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 January 31, 1996 Commission file number 1-6357
ESTERLINE TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2595091
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10800 NE 8th Street, Bellevue, Washington 98004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 206/453-9400
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 March 13, 1996:
Common Stock, par value $.20 per share-- 8,458,560
shares.
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEET
As of January 31, 1996 and October 31, 1995
(In thousands, except share amounts)
January 31, October 31,
1996 1995
ASSETS (unaudited)
Current Assets
Cash and equivalents $ 24,749 $ 22,097
Accounts receivable, net of allowances
of $4,911 and $4,117 for doubtful accounts 55,989 63,825
Inventories
Raw materials and purchased parts 12,578 11,422
Work in process 25,189 22,052
Finished goods 5,329 6,489
43,096 39,963
Deferred income taxes 14,122 14,122
Prepaid expenses 2,707 2,199
Total Current Assets 140,663 142,206
Property, Plant and Equipment 149,831 146,658
Accumulated depreciation 99,870 97,426
49,961 49,232
Intangibles, net and Other Assets 31,494 34,276
$222,118 $ 225,714
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 21,291 $ 23,143
Accrued liabilities 60,857 66,363
Credit facilities 8,607 7,721
Current maturities of long-term debt 6,646 7,030
Federal and foreign income taxes 3,734 2,208
Total Current Liabilities 101,135 106,465
Long-Term Debt, net of current maturities 34,999 35,543
Shareholders' Equity
Common stock, par value $.20 per share,
authorized 30,000,000 shares, issued and
outstanding 6,658,560 and 6,645,780 shares 1,331 1,328
Capital in excess of par value 10,397 10,390
Retained earnings 75,681 72,332
Cumulative translation adjustment (1,425) (344)
Total Shareholders' Equity 85,984 83,706
$222,118 $ 225,714
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended January 31, 1996 and 1995
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
January 31,
1996 1995
Net Sales $83,997 $83,332
Costs and Expenses
Cost of sales 50,695 49,938
Selling, general and administrative 27,032 28,902
Interest income (263) (288)
Interest expense 1,185 1,540
Earnings Before Income Taxes 5,348 3,240
Income Tax Expense 1,999 1,042
Net Earnings $ 3,349 $ 2,198
Net Earnings Per Share $ .48 $ .32
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended January 31, 1996 and 1995
(Unaudited)
(In thousands)
Three Months Ended
January 31,
1996 1995
Cash Flows Provided (Used) by Operating Activities
Net earnings $ 3,349 $ 2,198
Depreciation and amortization 3,711 4,105
Working capital changes
Accounts receivable 7,164 6,564
Inventories (3,587) (1,313)
Prepaid expenses (555) (949)
Accounts payable (1,555) (2,041)
Accrued liabilities (3,245) (1,026)
Federal and foreign income taxes 1,511 (357)
Other, net 330 (717)
7,123 6,464
Cash Flows Used by Investing Activities
Capital expenditures (4,391) (1,644)
Capital dispositions 295 807
(4,096) (837)
Cash Flows Provided (Used) by Financing Activities
Net change in credit facilities 1,185 925
Repayment of long-term debt (842) (184)
343 741
Effect of Exchange Rates (718) (219)
Net Increase in Cash and Equivalents 2,652 6,149
Cash and Equivalents - Beginning of Period 22,097 9,076
Cash and Equivalents - End of Period $24,749 $15,225
Supplemental Cash Flow Information
Cash paid during the period for
Interest expense $ 2,045 $ 1,949
Income taxes 354 1,446
ESTERLINE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended January 31, 1996 and 1995
1. The consolidated balance sheet as of January 31, 1996 and
the consolidated statements of operations and cash flows
for the three months ended January 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 per share, generating net proceeds of $38.9 million.
These funds will provide additional financial resources
for general corporate purposes, including the possible
acquisition of other companies.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES
RESULTS OF OPERATIONS
Three Months Ended January 31, 1996 Compared to Three Months
Ended January 31, 1995
Net sales for the first three months of fiscal 1996 were $84.0
million compared with $83.3 million in the same period in
1995. For the three months ended January 31, 1995 sales
include $2.8 million from Scientific Columbus Co., an
Instrumentation Group company, which was sold in October 1995.
The overall increase in sales is primarily due to the
continued strong performance in the Automation Group where
sales increased $3.2 million or 9% to $41.3 million compared
to the first three months of fiscal 1995. Excellon Automation
contributed the largest percentage of this increase as its
performance remained strong. Management expects Excellon's
growth rate to return to more normalized levels during 1996
following fiscal 1995's exceptional 70% rate. Sales in the
Company s Aerospace and Defense Group were relatively flat at
$20.8 million in the first three months of fiscal 1996
compared to $21.0 million in the same period in 1995.
Instrumentation Group sales were $21.9 million in the first
three months of fiscal 1996 and virtually level with sales in
the same period in 1995 after adjusting sales for the
Scientific Columbus divestiture.
Sales for the three months ended January 31, by Group, were as
follows:
(In Thousands)
1996 1995
Automation $ 41,254 $ 38,008
Aerospace and Defense 20,836 20,958
Instrumentation 21,907 24,366
Total Sales $ 83,997 $ 83,332
Cost of sales increased from $49.9 million in the first three
months of fiscal 1995 to $50.7 million in the same period in
1996. This increase was due to increased sales. Gross margin
in the first three months of fiscal 1996 was level with the
same period in 1995 at 40%. The Group gross margins ranged
from 38% to 41% in the first three months of fiscal 1996
compared with 39% to 41% during the same period in 1995.
Selling, general and administrative expenses for the first
three months of fiscal 1996 decreased to $27.0 million or 32%
of sales compared with $28.9 million or 35% of sales in the
same period in 1995. This decrease was predominantly due to
expenses incurred during the first three months of fiscal 1995
by Scientific Columbus which were not incurred during the same
period in 1996.
The effective income tax rate for the first three months of
fiscal 1996 increased to 37% from 32% in the same period in
1995. The low 1995 rate was due to state tax loss
carryforwards and foreign tax offsets, both of which were
not available in the current period.
Orders for the first three months of fiscal 1996 were $77.6
million, compared with $75.4 million in the same period in
1995. This increase is due primarily to the continuing
strength in the Automation Group's markets. Companywide,
backlog at January 31, 1996 was $96.8 million, compared
with $88.9 million at January 31, 1995. It is expected
that $13.1 million in backlog will ship after fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents on hand at January 31, 1996 totaled
$24.7 million, an increase of $2.7 million from October 31,
1995. Net working capital increased $3.8 million from
October 31, 1995 to $39.5 million at January 31, 1996
primarily due to cash generated from operations.
Current assets decreased by $1.5 million in the first
three months of fiscal 1996. This decrease was primarily due
to a $7.8 million decrease in accounts receivable offset by an
increase in cash and equivalents, and an increase in inventory
of $3.1 million. The increase in inventory will be used to
fill the higher order rates.
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 three months
ended January 31, 1996 totaled $4.4 million and were primarily
related to the Automation and Instrumentation Groups' new
machinery and equipment.
Total debt at January 31, 1996 was substantially unchanged
from October 31, 1995 at $50.3 million. Of the total debt
outstanding at January 31, 1996, $40.0 million was outstanding
under the Company's 8.75% Senior Notes, and $10.3 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 credit facilities at January 31,
1996 were approximately $45.0 million.
Subsequent to the end of the first quarter, on February 8,
1996, the Company completed a public offering of 1.8 million
shares of common stock priced at $23 per share, generating net
proceeds of $38.9 million. These funds will provide
additional financial resources for general corporate purposes,
including the possible acquisition of other companies.
Management believes the Company's financial condition is
strong and funds generated from operations along with cash on
hand and available credit facilities will adequately service
cash requirements through fiscal 1996.
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 but has not yet been advised regarding its
admittance to the Program. The outside attorneys and
governmental contracting consultant that were retained by the
Company to assist in this matter are continuing their internal
investigation. At this stage of the investigation, management
believes that the eventual outcome of this issue 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
Current directors whose terms will 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 months ended
January 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: March 18, 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 Months Ended
January 31, 1996
INDEX TO EXHIBITS
Exhibit Page
Number Exhibit Number
11. Schedule setting forth computation of earnings per 12
common share for the three months ended
January 31, 1996 and 1995.
EXHIBIT 11
ESTERLINE TECHNOLOGIES CORPORATION
Computation of Earnings Per Common Share
For the Three Months Ended January 31, 1996 and 1995
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
January 31,
1996 1995
Primary Basis
Net Earnings $ 3,349 $ 2,198
Average Number of Common Shares
Outstanding 6,654 6,515
Net Shares Assumed to be Issued
for Stock Options 267 322
Total $ 6,921 $ 6,837
Net Earnings per Common Share - Primary Basis
$ 0.48 $ .32
Fully Diluted Basis
Net Earnings $ 3,349 $ 2,198
Average Number of Common Shares
Outstanding $ 6,654 $ 6,515
Net Shares Assumed to be Issued
for Stock Options 267 384
Total $ 6,921 $ 6,899
Net Earnings per Common Share -
Fully Diluted Basis $ 0.48 $ .32
Net Earnings per Common Share -
Primary Basis $ 0.48 $ .32
Dilutive Effect per Common Share None None
