SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ESTERLINE TECHNOLOGIES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
ESTERLINE TECHNOLOGIES CORPORATION
10800 NE 8TH STREET
BELLEVUE, WASHINGTON 98004
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 4, 1998
------------------------
To the Shareholders of Esterline Technologies Corporation:
NOTICE IS HEREBY GIVEN that the 1998 ESTERLINE TECHNOLOGIES CORPORATION, a
Delaware corporation (the "Company"), annual meeting of shareholders will be
held on Wednesday, March 4, 1998 at 10:00 a.m., at the Hyatt Regency Bellevue,
900 Bellevue Way, Bellevue, Washington, for the following purposes:
(1) to elect three directors of the Company to serve a term of three years;
(2) to ratify the selection of Deloitte & Touche LLP, as the Company's
independent auditors for the fiscal year 1998; and
(3) to transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on January 5, 1998,
as the record date for determination of shareholders entitled to notice of and
to vote at the meeting or any adjournment or postponement thereof.
The Company's Annual Report for the fiscal year 1997 is enclosed for your
convenience.
By order of the Board of Directors
/s/ Robert W. Stevenson
ROBERT W. STEVENSON
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
January 23, 1998
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE ANNUAL MEETING. HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES MUST BE PRESENT EITHER IN PERSON OR BY PROXY FOR THE MEETING TO BE HELD.
IF YOU ATTEND THE MEETING AND VOTE YOUR SHARES PERSONALLY, ANY PREVIOUS PROXIES
WILL BE REVOKED.
- --------------------------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 4, 1998
------------------------
This proxy statement, which is first being mailed to shareholders on or
about January 23, 1998, has been prepared in connection with the solicitation by
the Board of Directors of Esterline Technologies Corporation (the "Company") of
proxies in the accompanying form to be voted at the 1998 annual meeting of
shareholders of the Company to be held on March 4, 1998, and at any adjournment
or postponement thereof. The Company's principal executive office is at 10800 NE
8th Street, Bellevue, Washington 98004.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, officers and employees of the Company may solicit, without
additional compensation, the return of proxies by telephone, telegram,
messenger, facsimile transmission or personal interview. Arrangements may also
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to their principals, and the Company may
reimburse such persons for their expenses in so doing.
Any proxy given pursuant to the solicitation may be revoked at any time
prior to being voted. A proxy may be revoked by the record holder or other
person entitled to vote (a) by attendance in person at the meeting and voting
the shares, (b) by executing another proxy dated as of a later date or (c) by
written notification to the Secretary of the Company, at its address set forth
on the notice of the meeting, if received prior to the meeting date. All shares
represented by valid proxies will be voted at the meeting. Proxies will be voted
in accordance with the specification made therein or, in the absence of
specification, in accordance with the provisions of the proxy.
The Board of Directors has fixed the close of business on January 5, 1998,
as the record date for determination of holders of common stock of the Company
(the "Common Stock") entitled to notice of and to vote at the annual meeting. At
the close of business on the record date there were outstanding and entitled to
vote 8,642,911 shares of Common Stock, which are entitled to one vote per share
on all matters which properly come before the annual meeting. The presence in
person or by proxy of the holders of record of a majority of the outstanding
shares of Common Stock entitled to vote is required to constitute a quorum for
the transaction of business at the meeting. The Common Stock is listed for
trading on the New York Stock Exchange.
Votes cast by proxy or in person at the annual meeting will be tabulated by
the inspectors of election appointed for the annual meeting. The inspectors of
election will determine whether or not a quorum is present at the annual
meeting. The inspectors of election will treat abstentions as shares of Common
Stock that are present and entitled to vote for purposes of determining the
presence of a quorum. Under certain circumstances, a broker or other nominee may
have discretionary authority to vote certain shares of Common Stock if
instructions have not been received from the beneficial owner or other person
entitled to vote. If a broker or other nominee indicates on the proxy that it
does not have instructions or discretionary authority to vote certain shares of
Common Stock on a particular matter, those shares will not be considered as
present for purposes of determining whether a quorum is present or whether a
matter has been approved.
1
ELECTION OF DIRECTORS
Three directors are to be elected at the 1998 annual meeting of shareholders
to serve three-year terms expiring at the 2001 annual meeting or until their
successors are elected and qualified. The Board of Directors recommends a vote
FOR the three director nominees named below.
Directors of the Company are normally elected for three-year terms that are
staggered such that one-third of the directors are elected each year. The
current directors whose terms expire at the 1998 annual meeting are John F.
Clearman, Edwin I. Colodny and Paul G. Schloemer. Mr. Colodny, who has served on
the Board of Directors since 1992, has advised the Board that he will be
retiring as a director immediately after the conclusion of the 1998 annual
meeting of shareholders.
Information as to each nominee and each director whose term will continue
after the 1998 annual meeting is provided below. The three director nominees who
receive the greatest number of votes cast at the meeting by shareholders
entitled to vote, either in person or by proxy, shall be elected directors. In
the election of directors, any action other than a vote FOR the nominee will
have the practical effect of voting against the nominee. Unless otherwise
instructed, it is the intention of the persons named in the accompanying proxy
to vote shares represented by properly executed proxies FOR the election of the
three nominees named below. The Board of Directors knows of no reason why any of
the nominees will be unable or unwilling to serve. If any nominee becomes
unavailable to serve, it is intended that the persons named as proxies will vote
for the election of such other persons, if any, as the Board of Directors may
recommend.
NOMINEES:
RICHARD R. ALBRECHT
SENIOR ADVISOR, COMMERCIAL AIRPLANE GROUP, THE BOEING COMPANY. Age 65.
Mr. Albrecht has been a Senior Advisor to the Commercial Airplane Group for The
Boeing Company (an aerospace company) since August 1997. Prior thereto, he was
Executive Vice President of Boeing Commercial Airplane Group, having held such
position from 1984 to 1997. He was elected a director effective December 1997.
JOHN F. CLEARMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER (RETIRED), NC MACHINERY CO. Age 60.
Mr. Clearman is the retired President and Chief Executive Officer of NC
Machinery Co. (a heavy machinery distributor), having held such positions from
1986 through 1994. He has been a director of the Company since 1989.
PAUL G. SCHLOEMER
PRESIDENT AND CHIEF EXECUTIVE OFFICER (RETIRED), PARKER HANNIFIN
CORPORATION. Age 69. Mr. Schloemer is the retired President and Chief
Executive Officer of Parker Hannifin Corporation (a manufacturer of motion
control products), having held such positions from 1984 to 1993 and is a
director of Parker Hannifin Corporation, Rubbermaid Incorporated and AMP
Incorporated. He has been a director of the Company since 1993.
2
CONTINUING DIRECTORS:
GILBERT W. ANDERSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER (RETIRED), PHYSIO-CONTROL
CORPORATION. Age 69. Mr. Anderson is the retired President and Chief Executive
Officer of Physio-Control Corporation (a medical device manufacturer), having
held such positions from 1986 to 1991 and is a private investor. He is also a
director of SpaceLabs Medical. He has been a director of the Company since 1991
and his term expires in 2000.
E. JOHN FINN
CHAIRMAN (RETIRED), DORR-OLIVER INCORPORATED. Age 66. Mr. Finn is the retired
Chairman and Partner of Dorr-Oliver Incorporated (a fluid/particle treatment
equipment manufacturer), having held such positions from 1988 to 1995. He is
also a director of Advanced Refractory Technologies and Stanley Technology
Group, Inc. and is on the Advisory Board of Bay Mills Ltd. He has been a
director of the Company since 1989 and his term expires in 1999.
ROBERT F. GOLDHAMMER
CHAIRMAN, IMCLONE SYSTEMS, INCORPORATED. Age 66. Mr. Goldhammer has been the
Chairman of ImClone Systems, Incorporated (a biotechnology company) since 1984.
Prior thereto, he was a Partner and Vice Chairman of the Executive Committee of
Kidder, Peabody & Co. Incorporated. He is also a Partner at Concord
International Investments Group L. P. He has been a director of the Company
since 1974 and his term expires in 1999.
WENDELL P. HURLBUT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, ESTERLINE TECHNOLOGIES. Age 66.
Mr. Hurlbut has served as Chairman and Chief Executive Officer of the Company
since September 1997. Prior thereto, he served as Chairman, President and Chief
Executive Officer from January 1993 through September 1997. From February 1989
through December 1992, he was President and Chief Executive Officer.
Mr. Hurlbut is also a member of the Board of Directors of the National
Association of Manufacturers. He has been a director of the Company since 1989
and his term expires in 2000.
JEROME J. MEYER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, TEKTRONIX, INC. Age 59. Mr. Meyer has
been the Chairman and Chief Executive Officer of Tektronix, Inc. (an electronic
equipment manufacturer) since 1990 and was the President of Industrial Group of
Honeywell, Inc. from 1988 to 1990. He is also a director of Enron Corp. and AMP
Incorporated. He has been a director of the Company since 1992 and his term
expires in 1999.
MALCOLM T. STAMPER
VICE CHAIRMAN (RETIRED), THE BOEING COMPANY. Age 72. Mr. Stamper is the
retired President and Vice Chairman of The Boeing Company (an aerospace
company), having held such positions from 1972 to 1990 and has been the
Chairman, Chief Executive Officer and Publisher of Storytellers Ink since 1990.
He is also a director of Whittaker Corp. and Pro-Air. He has been a director of
the Company since 1991 and his term expires in 2000.
3
OTHER INFORMATION AS TO DIRECTORS
DIRECTOR COMPENSATION
The Company pays, in cash, each non-employee director an annual retainer fee
of $20,000 for services on the Board and all committees thereof, a fee of $1,000
for each special meeting attended and a fee of $200 for each telephonic meeting
in which they participate (and reimburses each such director for out-of-pocket
expenses incurred therewith). The Company also pays non-employee committee
chairmen an annual fee of $5,000. In addition, the Company pays non-employee
directors additional compensation in the form of an annual issuance to each
director of $5,000 worth of fully-paid Common Stock and reimburses each such
director in cash for the payment of income taxes ($3,300 at current Federal
income tax rates) on this stock. Employees of the Company serving on the Board
and committees thereof receive no additional compensation for such service.
There were six meetings of the Board of Directors during fiscal 1997.
BOARD COMMITTEES
THE AUDIT COMMITTEE, currently consisting of Messrs. Clearman (Chairman),
Anderson, Colodny, Meyer and Schloemer, recommends to the Board the independent
auditors to be selected to audit the Company's annual financial statements and
reviews the fees charged for audits and for any non-audit assignments. This
Committee also reviews: (1) the scope and results of the annual audit by the
independent auditors, any recommendations of the independent auditors resulting
therefrom and management's response thereto, (2) the accounting principles being
applied by the Company in financial reporting, (3) the activities of the
Company's internal auditors and the adequacy of internal accounting controls,
(4) the Company's environmental compliance practices and management system, and
(5) such other related matters as it deems appropriate. The Audit Committee met
five times during 1997.
THE COMPENSATION & STOCK OPTION COMMITTEE, currently consisting of Messrs.
Goldhammer (Chairman), Finn and Stamper, recommends the form and level of
compensation for officers of the Company. The Compensation & Stock Option
Committee has also been appointed by the Board of Directors to administer the
Company's stock option plans and incentive compensation plans. The Compensation
& Stock Option Committee met five times during 1997.
THE EXECUTIVE COMMITTEE, currently consisting of Messrs. Hurlbut (Chairman),
Finn, Goldhammer and Stamper, reviews situations that might, at some future
time, become items for consideration of the entire Board of Directors and acts
on behalf of the entire Board of Directors between its meetings. The Executive
Committee met once during fiscal 1997.
THE NOMINATING COMMITTEE, currently consisting of Messrs. Stamper
(Chairman), Colodny and Finn, recommends individuals to be presented to the
shareholders of the Company for election or re-election to the Board of
Directors. Written proposals from shareholders for nominees for directors to be
elected at the 1998 annual meeting which submitted to the Secretary of the
Company by September 15, 1997, and which contain sufficient background
information concerning the nominee to enable a proper judgment to be made as to
his or her qualifications, will be considered by the Nominating Committee. The
Nominating Committee met twice during fiscal 1997.
Each director, during fiscal 1997, attended at least 75% of the total number
of meetings of the Board of Directors and Board committees of which he was a
member.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of shares of Common Stock as of January 11, 1998 by (i) each person or
entity who is known by the Company to own beneficially more than 5% of the
Common Stock, (ii) each of the Company's directors, (iii) each of the Company's
named executive officers and (iv) all directors and executive officers of the
Company as a group.
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES(2) OF CLASS
- ------------------------------------------------------------ ------------- ---------
The Prudential Insurance Company of America................. 581,900(3) 6.7%
Prudential Plaza, Newark, NJ 07102
Heartland Advisors, Inc..................................... 451,200(4) 5.2%
790 North Milwaukee Street, Milwaukee, WI 53202
Wendell P. Hurlbut.......................................... 105,496(5) 1.2%
Larry A. Kring.............................................. 103,950(5) 1.2%
Stephen R. Larson........................................... 78,750(5) *
Robert W. Cremin............................................ 47,894(5)(6) *
Robert W. Stevenson......................................... 39,812(5)(6) *
E. John Finn................................................ 18,755 *
Robert F. Goldhammer........................................ 11,505 *
John F. Clearman............................................ 5,755 *
Gilbert W. Anderson......................................... 2,877 *
Edwin I. Colodny............................................ 2,755 *
Jerome J. Meyer............................................. 1,755 *
Paul G. Schloemer........................................... 1,755 *
Malcolm T. Stamper.......................................... 1,755 *
Richard R. Albrecht......................................... 1,000 *
Directors, nominees and executive officers as a group (16
persons).................................................. 438,814(5)(6) 4.9%
- ------------------------
* Less than 1%
(1) Unless otherwise indicated, the business address of each of the shareholders
named in this table is Esterline Technologies Corporation, 10800 NE 8th
Street, Bellevue, Washington 98004.
(2) Unless otherwise indicated in the footnotes to this table, the person and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable.
(3) The holding shown is based on a Schedule 13G filed with the Securities and
Exchange Commission (the "SEC") on or about January 29, 1997, and certain
other information provided by The Prudential Insurance Company of America,
an insurance company, a registered broker-dealer and a registered investment
advisor that disclaims beneficial ownership of these shares. Based on such
information, shared voting and dispositive power is reported with respect to
all of the shares.
(4) The holding shown is based on a Schedule 13G filed with the SEC on or about
February 12, 1997, and certain other information provided by Heartland
Advisors, Inc., a registered broker-dealer and a registered investment
advisor. Based on such information, shared voting and dispositive power is
reported with respect to all of the shares.
(5) Includes shares subject to options granted under the Company's Stock Option
Plans which are exercisable currently or within 60 days of the date of this
proxy statement as follows: Mr. Hurlbut, 67,000 shares; Mr. Cremin, 44,250
shares; Mr. Stevenson, 28,750 shares; Mr. Kring, 98,750 shares; Mr. Larson,
78,750 shares; and directors, nominees and executive officers as a group,
332,500 shares.
(6) Includes shares held in the name of such holder's children as follows:
Mr. Cremin, 811 shares and Mr. Stevenson, 7,400 shares.
5
EXECUTIVE COMPENSATION
The following table summarizes compensation paid or accrued during fiscal
years 1997, 1996 and 1995 for services in all capacities to the Company by the
persons who, at October 31, 1997, were the Chief Executive Officer and the four
other most highly compensated executive officers of the Company (collectively,
the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------
AWARDS
ANNUAL -------------- PAYOUTS
COMPENSATION SECURITIES ----------
------------------ UNDERLYING LTIP ALL OTHER
SALARY BONUS OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1) ($)(2)
- -------------------------------------------------- ----- -------- -------- -------------- ---------- -------------
Wendell P. Hurlbut ............................... 1997 421,667 349,350 18,000 287,100 2,375
Chairman of the Board 1996 401,667 217,947 20,000 589,695 2,375
and Chief Executive Officer 1995 379,167 346,500 30,000 131,105 2,310
Robert W. Cremin ................................. 1997 317,083 232,900 25,000 156,600 2,375
President and Chief 1996 266,667 127,136 65,000 212,427 2,375
Operating Officer (3) 1995 247,500 168,750 15,000 46,273 2,310
Robert W. Stevenson .............................. 1997 277,500 172,620 10,000 104,400 2,375
Executive Vice President, 1996 265,000 106,955 7,500 223,465 2,375
Chief Financial Officer, 1995 262,500 178,875 10,000 53,985 2,310
Secretary and Treasurer
Larry A. Kring ................................... 1997 252,500 139,740 10,000 93,960 2,375
Group Vice President 1996 237,500 86,102 7,500 192,289 2,375
1995 222,500 135,000 10,000 42,416 2,310
Stephen R. Larson ................................ 1997 230,000 127,136 10,000 93,960 2,375
Group Vice President 1996 218,333 80,721 7,500 192,289 2,375
1995 208,333 126,000 10,000 42,416 2,310
- ------------------------
(1) The Compensation Committee adopted a new long-term incentive compensation
plan in fiscal 1997 covering the three years 1997-1999. See "Compensation
Committee Report--Long-Term Incentive Plan." The Board terminated the three
open four-year cycles for fiscal 1996 and prior under the Company's long-
term incentive compensation plan. With respect to compensation reported in
fiscal 1996, amounts shown include settlement of all amounts accrued and due
through the date of termination under open cycles of the discontinued plan.
(2) Amounts contributed or accrued by the Company for the Named Executive
Officer under the Company's 401(k) plan.
(3) President and Chief Operating Officer since September 25, 1997 at an annual
salary of $340,000 and Executive Vice President and Chief Operating Officer
from October 1, 1996 to September 24, 1997, at a salary of $315,000.
6
OPTIONS GRANTED IN THE FISCAL YEAR ENDED OCTOBER 31, 1997
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE AT
SECURITIES % OF TOTAL ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED TO OPTION TERM(2)
GRANTED EMPLOYEES IN EXERCISE -----------------------------
NAME (#)(1) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE 0%($) 5%($) 10%($)
- ------------------------- ------------ ------------- ------------- ------------------ -------- ------- --------
Wendell P. Hurlbut....... 18,000(3) 13% 26.50 December 2006 0 299,983 760,215
Robert W. Cremin......... 12,000(3) 26.50 December 2006 0 199,988 506,810
13,000(4) 18% 39.75 September 2007 0 324,981 823,566
Robert W. Stevenson...... 10,000(3) 7% 26.50 December 2006 0 166,657 422,342
Larry A. Kring........... 10,000(3) 7% 26.50 December 2006 0 166,657 422,342
Stephen R. Larson........ 10,000(3) 7% 26.50 December 2006 0 166,657 422,342
- ------------------------
(1) The exercise price of the options is equal to the fair market value of the
Common Stock on the date of grant. The options vest at the rate of
twenty-five percent per year on each of the first four anniversaries of the
date of grant. In the event any person becomes the beneficial owner of 30%
or more of the Common Stock, including by means of a tender offer, or upon
approval by the Company's shareholders of a merger or similar transaction
providing for the exchange of more than 50% of the Company's shares into
cash, property or securities of a third party, all options held by the Named
Executive Officers under the stock option plans will become immediately
exercisable.
(2) The potential realizable value is based on the assumption that the stock
price for the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten year option term
as specified by the SEC. These increases in value are based on assumptions
required under the rules of the SEC and are not intended to forecast
possible future appreciation, if any, of the Company's stock price. Actual
realizable value, if any, on stock option exercises is dependent on the
future performance of the Common Stock as well as the option holder's
continued employment with the Company.
(3) The grants were made in December 1996.
(4) This grant was made in September 1997 upon promotion to President and Chief
Operating Officer.
7
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED OCTOBER 31, 1997,
AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE FISCAL YEAR END(#)(3) FISCAL YEAR END($)(4)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#)(1) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- -------------- ----------- ------------- ----------- -------------
Wendell P. Hurlbut.................... 75,000 1,725,000 42,500 55,500 1,070,000 942,750
Robert W. Cremin...................... 65,000 1,681,251 31,250 83,750 634,688 1,176,188
Robert W. Stevenson................... 55,000 1,555,313 18,125 24,375 468,125 398,125
Larry A. Kring........................ -- -- 89,375 23,125 2,459,375 361,875
Stephen R. Larson..................... -- -- 69,375 23,125 1,763,750 361,875
- ------------------------
(1) All of the shares were acquired under the cashless exercise procedure
provided for in the Company's 1987 Stock Option Plan. The procedure provides
for payment of the exercise price of the options and Federal taxes incurred
upon such exercise by the optionees through withholding of shares otherwise
issuable upon such exercise, valued at market on the date of exercise. The
net number of shares issued pursuant to such exercise was as follows:
Mr. Hurlbut, 32,499; Mr. Cremin, 32,660; and Mr. Stevenson, 28,878.
(2) The value realized is the difference between the fair market value of the
underlying Common Stock at the time of exercise and the aggregate exercise
price of the options.
(3) Exercisable/unexercisable amounts are as of October 31, 1997.
(4) Based on the closing price of the Common Stock on October 31, 1997, as
reported by the New York Stock Exchange ($36.375), less the exercise price,
multiplied by the number of in-the-money options held. There is no guarantee
that, if and when these options are exercised, they will have this value.
LONG-TERM INCENTIVE PLANS--AWARDS IN THE FISCAL YEAR ENDED OCTOBER 31, 1997
ESTIMATED FUTURE
ANNUAL PAYOUTS
UNDER NON-STOCK
PERFORMANCE OR PRICE-BASED
NUMBER OF OTHER PERIOD PLANS($)(1)
SHARES, UNITS UNTIL MATURATION ----------------
NAME OR OTHER RIGHTS OR PAYOUT TARGET MAXIMUM
- ---- --------------- ---------------- ------- -------
Wendell P. Hurlbut.......................................... -- 1997-1999 275,000 412,500
Robert W. Cremin............................................ -- 1997-1999 150,000 225,000
Robert W. Stevenson......................................... -- 1997-1999 100,000 150,000
Larry A. Kring.............................................. -- 1997-1999 90,000 135,000
Stephen R. Larson........................................... -- 1997-1999 90,000 135,000
- ------------------------
(1) The above awards were made pursuant to the Company's long-term incentive
compensation plan which was instituted November 1, 1996. The new plan is
based on three groups of objectives: GROUP I establishes target earnings per
share growth and target return on shareholders equity; GROUP II establishes
strategic operating performance objectives for the Committee to monitor
which may be altered from time to time by the Committee; and GROUP III
establishes relative earnings per share and return on equity performance
measurements compared to a peer group of companies and industries. Each of
the three groups of objectives is weighted equally and the plan provides for
annual updating of objectives when the Committee deems appropriate. Partial
payments are to be made based on performance for each year. (See
Compensation Committee Report, following this section.)
8
RETIREMENT BENEFITS
The Named Executive Officers are covered by a tax-qualified defined benefit
retirement plan (which covers substantially all U.S. employees of the Company)
and a Supplemental Executive Retirement Plan ("SERP") which requires an employee
contribution of 1% of annual compensation. Under the plans, benefits accrue
until retirement, limited to 30 years of service, with normal retirement at age
65. Under the tax-qualified defined benefit retirement plan, retirees are
entitled to receive an annuity computed under a five-year average compensation
formula, which includes salary, amounts earned under annual and long-term
incentive compensation plans and amounts realized upon exercise of stock
options, less expected Social Security benefits. The SERP provides benefits in
excess of statutory limits and entitles retirees to receive an annuity computed
under a restricted version of the five-year average compensation formula, which
excludes amounts earned under the long-term incentive compensation plan and
amounts realized upon exercise of stock options. The SERP also provides that Mr.
Hurlbut receive retirement plan service maximums at age 65. The retirees may
select either a life annuity or one of several alternative forms of payment with
an equivalent actuarial value.
The approximate annual annuity payable upon retirement to the Named
Executive Officers is shown in the following table. The amounts shown are for
retirement at age 65. Benefits are integrated with Social Security based on the
career average Social Security wage base in effect in 1997. To the extent the
Social Security wage base is increased after 1997, the benefits payable under
the retirement plan would be lower than the amounts shown.
PENSION PLAN TABLE
YEARS OF CREDITED SERVICE AT RETIREMENT
--------------------------------------------------------------
AVERAGE COMPENSATION 10 15 20 25 30
- -------------------- ---------- ---------- ---------- ---------- ----------
$100,000.................................................... $ 13,500 $ 20,200 $ 26,900 $ 33,600 $ 40,400
250,000.................................................... 37,500 56,200 74,900 93,600 112,400
400,000.................................................... 61,500 92,200 122,900 153,600 184,400
550,000.................................................... 85,500 128,200 170,900 213,600 256,400
700,000.................................................... 109,500 164,200 218,900 273,600 328,400
850,000.................................................... 133,500 200,200 266,900 333,600 400,400
The Named Executive Officers currently have the following completed years of
credited service for purposes of the defined benefit retirement plan:
Mr. Hurlbut, 30; Mr. Stevenson, 24; Mr. Cremin, 20; Mr. Kring, 4; and
Mr. Larson, 18.
TERMINATION AGREEMENTS
The Company has entered into termination protection agreements with the
Named Executive Officers which are designed to induce them to remain in the
employ of the Company or any successor company in the event of certain changes
in ownership or control by assuring compensation benefits if an officer is
terminated "Without Cause" or resigns for "Good Reason," as defined in the
agreements. In the event of such termination within two years after a change in
ownership or control, the agreements provide for lump sum payments equal to
twice the average compensation received during the prior two years, payment of
certain legal fees and expenses associated with the termination and insurance
benefits for the remainder of the initial two-year period or until other
full-time employment is accepted.
9
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION PRINCIPLES
The Compensation & Stock Option Committee (the "Committee") is responsible
for administering the compensation program for the executive officers of the
Company. The Committee is composed exclusively of independent, non-employee
directors who are not eligible to participate in any of the executive
compensation programs.
The Company's executive compensation practices are based on principles
designed to align executive compensation with Company objectives, business
strategy, management initiatives and financial performance. In applying these
principles the Committee has established a program to:
- Support a performance-oriented environment that rewards performance not
only with respect to the Company's annual results but also Company
performance as compared to that of longer-term industry performance
levels.
- Reward executives for long-term strategic management and the enhancement
of shareholder value.
- Attract and retain key executives critical to the success of the Company.
EXECUTIVE COMPENSATION PROGRAM
Each executive's total compensation consists of both cash and equity-based
compensation. The cash portion consists of salary, an annual incentive plan and
a long-term incentive plan. The equity portion consists of awards under the
Company's stock option plans.
SALARY:
The Committee determines the initial salary for key executive officers based
upon surveys of salaries for positions of comparable responsibility taking into
account competitive norms and the experience of the person being considered.
Subsequent salary changes are based upon individual performance or changes in
responsibilities.
ANNUAL INCENTIVE PLAN:
At the beginning of the fiscal year, the Committee establishes a "target"
award amount for each executive (stated as a percentage of the executive's base
salary) and performance measurement goals for the year. The award amount
calculated pursuant to the plan formula can range from 0% to 150% of each
executive's "target" award amount.
After award amounts are computed under the plan formula, the Committee may,
at its discretion, adjust the actual amount paid to each executive upward or
downward by as much as 25% of the greater of the executive's computed award or
the executive's target award amount. The ability of the Committee to make
subjective adjustments to award amounts reflects the Committee's concern that
the performance of the Company measured against the goals established at the
beginning of the year may not fully reflect the achievements of management. No
award may exceed 112.5% of the executive's base salary.
For 1997, the Committee selected earnings per share as the sole performance
goal. Award amounts computed under the plan formula ranged from 27% to 82% of
base salary. No adjustments under the discretionary formula were made.
10
LONG-TERM INCENTIVE PLAN:
Effective November 1, 1996, the Committee adopted a long-term incentive
compensation plan covering the three fiscal year period ending in October 1999.
The new plan is based on three groups of objectives: GROUP I establishes target
earnings per share growth and target return on shareholders equity; GROUP II
establishes strategic operating performance objectives for the Committee to
monitor which may be altered from time to time by the Committee; and GROUP III
establishes relative earnings per share and return on equity performance
measurements compared to a peer group of companies and industries. Each of the
three groups of objectives is weighted equally and the plan provides for annual
updating of objectives when the Committee deems appropriate.
The plan contemplates partial payouts after the close of each fiscal year
based on Committee evaluation of performance and based upon certain dollar
targets established for each participant at the beginning of each fiscal year.
These partial payouts are limited to 100% of salary for each year an executive
receives payments under the plan. For fiscal 1997, no earned payout to a plan
participant exceeded 68% of salary.
STOCK OPTIONS:
The portion of the long-term incentives provided from stock options
contemplates annual awards of stock options roughly equal in market value to the
current salary of each senior executive. The Committee regularly reviews each
executive's situation and annually grants additional options. In December 1996
and 1997, the Committee awarded the officers options to purchase, in the
aggregate, 70,000 and 53,500 shares, respectively, of the Company's Common Stock
at fair value on the date of grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee believes the CEO's compensation should be
structured so that the payouts from the annual incentive plan and the long-term
incentive plan relate closely to the Company's performance and, has followed a
policy of providing the CEO a compensation package for target Company
performance which, in addition to base salary, would pay cash incentives of up
to 125% of salary. On January 1, 1997 the CEO's salary was increased to
$425,000. His award under the 1997 annual incentive plan was $349,350 (82% of
base salary), and the earned portion of the long-term incentive plan was
$287,100 (68% of salary). In December 1996 and 1997, the Committee awarded the
CEO options to purchase 18,000 and 12,500 shares, respectively, of the Company's
Common Stock at fair market value on the date of grant.
Each year, the Committee separately reviews the CEO's salary and
participation levels in both the annual incentive plan and long-term
incentive plan.
It is the Company's general policy to provide that compensation payable
under its executive compensation plans and arrangements will not fail to be
deductible by reason of the million dollar limit on deductible compensation
provided under Section 162(m) of the Internal Revenue Code. However, exceptions
may be made on a case-by-case basis.
Respectfully submitted,
ROBERT F. GOLDHAMMER, CHAIRMAN
E. JOHN FINN
MALCOLM T. STAMPER
11
COMMON STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total return to shareholders on
the Common Stock during the years 1992 through 1997 with the cumulative total
return of the Standard & Poor's 500 Stock Index, and the Standard & Poor's
Capital Goods Index. The cumulative total return on the Company's Common Stock
and each index assumes the value of each investment was $100 on October 31,
1992, and that all dividends were reinvested. The measurement dates plotted
below indicate the last trading date of each fiscal year shown. The stock price
performance shown in the graph is not necessarily indicative of future price
performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ESTERLINE TECHNOLOGIES S&P 500 STOCK INDEX S&P CAPITAL GOODS INDEX
10/92 100 100 100
10/93 76.92 114.94 110.19
10/94 126.92 119.39 127.63
10/95 237.18 150.96 158.64
10/96 239.74 187.33 205.98
10/97 373.08 247.48 257.53
SELECTION OF INDEPENDENT AUDITORS
The selection by the Board of Directors, on the recommendation of the Audit
Committee, of Deloitte & Touche LLP, Seattle, Washington, as independent
auditors to audit the financial statements of the Company for the fiscal year
ending October 31, 1998, is to be submitted to the meeting for ratification.
Said firm has audited the financial statements of the Company since 1987.
Representatives of Deloitte & Touche LLP will be present at the 1998 annual
meeting, will be given the opportunity to make a statement if they wish to do
so, and will be available to respond to appropriate questions.
The Company is not obligated by law or its Certificate of Incorporation or
Bylaws to seek ratification of the directors' selection of auditors, but does so
as a matter of corporate policy. If the selection of auditors is not ratified by
shareholders, the Board may continue to use Deloitte & Touche LLP as auditors or
select new auditors if, in the opinion of the Board, such a change would be in
the best interest of the Company and its shareholders; any such change would not
be expected to be submitted to shareholders for ratification prior to the 1999
annual meeting.
The affirmative vote of a majority of the votes cast by shareholders present
in person or by proxy and entitled to vote at the meeting is required to ratify
the appointment of Deloitte & Touche LLP as independent auditors.
12
COMPLIANCE WITH FORMS 3, 4 AND 5 REPORTING REQUIREMENTS
Based solely upon a review of reports on Forms 3, 4 and 5 and any amendments
thereto furnished to the Company pursuant to Section 16 of the Securities
Exchange Act, as amended, and written representations from the executive
officers and directors that no other reports were required, the Company believes
that all of such reports were filed on a timely basis by executive officers and
directors during 1997.
OTHER MATTERS
As of the date of this proxy statement, the only matters which management
intends to present at the meeting are those set forth in the notice of meeting
and in this proxy statement. Management knows of no other matters that may come
before the meeting. However, if any other matters properly come before the
meeting, it is intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the judgment of the person or persons voting
as proxies.
SHAREHOLDER PROPOSALS FOR 1999
An eligible shareholder who wants to have a qualified proposal considered
for inclusion in the proxy statement for the 1999 annual meeting must notify the
Secretary of the Company. The proposal must be received at the Company's
executive office no later than September 15, 1998. A shareholder must have been
a registered or beneficial owner of at least one percent of the outstanding
shares of Common Stock or shares of Common Stock with a market value of $1,000
for at least one year prior to submitting the proposal and the shareholder must
continue to own such stock through the date on which the meeting is held.
By order of the Board of Directors
/s/ Robert W. Stevenson
ROBERT W. STEVENSON
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
January 23, 1998
13
/X/ Please mark your votes
as in this example.
FOR AGAINST ABSTAIN
(1) Election of the (2) Ratification of / / / / / /
following Nominees as Deloitte & Touche LLP as
Directors to serve a term the Company's independent
of three years: Richard R. auditors for fiscal year
Albrecht, John F. Clearman, 1998.
Paul G. Schloemer.
FOR WITHHELD (3) In their discretion, / / / /
/ / / / the holders of this proxy
are authorized to vote upon
such other business as may
properly come before the
meeting or any adjournment
or postponement thereof.
INSTRUCTION: To withhold authority
for any individual nominee, print
that nominee's name in the following
space:
This proxy, when properly executed, will be voted
in the manner directed on this proxy card.
Management recommends a vote FOR all nominees
designated on this proxy card and FOR each of the
proposals referred to hereon; if no specification is
made, a vote FOR all of said nominees and FOR
approval of all of said proposals will be entered.
The undersigned hereby revokes any proxy or proxies
heretofore given for such shares and ratifies all
that said proxies or their substitutes may lawfully
do by virtue hereof.
Signature(s) Date
-------------------------------------------------- ----------
Please sign exactly as name appears on this proxy. If stock is held jointly,
each owner should sign. Persons signing in a representative capacity should give
their title.
PLEASE PROMPTLY DATE, SIGN AND RETURN THIS PROXY CARD.
FOLD AND DETACH HERE
ESTERLINE TECHNOLOGIES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Wendell P. Hurlbut and Robert W. Stevenson and
each of them as proxies, each with full power of substitution, to represent and
vote for and on behalf of the undersigned, the number of shares of common stock
of Esterline Technologies Corporation that the undersigned would be entitled to
vote if personally present at the annual meeting of shareholders to be held on
March 4, 1998, or at any adjournment thereof. The undersigned directs that this
proxy be voted as follows:
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
- ---------------------------------------------------------------------------
FOLD AND DETACH HERE