|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: EMERSON RADIO CORP, 8-K, 2000-06-09 |
Next: ESTERLINE TECHNOLOGIES CORP, 10-Q, EX-11, 2000-06-09 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM 10-Q
|
[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 30, 2000
OR
|
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________________ to ____________________
Commission file number 1-6357
ESTERLINE TECHNOLOGIES CORPORATION
|
Delaware
|
13-2595091 |
10800 NE 8th Street, Bellevue, Washington 98004
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code 425/453-9400
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.
|
Yes |
[X] |
No |
[ ] |
As of June 2, 2000, 17,366,140 shares of the issuer's common stock were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEET
As of April 30, 2000 and October 31, 1999
(In thousands, except share amounts)
|
April 30, |
October 31, |
|
|
ASSETS |
|
|
|
Deferred income taxes |
14,949 |
16,212 |
|
Property, Plant and Equipment |
198,155 |
193,275 |
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEET
As of April 30, 2000 and October 31, 1999
(In thousands, except share amounts)
|
April 30, |
October 31, |
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
Commitments and Contingencies |
- |
- |
|
Shareholders' Equity |
|
|
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three and Six Months ended April 30, 2000 and 1999
(Unaudited)
(In thousands, except per share amounts)
|
|
Three Months Ended |
Six Months Ended |
||
|
|
2000 |
1999 |
2000 |
1999 |
|
Net Sales |
$122,146 |
$116,121 |
$226,394 |
$224,819 |
|
Expenses |
|
|
|
|
|
Total Expenses |
32,289 |
32,521 |
61,189 |
63,129 |
|
Operating Earnings |
12,673 |
12,436 |
21,781 |
21,952 |
|
Interest income |
(499) |
(823) |
(1,143) |
(1,453) |
|
Net Other Expense |
1,585 |
1,442 |
2,977 |
2,985 |
|
Earnings Before Income Taxes |
11,088 |
10,994 |
18,804 |
18,967 |
|
Income Tax Expense |
4,151 |
3,852 |
7,041 |
6,768 |
|
Net Earnings |
$ 6,937 |
$ 7,142 |
$ 11,763 |
$ 12,199 |
|
Net Earnings Per Share - Basic |
$ .40 |
$ .41 |
$ .68 |
$ .70 |
|
Net Earnings Per Share - Diluted |
$ .40 |
$ .40 |
$ .67 |
$ .69 |
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended April 30, 2000 and 1999
(Unaudited)
(In thousands)
|
|
Six Months Ended |
|
|
|
2000 |
1999 |
|
Cash Flows Provided (Used) by Operating Activities |
|
|
|
Cash Flows Provided (Used) by Investing Activities |
|
|
|
Cash Flows Provided (Used) by Financing Activities |
|
|
|
Effect of Exchange Rates |
108 |
(324) |
|
Cash and Equivalents - Beginning of Period |
55,047 |
8,897 |
|
Supplemental Cash Flow Information |
|
|
ESTERLINE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended April 30, 2000 and 1999
|
1. |
The consolidated balance sheet as of April 30, 2000, the consolidated statements of operations for the three and six months ended April 30, 2000 and 1999, and the consolidated statement of cash flows for the six months ended April 30, 2000 and 1999 are unaudited, but in the opinion of management all of the necessary adjustments have been made to present fairly the financial statements referred to above. 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 Annual Report on Form 10-K for the fiscal year ended October 31, 1999 provide a summary of significant accounting policies and additional financial information that should be read in conjunction with this Form 10-Q. |
|
3. |
Classifications have been changed for certain amounts in the preceding period to conform to the current period's financial presentation. |
|
4. |
The Company's comprehensive income is as follows: |
|
|
Three Months Ended |
Six Months Ended |
||
|
|
2000 |
1999 |
2000 |
1999 |
|
Net Earnings |
$ 6,937 |
$ 7,142 |
$ 11,763 |
$ 12,199 |
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Quarter Ended April 30, 2000 Compared to Quarter Ended April 30, 1999
Net sales for the quarter ended April 30, by segment, were as follows:
(In thousands)
|
|
Incr./(Decr.) |
|
|
|
Aerospace |
39 % |
$ 61,337 |
$ 44,088 |
Net sales for the second quarter of 2000 were up 5% from the same prior year period. By segment, Aerospace sales increased 39% primarily as a result of two recent acquisitions--Muirhead and A.I.D. Advanced Materials sales were down slightly when comparing second quarter of 2000 with second quarter of 1999; however, sales have improved when compared with the past three quarters. Management believes that sales in this segment during the last 12 months have been impacted by short-term inventory balancing programs by certain customers, and that the segment's recent sales improvement indicates that the effect of these programs was lessening. The decrease in Automation sales was primarily due to the divestiture of Federal Products--an operation sold late in fiscal 1999. Excluding the impact of Federal, sales were up 6%. Sales related to printed circuit board ("PCB") manufacturing continued to improve this quarter while sales to agriculture markets remained weak.
Total gross margin as a percentage of net sales was 37% for the second quarter of 2000 compared with 39% for the second quarter of 1999. Segment gross margins ranged from 35% to 40% for the second quarter of 2000 compared with 34% to 42% during the same period in 1999. Factors affecting the gross margin comparison were unfavorable product mix in Aerospace and Advanced Materials, offset by improvement in PCB manufacturing operations.
Selling, general and administrative expenses decreased to 22% of sales for the second quarter of 2000 compared with 23% for the prior year period. Research, development and engineering spending was $4.9 million, or 4% of sales, for the second quarter of 2000 compared with $5.8 million, or 5% of sales, for the second quarter of 1999. Spending for research, development and engineering was down for the quarter as certain projects began to transition from prototype to production.
Segment earnings (operating earnings excluding corporate expenses) for the second quarter of 2000 were essentially unchanged from the same period in 1999 at $15.7 million. By segment, Aerospace earnings increased 52% to $8.2 million for the second quarter of 2000 from $5.4 million in the first quarter of 1999, primarily due to recent acquisitions. Advanced Materials earnings were $7.3 million for the second quarter of 2000 compared with $9.2 million for the second quarter of 1999. Specific operations in Advanced Materials, primarily metal finishing and high-end elastomer products, continued to be impacted by customer inventory balancing programs. Automation earnings decreased $603,000 to $205,000 for the second quarter of 2000. The decrease is primarily related to weak agricultural business partially offset by improvements in PCB manufacturing business.
Interest expense decreased 8% to $2.1 million in the second quarter. Interest income decreased $324,000 from the second quarter of 1999 to the second quarter of 2000, primarily due to lower levels of cash available for investing.
The effective income tax rate for the second quarter of 2000 was 37% compared with 35% during the same period last year. The change in effective tax is primarily related to state tax benefits recorded in 1999.
New orders for the second quarter of 2000 were $156.6 million compared with $135 million for the same period in 1999. The increase in new orders was primarily attributable to products in the Aerospace segment.
Six Months Ended April 30, 2000 Compared to Six Months Ended April 30, 1999
Year-to-date net sales ended April 30, by segment, were as follows:
(In thousands)
|
|
Incr./(Decr.) |
|
|
|
Aerospace |
30 % |
$ 108,808 |
$ 83,444 |
Sales for the first half of 2000 increased slightly compared with the prior year. The primary change when comparing sales year-to-date is in the mix by segment. Aerospace sales benefited from sales contributed by recent acquisitions. Advanced Materials sales reflect the delay in sales due to customer related inventory balancing programs. The decrease in Automation sales was primarily due to the divestiture of Federal. Excluding Federal, Automation sales improved 5% due to improved business related to PCB manufacturing equipment. Sales to agriculture markets remained weak.
Total gross margin as a percentage of net sales was 37% for the first half of 2000 compared with 38% for the first half of 1999. Segment gross margins ranged from 34% to 38% compared with 32% to 41% during the same period in 1999.
Selling, general and administrative expenses were 23% of net sales for the first half of both 2000 and 1999. Research, development and engineering spending was $9.9 million for the first half of 2000 compared with $10.7 million for the same period in 1999.
Segment earnings (operating earnings excluding corporate expenses) for the first half of 2000 decreased slightly to $27.7 million when compared with $28.1 million for the first half of 1999. Aerospace earnings increased 33% to $13.4 million for the first half of 2000 from $10 million in the first half of 1999, primarily due to acquisitions. Advanced Materials earnings were $13.2 million for the first half of 2000 compared with $17.8 million for the first half of 1999. Specific operations in Advanced Materials, primarily metal finishing and high-end elastomer products, were impacted by customer inventory balancing programs. Automation earnings improved $820,000 to $1.1 million for the first half of 2000; improvements in the Company's PCB equipment operation were partially offset by decreases in agriculture related equipment manufacturing.
Interest income and expense decreased slightly to $1.1 million and $4.1 million for the first half of 2000, respectively, compared with $1.5 million and $4.4 million for the first half of 1999, respectively.
New orders for the first half of 2000 were $273.8 million compared with $239.7 million for the same period in 1999. Company-wide backlog at April 30, 2000 was $230.6 million compared with $183.3 million at April 30, 1999. The increase in backlog year-over-year was related to several items including orders for product related to combustible ordinance, the acquisitions of A.I.D. and Muirhead, and improved order trends in aerospace products. Approximately $91 million in backlog is scheduled for delivery after fiscal 2000. Most orders in backlog are subject to cancellation until delivery.
Liquidity and Capital Resources
Cash and equivalents on hand and short-term investments at April 30, 2000 totaled $40.6 million and $1 million, respectively, a decrease of $14.4 million and $24.9 million, respectively, from October 31, 1999. Decreases in cash and net working capital are primarily attributable to expenditures for acquisitions completed in the first half of 2000. Net working capital decreased to $112.6 million at April 30, 2000 from $140.9 million at October 31, 1999.
Capital expenditures, consisting of machinery, equipment and computers, are anticipated to be approximately $21.5 million during fiscal 2000, compared with $15.6 million in fiscal 1999. Capital expenditures through the six months ended April 30, 2000 totaled $7 million and were primarily for enhancements to computer technology and machinery and equipment.
Total debt at April 30, 2000 was $125 million, a decrease of $4.4 million from October 31, 1999, principally related to foreign debt agreements. Total debt outstanding at April 30, 2000 consisted of $100 million under the Company's 1999 Senior Notes, $17.1 million under the Company's 8.75% Senior Notes, $1.6 million for revenue bonds and $6.3 million under various foreign currency debt agreements, including capital lease obligations. The 8.75% Senior Notes have a scheduled annual payment of $5.7 million, which will continue until maturity on July 30, 2002. The 1999 Senior Notes have maturities ranging from 5 to 10 years and interest rates from 6% to 6.77%. Management believes cash on hand and funds generated from operations will adequately service operating cash requirements and capital expenditures through 2000.
Forward-Looking Statements
Certain statements in the above commentary and throughout this quarterly report on Form 10-Q contain forward-looking statements within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements involve risks and uncertainties regarding matters that could significantly affect expected results, including information about industry trends, growth, orders, currency fluctuations, backlog, capital expenditures and cash requirements. The Company is susceptible to economic cycles and financial results can vary widely based on a number of factors, including domestic and foreign economic conditions and developments affecting specific industries and customers.
A significant portion of the sales and profitability of the Company's businesses is derived from aerospace, defense, computer, electronics, telecommunications, medical and heavy equipment markets. The products sold by most of the Company's operations represent capital investment or support for capital investment by either the initial customer or the ultimate end-user. Changes in general economic conditions or conditions in these and other specific industries, capital acquisition cycles and government policies, collectively or individually, can have a significant effect on the Company's results of operations and financial condition. Thus, actual results may vary materially from these forward-looking statements. The Company does not undertake any obligation to publicly release the results of any revisions that may be made to these forward-looking statements to reflect any future events or circumstances.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to various lawsuits and claims, both as plaintiff and defendant, and has contingent liabilities arising from the conduct of business, 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. The Company believes that it has made appropriate and adequate provisions for contingent liabilities.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareholders held on March 2, 2000, shareholders approved the following proposal:
|
(a) |
The election of the following directors for three-year terms expiring at the 2002 annual meeting: |
|
|
Votes Cast |
|
|
Name |
For |
Withheld |
|
Ross J. Centanni |
15,290,490 |
322,118 |
Current directors whose terms were continuing after the 2000 annual meeting are Richard R. Albrecht, John F. Clearman, Robert W. Cremin, E. John Finn, Robert F. Goldhammer, Jerry D. Leitman, and Paul G. Schloemer.
There were no broker non-votes on the above proposal.
Item 6. Exhibits and Reports on Form 8-K
|
(a) |
Exhibits. |
|
|
|
11. |
Schedule setting forth computation of basic and diluted earnings per common share for the three and six months ended April 30, 2000 and 1999. |
|
|
27. |
Financial Data Schedule (EDGAR Only). |
|
(b) |
Reports on Form 8-K. |
|
|
|
The Company filed a report on Form 8-K under Item 4 on April 25, 2000. |
|
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 |
|
|
|
|
|
Dated: June 9, 2000 |
By: |
/s/Robert D. George |
|
|