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 July 31, 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 September 11, 1996:
Common Stock, par value $.20 per share-- 8,499,850 shares.
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEET
As of July 31, 1996 and October 31, 1995
(In thousands, except share amounts)
July 31, October 31,
1996 1995
--------- -----------
ASSETS (unaudited)
Current Assets
Cash and equivalents $ 61,564 $ 22,097
Accounts receivable, net of allowances
of $5,421 and $4,117 for doubtful accounts 56,955 63,825
Inventories
Raw materials and purchased parts 16,133 11,422
Work in process 24,491 22,052
Finished goods 6,296 6,489
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46,920 39,963
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Deferred income taxes 14,312 14,122
Prepaid expenses 2,801 2,199
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Total Current Assets 182,552 142,206
----------- ----------
Property, Plant and Equipment 156,650 146,658
Accumulated depreciation 104,950 97,426
----------- ----------
51,700 49,232
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Intangibles, net and Other Assets 29,418 34,276
----------- ----------
$ 263,670 $ 225,714
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 19,565 $ 23,143
Accrued liabilities 60,622 66,363
Credit facilities 9,866 7,721
Current maturities of long-term debt 6,654 7,030
Federal and foreign income taxes 1,774 2,208
----------- ----------
Total Current Liabilities 98,481 106,465
----------- ----------
Long-Term Debt, net of current maturities 29,195 35,543
Shareholders' Equity
Common stock, par value $.20 per share,
authorized 30,000,000 shares, issued and
outstanding 8,499,850 and 6,645,780 shares 1,700 1,328
Capital in excess of par value 48,478 10,390
Retained earnings 86,904 72,332
Cumulative translation adjustment (1,088) (344)
----------- ----------
Total Shareholders' Equity 135,994 83,706
----------- ----------
$ 263,670 $ 225,714
=========== ==========
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three and Nine Months Ended July 31, 1996 and 1995
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
July 31, July 31,
----------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
Net Sales $ 81,729 $ 87,318 $ 254,701 $ 255,462
Costs and Expense
Cost of sales 49,524 52,984 153,392 156,141
Selling, general and
administrative 24,264 25,483 77,805 80,256
Restructuring credit -- (2,067) -- (2,067)
Interest income (772) (260) (1,636) (952)
Interest expense 1,116 1,241 3,431 4,423
--------- --------- --------- ---------
74,132 77,381 232,992 237,801
--------- --------- --------- ---------
Earnings Before Income Taxes 7,597 9,937 21,709 17,661
Income Tax Expense 2,569 3,348 7,137 5,823
--------- --------- --------- ---------
Net Earnings $ 5,028 $ 6,589 $ 14,572 $ 11,838
========= ========= ========= =========
Net Earnings Per Share $ .58 $ .93 $ 1.82 $ 1.70
========= ========= ========= =========
Weighted Average Common Stock
and Equivalents 8,724 7,066 8,001 6,982
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended July 31, 1996 and 1995
(Unaudited)
(In thousands)
Nine Months Ended
July 31,
------------------
1996 1995
---- ----
Cash Flows Provided (Used) by Operating Activities
Net earnings $ 14,572 $ 11,838
Restructuring credit -- (2,067)
Depreciation and amortization 12,166 12,131
Deferred income taxes 1,418 (680)
Working capital changes
Accounts receivable 6,412 7,489
Inventories (7,146) (5,743)
Prepaid expenses (613) (476)
Accounts payable (3,432) 2,854
Accrued liabilities (5,593) (2,854)
Federal and foreign income taxes (444) 70
Other, net 1,474 1,170
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18,814 23,732
--------- --------
Cash Flows Provided (Used) by Investing Activities
Capital expenditures (13,778) (8,086)
Capital dispositions 796 1,068
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(12,982) (7,018)
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Cash Flows Provided (Used) by Financing Activities
Net change in credit facilities 2,262 7,328
Repayment of long-term debt (6,668) (19,764)
Net proceeds provided by sale of common stock 38,549 --
-------- ---------
34,143 (12,436)
-------- ---------
Effect of Exchange Rates (508) 80
--------- ---------
Net Increase in Cash and Equivalents 39,467 4,358
Cash and Equivalents - Beginning of Period 22,097 9,076
--------- ---------
Cash and Equivalents - End of Period $ 61,564 $ 13,434
========= =========
Supplemental Cash Flow Information
Cash paid during the period for
Interest expense $ 4,307 $ 5,457
Income taxes 4,490 6,057
ESTERLINE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Months Ended July 31, 1996 and 1995
1. The consolidated balance sheet as of July 31, 1996 and the consolidated
statements of operations and cash flows for the three and nine months ended
July 31, 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, generating net proceeds
of $38.5 million. These funds provide additional financial resources for
general corporate purposes, including the 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 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 U.S. Government defense budget priorities;
variability of capital equipment 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 that may be made to these forward-looking statements to
reflect any future events or circumstances.
RESULTS OF OPERATIONS
Three Months Ended July 31, 1996 Compared with the Three Months Ended
July 31, 1995
Net sales for the three months ended July 31, 1996 were $81.7 million compared
with $87.3 million in the same period in 1995. Due to improving aerospace
markets, the Aerospace and Defense Group's net sales increased 14% to $27.0
million compared with $23.7 million for the prior-year period. The Automation
Group's net sales decreased $6.5 million, or 17%, compared with a particularly
strong year-ago period. This decrease was primarily the result of a slowdown in
computer and telecommunications markets. The Instrumentation Group's net sales
of $22.1 million were 10% below the prior-year of $24.5 million; however, the
1995 figure included $2.2 million from the Scientific Columbus subsidiary
which was sold in October 1995 and $1.3 million of proceeds from a settlement
relating to a patent infringement.
Net sales for the three months ended July 31, by Group, were as follows:
(In thousands)
1996 1995
------ -------
Automation $32,642 $39,097
Aerospace and Defense 27,006 23,677
Instrumentation 22,081 24,544
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Total Sales $81,729 $87,318
======= ========
Gross margin as a percent of net sales for the three months ended July 31,
1996 held even at 39% with the same period in 1995. The Groups' gross margins
ranged from 38% to 40% compared with the same period in 1995 of 36% to 45%.
Selling, general and administrative expenses for the three months ended July
31, 1996 increased slightly as a percent of sales to 30%, or $24.3 million,
compared with 29%, or $25.5 million, during the same period in 1995.
Interest income increased to $772,000 for the three months ended July 31, 1996
compared with $260,000 during the same period in 1995, largely due to the
increased cash balance from a public offering completed on February 8, 1996
(the "Public Offering"). For the three months ended, July 31, 1996 excess cash
was primarily invested in securities which generated tax-exempt interest.
Net earnings for the period ended July 31, 1996 decreased $1.6 million to $5.0
million, or $.58 per share, when compared with the prior period net earnings
of $6.6 million, or $.93 per share. Net earnings for the three months ended
July 31, 1995 included two non-recurring items: a restructuring credit of $2.1
million, or $.20 per share, and proceeds from a settlement relating to a
patent infringement of $1.3 million, or $.12 per share. When net earnings for
the three months ended July 31, 1995 are adjusted for these non-recurring
items, net earnings increased by $800,000. The net earnings per share
calculation for the period ended July 31, 1996 includes 1.8 million shares
issued pursuant to the Public Offering.
Orders for the three months ended July 31, 1996 were $79.7 million, compared
with $104.9 million during the same period in 1995. The decrease in orders was
due in part to the slowdown in the computer and telecommunications markets
served by the Automation Group as well as timing issues related to receipt of
orders in the other Groups.
Nine Months Ended July 31, 1996 Compared with the Nine Months Ended
July 31, 1995
Net sales for the first nine months of fiscal 1996 were $254.7 million
compared with $255.5 million in the same period in 1995. The Aerospace and
Defense Group's net sales increased 7% to $72.8 million compared with $67.9
million a year ago. The Automation Group's net sales decreased 1% to $113.9
million. The Instrumentation Group's net sales of $68.0 million were down 7%
compared with the prior year's $72.8 million, but up 4% on a proforma basis
when net sales of $7.6 million from the subsequently sold Scientific Columbus
subsidiary are excluded.
Net sales for the nine months ended July 31, by Group, were as follows:
(In thousands)
1996 1995
-------- --------
Automation $113,883 $114,709
Aerospace and Defense 72,796 67,948
Instrumentation 68,022 72,805
-------- --------
Total Sales $254,701 $255,462
======== ========
Gross margin as a percent of net sales in the first nine months of fiscal 1996
improved slightly to 40% from 39% during the same period in 1995. The Groups'
gross margins ranged from 38% to 40% in the first nine months of fiscal 1996
compared with 38% to 41% during the same period in 1995.
Selling, general and administrative expenses for the first nine months of
fiscal 1996 were flat as a percent of sales at 31%. In 1996, these expenses
were $77.8 million compared with $80.3 million in the same period in 1995.
Net earnings for the first nine months of fiscal 1996 increased to $14.6
million, or $1.82 per share, when compared with net earnings from the same
period in 1995 of $11.8 million, or $1.70 per share. The net earnings per
share calculation for fiscal 1996 includes shares issued pursuant to the
Public Offering. The net earnings for fiscal 1995 include two non-recurring
items: a restructuring credit and the proceeds from a settlement relating to a
patent infringement.
Orders for the first nine months of fiscal 1996 were $264.0 million, compared
with $274.1 million during the same period in 1995. Companywide, backlog at
July 31, 1996 was $112.5 million, compared with $115.5 million at July 31,
1995. It is expected that $55.2 million in backlog will ship after fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents on hand at July 31, 1996 totaled $61.6 million, an
increase of $39.5 million from October 31, 1995, and working capital increased
$48.3 million from October 31, 1995 to $84.1 million at July 31, 1996.
These increases are primarily due to proceeds from the Public Offering of
$38.5 million.
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
nine months ended July 31, 1996 totaled $13.8 million and were primarily for
the Automation and Instrumentation Groups.
Total debt at July 31, 1996 decreased from October 31, 1995 to $45.7 million
from $50.3 million. Of the total debt outstanding at July 31, 1996, $34.3
million was outstanding under the Company's 8.75% Senior Notes, and $11.4
million was outstanding under various bank credit facilities and debt
agreements, primarily those related to Auxitrol. The Company began principal
repayment on the Senior Notes in the amount of $5.7 million on July 30, 1996
and is required to make such a payment each year thereafter until the Senior
Notes mature on July 30, 2002. The Company's available credit from the primary
facility at July 31, 1996 was approximately $32.0 million, net of commitments
to secure outstanding letters of credit.
Management believes that funds generated from operations along with cash on
hand and available credit facilities will adequately service cash requirements
for the next twelve months.
SUBSEQUENT EVENTS
On August 9, 1996 the Company purchased substantially all of the operating
assets of Mason Electric Company, Inc. Mason, a leading manufacturer of
control sticks, grips and wheels, and specialized switching for commercial and
military aircraft, was added to the Company's Aerospace and Defense Group. The
purchase was funded with available cash.
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. In June, Armtec
submitted its report to the Department of Defense Office of Inspector
General. 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11. Schedule setting forth computation of earnings per common
share for the three and nine months ended July 31, 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: September 16, 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 Nine Months Ended
July 31, 1996
INDEX TO EXHIBITS
Exhibit Page
Number Exhibit Number
- ------ ------- ------
11. Schedule setting forth computation of earnings per 12
common share for the three and nine months ended
July 31, 1996 and 1995.
EXHIBIT 11
ESTERLINE TECHNOLOGIES CORPORATION
Computation of Earnings Per Common Share
For the Three and Nine Months Ended July 31, 1996 and 1995
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
July 31, July 31,
----------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
Primary Basis
Net Earnings $ 5,028 $ 6,589 $ 14,572 $ 11,838
========= ========== ========= =========
Average Number of Common Shares
Outstanding 8,483 6,582 7,747 6,545
Net Shares Assumed to be Issued
for Stock Options 241 484 254 437
--------- ---------- --------- ---------
Total average common shares
on a primary basis 8,724 7,066 8,001 6,982
========= ========== ========= =========
Net Earnings per Common
Share - Primary Basis $ .58 $ .93 $ 1.82 $ 1.70
========= ========== ========= =========
Fully Diluted Basis
Net Earnings $ 5,028 $ 6,589 $ 14,572 $ 11,838
========= ========== ========= =========
Average Number of Common Shares
Outstanding 8,483 6,582 7,747 6,545
Net Shares Assumed to be Issued
for Stock Options 241 544 254 613
--------- ---------- --------- ---------
Total average common shares
on a fully diluted basis 8,724 7,126 8,001 7,158
========= ========== ========= =========
Net Earnings per Common
Share - Fully Diluted Basis $ .58 $ .92 $ 1.82 $ 1.65
========= ========== ========= =========
Net Earnings per Common
Share - Primary Basis $ .58 $ .93 $ 1.82 $ 1.70
========= ========== ========= =========
Dilutive Effect per
Common Share None $ .01 None $ .05
========= ========== ========= =========
Note: The sum of quarterly per share amounts may not equal per share amounts
reported for the year-to-date periods due to changes in the number of
weighted average shares outstanding for each period.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> The Schedule Contains Summary Financial
Information Extracted From the Esterline
Technologies Corporation Consolidated Balance
Sheets at July 31, 1996 and the Related
Consolidated Statements of Operations for the
Three 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> JUL-31-1996
<PERIOD-TYPE> 9-MOS
<CASH> 61,564
<SECURITIES> 0
<RECEIVABLES> 62,376
<ALLOWANCES> 5,421
<INVENTORY> 46,920
<CURRENT-ASSETS> 182,552
<PP&E> 156,650
<DEPRECIATION> 104,950
<TOTAL-ASSETS> 263,670
<CURRENT-LIABILITIES> 98,481
<BONDS> 29,195
0
0
<COMMON> 1,700
<OTHER-SE> 134,294
<TOTAL-LIABILITY-AND-EQUITY> 263,670
<SALES> 254,701
<TOTAL-REVENUES> 254,701
<CGS> 153,392
<TOTAL-COSTS> 153,392
<OTHER-EXPENSES> 77,805
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,795
<INCOME-PRETAX> 21,709
<INCOME-TAX> 7,137
<INCOME-CONTINUING> 14,572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,572
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.82
</TABLE>
