UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 1996 Commission file number 1-6357
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ESTERLINE TECHNOLOGIES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-2595091
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10800 NE 8th Street, Bellevue, Washington 98004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 206/453-9400
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of June 10, 1996:
Common Stock, par value $.20 per share-- 8,467,702 shares.
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEET
As of April 30, 1996 and October 31, 1995
(In thousands, except share amounts)
April 30, October 31,
1996 1995
---- ----
ASSETS (unaudited)
Current Assets
Cash and equivalents $65,813 $22,097
Accounts receivable, net of
allowances of $4,674 and $4,117
for doubtful accounts 58,183 63,825
Inventories
Raw materials and purchased parts 12,529 11,422
Work in process 24,822 22,052
Finished goods 7,152 6,489
-------- --------
44,503 39,963
-------- --------
Deferred income taxes 13,637 14,122
Prepaid expenses 1,827 2,199
-------- --------
Total Current Assets 183,963 142,206
Property, Plant and Equipment 152,932 146,658
Accumulated depreciation 101,680 97,426
-------- --------
51,252 49,232
-------- --------
Intangibles, net and Other Assets 30,692 34,276
-------- ---------
$265,907 $ 225,714
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 21,576 $ 23,143
Accrued liabilities 61,895 66,363
Credit facilities 9,602 7,721
Current maturities of long-term debt 6,620 7,030
Federal and foreign income taxes 936 2,208
-------- --------
Total Current Liabilities 100,629 106,465
-------- --------
Long-Term Debt, net of current 34,745 35,543
maturities
Shareholders' Equity
Common stock, par value $.20 per
share, authorized 30,000,000
shares, issued and outstanding
8,467,702 and 6,645,780 shares 1,694 1,328
Capital in excess of par value 48,573 10,390
Retained earnings 81,876 72,332
Cumulative translation adjustment (1,610) (344)
-------- --------
Total Shareholders' Equity 130,533 83,706
-------- ---------
$265,907 $ 225,714
======== =========
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three and Six Months Ended April 30, 1996 and 1995
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
April 30, April 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
Net Sales $ 88,975 $ 84,812 $ 172,972 $ 168,144
Costs and Expense
Cost of sales 53,173 53,819 103,868 103,157
Selling, general and
administrative 26,509 25,271 53,541 54,773
Interest income (601) (404) (864) (692)
Interest expense 1,130 1,642 2,315 3,182
-------- -------- -------- --------
80,211 80,328 158,860 160,420
-------- -------- -------- --------
Earnings Before Income Taxes 8,764 4,484 14,112 7,724
Income Tax Expense 2,569 1,433 4,568 2,475
-------- -------- -------- --------
Net Earnings $ 6,195 $ 3,051 $ 9,544 $ 5,249
========= ========= ========= =========
Net Earnings Per Share $ .75 $ .44 $ 1.24 $ .76
========= ========= ========= =========
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended April 30, 1996 and 1995
(Unaudited)
(In thousands)
Six Months Ended
April 30,
----------------
1996 1995
---- ----
Cash Flows Provided (Used) by Operating Activities
Net earnings $ 9,544 $ 5,249
Depreciation and amortization 7,795 8,097
Deferred income taxes 1,037 (680)
Working capital changes
Accounts receivable 4,761 12,424
Inventories (5,103) (5,323)
Prepaid expenses 329 (939)
Accounts payable (1,198) 491
Accrued liabilities (4,180) 2,955
Federal and foreign income taxes (1,281) (973)
Other, net 2,157 (1,230)
-------- --------
13,861 20,071
-------- --------
Cash Flows Provided (Used) by Investing Activities
Capital expenditures (10,016) (5,079)
Capital dispositions 1,067 949
-------- --------
(8,949) (4,130)
-------- --------
Cash Flows Provided (Used) by Financing Activities
Net change in credit facilities 2,292 1,282
Repayment of long-term debt (1,107) (479)
Net proceeds provided by sale of common stock 38,549 --
-------- --------
39,734 803
Effect of Exchange Rates (930) 346
-------- --------
Net Increase in Cash and Equivalents 43,716 17,090
Cash and Equivalents - Beginning of Period 22,097 9,076
-------- --------
Cash and Equivalents - End of Period $ 65,813 $ 26,166
======== ========
Supplemental Cash Flow Information
Cash paid during the period for
Interest expense $ 2,334 $ 2,379
Income taxes 4,004 4,153
ESTERLINE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended April 30, 1996 and 1995
1. The consolidated balance sheet as of April 30, 1996 and the
consolidated statements of operations and cash flows for the
three and six months ended April 30, 1996 and 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 results of operations and cash flows
for the interim periods presented are not necessarily
indicative of results for the full year.
2. The notes to the consolidated financial statements in the
Company's 1995 Annual Report provide a summary of significant
accounting policies and additional financial information that
should be read in conjunction with this Form 10-Q.
3. On February 8, 1996, the Company completed a public offering
of 1.8 million shares of common stock priced at $23.00 per
share (the "Public Offering"), generating net proceeds of $38.5
million. These funds will provide additional financial
resources for general corporate purposes, including the
possible acquisition of other companies.
4. Classifications have been changed for certain amounts in the
preceding period to conform with the current year's financial
presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES
Certain statements in this quarterly report contain
forward-looking information that involves risk and uncertainty,
including projections for sales and order trends, backlog,
capital expenditures and cash requirements. Actual results may
vary materially from these estimates depending on a variety of
factors which include changes in the telecommunications,
computer, aerospace and defense markets; reductions, terminations,
or changes in priority on U.S. Government defense budgets;
variability of capital goods markets, and other risks which are
detailed in other Company documents filed with the Securities and
Exchange Commission. The Company does not undertake any obligation
to publicly release the results of any revisions to these forward-
looking statements that may be made to reflect any future events or
circumstances.
RESULTS OF OPERATIONS
Three Months Ended April 30, 1996 Compared to Three Months
Ended April 30, 1995
Net sales for the three months ended April 30, 1996 were $89.0
million compared with $84.8 million in the same period in 1995.
For the three months ended April 30, 1995 sales include $2.6
million from Scientific Columbus Co., an Instrumentation Group
company, which was sold in October 1995. Sales increased in all
Groups for the three months ended April 30, 1996. The Automation
Group increased to $40.0 million, an increase of 6%, and the
Aerospace and Defense Group increased to $25.0 million, an
increase of 7%, when compared to the same period in 1995. The
Instrumenation Group increased to $24.0 million from $23.9
million when compared with the same period in 1995. When sales
for the three months ended April 30, 1995 are adjusted to exclude
Scientific Columbus, an increase in sales of 13% occurred in the
Instrumentation Group.
Sales for the three months ended April 30, by Group, were as follows:
(In Thousands)
1996 1995
---- ----
Automation $ 39,987 $ 37,604
Aerospace and Defense 24,954 23,313
Instrumentation 24,034 23,895
-------- --------
Total Sales $ 88,975 $ 84,812
======== ========
Gross margin for the three months ended April 30, 1996 increased
3% to 40% from 37% for the prior year period. This increase in
gross margin is primarily due to increased sales of relatively
high gross margin products. The Groups' gross margins ranged from
39% to 42% compared to the prior period of 35% to 39%.
Selling, general and administrative expenses for the three months
ended April 30, 1996 increased slightly to $26.5 million compared
with $25.3 million during the same period in 1995. As a percent of
sales there is no change from period to period.
Interest income increased to $601,000 for the three months ended
April 30, 1996 compared to $404,000 during the same period in
1995 due in part to the increased cash balance from the Public Offering.
In 1996, excess cash is primarily being invested in securities which
generate tax-exempt interest. Interest expense decreased 45% to $1.1
million for the three months ended April 30, 1996 compared with $1.6
million during the same period in 1995. This decrease in expense reflects
the redemption of $20 million principal amount of 8.25% convertible
debentures in May 1995.
The effective income tax rate for the three months ended April
30, 1996 decreased to 29% compared with 32% for the same period
of 1995 due primarily to the effect of tax-exempt interest being
generated.
Orders for the three months ended April 30, 1996 were $106.7
million, compared with $93.8 million during the same period in
1995. A drop in orders for electronics capital equipment in the
Automation Group was more than offset by increases in the other
two Groups. The Aerospace/Defense and Instrumentation Groups'
increases are due to a general strengthening of commercial
aerospace business and the timing of receipt of certain defense
orders.
Six Months Ended April 30, 1996 Compared to Six Months Ended
April 30, 1995
Net sales for the first six months of fiscal 1996 were $173.0
million compared with $168.1 million in the same period in 1995.
For the six months ended April 30, 1995 sales include $5.4
million from Scientific Columbus. The overall increase in sales
is primarily due to an increase of 7% in the Automation Group where sales
increased $5.6 million to $81.2 million. Excellon's performance
based on deliveries remained strong in the second quarter but
management expects the third quarter sales to be dampened by a
recent drop in the order rate. Sales in the Company's Aerospace
and Defense Group increased 3% to $45.8 million in the first six
months of fiscal 1996 compared to $44.3 million during the same
period in 1995. The Instrumentation Group's sales decreased 5% to
$45.9 million. When 1995 sales are adjusted to exclude the sales
of Scientific Columbus, sales for the first six months of fiscal
1996 for the Instrumentation Group increased 7%.
Sales for the six months ended April 30, by Group, were as follows:
(In Thousands)
1996 1995
---- ----
Automation $ 81,241 $ 75,612
Aerospace and Defense 45,790 44,271
Instrumentation 45,941 48,261
--------- ---------
Total Sales $172,972 $168,144
======== ========
Gross margin in the first six months of fiscal 1996 increased
slightly to 40% from 39% during the same period in 1995. The
Groups' gross margins ranged from 38% to 40% in the first six
months of fiscal 1996 compared with 38% to 39% during the same
period in 1995.
Selling, general and administrative expenses for the first six
months of fiscal 1996 decreased to $53.5 million, or 31% of
sales, compared with $54.8 million, or 33% of sales, in the same
period in 1995.
The effective income tax rate for the first six months of fiscal
1996 is flat with the first six months of 1995 at 32%.
Orders for the first six months of fiscal 1996 were $184.3
million, compared with $169.2 million during the same period in
1995. Companywide, backlog at April 30, 1996 was $114.5 million,
compared with $97.9 million at April 30, 1995. It is expected
that $35.9 million in backlog will ship after fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents on hand at April 30, 1996 totaled $65.8
million, an increase of $43.7 million from October 31, 1995. On
February 8, 1996, the Company completed the Public Offering of 1.8
million shares of common stock priced at $23.00 per share,
generating net proceeds of $38.5 million. Net working capital
increased $47.6 million from October 31, 1995 to $83.3 million at
April 30, 1996 primarily due to cash generated by the Public
Offering.
Capital expenditures, consisting primarily of machinery,
equipment and computers, are anticipated to be approximately
$18.0 million during fiscal 1996, compared with $11.5 million in
fiscal 1995. Capital expenditures for the six months ended April
30, 1996 totaled $10.0 million and were primarily computers,
machinery and equipment for the Automation and Instrumentation
Groups.
Total debt at April 30, 1996 increased slightly from October 31,
1995 to $51.0 million from $50.3 million. Of the total debt
outstanding at April 30, 1996, $40.0 million was outstanding
under the Company's 8.75% Senior Notes, and $11.0 million was
outstanding under various debt agreements, primarily those
related to Auxitrol. There were no borrowings outstanding under
the Company's primary credit facility. The Company is required to
begin principal repayment on the Senior Notes in the amount of
$5.7 million on July 30, 1996 and each year thereafter until the
Senior Notes mature on July 30, 2002. The Company's available
unused credit facilities at April 30, 1996 were $32.3 million,
net of amounts borrowed and commitments to secure outstanding
letters of credit.
Management believes that the funds generated from operations along
with cash on hand and available credit facilities will adequately
service cash requirements for the next twelve months.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1995, the Company identified irregularities in the
allocation of certain labor charges at its Armtec Defense
Products subsidiary and promptly disclosed these irregularities
to the Department of Defense. Armtec applied for admittance to
the Department of Defense Voluntary Disclosure Program and on
April 25, 1996 received notification of acceptance. Management
believes that the eventual outcome of this matter will not have a
material adverse effect on the financial position or future
operating results of the Company.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of shareholders held on March 6,
1996, shareholders approved the following proposals:
(a) The election of the following directors for
three-year terms expiring at the 1999 annual meeting:
Votes Cast
--------------------
Name For Withheld
--------- ---------
E. John Finn 6,006,891 19,491
Robert F. Goldhammer 6,005,779 20,603
Jerome J. Meyer 6,004,591 21,791
Other directors whose terms continue after the 1996
annual meeting are Gilbert W. Anderson, John F.
Clearman, Edwin I. Colodny, Wendell P. Hurlbut, Paul
G. Schloemer, and Malcolm T. Stamper.
(b) The selection of Deloitte & Touche LLP as independent
auditors for the fiscal year ending October 31, 1996.
The number of affirmative votes on the matter was
5,997,930, the number of negative votes was 11,985, and
the number of abstentions was 16,467.
There were no broker non-votes on any of the above proposals.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11. Schedule setting forth computation of earnings per
common share for the three and six months ended
April 30, 1996 and 1995.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Esterline Technologies Corporation
(Registrant)
Date: June 14, 1996 By: /s/Robert W. Stevenson
----------------------------------
Robert W. Stevenson
Executive Vice President and
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
ESTERLINE TECHNOLOGIES CORPORATION
Form 10-Q Report for the Three and Six Months Ended
April 30, 1996
INDEX TO EXHIBITS
Exhibit Page
Number Exhibit Number
------ ------- ------
11. Schedule setting forth computation of earnings 12
per common share for the three and six months
ended April 30, 1996 and 1995.
EXHIBIT 11
ESTERLINE TECHNOLOGIES CORPORATION
Computation of Earnings Per Common Share
For the Three and Six Months Ended April 30, 1996 and 1995
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------ ----------------
April 30, April 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
Primary Basis
Net Earnings $6,195 $3,051 $9,544 $5,249
====== ====== ====== ======
Average Number of Common Shares
Outstanding 8,010 6,524 7,429 6,524
Net Shares Assumed to be Issued
for Stock Options 259 374 260 374
------ ------ ------ ------
Total average common shares
on a primary basis 8,269 6,898 7,689 6,898
====== ====== ====== ======
Net Earnings per Common
Share - Primary Basis $ .75 $ .44 $ 1.24 $ .76
====== ====== ====== ======
Fully Diluted Basis
Net Earnings $6,195 $3,051 $9,544 $5,249
====== ====== ====== ======
Average Number of Common Shares
Outstanding 8,010 6,524 7,429 6,524
Net Shares Assumed to be Issued
for Stock Options 263 487 263 487
------ ------ ------ ------
Total average common shares
on a fully diluted basis 8,273 7,011 7,692 7,011
====== ====== ====== ======
Net Earnings per Common
Share - Fully Diluted Basis $ .75 $ .43 $ 1.24 $ .75
====== ====== ====== ======
Net Earnings per Common
Share - Primary Basis $ .75 $ .44 $ 1.24 $ .76
====== ====== ====== ======
Dilutive Effect per Common Share None $ .01 None $. 01
====== ====== ====== ======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> The Schedule Contains Summary Financial Information
Extracted From the Esterline Technologies Corporation
Consolidated Balance Sheets at April 30, 1996 and the
Related Consolidated Statement of Operations for the
Six Months then Ended and is Qualified in its Entirety
by Reference to Such Financial Statements.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<PERIOD-TYPE> 6-MOS
<CASH> 65,813
<SECURITIES> 0
<RECEIVABLES> 62,857
<ALLOWANCES> 4,674
<INVENTORY> 44,503
<CURRENT-ASSETS> 183,963
<PP&E> 152,932
<DEPRECIATION> 101,680
<TOTAL-ASSETS> 265,907
<CURRENT-LIABILITIES> 100,629
<BONDS> 34,745
0
0
<COMMON> 1,694
<OTHER-SE> 128,839
<TOTAL-LIABILITY-AND-EQUITY> 265,907
<SALES> 172,972
<TOTAL-REVENUES> 172,972
<CGS> 103,868
<TOTAL-COSTS> 103,868
<OTHER-EXPENSES> 53,541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,451
<INCOME-PRETAX> 14,112
<INCOME-TAX> 4,568
<INCOME-CONTINUING> 9,544
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,544
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
</TABLE>
