<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
August 12, 1998
---------------------------------
Date of Report
(Date of earliest event reported)
ESTERLINE TECHNOLOGIES CORP.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 001-06357 13-2595091
- ---------------------------- --------------------- -------------------
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
10800 NE 8th Street, Bellevue, Washington 98004
------------------------------------------------------------
(Address of principal executive offices, including Zip Code)
(425) 453-9400
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
As previously reported under Item 2 in Esterline Technologies Corporation's
("Esterline") current Report on Form 8-K dated as of August 12, 1998,
Esterline entered into a Stock Purchase Agreement (the "Purchase
Agreement"), dated as of August 10, 1998, by and among Esterline, Kirkhill
Rubber Company, a California corporation ("Kirkhill") and the Kirkhill
Rubber Company Employee Stock Ownership and Savings Plan (the "ESOP"),
pursuant to which Esterline agreed to acquire all of the outstanding shares
of Kirkhill for $83 million in cash, subject to certain customary closing
adjustments. At the same time, Esterline completed the acquisition of the
shares of Kirkhill held by the ESOP, which shares represented approximately
two-thirds of the outstanding capital stock of Kirkhill. Esterline agreed
to purchase the remaining shares from the minority individual shareholders
and currently owns 100% of the outstanding capital stock of Kirkhill.
Included under Item 7 are the historical financial statements of Kirkhill,
together with certain pro forma information regarding Esterline, as adjusted
to give effect to the Kirkhill acquisition.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired.
Filed as Exhibit 99.3 and incorporated herein by reference are certain
historical financial statements of Kirkhill for the period indicated. These
financial statements have been audited by Romberger, Wilson & Beeson, Inc.,
independent auditors, as stated in their report included therein and
incorporated herein by reference.
(b) Pro Forma Financial Information
Filed as Exhibit 99.4 and incorporated herein by reference is certain
unaudited pro forma financial information regarding Esterline, as adjusted
to give effect to the Kirkhill acquisition using the purchase method of
accounting.
(c) Exhibits
--------
2.1 Stock Purchase Agreement, dated as of August 10, 1998,
by and among Esterline Technologies Corporation, the
Kirkhill Rubber Company and the Kirkhill Rubber Company
Employee Stock Ownership and Savings Plan.*
23.1 Consent of Romberger, Wilson & Beeson, Inc. Independent
Auditors.
99.1 Press Release issued by the Registrant on
August 10, 1998.*
<PAGE> 2
99.2 Press Release issued by the Registrant on
August 13, 1998.*
99.3 Financial statements as of December 31, 1997, for
Kirkhill Rubber Company (with Independent Auditor's
Report).
99.4 Unaudited pro forma financial statements and related
footnotes for Esterline Technologies Corporation.
--------------------
* previously filed.
<PAGE> 3
SIGNATURE
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)
Dated: October 23, 1998 By /s/ Robert W. Stevenson
---------------------------------------
Robert W. Stevenson
Executive Vice President,
Chief Financial Officer and Secretary
(Principal Financial Officer)
By /s/ Robert D. George
---------------------------------------
Robert D. George
Treasurer and Controller
(Principal Accounting Officer)
<PAGE> 4
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
2.1 Stock Purchase Agreement, dated as of August 10, 1998, by
and among Esterline Technologies Corporation, the
Kirkhill Rubber Company and the Kirkhill Rubber Company
Employee Stock Ownership and Savings Plan.*
23.1 Consent of Romberger, Wilson & Beeson, Inc. Independent
Auditors.
99.1 Press Release issued by the Registrant on
August 10, 1998.*
99.2 Press Release issued by the Registrant on
August 13, 1998.*
99.3 Financial statements as of December 31, 1997, for
Kirkhill Rubber Company (with Independent Auditor's
Report).
99.4 Unaudited pro forma financial statements and related
footnotes for Esterline Technologies Corporation.
--------------------
* previously filed.
<PAGE> 5
Exhibit 23.1
CONSENT OF ROMBERGER, WILSON & BEESON, INC.
We consent to the reference to our firm in the Current Report on Form 8-K
dated as of August 12, 1998, as amended by Form 8-K/A, of Esterline
Technologies Corporation and to the inclusion and incorporation by reference
therein of our report dated March 3, 1998, with respect to the financial
statements of Kirkhill Rubber Company included therein for the fiscal year
ended December 31, 1997.
ROMBERGER, WILSON & BEESON, INC.
Brea, California
October 23, 1998
<PAGE> 6
Exhibit 99.3
The following table sets forth selected historical financial data for
Kirkhill Rubber Company for the period ended December 31, 1997.
Kirkhill Rubber Company
Balance Sheet
December 31, 1997
(In thousands, except share amounts)
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash (Notes 1 and 6) $ 6,510
Investments 11
Accounts Receivable, net of allowance of $120 5,351
Inventory (Notes 1 and 2) 9,584
Prepaid Expenses 735
Deferred Taxes (Notes 1 and 4) 813
-------
Total Current Assets 23,004
Fixed Assets, at cost (Note 1)
Land and Improvements 568
Buildings and Warehouses 6,934
Machinery and Equipment 12,961
Office Furniture and Equipment 767
Autos and Trucks 159
-------
21,389
Accumulated Depreciation 18,923
-------
Fixed Assets Net of Accumulated Depreciation 2,466
Other Assets 10
-------
TOTAL ASSETS $25,480
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 1,187
Accrued Liabilities 4,791
-------
Total Current Liabilities 5,978
Deferred Taxes Payable (Notes 1 and 4) 152
Stockholders' Equity
Capital Stock - No Par Value 200,000 Shares
Authorized; 36,636 Shares Issued and Outstanding 881
Additional Paid in Capital 8
Retained Earnings 18,461
-------
Total Stockholders' Equity 19,350
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $25,480
=======
</TABLE>
<PAGE> 7
Kirkhill Rubber Company
Statement of Income
For the year ended December 31, 1997
(In thousands)
<TABLE>
<S> <C>
Net Sales $57,396
Costs and Expenses
Cost of Goods Sold 40,023
Selling Expenses 2,603
Administrative Expenses 5,001
-------
Total Expenses 47,627
-------
Income from Operations 9,769
Other Income and (Expense)
Interest Earned 211
Other Expenses (15)
ESOP Expenses (Note 3) (130)
Interest Expense (Non-ESOP) (9)
-------
Total Other Income and (Expense) 57
-------
Income before Income Taxes 9,826
Income Tax Expense 3,812
-------
Net Income $ 6,014
=======
</TABLE>
<PAGE> 8
Kirkhill Rubber Company
Statement of Cash Flow
For the year ended December 31, 1997
(In thousands)
<TABLE>
<S> <C>
Cash Flow from Operating Activities
Net Income $ 6,014
Adjustments to Reconcile Net Income to Net Cash
from Operating Activities
Depreciation 448
Gain on Sale of Fixed Assets (2)
Accounts Receivable - Net (209)
Inventory 911
Prepaid Expenses 261
Deferred Taxes (317)
Accounts Payable 376
Accrued Liabilities 2,127
ESOP Contributions Payable (1,902)
-------
Total Adjustments 1,693
-------
Net Cash Provided (Used) by Operating Activities 7,707
Cash Flows from Investing Activities
Decrease in Deposits 12
Capital Expenditures (269)
Capital Dispositions 2
-------
Net Cash Provided (Used) by Investing Activities (255)
Cash flows from Financing Activities
Notes Payable Payments (4,852)
Stock Redemption (2,713)
ESOP Dividend (2,000)
Tax Benefit of ESOP Dividend 751
ESOP Deferred Compensation Recognized 4,852
-------
Net Cash Provided (Used) by Financing Activities (3,962)
-------
Net Increase (Decrease) in Cash 3,490
Cash at Beginning of Year 3,020
-------
Cash at End of Year $ 6,510
=======
Supplemental Disclosures of Cash Flow Information
Cash Paid For:
Interest $ 332
=======
Income Tax $ 3,075
=======
</TABLE>
<PAGE> 9
Kirkhill Rubber Company
Statement of Stockholders' Equity
For the year ended December 31, 1997
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Additional
Capital Paid in Retained
Shares Stock Capital Earnings
------ ------- ---------- --------
<S> <C> <C> <C> <C>
Beginning Balance 39,351 $946 $ 8 $16,345
Net Income 6,014
Stock Redemption (2,715) (65) (2,648)
Dividend Paid to ESOP Trust Net
of Income Tax Benefit of $751 (1,250)
------ ---- ------ -------
Ending Balance 36,636 $881 $ 8 $18,461
====== ==== ====== =======
</TABLE>
(Notes presented in thousands, except percentages and shares amounts)
Note 1 - Summary of Significant Accounting Policies
------------------------------------------
Business Activity
- -----------------
Kirkhill Rubber Company ("Kirkhill") is a manufacturer of rubber and plastic
products located in Southern California. Kirkhill's products are primarily
manufactured for the commercial, aircraft, aerospace, and defense
industries.
Estimates
- ---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date on the financial
statements and the reported amounts of revenues and expenses during the
year. Actual results may differ from those estimates.
Cash
- ----
For purposes of reporting cash flows, cash includes money market accounts
and any highly liquid debt instruments purchased with a maturity of three
months or less.
<PAGE> 10
Inventory
- ---------
Inventory is valued at the lower of cost or market. Cost is generally
determined on the first-in, first-out basis using a twelve month weighted
average cost for raw materials. Factory burden and direct labor costs are
applied to work-in-process and finished goods using product class rates.
Fixed Assets
- ------------
Fixed assets are stated at cost less accumulated depreciation. Expenditures
for maintenance, repairs and minor renewals are charged to expense as
incurred. Major renewals and betterments are capitalized. Depreciation is
provided on the straight-line method over the estimated useful lives of the
depreciable assets. The estimated useful lives for depreciation are as
follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Office Equipment and Furniture 5-8
Machinery 8
Buildings 20-25
Vehicles 3
</TABLE>
Depreciation was $448 for the year ended December 31, 1997.
Income Taxes
- ------------
Deferred taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. Deferred taxes
are provided for accumulated temporary differences due to basis differences
for assets and liabilities for financial reporting and income tax purposes,
including alternative minimum taxes.
Note 2 - Inventory
---------
Inventory is composed of:
<TABLE>
<S> <C>
Raw Materials $5,041
Work in Process 3,065
Finished Goods 1,478
------
$9,584
======
</TABLE>
<PAGE> 11
Note 3 - Employee Stock Ownership Plan
-----------------------------
The following description of the Kirkhill's Employee Stock Ownership Plan
provides only general information. Please refer to the summary plan
description for a more complete description of the plan.
Kirkhill has elected not to adopt Statement of Position 93-6, Employers'
Accounting for Employee Stock Ownership Plans. Kirkhill will continue to
apply Statement of Position 76-3, Accounting Practices for certain Employee
Stock Ownership Plans.
Kirkhill's Employee Stock Ownership and Savings Plan (the "Plan") is a
defined contribution plan with three features: a stock bonus portion
(ESOP), a money purchase portion (ESOP) and a 401(k) savings portion. The
ESOP stock bonus portion was adopted January 1, 1987. The 401(k) portion
became effective January 1, 1989. The ESOP portion of the plan was amended
January 1, 1991 to become a combination of a money purchase plan and a stock
bonus plan. Contributions are made by Kirkhill in cash or in Company stock
annually. The ESOP portion has no employee contributions; the 401(k)
portion receives employee salary deferral contributions.
The stock ownership portion of the ESOP was funded with a $32,700 loan and a
cash contribution of $2,312 from Kirkhill to the ESOP Trust in 1988. The
ESOP Trust used the funds to purchase 70% of the outstanding capital stock
from the shareholders at a cost of $35,001. The ESOP loan was completely
paid off in 1997.
The loan was recorded as a note payable on Kirkhill's balance sheet. A like
amount of deferred compensation was recorded as a reduction of stockholders'
equity. Deferred compensation, included as a component of stockholders'
equity, represented Kirkhill's prepayment of future compensation expenses.
As Kirkhill made contributions to the ESOP, these contributions were used to
repay the loan to Kirkhill. As the loan was repaid, shares were released
annually using the principal and interest method. These shares were
allocated to participants based upon their compensation.
Kirkhill's ESOP contribution for 1997 was $1,408. The principal portion of
the ESOP contribution was $1,338 and the interest portion was $70. The
principal portion was allocated to operations, based upon compensation, with
$1,107 charged to factory burden, $112 charged to selling expenses and $118
charged to administrative expenses. The interest portion of $70 was charged
to ESOP expenses. Also included in ESOP expenses is an annual loan charge,
amortization loan fees, and processing fees amounting to $61. A dividend of
$2,000, declared on October 16, 1997, was paid on ESOP shares. Of this
amount $1,885 was applied to the ESOP loan principal.
Employees may contribute up to 5% of compensation through tax deferred
withholdings to the 401(k) portion of the ESOP annually. These
contributions totaled $445 in 1997. Kirkhill
<PAGE> 12
made a matching contribution of 50% of eligible employees' salary deferral
to the 401(k) in the form of Company stock.
Eligibility
- -----------
Employees who are 21 years of age and have completed one year of service
(with 1,000 hours of service) are eligible to participate. Plan entrance is
on January 1 and July 1.
Benefits
- --------
Plan participants who terminate their employment for retirement, disability
or death will have their vested account balance distributed following the
end of the plan year in which their retirement, death or disability occurs.
For other terminations of service, distribution of benefits may be deferred
until a five-year break-in-service occurs. All distributions may be made in
a combination of whole shares or cash in annual installments over a five-
year period. Distributions of shares are subject to a limited "put" option
which grants the participant the right to "put" the shares to Kirkhill at
their fair market value as determined by an independent appraiser.
Note 4 - Income Taxes
------------
Deferred income tax asset and liabilities are computed annually for
differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities. Income tax at the combined federal and
state statutory rate of 39.8% is reconciled to Kirkhill's actual provision
as follows:
<TABLE>
<CAPTION>
Percentage of
income before
Amount income taxes
------ -------------
<S> <C> <C>
Tax at statutory rate $3,913 39.8%
Increase (decrease) resulting
from tax effect of:
Nondeductible expenses 9 .1
Other (110) (1.1)
------- ----
Income Tax Provision $3,812 38.8%
======= ====
</TABLE>
The income tax provision is presented gross without a tax reduction of $751
attributable to the dividend applied to the ESOP loan principal. The
benefit is credited directly to retained earnings.
<PAGE> 13
The components of the current deferred tax asset and noncurrent deferred tax
liability are as follows:
<TABLE>
<CAPTION>
Current Noncurrent
Asset Liability
------- ----------
<S> <C> <C>
Deferred tax liability resulting from
taxable temporary depreciation differences $ -- $(152)
Deferred tax assets resulting from
deductible temporary differences:
Vacation pay accrued 316 --
Allowance for doubtful accounts 49 --
State income taxes 238 --
Inventory uniform capitalization rules 210 --
----- -----
Net deferred tax asset or (liability) $ 813 $(152)
===== =====
</TABLE>
Note 5 - Related Party Transactions
--------------------------
During the year, Kirkhill sold $7,007 of goods to a related company which
has two directors and several shareholders in common. At year-end $363 was
due from the company. Kirkhill purchased $60 in goods and services from
this related company. Also legal services were provided by a director for
$28. At year-end, Kirkhill was not indebted to these related parties.
Note 6 - Contingent Liabilities
----------------------
Kirkhill is a party to various lawsuits and claims. Management believes
that the outcome of these lawsuits and claims will not have a material
impact on Kirkhill's financial position or results of future operations.
Note 7 - Concentrations of Risk
----------------------
At year-end, approximately forty customers account for 64% of trade accounts
receivable. The primary industries of these customers are 50% for
commercial, 47% for aircraft and 3% for governmental. Also customers
located in the state of California provided approximately 45% of Kirkhill's
sales during the year.
Kirkhill has certain contracts which require purchases of materials from
approved suppliers. Certain materials are limited to a single supplier. In
the event that a material or supplier is no
<PAGE> 14
longer available, a change in a material or a supplier could cause a delay
in manufacturing and a possible loss of sales. However, management believes
this risk is minimal and alternative materials or suppliers could be acquired
without affecting sales.
Kirkhill maintains cash in excess of the federally insured limits of $100 in
one financial institution.
Note 8 - Operating Leases
----------------
Kirkhill has operating leases for certain vehicles and equipment. Lease
terms range from 24 to 48 months. Lease expense for the year was $80.
Future minimum lease payments are as follows:
<TABLE>
<C> <C>
1998 $38
1999 26
2000 13
---
$77
===
</TABLE>
Note 9 - Environmental Costs
-------------------
Due to the continuing government regulation of the environment, Kirkhill is
incurring cost of compliance. Environmental cost totaled $2 for the year.
<PAGE> 15
March 3, 1998
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Kirkhill Rubber Company
300 East Cypress
Brea, California
We have audited the accompanying balance sheet of Kirkhill Rubber Company as
of December 31, 1997 and the related statements of income, cash flows and
stockholders' equity for the year then ended. These financial statements
are the responsibility of Kirkhill's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial condition of Kirkhill Rubber Company
as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Romberger, Wilson & Beeson, Inc.
<PAGE> 16
Exhibit 99.4
The unaudited pro forma financial statements and accompanying notes set
forth below reflect the application of the purchase method of accounting.
Under this method of accounting, the purchase price will be allocated to the
assets acquired and liabilities assumed based on their estimated fair values
at the time of closing. As discussed in the accompanying notes, estimates
of the fair values have been combined with the values recorded. However,
the estimated fair values may require additional adjustments once all of the
valuations have been completed.
The unaudited pro forma balance sheet combines the balance sheets of
Esterline and Kirkhill as of July 31, 1998. The unaudited pro forma
statement of earnings presents 1) Esterline's statement of income for the
year ended October 31, 1997 combined with Kirkhill's statement of income for
the year ended December 31, 1997 and 2) Esterline's and Kirkhill's
statements of income for the nine months ended July 31, 1998. Kirkhill's
year-end was December 31. For the nine months ended July 31, 1998,
Kirkhill's statement of income has been adjusted to be consistent with
Esterline's fiscal year presentation.
The unaudited pro forma financial statements are intended for informational
purposes only and are not necessarily indicative of the future financial
position or future results of operations of the combined company, or of the
financial position or results of operations of the combined company that
would have actually occurred had the transaction been in effect as of the
date or for the period presented.
<PAGE> 17
<TABLE>
<CAPTION>
Esterline Technologies
Pro Forma Statement of Income
Unaudited
(In thousands, except per share amounts)
Fiscal Year 1997 Nine Months Ended July 31, 1998
----------------------------------------------- ----------------------------------------------
Pro Pro Pro Pro
Esterline Kirkhill Forma Forma Forma Forma
10/31/97 12/31/97 Adjustments Combined Esterline Kirkhill Adjustments Combined
----------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $390,958 $57,396 $ -- $448,354 $321,172 $44,517 $ -- $365,689
Costs and Expenses
Cost of Sales 243,197 40,023 1,271 (A,B) 284,491 198,265 29,460 1,787 (A,B) 229,512
Selling, General
and Administrative 108,474 7,749 851 (B) 117,074 90,503 6,614 944 (B) 98,061
Interest Income (2,397) (211) 2,206 (C) (402) (1,469) (70) 1,539 (C) --
Interest Expense 3,603 9 3,094 (D) 6,706 2,373 -- 2,320 (D) 4,693
----------------------------------------------- ---------------------------------------------
352,877 47,570 7,422 407,869 289,672 36,004 6,590 332,266
----------------------------------------------- ---------------------------------------------
Earnings Before
Income Taxes 38,081 9,826 (7,422) 40,485 31,500 8,513 (6,590) 33,423
Income Tax Expense 12,760 3,812 (2,614)(E) 13,958 10,833 3,499 (2,561)(E) 11,771
----------------------------------------------- ---------------------------------------------
Net Earnings $ 25,321 $ 6,014 $(4,808) $ 26,527 $ 20,667 $ 5,014 $(4,029) $ 21,652
=============================================== =============================================
Net Earnings per
Share - Basic $ 1.48 $ 1.55 $ 1.20 $ 1.25
======== ======== ======== ========
Net Earnings per
Share - Diluted $ 1.44 $ 1.51 $ 1.17 $ 1.22
======== ======== ======== ========
</TABLE>
<PAGE> 18
Esterline Technologies
Pro Forma Balance Sheet (Unaudited)
As of July 31, 1998
<TABLE>
<CAPTION>
Pro Pro
Forma Forma
Esterline Kirkhill Adjustments Combined
--------- -------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash and equivalents $ 24,443 $ 9,261 $(25,636)(F) $ 8,068
Accounts receivable, net of allowances 66,412 5,703 72,115
Inventories
Raw material 24,906 4,826 29,732
Work-in-process 32,322 3,065 35,387
Finished goods 11,123 1,477 12,600
-------------------------------------------------
68,351 9,368 77,719
Deferred Income Taxes 12,525 813 13,338
Prepaid Expenses 3,381 583 3,964
-------------------------------------------------
Total Current Assets 175,112 25,728 (25,636) 175,204
Property, Plant and Equipment 198,948 21,078 10,097 (G) 230,123
Accumulated Depreciation 123,915 18,755 (18,755)(G) 123,915
-------------------------------------------------
75,033 2,323 28,852 106,208
Goodwill 44,096 46,872 (H) 90,968
Other Assets, net 12,077 11 12,088
-------------------------------------------------
$306,318 $28,062 $ 50,088 $384,468
=================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 19,469 $ 1,376 $ $ 20,845
Accrued liabilities 63,489 1,986 180 (I) 65,655
Credit facilities 9,977 9,977
Current maturities of long-term obligations 5,851 5,851
Federal and foreign income taxes 126 391 517
-------------------------------------------------
Total Current Liabilities 98,912 3,753 180 102,845
Long-Term Liabilities
Debt, net of current maturities 21,443 -- 64,400 (J) 85,843
Deferred Taxes Payable 542 152 9,665 (K) 10,359
-------------------------------------------------
Total Long-Term Liabilities 21,985 152 74,065 96,202
Shareholders' Equity
Common stock, par value $.20 per share,
authorized 30,000,000 shares, issued and
outstanding 17,288,562 shares 3,458 881 (881)(L) 3,458
Capital in excess of par value 46,869 8 (8)(L) 46,869
Retained earnings 139,674 23,268 (23,268)(L) 139,674
Cumulative translation adjustment (4,580) -- -- (4,580)
-------------------------------------------------
Total Shareholders' Equity 185,421 24,157 (24,157) 185,421
-------------------------------------------------
$306,318 $28,062 $ 50,088 $384,468
=================================================
</TABLE>
<PAGE> 19
The transaction is accounted for using the purchase method of accounting
and, accordingly, the pro forma adjustments reflect the allocation of
purchase price to the assets and liabilities assumed. The earnings per
share calculations have been prepared under the new Statement of Financial
Accounting Standards (SFAS) No. 128, effective for Kirkhill after
December 15, 1997 and also reflect the 2-for-1 stock split for shareholders
effective on April 20, 1998.
A preliminary allocation of the purchase price is summarized as follows (in
thousands):
<TABLE>
<S> <C>
Purchase price (including estimated transaction expenses) $83,816
Post-closing adjustments 6,400
-------
Total $90,216
=======
Allocation
Net Assets of Kirkhill $24,157
Increase (decrease) to net asset value at
July 31, 1998 as a result of estimated
fair value adjustments:
Property, Plant and Equipment, net 28,852
Deferred Income Taxes (9,665)
Excess of the purchase price over the
fair value of the net assets acquired 46,872
-------
Total $90,216
=======
</TABLE>
Following is a summary of adjustments and reclassifications reflected in the
unaudited pro forma statements of income for fiscal year 1997 and the nine
months ended July 31, 1998:
(A) Cost of sales was adjusted for depreciation expense that would
have occurred had the transaction been in effect at the
beginning of the period, $2,005 and $1,675, respectively.
(B) Cost of sales and selling, general and administrative expenses
were adjusted to reflect Kirkhill as if the ESOP was not in
existence for the periods presented. In addition, a
calculation for pension and 401(k) expense was estimated based
on Esterline's plan and agreements made during the transaction.
The adjustments to cost of sales were ($734) and $112,
respectively and to selling, general and administrative were
($321) and $65, respectively.
The excess purchase price over the fair value of assets
acquired will be amortized on a straight-line basis over a
40-year period reflecting an expense for the periods of $1,172
and $879, respectively.
(C) If the transaction had occurred prior to the periods being
presented, interest income would have been reduced due to the
cash payment made for the
<PAGE> 20
Kirkhill stock. For this calculation, the reduction was
calculated on $39,400 at 5.6% per annum resulting in reductions
of $2,206 for fiscal year 1997. For the period ended
July 31, 1998 interest expense would have been $-0-.
(D) Additional interest expense was calculated on the balance of
the cash used to complete the transaction, $50,000 at 6.187%,
assuming a payment of principal occurring at the end of a
specified period in the future, resulting in an increase of
interest expense $3,094 and $2,320, respectively.
(E) The reduction in taxes represents the tax effect of the
unaudited pro forma income statements, excluding goodwill
amortization based on a tax rate of 33.5%, $2,614 and $2,561,
respectively.
Following is a summary of adjustments reflected in the unaudited pro forma
balance sheet:
(F) Cash was reduced by amounts paid (including transaction costs)
to complete the Kirkhill transaction.
(G) Property, plant and equipment was adjusted for the estimated
fair value of assets on the date of acquisition, including the
netting of prior accumulated depreciation against the gross
value.
(H) The excess purchase price over the fair value of assets acquired
(including acquisition related expenses) is reflected. This
amount is expected to be amortized on a straight-line basis over
a 40-year period.
(I) Estimated additional acquisition related expenses.
(J) The Company is currently reviewing its options to complete a
private placement of debt. For these pro forma statements the
amounts not paid from Esterline's available cash are being
financed under the Company's current credit facilities with the
Bank of America.
(K) Deferred taxes payable were adjusted for the net tax effect of
the pro forma adjustments.
(L) These entries represent the elimination of Kirkhill's historical
equity as required by generally accepted accounting principles.
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