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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 Exchange Act Rule 14a-11 or 14a-12
AMETEK, Inc.
(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:
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Notice of 2001
Annual Meeting
Proxy Statement
Annual Financial Statements
and Review of Operations
[AMETEK LOGO]
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TABLE OF CONTENTS
Page
----
Notice of Annual Meeting
Proxy Statement......................................................................................... 1
Solicitation of Proxies............................................................................ 1
Voting Rights...................................................................................... 1
Proposals to be Voted Upon......................................................................... 2
Election of Directors.............................................................................. 3
Board Committees................................................................................... 4
Audit Committee Report............................................................................. 5
Compensation of Directors.......................................................................... 6
Stock Ownership.................................................................................... 7
Other Beneficial Ownership......................................................................... 9
Executive Officers................................................................................. 10
Executive Compensation............................................................................. 11
Compensation Committee Report on Executive Compensation............................................ 12
Stock Options and Stock Appreciation Rights........................................................ 16
Defined Benefit and Actuarial Plans................................................................ 17
Stock Performance Graph............................................................................ 19
Compensation Committee Interlocks and Insider Participation........................................ 20
Compliance with Section 16(a) of the Securities Exchange Act of 1934............................... 20
Employment Contracts and Termination, Severance and Change-of-Control Arrangements................. 20
Shareholder Proposals for the 2002 Proxy Statement................................................. 22
Appendix
Audit Committee Charter........................................................................... A-1
Index to Annual Financial Information and Review of Operations.................................... B-1
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[AMETEK LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 22, 2001
3:00 p.m. Eastern Daylight Time
J. P. Morgan Chase & Co.
270 Park Avenue
11th Floor Conference Center
New York, NY 10017
Dear Fellow Shareholder:
It is my pleasure to invite you to attend the 2001 Annual Meeting of
Shareholders of AMETEK, Inc. The following items of business will be discussed
during the Annual Meeting:
1. Re-election of two directors: Lewis G. Cole and Charles D.
Klein, each for a term of three years;
2. Ratification of the appointment of Ernst & Young LLP as
independent auditors for 2001;
3. Transaction of any other business properly brought before the
Annual Meeting.
Your vote is important. You can vote in one of four ways: (1) by computer using
the Internet, (2) by Touch-Tone telephone using a toll-free number, (3) by
marking, signing and dating your proxy card, and returning it promptly in the
enclosed envelope, or (4) by casting your vote in person at the Annual Meeting.
Directions to J. P. Morgan Chase & Co. are located on the back cover of the
attached Proxy Statement.
Please refer to your proxy card for specific proxy voting instructions or visit
our Web site at www.ametek.com for general questions and answers about proxy
voting.
Again this year we have included the detailed annual financial information
relating to our business and operations in an appendix to the Proxy Statement
instead of in a separate annual report to shareholders. We also have prepared a
Summary Annual Report, which is enclosed.
We hope the convenience and cost savings of voting by computer or by telephone
will attract you. A sizable electronic "turnout" would save your Company
significant return-postage fees.
On behalf of the management and directors of AMETEK, Inc., I want to thank you
for your continued support and confidence. I look forward to seeing you at the
Annual Meeting.
Sincerely,
/s/ Frank S. Hermance
Frank S. Hermance
Chairman of the Board
and Chief Executive Officer
Dated: Paoli, Pennsylvania
April 11, 2001
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[AMETEK LOGO]
Principal executive offices
37 North Valley Road
Building 4
P.O. Box 1764
Paoli, Pennsylvania 19301-0801
P R O X Y S T A T E M E N T
Solicitation of Proxies
The Board of Directors of AMETEK, Inc. (AMETEK) solicits the accompanying proxy
for use at the Annual Meeting of Shareholders to be held on May 22, 2001, and at
any and all adjournments thereof.
AMETEK has retained Georgeson Shareholder Communications Inc. to assist in the
solicitation of votes for a fee of $6,500, plus reasonable expenses. AMETEK will
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy and solicitation
material to the owners of Common Stock. The above Notice of Annual Meeting, this
Proxy Statement, and the proxy card with voting instructions are being
distributed on or about April 11, 2001.
Voting Rights
Shareholders as of the close of business on March 30, 2001 (the Record Date) are
entitled to vote at the Annual Meeting. Each share of Common Stock is entitled
to one vote. As of the Record Date, 32,835,411 shares of AMETEK's Common Stock
were issued and outstanding. In addition, AMETEK held 541,080 issued shares in
its treasury, which, while so held, cannot be voted. A majority of the
outstanding shares of Common Stock, present or represented by proxy, constitutes
a quorum for the purpose of adopting proposals at the Annual Meeting. A
shareholder who is present or represented by proxy at the Annual Meeting and who
abstains from voting, and broker non-votes (shares held by a broker or nominee
who is present or represented at the meeting, but with respect to which the
broker or nominee is not empowered to vote on proposals) will be counted for
purposes of determining the quorum, but will not be counted as votes for or
against the proposals. A shareholder may revoke a proxy any time before the
Annual Meeting. If a proxy is properly submitted and is not revoked by the
shareholder, the shares it represents will be voted at the Annual Meeting in
accordance with the instructions of the shareholder. If the shareholder submits
the proxy without making selections, the proxy will be voted in favor of the
election as directors of the nominees listed on the following page and in favor
of the appointment of independent auditors.
If you own shares independently and also have shares credited to your account
under the AMETEK Retirement and Savings Plan or the AMETEK 401(k) Plan for
Acquired Businesses, held in custody by the trustee, you will receive two
separate proxy mailings. Shares for which no instructions are received by the
trustee will be voted in the same proportion as the shares for which the trustee
receives instructions. In addition, if your shares are in more than one account
or are not all under the same registration in AMETEK stock records, you also
will receive more than one proxy card. To ensure that all your shares are
counted, please vote all proxies online, by telephone, by mail, or in person at
the Annual Meeting.
Representatives of American Stock Transfer & Trust Company will tabulate the
votes and act as inspectors of election.
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PROPOSALS TO BE VOTED UPON
1. Election of Directors
Nominees for re-election this year are Lewis G. Cole and Charles D. Klein. Each
has consented to serve a three-year term.
All proxies received will be voted for the re-election of the nominees unless
directed otherwise in the proxy. Each nominee needs the affirmative vote of a
plurality of shares represented either in person or by proxy at the Annual
Meeting and entitled to vote. While there is no reason to believe that it will
occur, if any director is unable to stand for re-election, shares represented by
proxies may be voted for a substitute director.
Your Board of Directors Recommends a Vote FOR All Nominees.
2. Appointment of Independent Auditors
The Board of Directors has reappointed the firm of Ernst & Young LLP as
independent auditors for the fiscal year 2001.
Representatives of Ernst & Young LLP will attend the Annual Meeting. They will
have an opportunity to make a statement, if they desire, and be available to
answer appropriate questions. The shareholders are requested to signify their
approval of the appointment.
Your Board of Directors Recommends a Vote FOR this Proposal.
3. Other Matters
As of this date, the Board of Directors is not aware of any matters that may
come before the Annual Meeting other than those set forth above. However, your
proxy confers discretionary authority to the Board of Directors to vote on any
other business that may properly come before the Annual Meeting, and any
adjournments of the Annual Meeting.
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ELECTION OF DIRECTORS
At the time of this Proxy Statement, the Board of Directors of AMETEK consists
of eight members, seven of whom are non-employee directors. The Board is divided
into three classes with staggered terms so that the term of one class expires at
each Annual Meeting of Shareholders.
Class I: Nominees for election at this Annual Meeting for terms expiring in
2004:
LEWIS G. COLE Partner, Stroock & Stroock & Lavan LLP, Attorneys. Age 70.
Director since 1987
CHARLES D. KLEIN A Managing Director of American Securities, L.P. and an executive
Director since 1980 officer in the corporate general partner of several affiliated
entities. Director of CTB International Corp. Age 62.
Class II: Directors whose terms continue until 2002:
SHELDON S. GORDON Chairman of Union Bancaire Privee Holdings, Inc. and affiliated
Director since 1989 entities since May 1996. Partner of The Blackstone Group, L.P. from
April 1991 to May 1996. Director of Anangel-American Shipholdings
Limited, the Holland Balanced Fund and Union Bancaire Privee. Age
65.
FRANK S. HERMANCE Chairman of the Board and Chief Executive Officer of AMETEK since
Director since 1999 January 1, 2001. President and Chief Executive Officer from
September 1999 to January 2001. President and Chief Operating
Officer from November 1996 to September 1999. Executive Vice
President and Chief Operating Officer from January 1996 to November
1996. President of the Electronic Instruments Group from September
1994 to November 1996. Director of CTB International Corp. Age 52.
DAVID P. STEINMANN A Managing Director of American Securities, L.P. and an executive
Director since 1993 officer in the corporate general partner of several affiliated
entities. Age 59.
Class III: Directors whose terms continue until 2003:
HELMUT N. FRIEDLAENDER Private investor. Age 87.
Director since 1955
JAMES R. MALONE Founder and Managing Director of Bridge Associates LLC since June
Director since 1994 2000. Chairman of the Board since December 1996 and Chief Executive
Officer since May 1997 of Health-Mor Industries. Chairman of the
Board of Anchor Resolution Corp. (formerly Anchor Glass Container
Corp.) since January 1996. Partner and Managing Director of Rhone
Group LLC from July 1998 to August 1999. President and Chief
Executive Officer of Anchor Glass Container Corp. from May 1993 to
January 1996. Chairman of the Board of Intek Capital Corp. since
September 1990. Director of AmSouth Bank N.A. Age 58.
ELIZABETH R. VARET A Managing Director of American Securities, L.P. and chairman of the
Director since 1987 corporate general partner of several affiliated entities. Age 57.
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BOARD COMMITTEES
AMETEK's Board has an Audit Committee, a Compensation Committee, a Stock Option
Committee, a Nominating Committee, and a Pension Investment Committee, all of
which are comprised of non-employee directors. In addition, AMETEK has an
Executive Committee, which consists of four directors and has limited powers to
act on behalf of the Board whenever the Board is not in session.
The Audit Committee reviews with independent auditors the plan for and results
of the audit engagement, reviews the scope and results of AMETEK's procedures
for internal auditing, reviews the independence of the auditors, considers the
range of audit and non-audit services, and reviews the adequacy of AMETEK's
system of internal accounting controls. Its report is included on page 5.
The Compensation Committee analyzes and makes recommendations regarding
management compensation, periodically reviews management compensation policies
and practices, and recommends incentive compensation programs and awards, and
officer salary adjustments to the Board of Directors.
The Stock Option Committee administers AMETEK's stock option plans.
The Nominating Committee determines the appropriate size and composition of the
Board of Directors, considers qualifications of prospective Board member
candidates, conducts research to identify and recommend nomination of suitable
candidates, and reviews the experience, background, interests, ability and
availability of prospective nominees to meet time requirements of Board of
Director and committee membership.
The Pension Investment Committee reviews administration of AMETEK's retirement
plans, including compliance, investment manager and trustee performance, and
results of independent audits of the plans.
Committee membership as of the Record Date was as follows:
Audit Compensation Stock Option
----- ------------ ------------
Sheldon S. Gordon, Chairman Charles D. Klein, Chairman Sheldon S. Gordon, Chairman
Lewis G. Cole Sheldon S. Gordon James R. Malone
Helmut N. Friedlaender James R. Malone
James R. Malone Elizabeth R. Varet
Nominating Pension Investment Executive
---------- ------------------ ---------
James R. Malone, Chairman Lewis G. Cole, Chairman Frank S. Hermance, Chairman
Helmut N. Friedlaender Sheldon S. Gordon Sheldon S. Gordon
Charles D. Klein James R. Malone Charles D. Klein
David P. Steinmann Elizabeth R. Varet
During 2000 there were six meetings of the Board of Directors, six meetings of
the Audit Committee, twelve meetings of the Compensation Committee, seven
meetings of the Stock Option Committee, two meetings of the Nominating
Committee, four meetings of the Pension Investment Committee, and four meetings
of the Executive Committee.
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AUDIT COMMITTEE REPORT
The Audit Committee is composed of independent directors and acts under a
written charter first adopted and approved by the Board of Directors in May
2000. A copy of the Audit Committee Charter is attached to this Proxy Statement
as Appendix A.
The Audit Committee monitors and oversees AMETEK's financial reporting process
on behalf of the Board of Directors as required by The New York Stock Exchange,
Inc. Management has the primary responsibility for the financial statements and
the reporting process, including the systems of internal control. The
independent auditors are responsible for expressing an opinion on the conformity
of the audited financial statements with accounting principles generally
accepted in the United States. In fulfilling its responsibilities, the Audit
Committee has reviewed with management and the independent auditors the audited
financial statements contained in AMETEK's 2000 Annual Report on Form 10-K and
in Appendix B to this Proxy Statement. The Committee discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61, Communication with Audit Committees.
In addition, the Committee has discussed with the independent auditors their
independence from management and AMETEK, including the matters in the written
disclosures required by the Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and has considered the
compatibility of non-audit services with their independence.
The Committee discussed with AMETEK's internal and independent auditors the
overall scope and plans for their respective audits. The Committee meets with
the internal and independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of AMETEK's
internal controls, and the overall quality of AMETEK's financial reporting. The
Committee meets at least three times annually and holds telephone meetings prior
to quarterly earnings announcements, as well as special meetings as
circumstances warrant.
Audit fees billed by Ernst & Young LLP for the fiscal year 2000 were $547,000.
The aggregate fees billed for all other services rendered by Ernst & Young LLP
in the 2000 fiscal year were $616,000, including audit related services of
$276,000 and non-audit services of $340,000. Audit related services generally
include fees for employee benefit plans and statutory audits, due diligence
reviews pertaining to business acquisitions, consultation on accounting
standards, and consents and other matters related to SEC registration
statements. Non-audit services generally include consultation related to tax
planning and compliance, and other regulatory matters.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board approved) that the audited
financial statements be included in the Annual Report on Form 10-K, for the
fiscal year ended December 31, 2000, for filing with the Securities and Exchange
Commission. The Committee and the Board also recommended, subject to shareholder
approval, the selection of Ernst & Young LLP as AMETEK's independent auditors,
for the 2001 fiscal year.
The Audit Committee:
Sheldon S. Gordon, Chairman
Lewis G. Cole
Helmut N. Friedlaender
James R. Malone
April 11, 2001
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COMPENSATION OF DIRECTORS
Mr. Hermance, the only employee director of AMETEK, receives no additional
compensation for serving on the Board or its Committees. Non-employee directors
receive $35,000 annually and $2,500 for each of the six regular meetings of the
Board of Directors attended. There is no additional compensation for attending
Committee meetings.
AMETEK sponsors a retirement plan for directors, under which each non-employee
director who has at least three years of service as a director or officer of
AMETEK and does not have a benefit under AMETEK's retirement plan, will receive
an annual retirement benefit equal to 100% of the highest annual rate of Board
fees during the director's service with the Board. The benefit is reduced
proportionately if the director has less than five years of service. Retirement
benefits are paid from AMETEK's general assets. All non-employee directors have
accrued an annual retirement benefit of $50,000. This benefit is not available
to persons who first become members of the Board of Directors on or after
January 1, 1997.
AMETEK sponsors a Death Benefit Program for directors, under which each
non-employee director has an individual agreement that pays the director (or the
director's beneficiary in the event of the director's death) an annual amount
equal to 100% of the highest annual rate of compensation during the director's
service with the Board. The payments are made for ten years beginning at the
director's death or the later of retirement or age 70. Directors appointed after
January 1, 1989 must complete five years of service as a director before
becoming eligible for the benefit payable at the later of retirement or age 70.
The Death Benefit Program is funded by individual life insurance policies
purchased by AMETEK on the lives of the directors. In addition, non-employee
directors have a group term life insurance benefit of $50,000. AMETEK retains
the right to terminate any of the individual agreements under certain
circumstances.
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STOCK OWNERSHIP
The following table shows the number of shares of AMETEK Common Stock the
officers and directors beneficially owned as of February 12, 2001.
- ---------------------------------------------------------------------------------------------------------------
Amount of Shares and
Nature of Ownership (1)
- ---------------------------------------------------------------------------------------------------------------
Sole Shared
Voting Voting Percent
and/or and/or Right to of Class
Investment Investment Acquire SERP Total
Name Power Power (4) (5)
(2) (3)
- ---------------------------------------------------------------------------------------------------------------
R. W. Chlebek, Officer 2,500 -- 53,668 4,227 60,395 *
L. G. Cole, Director (6) 15,000 573,318 -- -- 588,318 1.8%
H. N. Friedlaender, Director (7) 48,500 30,400 -- -- 78,900 *
S. S. Gordon, Director 40,000 -- -- -- 40,000 *
F. S. Hermance,
Director and Officer 224,085 -- 218,721 22,267 465,073 1.4%
C. D. Klein, Director (8) 58,000 70,833 -- -- 128,833 *
J. R. Malone, Director 20,000 -- -- -- 20,000 *
J. J. Molinelli, Officer 60,065 -- 96,719 9,659 166,443 *
A. J. Neupaver, Officer 32,218 -- 94,461 9,600 136,279 *
D. P. Steinmann, Director (9) 34,700 274,744 -- -- 309,444 *
E. R. Varet, Director (10) 64,600 656,737 -- -- 721,337 2.2%
Directors and Executive
Officers as a Group (15 persons)
including individuals named above 665,518 823,899 565,821 51,260 2,106,498 6.4%
- ---------------------------------------------------------------------------------------------------------------
* Represents less than 1% of the outstanding shares of Common Stock of
AMETEK.
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the vote) and/or
sole or shared investment power (including the power to dispose or
direct the disposition) with respect to the security through any
contract, arrangement, understanding, relationship or otherwise.
(2) Shares held in the individual's name, individually or with others, or
in the name of a bank, broker or nominee for the individual's account,
where the officer or director has sole voting and/or investment power.
(3) Other shares where the officer or director has shared voting and/or
investment power.
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(4) Shares the officers have a right to acquire through stock option
exercises within 60 days of February 12, 2001.
(5) Shares deemed held for the account of the individual under the
Supplemental Executive Retirement Plan (described in more detail on
page 18).
(6) Mr. Cole has shared voting and investment power with respect to 573,318
shares, as to 505,184 shares of which such power is shared with Ms.
Varet and others, as to 58,134 shares of which such power is shared
with Mr. Steinmann and others, and as to 10,000 shares of which such
power is shared with Mr. Steinmann, Mr. Klein and others. Mr. Cole
disclaims beneficial ownership of such shares.
(7) Mr. Friedlaender has shared voting and investment power with respect to
30,400 shares. Of these, 15,200 shares are owned by a trust of which
Mr. Friedlaender is a trustee; Mr. Friedlaender disclaims beneficial
ownership of such shares.
(8) Includes 2,000 shares owned by Mr. Klein's children either through a
trust or a custodial relationship for which Mrs. Klein is the trustee
and/or custodian and as to which Mr. Klein disclaims any beneficial
ownership. Mr. Klein has shared voting and investment power with
respect to 70,833 shares, as to 58,833 shares of which such power is
shared with Mr. Steinmann and others, and as to 10,000 shares of which
such power is shared with Mr. Steinmann, Mr. Cole and others.
(9) Includes 7,424 shares of which 5,200 shares are owned by Mr.
Steinmann's wife and 2,224 shares are owned by Mr. Steinmann's adult
children and as to which Mr. Steinmann disclaims any beneficial
ownership. Mr. Steinmann has shared voting and investment power with
respect to 274,744 shares, as to 140,353 shares of which such power is
shared with Ms. Varet and others, as to 58,833 shares of which such
power is shared with Mr. Klein and others, as to 58,134 shares of which
such power is shared with Mr. Cole and others, and as to 10,000 shares
of which such power is shared with Mr. Cole, Mr. Klein and others.
(10) Includes 11,200 shares of which 10,000 shares are owned by a trust of
which Ms. Varet's husband is a beneficiary and 1,200 shares are owned
by Ms. Varet's adult children and as to which Ms. Varet disclaims any
beneficial ownership. Ms. Varet has shared voting and investment power
with respect to 656,737 shares, as to 505,184 shares of which such
power is shared with Mr. Cole and others, and as to 140,353 shares of
which such power is shared with Mr. Steinmann and others.
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OTHER BENEFICIAL OWNERSHIP
The following table shows the only entities known to AMETEK to be beneficial
owners of more than five percent of the outstanding shares of AMETEK as of March
30, 2001.
Name and Address of Nature of Beneficial Percent
Beneficial Owner Ownership Amount of Shares of Class
- ------------------------------------------------------------------------------------------------------------------------
Fidelity Management & Research Corp.
82 Devonshire Street
Boston, MA 02109-3614 Sole dispositive power.......... 1,927,800*
Fidelity Management Trust Co.
82 Devonshire Street Sole voting and dispositive
Boston, MA 02109-3614 power......................... 418,170
========================================================================================================================
TOTAL (1)............... 2,345,970 7.30%
========================================================================================================================
Gabelli Funds, Inc.
One Corporate Center Sole voting and dispositive
Rye, NY 10580-1434 power......................... 617,800
GAMCO Investors, Inc. Sole voting power for
One Corporate Center 3,481,975 shares, but sole
Rye, NY 10580-1434 dispositive power............. 3,539,975
Gabelli & Company, Inc.
One Corporate Center Sole voting and dispositive
Rye, NY 10580-1434 power......................... 100
========================================================================================================================
TOTAL (2).............. 4,157,875 12.93%
========================================================================================================================
* Voting power resides with Fidelity Funds' Board of Trustees.
(1) Based on Schedule 13(G) filed on February 13, 2001.
(2) Based on Schedule 13(D) filed on March 5, 2001.
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EXECUTIVE OFFICERS
Officers are appointed by the Board of Directors to serve for the ensuing year
and until their successors have been elected and qualified. Information on
executive officers of AMETEK is shown below:
Name Age Present Position with AMETEK
---- --- ----------------------------
Frank S. Hermance 52 Chairman of the Board and Chief Executive Officer
John J. Molinelli 54 Executive Vice President - Chief Financial Officer
Albert J. Neupaver 50 President - Electromechanical Group
Robert W. Chlebek 57 President - Electronic Instruments
Thomas F. Mangold, Jr. 55 President - Electronic Instruments
Robert R. Mandos, Jr. 42 Vice President and Comptroller
Deirdre D. Saunders 53 Vice President and Treasurer
Donna F. Winquist 51 Vice President and General Counsel
Frank S. Hermance's employment history with AMETEK and other directorships
currently held are included under the section "Election of Directors" on page 3.
John J. Molinelli was elected Executive Vice President - Chief Financial Officer
on April 22, 1998. Previously he had served as Senior Vice President - Chief
Financial Officer since April 1994.
Albert J. Neupaver was elected President - Electromechanical Group on January
10, 1997, and was elected President of the former Industrial Materials Group on
September 23, 1994.
Robert W. Chlebek was elected President - Electronic Instruments on March 1,
1997. Prior to joining AMETEK, Mr. Chlebek had been President of Philips
Components North America, a subsidiary of Philips Electronics, N.V. since 1993.
Thomas F. Mangold, Jr. was elected President - Electronic Instruments on October
5, 1999. He served as General Manager of the Process and Analytical Instruments
Division from June 1986 to October 1999. Mr. Mangold was elected a Corporate
Vice President in 1988.
Robert R. Mandos, Jr. was elected Vice President and Comptroller of AMETEK on
April 22, 1998. He has served as Comptroller of AMETEK since April 1996. He
served as Director of Financial Information from November 1, 1995 to March 31,
1996.
Deirdre D. Saunders was elected Vice President on July 30, 1997. She has served
as Treasurer since April 1993.
Donna F. Winquist was elected Vice President and General Counsel on July 19,
2000. She has served as a Vice President since July 30, 1997 and was Corporate
Secretary from May 1, 1997 to July 19, 2000. Since December 1994, and prior to
her appointment as General Counsel, she served as Corporate Counsel.
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EXECUTIVE COMPENSATION
Summary Compensation Table
Other Restricted Shares All Other
Name and Salary Bonus Annual Stock Underlying Compensation
Principal Position Year ($) ($) Compensation Award(s) Options/SARs ($)
------------------ ---- --- --- ------------ -------- ------------ ---
($) ($) (#) (1)
F.S. Hermance 2000 450,000 600,000 -- 3,675,000(2) 80,000 116,392
Chairman of the Board 1999 396,000 400,000 -- -- 150,000 87,009
effective 1/1/2001 1998 360,000 256,500 -- -- 50,000 63,594
and Chief
Executive Officer
W.E. Blankley 2000 540,000 -- -- -- -- 23,687
Chairman of the Board 1999 527,500 600,000 -- -- 80,000 80,780
through 12/31/2000 1998 515,000 460,750 -- -- 80,000 61,562
and Executive Officer
J.J. Molinelli 2000 252,500 200,000 -- -- 32,500 40,697
Executive Vice 1999 241,000 192,000 -- -- 30,000 40,143
President - 1998 225,000 147,250 -- -- 30,000 30,725
Chief Financial
Officer
A.J. Neupaver 2000 258,000 200,000 -- -- 32,500 39,949
President - 1999 248,000 188,000 -- -- 30,000 39,767
Electromechanical 1998 235,000 156,750 -- -- 30,000 32,991
Group
R.W. Chlebek 2000 246,500 165,000 -- -- 30,000 44,377
President - 1999 237,000 185,000 -- -- 22,500 23,395
Electronic 1998 228,000 142,500 -- -- 25,000 39,195
Instruments
(1) The amounts reported represent AMETEK's contribution ($1,200 each) to
the AMETEK Retirement and Savings Plan for each of the named executive
officers listed above, the value of premiums paid by AMETEK with
respect to term life insurance for the benefit of each of the named
executive officers, the amount contributed for Mr. Chlebek under the
Retirement Feature of the AMETEK Retirement and Savings Plan ($8,676),
and the value of contributions under the Supplemental Executive
Retirement Plan ("SERP") (described in more detail on page 18).
(2) On December 15, 2000, Mr. Hermance was granted 150,000 shares of
restricted Common Stock. These shares become vested on the earliest to
occur of (a) the closing price of AMETEK's Common Stock on any five
consecutive trading days equaling or exceeding $40 per share, (b) the
death or disability of Mr. Hermance, or (c) December 15, 2006 provided
Mr. Hermance has been in the continuous employ of AMETEK through that
date. The value of this restricted stock reported in the table was
$24.50 per share, the closing price of AMETEK's Common Stock on the
date of grant. The aggregate value on December 31, 2000 was $3,891,000,
based on AMETEK's year-end closing stock price of $25.94. Cash
dividends will be earned but will not be paid until the restricted
stock vests. (See additional discussion of Termination and
Change-of-Control Agreement beginning on page 20).
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The following report, submitted by the Compensation Committee of the Board of
Directors, provides information regarding policies and practices concerning
compensation of the Chairman of the Board and Chief Executive Officer and the
other executive officers of AMETEK.
COMPENSATION OVERVIEW
The Compensation Committee recommends to the Board of Directors (a)
executive compensation arrangements for senior management and directors,
and (b) compensation plans in which officers and employees are eligible to
participate. The Stock Option Committee approves, and then submits for
ratification to the Board of Directors, grants of stock options and
restricted stock awards under AMETEK's stock plans.
The members of the Compensation Committee, Messrs. Gordon, Klein and
Malone and Ms.Varet, are non-employee directors of AMETEK. The members of
the Stock Option Committee, Messrs. Gordon and Malone, are directors and
have no other affiliation with AMETEK.
Executive compensation consists of three principal elements: (a) salary,
(b) annual incentive bonus and (c) grants of stock options and/or
restricted stock. AMETEK provides additional retirement and other benefits
for executives similar to those provided by other major corporations.
Information regarding similarly situated executive officers at comparable
companies was drawn from publicly available information for certain of the
companies included in the index of peer companies used in the Stock
Performance Graph set forth on page 19 and for certain other companies
identified by an independent employee benefits consulting firm engaged by
AMETEK.
REQUIRED STOCK OWNERSHIP FOR EXECUTIVES
The Compensation Committee and the Stock Option Committee believe that
AMETEK should attract, retain, motivate and benefit from the guidance and
experience of talented and qualified executives who will advance AMETEK's
profitability and worldwide growth. AMETEK also believes that encouraging
its executives to acquire a larger equity interest in AMETEK links their
efforts as executives to the interests of the shareholders, providing
additional incentives for the maximum success of AMETEK. Accordingly,
AMETEK has directed that executive officers and management of AMETEK
acquire stock, within a reasonable period of time, varying in value from
one to five times their base salary. Mr. Hermance has exceeded his
required AMETEK stock ownership level of five times base salary, and
Messrs. Molinelli and Neupaver have each exceeded their required AMETEK
stock ownership level of three times base salary. The other executive
officers have either achieved their required stock ownership level, or
continue to make progress towards this goal.
SALARY
The salary level for each AMETEK executive officer is based principally on
the executive's responsibilities. Consideration also is given to factors
such as the individual's experience and performance, salaries paid to
executive officers by comparable companies, and the cost of living in the
geographic area where the executive is located. When determining
adjustments to each executive officer's salary, consideration also is
given to prevailing economic conditions, the adjustments being given to
other employees within AMETEK, and achievement of performance objectives.
In determining executive salaries, the Compensation Committee has
generally targeted the median level of the compensation range for each
position at comparable companies.
ANNUAL INCENTIVE BONUS
Bonuses are viewed as incentive rewards for individual contributions to
AMETEK's performance, based not only on short-term results but also
investments made in the future growth of AMETEK's
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profits. The principal financial performance measures considered by the
Compensation Committee are earnings, return on assets and cash flow, with
the relative weight of each of these factors being roughly equal. However,
the significance of any one of these factors may vary from one executive
officer to another depending upon whether that officer has been assigned
other long-term goals, such as reorganizing a business, developing new
products or increasing market penetration. The Chairman and Chief
Executive Officer reviews AMETEK's performance and the individual
contribution of each executive officer to AMETEK's performance and makes
recommendations to the Compensation Committee with respect to the suitable
bonus amount to be awarded to each individual for that year. The
Compensation Committee then meets with the Chairman and Chief Executive
Officer to consider such recommendations, makes any appropriate changes,
and presents its recommendations to the Board of Directors, which then
discusses and votes upon the bonuses.
Each year through 2000, an aggregate amount, generally equal to five
percent of income before federal income taxes exclusive of capital gains
and certain nonrecurring charges, has been established for the purpose of
paying the bonuses to executive officers and certain other employees.
Continuing to use this formula, the bonus pool for 2000 increased compared
with 1999.
In 2001 the method of computation of the annual incentive bonus will be
changed. AMETEK's diluted earnings per share, the operating profit of the
business unit an executive is responsible for, and other goals as
established by the Chief Executive Officer and the Compensation Committee
will be the factors used in determining performance. Bonuses determined in
2001 and thereafter will be leveraged, which means that amounts paid for
over- or underperformance to targets could be significantly higher or
lower than under the previous method. The Compensation Committee believes
this will more appropriately reward executive officers for their
performance and that of AMETEK.
STOCK OPTIONS AND RESTRICTED STOCK AWARDS
Awards of stock options and/or shares of restricted stock are considered
an important complement to the cash elements of AMETEK's executive
officers' compensation because they align the executives' interests with
the shareholders' interests. A principal factor influencing the market
price of AMETEK's stock is AMETEK's performance as reflected in its sales,
earnings, cash flow and other results; thus, by granting stock options to
AMETEK's executive officers, such individuals are encouraged to achieve
consistent improvements in AMETEK's performance. The plans under which
such awards are made have been approved by AMETEK's shareholders. AMETEK
stock options generally require the executive to be employed by AMETEK on
the exercise date. The exercise price of options equals the mean market
price of AMETEK's stock on the grant date. Accordingly, options will only
yield income to the executive if the market price of AMETEK's stock is
greater at the time of exercise than it was when the option was granted.
Awards of shares of restricted stock are subject to forfeiture
restrictions, which prohibit the recipient from selling such shares for a
specified period following the date of the award. Awards provide
inducements to the executive officers to remain with AMETEK over the long
term and enhance corporate performance and, correspondingly, shareholder
value. When considering whether to make grants of stock options or awards
of restricted stock, the Stock Option Committee reviews practices of other
comparable companies as well as individual performance-related criteria,
and takes into consideration the effect such awards might have on AMETEK's
performance and shareholder value. The measures of AMETEK performance that
are considered in making such awards, and the relative weight of each of
these factors, are generally the same as those used in determining bonus
levels. However, more emphasis is placed on the long-term objectives that
an officer has been assigned.
MR. HERMANCE'S COMPENSATION
In determining the appropriate levels for Mr. Hermance's 2000 base salary
and bonus, the Compensation Committee considered the same factors it
considered when setting compensation levels for AMETEK's other executive
officers. The Compensation Committee also considered the major initiatives
and programs commenced or furthered under Mr. Hermance's leadership during
2000. Among the achievements in 2000 under Mr. Hermance's leadership:
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(a) AMETEK achieved its seventh consecutive year of double-digit percentage
growth in earnings per share from continuing operations. Operating
income rose 14%, net income rose 13%, and diluted earnings per share
rose 14%, compared with 1999. These results were achieved while the
economy weakened significantly during the second half of 2000. AMETEK's
performance confirms the soundness of the business strategies developed
and implemented under Mr. Hermance's guidance.
(b) AMETEK continued to enhance long-term shareholder value through its
Four Growth Strategies: Strategic Acquisitions & Alliances, Global &
Market Expansion, Operational Excellence, and New Products.
- AMETEK completed two strategic acquisitions during 2000. The
acquisitions of Rochester Instrument Systems and several
businesses from Prestolite Electric, with combined annual
revenues of more than $100 million. These acquisitions extend
AMETEK's served markets, technology base, and product
offering.
- AMETEK continued to expand its international presence.
- International sales increased 8% in 2000, compared
with 1999.
- AMETEK continued to shift production to low-cost
locales. In 2000, production of certain electronic
instruments for the aerospace, power and
heavy-vehicle markets was relocated to Mexico.
Expansions at AMETEK facilities in Mexico, China, and
the Czech Republic were completed or underway during
2000.
- AMETEK's focus on Operational Excellence was evidenced by
strong cost control and improvement in its manufacturing
processes. Group operating margins expanded from 14.9% in 1999
to 15.3% in 2000. This was accomplished while integrating six
acquisitions completed since the beginning of 1999.
- A number of new products were introduced during the last year
that contributed to AMETEK's growth in revenue and earnings.
Certain personal criteria also were reviewed in determining Mr. Hermance's
compensation, such as his ten years of service with AMETEK, completion of his
first full year as Chief Executive Officer, his election as Chairman of the
Board, and his previous service as an officer of AMETEK. The Compensation
Committee also evaluated data regarding CEO compensation practices of comparable
companies (which were referred to previously) so that Mr. Hermance's total
compensation would be in line with that of CEOs of such other companies. In
addition, in fixing Mr. Hermance's bonus, the Compensation Committee considered
AMETEK's financial performance and, in particular, earnings, return on assets,
cash flow and total return to shareholders.
The Compensation Committee desired to provide Mr. Hermance total compensation
(salary, bonus, and long-term incentives) approximating the median level of the
total compensation of chief executive officers of comparable companies. To
achieve that goal and to assure that Mr. Hermance is properly motivated to
increase shareholder value, on December 15, 2000 he was awarded a long-term
incentive through a grant of 150,000 shares of restricted stock, with vesting of
this stock to occur if AMETEK's stock price reaches $40 per share or upon other
conditions as detailed in footnote (2) on page 11 and on pages 20-21.
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Section 162(m)
Under Section 162(m) of the Internal Revenue Code, a publicly-held
corporation may not deduct more than $1 million in a taxable year for
compensation paid to the Chief Executive Officer or any other executive
officer whose compensation is required to be reported in the Summary
Compensation Table. AMETEK's policy is generally to preserve the federal
income tax deductibility of compensation paid to its executives.
Accordingly, to the extent feasible, AMETEK has taken action to preserve
the deductibility of certain stock-based incentive awards to its executive
officers. However, the Compensation Committee retains the authority to
authorize compensation that may not be deductible if it believes that it
is in the interest of AMETEK to do so. Other elements of compensation,
including perquisites and cash and other bonuses, even those based on
performance, may also cause a covered executive officer's income to exceed
deductible limits.
Compensation Committee of the Board:
Charles D. Klein, Chairman
Sheldon S. Gordon
James R. Malone
Elizabeth R. Varet
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STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table provides details regarding stock options granted to the
named executive officers in 2000. In addition, the table provides the
hypothetical gains or "option spreads" that would result for the respective
options based on assumed rates of annual compounded stock price appreciation of
5% and 10% from the date the options were granted through their expiration
dates.
STOCK OPTION/SAR GRANTS IN 2000
Potential
Realizable Value at
Assumed Annual
Rate of Stock
Price Appreciation
Individual Grants for Option Term(1)
- -----------------------------------------------------------------------------------------------------------------
Percent of
Number of Total
Shares Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in Price Expiration
Name Granted(#)(2) Fiscal Year ($/Sh) Date 5%($) 10%($)
- -----------------------------------------------------------------------------------------------------------------
F.S. Hermance 80,000 14.13 $24.4400 12/14/2007 795,963 1,854,932
W.E. Blankley -- -- -- -- -- --
J.J. Molinelli 32,500 5.74 $19.9375 4/12/2007 263,788 614,739
A.J. Neupaver 32,500 5.74 $19.9375 4/12/2007 263,788 614,739
R.W. Chlebek 30,000 5.30 $19.9375 4/12/2007 243,497 567,451
- -----------------------------------------------------------------------------------------------------------------
(1) The amounts represent certain assumed rates of appreciation. Actual
gains, if any, on stock option exercises are dependent on future
performance of AMETEK 's Common Stock. There can be no assurance that
the rates of appreciation reflected in this table will be achieved.
(2) The options granted in 2000 are exercisable after the first anniversary
of the date of the grant (April 13, 2000 with respect to Messrs.
Molinelli, Neupaver, and Chlebek and December 15, 2000 with respect to
Mr. Hermance) during each of the four succeeding 12-month periods only
to the extent of 25% of the total number of shares optioned. Optioned
shares, which may have been but were not purchased during any one
12-month period, may be purchased during any one or more succeeding
12-month periods up to the expiration date of the option. Options
generally become fully exercisable in the event of the holder's death,
normal retirement, or termination of employment in connection with a
change in control. No SARs were granted in 2000.
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The following table shows stock options and stock appreciation rights exercised
by the named executive officers during 2000 and the aggregate amounts realized
by each such officer. In addition, the table shows the aggregate number of
unexercised options and stock appreciation rights that were exercisable and
unexercisable as of December 31, 2000, and the value of "in-the-money" stock
options on December 31, 2000, which represents the positive difference between
the market price of AMETEK's Common Stock and the exercise price of such
options.
AGGREGATE OPTION/SAR EXERCISES IN 2000
AND OPTION/SAR VALUES AT DECEMBER 31, 2000
- -------------------------------------------------------------------------------------------------------------------
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money
Options Options
Shares at December 31, 2000 at December 31, 2000 ($)
Acquired On Value ------------------------------------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------
F.S. Hermance 23,146 202,669 248,160 217,500 2,470,032 769,490
W.E. Blankley 60,085 617,297 396,477 100,000 4,447,745 256,949
J.J. Molinelli 48,068 490,133 88,594 70,000 820,877 344,131
A.J. Neupaver 17,000 168,168 117,404 71,250 1,210,399 347,180
R.W. Chlebek -- -- 38,656 66,887 201,712 354,439
DEFINED BENEFIT AND ACTUARIAL PLANS
The Employees' Retirement Plan of AMETEK, Inc. (the "Retirement Plan") is a
non-contributory defined benefit pension plan under which contributions are
actuarially determined. The following table sets forth the estimated annual
benefits, expressed as a single life annuity, payable upon retirement (assuming
normal retirement at age 65) under the Retirement Plan for individuals with the
indicated years of service and at the indicated compensation levels (without
taking into account statutory restrictions incorporated in the Retirement Plan
and described below):
PENSION PLAN TABLE
- ------------------------------------------------------------------------------------------------------------------
Annual Benefits Based On
Years of Service at Normal Retirement Age (1)
Average ----------------------------------------------------------------------------------------
Compensation 15 20 25 30 35
- ------------------------------------------------------------------------------------------------------------------
$150,000 $58,200 $62,000 $65,800 $65,800 $65,800
200,000 78,600 83,700 88,800 88,800 88,800
250,000 99,000 105,300 111,700 111,700 111,700
300,000 119,400 127,000 134,700 134,700 134,700
350,000 139,800 148,700 157,600 157,600 157,600
400,000 160,200 170,400 180,600 180,600 180,600
450,000 180,600 192,000 203,500 203,500 203,500
500,000 201,000 213,700 226,500 226,500 226,500
550,000 221,400 235,400 249,400 249,400 249,400
600,000 241,800 257,100 272,400 272,400 272,400
650,000 262,200 278,700 295,300 295,300 295,300
700,000 282,600 300,400 318,300 318,300 318,300
- ------------------------------------------------------------------------------------------------------------------
(1) Benefit amounts assume a participant reaches age 65 in 2001; for
younger participants, the benefit amounts are less than the amounts
indicated above.
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At December 31, 2000, the executives named in the Summary Compensation Table had
the following years of credited service under the Retirement Plan: Mr.
Blankley-40; Mr. Hermance-10; Mr. Molinelli-31, and Mr. Neupaver-24. Persons
joining AMETEK after January 1, 1997, including Mr. Chlebek, are not eligible to
participate in the Retirement Plan, but instead are eligible to participate in
the Retirement Feature of the AMETEK Retirement and Savings Plan. Participants
receive an annual contribution of between 3% and 8% of their compensation
depending on their age and service with AMETEK.
The annual compensation taken into account for any plan year is generally equal
to the participant's salary and any bonus accrued during the plan year as
reported in the Summary Compensation Table. Compensation in excess of certain
amounts prescribed by the Secretary of the Treasury ($170,000 for 2000) cannot
be taken into account under the Retirement Plan or the Retirement Feature of the
AMETEK Retirement and Savings Plan. The individuals named in the Summary
Compensation Table are subject to this limitation.
In accordance with a non-qualified supplemental pension arrangement established
in 1991 (the "Excess Plan"), AMETEK agreed to provide to Mr. Blankley an
additional retirement benefit in an amount equal to the excess of (a) the annual
pension benefit which would be payable to him under the terms of the Retirement
Plan in the absence of the statutory restrictions on compensation, over (b) the
amount actually payable under the Retirement Plan. The benefit was limited to
the projected excess payable at age 65 determined as of May 21, 1991, taking
into account the statutory restrictions as of that date. Pursuant to the Excess
Plan, a restricted stock award was granted under the 1991 Stock Incentive Plan
of AMETEK, Inc. for 29,110 shares of AMETEK Common Stock having a fair market
value on the date of grant of 50% of the then present value of the projected
benefit under the Excess Plan, with the remaining 50% of the benefit to be paid
in cash directly out of AMETEK's general assets. In connection with the spin-off
of AMETEK's water filtration business on August 1, 1997, Mr. Blankley received a
stock dividend of 3,056 shares of Culligan Water Technologies, Inc. stock on his
29,110 shares of AMETEK Common Stock. This dividend was converted to 6,425
restricted shares of AMETEK Common Stock on March 3, 1998. On September 25,
2000, Mr. Blankley attained the age of 65 and, pursuant to the Excess Plan, the
restrictions on all 35,535 shares lapsed. The value of the shares as of that
date was $722,960. In addition, effective October 1, 2000, pursuant to the
Excess Plan, Mr. Blankley commenced the receipt of the cash portion of the
benefit in the form of a joint and 100% survivor annuity for the lives of Mr.
Blankley and his spouse in the monthly amount of approximately $6,100.
Statutory changes, since 1991, to the amount of compensation that can be taken
into account under the Retirement Plan have resulted in Mr. Blankley not
receiving an amount sufficient to provide him with his full benefit under the
Retirement Plan as contemplated by the Excess Plan. Accordingly, Mr. Blankley
also has received contributions under the SERP (described in the next
paragraph), but those contributions only take into account his compensation that
is not taken into account under the Excess Plan.
Pursuant to the AMETEK, Inc. Supplemental Executive Retirement Plan (the
"SERP"), AMETEK agreed, beginning in 1997, to credit to the account of certain
executives, including executives named in the Summary Compensation Table, an
amount equal to 13% of the executive's compensation in excess of the statutory
restrictions for each plan year, in order to compensate them for the loss of
retirement income under the Retirement Plan or the Retirement Feature of the
AMETEK Retirement and Savings Plan resulting from those restrictions. The
credited amounts are deemed to be invested in AMETEK Common Stock and, upon
termination of employment or retirement, shall be distributed in kind. An
executive's right to a benefit under the SERP becomes non-forfeitable at the
same time as the executive's right to an accrued benefit under the Retirement
Plan (or the Retirement Feature of the AMETEK Retirement and Savings Plan)
becomes non-forfeitable.
For retirements occurring in 2001, the maximum annual pension benefit payable at
normal retirement age is restricted by law to the greater of $140,000 or the
amount of such benefit determined under the Retirement Plan and prior existing
law as of December 31, 1982. The $140,000 limit is adjusted annually by the
Secretary of the Treasury to reflect increases in the cost of living.
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STOCK PERFORMANCE GRAPH
The following graph and accompanying table compare the cumulative total
shareholder return for AMETEK for the five years ended December 31, 2000 to that
of the Russell 2000 Index and the Dow Jones Electrical Components and Equipment
Industry Group ("DJEE"). The performance graph and table assume the investment
of $100 on December 31, 1995 and the reinvestment of all dividends.
[GRAPH OMITTED]
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
AMETEK, INC. $100.00 $120.11 $177.07 $147.81 $127.77 $175.98
RUSSELL 2000 100.00 116.49 142.55 138.92 168.45 163.36
Peer Group (DJEE)* 100.00 124.56 141.47 158.34 233.34 157.47
* Peer group excludes AMETEK.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Sheldon S. Gordon, Charles D. Klein, James R. Malone and Elizabeth R. Varet
comprise the Compensation Committee. Mr. Klein and Ms. Varet are managing
directors of American Securities, L.P., an investment banking firm.
The law firm of Stroock & Stroock & Lavan LLP, of which Mr. Cole is a member,
rendered during 2000 and continues to render legal services for AMETEK and its
subsidiaries. The investment banking firm of American Securities, L.P., and
affiliates of American Securities, L.P., rendered during 2000 and continue to
render financial advisory, investment management and other services to AMETEK.
American Securities, L.P. is owned indirectly by Ms. Varet and members of her
family through family trusts of which Ms. Varet and Mr. Cole are co-trustees.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires AMETEK's directors
and officers to file with the Securities and Exchange Commission and the New
York Stock Exchange initial reports of ownership and reports of changes in
ownership of AMETEK's Common Stock. Copies of all such Section 16(a) reports are
required to be furnished to AMETEK. These filing requirements also apply to
holders of more than 10% of AMETEK's Common Stock; to AMETEK's knowledge, there
currently are no such holders under Section 16(a). To AMETEK's knowledge, based
solely on a review of the copies of Section 16(a) reports furnished to AMETEK
and written representations that no other reports were required, during the
fiscal year ended December 31, 2000, AMETEK's officers and directors were in
compliance with all Section 16(a) filing requirements.
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND
CHANGE-OF-CONTROL ARRANGEMENTS
AMETEK has in place change-of-control agreements with all of its executive
officers other than Mr. Hermance, who is covered by a separate arrangement
described in the following paragraphs. The purpose of the agreements is to
assure the continued attention and dedication of key executives when AMETEK is
faced with a potential change of control by providing for some continuation of
the executive's compensation and benefits. Under the agreements, the sum of the
executive's prior year's salary, plus the greater of (a) the current year's
bonus, or (b) the average of the two prior years' bonuses (as limited under
Section 280G of the Internal Revenue Code (the "Code")) will be continued for a
period of one, two or three years (as defined in each executive's agreement).
Health benefits will be continued until Medicare eligibility, coverage under
another group health plan, the expiration of ten years, or the executive's
death, whichever is earlier, in the event that the executive's employment is
terminated by AMETEK without cause or by the executive for good reason within
two years after a Change of Control. For purposes of the agreements, a Change of
Control means the acquisition of 20% or more of the voting stock of AMETEK by a
party other than AMETEK (or its affiliates), or a merger or consolidation, after
which the shareholders of AMETEK do not own or control at least 50% of the
voting stock of AMETEK, or any sale or other disposition of all or substantially
all of AMETEK's assets, or an approved plan of liquidation. Each of the
executive officers named in the Summary Compensation Table on page 11 (other
than Mr. Hermance) would be entitled to three times their compensation in the
event of a Change of Control.
As of December 15, 2000, AMETEK entered into a Termination and Change-of-Control
Agreement with Mr. Hermance to assure his continued dedication in the event of a
Change of Control and to provide security to Mr. Hermance in the event his
employment is terminated by AMETEK or a successor without cause or by Mr.
Hermance for good reason.
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For the purposes of this Agreement, Change of Control means substantially the
same as when applied to other executive officers, as described above, but also
includes certain changes in the composition of the Board of Directors and
certain additional acquisitions of AMETEK or its shares.
In the event of his termination, prior to and not in anticipation of a Change of
Control, Mr. Hermance will receive a severance payment in an amount equal to two
times his annual base salary for the preceding year, and two times (a) his
current year's targeted bonus (if established) or (b) the average of his bonuses
for the two preceding years. In addition, his health, disability insurance and
death benefits will be continued under the same terms as are provided for other
executives as described above, but for a period of two years only, and certain
other executive perquisites will be continued for up to two years.
If Mr. Hermance is employed by AMETEK at the date of a Change of Control, or has
been terminated without cause or resigned for good reason in anticipation of the
Change of Control, AMETEK will pay Mr. Hermance an amount equal to the fair
market value of any non-vested restricted stock (see page 11, footnote (2)),
which amount may be reduced to an amount which maximizes the aggregate net
amount available to Mr. Hermance from all "parachute payments," as defined in
Section 280G of the Code, after reduction for all taxes. The shares of
restricted stock for which payment is made will then be forfeited. Mr. Hermance
will retain any remaining shares of restricted stock which will continue to vest
in accordance with their original terms.
If Mr. Hermance's employment is terminated by the Company without cause or by
Mr. Hermance for good reason, in anticipation of, upon or at any time following
a Change of Control, Mr. Hermance has agreed for a period of up to three years
not to compete, directly or indirectly, with any business that competes with any
business then conducted by AMETEK and not to solicit any AMETEK employee to
become an employee of any other entity, in exchange for which Mr. Hermance will
be paid, with respect to the period covered by the
non-competition/non-solicitation agreement, an amount equal to his estimated
total compensation (salary, bonus and long-term incentive compensation) for the
period. In such event, AMETEK will continue Mr. Hermance's health, disability
insurance and death benefits, as well as certain executive perquisites, in the
same manner as provided above, except that health benefits will continue for a
period of up to ten years. In the circumstances described in this paragraph, any
restricted stock remaining unvested at the time Mr. Hermance's employment
terminates will be forfeited.
Pursuant to a Supplemental Senior Executive Death Benefit Program (the
"Program"), AMETEK has entered into individual agreements with certain
executives. The agreements require AMETEK to pay death benefits to their
designated beneficiaries and to pay lifetime benefits to the executives under
certain circumstances. If a covered executive dies before retirement or before
age 65 while on disability retirement, the executive's beneficiary will receive
monthly payments from the date of the executive's death until the date he or she
would have attained age 80. If a covered executive retires, or reaches age 65
while on disability retirement, the Program provides for an annual benefit of
one-tenth of the lesser of (a) twice the executive's average annual base salary
for the last five full years of service, rounded off to the next highest
multiple of $50,000 or (b) a maximum amount specified in the agreement. The
highest maximum amount specified in the existing agreements is $1,000,000. The
benefit is payable monthly over a period of ten years to the executive or the
executive's beneficiary. The payments will commence for retirees at age 70 or
death, whichever is earlier. However, if the executive retires after age 70, the
payments commence on retirement.
To fund benefits under the Program, AMETEK has purchased individual life
insurance policies on the lives of certain of the covered executives. AMETEK
retains the right to terminate all of the Program agreements under certain
circumstances. Messrs. Blankley, Hermance, Molinelli, and Neupaver are
participants.
Pre- and post-retirement life insurance coverage and supplemental retirement
income are provided to Mr. Chlebek under a Supplemental Senior Executive Split
Dollar Death Benefit Plan. To fund these benefits, AMETEK has purchased a
split-dollar life insurance policy. AMETEK pays the majority of the premium
costs with Mr. Chlebek paying approximately $500 per year. Pre-retirement death
benefits include a $490,000 lump sum payment to his beneficiary and an annual
payment of $70,000 commencing ten years after his death and ending on the date
Mr. Chlebek would have attained age 80. Upon Mr. Chlebek's attainment of age 65,
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26
AMETEK will withdraw from the policy an amount equal to the amount of premiums
paid, and he will become the owner of the policy, which is targeted to have a
value of approximately $300,000 to $350,000 at age 65. In the event Mr. Chlebek
terminates employment prior to age 65, he can either purchase the policy from
AMETEK or terminate the agreement.
Effective January 1, 2001, AMETEK entered into an employment agreement
("Employment Agreement") with Walter E. Blankley, former Chairman of the Board,
under which he will continue to provide services to AMETEK as a non-executive
employee from January 1, 2001 to December 15, 2001, at which time his employment
will terminate. The services provided by Mr. Blankley will include working on
special projects and providing advice to executive management relating to
certain business matters of AMETEK. He will be compensated at the rate of $8,246
per month. The Employment Agreement also includes a non-competition provision
pursuant to which Mr. Blankley agrees that during his period of employment, and
for the four years following his termination of employment, Mr. Blankley will
not compete with any of the businesses of AMETEK. As consideration for this
non-competition agreement, Mr. Blankley will be paid $125,000 per year, payable
on a quarterly basis, commencing with the first quarter of 2002 and ending with
the last quarter of 2005. In the event of his death prior to all payments being
made, the remaining payments will continue to be made to his estate.
SHAREHOLDER PROPOSALS FOR THE 2002 PROXY STATEMENT
Proposals of shareholders intended to be presented at AMETEK's 2002 Annual
Meeting of Shareholders must be received by AMETEK at its executive offices on
or prior to December 20, 2001 to be eligible for inclusion in the proxy material
to be used in connection with the 2002 Annual Meeting.
By order of the Board of Directors
KATHRYN E. LONDRA
Corporate Secretary
Dated: Paoli, Pennsylvania
April 11, 2001
22
27
AUDIT COMMITTEE CHARTER
FOR
AMETEK, INC.
1. The Audit Committee shall consist of at least three members and shall
be composed entirely of independent directors, all of whom shall be
financially literate as determined by the Company's Board in its
business judgment, with at least one member having accounting or
related financial management expertise as determined by the Company's
Board in its business judgment.
2. The purposes of the Audit Committee are:
(a) to oversee the Company's accounting and financial reporting
policies and practices and its internal controls;
(b) to oversee the quality and objectivity of the Company's
financial statements and the independent audit thereof; and
(c) to act as a liaison between the Company's independent auditors
and the full Board of Directors.
The function of the Audit Committee is oversight. The Company's
management is responsible for (i) the preparation, presentation and
integrity of the Company's financial statements, (ii) the maintenance
of appropriate accounting and financial reporting principles and
policies and (iii) the maintenance of internal controls and procedures
designed to assure compliance with accounting standards and applicable
laws and regulations. The outside auditors are responsible for planning
and carrying out a proper audit and reviews. In fulfilling their
responsibilities hereunder, it is recognized that members of the Audit
Committee are not full-time employees of the Company and are not, and
do not represent themselves to be, accountants or auditors by
profession or experts in the fields of accounting or auditing. As such,
it is not the duty or responsibility of the Audit Committee or its
members to conduct "field work" or other types of auditing or
accounting reviews or procedures. Each member of the Audit Committee
shall be entitled to rely on (i) the integrity of those persons and
organizations within and outside the Company from which it receives
information and (ii) the accuracy of the financial and other
information provided to the Audit Committee by such persons and
organizations absent actual knowledge to the contrary (which shall be
promptly reported to the Company's Board). In addition, the evaluation
of the Company's financial statements by the Audit Committee is not of
the same scope as, and does not involve the extent of detail as, audits
performed by the independent accountants, nor does the Audit
Committee's evaluation substitute for the responsibilities of the
Company's management for preparing, or the independent accountants for
auditing, the financial statements.
3. To carry out its purposes, the Audit Committee shall have the following
duties and powers:
(a) to recommend the selection, retention or termination of
outside auditors and, in connection therewith, to evaluate the
independence of the auditors, including whether the auditors
provide any consulting services to the Company (it being
understood that the auditors are ultimately accountable to the
Audit Committee and the Company's Board and that the Audit
Committee and the Company's Board shall have the ultimate
authority and responsibility to select, evaluate, retain and
terminate auditors, subject to any required stockholder vote);
(b) to ensure receipt of a formal written statement from the
outside auditors on a periodic basis specifically delineating
all relationships between the auditors and the Company; to
discuss with the auditors any disclosed relationships or
services that may impact the auditors' objectivity and
independence; and to recommend that the Company's Board take
appropriate action in response to the auditors' report to
satisfy itself of the auditors' independence;
A-1
28
(c) to meet with the Company's outside auditors, including private
meetings, as necessary (i) to review the arrangements for and
scope of the annual audit and any special audits; (ii) to
discuss any matters of concern relating to the Company's
financial statements, including any adjustments to such
statements recommended by the auditors, or other results of
said audit(s); and (iii) to consider the auditors' comments
with respect to the Company's financial policies, procedures
and internal accounting controls and management's responses
thereto;
(d) to consider the effect upon the Company of any changes in
accounting principles or practices proposed by management or
the outside auditors;
(e) to review the fees charged by the outside auditors for audit
and non-audit services;
(f) to investigate improprieties or suspected improprieties in
Company operations; and
(g) to report its activities to the full Board on a periodic basis
and to make such recommendations with respect to the above and
other matters as the Committee may deem necessary or
appropriate.
4. The Committee shall meet at least twice annually and is empowered to
hold special meetings as circumstances require.
5. The Committee shall regularly meet (typically, concurrently with the
regular Committee meetings) with the Company's management.
6. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain
special counsel and other experts or consultants at the expense of the
Company.
7. The Committee shall review the adequacy of this Charter at least
annually and recommend any changes to the full Board. The Board shall
also review and approve this Charter at least annually.
8. With respect to any subsequent changes to the composition of the
Committee, and otherwise approximately once each year, the Company
shall provide the New York Stock Exchange written confirmation
regarding:
(a) any determination that the Company's Board has made regarding
the independence of directors pursuant to the New York Stock
Exchange's governance standards or applicable law;
(b) the financial literacy of the Committee members;
(c) the determination that at least one of the Committee members
has accounting or related financial management expertise; and
(d) the annual review and reassessment of the adequacy of the
Committee charter.
Adopted: Effective May 10, 2000
A-2
29
AMETEK, Inc.
ANNUAL FINANCIAL INFORMATION AND REVIEW OF OPERATIONS
(Appendix to Proxy Statement)
Index
Page
----
Selected Financial Data................................................................... B-2
Management's Discussion and Analysis of
Financial Condition and Results of Operations......................................... B-4
Report of Management ..................................................................... B-12
Report of Independent Auditors ........................................................... B-13
Consolidated Statement of Income ......................................................... B-14
Consolidated Balance Sheet ............................................................... B-15
Consolidated Statement of Stockholders' Equity ........................................... B-16
Consolidated Statement of Cash Flows ..................................................... B-17
Notes to Consolidated Financial Statements ............................................... B-18
B-1
30
AMETEK, INC.
SELECTED FINANCIAL DATA
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED OPERATING RESULTS (YEARS
ENDED DECEMBER 31):
Net sales ........................................... $1,024.7 $924.8 $927.5 $ 847.8 $800.0
Operating income(1) ................................. $ 135.9 $118.8 $ 96.4 $ 92.0 $ 82.8
Interest expense .................................... $ (29.2) $(24.8) $(23.7) $ (18.2) $(19.1)
Income from continuing operations(1) ................ $ 68.5 $ 60.8 $ 50.4 $ 50.3 $ 43.1
Net income(1)(2) .................................... $ 68.5 $ 60.8 $ 41.7 $ 50.4 $ 51.2
Basic earnings per share:
Income from continuing operations(1) .............. $ 2.13 $ 1.88 $ 1.55 $ 1.53 $ 1.32
Net income(1)(2) .................................. $ 2.13 $ 1.88 $ 1.28 $ 1.53 $ 1.57
Diluted earnings per share:
Income from continuing operations(1) .............. $ 2.11 $ 1.85 $ 1.50 $ 1.49 $ 1.30
Net income(1)(2) .................................. $ 2.11 $ 1.85 $ 1.24 $ 1.49 $ 1.54
Dividends declared and paid per share ............... $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24
Average common shares outstanding:
Basic ............................................. 32.1 32.3 32.7 32.9 32.7
Diluted ........................................... 32.5 32.9 33.7 33.9 33.3
PERFORMANCE MEASURES AND OTHER DATA:
Operating Data excluding Nonrecurring
Charge(3):
Operating income .................................. $ 135.9 $118.8 $104.5 $ 92.0 $ 82.8
Operating income-Return on sales .................. 13.3% 12.8% 11.3% 10.8% 10.4%
Operating income-Return on average total
assets ......................................... 16.7% 16.2% 16.6% 17.4% 16.8%
EBITDA(4) ......................................... $ 177.6 $158.1 $146.4 $ 128.0 $116.9
Ratio of EBITDA to interest expense(4) ............ 6.1x 6.4x 6.2x 7.0x 6.1x
Income from continuing operations ................. $ 68.5 $ 60.8 $ 55.3 $ 50.3 $ 43.1
Diluted earnings per share ........................ $ 2.11 $ 1.85 $ 1.64 $ 1.49 $ 1.30
Depreciation and amortization ....................... $ 43.3 $ 39.6 $ 38.4 $ 32.9 $ 32.7
Capital expenditures ................................ $ 29.6 $ 30.3 $ 49.8 $ 41.2 $ 39.1
Cash provided by continuing operations(5) ........... $ 78.7 $ 86.6 $ 78.4 $ 71.2 $ 64.7
Ratio of earnings to fixed charges .................. 4.3x 4.4x 3.9x 4.8x 4.0x
Net income - Return on average total capital ........ 11.5% 11.8% 10.4% 15.8% 16.9%
- Return on average stockholders equity 27.6% 31.2% 25.1% 34.9% 47.3%
YEAR-END CONSOLIDATED FINANCIAL POSITION:
Current assets ...................................... $ 303.1 $256.1 $267.8 $ 248.5 $229.3
Current liabilities ................................. $ 297.7 $262.7 $233.9 $ 178.7 $178.9
Property, plant, and equipment ...................... $ 214.0 $219.6 $214.4 $ 186.3 $174.8
Total assets ........................................ $ 859.0 $768.2 $699.8 $ 555.2 $528.9
Long-term debt ...................................... $ 233.6 $231.8 $227.0 $ 152.3 $150.3
Stockholders' equity ................................ $ 280.8 $216.2 $174.0 $ 159.0 $129.5
Stockholders' equity per share ...................... $ 8.66 $ 6.76 $ 5.42 $ 4.82 $ 3.96
Total debt as a percentage of capitalization(6) ..... 56.3% 60.5% 63.7% 51.0% 58.5%
B-2
31
- ----------------
(1) Amounts in 1998 include a nonrecurring pretax charge for cost reduction
initiatives totaling $8.0 million, ($4.8 million after-tax or $0.14 per
diluted share).
(2) Amounts in 1998 include an extraordinary loss on the early repayment of
debt of $8.7 million ($0.26 per diluted share). Amounts in 1997 and
1996 include discontinued operations of the former Water Filtration
Business.
(3) See description of nonrecurring charge in Note 1 above. All amounts are
based on continuing operations.
(4) EBITDA represents income from continuing operations before interest,
taxes, depreciation and amortization, amortization of deferred
financing costs, and nonrecurring items. It should not be considered,
however, as an alternative to operating income as an indicator of the
Company's operating performance, or as an alternative to cash flows as
a measure of the Company's overall liquidity as presented in the
Company's financial statements. Furthermore, EBITDA measures shown for
the Company may not be comparable to similarly titled measures given by
other companies.
(5) Amount in 2000 and 1999 excludes $1 million and $44 million,
respectively, of net cash proceeds received from an accounts receivable
securitization program.
(6) Without considering the effect of the accounts receivable
securitization program referred to in note 5 above; total debt as a
percentage of capitalization at December 31, 2000 and 1999 would have
been 59.1% and 63.6%, respectively.
B-3
32
AMETEK, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of the Company's financial
condition and results of operations set forth below should be read in
conjunction with the consolidated financial statements of the Company and the
related notes shown in the index on page B-1 of this report.
Business Overview
In 2000, the Company reported record sales, operating income, net
income and diluted earnings per share that resulted in double-digit percentage
growth when compared with 1999. The Company continues to achieve several major
objectives under its four growth strategies: Strategic Acquisitions and
Alliances, Global and Market Expansion, New Products and Operational Excellence.
Significant events of 2000 were:
- Sales exceeded $1 billion for the first time in the Company's
history.
- The seventh consecutive year of double-digit percentage growth
in earnings per share from continuing operations.
- The completion of two new business acquisitions: The August
acquisition of businesses that produce switches, industrial
battery chargers, and direct-current (DC) motors for the
telecommunications and material-handling markets, which is
included within the Electromechanical Group (EMG), and the
September acquisition of a business that produces power
measurement instruments and is included within the Electronic
Instruments Group (EIG).
- Continuing with the Company's global plan to lower its cost
structure, operational excellence initiatives, in 2000,
included the shift of production to lower-cost facilities in
Mexico, China, Brazil and the Czech Republic. This action
along with the consolidation of the Company's European motor
operations resulted in improved operating profit margins for
both the EIG and the EMG business segments.
- The Company continued its emphasis on investment in research,
development and engineering, spending $45.9 million in 2000,
an increase of 8.8% over 1999.
- Benefiting from the investment in research and development,
new product sales (from products introduced within the past
three years) increased 17.3% over 1999 to $125.6 million.
B-4
33
Results of Operations
The following table sets forth net sales and income of the Company by
business segment and on a consolidated basis for the years ended December 31,
2000, 1999, and 1998:
YEARS ENDED DECEMBER 31,
----------------------------------
2000 1999 1998
----------- ----------- --------
(DOLLARS IN THOUSANDS)
NET SALES(1):
Electronic Instruments............................................. $ 509,504 $ 451,072 $ 414,202
Electromechanical.................................................. 515,156 473,725 513,272
---------- --------- ---------
Total net sales................................................. $1,024,660 $ 924,797 $ 927,474
========== ========= =========
INCOME(2):
Segment operating income(3)
Electronic Instruments............................................. $ 78,771 $ 69,965 $ 55,703
Electromechanical.................................................. 77,560 67,575 62,511
---------- --------- ---------
Total segment operating income.................................. 156,331 137,540 118,214
Corporate administrative and other expenses.......................... (20,441) (18,743) (21,778)
---------- --------- ---------
Consolidated operating income........................................ 135,890 118,797 96,436
Interest and other expenses.......................................... (29,752) (24,336) (19,078)
---------- --------- ---------
Consolidated income before income taxes......................... $ 106,138 $ 94,461 $ 77,358
========== ========= =========
- ------------
(1) After elimination of intra-and intersegment sales, which are not
significant in amount.
(2) 2000 and 1998 includes charges for cost realignment initiatives and
cost reduction initiatives.
(3) Segment operating income represents sales less all direct costs and
expenses (including certain administrative and other expenses)
applicable to each segment, but does not include interest expense.
YEAR ENDED DECEMBER 31, 2000, COMPARED WITH YEAR ENDED DECEMBER 31, 1999.
Results of Operations
The Company reported sales for 2000 of $1,024.7 million, an increase of
10.8% from sales of $924.8 million in 1999, driven by the contributions of the
Company's acquisitions and strength in several core markets. EIG's sales were
$509.5 million in 2000, an increase of 13.0% from sales of $451.1 million in
1999. Without recent acquisitions, sales for EIG would have been slightly lower
than in 1999 due largely to a decline in demand for heavy-vehicle instruments.
For the EMG segment, sales were $515.2 million in 2000, an increase of 8.7% from
sales of $473.7 million in 1999 due to improved conditions in specialty metal
markets along with contributions from an acquisition, reduced somewhat by
continued competitive factors and adverse currency translation effects from
international businesses. International sales reported by both segments totaled
$324.9 million in 2000, an increase of $23.0 million or 7.6% from 1999. Export
shipments from the United States in 2000 were $179.1 million, compared with
$158.5 million in 1999.
New orders for 2000 were $1,037.6 million, an increase of 9.9% from
$944.5 million for 1999. The order backlog at December 31, 2000 was $256.4
million, compared with $243.5 million at December 31, 1999. New orders from the
acquisitions made by the Company during the year were the primary reason for the
increase.
The Company's plan to lower its cost structure globally through
operational excellence initiatives continues to have a positive effect on
segment operating income and margins in 2000. Total segment operating income
improved to $156.3 million for 2000, an increase of 13.7%, compared with segment
operating income of $137.5 million for 1999, primarily from the acquisitions and
strength in core businesses. Operating margins in 2000 were 15.3% of sales, an
increase from 14.9% in 1999. Improved operating margins were primarily the
result of operational excellence initiatives, including increased motor
production at the Company's lower cost facilities, improved supply chain
management and flow manufacturing expansion in EIG. The Company also benefited
from lower overall net pension costs resulting primarily from a higher return on
pension investment assets. After deducting corporate administrative expenses,
consolidated operating income was $135.9 million or 13.3% of net sales, an
increase of $17.1 million, or 14.3%, when compared with 1999 operating income of
$118.8 million or 12.8 % of net sales.
B-5
34
Selling, general, and administrative (SG&A) expenses were $95.1 million
in 2000, compared with $79.4 million in 1999, a $15.7 million increase due
mainly to acquisitions completed in late 1999 and 2000. As a percentage of
sales, SG&A was 9.3% in 2000, compared with 8.6% in 1999. The acquisitions were
the primary contributors to an increase in selling expenses. Corporate general
and administrative expenses increased slightly, but were flat year to year, as a
percentage of sales.
Interest expense was $29.2 million in 2000, an increase of 17.9%,
compared with $24.8 million in 1999. Higher average debt levels to finance
acquisitions as well as higher average borrowing rates, were the primary reasons
for the increase.
Net income for 2000 rose 12.8% and was $68.5 million, or $2.11 per
diluted share, compared with net income for 1999 of $60.8 million, or $1.85 per
diluted share. The increase in net income was due primarily to the higher sales
and operating income discussed above.
Fourth Quarter Results
Sales for the fourth quarter of 2000 were $258.2 million, compared with
$236.0 million in the fourth quarter of 1999, an increase of $22.2 million, or
9.4%. The increase in sales was driven by acquisitions made in 2000 and late
1999.
Operating income for the fourth quarter of 2000 was $34.1 million,
compared with $29.5 million for the fourth quarter of 1999, an increase of $4.6
million or 15.5%. The acquired businesses, combined with continued productivity
gains as a result of the Company's operational excellence initiatives and cost
reduction programs, were the primary reasons for the increase in operating
income. As a result of slowing U.S. economic growth, in the fourth quarter of
2000, the Company accelerated certain cost realignment initiatives. These
initiatives include a more aggressive movement of certain production activities
to low-cost locations, and the resizing of several businesses. These actions
resulted in a fourth quarter 2000 pretax charge of $3.4 million. Also, fourth
quarter 2000 results include a pretax gain of $3.6 million due to the resolution
of a contract issue with a major customer in the Electronic Instruments Group.
Net income for the fourth quarter of 2000 totaled $17.2 million, or
$0.53 per diluted share, an increase of 14.8% from the fourth quarter of 1999
net income of $15.0 million, or $0.46 per diluted share.
Operating Segment Results
The ELECTRONIC INSTRUMENTS GROUP (EIG) sales were $509.5 million in
2000, an increase of 13.0% from 1999 sales of $451.1 million. The 2000
acquisition of a business, along with a business acquired in December 1999,
drove the year-to-year increase in sales. The heavy-vehicle instruments business
reported significantly lower sales in 2000 due to weak market conditions, which
began in the second quarter of 2000, compared to robust market conditions in
1999. EIG's aerospace and power instrument businesses continue to grow through
acquisitions and core growth, expanding the Company's technology, market scope
and penetration. Also, the process instruments business continues to rebound
from weak market conditions experienced during the first nine months of 1999.
EIG's operating income for 2000 increased to $78.7 million from $70.0
million in 1999, an increase of 12.6%. The acquisitions described above were the
primary reasons for the increase in operating income. Profit margins were flat
year-to-year at 15.5%. Improved operating performance, primarily by EIG's
aerospace and process businesses was reduced by margin declines on lower sales
of heavy-vehicle instruments.
The ELECTROMECHANICAL GROUP (EMG) sales for 2000 were $515.2 million,
an increase of 8.7%, from sales of $473.7 million in 1999. The 2000 acquisition
of businesses and improved market conditions within the specialty metals market,
drove the year-to-year increase in sales. Partially reducing the sales increase
were EMG's operations in Europe, where competitive pricing pressures and
currency translation changes continue to adversely affect EMG's sales.
B-6
35
EMG's operating income for 2000 increased to $77.6 million from $67.6
million in 1999, a 14.8% increase. The acquisition described above, along with
improved market conditions within the specialty metals market, were the primary
reasons for the increase in operating income. Partially offsetting the profit
improvement were lower profits at EMG's motor operations in Europe, due to the
adverse effects on sales noted above. Operating margins improved to 15.1% of
sales in 2000 from 14.3% in 1999 due to the higher sales, and lower operating
costs in EMG's worldwide motor operations, as a result of the operational
excellence and cost reduction initiatives.
YEAR ENDED DECEMBER 31, 1999, COMPARED WITH YEAR ENDED DECEMBER 31, 1998.
Results of Operations
The Company reported sales for 1999 of $924.8 million, down slightly from
sales of $927.5 million in 1998. EIG's sales increased by 8.9% to $451.1 million
in 1999 from $414.2 million in 1998 because of the incremental sales generated
by strategic acquisitions made during the year. Sales to heavy-vehicle
manufacturers were strong along with an improving process instruments business.
Without the acquisitions, sales for EIG would have been lower than in 1998 due
largely to changes in the mix of sales and to slightly lower demand in process
instruments and aerospace markets. Aerospace markets were down from peak levels
in 1998. For the EMG group, competitive factors in international markets caused
slightly lower unit shipments in 1999 when compared with 1998. The result was a
decline in EMG reported sales to $473.7 million in 1999 from $513.3 million in
1998, a decrease of 7.7%. A change in the mix of U.S. sales also contributed to
the EMG's sales decline. Sales by both segments to foreign markets totaled
$302.0 million in 1999, a decrease of $43.0 million or 12.5% from 1998. Export
shipments from the United States in 1999 were $158.5 million, compared with
$162.6 million in 1998.
New orders for 1999 were $944.5 million, an increase of 4.2% from $906.1
million for 1998. The order backlog at December 31, 1999 was $243.5 million,
compared with $223.8 million at December 31, 1998. New orders from the strategic
acquisitions made by the Company during the year were the primary reason for the
increase.
The Company's plan to lower its cost structure globally under the
operational excellence initiatives, announced in the fourth quarter of 1998, had
a positive effect on operating income and margins. Total segment operating
income improved to $137.5 million for 1999 compared with operating income of
$125.7 million for 1998, before a fourth quarter 1998 non-recurring charge, an
increase of 9.3%. Operating margins improved to 14.9% from 13.6% for the
comparable period. The operational excellence initiatives and the impact of new
acquisitions, along with the transition of a portion of the Company's motor
production to a lower cost facility in Reynosa, Mexico, the closing and
consolidation of certain EMG motor plants in Europe, improved supply chain
management and flow manufacturing expansion in EIG, along with related workforce
reductions drove margins to higher levels. Consolidated operating income was
$118.8 million or 12.8% of net sales, an increase of $14.3 million when compared
with 1998 operating income of $104.5 million or 11.3% of net sales, before the
$8.0 million pretax nonrecurring charge. Selling, general and administrative
expenses were $79.4 million in 1999, a $2.7 million decrease when compared with
1998 when SG&A totaled $82.1 million. As a percent of sales, SG&A was 8.6% in
1999, slightly lower than in 1998. The corporate cost reduction initiative was
the driving force behind the reduction in general and administrative expense.
Selling expense was flat year-to-year, as new EIG selling expense from
acquisitions almost entirely offset reduced selling costs for the EMG group.
Interest expense was $24.8 million in 1999 compared with $23.7 million in
1998, an increase of 4.7%. Higher average debt levels to finance acquisitions,
was the primary reason for the increase in interest expense. Other income, net
decreased to $0.4 million in 1999 from $4.6 million in 1998 primarily because of
lower gains from the sale of securities and idle property.
Net income for 1999 was $60.8 million, or $1.85 per diluted share, compared
with net income for 1998 of $41.7 million, or $1.24 per diluted share. The 1998
net income includes an after-tax nonrecurring charge of $4.8 million or $0.14
per diluted share, and an after-tax extraordinary charge for the early repayment
of long-term debt of $8.7 million, or $0.26 per diluted share. Without the
nonrecurring charge and the extraordinary item in 1998, net income would have
been $55.3 million, or $1.64 per diluted share.
The weighted average shares outstanding during 1999 were 32.3 million
shares, compared with 32.7 million shares for 1998. The reduction reflects
purchases by the Company through its share repurchase program. The Company
repurchased 0.5 million shares in 1999. After accounting for the dilutive effect
of issued stock options and other stock awards, the weighted average diluted
shares outstanding were 32.9 million shares for 1999, compared with 33.7 million
shares for 1998.
B-7
36
Fourth Quarter Results
Sales for the fourth quarter of 1999 were $236.0 million, compared with
$206.8 million in the fourth quarter 1998. Operating income for the fourth
quarter 1999 was $29.5 million, compared with $20.1 million for the fourth
quarter 1998, before a nonrecurring pretax charge of $8.0 million. The 14%
increase in sales was driven by the strategic acquisitions made by the Company
during 1999, and a stronger worldwide motor market during the fourth quarter of
1999. The acquisitions, combined with productivity gains as a result of the
Company's operational excellence initiatives and cost reduction programs were
the primary reasons for a 46.8% gain in operating income. Net income for the
fourth quarter of 1999 totaled $15.0 million, or $0.46 per diluted share, up 37%
from the fourth quarter 1998 net income of $11.0 million or $0.33 per diluted
share, excluding the after-tax effect of the nonrecurring charge of $4.8
million. The fourth quarter 1999 tax rate was 34.9%, a rate more normal than the
1998 fourth quarter tax rate of 21.4%. The 1998 fourth quarter benefited from a
lower effective tax rate due to lower foreign pretax income, which would be
taxed at higher rates than in the U.S., and favorable foreign tax adjustments
relating to certain prior tax years.
Operating Segment Results
The ELECTRONIC INSTRUMENTS GROUP (EIG) sales were $451.1 million in 1999,
an increase of 8.9% from 1998 sales of $414.2 million. The Company's 1999
acquisition of businesses, which produce electronic instruments and controls,
transducers, sensors, and gauges, drove the year-to-year increase in sales. A
business acquired in December 1999, which specializes in the design and
manufacture of continuous level measurement and control devices has subsequently
enhanced sales growth. The heavy-vehicle instruments business was strong in 1999
because of robust market conditions for heavy trucks. Also, the Company's
process instruments business rebounded from weak market conditions during the
first nine months of 1999. The aerospace business continues to grow because of
the acquisitions described above, expanding the Company's aerospace technology
and market breadth, despite aerospace markets being down slightly from peak
levels in 1998.
Group Operating income for 1999 increased to $70.0 million from $58.0
million in 1998, an increase of 20.6%. The acquisitions described above were the
primary reasons for the large increase in operating income. Profit margins
improved significantly to 15.5% from 14.0% for the same comparable period. The
Group margins benefited from workforce reductions directed toward improving
productivity, and supply chain management savings. EIG's operating income for
1998 was $55.7 million, after a fourth quarter 1998 nonrecurring charge of $2.3
million for cost reduction activities.
The ELECTROMECHANICAL GROUP (EMG) sales for 1999 were $473.7 million, a
$39.5 million decrease from sales of $513.3 million in 1998. Weak market
conditions in Europe and Asia, where major competitive pricing pressures
affected EMG's motor operations, as well as lower demand were the primary
reasons for the sales decline.
Operating income for 1999 was essentially unchanged at $67.6 million.
Improved profitability from the relocation of a portion of its U.S. motor
production to lower cost facilities in Reynosa, Mexico was offset by lower
profits at the Company's motor operations in Europe and Asia on lower unit
volume shipped as a result of market and price competition. Operating margins,
however, improved dramatically to 14.3% in 1999 from 13.2% in 1998. As of
December 31, 1999, approximately 40% of EMG's North American motor production
for floorcare applications and outdoor power equipment is produced in Mexico.
Operations at the Company's Cambridge, Ohio plant ceased in the first quarter of
2000. The plant relocation and rationalization activity in Europe stemming from
the 1998 cost reduction initiatives is now complete. EMG's operating income in
1998 was $62.5 million, after a fourth quarter 1998 $5.2 million nonrecurring
charge for the above mentioned cost reduction activities.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities before proceeds from the sale of
accounts receivable totaled $78.7 million for 2000, compared with $86.6 million
for 1999, a decrease of $7.9 million. The decrease was caused primarily by
higher cash outflows to fund operating working capital requirements due in part
to higher accounts receivable levels related to increased sales and to higher
inventory levels partly associated with the Company's move of certain products
to its low-cost manufacturing facilities. Other long-term liabilities decreased
primarily because of the funding and settlement of a contract issue with a
customer in the fourth quarter of 2000. Net proceeds received from sales of
accounts receivables to a third party under an accounts receivable sales
agreement provided cash of $1 million in 2000, compared with $44 million of cash
provided in 1999. Total net cash provided by operating activities in 2000 was
$79.7 million compared with $130.6 million in 1999. Under the accounts
receivable sales agreement,
B-8
37
entered into in 1999, the Company, through a wholly-owned, special purpose
subsidiary, can sell up to $50 million of eligible accounts receivable.
Cash used for investing activities was $107.4 million for 2000, compared
with $148.0 million for 1999. Cash outlays for new business acquisitions totaled
$81 million in 2000, compared with $147.5 million in 1999. Also, the prior year
included proceeds received from the sale of investment assets of $29.5 million,
compared with $3.3 million in 2000.
Financing activities provided cash of $26.2 million in 2000, compared with
$16.3 million provided in 1999. In 2000, net short-term borrowings increased
$25.2 million, primarily to fund the 2000 acquisitions. During 1999, short-term
borrowings increased $37.8 million and the Company made net payments on long-
term debt of $9.1 million, which included the final repayment on its 9-3/4%
Notes. Common stock repurchases totaled $1.6 million in 2000, compared with $9.3
million in 1999.
As a result of all the Company's cash flow activities, cash and cash
equivalents decreased $1.4 million since year-end 1999, to $7.2 million at
December 31, 2000. The Company believes that it has sufficient cash generating
capabilities and available financing facilities to enable it to meet its needs
in the foreseeable future.
NEW ACCOUNTING PRONOUNCEMENTS
In the fourth quarter of 2000, the Company adopted the Securities and
Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition in Financial Statements". The SAB summarizes certain of the staff's
views in applying generally accepted accounting principles to revenue
recognition in the financial statements. The adoption of the Bulletin did not
have a significant effect on the Company's consolidated results of operations,
financial position, or cash flows.
In September, 2000, the FASB issued Statement No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
- -- A Replacement of FASB Statement 125". The Statement requires extensive
disclosures about securitizations entered into during the period and retained
interests in securitized financial assets at the balance sheet date, accounting
policies, sensitivity information relating to retained interests, and cash flows
distributed to the transferor. The accounting requirements of Statement 140 are
effective for transfers occurring after March 31, 2001. However, the expanded
disclosures about securitizations and collateral are effective for fiscal years
ending after December 15, 2000. The Company is continuing to study the future
impact of adopting the accounting changes of this Statement. The Company adopted
the disclosure requirement by the Statement, for fiscal year 2000, which are
included in footnote 5 of the financial statements.
On July 1, 2000, the Company adopted FASB Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation". The
Interpretation provides guidance on the application of APB Opinion No. 25,
"Accounting for Stock Issued to Employees". The adoption of this Interpretation
did not have a material effect on the Company's consolidated results of
operations, financial position, or cash flows.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement requires recognition of all
derivative instruments measured at fair value in the statement of financial
position. Gains or losses resulting from changes in the value of derivatives
would be accounted for depending on the intended use of the derivative and
whether it qualifies for hedge accounting. In June 1999, the FASB approved a
one-year delay in the effective date of this Statement until January 2001.
In June 2000, the FASB issued Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities". This Statement amends
Statement No. 133 for certain impractical aspects of the original Statement
which were incompatible with many common current hedging approaches. Statement
No. 138 is effective simultaneously with Statement No. 133.
The provisions of SFAS 133 and related amendments and interpretations
became effective for the Company beginning January 1, 2001, including the
interim periods of that year. Based on the Company's limited use of derivative
financial instruments, adoption of these Statements did not have a significant
effect on the Company's consolidated results of operations, financial position,
or cash flows.
B-9
38
INTERNAL REINVESTMENT
Capital Expenditures
Capital expenditures were $29.6 million for 2000, compared with $30.3
million for 1999. Approximately 74% of the expenditures in 2000 were for
equipment to increase productivity and expand capacity. The Company's 2001
capital expenditures are expected to increase when compared to 2000 levels, with
a continuing emphasis on spending to improve productivity, and expand low cost
manufacturing facilities.
Product Development and Engineering
Product development and engineering expenses are directed toward the
development and improvement of new and existing products and processes. Such
expenses were $45.9 million in 2000, an increase from $42.2 million for 1999,
and $42.1 million for 1998. Included in the amounts above are net expenses for
research and development of $23.8 million for 2000, $21.6 million for 1999, and
$23.4 million for 1998.
ENVIRONMENTAL MATTERS
The Company is subject to environmental laws and regulations as well as
stringent cleanup requirements. It also has been named a potentially responsible
party at several sites that are the subject of government-mandated cleanups. No
amounts were charged to expense in 2000 for environmental cleanup. Amounts
charged to expense for environmental cleanup were approximately, $0.9 million in
1999, and $0.3 million in 1998.
It is not possible to accurately quantify the potential financial impact of
actions regarding environmental matters, but the Company believes, based on past
experience and current evaluations, that the outcome of these actions is not
likely to have a material adverse effect on the future results of operations,
financial position, or cash flows of the Company.
IMPACT OF INFLATION
The Company attempts to minimize the impact of inflation through cost
reduction programs and by improving productivity. In addition, the Company uses
the last-in, first-out (LIFO) method of accounting for most inventories (whereby
the cost of products sold approximates current costs), and therefore, the impact
of inflation is substantially reflected in operating costs. In general, the
Company believes programs are in place that are designed to monitor the impact
of inflation and to take necessary steps to minimize inflation's effect on
operations.
MARKET RISK DISCLOSURE
The Company's primary exposure to market risks includes fluctuations in
interest rates on its short-term and long-term debt and in foreign currency
exchange rates.
The Company's long-term debt is fixed rate and its short-term debt is
variable rate. These financial instruments are more fully described in the notes
to the financial statements.
The foreign currencies to which the Company has the most significant
exchange rate exposure is the Italian lira, and the European Euro currency.
Exposure to foreign currency rate fluctuation is mitigated, when possible,
through the use of natural hedges, whereby, purchases and sales in the same
foreign currency and with similar maturities offset one another. Translation of
foreign financial statements into U.S. dollars have not had a significant effect
on the operating results reported by the Company.
Based on a hypothetical ten percent adverse movement in interest rates and
foreign currency exchange rates, the potential losses in future earnings, fair
value of risk sensitive financial instruments, and cash flows are immaterial,
although the actual effects may differ materially from the hypothetical
analysis.
FORWARD-LOOKING INFORMATION
Except for historical information contained herein, certain matters
discussed in this Form 10-K are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act (PSLRA) of 1995, which involve risks
and uncertainties that exist in the Company's operations and business
environment, and are subject to change based
B-10
39
on various important factors. The Company wishes to take advantage of the "safe
harbor" provisions of the PSLRA by cautioning readers that numerous important
factors discussed below, among others, in some cases have caused, and in the
future could cause, the Company's actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company. The following include some, but not all, of the factors or
uncertainties that could cause actual results to differ from projections:
- An economic slowdown, or unforeseen price reductions in the Company's
global market segments, with adverse effects on profit margins.
- The Company's ability to continue achieving its cost reduction
objectives, due in part to varying prices and availability of certain
raw materials and semifinished materials and components.
- Underutilization of the Company's existing factories and plants, or
plant expansions or new plants; possibly resulting in production
inefficiencies. Higher than anticipated, or unanticipated start-up
expenses and production delays at new plants.
- The unanticipated expenses of divesting businesses, or of assimilating
newly-acquired businesses into the Company's business structure; as
well as the impact of unusual expenses from business strategies, asset
valuations, acquisitions, divestitures and organizational structures.
Acquisition and divestiture strategies may face legal and regulatory
delays and other unforeseeable obstacles beyond the Company's control.
- Unpredictable delays or difficulties in the development of key new
product programs, and the risk of not recovering major research and
development expenses, and/or the risks of major technological shifts
away from the Company's technologies and core competencies.
- A prolonged slowing of the growth rate in the U.S. and Europe for
electric motor products, aerospace, heavy-vehicle and process
instrumentation; as well as a restriction in the ability of
heavy-vehicle manufacturers to secure components manufactured by
outside suppliers.
- Rapid or unforeseen escalation of the cost of regulatory compliance
and/or litigation, including but not limited to, environmental
compliance, product-related liability, assertions related to
intellectual property rights and licenses, adoption of new, or changes
in accounting policies and practices and the application of such
policies and practices.
- The effects, in the United States and abroad, of changes in trade
practices; monetary and fiscal policies; laws and regulations; other
activities of governments, agencies and similar organizations; and
social and economic conditions, such as trade restrictions or
prohibitions; unforeseen inflationary pressures and monetary
fluctuation; import and other charges or taxes; the ability or
inability of the Company to obtain, or hedge foreign currencies,
foreign currency exchange rates and fluctuation in those rates. This
would include extreme currency fluctuations; protectionism and
confiscation of assets; nationalizations and unstable governments and
legal systems, and intergovernmental disputes.
- Variation in the level of orders booked, which can be affected by
general economic conditions, intensity of competition and continued
marketplace acceptance of products.
The Company believes that it has the product offerings, facilities, personnel
and competitive and financial resources for continued business success. However,
future revenues, costs, margins, product mix and profits are all influenced by a
number of factors, as discussed above.
B-11
40
REPORT OF MANAGEMENT
Management has prepared and is responsible for the integrity of the
consolidated financial statements and related information included herein. The
statements are prepared in conformity with accounting principles generally
accepted in the United States consistently applied and include certain amounts
based on management's best estimates and judgments. Historical financial
information elsewhere in this report is consistent with that in the financial
statements.
In meeting its responsibility for the reliability of the financial
information, management maintains a system of internal accounting controls,
including an internal audit program. The system of controls provides for
appropriate division of responsibility and the application of written policies
and procedures. That system, which undergoes continual reevaluation, is designed
to provide reasonable assurance that assets are safeguarded and records are
adequate for the preparation of reliable financial data. Management uses its
best judgment in balancing the benefits of the system with its cost. Management
believes that the Company's system of internal control is effective and adequate
to accomplish the above-described objectives.
The Company's independent auditors, Ernst & Young LLP, are engaged to
render an opinion as to whether management's financial statements present
fairly, in all material respects, the Company's financial position and operating
results. Their report is included herein.
The Audit Committee of the Board of Directors, which is composed solely of
Directors who are not employees of the Company, meets with the independent
auditors, the internal auditors and management to satisfy itself that each is
properly discharging its responsibilities. The Report of the Audit Committee is
included in this proxy statement. Both the independent auditors and internal
auditors have direct access to the Audit Committee.
Management recognizes its responsibility for conducting the Company's
activities according to the highest standards of personal and corporate conduct.
That responsibility is characterized and reflected in key policy statements
publicized throughout the Company.
/s/ John Molinelli
John J. Molinelli
Executive Vice President-
January 22, 2001 Chief Financial Officer
B-12
41
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of AMETEK, Inc.
We have audited the accompanying consolidated balance sheets of AMETEK,
Inc. as of December 31, 2000 and 1999, and the related consolidated statements
of income, cash flows, and stockholders' equity for each of the three years in
the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
AMETEK, Inc. at December 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
Philadelphia, PA
January 22, 2001
B-13
42
AMETEK, INC.
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31,
-------------------------------------------
2000 1999 1998
------------- ------------- ---------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
Net sales......................................................... $ 1,024,660 $ 924,797 $ 927,474
----------- ---------- ----------
Expenses:
Cost of sales (excluding depreciation).......................... 761,548 696,011 711,020
Selling, general and administrative............................. 95,147 79,351 82,089
Depreciation.................................................... 32,075 30,638 29,909
Nonrecurring charge............................................. -- -- 8,020
------- --------- ---------
Total expenses............................................... 888,770 806,000 831,038
------- --------- ---------
Operating income.................................................. 135,890 118,797 96,436
Other income (expenses):
Interest expense................................................ (29,203) (24,776) (23,659)
Other, net...................................................... (549) 440 4,581
-------- --------- ---------
Income before income taxes........................................ 106,138 94,461 77,358
Provision for income taxes........................................ 37,606 33,693 26,909
------ --------- ---------
Income before extraordinary item.................................. 68,532 60,768 50,449
Extraordinary loss on early extinguishment of debt, net of taxes.. -- -- (8,710)
-------- --------- ---------
Net income........................................................ $ 68,532 $ 60,768 $ 41,739
======= ========= =========
Basic earnings (loss) per share:
Income before extraordinary item................................ $ 2.13 $ 1.88 $ 1.55
Extraordinary loss on early extinguishment of debt.............. -- -- (0.27)
-------- --------- ---------
Net income...................................................... $ 2.13 $ 1.88 $ 1.28
======== ========= =========
Diluted earnings (loss) per share:
Income before extraordinary item................................ $ 2.11 $ 1.85 $ 1.50
Extraordinary loss on early extinguishment of debt.............. -- -- (0.26)
-------- --------- ---------
Net income...................................................... $ 2.11 $ 1.85 $ 1.24
======== ========= =========
Average common shares outstanding:
Basic shares.................................................... 32,131 32,297 32,733
====== ========= ==========
Diluted shares.................................................. 32,534 32,925 33,741
====== ========= ==========
See accompanying notes.
B-14
43
AMETEK, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
------------------------
2000 1999
---- ----
(DOLLARS IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents......................................$ 7,187 $ 8,636
Marketable securities........................................... 8,111 6,764
Receivables, less allowance for possible losses................. 139,568 112,756
Inventories..................................................... 129,365 102,396
Deferred income taxes........................................... 10,516 12,001
Other current assets............................................ 8,353 13,548
-------- ---------
Total current assets......................................... 303,100 256,101
Property, plant and equipment, net................................ 213,955 219,571
Goodwill, net of accumulated amortization......................... 299,479 248,304
Investments and other assets...................................... 42,454 44,174
-------- ---------
Total assets................................................$ 858,988 $ 768,150
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt....$ 127,601 $ 99,674
Accounts payable................................................ 87,315 73,377
Income taxes payable............................................ 12,347 17,979
Accrued liabilities............................................. 70,392 71,706
-------- ---------
Total current liabilities.................................... 297,655 262,736
Long-term debt.................................................... 233,616 231,756
Deferred income taxes............................................. 33,166 27,781
Other long-term liabilities....................................... 13,713 29,661
Stockholders' equity:
Preferred stock, $0.01 par value; authorized: 5,000,000
shares; none issued.......................................... -- --
Common stock, $0.01 par value; authorized: 100,000,000
shares; issued: 2000 and 1999 -- 33,376,491 shares........... 334 334
Capital in excess of par value.................................. 2,248 2,041
Retained earnings............................................... 330,696 269,861
Accumulated other comprehensive losses.......................... (30,165) (27,395)
Less: Cost of shares held in treasury: 2000 -- 931,295
shares; 1999 -- 1,413,502 shares............................. (22,275) (28,625)
-------- ---------
Total stockholders' equity................................... 280,838 216,216
-------- ---------
Total liabilities and stockholders' equity..................$ 858,988 $ 768,150
========= =========
See accompanying notes.
B-15
44
AMETEK, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
2000 1999 1998
---------------------------- ----------------------------- ----------------------------
COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE STOCKHOLDERS'
INCOME EQUITY INCOME EQUITY INCOME EQUITY
(DOLLARS IN THOUSANDS)
CAPITAL STOCK
Preferred Stock, $0.01 par value......... $ -- $ -- $ --
--------- -------- -------
Common Stock, $0.01 par value
Balance at the beginning of the year... 334 334 332
Shares issued, net of common stock
retirement............................. -- -- 2
--------- -------- --------
Balance at the end of the year....... 334 334 334
--------- -------- --------
CAPITAL IN EXCESS OF PAR VALUE
Balance at the beginning of the year... 2,041 4,727 3,146
Employee stock option, savings and
award plans........................... 207 (2,686) 1,581
--------- -------- -------
Balance at the end of the year....... 2,248 2,041 4,727
--------- -------- -------
RETAINED EARNINGS
Balance at the beginning of the year... 269,861 216,837 182,935
Net income............................. $ 68,532 68,532 $ 60,768 60,768 $ 41,739 41,739
------- -------- --------
Cash dividends paid.................... (7,697) (7,744) (7,837)
--------- -------- --------
Balance at the end of the year....... 330,696 269,861 216,837
--------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE LOSSES(1)
Foreign currency translation:
Balance at the beginning of the year.... (26,292) (16,277) (20,246)
Translation adjustments................. (4,175) (4,175) (10,015) (10,015) 3,969 3,969
--------- -------- --------
Balance at the end of the year........ (30,467) (26,292) (16,277)
--------- -------- --------
Minimum pension liability adjustment:
Balance at the beginning of the year.... (280) (4,012) (1,909)
Adjustments during the year............. 111 111 3,732 3,732 (2,103) (2,103)
--------- -------- --------
Balance at the end of the year...... (169) (280) (4,012)
--------- -------- --------
Valuation adjustments for marketable
securities and other:
Balance at the beginning of the year.... (823) (575) 268
Increase (decrease) in marketable 1,294 1,294 (248) (248) (1,018) (1,018)
securities(2)...........................
Other................................... -- -- -- -- 175 175
------ -------- --------
Net change in marketable securities
and other............................. 1,294 (248) (843)
------ --------- -------- -------- -------- --------
Balance at the end of the year........ 471 (823) (575)
--------- -------- --------
Total other comprehensive (loss)
income for the year................... (2,770) (6,531) 1,023
------ -------- --------
Total comprehensive income for the
year.................................. $ 65,762 $ 54,237 $ 42,762
Accumulated other comprehensive loss ======== ======== ========
at the end of the year................. (30,165) (27,395) (20,864)
--------- -------- --------
TREASURY STOCK
Balance at the beginning of the year..... (28,625) (26,985) (5,479)
Employee stock option, savings and 7,961 7,641 6,493
award plans..............................
Purchase of treasury stock............... (1,611) (9,281) (27,999)
--------- -------- --------
Balance at the end of the year......... (22,275) (28,625) (26,985)
--------- -------- --------
Total Stockholders' Equity........... $ 280,838 $216,216 $174,049
========= ======== ========
- --------------
(1) Amounts presented are net of tax based on an average effective tax
rate of 35%, except for foreign currency translation adjustments,
which are presented on a pretax basis.
(2) Includes reclassification adjustment for gains included in net income
for 2000, 1999, and 1998 of $0.3 million, $0.1 million, and $1.2
million, respectively.
See accompanying notes.
B-16
45
AMETEK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31,
2000 1999 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
CASH PROVIDED BY (USED FOR):
Operating activities:
Income before extraordinary item.................................... $ 68,532 $ 60,768 $ 50,449
Adjustments to reconcile income before extraordinary
item to net cash provided by operating activities:
Depreciation and amortization.................................... 43,257 39,624 38,369
Deferred income taxes............................................ 6,430 5,118 (1,692)
Changes in assets and liabilities (net of acquisitions):
(Increase) decrease in receivables............................. (16,782) (7,008) 10,953
(Increase) decrease in inventories and other current assets.... (6,622) (68) 3,085
(Decrease) increase in payables, accruals, and income taxes.... (4,390) (6,861) (20,657)
(Decrease) increase in other long-term liabilities............. (14,866) 1,568 (3,340)
Other............................................................ 3,165 (6,572) 1,219
------ --------- ---------
Cash provided by operating activities before sale of
accounts receivable............................................ 78,724 86,569 78,386
Increase in accounts receivable sold............................. 1,000 44,000 --
------ --------- --------
Total operating activities....................................... 79,724 130,569 78,386
------ --------- ---------
Investing activities:
Additions to property, plant and equipment.......................... (29,554) (30,331) (49,841)
Purchase of businesses.............................................. (81,017) (147,470) (115,380)
Proceeds from sale of assets........................................ 3,314 29,515 4,770
Increase in marketable securities and other......................... (143) 255 (3,038)
------- --------- ---------
Total investing activities....................................... (107,400) (148,031) (163,489)
-------- --------- ---------
Financing activities:
Net change in short-term borrowings................................. 25,154 37,820 51,023
Additional long-term borrowings..................................... 3,003 5,201 225,000
Reduction in long-term borrowings................................... (271) (14,309) (136,948)
Debt prepayment premium and new debt issuance costs................. -- -- (16,829)
Repurchases of common stock......................................... (1,611) (9,281) (27,999)
Cash dividends paid................................................. (7,697) (7,744) (7,837)
Proceeds from stock options......................................... 7,649 4,541 4,793
Other............................................................... -- 102 2,984
------ --------- ---------
Total financing activities....................................... 26,227 16,330 94,187
------ --------- ---------
(Decrease) increase in cash and cash equivalents...................... (1,449) (1,132) 9,084
Cash and cash equivalents:
Beginning of year................................................... 8,636 9,768 684
----- --------- ---------
End of year......................................................... $ 7,187 $ 8,636 $ 9,768
====== ========= =========
See accompanying notes.
B-17
46
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying consolidated financial statements reflect the operations,
financial position and cash flows of AMETEK, Inc. (the "Company"), and include
the accounts of the Company and subsidiaries, after elimination of all
significant intercompany transactions in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates and assumptions.
Cash Equivalents, Securities, and Other Investments
All highly liquid investments with maturities of three months or less when
purchased are considered cash equivalents. At December 31, 2000 and 1999, all of
the Company's equity securities and fixed income securities (primarily those of
a captive insurance subsidiary) are considered available-for-sale. The aggregate
market value of such securities at December 31, 2000 and 1999 was: 2000 -- $16.4
million ($16.0 million amortized cost) and 1999 -- $14.5 million ($16.1 million
amortized cost). The Company's other investments are accounted for by the equity
method.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined principally by the last-in, first-out (LIFO) method of inventory
valuation, and market on the basis of the lower of replacement cost or estimated
net proceeds from sales. The excess of the first-in, first-out (FIFO) value over
the LIFO value at December 31, 2000 and 1999 was $31.6 million and $33.2
million, respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for
additions to plant facilities, or that extend their useful lives, are
capitalized. The cost of tools, jigs, and dies, and maintenance and repairs is
charged to operations as incurred. Depreciation of plant and equipment is
calculated principally on a straight-line basis over the estimated useful lives
of the related assets.
Revenue Recognition
The Company generally recognizes revenue when products are shipped and
services are rendered. The policy with respect to sales returns and allowances
generally provides that a customer may not return products, or be given
allowances, except at the Company's option. The aggregate provisions for
estimated warranty costs (not significant in amount) are recorded at the time of
sale and periodically adjusted to reflect actual experience.
Research and Development
Company-funded research and development costs are charged to operations as
incurred and during the past three years were: 2000-$23.8 million, 1999-$21.6
million, and 1998-$23.4 million.
B-18
47
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Earnings Per Share
The calculation of basic earnings per share is based on the average number
of common shares outstanding during the period. Diluted earnings per share
reflect the effect of all potentially dilutive securities (primarily outstanding
common stock options). The following table presents the number of shares used in
the calculation of basic earnings per share and diluted earnings per share:
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
Weighted average shares:
Basic........................................ 32,131 32,297 32,733
Stock option and award plans................. 403 628 1,008
------ ------ ------
Diluted...................................... 32,534 32,925 33,741
====== ====== ======
Foreign Currency Translation
Assets and liabilities of foreign operations are translated by using
exchange rates in effect at the balance sheet date, and their results of
operations are translated by using average exchange rates for the year. Certain
transactions of the Company and its subsidiaries are made in currencies other
than their functional currency. Gains and losses from those transactions are
included in operating results for the year.
Derivative Financial Instruments
The Company makes limited use of derivative financial instruments to manage
interest rate, foreign exchange, and forward contract exposure. The Company does
not hold or trade in derivatives for speculative purposes. Interest rate swap
and cap agreements are sometimes used to manage the interest rate
characteristics of certain outstanding revolving credit loans to a more
desirable fixed or variable rate basis, or to limit the Company's exposure to
rising interest rates. These swaps and caps are matched with the underlying
fixed or variable rate debt, and any periodic cash payments are accrued on a
settlement basis and accounted for as adjustments to interest costs. No gains or
losses are recorded. There were no interest rate swap or cap agreements in place
during 2000. Foreign currency option contracts, foreign currency exchange
contracts, and foreign currency swap agreements may be entered into to mitigate
the translation exposure from investments in certain foreign subsidiaries.
Realized and unrealized gains and losses from these instruments are recognized
when the underlying hedged instrument is settled. Foreign currency forward
contracts are entered into to from time-to-time to hedge specific firm
commitments for certain export sales, thereby minimizing the Company's exposure
to foreign currency fluctuation. These contracts are entered into for periods
generally not to exceed one year. Unrealized gains and losses from these
contracts are deferred and are recognized in operations as the related sales and
purchases occur. Realized and unrealized changes in fair value of derivatives
designated with items that no longer exist, or are no longer probable of
occurring are recorded as a component of the gain or loss arising from the
disposition of the designated item. There are no carrying amounts related to the
above derivative financial instruments in the consolidated balance sheet and the
Company had no significant derivatives outstanding at December 31, 2000 and
1999.
Intangible Assets
The excess of cost over net assets acquired (goodwill) is being amortized
on a straight-line basis primarily over a 30 year period. The Company reviews
the carrying value of intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If such
an event occurred, the Company would prepare projections of future cash flows
for the applicable business. If such projections indicated that goodwill would
not be recoverable, the Company's carrying value of such assets would be reduced
by the estimated excess of such value over projected discounted cash flow.
Patents are being amortized on a straight-line basis over their estimated useful
lives of 9 to 17 years. Other acquired intangibles are being amortized on a
straight-line basis over their estimated useful lives of 5 to 30 years.
B-19
48
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reclassifications
Certain amounts appearing in the prior year's financial statements and
supporting footnote disclosures have been reclassified to conform to the current
year's presentation.
2. NONRECURRING CHARGE
Included in the 1998 results of operations is a pretax nonrecurring charge
of $8.0 million ($4.8 million after-tax, or $0.14 per diluted share) incurred in
the fourth quarter of 1998 for costs associated with initiatives the Company
undertook to lower its cost structure. The initiatives included: the closure and
consolidation of certain of the Company's Electromechanical Group's (EMG) motor
plants in Europe ($2.7 million), the transition of some of EMG's U.S. motor
production to a lower cost facility in Reynosa, Mexico ($1.5 million), selected
workforce reductions, and other initiatives to maximize operating efficiencies,
mostly within the Electronic Instruments Group (EIG) ($3.8 million). As of
December 31, 2000, all actions under these initiatives were completed.
3. ACQUISITIONS
In 2000, the Company made two acquisitions. In August 2000, the Company
acquired the assets of certain businesses of Prestolite Electric Incorporated.
The acquired businesses consist of Prestolite's Switch Division, its Industrial
Battery Charger business, and its Direct-Current (DC) motor business, which are
now a part of the Electromechanical Group. Additionally, in September 2000, the
Company acquired the assets of Rochester Instrument Systems, a leading supplier
for the electric power generation market, which is now a part of the Electronic
Instruments Group. The aggregate purchase price paid for the 2000 acquisitions
was $81 million in cash, subject to adjustment for finalization of the value of
the net assets acquired.
In 1999, the Company made four acquisitions, which operate as part of the
Electronic Instruments Group. On January 4, 1999, the Company acquired all of
the outstanding shares of National Controls Corporation, a leading U.S.
manufacturer of electronic instruments and controls for food service equipment.
On April 30, 1999, the Company acquired substantially all of the assets of
Gulton-Statham Transducers, a leading manufacturer of high-accuracy electronic
pressure transmitters and transducers for the aerospace and industrial markets,
from Mark IV Industries, Inc. On July 30, 1999, the Company acquired Patriot
Sensors and Controls Corporation, a leading manufacturer of position sensors,
tank gauges and aviation transducers, from First Atlantic Capital, Ltd. These
products are used in a wide range of industrial and aerospace applications.
Finally, on December 2, 1999, the Company acquired Drexelbrook Engineering
Company (Drexelbrook). Drexelbrook designs and manufactures point level and
continuous level measurement and control devices and flow measurement
instrumentation. These instruments are used in a variety of end markets,
including chemical, petrochemical, pharmaceutical, food and beverage, pulp and
paper, water and wastewater. The aggregate purchase price paid for the 1999
acquisitions was $147.5 million.
In January 1998, the Company acquired Rotron, Inc., a manufacturer of
electric motors, fans and motor-blowers, from EG&G Holdings, Inc. In April 1998,
the Company acquired the Western Research business unit of BOVAR, Inc. Western
Research is a manufacturer of gas analysis instrumentation for industrial
process control and air emissions monitoring. In July 1998, the Company acquired
the assets of Darmet Corporation, a manufacturer of specialty wire alloys for
electrical and electronics-related applications. The aggregate purchase price of
the 1998 acquisitions was $115.4 million in cash.
As of the closing dates, the Company also recorded liabilities for certain
estimated future pension obligations, and for certain other personnel-related
costs associated with the relocation and consolidation of certain operations of
the acquired businesses.
All of the above acquisitions were accounted for by the purchase method,
and accordingly, the results of their operations are included in the Company's
consolidated results from their respective dates of acquisition. The estimated
goodwill acquired with these businesses is being amortized on a straight-line
basis over thirty years.
B-20
49
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Had the 2000 acquisitions been made at the beginning of 1999, proforma net
sales for 2000 and 1999 would have been $1,085.4 million and $1,022.3 million.
Proforma net income and diluted earnings per share for 2000 or 1999 would not
have been materially different than those reported.
4. OTHER BALANCE SHEET INFORMATION
2000 1999
--------- -----------
(IN THOUSANDS)
INVENTORIES
Finished goods and parts............................... $ 22,879 $ 18,749
Work in process........................................ 31,020 26,904
Raw materials and purchased parts...................... 75,466 56,743
---------- ----------
$ 129,365 $ 102,396
========== ==========
PROPERTY, PLANT AND EQUIPMENT, at cost
Land................................................... $ 9,138 $ 7,753
Buildings.............................................. 105,335 103,405
Machinery and equipment................................ 414,048 405,622
------- ----------
528,521 516,780
Less accumulated depreciation.......................... (314,566) (297,209)
-------- ----------
$ 213,955 $ 219,571
========== ==========
GOODWILL, at cost........................................ $ 327,320 $ 266,377
Less accumulated amortization............................ (27,841) (18,073)
------- ----------
$ 299,479 $ 248,304
========== ==========
INVESTMENTS & OTHER ASSETS Other intangibles, at cost:
Patents................................................ $ 21,448 $ 21,448
Other acquired intangibles............................. 47,513 47,513
Less accumulated amortization.......................... (64,701) (63,541)
------- ----------
4,260 5,420
Investments............................................ 15,727 16,035
Other.................................................. 22,467 22,719
------ ----------
$ 42,454 $ 44,174
========== ==========
ACCRUED LIABILITIES
Accrued employee compensation and benefits............. $ 27,968 $ 26,412
Other.................................................. 42,424 45,294
------ ----------
$ 70,392 $ 71,706
========== ==========
2000 1999 1998
-------- -------- ------
(IN THOUSANDS)
ALLOWANCES FOR POSSIBLE LOSSES ON ACCOUNTS AND
NOTES RECEIVABLE
Balance at beginning of year...................................... $3,994 $ 4,580 $3,932
Additions charged to expense.................................... 264 43 429
Recoveries credited to allowance................................ 43 100 51
Write-offs...................................................... (157) (1,119) (85)
Allowance acquired with new businesses.......................... 214 502 210
Currency translation adjustment and other....................... (40) (112) 43
--- -------- ------
Balance at end of year.......................................... $4,318 $ 3,994 $4,580
====== ======== ======
5. ACCOUNTS RECEIVABLE SALES
On October 1, 1999, the Company entered into an accounts receivable sale
agreement through a wholly-owned, special purpose subsidiary with a bank whereby
it can sell to a third party up to $50 million of its trade accounts receivable.
The Company's retained interest in the associated receivables, which represents
its subordinated interest in the receivables sold to the special purpose
subsidiary that have not subsequently been sold to the third party, is reflected
as a component of accounts receivable in the Company's consolidated balance
sheets. The balance of the retained interest was $29.6 million and $26.2 million
at December 31, 2000 and 1999, respectively. Proceeds from the initial sale of
accounts receivable in 1999 were used to reduce short-term borrowings
outstanding under the Company's revolving bank credit agreement. The special
purpose subsidiary uses collections on previously purchased
B-21
50
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
interests to acquire additional interests in new eligible receivables from the
Company. The Company remains responsible for servicing the underlying accounts
receivable for which it receives an adequate service fee as compensation. The
Company estimates the fair value of its retained interests by considering the
present value of future cash flows from the retained interest and expected
credit losses in both the pool of receivables making up the retained interest
and the pool of receivables sold to the third party. Due to the short period of
time over which cash flows from the retained interest are expected to be
realized (based on an average collection cycle of 60 days), the cost basis of
the underlying receivables approximates fair value, less an associated allowance
for doubtful accounts. A hypothetical 10% or greater adverse change in either
the discount rate used to calculate the present value of future cash flows or
the collection cycle would not materially affect the fair value of the retained
interest. During 2000, the Company sold to its special purpose subsidiary $541.7
million in net receivables throughout the year and made collections on these
receivables, net of a servicing fee, of $537.3 million. Accounts receivable sold
to third parties as of December 31, 2000 and 1999 were $45 million and $44
million, respectively. The costs associated with the sale of accounts
receivable, which are included in interest expense, were $3 million in 2000 and
$1 million in 1999.
6. LONG-TERM DEBT
At December 31, 2000 and 1999, long-term debt consisted of the following:
DECEMBER 31,
2000 1999
---------- -------
(IN THOUSANDS)
7.20% Senior Notes due 2008........................ $ 225,000 $225,000
Other, Principally Foreign......................... 9,938 6,872
--------- ---------
234,938 231,872
Less: current portion.............................. (1,322) (116)
--------- ---------
Total long-term debt.......................... $233,616 $231,756
========= =========
Maturities of long-term debt outstanding at December 31, 2000 are as
follows: $3.0 million in 2002; $2.2 million in 2003; $1.9 million in 2004; and
$226.5 million in 2005 and thereafter. On July 17, 1998 the Company issued,
through a private placement, $225 million principal amount of 7.20% Senior Notes
due July 15, 2008. The Senior Notes were priced at a discount to yield of 7.241%
to maturity.
In connection with the early retirement of $136.2 million of senior notes
in 1998, an extraordinary after-tax charge of $8.7 million, or $0.26 per diluted
share, was recorded net of tax benefits totaling $5.1 million.
At, December 31, 2000, the Company had a $195 million revolving Bank Credit
Agreement that matures in 2002. Interest rates on outstanding loans under the
Bank Credit Agreement are based on the London Interbank Offered Rate (LIBOR),
plus a negotiated spread over LIBOR, or at the U.S. prime rate. At December 31,
2000, the Company had $114 million in revolving credit loans outstanding at a
blended rate of 7.40%, all of which are included in short-term borrowings at
year-end.
The Bank Credit Agreement was amended in 1999, to change restrictions on
allowable foreign debt, and the measurement of the pro forma effect of potential
acquisitions in certain debt covenant compliance calculations. The Bank Credit
Agreement places certain restrictions on cash payments, including the payment of
dividends. At December 31, 2000, retained earnings of approximately $18.2
million were not subject to the dividend limitation.
Foreign subsidiaries of the Company had available credit facilities with
local foreign lenders of approximately $37.7 million, of which $22.2 million was
outstanding at December 31, 2000. The weighted average interest rate on total
debt outstanding at December 31, 2000 was 7.31%. The Company also had
outstanding letters of credit totaling $14.3 million at December 31, 2000.
7. STOCKHOLDERS' EQUITY
In 2000, the Company repurchased 83,500 shares of its common stock, under
its current share repurchase authorization at a total cost of $1.6 million. This
compares with repurchases of 492,000 shares at a total cost of $9.3 million in
1999. At December 31, 2000, approximately $27 million of the current $50 million
authorization was unexpended.
B-22
51
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has a Shareholder Rights Plan, under which the Company's Board
of Directors declared a dividend of one Right for each share of Company common
stock owned. The Plan provides, under certain conditions involving acquisition
of the Company's common stock, that holders of Rights, except for the acquiring
entity, would be entitled to (i) to purchase shares of preferred stock at a
specified exercise price, or (ii) to purchase shares of common stock of the
Company, or the acquiring company, having a value of twice the Rights exercise
price. The Rights under the Plan expire in 2007.
8. STOCK OPTION AND AWARD PLANS
In 1999, the Company adopted the 1999 Stock Incentive Plan ("the 1999
Plan"). The 1999 Plan provided for the grant of up to 2.0 million shares of
common stock to eligible employees and nonemployee directors of the Company in
the form of options, phantom stock awards, restricted stock awards and stock
rights. The Company's 1997 Stock Incentive Plan permitted the grant of up to 3.8
million shares of common stock. Stock options may be granted as non-qualified
stock options or as incentive stock options under the Internal Revenue Code of
1986.
Restricted stock awards of the Company's common stock are made to eligible
employees and nonemployee directors at such cost to the recipient as the stock
option committee of the Board of Directors may determine. Such shares are issued
subject to certain conditions with respect to transfer and other restrictions as
prescribed by the plan. Upon issuance of restricted stock, unearned
compensation, equivalent to the excess of the market price of the shares awarded
over the price paid by the recipient at the date of grant, is charged to
stockholders' equity and is included in treasury stock. Unearned compensation is
amortized to expense over the periods until the restrictions lapse. In December
2000, the Company awarded 150,000 shares of restricted stock. The expense
related to the restricted stock award was immaterial in 2000. The Company did
not grant any restricted stock in 1999 or 1998.
In 2000, the Company reserved 14,600 shares, net of share adjustments for
terminations, under a Supplemental Executive Retirement Plan ("SERP"), bringing
the total number of shares reserved to 94,100 shares. Charges to expense under
the SERP are considered pension expense (see Note 11), with the offsetting
credit reflected in stockholders' equity.
At December 31, 2000, 4,259,584 (4,842,758 in 1999) shares of common stock
were reserved for issuance, (including stock options outstanding), under the
1999 and 1997 plans. The options are exercisable at prices not less than market
prices on dates of grant, and in installments over four-to-ten-year-periods from
dates of grant. The Company had no stock appreciation rights outstanding at
December 31, 2000 or 1999. Stock appreciation rights, when issued, are
exercisable for cash and/or shares of the Company's common stock when the
related option is exercised. A charge to income, not significant in amount, is
made for these rights and certain related options.
A summary of the Company's stock option activity and related information
for the years ended December 31 follows:
2000 1999 1998
------------------------------ ----------------------------------------------------------
PRICE PRICE PRICE
SHARES RANGE SHARES RANGE SHARES RANGE
---------- ---------------- ----------- ---------------- ---------- --------------
Outstanding at beginning of year 2,907,991 $10.92 -- $30.34 2,687,031 $10.92 -- $30.34 2,601,564 $ 9.73 --$23.78
Granted....................... 566,150 $19.94 -- $24.44 717,400 $18.78 -- $24.84 593,600 $25.69 --$30.34
Exercised..................... (433,174) $10.92 -- $20.00 (377,260) $11.60 -- $22.00 (417,653) $ 9.73 --$18.10
Canceled...................... (84,372) $14.15 -- $30.34 (119,180) $14.15 -- $30.34 (90,480) $11.60 --$28.63
---------- ---------------- --------- ----------------- ---------- ---------------
Outstanding at end of year.... 2,956,595 $11.60 -- $30.34 2,907,991 $10.92 -- $30.34 2,687,031 $10.92 --$30.34
========= ================ ========= ================= ========== ==============
Exercisable at end of year.... 1,634,903 $11.60 -- $30.34 1,628,799 $10.92 -- $30.34 1,570,966 $10.92 --$23.78
========= ================ ========= ================= ========== ===============
B-23
52
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information pertaining to the Company's
stock options outstanding at December 31, 2000:
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
RANGE OF AVERAGE REMAINING AVERAGE
EXERCISE OPTIONS EXERCISE CONTRACTUAL OPTIONS EXERCISE
PRICES OUTSTANDING PRICE LIFE EXERCISABLE PRICE
------ ----------- --------- ----------- ------------ --------
$11.60 -- $18.20 1,222,645 $ 13.90 3.8 1,215,133 $ 13.87
$18.21 -- $24.27 997,600 $ 20.26 5.8 131,050 $ 20.48
$24.28 -- $30.34 736,350 $ 27.97 4.9 288,720 $ 28.88
---------- ------- --- ------- -------
2,956,595 $ 19.55 4.7 1,634,903 $ 17.05
========== ======= === =========== =======
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for its stock option plans. Had
compensation expense for such plans been determined in accordance with Financial
Accounting Standards Board Statement No. 123, "Accounting for Stock-Based
Compensation" pro forma net income and related per share amounts for the years
ended December 31, 2000, 1999, and 1998 would have been as follows:
2000 1999 1998
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income:
As reported............................................................ $ 68,532 $ 60,768 $ 41,739
Pro forma.............................................................. 66,452 58,838 40,120
Net income per share:
Basic:
As reported......................................................... $ 2.13 $ 1.88 $ 1.28
Pro forma........................................................... 2.07 1.82 1.23
Diluted:
As reported......................................................... 2.11 1.85 1.24
Pro forma........................................................... 2.07 1.82 1.23
The weighted average fair value of each option grant on the grant date was
$7.18 for 2000, $6.65 for 1999, and $8.41 for 1998. The fair value of each
option was estimated using the Black-Scholes option pricing model with the
following weighted-average assumptions for options granted in each of the last
three years.
2000 1999 1998
------ ------ -----
Expected life (years)....................................................... 5.0 5.0 5.0
Expected volatility......................................................... 30.8% 28.0% 24.5%
Dividend yield.............................................................. 1.2% 1.2% 0.8%
Risk-free interest rate..................................................... 6.61% 5.58% 4.79%
9. LEASES
Minimum aggregate rental commitments under noncancelable leases in effect
at December 31, 2000 (principally for production and administrative facilities
and equipment) amounted to $19.1 million consisting of annual payments of $4.7
million in 2001, $3.2 million in 2002, $2.5 million in 2003, $2.0 million in
2004, $1.4 million in 2005 and $5.3 million in 2006 and thereafter. Rental
expense was $8.1 million in 2000, $6.9 million in 1999 and $6.7 million in 1998.
B-24
53
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES
The components of income before income taxes and the details of the
provision for income taxes are as follows:
2000 1999 1998
--------- --------- -------
(IN THOUSANDS)
Income before income taxes:
Domestic.................................................. $ 97,302 $85,797 $69,072
Foreign................................................... 8,664 8,286
-------- ------- -------
8,836
Total.................................................. $ 106,138 $94,461 $77,358
========= ======= =======
Provision for income taxes:
Current:
Federal................................................ $ 26,995 $26,421 $23,965
Foreign................................................ 2,390 5,899 2,335
State.................................................. 1,541 (136) 3,849
--------- ------- -------
Total current........................................ 30,926 32,184 30,149
--------- ------- -------
Deferred:
Federal................................................... 4,733 2,477 (2,148)
Foreign................................................... 1,230 (1,541) (807)
State..................................................... 717 573 (285)
--------- ------- -------
Total deferred....................................... 6,680 1,509 (3,240)
--------- ------- -------
Total provision...................................... $ 37,606 $33,693 $26,909
========= ======= =======
Significant components of the Company's deferred tax (asset) liability as
of December 31 are as follows:
2000 1999
--------- -------
(IN THOUSANDS)
Current deferred tax asset:
Reserves not currently deductible...................................... $ (7,101) $ (7,587)
Other.................................................................. (3,415) (4,414)
--------- --------
Net current deferred tax asset...................................... (10,516) (12,001)
Noncurrent deferred tax (asset) liability:
Differences in basis of property and accelerated
Depreciation........................................................ 18,709 15,774
Purchased tax benefits................................................. 5,434 7,102
Reserves not currently deductible...................................... (5,737) (8,518)
Other.................................................................. 14,760 13,423
--------- --------
Noncurrent deferred tax liability................................... 33,166 27,781
--------- ---------
Net deferred tax liability.......................................... $ 22,650 $ 15,780
========= =========
The effective rate of the provision for income taxes reconciles to the
statutory rate as follows:
2000 1999 1998
------ ------ -----
Statutory rate................................................ 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit(a)...... 1.4 0.3 3.0
Foreign Sales Corporation (FSC) tax credit.................... (3.3) (3.0) (3.7)
Differences between U.S. and foreign tax rates................ 1.0 1.8 1.6
Goodwill amortization......................................... 2.2 1.9 1.4
Other(b)...................................................... (0.9) (0.3) (2.5)
---- ---- -----
35.4% 35.7% 34.8%
===== ===== =====
- ----------------
(a) Years 2000 and 1999 include the reversal of certain prior years' excess
state income tax accruals.
(b) Year 1998 includes favorable foreign tax adjustments relating to prior
years.
B-25
54
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2000, the Company had available net operating loss
carryforwards of approximately $8.1 million to offset future taxable income. The
carryforwards, from a subsidiary acquired in 1999, will expire in 2005 through
2019.
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $50.8 million at December 31, 2000. Those earnings are considered
to be indefinitely reinvested and, accordingly, no provision for U.S. deferred
taxes has been made. Upon distribution of those earnings to the United States,
the Company would be subject to U.S. income taxes (subject to a reduction for
foreign tax credits) and withholding taxes payable to the various foreign
countries. Determination of the amount of unrecognized deferred income tax
liability is not practicable.
11. RETIREMENT AND PENSION PLANS
The Company maintains noncontributory defined benefit pension plans.
Benefits for eligible U.S. salaried and hourly employees are funded through
trusts established in conjunction with the plans. The Company's funding policy
with respect to its defined benefit plans is to contribute amounts that provide
for benefits in accordance with the funding requirements of federal law and
regulations. Assets of these plans are invested in a variety of equity and debt
instruments and in pooled temporary funds, as well as the Company's common
stock, the investment in which is not material to total plan assets.
The Company's retirement and savings plan has a defined contribution
retirement feature principally to cover U.S. salaried employees joining the
Company after December 31, 1996. Under this retirement feature, the Company
makes contributions for eligible employees based on a pre-established percentage
of the covered employee's salary. Employees of certain of the Company's foreign
operations participate in various local plans that in the aggregate are not
significant.
Effective May 1, 1999, the Company adopted a savings plan for its acquired
businesses for the benefit of eligible employees. Company contributions are made
for each participant up to a specified percentage, not to exceed 6% of the
participant's base compensation.
The Company has nonqualified unfunded retirement plans for its Directors
and certain retired employees. It also provides supplemental retirement
benefits, through contractual arrangements and/or a SERP covering certain
current and former employees of the Company. These supplemental benefits are
designed to compensate the employee for retirement benefits the executive would
have been provided under the Company's primary retirement plan, except for
statutory limitations on compensation that may be taken into account under those
plans. The projected benefit obligations of the SERP and the contracts will
primarily be funded by a grant of shares of the Company's common stock upon
retirement or termination of the employee. The Company is providing for these
obligations by charges to earnings over the applicable periods.
B-26
55
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides a reconciliation of the changes in benefit
obligations and fair value of plan assets for the defined benefit plans for 2000
and 1999:
2000 1999
---- ----
(IN THOUSANDS)
Change in benefit obligation
Net benefit obligation at beginning of period $ 253,672 $263,008
Service cost......................................................... 4,918 5,810
Interest cost........................................................ 19,410 18,279
Plan amendments...................................................... 1,241 650
Actuarial gain....................................................... (4,429) (18,273)
Benefits paid........................................................ (16,644) (15,802)
------- -------
Net benefit obligation at end of period............................ $258,168 $253,672
======== =========
Change in plan assets
Fair value of plan assets at beginning of period..................... $ 291,158 $265,681
Actual return on plan assets......................................... 38,162 40,587
Employer contributions............................................... 1,296 692
Benefits paid........................................................ (16,644) (15,802)
------- ----------
Fair value of plan assets at end of period $313,972 $291,158
========= ==========
The following table provides aggregate information for pension plans with
accumulated benefits in excess of plan assets:
2000 1999
-------- ------
(IN THOUSANDS)
Projected benefit obligation......................................... $ 4,071 $7,961
Accumulated benefit obligation....................................... 4,071 7,961
Fair value of plan assets............................................ 0 3,633
The following table provides the amounts recognized in the consolidated
balance sheets at December 31, 2000 and 1999:
2000 1999
--------- -------
(IN THOUSANDS)
Funded status asset (liability)
Funded status at December 31......................................... $ 55,805 $ 37,486
Unrecognized net actuarial gain...................................... (40,942) (24,659)
Unrecognized prior service cost...................................... 3,611 3,082
Unrecognized net transition asset.................................... (908) (1,490)
--------- ---------
Net amount recognized at December 31............................... $ 17,566 $ 14,419
========= =========
Balance sheet asset (liability)
Prepaid benefit cost................................................. $ 22,402 $ 20,682
Accrued benefit liability............................................ (4,836) (6,263)
Additional minimum liability......................................... (397) (919)
Intangible asset..................................................... 137 489
Accumulated other comprehensive income (before deferred tax
benefit)........................................................... 260 430
--------- ---------
Net amount recognized at December 31............................... $ 17,566 $ 14,419
========= =========
B-27
56
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides the components of net periodic benefit cost
charged to income for the three years ended December 31, 2000:
2000 1999 1998
--------- --------- -------
(IN THOUSANDS)
Defined benefit plans:
Service cost for benefits earned during the period $ 4,918 $ 5,810 $ 6,498
Interest cost on projected benefit obligation 19,410 18,278 17,732
Expected return on plan assets............................... (26,192) (23,875) (24,288)
Net amortization............................................. (45) 323 233
--------- --------- ---------
Net pension (income) cost................................. (1,909) 536 175
Other plans:
Defined contribution plans................................... 1,960 2,439 1,747
Supplemental retirement plans................................ 517 312 301
Foreign plans and other...................................... 801 728 1,234
--------- --------- ---------
Total other plans......................................... 3,278 3,479 3,282
--------- --------- ---------
Net pension cost........................................ $ 1,369 $ 4,015 $ 3,457
========= ========= =========
Assumptions used in accounting for the defined benefit plans as of December
31 of each year (based on a measurement date of October 1) were:
2000 1999 1998
------ ------ -----
Discount rate used in determining present values................. 8.00% 7.75% 7.00%
Annual rate of increase in future compensation levels............ 4.75% 4.75% 4.25%
Expected long-term rate of return on plan assets................. 9.25% 9.25% 9.25%
Effective October 1, 1999, the Company adopted a deferred compensation
plan, which allows employees whose compensation exceeds the statutory IRS limit
for retirement benefits to defer a portion of earned bonus compensation. The
plan permits deferred amounts to be deemed invested in either, or a combination
of, (a) an interest bearing fund, benefits from which are payable out of the
general assets of the Company, or (b) a fund which invest in shares of the
Company's common stock on behalf of the employee. The amount deferred under the
plan at December 31, 2000 is not significant. Initial employee deferrals began
January 1, 2000. Administrative expense for the plan is borne by the Company and
is not significant.
The Company provides limited postretirement benefits other than pensions
for certain retirees and a small number of employees. Benefits under these
arrangements are not significant. The Company also provides limited
postemployment benefits for certain former or inactive employees after
employment but before retirement. Those benefits, which are not significant in
amount, are accounted for on the accrual basis of accounting.
12. FINANCIAL INSTRUMENTS
The Company makes limited use of derivative financial instruments, and does
not use them for trading purposes. Such instruments are generally used to manage
well-defined interest rate risks and to hedge firm commitments related to
certain export sales denominated in a foreign currency.
Interest rate swap and cap agreements are used to reduce the potential
impact of increases in interest rates on the Company's borrowings. Accordingly,
the Company may enter into these agreements to effectively convert floating-rate
loans to fixed-rate loans and to cap certain interest rates that are indexed to
LIBOR rates to reduce the risk from rising interest rates. In 2000, the Company
did not enter into any such agreements and none are outstanding at December 31,
2000.
Cross currency and interest rate agreements may be used to hedge a portion
of the Company's net investment in certain foreign subsidiaries. At December 31,
2000 and 1999, the Company was party to one such agreement, whereby the Company
agreed to swap British pounds for an equivalent amount of U.S. dollars totaling
$3.8 million. The agreement provides for the Company to make a fixed interest
rate payment while receiving interest at floating rates. The currency swap
agreement was renewed on its August 1999 termination date and now terminates in
August 2001. The fair value of this agreement at December 31, 2000 and 1999 was
not significant.
B-28
57
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Forward currency contracts may be entered into from time-to-time to hedge
certain firm export sales commitments denominated in foreign currencies. The
purpose of such hedging activities is to protect the Company from the risk that
the eventual net cash dollar inflows and outflows resulting from the sale of
products to foreign customers will be adversely affected by changes in exchange
rates. At December 31, 2000 and 1999, the Company was not party to any forward
currency contracts. The terms of the currency contracts are linked to the firm
commitment and generally do not exceed one year. Deferred gains and losses on
such contracts, which are not significant, are recognized in operations as the
related sales and purchases occurred.
The estimated fair values of the Company's other financial instruments are
compared below to the recorded amounts at December 31, 2000 and 1999. Cash, cash
equivalents, and marketable securities are recorded at fair value at December
31, 2000 and 1999 in the accompanying balance sheet.
ASSET (LIABILITY)
---------------------------------------------------
DECEMBER 31, 2000 DECEMBER 31, 1999
------------------------ ----------------------
RECORDED FAIR RECORDED FAIR
AMOUNT VALUE AMOUNT VALUE
(IN THOUSANDS)
Fixed income and equity investments.................. $ 15,703 $ 15,703 $ 16,035 $ 16,035
Short-term borrowings................................ $(126,279) $(126,279) $ (99,558) $ (99,558)
Long-term debt (including current portion)......... $(234,938) $(220,669) $(231,872) $(206,391)
The fair values of fixed income investments are based on quoted market
prices. The fair value of equity investments are based on amounts reported by
the investee. The fair value of short-term borrowings is based on the carrying
value at year-end. The fair value of the Company's long-term debt, which
consists primarily of publicly traded notes, is based on the quoted market price
for such notes and borrowing rates currently available to the Company for loans
with similar terms and maturities. The fair value of the currency swap
agreement, which is not reflected in the financial statements, is based on
quoted market prices for comparable instruments and is not significant.
13. ADDITIONAL INCOME STATEMENT AND CASH FLOW INFORMATION
Included in other income is interest and other investment income of $1.5
million, $2.6 million, and $4.6 million for 2000, 1999, and 1998, respectively.
Income taxes paid in 2000, 1999, and 1998 were $33.6 million, $29.0 million, and
$25.6 million, respectively. Cash paid for interest was $30.2 million and $24.3
million in 2000 and 1999, respectively. Cash paid for interest in 1998 was $26.3
million, and included $6.6 million for unamortized debt issuance costs related
to the Company's 7.20% Senior Notes due 2008. These unamortized costs are
included as other assets and are being amortized to interest expense over the
life of the 7.20% Senior Notes.
14. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
Descriptive Information About Reportable Segments
The Company has two reportable segments, the Electronic Instruments Group
and the Electromechanical Group. The Company organizes its businesses primarily
on the basis of product type, production processes, distribution methods, and
management organizations.
The Electronic Instruments Group produces instrumentation for various
electronic applications that service certain types of transportation industries,
including aircraft cockpit instruments and displays, airborne electronics
systems that monitor and record flight and engine data, and
pressure-temperature-flow and liquid-level sensors for commercial airlines and
aircraft and jet engine manufacturers. The Group also produces instruments and
complete instrument panels for heavy truck manufacturers and heavy construction
and agricultural vehicles, as well as instruments for foodservice equipment, and
measurement and monitoring instrumentation for various process industries. To a
lesser degree, the Group also manufactures high-temperature-resistant and
corrosion-resistant materials, as well as thermoplastic compounds for
automotive, appliance, and telecommunications applications.
B-29
58
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Electromechanical Group produces air-moving electric motors and
motor-blower systems for manufacturers of floor-care appliances and outdoor
power equipment, fractional horsepower and brushless air-moving motors for
aerospace, mass transit, medical equipment, computer and business machine
applications. The Group also produces high-purity metal powders and alloys in
powder, strip, and wire form for electronic components, aircraft and automotive
products. Sales of electric motors, blowers, and fans represented 42.2% in 2000,
43.8% in 1999, and 47.8% in 1998 of the Company's consolidated net sales.
Measurement of Segment Results
Segment operating income represents sales, less all direct costs and
expenses (including certain administrative and other expenses) applicable to
each segment, but does not include an allocation of interest expense. Net sales
by segment are reported after elimination of intra- and inter-segment sales,
which are insignificant in amount. Such sales are generally based on prevailing
market prices. Reported segment assets include allocations directly related to
the segment's operations. Corporate assets consist primarily of investments,
insurance deposits, and deferred taxes.
B-30
59
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORTABLE SEGMENT FINANCIAL INFORMATION
2000 1999 1998
----------- ---------- -------
(IN THOUSANDS)
Net sales:
Electronic Instruments...................................... $ 509,504 $451,072 $414,202
Electromechanical........................................... 515,156 473,725 513,272
------- --------- ---------
Total Consolidated....................................... $1,024,660 $924,797 $927,474
========= ======== ========
Operating income and income before income taxes:(1) Operating income:
Electronic Instruments.................................... 78,771 $ 69,965 $ 55,703
Electromechanical......................................... 77,560 67,575 62,511
------ -------- --------
Total segments operating income......................... 156,331 137,540 118,214
Corporate administrative and other
expenses................................................ (20,441) (18,743) (21,778)
------- -------- --------
Consolidated operating income................................ 135,890 118,797 96,436
Interest and other expenses, net............................. (29,752) (24,336) (19,078)
------- -------- --------
Consolidated income before income taxes...................... $106,138 $ 94,461 $ 77,358
======= ======== ========
Assets:
Electronic Instruments....................................... $426,317 $ 386,309 $244,509
Electromechanical............................................ 387,983 332,493 375,985
------- ---------- ---------
Total segments.......................................... 814,300 718,802 620,494
Corporate.................................................... 44,688 49,348 79,331
------ ----------- ----------
Total Consolidated...................................... $858,988 $ 768,150 $699,825
======= ========= ========
Additions to property, plant and equipment:(2)
Electronic Instruments....................................... $ 10,883 $ 29,323 $ 11,580
Electromechanical............................................ 19,292 17,531 40,198
------ -------- --------
Total segments.......................................... 30,175 46,854 51,778
Corporate.................................................... 3,557 2,398 3,634
----- -------- --------
Total Consolidated...................................... $ 33,732 $ 49,252 $ 55,412
====== ======== ========
Depreciation and amortization:
Electronic Instruments....................................... 18,939 $ 16,132 $ 15,188
Electromechanical............................................ 24,028 22,980 22,761
------ -------- --------
Total segments.......................................... 42,967 39,112 37,949
Corporate.................................................... 290 512 420
----- -------- --------
Total Consolidated...................................... $ 43,257 $ 39,624 $ 38,369
------------
(1) Amounts in 1998 include a non-recurring charge for cost reduction
initiatives totaling $8.0 million pretax, consisting of $2.3 million in the
Electronic Instruments segment, $5.2 million in the Electromechanical
segment, and $0.5 million in Corporate.
(2) Includes $4.2 million in 2000, $18.9 million in 1999, and $5.6 million in
1998 from acquired businesses.
B-31
60
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Geographic Areas
Information about the Company's operations in different geographic areas
for the years ended December 31, 2000, 1999, and 1998 is shown below. Net sales
were attributed to geographic areas based on the location of the customer,
accordingly, U.S. export sales are reported in international sales.
2000 1999 1998
----------- ---------- -------
(IN THOUSANDS)
Net sales:
United States......................................... $699,713 $622,832 $582,494
----------- ---------- --------
International(a):
European Union countries........................... 118,934 123,116 147,300
Asia............................................... 68,409 57,451 60,693
Other foreign countries............................ 137,604 121,398 136,987
----------- ---------- ---------
Total international.............................. 324,947 301,965 344,980
----------- ---------- ---------
Total Consolidated............................... $ 1,024,660 $924,797 $927,474
=========== ========== =========
Long-lived assets from continuing operations:
United States......................................... $ 443,417 $390,749 $283,161
----------- ---------- ---------
International(b):
European Union countries........................... 53,229 65,111 72,081
Asia............................................... 4,710 4,424 4,675
Other foreign countries............................ 20,827 19,811 17,791
----------- ---------- ----------
Total international.............................. 78,766 89,346 94,547
----------- ---------- ----------
Total Consolidated............................... $ 522,183 $480,095 $377,708
=========== ========== ==========
------------
(a) Includes U.S. export sales of $179.1 million in 2000, $158.5 million in
1999, and $162.6 million in 1998.
(b) Represents long-lived assets of foreign-based operations only.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
--------- -------- ------- ------- -----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000
Net sales............................. $ 255,812 $ 255,504 $ 255,098 $ 258,246 $ 1,024,660
Operating income...................... $ 33,887 $ 33,770 $ 34,106 $ 34,127 $ 135,890
Net income............................ $ 16,754 $ 17,223 $ 17,318 $ 17,237 $ 68,532
Basic earnings per share:(a)
Net income......................... $ 0.52 $ 0.54 $ 0.54 $ 0.53 $ 2.13
Diluted earnings per share:(a)
Net income......................... $ 0.52 $ 0.53 $ 0.53 $ 0.53 $ 2.11
Dividends paid per share.............. $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.24
Common stock trading range:(b)
High................................ 22 1/8 21 9/16 22 7/8 26 15/16 26 15/16
Low................................. 15 1/2 17 1/2 18 1/2 20 15 1/2
B-32
61
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1999
Net sales................................ $ 230,878 $231,640 $226,258 $ 236,021 $ 924,797
Operating income......................... $ 29,149 $ 29,584 $ 30,518 $ 29,546 $ 118,797
Net income............................... $ 14,596 $ 15,564 $ 15,594 $ 15,014 $ 60,768
Basic earnings per share:(a)
Net income............................. $ 0.45 $ 0.48 $ 0.48 $ 0.47 $ 1.88
Diluted earnings per share:(a)
Net income............................. $ 0.45 $ 0.47 $ 0.47 $ 0.46 $ 1.85
Dividends paid per share................. $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.24
Common stock trading range:(b)
High................................... 23 1/16 25 3/4 24 5/8 20 1/2 25 3/4
Low.................................... 16 1/2 17 1/2 19 1/4 18 16 1/2
- ------------
(a) The sum of quarterly earnings per share may not equal total year earnings
per share due to the effect of the Company's purchasing shares of its
outstanding common stock.
(b) Trading ranges are based on the New York Stock Exchange composite tape.
16. NEW ACCOUNTING PRONOUNCEMENTS
In the fourth quarter of 2000, the Company adopted the Securities and
Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition in Financial Statements". The SAB summarizes certain of the staff's
views in applying generally accepted accounting principles to revenue
recognition in the financial statements. The adoption of the Bulletin did not
have a significant effect on the Company's consolidated results of operations,
financial position, or cash flows.
In September, 2000, the FASB issued Statement No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
- -- A Replacement of FASB Statement 125". The Statement requires extensive
disclosures about securitizations entered into during the period and retained
interests in securitized financial assets at the balance sheet date, accounting
policies, sensitivity information relating to retained interests, and cash flows
distributed to the transferor. The accounting requirements of Statement 140 are
effective for transfers occurring after March 31, 2001. However, the expanded
disclosures about securitizations and collateral are effective for fiscal years
ending after December 15, 2000. The Company is continuing to study the future
impact of adopting the accounting changes of this Statement. The Company adopted
the disclosure requirement by the Statement, for fiscal year 2000, which are
included in footnote 5 of the financial statements.
On July 1, 2000, the Company adopted FASB Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation". The
Interpretation provides guidance on the application of APB Opinion No. 25,
"Accounting for Stock Issued to Employees". The adoption of this Interpretation
did not have a material effect on the Company's consolidated results of
operations, financial position, or cash flows.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement requires recognition of all
derivative instruments measured at fair value in the statement of financial
position. Gains or losses resulting from changes in the value of derivatives
would be accounted for depending on the intended use of the derivative and
whether it qualifies for hedge accounting. In June 1999, the FASB approved a
one-year delay in the effective date of this Statement until January 2001.
In June 2000, the FASB issued Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities". This Statement amends
Statement No. 133 for certain impractical aspects of the original Statement
which were incompatible with many common current hedging approaches. Statement
No. 138 is effective simultaneously with Statement No. 133.
The provisions of SFAS 133 and related amendments and interpretations
became effective for the Company beginning January 1, 2001, including the
interim periods of that year. Based on the Company's limited use of derivative
financial instruments, adoption of these Statements did not have a significant
effect on the Company's consolidated results of operations, financial position,
or cash flows.
B-33
62
DIRECTIONS TO
ANNUAL MEETING OF SHAREHOLDERS OF AMETEK, INC.
HELD AT
J. P. MORGAN CHASE & CO.
270 PARK AVENUE
11TH FLOOR CONFERENCE CENTER
NEW YORK, NY 10017
(212) 270-6000
J. P. Morgan Chase & Co.'s 270 Park Avenue location is in midtown Manhattan and
accessible by mass transportation from New York, New Jersey, Connecticut, Long
Island and elsewhere. Below are automobile directions:
DIRECTIONS FROM NEW JERSEY
Take Route 3 East to the Lincoln Tunnel. Upon exiting the Tunnel, turn right
onto 40th Street and proceed eastbound to Park Avenue. Turn left onto Park
Avenue and travel north to East 49th Street. Turn left at 49th Street and
proceed southbound on Park Avenue. J. P. Morgan Chase & Co. is located on Park
Avenue between 47th and 48th Streets.
Alternate route:
From the George Washington Bridge, follow signs to Henry Hudson Parkway South.
Take the Parkway South to the 56th Street exit (a left lane exit). At the end of
the exit ramp, proceed straight onto 56th Street. Proceed eastbound to Park
Avenue. Turn right onto Park Avenue and proceed southbound. J. P. Morgan Chase &
Co. is located on Park Avenue between 47th and 48th Streets.
DIRECTIONS FROM CONNECTICUT
Take I-95 South to the Cross Bronx Expressway. Take the Cross Bronx Expressway
to the last exit in New York (stay to the right when approaching the George
Washington Bridge so as not to miss the exit). Follow signs for Henry Hudson
Parkway/181st Street. Take the Henry Hudson Parkway South to the 56th Street
exit (a left lane exit). At the end of the exit ramp, proceed straight onto 56th
Street. Proceed eastbound to Park Avenue. Turn right onto Park Avenue and
proceed southbound. J. P. Morgan Chase & Co. is located on Park Avenue between
47th and 48th Streets.
Alternate route:
Take 684 South onto the Hutchinson River Parkway South to the Cross County
Parkway. Proceed west on the Cross County Parkway to the Saw Mill River Parkway
South. The Saw Mill becomes the Henry Hudson Parkway in New York City. Proceed
south on the Parkway until the 56th Street exit (a left lane exit). At the end
of the exit ramp, proceed straight onto 56th Street. Proceed eastbound to Park
Avenue. Turn right onto Park Avenue and proceed southbound. J. P. Morgan Chase &
Co. is located on Park Avenue between 47th and 48th Streets.
DIRECTIONS FROM LONG ISLAND
Take the Long Island Expressway West (Route 495) to the Midtown Tunnel. Upon
exiting the Tunnel, turn left onto East 39th Street and proceed westbound to
Park Avenue. Turn right onto Park Avenue and travel north to East 49th Street.
Turn left at 49th Street and proceed southbound on Park Avenue. J. P. Morgan
Chase & Co. is located on Park Avenue between 47th and 48th Streets.
Alternate route:
Take the Grand Central Parkway to the Triborough Bridge. Take the exit to
Manhattan and follow signs for the FDR Drive South. Exit at 63rd Street and
proceed to Park Avenue. Turn left and proceed southbound. J. P. Morgan Chase &
Co. is located on Park Avenue between 47th and 48th Streets.
PRINTED ON RECYCLED PAPER.
This document is printed on recycled paper, which contains at least 10% post
consumer waste.
63
NOTIFICATION OF ELECTRONIC AVAILABILITY
IF YOU WOULD LIKE TO RECEIVE FUTURE NOTIFICATION OF THE AVAILABILITY OF THE
PROXY STATEMENT AND ANNUAL REPORT ELECTRONICALLY, PLEASE VISIT
WWW.INVESTPOWER.COM. CLICK ON "ENROLL TO RECEIVE MAILINGS VIA E-MAIL" AND
REFER TO THE COMPANY NUMBER AND ACCOUNT NUMBER ON TOP OF THE REVERSE SIDE
OF THIS CARD.
ANNUAL MEETING OF SHAREHOLDERS
AMETEK, INC.'S ANNUAL MEETING OF SHAREHOLDERS WILL BE HELD AT 3:00 P.M. ON
TUESDAY, MAY 22, 2001, AT J. P. MORGAN CHASE & CO., 270 PARK AVENUE, 11TH
FLOOR CONFERENCE CENTER, NEW YORK, NEW YORK 10017. PLEASE SEE YOUR PROXY
STATEMENT FOR DIRECTIONS SHOULD YOU WISH TO ATTEND THE MEETING.
AMETEK, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Frank S. Hermance, Donna F. Winquist and
Kathryn E. Londra or a majority of those present and acting, or, if only
one is present, then that one, proxies, with full power of substitution, to
vote all stock of AMETEK, Inc. which the undersigned is entitled to vote at
AMETEK's Annual Meeting of Shareholders to be held at J. P. Morgan Chase &
Co., 270 Park Avenue, 11th Floor Conference Center, New York, New York
10017, on Tuesday, May 22, 2001, at 3:00 p.m. local time, and at any
adjournment or postponements thereof, hereby ratifying all that said
proxies or their substitutes may do by virtue hereof, and the undersigned
authorizes and instructs said proxies to vote as follows:
(TO BE SIGNED ON REVERSE SIDE) SEE
REVERSE
SIDE
64
ANNUAL MEETING OF SHAREHOLDERS OF
AMETEK, INC.
MAY 22, 2001
PROXY VOTING INSTRUCTIONS
TO VOTE BY INTERNET
PLEASE ACCESS THE WEB PAGE AT WWW.VOTEPROXY.COM AND FOLLOW THE ON-SCREEN
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
PLEASE CALL TOLL-FREE 1-800-PROXIES AND FOLLOW THE INSTRUCTIONS. HAVE YOUR
CONTROL NUMBER AND THE PROXY CARD AVAILABLE WHEN YOU CALL.
TO VOTE BY MAIL
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS
POSSIBLE.
PLEASE VOTE
IF YOU VOTE BY INTERNET OR BY TELEPHONE, THERE IS NO NEED TO RETURN YOUR
PROXY CARD.
YOUR CONTROL NUMBER IS [ARROW] [ ]
- Please Detach and Mail in the Envelope Provided -
- --------------------------------------------------------------------------------
A [X} PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD
listed at right Authority to vote
(except as marked for all nominees
to the contrary) listed at right
1. ELECTION OF
DIRECTORS [ ] [ ] NOMINEES:
Lewis G. Cole
Charles D. Klein
INSTRUCTION:
To withhold authority to vote for any individual nominee, write the name of the
nominee(s) on the line below.
____________________________
2. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR THE YEAR 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
Receipt of the notice of said meeting and of the Proxy Statement of AMETEK, Inc.
accompanying the same is hereby acknowledged.
UNLESS OTHERWISE SPECIFIED IN THE SPACES PROVIDED, THE UNDERSIGNED'S VOTE IS TO
BE CAST FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL (1),
AND FOR APPROVAL OF PROPOSAL (2), AS MORE FULLY DESCRIBED IN THE ENCLOSED PROXY
STATEMENT.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
_______________________ Date: ___________ , 2001 _______________________________
SIGNATURE SIGNATURE IF HELD JOINTLY
Date:_________________ , 2001
NOTE: Please sign exactly as your name appears on this card. Indicate your full
title if you are signing as an executor, administrator, trustee, etc. If
the signer is a corporation, an authorized officer should sign the full
corporate name. All owners must sign if shares are held in the name of
more than one person.
65
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
AMETEK, INC.
MAY 22, 2001
- Please Detach and Mail in the Envelope Provided -
- --------------------------------------------------------------------------------
A [X} PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD
listed at right Authority to vote
(except as marked for all nominees
to the contrary) listed at right
1. ELECTION NOMINEES:
OF Lewis G. Cole
DIRECTORS [ ] [ ] Charles D. Klein
INSTRUCTION: To withhold authority to vote for any individual nominee, write the
name of the nominee(s) on the line below.
_________________________________
2. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR THE YEAR 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
Receipt of the notice of said meeting and of the Proxy Statement of AMETEK, Inc.
accompanying the same is hereby acknowledged.
UNLESS OTHERWISE SPECIFIED IN THE SPACES PROVIDED, THE UNDERSIGNED'S VOTE IS TO
BE CAST FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL (1),
AND FOR APPROVAL OF PROPOSAL (2), AS MORE FULLY DESCRIBED IN THE ENCLOSED PROXY
STATEMENT.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
_______________________ Date:____________ , 2001 _____________________________
SIGNATURE SIGNATURE IF HELD JOINTLY
Date:________________ , 2001
NOTE:Please sign exactly as your name appears on this card. Indicate your full
title if you are signing as an executor, administrator, trustee, etc. If
the signer is a corporation, an authorized officer should sign the full
corporate name. All owners must sign if shares are held in the name of more
than one person.