<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ESTERLINE TECHNOLOGIES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
ESTERLINE TECHNOLOGIES CORPORATION
10800 NE 8TH STREET
BELLEVUE, WASHINGTON 98004
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 3, 1999
------------------------
To the Shareholders of Esterline Technologies Corporation:
NOTICE IS HEREBY GIVEN that the 1999 ESTERLINE TECHNOLOGIES CORPORATION, a
Delaware corporation (the "Company"), annual meeting of shareholders will be
held on Wednesday, March 3, 1999 at 10:00 a.m., at the Hyatt Regency Bellevue,
900 Bellevue Way, Bellevue, Washington, for the following purposes:
(1) to elect four directors of the Company to serve a term of three years;
(2) to approve an increase in the number of authorized shares of common
stock from 30,000,000 to 60,000,000 shares,
(3) to ratify the selection of Deloitte & Touche LLP, as the Company's
independent auditors for the fiscal year 1999; and
(4) to transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on January 5, 1999,
as the record date for determination of shareholders entitled to notice of and
to vote at the meeting or any adjournment or postponement thereof.
The Company's Annual Report for the fiscal year 1998 is enclosed for your
convenience.
By order of the Board of Directors
/s/ Robert W. Stevenson
ROBERT W. STEVENSON
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
January 15, 1999
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE ANNUAL MEETING. HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES MUST BE PRESENT EITHER IN PERSON OR BY PROXY FOR THE MEETING TO BE HELD.
IF YOU ATTEND THE MEETING AND VOTE YOUR SHARES PERSONALLY, ANY PREVIOUS PROXIES
WILL BE REVOKED.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 3, 1999
------------------------
This proxy statement, which is first being mailed to shareholders on or
about January 15, 1999, has been prepared in connection with the solicitation by
the Board of Directors of Esterline Technologies Corporation (the "Company") of
proxies in the accompanying form to be voted at the 1999 annual meeting of
shareholders of the Company to be held on Wednesday, March 3, 1999 at
10:00 a.m., at the Hyatt Regency Bellevue, 900 Bellevue Way, Bellevue,
Washington, and at any adjournment or postponement thereof. The Company's
principal executive office is at 10800 NE 8th Street, Bellevue, Washington
98004.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, officers and employees of the Company may, without
additional compensation, solicit the return of proxies by telephone, telegram,
messenger, facsimile transmission or personal interview. Arrangements may also
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to their principals, and the Company may
reimburse such persons for their expenses in so doing.
Any proxy given pursuant to the solicitation may be revoked at any time
prior to being voted. A proxy may be revoked by the record holder or other
person entitled to vote (a) by attending the meeting in person and voting the
shares, (b) by executing another proxy dated as of a later date or (c) by
notifying the Secretary of the Company in writing, at the Company's address set
forth on the notice of the meeting, provided that such notice is received by the
Secretary prior to the meeting date. All shares represented by valid proxies
will be voted at the meeting. Proxies will be voted in accordance with the
specification made therein or, in the absence of specification, in accordance
with the provisions of the proxy.
The Board of Directors has fixed the close of business on January 5, 1999,
as the record date for determination of holders of common stock of the Company
(the "Common Stock") entitled to notice of and to vote at the annual meeting. At
the close of business on the record date there were outstanding and entitled to
vote 17,334,388 shares of Common Stock, which are entitled to one vote per share
on all matters which properly come before the annual meeting. A plurality of the
shares of Common Stock present in person or represented by proxy at the meeting
is required for the election of directors. An affirmative vote of a majority of
the shares of Common Stock present in person or represented by proxy and
entitled to vote at the meeting is required for approval of all other items
being submitted to the shareholders for their consideration. The presence in
person or by proxy of the holders of record of a majority of the outstanding
shares of Common Stock entitled to vote is required to constitute a quorum for
the transaction of business at the meeting. The Common Stock is listed for
trading on the New York Stock Exchange.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the inspectors of election appointed for the annual meeting. The inspectors of
election will determine whether or not a quorum is present at the annual
meeting. The inspectors of election will treat abstentions as shares of Common
Stock that are present and entitled to vote for purposes of determining the
presence of a quorum. Under certain circumstances, a broker or other nominee may
have discretionary authority to vote certain shares of Common Stock if
instructions have not been received from the beneficial owner or other person
entitled to vote. If a broker or other nominee indicates on the proxy that it
does not have instructions or discretionary authority to vote certain shares of
Common Stock on a particular matter, those shares will not be considered as
present for purposes of determining whether a quorum is present or whether a
matter has been approved.
1
<PAGE>
ELECTION OF DIRECTORS
Four directors are to be elected at the 1999 annual meeting of shareholders
to serve three-year terms expiring at the 2002 annual meeting or until their
successors are elected and qualified. The Board of Directors recommends a vote
FOR the four director nominees named below.
Directors of the Company are elected for three-year terms that are staggered
such that approximately one-third of the directors are elected each year. The
current directors whose terms expire at the 1999 annual meeting are
E. John Finn, Robert F. Goldhammer and Jerome J. Meyer. Mr. Meyer, who has
served on the Board of Directors since 1992, has advised the Board that he will
be retiring as a director immediately after the conclusion of the 1999 annual
meeting of shareholders. During 1998, the Board of Directors was expanded by two
members and Messrs. Leitman and Cremin were elected in June and December,
respectively. Upon Mr. Meyer's retirement, the size of the Board of Directors
will be reduced by one member.
Information as to each nominee and each director whose term will continue
after the 1999 annual meeting is provided below. In the election of directors,
any action other than a vote FOR the nominee will have the practical effect of
voting against the nominee. Unless otherwise instructed, it is the intention of
the persons named in the accompanying proxy to vote shares represented by
properly executed proxies FOR the election of the four nominees named below. The
Board of Directors knows of no reason why any of the nominees will be unable or
unwilling to serve. If any nominee becomes unavailable to serve, the Board of
Directors intends for the persons named as proxies to vote for the election of
such other persons, if any, as the Board of Directors may recommend.
NOMINEES:
ROBERT W. CREMIN
PRESIDENT AND CHIEF OPERATING OFFICER, ESTERLINE TECHNOLOGIES. Age 58.
Mr. Cremin has been President of the Company since September 1997 and Chief
Operating Officer since October 1996. In addition, he served as Executive Vice
President from October 1996 to September 1997. From January 1991 to
October 1996, he was Senior Vice President and Group Executive. He was elected a
director of the Company effective December 1998.
E. JOHN FINN
CHAIRMAN (RETIRED), DORR-OLIVER INCORPORATED. Age 67.
Mr. Finn is the retired Chairman and Partner of Dorr-Oliver Incorporated (a
process engineering and equipment company), having held such positions from 1988
to 1995. He is also a director of Advanced Refractory Technologies, Inc., Pro
Air, Inc. and Stantec, Inc. He has been a director of the Company since 1989.
ROBERT F. GOLDHAMMER
CHAIRMAN, IMCLONE SYSTEMS, INCORPORATED. Age 67.
Mr. Goldhammer has been the Chairman of ImClone Systems, Incorporated (a
biotechnology company) since 1984. Previously, he was a Partner and Vice
Chairman of the Executive Committee of Kidder, Peabody & Co. Incorporated. He is
also a Partner at Concord International Investments Group L.L.P. He has been a
director of the Company since 1974.
JERRY D. LEITMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER, ENERGY RESEARCH CORPORATION. Age 56.
Mr. Leitman has served as President and Chief Executive Officer of Energy
Research Corporation (a fuel cell and rechargeable battery development company)
since August 1997. Previously, he was President of Jaydell, Inc. from
January 1995 through August 1997, and President of ABB, Air Pollution Control
from October 1992 through December 1994. He was elected a director of the
Company effective June 1998.
2
<PAGE>
CONTINUING DIRECTORS:
RICHARD R. ALBRECHT
EXECUTIVE VICE PRESIDENT (RETIRED), COMMERCIAL AIRPLANE GROUP, THE BOEING
COMPANY. Age 66.
Prior to August 1997, Mr. Albrecht was Executive Vice President of the
Commercial Airplane Group for The Boeing Company (an aerospace company), having
held such position from 1984 to 1997. He has been a director of the Company
since 1997 and his term expires in 2001.
GILBERT W. ANDERSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER (RETIRED), PHYSIO-CONTROL
CORPORATION. Age 70.
Mr. Anderson is the retired President and Chief Executive Officer of
Physio-Control Corporation (a medical device manufacturer), having held such
positions from 1986 to 1991 and is a private investor. He is also a director of
SpaceLabs Medical. He has been a director of the Company since 1991 and his term
expires in 2000.
JOHN F. CLEARMAN
CHIEF FINANCIAL OFFICER, MILLIMAN & ROBERTSON. Age 61.
Mr. Clearman is the Chief Financial Officer, Milliman & Robertson (an actuarial
consulting firm) commencing October 1998. He is the former President and Chief
Executive Officer of NC Machinery Co., having held such positions from 1986
through 1994. He has been a director of the Company since 1989 and his term
expires in 2001.
WENDELL P. HURLBUT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, ESTERLINE TECHNOLOGIES. Age 67.
Mr. Hurlbut has served as Chairman and Chief Executive Officer of the Company
since September 1997. Previously, he served as Chairman, President and Chief
Executive Officer from January 1993 through September 1997. From February 1989
through December 1992, he was President and Chief Executive Officer. 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 and his term
expires in 2000.
PAUL G. SCHLOEMER
PRESIDENT AND CHIEF EXECUTIVE OFFICER (RETIRED), PARKER HANNIFIN
CORPORATION. Age 70.
Mr. Schloemer is the retired President and Chief Executive Officer of Parker
Hannifin Corporation (a manufacturer of motion control products), having held
such positions from 1984 to 1993 and is a director of Rubbermaid Incorporated
and AMP Incorporated. He has been a director of the Company since 1993 and his
term expires in 2001.
MALCOLM T. STAMPER
VICE CHAIRMAN (RETIRED), THE BOEING COMPANY. Age 73.
Mr. Stamper is the retired President and Vice Chairman of The Boeing Company (an
aerospace company), having held such positions from 1972 to 1990 and has been
the Chairman, Chief Executive Officer and Publisher of Storytellers Ink since
1990. He is a director of Whittaker Corp. and Pro Air, Inc. He has been a
director of the Company since 1991 and his term expires in 2000.
3
<PAGE>
OTHER INFORMATION AS TO DIRECTORS
DIRECTOR COMPENSATION
The Company pays, in cash, non-employee directors an annual retainer fee of
$20,000 for services on the Board and all committees thereof, a fee of $1,000
for each special meeting attended and a fee of $200 for each telephonic meeting
in which they participate (and reimburses such directors for out-of-pocket
expenses incurred therewith). The Company also pays non-employee committee
chairmen an annual fee of $5,000. In addition, the Company pays non-employee
directors additional compensation in the form of an annual issuance to each
director of $5,000 worth of fully-paid Common Stock and reimburses each such
director in cash for the payment of income taxes ($3,278.15 at current Federal
income tax rates) on this stock. Employees of the Company serving on the Board
and committees thereof receive no additional compensation for such service.
There were five meetings of the Board of Directors during fiscal 1998.
BOARD COMMITTEES
THE AUDIT COMMITTEE, currently consisting of Messrs. Clearman (Chairman),
Albrecht, Anderson, Leitman, Meyer and Schloemer, recommends to the Board the
independent auditors to be selected to audit the Company's annual financial
statements and reviews the fees charged for audits and for any non-audit
assignments. This Committee also reviews: (1) the scope and results of the
annual audit by the independent auditors, any recommendations of the independent
auditors resulting therefrom and management's response thereto, (2) the
accounting principles being applied by the Company in financial reporting,
(3) the activities of the Company's internal auditors and the adequacy of
internal accounting controls, (4) the Company's environmental compliance
practices and management system, and (5) such other related matters as it deems
appropriate. The Audit Committee met six times during fiscal 1998.
THE COMPENSATION & STOCK OPTION COMMITTEE, currently consisting of
Messrs. Goldhammer (Chairman), Finn and Stamper, recommends the form and level
of compensation for officers of the Company. The Compensation & Stock Option
Committee has also been appointed by the Board of Directors to administer the
Company's stock option plans and executive officer incentive compensation plans.
The Compensation & Stock Option Committee met four times during fiscal 1998.
THE EXECUTIVE COMMITTEE, currently consisting of Messrs. Hurlbut (Chairman),
Finn, Goldhammer and Stamper, reviews situations that might, at some future
time, become items for consideration of the entire Board of Directors and acts
on behalf of the entire Board of Directors between its meetings. The Executive
Committee met once during fiscal 1998.
THE NOMINATING COMMITTEE, currently consisting of Messrs. Stamper
(Chairman), Finn and Schloemer, recommends individuals to be presented to the
shareholders of the Company for election or re-election to the Board of
Directors. Written proposals from shareholders for nominees for directors to be
elected at the 1999 annual meeting, which were submitted to the Secretary of the
Company by September 26, 1998, and which contain sufficient background
information concerning the nominee to enable a proper judgment to be made as to
his or her qualifications, will be considered by the Nominating Committee. The
Nominating Committee met twice during fiscal 1998.
Each director, during fiscal 1998, attended at least 75% of the total number
of meetings of the Board of Directors and Board committees of which he was
a member.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of shares of Common Stock as of January 5, 1999 by (i) each person or
entity who is known by the Company to own beneficially more than 5% of the
Common Stock, (ii) each of the Company's directors, (iii) each of the Company's
named executive officers and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES(2) OF CLASS
- ------------------------------------------------------------ ----------------- --------
<S> <C> <C>
Sanford C. Bernstein & Co., Inc............................. 1,371,365(3) 7.9%
767 Fifth Avenue, New York, NY 10153
The Prudential Insurance Company of America................. 1,164,800(4) 6.7%
Prudential Plaza, Newark, NJ 07102
Larry A. Kring.............................................. 225,400(5) 1.3%
Wendell P. Hurlbut.......................................... 189,327(5) 1.1%
Stephen R. Larson........................................... 154,500(5) *
Robert W. Cremin............................................ 152,788 (5)(6 *
Robert W. Stevenson......................................... 97,374 (5)(6 *
E. John Finn................................................ 37,744 *
Robert F. Goldhammer........................................ 18,244 *
John F. Clearman............................................ 11,744 *
Gilbert W. Anderson......................................... 5,988 *
Jerome J. Meyer............................................. 3,744 *
Paul G. Schloemer........................................... 3,744 *
Malcolm T. Stamper.......................................... 3,744 *
Richard R. Albrecht......................................... 2,234 *
Jerry D. Leitman............................................ -- *
Directors, nominees and executive officers as a group
(17 persons).............................................. 979,525 (5)(6 5.4%
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise indicated, the business address of each of the shareholders
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 Securities and
Exchange Commission (the "SEC") on or about February 4, 1998, and certain
other information provided by Sanford C. Bernstein & Co., Inc., a registered
broker-dealer and a registered investment advisor. Based on such
information, shared voting and dispositive power is reported with respect to
all of the shares.
(4) The holding shown is based on a Schedule 13G filed with the SEC on or about
February 9, 1998, and certain other information provided 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 such information, shared voting and
dispositive power is reported with respect to all of the shares.
(5) Includes shares subject to options granted under the Company's 1987 and 1997
Stock Option Plans which are exercisable currently or within 60 days of the
date of this proxy statement as follows: Mr. Hurlbut, 114,250 shares;
Mr. Cremin, 146,000 shares; Mr. Stevenson, 75,250 shares; Mr. Kring, 215,000
shares; Mr. Larson, 154,500 shares; and directors, nominees and executive
officers as a group, 775,750 shares.
(6) Includes shares held in the name of such holder's children as follows:
Mr. Cremin, 2,122 shares and Mr. Stevenson, 17,500 shares.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes compensation paid or accrued during fiscal
years 1998, 1997 and 1996 for services in all capacities to the Company by the
persons who, at October 31, 1998, were the Chief Executive Officer and the four
other most highly compensated executive officers of the Company (collectively,
the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
AWARDS
ANNUAL -------------- PAYOUTS
COMPENSATION SECURITIES ----------
------------------ UNDERLYING LTIP ALL OTHER
SALARY BONUS OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)(1) ($)(2) ($)(3)
- -------------------------------------------------- ----- -------- -------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wendell P. Hurlbut................................ 1998 425,000 307,785 25,000 412,500 2,500
Chairman of the Board 1997 421,667 349,350 36,000 287,100 2,375
and Chief Executive Officer 1996 401,667 217,947 40,000 589,695 2,375
Robert W. Cremin.................................. 1998 340,000 225,709 20,000 300,000 2,500
President and Chief 1997 317,083 232,900 50,000 156,600 2,375
Operating Officer (4) 1996 266,667 127,136 130,000 212,427 2,375
Robert W. Stevenson............................... 1998 292,500 160,229 16,000 150,000 2,500
Executive Vice President, 1997 277,500 172,620 20,000 104,400 2,375
Chief Financial Officer, and Secretary 1996 265,000 106,955 15,000 223,465 2,375
Larry A. Kring.................................... 1998 267,500 130,356 15,000 135,000 2,500
Group Vice President 1997 252,500 139,740 20,000 93,960 2,375
1996 237,500 86,102 15,000 192,289 2,375
Stephen R. Larson................................. 1998 238,667 115,872 13,000 135,000 2,500
Group Vice President 1997 230,000 127,136 20,000 93,960 2,375
1996 218,333 80,721 15,000 192,289 2,375
</TABLE>
- ------------------------
(1) All prior year options have been restated for the two-for-one stock split
effective April 20, 1998.
(2) The Compensation Committee adopted a new long-term incentive compensation
plan in fiscal 1997 covering the three years 1997-1999. See "Compensation
Committee Report--Long-Term Incentive Plan." With respect to compensation
reported in fiscal 1996, amounts shown include settlement of all amounts
accrued and due through the date of termination for the prior plan.
(3) Amounts contributed or accrued by the Company for the Named Executive
Officer under the Company's 401(k) plan.
(4) President and Chief Operating Officer since September 25, 1997 at an annual
salary of $340,000 and Executive Vice President and Chief Operating Officer
from October 1, 1996 to September 24, 1997, at a salary of $315,000.
6
<PAGE>
OPTIONS GRANTED IN THE FISCAL YEAR ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- --------------------------------------------------------------------------------------- VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE -------------------------
NAME (#)(1) FISCAL YEAR ($/SHARE) EXPIRATION DATE 0%($) 5%($) 10%($)
- ------------------------------ ---------- ------------ --------- --------------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Wendell P. Hurlbut............ 25,000 13% 18.25 December 2007 0 286,933 727,145
Robert W. Cremin.............. 20,000 11% 18.25 December 2007 0 229,547 581,716
Robert W. Stevenson........... 16,000 9% 18.25 December 2007 0 183,637 465,373
Larry A. Kring................ 15,000 8% 18.25 December 2007 0 172,160 436,287
Stephen R. Larson............. 13,000 7% 18.25 December 2007 0 149,205 378,115
</TABLE>
- ------------------------
(1) The grants were made in December 1997 pursuant to the Company's Stock Option
Plan. The exercise price of the options is equal to the fair market value of
the Common Stock on the date of grant. The options vest at the rate of
twenty-five percent per year on each of the first four anniversaries of the
date of grant. In the event any person becomes the beneficial owner of 30%
or more of the Common Stock, including by means of a tender offer, or upon
approval by the Company's shareholders of a merger or similar transaction
providing for the exchange of more than 50% of the Company's shares into
cash, property or securities of a third party, all options held by the Named
Executive Officers under the stock option plans will become immediately
exercisable.
(2) The potential realizable value is based on the assumption that the stock
price for the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten-year option term,
as specified by the SEC. These assumed rates of annual stock price
appreciation are specified by the rules of the SEC and are not intended to
forecast possible future appreciation, if any, of the Company's stock price.
Actual realizable value, if any, on stock option exercises depends on the
future performance of the Common Stock as well as the option holder's
continued employment with the Company.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED OCTOBER 31, 1998,
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE FISCAL YEAR END(#)(3) FISCAL YEAR END($)(4)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#)(1) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- -------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wendell P. Hurlbut................. 60,000 937,500 74,000 87,000 837,313 595,688
Robert W. Cremin................... -- -- 120,000 130,000 1,272,406 860,344
Robert W. Stevenson................ -- -- 57,500 43,500 788,906 259,406
Larry A. Kring..................... -- -- 197,500 42,500 2,997,656 257,656
Stephen R. Larson.................. -- -- 157,500 40,500 2,229,531 254,156
</TABLE>
- ------------------------
(1) All of the shares were acquired under the cashless exercise procedure
provided for in the Company's Stock Option Plan. This procedure provides for
payment of the exercise price of the options and federal taxes incurred upon
such exercise by the optionees through withholding of shares otherwise
issuable upon such exercise, valued at market on the date of exercise. The
net number of shares issued pursuant to such exercise for Mr. Hurlbut
was 28,616.
(2) The value realized is the difference between the fair market value of the
underlying Common Stock at the time of exercise and the aggregate exercise
price of the options.
(3) Exercisable/unexercisable amounts are as of October 31, 1998.
(4) Based on the closing price of the Common Stock on October 30, 1998, as
reported by the New York Stock Exchange ($20.00), less the exercise price,
multiplied by the number of in-the-money options held. There is no guarantee
that, if and when these options are exercised, they will have this value.
LONG-TERM INCENTIVE PLANS--AWARDS IN THE FISCAL YEAR ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
ESTIMATED FUTURE
ANNUAL PAYOUTS
UNDER
NON-STOCK
PERFORMANCE OR PRICE-BASED
NUMBER OF OTHER PERIOD PLANS($)(1)
SHARES, UNITS UNTIL MATURATION ----------------
NAME OR OTHER RIGHTS OR PAYOUT TARGET MAXIMUM
- ------------------------------------------------------------ --------------- ---------------- ------- -------
<S> <C> <C> <C> <C>
Wendell P. Hurlbut.......................................... -- 1997-1999 275,000 412,500
Robert W. Cremin............................................ -- 1997-1999 200,000 300,000
Robert W. Stevenson......................................... -- 1997-1999 100,000 150,000
Larry A. Kring.............................................. -- 1997-1999 90,000 135,000
Stephen R. Larson........................................... -- 1997-1999 90,000 135,000
</TABLE>
- ------------------------
(1) The above awards were made pursuant to the Company's long-term incentive
compensation plan which was instituted on November 1, 1996. Awards under the
new plan are based on performance with respect to three groups of
objectives: GROUP I--target earnings per share growth and target return on
shareholders equity; GROUP II--strategic operating performance objectives,
which may be altered from time to time by the Committee; and
GROUP III--relative earnings per share and return on equity as compared to a
peer group of companies and industries. Each of the three groups of
objectives is weighted equally and the plan provides for annual updating of
objectives when the Committee deems appropriate. Partial payments are to be
made based on performance with respect to each group of targets for each
year. See "Compensation Committee Report--Long Term Incentive Plan."
8
<PAGE>
RETIREMENT BENEFITS
The Named Executive Officers are covered by a tax-qualified defined benefit
retirement plan (which covers substantially all U.S. employees of the Company)
and a Supplemental Executive Retirement Plan ("SERP") which, combined, requires
an employee contribution of 1% of annual covered compensation. Under the plans,
benefits accrue until retirement, subject to a 30-year maximum, with normal
retirement at age 65. Under the tax-qualified defined benefit retirement plan,
retirees are entitled to receive an annuity computed under a five-year average
compensation formula, which includes salary, amounts earned under annual and
long-term incentive compensation plans and amounts realized upon exercise of
stock options, less expected Social Security benefits. The SERP provides
benefits in excess of statutory limits and entitles retirees to receive an
annuity computed under a restricted version of the five-year average
compensation formula, which excludes amounts earned under the long-term
incentive compensation plan and amounts realized upon exercise of stock options.
The SERP provides that Mr. Hurlbut receive retirement plan service maximums at
age 65, thus his credited service equals 30 years at this time. The retirees may
select either a life annuity or one of several alternative forms of payment with
an equivalent actuarial value.
The approximate annual annuity payable upon retirement to the Named
Executive Officers is shown in the following table. The amounts shown are for
retirement at age 65. Benefits are integrated with Social Security based on the
career average Social Security wage base in effect in 1998. To the extent the
Social Security wage base is increased after 1998, the benefits payable under
the retirement plan would be lower than the amounts shown.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE AT RETIREMENT
--------------------------------------------------------------
AVERAGE COMPENSATION 10 15 20 25 30
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$100,000.................................................... $ 13,400 $ 20,100 $ 26,800 $ 33,600 $ 40,300
250,000.................................................... 37,400 56,100 74,800 93,600 112,300
400,000.................................................... 61,400 92,200 122,800 153,600 184,300
550,000.................................................... 85,400 128,100 170,800 213,600 256,300
700,000.................................................... 109,400 164,100 218,800 273,600 328,300
850,000.................................................... 133,400 200,100 266,800 333,600 400,300
</TABLE>
The Named Executive Officers currently have the following completed years of
credited service for purposes of the defined benefit retirement plan:
Mr. Hurlbut, 30; Mr. Stevenson, 25; Mr. Cremin, 21; Mr. Kring, 5; and
Mr. Larson, 19.
TERMINATION AGREEMENTS
The Company has entered into termination protection agreements with the
Named Executive Officers which are designed to induce them to remain in the
employ of the Company or any successor company in the event of certain changes
in ownership or control by assuring compensation benefits if an officer is
terminated "Without Cause" or resigns for "Good Reason," as defined in the
agreements. In the event of such termination within two years after a change in
ownership or control, the agreements provide for lump sum payments equal to
twice the average compensation received during the prior two years, payment of
certain legal fees and expenses associated with the termination and insurance
benefits for the remainder of the initial two-year period, or until other
full-time employment is accepted.
9
<PAGE>
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION PRINCIPLES
The Compensation & Stock Option Committee (the "Committee") is responsible
for administering the compensation program for the executive officers of the
Company. The Committee is composed exclusively of independent, non-employee
directors who are not eligible to participate in any of the executive
compensation programs.
The Company's executive compensation practices are based on principles
designed to align executive compensation with Company objectives, business
strategy, management initiatives and financial performance. In applying these
principles the Committee has established a program to:
- Support a performance-oriented environment that rewards performance not
only with respect to the Company's annual results but also Company
performance as compared to that of longer-term industry performance
levels.
- Reward executives for long-term strategic management and the enhancement
of shareholder value.
- Attract and retain key executives critical to the success of the Company.
EXECUTIVE COMPENSATION PROGRAM
Each executive's total compensation consists of both cash and equity-based
compensation. The cash portion consists of salary, an annual incentive plan and
a long-term incentive plan. The equity portion consists of awards under the
Company's stock option plans.
SALARY:
The Committee determines the initial salary for key executive officers based
upon surveys of salaries for positions of comparable responsibility, taking into
account competitive norms and the experience of the person being considered.
Subsequent salary changes are based upon individual performance or changes in
responsibilities.
ANNUAL INCENTIVE PLAN:
At the beginning of the fiscal year, the Committee establishes a "target"
award amount for each executive (stated as a percentage of the executive's base
salary) and performance measurement goals for the year. The award amount
calculated pursuant to the plan formula can range from 0% to 150% of each
executive's "target" award amount.
After award amounts are computed under the plan formula, the Committee may,
at its discretion, adjust the actual amount paid to each executive upward or
downward by as much as 25% of the greater of the executive's computed award or
the executive's target award amount. The ability of the Committee to make
subjective adjustments to award amounts reflects the Committee's concern that
the performance of the Company measured against the goals established at the
beginning of the year may not fully reflect the achievements of management. No
award may exceed 112.5% of the executive's base salary.
For 1998, the Committee selected earnings per share as the sole performance
goal. Award amounts computed under the plan formula ranged from 30% to 72% of
base salary. No adjustments under the discretionary formula were made.
10
<PAGE>
LONG-TERM INCENTIVE PLAN:
The long-term incentive compensation plan covers the three fiscal year
period ending in October 1999 and is based on three groups of objectives:
GROUP I establishes target earnings per share growth and target return on
shareholders equity; GROUP II establishes strategic operating performance
objectives for the Committee to monitor which may be altered from time to time
by the Committee; and GROUP III establishes relative earnings per share and
return on equity performance measurements compared to a peer group of companies
and industries. Each of the three groups of objectives is weighted equally and
the plan provides for annual updating of objectives when the Committee deems
appropriate.
The plan contemplates partial payouts after the close of each fiscal year
based on Committee evaluation of performance and based upon certain dollar
targets established for each participant at the beginning of each fiscal year.
These partial payouts are limited to 100% of salary for each year an executive
receives payments under the plan. For fiscal 1998, no earned payout to a plan
participant exceeded 98% of salary.
STOCK OPTIONS:
The portion of the long-term incentives provided from stock options
contemplates annual awards of stock options roughly equal in market value to the
current salary of each senior executive. The Committee regularly reviews each
executive's situation and periodically grants additional options. In
December 1997 and 1998, the Committee awarded the officers options to purchase,
in the aggregate, 107,000 and 125,000 shares, respectively, of the Company's
Common Stock at fair value on the date of grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee believes the CEO's compensation should be
structured so that the payouts from the annual incentive plan and the long-term
incentive plan relate closely to the Company's performance. It has followed a
policy of providing the CEO a planned compensation package which, in addition to
base salary, would pay cash incentives of up to 125% of salary for achieving
targeted Company performance. In 1998, the CEO's award under the annual
incentive plan was $307,785 (72% of base salary), the earned portion of the
long-term incentive plan was $412,500 (97% of base salary) and his base salary
was $425,000 (effective January 1, 1997). In December 1997 and 1998, the
Committee awarded the CEO options to purchase 25,000 and 20,000 shares,
respectively, of the Company's Common Stock at fair market value on the date of
grant.
Each year, the Committee separately reviews the CEO's salary and
participation levels in both the annual incentive plan and long-term incentive
plan.
It is the Company's general policy to provide that compensation payable
under its executive compensation plans and arrangements will not fail to be
deductible by reason of the million dollar limit on deductible compensation
provided under Section 162(m) of the Internal Revenue Code. However, exceptions
may be made on a case-by-case basis.
Respectfully submitted,
ROBERT F. GOLDHAMMER, CHAIRMAN
E. JOHN FINN
MALCOLM T. STAMPER
11
<PAGE>
COMMON STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total return to shareholders on
the Common Stock during the years 1993 through 1998 with the cumulative total
return of the Standard & Poor's 500 Stock Index, and the Standard & Poor's
Capital Goods Index. The cumulative total return on the Company's Common Stock
and each index assumes the value of each investment was $100 on
October 31, 1993, and that all dividends were reinvested. The measurement dates
plotted below indicate the last trading date of each fiscal year shown. The
stock price performance shown in the graph is not necessarily indicative of
future price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ESTERLINE TECHNOLOGIES S&P 500 INDEX CAPITAL GOODS-500
<S> <C> <C> <C>
10/93 $100 $100 $100
10/94 $165.01 $103.87 $115.82
10/95 $308.35 $131.33 $143.95
10/96 $311.68 $162.97 $186.91
10/97 $485.01 $215.31 $233.69
10/98 $533.33 $262.66 $264.88
</TABLE>
12
<PAGE>
PROPOSAL TO APPROVE AN INCREASE IN THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has unanimously adopted, subject to shareholder
approval, an amendment to Article 4 of the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
30,000,000 shares to 60,000,000 shares. The text of the first sentence of
Article 4, as it is proposed to be amended, is as follows:
The total number of shares of stock which the Corporation shall have
authority to issue is Sixty Million Five Hundred Thousand shares, consisting of
Sixty Million shares of Common Stock having a par value of $0.20 per share,
Twenty Five Thousand shares of Preferred Stock having a par value of $100.00 per
share, issuable in series (hereinafter called the "Preferred Stock"), and Four
Hundred Seventy Five Thousand shares of Serial Preferred Stock having a par
value of $1.00 per share, issuable in series (herinafter the "Serial Preferred
Stock").
Under the present Restated Certificate of Incorporation, the Company has the
authority to issue 30,000,000 shares of Common Stock, $0.20 par value per share,
25,000 shares of Preferred Stock, $100.00 par value and 475,000 shares of Serial
Preferred Stock, $1.00 par value per share. At January 5, 1999, 17,334,388
shares of Common Stock were issued and outstanding and no shares of Preferred or
Serial Preferred Stock were outstanding. Accordingly, as of January 5, 1999,
after taking into account the shares reserved for issuance upon the exercise of
Company stock options, approximately 11,259,862 shares of Common Stock remained
available for issuance. The proposed amendment would provide for an additional
30,000,000 shares of Common Stock available for issuance.
The purpose of the increase in authorized shares is to provide additional
shares of Common Stock that could be issued for corporate purposes without
further shareholder approval unless required by applicable law or regulation. At
this time, the Company has no present plans, understandings, or agreements for
the issuance or use of the proposed additional shares of Common Stock.
Nevertheless, the Board of Directors believes that the proposed increase is
desirable so that, as the need may arise, the Company will have more financial
flexibility and be able to issue shares of Common Stock, without the expense and
delay of a special shareholders' meeting, in connection with future
opportunities for expanding the business through investments or acquisitions,
possible stock splits or stock dividends, equity financings, management
incentive plans, and for other purposes.
The additional shares of Common Stock that would become available for
issuance if the proposed amendment were adopted could also be used by the
Company to oppose a hostile takeover attempt or delay or prevent changes of
control (whether by merger, tender offer, proxy contest or assumption of control
by holder of a large block of the Company's securities) or changes in or removal
of management of the Company. For example, without further shareholder approval,
the Board of Directors could strategically sell shares of Common Stock in a
private transaction to purchasers who would oppose a takeover or favor the
current Board of Directors. Although this proposal to increase the number of
authorized shares of Common Stock has been prompted by business and financial
considerations, not by the threat of any attempt to accumulate shares or
otherwise gain control of the Company (nor is the Board of Directors currently
aware of any such attempts directed at the Company), shareholders nevertheless
should be aware that approval of the proposal could facilitate future efforts by
the Company to deter or prevent changes of control of the Company, including
transactions in which the shareholders might otherwise receive a premium for
their shares over then-current market prices or benefit in some other manner.
The additional Common Stock to be authorized by adoption of the proposed
amendment would have rights identical to the currently outstanding Common Stock
of the Company. Adoption of the proposed amendment and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding Common
Stock, except for effects incidental to increasing the number of shares of the
Common Stock outstanding, such as dilution of the earnings per share and voting
rights of current holders of Common Stock. The holders of Common Stock do not
have preemptive rights to subscribe for the additional Common Stock proposed to
be authorized. If the amendment is adopted, it will become effective upon filing
of a Certificate of Amendment of the Company's Restated Certificate of
Incorporation with the Secretary of State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK.
13
<PAGE>
SELECTION OF INDEPENDENT AUDITORS
The selection by the Board of Directors, on the recommendation of the Audit
Committee, of Deloitte & Touche LLP, Seattle, Washington, as independent
auditors to audit the financial statements of the Company for the fiscal year
ending October 31, 1999, is to be submitted to the meeting for ratification.
Said firm has audited the financial statements of the Company since 1987.
Representatives of Deloitte & Touche LLP will be present at the 1999 annual
meeting, will be given the opportunity to make a statement if they wish to do
so, and will be available to respond to appropriate questions.
The Company is not obligated by law or its Certificate of Incorporation or
Bylaws to seek ratification of the directors' selection of auditors, but does so
as a matter of corporate policy. If the selection of auditors is not ratified by
shareholders, the Board may continue to use Deloitte & Touche LLP as auditors or
select new auditors if, in the opinion of the Board, such a change would be in
the best interest of the Company and its shareholders; any such change would not
be expected to be submitted to shareholders for ratification prior to the 2000
annual meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange act of 1934, as amended, generally
requires the Company's directors and executive officers to send reports of their
ownership of Common Stock and of changes in such ownership to the SEC. SEC
regulations also require the Company to identify in this proxy statement any
person subject to this requirement who did not file a Section 16 report on a
timely basis. Based solely upon a review of such reports furnished to the
Company and written representations from the executive officers and directors
that no other reports were required, the Company believes that all such reports
were filed on a timely basis during 1998, except that the initial statement of
ownership for James J. Cich, Jr. following his promotion to an executive officer
of the Company was inadvertently filed 246 days late.
OTHER MATTERS
As of the date of this proxy statement, the only matters which management
intends to present at the meeting are those set forth in the notice of meeting
and in this proxy statement. Management knows of no other matters that may come
before the meeting. However, if any other matters properly come before the
meeting, it is intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the judgment of the person or persons voting
as proxies.
SHAREHOLDER PROPOSALS FOR 2000
An eligible shareholder who wants to have a qualified proposal considered
for inclusion in the proxy statement for the 2000 annual meeting must notify the
Secretary of the Company. The proposal must be received at the Company's
executive office no later than September 18, 1999. A shareholder must have been
a registered or beneficial owner of at least one percent of the outstanding
shares of Common Stock or shares of Common Stock with a market value of $2,000
for at least one year prior to submitting the proposal and the shareholder must
continue to own such stock through the date on which the meeting is held. In
addition, if the Company receives notice of a shareholder proposal after
December 1, 1999, the persons named as proxies in the proxy statement for the
2000 annual meeting will have discretionary voting authority to vote on such
proposal at the 2000 annual meeting.
By order of the Board of Directors
/s/ Robert W. Stevenson
ROBERT W. STEVENSON
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
January 15, 1999
14
<PAGE>
[LOGO]
<PAGE>
ESTERLINE TECHNOLOGIES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Wendell P. Hurlbut and Robert W. Stevenson and
each of them as proxies, each with full power of substitution, to represent
and vote for and on behalf of the undersigned, the number of shares of common
stock of Esterline Technologies Corporation that the undersigned would be
entitled to vote if personally present at the annual meeting of shareholders
to be held on March 3, 1999, or at any adjournment or postponement thereof. The
undersigned directs that this proxy be voted as follows:
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<S><C>
/X/ Please mark your votes
as in this example.
(1) Election of the following Nominees as Directors to serve a term of three years:
Robert W. Cremin, E. John Finn, Robert F. Goldhammer, Jerry D. Leitman
FOR WITHHELD
/ / / /
INSTRUCTION: To withhold authority for any individual nominee,
print that nominee's name in the following space:
FOR AGAINST ABSTAIN
(2) Approval of an increase in the number of authorized shares of Common Stock / / / / / /
from 30,000,000 to 60,000,000.
FOR AGAINST ABSTAIN
(3) Ratification of Deloitte & Touche LLP as the Company's independent / / / / / /
auditors for fiscal year 1999.
(4) In their discretion, the holders of this proxy are authorized to vote upon such
other business as may properly come before the meeting or any adjournment or
postponement thereof.
This proxy, when properly executed, will be voted in the manner directed
on this proxy card. Management recommends a vote FOR all nominees designated on
this proxy card and FOR each of the proposals referred to hereon; if no
specification is made, a vote FOR all of said nominees and FOR approval of
all of said proposals will be entered.
The undersigned hereby revokes any proxy or proxies heretofore given for such
shares and ratifies all that said proxies or their substitutes may lawfully do
by virtue hereof.
Signature(s) ___________________________________________ Date _____________
Please sign exactly as name appears on this proxy. If stock is held jointly,
each owner should sign. Persons signing in a representative capacity should
give their title.
PLEASE PROMPTLY DATE, SIGN AND RETURN THIS PROXY CARD.
- ---------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
