UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

September 11, 2013

Date of Report (Date of earliest event reported)

 

 

ESTERLINE TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-06357   13-2595091

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File No.)

 

(IRS Employer

Identification No.)

500-108 th Avenue NE, Bellevue, Washington   98004
(Address of principal executive offices)   (Zip Code)

(425) 453-9400

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On September 11, 2013, the Board of Directors of Esterline Technologies Corporation (“Esterline”) appointed Curtis C. Reusser as President and Chief Executive Officer, effective October 28, 2013 (the “Effective Date”). Mr. Reusser will succeed R. Bradley Lawrence, who is retiring as President and CEO as of the Effective Date and then continuing as Executive Chairman of the Board until Esterline’s 2014 annual shareholders meeting. The Board of Directors also increased the size of the Board to 11 directors and elected Mr. Reusser to fill the vacancy, in each case, effective as of the Effective Date. Mr. Reusser will be a member of the class of directors whose term expires at Esterline’s 2016 annual shareholders meeting. The Nominating and Corporate Governance Committee of the Board has not yet determined the board committee or committees on which Mr. Reusser will serve. As an employee director, Mr. Reusser will not receive any additional compensation for his service as a director.

Mr. Reusser, 53, is currently President, Aircraft Systems of UTC Aerospace Systems, a division of United Technologies Corporation, a provider of a broad range of high-technology products and services to the global aerospace and building systems industries, in which capacity he has served since July 2012. From January 2008 until July 2012, Mr. Reusser served as President, Electronic Systems Segment, and Executive Vice President of Goodrich Corporation, an aerospace and defense company that was acquired by United Technologies Corporation in July 2012. Prior to this role, Mr. Reusser served in various roles of increasing responsibility at Goodrich Corporation since 1988. Mr. Reusser holds a B.S. in Industrial Engineering from the University of Washington.

In connection with the new appointment, Mr. Reusser agreed to the terms of an offer letter with Esterline. Mr. Reusser, like all other executive officers of Esterline, will serve at the pleasure of the Board of Directors. Pursuant to the offer letter, as of the Effective Date, Mr. Reusser will receive an annual base salary of $750,000. He will also receive a sign-on bonus of $600,000 payable in December 2013 and an award of 52,750 restricted stock units under the Esterline 2013 Equity Incentive Plan, which will vest in three substantially equal installments on each of October 28, 2014, October 28, 2015 and October 28, 2016.

Pursuant to the offer letter, Mr. Reusser will be eligible to participate in Esterline’s Annual Incentive Compensation Plan for fiscal year 2014, and his target will equal 90% of his base salary for fiscal year 2014. He will also be eligible to participate in Esterline’s Long Term Incentive Program (“LTIP”) beginning in fiscal year 2014, with a total annual target award of $1,875,000. The value of Mr. Reusser’s LTIP award will be allocated 30% to the cash LTIP, 45% in stock options and 25% in restricted stock units. In addition, Mr. Reusser’s appointment to the cash LTIP will be phased in one-, two- and three-year cycles, enabling Mr. Reusser to earn a cash LTIP award at the end of fiscal years 2014, 2015 and 2016, depending on Esterline’s performance, as follows:

 

Performance Period

   Target Opportunity  

2012-2014

   $ 187,500   

2013-2015

   $ 375,000   

2014-2016

   $ 562,500   

For each performance period, the maximum cash LTIP award will equal 400% of the target opportunity.

Mr. Reusser will also be eligible to participate in Esterline’s retirement, health care and other benefit plans and in the Supplemental Executive Retirement Plan and the Supplemental Executive Retirement and Deferred Compensation Plan. Mr. Reusser will also receive a car allowance of up to approximately $800 per month, before taxes. Esterline will also pay up to $8,000 annually to a financial services provider for services rendered to Mr. Reusser and will reimburse him for certain relocation expenses in accordance with standard corporate policy.

Upon the effectiveness of Mr. Reusser’s appointment, and like Esterline’s arrangements with its other executive officers, Esterline and Mr. Reusser will enter into Esterline’s standard form of Termination Protection Agreement, as previously filed by Esterline, that provides, in the event that Mr. Reusser is terminated without cause or resigns for good reason within two years of a change of control, a lump sum payment equal to three times Mr. Reusser’s average compensation during the prior two years, payment of certain legal fees and expenses associated with the termination and insurance benefits for the remainder of an initial two-year period.

The foregoing summary of the offer letter is qualified in its entirety by the terms of the offer letter, which is filed with this report as Exhibit 10.1 and incorporated herein by reference.

 

Item 7.01. Regulation FD Disclosure.

On September 12, 2013, Esterline issued a press release regarding the appointment of Mr. Reusser as Esterline’s President and Chief Executive Officer, which is furnished as Exhibit 99.1 to this report.

 

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit No.

  

Description

10.1    Offer Letter from Esterline Technologies Corporation to Curtis Reusser dated September 11, 2013
99.1    Press issued by Esterline Technologies Corporation dated September 12, 2013.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    ESTERLINE TECHNOLOGIES CORPORATION
Dated: September 12, 2013     By:  

 /s/ MARCIA J. MASON

    Name: Marcia J. Mason
    Title:   General Counsel & Vice President, Administration

EXHIBIT INDEX

 

Exhibit No.

  

Description

10.1    Offer Letter from Esterline Technologies Corporation to Curtis Reusser dated September 11, 2013
99.1    Press release issued by Esterline Technologies Corporation dated September 12, 2013.

Exhibit 10.1

 

LOGO

CONFIDENTIAL

September 11, 2013

Mr. Curtis Reusser

2200 Queens Road East

Charlotte, NC 28207

Dear Curtis:

It is my pleasure to confirm that the Board of Directors has authorized me to extend an offer to you for the position of President & CEO of Esterline Technologies effective October 28, 2013. The Board has also elected you to serve as a member of the Board, effective on the day you begin employment.

Base Salary – Your annual base salary will be $750,000.00.

Annual Incentive Compensation – You will also participate in Esterline’s Annual Incentive Compensation Plan for fiscal year 2014 (“AIC Plan”). Your target award will be 90% of your base salary, consistent with competitive market benchmarks. The actual award will vary, of course, depending on the Company’s 2014 financial performance. The Board will consider and approve performance goals for the FY14 AIC Plan in its December 2013 meeting, so that plan is not yet established. Nevertheless, I expect the FY14 AIC Plan to be similar to the current, FY13 plan, which is enclosed as Attachment 1 for your reference. This fiscal year, the plan’s performance goals are achievement of budgeted (1) earnings-per-share with a weighting of 70% and (2) return-on-sales excluding costs and income attributable to acquisitions, with a weighting of 30%.

Your participation in the AIC Plan is subject to its usual terms including a requirement that you continue employment through the date on which AIC Plan payments are made. The AIC Plan is re-evaluated each year, such that the performance goals, formula, total funding, and your target award could vary from year to year.

Long-Term Incentive Compensation – You will also be appointed to Esterline’s Equity Incentive Plan with a total annual target award of $1,875,000 (2.5 times your starting annual base salary). That value will be allocated among Esterline’s three long term incentive compensation vehicles, as follows:

 

LTI Program

   Allocation     Target Value  

1. LTIP Cash Plan

     30 %    $ 562,500   

2. Option grant

     45 %      843,750   

3. Restricted Stock Units (RSU’s)

     25 %      468,750   

CONFIDENTIAL

Curtis Reusser

September 11, 2013

Page 2

 

LTIP Cash Plan – The LTIP Cash Plan gives you an opportunity to earn a cash award (or cash + stock) based on the corporation’s (1) average return on invested capital and (2) cumulative compound earnings per share growth. The LTIP Cash Plan performance period has duration of 3 years. A new three-year performance period will start with each new fiscal year, such that there will be three overlapping LTIP performance periods open at any given time.

As a new participant, your initial appointments will be phased in with one-, two-, and three-year cycles so you will have an opportunity to earn an LTIP award at the end of fiscal years 2014, 2015, and 2016, depending on the corporation’s performance. More specifically, for the 2012–2014 performance period, the target opportunity is $187,500 (1/3 of $562,500) and a maximum of 400% of target. For the 2013-2015 performance period, the target opportunity is $375,000 (2/3 of $562,500) with a maximum equal to 400% or target. For the 2014-2016 performance period, the target opportunity is $562,500 with a maximum of 400% of target. LTIP payments are typically made by January 10 th following the end of each performance period.

As with the Annual IC Plan, LTIP Cash goals and plan design may change in the future at the discretion of Esterline’s Board of Directors. A copy of the FY13-15 LTIP document is enclosed for your reference as Attachment 2. I would expect the new plan for FY14-FY16 to be similar.

Option grant – Our option grants vest ratably over a four-year period on the anniversary dates of the original grant.

Restricted Stock Units (RSU) – Our RSU grants vest 100% on the third anniversary of the grant (“3-year cliff vesting”).

New Hire Equity Award – Further, we will make a new hire grant of 52,750 RSU’s effective on your first day of work. This grant will vest 1/3 each year as opposed to the normal RSU 3 year cliff vesting. This award is part of a buyout of your current unvested equity value. If the company terminates your employment without cause prior to full vesting, any of these unvested RSU’s will vest immediately. If you voluntarily terminate your employment prior to full vesting, any of these unvested RSU’s will be forfeited.

Sign-on Bonus – We will also pay you a sign-on bonus in the amount $600,000 payable in the month following your first 30 days of employment. If you voluntarily terminate your employment within 12 months of your employment date, you would forfeit the bonus and be obligated to reimburse the Company in full.

Stock Ownership Requirements – In considering your total compensation opportunity with Esterline, and its equity grants in particular, please be aware that Board policy requires the Company’s CEO to accumulate and hold Esterline stock equivalent in value to three times the annual base salary. Attachment 3 is the share ownership policy.

CONFIDENTIAL

Curtis Reusser

September 11, 2013

Page 3

 

Retirement & Other Fringe Benefits – You will be eligible to participate in the Esterline Voluntary Savings Plan (401(k)) and in the Esterline Retirement Plan (pension). In the 401(k) plan, Esterline matches 50% of the first 6% of employee contributions, subject to certain IRS limits. The pension plan is a cash balance formula with age-based annual credits + annual interest. Annual credits increase with age from 2% for employees under age 30 to 6% for employees age 60+.

You will also be eligible to participate in two types of Esterline Supplemental Executive Retirement Programs (SERPs). The “defined benefit” SERP corresponds to the pension plan and allows executives to earn pension benefits on income that exceeds IRS limits that apply to the underlying tax-qualified plan. The other “defined contribution” SERP corresponds to the 401(k) plan and similarly allows continuation of employee contributions and company matching on compensation that exceeds IRS limits. If you have any questions or require further clarification on pension benefits we would be happy to arrange an information session with our HR staff or benefits advisors.

Paid time off, health care and other fringe benefits will be available to you in accordance with the usual corporate office benefits program which might change from time to time. Attachment 4 presents the Esterline Benefits Summary. We will make an exception to the vacation accrual service periods so that you will immediately accrue vacation at the rate of four weeks per year.

Relocation – You have agreed to relocate from Charlotte, NC to the Bellevue, WA area. As such, you will be eligible for Esterline’s standard relocation benefits that are administered by an outside vendor, Cartus Corporation. Relocation benefits are outlined in Attachment 5.

Our policy requires you to use Cartus Relocation services for the sale of your current home under their Buyer Value Option Home Sale program. If your Charlotte house does not sell within 90 days after the listing date, we will authorize Cartus to purchase the house from you through its Guaranteed Offer/Appraised Value Sale program.

When you are ready, and before you take any steps to list your house or make other moving arrangements, please contact Suzanne Farraj in our corporate HR department who can introduce you to Cartus and help you get all the detailed information you will need.

Car Allowance – In your new role, you will also be eligible for a car allowance under Esterline policy. The allowance is intended to cover usual purchase, operating, maintenance, and insurance costs for cars in your new residential zip code. The allowance will be approximately $800/month before taxes.

CONFIDENTIAL

Curtis Reusser

September 11, 2013

Page 4

 

Other Terms – Esterline will also provide the following forms of compensation, briefly described here:

 

  •   Change in control agreement – at the standard executive level of 3 years’ average total cash compensation. (see Attachment 6)

 

  •   Financial advisory services – will be reimbursed up to $8,000 per year.

 

  •   Conquistador dues – will be reimbursed annually.

Requirements & Administrative Matters – This offer is contingent upon satisfactorily passing a pre-employment physical examination and background check. This physical examination is an annual requirement. Please schedule an appointment at your earliest convenience and have your doctor return the enclosed report form (Attachment 7) to Suzanne Farraj in our office.

To authorize the background check, please complete the enclosed forms (attachment 8) at your earliest convenience and return to Suzanne.

In addition, please read, sign, and return the following to Suzanne:

 

  •   Copy of this letter

 

  •   Confidential Information & Inventions Assignment Agreement (Attachment 9)

 

  •   Summary of Outside Business Interests (Attachment 10)

This offer includes and is contingent on satisfactory completion of the various forms and agreements enclosed here. Except as specifically provided in this letter, other aspects of your employment will be the same as those that apply to other corporate staff. We are all employed at-will, and the officers serve at the pleasure of the Board for one-year terms, subject to Company by-laws and Board action.

Planning and Announcements – As you know, there is work to be done to prepare for your arrival at Esterline. The company’s current plan calls for public and internal announcements to be made on Thursday, September 12 th .

Curtis, you have earned the confidence and strong support of the entire Board of Directors. We look forward to your success leading Esterline Technologies, and to your contributions to the corporation overall in this key position.

Congratulations and best regards,

 

/s/ PAUL V. HAACK

Paul V. Haack

Lead Director

CONFIDENTIAL

Curtis Reusser

September 11, 2013

Page 5

 

Acceptance

I have read and understood this offer and hereby accept the position on these terms.

 

/s/ CURTIS REUSSER

 

Curtis Reusser

 

9/12/2013

Date

 

Enclosures:

 

Attachment 1:    

   FY13 Annual Incentive Compensation Plan

Attachment 2:

   FYFY13-15 Long Term Incentive Plan & Matrix (LTIP)

Attachment 3:

   Stock Option Equity Plan

Attachment 4

   Esterline Benefits Summary

Attachment 5:

   Esterline Relocation Policy

Attachment 6:

   Change In Control Agreement

Attachment 7:

   Physical Form

Attachment 8:

   Background Check

Attachment 9:

   Confidential Information & Invention Agreement

Attachment 10:

   Summary of Outside Business Interest

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Contact:    Brian Keogh (425) 453-9400

ESTERLINE NAMES AEROSPACE INDUSTRY VETERAN CURTIS REUSSER

TO SUCCEED BRAD LAWRENCE AS PRESIDENT AND CEO

Reusser is President, United Technologies’ Aircraft Systems Business;

Lawrence to Guide Leadership Transition as Executive Chairman

BELLEVUE, Wash., September 12, 2013 – Esterline Corporation (NYSE: ESL) (www.esterline.com), a leading specialty manufacturer serving global aerospace and defense markets, today announced that Curtis Reusser, President of United Technologies’ multi-billion dollar Aircraft Systems business, will succeed Brad Lawrence as Esterline’s President and Chief Executive Officer, and be elected to its Board of Directors effective October 28, 2013. Lawrence will continue as Esterline’s Executive Chairman of the Board until the Company’s March 5, 2014 annual meeting.

Lawrence said Reusser’s 30 years of broad aerospace and defense industry experience “…make him the ideal choice to lead Esterline into the future. I’m delighted Curtis will be joining Esterline and look forward to working with him as we move through what I’m confident will be a seamless transition.”

Reusser remarked, “I am very excited and honored to have this opportunity to lead Esterline, a company I have known and admired for many years. The Company has built a winning combination of great businesses, talented people, and a high-performance culture. The future holds great potential for Esterline to grow and to create significant value for our customers, investors, employees, and the communities within which we work around the globe. I am particularly pleased to have Brad’s support and guidance during the transition.”

Related to today’s announcement, the Company also announced that it would postpone its 2013 Analyst & Investor Day, previously scheduled for September 19, 2013, to give Reusser the

 

(more)

Page 2 of 3 Esterline Names Aerospace Industry Veteran as President and CEO

 

opportunity to review and contribute to the company’s long-term strategic planning and operational development. The Company plans to re-schedule the analyst meeting in calendar-year 2014.

Reusser’s position at United Technologies (UTC) was created following the company’s acquisition of Goodrich Corporation. His responsibilities at UTC included full operational and financial leadership for seven strategic business units employing 14,000 people and generating revenues in excess of $7 billion. During his tenure he was instrumental in winning a number of significant new long-term programs, and driving financial and operational performance by reducing SG&A and leveraging supply chain, manufacturing, and engineering synergies between the combined Goodrich and UTC businesses.

Prior to UTC, Reusser was at Goodrich as President, Electronic Systems Segment, a $2.6 billion business with 7,800 employees and operations in seven countries, consisting of three business units: Sensors & Integrated Systems; Engine Controls & Electric Power Systems; and Intelligence, Surveillance and Reconnaissance Systems. While there, he developed and executed several strategic acquisitions and established joint-venture partnerships that generated significant improvement in segment-level profitability. In previous years with Goodrich, he held various positions of increasing responsibility, including President, Aerostructures. That division nearly doubled its sales over the five years of his leadership and became widely recognized for world-class application of lean.

Prior to his long tenure at Goodrich, Reusser had an early career as an engineer with General Dynamics. Reusser holds a degree in industrial engineering from the University of Washington.

About Esterline:

Esterline Corporation is a leading worldwide supplier to the aerospace and defense industry specializing in three core business segments: Advanced Materials; Avionics & Controls; and Sensors & Systems. With annual sales of approximately $2 billion, Esterline employs roughly 12,000 people worldwide and is headquartered in Bellevue, Wash.

Operations within the Advanced Materials segment focus on technologies including high-temperature-resistant materials and components used for a wide range of military and commercial aerospace purposes, and combustible ordnance and electronic warfare countermeasure products.

 

(more)

Page 3 of 3 Esterline Names Aerospace Industry Veteran as President and CEO

 

Operations within the Avionics & Controls segment focus on technology interface systems for commercial and military aircraft and similar devices for land- and sea-based military vehicles, cockpit integration systems, secure communications systems, specialized medical equipment, and other high-end industrial and gaming applications.

The Sensors & Systems segment includes operations that produce high-precision temperature and pressure sensors, specialized harsh-environment connectors, electrical power distribution equipment, and other related systems principally for aerospace and defense customers.

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will,” or the negative of such terms, or other comparable terminology. These forward-looking statements are only predictions based on the current intent and expectations of the management of Esterline, are not guarantees of future performance or actions, and involve risks and uncertainties that are difficult to predict and may cause Esterline’s or its industry’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Esterline’s actual results and the timing and outcome of events may differ materially from those expressed in or implied by the forward-looking statements due to risks detailed in Esterline’s public filings with the Securities and Exchange Commission including its most recent Annual Report on Form 10-K.