Total............................. $ $ $
Total Assuming Full Exercise of
Over-Allotment Option (3)........ $ $ $
<FN>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $415,000, which are payable by the
Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to
the Underwriters to purchase up to 270,000 additional shares, on the same
terms, solely to cover over-allotments. See "Underwriting."
</TABLE>
-------------------
The U.S. Shares are offered by the U.S. Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the U.S. Underwriters, and subject
to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made in New York City on or about
, 1995.
-------------------
PAINEWEBBER INCORPORATED
RAGEN MACKENZIE INCORPORATED
PACIFIC CREST SECURITIES INC.
------------
THE DATE OF THIS PROSPECTUS IS , 1995
<PAGE>
ALL PHOTOS ARE BLACK & WHITE
PHOTOS NUMBERS 1 AND 2 ARE ON THE INSIDE FRONT COVER OF THE PROSPECTUS. PHOTOS
NUMBERS 3 THROUGH 6 ARE ON THE INSIDE BACK COVER OF THE PROSPECTUS.
Photo #1 shows a technician holding a drilled circuit board. In the background
is an EXCELLON drilling machine.
Photo #2 shows a WHITNEY punching machine with a touch-screen computer
controller.
Photo #3 shows (clockwise from left) an AUXITROL optical pyrometer,
thermocouple harness, and high temperature sensor.
Photo #4 shows a KORRY lighted switch panel with the facia removed.
Photo #5 shows an array of ARMTEC combustible ordance products.
Photo #6 shows the gauge head of a FEDERAL PRODUCTS dimensional measurement
system.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS (INCLUDING NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. UNLESS THE
CONTEXT INDICATES OTHERWISE, REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" OR
TO "ESTERLINE" ARE TO ESTERLINE TECHNOLOGIES CORPORATION AND ITS SUBSIDIARIES.
UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITERS OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED.
THE COMPANY
Esterline is a diversified manufacturing company that has strong market
positions within a variety of general manufacturing industries, including
electronic equipment, metal fabrication, commercial aerospace and defense. The
Company conducts its operations through three business segments: its Automation
Group, Aerospace and Defense Group, and Instrumentation Group. The six principal
subsidiaries of Esterline set forth below generated approximately 78% and 81% of
net sales and 89% and 83% of operating earnings (excluding restructuring charges
and corporate expenses) in fiscal 1994 and for the nine-month period ended July
31, 1995, respectively.
AUTOMATION GROUP
EXCELLON AUTOMATION CO. ("Excellon") is a leading manufacturer of highly
efficient automated drilling systems, for the printed circuit board
manufacturing industry. Excellon has experienced significant growth over the
past two years, fueled by the growing capacity requirements of printed circuit
board manufacturers and the proliferation of increasingly more complex boards
which is helping to render older printed circuit board drilling machines
obsolete. Management believes that Excellon's newest automated equipment, which
includes fully integrated material handling equipment, is the technological
leader based upon its productivity and accuracy and enables its customers to
achieve one of the lowest costs per hole.
W.A. WHITNEY CO. ("Whitney") designs and builds highly productive automated
machine tool and material handling systems for cutting and punching sheet,
plate, and structural steel for construction, transportation, agricultural and
mining equipment manufacturers and independent steel fabrication centers.
Whitney produces equipment specifically designed for mid- to heavy plate metal
that enables manufacturers to meet rigid cut quality and accuracy standards. In
its niche, Whitney is a leading supplier in the United States, and has market
positions in both Europe and Asia.
AEROSPACE AND DEFENSE GROUP
ARMTEC DEFENSE PRODUCTS CO. ("Armtec") manufactures molded fiber cartridge
cases, mortar increments, igniter tubes and other combustible ammunition
components for the United States Armed Forces and licenses such technology to
foreign defense contractors and governments. In conjunction with the U.S. Army's
development of an improved solid propellent propulsion system for 155mm
artillery, Armtec is developing what management expects will become the next
generation of specialized modular cartridge cases.
AUXITROL S.A. ("Auxitrol"), headquartered in France, manufactures high
precision temperature and pressure sensing devices used primarily on rocket
motors and jet engines, and liquid level and various other measuring devices for
the ship building and petroleum and process industries. Auxitrol also
manufactures electrical penetration devices under license for use in nuclear
power plants in certain European countries and other foreign countries.
INSTRUMENTATION GROUP
FEDERAL PRODUCTS CO. ("Federal") designs and produces high-precision analog
and digital measurement and inspection instruments and systems for dimensional
and other quality control applications in the production of finely machined
parts for the automotive, aerospace and general manufacturing industries.
Manufacturers use Federal equipment for direct shop-floor inspections to reduce
costly rework at more advanced production stages.
3
<PAGE>
KORRY ELECTRONICS CO. ("Korry") is a market and technology leader in the
manufacture of high-reliability electro-optical components and systems,
illuminated push button switches, indicators, panels, and keyboards primarily
for commercial and military aircraft manufacturers, electronic instruments
producers, and defense contractors. Korry's products have been designed into
many existing aircraft systems, and as a result, Korry enjoys a considerable
spares and retrofit business.
Esterline's senior management group joined the Company in 1987. In its
efforts to improve stockholder returns, management has downsized and
restructured the Company and navigated it through extended downturns in both the
electronics capital goods and commercial aerospace and defense markets. Since
October 31, 1989, senior management has reduced the Company's total debt from
$172.1 million to $50.4 million at July 31, 1995. Today, Esterline is enjoying
the benefits of its increased operating leverage as a result of its
restructuring efforts and improving capital goods markets.
The Company's operating strategy consists of the following key elements:
FOCUS ON MANUFACTURING HIGHLY ENGINEERED PRODUCTS IN NICHE MARKETS --
Management believes that engineered products with technological advantages help
maintain strong market shares which provide the opportunity to earn above
average profit margins. Even during market downturns, the Company provides
financial resources to its operating units for the research and development of
new or enhanced products in an effort to maintain technological advantages.
IMPLEMENT PROFESSIONAL MANAGEMENT PRACTICES -- Esterline's corporate
management supports stand-alone operating management teams at each Esterline
subsidiary. The Company believes that its long-term management approach and
continuous focus on incremental improvement often enable it to increase the
value of small- to medium-sized manufacturing businesses by bringing
professional management practices to traditional entrepreneurial operations.
INCENTIVIZE MANAGEMENT TO OBTAIN ABOVE AVERAGE RETURN FOR STOCKHOLDERS --
The Company's goal is to provide stockholders with an above average return on
equity. The compensation system for senior management is consistent with this
goal, rewarding performance not only with respect to the Company's annual
results but also long-term Company performance relative to specific industry
indices.
PURSUE SELECTIVE ACQUISITION OPPORTUNITIES -- Strategic acquisitions are an
important element in achieving the Company's long-term earnings growth
objectives. The Company will continue to target acquisition candidates in the
areas it knows well--technically based manufacturing companies delivering
products to industrial customers--where its management team's knowledge and
experience can add value. With the proceeds from this offering and the reduced
financial leverage, the Company should be well-positioned from a financial
standpoint to successfully complete acquisitions.
Esterline, organized in August 1967, is a Delaware corporation with its
principal executive offices at 10800 NE 8th Street, Bellevue, Washington
(telephone number (206) 453-9400).
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company......... 1,800,000 shares (1)
Common Stock to be Outstanding after the
Offering................................... 8,445,214 shares (1)
Use of Proceeds............................. General corporate purposes, including
acquisitions.
New York Stock Exchange Symbol.............. ESL
<FN>
- ------------------------
(1) Does not include 974,500 shares of Common Stock reserved for issuance under
the Company's Stock Option Plan, of which 755,875 are currently outstanding
and of which 471,625 are currently exercisable.
</TABLE>
4
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The following table sets forth summary historical financial and operating
data of the Company and its subsidiaries. The results for the interim periods
are not necessarily indicative of the results of the full fiscal year. For
additional information, see the consolidated financial statements of the Company
and its subsidiaries and "Selected Historical Financial and Operating Data"
included elsewhere in this Prospectus. The summary historical financial data
should also be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED OCTOBER 31, ENDED JULY 31,
-------------------------------------------------------- ----------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- ------------ ----------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND EMPLOYEE (UNAUDITED)
DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales..................... $389,109 $350,934 $304,827 $285,152 $294,044 $200,415 $255,462
Cost of sales................. 241,235 214,415 187,235 175,568 178,397 122,327 151,441
Selling, general and
administrative expense....... 118,618 111,858 102,202 100,669 100,845 70,194 84,956
Restructuring charge
(credit)..................... -- -- -- 40,626(1) -- -- (2,067)(3)
Interest expense, net......... 17,350 12,709 7,246 6,324 5,985 4,309 3,471
Earnings (loss) before income
taxes........................ 11,906 11,952 8,144 (38,035) 8,817 3,585 17,661
Income tax expense (benefit).. 4,848 4,637 3,050 (12,400) 1,254(2) 1,320 5,823
Net earnings (loss)........... $ 7,058 $ 7,315 $ 5,094 $(25,635)(1) $ 7,563(2) $ 2,265 $ 11,838(3)
Net earnings (loss) per
share........................ $ 1.08 $ 1.12 $ 0.76 $ (3.90)(1) $ 1.15(2) $ 0.35 $ 1.70(3)
Weighted average number of
shares outstanding........... 6,535 6,543 6,667 6,579 6,571 6,519 6,982
BALANCE SHEET DATA
(at period end)
Working capital............... $15,909 $20,377 $21,721 $ 9,064 $ 10,542 $ 27,786
Total assets.................. 289,667 256,384 232,024 205,672 215,975 209,296
Total debt.................... 151,123 109,302 81,784 74,486 62,360 50,400
Shareholders' equity.......... 71,441 77,377 82,622 55,323 65,491 78,456
OTHER DATA
Gross margin percentage....... 38.0% 38.9% 38.6% 38.4% 39.3% 39.0% 40.7%
Research, development and
related engineering costs as
a percentage of sales (4).... 4.4% 4.7% 4.4% 4.9% 4.7% 5.2% 4.7%
Total number of employees (at
period end).................. 3,868 3,499 3,109 2,809 2,804 2,772 2,927
<FN>
- ------------------------------
(1) In the fourth quarter of fiscal 1993, the Company recorded a $40.6 million
restructuring charge ($27.2 million, or $4.14 per share, net of income tax
effect). Without this restructuring charge, net earnings in 1993 would have
been $1.6 million, or $.24 per share.
(2) Net earnings in 1994 reflect a $2.0 million, or $.30 per share, tax benefit
recorded in the fourth quarter of fiscal 1994 as a result of a settlement
with the Internal Revenue Service. Net earnings in 1994 would have been
$5.6 million, or $.85 per share, without this credit.
(3) Net earnings for the nine-month period ended July 31, 1995 reflect
nonrecurring items including a pre-tax restructuring credit of $2.1
million, or $.20 per share on an after-tax basis, and a pre-tax patent
infringement settlement credit of $1.3 million, or $.12 per share on an
after-tax basis, both of which were recorded in the third quarter of fiscal
1995. Without these credits, net earnings for the nine-month period ended
July 31, 1995 would have been $9.6 million, or $1.38 per share.
(4) Research, development and related engineering costs are included in
selling, general and administrative expense.
</TABLE>
5
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE COMMON STOCK SHOULD CONSIDER CAREFULLY THE
SPECIFIC RISK FACTORS SET FORTH BELOW AS WELL AS THE OTHER INFORMATION CONTAINED
IN THIS PROSPECTUS.
CYCLICALITY OF BUSINESS. The Company's business is susceptible to economic
cycles and its results can vary widely based on a number of factors, including
domestic and foreign economic conditions and developments affecting the specific
industries and customers served. The products sold by the Company's businesses
represent capital investment or support for 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 results of operations and financial
condition. For example, recently, strong demand for the Automation Group's
manufacturing equipment products, particularly at Excellon, was primarily
responsible for the Company's sales increases. There can be no assurance that
such demand for Excellon's products will continue at their current levels.
COMPETITION. The Company competes in most markets it serves with numerous
other companies, some of which have far greater sales volume and financial
resources than the Company. The principal competitive factors in the commercial
markets in which the Company participates are product performance and service.
Part of product performance requires significant expenditures in research and
development that lead to product improvement. The market for many of the
Company's products may be affected by rapid technological changes and new
product introduction. Current competitors or new entrants could introduce new
products with features that render the Company's products obsolete or less
marketable. Excellon's principal competitors are Hitachi, Ltd. and Pluritec.
Whitney's principal competitors are Mazak, Cincinnati Milacron, U.S. Amada, and
Trumpf. Auxitrol's principal competitors are Ametek and Rosemount. Federal's
principal competitors are Starrett and Mitutoyo. Korry's principal competitors
are Eaton-MSC and Ducommun Jay-El. See "Business -- Competition."
DEPENDENCE ON MAJOR CUSTOMERS; BACKLOG. Certain of the Company's
subsidiaries are dependent on a relatively small number of customers and defense
programs which change from time to time. For example, Armtec is dependent on the
U.S. Army. Significant customers in fiscal 1994 included AT&T, the U.S. Army,
Snecma, Boeing and General Dynamics. There can be no assurance that the
Company's current customers will continue to buy the Company's products at their
current levels. Moreover, orders included in backlog are generally subject to
cancellation by the Company's customers. The inability to replace sales due to
the loss of any major customer or defense program could have a material adverse
effect on the Company's results of operations and financial condition.
EFFECT OF GOVERNMENT CONTRACT PROVISIONS AND AUDITS. As a contractor and
subcontractor to the United States Government, the Company is subject to various
laws and regulations that are more restrictive than those applicable to
non-government contractors. Although only 4% of the Company's sales are made
directly to the United States Government, the Company's subcontracting
activities account for an additional 15% of sales. Therefore, approximately 19%
of the Company's sales are governed by rules favoring the government's
contractual position. As a consequence, such contracts may be subject to protest
or challenge by unsuccessful bidders or to termination, reduction, or
modification in the event of changes in government requirements, reductions in
federal spending, or other factors. The accuracy and appropriateness of certain
costs and expenses used to substantiate direct and indirect costs of the Company
for the United States Government under both cost-plus and fixed-price contracts
are subject to extensive regulation and audit by the Defense Contract Audit
Agency ("DCAA"), an arm of the United States Department of Defense.
DEPENDENCE ON PROPRIETARY TECHNOLOGY. The Company's subsidiaries take
precautionary steps to protect their technological advantages and rely in part
on patent, trademark, trade secret, and copyright law to protect their
intellectual property. There can be no assurances that the precautionary steps
taken by the Company will prevent misappropriation of its technology. Litigation
may be necessary in the future to enforce the Company's patents and other
intellectual property rights, to protect the Company's trade secrets, to
determine the validity and scope of proprietary rights of others, or to defend
against claims of
6
<PAGE>
infringement or invalidity by others. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's operating results and financial condition.
RISK OF FOREIGN OPERATIONS. Foreign sales represented approximately 31% of
the Company's total sales in fiscal 1994. Foreign sales are subject to numerous
risks, including political and economic instability in foreign markets,
restrictive trade policies of foreign governments, economic conditions in local
markets, inconsistent product regulation by foreign agencies or governments, the
imposition of product tariffs and the burdens of complying with a wide variety
of international and U.S. export laws and differing regulatory requirements. To
the extent that foreign sales are transacted in a foreign currency, the Company
would be subject to the risk of losses due to foreign currency fluctuations. In
addition, the Company has substantial assets denominated in foreign currencies
which are not offset by liabilities denominated in such foreign currencies.
These net foreign currency investments are subject to material changes in the
event of fluctuations in foreign currencies against the U.S. dollar.
PRODUCT LIABILITY. The Company is subject to the risk of claims arising
from injuries to persons or property due to the use of its products. Although
the Company maintains general liability and product liability insurance, there
can be no assurance that such insurance will be sufficient to cover any claims
that may arise.
ENVIRONMENTAL MATTERS. The Company is subject to federal, state, local and
foreign laws, regulations and ordinances that (i) govern activities or
operations that may have adverse environmental effects, such as discharges to
air and water, as well as handling and disposal practices for solid and
hazardous wastes, and (ii) impose liability for the costs of cleaning up, and
certain damages resulting from, sites of past spills, disposals or other
releases of hazardous substances (together, "Environmental Laws"). From time to
time, the Company's operations have resulted or may result in noncompliance with
or liability for cleanup pursuant to Environmental Laws. In addition, the
Company has been identified as a potentially responsible party pursuant to the
federal Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or under analogous state Environmental Laws, for the cleanup
of contamination resulting from past disposals of hazardous wastes at certain
sites to which the Company, among others, sent wastes in the past. The Company
believes that any such noncompliance or liability under current Environmental
Laws would not have a material adverse effect on its results of operation or
financial condition. Nonetheless, there can be no assurance that such matters,
or any similar liabilities that arise in the future, will not have a material
adverse effect on the Company's results of operations or financial condition.
See "Business -- Environmental Matters."
VOLATILITY OF STOCK PRICE. The trading price of the Company's Common Stock
has from time to time fluctuated widely and in the future may be subject to
similar fluctuations in response to quarter-to-quarter variations in the
Company's operating results, announcements of technological innovations or new
products by the Company or its competitors, announcements of marketing and
distribution arrangements by the Company, general conditions in the industries
in which the Company competes and other events or factors. In addition, in
recent years broad stock market indices, in general, and the securities of
technology companies, in particular, have experienced substantial price
fluctuations. Such broad market fluctuations also may adversely affect the
future trading price of the Common Stock. See "Price Range of Common Stock."
RISKS ASSOCIATED WITH ACQUISITIONS. A key operating strategy of the Company
is the pursuit of selective acquisitions. Although the Company reviews many
possible acquisitions, including some outside of its current markets and
acquisition criteria, the Company currently has no commitments, agreements or
understandings to acquire any specific businesses or other material assets.
There can be no assurance that any acquisition will be consummated, or if
consummated, that any such acquisition will be successfully integrated or will
not have a material adverse effect upon the Company's financial condition or
results of operations. The Company is seeking stand-alone operations with
revenues in the $40 to $100 million range,
7
<PAGE>
or smaller companies or product lines that complement the Company's current
market or product forces; however, there can be no assurance that the Company
will not consumate an acquisition outside this revenue range.
CERTAIN ANTI-TAKEOVER PROVISIONS. The Company's Restated Certificate of
Incorporation, as amended, (the "Certificate of Incorporation"), and Bylaws
contain provisions for a classified Board of Directors and restricting the
ability of stockholders to call special meetings. These provisions could delay
or impede the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving the Company, even if such events
might be favorable to the Company's stockholders. In addition, certain
agreements to which the Company is a party, including loan and employment
agreements, contain provisions that impose substantial penalties upon the
Company in the event of a change of control.
The Company's stockholder Rights Plan is designed to cause substantial
dilution to any "Acquiring Person" that attempts to merge or consolidate with,
or that takes certain other actions affecting, the Company on terms that are not
approved by the Board of Directors of the Company. The Company is also subject
to the "business combination" statute of the Delaware General Corporation Law.
In general, the statute prohibits a publicly held Delaware corporation from
engaging various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which such person became an "interested stockholder," unless the business
combination is approved in a prescribed manner. These provisions could
discourage or make more difficult a merger, tender offer or other similar
transaction, even if favorable to the Company's stockholders. See "Description
of Capital Stock -- Rights Plan; -- Section 203 of Delaware General Corporation
Law."
Under the Company's Certificate of Incorporation, the Company has the
ability to issue approximately 21.5 million shares of Common Stock, 25,000
shares of Preferred Stock and 475,000 shares of Serial Preferred Stock. The
Preferred and Serial Preferred Stock may be issued from time to time in one or
more series with such designations, preferences and relative participating,
optional or other special rights and qualifications, limitations or restrictions
thereon, as determined by the Board of Directors. One of the effects of the
existence of unissued and unreserved capital stock may be to enable the Board of
Directors to issue shares to persons friendly to current management which could
render more difficult or discourage an attempt to obtain control of the Company
by means of a merger, tender offer, proxy contest or otherwise, and thereby
protect the continuity of management. Such additional shares also could be used
to dilute the stock ownership of persons seeking to obtain control of the
Company. See "Description of Capital Stock -- Preferred Stock and Serial
Preferred Stock; -- Certain Effects of Authorized But Unissued Stock."
8
<PAGE>
USE OF PROCEEDS
The Company expects to use the net proceeds from the sale of the Common
Stock estimated to be approximately $47,251,250 ($54,401,188 if the
Underwriters' over-allotment option is exercised in full), assuming a public
offering price of $27.875 and after deducting the Underwriters' discounts, fees,
expenses and commissions, for general corporate purposes, including, without
limitation, the possible acquisition of other companies and working capital
needs. The Company routinely reviews acquisition opportunities. The Company is
seeking stand-alone operations with revenues in the $40 million to $100 million
range, or smaller companies or product lines that complement the Company's
current market or product focus. The Company's acquisition focus will continue
to be in areas it knows well -- where the management team's knowledge and
experience can add value. With the proceeds from this offering and the reduced
financial leverage, the Company should be well positioned from a financial
standpoint to successfully complete acquisitions.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The following table sets forth the high and low sales prices for the
Company's Common Stock for the periods indicated as reported by the New York
Stock Exchange. As of September 25, 1995, the Company believes that there were
approximately 1,100 holders of record of Common Stock.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED HIGH LOW
- --------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
1993
January 31, 1993........................................................... $ 13.00 $ 9.63
April 30, 1993............................................................. 11.88 8.50
July 31, 1993.............................................................. 10.00 7.63
October 31, 1993........................................................... 8.63 7.50
1994
January 31, 1994........................................................... 8.13 7.25
April 30, 1994............................................................. 9.00 7.13
July 31, 1994.............................................................. 10.00 6.38
October 31, 1994........................................................... 12.38 9.50
1995
January 31, 1995........................................................... 14.75 11.13
April 30, 1995............................................................. 17.63 12.50
July 31, 1995.............................................................. 24.75 16.63
August 1, 1995 through September 25, 1995.................................. 29.88 22.13
</TABLE>
No cash dividends were paid during the fiscal years ended October 31, 1993
and 1994 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. In addition, the Company's debt agreements contain various
restrictions on the payment of dividends.
The last reported sale price of the Company's Common Stock on September 25,
1995 was $27.875 per share.
9
<PAGE>
CAPITALIZATION
The following table sets forth the total capitalization, cash and cash
equivalents and short-term debt of the Company as of July 31, 1995, as adjusted
to reflect the sale of the shares of Common Stock offered by the Company hereby
at an assumed public offering price of $27.875 (after deducting estimated
underwriting discount and commissions and offering expenses) and the receipt of
the net proceeds therefrom. See "Use of Proceeds" and "Management's Discussion
and Analysis of Results of Operations and Financial Condition."
<TABLE>
<CAPTION>
JULY 31, 1995
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
(UNAUDITED)
Cash and cash equivalents............................................. $ 13,434 $ 60,685
-------- -----------
-------- -----------
Short-term debt....................................................... $ 14,009 $ 14,009
-------- -----------
-------- -----------
Long-term debt, net of current maturities............................. $ 36,391 $ 36,391
-------- -----------
Shareholders' equity
Common stock, par value $.20 per share, 30,000,000 shares
authorized, 6,634,539 shares issued and outstanding and 8,434,539
shares, as adjusted (1)............................................ 1,326 1,686
Preferred Stock, par value $100 per share, 25,000 shares authorized,
no shares issued and outstanding................................... -- --
Serial Preferred Stock, par value $1 per share, 475,000 shares
authorized, no shares issued and outstanding....................... -- --
Capital in excess of par value...................................... 10,372 57,263
Retained earnings................................................... 66,789 66,789
Cumulative translation adjustment................................... (31) (31 )
-------- -----------
Total shareholders' equity........................................ 78,456 125,707
-------- -----------
Total capitalization............................................ $114,847 $ 162,098
-------- -----------
-------- -----------
<FN>
- ------------------------
(1) Does not include currently outstanding options to purchase 776,875 shares
of the Company's Common Stock as of July 31, 1995, 473,875 of which were
then exercisable.
</TABLE>
10
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The following table sets forth selected historical financial and operating
data of the Company and its subsidiaries. The selected historical financial
operating and balance sheet data as of and for each of the five fiscal years in
the period ended October 31, 1994 were derived from the audited consolidated
financial statements of the Company and its subsidiaries. The selected
historical financial data of the Company and its subsidiaries as of July 31,
1995 and 1994 and for the nine-months then ended are unaudited but in the
opinion of management all adjustments necessary to present fairly the financial
data for such periods have been made, none of which were other than normal
recurring accruals. The results for the interim periods are not necessarily
indicative of the results of the full fiscal year. For additional information,
see the consolidated financial statements of the Company and its subsidiaries
included elsewhere in this Prospectus. The selected historical financial data
should also be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED OCTOBER 31, ENDED JULY 31,
---------------------------------------------------------- -----------------------
1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- ------------ ----------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND EMPLOYEE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales......................... $ 389,109 $ 350,934 $ 304,827 $ 285,152 $ 294,044 $ 200,415 $ 255,462
Cost of sales..................... 241,235 214,415 187,235 175,568 178,397 122,327 151,441
Selling, general and
administrative expense........... 118,618 111,858 102,202 100,669 100,845 70,194 84,956
Restructuring charge (credit)..... -- -- -- 40,626(1) -- -- (2,067)(3)
Interest expense, net............. 17,350 12,709 7,246 6,324 5,985 4,309 3,471
Earnings (loss) before income
taxes............................ 11,906 11,952 8,144 (38,035) 8,817 3,585 17,661
Income tax expense (benefit)...... 4,848 4,637 3,050 (12,400) 1,254(2) 1,320 5,823
Net earnings (loss)............... $ 7,058 $ 7,315 $ 5,094 $ (25,635)(1) $ 7,563(2) $ 2,265 $ 11,838(3)
Net earnings (loss) per share..... $ 1.08 $ 1.12 $ 0.76 $ (3.90)(1) $ 1.15(2) $ 0.35 $ 1.70(3)
Weighted average numbers of shares
outstanding...................... 6,535 6,543 6,667 6,579 6,571 6,519 6,982
BUSINESS SEGMENT DATA
Net sales
Automation...................... $ 152,117 $ 125,263 $ 91,449 $ 94,460 $ 108,642 $ 70,922 $ 114,709
Aerospace and Defense........... 120,914 113,335 111,077 99,071 93,370 62,244 67,948
Instrumentation................. 116,078 112,336 102,301 91,621 92,032 67,249 72,805
BALANCE SHEET DATA (AT PERIOD END)
Working capital................... $ 15,909 $ 20,377 $ 21,721 $ 9,064 $ 10,542 $ 27,786
Total assets...................... 289,667 256,384 232,024 205,672 215,975 209,296
Total debt........................ 151,123 109,302 81,784 74,486 62,360 50,400
Shareholders' equity.............. 71,441 77,377 82,622 55,323 65,491 78,456
OTHER DATA
Gross margin percentage........... 38.0% 38.9% 38.6% 38.4% 39.3% 39.0% 40.7%
Research, development and related
engineering costs as a percentage
of sales (4)..................... 4.4% 4.7% 4.4% 4.9% 4.7% 5.2% 4.7%
Total number of employees (at
period end)...................... 3,868 3,499 3,109 2,809 2,804 2,772 2,927
<FN>
- ------------------------------
(1) In the fourth quarter of fiscal 1993, the Company recorded a $40.6 million
restructuring charge ($27.2 million, or $4.14 per share, net of income tax
effect). Without this restructuring charge net earnings in 1993 would have
been $1.6 million, or $.24 per share.
(2) Net earnings in 1994 reflect a $2.0 million, or $.30 per share, tax benefit
recorded in the fourth quarter of fiscal 1994 as a result of a settlement
with the Internal Revenue Service. Net earnings in 1994 would have been
$5.6 million, or $.85 per share, without this credit.
(3) Net earnings for the nine-month period ended July 31, 1995 reflect
nonrecurring items including a pre-tax restructuring credit of $2.1
million, or $.20 per share on an after-tax basis, and a pre-tax patent
infringement settlement credit of $1.3 million, or $.12 per share on an
after-tax basis, both of which were recorded in the third quarter of fiscal
1995. Without these credits, net earnings for the nine-month period ended
July 31, 1995 would have been $9.6 million, or $1.38 per share.
(4) Research, development and related engineering costs are included in
selling, general and administrative expense.
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO OF THE COMPANY AND ITS SUBSIDIARIES
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
GENERAL
The Company consists of 13 individual businesses divided into three
operating business segments: Automation, Aerospace and Defense, and
Instrumentation. These three operating business segments consist of six
principal businesses. The Automation Group's principal businesses are Excellon
and Whitney. The Aerospace and Defense Group's principal businesses are Armtec
and Auxitrol. The Instrumentation Group's principal businesses are Federal and
Korry. These six principal businesses of Esterline generated approximately 78%
and 81% of the Company's net sales and 89% and 83% of operating earnings in
fiscal 1994 and for the nine-month period ended July 31, 1995, respectively.
The Company's business is susceptible to economic cycles and its 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 or support for 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 results of operations and financial
condition.
In the fourth quarter of fiscal 1993, the Company recorded a $40.6 million
restructuring charge ($27.2 million, or $4.14 per share, net of income tax
effect). The restructuring plan provided for the sale or shutdown of certain
small operations, the write-off of intangible assets, anticipated losses on the
sale of vacant facilities and product lines, employees' severance and
consolidation of facilities and product lines for increased efficiency. The
objective of the plan was to strengthen the Company for long-term growth and to
permit management to focus on operations with strong market positions. The
estimated costs represented the Company's best assessment of the plan, although
the Company expected that some cost elements of the original plan could change.
During the third quarter of fiscal 1995, several remaining restructuring actions
were completed and the Company comprehensively reviewed all of the actions as
they were originally contemplated. Asset accounts, including intangibles and
accrued liabilities associated with the plan were adjusted such that the total
restructuring costs were lowered to $38.5 million. As a result, the Company took
a restructuring credit in the third quarter of fiscal 1995 of $2.1 million ($1.4
million, or $.20 per share, net of income tax), or approximately 5% of the
original charge. No other amounts related to the restructuring plan were charged
or credited to earnings since the inception of the plan. Cash impacts of actions
taken during this period were not significant nor materially different than
originally anticipated. The Company believes the restructuring action is now
substantially complete.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JULY 31, 1995 COMPARED TO NINE MONTHS ENDED JULY 31, 1994
Sales for the nine months ended July 31, 1995 were $255.5 million versus
$200.4 million in the same period in 1994. The sales improvement was primarily
attributable to the Automation Group, where sales increased to $114.7 million in
the nine-month period ended July 31, 1995 compared with $70.9 million in the
prior year period. Continuing strong demand for the group's automated
manufacturing equipment, particularly at Excellon, was primarily responsible for
the sales increase.
Sales in the Company's two other groups, Aerospace and Defense, and
Instrumentation, also improved in the nine-month period ended July 31, 1995 as
compared with the same period in the prior year. In the Aerospace and Defense
Group, sales for the first nine months of fiscal 1995 were $67.9 million,
compared with $62.2 million in the same prior-year period. This increase was
primarily a result of translation effects resulting from changes in the exchange
rates related to Auxitrol's sales. Instrumentation Group sales for the
12
<PAGE>
nine months ended July 31, 1995 were $72.8 million, versus $67.2 million in the
same period in 1994. This increase was primarily as a result of new product
introductions and expanded sales efforts at Federal and a $1.3 million favorable
settlement of a patent infringement case.
Cost of sales increased to $151.4 million for the nine months ended July 31,
1995 compared with $122.3 million in the prior-year period primarily due to the
increased sales volume discussed above. Gross margin as a percentage of sales
improved to 41% in the current-year period compared with 39% in the same period
in 1994 primarily due to favorable product mix of sales and receipt of the
patent infringement settlement discussed above. By group, gross margins ranged
from 40% to 41% in the current-year period, compared with 39% for each group in
the same period in 1994.
Selling, general and administrative expenses (which includes corporate
expenses, and research, development and related engineering costs) for the nine
months ended July 31, 1995 increased to $85.0 million compared with $70.2
million in the prior-year period. As a percent of sales, however, they decreased
from 35% in the 1994 period to 33% in 1995 because of cost containment and
operating leverage the Company is experiencing due to increased sales volumes.
Research, development and related engineering costs for the first nine months of
fiscal 1995 increased to $12.1 million, versus $10.4 million in the year-ago
period, reflecting the Company's continuing commitment to invest in strategic
product development programs.
Operating earnings (excluding corporate expenses and the restructuring
credit) increased significantly in the Automation Group, particularly at
Excellon. Operating earnings in the current nine-month period versus the prior
year in the Aerospace and Defense Group were lower, while in the Instrumentation
Group, receipt of the settlement of the patent infringement case added to an
already improved level of earnings.
Net interest expense for the nine months ended July 31, 1995 was $3.5
million compared with $4.3 million in the prior-year period due primarily to
reduced debt levels, offset by slight increases in interest rates.
The effective income tax rate for the first nine months of fiscal 1995 was
33% compared with 37% in the prior-year period. This reduction was primarily due
to the availability of foreign tax offsets in the current-year period.
Net earnings for the nine months ended July 31, 1995, were $11.8 million, or
$1.70 per share, compared with net earnings of $2.3 million, or $.35 per share
in the prior-year period. Earnings in the current-year period include $.20 per
share and $.12 per share, respectively, from the restructuring credit and patent
infringement settlement discussed above.
Orders for the nine months ended July 31, 1995, were $274.1 million,
compared with $235.4 million a year earlier. The increases were primarily
attributable to the Automation Group and its improved markets as discussed
above. Backlog at July 31, 1995 was $115.5 million, compared with $106.4 million
a year earlier. At July 31, 1995, approximately $50.0 million of Company-wide
backlog was scheduled to be delivered after fiscal 1995. Orders in backlog are
subject to cancellation.
TWELVE MONTHS ENDED OCTOBER 31, 1994 COMPARED TO TWELVE MONTHS ENDED OCTOBER
31, 1993
Net sales in 1994 were $294.0 million, compared with $285.2 million in 1993.
The 1994 sales improvement was attributable to the Automation Group, where sales
increased $14.2 million or 15% to $108.6 million. Strengthening of domestic
markets coupled with strong customer acceptance of newer products, principally
at Excellon, contributed to the sales growth. This sales increase in the
Automation Group was primarily attributable to sales increases at Excellon and
at Whitney. Instrumentation Group sales stabilized and were virtually level with
the prior year at $92.0 million, while sales in the Aerospace and Defense Group
decreased $5.7 million or 6% to $93.4 million. The sale of Republic Electronics
Co. in the second quarter of 1994 accounted for approximately two-thirds of this
decrease. Including export sales by domestic operations, sales to foreign buyers
totaled $91.0 million and $89.3 million in 1994 and 1993, respectively, and
accounted for 31% of the Company's total sales in each year.
Cost of sales increased to $178.4 million in 1994 from $175.6 million in
1993. This increase was primarily attributable to the increase in net sales
discussed above. Gross margin as a percentage of sales increased slightly to 39%
in 1994 from 38% in 1993. Gross margin percentages by business segment increased
in 1994
13
<PAGE>
in both the Aerospace and Defense and Instrumentation Groups, and were
approximately level in the Automation Group. In 1994, group margins ranged from
38% to 42%, compared with 37% to 40% in the prior year.
Selling, general and administrative expenses in 1994 were level with the
prior year at $100.8 million. However, they decreased slightly as a percent of
sales from 35% to 34%. The costs related to the corporate expenses portion of
selling, general and administrative expenses amount to $8.5 million in 1994,
compared with $7.2 million in 1993. This increase was primarily attributable to
additional performance-based compensation being awarded to senior management as
a result of the Company's improved earnings in 1994. The research, development
and related engineering costs portion of selling, general and administrative
expenses amounted to $13.7 million in 1994, compared with $14.0 million in 1993,
reflecting the Company's continuing commitment to invest in strategic product
development programs.
Operating earnings (excluding corporate expenses and restructuring charges)
in 1994 improved in all three of the Company's business segments and totaled
$23.3 million, compared with $16.1 million in the prior year. The improvement
was primarily attributable to the Automation Group where earnings advanced $4.0
million over the prior year primarily as a result of the earnings improvement at
Excellon and Whitney. Overall, operating earnings reflect a $2.6 million
reduction in depreciation and amortization expense as a result of the 1993
restructuring, and continued cost containment measures.
Net interest expense decreased from $6.3 million in 1993 to $6.0 million in
1994 due to reduced debt levels, offset by increases in interest rates.
Income tax expense in 1994 was $1.3 million, reflecting a $2.0 million
benefit recorded in the fourth quarter of 1994 resulting from a settlement with
the Internal Revenue Service of audits of certain federal income tax returns
compared with an income tax benefit of $12.4 million recorded in 1993.
Net earnings in 1994 were $7.6 million, or $1.15 per share on sales of
$294.0 million, compared with a net loss of $25.6 million, or $3.90 per share on
sales of $285.2 million in 1993. Net earnings in 1994 reflect the $2.0 million
tax benefit recorded in the fourth quarter resulting from the settlement with
the Internal Revenue Service. Net earnings in 1993 included a $27.2 million
after tax ($40.6 million before tax) restructuring provision. Without the
restructuring charge, 1993 net earnings would have been $1.6 million, or $.24
per share.
Orders for the year ended October 31, 1994 totaled $319.0 million, up more
than 20% from the prior year. Company-wide backlog at the end of 1994 was $97.0
million compared with $74.0 million a year earlier. The increases were primarily
attributable to the Automation Group, where year-end backlog levels of $30.0
million were more than triple the prior-year amount, reflecting strengthening
markets and the introduction of new products in 1993. Backlog at the Company's
two other groups were relatively consistent with prior-year levels.
Approximately $11.0 million of 1994's Company-wide backlog was scheduled to be
shipped after fiscal 1995. Orders in backlog are subject to cancellation.
TWELVE MONTHS ENDED OCTOBER 31, 1993 COMPARED TO TWELVE MONTHS ENDED OCTOBER
31, 1992
Sales in 1993 were $285.2 million, compared with $304.8 million in 1992. The
$19.6 million decrease was almost equally divided between two business segments:
the Aerospace and Defense Group primarily as a result in decreased sales at
Armtec, and the Instrumentation Group. Sales in the Automation Group increased
$3.1 million over 1992, from $91.4 million to $94.5 million, due to increased
sales at Excellon as a result of the introduction of some new products.
Aerospace and Defense Group sales decreased 11% from 1992, from $111.1 million
to $99.1 million. The commercial aircraft and defense markets served by this
group faced significant downturns during 1993, resulting in the sales decrease.
Sales in the Instrumentation Group (which decreased 10% from 1992, from $102.3
million to $91.6 million) also were affected by the commercial aircraft market
downturn as well as reduced capital spending by industrial and utilities
customers for the types of products produced by the group's operating units.
Including exports, sales to foreign buyers as a percent of total 1993 sales
remained approximately level with the prior year at 31%.
14
<PAGE>
Cost of sales decreased to $175.6 million in 1993 from $187.2 million in
1992. This decrease was primarily attributable to the decrease in net sales
discussed above. Gross margin as a percentage of sales decreased slightly to 38%
in 1993 from 39% in 1992 despite significantly reduced sales in 1993. 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.
Although selling, general and administrative expenses decreased by $1.5
million from 1992 to 1993, they increased as a percentage of sales from 34% to
35%. The costs related to the corporate expenses portion of selling, general and
administrative expenses amount to $7.2 million in 1993 compared with $7.9
million in 1992. This decrease was primarily attributable to the absence of any
performance-based compensation being awarded to senior management as a result of
the Company's net loss recorded in 1993. Research, development and related
engineering costs increased slightly to $14.0 million in 1993 from $13.4 million
the prior year, reflecting the Company's continued commitment to strong product
development programs.
Operating earnings (excluding corporate expenses), prior to the
restructuring charge, decreased 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 $1.0 million in 1992 to $7.9 million in 1993
based on some market improvement and increased sales coupled with significant
cost reductions at Excellon.
Net interest expense decreased from $7.2 million in 1992 to $6.3 million in
1993 due to the reduced debt level.
A net tax benefit of $12.4 million was recorded in 1993 compared to a $3.1
million expense recorded in 1992. The 1993 net benefit reflects an estimated
$13.4 million realizable tax benefit from restructuring.
A net loss of $25.6 million, or $3.90 per share, was reported for 1993,
resulting from a fourth quarter after-tax restructuring charge of $27.2 million
($40.6 million before tax). Without the restructuring charge the Company's net
earnings for 1993 would have been $1.6 million, or $.24 per share. In 1992, net
earnings were $5.1 million, or $.76 per share.
Company-wide backlog at October 31, 1993 was $74.0 million compared with
$97.0 million at October 31, 1992. The decrease was primarily in the Aerospace
and Defense Group and was due to the timing of the release of orders by
customers together with the downturn in the commercial aircraft and defense
markets. Automation Group backlog at the end of 1993 was also somewhat lower
than at the end of 1992 due to low order levels for printed circuit board
drilling machines. Of 1993's year-end backlog, $14.0 million was scheduled to be
shipped after fiscal 1994. Orders in backlog are subject to cancellation.
LIQUIDITY AND CAPITAL RESOURCES
Total debt at July 31, 1995 was $50.4 million, $12.0 million less than at
October 31, 1994. This debt reduction primarily reflects early redemption of
$20.0 million principal amount of 8.25% Convertible Debentures which was
effected in May 1995 using available cash. Cash and cash equivalents on hand at
July 31, 1995 totalled $13.4 million, an increase of $4.4 million from October
31, 1994. Working capital at July 31, 1995 increased to $27.8 million from $10.5
million at October 31, 1994 primarily due to cash generated from operations, and
to reductions in accrued liabilities related to the 1993 restructuring.
Of the total debt outstanding at July 31, 1995, $40.0 million was
outstanding under the Company's 8.75% Senior Notes, nothing was outstanding
under the Company's bank credit facility and $10.4 million was outstanding under
the various bank credit facilities and other debt agreements, primarily those
related to Auxitrol. The Company's financing arrangements contain various
restrictions, including maintenance of net worth, various cash flow, leverage
and fixed charge coverage ratios, and limitations on capital expenditures,
mergers and acquisitions, disposition of assets and securities proceeds, payment
of dividends, and additional borrowings.
15
<PAGE>
Capital expenditures, consisting primarily of machinery, equipment and
computers, are anticipated to be approximately $12.0 million during fiscal 1995,
compared with $11.3 million in fiscal 1994. As of July 31, 1995, $8.1 million
had been expended. In addition, the Company is required to prepay $5.7 million
principal amount of the Senior Notes on July 30, 1996 and each year thereafter
until the Senior Notes mature on July 30, 2002. Management believes cash on
hand, funds generated from operations, and available bank credit lines at July
31, 1995 of approximately $32.2 million will adequately service cash
requirements through fiscal 1996.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which is
effective for fiscal years beginning after December 15, 1995. This Statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. In
addition, this Statement requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The adoption of this Statement is not
expected to have any material impact on the consolidated financial statements of
the Company.
16
<PAGE>
BUSINESS
GENERAL
Esterline is a diversified manufacturing company that has strong market
positions within a variety of general manufacturing industries, including
electronic equipment, metal fabrication, commercial aerospace and defense. The
Company conducts its operations through three business segments: its Automation
Group, Aerospace and Defense Group, and Instrumentation Group. The six principal
subsidiaries of Esterline generated approximately 78% and 81% of net sales and
89% and 83% of operating earnings, (excluding restructuring charges and
corporate expenses), in fiscal 1994 and for the nine-month period ended July 31,
1995, respectively. The six principal subsidiaries are Excellon and Whitney in
the Automation Group, Armtec and Auxitrol in the Aerospace and Defense Group,
and Federal and Korry in the Instrumentation Group.
Esterline's senior management group joined the Company in 1987. In its
efforts to improve stockholder returns, management has downsized and
restructured the Company and navigated it through extended downturns in both the
electronics capital goods and commercial aerospace and defense markets. Since
October 31, 1989, senior management has reduced the Company's total debt from
$172.1 million to $50.4 million at July 31, 1995. Today, Esterline is enjoying
the benefits of its increased operating leverage as a result of its
restructuring efforts and improving capital goods markets.
OPERATING STRATEGY
The Company's operating strategy consists of the following key elements:
FOCUS ON MANUFACTURING HIGHLY ENGINEERED PRODUCTS IN NICHE MARKETS
Management believes that engineered products with technological advantages
help maintain strong market shares which provide the opportunity to earn above
average profit margins. Esterline's subsidiaries focus on highly engineered
products for industrial customers. The Company focuses new research and
development investments on developing new or enhanced products for established
industrial markets with technology that is easily differentiated from
competitors. The Company avoids commodity-type products where price is the
primary competitive element or industries where profit margins are low. Even
during market downturns, the Company provides financial resources to its
operating units for the research and development of new or enhanced products in
an effort to maintain technological advantages. As an example, Excellon invested
heavily in the development of highly efficient automated drilling systems during
the cyclical downturn of 1991 and 1992, and when the markets began to turn in
late 1993, Excellon emerged with a significantly improved drilling system having
enhanced productivity capabilities able to achieve a lower cost per hole for its
customers.
IMPLEMENT PROFESSIONAL MANAGEMENT PRACTICES
Esterline corporate management supports stand-alone operating management
teams at each Esterline subsidiary. Esterline has developed a comprehensive
system of monitoring its separate business units and actively participates in
the strategic management of each subsidiary. The Company believes that this
management approach allows it to increase the value of small- to medium-sized
manufacturing businesses by bringing professional management practices to
traditional entrepreneurial operations. The Company's key management personnel
use their knowledge and experience to assist each operating unit in developing
long-term strategies in key areas such as new products, manufacturing, and
pricing and marketing on a world-wide basis. One example of this is
Manufacturing Resource Planning Systems ("MRP II") where Esterline's management
has gained extensive experience in connection with the installation of MRP II
systems at its subsidiaries. Where employed, MRP II has allowed the use of new
competitive manufacturing techniques-- just-in-time work cells and
quick-response, short lead time manufacturing.
INCENTIVIZE MANAGEMENT TO OBTAIN ABOVE AVERAGE RETURN FOR STOCKHOLDERS
The Company's goal is to provide stockholders with an above average return
on equity. The compensation system for senior management is consistent with this
goal, rewarding performance not only with respect to the Company's annual
results but also long-term Company performance relative to specific industry
indices. Specifically, under the long-term plan, a new four-year cycle is
established each year in which
17
<PAGE>
payouts are tied to Company performance (measured by return on equity, and
growth in earnings per share) relative to such indices. In addition, financial
incentives for key operating unit personnel are consistent with the goals stated
above. These managers are eligible for bonuses based on subsidiary-specific
return on investment incentive compensation plans.
PURSUE SELECTIVE ACQUISITION OPPORTUNITIES
Strategic acquisitions are an important element in achieving the Company's
long-term growth objectives, and the Company has intensified its efforts in this
regard with the extensive involvement of top management at the corporate level
and key operating unit personnel. The Company's acquisition focus will continue
to be in the areas it knows well -- technically based manufacturing companies
delivering products to industrial customers -- where its management team's
knowledge and experience can add value. Esterline management is seeking
stand-alone operations with revenues in the $40 million to $100 million range,
or smaller companies or product lines that complement the Company's current
market and product focus. A team of senior Esterline managers has been assembled
to actively identify and evaluate potential candidates. This team is currently
reviewing a number of potential candidates; however, it currently has no
commitments, agreements or understandings to acquire any specific businesses or
other material assets. With the proceeds from this offering and the reduced
financial leverage, the Company should be well-positioned from a financial
standpoint to successfully complete acquisitions.
AUTOMATION GROUP
The Automation Group consists of four subsidiaries of which Excellon and
Whitney are the principal subsidiaries. In fiscal 1994, the Automation Group
accounted for 37% of the Company's net sales. For the nine-month period ended
July 31, 1995 the Automation Group accounted for 45% of the Company's net sales.
Equipment Sales Co. and Tulon Co. comprise the remaining members of the
Automation Group.
EXCELLON
Excellon is a leading manufacturer of highly efficient automated drilling
systems for the printed circuit board manufacturing industry. Excellon has
experienced significant growth over the past two years, fueled by the growing
capacity requirements of printed circuit board manufacturers and the
proliferation of increasingly more complex boards which is helping to render
older printed circuit board drilling machines obsolete. As new electronic
applications multiply, board designers are forced to integrate increasingly more
functions into smaller packages, requiring more PCB holes, smaller holes and
much tighter tolerances between holes. Management believes that its drilling
systems enable its customers to achieve one of the lowest costs per hole, an
increasingly important consideration in the cost-conscious electronics industry.
Excellon's high levels of research and development expenditures are key to
maintaining its important technology lead. Excellon's latest product
developments are micro-drilling machines that automatically load or unload
circuit boards in combination with fully integrated material handling systems.
These drilling equipment systems, in combination with Excellon's powerful
software, respond to customer needs for increased flexibility--smaller, shorter
production runs--in an automated production environment. These units feature a
tool management system that provides access to 600 tools per spindle, integrated
laser inspection for broken bits, and full Z-axis control for precision depth
drilling. Depending on the configuration ordered, Excellon's System 2000
machine, for example, can automatically load circuit board material onto one of
five drilling stations, drill the board to exacting pre-programmed
specifications, and then unload the finished boards. This level of automation
translates into dramatic productivity advantages for Excellon's customers. An
Excellon system can provide access to any function of the drilling machine, and
full process analysis traceability of system or operator performance and
statistical process control. Yet, its color touch-screen with easy-to-read menus
available in nine different languages provides for ease of operation.
Excellon products are sold worldwide to the PCB manufacturing industry, at
prices ranging from $100,000 to $500,000. The three largest markets for the PCB
manufacturers are the computer (35%), communications (25%) and automotive (12%)
markets. Since August 1994, AT&T Corp., one of Excellon's largest customers and
one of the world's leading producers of PCBs, has installed more than 30
Excellon drilling systems, served by fully integrated material handling
equipment.
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<PAGE>
In fiscal 1992, 1993 and 1994, printed circuit board drilling equipment
accounted for 12%, 16% and 18% respectively, of the Company's consolidated net
sales.
WHITNEY
Whitney designs and builds highly productive automated machine tool and
material handling systems for cutting and punching sheet, plate, and structural
steel for construction, transportation, agricultural and mining equipment
manufacturers and independent steel fabrication centers. Whitney produces
equipment specifically designed for mid- to heavy plate metal that enables
manufacturers to meet rigid cut quality and accuracy standards. Whitney's
computer-controlled heavy punching and cutting machines significantly reduce
setup time, decrease work-in-process time and material handling, and enable
customers to utilize just-in-time production to lower inventory and costs.
Management believes that Whitney's proprietary TRUECut-TM- oxygen plasma cutting
technology virtually eliminates rejected parts and additional finish work,
resulting in improved throughput and reduced cost per part. In its niche,
Whitney is a leading supplier in the United States, and has market positions in
both Europe and Asia. Whitney continually evaluates new approaches to metal
cutting such as laser technology, but to date has not found such technology to
be competitive with Whitney's current systems in its market niche.
OTHER
EQUIPMENT SALES CO. acts as a sales representative for various
manufacturers' products sold to the PCB assembly industry, including high-speed
assembly equipment.
TULON CO. produces tungsten carbide drill and router bits, commonly ranging
in size from 5.6mm down to .25mm -- some as small as .10mm -- for use in PCB
drilling equipment. Tulon Co. utilizes computerized equipment which
automatically inspects drill bits and provides the product consistency customers
need for higher-technology drilling. Tulon Co.'s products can be used in
drilling machines produced by other companies as well as the machines produced
by Excellon.
BACKLOG
At July 31, 1995 the backlog of the Automation Group (of which $12.2 million
is expected to be filled after fiscal 1995) was $40.7 million compared with
$29.9 million at October 31, 1994. The increase was primarily attributable to
strengthening markets and strong customer acceptance of Excellon's newer
products.
AEROSPACE AND DEFENSE GROUP
The Aerospace and Defense Group consists of five subsidiaries of which
Auxitrol and Armtec are the principal subsidiaries. In fiscal 1994, the
Aerospace and Defense Group accounted for 32% of the Company's net sales. For
the nine-month period ended July 31, 1995 the Aerospace and Defense Group
accounted for 27% of the Company's net sales. Hytek Finishes Co., Midcon Cables
Co. and TA Mfg. Co. comprise the remaining companies in the Aerospace and
Defense Group.
ARMTEC
Armtec manufactures molded fiber cartridge cases, mortar increments, igniter
tubes and other combustible ammunition components for the United States Armed
Forces and licenses such technology to foreign defense contractors and
governments. Armtec currently is a principal U.S. producer of combustible
ordnance products utilized by the U.S. Army. These products include the 120mm
combustible case used as the main armament system on the U.S. Army's M-1A1 and
M-1A2 tanks, the 60mm, 81mm and 120mm combustible mortar increments, and the
155mm combustible case for artillery ammunition. As opposed to metal cartridge
casings, Armtec's products are part of the ammunition propulsion system and are
combusted when fired. In conjunction with the U.S. Army's development of an
improved solid propellant propulsion system for 155mm artillery, Armtec is
developing what management expects will become the next generation of
specialized modular cartridge cases.
In fiscal 1992, 1993 and 1994, combustible ordnance components accounted for
12%, 9% and 9%, respectively, of the Company's consolidated net sales.
19
<PAGE>
AUXITROL
Auxitrol, headquartered in France, manufactures high precision temperature
and pressure sensing devices used primarily in aerospace and aviation
applications, liquid level measurement devices for ships and storage tanks,
pneumatic accessories (including pressure gauges and regulators) and industrial
alarms. Auxitrol's principal customers are jet engine and rocket motor
manufacturers, aerospace equipment manufacturers, shipbuilders, petroleum
companies, processors and electric utilities. Exhaust gas temperature sensing
equipment for a jet engine manufacturer constitutes a significant portion of
Auxitrol's sales. Auxitrol also distributes products manufactured by others,
including valves, temperature and pressure switches and flow gauges.
Auxitrol also manufactures electrical penetration devices under license for
certain European and other foreign nuclear power plants. These penetration
devices permit electrical signals to go into and out of containment domes while
maintaining pressure integrity and signal continuity. In addition, Auxitrol has
entered into a joint venture with a Russian company to facilitate use of its
penetration devices in retrofitting the aging nuclear plants in Eastern Europe,
where growing industrialization requires new power sources.
OTHER
HYTEK FINISHES CO. provides specialized metal finishing and inspection
services, including plating, anodizing, polishing, non-destructive testing and
organic coatings, primarily to the commercial aircraft, aerospace and
electronics markets. Hytek also has an automated tin-lead plating line,
employing among the most advanced automated plating technology, to serve the
semi-conductor industry.
MIDCON CABLES CO. manufactures electronic and electrical cable assemblies
and cable harnesses for the military, government contractors and the commercial
electronics market, offering both product design services and assembly of
product to customer specifications. Its proprietary cable, trademarked EverFlex,
uses an internally developed, patented design to provide a unique solution to
significant problems in wiring applications involving vibration, abrasion and
repetitive movement.
TA MFG. CO. designs and manufactures specialty clamps and elastomeric
compounds in custom molded shapes for wiring and tubing installations for
airframe and jet engine manufacturers as well as military and commercial airline
aftermarkets. TA's products include proprietary elastomers which are
specifically formulated for various extreme applications, including
high-temperature environments on or near a jet engine.
BACKLOG
At July 31, 1995 the backlog of the Aerospace and Defense Group (of which
$21.4 million is expected to be filled after fiscal 1995) was $44.5 million,
compared with $38.9 million at October 31, 1994.
INSTRUMENTATION GROUP
The Instrumentation Group consists of four subsidiaries of which Federal and
Korry are the principal subsidiaries. In fiscal 1994, the Group's net sales
represented 31% of the Company's net sales. For the nine-month period ended July
31, 1995 the Instrumentation Group accounted for 29% of the Company's net sales.
Angus Electronics Co. and Scientific Columbus Co. comprise the remaining
companies in the Instrumentation Group.
FEDERAL
Federal manufactures a broad line of high-precision analog and digital
dimensional and surface measurement and inspection instruments and systems for a
wide range of industrial quality control and scientific applications.
Manufacturers use Federal equipment for direct shop-floor inspections to reduce
costly rework at more advanced production stages. Federal's products include:
dial indicators, air gauges and other precision gauges; electronic gauges for
use where high-precision measurement is required; and 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 equipment is used extensively in precision metal
working. Its markets include the automotive, farm implement, construction
equipment, aerospace, ordnance and bearing industries.
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<PAGE>
In each of fiscal years 1992, 1993 and 1994, gauge products manufactured by
Federal accounted for 13% of the Company's consolidated net sales.
KORRY
Korry is a market and technology leader in the manufacture of
high-reliability electro-optical components and systems, illuminated push button
switches, indicators, panels and keyboards that act as human interfaces in a
broad variety of control and display applications for the aerospace and defense
industry. Korry's products have been designed into many existing aircraft
systems, and as a result, Korry enjoys a considerable spares and retrofit
business. Korry's customers include original equipment manufacturers and the
aftermarkets (equipment operators and spare parts distributors), primarily in
the commercial aviation, military airborne, ground-based military equipment and
shipboard military equipment markets. Korry's proprietary products provide its
customers with a significant technological advantage in such areas as night
vision--a top defense priority--and in the area of active matrix liquid crystal
displays, a technology expected to have broad usage in commercial aerospace and
military applications.
OTHER
ANGUS ELECTRONICS CO. manufactures recording instruments together with other
analytical and process, and environmental monitoring instrumentation. These
include analog strip chart and digital printout recorders as well as electronic
and multi-channel microprocessor-based recording equipment. Customers of Angus
Electronics include industrial equipment manufacturers, electric utilities,
scientific laboratories, pharmaceutical manufacturers and process industries.
SCIENTIFIC COLUMBUS CO. 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. The
Company has entered into an agreement to sell Scientific Columbus to a
subsidiary of Rochester Instrument Systems, Inc.
BACKLOG
At July 31, 1995, the backlog of the Instrumentation Group (of which $16.3
million is expected to be filled after fiscal 1995) was $30.3 million compared
with $28.0 million at October 31, 1994.
MARKETING AND DISTRIBUTION
For most of the Company's products, the maintenance of a service capability
is an integral part of the marketing function. Each of the Company's separate
operating units maintains its own separate and distinct sales force or
distributor relationships.
Automation Group products manufactured by Excellon are marketed domestically
principally through employees and in foreign markets through employees, and
independent distributors. Whitney products are sold principally through
independent distributors and representatives.
Aerospace and Defense Group products manufactured by Armtec are marketed
domestically and abroad by employees and independent representatives. Auxitrol's
products are marketed in Europe through employees and independent
representatives.
Instrumentation Group products manufactured by Federal and Korry are
marketed domestically principally through employees, and in foreign markets
through both employees and independent representatives.
EMPLOYEES
The Company and its subsidiaries had 2,927 employees at July 31, 1995. Less
than 10% of these employees were members of an organized labor union.
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.
21
<PAGE>
The Company competes in most markets it serves with numerous other companies,
many of which have far greater sales volume and financial resources than the
Company. The principal competitive factors in the commercial markets in which
the Company participates are product performance and service. Part of product
performance requires expenditures in research and development that lead to
product improvement on a rapid basis. The market for many of the Company's
products maybe affected by rapid and significant technological changes and new
product introduction. Current competitors or new entrants could introduce new
products with features that render the Company's products obsolete or less
marketable. Excellon's principal competitors are Hitachi, Ltd. and Pluritec.
Whitney's principal competitors are Mazak, Cincinnati Milacron, U.S. Amada, and
Trumpf. Auxitrol's principal competitors are Ametek and Rosemount. Federal's
principal competitors are Starrett and Mitutoyo. Korry's principal competitors
are Eaton-MSC and Ducommun Jay-El. See "Risk Factors -- Competition."
The subsidiaries hold a number of patents but in general rely on technical
superiority, exclusive features in their equipment and marketing and service to
customers to meet competition. Licenses which help maintain a significant
advantage over competition include a long-term license agreement under which
Auxitrol manufactures and sells electrical penetration assemblies.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND COMPONENTS
Due to the Company's diversification, the sources and availability of raw
materials and components are not nearly as important as they would be for a
company that manufactures a single product. In general, the Company is not
dependent for its raw materials and components upon any one source of supply.
However, certain components and supplies such as air bearing spindles purchased
by Excellon and hydraulic components purchased by Whitney and certain other raw
materials and components purchased by other subsidiaries are purchased from a
single source. In such instances, ongoing efforts are conducted to develop
alternative sources or designs to help avoid the possibility of any business
impairment.
LEGAL PROCEEDINGS
The Company has various lawsuits and claims, both offensive and defensive,
and contingent liabilities arising from the conduct of business, including those
associated with government contracting activities, none of which, in the opinion
of management, is expected to have a material effect on the Company's financial
position or results of operations.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state, local and foreign laws,
regulations and ordinances that (i) govern activities or operations that may
have adverse environmental effects, such as discharges to air and water, as well
as handling and disposal practices for solid and hazardous wastes, and (ii)
impose liability for the costs of cleaning up, and certain damages resulting
from, sites of past spills, disposals or other releases of hazardous substances
(together, "Environmental Laws").
The Company's various operations use certain substances and generate certain
wastes that are regulated as or may be deemed hazardous under applicable
Environmental Laws, or for which the Company has incurred cleanup obligations.
While the Company endeavors at each of its facilities to assure compliance with
Environmental Laws and regulations, from time to time, operations of the Company
have resulted or may result in certain noncompliance with applicable
requirements under Environmental Laws for which the Company has incurred cleanup
and related costs. However, the Company believes that any such noncompliance or
cleanup liability under current Environmental Laws would not have a material
adverse effect on the Company's results of operations and financial condition.
The Company has been identified as a potentially responsible party ("PRP"),
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA" or "Superfund"), and analogous state
Environmental Laws, for the cleanup of contamination resulting from past
disposals of hazardous wastes at certain sites to which the Company, among
others, sent wastes in the past. CERCLA requires PRPs to pay for cleanup of
sites from which there has been a release or threatened release of hazardous
substances. Courts have interpreted CERCLA to impose strict, joint and several
liability upon all persons liable for cleanup costs. As a practical matter,
however, at sites where there are
22
<PAGE>
multiple PRPs, the costs of cleanup typically are allocated among the parties
according to a volumetric or other standard. Although there can be no assurance,
the Company believes, based on, among other things, a review of the data
available to the Company regarding each such site, including the minor volumes
of waste which the Company is alleged to have contributed, and a comparison of
the Company's liability at each such site to settlements previously reached by
the Company in similar cases, that its liability for such matters will not be
material. Nonetheless, until the Company's proportionate share is finally
determined at each such site, there can be no assurance that such matters, or
any similar liabilities that arise in the future, will not have a material
adverse effect on the Company's results of operations or financial condition.
23
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The names and ages of all directors and executive officers of the Company
and the positions and offices held by such persons are as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE
- ----------------------------------------------------------------- ---
<S> <C> <C>
Wendell P. Hurlbut Chairman, President and Chief Executive 63
Officer
Gilbert W. Anderson Director 67
John F. Clearman Director 58
Edwin I. Colodny Director 69
E. John Finn Director 63
Robert F. Goldhammer Director 64
Jerome J. Meyer Director 57
Paul G. Schloemer Director 67
Malcolm T. Stamper Director 70
Robert W. Stevenson Executive Vice President and Chief 56
Financial Officer, Secretary and
Treasurer
Robert W. Cremin Senior Vice President and Group 55
Executive
Larry A. Kring Group Vice President 55
Stephen R. Larson Group Vice President 51
Marcia J.M. Greenberg Vice President, Human Relations 43
</TABLE>
The Board of Directors of the Company is divided into three classes of
directors whose terms expire in 1996 (Messrs. Finn, Goldhammer and Meyer), 1997
(Messrs. Anderson, Hurlbut and Stamper) and 1998 (Messrs. Clearman, Colodny and
Schloemer). Set forth below is a description of the background of directors and
executive officers of the Company.
Mr. Hurlbut has been Chairman, President and Chief Executive Officer since
January 1993. From February 1989 through December 1992, he was President, Chief
Executive Officer and a director. From June 1988 to February 1989, he was
President and Chief Operating Officer. From November 1987 to June 1988, he was
Executive Vice President, Operations. From October 1978 to September 1989, Mr.
Hurlbut served in various capacities ranging from Group Vice President to
President and Chief Executive Officer of Criton Technologies. From November 1972
to October 1978 he served as President of Heath Tecna Aerospace Company. Mr.
Hurlbut has a B.S. degree in Engineering from the University of Washington. Mr.
Hurlbut is also a member of the Board of Directors of the National Association
of Manufacturers. He has been a director of the Company since 1989.
Mr. Clearman is the retired President and Chief Executive Officer of NC
Machinery Co. (a heavy machinery distributor), having held such position from
1986 through 1994, and is a director of Metropolitan Bancorp. He has been a
director of the Company since 1989.
Mr. Colodny is the retired Chairman of USAir Group, Inc., having held such
position from 1983 to 1992 and of Counsel at Paul, Hastings, Janofsky and
Walker. Prior thereto, for more than five years he was President and Chief
Executive Officer of USAir, Inc. and USAir Group, Inc. Mr. Colodny is a director
of USAir, Inc. and USAir Group, Inc., Lockheed Martin Corporation and COMSAT. He
has been a director of the Company since 1992.
Mr. Schloemer is the retired President and Chief Executive Officer of Parker
Hannifin Corporation (a manufacturer of motion control products), having held
such position from 1984 to 1993 and is a director of Parker Hannifin
Corporation, Rubbermaid Incorporated and AMP Incorporated. He has been a
director of the Company since 1993.
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<PAGE>
Mr. Anderson is the retired President and Chief Executive Officer of
Physio-Control Corporation (a medical equipment manufacturer), having held such
position from 1986 to 1991 and is a director of Key Trust of Northwest, Optex
Biomedical, Inc. (a medical device company) and SpaceLabs Medical. He has been a
director of the Company since 1991.
Mr. Finn is the retired Chairman of Dorr-Oliver Incorporated (a
fluid/particle treatment equipment manufacturer), having held such positions
from 1988 to 1995, and is a director of Dorr-Oliver Incorporated, Advanced
Refractory Technologies and Stanley Technology Group, Inc. and is on the
Advisory Board of Bay Mills Ltd. He has been a director of the Company since
1989.
Mr. Goldhammer has been a partner at Concord International Investments Group
L.P. since 1991. Prior thereto, he was a Partner at Rohammer Corporation (a
private investment company) from 1989 to 1991. He is a director at EG&G, Inc.
and ImClone Systems, Incorporated (a biotechnology company), and has been a
director of the Company since 1974.
Mr. Meyer has been the Chairman and Chief Executive Officer of Tektronix,
Inc. (an electronic equipment manufacturer) since 1990 and was the President of
Industrial Group of Honeywell, Inc. from 1988 to 1990. He is a director of
Portland General Corporation (an electric utility) and Standard Insurance
Company. He has been a director of the Company since 1992.
Mr. Stamper has been the Chairman of Storytellers Ink (a publisher of
children's books) since 1990, and is the retired President and Vice Chairman of
The Boeing Company, having held such position from 1985 to 1992. He is a
director of Chrysler Corporation and Whittaker Corp. (an
aerospace/communications company). He has been a director of the Company since
1991.
Mr. Stevenson has been Executive Vice President and Chief Financial Officer,
Secretary and Treasurer since October 1987. From March 1968 to September 1989,
Mr. Stevenson served in various capacities ranging from Assistant Controller to
Executive Vice President, Chief Financial Officer and Secretary of Criton
Technologies. Mr. Stevenson has a M.B.A from the Wharton School of Business at
the University of Pennsylvania and a B.A. degree from Stanford University.
Mr. Cremin has been Senior Vice President and Group Executive since January
1991. From October 1987 to December 1990, he was Group Vice President. From July
1976 to September 1989, Mr. Cremin served in various capacities ranging from
Director, Program Analysis to Group Vice President of Criton Technologies. Mr.
Cremin has an M.B.A. from Harvard Business School and a B.S. degree in
Metallurgical Engineering from Polytechnic Institute of Brooklyn.
Mr. Kring has been Group Vice President since August 1993. From November
1978 to July 1993, he was President and Chief Executive Officer of Heath Tecna
Aerospace Co., a unit of Ciba Composites Division, Anaheim, California. Mr.
Kring has a M.B.A from California State University at Northridge and a B.S.
degree in Aeronautical Engineering from Purdue University. He is a director of
Active Apparel Group, Inc.
Mr. Larson has been Group Vice President since April 1991. From February
1978 to March 1993, he held various executive positions with Korry Electronics
part of Criton Technologies, including President and Executive Vice President,
Marketing. Mr. Larson has an M.B.A. degree from the University of Chicago and a
B.S. degree in Electrical Engineering from Northwestern University.
Ms. Greenberg has been Vice President, Human Relations since March 1993.
From January 1992 to February 1993, she was a partner in the law firm of Bogle &
Gates, Seattle, Washington. From August 1984 to December 1991, she was an
associate attorney in the law firm of Bogle & Gates. Ms. Greenberg has a J.D.
degree from Northwestern University School of Law and a B.A. from Portland State
University.
25
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 8, 1995, by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each of the
Company's named executive officers, and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES(2) CLASS
- -------------------------------------------------------------- ---------- ----------
<S> <C> <C>
The Prudential Insurance Company of America 661,389(3) 10.0%
Prudential Plaza
Newark, NJ 07102
Merrill Lynch & Co., Inc. 350,600(4) 5.3%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281
Wendell P. Hurlbut 153,071(5) 2.3%
Robert W. Stevenson 86,612(5) 1.3%
Robert W. Cremin 65,500(5) *
Stephen R. Larson 46,250(5) *
Larry A. Kring 45,200(5) *
E. John Finn 18,344 *
Robert F. Goldhammer 11,094 *
John F. Clearman 5,344 *
Gilbert W. Anderson 2,466 *
Edwin I. Colodny 2,344 *
Jerome J. Meyer 1,344 *
Paul G. Schloemer 1,344 *
Malcolm T. Stamper 1,344 *
Directors and executive officers as a group (14 persons) 440,257 6.6%
<FN>
- ------------------------
* Less than 1%.
(1) Unless otherwise indicated, the business address of each of the
stockholders named in this table is Esterline Technologies Corporation,
10800 NE 8th Street, Bellevue, Washington 98004.
(2) Unless otherwise indicated in the footnotes to this table, the person and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property
laws where applicable.
(3) The holding shown is based on a Schedule 13G filed with the Commission on
or about April 10, 1995 by The Prudential Insurance Company of America, an
insurance company, a registered broker-dealer and a registered investment
advisor that disclaims beneficial ownership of these shares. Based on the
information in such filing, shared voting and dispositive power is reported
with respect to all of the shares.
(4) The holding shown is based on an amended Schedule 13G jointly filed with
the Commission on or about February 14, 1995, by Merrill Lynch & Co., Inc.,
a holding company, Merrill Lynch Group, Inc., a holding company, Princeton
Services, Inc., a holding company, Fund Asset Management, L.P. a regis-
tered investment advisor, and Merrill Lynch Phoenix Fund, Inc., a
registered investment company. All parties to the joint filing disclaim,
beneficial ownership of these shares. Based on the information in such
filing shared voting and dispositive power is reported with respect to all
of the shares.
(5) Includes options for shares granted under the Company's 1987 Stock Option
Plan which are exercisable within 60 days of September 8, 1995 as follows:
Mr. Cremin, 62,500 shares; Mr. Hurlbut, 113,750 shares; Mr. Kring, 40,000
shares; Mr. Larson, 46,250 shares, Mr. Stevenson, 76,250 shares; and
directors and executive officers as a group, 338,750 shares.
</TABLE>
26
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 30,500,000 shares, of
which 30,000,000 shares are Common Stock, par value $.20 per share (the "Common
Stock"), of the Common Stock 974,500 shares are reserved for issuance upon
exercise of options; 25,000 shares are Preferred Stock, par value $100 per share
(the "Preferred Stock"), issuable in series, 475,000 shares are Serial Preferred
Stock, par value $1 per share (the "Serial Preferred Stock"), also issuable in
series. Of the Serial Preferred Stock, 100,000 shares have been designated
Series A Serial Preferred Stock, par value $1 per share (the "Series A Serial
Preferred Stock"), and reserved for issuance pursuant to the Company's Rights
Plan (defined below). The following summary description of the capital stock of
the Company does not purport to be complete and is qualified in its entirety by
reference to the Company's Restated Certificate of Incorporation, as amended,
the Company's Bylaws, and the Rights Agreement dated as of December 9, 1992, as
amended, between the Company and Chemical Bank, as rights agent thereunder, and
to Delaware corporation law.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. The Board of Directors is currently comprised of nine members having
staggered terms, one-third of whom are elected at each year's annual meeting to
serve a three-year term. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding Preferred Stock or Serial Preferred Stock. Upon the liquidation,
dissolution or winding up of the Company, the holders of the Common Stock are
entitled to receive ratably the net assets of the Company available after the
payment of all debts and other liabilities and subject to the prior rights of
any outstanding Preferred Stock or Serial Preferred Stock. Holders of Common
Stock have no preemptive, subscription, redemption or conversion rights. The
shares of Common Stock outstanding immediately following the completion of this
offering will be fully paid and nonassessable. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock or Serial Preferred Stock that the Company may designate and issue in the
future. As of September 25, 1995, there were 6,645,214 shares of Common Stock
outstanding. The Common Stock is currently listed and traded on the New York
Stock Exchange.
PREFERRED STOCK AND SERIAL PREFERRED STOCK
The Preferred Stock and Serial Preferred Stock may be issued from time to
time in one or more series with such designations, preferences and relative
participating, optional, or other special rights and qualifications, limitations
or restrictions thereof, as shall be stated in the resolutions adopted by the
Board of Directors providing for the issuance of such Preferred Stock and Serial
Preferred Stock or series thereof. The Board of Directors is expressly vested
with authority to fix such designations, preferences and relative participating,
optional or other special rights, or qualifications, limitations or restrictions
for each series, including, but not by way of limitation, the power to fix the
redemption and liquidating preferences, the rate of dividends payable and the
time for and priority of payment thereof and to determine whether such dividends
shall be cumulative or not and to provide for and fix the terms of conversion of
such Preferred Stock or Serial Preferred Stock or any series thereof into Common
Stock of the Company and to fix the voting power, if any, of shares of Preferred
Stock or Serial Preferred Stock or any series thereof at elections of directors,
provided that the voting rights of the Preferred Stock or Serial Preferred Stock
so fixed shall not exceed one (1) vote per share. The issuance of the Preferred
Stock and Serial Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes could, among other things,
adversely affect the rights of the holders of Common Stock, and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company. In the event that shares of Preferred Stock or Serial Preferred Stock
are issued as convertible securities, convertible into shares of Common Stock,
the holders of Common Stock may experience dilution. As of the date hereof there
were no shares of Preferred Stock or Serial Preferred Stock outstanding.
However, in connection with the adoption of the Company's stockholders' Rights
Plan the Company has designated and reserved for issuance, upon exercise of
rights granted to its stockholders, 100,000 shares of Series A Serial Preferred
Stock.
27
<PAGE>
RIGHTS PLAN
On December 9, 1992, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of the Company's
Common Stock to stockholders of record at the close of business on December 23,
1992 (the "Rights Plan"). Each Right initially entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series A Serial
Preferred Stock, par value $1.00 per share at a Purchase Price of $56 per
one-one hundreth of a share, subject to adjustment.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 10% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), or (ii) 10 business days (or such later date as the Board
shall determine) following the commencement of a tender or exchange offer that
would result in a person or group beneficially owning 10% or more of such
outstanding shares of Common Stock. Until the Distribution Date, (i) the Rights
will be evidenced by the Common Stock certificates and will be transferred with
and only with such Common Stock certificates, (ii) new Common Stock certificates
issued after December 23, 1992 contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Stock outstanding will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. Pursuant to
the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event (as defined below) that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Series A
Serial Preferred Stock will be issued.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 23, 2002, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of the Common Stock as of the close of business
on the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights. Except as otherwise determined by the Board of
Directors, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
In the event that, at any time following the Distribution Date, (i) the
Company is the surviving corporation in a merger with an Acquiring Person and
its Common Stock is not changed or exchanged, (ii) a person becomes the
beneficial owner of more than 15% of the then outstanding shares of Common Stock
(except pursuant to an offer for all outstanding shares of Common Stock which
the independent directors determine to be fair to and otherwise in the best
interests of the Company and its stockholders (a "Fair Offer")), (iii) an
Acquiring Person engages in one or more "self-dealing" transactions as set forth
in the Rights Agreement, or (iv) during such time as there is an Acquiring
Person, an event occurs which results in such Acquiring Person's ownership
interest being increased by more than 1% (E.G., a reverse stock split), each
holder of a Right will thereafter have the right to receive, upon exercise,
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the exercise price of the
Right. Notwithstanding any of the foregoing, following the occurrence of any of
the events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by an
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of either of the events set forth above until such time
as the Rights are no longer redeemable by the Company as set forth below.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger
described in the preceding paragraph or a merger which follows a Fair Offer, or
(ii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to
28
<PAGE>
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right. The events set forth in this
paragraph and in the preceding paragraph are referred to as the "Triggering
Events."
The Purchase Price payable, and the number of shares of Series A Serial
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series A Serial Preferred Stock, (ii) if holders of the
Series A Serial Preferred Stock are granted certain rights or warrants to
subscribe for Series A Preferred Stock, or convertible securities at less than
the current market price of the Series A Serial Preferred Stock, or (iii) upon
the distribution to holders of the Series A Serial Preferred Stock of evidences
of indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Series A Serial Preferred
Stock on the last trading date prior to the date of exercise.
At any time until ten days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price of $.01 per Right
(payable in cash, Common Stock or other consideration deemed appropriate by the
Board of Directors). After the redemption period has expired, the Company's
right of redemption may be reinstated if an Acquiring Person reduces his
beneficial ownership to less than 10% of the outstanding shares of Common Stock
in a transaction or series of transactions not involving the Company.
Immediately upon the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights
Agreement; PROVIDED, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
The Rights may have certain anti-takeover effects. The Rights are designed
to cause substantial dilution to any Acquiring Person that attempts to merge or
consolidate with, or that takes certain other actions affecting, the Company on
terms not approved by the Board of Directors of the Company. The Company does
not believe that the Rights will interfere with any merger or other business
combination approved by the Board of Directors of the Company since the Rights
may be redeemed by the Company as provided above.
SECTION 203 OF DELAWARE CORPORATION LAW
The Company is subject to the "business combination" statute of the Delaware
General Corporation Law (Section 203). In general, such statute prohibits a
publicly held Delaware corporation from engaging in various "business
combination" transactions with any "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
"interested stockholder," unless (i) such transaction is approved by the Board
of Directors prior to the date the interested stockholder obtains such status,
(ii) upon consummation of the transaction the interested stockholder
beneficially owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
or (iii) the "business combination" is approved by the Board of Directors and
authorized at an annual
29
<PAGE>
or special meeting of stockholders by the affirmative vote of at least 66 2/3%
of the outstanding voting stock which is not owned by the "interested
stockholder." A "business combination" includes mergers, asset sales and other
transactions resulting in financial benefit to an "interested stockholder." An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of a corporation's
voting stock. The statute could prohibit or delay mergers or other takeover or
change in control attempts with respect to the Company and, accordingly, may
discourage attempts to acquire the Company.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Under the Company's Restated Certificate of Incorporation, as amended, upon
the sale of the Common Stock offered hereby there will be 21,554,786 shares of
Common Stock authorized but unissued (assuming no exercise of options) and
25,000 shares of Preferred Stock and 475,000 shares of Serial Preferred Stock
authorized but unissued for future issuance without additional stockholder
approval. These additional shares may be utilized for a variety of corporate
purposes, including future offerings to raise additional capital or to
facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved Common Stock,
Preferred Stock or Serial Peferred Stock may be to enable the Board to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of management. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of the Company.
The issuance of Preferred Stock or Serial Preferred Stock could have the
effect of delaying or preventing a change in control of the Company. The
issuance of Preferred Stock or Serial Preferred Stock could decrease the amount
of earnings and assets available for distribution to the holders of Common Stock
or could adversely affect the rights and powers, including voting rights of the
holders of the Common Stock. In certain circumstances, such issuance could have
the effect of decreasing the market price of the Common Stock.
The Company does not currently have any plans to issue additional shares of
Common Stock Preferred Stock or Serial Preferred Stock other than shares of
Common Stock and associated Series A Serial Preferred Stock which may be issued
upon the exercise of options which have been granted or which may be granted in
the future to directors, officers, and employees of the Company.
INDEMNIFICATION
The Restated Certificate of Incorporation, as amended, contains a provision
that limits the liability of the Company's directors for monetary damages for
breach of fiduciary duty as a director to the fullest extent permitted by the
Delaware corporation law. Such limitation does not, however, affect the
liability of a director unless such director acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The effect of this
provision is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior) except in certain situations. This provision does not limit or
eliminate the rights of the Company or any stockholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care. In addition, the directors and officers of the Company
have indemnification and directors and officers liability protection.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Stock is Chemical Bank.
30
<PAGE>
UNDERWRITING
The U.S. Underwriters named below, acting through PaineWebber Incorporated,
Ragen MacKenzie Incorporated, and Pacific Crest Securities Inc., as
Representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement by and among the
Company and the U.S. Underwriters (the "U.S. Underwriting Agreement"), to
purchase from the Company, and the Company has agreed to sell to the U.S.
Underwriters, the aggregate number of shares of Common Stock set forth opposite
their names below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ---------------------------------------------------------------------- ------------
<S> <C>
PaineWebber Incorporated..............................................
Ragen MacKenzie Incorporated..........................................
Pacific Crest Securities Inc..........................................
------------
Total............................................................... 1,440,000
------------
------------
</TABLE>
In addition, the International Underwriters (together with the U.S.
Underwriters, the "Underwriters"), in a concurrent offering of the Common Stock
to persons other than U.S. Persons (as defined below), acting through
PaineWebber International (U.K.) Ltd., Ragen MacKenzie Incorporated, and Pacific
Crest Securities Inc., as International Representatives (the "International
Representatives"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement by and among the Company and the
International Underwriters (the "International Underwriting Agreement"), to
purchase from the Company, and the Company has agreed to sell to the
International Underwriters, 360,000 shares of Common Stock.
The U.S. Underwriting Agreement provides that the obligation of the U.S.
Underwriters to purchase the shares of Common Stock listed above is subject to
certain conditions. The U.S. Underwriting Agreement also provides that the U.S.
Underwriters are obligated to purchase, and the Company is obligated to sell,
all the shares of Common Stock offered hereby if any are purchased (without
consideration of any shares that may be purchased through the Underwriters'
over-allotment option). The offering price and underwriting discounts and
commissions under both underwriting agreements are identical. In general, the
closing with respect to the sale of the shares of Common Stock pursuant to the
U.S. Underwriting Agreement is a condition to closing with respect to the sale
of the shares of Common Stock pursuant to the International Underwriting
Agreement and vice versa. PaineWebber International (U.K.) Ltd. is an affiliate
of PaineWebber Incorporated.
The Representatives have advised the Company that the U.S. Underwriters
propose to offer the shares of Common Stock to the public at the public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $ per share and that the U.S.
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers, including the U.S. Underwriters.
After the shares of Common Stock are released for sale to the public, the public
offering price and concessions and discounts may be changed by the U.S.
Underwriters.
Each U.S. Underwriter has agreed that, as part of the distribution of the
shares of Common Stock, (a) it is not purchasing any shares of Common Stock for
the account of anyone other than a United States or Canadian Person and (b) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
shares
31
<PAGE>
of Common Stock or distribute this Prospectus to any person outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Each International Underwriter has agreed that, as part of the distribution of
the shares of Common Stock, (a) it is not purchasing any shares of Common Stock
for the account of any United States or Canadian Person and (b) it has not
offered or sold, and will not offer or sell, directly or indirectly, any shares
of Common Stock or distribute this Prospectus to any person within the United
States or Canada or to any United States or Canadian Person. The foregoing
limitations do not apply to stabilization transactions or to certain other
transactions specified in the Agreement Between (as defined below). As used
herein, "United States or Canadian Person" means any individual who is resident
in the United States or Canada, or any corporation, pension, profit-sharing or
other trust or other entity organized under or governed by the laws of the
United States or Canada or any political subdivision thereof (other than a
foreign branch of any United States or Canadian Person), and shall include any
United States or Canadian branch of a person other than a United States or
Canadian Person; and "United States" shall mean the United States of America,
its territories, possessions and all areas subject to its jurisdiction.
Each U.S. Underwriter that will offer or sell shares of Common Stock in
Canada as part of the distribution has severally agreed that such offers or
sales will be made only pursuant to an exemption from the prospectus delivery
requirements in each jurisdiction in Canada in which such offers and sales are
made.
The U.S Underwriters and International Underwriters have entered into an
Agreement Between U.S. and International Underwriters (the "Agreement Between")
that provides for the coordination of their activities. Pursuant to the
Agreement Between, sales may be made between the U.S. Underwriters and the
International Underwriters of such number of shares of Common Stock as may be
mutually agreed upon. The per share price of any shares so sold shall be the
public offering price set forth on the cover page of the Prospectus, less an
amount not greater than the per share amount of the concession to dealers set
forth above. To the extent there are sales between the U.S. Underwriters and the
International Underwriters, the number of shares of Common Stock initially
available for sale by the U.S. Underwriters or by the International Underwriters
may be more or less than the amount appearing on the cover page of this
Prospectus.
The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day subsequent to the effective date of this offering,
to purchase up to an aggregate of 270,000 additional shares of Common Stock at
the public offering price set forth on the cover page of this Prospectus, less
the underwriting discounts and commissions. The Underwriters may exercise such
option only to cover over-allotments, if any, incurred in the sale of the shares
of Common Stock. To the extent that the Underwriters exercise such option, each
Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the percentage it
is required to purchase of the total number of shares of Common Stock under the
U.S. or International Underwriting Agreement, as the case may be.
The Company has agreed to indemnify the U.S. Underwriters and the
International Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended, or to contribute to payments which
the U.S. Underwriters or the International Underwriters may be required to make
in respect thereof.
The Company and an executive officer have agreed that they will not sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
rights to purchase or acquire shares of Common Stock for a period of 90 days
after the effective date of this offering, except for the shares of Common Stock
offered hereby, the issuance of shares by the Company pursuant to employee stock
options and the issuance of shares or options by the Company pursuant to
employee benefit, stock option and compensation plans of the Company, without
the prior written consent of the Representatives.
LEGAL MATTERS
Certain legal matters with respect to the shares of the Common Stock offered
hereby will be passed upon for the Company by Skadden, Arps, Slate, Meagher &
Flom, Los Angeles, California. Certain legal matters relating to the offering
will be passed upon for the Underwriters by Milbank, Tweed, Hadley & McCloy, Los
Angeles, California.
32
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of October 31, 1993
and 1994 and for each of the three years in the period ended October 31, 1994
included in this Prospectus, and related financial statement schedules
incorporated herein by reference, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and by
reference, and have been so incorporated and included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the Commission's regional offices at 7 World Trade Center, 13th Floor,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and inspected and copied or obtained by mail at
prescribed rates from the public reference facilities maintained by the
Commission at its principal offices: 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549.
The Company's Common Stock is listed on the New York Stock Exchange. The
Company's reports, proxy statements and other information can be inspected and
copied at the offices of the New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 under the Securities Act of 1933, as amended, with respect to the Common
Stock described in this Prospectus. This Prospectus does not contain all the
information set forth in the registration statement and exhibits and schedules
thereto. For further information with respect to the Company and the Common
Stock, reference is made to the registration statement and the exhibits and
schedules filed as part thereof. Statements contained in this Prospectus as to
the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the registration statement,
each such statement being qualified in all respects by reference to such
exhibit. The registration statement, including exhibits and schedules thereto,
may be inspected without charge or copied in whole or in part at prescribed
rates at the Commission's principal offices set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference, except as
superseded or modified herein:
1. The Description of the Company's Common Stock which is contained in the
Company's Registration Statement on Form S-1, dated October 23, 1967.
2. The Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1994;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1995;
4. The Company's Quarterly Report on Form 10-Q for the quarter ended April
30, 1995;
5. The Company's Quarterly Report on Form 10-Q for the quarter ended July
31, 1995;
6. The Company's Report on Form 8-K, dated April 17, 1995.
Each document filed subsequent to the date of this prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior
to the termination of the offering shall be deemed to be incorporated by
reference in this Prospectus and shall be part hereof from the date of filing
such document.
The Company will provide a copy of the documents incorporated by reference
herein (other than exhibits to such documents) without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request by such person. Requests should be addressed to:
Esterline Technologies Corporation, 10800 NE 8th Street, Bellevue, Washington
98004, Attention: Manager, Corporate Communications (telephone number (206)
453-9400).
33
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.................................................... F-2
Consolidated Statements of Operations for the years ended October 31, 1992, 1993
and 1994, and for the nine months ended July 31, 1994, and 1995 (unaudited).... F-3
Consolidated Balance Sheets as of October 31, 1993 and 1994, and July 31, 1995
(unaudited).................................................................... F-4
Consolidated Statements of Cash Flows for the years ended October 31, 1992, 1993
and 1994, and for the nine months ended July 31, 1994 and 1995 (unaudited)..... F-5
Consolidated Statements of Shareholders' Equity for the years ended October 31,
1992, 1993 and 1994, and for the nine months ended July 31, 1995 (unaudited)... F-6
Notes to Consolidated Financial Statements...................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders 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 1994,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended October 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Esterline Technologies
Corporation and its subsidiaries as of October 31, 1993 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended October 31, 1994 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Seattle, Washington
December 5, 1994
F-2
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED OCTOBER 31, ENDED JULY 31,
---------------------------- ------------------
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net Sales................................................... $304,827 $285,152 $294,044 $200,415 $255,462
-------- -------- -------- -------- --------
Costs and Expenses
Cost of sales............................................. 187,235 175,568 178,397 122,327 151,441
Selling, general and administrative....................... 102,202 100,669 100,845 70,194 84,956
Restructuring provision (credit).......................... -- 40,626 -- -- (2,067)
Interest expense, net..................................... 7,246 6,324 5,985 4,309 3,471
-------- -------- -------- -------- --------
296,683 323,187 285,227 196,830 237,801
-------- -------- -------- -------- --------
Earnings (Loss) Before Income Taxes......................... 8,144 (38,035) 8,817 3,585 17,661
Income Tax Expense (Benefit)................................ 3,050 (12,400) 1,254 1,320 5,823
-------- -------- -------- -------- --------
Net Earnings (Loss)......................................... $ 5,094 $(25,635) $ 7,563 $ 2,265 $ 11,838
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net Earnings (Loss) Per Share............................... $ .76 $ (3.90) $ 1.15 $ .35 $ 1.70
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31,
------------------ JULY 31,
1993 1994 1995
-------- -------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Current Assets
Cash and equivalents................................................ $ 3,218 $ 9,076 $ 13,434
Accounts receivable, net of allowances of $2,417, $2,201 and $2,328
for doubtful accounts.............................................. 45,778 63,685 57,336
Inventories......................................................... 38,430 31,673 38,104
Deferred income taxes............................................... 7,882 13,002 11,033
Prepaid expenses.................................................... 1,838 1,876 2,328
-------- -------- -----------
Total Current Assets.............................................. 97,146 119,312 122,235
Property, Plant and Equipment
Land................................................................ 4,833 3,901 3,920
Buildings........................................................... 44,317 43,137 43,640
Machinery and equipment............................................. 91,741 98,635 105,805
-------- -------- -----------
140,891 145,673 153,365
Accumulated depreciation............................................ 84,326 94,070 102,928
-------- -------- -----------
56,565 51,603 50,437
Intangibles, net and Other Assets..................................... 51,961 45,060 36,624
-------- -------- -----------
Total Assets...................................................... $205,672 $215,975 $ 209,296
-------- -------- -----------
-------- -------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable.................................................... $ 14,647 $ 18,927 $ 22,277
Accrued liabilities................................................. 60,063 67,877 56,789
Notes payable....................................................... 5,157 58 7,706
Current maturities of long-term debt................................ 7,062 20,588 6,303
Federal and foreign income taxes.................................... 1,153 1,320 1,374
-------- -------- -----------
Total Current Liabilities......................................... 88,082 108,770 94,449
Long-Term Debt, net of current maturities............................. 62,267 41,714 36,391
Commitments and Contingencies (Notes 8 and 9)
Shareholders' Equity
Common stock, par value $.20 per share, authorized 30,000,000 shares
issued and outstanding 6,512,641 and 6,513,057 and 6,634,539
shares............................................................. 1,302 1,302 1,326
Capital in excess of par value...................................... 10,482 10,482 10,372
Retained earnings................................................... 47,388 54,951 66,789
Cumulative translation adjustment................................... (3,849) (1,244) (31 )
-------- -------- -----------
Total Shareholders' Equity........................................ 55,323 65,491 78,456
-------- -------- -----------
Total Liabilities and Shareholders' Equity........................ $205,672 $215,975 $ 209,296
-------- -------- -----------
-------- -------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED OCTOBER 31, ENDED JULY 31,
---------------------------- -----------------
1992 1993 1994 1994 1995
-------- -------- -------- ------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING
ACTIVITIES
Net earnings (loss)....................................... $ 5,094 $(25,635) $ 7,563 $ 2,265 $ 11,838
Restructuring provision (credit).......................... -- 40,626 -- -- (2,067)
Depreciation and amortization............................. 19,823 19,259 16,414 12,275 12,131
Deferred income taxes..................................... 331 (16,558) (1,303) 951 (680)
Working capital changes
Accounts receivable..................................... 4,599 1,779 (15,625) 1,431 7,489
Inventories............................................. 7,880 1,250 7,590 (682) (5,743)
Prepaid expenses........................................ (105) (202) 38 (68) (476)
Accounts payable........................................ (987) (1,959) 3,564 970 2,854
Accrued liabilities..................................... (2,411) 2,040 6,910 (2,153) (2,854)
Federal and foreign income taxes........................ 175 (1,750) 144 (794) 70
Other, net................................................ (954) (1,994) 92 (1,073) 1,170
-------- -------- -------- ------- --------
33,445 16,856 25,387 13,122 23,732
-------- -------- -------- ------- --------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
Capital expenditures...................................... (10,762) (9,566) (11,288) (8,446) (8,086)
Capital dispositions...................................... 5,815 -- 3,945 51 1,068
-------- -------- -------- ------- --------
(4,947) (9,566) (7,343) (8,395) (7,018)
-------- -------- -------- ------- --------
CASH FLOWS PROVIDED (USED) BY FINANCING
ACTIVITIES
Net change in notes payable............................... (9,281) 2,462 (5,218) (182) 7,328
Repayment of long-term debt............................... (58,427) (9,382) (7,290) (7,134) (19,764)
Proceeds from sale of senior notes........................ 40,000 -- -- -- --
-------- -------- -------- ------- --------
(27,708) (6,920) (12,508) (7,316) (12,436)
-------- -------- -------- ------- --------
EFFECT OF EXCHANGE RATES.................................... 8 (269) 322 185 80
-------- -------- -------- ------- --------
Net Increase (Decrease) in Cash and Equivalents............. 798 101 5,858 (2,404) 4,358
Cash and Equivalents -- Beginning of Period................. 2,319 3,117 3,218 3,218 9,076
-------- -------- -------- ------- --------
Cash and Equivalents -- End of Period....................... $ 3,117 $ 3,218 $ 9,076 $ 814 $ 13,434
-------- -------- -------- ------- --------
-------- -------- -------- ------- --------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for.............................
Interest expense........................................ $ 7,836 $ 6,271 $ 6,033 $ 4,033 $ 4,505
Income taxes............................................ 1,436 2,264 2,212 2,204 6,057
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
NINE MONTHS
ENDED JULY 31,
1992 1993 1994 1995
-------- -------- -------- --------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Common Stock, par value $.20 per share
Beginning of period....................................... $ 1,300 $ 1,301 $ 1,302 $ 1,302
Stock issued under stock option plans..................... 1 1 -- 24
-------- -------- -------- -------
End of period............................................. 1,301 1,302 1,302 1,326
-------- -------- -------- -------
Capital in Excess of Par Value
Beginning of period....................................... 10,445 10,480 10,482 10,482
Stock issued under stock option plans..................... 35 2 -- (110)
-------- -------- -------- -------
End of period............................................. 10,480 10,482 10,482 10,372
-------- -------- -------- -------
Retained Earnings
Beginning of period....................................... 67,929 73,023 47,388 54,951
Net earnings (loss)....................................... 5,094 (25,635) 7,563 11,838
-------- -------- -------- -------
End of period............................................. 73,023 47,388 54,951 66,789
-------- -------- -------- -------
Cumulative Foreign Currency Translation Adjustment
Beginning of period....................................... (2,297) (2,182) (3,849) (1,244)
Aggregate adjustment resulting from foreign currency
translation.............................................. 115 (1,667) 2,605 1,213
-------- -------- -------- -------
End of period............................................. (2,182) (3,849) (1,244) (31)
-------- -------- -------- -------
Shareholders' Equity........................................ $ 82,622 $ 55,323 $ 65,491 $ 78,456
-------- -------- -------- -------
-------- -------- -------- -------
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NOTES TO UNAUDITED JULY 31, 1994 AND 1995 FINANCIAL STATEMENTS
The consolidated balance sheet as of July 31, 1995 and the consolidated
statements of operations and cash flows for the nine months ended July 31, 1994
and 1995, and shareholders' equity for the nine months ended July 31, 1995 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. The effective income tax
rates for the nine month periods are based on the anticipated effective tax rate
for the year.
During the quarter ended July 31, 1995, several remaining actions associated
with the fourth quarter 1993 restructuring were completed, and the Company
comprehensively reviewed all of the actions as they were originally
contemplated. Asset accounts, including intangibles, and accrued liabilities
associated with the plan were adjusted such that the total restructuring costs
were lowered from $40.6 million to $38.5 million. As a result, the Company took
a third quarter fiscal 1995 restructuring credit of $2.1 million, or
approximately 5% of the original charge. No other amounts related to the
restructuring plan were charged or credited to earnings since inception by the
plan. Cash impacts of actions taken during this period were not significant nor
materially different than originally anticipated. The Company believes the
restructuring action is now substantially complete.
Sales during the nine months ended July 31, 1995, include the effect of a
$1.3 million favorable settlement of a patent infringement.
Certain reclassifications have been made to the October 31, 1993 and 1994
financial statements to conform to the July 31, 1995 presentation.
2. 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 RELATED ENGINEERING COSTS: Research, development
and related engineering costs approximated $13,441,000, $14,007,000 and
$13,711,000 in 1992, 1993 and 1994, respectively, and are 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.
INTANGIBLE ASSETS: Intangible assets arise primarily from business
acquisitions and include intangibles and the cost of purchased businesses in
excess of amounts assigned to tangible and intangible assets. Intangible assets
are being amortized over estimated lives which range from 3 to 40 years.
Intangible assets as of October 31, 1993 and 1994 totaled $31,140,000 and
$28,678,000, net of accumulated amortization of $14,628,000 and $17,174,000,
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.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES (CONTINUED)
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 period
(6,667,000 shares in 1992, 6,579,000 shares in 1993, 6,571,000 shares in 1994).
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 5) were estimated using
interest rates that are currently available to the Company for issuance of debt
with similar terms and remaining maturities.
CONCENTRATIONS OF CREDIT RISK: Concentrations of credit risk with respect
to accounts receivable are generally diversified due to the large number of
entities comprising the Company's customer base and their dispersion across many
different industries and geographies. The Company performs ongoing credit
evaluations of its customers' financial condition and, in certain circumstances,
utilizes letters of credit and bank guarantees to minimize credit risk.
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
JULY 31,
1993 1994 1995
--------- --------- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
Finished goods.............................................. $ 9,508 $ 6,016 $ 5,295
Work in process............................................. 17,340 16,887 21,321
Raw materials and purchased parts........................... 11,582 8,770 11,488
--------- --------- -----------
$ 38,430 $ 31,673 $ 38,104
--------- --------- -----------
--------- --------- -----------
</TABLE>
At October 31, 1993 and 1994, $9,000,000 and $8,500,000, 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 $3,386,000 higher than reported at
October 31, 1993 and 1994, respectively.
4. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1993 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Payroll and other compensation............................ $ 13,893 $ 18,905
Self-insurance provisions................................. 6,912 7,886
Interest.................................................. 4,187 2,770
Warranties................................................ 2,426 3,495
State and other tax accruals.............................. 6,508 7,048
Accrued restructuring cost................................ 15,261 13,698
Other..................................................... 10,876 14,075
--------- ---------
$ 60,063 $ 67,877
--------- ---------
--------- ---------
</TABLE>
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
JULY 31,
1993 1994 1995
--------- --------- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
8.75% senior notes, due 2002.................. $ 40,000 $ 40,000 $ 40,000
8.25% convertible subordinated guaranteed
debentures, due 1995......................... 20,000 20,000 --
Variable rate term loan....................... 6,621 -- --
Other......................................... 2,708 2,302 2,694
--------- --------- -----------
69,329 62,302 42,694
Less current maturities................... 7,062 20,588 6,303
--------- --------- -----------
$ 62,267 $ 41,714 $ 36,391
--------- --------- -----------
--------- --------- -----------
</TABLE>
The 8.75% senior notes are unsecured and payable in equal annual
installments beginning in fiscal 1996. Interest is payable semi-annually in
January and July of each year.
The 8.25% convertible debentures were issued by Esterline International
Finance N.V., a subsidiary of the Company, and require annual interest payments.
The debentures are convertible into common stock of the Company at $39.6667 per
share, subject, in certain events, to adjustment. The debentures are guaranteed,
on a subordinated basis, as to payment of interest and principal by the Company.
The variable rate term loan, together with a $35,000,000 line of credit, are
unsecured and are with a group of banks. Alternative interest rates are
available based on LIBOR, or the lead bank's prime rate, at the Company's
option. The term loan was repaid during fiscal 1994 and at October 31, 1994
there were no amounts borrowed under the line of credit.
The loan agreements contain various restrictions, including maintenance of
net worth, payment of dividends, interest coverage, and limitations on
additional borrowings.
The fair value of the Company's notes payable and long-term debt was
estimated at $75,886,000 and $61,088,000 at October 31, 1993 and 1994,
respectively.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1995................................................................ $ 20,588
1996................................................................ 6,422
1997................................................................ 6,215
1998................................................................ 6,136
1999................................................................ 5,796
2000 and thereafter................................................. 17,145
-------
$ 62,302
-------
-------
</TABLE>
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DEBT (CONTINUED)
The Company had lines of credit with domestic and foreign banks as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1993 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Outstanding Balance
Domestic.............................................................. $ -- $ --
Foreign............................................................... 5,157 58
--------- ---------
$ 5,157 $ 58
--------- ---------
--------- ---------
Credit Lines
Domestic.............................................................. $ 35,000 $ 35,000
Foreign............................................................... 10,000 10,000
Average Borrowings During the Year
Domestic.............................................................. 400 500
Foreign............................................................... 3,700 4,500
Average Interest Rates During the Year
Domestic.............................................................. 6.6% 6.8%
Foreign............................................................... 9.5% 7.5%
</TABLE>
Available credit lines were reduced by outstanding letters of credit of
approximately $6,965,000 at October 31, 1994.
6. 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% and annual
compensation increases of 5%. Investments of the plans primarily consist of U.S.
Government obligations, publicly traded common stocks, mutual funds and
insurance contracts.
Pension expense consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------
1992 1993 1994
--------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the year................. $ 1,755 $ 2,106 $ 2,322
Interest cost on projected benefit obligations............... 4,125 4,248 4,457
Actual return on plan assets-investment losses (gains)....... (6,231) (10,467) (2,827)
Net amortization and deferral................................ 308 4,487 (3,515)
--------- ---------- ---------
Net pension expense (credit)................................. $ (43) $ 374 $ 437
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. RETIREMENT BENEFITS (CONTINUED)
Combined funded status of the plans was as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1993 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Plan assets at fair market value........................................ $ 77,642 $ 75,457
Projected benefit obligations for service rendered to date.............. 59,485 62,278
--------- ---------
Plan assets in excess of projected benefit obligations.................. 18,157 13,179
Unrecognized prior service costs........................................ -- 481
Unrecognized net gain................................................... (4,423) (761)
Unrecognized net asset at November 1, 1985.............................. (2,562) (2,162)
--------- ---------
Prepaid pension expense................................................. $ 11,172 $ 10,737
--------- ---------
--------- ---------
Actuarial present value of accumulated benefit obligations, including
vested benefits of $49,730 and $52,931................................. $ 50,305 $ 54,044
--------- ---------
--------- ---------
</TABLE>
Provision for all retirement benefits consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Pension plans........................................................ $ 649 $ 464 $ 1,232
Profit-sharing and other plans....................................... 246 72 --
--------- --------- ---------
$ 895 $ 536 $ 1,232
--------- --------- ---------
--------- --------- ---------
</TABLE>
7. INCOME TAXES
During 1993, the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes." The cumulative effect of the change was
not material and prior years' financial statements have not been restated.
During 1994, the Internal Revenue Service completed an examination of
certain federal income tax returns and reached agreement with the Company on
various filing positions. As a result, the Company recorded a $2 million tax
benefit in the fourth quarter of 1994.
Income tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------
1992 1993 1994
--------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current U.S. Federal.......................................... $ 959 $ 836 $ 1,210
Foreign....................................................... 1,317 681 762
State and local............................................... 443 178 585
Deferred...................................................... 331 (14,095) (1,303)
--------- ---------- ---------
$ 3,050 $ (12,400) $ 1,254
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
Primary components of the Company's deferred tax assets and (liabilities)
resulted from temporary tax differences associated with the following:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
--------------------
1993 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Reserves and liabilities................................................ $ 9,026 $ 10,660
Employee benefits....................................................... 3,779 5,357
Tax credits............................................................. 1,234 751
Restructuring accruals.................................................. 5,418 4,863
--------- ---------
Total deferred tax assets............................................. 19,457 21,631
--------- ---------
Depreciation and amortization........................................... (3,061) (4,110)
Retirement benefits..................................................... (4,034) (3,856)
--------- ---------
Total deferred tax liabilities........................................ (7,095) (7,966)
--------- ---------
$ 12,362 $ 13,665
--------- ---------
--------- ---------
</TABLE>
A valuation allowance was not required due to the nature of and
circumstances associated with the temporary tax differences.
A reconciliation of the United States federal statutory income tax rate to
the effective income tax rate was as follows:
<TABLE>
<CAPTION>
1992 1993 1994
---- ------- -----
<S> <C> <C> <C>
U.S. statutory income tax rate.............................. 34.0% (34.0)% 34.0%
State income taxes.......................................... 3.6 (1.1) 6.6
Foreign tax rates........................................... (2.8) .7 2.5
Tax settlement.............................................. -- -- (22.7)
Other, net.................................................. 2.7 1.8 (6.2)
---- ------- -----
Effective income tax rate................................... 37.5% (32.6)% 14.2%
---- ------- -----
---- ------- -----
</TABLE>
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 $4,555,000, $1,157,000 and $1,605,000 in 1992,
1993 and 1994, respectively.
The deferred portion of income tax expense for 1992 was as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Depreciation and amortization............................... $ (201)
Accrued expenses............................................ 534
Alternative minimum tax..................................... 227
All other, net.............................................. (229)
-----
$ 331
-----
-----
</TABLE>
8. CONTINGENCIES
The Company has various lawsuits and claims, both offensive and defensive,
and contingent liabilities arising from the conduct of business, including those
associated with government contracting activities, none of which, in the opinion
of management, is expected to have a material effect on the Company's financial
position or results of operations. Liabilities have been accrued for
environmental remediation costs expected
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CONTINGENCIES (CONTINUED)
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.
9. OPERATING LEASES
Net rental expense for operating leases amounted to approximately
$3,748,000, $3,241,000 and $3,170,000 in 1992, 1993 and 1994, respectively.
The Company's rental commitments for noncancelable operating leases with a
duration in excess of one year are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1995........................................................ $ 2,706
1996........................................................ 2,266
1997........................................................ 2,076
1998........................................................ 2,006
1999........................................................ 2,021
2000 and thereafter......................................... 1,815
-------
$ 12,890
-------
-------
</TABLE>
10. STOCK OPTION PLANS
At October 31, 1994, the Company had 1,079,625 shares of common stock
reserved for issuance to officers, directors and key employees under its stock
option plans, of which 41,125 shares were available for future grant. Options
granted under the plans are exercisable over a period of four years following
the date of grant and expire not later than the tenth anniversary of the grant.
The option prices are at fair market value on the date of grant.
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, 1991..................................... 660,550 $ 8.00-$18.00
Granted..................................................... 277,500 11.00- 11.25
Canceled.................................................... (12,050) 8.00- 18.00
Exercised................................................... (14,375) 8.00
---------- ---------------
Balance -- October 31, 1992..................................... 911,625 8.00- 11.25
Granted..................................................... 117,500 7.63- 9.38
Canceled.................................................... (25,625) 8.00- 11.25
Exercised................................................... (25,000) 8.00
---------- ---------------
Balance -- October 31, 1993..................................... 978,500 7.63- 11.25
Granted..................................................... 119,000 7.38- 9.88
Canceled.................................................... (54,000) 7.38- 11.25
Exercised................................................... (5,000) 9.00
---------- ---------------
Balance -- October 31, 1994..................................... 1,038,500 $ 7.38-$11.25
---------- ---------------
---------- ---------------
Exercisable at October 31, 1994................................. 734,500 $ 7.63-$11.25
---------- ---------------
---------- ---------------
</TABLE>
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CAPITAL STOCK
The authorized capital stock of the Company consists of 500,000 shares of
preferred stock, including 25,000 shares ($100 par value) and 475,000 shares
($1.00 par value) issuable in series, and 30,000,000 shares of common stock
($.20 par value). At October 31, 1994, there were no shares of preferred stock
outstanding, 504,201 shares of common stock were reserved for issuance upon
conversion of the 8.25% convertible debentures and 1,079,625 shares of common
stock were reserved for issuance under the Company's stock option plans.
On December 9, 1992, the Board of Directors adopted a Stockholder 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 transferrable 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.
12. RESTRUCTURING PROVISION
In the fourth quarter of 1993 the Company recorded a $40.6 million
restructuring charge ($27.2 million net of income tax effect), based on
management's estimate of the effects of the contemplated actions. The charge
provided for the sale or shutdown of certain small operating companies,
consolidation of plants and product lines, employees' severance, provisions for
intangible assets which no longer had value and the sale of two vacant
facilities. The charges reduced 1993 earnings per share by $4.14. Restructuring
actions completed through 1994 included the sale of one small subsidiary, the
sale of a vacant facility, employees' severance and write-off of intangible
assets, and comprised $19.1 million (before tax) of the recorded provision.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. BUSINESS SEGMENT INFORMATION
Details of the Company's operations by business segment for the years ended
October 31 were as follows:
<TABLE>
<CAPTION>
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Net Sales
Automation....................................................... $ 91,449 $ 94,460 $ 108,642
Aerospace and Defense............................................ 111,077 99,071 93,370
Instrumentation.................................................. 102,301 91,621 92,032
---------- ---------- ----------
$ 304,827 285,152 $ 294,044
---------- ---------- ----------
---------- ---------- ----------
Earnings (Loss) Before Income Taxes
Automation....................................................... $ 957 $ 7,887 $ 11,913
Aerospace and Defense............................................ 14,856 7,259 9,809
Instrumentation.................................................. 7,509 935 1,537
---------- ---------- ----------
Operating Earnings............................................. 23,322 16,081 23,259
---------- ---------- ----------
Corporate expense................................................ (7,932) (7,166) (8,457)
Restructuring provision.......................................... -- (40,626) --
Interest expense, net............................................ (7,246) (6,324) (5,985)
---------- ---------- ----------
$ 8,144 $ (38,035) $ 8,817
---------- ---------- ----------
---------- ---------- ----------
Identifiable Assets
Automation....................................................... $ 52,853 $ 41,752 $ 49,540
Aerospace and Defense............................................ 96,248 77,419 76,681
Instrumentation.................................................. 67,818 55,744 49,822
Corporate (1).................................................... 15,105 30,757 39,932
---------- ---------- ----------
$ 232,024 $ 205,672 $ 215,975
---------- ---------- ----------
---------- ---------- ----------
Capital Expenditures
Automation....................................................... $ 3,788 $ 2,402 $ 4,214
Aerospace and Defense............................................ 3,821 4,125 3,158
Instrumentation.................................................. 3,063 2,935 3,847
Corporate........................................................ 90 94 69
---------- ---------- ----------
$ 10,762 $ 9,556 $ 11,288
---------- ---------- ----------
---------- ---------- ----------
Depreciation and Amortization
Automation....................................................... $ 4,335 $ 3,982 3,546
Aerospace and Defense............................................ 7,129 7,829 6,128
Instrumentation.................................................. 7,984 7,158 6,257
Corporate........................................................ 375 290 483
---------- ---------- ----------
$ 19,823 $ 19,259 $ 16,414
---------- ---------- ----------
---------- ---------- ----------
<FN>
- ------------------------
(1) Primarily prepaid pension expense (see Note 6) and cash. Also, 1993 and
1994 include net deferred tax assets (see Note 7).
</TABLE>
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. BUSINESS SEGMENT INFORMATION (CONTINUED)
The Company's principal foreign operations consist of manufacturing
facilities located in France, Spain, Mexico and Italy, and include sales and
service operations located in England, Germany, Japan, and France.
Details of the Company's operations by geographic area for the years ended
October 31 were as follows:
<TABLE>
<CAPTION>
1992 1993 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
SALES
Domestic
Unaffiliated customers -- U.S........................... $211,313 $195,808 $203,010
Unaffiliated customers -- export........................ 33,126 33,163 34,248
Intercompany............................................ 4,300 4,163 6,231
-------- -------- --------
$248,739 $233,134 $243,489
-------- -------- --------
Foreign
Unaffiliated customers.................................. $ 60,388 $ 56,181 $ 56,786
Intercompany............................................ -- 29 628
-------- -------- --------
$ 60,388 $ 56,210 $ 57,414
-------- -------- --------
Eliminations............................................ $ (4,300) $ (4,192) $ (6,859)
-------- -------- --------
Net Sales................................................. $304,827 $285,152 $294,044
-------- -------- --------
-------- -------- --------
OPERATING EARNINGS (1)
Domestic.................................................. $ 18,888 $ 13,042 $ 20,449
Foreign................................................... 3,864 2,833 2,994
Eliminations.............................................. 570 206 (184)
-------- -------- --------
$ 23,322 $ 16,081 $ 23,259
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS (2)
Domestic.................................................. $187,860 $142,644 $133,200
Foreign................................................... 29,059 33,604 42,843
-------- -------- --------
$216,919 $176,248 $176,043
-------- -------- --------
-------- -------- --------
<FN>
- ------------------------
(1) Before 1993 restructuring provision, shown on page F-15.
(2) Excludes Corporate, shown on page F-15.
</TABLE>
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.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. BUSINESS SEGMENT INFORMATION (CONTINUED)
Product lines contributing more than 10% of total sales in any of the years
ended October 31 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
-------------
1992 1993 1994
--- --- ---
<S> <C> <C> <C>
Printed circuit board drilling equipment.................... 12 % 16 % 18 %
Gauge products.............................................. 13 % 13 % 13 %
Combustible ordnance components............................. 12 % 9 % 9 %
</TABLE>
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial information:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31, 1993
Net sales................................................... $67,324 $71,588 $ 69,131 $ 77,109
Gross margin................................................ 25,411 27,288 26,730 30,155
Net earnings (loss)......................................... 331 483 404 (26,853)
Net earnings (loss) per share............................... $ .05 $ .07 $ .06 $ (4.08)
YEAR ENDED OCTOBER 31, 1994
Net sales................................................... $57,872 $70,867 $ 71,676 $ 93,629
Gross margin................................................ 21,725 27,867 28,496 37,559
Net earnings (loss)......................................... (404) 1,154 1,515 5,298
Net earnings (loss) per share............................... $ (.06) $ .18 $ .23 $ .80
NINE MONTHS ENDED JULY 31, 1995
Net sales................................................... $83,332 $84,812 $ 87,318
Gross margin................................................ 33,394 34,593 36,034
Net earnings................................................ 2,198 3,051 6,589
Net earnings per share...................................... $ .32 $ .44 $ .93
</TABLE>
F-17
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Prospectus Summary.................................... 3
Risk Factors.......................................... 6
Use of Proceeds....................................... 9
Price Range of Common Stock and Dividend Policy....... 9
Capitalization........................................ 10
Selected Historical Financial and Operating Data...... 11
Management's Discussion and Analysis of Results of
Operations and Financial Condition.................. 12
Business.............................................. 17
Management............................................ 24
Security Ownership of Certain Beneficial Owners and
Management.......................................... 26
Description of Capital Stock.......................... 27
Underwriting.......................................... 31
Legal Matters......................................... 32
Experts............................................... 33
Available Information................................. 33
Incorporation of Certain Documents by Reference....... 33
Index to Financial Statements......................... F-1
</TABLE>
1,800,000 SHARES
[LOGO]
ESTERLINE TECHNOLOGIES CORPORATION
COMMON STOCK
--------------------
PROSPECTUS
--------------------
PAINEWEBBER INCORPORATED
RAGEN MACKENZIE INCORPORATED
PACIFIC CREST SECURITIES INC.
------------
, 1995
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION,
PRELIMINARY PROSPECTUS DATED SEPTEMBER 26, 1995
1,800,000 SHARES
[LOGO]
ESTERLINE TECHNOLOGIES CORPORATION
COMMON STOCK
----------------
All of the shares of Common Stock offered hereby are being sold by Esterline
Technologies Corporation, a Delaware corporation (the "Company"). Of the
1,800,000 shares of Common Stock offered, 360,000 shares are being offered
hereby in an international offering outside the United States and Canada (the
"International Shares") and 1,440,000 shares are being offered in a concurrent
offering in the United States and Canada. The price to the public and aggregate
underwriting discounts and commissions per share will be identical for both
offerings. See "Underwriting."
The Company's Common Stock is traded on the New York Stock Exchange ("NYSE")
under the trading symbol "ESL." On September 25, 1995, the last reported sale
price of the Common Stock as reported by the NYSE was $27.875 per share. See
"Price Range of Common Stock."
-------------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" ON PAGE 6 IN THIS PROSPECTUS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share......................... $ $ $
Total............................. $ $ $
Total Assuming Full Exercise of
Over-Allotment Option (3)........ $ $ $
<FN>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $415,000, which are payable by the
Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to
the Underwriters to purchase up to 270,000 additional shares, on the same
terms, solely to cover over-allotments. See "Underwriting."
</TABLE>
-------------------
The International Shares are offered by the International Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
International Underwriters, and subject to their right to reject orders in whole
or in part. It is expected that delivery of the shares of Common Stock will be
made in New York City on or about , 1995.
-------------------
PAINEWEBBER INTERNATIONAL
RAGEN MACKENZIE INCORPORATED
PACIFIC CREST SECURITIES INC.
------------
THE DATE OF THIS PROSPECTUS IS , 1995.
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States Federal tax
consequences of the acquisition, ownership, and disposition of Common Stock by a
holder that, for United States Federal income tax purposes, is not a "United
States person" (a "Non-United States Holder"). This discussion is based upon the
United States Federal tax law now in effect, which is subject to change,
possibly retroactively. For purposes of this discussion, a "United States
person" means a citizen or resident of the United States; a corporation,
partnership, or other entity created or organized in the United States or under
the laws of the United States or of any political subdivision thereof; or an
estate or trust whose income is includible in gross income for United States
Federal income tax purposes regardless of its source. This discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-United States Holder. Prospective investors are urged to consult their tax
advisors regarding the United States Federal tax consequences of acquiring,
holding, and disposing of Common Stock, as well as any tax consequences that may
arise under the laws of any foreign, state, local, or other taxing jurisdiction.
DIVIDENDS
Dividends paid to a Non-United States Holder will generally be subject to
withholding of United States Federal income tax at the rate of 30% unless the
dividend is effectively connected with the conduct of a trade or business within
the United States by the Non-United States Holder, in which case the dividend
will be subject to the United States Federal income tax on net income that
applies to United States persons generally (and, with respect to corporate
holders and under certain circumstances, the branch profits tax). Non-United
States Holders should consult any applicable income tax treaties, which may
provide for a lower rate of withholding or other rules different from those
described above. A Non-United States Holder may be required to satisfy certain
certification requirements in order to claim treaty benefits or otherwise claim
a reduction of or exemption from withholding under the foregoing rules.
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
Federal income tax on gain recognized on a sale or other disposition of Common
Stock unless (i) the gain is effectively connected with the conduct of a trade
or business within the United States by the Non-United States Holder or (ii) in
the case of a Non-United States Holder who is a nonresident alien individual and
holds the Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year and certain other requirements
are met. Gain that is effectively connected with the conduct of a trade or
business within the United States by the Non-United States Holder will be
subject to the United States Federal income tax on net income that applies to
United States persons generally (and, with respect to corporate holders and
under certain circumstances, the branch profits tax) but will not be subject to
withholding. Non-United States Holders should consult applicable treaties, which
may provide for different rules.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is not a citizen
or resident (as specially defined for United States Federal estate tax purposes)
of the United States at the date of death will be included in such individual's
estate for United States Federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under temporary United States Treasury regulations, United States
information reporting requirements and backup withholding tax will generally not
apply to dividends paid on the Common Stock to a Non-United States Holder at an
address outside the United States. Payments by a United States office of a
broker of the proceeds of a sale of the Common Stock is subject to both backup
withholding at a rate of 31% and information reporting unless the holder
certifies its Non-United States Holder status under penalties of perjury or
otherwise establishes an exemption. Information reporting requirements (but not
backup withholding) will also apply to payments of the proceeds of sales of the
Common Stock by foreign offices of
31
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
United States brokers, or foreign brokers with certain types of relationships to
the United States, unless the broker has documentary evidence in its records
that the holder is a Non-United States Holder and certain other conditions are
met, or the holder otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-United
States Holder's United States Federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
These information reporting and backup withholding rules are under review by
the United States Treasury and their application to the Common Stock could be
changed by future regulations.
32
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
The International Underwriters named below, acting through PaineWebber
(U.K.) Ltd., Ragen MacKenzie Incorporated, and Pacific Crest Securities Inc., as
International Representatives (the "International Representatives"), have
severally agreed, subject to the terms and conditions set forth in the
Underwriting Agreement by and among the Company and the International
Underwriters (the "International Underwriting Agreement"), to purchase from the
Company, and the Company has agreed to sell to the International Underwriters,
the aggregate number of shares of Common Stock set forth opposite their names
below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ----------------------------------------------------------------------------- -----------
<S> <C>
PaineWebber International (U.K.) Ltd.........................................
Ragen MacKenzie Incorporated.................................................
Pacific Crest Securities Inc.................................................
-----------
Total........................................................................ 360,000
-----------
-----------
</TABLE>
In addition, the U.S. Underwriters (together with the International
Underwriters, the "Underwriters"), in a concurrent offering of the Common Stock
to U.S Persons (as defined below), acting through PaineWebber Incorporated,
Ragen MacKenzie Incorporated, and Pacific Crest Securities Inc., as
Representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement by and among the
Company and the U.S. Underwriters (the "U.S. Underwriting Agreement"), to
purchase from the Company, and the Company has agreed to sell to the U.S.
Underwriters, 1,440,000 shares of Common Stock.
The International Underwriting Agreement provides that the obligation of the
International Underwriters to purchase the shares of Common Stock listed above
is subject to certain conditions. The International Underwriting Agreement also
provides that the International Underwriters are obligated to purchase, and the
Company is obligated to sell, all the shares of Common Stock offered hereby if
any are purchased (without consideration of any shares that may be purchased
through the Underwriters' over-allotment option). The offering price and
underwriting discounts and commissions under both underwriting agreements are
identical. In general, the closing with respect to the sale of the shares of
Common Stock pursuant to the International Underwriting Agreement is a condition
to closing with respect to the sale of the shares of Common Stock pursuant to
the U.S. Underwriting Agreement and vice versa. PaineWebber Incorporated is an
affiliate of PaineWebber International (U.K.) Ltd.
The International Representatives have advised the Company that the
International Underwriters propose to offer the shares of Common Stock to the
public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share and that the International Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to certain
other dealers, including the International Underwriters. After the shares of
Common Stock are released for sale to the public, the public offering price and
concessions and discounts may be changed by the International Underwriters.
Each International Underwriter has agreed that, as part of the distribution
of the shares of Common Stock, (a) it is not purchasing any shares of Common
Stock for the account of any United States or Canadian Person and (b) it has not
offered or sold, and will not offer or sell, directly or indirectly, any shares
of Common Stock or distribute this Prospectus to any person within the United
States or Canada or to any United States or Canadian Person. Each U.S.
Underwriter has agreed that, as part of the distribution of the shares of Common
Stock, (a) it is not purchasing any shares of Common Stock for the account of
anyone other than a United States or Canadian Person and (b) it has not offered
or sold, and will not offer or sell, directly or indirectly, any shares of
Common Stock or distribute this Prospectus to any person outside the United
States or Canada or to anyone other than a United States or Canadian Person. The
foregoing limitations do not apply to stabilization transactions or to certain
other transactions specified in the
33
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
Agreement Between (as defined below). As used herein, "United States or Canadian
Person" means any individual who is resident in the United States or Canada, or
any corporation, pension, profit-sharing or other trust or other entity
organized under or governed by the laws of the United States or Canada or any
political subdivision thereof (other than a foreign branch of any United States
or Canadian Person), and shall include any United States or Canadian branch of a
person other than a United States or Canadian Person; and "United States" shall
mean the Untied States of America, its territories, possessions and all areas
subject to its jurisdiction.
Each International Underwriter has severally represented and agreed that (i)
it has not offered or sold and will not offer or sell in the United Kingdom, by
means of any document, any shares of Common Stock other than to persons whose
ordinary business it is to buy or sell shares or debentures, whether as
principal or agent, or in circumstances which do not constitute and offer to the
public within the meaning of the Companies Act 1985; (ii) it has complied and
will comply with all applicable provisions of the Financial Services Act 1986
with respect to anything done by it in relation to the shares of Common Stock
in, from and otherwise involving the United Kingdom; and (iii) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the issue of the shares of Common
Stock to a person who is of a kind described in Article 9(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988 or is a
person to whom such document may otherwise lawfully be issued or passed on.
The U.S. Underwriters and International Underwriters have entered into an
Agreement Between U.S. and International Underwriters (the "Agreement Between")
that provides for the coordination of their activities. Pursuant to the
Agreement Between, sales may be made between the U.S. Underwriters and the
International Underwriters of such number of shares of Common Stock as may be
mutually agreed upon. The per share price of any shares so sold shall be the
public offering price set forth on the cover page of the Prospectus, less an
amount not greater than the per share amount of the concession to dealers set
forth above. To the extent there are sales between the U.S. Underwriters and the
International Underwriters, the number of shares of Common Stock initially
available for sale by the U.S. Underwriters or by the International Underwriters
may be more or less than the amount appearing on the cover page of this
Prospectus.
The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day subsequent to the effective date of this offering,
to purchase up to an aggregate of 270,000 additional shares of Common Stock at
the public offering price set forth on the cover page of this Prospectus, less
the underwriting discounts and commissions. The Underwriters may exercise such
option only to cover over-allotments, if any, incurred in the sale of the shares
of Common Stock. To the extent that the Underwriters exercise such option, each
Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the percentage it
is required to purchase of the total number of shares of Common Stock under the
U.S. or International Underwriting Agreement, as the case may be.
The Company has agreed to indemnify the U.S. Underwriters and the
International Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended, or to contribute to payments which
the U.S. Underwriters or the International Underwriters may be required to make
in respect thereof.
The Company and an executive officer have agreed that they will not sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
rights to purchase or acquire shares of Common Stock for a period of 90 days
after the effective date of this offering, except for the shares of Common Stock
offered hereby, the issuance of shares by the Company pursuant to employee stock
options and the issuance of shares or options by the Company pursuant to
employee benefit, stock option and compensation plans of the Company, without
the prior written consent of the Representatives.
LEGAL MATTERS
Certain legal matters with respect to the shares of the Common Stock offered
hereby will be passed upon for the Company by Skadden, Arps, Slate, Meagher &
Flom, Los Angeles, California. Certain legal matters relating to the offering
will be passed upon for the Underwriters by Milbank, Tweed, Hadley & McCloy, Los
Angeles, California.
34
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
EXPERTS
The consolidated financial statements of the Company as of October 31, 1993
and 1994 and for each of the three years in the period ended October 31, 1994
included in this Prospectus, and related financial statement schedules
incorporated herein by reference, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and by
reference, and have been so incorporated and included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the Commission's regional offices at 7 World Trade Center, 13th Floor,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and inspected and copied or obtained by mail at
prescribed rates from the public reference facilities maintained by the
Commission at its principal offices: 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549.
The Company's Common Stock is listed on the New York Stock Exchange. The
Company's reports, proxy statements and other information can be inspected and
copied at the offices of the New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 under the Securities Act of 1933, as amended, with respect to the Common
Stock described in this Prospectus. This Prospectus does not contain all the
information set forth in the registration statement and exhibits and schedules
thereto. For further information with respect to the Company and the Common
Stock, reference is made to the registration statement and the exhibits and
schedules filed as part thereof. Statements contained in this Prospectus as to
the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the registration statement,
each such statement being qualified in all respects by reference to such
exhibit. The registration statement, including exhibits and schedules thereto,
may be inspected without charge or copied in whole or in part at prescribed
rates at the Commission's principal offices set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference, except as
superseded or modified herein:
1. The Description of the Company's Common Stock which is contained in the
Company's Registration Statement on Form S-1, dated October 23, 1967.
2. The Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1994;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1995;
4. The Company's Quarterly Report on Form 10-Q for the quarter ended April
30, 1995;
5. The Company's Quarterly Report on Form 10-Q for the quarter ended July
31, 1995;
6. The Company's Report on Form 8-K, dated April 17, 1995.
Each document filed subsequent to the date of this prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior
to the termination of the offering shall be deemed to be incorporated by
reference in this Prospectus and shall be part hereof from the date of filing
such document.
The Company will provide a copy of the documents incorporated by reference
herein (other than exhibits to such documents) without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request by such person. Requests should be addressed to:
Esterline Technologies Corporation, 10800 NE 8th Street, Bellevue, Washington
98004, Attention: Manager, Corporate Communications (telephone number (206)
453-9400).
35
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Prospectus Summary.................................... 3
Risk Factors.......................................... 6
Use of Proceeds....................................... 9
Price Range of Common Stock and Dividend Policy....... 9
Capitalization........................................ 10
Selected Historical Financial and Operating Data...... 11
Management's Discussion and Analysis of Results of
Operations and Financial Condition.................. 12
Business.............................................. 17
Management............................................ 24
Security Ownership of Certain Beneficial Owners and
Management.......................................... 26
Description of Capital Stock.......................... 27
Certain United States Federal Tax Consequences to
Non-United States Holders........................... 31
Underwriting.......................................... 33
Legal Matters......................................... 34
Experts............................................... 35
Available Information................................. 35
Incorporation of Certain Documents by Reference....... 35
Index to Financial Statements......................... F-1
</TABLE>
1,800,000 SHARES
[LOGO]
ESTERLINE TECHNOLOGIES
CORPORATION
COMMON STOCK
--------------------
PROSPECTUS
--------------------
PAINEWEBBER INTERNATIONAL
RAGEN MACKENZIE INCORPORATED
PACIFIC CREST SECURITIES INC.
------------
, 1995
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
AMOUNT*
----------
<S> <C>
Securities and Exchange Commission Registration Fee............................... $ 20,344
New York Stock Exchange (NYSE) Registration Fee................................... 10,500
National Association of Securities Dealers, Inc. (NASD) filing fee................ 6,400
Printing and Engraving Expenses................................................... 75,000
Blue Sky Fees and Expenses (including counsel fees)............................... 10,000
Legal Fees and Expenses........................................................... 250,000
Accounting Fees and Expenses...................................................... 15,000
Miscellaneous..................................................................... 27,756
----------
Total........................................................................... $ 415,000
----------
----------
<FN>
- ------------------------
* All expenses are estimated, except the registration, NYSE and NASD fees.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation. Section 145 of the Delaware General
Corporation Law (the "DGCL") provides that any person may be indemnified by a
Delaware corporation against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him or
her in connection with any threatened, pending, or completed action, suit, or
proceeding in which such person is made a party by reason of his or her being or
having been a director, officer, employee, or agent of the corporation. The
statute provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise.
Article Eighth, Section 1 of the Company's Certificate of Incorporation
provides that directors of the Company shall not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation theories
expressly not permitted under the DGCL, as amended from time to time.
Section 2 of said Article Eighth provides for indemnification of each
director and officer who was or is a party or is threatened to be made a party
to any action, suit or proceeding by virtue of his or her position as a director
or officer to the fullest extent authorized or permitted by the DGCL, as amended
from time to time. In addition, the Registrant has insurance policies that
provide liability coverage to directors and officers while acting in that
capacity.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- ----------------------------------------------------------------------
<C> <S>
1.1 * Form of U.S. Underwriting Agreement.
1.2 * Form of International Underwriting Agreement.
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 on Form 8-A filed December 17, 1992.)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- ----------------------------------------------------------------------
<C> <S>
5* Legal Opinion of Skadden, Arps, Slate, Meagher & Flom.
23.1 * Consent of Deloitte & Touche LLP.
23.2 * Consent of Skadden, Arps, Slate, Meagher & Flom. (contained in its
opinion filed as Exhibit 5 hereto.)
24** Power of Attorney (included on page II-3).
<FN>
- ------------------------
* filed herewith.
** previously filed.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497 (h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Bellevue, State of Washington, on
September 26, 1995.
ESTERLINE TECHNOLOGIES CORPORATION
By: /s/ WENDELL P. HURLBUT
--------------------------------------
Wendell P. Hurlbut
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on September 26, 1995.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------------------ ---------------------------------------------
<C> <S> <C>
* Chairman, President and Chief
--------------------------------- Executive Officer (Director and
Wendell P. Hurlbut Principal Executive Officer)
*
--------------------------------- Director
Gilbert W. Anderson
*
--------------------------------- Director
John F. Clearman
*
--------------------------------- Director
Edwin I. Colodny
*
--------------------------------- Director
E. John Finn
*
--------------------------------- Director
Robert F. Goldhammer
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------------------ ---------------------------------------------
<C> <S> <C>
*
--------------------------------- Director
Jerome J. Meyer
*
--------------------------------- Director
Paul G. Schloemer
*
--------------------------------- Director
Malcolm T. Stamper
Executive Vice President and Chief
* Financial Officer, Secretary
--------------------------------- and Treasurer (Principal Financial
Robert W. Stevenson Officer and Accounting Officer)
By: /s/ ROBERT W. STEVENSON
---------------------------------
ROBERT W. STEVENSON
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBER DESCRIPTION OF DOCUMENTS NUMBERED
- -------------- -------------------------------------------------- ------------
<S> <C> <C>
1.1 * Form of U.S. Underwriting Agreement.
1.2 * Form of International Underwriting Agreement.
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 on Form 8-A filed December
17, 1992.)
5* Legal Opinion of Skadden, Arps, Slate, Meagher &
Flom.
23.1 * Consent of Deloitte & Touche LLP.
23.2 * Consent of Skadden, Arps, Slate, Meagher & Flom.
(contained in its opinion filed as Exhibit 5
hereto.)
24** Power of Attorney (included on page II-3).
<FN>
- ------------------------
* filed herewith.
** previously filed.
</TABLE>
<PAGE>
EXHIBIT 1.1
1,440,000 Shares
ESTERLINE TECHNOLOGIES CORPORATION
Common Stock
UNDERWRITING AGREEMENT
(U.S. Version)
October __, 1995
PAINEWEBBER INCORPORATED
RAGEN MACKENZIE INCORPORATED
PACIFIC CREST SECURITIES INC.
As Representatives of the
several U.S. Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Esterline Technologies Corporation, a Delaware corporation (the
"COMPANY") proposes to sell an aggregate of 1,440,000 shares (the "U.S. FIRM
SHARES") of the Company's Common Stock, par value $0.20 per share (the "COMMON
STOCK"), to you and to the several other U.S. Underwriters named in SCHEDULE I
hereto (collectively, the "U.S. UNDERWRITERS"), for whom you are acting as
representatives (the "REPRESENTATIVES"), in connection with the offering and
sale of such shares of Common Stock in the United States and Canada to United
States and Canadian Persons (as hereinafter defined). The Company has also
agreed to grant to you and the other U.S. Underwriters an option (the "U.S.
OPTION") to purchase up to an aggregate additional 216,000 shares of Common
Stock (the "U.S. OPTION SHARES") on the terms and for the purposes set forth in
SECTION 1(b) hereof. The U.S. Firm Shares and the U.S. Option Shares are
referred to collectively herein as the "U.S. SHARES" and the International
Shares (as hereinafter defined) and the U.S. Shares are referred to collectively
herein as the "SHARES".
<PAGE>
2
It is understood that the Company is concurrently entering into an
agreement (the "INTERNATIONAL UNDERWRITING AGREEMENT") providing for the sale by
the Company of an aggregate of 414,000 shares of Common Stock, including the
over-allotment option described therein (the "INTERNATIONAL SHARES"), through
arrangements with certain underwriters outside the United States and Canada (the
"INTERNATIONAL UNDERWRITERS"), for whom PaineWebber International (U.K.) Ltd.,
Ragen MacKenzie Incorporated and Pacific Crest Securities Inc. are acting as
lead managers (the "MANAGERS"), in connection with the offering and the sale of
such shares of Common Stock outside the United States and Canada to persons
other than United States and Canadian Persons. (The U.S. Underwriters and
International Underwriters are referred to herein collectively as the
"UNDERWRITERS".) As used herein, "UNITED STATES AND CANADIAN PERSON" shall mean
any individual who is resident in the United States or in Canada or any
corporation, pension, profit-sharing or other trust or other entity organized
under or governed by the laws of the United States or Canada or of any political
subdivision thereof (other than the foreign branch of any United States or
Canadian Person), and shall include any United States or Canadian branch of
a person other than a United States or Canadian Person; and "UNITED STATES"
shall mean the United States of America, its territories, possessions and all
areas subject to its jurisdiction.
The U.S. Underwriters have entered into an agreement with the
International Underwriters (the "AGREEMENT BETWEEN U.S. UNDERWRITERS AND
INTERNATIONAL UNDERWRITERS") contemplating the coordination of certain
transactions between the U.S. Underwriters and the International Underwriters
and any such transactions between the U.S. Underwriters and the International
Underwriters shall be governed by the Agreement Between U.S. Underwriters and
International Underwriters and shall not be governed by the terms of this
Agreement.
The initial public offering price per share for the U.S. Shares and
the purchase price per share for the U.S. Shares to be paid by the several U.S.
Underwriters shall be agreed upon by the
<PAGE>
3
Company and the Representatives, acting on behalf of the several U.S.
Underwriters, and such agreement shall be set forth in a separate written
instrument substantially in the form of EXHIBIT A hereto (the "U.S. PRICE
DETERMINATION AGREEMENT"). The U.S. Price Determination Agreement shall be
executed and delivered by the parties thereto concurrently with the execution
and delivery of this Agreement. The U.S. Price Determination Agreement may take
the form of an exchange of any standard form of written telecommunication among
the Company and the Representatives and shall specify such applicable
information as is indicated in EXHIBIT A hereto. The offering of the U.S.
Shares will be governed by this Agreement, as supplemented by the U.S. Price
Determination Agreement. This Agreement shall be deemed to incorporate, and,
unless the context otherwise indicates, all references contained herein to "this
Agreement" and to the phrase "herein" shall be deemed to include the U.S. Price
Determination Agreement. The initial public offering price per share and the
purchase price per share for the International Shares to be paid by the several
International Underwriters pursuant to the International Underwriting Agreement
shall be set forth in a separate agreement (the "INTERNATIONAL PRICE
DETERMINATION AGREEMENT"), the form of which is attached to the International
Underwriting Agreement. Unless the context otherwise indicates, all references
contained herein to the "International Underwriting Agreement" shall be deemed
to include the International Price Determination Agreement. The purchase price
per share to be paid by the several International Underwriters and the initial
public offering price per share for the International Shares shall be identical
to the purchase price per share to be paid by the several U.S. Underwriters and
the initial public offering price per share, for the U.S. Shares hereunder,
respectively.
The Company confirms as follows its respective agreements with the
Representatives and the several other U.S. Underwriters.
<PAGE>
4
1. AGREEMENT TO SELL AND PURCHASE.
(a) On the basis of the respective representations, warranties
and agreements of the Company herein contained and subject to all the terms and
conditions of this Agreement, (i) the Company agrees to sell to the several U.S.
Underwriters and (ii) each of the U.S. Underwriters, severally and not jointly,
agrees to purchase from the Company at the purchase price per share for the U.S.
Firm Shares to be agreed upon by the Representatives and the Company in
accordance with SECTION 1(c) OR 1(d) and set forth in the U.S. Price
Determination Agreement, the number of U.S. Firm Shares set forth opposite the
name of such U.S. Underwriter in SCHEDULE I, plus such additional number of U.S.
Firm Shares which such U.S. Underwriter may become obligated to purchase
pursuant to SECTION 8 hereof.
(b) Subject to all the terms and conditions of this Agreement,
the Company grants the U.S. Option to the several U.S. Underwriters to purchase,
severally and not jointly, up to 216,000 U.S. Option Shares at the same price
per share as the U.S. Underwriters shall pay for the U.S. Firm Shares. The U.S.
Option may be exercised only to cover over-allotments in the sale of the U.S.
Firm Shares by the U.S. Underwriters and may be exercised in whole or in part at
any time (but not more than once) on or before the 30th day after the date of
this Agreement, upon written or telegraphic notice (the "U.S. OPTION SHARES
NOTICE") by the Representatives to the Company no later than 12:00 noon, New
York City time, at least two and no more than five business days before the date
specified for closing in the U.S. Option Shares Notice (the "U.S. OPTION CLOSING
DATE") setting forth the aggregate number of U.S. Option Shares to be purchased
and the time and date for such purchase. On the U.S. Option Closing Date, the
Company will issue and sell to the U.S. Underwriters the number of U.S. Option
Shares set forth in the U.S. Option Shares Notice, and each U.S. Underwriter
will purchase such percentage of the U.S. Option Shares as is equal to the
percentage of U.S. Firm
<PAGE>
5
Shares that such U.S. Underwriter is purchasing, as adjusted by the
Representatives in such manner as they deem advisable to avoid fractional
shares.
(c) If the Company has elected not to rely on Rule 430A, the
initial public offering price per share for the U.S. Firm Shares and the
purchase price per share for the U.S. Firm Shares to be paid by the several U.S.
Underwriters shall be agreed upon and set forth in the U.S. Price Determination
Agreement, which shall be dated the date hereof, and an amendment to the
Registration Statement (as hereinafter defined) containing such per share price
information shall be filed with the Commission (as hereinafter defined) before
the Registration Statement becomes effective pursuant to the Act (as hereinafter
defined).
(d) If the Company has elected to rely on Rule 430A, the initial
public offering price per share for the U.S. Firm Shares and the purchase price
per share for the U.S. Firm Shares to be paid by the several U.S. Underwriters
shall be agreed upon and set forth in the U.S. Price Determination Agreement,
which shall be dated the date hereof, and the Prospectus (as hereinafter
defined) will be filed with the Commission pursuant to Rule 424(b) of the Act.
In the event that the Price Determination Agreement has not been executed by the
close of business on the fourth business day following the date on which the
Registration Statement becomes effective, this Agreement shall terminate
forthwith, without liability of any party to any other party except that
Section 5 shall remain in effect.
2. DELIVERY AND PAYMENT. Delivery of the U.S. Firm Shares shall be
made to the Representatives for the accounts of the U.S. Underwriters against
payment of the purchase price with next-day available funds to the order of the
Company at the office of PaineWebber Incorporated, 1285 Avenue of the Americas,
New York, New York 10019 or at such other place as may be agreed upon by the
Company and the Representatives. Such payment shall be made at 10:00 a.m., New
York City
<PAGE>
6
time, on the third business day following the date of this Agreement or, if the
Company has elected to rely on Rule 430A, the third business day after the date
on which the first bona fide offering of the U.S. Shares to the public is made
by the U.S. Underwriters or at such time on such other date, not later than
seven business days after the date of this Agreement, as may be agreed upon by
the Company and the Representatives (such date is hereinafter referred to as the
"CLOSING DATE").
To the extent the U.S. Option is exercised, delivery of the U.S.
Option Shares against payment by the U.S. Underwriters (in the manner specified
above) will take place at the offices specified above for the Closing Date at
the time and date (which may be the Closing Date) specified in the U.S. Option
Shares Notice.
Certificates evidencing the U.S. Shares shall be in definitive form
and shall be registered in such names and in such denominations as the
Representatives shall request at least two business days prior to the Closing
Date or the U.S. Option Closing Date, as the case may be, by written notice to
the Company. For the purpose of expediting the checking and packaging of
certificates for the U.S. Shares, the Company agrees to make such certificates
available at the offices of PaineWebber Incorporated, 1285 Avenue of the
Americas, New York, New York 10019, for inspection at least 24 hours prior to
the Closing Date or the U.S. Option Closing Date, as the case may be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the U.S. Firm Shares and U.S. Option Shares by the
Company to the respective U.S. Underwriters shall be borne by the Company. The
Company will pay and save each U.S. Underwriter and any subsequent holder of the
U.S. Shares harmless from any and all liabilities with respect to or resulting
from any failure or delay in paying Federal and state stamp and other transfer
taxes, if any,
<PAGE>
7
which may be payable or determined to be payable in connection with the original
issuance or sale to such U.S. Underwriter of the U.S. Firm Shares and U.S.
Option Shares.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants and covenants to each U.S. Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement (Registration No. 33-62625) on Form S-3 relating to the
Shares, including a preliminary prospectus and such amendments to such
registration statement as may have been required to the date of this Agreement,
has been prepared by the Company under the provisions of the Securities Act of
1933, as amended (the "ACT"), and the rules and regulations (collectively
referred to as the "RULES AND REGULATIONS") of the Securities and Exchange
Commission (the "COMMISSION") thereunder, and has been filed with the
Commission. The registration statement contains the forms of two preliminary
prospectuses to be used in connection with the offering and sale of the Shares:
a United States preliminary prospectus (the "U.S. PRELIMINARY PROSPECTUS")
relating to the U.S. Shares and an international preliminary prospectus relating
to the International Shares (the "INTERNATIONAL PRELIMINARY PROSPECTUS"; the
U.S. Preliminary Prospectus and the International Preliminary Prospectus are
referred to collectively herein as the "PRELIMINARY PROSPECTUS"). The
International Preliminary Prospectus is identical to the U.S. Preliminary
Prospectus, except for differences in the outside front cover page, the back
cover page and the text of the section headed "Underwriting" and except for the
inclusion in the International Preliminary Prospectus of a section headed
"Certain United States Federal Tax Consequences to Non-United States Holders."
The term "preliminary prospectus" as used herein means a preliminary prospectus
as contemplated by Rule 430 or Rule 430A ("RULE 430A") of the Rules and
Regulations included at any time as part of the registration statement. Copies
of such registration statement and amendments have been delivered to the
Representatives and the Managers, copies of
<PAGE>
8
each related U.S. Preliminary Prospectus have been delivered to the
Representatives and copies of each related International Preliminary Prospectus
have been delivered to the Managers. If such registration statement has not
become effective pursuant to the Act, a further amendment to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become so effective will be filed promptly by the
Company with the Commission. If such registration statement has become
effective, a final prospectus containing information permitted to be omitted at
the time of effectiveness by Rule 430A will be filed by the Company with the
Commission in accordance with Rule 424(b) of the Rules and Regulations as
required after execution and delivery of this Agreement. The term "REGISTRATION
STATEMENT" means the registration statement as amended at the time it becomes or
became effective pursuant to the Act (the "EFFECTIVE DATE"), including financial
statements and all exhibits and any information deemed to be included by
Rule 430A. The term "REGISTRATION STATEMENT" shall also include any
registration statement relating to the Shares that is filed and becomes
effective pursuant to Rule 462(b) of the Rules and Regulations. The term
"PROSPECTUS" means, collectively, (i) a prospectus relating to the U.S. Shares
(the "U.S. PROSPECTUS") and (ii) a prospectus relating to the International
Shares (the "INTERNATIONAL PROSPECTUS"), in the respective forms they are first
filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations
or, if no such filing is required, the forms of final prospectuses included in
the Registration Statement at the Effective Date. Any reference herein to the
Registration Statement, any preliminary prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), on or before the Effective Date or
the date of such preliminary prospectus or the Prospectus, as the case may be.
Any reference herein to the terms "amend," "amendment" or "supplement" with
respect to the Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to refer to and
<PAGE>
9
include the filing of any document under the Exchange Act after the Effective
Date, or the date of any preliminary prospectus or the Prospectus, as the case
may be, and deemed to be incorporated therein by reference.
(b) On the Effective Date, the date the Prospectus is first
filed with the Commission pursuant to Rule 424(b) (if required), and at all
times subsequent to the Effective Date through and including the Closing Date
and, if later, the U.S. Option Closing Date or the International Option Closing
Date (as defined in the International Underwriting Agreement) and when any post-
effective amendment to the Registration Statement becomes effective or any
amendment or supplement to the Prospectus is filed with the Commission, the
Registration Statement and the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment or supplement
thereto), including the financial statements included or incorporated by
reference in the Prospectus, did or will comply in all material respects with
all applicable provisions of the Act, the Exchange Act, the rules and
regulations thereunder (the "EXCHANGE ACT RULES AND REGULATIONS") and the Rules
and Regulations and will contain all statements required to be stated therein in
accordance with the Act, the Exchange Act, the Exchange Act Rules and
Regulations and the Rules and Regulations, as the case may be. On the Effective
Date and when any post-effective amendment to the Registration Statement becomes
effective, no part of the Registration Statement or any such amendment did or
will contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. At the Effective Date, the date the Prospectus or any
amendment or supplement to the Prospectus is filed with the Commission and at
the Closing Date and, if later, the U.S. Option Closing Date or the
International Option Closing Date, the Prospectus did not or will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
<PAGE>
10
circumstances under which they were made, not misleading. The foregoing
representations and warranties in this SECTION 3(b) do not apply to any
statements or omissions made in conformity with information relating to any U.S.
Underwriter or International Underwriter furnished in writing to the Company by
the Representatives or Managers specifically for inclusion in the Registration
Statement or the Prospectus or any amendment or supplement thereto. For all
purposes of this Agreement (including, but not limited to, SECTION 6 hereof),
the statements set forth in the last paragraph of the cover page of the
Prospectus, the stabilization legend on the inside front cover page of the
Prospectus and the statements set forth under the heading "Underwriting" in the
Prospectus constitute the only information relating to any U.S. Underwriter or
International Underwriter furnished in writing to the Company by the
Underwriters specifically for inclusion in the preliminary prospectus, the
Registration Statement or the Prospectus. The Company has not distributed any
offering material in connection with the offering or sale of the Shares other
than the Registration Statement, the preliminary prospectus, the Prospectus or
any other materials, if any, permitted by the Act.
(c) The documents which are incorporated by reference in the
preliminary prospectus and the Prospectus or from which information is so
incorporated by reference, when they become effective or were filed with the
Commission, as the case may be, complied in all material respects with the
requirements of the Act or the Exchange Act, as applicable, the Exchange Act
Rules and Regulations and the Rules and Regulations except as amended and
superseded by statements made in the Registration Statement; and any documents
so filed and incorporated by reference subsequent to the Effective Date shall,
when they are filed with the Commission, conform in all material respects with
the requirements of the Act and the Exchange Act, as applicable, the Exchange
Act Rules and Regulations and the Rules and Regulations.
<PAGE>
11
(d) The only "subsidiaries" (as defined in the Rules and
Regulations) of the Company (other than subsidiaries which, considered in the
aggregate as a single subsidiary, would not constitute a "significant
subsidiary" (as defined in the Rules and Regulations)) are the subsidiaries
listed on SCHEDULE II hereto (the "SUBSIDIARIES"). The Company and each of its
Subsidiaries is, and at the Closing Date will be, a corporation or partnership,
as applicable, duly organized, and in the case of a corporation, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. The Company and each of its Subsidiaries has,
and at each of the Closing Date, the U.S. Option Closing Date and the
International Option Closing Date will have, full corporate or partnership, as
applicable, power and authority to own or lease all the assets owned or leased
by it and to conduct its activities and business as described in the
Registration Statement and the Prospectus. The Company and each of its
subsidiaries is, and at each of the Closing Date, the U.S. Option Closing Date
and the International Option Closing Date will be, duly licensed or qualified to
do business and in good standing as a foreign corporation or partnership, if
applicable, in all jurisdictions in which the nature of the activities conducted
by it or the character of the assets owned or leased by it makes such licensing
or qualification necessary, except where the failure to be so licensed or
qualified would not have a material adverse effect on the business, properties,
condition (financial or otherwise) or results of operations of the Company and
its Subsidiaries, taken as a whole. None of the Company or any of its
Subsidiaries has any interest in a joint venture, corporation or partnership
which interest requires disclosure in the Registration Statement which has not
been so disclosed. Complete and correct copies of the certificate of
incorporation and of the by-laws, or partnership agreement, as applicable, of
the Company and each of its Subsidiaries and all amendments thereto have been
delivered or made available to the Representatives and the Managers, and no
changes therein will be made subsequent to
<PAGE>
12
the date hereof and prior to the Closing Date or, if later, the U.S. Option
Closing Date or the International Option Closing Date, except as otherwise
described in the Registration Statement.
(e) The outstanding shares of Common Stock have been, and the
Shares to be issued and sold by the Company, when issued and delivered to and
paid for by the Underwriters, will be, duly authorized, validly issued, fully
paid and nonassessable and will be free of any pledge, charge, lien,
encumbrance, security interest, claim or statutory or contractual preemptive
rights, except those which have been waived or created by the actions of the
Underwriters. The authorized and outstanding capital stock of the Company is as
set forth in the Registration Statement and the Prospectus. The description of
the Company's capital stock, including without limitation the Common Stock, in
the Registration Statement and the Prospectus is, and at each of the Closing
Date, the U.S. Option Closing Date and the International Option Closing Date
will be, complete and accurate in all material respects. Except as described on
SCHEDULE II, all of the issued and outstanding shares of capital stock or
partnership interests, as applicable, of each of the Subsidiaries of the Company
are owned by the Company directly or indirectly; all of such shares have been
duly authorized and validly issued and are fully paid and nonassessable and such
shares and partnership interests, as applicable, are so owned free and clear of
any pledge, lien, charge, encumbrance, security interest or other claim, except
as described in the Registration Statement. Except as set forth in the
Prospectus (or pursuant to grants of options to employees pursuant to existing
employee benefit plans which grants are immaterial in amount), neither the
Company nor any of its Subsidiaries have outstanding, or at the Closing Date
will have outstanding, any options to purchase, or any rights or warrants to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell, any shares of Common Stock, any
shares of capital stock or partnership interests, as applicable, of any
Subsidiary or any such warrants, convertible securities or obligations.
<PAGE>
13
(f) The audited and unaudited financial statements and schedules
included or incorporated by reference in the Registration Statement or the
Prospectus present fairly the consolidated financial condition of the Company as
of the respective dates thereof and the consolidated results of operations and
cash flows of the Company for the respective periods covered thereby (subject,
in the case of the Company's unaudited financial statements, to normal recurring
year end adjustments); such statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the entire period involved, except as otherwise disclosed in the
Prospectus. No other financial statements or schedules of the Company are
required by the Act, the Exchange Act, the Exchange Act Rules and Regulations or
the Rules and Regulations to be included in the Registration Statement or the
Prospectus. Deloitte & Touche LLP (the "ACCOUNTANTS"), who have reported on
such financial statements and schedules, are independent accountants with
respect to the Company as required by the Act and the Rules and Regulations.
The statements included in the Registration Statement with respect to the
Accountants pursuant to Rule 509 of Regulation S-K of the Rules and Regulations
are true and correct in all material respects.
(g) The Company maintains a system of internal accountings
control sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
<PAGE>
14
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus and prior to the
Closing Date, or, if later, the U.S. Option Closing Date or the International
Option Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, there has not been (i) any material and adverse
change, financial or otherwise, in the business, properties, regulations or laws
affecting the Company and its Subsidiaries, results of operations, business
prospects or condition of the Company or any of its Subsidiaries, taken as a
whole, (ii) any transaction which is material to the Company and its
Subsidiaries, taken as a whole, (iii) any obligation, contingent or otherwise,
directly or indirectly incurred by the Company or any of its Subsidiaries, which
is material to the Company and its Subsidiaries, taken as a whole, or (iv) any
payment or declaration of any dividends or other distributions of any kind on
any class of its capital stock.
(i) Neither the Company nor any of its Subsidiaries is an
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
(j) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries or any of their respective properties or any of their respective
officers in their capacity as such, at law or in equity, or before or by any
federal, state, local or foreign governmental or regulatory commission, board,
body, authority or agency which are likely to result in a judgment, decree or
order having a material adverse effect on the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole.
<PAGE>
15
(k) Except where the effect is not likely to have a material
adverse effect on the properties, assets, operations, business or financial
condition of the Company and its Subsidiaries, taken as a whole, neither the
Company nor any of its Subsidiaries is in breach of, or in default under (nor
has any event occurred which with notice, lapse of time, or both would
constitute a breach of, or default under) its respective charter or by-laws, or
partnership agreement, as applicable, or in the performance or observance of any
obligation, agreement, covenant or condition contained in any license,
indenture, mortgage, deed of trust, bank loan or credit agreement or any other
agreement or instrument (collectively, a "contract or other agreement") to which
the Company or any of its Subsidiaries is a party or by which any of them or
their respective properties are bound. To the best knowledge of the Company and
each of its Subsidiaries, no other party under any contract or other agreement
to which it is a party is in default in any respect thereunder. Each of the
Company and its Subsidiaries has all governmental licenses, permits, consents,
orders, approvals and other authorizations necessary to conduct its business
(collectively, "Licenses"), other than those Licenses the absence of which is
not likely to have a material adverse effect on the properties, assets,
operations, business or financial condition of the Company and its Subsidiaries,
taken as a whole. The Company and each of its Subsidiaries are in compliance
with all applicable laws, orders, rules, regulations and directives except where
failure to be in compliance is not likely to have a material adverse effect on
the properties, assets, operations, business or financial condition of the
Company and its Subsidiaries, taken as a whole.
(l) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is required
for the consummation by the Company of the transactions on its part contemplated
herein and in the International Underwriting Agreement, except such as have been
or may be obtained under the Act or the Rules and Regulations
<PAGE>
16
and such as may be required under state securities or Blue Sky laws or under the
laws of any jurisdiction outside of the U.S. or the by-laws and rules of the
National Association of Securities Dealers, Inc. (the "NASD") in connection with
the purchase and distribution by the U.S. Underwriters of the U.S. Shares to be
sold by the Company.
(m) The Company has full corporate power and authority to enter
into this Agreement and the International Underwriting Agreement. Each of this
Agreement and the International Underwriting Agreement has been duly authorized,
executed and delivered by the Company and, assuming due authorization, execution
and delivery by the other persons party hereto and thereto, constitutes a valid
and binding agreement of the Company and is enforceable against the Company in
accordance with the terms hereof and thereof, except as rights to indemnity and
contribution hereunder and thereunder may be limited by federal or state
securities laws and except as the enforceability hereof and thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to general principles of
equity. The execution, delivery and performance of this Agreement and the
International Underwriting Agreement and the consummation of the transactions
contemplated hereby and thereby do not and will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of the
Company or any of its Subsidiaries pursuant to the terms or provisions of, or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or give any other party a right to terminate any of
its obligations under, or result in the acceleration of any obligation under,
the certificate of incorporation or by-laws of the Company or any of its
Subsidiaries, any contract or other agreement to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective properties is bound or affected, or violate or conflict
with any judgment, ruling, decree, order, statute, rule or regulation of any
court or other governmental
<PAGE>
17
agency or body applicable to the business or properties of the Company or any of
its Subsidiaries, except in each case as are not material to the business of the
Company and its Subsidiaries, taken as a whole.
(n) The Company and each of its Subsidiaries has good and
marketable title to all properties and assets described in the Prospectus as
owned by it, free and clear of all pledges, charges, liens, encumbrances,
security interests or other claims, except such as are described in the
Prospectus or the Registration Statement or are not material to the business of
the Company and its Subsidiaries, taken as a whole. The Company and each of its
Subsidiaries has valid, subsisting and enforceable leases for all properties and
assets described in the Prospectus as leased by it, with such exceptions as are
described in the Prospectus or the Registration Statement or are not material to
the business of the Company and its Subsidiaries, taken as a whole.
(o) There is no document or contract of a character required to
be described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required. All such contracts to which the Company or any Subsidiary is a party
have been duly authorized, executed and delivered by the Company or such
Subsidiary, constitute valid and binding agreements of the Company or such
Subsidiary and are enforceable against the Company or such Subsidiary in
accordance with the terms thereof.
(p) No statement, representation, warranty or covenant made by
the Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Representatives was or will be, when made,
inaccurate, untrue or incorrect.
(q) No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement.
<PAGE>
18
(r) The Shares are duly authorized for listing by the New York
Stock Exchange upon official notice of issuance thereof.
(s) Neither the Company nor any of its Subsidiaries is engaged
in any unfair labor practice which would have a material adverse effect on the
Company and its Subsidiaries, taken as a whole. Except for matters which are
not material in the aggregate to the Company and its Subsidiaries, (i) there is
(A) no unfair labor practice complaint pending or, to the best of their
knowledge, threatened against the Company or any of its Subsidiaries before the
National Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under collective bargaining agreements is pending or, to the
best of their knowledge, threatened, (B) no strike, labor dispute, slowdown or
stoppage pending or, to the best knowledge of the Company or any of its
Subsidiaries after due inquiry, threatened against the Company or any of its
Subsidiaries and (C) no union representation dispute currently existing
concerning the employees of the Company or any of its Subsidiaries and (ii) to
the best knowledge of the respective managements of the Company or any of its
Subsidiaries, (A) no union organizing activities are currently taking place
concerning the employees of the Company or any of its Subsidiaries and (B) there
has been no violation of any federal, state or local law relating to
discrimination in the hiring, promotion or pay of employees, of any applicable
wage or hour laws, nor any provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA") or the rules and regulations promulgated thereunder
concerning the employees of the Company or any of its Subsidiaries.
(t) The Company and its Subsidiaries own, or are licensed or
otherwise have the full exclusive right to use, all patents, trademarks, trade
names and copyrights which are used in or necessary for the conduct of their
respective businesses as described in the Prospectus, except where the failure
to so own, license or have the exclusive right to use would not have a material
<PAGE>
19
adverse effect on the business of the Company and its Subsidiaries, taken as a
whole. Neither the Company nor any of its Subsidiaries has received any notice
of any person respecting the use of any such patents, trademarks, trade names or
copyrights or challenging or questioning the validity or effectiveness of any
such patent, trademark, trade name or copyright which is likely to result in a
material adverse effect on the business of the Company and its Subsidiaries,
taken as a whole. The use, in connection with the business and operations of
the Company and its Subsidiaries of such patents, trademarks, trade names and
copyrights does not, to the Company's knowledge, infringe on the rights of any
person which infringement is likely to result in a material adverse effect on
the business of the Company and its Subsidiaries, taken as a whole.
(u) Neither the Company nor any of its Subsidiaries is probable
of consummating the acquisition of any business or property which is
"significant" to the Company within the meaning of Regulation S-X of the Rules
and Regulations.
(v) Neither the Company nor any of its directors, officers or
controlling persons has taken, directly or indirectly, any action designed, or
which might reasonably be expected, to cause or result, under the Act or
otherwise, in, or which has constituted stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares.
(w) Except as otherwise set forth in the Prospectus or where the
effect is not likely to have a material adverse effect on the properties,
assets, operations, business or financial condition of the Company and its
Subsidiaries, taken as a whole, (i) each of the Company and its Subsidiaries is
in compliance with all applicable federal environmental laws, including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. SECTION 1251 ET
SEQ.), Resource Conservation & Recovery Act (42 U.S.C. SECTION 6901 ET SEQ.),
Safe Drinking Water Act (21 U.S.C. SECTION 349, 42 U.S.C. SECTIONS 201, 300f),
Toxic Substances Control Act (15 U.S.C. SECTION 2601 ET SEQ.), Clean Air Act
(42 U.S.C. SECTION
<PAGE>
20
74011251 ET SEQ.), Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. SECTION 9601 ET SEQ.), the appropriate environmental
laws of any state in which the Company or any of its Subsidiaries owns or leases
real property and any other laws regulating emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes or under any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder (collectively, "Environmental Laws")
and (ii) each of the Company and its Subsidiaries is in compliance with all
terms and conditions of any required permits, licenses and authorizations, and
is also in compliance with all other applicable limitations, restrictions,
conditions, standards, prohibitions, requirements and obligations contained in
the Environmental Laws.
(x) Except as otherwise set forth in the Prospectus or where the
effect is not likely to have a material adverse effect on the properties,
assets, operations, business or financial condition of the Company and its
Subsidiaries, taken as a whole, (i) there are no past or present events,
conditions, activities, practices, actions, or plans relating to the business as
presently being conducted by the Company or its Subsidiaries that could
reasonably be expected to interfere with or prevent compliance or continued
compliance with the Environmental Laws, or which would be reasonably likely to
give rise to any legal liability based on or related to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release into the workplace,
the environment, of any pollutant, contaminant, chemical or industrial, toxic or
hazardous substance or waste and (ii) no asbestos-containing material and no
underground or above-
<PAGE>
21
ground storage tanks are located on property owned or leased by the Company or
its Subsidiaries and none have been previously removed or filled by the Company
or its Subsidiaries or, to the best of their knowledge, any predecessor of the
Company or its Subsidiaries.
(y) Except as disclosed in the Registration Statement and the
Prospectus, there are no business relationships or related party transactions
required to be disclosed therein by Item 404 of Regulation S-K promulgated under
the Securities Act.
(z) All material tax returns required by applicable law to be
filed by the Company or any of its Subsidiaries have been filed, and all
material taxes and other assessments of a similar nature (whether imposed
directly or through withholding) including any interest, additions to tax or
penalties applicable thereto due or claimed to be due from such entities have
been paid, other than those being contested in good faith and for which adequate
reserves have been provided or those currently payable without penalty or
interest.
(aa) The Company and each of its Subsidiaries maintains insurance
covering its properties, operations, personnel and businesses as the Company
deems adequate and as previously disclosed to the Representatives and the
Managers. Such insurance insures against such losses and risks to an extent
which is adequate in accordance with customary industry practice to protect the
Company and its Subsidiaries and their businesses. All such insurance is
outstanding and fully in force on the date hereof and will be outstanding and
duly in force on the Closing Date and the U.S. Option Closing Date and the
International Option Closing Date, if any.
(bb) Neither the Company nor any affiliate of the Company does
business with the government of Cuba or with any person or affiliate located in
Cuba and the Company and each affiliate thereof has complied, to the extent
necessary with all of the provisions of Section 517.075, Florida Statutes, and
applicable rules and regulations thereunder.
<PAGE>
22
4. AGREEMENTS OF THE COMPANY. The Company agrees with the several
U.S. Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or
thereafter during such period as the Prospectus is required by the Act to be
delivered in connection with sales of the Shares by a U.S. Underwriter,
International Underwriter or dealer, file any amendment or supplement to the
Registration Statement or the Prospectus, unless a copy thereof shall first have
been submitted to the Representatives and the Managers within a reasonable
period of time prior to the filing thereof and the Representatives and the
Managers shall not have promptly and reasonably objected thereto in good faith
and in writing prior to said filing.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective pursuant to the Act, and will notify
the Representatives and the Managers promptly, and will confirm such advice in
writing, (1) when the Registration Statement has become so effective and when
any post-effective amendment thereto becomes effective, (2) of any request by
the Commission for amendments or supplements to the Registration Statement or
the Prospectus or for additional information, (3) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or the threat
thereof, (4) of the happening of any event during the period mentioned in the
second sentence of SECTION 4(E) hereof that in the judgment of the Company makes
any statement made in the Registration Statement or the Prospectus untrue or
that requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances in which they are made, not misleading and (5) of receipt by the
Company or any representative or attorney of the Company of any other
communication from the Commission relating
<PAGE>
23
to the Company, the Registration Statement, any preliminary prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible moment. If the Company has omitted any information from the
Registration Statement pursuant to Rule 430A, the Company will use its best
efforts to comply with the provisions of and make all requisite filings with the
Commission pursuant to said Rule 430A and to notify the Representatives and the
Managers promptly of all such filings.
(c) The Company will furnish to the Representatives and the
Managers, without charge, three signed copies of the Registration Statement and
of any post-effective amendment thereto, including financial statements and
schedules, and all exhibits thereto (including copies of any document filed
under the Exchange Act and deemed to be incorporated by reference into the
Prospectus), and will furnish to the Representatives and the Managers, without
charge, for transmittal to each of the other U.S. Underwriters and International
Underwriters, a copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules but without
exhibits.
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the
Company will deliver (i) to each of the U.S. Underwriters, without charge, as
many copies of the U.S. Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request (for the purposes set forth in the Act or
in other applicable law) and (ii) to each of the International Underwriters,
without charge, as many copies of the International Prospectus or any amendment
or supplement thereto as the Managers may reasonably request (for the purposes
set forth in the Act or in
<PAGE>
24
other applicable law). Unless the Company has notified the Representatives and
the Managers in writing that it is necessary to supplement or amend the
Prospectus to comply with the Act, the Company consents to the use of the
Prospectus or any amendment or supplement thereto (for the purposes set forth
in the Act or in other applicable law) by the several U.S. Underwriters and
International Underwriters and by all dealers to whom the Shares may be sold,
both in connection with the offering or sale of the Shares and for any period of
time thereafter during which the Prospectus is required by the Act to be
delivered in connection therewith. If during such period of time any event
shall occur which in the judgment of the Company or counsel to the U.S.
Underwriters or counsel to the International Underwriters should be set forth
in the Prospectus in order to make any statement therein, in the light of the
circumstances under which it was made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with the Act, the Company will
forthwith prepare and duly file with the Commission an appropriate supplement or
amendment thereto, and will deliver to each of the U.S. Underwriters, without
charge, such number of copies of such supplement or amendment to the U.S.
Prospectus as theRepresentatives may reasonably request and will deliver to each
of the Managers, without charge, such number of copies of such supplement or
amendment to the International Prospectus as the Managers may reasonably
request. The Company shall not file any document under the Exchange Act before
the termination of the offering of the Shares by the U.S. Underwriters and the
Managers if such document would be deemed to be incorporated by reference into
the Prospectus which is promptly and reasonably objected to in good faith and in
writing prior to said filing by the Representatives and the Managers after
reasonable notice thereof.
(f) Prior to any public offering of the Shares, the Company will
cooperate with the Representatives and the Managers and counsel to the
Underwriters and the Managers in connection with the registration or
qualification of the Shares for offer and sale under the securities or
<PAGE>
25
Blue Sky laws of such jurisdictions as the Representatives and the Managers may
request, including, without limitation, jurisdictions outside of the United
States; provided, that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any jurisdiction
where it is not now so subject or to taxation as a foreign business corporation
doing business in such jurisdiction to which it is not then subject.
(g) During a period of three years commencing on the Effective
Date, the Company will furnish to the Representatives, the Managers and each
other U.S. Underwriter or International Underwriter who may so request copies of
such financial statements and other periodic and special reports as the Company
may from time to time distribute generally to the holders of any class of its
capital stock, and will furnish to the Representatives, the Managers and each
other U.S. Underwriter or International Underwriter who may so request a copy of
each annual, quarterly or current report it shall be required to file with the
Commission.
(h) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the last day
of the fifteenth full calendar month following the calendar quarter in which the
Effective Date falls, an earnings statement (which need not be audited) for a
period of 12 months ended commencing after the Effective Date, and which will
satisfy the provisions of Section 11(a) of the Act (including Rule 158 of the
Rules and Regulations).
(i) Whether or not the transactions contemplated by this
Agreement or the International Underwriting Agreement are consummated or this
Agreement or the International Underwriting Agreement is terminated, the Company
will pay, or reimburse if paid by the Representatives or the Managers, all costs
and expenses incident to the performance of the obligations of the Company under
this Agreement and the International Underwriting Agreement, including but not
<PAGE>
26
limited to costs and expenses of or relating to (i) the preparation, printing
and filing of the Registration Statement and exhibits to it, each preliminary
prospectus, Prospectus and any amendment or supplement to the Registration
Statement or Prospectus, (ii) the preparation and delivery of certificates
representing the Shares, (iii) furnishing (including costs of shipping and
mailing) such copies of the Registration Statement, the Prospectus and any
preliminary prospectus, and all amendments and supplements thereto, as may be
requested for use in connection with the offering and sale of the Shares by the
U.S. Underwriters, the International Underwriters or by dealers to whom Shares
may be sold, (iv) the listing of the Shares on the New York Stock Exchange,
(v) any filings required to be made by the U.S. Underwriters and the
International Underwriters with the NASD, and the reasonable fees, disbursements
and other charges of counsel for the U.S. Underwriters and International
Underwriters in connection therewith, (vi) the registration or qualification of
the Shares for offer and sale under the securities or Blue Sky laws of such
jurisdictions designated pursuant to SECTION 4(f), including the reasonable
fees, disbursements and other charges of counsel to the U.S. Underwriters and
International Underwriters in connection therewith, and the preparation and
printing of preliminary, supplemental and final Blue Sky memoranda, (vii) the
printing of this Agreement, the Agreement Among Underwriters, any Dealer
Agreements and any Underwriters' Questionnaire, (viii) counsel to the Company
and (ix) the transfer agent for the Shares.
(j) If this Agreement or the International Underwriting
Agreement shall be terminated by the Company pursuant to any of the provisions
hereof or thereof (otherwise than pursuant to SECTION 8 hereof and SECTION 8
thereof) or if for any reason the Company shall be unable to perform its
obligations hereunder or thereunder, the Company will reimburse the several U.S.
Underwriters and International Underwriters for all reasonable out-of-pocket
expenses (including the
<PAGE>
27
fees, disbursements and other charges of counsel to the U.S. Underwriters and
International Underwriters) reasonably incurred by them in connection herewith.
(k) The Company will apply the net proceeds from the offering
and sale of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of Proceeds."
(l) The Company will not, and will cause Wendell P. Hurlbut to
enter into agreements with the Representatives and the Managers in the form set
forth in EXHIBIT B to the effect that he will not, for a period of 90 days after
the commencement of the public offering of the Shares, without the prior written
consent of the Representatives, sell, contract to sell or otherwise dispose of
any shares of Common Stock or rights to acquire such shares (other than pursuant
to employee stock option plans or in connection with other employee incentive
compensation arrangements of the Company), except for the sale of the Shares to
the Underwriters.
(m) The Company will not at any time, directly or indirectly,
take any action intended, or which might reasonably be expected, to cause or
result in, or which will constitute, stabilization of the price of the shares of
Common Stock to facilitate the sale or resale of any of the Shares.
5. CONDITIONS OF THE OBLIGATIONS OF THE U.S. UNDERWRITERS. In
addition to the execution and delivery of the U.S. Price Determination
Agreement, the obligations of each U.S. Underwriter hereunder are subject to the
following conditions:
(a) Notification that the Registration Statement has become
effective shall be received by the Representatives and the Managers not later
than 5:00 p.m., New York City time, on the date of this Agreement and the
International Underwriting Agreement or at such later date and time
<PAGE>
28
as shall be consented to in writing by the Representatives and the Managers and
all filings required by Rule 424 of the Rules and Regulations and Rule 430A
shall have been made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any state
shall be in effect and no proceeding for such purpose shall be pending before or
threatened by the Commission or the authorities of any such state, (iii) any
request for additional information on the part of the staff of the Commission or
any such authorities shall have been waived or complied with to the satisfaction
of the staff of the Commission or such authorities and (iv) no amendment or
supplement to the Registration Statement or the Prospectus after the date hereof
shall have been filed unless a copy thereof was first submitted to the
Representatives and the Managers and the Representatives and the Managers did
not reasonably object thereto in writing and in good faith prior to said filing,
and the Representatives and Managers shall have received certificates, dated the
Closing Date and the U.S. Option Closing Date and signed by the Chief Executive
Officer or the Chairman of the Board of Directors of the Company and the Chief
Financial Officer of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of clauses (i),
(ii) and (iii).
(c) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, (i) there shall not have been
a material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, in each case other
than as set forth in or contemplated by the Registration Statement and the
Prospectus and (ii) neither the Company nor any
<PAGE>
29
of its Subsidiaries shall have sustained any material loss or interference with
its business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, which is not set
forth in the Registration Statement and the Prospectus, if in the reasonable
judgment of the Representatives and Managers any such development makes it
impracticable or inadvisable to consummate the sale and delivery of the Shares
by the Underwriters at the initial public offering price.
(d) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall be no actions,
suits or proceedings pending or, to the Company's knowledge, threatened against
the Company or any of its Subsidiaries or any of their respective properties, at
law or in equity, or before or by any federal, state, local or foreign
governmental or regulatory commission, board, body, authority or agency which
are likely to result in a judgment, decree or order having a material adverse
effect on the business, business prospects, condition (financial or otherwise)
or property of the Company and its Subsidiaries, taken as a whole.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct at the Closing Date and, with respect
to the U.S. Option Shares, at the U.S. Option Closing Date and, with respect to
the International Option Shares, at the International Option Closing Date, and
all covenants and agreements contained herein and in the International
Underwriting Agreement to be performed on the part of the Company and all
conditions contained herein and in the International Underwriting Agreement to
be fulfilled or complied with by the Company at or prior to the Closing Date
and, with respect to the U.S. Option Shares, at or prior to the U.S. Option
Closing Date and, with respect to the International Option Shares, at or prior
to the International Option Closing Date, shall have been duly performed,
fulfilled or complied with in all material respects.
<PAGE>
30
(f) The Representatives and the Managers shall have received
opinions, each dated the Closing Date and, with respect to the U.S. Option
Shares, the U.S. Option Closing Date, and, with respect to the International
Option Shares, the International Option Closing Date, and satisfactory in form
and substance to counsel for the U.S. Underwriters and International
Underwriters, from Skadden, Arps, Slate, Meagher & Flom, counsel to the Company,
to the effect set forth in EXHIBIT C.
(g) The Representatives and the Managers shall have received an
opinion, dated the Closing Date, the U.S. Option Closing Date and the
International Option Closing Date, from Milbank, Tweed, Hadley & McCloy, counsel
to the Underwriters, with respect to the Registration Statement, the Prospectus
and this Agreement, which opinion shall be satisfactory in all respects to the
Representatives and the Managers.
(h) Concurrently with the execution and delivery of this
Agreement and the International Underwriting Agreement, or, if the Company
elects to rely on Rule 430A, on the date of the U.S. Prospectus, the Accountants
shall have furnished to the Representatives and the Managers a letter, dated the
date of its delivery (confirmed by procedures performed within five business
days of the date of its delivery), addressed to the Representatives and the
Managers and in form and substance satisfactory to the Representatives and the
Managers, confirming that they are independent accountants with respect to the
Company as required by the Act and the Rules and Regulations and with respect to
the financial and other statistical and numerical information contained in the
Registration Statement or incorporated by reference therein. At the Closing
Date and, as to the U.S. Option Shares, the U.S. Option Closing Date, and, as to
the International Option Shares, the International Option Closing Date, the
Accountants shall have furnished to the Representatives and the Managers a
letter, dated the date of its delivery, which shall confirm, on the basis of a
review in accordance with the procedures set forth
<PAGE>
31
in the letter from the Accountants, that nothing has come to their attention
during the period from the date of the letter referred to in the prior sentence
to a date (specified in the letter) not more than five business days prior to
the Closing Date, the U.S. Option Closing Date and the International Option
Closing Date, as the case may be, which would require any change in their letter
dated the date hereof or the date of the U.S. Prospectus, as the case may be, if
it were required to be dated and delivered at the Closing Date, the U.S. Option
Closing Date and the International Option Closing Date.
(i) At the Closing Date and, as to the U.S. Option Shares, the
U.S. Option Closing Date and, as to the International Option Shares, the
International Option Closing Date, there shall be furnished to the
Representatives and the Managers a certificate, dated the date of its delivery,
signed by each of the Chief Executive Officer and the Chief Financial Officer of
the Company, in form and substance satisfactory to the Representatives and the
Managers, to the effect that:
(i) Each signer of such certificate has carefully examined
the Registration Statement and the Prospectus and (A) as of the date of
such certificate, such documents are true and correct in all material
respects and do not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not untrue or misleading and
(B) in the case of the certificate delivered at the Closing Date, the U.S.
Option Closing Date and the International Option Closing Date, since the
date hereof or the date of the U.S. Prospectus, as the case may be, no
event has occurred as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein, in light
of the circumstances under which they were made, not untrue or misleading
in any material respect and there has been no document required to be filed
under the Exchange Act and the Exchange Act Rules and Regulations that upon
such filing would be deemed to be incorporated by reference into the
Prospectus that has not been so filed.
<PAGE>
32
(ii) Each of the representations and warranties of the
Company contained in this Agreement were, when originally made, and are, at
the time such certificate is dated, true and correct in all material
respects.
(iii) Each of the covenants required to be performed by the
Company herein and in the International Underwriting Agreement on or prior
to the date of such certificate has been duly, timely and fully performed
in all material respects or waived in writing by the Representatives and
each condition herein required to be complied with by the Company has been
duly, timely and fully satisfied or waived in writing by the
Representatives.
(j) On or prior to the Closing Date, the Representatives and the
Managers shall have received the executed agreements referred to in
SECTION 4(L).
(k) The Shares shall be qualified for sale in such jurisdictions
as the Representatives and the Managers may reasonably request, each such
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date, the U.S. Option Closing Date or the
International Option Closing Date.
(l) Prior to the date hereof, the Shares shall have been duly
authorized for listing on the New York Stock Exchange, upon official notice of
issuance.
(m) The closing of the purchase and sale of the International
Shares pursuant to the International Underwriting Agreement shall occur
concurrently with the closing of the purchase and sale of the U.S. Shares
hereunder; PROVIDED, HOWEVER, that this condition shall not apply if the failure
of such closing is due to defaulting Underwriters referred to in SECTION 8 of
this Agreement and SECTION 8 of the International Underwriting Agreement and the
number of U.S. Firm Shares and International Firm Shares such defaulting
Underwriters agreed but failed or refused to
<PAGE>
33
purchase is less than one-tenth of the aggregate amount of U.S. Firm Shares and
International Firm Shares.
6. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless each U.S.
Underwriter, and each person, if any, who controls each U.S. Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act from and
against any and all losses, claims, liabilities, expenses and damages (including
any and all reasonable investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they, or any of them, may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus or in
any documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus, or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading in light of the circumstances under which
they were made, provided that the Company will not be liable to the extent that
such loss, claim, liability, expense or damage arises from the sale of the U.S.
Shares in the public offering to any person by a U.S. Underwriter and is based
on an untrue statement or omission or alleged untrue statement or omission made
in conformity with information relating to any U.S. Underwriter furnished in
writing to the Company by the Representatives expressly for inclusion in the
Registration Statement, the U.S. Preliminary Prospectus or the U.S. Prospectus.
For purposes of the preceding sentence, the statements set forth in the last
paragraph of the cover page
<PAGE>
34
of the U.S. Prospectus, the stabilization legend on the inside front cover page
of the U.S. Prospectus and the statements set forth under the heading
"Underwriting" in the U.S. Prospectus constitute the only information relating
to any Underwriter furnished in writing to the Company by the Underwriters
expressly for inclusion in the Registration Statement, the U.S. Preliminary
Prospectus or the U.S. Prospectus, and provided further that the Company will
not be liable to any U.S. Underwriter, the directors, officers, employees or
agents of such U.S. Underwriter or any person controlling such U.S. Underwriter
with respect to any loss, claim, liability, expense, charge or damage arising
out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission to state a material fact in any U.S. Preliminary
Prospectus which is corrected in the U.S. Prospectus if the person asserting
such loss, claim, liability, charge or damage purchased U.S. Shares from such
U.S. Underwriter but was not sent or given a copy of the U.S. Prospectus at or
prior to the written confirmation of the sale of such U.S. Shares to such
person. This indemnity agreement will be in addition to any liability that the
Company might otherwise have.
(b) Each U.S. Underwriter will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company who signs the Registration Statement to
the same extent as the foregoing indemnity from the Company to each U.S.
Underwriter, but only insofar as losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or omission or alleged
untrue statement or omission made in conformity with information relating to any
Underwriter furnished in writing to the Company by the Underwriters expressly
for use in the Registration Statement, the U.S. Preliminary Prospectus or the
U.S. Prospectus. For purposes of the preceding sentence, the statements set
forth in the last paragraph of the cover page of the U.S. Prospectus, the
stabilization legend on the inside front cover page of the
<PAGE>
35
U.S. Prospectus and the statements set forth under the heading "Underwriting" in
the U.S. Prospectus constitute the only information relating to any Underwriter
furnished in writing to the Company by the Underwriters expressly for inclusion
in the Registration Statement, the U.S. Preliminary Prospectus or the U.S.
Prospectus. This indemnity will be in addition to any liability that each U.S.
Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be
indemnified under this SECTION 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this SECTION 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve it from any liability that it may have to any indemnified party
under the foregoing provisions of this Section 6 unless, and to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by
delivering written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified party, jointly
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless
<PAGE>
36
(i) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (ii) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (iii) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (iv) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate counsel admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties (including any indemnified party or parties under the International
Underwriting Agreement). All such fees, disbursements and other charges will be
reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not be liable for any settlement of any action or claim
effected without its written consent (which consent will not be unreasonably
withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this SECTION 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the U.S. Underwriters,
the Company and the U.S. Underwriters will contribute to the total losses,
claims, liabilities, expenses and damages to which the Company and any one or
more of the U.S. Underwriters may be subject in such proportion as shall be
appropriate to reflect the relative benefits received by the
<PAGE>
37
Company on the one hand and the U.S. Underwriters on the other. The relative
benefits received by the Company on the one hand and the U.S. Underwriters on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the U.S.
Underwriters, in each case as set forth in the table on the cover page of the
U.S. Prospectus. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution
shall be made in such proportion as is appropriate to reflect not only the
relative benefits referred to in the foregoing sentence but also the relative
fault of the Company, on the one hand, and the U.S. Underwriters, on the other,
with respect to the statements or omissions which resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any other
relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Underwriters, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the U.S. Underwriters agree that it would not be just and equitable if
contributions pursuant to this SECTION 6(d) were to be determined by pro rata
allocation (even if the U.S. Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this SECTION 6(d)
shall be deemed to include, for purposes of this SECTION 6(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this SECTION 6(d), no U.S. Underwriter shall be required to
contribute any amount in
<PAGE>
38
excess of the underwriting discounts received by it except with respect to
losses, claims, liabilities, expenses and damages which are solely the result of
information relating to any Underwriter furnished in writing to the Company by
the Underwriters expressly for inclusion in the Registration Statement, the U.S.
Preliminary Prospectus or the U.S. Prospectus and no person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of the preceding sentence, the
statements set forth in the last paragraph of the cover page of the U.S.
Prospectus, the first two paragraphs of the inside front cover page of the U.S.
Prospectus and the statements set forth under the heading "Underwriting" in the
U.S. Prospectus constitute the only information relating to any Underwriter
furnished in writing to the Company by the Underwriters expressly for inclusion
in the Registration Statement, the U.S. Preliminary Prospectus or the U.S.
Prospectus. The U.S. Underwriters' obligations to contribute as provided in
this SECTION 6(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this SECTION 6(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 6(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 6(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
<PAGE>
39
(e) The indemnity and contribution agreements contained in this
SECTION 6 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the U.S. Underwriters or any
person who controls any U.S. Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act or on behalf of the Company, each of its
directors and officers, or any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act,
(ii) acceptance of any of the U.S. Shares and payment therefor or (iii) any
termination of this Agreement.
7. TERMINATION. The obligations of the several U.S. Underwriters
under this Agreement may be terminated at any time on or prior to the Closing
Date (or, with respect to the U.S. Option Shares, on or prior to the U.S. Option
Closing Date), by notice to the Company from the Representatives, without
liability on the part of any U.S. Underwriter to the Company, if, prior to
delivery and payment for the U.S. Shares (or the U.S. Option Shares, as the case
may be), (i) trading in any of the equity securities of the Company shall have
been suspended by the Commission, or by the New York Stock Exchange,
(ii) trading in securities generally on the New York Stock Exchange shall have
been suspended or limited or minimum or maximum prices shall have been generally
established on such exchange, or additional material governmental restrictions,
not in force on the date of this Agreement, shall have been imposed upon trading
in securities generally by such exchange or by order of the Commission or any
court or other governmental authority, (iii) a general banking moratorium shall
have been declared by either federal or New York State authorities, or (iv) any
material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States or
any outbreak or material escalation of hostilities or declaration by the United
States of a national emergency or war or other calamity or crisis shall have
occurred, the effect
<PAGE>
40
of any of which is such as to make it, in the sole judgment of the
Representatives, impracticable to market the Shares in a registered public
offering.
8. SUBSTITUTION OF UNDERWRITERS. If any one or more of the U.S.
Underwriters shall fail or refuse to purchase any of the U.S. Firm Shares which
it or they have agreed to purchase hereunder, and the aggregate number of
U.S. Firm Shares which such defaulting U.S. Underwriter or U.S. Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of U.S. Firm Shares, the other U.S. Underwriters shall be
obligated, severally, to purchase the U.S. Firm Shares which such defaulting
U.S. Underwriter or U.S. Underwriters agreed but failed or refused to purchase,
in the proportions which the number of U.S. Firm Shares which they have
respectively agreed to purchase pursuant to SECTION 1 hereof bears to the
aggregate number of U.S. Firm Shares which all such non-defaulting
U.S. Underwriters have so agreed to purchase, or in such other proportions as
the Representatives may specify; provided that in no event shall the maximum
number of U.S. Firm Shares which any U.S. Underwriter has become obligated to
purchase pursuant to SECTION 1 hereof be increased pursuant to this SECTION 8 by
more than one-ninth of the number of U.S. Firm Shares agreed to be purchased by
such U.S. Underwriter without the prior written consent of such U.S.
Underwriter. If any U.S. Underwriter or U.S. Underwriters shall fail or refuse
to purchase any U.S. Firm Shares and the aggregate number of U.S. Firm Shares
which such defaulting U.S. Underwriter or U.S. Underwriters agreed but failed or
refused to purchase exceeds one-tenth of the aggregate number of the U.S. Firm
Shares and arrangements satisfactory to the Representatives and the Company for
the purchase of such U.S. Firm Shares are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any non-
defaulting U.S. Underwriter or the Company for the purchase or sale of any U.S.
Shares under this Agreement. In any such case either the Representatives or the
Company shall have the right to post-
<PAGE>
41
pone the Closing Date, but in no event for longer than seven days, in order that
the required changes, if any, in the Registration Statement and in the U.S.
Prospectus or in any other documents or arrangements may be effected. Any
action taken pursuant to this SECTION 8 shall not relieve any defaulting
U.S. Underwriter from liability in respect of any default of such
U.S. Underwriter under this Agreement.
9. U.S. AND CANADIAN DISTRIBUTION. Each U.S. Underwriter represents
and agrees that, except for (x) sales between the U.S. Underwriters and the
International Underwriters pursuant to SECTION 1 of the Agreement Between U.S.
and International Underwriters and (y) stabilization transactions contemplated
in SECTION 3 thereof conducted as part of the distribution of the Shares, (i) it
is not purchasing any of the U.S. Shares for the account of anyone other than a
United States or Canadian Person and (ii) it has not offered or sold, and will
not offer or sell, directly or indirectly, any of the U.S. Shares or distribute
any prospectus relating to the U.S. Shares outside the United States or Canada
to anyone other than a United States or Canadian Person, and any dealer to whom
it may sell any of the U.S. Shares will represent that it is not purchasing any
of the U.S. Shares for the account of anyone other than a United States or
Canadian Person and will agree that it will not offer or resell such U.S. Shares
directly or indirectly outside the United States or Canada or to anyone other
than a United States or Canadian Person or to any other dealer who does not so
represent and agree.
Each U.S. Underwriter further confirms that it has not offered or
sold, and will not offer or sell, directly or indirectly, any of the U.S. Shares
in Canada except pursuant to an exemption from the prospectus delivery
requirements in each jurisdiction in Canada in which such offers and sales are
made.
Each U.S. Underwriter further confirms that in determining its net
commitment for short account pursuant to SECTION 6 of the Amended and Restated
Master Agreement Among
<PAGE>
42
Underwriters dated as of June 11, 1984, there shall be subtracted any Shares
purchased for such U.S. Underwriter's account pursuant to SECTION 1 of the
Agreement Between U.S. and International Underwriters.
10. MISCELLANEOUS. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (i) if to the Company, at the office of the Company, 10800
NE 8th Street, Bellevue, Washington 98004, Attention: President, with a copy to
Gregg A. Noel, Esq., Skadden, Arps, Slate Meagher & Flom, 300 South Grand
Avenue, Suite 3400, Los Angeles, California 90071, or (ii) if to the U.S.
Underwriters, to the Representatives at the offices of PaineWebber Incorporated,
1285 Avenue of the Americas, New York, New York 10019, Attention: Corporate
Finance Department, with a copy to Eric H. Schunk, Esq., Milbank, Tweed, Hadley
& McCloy, 601 South Figueroa Street, 30th Floor, Los Angeles, California 90017.
Any such notice shall be effective only upon receipt. Any notice under
SECTION 7 OR 8 hereof may be made by telex or telephone, but if so made shall be
subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the
several U.S. Underwriters and the Company and of the controlling persons,
directors and officers referred to in SECTION 6, and their respective successors
and assigns, and, except as set forth in the International Underwriting
Agreement, no other person shall acquire or have any right under or by virtue of
this Agreement. The term "successors and assigns" as used in this Agreement
shall not include a purchaser, as such purchaser, of U.S. Shares from any of the
several U.S. Underwriters.
Any action required or permitted to be taken by the Representatives
under this Agreement may be taken by them jointly or by PaineWebber
Incorporated.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
43
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several U.S. Underwriters.
Very truly yours,
ESTERLINE TECHNOLOGIES CORPORATION
By: __________________________________________
Title:
Confirmed as of the date first
above mentioned:
PAINEWEBBER INCORPORATED
RAGEN MACKENZIE INCORPORATED
PACIFIC CREST SECURITIES INC.
Acting on behalf of themselves
and as the Representatives of
the other several U.S. Under-
writers named in SCHEDULE I hereof.
By: PAINEWEBBER INCORPORATED
By: ________________________
Title:
<PAGE>
SCHEDULE I
U.S. UNDERWRITERS
Number of
Names of U.S. Firm Shares
U.S. Underwriters to be Purchased
- ------------------ -----------------
PaineWebber Incorporated
Ragen MacKenzie Incorporated
Pacific Crest Securities Inc.
-----------------
Total. . . . . . . . . . . . . . . . . . . . . 1,440,000
-----------------
<PAGE>
SCHEDULE II
SUBSIDIARIES
Percentage Jurisdiction of
Name of Subsidiary Owned by Company Incorporation or Organization
- ------------------ ---------------- -----------------------------
<PAGE>
Exhibit 1.2
360,000 Shares
ESTERLINE TECHNOLOGIES CORPORATION
Common Stock
UNDERWRITING AGREEMENT
(International Version)
October __, 1995
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
RAGEN MACKENZIE INCORPORATED
PACIFIC CREST SECURITIES INC.
As Managers of the several
International Underwriters
c/o PaineWebber International (U.K.) LTD.
1 Finsbury Avenue
London EC2M 2PA England
Dear Sirs:
Esterline Technologies Corporation, a Delaware corporation (the
"COMPANY") proposes to sell an aggregate of 360,000 shares (the "INTERNATIONAL
FIRM SHARES") of the Company's Common Stock, par value $0.20 per share (the
COMMON STOCK"), to you and to the several other International Underwriters named
in Schedule I hereto (collectively, the "INTERNATIONAL UNDERWRITERS"), for whom
you are acting as managers (the "MANAGERS"), in connection with the offering and
sale of such shares of Common Stock outside the United States and Canada to
persons other than United States and Canadian Persons (as hereinafter defined).
The Company has also agreed to grant to you and the other International
Underwriters an option (the "INTERNATIONAL OPTION") to purchase up to an
aggregate of an additional 54,000 shares of Common Stock (the "INTERNATIONAL
OPTION SHARES") on the terms and for the
<PAGE>
2
purposes set forth in SECTION 1(b) hereof. The International Firm Shares and
the International Option Shares are referred to collectively herein as the
"INTERNATIONAL SHARES."
It is understood that the Company is concurrently entering into an
agreement (the "U.S. UNDERWRITING AGREEMENT") providing for the sale by the
Company of an aggregate of 1,656,000 shares of Common Stock, including the over-
allotment option described therein (the "U.S. SHARES"), through arrangements
with certain underwriters in the United States and Canada (the "U.S.
UNDERWRITERS"), for whom PaineWebber Incorporated, Ragen MacKenzie
Incorporated, and Pacific Crest Securities Inc. are acting as representatives,
in connection with the offering and sale of such shares of Common Stock in the
United States and Canada to United States and Canadian Persons. As used herein,
"UNITED STATES OR CANADIAN PERSON" shall mean any individual who is resident in
the United States or in Canada or any corporation, pension, profit-sharing or
other trust or other entity organized under or governed by the laws of the
United States or Canada or of any political subdivision thereof (other than the
foreign branch of any United States or Canadian Person), and shall include any
United States branch of a person other than a United States or Canadian Person;
and "UNITED STATES" shall mean the United States of America, its territories,
possessions and all areas subject to its jurisdiction. This Agreement
incorporates by reference certain provisions from the U.S. Underwriting
Agreement (including the definitions of terms used therein which are also used
herein) and, in general, all such provisions (and defined terms) shall be
applied MUTATIS MUTANDIS as if the incorporated provisions were set forth in
full herein having regard to their context in this Agreement as opposed to the
U.S. Underwriting Agreement.
The U.S. Underwriters have entered into an agreement with the
International Underwriters (the "AGREEMENT BETWEEN U.S. UNDERWRITERS AND
INTERNATIONAL UNDERWRITERS")
<PAGE>
3
contemplating the coordination of certain transactions between the U.S.
Underwriters and the International Underwriters and any such transactions
between the U.S. Underwriters and the International Underwriters shall be
governed by the Agreement Between U.S. Underwriters and International
Underwriters and shall not be governed by the terms of this Agreement.
The initial public offering price per share for the International
Shares and the purchase price per share for the International Shares to be paid
by the several International Underwriters shall be agreed upon by the Company
and the Managers, acting on behalf of the several International Underwriters,
and such agreement shall be set forth in a separate written instrument
substantially in the form of EXHIBIT A hereto (the "INTERNATIONAL PRICE
DETERMINATION AGREEMENT.") The International Price Determination Agreement
shall be executed and delivered by the parties thereto concurrently with the
execution and delivery of this Agreement. The International Price Determination
Agreement may take the form of an exchange of any standard form of written
telecommunication among the Company and the Managers and shall specify such
applicable information as is indicated in EXHIBIT A hereto. The offering of the
International Shares will be governed by this Agreement, as supplemented by the
International Price Determination Agreement. This Agreement shall be deemed to
incorporate, and, unless the context otherwise indicates, all references
contained herein to "this Agreement" and to the phrase "herein" shall be deemed
to include the International Price Determination Agreement. The initial public
offering price per share and the purchase price per share for the U.S. Shares to
be paid by the several U.S. Underwriters pursuant to the U.S. Underwriting
Agreement shall be set forth in a separate agreement (the "U.S. PRICE
DETERMINATION AGREEMENT"), the form of which is attached to the U.S.
Underwriting Agreement. Unless the context otherwise indicates, all references
contained herein
<PAGE>
4
to the "U.S. UNDERWRITING AGREEMENT" shall be deemed to include the U.S. Price
Determination Agreement. The purchase price per share to be paid by the several
U.S. Underwriters and the initial public offering price per share for the U.S.
Shares shall be identical to the purchase price per share to be paid by the
several International Underwriters and the initial public offering price per
share for the International Shares hereunder, respectively.
The Company confirms as follows their respective agreements with the
Managers and the several other International Underwriters.
1. AGREEMENT TO SELL AND PURCHASE.
(a) On the basis of the respective representations, warranties
and agreements of the Company herein contained and subject to all the terms and
conditions of this Agreement, (i) the Company agrees to sell to the several
International Underwriters and (ii) each of the International Underwriters,
severally and not jointly, agrees to purchase from the Company at the purchase
price per share for the International Firm Shares to be agreed upon by the
Managers and the Company in accordance with SECTION 1(c) OR 1(d) and set forth
in the International Price Determination Agreement, the number of International
Firm Shares set forth opposite the name of such International Underwriter in
Schedule I, plus such additional number of International Firm Shares which such
International Underwriter may become obligated to purchase pursuant to SECTION 8
hereof.
(b) Subject to all the terms and conditions of this Agreement,
the Company grants the International Option to the several International
Underwriters to purchase, severally and not jointly, up to 54,000 International
Option Shares from the Company at the same price per share as the International
Underwriters shall pay for the International Firm Shares. The International
Option may
<PAGE>
5
be exercised only to cover over-allotments in the sale of the International Firm
Shares by the International Underwriters and may be exercised in whole or in
part at any time (but not more than once) on or before the 30th day after the
date of this Agreement, upon written or telegraphic notice (the "INTERNATIONAL
OPTION SHARES NOTICE") by the Managers to the Company no later than 12:00 noon,
New York City time, at least two and no more than five business days before the
date specified for closing in the International Option Shares Notice (the
"INTERNATIONAL OPTION CLOSING DATE") setting forth the aggregate number of
International Option Shares to be purchased and the time and date for such
purchase. The International Option Shares Notice shall specify that the same
number of International Option Shares will be purchased from the Company. On
the International Option Closing Date, the Company will issue and sell to the
International Underwriters the number of International Option Shares set forth
in the International Option Shares Notice, and each International Underwriter
will purchase such percentage of the International Option Shares as is equal to
the percentage of International Firm Shares that such International Underwriter
is purchasing, as adjusted by the Managers in such manner as they deem advisable
to avoid fractional shares.
(c) If the Company has elected not to rely on Rule 430A, the
initial public offering price per share for the International Firm Shares and
the purchase price per share for the International Firm Shares to be paid by the
several International Underwriters shall be agreed upon and set forth in the
International Price Determination Agreement, which shall be dated the date
hereof, and an amendment to the Registration Statement (as hereinafter defined)
containing such per share price information shall be filed with the Commission
(as hereinafter defined) before the Registration Statement becomes effective
pursuant to the Act (as hereinafter defined).
<PAGE>
6
(d) If the Company has elected to rely on Rule 430A, the initial
public offering price per share for the International Firm Shares and the
purchase price per share for the International Firm Shares to be paid by the
several International Underwriters shall be agreed upon and set forth in the
International Price Determination Agreement, which shall be dated the date
hereof, and the Prospectus (as hereinafter defined) will be filed with the
Commission pursuant to Rule 424(b) of the Act. In the event that the
International Price Determination Agreement has not been executed by the close
of business on the fourth business day following the date on which the
Registration Statement becomes effective, this Agreement shall terminate
forthwith, without liability of any party to any other party except that Section
5 shall remain in tact.
(e) Each of the International Underwriters agrees that (i) it
has not solicited, and will not solicit offers to purchase the International
Firm Shares, (ii) it has not sold and will not sell any of the International
Firm Shares and (iii) it has not distributed and will not distribute the
International Preliminary Prospectus or the International Prospectus, as the
case may be, to any person or entity in any jurisdiction outside the United
States or Canada, except in each case, in compliance in all material respects
with all applicable laws of such jurisdiction.
2. DELIVERY AND PAYMENT. Delivery of the International Firm Shares
shall be made to the Managers for the accounts of the International Underwriters
against payment of the purchase price with next-day available funds to the order
of the Company at the office of PaineWebber Incorporated, 1285 Avenue of the
Americas, New York, New York 10019 or at such other place as may be agreed upon
by the Company and the Managers. Such payment will be made at 10:00 a.m., New
York City time, on the third business day following the date of this Agreement,
or, if the
<PAGE>
7
Company has elected to rely on Rule 430A, the third business day after the date
on which the first bona fide offering of the International Shares is made by the
International Underwriters, or at such time on such other date, not later than
seven business days after the date of this Agreement, as may be agreed upon by
the Company and the Managers (such date is hereinafter referred to as the
"CLOSING DATE").
To the extent the International Option is exercised, delivery of the
International Option Shares against payment by the International Underwriters
(in the manner specified above) will take place at the offices specified above
for the Closing Date at the time and date (which may be the Closing Date)
specified in the International Option Shares Notice.
Certificates evidencing the International Shares shall be in
definitive form and shall be registered in such names and in such denominations
as the Managers shall request at least two business days prior to the Closing
Date or the International Option Closing Date, as the case may be, by written
notice to the Company. For the purpose of expediting the checking and packaging
of certificates for the International Shares, the Company agrees to make such
certificates available at the offices of PaineWebber Incorporated, 1285 Avenue
of the Americas, New York, New York 10019, for inspection at least 24 hours
prior to the Closing Date or the International Option Closing Date, as the case
may be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the International Firm Shares and the International
Option Shares by the Company to the respective International Underwriters shall
be borne by the Company. The Company will pay and save each International
Underwriter and any subsequent holder of the International Shares harmless from
any and all liabilities with respect to or resulting
<PAGE>
8
from any failure or delay in paying Federal and state stamp and other transfer
taxes, if any, which may be payable or determined to be payable in connection
with the original issuance or sale to such International Underwriter of the
International Firm Shares and International Option Shares.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes to each International Underwriter the same representations and
warranties as are set forth in SECTION 3 of the U.S. Underwriting Agreement,
which Section is hereby incorporated herein by reference.
4. AGREEMENTS OF THE COMPANY. The Company hereby makes the same
agreements with the several International Underwriters as the Company makes in
SECTION 4 of the U.S. Underwriting Agreement, which Section is hereby
incorporated herein by reference.
5. CONDITIONS OF THE OBLIGATIONS OF THE INTERNATIONAL UNDERWRITERS.
The obligations of each International Underwriter hereunder are subject to each
of the conditions set forth in SECTION 5 of the U.S. Underwriting Agreement,
which Section is hereby incorporated herein by reference, and the additional
condition that the closing of the purchase and sale of the U.S. Shares pursuant
to the U.S. Underwriting Agreement shall occur concurrently with the closing of
the purchase and sale of the International Shares hereunder.
6. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless each
International Underwriter and each person, if any, who controls each
International Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
liabilities, expenses and damages (including any and all reasonable
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit
<PAGE>
9
or proceeding or any claim asserted), to which they, or any of them, may become
subject under the Act, the Exchange Act or other federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus, or the
omission or alleged omission to state in such document a material fact required
to be stated in it or necessary to make the statements in it not misleading in
light of the circumstances under which they were made, provided that the Company
will not be liable to the extent that such loss, claim, liability, expense or
damage arises from the sale of the International Shares in the public offering
to any person by an International Underwriter and is based on an untrue
statement or omission or alleged untrue statement or omission made in conformity
with information relating to any International Underwriter furnished in writing
to the Company by the Managers expressly for inclusion in the Registration
Statement, the International Preliminary Prospectus or the International
Prospectus. For purposes of the preceding sentence, the statements set forth in
the last paragraph of the cover page of the International Prospectus, the
stabilization legend on inside front cover page of the International Prospectus
and the statements set forth under the heading "Underwriting" in the
International Prospectus constitute the only information relating to any
Underwriter furnished in writing to the Company by the Underwriters expressly
for inclusion in the Registration Statement, the International Preliminary
Prospectus or the International Prospectus. This indemnity agreement will be in
addition to any liability that the Company might otherwise have.
<PAGE>
10
(b) Each International Underwriter will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, each
director of the Company and each officer of the Company who signs the
Registration Statement to the same extent as the foregoing indemnity from the
Company to each International Underwriter, but only insofar as losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or omission or alleged untrue statement or omission made in conformity
with information relating to any Underwriter furnished in writing to the Company
by the Underwriters expressly for use in the Registration Statement, the
International Preliminary Prospectus or the International Prospectus. For
purposes of the preceding sentence, the statements set forth in the last
paragraph of the cover page of the International Prospectus, the stabilization
legend on the inside front cover page of the International Prospectus and the
statements set forth under the heading "Underwriting" in the International
Prospectus constitute the only information relating to any Underwriter furnished
in writing to the Company by the Underwriters expressly for inclusion in the
Registration Statement, the International Preliminary Prospectus or the
International Prospectus. This indemnity will be in addition to any liability
that each International Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be
indemnified under this SECTION 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this SECTION 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve it from any liability that it may have to any indemnified party
under the foregoing provisions of this Section 6
<PAGE>
11
unless, and to the extent that, such omission results in the forfeiture of
substantive rights or defenses by the indemnifying party. If any such action is
brought against any indemnified party and it notifies the indemnifying party of
its commencement, the indemnifying party will be entitled to participate in and,
to the extent that it elects by delivering written notice to the indemnified
party promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly notified,
to assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying party
will not be liable to the indemnified party for any legal or other expenses
except as provided below and except for the reasonable costs of investigation
subsequently incurred by the indemnified party in connection with the defense.
The indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party,
(ii) the indemnified party has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, (iii) a conflict or potential conflict exists (based on advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (iv) the
indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel
<PAGE>
12
will be at the expense of the indemnifying party or parties. It is understood
that the indemnifying party or parties shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one separate
counsel admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties (including any indemnified party or parties under
the U.S. Underwriting Agreement). An indemnifying party will not be liable for
any settlement of any action or claim effected without its written consent
(which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this SECTION 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the International
Underwriters, the Company and the International Underwriters will contribute to
the total losses, claims, liabilities, expenses and damages to which the Company
and any one or more of the International Underwriters may be subject in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company on the one hand and the International Underwriters on the other.
The relative benefits received by the Company on the one hand and the
International Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the International Underwriters, in each case as set
forth in the table on the cover page of the International Prospectus. If, but
only if, the allocation provided by the foregoing sentence is not permitted by
applicable law, the allocation of contribution shall be made in such proportion
as is appropriate to reflect not only the relative benefits referred to in the
foregoing
<PAGE>
13
sentence but also the relative fault of the Company on the one hand, and the
International Underwriters, on the other, with respect to the statements or
omissions which resulted in such loss, claim, liability, expense or damage, or
action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Underwriters, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
International Underwriters agree that it would not be just and equitable if
contributions pursuant to this SECTION 6(d) were to be determined by pro rata
allocation (even if the International Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, liability,
expense or damage, or action in respect thereof, referred to above in this
SECTION 6(d) shall be deemed to include, for purposes of this SECTION 6(d), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this SECTION 6(d), no International
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts received by it except with respect to losses, claims,
liabilities, expenses and damages which are solely the result of information
relating to any Underwriter furnished in writing to the Company by the
Underwriters expressly for inclusion in the Registration Statement, the
International Preliminary Prospectus or the International Prospectus, and no
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) will be
<PAGE>
14
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of the preceding sentence, the statements set
forth in the last paragraph of the cover page of the International Prospectus,
the stabilization legend on the inside front cover page of the International
Prospectus and the statements set forth under the heading "Underwriting" in the
International Prospectus constitute the only information relating to any
Underwriter furnished in writing to the Company by the Underwriters expressly
for inclusion in the Registration Statement, the International Preliminary
Prospectus or the International Prospectus. The International Underwriters'
obligations to contribute as provided in this SECTION 6(d) are several in
proportion to their respective underwriting obligations and not joint. For
purposes of this SECTION 6(d), any person who controls a party to this Agreement
within the meaning of the Act will have the same rights to contribution as that
party, and each officer of the Company who signed the Registration Statement
will have the same rights to contribution as the Company, subject in each case
to the provisions hereof. No party will be liable for contribution with respect
to any action or claim settled without its written consent (which consent will
not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
SECTION 6 and the representations and warranties of the Company contained in, or
incorporated by reference into, this Agreement shall remain operative and in
full force and effect regardless of (i) any investigation made by or on behalf
of the International Underwriters or any person who controls any International
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, or on behalf of the Company, each of its directors and officers or
any person who controls the Company
<PAGE>
15
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
(ii) acceptance of any of the International Shares and payment therefor or
(iii) any termination of this Agreement.
7. TERMINATION. The obligations of the several International
Underwriters under this Agreement may be terminated at any time on or prior to
the Closing Date (or, with respect to the International Option Shares, on or
prior to the International Option Closing Date), by notice to the Company from
the Managers, without liability on the part of any International Underwriter to
the Company, if, prior to delivery and payment for the International Shares (or
the International Option Shares, as the case may be), (i) trading in any of the
equity securities of the Company shall have been suspended by the Commission or
the New York Stock Exchange, (ii) trading in securities generally on the New
York Stock Exchange shall have been suspended or limited or minimum or maximum
prices shall have been generally established on such exchange, or additional
material governmental restrictions, not in force on the date of this Agreement,
shall have been imposed upon trading in securities generally by such exchange or
by order of the Commission or any court or other governmental authority, (iii) a
general banking moratorium shall have been declared by either Federal or New
York State authorities, or (iv) any material adverse change in the financial or
securities markets or in political, financial or economic conditions or any
outbreak or material escalation of hostilities or declaration by the United
States of a national emergency or war or other calamity or crisis shall have
occurred, the effect of any of which is such as to make it, in the sole judgment
of the Representatives, impracticable to market the Shares in a registered
public offering.
8. SUBSTITUTION OF UNDERWRITERS. If any one or more of the
International Underwriters shall fail or refuse to purchase any of the
International Firm Shares which it or they have
<PAGE>
16
agreed to purchase hereunder, and the aggregate number of International Firm
Shares which such defaulting International Underwriter or International
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of International Firm Shares, the other International
Underwriters shall be obligated, severally, to purchase the International Firm
Shares which such defaulting International Underwriter or International
Underwriters agreed but failed or refused to purchase, in the proportions which
the number of International Firm Shares which they have respectively agreed to
purchase pursuant to SECTION 1 hereof bears to the aggregate number of
International Firm Shares which all such non-defaulting International
Underwriters have so agreed to purchase, or in such other proportions as the
Managers may specify; provided that in no event shall the maximum number of
International Firm Shares which any International Underwriter has become
obligated to purchase pursuant to SECTION 1 hereof be increased pursuant to this
SECTION 8 by more than one-ninth of the number of International Firm Shares
agreed to be purchased by such International Underwriter without the prior
written consent of such International Underwriter. If any International
Underwriter or International Underwriters shall fail or refuse to purchase any
International Firm Shares and the aggregate number of International Firm Shares
which such defaulting International Underwriter or International Underwriters
agreed but failed or refused to purchase exceeds one-tenth of the aggregate
number of the International Firm Shares and arrangements satisfactory to the
Managers and the Company for the purchase of such International Firm Shares are
not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting International Underwriter or
the Company for the purchase or sale of any International Shares under this
Agreement. In any such case either the Managers or the Company shall have the
right to postpone the
<PAGE>
17
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the International
Prospectus or in any other documents or arrangements may be effected. Any
action taken pursuant to this SECTION 8 shall not relieve any defaulting
International Underwriter from liability in respect of any default of such
International Underwriter under this Agreement.
9. INTERNATIONAL DISTRIBUTION. Each International Underwriter
represents and agrees that, except for (x) sales between the U.S. Underwriters
and the International Underwriters pursuant to SECTION 1 of the Agreement
between U.S. and International Underwriters and (y) stabilization transactions
contemplated in SECTION 3 thereof conducted as part of the distribution of the
Shares, (i) it is not purchasing any of the International Shares for the account
of any United States or Canadian Person and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any of the International Shares
or distribute any prospectus relating to the International Shares in the United
States or Canada or to any United States or Canadian Person, and any dealer to
whom it may sell any of the International Shares will represent that it is not
purchasing any of the International Shares for the account of any United States
or Canadian Person and will agree that it will not offer or resell such
International Shares directly or indirectly in the United States or Canada or to
any United States or Canadian Person or to any other dealer who does not so
represent and agree.
10. MISCELLANEOUS. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (i) if to the Company, at the office of the Company, 10800
NE 8th Street, Bellevue, Washington 98004, Attention: President, with a copy
to Gregg A. Noel, Esq., Skadden, Arps, Slate, Meagher & Flom,
<PAGE>
18
300 South Grand Avenue, Suite 3400, Los Angeles, California 90071, or (ii) if
to the International Underwriters, to the Managers at the offices of PaineWebber
International (U.K.) Ltd., 1 Finsbury Avenue, London EC2M 2PA England,
Attention: Corporate Finance Department, with a copy to Eric H. Schunk, Esq.,
Milbank, Tweed, Hadley & McCloy, 601 South Figueroa Street, 30th Floor, Los
Angeles, California 90017. Any such notice shall be effective only upon
receipt. Any notice under SECTION 7 OR 8 may be made by telex or telephone, but
if so made shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the
several International Underwriters, the Company and of the controlling persons,
directors and officers referred to in SECTION 6, and their respective successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" as used in this
Agreement shall not include a purchaser, as such purchaser, of International
Shares from any of the several International Underwriters.
Any action required or permitted to be taken by the Managers under
this Agreement may be taken by them jointly or by PaineWebber International
(U.K.) Ltd.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
<PAGE>
19
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several International Underwriters.
Very truly yours,
ESTERLINE TECHNOLOGY CORPORATION
By: ________________________
Title:
Confirmed as of the date first
above mentioned:
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
RAGEN MACKENZIE INCORPORATED
PACIFIC CREST SECURITIES INC.
Acting on behalf of themselves
and as the Managers of the other
several International Underwriters
named in Schedule I hereof.
By: PAINEWEBBER INTERNATIONAL (U.K.) LTD.
By: __________________________________
Title:
<PAGE>
EXHIBIT 5
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071-3144
[LETTERHEAD]
-------------------
(213) 687-5000
September 26, 1995
Esterline Technologies Corporation
10800 NE 8th Street
Bellevue, Washington 98004
Re: Esterline Technologies Corporation
Registration on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to Esterline Technologies
Corporation, a Delaware corporation (the "Company"), in connection with the
public offering by the Company of up to 2,070,000 shares (including 270,000
shares subject to an over-allotment option) (the "Shares") of the Company's
Common Stock, par value $.20 per share (the "Common Stock").
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement on Form S-3 (File No. 33-62625) as filed with the Securities and
Exchange Commission (the "Commission") on September 14, 1995 under the Act, and
Amendment No. 1 thereto filed with the Commission on September 26, 1995 (such
Registration Statement, as so amended, being hereinafter referred to as the
"Registration Statement"); (ii) the form of the Underwriting Agreement (the
"Underwriting Agreement") proposed to be entered into between
<PAGE>
Esterline Technologies Corporation
September 26, 1995
Page 2
the Company, as issuer, and PaineWebber Incorporated and Ragen MacKenzie
Incorporated, as representatives of the several underwriters named therein (the
"Underwriters"), filed as an exhibit to the Registration Statement; (iii) a
specimen certificate representing the Common Stock; (iv) the Certificate of
Incorporation of the Company, as presently in effect; (v) the By-Laws of the
Company, as presently in effect; and (vi) certain resolutions of the Board of
Directors of the Company and drafts of certain resolutions (the "Draft
Resolutions") of the Pricing Committee of the Board of Directors of the Company
(the "Pricing Committee") in each case relating to the issuance and sale of the
Shares and related matters. We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such records of the
Company and such agreements, certificates of public officials, certificates of
officers or other representatives of the Company and others, and such other
documents, certificates and records as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed, we have assumed that the
parties thereto had or will have the power, corporate or other, to enter into
and perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents and the validity and binding effect
thereof. As to any facts material to the opinions expressed herein which we
have not independently established or verified, we have relied upon statements
and representations of officers and other representatives of the Company and
others.
Members of our firm are admitted to the bar in the State of Delaware and we
do not express any opinion as to the laws of any other jurisdiction.
2
<PAGE>
Esterline Technologies Corporation
September 26, 1995
Page 3
Based upon and subject to the foregoing, we are of the opinion that
when (i) the Registration Statement becomes effective; (ii) the Draft
Resolutions have been adopted by the Pricing Committee of the Board of
Directors; (iii) the price at which the Shares are to be sold to the
Underwriters pursuant to the Underwriting Agreement and other matters relating
to the issuance and sale of the Shares have been approved by the Pricing
Committee of the Board of Directors as contemplated by the Underwriting
Agreement, the issuance and sale of the Shares will have been duly authorized,
and the Shares will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom
3
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Registration Statement No. 33-62625 of Esterline
Technologies Corporation on Amendment No. 1 to Form S-3 of our report dated
December 5, 1994, included and incorporated by reference in the Annual Report on
Form 10-K of Esterline Technologies Corporation for the year ended October 31,
1994, and to the use of our report dated December 5, 1994, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Seattle, Washington
September 26, 1995
