FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
___________________________________
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - -----
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ----------------- to ------------------
Commission file number 1-168
AMETEK, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-4923320
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Station Square, Paoli, Pennsylvania 19301
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(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code 610-647-2121
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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The number of shares of the issuer's common stock outstanding as
of the latest practicable date was:
Common Stock, $.01 Par Value, outstanding at April 30, 1994. . .
36,623,745 Shares
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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AMETEK, INC.
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CONSOLIDATED STATEMENT OF INCOME
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(Unaudited)
(Dollars in thousands except per-share amounts)
Three months ended March 31,
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1994 1993
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Net sales $199,273 $187,114
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Expenses:
Cost of sales (excluding depreciation) 154,719 144,628
Selling, general & administrative 20,263 19,811
Depreciation 6,817 7,256
Resizing charges - 2,905 (a)
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181,799 174,600
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Operating income 17,474 12,514
Other income (expenses):
Interest expense (5,032) (4,588)
Other, net 1,775 1,722
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Income before income taxes 14,217 9,648
Provision for income taxes 5,410 3,552
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Income before extraordinary item and
cumulative effect of accounting change 8,807 6,096
Extraordinary loss on early extinguishment
of debt, net of taxes (Note 5) (11,810) -
Cumulative effect of accounting change, net
of taxes (Note 4) 3,819 -
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Net income $816 $6,096
========== ==========
Earnings (loss) per share (Note 2):
Income before extraordinary item and
cumulative effect of accounting change $0.21 $0.14
Extraordinary loss on early extinguishment
of debt (Note 5) (0.28) -
Cumulative effect of accounting change (Note 4) 0.09 -
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Net income $0.02 $0.14
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Cash dividends paid per share $0.06 $0.17
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Average common shares outstanding 42,644,128 44,247,170
========== ==========
(a) Reclassified to conform to 1993 year-end presentation.
See accompanying notes.
2
AMETEK, INC.
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CONDENSED CONSOLIDATED BALANCE SHEET
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(Dollars in thousands)
March 31, December 31,
1994 1993
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(Unaudited)
ASSETS
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Current assets:
Cash and cash equivalents $49,058 $40,468
Marketable securities (Note 4) 16,665 44,191
Receivables, net 123,230 108,068
Inventories (Note 3) 91,456 91,894
Deferred income taxes 13,248 13,346
Other current assets 5,785 4,100
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Total current assets 299,442 302,067
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Property, plant and equipment 395,277 384,435
Less accumulated depreciation (207,781) (199,626)
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187,496 184,809
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Intangibles, investments and other assets 83,842 75,787
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Total assets $570,780 $562,663
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LIABILITIES AND STOCKHOLDERS' EQUITY
- - -------------------------------------
Current liabilities:
Accounts payable $65,116 $54,374
Accruals 96,070 98,987
Short-term borrowings and current
portion of long-term debt (Note 5) 45,476 14,543
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Total current liabilities 206,662 167,904
Long-term debt (Note 5) 214,803 172,429
Deferred income taxes 30,020 27,948
Other long-term liabilities 28,514 29,056
Stockholders' equity (Note 6) 90,781 165,326
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Total liabilities and stockholders' equity $570,780 $562,663
========= =========
See accompanying notes.
3
AMETEK, INC.
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
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(Unaudited)
(Dollars in thousands)
Three months ended March 31,
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1994 1993
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Cash provided by (used for):
Operating activities:
Net income $816 $6,096
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary loss on early extinguishment of debt 11,810 -
Cumulative effect of accounting change (3,819) -
Depreciation and amortization 8,678 9,101
Deferred income taxes 3,085 (7)
Net change in operating working capital 27,923 (4,903)
Other (1,231) (224)
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Total operating activities 47,262 10,063
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Investing activities:
Additions to property, plant and equipment (7,370) (9,403)
Proceeds from sale of investments 1,181 1,790
Purchase of businesses and investments (347) (8,739)
Increase in marketable securities - (16,349)
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Total investing activities (6,536) (32,701)
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Financing activities:
Proceeds from issuance of long-term debt 256,000 -
Repayments of long-term debt (185,810) (385)
Debt prepayment premiums and debt issuance costs (29,368) -
Repurchases of common stock (74,147) -
Cash dividends paid (2,620) (7,525)
Other 3,809 659
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Total financing activities (32,136) (7,251)
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Increase (decrease) in cash and cash equivalents 8,590 (29,889)
Cash and cash equivalents:
As of January 1 40,468 59,138
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As of March 31 $49,058 $29,249
========= =========
See accompanying notes.
4
AMETEK, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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March 31, 1994
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(Unaudited)
Note 1 - Financial Statement Presentation
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The accompanying consolidated financial statements are unaudited, but the
Company believes that all adjustments (which consist of normal recurring
accruals) necessary for fair presentation of the consolidated financial position
of the Company at March 31, 1994 and the consolidated results of its operations
and cash flows for the three-month periods ended March 31, 1994 and 1993 have
been included. Quarterly results of operations are not necessarily indicative
of results for the full year. Quarterly financial statements should be read in
conjunction with the financial statements and related notes in the Company's
1993 Annual Report.
Note 2 - Earnings Per Share
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Earnings per share is based on the average number of common shares
outstanding each period. No material dilution of earnings per share would
result for the first quarter of 1994 or 1993 if it were assumed that all
outstanding stock options were exercised.
Note 3 - Inventories
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The estimated components of inventory stated at lower of LIFO cost or
market are:
In thousands
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March 31, December 31,
1994 1993
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(Unaudited)
Finished goods and parts $30,032 $32,410
Work in process 24,904 23,683
Raw materials and purchased parts 36,520 35,801
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$91,456 $91,894
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Note 4 - Accounting Change
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Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". SFAS No. 115 requires, among other things, that
when an enterprise acquires debt and equity securities for the purpose of
selling them in the near term, those securities are deemed to be trading
securities and are to be reported at market value, with changes in the net
unrealized gains and losses included in net income. Securities that are
available for sale are required to be carried at market value, with changes in
the net unrealized gains and losses recorded directly to stockholders' equity.
Previously, unrealized gains and losses on held-for-sale securities of
5
AMETEK, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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March 31, 1994
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(Unaudited)
Note 4 - Accounting Change (cont'd)
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the Company's captive insurance subsidiary, which are now classified as trading
securities, were included in stockholders' equity. Fixed income securities
which are now classified as available for sale were previously carried at the
lower of amortized cost or market value. The cumulative effect on net income as
of January 1, 1994, of adopting this Statement for securities classified as
trading was to increase net income by $3.8 million, or $.09 per share, net of
taxes of $2.4 million. The change in unrealized gains and losses from adopting
this Statement for securities classified as available for sale had no
significant impact on stockholders' equity. In accordance with the Statement,
the prior period financial statements have not been restated for this accounting
change.
Note 5 - Long-Term Debt
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Long-term debt consists of the following:
In thousands
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March 31, December 31,
1994 1993
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(Unaudited)
8.95% notes payable $ - $ 93,500
9.35% notes payable - 75,000
9.75% senior notes due 2004 150,000 -
7.25% secured bank term notes due
1995 to 2001 64,286 -
Other 517 3,929
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$214,803 $172,429
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On March 21, 1994, the Company completed an offering of $150 million in
principal amount of 9 3/4% senior notes due March 15, 2004. Also in March 1994,
the Company borrowed $106 million under a new $250 million floating-rate
senior secured bank credit agreement, consisting of $75 million of term loans
payable from 1994 to 2001 based on an interest rate of 7 1/4%; and $31 million
under a revolving credit facility which had an average interest rate of 6 7/8%.
The proceeds from these issuances, together with available cash, were used to
finance the Company's early retirement of existing debt aggregating $185.4
million, fund prepayment premiums and other expenses related to the sale of
the senior notes and the bank credit agreement, along with the repurchase of
outstanding shares of the Company's common stock. (See Note 6.)
In connection with the early retirement of debt referred to above, in March
1994 the Company recorded an extraordinary loss of $11.8 million (net of tax
benefits of $7.6 million), or $.28 per share, for the prepayment premiums paid
and the write-off of related deferred debt issuance costs.
6
AMETEK, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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March 31, 1994
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(Unaudited)
Note 6 - Stockholders' Equity
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Stockholders' equity consists of the following:
In thousands
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March 31, December 31,
1994 1993
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(Unaudited)
Preferred stock, $1.00 par value,
authorized: 5,000,000 shares;
none issued $ - $ -
Common stock, $1.00 par value,
authorized: 100,000,000 shares;
issued: 1994 - 40,412,217 shares
and 1993 - 46,414,317 shares 40,412 46,414
Capital in excess of par value - 6,389
Retained earnings 98,229 161,297
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138,641 214,100
Net unrealized losses (21,025) (21,632)
Less: Cost of shares held in treasury;
1994 - 2,745,672 shares and
1993 - 2,774,672 shares (26,835) (27,142)
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$ 90,781 $165,326
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During March 1994, the Company repurchased 6,002,100 shares of its common
stock upon the exercise of an option and in a combination of privately
negotiated and open market transactions for an aggregate price of $74.1 million,
using a portion of the proceeds from the debt issuances described in Note 5.
The stock repurchases are ongoing, and were made under a previously announced
plan intended to enhance shareholder value. The plan permits the Company to
purchase outstanding shares of its common stock for an aggregate purchase price
of up to $150 million. As of March 31, 1994, all of the repurchased shares have
been retired as required by the Company's recent loan agreements, and such
shares have been returned to the status of authorized but unissued shares.
At the Annual Meeting of Stockholders on April 26, 1994, the Company's
shareholders approved a reduction in the par value of the Company's common
stock from $1.00 per share to $.01 per share. This change will result in a
transfer of an equal amount from the common stock account to the capital in
excess of par value account.
7
AMETEK, INC.
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Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Financial Condition
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Liquidity and Capital Resources
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Working capital at March 31, 1994 amounted to $92.8 million, a decrease
of $41.4 million from December 31, 1993, due primarily to an increase in
accounts payable and the current portion of borrowings. The ratio of
current assets to current liabilities at March 31, 1994 was 1.45 to 1,
compared to 1.80 to 1 at December 31, 1993.
Cash generated by the Company's operating activities for the first
quarter of 1994 totalled $47.3 million, compared to $10.1 million in the
first quarter of 1993, an increase of $37.2 million. Of the increase,
$27.9 million was provided by working capital, primarily due to net
cash inflows of $31.6 million from transactions in trading securities.
(See Note 4.) Previously, such cash flows were reported as changes in
marketable securities under investing activities. Cash used for
investing activities in the first quarter of 1994 totalled $6.5
million, compared to cash used of $32.7 million in the same period last
year. Cash expended for investing activities in the 1994 quarter
was primarily for additions to property, plant and equipment which
totalled $7.4 million. The first quarter of the prior year included
capital expenditures of $9.4 million and a $7 million cash purchase of
a business, as well as a $16.3 million net increase in marketable
securities. Cash used for financing activities since December 31, 1993
totalled $32.1 million. The proceeds received from the sale of $150
million of 9 3/4% senior public notes and borrowings of $106 million
under a new $250 million senior secured bank credit agreement, along with
available cash, were used (a) to retire $185.4 million of existing
debt, (b) to fund debt prepayment premiums and debt issuance costs
totalling $29.4 million, (c) to repurchase approximately 6 million
shares of the Company's common stock at a cost of $74.1 million, and
(d) to fund the new lower quarterly cash dividend. Under the Company's
ongoing share repurchase program, which permits the Company to purchase
up to $150 million of its outstanding common stock, a total of 7.5
million shares has been repurchased through a combination of privately
negotiated and open market transactions as of May 10, 1994,
representing 17.2% of the shares outstanding at December 31, 1993, at a
cost of $93.8 million. As a result of the above activities, cash and
cash equivalents and marketable securities totalled $65.7 million at
March 31, 1994, a decrease of $18.9 million since December 31, 1993.
8
AMETEK, INC.
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Financial Condition (cont'd)
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The Company believes that the amount of cash available under the new bank
credit agreement, together with cash on hand and cash flows generated
from operations will provide sufficient funds to service debt
obligations, finance the share repurchase program, and meet its operating
needs in the foreseeable future.
Results of Operations
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Operations for the first quarter of 1994
compared to the first quarter of 1993
Sales for the first quarter of 1994 were $199.3 million, compared to
sales of $187.1 million for the first quarter of 1993, an increase of
$12.2 million or 6.5%. The sales improvement came primarily from the
Company's Electro-mechanical Group, which increased $9.8 million or
13.4%. The Precision Instruments Group's sales of $70.4 million were
essentially unchanged from last year's first-quarter sales, while the
Industrial Materials Group's sales increased $2 million or 4.4%.
Operating income for the first quarter of 1994 increased $2.1 million or
13.3% to $17.5 million, compared to $15.4 million in the first quarter of
1993 before including a $2.9 million charge primarily for resizing the
Company's aerospace operations. This increase reflects overall improved
operating performance and the initially modest benefits from the
restructuring programs launched in the fourth quarter of 1993. Interest
expense of $5 million in this year's first quarter increased 9.7% from
the prior year because of the higher level of total debt outstanding
during the period.
The effective income tax rate was 38.1% for the first quarter of 1994
compared with 36.8% for the first quarter of 1993. The higher 1994 rate
reflects the increase in the U.S federal statutory income tax rate from
34% to 35% which became effective in the third quarter of 1993.
First quarter 1994 income before an extraordinary item and the cumulative
effect of an accounting change was $8.8 million, or $.21 per share,
compared with first quarter 1993 earnings before resizing charges of $7.9
million or $.18 per share, an improvement of 11.9%. After recognizing an
$11.8 million ($.28 per share) after-tax loss from the early
extinguishment of debt, and a $3.8 million ($.09 per share) after-tax
gain due to a required change in accounting for certain marketable
securities, net income for the first quarter of 1994 was $.8
9
AMETEK, INC.
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Results of Operations (cont'd)
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million or $.02 per share. This compares to net income of $6.1 million
or $.14 per share for the first quarter of 1993, which included a $.04
per share charge for business resizing.
Electro-mechanical Group sales totalled $82.7 million in the current
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quarter, an increase of $9.8 million or 13.4% from the first quarter
of last year, due to improved demand for electric motor products
manufactured by the Company's domestic and Italian operations.
Before currency effects, the Italian operations reported a 27%
increase in sales from the same quarter a year ago.
Operating profit of this group declined $.5 million or 4.4% to $10.2
million in this year's first quarter. Group operating margins were
suppressed by higher costs at the new plant in Rock Creek, N.C.
stemming from inefficiencies related to increasing production
levels, and the unfavorable impact of reconfiguring the plant in
Graham, N.C., along with the negative effects of changes in product
mix.
In the Precision Instruments Group, sales of $70.4 million in this
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year's first quarter were substantially the same as the $69.9
million of sales in the same quarter last year. Higher sales of
truck instruments were largely offset by lower sales of aerospace
instruments.
Group operating profit for the current quarter increased to $6.4
million, from $4.4 million, before reflecting a $2.9 million
resizing charge in the first quarter of 1993, an increase of $2
million or 45.7%. After the 1993 resizing charge, group operating
profit was $1.5 million. Although the group reported a profit
improvement, reflecting the initially modest benefits of business
restructuring actions initiated in the fourth quarter of 1993 and
improved operating efficiencies, 1994 operating profit reflects
continued soft business conditions in aerospace and process control
markets.
The Industrial Materials Group's first-quarter 1994 sales increased
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$2 million or 4.4% to $46.2 million. Group operating profit for the
current quarter increased $.6 million, or 10.7%, to $6.4 million.
Both the increases, in sales and operating profit, were due to
improved general business conditions which benefitted this group.
All but one business in this group reported increased sales and
operating profit, led by the specialty metals and liquid filtration
businesses.
10
AMETEK, INC.
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PART II. OTHER INFORMATION
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Item 2. Changes in Securities
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On March 11, 1994, the Company entered into a $250 million senior secured bank
credit agreement. On March 21, 1994, the Company completed the sale of $150
million of 9 3/4% senior public notes and repaid its existing indebtedness to
institutional lenders. Both the bank credit agreement and the indenture related
to the sale of the senior public notes contain certain restrictions on the
Company, including but not limited to restrictions regarding the payment of
dividends, the incurrence of additional indebtedness, capital expenditures,
liens, mergers, consolidations and certain sales of assets. The Company is also
required by the agreements to maintain certain financial ratios.
Item 4. Submission of Matters to a Vote of Security Holders
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The Annual Meeting of Stockholders of the Company was held on April 26, 1994.
The following matters were voted on at the Annual Meeting:
1) Election of Directors. The following persons were elected as directors:
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Shares
Shares Voted Against
Name Voted for or Withheld
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Walter E. Blankley 34,170,091 1,041,578
Lewis G. Cole 34,170,335 1,041,334
Helmut N. Friedlaender 34,153,181 1,058,488
Sheldon S. Gordon 34,175,042 1,036,627
Charles D. Klein 34,150,865 1,060,804
David P. Steinmann 34,171,058 1,040,611
Elizabeth R. Varet 34,179,063 1,032,606
2) Amendment to Certificate of Incorporation. The stockholders approved a
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proposal to amend the Company's Certificate of Incorporation to reduce the par
value of its common stock from $1.00 per share to $.01 per share. There were
33,360,708 shares voted in favor of the proposal; 1,027,993 shares voted
against the proposal; and 822,968 abstentions.
3) Appointment of Independent Auditors. The stockholders approved the
-----------------------------------
appointment of Ernst & Young as independent auditors for the Company for the
year 1994. There were 34,622,314 shares voted for approval; 308,237 shares
voted against; and 281,118 abstentions.
4) Shareholder Proposal. The shareholders rejected a shareholder proposal to
--------------------
reconstitute and/or expand the Company's Board of Directors. There were
8,792,552 shares voted for approval; 20,985,979 shares voted against;
1,280,030 abstentions and 4,153,108 shares not voting.
11
AMETEK, INC.
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Item 6. Exhibits and Reports on Form 8-K
- - ------- --------------------------------
a) Exhibits:
Exhibit
Number Description
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4 Indenture dated as of March 15, 1994 between the Company and
Corestates Bank N.A., as Trustee, relating to the Company's 9 3/4%
Senior Notes due 2004.
10 First Amendment to Credit Agreement among the Company, Various
Lending Institutions, Bank of Montreal, Corestates Bank, N.A.,
and PNC Bank, National Association, as Co-Agents, and the Chase
Manhattan Bank, N.A., as Administrative Agent.
b) Reports on Form 8-K: During the quarter ended March 31, 1994, the Company
filed a report on Form 8-K dated February 10, 1994 under Item 5 regarding
the Company's announcement of its 1993 results of operations.
12
AMETEK, INC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMETEK, INC.
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(Registrant)
By /s/ John J. Molinelli
--------------------------------
John J. Molinelli
Senior Vice President -
Chief Financial Officer
(Principal Financial Officer)
By /s/ Otto W. Richards
--------------------------------
Otto W. Richards
Vice President and Comptroller
(Principal Accounting Officer)
May 13, 1994
13