<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1995
REGISTRATION NO. 33-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
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. / /
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO AGGREGATE PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.20 par value per share (includes
Series A Serial Preferred Stock Purchase
Rights)......................................... 2,070,000 $28.50 $58,995,000.00 $20,344.00
<FN>
(1) Includes 270,000 shares of Common Stock to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
</TABLE>
-------------------
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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<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 13, 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 12, 1995, the last reported sale
price of the Common Stock as reported by the New York Stock Exchange was $29.625
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 $ , 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 an aggregate of 270,000 additional
shares of Common Stock, 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
------------
THE DATE OF THIS PROSPECTUS IS , 1995
<PAGE>
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.
-------------------
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 10, dated December 13, 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).
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 the lowest cost 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-gauge plate
metal and enables manufacturers to meet rigid cut quality and accuracy
standards. In its niche, Whitney is the leading supplier in the United States,
and has strong positions in both Europe and Asia.
AEROSPACE AND DEFENSE GROUP
ARMTEC DEFENSE PRODUCTS CO. ("Armtec") manufactures molded fiber cartridge
cases, mortar increments, and other combustible ammunition components for the
U.S. armed forces and both domestic and foreign defense contractors. In
conjunction with the U.S. Army's development of an improved 155mm artillery gun,
Armtec is developing what management expects will be the next generation of
specialized modular cartridge cases.
AUXITROL S.A. ("Auxitrol"), headquartered in France, manufactures
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 and is the only
significant supplier in its licensed market.
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.
KORRY ELECTRONICS CO. ("Korry") is a market and technology leader in the
manufacture of high-reliability electro-optical control systems such as
illuminated switches, panels, and other control components primarily
3
<PAGE>
for commercial and military aircraft manufacturers, electronic instruments
producers, and defense contractors. Kory'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
1989, senior management has reduced the Company's long-term debt from $172
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 471,625 are subject to currently
outstanding options.
</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 % 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 2,855
<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.
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 Pluratec.
Whitney's principal competitors are Mazak, Cincinnati Milacron and Trumpf.
Auxitrol's principal competitors are Ametek and Idem. 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. In fiscal 1994, AT&T, the U.S. Army, Snecma, Boeing and General
Dynamics, accounted for an aggregate of 17% of total Company sales. 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 not have a material adverse effect
upon the Company's financial condition or results of operations.
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
7
<PAGE>
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 Common 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 $ ($ if the Underwriters'
over-allotment option is exercised in full), 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.
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 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 8, 1995, the Company believes that there were
approximately 1,100 beneficial owners of Common Stock.
<TABLE>
<CAPTION>
FISCAL QUARTER 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 12, 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. The Company has not declared or paid any cash dividends on its
Common Stock since 1986. 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 12,
1995 was $29.625 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 receipt of the net proceeds of the shares of Common Stock offered
by the Company hereby. 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 $
-------- -----------
-------- -----------
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
Retained earnings................................................... 66,789 66,789
Cumulative translation adjustment................................... (31) (31 )
-------- -----------
Total shareholders' equity........................................ 78,456
-------- -----------
Total capitalization............................................ $114,847 $
-------- -----------
-------- -----------
<FN>
------------------------
(1) Does not include currently outstanding options to purchase 473,875 shares
of the Company's Common Stock as of July 31, 1995.
</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 % 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 2,855
<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. At 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 shareholder 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
1989, senior management has reduced the Company's long-term debt from $172
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 as the technological leader based upon its
productivity and accuracy.
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
high-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 payouts are tied to Company performance (measured
by return on equity, and growth in earnings per share)
17
<PAGE>
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 squeeze increasingly more
functions into smaller packages, requiring more PCB holes, smaller holes and
much tighter tolerances between holes. Independent research indicates that the
annual total number of drilled circuit board holes will grow by more than 30% in
the next five years, from three to four trillion, due to the proliferation of
electronics. Management believes that its drilling systems enable its customers
to achieve the lowest cost 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 eight 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 (24%) and automotive (13%)
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.
18
<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's produces
equipment specifically designed for mid- to heavy-gauge plate metal and enables
manufacturers to meet rigid cut quality and accuracy standards. Whitney's
computer-controlled heavy-gauge 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 "True Cut" 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 the leading supplier in the United States, and has strong 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 domestic and foreign defense contractors. Armtec currently is the
sole U.S. producer of combustible ordnance, including the 120mm combustible case
used on the main armament system on the U.S. Army's M-1A1 and M-1A2 tanks, and
the 120mm, 81mm and 60mm combustible mortar increments for the U.S. Army. The
majority of Armtec's sales are to ordnance suppliers to the U.S. armed forces.
As opposed to brass cartridge casings, Armtec's products are designed as part of
the ammunition propellant and are exhausted when fired. In conjunction with the
U.S. Army's development of an improved 155mm artillery gun, Armtec is developing
what management expects will be 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 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 and is the only
significant supplier in its licensed market. 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 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. 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.
20
<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 the market and technology leader in the manufacture of
high-reliability electro-optical control systems such as illuminated information
and control components, and integrated thin-panel data systems, such as
switches, indicators, panels and keyboards which act as man-machine interfaces
in a broad variety of control and display applications for the aerospace
industry. Having been designed into many existing aircraft systems, 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, general 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.
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 2,855 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 Pluratec.
Whitney's principal competitors are Mazak, Cincinnati Milacron and Trumpf.
Auxitrol's principal competitors are Ametek and Idem. Federal's principal
competitors are Starrett and Mitutoyo. Korry's principal competitors are
Eaton-MSC and Ducommun Jay-El. See "Business -- 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 bearings 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.
24
<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 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) 10.1%
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 975,500 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 8 hereof, 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. 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) the transaction is approved by the Board of Directors
prior to the date the interested stockholder obtains such status, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
"interested stockholder," the "interested stockholder" 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) on or subsequent to
such date the "business
29
<PAGE>
combination" is approved by the Board of Directors and authorized at an annual
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 COMMON 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) 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
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 Company does not currently have any plans to issue additional shares of
Common Stock other than shares of Common 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
and Ragen MacKenzie Incorporated, 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..........................................
------------
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. and Ragen MacKenzie Incorporated, 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 of Common Stock or distribute this Prospectus to any person outside the
United States or Canada or to
31
<PAGE>
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 of 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.
32
<PAGE>
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.
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.
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>
Available Information................................. 2
Incorporation of Certain Documents by Reference....... 2
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......................................... 33
Experts............................................... 33
Index to Financial Statements......................... F-1
</TABLE>
1,800,000 SHARES
[LOGO]
ESTERLINE TECHNOLOGIES CORPORATION
COMMON STOCK
--------------------
PROSPECTUS
--------------------
PAINEWEBBER INCORPORATED
RAGEN MACKENZIE INCORPORATED
------------
, 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 13, 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 12, 1995, the last reported sale
price of the Common Stock as reported by the NYSE was $29.625 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 $ , 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 an aggregate of 270,000 additional
shares of Common Stock, 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
------------
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 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.
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
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.
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
The International Underwriters named below, acting through PaineWebber
(U.K.) Ltd. and Ragen MacKenzie Incorporated, 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.................................................
-----------
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 and
Ragen MacKenzie Incorporated, 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 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
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL PROSPECTUS]
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 of
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.
<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>
Available Information.................................
Incorporation of Certain Documents by Reference.......
Prospectus Summary....................................
Risk Factors..........................................
Use of Proceeds.......................................
Price Range of Common Stock and Dividend Policy.......
Capitalization........................................
Selected Historical Financial and Operating Data......
Management's Discussion and Analysis of Results of
Operations and Financial Condition..................
Business..............................................
Management............................................
Security Ownership of Certain Beneficial Owners and
Management..........................................
Description of Capital Stock..........................
Certain United States Federal Tax Consequences to
Non-United States Holders...........................
Underwriting..........................................
Legal Matters.........................................
Experts...............................................
Index to Financial Statements.........................
</TABLE>
1,800,000 SHARES
[LOGO]
ESTERLINE TECHNOLOGIES
CORPORATION
COMMON STOCK
--------------------
PROSPECTUS
--------------------
PAINEWEBBER INTERNATIONAL
RAGEN MACKENZIE INCORPORATED
------------
, 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............................. $ 20,344.00
New York Stock Exchange (NYSE) Registration Fee................................. $ 10,500.00
National Association of Securities Dealers, Inc. (NASD) filing fee.............. $ 6,400.00
Printing and Engraving Expenses.................................................
Blue Sky Fees and Expenses (including counsel fees).............................
Legal Fees and Expenses.........................................................
Accounting Fees and Expenses....................................................
Miscellaneous...................................................................
------------
Total......................................................................... $
------------
------------
<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>
------------------------
* To be filed by amendment.
</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 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bellevue, State of Washington, on September 13, 1995.
ESTERLINE TECHNOLOGIES CORPORATION
By: /s/ WENDELL P. HURLBUT
--------------------------------------
Wendell P. Hurlbut
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears below
hereby constitutes and appoints Wendell P. Hurlbut, Robert W. Stevenson and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission granting unto said attorney-in-fact and
agent, and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all this said attorneys-in-fact and
agents, or any of them or their or his substitutes or substitute, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
------------------------------------------ --------------------------------------------- ----------------------
<C> <S> <C>
/s/ WENDELL P. HURLBUT Chairman, President and Chief
--------------------------------- Executive Officer (Director and September 13, 1995
Wendell P. Hurlbut Principal Executive Officer)
/s/ GILBERT W. ANDERSON
--------------------------------- Director September 13, 1995
Gilbert W. Anderson
/s/ JOHN F. CLEARMAN
--------------------------------- Director September 13, 1995
John F. Clearman
/s/ EDWIN I. COLODNY
--------------------------------- Director September 13, 1995
Edwin I. Colodny
/s/ E. JOHN FINN
--------------------------------- Director September 13, 1995
E. John Finn
/s/ ROBERT F. GOLDHAMMER
--------------------------------- Director September 13, 1995
Robert F. Goldhammer
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
------------------------------------------ --------------------------------------------- ----------------------
<C> <S> <C>
/s/ JEROME J. MEYER
--------------------------------- Director September 13, 1995
Jerome J. Meyer
/s/ PAUL G. SCHLOEMER
--------------------------------- Director September 13, 1995
Paul G. Schloemer
/s/ MALCOLM T. STAMPER
--------------------------------- Director September 13, 1995
Malcolm T. Stamper
Executive Vice President and Chief
/s/ ROBERT W. STEVENSON Financial Officer, Secretary
--------------------------------- and Treasurer (Principal Financial
Robert W. Stevenson Officer and Accounting Officer)
</TABLE>
II-4
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Esterline
Technologies Corporation on 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
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 12, 1995
