UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2015.April 1, 2016.
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
(Exact name of registrant as specified in its charter)
Delaware |
| 13-2595091 |
(State or other Jurisdiction |
| (I.R.S. Employer |
of incorporation or organization) |
| Identification No.) |
500 108th Avenue N.E., 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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| þ |
| Accelerated filer |
| ¨ |
|
|
|
| |||
Non-accelerated filer |
| ¨ (Do not check if a smaller reporting company) |
| Smaller reporting company |
| ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
As of September 3, 2015, 29,545,713May 4, 2016, 29,353,387 shares of the issuer’s common stock were outstanding.
1
PART I – FINANCIAL INFORMATION
Item 1.Financial Statements
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEET
As of July 31, 2015April 1, 2016 and October 31, 20142, 2015
(In thousands, except share amounts)
|
| July 31, |
|
| October 31, |
|
|
| April 1, |
|
| October 2, |
|
| ||||
|
| 2015 |
| 2014 |
|
|
| 2016 |
|
| 2015 |
|
| |||||
|
| (Unaudited) |
|
|
|
|
|
|
| (Unaudited) |
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
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|
|
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|
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| ||
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||
Cash and cash equivalents |
| $ | 187,682 |
|
| $ | 238,144 |
|
|
| $ | 219,271 |
|
| $ | 191,355 |
|
|
Accounts receivable, net of allowances of $10,397 and $10,023 |
|
| 373,699 |
|
| 379,889 |
|
| ||||||||||
Cash in escrow |
|
| 1,125 |
|
|
| - |
|
| |||||||||
Accounts receivable, net of allowances of $8,746 and $10,050 |
|
| 374,090 |
|
|
| 380,748 |
|
| |||||||||
Inventories |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Raw materials and purchased parts |
|
| 174,346 |
|
| 165,839 |
|
|
|
| 175,848 |
|
|
| 169,153 |
|
| |
Work in progress |
|
| 191,519 |
|
| 178,354 |
|
|
|
| 187,056 |
|
|
| 181,187 |
|
| |
Finished goods |
|
| 103,835 |
|
|
| 89,402 |
|
|
|
| 97,813 |
|
|
| 96,428 |
|
|
|
|
| 469,700 |
|
|
| 433,595 |
|
|
|
| 460,717 |
|
|
| 446,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||
Income tax refundable |
|
| 17,515 |
|
| 5,266 |
|
|
|
| 11,411 |
|
|
| 12,575 |
|
| |
Deferred income tax benefits |
|
| 36,945 |
|
| 48,679 |
|
|
|
| - |
|
|
| 41,082 |
|
| |
Prepaid expenses |
|
| 21,407 |
|
| 20,336 |
|
|
|
| 21,816 |
|
|
| 23,008 |
|
| |
Other current assets |
|
| 17,196 |
|
| 2,149 |
|
|
|
| 6,213 |
|
|
| 5,427 |
|
| |
Current assets of businesses held for sale |
|
| 14,398 |
|
|
| 41,446 |
|
|
|
| 19,217 |
|
|
| 27,851 |
|
|
Total Current Assets |
|
| 1,138,542 |
|
|
| 1,169,504 |
|
|
|
| 1,113,860 |
|
|
| 1,128,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Property, Plant and Equipment |
|
| 723,746 |
|
| 721,460 |
|
|
|
| 771,321 |
|
|
| 729,317 |
|
| |
Accumulated depreciation |
|
| 417,355 |
|
|
| 402,118 |
|
|
|
| 443,957 |
|
|
| 419,918 |
|
|
|
|
| 306,391 |
|
|
| 319,342 |
|
|
|
| 327,364 |
|
|
| 309,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||
Other Non-Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Goodwill |
|
| 1,040,443 |
|
| 1,071,786 |
|
|
|
| 1,042,283 |
|
|
| 1,041,991 |
|
| |
Intangibles, net |
|
| 459,968 |
|
| 471,377 |
|
|
|
| 425,457 |
|
|
| 452,040 |
|
| |
Debt issuance costs, net of accumulated amortization of $2,789 and $5,743 |
|
| 11,035 |
|
| 4,295 |
|
| ||||||||||
Deferred income tax benefits |
|
| 75,612 |
|
| 71,307 |
|
|
|
| 65,783 |
|
|
| 28,979 |
|
| |
Other assets |
|
| 22,103 |
|
| 14,179 |
|
|
|
| 15,988 |
|
|
| 14,348 |
|
| |
Non-current assets of businesses held for sale |
|
| 31,558 |
|
|
| 71,677 |
|
|
|
| 21,305 |
|
|
| 24,917 |
|
|
Total Assets |
| $ | 3,085,652 |
|
| $ | 3,193,467 |
|
|
| $ | 3,012,040 |
|
| $ | 3,000,488 |
|
|
2
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEET
As of July 31, 2015April 1, 2016 and October 31, 20142, 2015
(In thousands, except share amounts)
|
| July 31, |
|
| October 31, |
|
|
| April 1, |
|
| October 2, |
|
| ||||
|
| 2015 |
| 2014 |
|
|
| 2016 |
|
| 2015 |
|
| |||||
|
| (Unaudited) |
|
|
|
|
|
|
| (Unaudited) |
|
|
|
|
|
| ||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
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|
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| ||
|
|
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|
|
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|
|
|
|
|
|
|
|
|
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| ||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||
Accounts payable |
| $ | 111,415 |
|
| $ | 115,284 |
|
|
| $ | 123,309 |
|
| $ | 117,976 |
|
|
Accrued liabilities |
|
| 267,386 |
|
| 262,536 |
|
|
|
| 257,681 |
|
|
| 259,734 |
|
| |
Current maturities of long-term debt |
|
| 1,014 |
|
| 12,774 |
|
|
|
| 17,182 |
|
|
| 13,376 |
|
| |
Deferred income tax liabilities |
|
| 2,993 |
|
| 1,773 |
|
| ||||||||||
Federal and foreign income taxes |
|
| 3,853 |
|
| 1,571 |
|
|
|
| 1,527 |
|
|
| 2,404 |
|
| |
Current liabilities of businesses held for sale |
|
| 8,885 |
|
|
| 14,191 |
|
|
|
| 14,180 |
|
|
| 17,106 |
|
|
Total Current Liabilities |
|
| 395,546 |
|
|
| 408,129 |
|
|
|
| 413,879 |
|
|
| 410,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Long-Term Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Credit facilities |
|
| 200,000 |
|
| 100,000 |
|
|
|
| 165,000 |
|
|
| 160,000 |
|
| |
Long-term debt, net of current maturities |
|
| 712,809 |
|
| 509,720 |
|
|
|
| 698,583 |
|
|
| 701,457 |
|
| |
Deferred income tax liabilities |
|
| 133,499 |
|
| 149,165 |
|
|
|
| 63,073 |
|
|
| 73,849 |
|
| |
Pension and post-retirement obligations |
|
| 56,758 |
|
| 62,693 |
|
|
|
| 74,188 |
|
|
| 75,019 |
|
| |
Other liabilities |
|
| 30,512 |
|
| 46,884 |
|
|
|
| 24,182 |
|
|
| 29,367 |
|
| |
Non-current liabilities of businesses held for sale |
|
| 1,859 |
|
| 18,876 |
|
|
|
| 822 |
|
|
| 2,409 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Common stock, par value $.20 per share, authorized 60,000,000 shares, issued 32,365,349 and 32,123,717 shares |
|
| 6,473 |
|
| 6,425 |
|
| ||||||||||
Common stock, par value $.20 per share, authorized 60,000,000 shares, issued 32,481,814 and 32,378,185 shares |
|
| 6,496 |
|
|
| 6,476 |
|
| |||||||||
Additional paid-in capital |
|
| 679,647 |
|
| 655,723 |
|
|
|
| 694,022 |
|
|
| 682,479 |
|
| |
Treasury stock at cost, repurchased 2,831,350 and 269,228 shares |
|
| (289,780 | ) |
| (30,262 | ) |
| ||||||||||
Treasury stock at cost, repurchased 3,033,660 and 2,831,350 shares |
|
| (301,856 | ) |
|
| (289,780 | ) |
| |||||||||
Retained earnings |
|
| 1,444,134 |
|
| 1,387,508 |
|
|
|
| 1,467,177 |
|
|
| 1,447,120 |
|
| |
Accumulated other comprehensive loss |
|
| (295,835 | ) |
|
| (131,577 | ) |
|
|
| (304,088 | ) |
|
| (308,828 | ) |
|
Total Esterline Shareholders' Equity |
|
| 1,544,639 |
|
|
| 1,887,817 |
|
|
|
| 1,561,751 |
|
|
| 1,537,467 |
|
|
Noncontrolling interests |
|
| 10,030 |
|
|
| 10,183 |
|
|
|
| 10,562 |
|
|
| 10,324 |
|
|
Total Shareholders' Equity |
|
| 1,554,669 |
|
|
| 1,898,000 |
|
|
|
| 1,572,313 |
|
|
| 1,547,791 |
|
|
Total Liabilities and Shareholders' Equity |
| $ | 3,085,652 |
|
| $ | 3,193,467 |
|
|
| $ | 3,012,040 |
|
| $ | 3,000,488 |
|
|
3
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
For the Three and NineSix Month Periods Ended July 31,April 1, 2016 and March 27, 2015 and August 1, 2014
(Unaudited)
(In thousands, except per share amounts)
|
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||||||||||||||||||
|
| Three Months Ended |
|
| Nine Months Ended |
|
|
| April 1, |
|
| March 27, |
|
| April 1, |
|
| March 27, |
| ||||||||||||||
|
| July 31, |
|
| August 1, |
|
| July 31, |
|
| August 1, |
|
|
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
| ||||||||
|
| 2015 |
| 2014 |
|
| 2015 |
| 2014 |
|
|
|
|
|
|
| (Recast) |
|
|
|
|
|
| (Recast) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net Sales |
| $ | 496,217 |
|
| $ | 506,309 |
|
| $ | 1,442,641 |
|
| $ | 1,503,110 |
|
|
| $ | 490,310 |
|
| $ | 468,210 |
|
| $ | 931,787 |
|
| $ | 972,821 |
|
Cost of Sales |
|
| 326,421 |
|
|
| 329,222 |
|
|
| 963,844 |
|
|
| 976,063 |
|
|
|
| 334,137 |
|
|
| 318,193 |
|
|
| 637,895 |
|
|
| 644,563 |
|
|
|
| 169,796 |
|
|
| 177,087 |
|
|
| 478,797 |
|
|
| 527,047 |
|
|
|
| 156,173 |
|
|
| 150,017 |
|
|
| 293,892 |
|
|
| 328,258 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling, general & administrative |
|
| 91,968 |
|
|
| 88,884 |
|
|
| 286,366 |
|
|
| 270,051 |
|
|
| �� | 102,423 |
|
|
| 99,432 |
|
|
| 196,514 |
|
|
| 197,521 |
|
Research, development and engineering |
|
| 29,245 |
|
|
| 24,259 |
|
|
| 78,700 |
|
|
| 75,441 |
|
|
|
| 24,974 |
|
|
| 25,143 |
|
|
| 50,549 |
|
|
| 48,674 |
|
Restructuring charges |
|
| 1,403 |
|
|
| 3,405 |
|
|
| 5,375 |
|
|
| 10,279 |
|
|
|
| 940 |
|
|
| 1,634 |
|
|
| 1,871 |
|
|
| 4,927 |
|
Other (income) expense |
|
| - |
|
|
| - |
|
|
| (12,744 | ) |
|
| - |
|
|
|
| - |
|
|
| (12,744 | ) |
|
| - |
|
|
| (12,744 | ) |
Total Expenses |
|
| 122,616 |
|
|
| 116,548 |
|
|
| 357,697 |
|
|
| 355,771 |
|
|
|
| 128,337 |
|
|
| 113,465 |
|
|
| 248,934 |
|
|
| 238,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Operating Earnings from Continuing Operations |
|
| 47,180 |
|
|
| 60,539 |
|
|
| 121,100 |
|
|
| 171,276 |
|
|
|
| 27,836 |
|
|
| 36,552 |
|
|
| 44,958 |
|
|
| 89,880 |
|
Interest Income |
|
| (144 | ) |
|
| (145 | ) |
|
| (447 | ) |
|
| (400 | ) |
|
|
| (94 | ) |
|
| (135 | ) |
|
| (181 | ) |
|
| (319 | ) |
Interest Expense |
|
| 10,618 |
|
|
| 7,865 |
|
|
| 25,023 |
|
|
| 24,924 |
|
|
|
| 7,294 |
|
|
| 5,934 |
|
|
| 14,510 |
|
|
| 14,016 |
|
Loss on Extinguishment of Debt |
|
| - |
|
|
| 533 |
|
|
| 329 |
|
|
| 533 |
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Earnings from Continuing Operations Before Income Taxes |
|
| 36,706 |
|
|
| 52,286 |
|
|
| 96,195 |
|
|
| 146,219 |
|
|
|
| 20,636 |
|
|
| 30,753 |
|
|
| 30,629 |
|
|
| 76,183 |
|
Income Tax Expense |
|
| 6,405 |
|
|
| 12,403 |
|
|
| 19,097 |
|
|
| 31,415 |
|
| ||||||||||||||||
Income Tax Expense (Benefit) |
|
| 3,416 |
|
|
| 5,714 |
|
|
| 3,383 |
|
|
| 16,686 |
| |||||||||||||||||
Earnings from Continuing Operations Including Noncontrolling Interests |
|
| 30,301 |
|
|
| 39,883 |
|
|
| 77,098 |
|
|
| 114,804 |
|
|
|
| 17,220 |
|
|
| 25,039 |
|
|
| 27,246 |
|
|
| 59,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Earnings Attributable to Noncontrolling Interests |
|
| (111 | ) |
|
| (46 | ) |
|
| (218 | ) |
|
| (429 | ) |
| ||||||||||||||||
Loss (Earnings) Attributable to Noncontrolling Interests |
|
| (224 | ) |
|
| (108 | ) |
|
| (386 | ) |
|
| (91 | ) | |||||||||||||||||
Earnings from Continuing Operations Attributable to Esterline, Net of Tax |
|
| 30,190 |
|
|
| 39,837 |
|
|
| 76,880 |
|
|
| 114,375 |
|
|
|
| 16,996 |
|
|
| 24,931 |
|
|
| 26,860 |
|
|
| 59,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Loss from Discontinued Operations Attributable to Esterline, Net of Tax |
|
| (1,693 | ) |
|
| (929 | ) |
|
| (20,254 | ) |
|
| (8,485 | ) |
|
|
| (2,023 | ) |
|
| (14,600 | ) |
|
| (6,803 | ) |
|
| (20,476 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Net Earnings Attributable to Esterline |
| $ | 28,497 |
|
| $ | 38,908 |
|
| $ | 56,626 |
|
| $ | 105,890 |
|
|
| $ | 14,973 |
|
| $ | 10,331 |
|
| $ | 20,057 |
|
| $ | 38,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
| ||
Earnings (Loss) Per Share Attributable to Esterline - Basic: | Earnings (Loss) Per Share Attributable to Esterline - Basic: |
|
|
|
|
|
|
|
|
|
| Earnings (Loss) Per Share Attributable to Esterline - Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Continuing operations |
| $ | 1.00 |
|
| $ | 1.25 |
|
| $ | 2.48 |
|
| $ | 3.60 |
|
|
| $ | 0.58 |
|
| $ | 0.80 |
|
| $ | 0.91 |
|
| $ | 1.89 |
|
Discontinued operations |
|
| (0.06 | ) |
|
| (0.03 | ) |
|
| (0.65 | ) |
|
| (0.27 | ) |
|
|
| (0.07 | ) |
|
| (0.47 | ) |
|
| (0.23 | ) |
|
| (0.65 | ) |
Earnings (Loss) Per Share Attributable to Esterline - Basic |
| $ | 0.94 |
|
| $ | 1.22 |
|
| $ | 1.83 |
|
| $ | 3.33 |
|
| ||||||||||||||||
Earnings (Loss) Per Share - Basic |
| $ | 0.51 |
|
| $ | 0.33 |
|
| $ | 0.68 |
|
| $ | 1.24 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Earnings (Loss) Per Share Attributable to Esterline - Diluted: | Earnings (Loss) Per Share Attributable to Esterline - Diluted: |
|
|
|
|
|
|
|
|
|
| Earnings (Loss) Per Share Attributable to Esterline - Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Continuing operations |
| $ | 0.97 |
|
| $ | 1.22 |
|
| $ | 2.44 |
|
| $ | 3.53 |
|
|
| $ | 0.57 |
|
| $ | 0.79 |
|
| $ | 0.90 |
|
| $ | 1.86 |
|
Discontinued operations |
|
| (0.05 | ) |
|
| (0.03 | ) |
|
| (0.64 | ) |
|
| (0.26 | ) |
|
|
| (0.07 | ) |
|
| (0.46 | ) |
|
| (0.23 | ) |
|
| (0.64 | ) |
Earnings (Loss) Per Share Attributable to Esterline - Diluted |
| $ | 0.92 |
|
| $ | 1.19 |
|
| $ | 1.80 |
|
| $ | 3.27 |
|
| ||||||||||||||||
Earnings (Loss) Per Share - Diluted |
| $ | 0.50 |
|
| $ | 0.33 |
|
| $ | 0.67 |
|
| $ | 1.22 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net Earnings |
| $ | 14,973 |
|
| $ | 10,331 |
|
| $ | 20,057 |
|
| $ | 38,930 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Change in Fair Value of Derivative Financial Instruments |
|
| 20,274 |
|
|
| (12,667 | ) |
|
| 16,101 |
|
|
| (18,747 | ) | |||||||||||||||||
Income Tax Expense (Benefit) |
|
| 5,779 |
|
|
| (3,540 | ) |
|
| 4,494 |
|
|
| (5,682 | ) | |||||||||||||||||
|
|
| 14,495 |
|
|
| (9,127 | ) |
|
| 11,607 |
|
|
| (13,065 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Change in Pension and Post-Retirement Obligations |
|
| (87 | ) |
|
| 9,195 |
|
|
| 2,188 |
|
|
| (626 | ) | |||||||||||||||||
Income Tax Expense (Benefit) |
|
| 83 |
|
|
| 3,005 |
|
|
| 840 |
|
|
| (312 | ) | |||||||||||||||||
|
|
| (170 | ) |
|
| 6,190 |
|
|
| 1,348 |
|
|
| (314 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Currency Translation Adjustment |
|
| 31,246 |
|
|
| (116,598 | ) |
|
| (8,215 | ) |
|
| (172,596 | ) | |||||||||||||||||
Comprehensive Income (Loss) |
| $ | (990 | ) |
| $ | 16,479 |
|
| $ | (107,632 | ) |
| $ | 86,162 |
|
|
| $ | 60,544 |
|
| $ | (109,204 | ) |
| $ | 24,797 |
|
| $ | (147,045 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
ESTERLINE TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the NineSix Month Periods Ended July 31,April 1, 2016 and March 27, 2015 and August 1, 2014
(Unaudited)
(In thousands)
|
| April 1, |
|
| March 27, |
|
| |||||||||||
|
| July 31, |
| August 1, |
|
|
| 2016 |
|
| 2015 |
|
| |||||
|
| 2015 |
| 2014 |
|
|
|
|
|
|
| (Recast) |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Provided (Used) by Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net earnings including noncontrolling interests |
| $ | 56,844 |
| $ | 106,319 |
|
|
| $ | 20,443 |
|
| $ | 39,021 |
|
| |
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided (used) by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 77,310 |
| 87,443 |
|
|
|
| 48,736 |
|
|
| 49,827 |
|
| ||
Deferred income taxes |
|
| (9,333 | ) |
| (13,104 | ) |
|
|
| (10,094 | ) |
|
| (9,217 | ) |
| |
Share-based compensation |
|
| 8,618 |
| 9,833 |
|
|
|
| 7,578 |
|
|
| 6,274 |
|
| ||
Gain on release of non-income tax liability |
|
| (15,656 | ) |
| - |
|
|
|
| - |
|
|
| (15,656 | ) |
| |
Loss on assets held for sale |
|
| 16,963 |
| - |
|
|
|
| 3,572 |
|
|
| 14,447 |
|
| ||
Working capital changes, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts receivable |
|
| 17,943 |
| 23,480 |
|
|
|
| 7,700 |
|
|
| (21,394 | ) |
| ||
Inventories |
|
| (18,313 | ) |
| (42,411 | ) |
|
|
| (7,275 | ) |
|
| (8,789 | ) |
| |
Prepaid expenses |
|
| (2,588 | ) |
| (6,202 | ) |
|
|
| 1,120 |
|
|
| (3,419 | ) |
| |
Other current assets |
|
| 142 |
| (99 | ) |
|
|
| 624 |
|
|
| (40 | ) |
| ||
Accounts payable |
|
| (16,809 | ) |
| (4,508 | ) |
|
|
| 1,439 |
|
|
| 8,866 |
|
| |
Accrued liabilities |
|
| (7,189 | ) |
| (16,458 | ) |
|
|
| 917 |
|
|
| 1,907 |
|
| |
Federal and foreign income taxes |
|
| (8,501 | ) |
| (7,983 | ) |
|
|
| (690 | ) |
|
| (4,506 | ) |
| |
Other liabilities |
|
| 3,243 |
| (1,440 | ) |
|
|
| (1,345 | ) |
|
| 4,771 |
|
| ||
Other, net |
|
| 1,526 |
|
| (155 | ) |
|
|
| 7,159 |
|
|
| (11,222 | ) |
| |
|
|
| 104,200 |
|
| 134,715 |
|
|
|
| 79,884 |
|
|
| 50,870 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash Flows Provided (Used) by Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Purchase of capital assets |
|
| (37,777 | ) |
| (35,009 | ) |
|
|
| (42,506 | ) |
|
| (25,340 | ) |
| |
Proceeds from sale of discontinued operations |
|
| 32,053 |
| - |
|
| |||||||||||
Escrow deposit |
|
| (1,125 | ) |
|
| - |
|
| |||||||||
Acquisition of businesses, net of cash acquired |
|
| (171,070 | ) |
|
| (44,745 | ) |
|
|
| - |
|
|
| (171,070 | ) |
|
|
|
| (176,794 | ) |
|
| (79,754 | ) |
|
|
| (43,631 | ) |
|
| (196,410 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash Flows Provided (Used) by Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Proceeds provided by stock issuance under employee stock plans |
|
| 13,477 |
| 23,173 |
|
|
|
| 3,489 |
|
|
| 10,103 |
|
| ||
Excess tax benefits from stock option exercises |
|
| 1,877 |
| 6,392 |
|
|
|
| 496 |
|
|
| 2,113 |
|
| ||
Shares repurchased |
|
| (259,518 | ) |
| (5,176 | ) |
|
|
| (12,076 | ) |
|
| (127,420 | ) |
| |
Repayment of long-term credit facilities |
|
| (235,000 | ) |
| (40,000 | ) |
|
|
| (10,000 | ) |
|
| (10,000 | ) |
| |
Repayment of long-term debt |
|
| (167,065 | ) |
| (34,076 | ) |
|
|
| (6,158 | ) |
|
| (9,918 | ) |
| |
Proceeds from issuance of long-term credit facilities |
|
| 335,000 |
| 25,000 |
|
|
|
| 15,000 |
|
|
| 210,000 |
|
| ||
Proceeds from issuance of long-term debt |
|
| 356,532 |
| - |
|
| |||||||||||
Proceeds from government assistance |
|
| 3,054 |
| 3,362 |
|
|
|
| - |
|
|
| 3,310 |
|
| ||
Dividends paid to noncontrolling interests |
|
| - |
| (780 | ) |
| |||||||||||
Debt and other issuance costs |
|
| (8,213 | ) |
|
| - |
|
| |||||||||
|
|
| 40,144 |
|
| (22,105 | ) |
|
|
| (9,249 | ) |
|
| 78,188 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Effect of Foreign Exchange Rates on Cash and Cash Equivalents |
|
| (18,012 | ) |
|
| (1,578 | ) |
|
|
| 912 |
|
|
| (14,576 | ) |
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
| (50,462 | ) |
|
| 31,278 |
|
|
|
| 27,916 |
|
|
| (81,928 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and Cash Equivalents - Beginning of Year |
|
| 238,144 |
|
| 179,178 |
|
|
|
| 191,355 |
|
|
| 213,251 |
|
| |
Cash and Cash Equivalents - End of Period |
| $ | 187,682 |
| $ | 210,456 |
|
|
| $ | 219,271 |
|
| $ | 131,323 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash paid for interest |
| $ | 15,939 |
| $ | 26,066 |
|
|
| $ | 13,314 |
|
| $ | 14,021 |
|
| |
Cash paid for taxes |
|
| 29,790 |
| 49,036 |
|
|
|
| 6,654 |
|
|
| 21,852 |
|
|
5
ESTERLINE TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and NineSix Month Periods Ended July 31,April 1, 2016 and March 27, 2015 and August 1, 2014
Note 1 – Basis of Presentation
The consolidated balance sheet as of July 31, 2015,April 1, 2016, the consolidated statement of operations and comprehensive income (loss) for the three and ninesix month periods ended July 31,April 1, 2016, and March 27, 2015, and August 1, 2014, and the consolidated statement of cash flows for the ninesix month periods ended July 31,April 1, 2016, and March 27, 2015, and August 1, 2014, are unaudited but, in the opinion of management, all of the necessary adjustments, consisting of normal recurring accruals, have been made to present fairly the financial statements referred to above in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the above statements do not include all of the footnotes required for complete financial statements. The results of operations and cash flows for the interim periods presented are not necessarily indicative of results that can be expected for the full year.
The notes to the consolidated financial statements in the Company’s AnnualTransition Report on Form 10-K for the fiscal yeareleven months ended October 31, 2014,2, 2015, provide a summary of significant accounting policies and additional financial information that should be read in conjunction with this Form 10-Q.
The timing of the Company’s revenues is impacted by the purchasing patterns of customers and, as a result, revenues are not generated evenly throughout the year. Moreover, the Company’s first fiscal quarter, NovemberOctober through January,December, includes significant holiday periods in both Europe and North America. The first nine months of fiscal 2015 was 39 weeks, while the first nine months of fiscal 2014 was 40 weeks.
Note 2 – Change in Fiscal Year End
On June 5, 2014, the Company’s board of directors authorized a change in the Company’s fiscal year end to the last Friday of September from the last Friday in October. The Company plans to reportreported its financial results for the 11-month transition period of November 1, 2014, through October 2, 2015, on an Annualthe Transition Report on Form 10-K and to thereafter will file its annual report for each 12-month period ending the last Friday of September of each year, beginning with the 12-month period ending September 30, 2016. Refer to the Transition Report on Form 10-K for the eleven months ended October 2, 2015, for additional information regarding the Company’s fiscal year change.
The prior year Consolidated Statement of Operations and Comprehensive Income (Loss) for the three and six month period ended March 27, 2015, and the Consolidated Statement of Cash Flows for the six month period ended March 27, 2015, have been recast to align to the Company’s new quarter end.
Note 23 – Recent Accounting Pronouncements
In April 2014,March 2016, the Financial Accounting Standards Board (FASB) issued new guidance simplifying certain aspects of accounting for share-based payments. The key provision of the new standard requires that modifiesexcess tax benefits and shortfalls be recorded as income tax benefit or expense in the criteria used to qualify divestitures for classification as discontinued operationsincome statement, rather than in equity. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and expands disclosure related to disposals of significant components.disclosures. The amendment will becomenew guidance is effective for the Company in fiscal 2016,year 2018, with early adoption permitted; however,permitted.
In February 2016, the FASB issued a new lease accounting standard, which provides revised guidance on accounting for lease arrangements by both lessors and lessees. The central requirement of the new standard is that lessees must recognize lease related assets and liabilities for all leases with a term longer than 12 months. The Company is evaluating the effect the standard will have on the Company’s consolidated financial statements and related disclosures. The new standard is effective for the Company does not expectin fiscal year 2020, with early adoption permitted.
In November 2015, the FASB issued new guidance requiring all deferred tax assets and liabilities to early adoptbe classified as noncurrent on the amended guidance.balance sheet instead of separating those balances into current and noncurrent amounts. The amendednew guidance is expectedeffective for the Company in fiscal year 2018, with early adoption permitted. The Company adopted this guidance prospectively on April 1, 2016, and reclassified the current portion of net deferred tax assets and liabilities to decrease the likelihood that future disposals will qualify for discontinued operations treatment, meaning that the results of operation of some future disposals may be reported as continuing operations.net noncurrent deferred tax assets and liabilities. No prior periods were retrospectively adjusted.
In May 2014, the FASB amended requirements for an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective, and permits the use of either the retrospective or cumulative effect transition method. Early adoption is permitted. The updated standard becomes effective for the Company in the first fiscal quarter of 2019.
6
The Company has not yet selected a transition method, and is currently evaluating the effect that the updated standard will have on consolidated financial statements and related disclosures.
In April 2015, FASB amended requirements related to the presentation of debt issuance costs. The updated standard requires debt issuance costs related to recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. The recognition and measurement of debt issuance costs are not affected by this amendment. The updated standard is effective for the Company in the first fiscal quarter of 2016. The Company does not expect that the standard will have a material impact on its consolidated financial statements and related disclosures.
Note 34 – Earnings Per Share and Shareholders’ Equity
Basic earnings per share is computed on the basis of the weighted average number of shares outstanding during the year. Diluted earnings per share includes the dilutive effect of stock options and restricted stock units. Common shares issuable from stock options excluded from the calculation of diluted earnings per share because they were anti-dilutive were 370,050766,500 and 170,300688,600 in the third fiscal quarterthree and six month periods ending April 1, 2016, respectively. Common shares issuable from stock options excluded from the calculation of 2015diluted earnings per share because they were anti-dilutive were 257,650 and 2014,197,375 in the three and six month periods ending March 27, 2015, respectively. Shares used for calculating earnings per share are disclosed in the following table:
In Thousands |
| Three Months Ended |
|
| Nine Months Ended |
|
|
| Three Months Ended |
|
| Six Months Ended |
|
| ||||||||||||||||||||
|
| April 1, |
|
| March 27, |
|
| April 1, |
|
| March 27, |
|
| |||||||||||||||||||||
|
| July 31, |
|
| August 1, |
|
| July 31, |
|
| August 1, |
|
|
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
|
| ||||||||
|
| 2015 |
| 2014 |
|
| 2015 |
| 2014 |
|
|
|
|
|
|
| (Recast) |
|
|
|
|
|
| (Recast) |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Shares used for basic earnings per share |
|
| 30,397 |
| 31,995 |
|
|
| 31,003 |
| 31,818 |
|
|
|
| 29,588 |
|
|
| 31,162 |
|
|
| 29,585 |
|
|
| 31,401 |
|
| ||||
Shares used for diluted earnings per share |
|
| 30,914 |
| 32,591 |
|
|
| 31,531 |
| 32,427 |
|
|
|
| 29,825 |
|
|
| 31,687 |
|
|
| 29,882 |
|
|
| 31,937 |
|
|
The authorized capital stock of the Company consists of 25,000 shares of preferred stock ($100 par value), 475,000 shares of serial preferred stock ($1.00 par value), each issuable in series, and 60,000,000 shares of common stock ($.20 par value). As of July 31, 2015,April 1, 2016, and October 31, 2014,2, 2015, there were no shares of preferred stock or serial preferred stock outstanding.
On June 19, 2014, the Company’s board of directors approved a $200 million share repurchase program. In March 2015, the Company’s board of directors approved an additional $200 million for the share repurchase program. Under the program, the Company is authorized to repurchase up to $400 million of outstanding shares of common stock from time to time, depending on market conditions, share price and other factors. Repurchases may be made in the open market or through private transactions, in accordance with SEC requirements. The Company may enter into a Rule 10(b)5-1 plan designed to facilitate the repurchase of all or a portion of the repurchase amount. The program does not require the Company to acquire a specific number of shares. Common stock repurchased can be reissued, and accordingly, the Company accounts for repurchased stock under the cost method of accounting.
During the ninesix months ended July 31, 2015,April 1, 2016, the Company repurchased 2,562,122202,310 shares under this program at an average price paid per share of $101.29,$59.69, for an aggregate purchase price of $259.5$12.1 million. During the six months ended March 27, 2015, the Company repurchased 1,167,732 shares under this program at an average price paid per share of $109.12, for an aggregate purchase price of $127.4 million. Since the program began, the Company has repurchased 3,033,660 shares for an aggregate purchase price of $301.9 million, leaving $98.1 million for shares to be repurchased in the future.
Changes in issued and outstanding common shares are summarized as follows:
| Six Months Ended |
|
| Year Ended |
|
| ||||||||||
| July 31, |
|
| October 31, |
|
| April 1, |
|
| October 2, |
|
| ||||
| 2015 |
|
| 2014 |
|
| 2016 |
|
| 2015 |
|
| ||||
Shares Issued: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| 32,123,717 |
|
|
| 31,441,949 |
|
|
| 32,378,185 |
|
|
| 32,123,717 |
|
|
Shares issued under share-based compensation plans |
| 241,632 |
|
|
| 681,768 |
|
|
| 103,629 |
|
|
| 254,468 |
|
|
Balance, end of current period |
| 32,365,349 |
|
|
| 32,123,717 |
|
|
| 32,481,814 |
|
|
| 32,378,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
| 269,228 |
|
|
| - |
|
|
| (2,831,350 | ) |
|
| (269,228 | ) |
|
Shares purchased |
| 2,562,122 |
|
|
| 269,228 |
|
|
| (202,310 | ) |
|
| (2,562,122 | ) |
|
Balance, end of current period |
| 2,831,350 |
|
|
| 269,228 |
|
|
| (3,033,660 | ) |
|
| (2,831,350 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding, end of period |
| 29,533,999 |
|
|
| 31,854,489 |
|
|
| 29,448,154 |
|
|
| 29,546,835 |
|
|
7
The components of Accumulated Other Comprehensive Gain (Loss):
In Thousands | July 31, |
|
| October 31, |
|
| April 1, |
|
| October 2, |
|
| ||||
| 2015 |
|
| 2014 |
|
| 2016 |
|
| 2015 |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on derivative contracts | $ | (27,050 | ) |
| $ | (14,179 | ) |
| $ | (6,840 | ) |
| $ | (22,941 | ) |
|
Tax effect |
| 7,317 |
|
|
| 3,890 |
|
|
| 1,542 |
|
|
| 6,036 |
|
|
|
| (19,733 | ) |
|
| (10,289 | ) |
|
| (5,298 | ) |
|
| (16,905 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and post-retirement obligations |
| (77,644 | ) |
|
| (90,225 | ) |
|
| (97,535 | ) |
|
| (99,724 | ) |
|
Tax effect |
| 25,941 |
|
|
| 30,072 |
|
|
| 32,934 |
|
|
| 33,775 |
|
|
|
| (51,703 | ) |
|
| (60,153 | ) |
|
| (64,601 | ) |
|
| (65,949 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment |
| (224,399 | ) |
|
| (61,135 | ) |
|
| (234,189 | ) |
|
| (225,974 | ) |
|
Accumulated other comprehensive gain (loss) | $ | (295,835 | ) |
| $ | (131,577 | ) |
| $ | (304,088 | ) |
| $ | (308,828 | ) |
|
Note 45 – Retirement Benefits
The Company’s pension plans principally include a U.S. pension plan maintained by Esterline and a non-U.S. plan maintained by CMC Electronics, Inc. (CMC). The Company also sponsors a number of other non-U.S. defined benefit pension plans, primarily in Belgium, France and Germany. In fiscal 2014, the Company offered vested terminated participants of its U.S. pension plan a one-time opportunity to elect a lump-sum payment from the plan in lieu of a lifetime annuity. In the first fiscal quarter of 2015, the Company made a $16.6 million lump-sum payment to vested terminated pension plan participants from the plan, which resulted in an actuarial estimated settlement charge of $3.2$3.0 million. The charge was recorded in selling, general and administrative expenses. Components of periodic pension cost consisted of the following:
In Thousands |
| Three Months Ended |
|
| Nine Months Ended |
|
| ||||||||||
|
| July 31, |
|
| August 1, |
|
| July 31, |
|
| August 1, |
|
| ||||
|
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
|
| ||||
Components of Net Periodic Cost |
|
| |||||||||||||||
Service cost |
| $ | 3,028 |
|
| $ | 2,621 |
|
| $ | 8,728 |
|
| $ | 8,244 |
|
|
Interest cost |
|
| 4,334 |
|
|
| 4,737 |
|
|
| 12,863 |
|
|
| 14,314 |
|
|
Expected return on plan assets |
|
| (6,398 | ) |
|
| (6,504 | ) |
|
| (19,257 | ) |
|
| (19,398 | ) |
|
Settlement |
|
| 184 |
|
|
| - |
|
|
| 3,175 |
|
|
| - |
|
|
Amortization of prior service cost |
|
| 271 |
|
|
| 19 |
|
|
| 305 |
|
|
| 58 |
|
|
Amortization of actuarial (gain) loss |
|
| 1,462 |
|
|
| 1,213 |
|
|
| 3,860 |
|
|
| 3,913 |
|
|
Net periodic cost (benefit) |
| $ | 2,881 |
|
| $ | 2,086 |
|
| $ | 9,674 |
|
| $ | 7,131 |
|
|
The Company’s principal post-retirement plans include non-U.S. plans, which are non-contributory healthcare and life insurance plans. The components of expense of these other retirement benefits consisted of the following:
In Thousands |
| Three Months Ended |
|
| Nine Months Ended |
|
|
| Three Months Ended |
|
| Six Months Ended |
|
| ||||||||||||||||||||
|
| April 1, |
|
| March 27, |
|
| April 1, |
|
| March 27, |
|
| |||||||||||||||||||||
|
| July 31, |
|
| August 1, |
|
| July 31, |
|
| August 1, |
|
|
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
|
| ||||||||
|
| 2015 |
| 2014 |
|
| 2015 |
| 2014 |
|
|
|
|
|
|
| (Recast) |
|
|
|
|
|
| (Recast) |
|
| ||||||||
Components of Net Periodic Cost | Components of Net Periodic Cost |
|
| Components of Net Periodic Cost |
|
| ||||||||||||||||||||||||||||
Service cost |
| $ | 206 |
| $ | 233 |
|
| $ | 631 |
| $ | 696 |
|
|
| $ | 2,945 |
|
| $ | 2,744 |
|
| $ | 5,902 |
|
| $ | 5,446 |
|
| ||
Interest cost |
|
| 134 |
| 187 |
|
|
| 411 |
| 560 |
|
|
|
| 4,247 |
|
|
| 4,087 |
|
|
| 8,640 |
|
|
| 8,451 |
|
| ||||
Expected return on plan assets |
|
| (5,993 | ) |
|
| (6,249 | ) |
|
| (11,904 | ) |
|
| (12,716 | ) |
| |||||||||||||||||
Settlement |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,991 |
|
| |||||||||||||||||
Amortization of prior service cost |
|
| (18 | ) |
| (17 | ) |
|
| (52 | ) |
| (51 | ) |
|
|
| 112 |
|
|
| 15 |
|
|
| 226 |
|
|
| 34 |
|
| ||
Amortization of actuarial (gain) loss |
|
| (23 | ) |
|
| (67 | ) |
|
| (72 | ) |
|
| (201 | ) |
|
|
| 1,577 |
|
|
| 1,105 |
|
|
| 3,059 |
|
|
| 2,316 |
|
|
Net periodic cost (benefit) |
| $ | 299 |
| $ | 336 |
|
| $ | 918 |
| $ | 1,004 |
|
|
| $ | 2,888 |
|
| $ | 1,702 |
|
| $ | 5,923 |
|
| $ | 6,522 |
|
|
The Company amortizes prior service cost and actuarial gains and losses from accumulated other comprehensive income to expense over the remaining service period.
Note 56 – Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established that prioritizes the inputs to valuation
techniques used to measure fair value. An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy of fair value measurements is described below:
Level 1 – Valuations are based on quoted prices that the Company has the ability to obtain in actively traded markets for identical assets and liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market or exchange traded market, a valuation of these instruments does not require a significant degree of judgment.
Level 2 – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 – Valuations are based on model-based techniques for which some or all of the assumptions are obtained from indirect market information that is significant to the overall fair value measurement and which require a significant degree of management judgment.
8
The following table sets forth the Company’s financial assets and liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy at July 31, 2015,April 1, 2016, and October 31, 2014.2, 2015.
In Thousands | Level 2 |
|
| Level 2 |
|
| ||||||||||
| July 31, |
|
| October 31, |
|
| April 1, |
|
| October 2, |
|
| ||||
| 2015 |
|
| 2014 |
|
| 2016 |
|
| 2015 |
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts designated as hedging instruments | $ | 892 |
|
| $ | 24 |
|
| $ | 5,328 |
|
| $ | 1,386 |
|
|
Derivative contracts not designated as hedging instruments |
| 1,213 |
|
|
| 1,081 |
|
|
| 560 |
|
|
| 189 |
|
|
Embedded derivatives |
| 4,454 |
|
|
| 2,351 |
|
|
| 2,406 |
|
|
| 3,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts designated as hedging instruments | $ | 28,277 |
|
| $ | 14,592 |
|
| $ | 12,505 |
|
| $ | 24,660 |
|
|
Derivative contracts not designated as hedging instruments |
| 1,837 |
|
|
| 4,188 |
|
|
| 4,783 |
|
|
| 2,324 |
|
|
Embedded derivatives |
| 132 |
|
|
| 15 |
|
|
| 1,537 |
|
|
| 380 |
|
|
In Thousands | Level 3 |
|
| Level 3 |
|
| ||||||||||
| July 31, |
|
| October 31, |
|
| April 1, |
|
| October 2, |
|
| ||||
| 2015 |
|
| 2014 |
|
| 2016 |
|
| 2015 |
|
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent purchase obligation | $ | 3,750 |
|
| $ | 5,000 |
|
| $ | - |
|
| $ | 3,750 |
|
|
The Company’s embedded derivatives are the result of entering into sales or purchase contracts that are denominated in a currency other than the Company’s functional currency or the supplier’s or customer’s functional currency. The fair value is determined by calculating the difference between quoted exchange rates at the time the contract was entered into and the period-end exchange rate. These contracts are categorized as Level 2 in the fair value hierarchy.
From time to time, the Company’s derivative contracts consist of foreign currency exchange contracts and interest rate swap agreements. These derivative contracts are over the counter, and their fair value is determined using modeling techniques that include market inputs such as interest rates, yield curves, and currency exchange rates. These contracts are categorized as Level 2 in the fair value hierarchy.
The Company’s contingent purchase obligation consistsconsisted of additional contingent consideration in connection with the acquisition of Sunbank Family of Companies, LLC (Sunbank) of $3.8 million as of July 31, 2015, and $5.0$3.75 million as of October 31, 2014. The Company2, 2015, which was paid the first installment of $1.3 million in the thirdsecond fiscal quarter of 2015. The contingent consideration will be payable to the sellers if certain performance objectives are met following the acquisition in accordance with the terms2016 upon achievement of the purchase agreement.performance objectives. The valuesvalue recorded on the balance sheet wereat October 2, 2015, was derived from the estimated probability that the performance objectives will be met. The contingent purchase obligation iswas categorized as Level 3 in the fair value hierarchy.
Note 67 – Derivative Financial Instruments
The Company uses derivative financial instruments in the form of foreign currency forward exchange contracts and interest rate swap contracts for the purpose of minimizing exposure to changes in foreign currency exchange rates on business transactions and interest rates, respectively. The Company’s policy is to execute such instruments with banks the Company believes to be creditworthy and not to enter into derivative financial instruments for speculative purposes. These derivative financial instruments do not subject the
Company to undue risk, as gains and losses on these instruments generally offset gains and losses on the underlying assets, liabilities, or anticipated transactions that are being hedged.
All derivative financial instruments are recorded at fair value in the Consolidated Balance Sheet. For a derivative that has not been designated as an accounting hedge, the change in the fair value is recognized immediately through earnings. For a derivative that has been designated as an accounting hedge of an existing asset or liability (a fair value hedge), the change in the fair value of both the derivative and underlying asset or liability is recognized immediately through earnings. For a derivative designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the Consolidated Balance Sheet in Accumulated Other Comprehensive Income (AOCI) to the extent the derivative is effective in mitigating the exposure related to the anticipated transaction. The change in the fair value related to the ineffective portion of the hedge, if any, is immediately recognized in earnings. The amount recorded within AOCI is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings.
The fair value of derivative instruments areis presented on a gross basis, as the Company does not have any derivative contracts which are subject to master netting arrangements. At July 31, 2015,April 1, 2016, and October 31, 2014,2, 2015, the Company did not have any hedges with credit-risk-related contingent features or that required the posting of collateral. The cash flows from derivative contracts are recorded in operating activities in the Consolidated Statement of Cash Flows.
9
Foreign Currency Forward Exchange Contracts
The Company transacts business in various foreign currencies, which subjects the Company’s cash flows and earnings to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates, and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. At July 31, 2015,April 1, 2016, and October 31, 2014,2, 2015, the Company had outstanding foreign currency forward exchange contracts principally to sell U.S. dollars with notional amounts of $380.3$400.1 million and $396.2$402.9 million, respectively. These notional values consist primarily of contracts for the European euro, British pound sterling and Canadian dollar, and are stated in U.S. dollar equivalents at spot exchange rates at the respective dates.
Interest Rate Swaps
The Company manages its exposure to interest rate risk by maintaining an appropriate mix of fixed and variable rate debt, which over time should moderate the costs of debt financing. When considered necessary, the Company may use financial instruments in the form of interest rate swaps to help meet this objective.
Embedded Derivative Instruments
The Company’s embedded derivatives are the result of entering into sales or purchase contracts that are denominated in a currency other than the Company’s functional currency or the supplier’s or customer’s functional currency.
Net Investment Hedge
In April 2015, the Company issued €330.0 million in 3.625% Senior Notes due April 2023 (2023 Notes) and requiring semi-annual interest payments in April and October each year until maturity. The Company designated the 2023 Notes and accrued interest as a hedge of the investment of certain foreign business units. The foreign currency gain or loss that is effective as a hedge is reported as a component of other comprehensive income (loss) in shareholders’ equity. To the extent that this hedge is ineffective, the foreign currency gain or loss is recorded in earnings. There was no ineffectiveness since inception of the hedge. The Company also designated the accrued interest on the 2023 Notes as a net investment hedge.hedge since inception.
In July 2011, the Company entered into a Euro Term Loan for €125.0 million under the secured credit facility. The Company designated the Euro Term Loan a hedge of the investment in a certain French business unit. The foreign currency gain or loss that is effective as a hedge is reported as a component of other comprehensive income (loss) in shareholders’ equity. To the extent that this hedge is ineffective, the foreign currency gain or loss is recorded in earnings. There was no ineffectiveness since inception of the hedge. On June 30, 2014, the Company paid off the remaining balance of the Euro Term Loan. As a result, the Company recorded a net loss of $0.5 million on extinguishment of debt in the third fiscal quarter of 2014.
Fair Value of Derivative Instruments
Fair value of derivative instruments in the Consolidated Balance Sheet at July 31, 2015,April 1, 2016, and October 31, 2014,2, 2015, consisted of:
In Thousands |
|
| Fair Value |
|
|
|
| Fair Value |
|
| ||||||||||
|
|
| July 31, |
| October 31, |
|
|
|
| April 1, |
|
| October 2, |
|
| |||||
| Classification |
| 2015 |
|
| 2014 |
|
| Classification |
| 2016 |
|
| 2015 |
|
| ||||
Foreign Currency Forward Exchange Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other current assets |
| $ | 1,739 |
| $ | 1,052 |
|
| Other current assets |
| $ | 3,353 |
|
| $ | 1,527 |
|
| |
| Other assets |
|
| 366 |
| 53 |
|
| Other assets |
|
| 2,535 |
|
|
| 48 |
|
| ||
| Accrued liabilities |
|
| 22,683 |
| 15,490 |
|
| Accrued liabilities |
|
| 14,181 |
|
|
| 20,688 |
|
| ||
| Other liabilities |
|
| 7,431 |
| 3,290 |
|
| Other liabilities |
|
| 3,107 |
|
|
| 6,296 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Embedded Derivative Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Other current assets |
| $ | 497 |
| $ | 296 |
|
| Other current assets |
| $ | 2,030 |
|
| $ | 2,913 |
|
| |
| Other assets |
|
| 3,957 |
| 2,055 |
|
| Other assets |
|
| 376 |
|
|
| 1,079 |
|
| ||
| Accrued liabilities |
|
| 132 |
| 15 |
|
| Accrued liabilities |
|
| 1,282 |
|
|
| 351 |
|
| ||
| Other liabilities |
|
| - |
| - |
|
| Other liabilities |
|
| 255 |
|
|
| 29 |
|
|
The effect of derivative instruments on the Consolidated Statement of Operations and Comprehensive Income (Loss) for the three and ninesix month periods ended July 31,April 1, 2016, and March 27, 2015, and August 1, 2014, consisted of:
Fair Value Hedges and Embedded Derivatives
We recognized the following gains (losses) on contracts designated as fair value hedges:hedges and embedded derivatives:
In Thousands |
| Three Months Ended |
|
| Nine Months Ended |
|
|
| Three Months Ended |
|
| Six Months Ended |
|
| ||||||||||||||||||||
Gain (Loss) |
| July 31, |
| August 1, |
|
| July 31, |
|
| August 1, |
|
|
| April 1, |
|
| March 27, |
|
| April 1, |
|
| March 27, |
|
| |||||||||
|
| 2015 |
|
| 2014 |
|
| 2015 |
| 2014 |
|
|
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Recast) |
|
|
|
|
|
| (Recast) |
|
| ||
Embedded derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Recognized in sales |
| $ | 491 |
| $ | (651 | ) |
| $ | 2,070 |
| $ | 215 |
|
|
| $ | (4,708 | ) |
| $ | 4,033 |
|
| $ | (3,607 | ) |
| $ | 5,928 |
|
|
10
We recognized the following gains (losses) on contracts designated as cash flow hedges:
In Thousands |
| Three Months Ended |
|
| Nine Months Ended |
|
|
| Three Months Ended |
|
| Six Months Ended |
|
| ||||||||||||||||||||
Gain (Loss) |
| July 31, |
| August 1, |
|
| July 31, |
| August 1, |
|
|
| April 1, |
|
| March 27, |
|
| April 1, |
|
| March 27, |
|
| ||||||||||
|
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
|
|
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Recast) |
|
|
|
|
|
| (Recast) |
|
| ||
Foreign currency forward exchange contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Recognized in AOCI (effective portion) |
| $ | (1,468 | ) |
| $ | 1,873 |
|
| $ | 6,305 |
| $ | (858 | ) |
|
| $ | 25,688 |
|
| $ | (5,851 | ) |
| $ | 28,574 |
|
| $ | (7,415 | ) |
| |
Reclassified from AOCI into sales |
|
| (5,775 | ) |
| (893 | ) |
|
| (19,176 | ) |
| (3,638 | ) |
|
|
| (5,414 | ) |
|
| (6,815 | ) |
|
| (12,473 | ) |
|
| (11,331 | ) |
|
Net Investment Hedges
We recognized the following gains (losses) on contracts designated as net investment hedges:
In Thousands |
| Three Months Ended |
|
| Nine Months Ended |
|
|
| Three Months Ended |
|
| Six Months Ended |
|
| ||||||||||||||||||||
Gain (Loss) |
| July 31, |
|
| August 1, |
|
| July 31, |
|
| August 1, |
|
|
| April 1, |
|
| March 27, |
|
| April 1, |
|
| March 27, |
|
| ||||||||
|
| 2015 |
| 2014 |
|
| 2015 |
| 2014 |
|
|
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Recast) |
|
|
|
|
|
| (Recast) |
|
| ||
Euro Term Loan: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
2023 Notes and Accrued Interest: |
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|
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|
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|
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| |||||||||||||||||
Recognized in AOCI |
| $ | - |
| $ | 162 |
|
| $ | - |
| $ | 134 |
|
|
| $ | (17,785 | ) |
| $ | - |
|
| $ | (6,252 | ) |
| $ | - |
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| ||
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|
|
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| ||||
2023 Notes: |
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|
|
|
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|
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|
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| |||||||||||||||||||||
Recognized in AOCI |
| $ | 7,095 |
| $ | - |
|
| $ | (5,940 | ) |
| $ | - |
|
| ||||||||||||||||||
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| |||||||||||||||||||||
2023 Notes Interest: |
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|
|
|
|
|
|
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| |||||||||||||||||||||
Recognized in AOCI |
| $ | 34 |
| $ | - |
|
| $ | 34 |
| $ | - |
|
|
During the first ninesix months of fiscal 20152016 and 2014,2015, the Company recorded a gainlosses of $1.0$3.6 million and a loss of $0.8$3.2 million, respectively, on foreign currency forward exchange contracts that have not been designated as accounting hedges. These foreign currency exchange gains (losses)losses are included in selling, general and administrative expense.
There was no significant impact to the Company’s earnings related to the ineffective portion of any hedging instruments during the first ninesix months of fiscal 20152016 and 2014.2015. In addition, there was no significant impact to the Company’s earnings when a hedged firm commitment no longer qualified as a fair value hedge or when a hedged forecasted transaction no longer qualified as a cash flow hedge during the first ninesix months of fiscal 20152016 and 2014.2015.
Amounts included in AOCI are reclassified into earnings when the hedged transaction settles. The Company expects to reclassify approximately $20.8$8.5 million of net loss into earnings over the next 12 months. The $20.8 million loss will reduce the Company’s U.S.-dollar-denominated sales covered by qualified forward contracts to the forward rate when the Company entered into the forward contracts. The maximum duration of the Company’s foreign currency cash flow hedge contracts at July 31, 2015,April 1, 2016, is 24 months.
Note 78 – Income Taxes
The income tax rate was 17.4%16.6% in the thirdsecond fiscal quarter of 20152016 compared with 23.7%18.6% in the prior-year period. In the thirdsecond fiscal quarter of 2016, the Company recognized $0.3 million of discrete tax benefits due to income tax return to provision adjustments. In the second fiscal quarter of 2015, the Company recognized $0.9 million of discrete tax benefits principally related to the following items. The first item was approximately $1.2 million of tax benefits due to the release of reserves upon the expiration of a statute of limitations. The second item was approximately $0.3$0.5 million of discrete tax expense principally related to reconciling the prior year’sfollowing two items. The first item was a $2.0 million tax expense due to income tax return to the income tax provision. In the third fiscal quarter of 2014, the Company recognized $0.2 provision adjustments. The second item was approximately $1.5��million of discrete tax expense.benefits due to the retroactive extension of the U.S. federal research and experimentation credits. The income tax rate differed from the statutory rate in the thirdsecond fiscal quartersquarter of 20152016 and 2014,2015, as both years benefited from various tax credits and certain foreign interest expense deductions.
The income tax rates were 19.9%11.0% and 21.5%21.9% for the first ninesix months of fiscal 20152016 and 2014,2015, respectively. In the first ninesix months of fiscal 2015,2016, the Company recognized $0.1$2.2 million of discrete tax benefits principally related to the following items. The first item was a $1.3 million reduction of net deferred income tax liabilities as a result of the enactment of tax laws reducing the U.K. statutory income tax rate. The second item was approximately $1.3 million of discrete tax benefits due to the retroactive extension of the U.S. federal research and experimentation credits. The third item was a $0.4 million tax expense due to income tax return to provision adjustments. In the first six months of 2015, the Company recognized approximately $0.2 million of discrete tax benefits principally related to the following two items. The first item was approximately $1.5 million of discrete tax benefits due to the retroactive extension of the U.S. federal research and experimentation credits. The second item was approximately $1.2a $1.3 million of tax benefits due to the release of reserves upon the expiration of a statute of limitations. The third item was approximately $2.6 million of discrete tax expense principally relateddue to reconciling the prior year’s income tax return to the income tax provision. In the first nine months of fiscal 2014, the Company recognized approximately $0.9 million of discrete tax benefits principally related to the following items. The first item was approximately $0.7 million of tax benefits upon the release of reserves due to the expiration of a statute of limitations. The second item was a $0.5 million reduction of net deferred income tax liabilities as a result of the enactment of tax laws reducing the U.K. statutory income tax rate. The third item was approximately $0.3 million of discrete tax expense principally related to reconciling the prior year’s income tax return to the income tax provision.provision adjustments. The income tax rate differed from the statutory rate in the first ninesix months of fiscal 20152016 and 2014,2015, as both years benefited from various tax credits and certain foreign interest expense deductions.
It is reasonably possible that within the next twelve months approximately $0.9$1.1 million of tax benefits that are currently unrecognized could be recognized as a result of settlement of examinations and/or the expiration of applicable statutes of limitations.
11
In March 2011, the Company entered into a secured credit facility for $460 million made available through a group of banks. The credit facility is secured by substantially all of the Company’s assets and interest is based on standard inter-bank offering rates. U.S. Credit Facility
On April 9, 2015, the Company amended theits secured credit facility to extend the expirationmaturity to April 9, 2020, increase the amount available for borrowing under the secured revolving credit facility to $500 million, and provide for a delayed-draw term loan facility of $250 million. Borrowing undermillion (U.S. Term Loan, due 2020). The Company recorded $2.3 million in debt issuance costs. The credit facility is secured by substantially all the delayed-draw term loan facility, if utilized, may be used only for working capitalCompany’s assets, and repayment or refinancing of our existing indebtedness and to pay the fees and expenses in connection therewith.interest is based on standard inter-bank offering rates. The interest rate on the credit facility ranges from LIBOR plus 1.25% to LIBOR plus 2.00% depending on the leverage ratios at the time the funds are drawn.. At July 31, 2015,April 1, 2016, the Company had $200.0$165.0 million outstanding under the secured credit facility at an interest rate of LIBOR plus 1.50%1.75%, which was 1.69% at2.20%.
U.S. Term Loan, due July 31, 2015.2016
In April 2013, the Company amended the secured credit facility to provide for a $175.0 million term loan (U.S. Term Loan). The interest rate on the U.S. Term Loan, ranges from LIBOR plus 1.5% to LIBOR plus 2.25% depending on the leverage ratios at the time the funds are drawn.due 2016). On April 8, 2015, the Company paid off the $175 million U.S. Term Loan.Loan, due 2016. In connection with the redemption,repayment, the Company wrote off $0.3 million in unamortized debt issuance costs as a loss on extinguishment of debt in the secondthird fiscal quarter of 2015.
U.S. Term Loan, due April 2020
On August 3, 2015, the Company borrowed $250 million under the U.S. Term Loan, due 2020, provided for under the amended secured credit facility. The interest rate on the U.S. Term Loan, due 2020, ranges from LIBOR plus 1.25% to LIBOR plus 2.00%. At April 1, 2016, the interest rate was LIBOR plus 1.75%, which equaled 2.19%. The loan amortizes at 1.25% of the original principal balance quarterly through March 2020, with the remaining balance due in April 2020.
7% Senior Notes, due August 2020
In August 2010, the Company issued $250.0 million in 7% Senior Notes, due August 1, 2020 (2020 Notes), and requiringwhich require semi-annual interest payments in FebruaryMarch and AugustSeptember of each year until maturity. The net proceeds from the sale of the notes, after deducting $4.4 million of debt issuance costs, were $245.6 million. The 2020 Notes are general unsecured senior obligations of the Company. The 2020 Notes are guaranteed, jointly and severally on a senior basis, by all the existing and future domestic subsidiaries of the
Company unless designated as an “unrestricted subsidiary,” and those foreign subsidiaries that executed related subsidiary guarantees under the indenture covering the 2020 Notes. The 2020 Notes are subject to redemption at the option of the Company at any time prior to August 1, 2015, at a price equal to 100% of the principal amount, plus any accrued interest to the date of redemption and a make-whole provision. The 2020 Notes are also subject to redemption at the option of the Company, in whole or in part, on or after August 1, 2015, at redemption prices starting at 103.500% of the principal amount plus accrued interest during the period beginning August 1, 2015, and declining annually to 100% of principal and accrued interest on or after August 1, 2018.
Subsequent to period end, on August 3, 2015, the Company borrowed $250 million under the delayed-draw term loan provided for under the amended credit facility. The delayed-draw term loan carries the same interest rate as the amended credit facility.
On August 4, 2015, the proceeds from the delayed-draw term loanU.S. Term Loan, due 2020, were used to redeem all of the 7% Senior Notes due 2020.2020 Notes. As part of the redemption, the Company incurred an $8.75 million redemption premium and wrote off $2.4 million in unamortized debt issuance costs which will be expensedas a loss on extinguishment of debt in the fourth fiscal quarter of 2015.
3.625% Senior Notes, due April 2023
In April 2015, the Company issued €330.0 million in 3.625% Notes, due 2023 Notes requiring semi-annual interest payments in April and October of each year until maturity. The net proceeds from the sale of the notes, after deducting $5.7$5.9 million of debt issuance costs, were $350.8 million. The 2023 Notes are general unsecured senior obligations of the Company. The 2023 Notes are unconditionally guaranteed on a senior basis by the Company and certain subsidiaries of the Company that are guarantors under the Company’s existing secured credit facility. The 2023 Notes are subject to redemption at the option of the Company at any time prior to April 15, 2018, at a price equal to 100% of the principal amount, plus any accrued interest to the date of redemption and a make-whole provision. The Company may also redeem up to 35% of the 2023 Notes before April 15, 2018, with the net cash proceeds from equity offerings. The 2023 Notes are also subject to redemption at the option of the Company, in whole or in part, on or after April 15, 2018, at redemption prices starting at 102.719% of the principal amount plus accrued interest during the period beginning April 15, 2018, and declining annually to 100% of principal and accrued interest on or after April 15, 2021.
Based on quoted market prices, the approximate fair value of the Company’s 2020 Notes was approximately $255.3 million and $266.9 million as of July 31, 2015, and October 31, 2014, respectively. Based on quoted market prices, the approximate fair value of the Company’s 2023 Notes was approximately $352.5$329.7 million as of July 31,April 1, 2016, and $347.7 million as of October 2, 2015. The carrying amount of the secured credit facility approximatesand the U.S. Term Loan, due 2020, approximate fair value. EstimatesThe estimate of fair value for the 2020 Notes and 2023 Notes areis based on quoted market prices, and are considered Level 2 inputs as defined in the fair value hierarchy described in Note 5.described.
Government refundable advances consist of payments received from the Canadian government to assist in research and development related to commercial aviation. The repayment ofrequirement to repay this advance is solely based on year-over-year commercial aviation revenue growth at CMC beginning in 2014. Imputed interest on the advance was 4.29%3.819% at July 31, 2015.April 1, 2016. The debt recognized was $43.2$44.6 million and $51.9$43.3 million as of July 31, 2015,April 1, 2016, and October 31, 2014,2, 2015, respectively.
In April 2015, FASB amended requirements related to the presentation of debt issuance costs. The updated standard requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. The recognition and measurement of debt issuance costs are not affected by this amendment. The Company adopted this updated standard during the first fiscal quarter of 2016. The Company reclassified $6.5 million of debt issuance costs from other non-current assets to a reduction of the Company’s current maturities of long-term debt of $0.2 million and a reduction of the Company’s long-term debt of $6.3 million as of October 2, 2015.
Note 910 – Commitments and Contingencies
The Company is party to various lawsuits and claims, both as a 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
12
position or results of operations. The Company believes that it has made appropriate and adequate provisions for contingent liabilities.
As of July 31, 2015,April 1, 2016, and October 31, 2014,2, 2015, the Company had a liability of $1.5$0.8 million in both periods,and $1.6 million, respectively, related to environmental remediation at a previously sold business for which the Company provided indemnification.
In the first fiscal quarter of 2015, the Company recognized a $15.7 million gain and a $2.4 million reduction in interest expense upon the lapse of a statutory period related to a liability for a non-income tax position of an acquired company.
On March 5, 2014, the Company entered into a Consent Agreement with the U.S. Department of State’s Directorate of Defense Trade Controls Office of Defense Trade Controls Compliance (DTCC) to resolve alleged International Traffic in Arms Regulations (ITAR) civil violations. The Consent Agreement settled the pending ITAR compliance matter with the DTCC previously reported by the Company that resulted from voluntary reports the Company filed with DTCC that disclosed possible technical and administrative violations of the ITAR. The Consent Agreement has a three-year term and providesprovided for: (i) a payment of $20 million, $10 million of which is suspended and eligible for offset credit based on verified expenditures for past and future remedial compliance measures; (ii) the appointment of an external Special Compliance Official to oversee compliance with the Consent Agreement and the ITAR; (iii) two external audits of the Company’s ITAR compliance program; and (iv) continued implementation of ongoing remedial compliance measures and additional remedial compliance measures related to automated systems and ITAR compliance policies, procedures, and training.
The settlement amount in the Consent Agreement was consistent with the amount proposed by DTCC in August 2013, for which the Company estimated and recorded a $10 million charge in the third fiscal quarter ended July 26, 2013. The $10 million portion of the settlement that is not subject to suspension will be paid in installments, with $4 million paid in March 2014, $2 million paid in February 2015, $2 million paid in March 2016, and $2 million to be paid in each of March 2016 and 2017. The Company expects that some part of recent investments made in its ITAR compliance program will be eligible for credit against the suspended portion of the settlement amount, which include: additional staffing, ongoing implementation of a new software system, employee training, and establishment of a regular
compliance audit program and corrective action process. The Company expects recent and future investments in remedial compliance measures will be sufficient to cover the $10 million suspended payment. As of April 1, 2016, DTCC has accepted $5 million of the Company’s investment in remedial compliance measures. An additional amount of approximately $15 million in investment in remedial compliance measures will be submitted to the DTCC in fiscal 2016 to be applied against the suspended payment.
Note 1011 – Employee Stock Plans
As of July 31, 2015,April 1, 2016, the Company had three share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans was $8.6$7.6 million and $9.8$6.3 million for the first ninesix months of fiscal 20152016 and 2014,2015, respectively. During the first ninesix months of fiscal 20152016 and 2014,2015, the Company issued 241,632103,629 and 600,540231,000 shares, respectively, under its share-based compensation plans.
Employee Stock Purchase Plan (ESPP)
The ESPP is a “safe-harbor” designed plan whereby shares are purchased by participants at a discount of 5% of the market value on the purchase date and, therefore, compensation cost is not recorded.
Employee Sharesave Scheme
The Company offers shares under its employee sharesave scheme for U.K. employees. This plan allows participants the option to purchase shares at a 5% discount of the market price of the stock as of the beginning of the offering period. The term of these options is three years. The sharesave scheme is not a “safe-harbor” design, and therefore, compensation cost is recognized on this plan. Under the sharesave scheme, option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The Company granted 25,984 and 29,242No options in the nine month periods ended July 31, 2015, and August 1, 2014, respectively. The weighted-average grant date fair value of optionswere granted during the nine month periods ended July 31, 2015, and August 1, 2014, was $24.31 and $27.03 per share, respectively.
|
| Nine Months Ended |
|
| |||||
|
| July 31, |
|
| August 1, |
|
| ||
|
| 2015 |
|
| 2014 |
|
| ||
|
|
|
|
|
|
|
|
|
|
Volatility |
|
| 25.80 | % |
|
| 33.69 | % |
|
Risk-free interest rate |
|
| 0.93 | % |
|
| 0.73 | % |
|
Expected life (years) |
| 3 |
|
| 3 |
|
| ||
Dividends |
| 0 |
|
| 0 |
|
|
first six months of fiscal 2016 or 2015.
Equity Incentive Plan
Under the equity incentive plan, option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The Company granted 192,700218,200 and 193,200187,500 options to purchase shares in the ninesix month periods ended July 31,April 1, 2016, and March 27, 2015, and August 1, 2014, respectively. The weighted-average grant date fair value of options granted during the ninesix month periods ended July 31,April 1, 2016, and March 27, 2015, was $35.84 and August 1, 2014, was $48.48 and $45.23$48.62 per share, respectively.
13
The fair value of each option granted by the Company was estimated using a Black-Scholes pricing model, which uses the assumptions noted in the following table. The Company uses historical data to estimate volatility of the Company’s common stock and option exercise and employee termination assumptions. The risk-free rate for the contractual life of the option is based on the U.S. Treasury zero coupon issues in effect at the time of the grant.
|
| Nine Months Ended |
|
| Six Months Ended |
| ||||
|
| July 31, |
| August 1, |
|
| April 1, |
| March 27, |
|
|
| 2015 |
| 2014 |
|
| 2016 |
| 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Volatility |
| 40.73 - 41.89% |
| 41.87 - 43.17% |
|
| 33.06 - 40.52% |
| 40.73 - 41.89% |
|
Risk-free interest rate |
| 1.43 - 2.00% |
| 1.73 - 2.99% |
|
| 1.61 - 2.24% |
| 1.43 - 2.00% |
|
Expected life (years) |
| 5 - 9 |
| 5 - 9 |
|
| 5 - 9 |
| 5 - 9 |
|
Dividends |
| 0 |
| 0 |
|
| 0 |
| 0 |
|
The Company granted 22,00036,000 and 77,57520,300 restricted stock units in the ninesix month periods ended July 31,April 1, 2016, and March 27, 2015, and August 1, 2014, respectively. The weighted-average grant date fair value of restricted stock units granted during the ninesix month periods ended July 31,April 1, 2016, and March 27, 2015, was $85.33 and August 1, 2014, was $112.53 and $84.50$113.98 per share, respectively. The fair value of each restricted stock unit granted by the Company is equal to the fair market value of the Company’s common stock on the date of grant.
The Company granted 55,300 and 34,000 performance share plan shares in the six month periods ended April 1, 2016, and March 27, 2015, respectively. The total shares granted in each period equaled the number of shares participants would receive if the Company achieves target performance over the relevant period and is therefore at risk if the Company does not achieve the target level of the performance. The grant date fair value of performance share plan shares granted during the six month periods ended April 1, 2016, and March 27, 2015, was $79.31 and $117.53, respectively. The fair value of each performance share plan share granted by the Company is equal to the fair market value of the Company’s common stock on the date of grant.
Note 1112 – Acquisitions
On January 31, 2015, the Company acquired the defense, aerospace and training display (DAT) business of Belgium-based Barco N.V. (Barco) for €150 million, or approximately $171 million, in cash before a working capital adjustment of approximately $15 million which decreased the purchase price and was received subsequent to the third fiscal quarter of 2015.million. The Company incurred a $2.9 million foreign currency exchange loss in the funding of the acquisition in the first fiscal quarter of 2015. Acquisition related costs of $3.4 million have beenwere recognized as selling, general and administrative expense.expense in fiscal 2015. The Company financed the acquisition primarily using international cash reserves, with the balance funded by borrowings under its existing credit facility. The displayDAT business develops and manufactures visualization solutions for a variety of demanding defense and commercial aerospace applications. The display businessapplications and is included in our Avionics & Controls segment.
The following summarizes the allocation of the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The fair value adjustment for inventory was $7.1$7.0 million, which will bewas recognized as cost of goods sold over 13eight months, the estimated inventory turnover. The fair value of acquired programs represented the value of visualization solutions sold under long-term supply agreements with aerospace companies, military contractors, and OEM manufacturers using similar technology. The valuation of the program included the values of program-specific technology, the backlog of contracts, and the relationship with customers which lead to potential future contracts. The valuation of the programs was based upon the discounted cash flow at a market-based discount rate. The purchase price includes the value of existing technologies, the introduction of new technologies, and the addition of new customers. These factors resulted in recording goodwill of $48.0$48.5 million. TheA substantial portion of the amount allocated to goodwill is not deductible for income tax purposes.
In Thousands |
|
|
|
|
As of January 31, 2015 |
|
|
|
|
|
|
|
|
|
Current assets | $ | 94,899 |
|
|
Property, plant and equipment |
| 6,211 |
|
|
Intangible assets subject to amortization |
|
|
|
|
Programs (15 year average useful life) |
| 56,513 |
|
|
Programs (3 year average useful life) |
| 677 |
|
|
Trade name (3 year average useful life) |
| 226 |
|
|
Goodwill |
| 48,001 |
|
|
Other assets |
| 3,401 |
|
|
Total assets acquired |
| 209,928 |
|
|
|
|
|
|
|
Current liabilities assumed |
| 33,492 |
|
|
Long-term liabilities assumed |
| 5,366 |
|
|
Net assets acquired | $ | 171,070 |
|
|
14
|
|
|
| |
As of January 31, 2015 |
|
|
|
|
|
|
|
|
|
Current assets | $ | 80,400 |
|
|
Property, plant and equipment |
| 6,206 |
|
|
Intangible assets subject to amortization |
|
|
|
|
Programs (15 year average useful life) |
| 56,455 |
|
|
Programs (3 year average useful life) |
| 677 |
|
|
Trade name (3 year average useful life) |
| 226 |
|
|
Goodwill |
| 48,537 |
|
|
Other assets |
| 3,401 |
|
|
Total assets acquired |
| 195,902 |
|
|
|
|
|
|
|
Current liabilities assumed |
| 34,006 |
|
|
Long-term liabilities assumed |
| 5,921 |
|
|
Net assets acquired | $ | 155,975 |
|
|
On December 20, 2013,To take advantage of synergies across the Company, acquired Sunbank for $51.7 million. The purchase price included $5 million in additional contingent consideration based upon achievementDAT will be further integrated with existing businesses. As a result of certain sales levels over a two-year period, of whichthese integration activities, the Company paidincurred $3.6 million and $7.7 million of integration expenses in the first installmentthree and six months of $1.3 million in the third fiscal quarter of 2015. The remaining $3.7 million in additional contingent consideration is expected to be paid. Sunbank is a manufacturer of electrical cable accessories, connectors and flexible conduit systems. Sunbank is included in the Sensors & Systems segment.
Note 12 – Comprehensive Income (Loss)
The Company’s comprehensive income (loss) is as follows:
In Thousands |
| Three Months Ended |
|
| Nine Months Ended |
|
| ||||||||||
|
| July 31, |
|
| August 1, |
|
| July 31, |
|
| August 1, |
|
| ||||
|
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
| $ | 28,497 |
|
| $ | 38,908 |
|
| $ | 56,626 |
|
| $ | 105,890 |
|
|
Change in fair value of derivative financial instruments, net of tax (1) |
|
| (5,276 | ) |
|
| 810 |
|
|
| (9,444 | ) |
|
| (3,150 | ) |
|
Change in pension and post-retirement obligations, net of tax (2) |
|
| 1,951 |
|
|
| 507 |
|
|
| 8,450 |
|
|
| 2,653 |
|
|
Currency translation adjustment |
|
| (26,162 | ) |
|
| (23,746 | ) |
|
| (163,264 | ) |
|
| (19,231 | ) |
|
Comprehensive Income (Loss) |
| $ | (990 | ) |
| $ | 16,479 |
|
| $ | (107,632 | ) |
| $ | 86,162 |
|
|
|
|
|
|
Note 13 – Restructuring
On December 5, 2013, the Company announced the acceleration of its plans to consolidate certain facilities and create cost efficiencies through shared services in sales, general and administrative and support functions. These integration activities are expected to result in charges and expenses for a total of $35 million in fiscal 2014 and fiscal 2015. Total restructuring expenses were $20.4 million in fiscal 2014. The costs are for exit and relocation of facilities, losses on the write off of certain property, plant and equipment, and severance.
In the second fiscal quarter of 2016, restructuring expense totaled $1.9 million. In the first ninesix months of fiscal 2015,2016, restructuring expense totaled $10.1$3.3 million, as more fully described in the following table:
In Thousands |
|
|
|
| Write Off of |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Write Off of |
|
|
|
|
|
|
|
|
|
| ||
| Exit & |
|
| Property, |
|
|
|
|
|
|
|
|
|
| Exit & |
|
| Property, |
|
|
|
|
|
|
|
|
|
| ||||
| Relocation |
|
| Plant & |
|
|
|
|
|
|
|
|
|
| Relocation |
|
| Plant & |
|
|
|
|
|
|
|
|
|
| ||||
| of Facilities |
|
| Equipment |
|
| Severance |
|
| Total |
|
| of Facilities |
|
| Equipment |
|
| Severance |
|
| Total |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales | $ | 3,512 |
|
| $ | 651 |
|
| $ | 588 |
|
| $ | 4,751 |
|
| $ | 1,249 |
|
| $ | 18 |
|
| $ | 180 |
|
| $ | 1,447 |
|
|
Restructuring charges |
| 3,980 |
|
|
| - |
|
|
| 1,395 |
|
|
| 5,375 |
|
|
| 1,451 |
|
|
| - |
|
|
| 420 |
|
|
| 1,871 |
|
|
Total | $ | 7,492 |
|
| $ | 651 |
|
| $ | 1,983 |
|
| $ | 10,126 |
|
| $ | 2,700 |
|
| $ | 18 |
|
| $ | 600 |
|
| $ | 3,318 |
|
|
In the recast second fiscal quarter of 2015, restructuring expense totaled $3.8 million. In the recast first ninesix months of fiscal 2014,2015, restructuring expense totaled $14.3$9.3 million, as more fully described in the following table:
In Thousands |
|
|
|
| Write Off of |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Write Off of |
|
|
|
|
|
|
|
|
|
| ||
| Exit & |
|
| Property, |
|
|
|
|
|
|
|
|
|
| Exit & |
|
| Property, |
|
|
|
|
|
|
|
|
|
| ||||
| Relocation |
|
| Plant & |
|
|
|
|
|
|
|
|
|
| Relocation |
|
| Plant & |
|
|
|
|
|
|
|
|
|
| ||||
| of Facilities |
|
| Equipment |
|
| Severance |
|
| Total |
|
| of Facilities |
|
| Equipment |
|
| Severance |
|
| Total |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales | $ | 4,029 |
|
| $ | 9 |
|
| $ | - |
|
| $ | 4,038 |
|
| $ | 3,014 |
|
| $ | 633 |
|
| $ | 714 |
|
| $ | 4,361 |
|
|
Restructuring charges |
| 2,866 |
|
|
| 2,542 |
|
|
| 4,871 |
|
|
| 10,279 |
|
|
| 3,762 |
|
|
| 48 |
|
|
| 1,117 |
|
|
| 4,927 |
|
|
Total | $ | 6,895 |
|
| $ | 2,551 |
|
| $ | 4,871 |
|
| $ | 14,317 |
|
| $ | 6,776 |
|
| $ | 681 |
|
| $ | 1,831 |
|
| $ | 9,288 |
|
|
The Company has recorded an accrued liability of $4.2$5.7 million and $5.9$5.2 million for these activities as of July 31, 2015,April 1, 2016, and October 31, 2014,2, 2015, respectively.
In Thousands | Accrued |
|
| |
| Liabilities |
|
| |
|
|
|
|
|
Beginning Balance as of October 25, 2013 | $ | - |
|
|
Amounts accrued and incurred |
| 20,388 |
|
|
Amounts paid |
| (11,688 | ) |
|
Write-off |
| (2,585 | ) |
|
Currency translation adjustment |
| (200 | ) |
|
Balance as of October 31, 2014 | $ | 5,915 |
|
|
|
|
|
|
|
Amounts accrued and incurred |
| 10,126 |
|
|
Amounts paid |
| (10,968 | ) |
|
Write-off |
| (651 | ) |
|
Currency translation adjustment |
| (227 | ) |
|
Balance as of July 31, 2015 | $ | 4,195 |
|
|
Note 14 – Discontinued Operations
On September 3, 2014,The Company’s board of directors previously approved the Company approved a plan to sell certain non-core business units including Eclipse Electronic Systems, Inc. (Eclipse), a manufacturer of embedded communication intercept receivers for signal intelligence applications; Wallop Defence Systems, Ltd. (Wallop), a manufacturer of flare countermeasure devices; Pacific Aerospace and Electronics Inc. (PA&E), a manufacturer of hermetically sealed electrical connectors; a small distribution business and a small distributionmanufacturing business. These businesses were not separate reporting units as defined under U.S. GAAP
15
On June 5, 2015, the Company sold Eclipse for $7.9 million and no indicatorretained ownership of impairment existedthe land, building and building improvements, which are held for sale. In addition, on July 20, 2015, the Company sold PA&E for $23.4 million. Under the terms of the stock purchase agreements for the sale of Eclipse and PA&E, the Company agreed to indemnify the buyer for certain breaches of the Company’s representations and warranties and certain other items for up to $2.8 million and $3.9 million, respectively. An escrow account in the amount of $1.1 million was established at August 1, 2014, requiring an impairment testclosing of theirthe sale of PA&E to partially cover the Company’s indemnification obligations. A claim against the escrow amount, if paid, would result in a corresponding reporting units’ goodwill or these businesses’ long-lived assets. Based upondecrease in the estimated fair values,purchase price for the sale of PA&E.
During the second fiscal quarter of 2016 and 2015, the Company incurred an estimated after-taxa loss of $49.5$2.0 million inand $14.6 million, respectively, on discontinued operations. During the fourthfirst six months of fiscal quarter2016 and 2015, the Company incurred a loss of 2014$6.8 million and $20.5 million, respectively. For the first and second fiscal quarters of fiscal 2016, the Company incurred a loss on assets held for sale at Advanced Materials of $2.2 million and $1.4 million, respectively. The loss on assets held for sale in discontinued operations.both quarters was principally due to the effect of changes in foreign currency exchange rates on the estimated sale price and Wallop’s assets held for sale. Principal assumptions used in measuring the estimated after-tax loss on assets held for sale included estimated selling price of the discontinued business, discount rates, industry growth rates, and pricing of comparable transactions in the market. Eclipse and the distribution business are included in the Avionics & Controls segment, Wallop is included in the Advanced Materials segment, and PA&E is included in the Sensors & Systems segment.
On June 5, 2015, the Company completed the sale of Eclipse for approximately $10 million. The Company retained ownership of the land, building and building improvements, which are being held for sale. On July 20, 2015, the Company completed the sale of PA&E for approximately $22 million. The selling price for both businesses is subject to customary working capital adjustments.
During the third fiscal quarter of 2015, the Company incurred a loss of $1.7 million on discontinued operations. During the first nine months of fiscal 2015, the Company incurred a loss on discontinued operations of $20.3 million, including a $16.4 million loss on assets held for sale. For the first nine months of fiscal 2015, a $11.9 million loss on assets held for sale at Avionics & Controls was principally due the reduction of Eclipse’s estimated selling price based upon lower expectations of earnings for the business and continuing negotiations with the buyer. The $5.1 million write-off in Advanced Materials was due to the effects of valuing Wallop’s balance sheet at the current exchange rate incurred in the first nine months of fiscal 2015.
During the first ninesix months of fiscal 2015, the Company recorded a $2.0$1.7 million increase in a liability related to environmental remediation at a previously sold business for which the Company provided indemnification. A loss of $1.3$1.1 million, net of tax, is reflected in discontinued operations.
The operating results of the discontinued operations for the three month period ended July 31, 2015,April 1, 2016, consisted of the following:
In Thousands |
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
|
|
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
|
| ||||||
|
| Controls |
|
| Systems |
|
| Materials |
|
| Other |
|
| Total |
|
|
| Controls |
|
| Systems |
|
| Materials |
|
| Other |
|
| Total |
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
| $ | 4,436 |
|
| $ | 6,419 |
|
| $ | 5,424 |
|
| $ | - |
|
| $ | 16,279 |
|
|
| $ | 4,479 |
|
| $ | - |
|
| $ | 2,289 |
|
| $ | - |
|
| $ | 6,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
| (1,132 | ) |
|
| 1,533 |
|
|
| (830 | ) |
|
| (803 | ) |
|
| (1,232 | ) |
|
|
| 1,072 |
|
|
| (151 | ) |
|
| (2,874 | ) |
|
| (7 | ) |
|
| (1,960 | ) |
|
Gain (loss) on net assets held for sale |
|
| (1,718 | ) |
|
| 619 |
|
|
| (18 | ) |
|
| - |
|
|
| (1,117 | ) |
| |||||||||||||||||||||
Tax expense (benefit) |
|
| (695 | ) |
|
| 428 |
|
|
| (127 | ) |
|
| (262 | ) |
|
| (656 | ) |
|
|
| 273 |
|
|
| - |
|
|
| (210 | ) |
|
| - |
|
|
| 63 |
|
|
Income (loss) from discontinued operations |
| $ | (2,155 | ) |
| $ | 1,724 |
|
| $ | (721 | ) |
| $ | (541 | ) |
| $ | (1,693 | ) |
|
| $ | 799 |
|
| $ | (151 | ) |
| $ | (2,664 | ) |
| $ | (7 | ) |
| $ | (2,023 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Included in Operating Earnings (Loss): | Included in Operating Earnings (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Gain (loss) on net assets held for sale |
|
| 326 |
|
|
| - |
|
|
| (1,381 | ) |
|
| - |
|
|
| (1,055 | ) |
|
The operating results of the discontinued operations for the ninesix month period ended July 31, 2015,April 1, 2016, consisted of the following:
In Thousands |
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
|
|
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
|
| ||||||
|
| Controls |
|
| Systems |
|
| Materials |
|
| Other |
|
| Total |
|
|
| Controls |
|
| Systems |
|
| Materials |
|
| Other |
|
| Total |
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
| $ | 18,349 |
|
| $ | 18,684 |
|
| $ | 11,529 |
|
| $ | - |
|
| $ | 48,562 |
|
|
| $ | 10,061 |
|
| $ | - |
|
| $ | 4,773 |
|
| $ | - |
|
| $ | 14,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
| (2,649 | ) |
|
| 3,270 |
|
|
| (3,909 | ) |
|
| (1,988 | ) |
|
| (5,276 | ) |
|
|
| 1,969 |
|
|
| (307 | ) |
|
| (8,867 | ) |
|
| (11 | ) |
|
| (7,216 | ) |
|
Gain (loss) on net assets held for sale |
|
| (11,871 | ) |
|
| (3 | ) |
|
| (5,089 | ) |
|
| - |
|
|
| (16,963 | ) |
| |||||||||||||||||||||
Tax expense (benefit) |
|
| (1,252 | ) |
|
| 626 |
|
|
| (686 | ) |
|
| (673 | ) |
|
| (1,985 | ) |
|
|
| 686 |
|
|
| - |
|
|
| (1,099 | ) |
|
| - |
|
|
| (413 | ) |
|
Income (loss) from discontinued operations |
| $ | (13,268 | ) |
| $ | 2,641 |
|
| $ | (8,312 | ) |
| $ | (1,315 | ) |
| $ | (20,254 | ) |
|
| $ | 1,283 |
|
| $ | (307 | ) |
| $ | (7,768 | ) |
| $ | (11 | ) |
| $ | (6,803 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Included in Operating Earnings (Loss): | Included in Operating Earnings (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Gain (loss) on net assets held for sale |
|
| 56 |
|
|
| - |
|
|
| (3,628 | ) |
|
| - |
|
|
| (3,572 | ) |
|
16
The operating results of the discontinued operations for the recast three month period ended March 27, 2015, consisted of the following:
In Thousands |
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
|
| |||
|
| Controls |
|
| Systems |
|
| Materials |
|
| Other |
|
| Total |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
| $ | 13,429 |
|
| $ | 6,329 |
|
| $ | 2,709 |
|
| $ | - |
|
| $ | 22,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
| (10,624 | ) |
|
| 1,449 |
|
|
| (4,236 | ) |
|
| (1,180 | ) |
|
| (14,591 | ) |
|
Tax expense (benefit) |
|
| 318 |
|
|
| 524 |
|
|
| (420 | ) |
|
| (413 | ) |
|
| 9 |
|
|
Income (loss) from discontinued operations |
| $ | (10,942 | ) |
| $ | 925 |
|
| $ | (3,816 | ) |
| $ | (767 | ) |
| $ | (14,600 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in Operating Earnings (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Loss on net assets held for sale |
|
| (11,439 | ) |
|
| - |
|
|
| (3,008 | ) |
|
| - |
|
|
| (14,447 | ) |
|
The operating results of the discontinued operations for the threerecast six month period ended August 1, 2014,March 27, 2015, consisted of the following:
In Thousands |
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
|
|
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
|
| ||||||
|
| Controls |
|
| Systems |
|
| Materials |
|
| Other |
|
| Total |
|
|
| Controls |
|
| Systems |
|
| Materials |
|
| Other |
|
| Total |
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
| $ | 7,249 |
|
| $ | 5,860 |
|
| $ | 11,706 |
|
| $ | - |
|
| $ | 24,815 |
|
|
| $ | 27,591 |
|
| $ | 12,257 |
|
| $ | 6,150 |
|
| $ | - |
|
| $ | 45,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
| (1,847 | ) |
|
| 141 |
|
|
| (196 | ) |
|
| - |
|
|
| (1,902 | ) |
|
|
| (11,395 | ) |
|
| 1,749 |
|
|
| (11,221 | ) |
|
| (1,692 | ) |
|
| (22,559 | ) |
|
Gain (loss) on net assets held for sale |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| |||||||||||||||||||||
Tax expense (benefit) |
|
| (520 | ) |
|
| (461 | ) |
|
| 8 |
|
|
| - |
|
|
| (973 | ) |
|
|
| (89 | ) |
|
| 672 |
|
|
| (2,076 | ) |
|
| (590 | ) |
|
| (2,083 | ) |
|
Income (loss) from discontinued operations |
| $ | (1,327 | ) |
| $ | 602 |
|
| $ | (204 | ) |
| $ | - |
|
| $ | (929 | ) |
|
| $ | (11,306 | ) |
| $ | 1,077 |
|
| $ | (9,145 | ) |
| $ | (1,102 | ) |
| $ | (20,476 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Included in Operating Earnings (Loss): | Included in Operating Earnings (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Loss on net assets held for sale |
|
| (11,439 | ) |
|
| - |
|
|
| (3,008 | ) |
|
| - |
|
|
| (14,447 | ) |
|
The operating results of the discontinued operations for the nine month period ended August 1, 2014, consisted of the following:
In Thousands |
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
|
| |||
|
| Controls |
|
| Systems |
|
| Materials |
|
| Other |
|
| Total |
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
| $ | 24,783 |
|
| $ | 16,798 |
|
| $ | 20,987 |
|
| $ | - |
|
| $ | 62,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
| (6,566 | ) |
|
| (278 | ) |
|
| (5,020 | ) |
|
| (343 | ) |
|
| (12,207 | ) |
|
Gain (loss) on net assets held for sale |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
Tax expense (benefit) |
|
| (2,136 | ) |
|
| (595 | ) |
|
| (991 | ) |
|
| - |
|
|
| (3,722 | ) |
|
Income (loss) from discontinued operations |
| $ | (4,430 | ) |
| $ | 317 |
|
| $ | (4,029 | ) |
| $ | (343 | ) |
| $ | (8,485 | ) |
|
Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at July 31, 2015,April 1, 2016, are comprised of the following:
In Thousands |
|
|
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
| ||||||
|
|
|
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
|
|
|
|
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
| $ | 1,589 |
|
| $ | - |
|
| $ | 4,949 |
|
| $ | 6,538 |
|
|
|
|
| $ | 4,341 |
|
| $ | - |
|
| $ | 221 |
|
| $ | 4,562 |
|
|
Inventories |
|
|
|
| 2,451 |
|
|
| - |
|
|
| 5,111 |
|
|
| 7,562 |
|
|
|
|
|
| 11,954 |
|
|
| - |
|
|
| 2,380 |
|
|
| 14,334 |
|
|
Prepaid expenses |
|
|
|
| 21 |
|
|
| - |
|
|
| 277 |
|
|
| 298 |
|
|
|
|
|
| 82 |
|
|
| - |
|
|
| 239 |
|
|
| 321 |
|
|
Deferred income tax benefits |
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| |||||||||||||||||||
Income tax refundable |
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| |||||||||||||||||||
Current Assets of Businesses Held for Sale | Current Assets of Businesses Held for Sale |
| $ | 4,061 |
|
| $ | - |
|
| $ | 10,337 |
|
| $ | 14,398 |
|
| Current Assets of Businesses Held for Sale |
|
| 16,377 |
|
|
| - |
|
|
| 2,840 |
|
|
| 19,217 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment |
|
|
| $ | 5,324 |
|
| $ | - |
|
| $ | 16,817 |
|
| $ | 22,141 |
|
|
|
|
|
| 5,417 |
|
|
| - |
|
|
| 9,463 |
|
|
| 14,880 |
|
|
Intangibles, net |
|
|
|
| 950 |
|
|
| - |
|
|
| 6,905 |
|
|
| 7,855 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 3,779 |
|
|
| 3,779 |
|
|
Deferred income tax benefits |
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
| (147 | ) |
|
| - |
|
|
| 1,370 |
|
|
| 1,223 |
|
|
Other assets |
|
|
|
| - |
|
|
| - |
|
|
| 1,562 |
|
|
| 1,562 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,423 |
|
|
| 1,423 |
|
|
Non-Current Assets of Businesses Held for Sale | Non-Current Assets of Businesses Held for Sale |
| $ | 6,274 |
|
| $ | - |
|
| $ | 25,284 |
|
| $ | 31,558 |
|
| Non-Current Assets of Businesses Held for Sale |
|
| 5,270 |
|
|
| - |
|
|
| 16,035 |
|
|
| 21,305 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
| $ | 1,533 |
|
| $ | - |
|
| $ | 5,389 |
|
| $ | 6,922 |
|
|
|
|
|
| 765 |
|
|
| - |
|
|
| 1,837 |
|
|
| 2,602 |
|
|
Accrued liabilities |
|
|
|
| 506 |
|
|
| - |
|
|
| 1,457 |
|
|
| 1,963 |
|
|
|
|
|
| 8,006 |
|
|
| - |
|
|
| 3,572 |
|
|
| 11,578 |
|
|
Current Liabilities of Businesses Held for Sale | Current Liabilities of Businesses Held for Sale |
| $ | 2,039 |
|
| $ | - |
|
| $ | 6,846 |
|
| $ | 8,885 |
|
| Current Liabilities of Businesses Held for Sale |
|
| 8,771 |
|
|
| - |
|
|
| 5,409 |
|
|
| 14,180 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities |
|
|
| $ | - |
|
| $ | - |
|
| $ | 1,795 |
|
| $ | 1,795 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 319 |
|
|
| 319 |
|
|
Other liabilities |
|
|
|
| 64 |
|
|
| - |
|
|
| - |
|
|
| 64 |
|
|
|
|
|
| 503 |
|
|
| - |
|
|
| - |
|
|
| 503 |
|
|
Non-Current Liabilities of Businesses Held for Sale | Non-Current Liabilities of Businesses Held for Sale |
| $ | 64 |
|
| $ | - |
|
| $ | 1,795 |
|
| $ | 1,859 |
|
| Non-Current Liabilities of Businesses Held for Sale |
|
| 503 |
|
|
| - |
|
|
| 319 |
|
|
| 822 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets of Businesses Held for Sale | Net Assets of Businesses Held for Sale |
| $ | 8,232 |
|
| $ | - |
|
| $ | 26,980 |
|
| $ | 35,212 |
|
| Net Assets of Businesses Held for Sale |
| $ | 12,373 |
|
| $ | - |
|
| $ | 13,147 |
|
| $ | 25,520 |
|
|
17
Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at October 31, 2014,2, 2015, were comprised of the following:
In Thousands |
|
|
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
|
|
|
| Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
| ||||||
|
|
|
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
|
|
|
|
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
| $ | 5,154 |
|
| $ | 3,752 |
|
| $ | 2,106 |
|
| $ | 11,012 |
|
|
|
|
| $ | 5,360 |
|
| $ | - |
|
| $ | 1,546 |
|
| $ | 6,906 |
|
|
Inventories |
|
|
|
| 12,646 |
|
|
| 7,972 |
|
|
| 5,258 |
|
|
| 25,876 |
|
|
|
|
|
| 14,763 |
|
|
| - |
|
|
| 5,841 |
|
|
| 20,604 |
|
|
Prepaid expenses |
|
|
|
| 408 |
|
|
| 86 |
|
|
| 335 |
|
|
| 829 |
|
|
|
|
|
| 156 |
|
|
| - |
|
|
| 185 |
|
|
| 341 |
|
|
Deferred income tax benefits |
|
|
|
| 671 |
|
|
| 680 |
|
|
| - |
|
|
| 1,351 |
|
| |||||||||||||||||||
Income tax refundable |
|
|
|
| - |
|
|
| - |
|
|
| 2,378 |
|
|
| 2,378 |
|
| |||||||||||||||||||
Current Assets of Businesses Held for Sale | Current Assets of Businesses Held for Sale |
| $ | 18,879 |
|
| $ | 12,490 |
|
| $ | 10,077 |
|
| $ | 41,446 |
|
| Current Assets of Businesses Held for Sale |
|
| 20,279 |
|
|
| - |
|
|
| 7,572 |
|
|
| 27,851 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment |
|
|
| $ | 4,949 |
|
| $ | 4,105 |
|
| $ | 19,839 |
|
| $ | 28,893 |
|
|
|
|
|
| 5,474 |
|
|
| - |
|
|
| 12,199 |
|
|
| 17,673 |
|
|
Intangibles, net |
|
|
|
| 22,228 |
|
|
| 10,659 |
|
|
| 8,327 |
|
|
| 41,214 |
|
|
|
|
|
| 945 |
|
|
| - |
|
|
| 4,928 |
|
|
| 5,873 |
|
|
Deferred income tax benefits |
|
|
|
| - |
|
|
| (30 | ) |
|
| - |
|
|
| (30 | ) |
|
|
|
|
| (147 | ) |
|
| - |
|
|
| - |
|
|
| (147 | ) |
|
Other assets |
|
|
|
| - |
|
|
| - |
|
|
| 1,600 |
|
|
| 1,600 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,518 |
|
|
| 1,518 |
|
|
Non-Current Assets of Businesses Held for Sale | Non-Current Assets of Businesses Held for Sale |
| $ | 27,177 |
|
| $ | 14,734 |
|
| $ | 29,766 |
|
| $ | 71,677 |
|
| Non-Current Assets of Businesses Held for Sale |
|
| 6,272 |
|
|
| - |
|
|
| 18,645 |
|
|
| 24,917 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
| $ | 2,194 |
|
| $ | 873 |
|
| $ | 6,326 |
|
| $ | 9,393 |
|
|
|
|
|
| 1,878 |
|
|
| - |
|
|
| 4,837 |
|
|
| 6,715 |
|
|
Accrued liabilities |
|
|
|
| 1,765 |
|
|
| 1,008 |
|
|
| 2,025 |
|
|
| 4,798 |
|
|
|
|
|
| 8,340 |
|
|
| - |
|
|
| 2,051 |
|
|
| 10,391 |
|
|
Current Liabilities of Businesses Held for Sale | Current Liabilities of Businesses Held for Sale |
| $ | 3,959 |
|
| $ | 1,881 |
|
| $ | 8,351 |
|
| $ | 14,191 |
|
| Current Liabilities of Businesses Held for Sale |
|
| 10,218 |
|
|
| - |
|
|
| 6,888 |
|
|
| 17,106 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities |
|
|
| $ | 11,084 |
|
| $ | 6,243 |
|
| $ | 1,537 |
|
| $ | 18,864 |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 194 |
|
|
| 194 |
|
|
Other liabilities |
|
|
|
| - |
|
|
| - |
|
|
| 12 |
|
|
| 12 |
|
|
|
|
|
| 2,215 |
|
|
| - |
|
|
| - |
|
|
| 2,215 |
|
|
Non-Current Liabilities of Businesses Held for Sale | Non-Current Liabilities of Businesses Held for Sale |
| $ | 11,084 |
|
| $ | 6,243 |
|
| $ | 1,549 |
|
| $ | 18,876 |
|
| Non-Current Liabilities of Businesses Held for Sale |
|
| 2,215 |
|
|
| - |
|
|
| 194 |
|
|
| 2,409 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets of Businesses Held for Sale | Net Assets of Businesses Held for Sale |
| $ | 31,013 |
|
| $ | 19,100 |
|
| $ | 29,943 |
|
| $ | 80,056 |
|
| Net Assets of Businesses Held for Sale |
| $ | 14,118 |
|
| $ | - |
|
| $ | 19,135 |
|
| $ | 33,253 |
|
|
Note 15 – Business Segment Information
Business segment information for continuing operations includes the segments of Avionics & Controls, Sensors & Systems and Advanced Materials.
In Thousands |
| Three Months Ended |
|
| Nine Months Ended |
|
|
| Three Months Ended |
|
| Six Months Ended |
|
| ||||||||||||||||||||
|
| April 1, |
|
| March 27, |
|
| April 1, |
|
| March 27, |
|
| |||||||||||||||||||||
|
| July 31, |
|
| August 1, |
|
| July 31, |
|
| August 1, |
|
|
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
|
| ||||||||
|
| 2015 |
| 2014 |
|
| 2015 |
| 2014 |
|
|
|
|
|
|
| (Recast) |
|
|
|
|
|
| (Recast) |
|
| ||||||||
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Avionics & Controls |
| $ | 207,467 |
| $ | 192,860 |
|
| $ | 594,534 |
| $ | 571,366 |
|
|
| $ | 198,665 |
|
| $ | 187,330 |
|
| $ | 384,910 |
|
| $ | 393,947 |
|
| ||
Sensors & Systems |
|
| 175,530 |
| 192,246 |
|
|
| 515,611 |
| 579,131 |
|
|
|
| 176,069 |
|
|
| 171,538 |
|
|
| 328,499 |
|
|
| 354,432 |
|
| ||||
Advanced Materials |
|
| 113,220 |
|
| 121,203 |
|
|
| 332,496 |
|
| 352,613 |
|
|
|
| 115,576 |
|
|
| 109,342 |
|
|
| 218,378 |
|
|
| 224,442 |
|
| ||
|
| $ | 496,217 |
| $ | 506,309 |
|
| $ | 1,442,641 |
| $ | 1,503,110 |
|
|
| $ | 490,310 |
|
| $ | 468,210 |
|
| $ | 931,787 |
|
| $ | 972,821 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Earnings from Continuing Operations Before Income Taxes | Earnings from Continuing Operations Before Income Taxes |
|
|
|
|
|
|
|
|
|
| Earnings from Continuing Operations Before Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Avionics & Controls |
| $ | 23,473 |
|
| $ | 30,902 |
|
| $ | 52,024 |
|
| $ | 81,952 |
|
|
| $ | 2,649 |
|
| $ | 7,934 |
|
| $ | 12,062 |
|
| $ | 45,260 |
|
|
Sensors & Systems |
|
| 23,356 |
| 18,055 |
|
|
| 55,491 |
| 61,811 |
|
|
|
| 20,944 |
|
|
| 16,256 |
|
|
| 33,728 |
|
|
| 33,714 |
|
| ||||
Advanced Materials |
|
| 24,396 |
|
| 27,724 |
|
|
| 65,908 |
|
| 75,911 |
|
|
|
| 23,208 |
|
|
| 19,469 |
|
|
| 36,198 |
|
|
| 41,024 |
|
| ||
Segment Earnings |
|
| 71,225 |
|
| 76,681 |
|
|
| 173,423 |
|
| 219,674 |
|
|
|
| 46,801 |
|
|
| 43,659 |
|
|
| 81,988 |
|
|
| 119,998 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Corporate expense |
|
| (24,045 | ) |
| (16,142 | ) |
|
| (65,067 | ) |
| (48,398 | ) |
|
|
| (18,965 | ) |
|
| (19,851 | ) |
|
| (37,030 | ) |
|
| (42,862 | ) |
| ||
Other income |
|
| - |
| - |
|
|
| 12,744 |
| - |
|
|
|
| - |
|
|
| 12,744 |
|
|
| - |
|
|
| 12,744 |
|
| ||||
Interest income |
|
| 144 |
| 145 |
|
|
| 447 |
| 400 |
|
|
|
| 94 |
|
|
| 135 |
|
|
| 181 |
|
|
| 319 |
|
| ||||
Interest expense |
|
| (10,618 | ) |
| (7,865 | ) |
|
| (25,023 | ) |
| (24,924 | ) |
|
|
| (7,294 | ) |
|
| (5,934 | ) |
|
| (14,510 | ) |
|
| (14,016 | ) |
| ||
Loss on extinguishment of debt |
|
| - |
|
| (533 | ) |
|
| (329 | ) |
|
| (533 | ) |
| ||||||||||||||||||
|
| $ | 36,706 |
| $ | 52,286 |
|
| $ | 96,195 |
| $ | 146,219 |
|
|
| $ | 20,636 |
|
| $ | 30,753 |
|
| $ | 30,629 |
|
| $ | 76,183 |
|
|
18
Note 16 – Guarantors
The following schedules set forth condensed consolidating financial information as required by Rule 3-10 of Securities and Exchange Commission Regulation S-X as of July 31, 2015, and October 31, 2014, and for the applicable periods ended July 31, 2015, and August 1, 2014, for (a) Esterline Technologies Corporation (the Parent); (b) TA Mfg. Limited, the issuer of the 2023 Notes; (c) on a combined basis, the current subsidiary guarantors (Guarantor Subsidiaries) of the secured credit facility, the 2020 Notes and the 2023 Notes for the periods after April 2015; and (d) on a combined basis, the subsidiaries that are not guarantors (Non-Guarantor Subsidiaries) of the secured credit facility, the 2020 Notes and the 2023 Notes for the periods after April 2015. The Guarantor Subsidiaries are direct and indirect wholly-owned subsidiaries of Esterline Technologies Corporation and have fully and unconditionally, jointly and severally, guaranteed the secured credit facility, the 2020 Notes and the 2023 Notes.
Condensed Consolidating Balance Sheet as of July 31, 2015.
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents | $ | 16,454 |
|
| $ | 995 |
|
| $ | 1,376 |
|
| $ | 168,857 |
|
| $ | - |
|
| $ | 187,682 |
|
Accounts receivable, net |
| 33 |
|
|
| - |
|
|
| 136,624 |
|
|
| 237,042 |
|
|
| - |
|
|
| 373,699 |
|
Inventories |
| - |
|
|
| - |
|
|
| 193,345 |
|
|
| 276,355 |
|
|
| - |
|
|
| 469,700 |
|
Income tax refundable |
| - |
|
|
| - |
|
|
| - |
|
|
| 17,515 |
|
|
| - |
|
|
| 17,515 |
|
Deferred income tax benefits |
| 29,330 |
|
|
| - |
|
|
| (14,519 | ) |
|
| 22,134 |
|
|
| - |
|
|
| 36,945 |
|
Prepaid expenses |
| 93 |
|
|
| - |
|
|
| 7,648 |
|
|
| 13,666 |
|
|
| - |
|
|
| 21,407 |
|
Other current assets |
| 74 |
|
|
| - |
|
|
| 111 |
|
|
| 17,011 |
|
|
| - |
|
|
| 17,196 |
|
Current assets of businesses held for sale |
| - |
|
|
| - |
|
|
| - |
|
|
| 14,398 |
|
|
| - |
|
|
| 14,398 |
|
Total Current Assets |
| 45,984 |
|
|
| 995 |
|
|
| 324,585 |
|
|
| 766,978 |
|
|
| - |
|
|
| 1,138,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant & Equipment, Net |
| 1,992 |
|
|
| - |
|
|
| 158,658 |
|
|
| 145,741 |
|
|
| - |
|
|
| 306,391 |
|
Goodwill |
| - |
|
|
| - |
|
|
| 372,021 |
|
|
| 668,422 |
|
|
| - |
|
|
| 1,040,443 |
|
Intangibles, net |
| - |
|
|
| - |
|
|
| 109,929 |
|
|
| 350,039 |
|
|
| - |
|
|
| 459,968 |
|
Debt issuance costs, net |
| 5,380 |
|
|
| 5,655 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 11,035 |
|
Deferred income tax benefits |
| 18,659 |
|
|
| - |
|
|
| 14,670 |
|
|
| 42,283 |
|
|
| - |
|
|
| 75,612 |
|
Other assets |
| 281 |
|
|
| - |
|
|
| 10,386 |
|
|
| 11,436 |
|
|
| - |
|
|
| 22,103 |
|
Non-current assets of businesses held for sale |
| - |
|
|
| - |
|
|
| 5,262 |
|
|
| 26,296 |
|
|
| - |
|
|
| 31,558 |
|
Amounts Due From (To) Subsidiaries |
| - |
|
|
| 353,831 |
|
|
| 817,896 |
|
|
| - |
|
|
| (1,171,727 | ) |
|
| - |
|
Investment in Subsidiaries |
| 3,098,201 |
|
|
| 653,386 |
|
|
| 1,009,069 |
|
|
| 14,644 |
|
|
| (4,775,300 | ) |
|
| - |
|
Total Assets | $ | 3,170,497 |
|
| $ | 1,013,867 |
|
| $ | 2,822,476 |
|
| $ | 2,025,839 |
|
| $ | (5,947,027 | ) |
| $ | 3,085,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable | $ | 2,846 |
|
| $ | - |
|
| $ | 36,884 |
|
| $ | 71,685 |
|
| $ | - |
|
| $ | 111,415 |
|
Accrued liabilities |
| 19,441 |
|
|
| 4,124 |
|
|
| 80,197 |
|
|
| 163,624 |
|
|
| - |
|
|
| 267,386 |
|
Current maturities of long-term debt |
| - |
|
|
| - |
|
|
| 898 |
|
|
| 116 |
|
|
| - |
|
|
| 1,014 |
|
Deferred income tax liabilities |
| 15,159 |
|
|
| - |
|
|
| (14,669 | ) |
|
| 2,503 |
|
|
| - |
|
|
| 2,993 |
|
Federal and foreign income taxes |
| (9,624 | ) |
|
| (51 | ) |
|
| (5,165 | ) |
|
| 18,693 |
|
|
| - |
|
|
| 3,853 |
|
Current liabilities of businesses held for sale |
| - |
|
|
| - |
|
|
| - |
|
|
| 8,885 |
|
|
| - |
|
|
| 8,885 |
|
Total Current Liabilities |
| 27,822 |
|
|
| 4,073 |
|
|
| 98,145 |
|
|
| 265,506 |
|
|
| - |
|
|
| 395,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facilities |
| 170,000 |
|
|
| - |
|
|
| - |
|
|
| 30,000 |
|
|
| - |
|
|
| 200,000 |
|
Long-Term Debt, Net |
| 250,000 |
|
|
| 362,472 |
|
|
| 56,976 |
|
|
| 43,361 |
|
|
| - |
|
|
| 712,809 |
|
Deferred Income Tax Liabilities |
| 24,867 |
|
|
| - |
|
|
| 14,658 |
|
|
| 93,974 |
|
|
| - |
|
|
| 133,499 |
|
Pension and Post-Retirement Obligations |
| 18,591 |
|
|
| - |
|
|
| 754 |
|
|
| 37,413 |
|
|
| - |
|
|
| 56,758 |
|
Other Liabilities |
| 14,134 |
|
|
| - |
|
|
| 194 |
|
|
| 16,184 |
|
|
| - |
|
|
| 30,512 |
|
Non-current liabilities of businesses held for sale |
| - |
|
|
| - |
|
|
| - |
|
|
| 1,859 |
|
|
| - |
|
|
| 1,859 |
|
Amounts Due To (From) Subsidiaries |
| 1,110,414 |
|
|
| - |
|
|
| - |
|
|
| 398,562 |
|
|
| (1,508,976 | ) |
|
| - |
|
Shareholders' Equity |
| 1,554,669 |
|
|
| 647,322 |
|
|
| 2,651,749 |
|
|
| 1,138,980 |
|
|
| (4,438,051 | ) |
|
| 1,554,669 |
|
Total Liabilities and Shareholders' Equity | $ | 3,170,497 |
|
| $ | 1,013,867 |
|
| $ | 2,822,476 |
|
| $ | 2,025,839 |
|
| $ | (5,947,027 | ) |
| $ | 3,085,652 |
|
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) for the three month period ended July 31, 2015.
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales | $ | - |
|
| $ | - |
|
| $ | 225,105 |
|
| $ | 272,137 |
|
| $ | (1,025 | ) |
| $ | 496,217 |
|
Cost of sales |
| - |
|
|
| - |
|
|
| 147,206 |
|
|
| 180,240 |
|
|
| (1,025 | ) |
|
| 326,421 |
|
|
| - |
|
|
| - |
|
|
| 77,899 |
|
|
| 91,897 |
|
|
| - |
|
|
| 169,796 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
| - |
|
|
| 55 |
|
|
| 38,794 |
|
|
| 53,119 |
|
|
| - |
|
|
| 91,968 |
|
Research, development & engineering |
| - |
|
|
| - |
|
|
| 10,158 |
|
|
| 19,087 |
|
|
| - |
|
|
| 29,245 |
|
Restructuring charges |
| - |
|
|
| - |
|
|
| 1,228 |
|
|
| 175 |
|
|
| - |
|
|
| 1,403 |
|
Other (income) expense |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total Expenses |
| - |
|
|
| 55 |
|
|
| 50,180 |
|
|
| 72,381 |
|
|
| - |
|
|
| 122,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Earnings from Continuing Operations |
| - |
|
|
| (55 | ) |
|
| 27,719 |
|
|
| 19,516 |
|
|
| - |
|
|
| 47,180 |
|
Interest Income |
| (3,928 | ) |
|
| (3,401 | ) |
|
| (3,766 | ) |
|
| (7,597 | ) |
|
| 18,548 |
|
|
| (144 | ) |
Interest Expense |
| 8,790 |
|
|
| 3,500 |
|
|
| 8,838 |
|
|
| 8,038 |
|
|
| (18,548 | ) |
|
| 10,618 |
|
Loss on Extinguishment of Debt |
| (122 | ) |
|
| - |
|
|
| - |
|
|
| 122 |
|
|
| - |
|
|
| - |
|
Earnings (Loss) from Continuing Operations Before Income Taxes |
| (4,740 | ) |
|
| (154 | ) |
|
| 22,647 |
|
|
| 18,953 |
|
|
| - |
|
|
| 36,706 |
|
Income Tax Expense (Benefit) |
| (943 | ) |
|
| (31 | ) |
|
| 3,678 |
|
|
| 3,701 |
|
|
| - |
|
|
| 6,405 |
|
Earnings (Loss) from Continuing Operations Including Noncontrolling Interests |
| (3,797 | ) |
|
| (123 | ) |
|
| 18,969 |
|
|
| 15,252 |
|
|
| - |
|
|
| 30,301 |
|
Earnings Attributable to Noncontrolling Interests |
| - |
|
|
| - |
|
|
| - |
|
|
| (111 | ) |
|
| - |
|
|
| (111 | ) |
Earnings (Loss) from Continuing Operations Attributable to Esterline, Net of Tax |
| (3,797 | ) |
|
| (123 | ) |
|
| 18,969 |
|
|
| 15,141 |
|
|
| - |
|
|
| 30,190 |
|
Loss from Discontinued Operations Attributable to Esterline, Net of Tax |
| (541 | ) |
|
| - |
|
|
| 63 |
|
|
| (1,215 | ) |
|
| - |
|
|
| (1,693 | ) |
Equity in Net Earnings of Consolidated Subsidiaries |
| 32,835 |
|
|
| 10,457 |
|
|
| 27 |
|
|
| - |
|
|
| (43,319 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Attributable to Esterline | $ | 28,497 |
|
| $ | 10,334 |
|
| $ | 19,059 |
|
| $ | 13,926 |
|
| $ | (43,319 | ) |
| $ | 28,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss) | $ | (1,797 | ) |
| $ | 14,871 |
|
| $ | 19,728 |
|
| $ | (4,972 | ) |
| $ | (28,820 | ) |
| $ | (990 | ) |
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) for the nine month period ended July 31, 2015.
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales | $ | - |
|
| $ | - |
|
| $ | 668,970 |
|
| $ | 776,796 |
|
| $ | (3,125 | ) |
| $ | 1,442,641 |
|
Cost of sales |
| - |
|
|
| - |
|
|
| 440,583 |
|
|
| 526,386 |
|
|
| (3,125 | ) |
|
| 963,844 |
|
|
| - |
|
|
| - |
|
|
| 228,387 |
|
|
| 250,410 |
|
|
| - |
|
|
| 478,797 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
| - |
|
|
| 71 |
|
|
| 113,087 |
|
|
| 173,208 |
|
|
| - |
|
|
| 286,366 |
|
Research, development & engineering |
| - |
|
|
| - |
|
|
| 32,455 |
|
|
| 46,245 |
|
|
| - |
|
|
| 78,700 |
|
Restructuring charges |
| - |
|
|
| - |
|
|
| 4,588 |
|
|
| 787 |
|
|
| - |
|
|
| 5,375 |
|
Other (income) expense |
| - |
|
|
| - |
|
|
| - |
|
|
| (12,744 | ) |
|
| - |
|
|
| (12,744 | ) |
Total Expenses |
| - |
|
|
| 71 |
|
|
| 150,130 |
|
|
| 207,496 |
|
|
| - |
|
|
| 357,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Earnings from Continuing Operations |
| - |
|
|
| (71 | ) |
|
| 78,257 |
|
|
| 42,914 |
|
|
| - |
|
|
| 121,100 |
|
Interest Income |
| (11,922 | ) |
|
| (4,261 | ) |
|
| (18,232 | ) |
|
| (23,485 | ) |
|
| 57,453 |
|
|
| (447 | ) |
Interest Expense |
| 21,991 |
|
|
| 4,389 |
|
|
| 33,633 |
|
|
| 22,463 |
|
|
| (57,453 | ) |
|
| 25,023 |
|
Loss on Extinguishment of Debt |
| 207 |
|
|
| - |
|
|
| - |
|
|
| 122 |
|
|
| - |
|
|
| 329 |
|
Earnings (Loss) from Continuing Operations Before Income Taxes |
| (10,276 | ) |
|
| (199 | ) |
|
| 62,856 |
|
|
| 43,814 |
|
|
| - |
|
|
| 96,195 |
|
Income Tax Expense (Benefit) |
| (2,052 | ) |
|
| (40 | ) |
|
| 10,625 |
|
|
| 10,564 |
|
|
| - |
|
|
| 19,097 |
|
Earnings (Loss) from Continuing Operations Including Noncontrolling Interests |
| (8,224 | ) |
|
| (159 | ) |
|
| 52,231 |
|
|
| 33,250 |
|
|
| - |
|
|
| 77,098 |
|
Earnings Attributable to Noncontrolling Interests |
| - |
|
|
| - |
|
|
| - |
|
|
| (218 | ) |
|
| - |
|
|
| (218 | ) |
Earnings (Loss) from Continuing Operations Attributable to Esterline, Net of Tax |
| (8,224 | ) |
|
| (159 | ) |
|
| 52,231 |
|
|
| 33,032 |
|
|
| - |
|
|
| 76,880 |
|
Loss from Discontinued Operations Attributable to Esterline, Net of Tax |
| (1,315 | ) |
|
| - |
|
|
| (9,592 | ) |
|
| (9,347 | ) |
|
| - |
|
|
| (20,254 | ) |
Equity in Net Earnings of Consolidated Subsidiaries |
| 66,165 |
|
|
| 31,991 |
|
|
| 140 |
|
|
| - |
|
|
| (98,296 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Attributable to Esterline | $ | 56,626 |
|
| $ | 31,832 |
|
| $ | 42,779 |
|
| $ | 23,685 |
|
| $ | (98,296 | ) |
| $ | 56,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss) | $ | (95,254 | ) |
| $ | 25,408 |
|
| $ | 43,723 |
|
| $ | (109,270 | ) |
| $ | 27,761 |
|
| $ | (107,632 | ) |
Condensed Consolidating Statement of Cash Flows for the nine month period ended July 31, 2015.
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Provided (Used) by Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net earnings (loss) including noncontrolling interests | $ | 56,844 |
|
| $ | 31,832 |
|
| $ | 42,779 |
|
| $ | 23,685 |
|
| $ | (98,296 | ) |
| $ | 56,844 |
|
Depreciation & amortization |
| - |
|
|
| - |
|
|
| 28,339 |
|
|
| 48,971 |
|
|
| - |
|
|
| 77,310 |
|
Deferred income taxes |
| (17,829 | ) |
|
| - |
|
|
| 16,243 |
|
|
| (7,747 | ) |
|
| - |
|
|
| (9,333 | ) |
Share-based compensation |
| - |
|
|
| 5 |
|
|
| 3,722 |
|
|
| 4,891 |
|
|
| - |
|
|
| 8,618 |
|
Gain on release of non-income tax liability |
| - |
|
|
| - |
|
|
| - |
|
|
| (15,656 | ) |
|
| - |
|
|
| (15,656 | ) |
Loss on assets held for sale |
| - |
|
|
| - |
|
|
| 10,842 |
|
|
| 6,121 |
|
|
| - |
|
|
| 16,963 |
|
Working capital changes, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
| 577 |
|
|
| - |
|
|
| 8,228 |
|
|
| 9,138 |
|
|
| - |
|
|
| 17,943 |
|
Inventories |
| - |
|
|
| - |
|
|
| (5,268 | ) |
|
| (13,045 | ) |
|
| - |
|
|
| (18,313 | ) |
Prepaid expenses |
| 54 |
|
|
| - |
|
|
| (918 | ) |
|
| (1,724 | ) |
|
| - |
|
|
| (2,588 | ) |
Other current assets |
| 6 |
|
|
| - |
|
|
| 3 |
|
|
| 133 |
|
|
| - |
|
|
| 142 |
|
Accounts payable |
| 1,095 |
|
|
| - |
|
|
| (4,430 | ) |
|
| (13,474 | ) |
|
| - |
|
|
| (16,809 | ) |
Accrued liabilities |
| (2,286 | ) |
|
| - |
|
|
| (12,976 | ) |
|
| 8,073 |
|
|
| - |
|
|
| (7,189 | ) |
Federal and foreign income taxes |
| (7,342 | ) |
|
| (51 | ) |
|
| (2,522 | ) |
|
| 1,414 |
|
|
| - |
|
|
| (8,501 | ) |
Other liabilities |
| 3,608 |
|
|
| - |
|
|
| (528 | ) |
|
| 163 |
|
|
| - |
|
|
| 3,243 |
|
Other, net |
| (28,400 | ) |
|
| - |
|
|
| (42,771 | ) |
|
| 72,697 |
|
|
| - |
|
|
| 1,526 |
|
|
| 6,327 |
|
|
| 31,786 |
|
|
| 40,743 |
|
|
| 123,640 |
|
|
| (98,296 | ) |
|
| 104,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Provided (Used) by Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Purchases of capital assets |
| (804 | ) |
|
| - |
|
|
| (14,480 | ) |
|
| (22,493 | ) |
|
| - |
|
|
| (37,777 | ) |
Proceeds from sale of discontinued operations |
| - |
|
|
| - |
|
|
| 32,053 |
|
|
| - |
|
|
| - |
|
|
| 32,053 |
|
Acquisition of businesses, net of cash acquired |
| - |
|
|
| - |
|
|
| - |
|
|
| (171,070 | ) |
|
| - |
|
|
| (171,070 | ) |
|
| (804 | ) |
|
| - |
|
|
| 17,573 |
|
|
| (193,563 | ) |
|
| - |
|
|
| (176,794 | ) |
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Provided (Used) by Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Proceeds provided by stock issuance under employee stock plans |
| 13,477 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 13,477 |
|
Excess tax benefits from stock option exercises |
| 1,877 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,877 |
|
Shares repurchased |
| (259,518 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (259,518 | ) |
Repayment of long-term credit facilities |
| (235,000 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (235,000 | ) |
Repayment of long-term debt |
| (161,875 | ) |
|
| - |
|
|
| (416 | ) |
|
| (4,774 | ) |
|
| - |
|
|
| (167,065 | ) |
Proceeds from issuance of long-term credit facilities |
| 305,000 |
|
|
| - |
|
|
| - |
|
|
| 30,000 |
|
|
| - |
|
|
| 335,000 |
|
Proceeds from issuance of long-term debt |
| - |
|
|
| 356,532 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 356,532 |
|
Proceeds from government assistance |
| - |
|
|
| - |
|
|
| - |
|
|
| 3,054 |
|
|
| - |
|
|
| 3,054 |
|
Dividends paid to noncontrolling interests |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Debt and other issuance costs |
| (2,333 | ) |
|
| (5,880 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8,213 | ) |
Net change in intercompany financing |
| 333,610 |
|
|
| (380,925 | ) |
|
| (60,805 | ) |
|
| 9,824 |
|
|
| 98,296 |
|
|
| - |
|
|
| (4,762 | ) |
|
| (30,273 | ) |
|
| (61,221 | ) |
|
| 38,104 |
|
|
| 98,296 |
|
|
| 40,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Foreign Exchange Rates on Cash and Cash Equivalents |
| 1,059 |
|
|
| (518 | ) |
|
| 827 |
|
|
| (19,380 | ) |
|
| - |
|
|
| (18,012 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
| 1,820 |
|
|
| 995 |
|
|
| (2,078 | ) |
|
| (51,199 | ) |
|
| - |
|
|
| (50,462 | ) |
Cash and Cash Equivalents - Beginning of Year |
| 14,634 |
|
|
| - |
|
|
| 3,454 |
|
|
| 220,056 |
|
|
| - |
|
|
| 238,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents - End of Period | $ | 16,454 |
|
| $ | 995 |
|
| $ | 1,376 |
|
| $ | 168,857 |
|
| $ | - |
|
| $ | 187,682 |
|
Condensed Consolidating Balance Sheet as of October 31, 2014.
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents | $ | 14,634 |
|
| $ | - |
|
| $ | 3,454 |
|
| $ | 220,056 |
|
| $ | - |
|
| $ | 238,144 |
|
Accounts receivable, net |
| 610 |
|
|
| - |
|
|
| 143,158 |
|
|
| 236,121 |
|
|
| - |
|
|
| 379,889 |
|
Inventories |
| - |
|
|
| - |
|
|
| 188,982 |
|
|
| 244,613 |
|
|
| - |
|
|
| 433,595 |
|
Income tax refundable |
| - |
|
|
| - |
|
|
| - |
|
|
| 5,266 |
|
|
| - |
|
|
| 5,266 |
|
Deferred income tax benefits |
| 31,486 |
|
|
| - |
|
|
| (1,191 | ) |
|
| 18,384 |
|
|
| - |
|
|
| 48,679 |
|
Prepaid expenses |
| 147 |
|
|
| - |
|
|
| 6,703 |
|
|
| 13,486 |
|
|
| - |
|
|
| 20,336 |
|
Other current assets |
| 80 |
|
|
| - |
|
|
| 114 |
|
|
| 1,955 |
|
|
| - |
|
|
| 2,149 |
|
Current assets of businesses held for sale |
| - |
|
|
| - |
|
|
| 26,800 |
|
|
| 14,646 |
|
|
| - |
|
|
| 41,446 |
|
Total Current Assets |
| 46,957 |
|
|
| - |
|
|
| 368,020 |
|
|
| 754,527 |
|
|
| - |
|
|
| 1,169,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant & Equipment, Net |
| 1,489 |
|
|
| - |
|
|
| 158,089 |
|
|
| 159,764 |
|
|
| - |
|
|
| 319,342 |
|
Goodwill |
| - |
|
|
| - |
|
|
| 347,700 |
|
|
| 724,086 |
|
|
| - |
|
|
| 1,071,786 |
|
Intangibles, net |
| - |
|
|
| - |
|
|
| 106,164 |
|
|
| 365,213 |
|
|
| - |
|
|
| 471,377 |
|
Debt issuance costs, net |
| 4,134 |
|
|
| - |
|
|
| - |
|
|
| 161 |
|
|
| - |
|
|
| 4,295 |
|
Deferred income tax benefits |
| 20,455 |
|
|
| - |
|
|
| 30 |
|
|
| 50,822 |
|
|
| - |
|
|
| 71,307 |
|
Other assets |
| 130 |
|
|
| - |
|
|
| 7,502 |
|
|
| 6,547 |
|
|
| - |
|
|
| 14,179 |
|
Non-current assets of businesses held for sale |
| - |
|
|
| - |
|
|
| 40,737 |
|
|
| 30,940 |
|
|
| - |
|
|
| 71,677 |
|
Amounts Due From (To) Subsidiaries |
| - |
|
|
| - |
|
|
| 797,342 |
|
|
| - |
|
|
| (797,342 | ) |
|
| - |
|
Investment in Subsidiaries |
| 3,307,454 |
|
|
| - |
|
|
| 1,127,237 |
|
|
| 20,768 |
|
|
| (4,455,459 | ) |
|
| - |
|
Total Assets | $ | 3,380,619 |
|
| $ | - |
|
| $ | 2,952,821 |
|
| $ | 2,112,828 |
|
| $ | (5,252,801 | ) |
| $ | 3,193,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable | $ | 1,751 |
|
| $ | - |
|
| $ | 36,905 |
|
| $ | 76,628 |
|
| $ | - |
|
| $ | 115,284 |
|
Accrued liabilities |
| 20,178 |
|
|
| - |
|
|
| 93,168 |
|
|
| 149,190 |
|
|
| - |
|
|
| 262,536 |
|
Current maturities of long-term debt |
| 8,750 |
|
|
| - |
|
|
| 349 |
|
|
| 3,675 |
|
|
| - |
|
|
| 12,774 |
|
Deferred income tax liabilities |
| 76 |
|
|
| - |
|
|
| 8 |
|
|
| 1,689 |
|
|
| - |
|
|
| 1,773 |
|
Federal and foreign income taxes |
| (2,282 | ) |
|
| - |
|
|
| (2,643 | ) |
|
| 6,496 |
|
|
| - |
|
|
| 1,571 |
|
Current liabilities of businesses held for sale |
| - |
|
|
| - |
|
|
| 4,010 |
|
|
| 10,181 |
|
|
| - |
|
|
| 14,191 |
|
Total Current Liabilities |
| 28,473 |
|
|
| - |
|
|
| 131,797 |
|
|
| 247,859 |
|
|
| - |
|
|
| 408,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facilities |
| 100,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 100,000 |
|
Long-Term Debt, Net |
| 403,125 |
|
|
| - |
|
|
| 55,176 |
|
|
| 51,419 |
|
|
| - |
|
|
| 509,720 |
|
Deferred Income Tax Liabilities |
| 58,615 |
|
|
| - |
|
|
| (17,333 | ) |
|
| 107,883 |
|
|
| - |
|
|
| 149,165 |
|
Pension and Post-Retirement Obligations |
| 18,683 |
|
|
| - |
|
|
| 1,226 |
|
|
| 42,784 |
|
|
| - |
|
|
| 62,693 |
|
Other Liabilities |
| 16,762 |
|
|
| - |
|
|
| 3,944 |
|
|
| 26,178 |
|
|
| - |
|
|
| 46,884 |
|
Non-current liabilities of businesses held for sale |
| - |
|
|
| - |
|
|
| 17,327 |
|
|
| 1,549 |
|
|
| - |
|
|
| 18,876 |
|
Amounts Due To (From) Subsidiaries |
| 856,961 |
|
|
| - |
|
|
| - |
|
|
| 456,861 |
|
|
| (1,313,822 | ) |
|
| - |
|
Shareholders' Equity |
| 1,898,000 |
|
|
| - |
|
|
| 2,760,684 |
|
|
| 1,178,295 |
|
|
| (3,938,979 | ) |
|
| 1,898,000 |
|
Total Liabilities and Shareholders' Equity | $ | 3,380,619 |
|
| $ | - |
|
| $ | 2,952,821 |
|
| $ | 2,112,828 |
|
| $ | (5,252,801 | ) |
| $ | 3,193,467 |
|
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) for the three month period ended August 1, 2014.
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales | $ | - |
|
| $ | - |
|
| $ | 239,134 |
|
| $ | 268,860 |
|
| $ | (1,685 | ) |
| $ | 506,309 |
|
Cost of sales |
| - |
|
|
| - |
|
|
| 150,139 |
|
|
| 180,768 |
|
|
| (1,685 | ) |
|
| 329,222 |
|
|
| - |
|
|
| - |
|
|
| 88,995 |
|
|
| 88,092 |
|
|
| - |
|
|
| 177,087 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
| - |
|
|
| - |
|
|
| 33,454 |
|
|
| 55,430 |
|
|
| - |
|
|
| 88,884 |
|
Research, development & engineering |
| - |
|
|
| - |
|
|
| 10,932 |
|
|
| 13,327 |
|
|
| - |
|
|
| 24,259 |
|
Restructuring charges |
| - |
|
|
| - |
|
|
| 2,577 |
|
|
| 828 |
|
|
| - |
|
|
| 3,405 |
|
Other (income) expense |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total Expenses |
| - |
|
|
| - |
|
|
| 46,963 |
|
|
| 69,585 |
|
|
| - |
|
|
| 116,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Earnings from Continuing Operations |
| - |
|
|
| - |
|
|
| 42,032 |
|
|
| 18,507 |
|
|
| - |
|
|
| 60,539 |
|
Interest Income |
| (3,837 | ) |
|
| - |
|
|
| (1,948 | ) |
|
| (13,931 | ) |
|
| 19,571 |
|
|
| (145 | ) |
Interest Expense |
| 5,777 |
|
|
| - |
|
|
| 6,832 |
|
|
| 14,827 |
|
|
| (19,571 | ) |
|
| 7,865 |
|
Loss on Extinguishment of Debt |
| - |
|
|
| - |
|
|
| - |
|
|
| 533 |
|
|
| - |
|
|
| 533 |
|
Earnings (Loss) from Continuing Operations Before Income Taxes |
| (1,940 | ) |
|
| - |
|
|
| 37,148 |
|
|
| 17,078 |
|
|
| - |
|
|
| 52,286 |
|
Income Tax Expense (Benefit) |
| (466 | ) |
|
| - |
|
|
| 8,449 |
|
|
| 4,420 |
|
|
| - |
|
|
| 12,403 |
|
Earnings (Loss) from Continuing Operations Including Noncontrolling Interests |
| (1,474 | ) |
|
| - |
|
|
| 28,699 |
|
|
| 12,658 |
|
|
| - |
|
|
| 39,883 |
|
Earnings Attributable to Noncontrolling Interests |
| - |
|
|
| - |
|
|
| - |
|
|
| (46 | ) |
|
| - |
|
|
| (46 | ) |
Earnings (Loss) from Continuing Operations Attributable to Esterline, Net of Tax |
| (1,474 | ) |
|
| - |
|
|
| 28,699 |
|
|
| 12,612 |
|
|
| - |
|
|
| 39,837 |
|
Loss from Discontinued Operations Attributable to Esterline, Net of Tax |
| - |
|
|
| - |
|
|
| (787 | ) |
|
| (142 | ) |
|
| - |
|
|
| (929 | ) |
Equity in Net Earnings of Consolidated Subsidiaries |
| 40,382 |
|
|
| - |
|
|
| 883 |
|
|
| 114 |
|
|
| (41,379 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Attributable to Esterline | $ | 38,908 |
|
| $ | - |
|
| $ | 28,795 |
|
| $ | 12,584 |
|
| $ | (41,379 | ) |
| $ | 38,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss) | $ | 15,707 |
|
| $ | - |
|
| $ | 26,224 |
|
| $ | (9,163 | ) |
| $ | (16,289 | ) |
| $ | 16,479 |
|
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) for the nine month period ended August 1, 2014.
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales | $ | - |
|
| $ | - |
|
| $ | 702,424 |
|
| $ | 804,889 |
|
| $ | (4,203 | ) |
| $ | 1,503,110 |
|
Cost of sales |
| - |
|
|
| - |
|
|
| 446,042 |
|
|
| 534,224 |
|
|
| (4,203 | ) |
|
| 976,063 |
|
|
| - |
|
|
| - |
|
|
| 256,382 |
|
|
| 270,665 |
|
|
| - |
|
|
| 527,047 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
| - |
|
|
| - |
|
|
| 107,162 |
|
|
| 162,889 |
|
|
| - |
|
|
| 270,051 |
|
Research, development & engineering |
| - |
|
|
| - |
|
|
| 35,245 |
|
|
| 40,196 |
|
|
| - |
|
|
| 75,441 |
|
Restructuring charges |
| - |
|
|
| - |
|
|
| 6,898 |
|
|
| 3,381 |
|
|
| - |
|
|
| 10,279 |
|
Other (income) expense |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total Expenses |
| - |
|
|
| - |
|
|
| 149,305 |
|
|
| 206,466 |
|
|
| - |
|
|
| 355,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Earnings from Continuing Operations |
| - |
|
|
| - |
|
|
| 107,077 |
|
|
| 64,199 |
|
|
| - |
|
|
| 171,276 |
|
Interest Income |
| (11,588 | ) |
|
| - |
|
|
| (5,886 | ) |
|
| (42,303 | ) |
|
| 59,377 |
|
|
| (400 | ) |
Interest Expense |
| 18,350 |
|
|
| - |
|
|
| 20,619 |
|
|
| 45,332 |
|
|
| (59,377 | ) |
|
| 24,924 |
|
Loss on Extinguishment of Debt |
| - |
|
|
| - |
|
|
| - |
|
|
| 533 |
|
|
| - |
|
|
| 533 |
|
Earnings (Loss) from Continuing Operations Before Income Taxes |
| (6,762 | ) |
|
| - |
|
|
| 92,344 |
|
|
| 60,637 |
|
|
| - |
|
|
| 146,219 |
|
Income Tax Expense (Benefit) |
| (1,462 | ) |
|
| - |
|
|
| 20,686 |
|
|
| 12,191 |
|
|
| - |
|
|
| 31,415 |
|
Earnings (Loss) from Continuing Operations Including Noncontrolling Interests |
| (5,300 | ) |
|
| - |
|
|
| 71,658 |
|
|
| 48,446 |
|
|
| - |
|
|
| 114,804 |
|
Earnings Attributable to Noncontrolling Interests |
| - |
|
|
| - |
|
|
| - |
|
|
| (429 | ) |
|
| - |
|
|
| (429 | ) |
Earnings (Loss) from Continuing Operations Attributable to Esterline, Net of Tax |
| (5,300 | ) |
|
| - |
|
|
| 71,658 |
|
|
| 48,017 |
|
|
| - |
|
|
| 114,375 |
|
Loss from Discontinued Operations Attributable to Esterline, Net of Tax |
| (343 | ) |
|
| - |
|
|
| (3,645 | ) |
|
| (4,497 | ) |
|
| - |
|
|
| (8,485 | ) |
Equity in Net Earnings of Consolidated Subsidiaries |
| 111,533 |
|
|
| - |
|
|
| 2,117 |
|
|
| 1,434 |
|
|
| (115,084 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Attributable to Esterline | $ | 105,890 |
|
| $ | - |
|
| $ | 70,130 |
|
| $ | 44,954 |
|
| $ | (115,084 | ) |
| $ | 105,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss) | $ | 88,374 |
|
| $ | - |
|
| $ | 68,693 |
|
| $ | 35,471 |
|
| $ | (106,376 | ) |
| $ | 86,162 |
|
Condensed Consolidating Statement of Cash Flows for the nine month period ended August 1, 2014.
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Provided (Used) by Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net earnings (loss) including noncontrolling interests | $ | 106,319 |
|
| $ | - |
|
| $ | 70,130 |
|
| $ | 44,954 |
|
| $ | (115,084 | ) |
| $ | 106,319 |
|
Depreciation & amortization |
| - |
|
|
| - |
|
|
| 32,336 |
|
|
| 55,107 |
|
|
| - |
|
|
| 87,443 |
|
Deferred income taxes |
| (4,971 | ) |
|
| - |
|
|
| (2 | ) |
|
| (8,131 | ) |
|
| - |
|
|
| (13,104 | ) |
Share-based compensation |
| - |
|
|
| - |
|
|
| 4,248 |
|
|
| 5,585 |
|
|
| - |
|
|
| 9,833 |
|
Gain on release of non-income tax liability |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Loss on assets held for sale |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Working capital changes, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
| 528 |
|
|
| - |
|
|
| 13,887 |
|
|
| 9,065 |
|
|
| - |
|
|
| 23,480 |
|
Inventories |
| - |
|
|
| - |
|
|
| (17,289 | ) |
|
| (25,122 | ) |
|
| - |
|
|
| (42,411 | ) |
Prepaid expenses |
| (52 | ) |
|
| - |
|
|
| (1,913 | ) |
|
| (4,237 | ) |
|
| - |
|
|
| (6,202 | ) |
Other current assets |
| 2 |
|
|
| - |
|
|
| (1 | ) |
|
| (100 | ) |
|
| - |
|
|
| (99 | ) |
Accounts payable |
| 117 |
|
|
| - |
|
|
| 3,585 |
|
|
| (8,210 | ) |
|
| - |
|
|
| (4,508 | ) |
Accrued liabilities |
| (10,486 | ) |
|
| - |
|
|
| (1,534 | ) |
|
| (4,438 | ) |
|
| - |
|
|
| (16,458 | ) |
Federal and foreign income taxes |
| (4,462 | ) |
|
| - |
|
|
| 21,809 |
|
|
| (25,330 | ) |
|
| - |
|
|
| (7,983 | ) |
Other liabilities |
| 5,415 |
|
|
| - |
|
|
| 95 |
|
|
| (6,950 | ) |
|
| - |
|
|
| (1,440 | ) |
Other, net |
| (497 | ) |
|
| - |
|
|
| (10,962 | ) |
|
| 11,304 |
|
|
| - |
|
|
| (155 | ) |
|
| 91,913 |
|
|
| - |
|
|
| 114,389 |
|
|
| 43,497 |
|
|
| (115,084 | ) |
|
| 134,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Provided (Used) by Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Purchases of capital assets |
| (186 | ) |
|
| - |
|
|
| (11,748 | ) |
|
| (23,075 | ) |
|
| - |
|
|
| (35,009 | ) |
Proceeds from sale of discontinued operations |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Acquisition of businesses, net of cash acquired |
| - |
|
|
| - |
|
|
| (44,745 | ) |
|
| - |
|
|
| - |
|
|
| (44,745 | ) |
|
| (186 | ) |
|
| - |
|
|
| (56,493 | ) |
|
| (23,075 | ) |
|
| - |
|
|
| (79,754 | ) |
In Thousands |
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| TA Mfg. |
|
| Guarantor |
|
| Guarantor |
|
|
|
|
|
|
|
|
| |||
| Parent |
|
| Ltd. |
|
| Subsidiaries |
|
| Subsidiaries |
|
| Eliminations |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Provided (Used) by Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Proceeds provided by stock issuance under employee stock plans |
| 23,173 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 23,173 |
|
Excess tax benefits from stock option exercises |
| 6,392 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,392 |
|
Shares repurchased |
| (5,176 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (5,176 | ) |
Repayment of long-term credit facilities |
| (40,000 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (40,000 | ) |
Repayment of long-term debt |
| (6,562 | ) |
|
| - |
|
|
| (245 | ) |
|
| (27,269 | ) |
|
| - |
|
|
| (34,076 | ) |
Proceeds from issuance of long-term credit facilities |
| 25,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 25,000 |
|
Proceeds from issuance of long-term debt |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Proceeds from government assistance |
| - |
|
|
| - |
|
|
| - |
|
|
| 3,362 |
|
|
| - |
|
|
| 3,362 |
|
Dividends paid to noncontrolling interests |
| - |
|
|
| - |
|
|
| - |
|
|
| (780 | ) |
|
| - |
|
|
| (780 | ) |
Debt and other issuance costs |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Net change in intercompany financing |
| (98,319 | ) |
|
| - |
|
|
| (56,888 | ) |
|
| 40,123 |
|
|
| 115,084 |
|
|
| - |
|
|
| (95,492 | ) |
|
| - |
|
|
| (57,133 | ) |
|
| 15,436 |
|
|
| 115,084 |
|
|
| (22,105 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Foreign Exchange Rates on Cash and Cash Equivalents |
| (22 | ) |
|
| - |
|
|
| (22 | ) |
|
| (1,534 | ) |
|
| - |
|
|
| (1,578 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
| (3,787 | ) |
|
| - |
|
|
| 741 |
|
|
| 34,324 |
|
|
| - |
|
|
| 31,278 |
|
Cash and Cash Equivalents - Beginning of Year |
| 7,826 |
|
|
| - |
|
|
| 4,876 |
|
|
| 166,476 |
|
|
| - |
|
|
| 179,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents - End of Period | $ | 4,039 |
|
| $ | - |
|
| $ | 5,617 |
|
| $ | 200,800 |
|
| $ | - |
|
| $ | 210,456 |
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
On June 5, 2014, we changed the Company’s fiscal year end to the last Friday of September from the last Friday in October. We reported our financial results for the 11-month transition period of November 1, 2014, through October 2, 2015, on our Transition Report on Form 10-K, and thereafter we will file our annual report for the 12-month period ending the last Friday of September of each year, beginning with the 12-month period ending September 30, 2016. Prior year results have been recast on a calendar quarter basis. Refer to the Transition Report on Form 10-K for the eleven months ended October 2, 2015, for additional information regarding our fiscal year change.
Overview
We operate our businesses in three segments: Avionics & Controls, Sensors & Systems and Advanced Materials. Our segments are structured around our technical capabilities. Sales in all segments include domestic, international, defense and commercial customers.
The Avionics & Controls segment includes avionics systems, control and communication systems, and interface technologies capabilities. Avionics systems designs and develops cockpit systems integration and avionics solutions for commercial and military applications. Control and communication systems designs and manufactures technology interface systems for military and commercial aircraft and land- and sea-based military vehicles. Additionally, control and communication systems designs and manufactures military audio and data products for severe battlefield environments and communication control systems to enhance security and aural clarity in military applications. Defense, aerospace and training display (DAT), which will be integrated into our avionics systems and control and communication systems capabilities develops and manufactures visualization solutions for a variety of demanding defense and commercial aerospace applications. Interface technologies manufactures and develops custom control panels, input systems for medical, industrial, military and gaming industries.
The Sensors & Systems segment includes power systems, connection technologies and advanced sensors capabilities. Power systems develops and manufactures electrical power switching and other related systems, principally for aerospace and defense customers. Connection technologies develops and manufactures highly engineered connectors for harsh environments and serves the aerospace, defense & space, power generation, rail and industrial equipment markets. Advanced sensors develops and manufactures high precision temperature and pressure sensors for aerospace and defense customers.
The Advanced Materials segment includes engineered materials and defense technologies capabilities. Engineered materials develops and manufactures thermally engineered components and high-performance elastomer products used in a wide range of commercial aerospace and military applications. Defense technologies develops and manufactures combustible ordnance components and warfare countermeasure devices for military customers.
Our current business and strategic plan focuses on the continued development of our products principally for aerospace and defense markets. We are concentrating our efforts to expand our capabilities in these markets, and to anticipate the global needs of our customers and to respond to such needs with comprehensive solutions. These efforts focus on continuous research and new product development, acquisitions and strategic realignments of operations to expand our capabilities as a more comprehensive supplier to our customers across our entire product offering. Our business has been impacted by reductions in defense spending.
On January 31, 2015, we acquired the DAT business of Belgium-based Barco N.V. (Barco) for €150 million net of acquired cash, or approximately $171 million in cash. A working capital adjustment of approximately $15 million was paid by Barco subsequent to July 31, 2015. We financed the acquisition primarily using international cash reserves, with the balance funded by borrowings under our existing credit facility. DAT develops and manufactures visualization solutions for a variety of demanding defense and commercial aerospace applications. DAT employs roughly 600 people in Belgium, France, Israel, Singapore and the U.S. The display business is included in our Avionics & Controls segment. We incurred a $2.9 million foreign currency exchange loss in funding the acquisition at the end of the first fiscal quarter of 2015. We estimate that DAT will break even in fiscal 2015, excluding integration and purchase accounting expenses and the above referenced foreign currency loss.
In September 2014, our board of directors approved a plan to sell certain non-core business units including Eclipse Electronic Systems, Inc. (Eclipse), a manufacturer of embedded communication intercept receivers for signal intelligence applications; Wallop Defence Systems, Ltd. (Wallop), a manufacturer of flare countermeasure devices; Pacific Aerospace and Electronics Inc. (PA&E), a manufacturer of hermetically sealed electrical connectors; and a small distribution business. These business units are reported as discontinued operations for all periods presented. Based upon the estimated fair values, we incurred an estimated after-tax loss of $49.5 million in the fourth quarter of fiscal 2014 on the assets held for sale in discontinued operations. During the first nine months of fiscal 2015 and 2014, we incurred a loss on discontinued operations of $20.3 million and $8.5 million, respectively. On June 5, 2015, we sold Eclipse for approximately $10 million. We retained ownership of the land, building and building improvements, which are being held for sale. In addition, on July 20, 2015, we sold PA&E for approximately $22 million. The selling price for both businesses is subject to customary working capital adjustments.
On June 19, 2014, our board of directors approved a share repurchase program and authorized the repurchase of up to $200 million of outstanding shares of common stock. In March 2015, our board of directors authorized an additional $200 million for repurchase of outstanding shares of common stock under the program. Under the program, the Company is authorized to repurchase up to $400 million of the outstanding shares of common stock from time to time, depending on market conditions, share price and other factors. During fiscal 2014, we repurchased 269,228 shares under this program at an average price paid per share of $112.40, for an aggregate purchase price of $30.3 million. During the first nine months of fiscal 2015, we repurchased 2,562,122 shares under this program at an average price paid per share of $101.29, for an aggregate purchase price of $259.5 million.
In March 2014, we entered into a Consent Agreement with the U.S. Department of State’s Directorate of Defense Trade Controls Office of Defense Trade Controls Compliance (DDTC) to resolve alleged International Traffic in Arms Regulations (ITAR) civil violations. Among other things, the Consent Agreement requiresrequired us to pay a $20 million penalty, of which $10 million was suspended and eligible for offset credit based upon verified expenditures for past and future remedial actions, and to continue to implement ongoing compliance remedialcredit. Compliance expense associated with these measures and to implement additional remedial measures related to ITAR compliance activities. As a result of these remedial measures, remedial compliance expense was $15$5.5 million in the first ninesix months of fiscal 2015 compared with $72016 and $7.2 million in the same period in fiscal 2014.prior-year period. More information about the Consent Agreement is set forth in Note 910 to the Consolidated Financial Statements included in Part 1, Item 1 of this report.
On December 20, 2013, we acquired Sunbank Family of Companies, LLC (Sunbank) for $51.7 million. The purchase price included $5 million in additional contingent consideration based upon achievement of certain sales levels over a two-year period. Sunbank is a manufacturer of electrical cable accessories, connectors and flexible conduit systems. Sunbank is included in the Sensors & Systems segment.
On December 5, 2013, we announced the acceleration of our plans to consolidate certain facilities and create cost efficiencies through shared services in sales, general and administrative and support functions. For fiscal 2014 and 2015 our integration activities are expected to result in aggregate charges and expenses of $35 million. Total restructuringRestructuring expenses were $20.4$11.7 million and $17.4 million in fiscal 2014. Restructuring expenses in fiscal2015 and 2014, were mainly comprised of $5.7respectively, and $3.3 million in severance and $11.9 million in exit and relocation of facilities expenses, and a $2.8 million loss on the write off of certain property, plant and equipment. Total restructuring expenses in the first nine months of fiscal 2015 were $10.1 million, of which $5.4 million was reported separately as restructuring expenses and $4.7 million was reported as cost of goods sold. Total restructuring expenses in the first nine months of fiscal 2014 were $14.3 million, of which $10.3 million was reported separately as restructuring expenses and $4.0 million was reported as cost of goods sold. Expense savings were $11.5$9.3 million in the first ninesix months of fiscal 2015.
For further explanation about changes in sales2016 and gross margin in the third fiscal quarter of 2015, over the prior year period, please see the table at the end of the Overview section for a roll forward presentation of sales and gross margin.respectively.
Total sales for the third fiscal quarter decreased by $10.1 million, or 2.0%, over the prior-year period. Sales decreased $23 million due to the effect of a weakening Canadian dollar, U.K. pound and euro compared with the prior-year period. Additionally, sales decreased $5 million due the impact of the settlement of forward foreign currency contracts qualifying under hedge accounting. These decreases were partially offset by $32 million in incremental sales from the DAT acquisition. Excluding the foreign currency exchange effects and the other items listed in the roll forward, sales volume decreased $14 million compared with the prior-year period and was mainly due to lower demand for Avionics & Controls and Advanced Materials segment products.
Consolidated gross margin was 34.2% in the thirdsecond fiscal quarter of 2015 compared with 35.0% in the prior-year period. Gross margin in the third quarter of fiscal 2015 was impacted by lower sales volume and mix of Avionics & Controls and Advanced Materials. Additionally, Avionics & Controls gross margin was impacted by an inventory fair value adjustment due to the shipment of acquired DAT inventory recorded at fair value. Sensors & Systems segment gross margin improved over the prior-year period on stronger sales mix.
Selling, general and administrative expense2016 increased by $3.1$22.1 million, and by 0.9 percentage pointsor 4.7%, over the prior-year period to 18.5% of$490.3 million, mainly reflecting higher sales reflecting incremental selling, general and administrative expenses from the acquisition of DAT of $8.9 million and a $7.9 million increase in corporate expense, mainlyvolumes across all segments due to higher demand and incremental sales from DAT, partially offset by the effect of changes in foreign currency exchange rates relative to the U.S. dollar. Avionics & Controls sales volume increased expenses for compliance activities.by $6 million, or 3%, Sensors & Systems increased by $5 million, or 3%, and Advanced Materials increased by $9 million, or 8%. Incremental sales from defense, aerospace and training display (DAT) were $12 million. These increases were partially offset by the favorable translation effectseffect of changes in foreign currencies.
Research, development and engineering spending increased by $5.0 million overcurrency exchange rates relative to the U.S. dollar compared with the prior-year period to 5.9% of sales due to incremental research, development and engineering expenses from the acquisition of DAT of $7.7 million, partially offset by lower spending for Avionics & Controls research, development and engineering.
The income tax rate was 17.4% in the third fiscal quarter of 2015 compared with 23.7% in the prior-year period, mainly reflecting certain discrete tax benefits and additional tax benefits resulting from DAT operating losses.$10 million.
Earnings from continuing operations in the thirdsecond fiscal quarter of 20152016 were $30.2$17.0 million, or $0.97$0.57 per diluted share, compared with $39.8$24.9 million, or $1.22$0.79 per diluted share, in the prior-year period. Loss from discontinued operations in the thirdsecond fiscal quarter of 20152016 was $1.7$2.0 million, or $0.05$0.07 per diluted share, compared with $0.9$14.6 million, or $0.03$0.46 per diluted share, in the prior-year period. Net income in the thirdsecond fiscal quarter of 2016 was $28.5$15.0 million, or $0.92$0.50 per diluted share, compared with $10.3 million, or $0.33 per diluted share, in the prior-year period.
Total sales for the first six months of fiscal 2016 decreased by $41.0 million, or 4.2%, over the prior-year period to $931.8 million, reflecting lower sales volumes across all segments due to decreased demand and the effect of changes in foreign currency exchange rates relative to the U.S. dollar. Avionics & Controls sales volume decreased by $52 million, or 13%, Sensors & Systems decreased by $13 million, or 4%, and Advanced Materials decreased by $2 million, or 1%. Additionally, the effect of changes in foreign currency exchange rates compared with the prior-year period reduced sales by $29 million. These decreases were partially offset by the incremental sales from DAT of $56 million.
Earnings from continuing operations in the first six months of fiscal 2016 were $26.9 million, or $0.90 per diluted share, compared with $59.4 million, or $1.86 per diluted share, in the prior-year period. Loss from discontinued operations in the first six months of fiscal 2016 was $6.8 million, or $0.23 per diluted share, compared with $20.5 million, or $0.64 per diluted share, in the prior-year period. Net income in the first six months of fiscal 2016 was $20.1 million, or $0.67 per diluted share, compared with $38.9 million, or $1.19$1.22 per diluted share, in the prior-year period.
For further explanation about changes19
Cash flows from operating activities were $79.9 million in the first six months of fiscal 2016 compared with $50.9 million in the prior-year period. The increase in cash flow from operating activities reflected higher cash collections of accounts receivable and lower cash payments for income taxes.
Our sales, gross margin and earnings results for the three and six month period ended April 1, 2016, compared with the prior-year period included a number of significant items which are summarized in the tables below.
The following is a roll forward of sales and gross margin from the recast three month period ended March 27, 2015, to the three month period ended April 1, 2016:
In Thousands | Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
| |||
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
|
| ||||
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month period ended March 27, 2015 | $ | 187,330 |
|
| $ | 171,538 |
|
| $ | 109,342 |
|
| $ | 468,210 |
|
|
Foreign currency gain (loss) |
| (7,128 | ) |
|
| (2,109 | ) |
|
| (2,247 | ) |
|
| (11,484 | ) |
|
Forward contract gain (loss) |
| 531 |
|
|
| 839 |
|
|
| - |
|
|
| 1,370 |
|
|
DAT incremental |
| 12,428 |
|
|
| - |
|
|
| - |
|
|
| 12,428 |
|
|
Sales volume |
| 6,364 |
|
|
| 5,080 |
|
|
| 8,648 |
|
|
| 20,092 |
|
|
Other |
| (860 | ) |
|
| 721 |
|
|
| (167 | ) |
|
| (306 | ) |
|
Three month period ended April 1, 2016 | $ | 198,665 |
|
| $ | 176,069 |
|
| $ | 115,576 |
|
| $ | 490,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month period ended March 27, 2015 |
| 55,959 |
|
|
| 60,083 |
|
|
| 33,975 |
|
|
| 150,017 |
|
|
Foreign currency gain (loss) |
| (5,638 | ) |
|
| (1,101 | ) |
|
| (601 | ) |
|
| (7,340 | ) |
|
Forward contract gain (loss) |
| 447 |
|
|
| 839 |
|
|
| - |
|
|
| 1,286 |
|
|
DAT incremental |
| 5,260 |
|
|
| - |
|
|
| - |
|
|
| 5,260 |
|
|
DAT inventory fair value adjustment |
| 1,816 |
|
|
| - |
|
|
| - |
|
|
| 1,816 |
|
|
DAT integration |
| (1,026 | ) |
|
| - |
|
|
| - |
|
|
| (1,026 | ) |
|
Volume/mix |
| 2,372 |
|
|
| 1,222 |
|
|
| 3,884 |
|
|
| 7,478 |
|
|
Lower (higher) manufacturing costs |
| (1,830 | ) |
|
| 412 |
|
|
| 1,120 |
|
|
| (298 | ) |
|
Inventory reserves and EAC adjustment |
| (840 | ) |
|
| (180 | ) |
|
| - |
|
|
| (1,020 | ) |
|
Three month period ended April 1, 2016 | $ | 56,520 |
|
| $ | 61,275 |
|
| $ | 38,378 |
|
| $ | 156,173 |
|
|
20
The following is a roll forward of sales and gross margin from the recast six month period ending March 27, 2015, to the six month period ended April 1, 2016:
In Thousands | Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
| |||
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
|
| ||||
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six month period ended March 27, 2015 | $ | 393,947 |
|
| $ | 354,432 |
|
| $ | 224,442 |
|
| $ | 972,821 |
|
|
Foreign currency gain (loss) |
| (9,582 | ) |
|
| (13,823 | ) |
|
| (3,464 | ) |
|
| (26,869 | ) |
|
Forward contract gain (loss) |
| (2,053 | ) |
|
| 234 |
|
|
| - |
|
|
| (1,819 | ) |
|
DAT incremental |
| 55,554 |
|
|
| - |
|
|
| - |
|
|
| 55,554 |
|
|
Sales volume |
| (51,553 | ) |
|
| (12,806 | ) |
|
| (2,370 | ) |
|
| (66,729 | ) |
|
Other |
| (1,403 | ) |
|
| 462 |
|
|
| (230 | ) |
|
| (1,171 | ) |
|
Six month period ended April 1, 2016 | $ | 384,910 |
|
| $ | 328,499 |
|
| $ | 218,378 |
|
| $ | 931,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six month period ended March 27, 2015 |
| 134,747 |
|
|
| 122,985 |
|
|
| 70,526 |
|
|
| 328,258 |
|
|
Foreign currency gain (loss) |
| (5,532 | ) |
|
| (3,041 | ) |
|
| (862 | ) |
|
| (9,435 | ) |
|
Forward contract gain (loss) |
| (2,119 | ) |
|
| 234 |
|
|
| - |
|
|
| (1,885 | ) |
|
DAT incremental |
| 23,309 |
|
|
| - |
|
|
| - |
|
|
| 23,309 |
|
|
DAT inventory fair value adjustment |
| 1,816 |
|
|
| - |
|
|
| - |
|
|
| 1,816 |
|
|
DAT integration |
| (2,129 | ) |
|
| - |
|
|
| - |
|
|
| (2,129 | ) |
|
Volume/mix |
| (26,531 | ) |
|
| (8,362 | ) |
|
| (1,345 | ) |
|
| (36,238 | ) |
|
Lower (higher) manufacturing costs |
| (4,080 | ) |
|
| (2,514 | ) |
|
| (2,583 | ) |
|
| (9,177 | ) |
|
Cost initiatives |
| 67 |
|
|
| 2,388 |
|
|
| 459 |
|
|
| 2,914 |
|
|
Factory layout costs (Kaikaku) |
| (2,307 | ) |
|
| - |
|
|
| - |
|
|
| (2,307 | ) |
|
Inventory reserves and EAC adjustment |
| (1,054 | ) |
|
| (180 | ) |
|
| - |
|
|
| (1,234 | ) |
|
Six month period ended April 1, 2016 | $ | 116,187 |
|
| $ | 111,510 |
|
| $ | 66,195 |
|
| $ | 293,892 |
|
|
The following table shows the average foreign exchange rates for the first nine monthsU.K. pound, Canadian dollar and euro relative to the U.S. dollar for the three and six month periods ended April 1, 2016, and March 27, 2015.
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
| April 1, |
|
| March 27, |
|
|
|
| April 1, |
|
| March 27, |
|
|
|
| ||||
| 2016 |
|
|
| 2015 |
|
| Change |
| 2016 |
|
|
| 2015 |
|
| Change |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GBP to USD |
| 1.4200 |
|
|
| 1.5240 |
|
| (6.8)% |
|
| 1.4670 |
|
|
| 1.5545 |
|
| (5.6)% |
|
CAD to USD |
| 0.7337 |
|
|
| 0.8038 |
|
| (8.7)% |
|
| 0.7425 |
|
|
| 0.8422 |
|
| (11.8)% |
|
EUR to USD |
| 1.0964 |
|
|
| 1.1341 |
|
| (3.3)% |
|
| 1.0922 |
|
|
| 1.1905 |
|
| (8.3)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables show the impact of fiscal 2015 overchanges in the prior yearforeign currency exchange rates for the U.K. pound, Canadian dollar and euro relative to the U.S. dollar on operating earnings during the three month period ended April 1, 2016, compared with the prior-year period.
In Thousands | Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
| |||
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency gain (loss) | $ | (8,764 | ) |
| $ | 2,706 |
|
| $ | (468 | ) |
| $ | (6,526 | ) |
|
Forward contract gain (loss) |
| 499 |
|
|
| 1,555 |
|
|
| 376 |
|
|
| 2,430 |
|
|
Impact on Operating Earnings (Loss) | $ | (8,265 | ) |
| $ | 4,261 |
|
| $ | (92 | ) |
| $ | (4,096 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
The following tables show the impact of changes in the foreign currency exchange rates for the U.K. pound, Canadian dollar and euro relative to the U.S. dollar on operating earnings during the six month period ended April 1, 2016, compared with the prior-year period.
In Thousands | Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
| |||
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency gain (loss) | $ | (6,433 | ) |
| $ | 5,280 |
|
| $ | (524 | ) |
| $ | (1,677 | ) |
|
Forward contract gain (loss) |
| (2,225 | ) |
|
| 111 |
|
|
| 620 |
|
|
| (1,494 | ) |
|
Impact on Operating Earnings (Loss) | $ | (8,658 | ) |
| $ | 5,391 |
|
| $ | 96 |
|
| $ | (3,171 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
For further explanation, please see the roll forward table of sales, gross margin and the analysis of the impact of changes in foreign currency exchange rates at the end of the Overview section for a roll forward presentation ofsection.
Three Month Period Ended April 1, 2016, Compared with Three Month Period Ended March 27, 2015
Total sales and gross margin.
Sales for the first nine months ofsecond fiscal 2015 decreased $60quarter increased by $22.1 million, or 4.0%4.7%, over the prior-year period. Sales by segment were as follows:
In Thousands |
|
|
|
| Three Months Ended |
|
| |||||
| Increase (Decrease) |
|
| April 1, |
|
| March 27, |
|
| |||
| From Prior Year |
|
| 2016 |
|
| 2015 |
|
| |||
|
|
|
|
|
|
|
|
| (Recast) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Avionics & Controls |
| 6.1% |
|
| $ | 198,665 |
|
| $ | 187,330 |
|
|
Sensors & Systems |
| 2.6% |
|
|
| 176,069 |
|
|
| 171,538 |
|
|
Advanced Materials |
| 5.7% |
|
|
| 115,576 |
|
|
| 109,342 |
|
|
Total Net Sales |
|
|
|
| $ | 490,310 |
|
| $ | 468,210 |
|
|
The $11.3 million, or 6.1%, increase in Avionics & Controls sales over the prior-year period mainly reflected incremental sales from DAT of $12 million and higher avionics systems sales of $7 million, partially offset by lower sales from interface technologies of $2 million and the effect of changes in foreign currency exchange rates. The increase in avionics systems reflected higher demand for flight management systems mainly for commercial aviation applications. The decrease in interface technologies reflected lower demand primarily for large medical diagnostic input consoles. The effect of changes in foreign currency exchange rates decreased $55sales by approximately $7 million compared to the prior-year period.
The $4.5 million, or 2.6%, increase in Sensors & Systems sales over the prior-year period reflected higher sales volumes of connection technologies due to higher demand for commercial aviation and industrial applications.
The $6.2 million, or 5.7%, increase in Advanced Materials sales over the prior-year period mainly reflected higher sales volumes of engineered materials and defense technologies. The $6 million increase in engineered materials sales volumes was mainly due to higher demand for elastomer clamping devices for commercial aviation and defense applications. The increase in defense technologies sales was due to higher demand for combustible ordnance.
Overall, gross margin was 31.9% and 32.0% for the second fiscal quarter of 2016 and 2015, respectively. Gross profit was $156.2 million and $150.0 million for the second fiscal quarter of 2016 and 2015, respectively. Gross profit was impacted by $1.0 million and $2.1 million in restructuring expense in the second fiscal quarter of 2016 and 2015, respectively.
Avionics & Controls segment gross margin was 28.5% and 29.9% for the second fiscal quarter of 2016 and 2015, respectively. Segment gross profit was $56.5 million compared with $56.0 million in the prior-year period. Gross profit in the second fiscal quarter of 2016 reflected incremental gross margin from DAT of $5 million, the effect of higher sales volume/mix of $2 million and an inventory fair value adjustment of $2 million recorded in the prior year period, offset by an increase in other expenses of $3 million, and the impact of foreign currency exchange rates. The increase in other expenses included (1) DAT integration costs of $1 million; and (2) other manufacturing costs of $2 million due to effectsproduction inefficiencies. In addition, gross margin was impacted by a $5 million long-term contract loss in both the second fiscal quarter of 2016 and 2015. The loss in the both periods principally related to a weakening Canadian dollar, U.K. poundscope issue on a long-term contract to upgrade avionics for a military transport aircraft that was settled in the second fiscal quarter of 2016. Gross margin in the second fiscal quarter of 2016 was also impacted by the effect of changes in foreign currency exchange rates of $5 million.
22
As of April 1, 2016, the Company has $6.5 million in outstanding accounts receivable on a long-term contract to upgrade avionics on a military transport aircraft. The final payment is due upon contract completion requiring a solution to a radio frequency tuning anomaly which is being tested on the aircraft. Management believes this solution will correct the anomaly, and euroaccordingly, the outstanding receivable is probable of collection.
Sensors & Systems segment gross margin was 34.8% and 35.0% for the second fiscal quarter of 2016 and 2015, respectively. Segment gross profit was $61.3 million compared with $60.1 million in the prior-year period, primarily reflecting the effect of higher sales volumes of connection technologies, partially offset by lower gross profit on sales of advanced sensors due to production inefficiencies.
Advanced Materials segment gross margin was 33.2% and 31.1% for the second fiscal quarter of 2016 and 2015, respectively. Segment gross profit was $38.4 million compared with $34.0 million in the prior-year period. Additionally,The increase in gross profit reflected the impact of higher sales decreased $15volumes of engineered materials.
Selling, general and administrative expenses (which include corporate expenses) totaled $102.4 million, due toor 20.9% of sales, and $99.4 million, or 21.2% of sales, for the settlementsecond fiscal quarter of forward foreign currency contracts qualifying under hedge accounting. These decreases were partially offset by $62 million in incremental sales from the DAT acquisition. Excluding the foreign currency exchange effects2016 and the other items noted in the roll forward, sales volume decreased $53 million2015, respectively. Selling, general and administrative expenses increased compared with the prior-year period and was due to lower demand across all three segments.
Consolidated gross margin was 33.2% in the first nine months of fiscal 2015 compared with 35.1% in the prior-year period. Gross margin was mainly impacted by the effect of weakening foreign currencies, an unfavorable estimate at completion (EAC) for certain long-term development contracts, and the impact from the settlement of our foreign currency forward contracts in the period. Additionally, gross margin was impacted by an inventory fair value adjustment due to the shipment of acquired DAT inventory recognized at fair value. Gross margin was also impacted by unfavorable sales mix at Avionics & Controls and Advanced Materials.
Selling, general and administrative expense increased by $16.3 million and by 1.9 percentage points over the first nine months of fiscal 2014 to 19.9% of sales, reflecting incremental selling, general and administrative expenses from the DAT acquisition of $17.8 million and increased corporate expenses of $16.7$5 million, partially offset by a decrease in segment selling, general and administrative expense. The increase in corporate expense was mainly due to increased expenses for compliance activities. The decrease in segment selling, general and administrative expense was principally due to the effect of translating selling, general and administrative expenses denominated in non-U.S. functional currencies to the U.S. dollar.lower acquisition expenses.
Research, development and engineering spending increasedwas $25.0 million, or 5.1% of sales, for the second fiscal quarter of 2016 compared with $25.1 million, or 5.4% of sales, for the second fiscal quarter of 2015. The decrease reflected lower spending on avionics systems developments, partially offset by $3.3 million over the first nine months of fiscal 2014 to 5.5% of sales. The increase in research, development and engineering spending principally reflects incremental research, development and engineering expense from DAT of $1.4 million.
Total restructuring expenses were $1.9 million, or 0.4% of sales, in the DAT acquisitionsecond fiscal quarter of $11.42016, of which $0.9 million partially offset by lower spending on Avionics & Controls developments.is reported separately as restructuring expenses and $1.0 million is included in cost of goods sold. Total restructuring expenses were $3.8 million, or 0.8% of sales, in the second fiscal quarter of 2015, of which $1.6 million is reported separately as restructuring expenses and $2.1 million is included in cost of goods sold.
During the first nine monthssecond fiscal quarter of fiscal 2015, we recognized a $15.7 million gain in other income and a $2.4 million reduction in interest expense upon the lapse of a statutory period related to a liability for a non-income tax position of an acquired company. In addition, we incurred a $2.9 million loss in
Segment earnings (operating earnings excluding corporate expenses and other income or expense) for the second fiscal quarter of 2016 totaled $46.8 million, or 9.5% of sales, compared with $43.7 million, or 9.3% of sales, for the second fiscal quarter in 2015.
Avionics & Controls segment earnings were $2.6 million, or 1.3% of sales, in the second fiscal quarter of 2016 and $7.9 million, or 4.2% of sales, in the second fiscal quarter of 2015, mainly reflecting increased operating expenses of $6 million. The increase in operating expenses principally reflects incremental selling, general and administrative expenses and research, development and engineering costs from DAT of $4 million, $3 million in DAT integration expense, and a $3 million foreign currency loss on mainly monetary assets. The loss on monetary assets was due to the strengthening of the Canadian dollar relative to the U.S. dollar from the end of the first fiscal quarter of 2016 to the end of the second fiscal quarter of 2016. In the prior-year period, the Canadian dollar weakened relative to the U.S. dollar. These increases were partially offset by a $2 million write-off of fixed assets due to an avionics systems program realignment recorded in the prior-year period.
Sensors & Systems segment earnings were $20.9 million, or 11.9% of sales, for the second fiscal quarter of 2016 compared with $16.3 million, or 9.5% of sales, for the second fiscal quarter of 2015. The change mainly reflects lower selling, general and administrative expenses due to the effect of changes in foreign currency exchange resulting fromrates of $3 million. In addition, restructuring expenses were $0.8 million and $2.4 million in the fundingsecond fiscal quarter of 2016 and 2015, respectively.
Advanced Materials segment earnings were $23.2 million, or 20.1% of sales, for the acquisitionsecond fiscal quarter of DAT.2016 compared with $19.5 million, or 17.8% of sales, for the second fiscal quarter of 2015, primarily reflecting higher sales volumes of engineered materials. Restructuring expenses were $0.7 million and $1.0 million in the second fiscal quarter of 2016 and 2015, respectively.
Interest expense for the second fiscal quarter of 2016 was $7.3 million compared with $5.9 million for the second fiscal quarter of 2015. Interest expense in the prior-year was favorably impacted by the $2.4 million adjustment noted above.
The income tax rate was 19.9%16.6% in the first nine monthssecond fiscal quarter of fiscal 2015 compared to 21.5% in the prior-year period, mainly reflecting additional tax benefits resulting from DAT operating losses.
Earnings from continuing operations in the first nine months of fiscal 2015 were $76.9 million, or $2.44 per diluted share,2016 compared with $114.4 million, or $3.53 per diluted share,18.6% in the prior-year period. LossIn the second fiscal quarter of 2016, we recognized $0.3 million of discrete tax benefits due to income tax return to provision adjustments. In the second fiscal quarter of 2015, we recognized $0.5 million of discrete tax expense principally related to the following two items. The first item was a $2.0 million tax expense due to income tax return to provision adjustments. The second item was approximately $1.5 million of discrete tax benefits due to the retroactive extension of the U.S. federal research and experimentation credits. The income tax rate differed from discontinued operationsthe statutory rate in the first nine monthssecond fiscal quarters of fiscal2016 and 2015, was $20.3 million, or $0.64 per diluted share, compared with $8.5 million, or $0.26 per diluted share, in the prior-year period. Net income in the first nine months of fiscal 2015 was $56.6 million, or $1.80 per diluted share, compared with $105.9 million, or $3.27 per diluted share, in the prior-year period.as both years benefited from various tax credits and certain foreign interest expense deductions.
Cash flows from operating activities were $104.2 million in the first nine months of fiscal 2015 compared with $134.7 million in the prior-year period. The decrease in cash flow from operating activities reflected lower net earnings, partially offset by lower cash payments for interest and income taxes compared to the prior-year period.23
Our sales, gross margin and earnings results for the three month and nine month period ended July 31, 2015, compared with the three month and nine month period ended August 1, 2014, included a number of significant items which are summarized in the tables below.
The following is a roll forward of sales and gross margin from the three month period ending August 1, 2014, to the three month period ending July 31, 2015:
In Thousands | Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
|
| |||
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
|
| ||||
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month period ended August 1, 2014 | $ | 192,860 |
|
| $ | 192,246 |
|
| $ | 121,203 |
|
| $ | 506,309 |
|
|
Foreign currency gain (loss) |
| (1,895 | ) |
|
| (17,985 | ) |
|
| (2,805 | ) |
|
| (22,685 | ) |
|
Forward contract gain (loss) |
| (2,756 | ) |
|
| (2,449 | ) |
|
| - |
|
|
| (5,205 | ) |
|
Acquired DAT business |
| 31,885 |
|
|
| - |
|
|
| - |
|
|
| 31,885 |
|
|
Sales volume |
| (12,627 | ) |
|
| 3,718 |
|
|
| (5,178 | ) |
|
| (14,087 | ) |
|
Three month period ended July 31, 2015 | $ | 207,467 |
|
| $ | 175,530 |
|
| $ | 113,220 |
|
| $ | 496,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month period ended August 1, 2014 |
| 71,565 |
|
|
| 63,619 |
|
|
| 41,903 |
|
|
| 177,087 |
|
|
Foreign currency gain (loss) |
| 2,424 |
|
|
| (2,732 | ) |
|
| (788 | ) |
|
| (1,096 | ) |
|
Forward contract gain (loss) |
| (2,756 | ) |
|
| (2,449 | ) |
|
| - |
|
|
| (5,205 | ) |
|
Acquired DAT business |
| 15,661 |
|
|
| - |
|
|
| - |
|
|
| 15,661 |
|
|
Volume/mix |
| (9,334 | ) |
|
| 2,961 |
|
|
| (6,667 | ) |
|
| (13,040 | ) |
|
DAT inventory fair value adjustment |
| (2,720 | ) |
|
| - |
|
|
| - |
|
|
| (2,720 | ) |
|
Inventory reserves and EAC adjustment |
| (878 | ) |
|
| - |
|
|
| - |
|
|
| (878 | ) |
|
Other |
| (3,185 | ) |
|
| 1,218 |
|
|
| 1,954 |
|
|
| (13 | ) |
|
Three month period ended July 31, 2015 | $ | 70,777 |
|
| $ | 62,617 |
|
| $ | 36,402 |
|
| $ | 169,796 |
|
|
The following is a roll forward of sales and gross margin from the nine month period ending August 1, 2014, to the nine month period ending July 31, 2015:
In Thousands | Avionics & |
|
| Sensors & |
|
| Advanced |
|
|
|
|
| |||
| Controls |
|
| Systems |
|
| Materials |
|
| Total |
| ||||
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine month period ended August 1, 2014 | $ | 571,366 |
|
| $ | 579,131 |
|
| $ | 352,613 |
|
| $ | 1,503,110 |
|
Foreign currency gain (loss) |
| (1,724 | ) |
|
| (45,350 | ) |
|
| (7,493 | ) |
|
| (54,567 | ) |
Forward contract gain (loss) |
| (8,684 | ) |
|
| (6,814 | ) |
|
| - |
|
|
| (15,498 | ) |
Acquired DAT business |
| 62,496 |
|
|
| - |
|
|
| - |
|
|
| 62,496 |
|
Sales volume |
| (28,920 | ) |
|
| (11,356 | ) |
|
| (12,624 | ) |
|
| (52,900 | ) |
Nine month period ended July 31, 2015 | $ | 594,534 |
|
| $ | 515,611 |
|
| $ | 332,496 |
|
| $ | 1,442,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine month period ended August 1, 2014 |
| 211,935 |
|
|
| 194,566 |
|
|
| 120,546 |
|
|
| 527,047 |
|
Foreign currency gain (loss) |
| 6,290 |
|
|
| (6,875 | ) |
|
| (2,062 | ) |
|
| (2,647 | ) |
Forward contract gain (loss) |
| (8,684 | ) |
|
| (6,814 | ) |
|
| - |
|
|
| (15,498 | ) |
Acquired DAT business |
| 24,220 |
|
|
| - |
|
|
| - |
|
|
| 24,220 |
|
Volume/mix |
| (20,368 | ) |
|
| 26 |
|
|
| (12,683 | ) |
|
| (33,025 | ) |
DAT inventory fair value adjustment |
| (5,444 | ) |
|
| - |
|
|
| - |
|
|
| (5,444 | ) |
Inventory reserves and EAC adjustment |
| (10,167 | ) |
|
| (500 | ) |
|
| - |
|
|
| (10,667 | ) |
Other |
| (7,011 | ) |
|
| 1,438 |
|
|
| 384 |
|
|
| (5,189 | ) |
Nine month period ended July 31, 2015 | $ | 190,771 |
|
| $ | 181,841 |
|
| $ | 106,185 |
|
| $ | 478,797 |
|
Results of Operations
For further explanation, please see the roll forward table of sales and gross margin at the end of the Overview section.
ThreeSix Month Period Ended July 31, 2015,April 1, 2016, Compared with ThreeSix Month Period Ended August 1, 2014March 27, 2015
Total sales for the thirdfirst six months of fiscal quarter2016 decreased by $10.1$41.0 million, or 2.0%4.2%, over the prior-year period. Sales by segment were as follows:
In Thousands |
|
| Six Months Ended |
|
| |||||||||||||||||
|
|
|
|
| Three Months Ended |
|
| Increase (Decrease) |
| April 1, |
|
| March 27, |
|
| |||||||
| Increase (Decrease) |
|
| July 31, |
|
| August 1, |
|
| From Prior Year |
| 2016 |
|
| 2015 |
|
| |||||
In Thousands | From Prior Year |
|
| 2015 |
|
| 2014 |
|
| |||||||||||||
|
|
|
|
|
|
| (Recast) |
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avionics & Controls |
| 7.6% |
|
| $ | 207,467 |
|
| $ | 192,860 |
|
| (2.3)% |
| $ | 384,910 |
|
| $ | 393,947 |
|
|
Sensors & Systems | (8.7)% |
|
|
| 175,530 |
|
|
| 192,246 |
|
| (7.3)% |
|
| 328,499 |
|
|
| 354,432 |
|
| |
Advanced Materials | (6.6)% |
|
|
| 113,220 |
|
|
| 121,203 |
|
| (2.7)% |
|
| 218,378 |
|
|
| 224,442 |
|
| |
Total Net Sales |
|
|
|
| $ | 496,217 |
|
| $ | 506,309 |
|
|
|
| $ | 931,787 |
|
| $ | 972,821 |
|
|
The $14.6$9.0 million, or 7.6%2.3%, increasedecrease in Avionics & Controls sales over the prior-year period mainly reflected incrementallower sales from the DAT acquisitionvolumes of $32 million. This increase was partially offset by the effectavionics systems of weakening foreign currencies, which reduced segment sales by $2$23 million, compared with the prior-year period. In addition, the settlementcontrol and communication systems of forward foreign currency contracts qualifying under hedge accounting reduced sales by $3 million. Excluding the foreign currency exchange effects and the other items listed in the roll forward, sales volume decreased by $13$22 million, and interface technologies of $6 million. The decrease in avionics systems reflected lower demand and delays for flight management systems for defense applications, including the T6-B military trainer for the U.S. Navy as the T6-B program is nearing completion. The decrease in control and communication systems mainly reflected lower sales of avionics systems for defense applications of $9 million and lowerheadset communication devices due to higher sales of switches and cockpit control devices and military communication systemsdelinquent orders in the prior-year period. The decrease in interface technologies reflected lower demand primarily for large medical diagnostic input consoles. The effect of $5changes in foreign currency exchange rates decreased sales by approximately $12 million. These decreases were partially offset by incremental sales from DAT of $55 million.
The $16.7$25.9 million, or 8.7%7.3%, decrease in Sensors & Systems sales over the prior-year period reflected the effectlower sales volumes of $13 million and weakening foreign currencies of approximately $18 million. Additionally, the impact of forward contracts under hedge accounting reduced sales by $2 million. Excluding the foreign currency exchange effects and the other items listedcurrencies. The decrease in the roll forward, sales volume increased $4 million, reflecting higherreflected lower sales of advanced sensors andof $6 million, power systems of $8 million, partially offset by lowerhigher sales of connection technologies of $3 milliontechnologies. The advanced sensors sales decrease mainly reflected lower OEM demand. The decrease in power systems sales reflected delays in shipments due to export control requirements. The decrease in connection technologies sales reflected lower demand from defense and industrial customers including oil and gas and nuclear. The effect of changes in foreign currency exchange rates decreased sales by approximately $14 million.
The $8.0$6.1 million, or 6.6%2.7%, decrease in Advanced Materials sales over the prior-year period reflected lower sales volumes of engineered materials under long-term defense contracts for metal insulation applications and the effect of weakening foreign currencies of $3 million. Excluding the foreign currency exchange effects and the other items listed in the roll forward, sales volume decreased by $5 million, primarily reflecting decreased sales volumes of engineered materials for defense applications of $7 million, partially offset by higher sales volumes of defense technologies for combustible ordnance applications.
Overall, gross margin was 34.2%31.5% and 35.0%33.7% for the thirdfirst six months of fiscal quarter of2016 and 2015, and 2014, respectively. Gross profit was $169.8$293.9 million and $177.1$328.3 million for the thirdfirst six months of fiscal quarter of2016 and 2015, and 2014, respectively. Gross marginprofit was impacted by $1.4 million and $2.0$4.4 million in restructuring expense in the thirdfirst six months of fiscal quarter of2016 and 2015, and 2014, respectively.
Avionics & Controls segment gross margin was 34.1%30.2% and 37.1%34.2% for the thirdfirst six months of fiscal quarter of2016 and 2015, and 2014, respectively. Segment gross profit was $70.8$116.2 million compared with $71.6$134.7 million in the prior-year period. The decrease in gross marginprofit reflected a $5the impact of lower sales volumes/mix of $27 million and an increase in other expenses of $9 million. The decrease due to sales volume mainly reflected an $11 million impact on lower sales of avionics systems and an $8a $15 million decreaseimpact on decreased sales of control and communication systems. These lower sales volumes resulted in a lower recovery of fixed costs. The decrease in avionics systems gross margin was mainlyhigher other expenses included DAT integration costs of $2 million, the cost of a major factory layout event (Kaikaku) of $2 million, and other manufacturing costs of $5 million due to lower sales volumes.production inefficiencies. Additionally, avionics systems gross margin was impacted by a $0.9 million estimate at completion adjustment due to development program realignments. The decreasethe effect of changes in control and communication systems was due to lower sales volumes and mix as well as higher manufacturing costs.foreign currency exchange rates of $8 million. These decreases were partially offset by incremental gross profit from the DAT acquisition of $13 million. DAT gross profit included the effect of selling acquired$23 million and a $2 million inventory valued at fair value at acquisition. A fair value adjustment of $2.7 million lowered incremental gross profit from DAT from $15.7 million to $13 million. recorded in the prior year period.
Sensors & Systems segment gross margin was 35.7%33.9% and 33.1%34.7% for the thirdfirst six months of fiscal quarter of2016 and 2015, and 2014, respectively. Segment gross profit was $62.6$111.5 million compared with $63.6$123.0 million in the prior-year period.period, primarily reflecting the impact of lower sales volume/mix of advanced sensors of $4 million and power systems of $5 million. Gross margin was impacted by the effects of weakeningchanges in foreign currenciescurrency exchange rates of $3 million and the impact from settlement of forward contracts of $2 million. These decreases were substantially offset by a $4 million increase in gross margin mainly due to improved mix on sales of connection technologies.
Advanced Materials segment gross margin was 32.2% compared with 34.6%30.3% and 31.4% for the prior-year period.first six months of fiscal 2016 and 2015, respectively. Segment gross profit was $36.4$66.2 million compared with $41.9$70.5 million in the prior-year period. The decrease in gross marginprofit reflected lower sales volumesthe impact of higher manufacturing costs of $4 million, mainly due to engineered materials for defense applications and a less favorable sales mix of $7 million, partially offset by lower cost of sales of defense technologies of $3 million.manufacturing inefficiencies.
Selling, general and administrative expenses (which include corporate expenses) totaled $92$196.5 million, or 18.5%21.1% of sales, and $88.9$197.5 million, or 17.6%20.3% of sales, for the thirdfirst six months of fiscal quarter of2016 and 2015, and 2014, respectively. The increase in selling,Selling, general and administrative expenses in the first six months of fiscal 2016 reflected the favorable effect of changes in foreign currency exchange rates of $9 million, a $2 million write-off of fixed assets due to an avionics systems program realignment recorded in the prior-year period and
24
lower corporate expenses. Corporate expenses decreased by $6 million principally due to a $3 million pension settlement in the prior-year quarter and decreased acquisition expenses. These decreases were partially offset by incremental selling, general and administrative expenses from the DAT acquisition of $8.9 million. Corporate expenses increased by $7.9 million mainly due to higher compliance costs. These increases were partially offset by the effect of translating selling, general and administrative expenses denominated in non-U.S. functional currencies to the U.S. dollar of approximately $6.8$11 million and foreign currency gains on monetary assets and forward contracts of $5.7 million.$3 million in DAT integration expense.
Research, development and engineering spending was $29.2$50.5 million, or 5.9%5.4% of sales, for the thirdfirst six months of fiscal quarter of 20152016 compared with $24.3$48.7 million, or 4.8%5.0% of sales, for the third fiscal quarter of 2014.prior-year period. The increase in research, development and engineering spending principally reflected incremental research, development and engineering from the DAT acquisition of $7.7$7 million, substantiallypartially offset by lower spending on controlavionics systems and communicationpower systems development.developments.
Total restructuring expenses were $2.8$3.3 million, or 0.6%0.4% of sales, in the third fiscal quarterfirst six months of 2015,2016, of which $1.4$1.9 million is reported separately as restructuring expenses and $1.4 million is included in cost of goods sold. Total restructuring expenses were $5.4$9.3 million, or 1.1%1.0% of sales, in the third fiscal quarterfirst six months of 2014,2015, of which $3.4$4.9 million is reported separately as restructuring expenses and $2.0$4.4 million is included in cost of goods sold.
Segment earnings (operating earnings excluding corporate expenses and other income or expense) for the thirdfirst six months of fiscal quarter of 20152016 totaled $71.2$82.0 million, or 14.4%8.8% of sales, compared with $76.7$120.0 million, or 15.1%12.3% of sales, for the third fiscal quarter in 2014. Excluding restructuring expensesfirst six months of $2.8 million and $5.4 million, segment earnings were $74.0 million, or 14.9% of sales, and $82.1 million, or 16.2% of sales, for the third fiscal quarters of 2015 and 2014, respectively.2015.
Avionics & Controls segment earnings were $23.5$12.1 million, or 11.3%3.1% of sales, in the thirdfirst six months of fiscal quarter of 20152016 and $30.9$45.3 million, or 16.0%11.5% of sales, in the third fiscal quarterfirst six months of 2014,2015, mainly reflecting a $3.7 million incremental loss from the DAT acquisition and a $6$19 million decrease in controlgross margin and communication systems earnings,increased selling, general and administrative expenses and research, development and engineering expenses of $15 million. This increase reflects incremental selling, general and administrative expenses and research, development and engineering expenses from DAT of $18 million and $6 million in DAT integration expense. These increases were partially offset by lower research, development and engineering expenses for avionics systems of $3 million, lower selling, general and administrative expenses of $3 million, and a $1$2 million increase on saleswrite-off of avionics systems. The decrease in earnings from sales of control and communication systems was principallyfixed assets due to lower sales volumes and mix. The $1 million increase inan avionics systems earnings reflected a $5 million foreign currency exchange gain on monetary assets and embedded derivatives, substantially offset by a comparable decrease in gross margin. Restructuring expenses were $0.2 million and $1.0 millionprogram realignment recorded in the third fiscal quarter of 2015 and 2014, respectively. prior-year period.
Sensors & Systems segment earnings were $23.4$33.7 million, or 13.3%10.3% of sales, for the thirdfirst six months of fiscal quarter of 20152016 compared with $18.1$33.7 million, or 9.4%9.5% of sales, for the third fiscal quarterfirst six months of 2014. Sensors & Systems earnings benefited from2015, mainly reflecting an $11 million decrease in gross margin, offset by lower selling, general and administrative expenses mainlyprincipally due to translating selling, general and administrative expenses denominatedthe effects of changes in non-U.S. functional currencies to the U.S. dollar.foreign currency exchange rates of $9 million. In addition, restructuring expenses were $1.6$1.3 million and $3.3$5.3 million in the third fiscal quarterfirst six months of 20152016 and 2014,2015, respectively.
Advanced Materials segment earnings were $24.4$36.2 million, or 21.5%16.6% of sales, for the thirdfirst six months of fiscal quarter of 20152016 compared with $27.7$41.0 million, or 22.9%18.3% of sales, for the third fiscal quarterfirst six months of 2014,2015, primarily reflecting lower earnings from sales ofhigher manufacturing costs at engineered materials, partially offset by higher earnings from sales of defense technologies of $3 million.materials. Restructuring expenses were $0.7$0.9 million and $2.4 million in both the third fiscal quarterfirst six months of 2016 and 2015, and 2014. The effect of foreign currencies was not material on segment earnings in the third fiscal quarter of 2015 compared with the prior-year period.respectively.
Interest expense for the thirdfirst six months of fiscal quarter of 20152016 was $10.6$14.5 million compared with $7.9$14.0 million for the third fiscal quarterfirst six months of 2014, reflecting the refinancing of our credit facility with an interest rate of about 1.7% with the €330.0 million 2023 Notes bearing interest at 3.625%. Subsequent to July 31, 2015, we repaid our $250.0 million 7% 2020 Senior Notes. Given our current debt levels, we expect interest expense to be approximately $30 million in both fiscal year 2015 and 2016.2015.
The income tax rate was 17.4% inrates were 11.0% and 21.9% for the thirdfirst six months of fiscal quarter of2016 and 2015, compared with 23.7% in the prior-year period.respectively. In the third fiscal quarterfirst six months of 2015,2016, we recognized $0.9$2.2 million of discrete tax benefits principally related to the following items. The first item was a $1.3 million reduction of net deferred income tax liabilities as a result of the enactment of tax laws reducing the U.K. statutory income tax rate. The second item was approximately $1.2$1.3 million of discrete tax benefits due to the releaseretroactive extension of reserves upon the expiration of a statute of limitations.U.S. federal research and experimentation credits. The secondthird item was approximately $0.3a $0.4 million of discrete tax expense principally relateddue to reconciling the prior year’s income tax return to the income tax provision. In the third fiscal quarter of 2014, we recognized $0.2 million of discrete tax expense. The income tax rate differed from the statutory rate in the third fiscal quarter of 2015 and 2014, as both years benefited from various tax credits and certain foreign interest expense deductions.
Nine Month Period Ended July 31, 2015, Compared with Nine Month Period Ended August 1, 2014
For further explanation, please see the roll forward table of sales and gross margin at the end of the Overview section.
Total sales for the first nine months decreased $60.5 million, or 4.0%, over the prior-year period. Sales by segment were as follows:
|
|
|
|
| Nine Months Ended |
|
| |||||
| Increase (Decrease) |
|
| July 31, |
|
| August 1, |
|
| |||
In Thousands | From Prior Year |
|
| 2015 |
|
| 2014 |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Avionics & Controls |
| 4.1% |
|
| $ | 594,534 |
|
| $ | 571,366 |
|
|
Sensors & Systems | (11.0)% |
|
|
| 515,611 |
|
|
| 579,131 |
|
| |
Advanced Materials | (5.7)% |
|
|
| 332,496 |
|
|
| 352,613 |
|
| |
Total Net Sales |
|
|
|
| $ | 1,442,641 |
|
| $ | 1,503,110 |
|
|
The $23.2 million, or 4.1%, increase in Avionics & Controls sales over the prior-year period reflected incremental sales of $62 million from the DAT acquisition. This increase was partially offset by a $9 million reduction in sales due to the settlement of forward contracts under hedge accounting. Excluding the foreign currency exchange effects and the other items listed in the roll forward, Avionics & Controls sales volume decreased $29 million. Avionics systems sales volume decreased by $22 million due to lower demand for aviation products for defense applications. Control and communication systems decreased by $4 million, reflecting lower sales of switches and cockpit control devices and military communication systems. Interface technologies sales decreased by $3 million due to lower demand for gaming and medical applications.
The $63.5 million, or 11.0%, decrease in Sensors & Systems sales over the prior-year period reflected the impact of weakening foreign currencies of $45 million and the impact of forward contracts under hedge accounting of $7 million. Excluding the foreign currency exchange effects and the other items listed in the roll forward, sales volume decreased by $11 million, reflecting a $15 million decrease in connection technologies sales mainly due to lower demand from defense and industrial customers including oil and gas. These decreases were offset by a $4 million increase in advanced sensors sales for OEM and aftermarket.
The $20.1 million, or 5.7%, decrease in Advanced Materials sales compared with the prior-year period reflected the impact of weakening foreign currencies of $7 million. Excluding the foreign currency exchange effects and the other items listed in the roll forward, sales volume decreased by $13 million, reflecting a $6 million decrease in defense technologies sales volume mainly due to lower demand for flare countermeasures and a $7 million decrease in sales of engineered materials due to lower demand for defense applications.
Overall, gross margin as a percentage of sales was 33.2% and 35.1% for the first nine months of fiscal 2015 and 2014, respectively. Gross profit was $478.8 million and $527.0 million for the first nine months of fiscal 2015 and 2014, respectively. Gross margin was impacted by $4.8 million and $4.0 million in restructuring expense in the first nine months of fiscal 2015 and 2014, respectively.
Avionics & Controls segment gross margin was 32.1% and 37.1% for the first nine months of fiscal 2015 and 2014, respectively. Segment gross profit was $190.8 million compared with $211.9 million in the prior-year period. The decrease in gross margin reflected a $25 million decrease on sales of avionics systems and an $11 million decrease on sales of control and communication systems. The decrease in avionics systems gross margin was mainly due to lower sales volumes. Additionally, avionics systems gross profit was impacted by a $1.4 million inventory write-off due to the uncertainty over a specific cockpit integration program and a $7 million estimate-at-completion adjustment due to development program realignments. The decrease in control and communication systems was mainly due to lower sales volumes and mix and higher manufacturing costs. Control and communication systems was further impacted by a $1.8 million inventory write-off due to a program reassessment. These decreases were partially offset by incremental gross profit from the DAT acquisition of $19 million. DAT gross profit included the effect of shipping acquired inventory valued at fair value at acquisition. A fair value adjustment of $5 million lowered incremental gross profit from DAT from $24 million to $19 million.
Sensors & Systems segment gross margin was 35.3% and 33.6% for the first nine months of fiscal 2015 and 2014, respectively. Segment gross profit was $181.8 million compared with $194.6 million in the prior-year period. The decrease in gross margin dollars mainly reflected a $10 million decrease on sales of connection technologies and a $4 million decrease in advanced sensors. The decrease in connection technologies gross margin was principally due to lower sales volumes of $10 million and the effects of weakening foreign currencies of $7 million partially offset by improved sales mix. The decrease in advanced sensors gross margin mainly reflected the effect from the settlement of forward contracts and weakening foreign currencies.
Advanced Materials segment gross margin was 31.9% for the first nine months of fiscal 2015 compared with 34.2% for the same period one year ago. Segment gross profit was $106.2 million compared with $120.5 million in the prior-year period. A $14 million decrease in volume/mix mainly reflected lower sales of engineered materials for defense applications and a lower recovery of fixed costs.
Selling, general and administrative expenses (which include corporate expenses) totaled $286.4 million, or 19.9% of sales, and $270.1 million, or 18.0% of sales, for the first nine months of fiscal 2015 and 2014, respectively. The increase in selling, general and
administrative expense reflected incremental selling, general and administrative expenses from the DAT acquisition of $17.8 million, increased corporate expenses of $16.7 million, partially offset by a decrease in segment selling, general and administrative expense. The increase in corporate expense was mainly due to higher compliance expense, $3.0 million in related acquisition expenses and $3 million in higher pension costs due to our settlement with vested terminated pension plan participants. These increases in corporate expense were partially offset by a $4.2 million reduction in incentive compensation. The decrease in segment selling, general and administrative expense reflected the effect of translating selling, general and administrative expenses denominated in non-U.S. functional currencies to the U.S. dollar of $16.8 million and a decrease in segment incentive compensation expense of $2.5 million. These decreases were partially offset by a $2.1 million write-off of fixed assets due to an avionics systems program.
In fiscal 2014, we offered vested terminated participants of our U.S. pension plan a one-time opportunity to elect a lump-sum payment from the plan in lieu of a lifetime annuity.provision adjustments. In the first fiscal quarter of 2015, we made $16.6 million in lump-sum payments to vested terminated pension plan participants from the plan, which resulted in an actuarial settlement charge of $3 million.
Total restructuring expenses were $10.1 million, or 0.7% of sales, in the first nine months of fiscal 2015, of which $5.4 million is reported separately as restructuring expenses and $4.7 million is included in cost of goods sold. Total restructuring expenses were $14.3 million, or 1.0% of sales, in the first nine months of fiscal 2014, of which $10.3 million is reported separately as restructuring expenses and $4.0 million is included in cost of goods sold.
Research, development and engineering spending was $78.7 million, or 5.5% of sales, for the first nine months of fiscal 2015 compared with $75.4 million, or 5.0% of sales, for the first nine months of fiscal 2014. The increase in research, development and engineering spending reflects incremental research, development and engineering expense from the DAT acquisition of $11.4 million, partially offset by lower spending on control and communication systems developments. Fiscal 2015 research, development and engineering spending is expected to be in the range of approximately 5.5% of sales.
Segment earnings (operating earnings excluding corporate expenses and other income or expense) for the first nine months of fiscal 2015 totaled $173.4 million, or 12.0% of sales, compared with $219.7 million, or 14.6% of sales, for the first nine months in fiscal 2014. Excluding restructuring expenses of $10.1 million, segment earnings were $183.5 million, or 12.7% of sales, for the first nine months of 2015. Excluding restructuring expenses of $14.3 million, segment earnings were $234.0 million, or 15.6% of sales, for the first nine months of 2014.
Avionics & Controls segment earnings were $52.0 million, or 8.8% of sales, in the first nine months of fiscal 2015 and $82.0 million, or 14.3% of sales, in the first nine months of fiscal 2014, mainly reflecting a $15 million decrease in avionics systems, a $10 million incremental loss from the DAT acquisition, and a $4 million decrease in control and communication systems earnings. The decrease in avionics systems earnings mainly reflected lower gross margin as explained above, partially offset by a $9 million decrease in selling, general and administrative expense. The decrease in avionics systems selling, general and administrative expense was mainly due to gains on monetary assets and embedded derivatives of $5 million and a decrease in restructuring expense. The decrease in earnings from sales of control and communication systems principally reflected lower sales volumes and unfavorable product mix, partially offset by lower research, engineering and development expense and selling, general and administrative expenses. Segment restructuring expenses were $0.6 million and $4.4 million in the first nine months of fiscal 2015 and 2014, respectively. The effect of foreign currencies and forward contracts had a favorable $4 million impact in the first nine months of fiscal 2015 compared with the prior-year period and was principally due to gains on monetary assets and embedded derivatives.
Sensors & Systems segment earnings were $55.5 million, or 10.8% of sales, for the first nine months of fiscal 2015 compared with $61.8 million, or 10.7% of sales, for the first nine months of fiscal 2014. The decrease in segment earnings principally reflected a $4 million decrease in earnings from sales of connection technologies and a $1 million decrease in advanced sensors. The decrease in both connection technologies and advanced sensors earnings was due to the decrease in gross margin as described above, partially offset by lower selling, general and administrative expense mainly due to the effects of weakening foreign currencies. Additionally, segment restructuring expenses were $6.1 million and $5.5 million in the first nine months of fiscal 2015 and 2014, respectively.
Advanced Materials segment earnings were $65.9 million, or 19.8% of sales, for the first nine months of fiscal 2015 compared with $75.9 million, or 21.5% of sales, for the first nine months of fiscal 2014, primarily reflecting lower earnings from sales of engineered materials. Earnings from sales of defense technologies improved mainly due to lower restructuring expense. Segment restructuring expense was $2.5 million and $3.9 million in the first nine months of fiscal 2015 and 2014, respectively.
Interest expense for the first nine months of fiscal 2015 was $25.0 million compared with $24.9 million for the first nine months of fiscal 2014.
The income tax rates were 19.9% and 21.5% for the first nine months of fiscal 2015 and 2014, respectively. In the first ninesix months of 2015, we recognized $0.1approximately $0.2 million of discrete tax benefits principally related to the following two items. The first item was approximately $1.5 million of discrete tax benefits due to the retroactive extension of the U.S. federal research and experimentation credits. The second item was approximately $1.2a $1.3 million of tax benefits due to the release of reserves upon the expiration of a statute
of limitations. The third item was approximately $2.6 million of discrete tax expense principally relateddue to reconciling the prior-year’s income tax return to the income tax provision. In the first nine months of fiscal 2014, we recognized approximately $0.9 million of discrete tax benefits principally related to the following items. The first item was approximately $0.7 million of tax benefits due to the release of reserves upon the expiration of a statute of limitations. The second item was a $0.5 million reduction of net deferred income tax liabilities as a result of the enactment of tax laws reducing the U.K. statutory income tax rate. The third item was approximately $0.3 million of discrete tax expense principally related to reconciling the prior year’s income tax return to the income tax provision.provision adjustments. The income tax rate differed from the statutory rate in the first ninesix months of fiscal 20152016 and 2014,2015, as both years benefited from various tax credits and certain foreign interest expense deductions.
It is reasonably possible that within the next twelve months approximately $0.9$1.1 million of tax benefits that are currently unrecognized could be recognized as a result of settlement of examinations and/or the expiration of applicable statutes of limitations.
To the extent that sales are transacted in a currency other than the functional currency of the operating unit, we are subject to foreign currency fluctuation risk.
New orders for the first ninesix months of fiscal 20152016 were $1.6$1.1 billion compared with $1.5$0.9 billion forin the sameprior-year period, reflecting an increase in 2014. New orders for the first nine months of fiscal 2015 include the acquired backlog of DAT of $204.0 million.all three segments. Backlog was $1.3$1.4 billion at July 31, 2015, $1.3 billion at AugustApril 1, 2014, and2016, $1.1 billion at March 27, 2015, and $1.2 billion at October 31, 2014.2, 2015.
Liquidity and Capital Resources
Cash and cash equivalents at July 31, 2015,April 1, 2016, totaled $187.7$219.3 million, a decreasean increase of $50.5$27.9 million from October 31, 2014.2, 2015. Net working capital decreased to $743.0$700.0 million at July 31, 2015,April 1, 2016, from $761.4$718.2 million at October 31, 2014.2, 2015. Sources and uses of cash flows from operating activities principally consisted of cash received from the sale of products and cash payments for material, labor and operating expenses. Cash flows provided by operating activities were $104.2$79.9 million and $134.7$50.9 million in the first ninesix months of fiscal 20152016 and 2014,2015, respectively. The decreaseincrease in cash flow from operating activities reflected lower net earnings partially offset byhigher cash collections of accounts receivable and lower cash payments for interest and income taxes compared with the prior-year period.taxes.
25
Cash flows used by investing activities were $176.8$43.6 million and $79.8$196.4 million in the first ninesix months of fiscal 20152016 and 2014,2015, respectively. Cash flows used by investing activities in the first ninesix months of fiscal 2015 mainly reflected2016 were primarily capital expenditures of $37.8$42.5 million, and cash paidincluding the purchase of a building for acquisitions of $171.1 million, partially offset by proceeds from the sales of discontinued operations.our DAT operation. Cash flows used by investing activities in the first ninesix months of fiscal 2014 mainly reflected2015 were primarily capital expenditures of $25.3 million and cash paid for acquisitionsan acquisition of $44.7$171.1 million, net of cash acquired.
Cash flows used by financing activities were $9.2 million in the first six months of fiscal 2016 and capital expendituresmainly reflected a $10.0 million repayment of $35.0 million.
long-term credit facilities, a $6.2 million repayment of long-term debt, and $12.1 million in shares repurchased, partially offset by $15.0 million in proceeds from our credit facilities and proceeds of $3.5 million from the issuance of common stock under our employee stock plans. Cash flows provided by financing activities were $40.1$78.2 million in the first ninesix months of fiscal 2015 and mainly reflected $335$210.0 million in proceeds from our credit facilities $356.5 million in proceeds from issuance of the 2023 Notes, and $13.5$10.1 million from the issuance of common stock under our employee stock plans, partially offset by $259.5$127.4 million in shares repurchased, $402.1 million in debt repayment, and $8.2 million of debt issuance costs. Cash flows used by financing activities were $22.1 million in the first nine months of fiscal 2014 and mainly reflected $40.0a $10.0 million repayment of long-term credit facilities, $34.1and a $9.9 million repayment of long-term debt, partially offset by $25.0 million in proceeds from our credit facilities and $23.2 million from the issuance of common stock under our employee stock plans.debt.
Capital expenditures, consisting of machinery, equipment and computers, are anticipated to be approximately $50$70 million during fiscal 2015,2016, compared with $45.7$49.3 million expended in eleven-month fiscal 20142015 (excluding acquisitions).
Total debt at July 31, 2015,April 1, 2016, was $913.8$880.8 million and consisted of $250.0$242.9 million of the U.S. Term Loan, due 2020, Notes, $362.5$370.7 million (€330.0 million) of the 2023 Notes, $200.0$165.0 million in borrowings under our secured credit facility, $43.2$44.6 million in government refundable advances, $58.0$57.4 million under capital lease obligations, and $0.1$0.2 million under our various foreign currency debt agreements and other debt agreements.
We believe cash on hand and funds generated from operations and borrowing capacity available under our debt facilities are sufficient to fund operating cash requirements and capital expenditures through the next twelve months.
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will” or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risk factors set forth in “Forward-Looking Statements” and “Risk Factors” in our AnnualTransition Report on Form 10-K for the fiscal year ended October 31, 2014,2, 2015, that may cause our or the industry’s actual results, performance or
achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included or incorporated by reference into this report are made only as of the date hereof. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes in our exposure to market risk during the first ninethree months of fiscal 2015.2016. A discussion of our exposure to market risk is provided in the Company’s AnnualTransition Report on Form 10-K for the fiscal year ended October 31, 2014.2, 2015.
Item 4. Controls and Procedures
Our principal executive and financial officers evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of July 31, 2015.April 1, 2016. Based upon that evaluation, they concluded as of July 31, 2015,April 1, 2016, that our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within time periods specified in Securities and Exchange Commission rules and forms. In addition, our principal executive and financial officers concluded as of July 31, 2015,April 1, 2016, that our disclosure controls and procedures are also effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
During the time period covered by this report, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
Item 1. Legal Proceedings
From time to time we are involved in legal proceedings arising in the ordinary course of business. We believe that adequate reserves for these liabilities have been made and that there is no litigation pending that could have a material adverse effect on our results of operations and financial condition.
See Note 910 to the Consolidated Financial Statements included in Part 1, Item 1 of this report for information regarding legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) | Not applicable. |
(b) | Not applicable. |
(c) | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
|
|
|
|
|
|
|
|
|
| Total Number of |
|
| Dollar Value |
|
| ||
|
|
|
|
|
|
|
|
|
| Shares Purchased |
|
| of Shares |
|
| ||
|
|
|
|
|
|
|
|
|
| as Part of |
|
| That May Yet |
|
| ||
|
| Total Number |
|
| Average |
|
| Publicly |
|
| Be Purchased |
|
| ||||
|
| of Shares |
|
| Price Paid |
|
| Announced Plans |
|
| Under the Plans |
|
| ||||
Period |
| Repurchased |
|
| Per Share |
|
| or Programs |
|
| or Programs |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2, 2015 to May 29, 2015 |
|
| 66,136 |
|
| $ | 111.01 |
|
|
| 66,136 |
|
| $ | 235,054,745 |
|
|
May 30, 2015 to June 26, 2015 |
|
| 431,431 |
|
|
| 94.43 |
|
|
| 431,431 |
|
|
| 194,313,700 |
|
|
June 27, 2015 to July 31, 2015 |
|
| 902,119 |
|
|
| 93.22 |
|
|
| 902,119 |
|
|
| 110,220,553 |
|
|
Total |
|
| 1,399,686 |
|
|
|
|
|
|
| 1,399,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Number of |
|
| Dollar Value |
|
| ||
|
|
|
|
|
|
|
|
|
| Shares Purchased |
|
| of Shares |
|
| ||
|
|
|
|
|
|
|
|
|
| as Part of |
|
| That May Yet |
|
| ||
|
| Total Number |
|
| Average |
|
| Publicly |
|
| Be Purchased |
|
| ||||
|
| of Shares |
|
| Price Paid |
|
| Announced Plans |
|
| Under the Plans |
|
| ||||
Period |
| Repurchased |
|
| Per Share |
|
| or Programs |
|
| or Programs |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2016 to January 29, 2016 |
|
| - |
|
| $ | - |
|
|
| 2,831,350 |
|
| $ | 110,220,429 |
|
|
January 30, 2016 to February 26, 2016 |
|
| 61,777 |
|
|
| 53.84 |
|
|
| 2,893,127 |
|
|
| 106,894,136 |
|
|
February 27, 2016 to April 1, 2016 |
|
| 140,533 |
|
|
| 62.26 |
|
|
| 3,033,660 |
|
|
| 98,144,250 |
|
|
Total |
|
| 202,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 19, 2014, our board of directors authorized a share repurchase program for the repurchase of up to an aggregate of $200 million of the Company’s outstanding common stock. On March 11, 2015, our board of directors authorized an additional $200 million for the repurchase of the Company’s outstanding common stock. All of the repurchases in the table above were made through that program.
27
Exhibit |
|
|
Number |
| Exhibit Index |
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
11 |
| Schedule setting forth computation of basic and diluted earnings per share for the three and |
|
|
|
31.1 |
| Certification of Chief Executive Officer. |
|
|
|
31.2 |
| Certification of Chief Financial Officer. |
|
|
|
32.1 |
| Certification (of Curtis C. Reusser) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2 |
| Certification (of Robert D. George) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
101.INS |
| XBRL Instance Document |
|
|
|
101.SCH |
| XBRL Taxonomy Extension Schema |
|
|
|
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase |
|
|
|
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase |
|
|
|
101.LAB |
| XBRL Taxonomy Extension Label Linkbase |
|
|
|
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase |
* Indicates management contract or compensatory plan or arrangement.
28
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: |
| By: |
| /s/ Robert D. George |
|
|
|
| Robert D. George |
|
|
|
| Vice President, Chief Financial Officer, |
|
|
|
| Corporate Development |
|
|
|
| (Principal Financial Officer) |
4429