NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Month Periods Ended June 30, 2017, and July 1, 2016
Note 1 – Basis of Presentation
The consolidated balance sheet as of June 30, 2017, the consolidated statement of operations and comprehensive income (loss) for the three and nine month periods ended June 30, 2017, and July 1, 2016, and the consolidated statement of cash flows for the nine month periods ended June 30, 2017, and July 1, 2016, 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 Annual Report on Form 10-K for the fiscal year ended September 30, 2016, 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, October through December, includes significant holiday periods in both Europe and North America, resulting in fewer business days.
Note 2 – Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (FASB) issued new guidance on the presentation of the net periodic cost of postretirement benefit programs. The new standard requires sponsors of defined benefit postretirement plans to present the non-service cost components of net periodic benefit cost separate from the service cost component on the income statement. The new standard also requires that the non-service cost components of net periodic benefit cost no longer be capitalized within assets. The Company is evaluating the effects the standard will have on the Company’s consolidated financial statements and related disclosures beyond the change in income statement presentation. This new standard is effective for the Company in fiscal year 2019, with early adoption permitted.
In January 2017, FASB issued new guidance regarding the goodwill impairment test. The new guidance eliminates the Step 2 valuation test when evaluating goodwill for impairment. The new guidance requires that an entity performs its annual or interim goodwill test by comparing the fair value of the reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The guidance will be effective for the Company in fiscal year 2021, with early adoption permitted.
In October 2016, FASB issued new guidance regarding income taxes. The new guidance will require the tax effects of intercompany transactions, other than sales of inventory, to be recognized currently, eliminating an exception under current Generally Accepted Accounting Principles (GAAP) in which the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The guidance will be effective for the Company in fiscal year 2019, with early adoption permitted.
In August 2016, the FASB issued new guidance addressing how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The guidance will be effective for the Company in fiscal year 2019, with early adoption permitted.
In June 2016, the FASB issued a new standard on the measurement of credit losses, which will impact the Company’s measurement of trade receivables. The new standard replaces the current incurred loss model with a forward-looking expected loss model that is likely to result in earlier recognition of losses. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The new standard is effective for the Company in fiscal year 2021, with early adoption permitted, but not earlier than in fiscal year 2020.
In March 2016, the FASB issued new guidance simplifying certain aspects of accounting for share-based payments. The key provision of the new standard requires that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the income statement, rather than in equity. The Company adopted the new guidance during the first nine months of fiscal 2017, which
6
resulted in a $2.3 million benefit to income tax expense and a favorable impact to operating cash flows of $2.
3 million
. The Company has also elected to account for forfeitures as they occur, rather than estimate expected forfeitures, which resulted in a positive cumulative effect on retained earnings of $0.9 million and a reduction of additional paid-in capital
of $0.9 million.
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 in fiscal year 2020, with early adoption permitted.
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. The Company is evaluating the effect the updated standard will have on the Company’s consolidated financial statements and related disclosures. The updated standard becomes effective for the Company in the first quarter of fiscal 2019, with early adoption permitted.
Anticipated changes under the new standard include accounting for development costs and associated customer funding related to certain contracts and increased use of over-time revenue recognition based on costs incurred for certain contracts. The new standard also significantly enhances required disclosures regarding revenue and related assets and liabilities. The Company is in the process of evaluating changes to business processes, systems and internal controls required to implement the new accounting standard.
Note 3 – 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, restricted stock units and share units related to the Company’s performance share plan to the extent that performance share plan objectives are met. Common shares issuable from stock options excluded from the calculation of diluted earnings per share because they were anti-dilutive were 605,725 and 690,475 in the three and nine month periods ending June 30, 2017. Common shares issuable from stock options excluded from the calculation of diluted earnings per share because they were anti-dilutive were 858,000 and 745,067 in the three and nine month periods ending July 1, 2016. Shares used for calculating earnings per share are disclosed in the following table:
In Thousands
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
June 30,
|
|
|
July 1,
|
|
|
June 30,
|
|
|
July 1,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used for basic earnings per share
|
|
29,830
|
|
|
|
29,381
|
|
|
|
29,698
|
|
|
|
29,517
|
|
|
Shares used for diluted earnings per share
|
|
30,068
|
|
|
|
29,601
|
|
|
|
29,953
|
|
|
|
29,788
|
|
|
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 June 30, 2017, and September 30, 2016, 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.
There were no shares repurchased during the nine months ended June 30, 2017. There were 304,577 shares repurchased during the nine months ended July 1, 2016. Since the program began, the Company has repurchased 3,135,927 shares for an aggregate purchase price of $308.5 million, with $91.5 million in shares remaining available for repurchase in the future.
7
Changes in issued and outstanding common shares are summarized as follows:
|
Nine Months Ended
|
|
|
Year Ended
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
Shares Issued:
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
32,564,252
|
|
|
|
32,378,185
|
|
|
Shares issued under share-based compensation plans
|
|
532,491
|
|
|
|
186,067
|
|
|
Balance, end of current period
|
|
33,096,743
|
|
|
|
32,564,252
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock:
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
(3,135,927
|
)
|
|
|
(2,831,350
|
)
|
|
Shares purchased
|
|
-
|
|
|
|
(304,577
|
)
|
|
Balance, end of current period
|
|
(3,135,927
|
)
|
|
|
(3,135,927
|
)
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding, end of period
|
|
29,960,816
|
|
|
|
29,428,325
|
|
|
The components of Accumulated Other Comprehensive Income (Loss):
In Thousands
|
June 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on derivative contracts
|
$
|
6,724
|
|
|
$
|
(4,547
|
)
|
|
Tax effect
|
|
(2,017
|
)
|
|
|
1,077
|
|
|
|
|
4,707
|
|
|
|
(3,470
|
)
|
|
|
|
|
|
|
|
|
|
|
Pension and post-retirement obligations
|
|
(112,214
|
)
|
|
|
(116,346
|
)
|
|
Tax effect
|
|
38,268
|
|
|
|
39,804
|
|
|
|
|
(73,946
|
)
|
|
|
(76,542
|
)
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
(258,919
|
)
|
|
|
(268,845
|
)
|
|
Accumulated other comprehensive income (loss)
|
$
|
(328,158
|
)
|
|
$
|
(348,857
|
)
|
|
Note 4 – 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. Components of periodic pension cost consisted of the following:
In Thousands
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
June 30,
|
|
|
July 1,
|
|
|
June 30,
|
|
|
July 1,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Cost
|
|
|
Service cost
|
$
|
3,287
|
|
|
$
|
2,871
|
|
|
$
|
10,012
|
|
|
$
|
8,773
|
|
|
Interest cost
|
|
3,838
|
|
|
|
4,412
|
|
|
|
11,293
|
|
|
|
13,052
|
|
|
Expected return on plan assets
|
|
(6,241
|
)
|
|
|
(6,060
|
)
|
|
|
(18,796
|
)
|
|
|
(17,964
|
)
|
|
Amortization of prior service cost
|
|
114
|
|
|
|
119
|
|
|
|
343
|
|
|
|
345
|
|
|
Amortization of actuarial (gain) loss
|
|
1,996
|
|
|
|
1,580
|
|
|
|
5,397
|
|
|
|
4,639
|
|
|
Net periodic cost (benefit)
|
$
|
2,994
|
|
|
$
|
2,922
|
|
|
$
|
8,249
|
|
|
$
|
8,845
|
|
|
The Company amortizes prior service cost and actuarial gains and losses from accumulated other comprehensive income to expense over the remaining service period.
Note 5 – 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
8
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 hierar
chy 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 not observable and therefore obtained from indirect market information that is significant to the overall fair value measurement and which require a significant degree of management judgment.
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 June 30, 2017, and September 30, 2016.
In Thousands
|
Level 2
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Derivative contracts designated as hedging instruments
|
$
|
7,400
|
|
|
$
|
2,948
|
|
|
Derivative contracts not designated as hedging instruments
|
|
515
|
|
|
|
143
|
|
|
Embedded derivatives
|
|
1,009
|
|
|
|
2,485
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Derivative contracts designated as hedging instruments
|
$
|
676
|
|
|
$
|
7,828
|
|
|
Derivative contracts not designated as hedging instruments
|
|
3,840
|
|
|
|
6,720
|
|
|
Embedded derivatives
|
|
1,287
|
|
|
|
985
|
|
|
In Thousands
|
Level 3
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Estimated value of assets held for sale
|
$
|
14,125
|
|
|
$
|
26,850
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Estimated value of liabilities held for sale
|
$
|
2,156
|
|
|
$
|
11,133
|
|
|
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.
The Company’s derivative contracts consist of foreign currency exchange contracts and, from time to time, 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.
In fiscal 2014, the Company’s board of directors approved the plan to sell certain non-core business units. Based upon the estimated fair values, the Company adjusted the carrying value of the assets and liabilities of the businesses to fair value. Principle assumptions used in measuring the estimated value of assets and liabilities held for sale included estimated selling price of the discontinued business, discount rates, industry growth rates, and pricing of comparable transactions in the market. The change in the estimated value of assets and liabilities held for sale is due to disposing of a business with assets held for sale of $10.5 million and liabilities held for sale of $7.4 million at September 30, 2016. In addition, the estimated selling price of the remaining business held for sale was reduced by $3.5 million during fiscal year 2017. The valuations are categorized as Level 3 in the fair value hierarchy.
9
Note 6 – 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 is presented on a gross basis, as the Company does not have any derivative contracts which are subject to master netting arrangements. The Company did not have any hedges with credit-risk-related contingent features or that required the posting of collateral as of June 30, 2017, and September 30, 2016. The cash flows from derivative contracts are recorded in operating activities in the Consolidated Statement of Cash Flows.
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 June 30, 2017, and September 30, 2016, the Company had outstanding foreign currency forward exchange contracts principally to sell U.S. dollars with notional amounts of $379.4 million and $450.9 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 accumulated 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 of the hedge since inception.
10
Fair Value
of Derivative Instruments
Fair value of derivative instruments in the Consolidated Balance Sheet at June 30, 2017, and September 30, 2016, consisted of:
In Thousands
|
|
|
Fair Value
|
|
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
Classification
|
|
2017
|
|
|
2016
|
|
|
Foreign Currency Forward Exchange Contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
6,221
|
|
|
$
|
1,757
|
|
|
|
Other assets
|
|
|
1,694
|
|
|
|
1,334
|
|
|
|
Accrued liabilities
|
|
|
3,811
|
|
|
|
11,168
|
|
|
|
Other liabilities
|
|
|
705
|
|
|
|
3,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded Derivative Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
858
|
|
|
$
|
1,864
|
|
|
|
Other assets
|
|
|
151
|
|
|
|
621
|
|
|
|
Accrued liabilities
|
|
|
1,108
|
|
|
|
866
|
|
|
|
Other liabilities
|
|
|
179
|
|
|
|
119
|
|
|
The effect of derivative instruments on the Consolidated Statement of Operations and Comprehensive Income (Loss) for the nine month periods ended June 30, 2017, and July 1, 2016, consisted of:
Fair Value Hedges and Embedded Derivatives
The Company recognized the following gains (losses) on contracts designated as fair value hedges and embedded derivatives:
In Thousands
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
Gain (Loss)
|
June 30,
|
|
|
July 1,
|
|
|
June 30,
|
|
|
July 1,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Embedded derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in sales
|
$
|
(952
|
)
|
|
$
|
818
|
|
|
$
|
(1,169
|
)
|
|
$
|
(2,858
|
)
|
|
Cash Flow Hedges
The Company recognized the following gains (losses) on contracts designated as cash flow hedges:
In Thousands
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
Gain (Loss)
|
June 30,
|
|
|
July 1,
|
|
|
June 30,
|
|
|
July 1,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Foreign currency forward exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in AOCI (effective portion)
|
$
|
14,250
|
|
|
$
|
3,528
|
|
|
$
|
21,425
|
|
|
$
|
32,212
|
|
|
Reclassified from AOCI into sales
|
|
(2,284
|
)
|
|
|
(2,640
|
)
|
|
|
(10,154
|
)
|
|
|
(15,223
|
)
|
|
Net Investment Hedges
The Company recognized the following gains (losses) on contracts designated as net investment hedges:
In Thousands
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
Gain (Loss)
|
June 30,
|
|
|
July 1,
|
|
|
June 30,
|
|
|
July 1,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2023 Notes and Accrued Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in AOCI
|
$
|
(25,512
|
)
|
|
$
|
8,336
|
|
|
$
|
(6,133
|
)
|
|
$
|
2,084
|
|
|
During the third quarter of fiscal 2017 and 2016, the Company recorded a gain of $3.4 million and a loss of $3.4 million, respectively, on foreign currency forward exchange contracts that have not been designated as accounting hedges. During the first nine months of fiscal 2017 and 2016, the Company recorded a gain of $3.1 million and a loss of $7.6 million, respectively, on foreign currency forward exchange contracts that have not been designated as accounting hedges. These foreign currency exchange gains and 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 nine months of fiscal 2017 and 2016. 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 nine months of fiscal 2017 and 2016.
11
Amounts included in AOCI are reclassified into earnings when the hedged transaction settles. The Company expects to reclassify approximately $
5.1
million of net gain into earnings over the next 12 month
s. The maximum duration of the Company’s foreign currency cash flow hedge contracts at June 30, 2017, was 24 months.
Note 7 – Income Taxes
The income tax rate was 24.8% in the third quarter of fiscal 2017 compared with 17.2% in the prior-year period. The income tax rate for the third quarter of fiscal 2017 was higher due to the U.K. tax law changes limiting interest expense deductions, partially offset by excess tax benefits related to employee share-based payments. The income tax rate differed from the statutory rate in the third quarter of fiscal 2017 and 2016, as both years benefited from various tax credits and certain foreign interest expense deductions.
The income tax rate was 21.9% and 14.7% for the first nine months of fiscal 2017 and 2016, respectively. The income tax rate in the current period was higher primarily due to U.K. limitations on interest expense deductions. In the first nine months of 2017, the Company recognized $7.1 million of discrete tax benefits primarily related to a reduction of the income tax rate in France for fiscal year 2020 and beyond and the early adoption of the accounting standard update for employee share-based payment awards. In the first nine months of 2016, the Company recognized approximately $1.7 million of discrete tax benefits principally related to the enactment of tax laws reducing the U.K. statutory income tax rate.
During the next 12 months, it is reasonably possible that approximately $1.4 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. The Company recognizes interest related to unrecognized tax benefits in income tax expense.
Note 8 – Debt
Long-term debt at June 30, 2017 and September 30, 2016, consisted of the following:
In Thousands
|
June 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
U.S. credit facility
|
$
|
65,000
|
|
|
$
|
155,000
|
|
|
U.S. Term Loan, due April 2020
|
|
228,125
|
|
|
|
237,500
|
|
|
3.625% Senior Notes, due April 2023
|
|
377,091
|
|
|
|
370,920
|
|
|
Government refundable advances
|
|
43,545
|
|
|
|
44,994
|
|
|
Obligation under capital leases
|
|
71,368
|
|
|
|
67,765
|
|
|
Debt issuance costs
|
|
(4,890
|
)
|
|
|
(5,609
|
)
|
|
|
|
780,239
|
|
|
|
870,570
|
|
|
Less current maturities
|
|
14,215
|
|
|
|
16,774
|
|
|
Carrying amount of long-term debt
|
$
|
766,024
|
|
|
$
|
853,796
|
|
|
U.S. Credit Facility
On April 9, 2015, the Company amended its secured credit facility to extend the maturity 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. The Company recorded $2.3 million in debt issuance costs. The credit facility is secured by substantially all the Company’s assets, and interest is based on standard inter-bank offering rates. The interest rate ranges from LIBOR plus 1.25% to LIBOR plus 2.00% depending on leverage ratios at the time the funds are drawn. At June 30, 2017, the Company had $65.0 million outstanding under the secured credit facility at an interest rate of LIBOR plus 1.75% which was 2.71%.
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 (U.S. Term Loan, due 2020). The interest rate on the U.S. Term Loan, due 2020, ranges from LIBOR plus 1.25% to LIBOR plus 2.00%. At June 30, 2017, the interest rate was LIBOR plus 1.50%, which equaled 2.73%. The loan amortizes at 1.25% of the original principal balance quarterly through March 2020, with the remaining balance due in April 2020.
3.625% Senior Notes, due April 2023
In April 2015, the Company issued €330.0 million in 3.625% Notes, due 2023 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 $5.9 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
12
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 am
ount 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 fair value of the Company’s 2023 Notes was $389.4 million and $365.3 million as of June 30, 2017, and September 30, 2016, respectively. The carrying amount of the secured credit facility and the U.S. Term Loan, due 2020, approximate fair value. The estimate of fair value for the 2023 Notes is based on Level 2 inputs as defined in the fair value hierarchy described in Note 5.
Government Refundable Advances
Government refundable advances consist of payments received from the Canadian government to assist in research and development related to commercial aviation. The requirement 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 2.4% at June 30, 2017. The debt recognized was $43.5 million and $45.0 million as of June 30, 2017, and September 30, 2016, respectively.
Obligation Under Capital Lease
The Company leases building and equipment under capital leases. The present value of the minimum capital lease payments, net of the current portion, totaled $69.4 million and $66.2 million as of June 30, 2017, and September 30, 2016, respectively.
Note 9 – 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 position or results of operations. The Company believes that it has made appropriate and adequate provisions for contingent liabilities.
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 provides 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 Company expects to be released from the Consent Agreement in fiscal 2017, depending upon the Company’s satisfactory completion of the remaining requirements under the agreement and the timing of final approval by the DTCC. The $10 million portion of the settlement that was not subject to suspension was paid in installments, with $8 million paid over fiscal years 2014, 2015 and 2016. The remaining $2 million was paid in February 2017. In fiscal 2016, the DTCC approved costs the Company incurred to implement compliance measures to fully offset the $10 million suspended payment.
During the first nine months of fiscal 2017, the Company received a $7.8 million insurance recovery relating to an energetic incident at one of its countermeasure operations, which occurred in the third quarter of fiscal 2016. We also received $5 million in fiscal 2016. The Company does not anticipate additional insurance recoveries arising from this matter.
Note 10 – Employee Stock Plans
As of June 30, 2017, 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 $7.5 million and $11.5 million for the first nine months of fiscal 2017 and 2016, respectively. During the first nine months of fiscal 2017 and 2016, the Company issued 532,491 and 154,075 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 11,338 and 70,673 options in the nine month periods ended June 30, 2017, and July 1, 2016,
13
respectively. The weighted-average grant date fair value of options
granted during the nine month periods ended June 30, 2017, and July 1, 2016, was $24.61 and $16.65 per share, respectively.
The fair value of the awards under the employee share-save scheme was estimated using a Black-Scholes pricing model which uses the assumptions noted in the following table. The risk-free rate for the contractual life of the options is based on the U.S. Treasury zero coupon issues in effect at the time of grant.
|
Nine Months Ended
|
|
|
|
June 30,
|
|
|
July 1,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
35.58
|
%
|
|
|
33.21
|
%
|
|
Risk-free interest rate
|
|
1.75
|
%
|
|
|
1.19
|
%
|
|
Expected life (years)
|
3
|
|
|
3
|
|
|
Dividends
|
0
|
|
|
0
|
|
|
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 237,200 and 221,200 options to purchase shares in the nine month periods ended June 30, 2017, and July 1, 2016, respectively. The weighted-average grant date fair value of options granted during the nine month periods ended June 30, 2017, and July 1, 2016, was $32.66 and $35.69 per share, respectively.
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
|
|
|
June 30,
|
|
July 1,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Volatility
|
34.97 - 35.42%
|
|
33.06 - 40.52%
|
|
Risk-free interest rate
|
1.98 - 2.51%
|
|
1.61 - 2.24%
|
|
Expected life (years)
|
5 - 9
|
|
5 - 9
|
|
Dividends
|
0
|
|
0
|
|
The Company granted 37,100 and 36,000 restricted stock units in the nine month periods ended June 30, 2017, and July 1, 2016, respectively. The weighted-average grant date fair value of restricted stock units granted during the nine month periods ended June 30, 2017, and July 1, 2016, was $76.83 and $85.33 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 43,650 and 56,200 performance share plan (PSP) shares in the nine month periods ended June 30, 2017, and July 1, 2016, respectively. PSP shares will be paid out in shares of Esterline common stock at the end of the three year performance period. The PSP shares granted in each period equaled the number of shares participants would receive if the Company achieves target performance over the relevant period. The actual number of shares that will be paid out upon completion of the performance period is based on actual performance and may range from 0% to 300% of the target number of shares.
Note 11 – Discontinued Operations
The Company’s board of directors previously approved the plan to sell certain non-core business units including Wallop Defence Systems, Ltd. (Wallop), a manufacturer of flare countermeasure devices; a small distribution business; and a small manufacturing business.
On May 4, 2016, the Company sold certain assets of Wallop for 2.5 million British pounds and contingent consideration of up to a maximum payment of 9 million British pounds. The contingent consideration is payable based upon receipt of acceptable orders during a three year period ending May 3, 2019, and is equal to the amount of the acceptable order multiplied by a specified percentage ranging from 26.5% to 31%. The contingent consideration amount was estimated to be 5.7 million British pounds at June 30, 2017. On June 2, 2017, the Company sold additional assets of Wallop for 0.7 million euros to be collected in the fourth quarter of fiscal 2017.
14
On March 28, 2017,
the Company sold a small manufacturing business for $0.6 million and a note receivable of $2.4 million, resulting in a gain on sale of the business of $0.8 million. The note receivable is due March 28, 2021, with an interest rate of 2.05%.
The Company incurred a $0.8 million loss from discontinued operations in the third quarter of fiscal 2017 compared to $8.7 million loss from discontinued operations in the third quarter of fiscal 2016. During the first nine months of fiscal 2017 and 2016, the Company incurred a loss from discontinued operations of $6.2 million and $15.5 million, respectively. Included in the loss of $6.2 million for the first nine months of fiscal 2017 was a $3.6 million loss on Wallop’s assets held for sale, principally due to a reduction in the estimated sale price and the effect of changes in foreign currency exchange rates. There was no significant change to the estimated sale price in the third quarter of fiscal 2017.
The operating results of the discontinued operations for the three month period ended June 30, 2017, consisted of the following:
In Thousands
|
Avionics &
|
|
|
Sensors &
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
Controls
|
|
|
Systems
|
|
|
Materials
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
270
|
|
|
$
|
-
|
|
|
$
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss)
|
|
(594
|
)
|
|
|
-
|
|
|
|
(598
|
)
|
|
|
(3
|
)
|
|
|
(1,195
|
)
|
|
Tax expense (benefit)
|
|
(62
|
)
|
|
|
-
|
|
|
|
(318
|
)
|
|
|
-
|
|
|
|
(380
|
)
|
|
Income (loss) from discontinued
operations
|
$
|
(532
|
)
|
|
$
|
-
|
|
|
$
|
(280
|
)
|
|
$
|
(3
|
)
|
|
$
|
(815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in Operating Earnings (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on net assets
held for sale
|
$
|
163
|
|
|
$
|
-
|
|
|
$
|
709
|
|
|
$
|
-
|
|
|
$
|
872
|
|
|
Gain (loss) on sale of discontinued
operations
|
|
(395
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(395
|
)
|
|
The operating results of the discontinued operations for the nine month period ended June 30, 2017, consisted of the following:
In Thousands
|
Avionics &
|
|
|
Sensors &
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
Controls
|
|
|
Systems
|
|
|
Materials
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
$
|
4,964
|
|
|
$
|
-
|
|
|
$
|
270
|
|
|
$
|
-
|
|
|
$
|
5,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss)
|
|
(713
|
)
|
|
|
893
|
|
|
|
(7,214
|
)
|
|
|
(896
|
)
|
|
|
(7,930
|
)
|
|
Tax expense (benefit)
|
|
(492
|
)
|
|
|
-
|
|
|
|
(941
|
)
|
|
|
(312
|
)
|
|
|
(1,745
|
)
|
|
Income (loss) from discontinued
operations
|
$
|
(221
|
)
|
|
$
|
893
|
|
|
$
|
(6,273
|
)
|
|
$
|
(584
|
)
|
|
$
|
(6,185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in Operating Earnings (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on net assets
held for sale
|
$
|
77
|
|
|
$
|
-
|
|
|
$
|
(3,614
|
)
|
|
$
|
-
|
|
|
$
|
(3,537
|
)
|
|
Gain (loss) on sale of discontinued
operations
|
|
793
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
793
|
|
|
The operating results of the discontinued operations for the three month period ended July 1, 2016, consisted of the following:
In Thousands
|
Avionics &
|
|
|
Sensors &
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
Controls
|
|
|
Systems
|
|
|
Materials
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
$
|
3,577
|
|
|
$
|
-
|
|
|
$
|
456
|
|
|
$
|
-
|
|
|
$
|
4,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss)
|
|
(1,184
|
)
|
|
|
(71
|
)
|
|
|
(5,908
|
)
|
|
|
(251
|
)
|
|
|
(7,414
|
)
|
|
Tax expense (benefit)
|
|
570
|
|
|
|
(83
|
)
|
|
|
876
|
|
|
|
(87
|
)
|
|
|
1,276
|
|
|
Income (loss) from discontinued
operations
|
$
|
(1,754
|
)
|
|
$
|
12
|
|
|
$
|
(6,784
|
)
|
|
$
|
(164
|
)
|
|
$
|
(8,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in Operating Earnings (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on net assets
held for sale
|
$
|
(2,411
|
)
|
|
$
|
-
|
|
|
$
|
(1,912
|
)
|
|
$
|
-
|
|
|
$
|
(4,323
|
)
|
|
15
The operating results of the discontinued operations for the nine month period ended July 1, 2016, consisted of the following:
In Thousands
|
Avionics &
|
|
|
Sensors &
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
|
|
Controls
|
|
|
Systems
|
|
|
Materials
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
$
|
13,638
|
|
|
$
|
-
|
|
|
$
|
5,229
|
|
|
$
|
-
|
|
|
$
|
18,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss)
|
|
785
|
|
|
|
(378
|
)
|
|
|
(14,775
|
)
|
|
|
(262
|
)
|
|
|
(14,630
|
)
|
|
Tax expense (benefit)
|
|
1,256
|
|
|
|
(83
|
)
|
|
|
(223
|
)
|
|
|
(87
|
)
|
|
|
863
|
|
|
Income (loss) from discontinued
operations
|
$
|
(471
|
)
|
|
$
|
(295
|
)
|
|
$
|
(14,552
|
)
|
|
$
|
(175
|
)
|
|
$
|
(15,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in Operating Earnings (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on net assets
held for sale
|
$
|
(2,355
|
)
|
|
$
|
-
|
|
|
$
|
(5,540
|
)
|
|
$
|
-
|
|
|
$
|
(7,895
|
)
|
|
Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at June 30, 2017, are comprised of the following:
In Thousands
|
|
|
Avionics &
|
|
|
Sensors &
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
Controls
|
|
|
Systems
|
|
|
Materials
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,868
|
|
|
$
|
3,868
|
|
|
Current Assets of Businesses Held for Sale
|
|
|
-
|
|
|
|
-
|
|
|
|
3,868
|
|
|
|
3,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
|
|
5,262
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,262
|
|
|
Other assets
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,995
|
|
|
|
4,995
|
|
|
Non-Current Assets of Businesses Held for Sale
|
|
|
5,262
|
|
|
|
-
|
|
|
|
4,995
|
|
|
|
10,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
-
|
|
|
|
-
|
|
|
|
385
|
|
|
|
385
|
|
|
Accrued liabilities
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86
|
|
|
|
86
|
|
|
Current Liabilities of Businesses Held for Sale
|
|
|
-
|
|
|
|
-
|
|
|
|
471
|
|
|
|
471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,365
|
|
|
|
1,365
|
|
|
Other liabilities
|
|
|
|
-
|
|
|
|
-
|
|
|
|
320
|
|
|
|
320
|
|
|
Non-Current Liabilities of Businesses Held for Sale
|
|
|
-
|
|
|
|
-
|
|
|
|
1,685
|
|
|
|
1,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets of Businesses Held for Sale
|
|
$
|
5,262
|
|
|
$
|
-
|
|
|
$
|
6,707
|
|
|
$
|
11,969
|
|
|
16
Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at September 30, 2016, were comprised of the following:
In Thousands
|
|
|
Avionics &
|
|
|
Sensors &
|
|
|
Advanced
|
|
|
|
|
|
|
|
|
|
Controls
|
|
|
Systems
|
|
|
Materials
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
$
|
2,588
|
|
|
$
|
-
|
|
|
$
|
4,093
|
|
|
$
|
6,681
|
|
|
Inventories
|
|
|
|
8,070
|
|
|
|
-
|
|
|
|
398
|
|
|
|
8,468
|
|
|
Prepaid expenses
|
|
|
|
127
|
|
|
|
-
|
|
|
|
103
|
|
|
|
230
|
|
|
Income tax refundable
|
|
|
|
-
|
|
|
|
-
|
|
|
|
71
|
|
|
|
71
|
|
|
Current Assets of Businesses Held for Sale
|
|
|
10,785
|
|
|
|
-
|
|
|
|
4,665
|
|
|
|
15,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
|
|
5,368
|
|
|
|
-
|
|
|
|
2,869
|
|
|
|
8,237
|
|
|
Intangibles, net
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,856
|
|
|
|
1,856
|
|
|
Deferred income tax benefits
|
|
|
|
(392
|
)
|
|
|
-
|
|
|
|
400
|
|
|
|
8
|
|
|
Other assets
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,299
|
|
|
|
1,299
|
|
|
Non-Current Assets of Businesses Held for Sale
|
|
|
4,976
|
|
|
|
-
|
|
|
|
6,424
|
|
|
|
11,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
441
|
|
|
|
-
|
|
|
|
1,463
|
|
|
|
1,904
|
|
|
Accrued liabilities
|
|
|
|
7,000
|
|
|
|
-
|
|
|
|
1,909
|
|
|
|
8,909
|
|
|
Current Liabilities of Businesses Held for Sale
|
|
|
7,441
|
|
|
|
-
|
|
|
|
3,372
|
|
|
|
10,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
|
-
|
|
|
|
-
|
|
|
|
320
|
|
|
|
320
|
|
|
Non-Current Liabilities of Businesses Held for Sale
|
|
|
-
|
|
|
|
-
|
|
|
|
320
|
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets of Businesses Held for Sale
|
|
$
|
8,320
|
|
|
$
|
-
|
|
|
$
|
7,397
|
|
|
$
|
15,717
|
|
|
Note 12 – 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
|
|
|
|
June 30,
|
|
|
July 1,
|
|
|
June 30,
|
|
|
July 1,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avionics & Controls
|
$
|
209,168
|
|
|
$
|
222,583
|
|
|
$
|
615,443
|
|
|
$
|
607,493
|
|
|
Sensors & Systems
|
|
184,450
|
|
|
|
186,337
|
|
|
|
534,001
|
|
|
|
514,836
|
|
|
Advanced Materials
|
|
110,135
|
|
|
|
108,172
|
|
|
|
321,224
|
|
|
|
326,550
|
|
|
|
$
|
503,753
|
|
|
$
|
517,092
|
|
|
$
|
1,470,668
|
|
|
$
|
1,448,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Continuing Operations Before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avionics & Controls
|
$
|
22,495
|
|
|
$
|
28,517
|
|
|
$
|
62,173
|
|
|
$
|
40,579
|
|
|
Sensors & Systems
|
|
24,842
|
|
|
|
27,942
|
|
|
|
71,944
|
|
|
|
61,670
|
|
|
Advanced Materials
|
|
17,780
|
|
|
|
15,512
|
|
|
|
55,982
|
|
|
|
51,710
|
|
|
Segment Earnings
|
|
65,117
|
|
|
|
71,971
|
|
|
|
190,099
|
|
|
|
153,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expense
|
|
(15,969
|
)
|
|
|
(17,926
|
)
|
|
|
(53,758
|
)
|
|
|
(54,956
|
)
|
|
Interest income
|
|
150
|
|
|
|
30
|
|
|
|
346
|
|
|
|
211
|
|
|
Interest expense
|
|
(7,299
|
)
|
|
|
(7,659
|
)
|
|
|
(22,645
|
)
|
|
|
(22,169
|
)
|
|
|
$
|
41,999
|
|
|
$
|
46,416
|
|
|
$
|
114,042
|
|
|
$
|
77,045
|
|
|
17