[CONFORMED COPY]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-4923320
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
STATION SQUARE, PAOLI, PA 19301
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(610) 647-2121
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
COMMON STOCK, $.01 PAR VALUE (VOTING) NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
9 3/4% SENIOR NOTES DUE 2004 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(TITLE OF EACH CLASS)
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
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS OR ANY AMENDMENT TO THIS FORM 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 1997, was $675,774,520.
The number of shares of common stock outstanding as of February 28, 1997,
was 32,758,125.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMETEK, INC.
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business............................................................................... 3
Item 2. Properties............................................................................. 10
Item 3. Legal Proceedings...................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders.................................... 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................. 10
Item 6. Selected Financial Data................................................................ 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 12
Item 8. Financial Statements and Supplementary Data............................................ 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 39
PART III
Item 10. Directors and Executive Officers of the Registrant..................................... 40
Item 11. Executive Compensation................................................................. 42
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 46
Item 13. Certain Relationships and Related Transactions......................................... 48
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................ 49
Signatures...................................................................................... 50
Index to Exhibits............................................................................... 51
2
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
AMETEK, Inc. ("AMETEK" or the "Company") was incorporated in Delaware in
1930 under the name of American Machine and Metals, Inc. and maintains its
principal executive offices at Station Square, Paoli, Pennsylvania 19301.
AMETEK is a global manufacturer of electrical products, and materials
engineered for niche markets. Operations are in North America, Europe, and
Asia, with one-third of sales to international markets. The Company has a
significant market share for many of its products. The Electromechanical Group
is the world's largest independent producer of electric motors and blowers for
vacuum cleaners and floor-care products; the Precision Instruments Group
builds technologically advanced monitoring, sensing, calibration, and display
devices for the aerospace, process, and heavy-vehicle industries; and the
Industrial Materials Group produces specialty materials and water filtration
products for consumer and industrial markets. The Company has grown through a
focus on the manufacturing of electronic, electromechanical and electrical
products, for niche markets where, based on technological or cost advantages,
it has or it seeks to build a significant market share.
Continuation of Shareholder Value Enhancement Plan
In November 1993, the Company adopted a Shareholder Value Enhancement Plan
(the "Plan") with the objective of improving AMETEK's earnings growth through
a combination of financial and operating strategies.
The Plan's financial strategies consist of a share repurchase program (which
is ongoing), a debt refinancing (completed in 1994) and a dividend reduction
(which was adopted at the same time as the Plan). From the inception of the
Plan through December 31, 1996, AMETEK has repurchased approximately 30% of
its outstanding shares. This represents approximately 12.2 million shares of
common stock at an aggregate repurchase price of $171 million (or an average
cost of $14.01 per share). During 1996, AMETEK repurchased 698,000 shares at
an aggregate repurchase price of $12.5 million (or an average cost of $17.92
per share). Also, during 1996, AMETEK's Board of Directors authorized a new
share repurchase program of up to $50 million.
Shortly after the Plan was adopted, AMETEK implemented certain of its
operating strategies primarily by restructuring the Precision Instruments
Group and, as a result, incurred after-tax charges of $33.5 million in 1993.
The Plan's other operating strategies, which are ongoing, consist of: (i)
achieving operational excellence through improved asset management, increased
operating synergies and reduced cycle time, (ii) intensifying new product
development efforts, especially in the electric motor-blower, precision
instruments and specialty metals product lines, (iii) completing strategic
acquisitions and alliances which concentrate on enhancing AMETEK's
technological and manufacturing advantages and market position in its core
businesses, and (iv) pursuing global and market expansion, especially in
Europe and Asia.
In continuing to carry out the financial and operating strategies of the
Plan, AMETEK has sought to allocate its historically strong cash flow to those
opportunities, including the furtherance of its operating strategies,
additional share repurchases and further debt reductions, which appear to have
the best potential for improving earnings growth and thereby enhancing
shareholder value.
AGREEMENT TO MERGE WATER FILTRATION BUSINESS INTO CULLIGAN
In a recent development the Company announced on February 5, 1997 that it
had entered into an agreement to merge its water filtration business into
Culligan Water Technologies, Inc., for a total purchase price of approximately
$155 million. The purchase price, less assumed debt (ranging from $25 million
to $75 million at AMETEK's discretion), is payable in Culligan common stock
valued at $37.50 per share.
3
The transaction, which utilizes a "Morris Trust" structure, will involve the
tax-free spin-off to AMETEK's shareholders of an entity containing all of
AMETEK's existing operations, except its water filtration business. This spun-
off entity will retain the AMETEK name and its common stock will be traded on
the New York and Pacific Stock Exchanges.
AMETEK's water filtration business consists of the Plymouth Products
Division, based in Sheboygan, Wisconsin, and three international subsidiaries:
AMETEK Filters Ltd., Teeside, England; APIC, S. A., Colombe, France; and
AFIMO, S. A. M., Monaco. AMETEK's water filtration business had 1996 sales of
approximately $70 million.
Following the spin-off, AMETEK's water filtration business, assuming the
expected $25 million of retained debt, will be merged with Culligan in return
for 3,466,667 shares of Culligan common stock (or, 0.11 shares of Culligan for
each share of AMETEK, based on AMETEK's shares outstanding as of December 31,
1996). The new AMETEK stock and the Culligan stock issued in this transaction
are intended to be distributed on a tax-free basis to AMETEK's shareholders.
The transaction is subject to approval by AMETEK's shareholders and other
regulatory approvals.
AMETEK has decided to postpone its annual meeting of shareholders,
customarily held in April in order to combine it with the shareholders meeting
to be held at a date to be determined to vote on the merger of the Water
Filtration Business.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN OPERATIONS AND EXPORT
SALES
Business segment and geographic information is shown on pages 35-37 of this
report.
Among the Company's growth strategies are global and market expansion, which
are subject to certain risks inherent in conducting business outside the
United States, such as fluctuation in currency exchange rates and controls;
restrictions on the movement of funds, import and export controls; and other
economic, political and regulatory policies of the countries in which business
is conducted. The expansion results from a combination of increasing levels of
export sales of products manufactured in the United States, sales from
overseas operations, and strategic alliances.
NARRATIVE DESCRIPTION OF BUSINESS
PRODUCTS AND SERVICES
The Company's growth strategies are focused on its principal businesses:
Electromechanical, Precision Instruments, and Industrial Materials. The
products and markets of each business are described below:
ELECTROMECHANICAL GROUP
Overview
The Electromechanical Group ("EMG") is the world's largest independent
producer of high-speed, air-moving electric motors for original equipment
manufacturers ("OEMs") of floor-care products. The manufacture of small vacuum
motors parts rotating at 25,000 to 40,000 RPM requires advanced manufacturing
technology. EMG must address complex motor-blower dynamics including heat,
noise, vibration, and wear, in designing its customized products. EMG's
worldwide market leadership is based on core competencies developed over 80
years. EMG has a leading market share in North America and Western Europe and
a growing share in the Pacific Rim. Sales have more than quadrupled since
1981--increasing from approximately $80 million to $376 million in 1996.
EMG has grown its business by extending its technological expertise in
manufacturing high-speed, air-moving electric motors to a variety of targeted
markets, with the floor care market being its primary focus. EMG has formed
alliances with OEM customers to design and manufacture cost-effective products
for numerous floor care applications. EMG is also using its technological and
marketing expertise in an effort to penetrate new markets, such as lawn and
garden equipment, where it is seeking to establish alliances with its major
customers.
4
EMG is seeking to build on its market leadership in the floor care markets
of North America and Europe, through initiatives in Eastern Europe, Latin
America and the Pacific Rim. In addition to pursuing strategic alliances and
joint ventures, EMG has expanded its presence in the Pacific Rim with a plant
in Shanghai, Peoples' Republic of China (PRC). Such Shanghai operations plus
facilities in the Czech Republic and Mexico are expected to contribute to
manufacturing output in 1997. About 50% of EMG's sales are outside of the
United States.
Consistent with its strategies for long-term global growth and low-cost
producer status, EMG has increased its production capacity over the past three
years with highly automated production lines at its Graham, North Carolina,
facility. The recently initiated operations in Reynosa, Mexico, Shanghai, PRC;
and the Czech Republic are focused on reducing costs and then market
expansion.
EMG employs approximately 2,900 people and has thirteen manufacturing
locations: six in the United States, three in Italy, two in Mexico, and one
each in the PRC and the Czech Republic. EMG produced approximately 22 million
motor products in 1996 with flexible, automated production lines designed for
low-cost, high-volume operations. Technological resources provide EMG
customers with custom-designed products.
Floor-Care Market and Product Line
About two thirds of EMG's sales are to floor-care markets, where it has a
leading share through sales of air-moving electric motors to most of the
world's major floor-care OEMs, including integrated OEMs that produce some of
their own motors. EMG produces a full range of floor-care products, from hand-
held, canister and upright vacuums to central vacuums for residential use.
High performance vacuums are marketed for residential and commercial
applications. Customers include Matsushita, Bissell, Royal, Eureka, and SEB-
Rowenta.
Sales growth in the floor-care industry has been achieved by marketing
products to vertically integrated vacuum cleaner manufacturers that decide to
outsource motor production to realize the economic and operational advantages
of reducing or discontinuing their own motor production. By purchasing EMG's
motors, vacuum cleaner manufacturers can reduce the otherwise substantial
capital expenditures they would incur to manufacture motors for changing
consumer demands. The global consumer trend toward multiple floor-care
products increases the variety and frequency of these investments by OEMs,
which are striving to operate more economically.
EMG's new product development focuses on enhancing motor-blower cost-
performance through advances in power, efficiency, size, weight, and
quietness. EMG's world lamination design is gaining market share in the world
lawn and garden market due to the motor's performance-to-weight ratio. A new
line of high-efficiency fans complement this motor and are targeted for floor-
care applications in Asia, representing one of EMG's major growth initiatives.
EMG has a significant position in the European floor-care market. The
electric motors it produces in Italy are similar to those produced in the
United States. Capacity and productivity in Italy have been increased through
capital investment and such initiatives as manufacturing integration,
automation, inventory management, and increased labor flexibility.
Technical Motor Market and Product Line
EMG formed the Technical Motor Division to capitalize upon its global
presence and technical expertise in floor-care products and to expand
production and marketing of its brushless DC motor-blowers.
EMG's brushless motors are used in computer equipment, business machines and
medical equipment. Brushless motors are free of static charges and have high
reliability. They are increasingly popular in medical and other applications
in which long life and speed control are desired. Continuing product
developments include the use of brushless motors in systems designed to assist
patients with sleep-breathing disorders, in hospital
5
air-mattress systems as well as systems that recover gasoline fumes at
automotive fueling stations. Customers include Thomas Industries, Gast, Rheem,
Kinetic Concepts, and DevilBiss.
Commercial Motor Market and Product Line
EMG's leadership in air-moving electric motors, and its manufacturing
infrastructure, technical expertise and global marketing strengths serve as
the foundation for its future growth. EMG is capitalizing on its core
competencies in air-moving electric motors to create opportunities in consumer
appliances and in lawn and garden equipment, and outdoor power equipment, in
consumer products such as leaf blowers and chainsaws as well as low-pressure
paint sprayers, and high-pressure power washers. For example, EMG has received
orders from most of the world's major producers of lawn and garden products.
Customers include Poulan, American Kleaner, Sunbeam, and Wagner Spray Tech.
Customers
EMG is not dependent on any single customer such that the loss of that
customer would have a material adverse effect on the Company's operations.
Approximately 31% of EMG's sales for 1996 were made to its five largest
customers.
PRECISION INSTRUMENTS GROUP
The Precision Instruments Group ("PI") applies its niche market focus and
technology to produce monitoring, calibration and display instruments for the
aerospace, process, and heavy vehicle industries.
PI's growth is based on competitive advantages, which include designing
products for specific customer applications that are significantly
differentiated from or are lower in cost than competitive products. Precision
Instruments is number one or two in many of the niche markets it serves,
including aerospace fuel-flow meters, heavy-vehicle instrument panels, oxygen
analyzers, and pressure gauges. About 25% of sales are to markets outside the
United States.
Aerospace Market and Product Line
Approximately one third of PI revenues are from the sale of aerospace
products, including airborne-data and vibration-monitoring systems; turbine
engine temperature measurement; indicators and displays; fuel and fluid
measurements; and sensors, switches and electronic cable harnesses. PI's
customers are the leading producers of airframes and jet engines, commercial
airlines and aircraft operators. As a prime innovator with more than 50 years
experience, PI serves all segments of commercial aerospace, including
helicopters, business jets, commuter aircraft, and commercial airliners.
Customer support includes parts warehousing and maintenance programs.
Aerospace products are designed to customer specifications and manufactured to
stringent operational and reliability requirements. Operations are in
Binghamton, NY; Sellersville, PA; and Wilmington, MA. A repair and maintenance
facility is in Seattle, WA.
The aerospace business operates in niche markets, where its products have a
technological and/or cost advantage. Its 50 years of experience as a prime
aerospace contractor and its long-standing customer relationships with global
commercial aircraft OEMs and jet engine manufacturers are significant
competitive advantages. Its new products are now in service on the Boeing 777
airliner, the Bombardier Global Express business jet, and the Agusta 109
helicopter. Other aircraft with PI products aboard include: Learjet 60, Boeing
737/747/757/767, Beechjet, Sikorsky S-64, Cessna Citation, Saab SK-60,
Mitsubishi YS-11, and Bell 407. Jet engines with PI products include GE 90,
Pratt & Whitney 4000 series, Rolls Royce Trent 700/800 and GE CF6-50/80
series. Customers include Boeing, General Electric, Honeywell and the Federal
Government.
In 1993, PI reduced costs and restructured operations to increase
profitability in a weak aerospace market. Further initiatives include
achieving additional efficiencies, improving asset management, and optimizing
the benefits of prior actions. Demand in the aerospace market has strengthened
significantly, as airlines replace aging fleets, passenger miles increase, and
airline profits improve.
6
Process and Analytical Instruments Market and Product Line
Approximately one half of PI sales are process and analytical instruments,
and pressure sensors. This includes pressure gauges and products for
industrial measurement and calibration; oxygen, moisture, combustion and
liquid analyzers; and emission monitors. The market focus is on measurement
and analysis for the process industry, which includes refining and
petrochemical plants, power generation, specialty gas, water and waste
treatment, and natural gas distribution. The Group also has products which
serve the semiconductor market. PI is the leader in the North American
pressure gauge market, which has been adversely affected by low-cost offshore
products. PI has reduced costs through restructuring its Sellersville, PA,
operations and refocusing its domestic manufacturing on more advanced pressure
measurement products, such as its new Electronic Pressure Calibrator Model
2000.
In connection with its global expansion, PI has 50% ownership of a joint
venture that manufactures low-cost pressure gauges in Taiwan and the PRC,
where the joint venture also markets these products. For the remainder of the
world, PI is the exclusive marketer of the joint venture's products, expanding
PI's leadership in price-sensitive gauges.
The process industry has experienced lackluster market conditions in the
United States, primarily due to reduced refinery and petrochemical plant
construction and lower industry operating rates, resulting in part from
increased environmental regulations. Worldwide process industry markets are
benefiting from improved economic conditions and new construction in Europe
and Asia, where increased growth and market expansion are expected. Customers
in this segment include Exxon, DuPont, and Intel.
Heavy-Vehicle Market Product Line
Approximately one fifth of PI sales are electronic and mechanical
instruments and panels for heavy vehicles, such as Class 8 heavy trucks. New
products, acquisitions and the addition of construction and agricultural
vehicle markets have increased the markets served. The strategic acquisition
of privately held Dixson, Inc. in 1995 added to PI's number-one position in
the U.S. heavy-truck market and increased market share in other heavy-vehicle
instrument segments, including agricultural, construction and off-road
vehicles. Dixson also has a complementary customer base in Europe and Asia and
product development capabilities in solid-state instruments that monitor
engine performance, efficiency and emissions. Dixson's market position in
Europe enhances the global opportunities for this product line. Instrument
demand in 1996 was reduced by a down cycle in the heavy-truck industry. Modest
industry improvement is expected in 1997. Customers include Peterbilt and
Kenworth, Mack, Volvo, Freightliner, Ford, Clark and Caterpillar.
Customers
The Precision Instruments Group is not dependent on any single customer such
that the loss of that customer would have a material adverse effect on PI's
operations. Approximately 27% of PI's 1996 sales were made to its five largest
customers.
INDUSTRIAL MATERIALS GROUP
The Industrial Materials Group ("IMG") is a world leader in the manufacture
of technology-based materials and products. It uses proprietary mechanical,
metallurgical and plastics technology to develop differentiated products,
including water filtration products, high-purity metal powders and products,
and materials for industrial and chemical processing.
Water Filtration Product Line
As previously noted, AMETEK has reached agreement to merge its water
filtration business into Culligan Water Technologies, Inc., (see "Agreement to
Merge Water Filtration Business Into Culligan", page 3 of this report). This
business produces fluid cartridge filtration products for consumer,
commercial, and industrial customers in the United States and over a hundred
other countries. It offers a broad line of cartridge filters, ranging from
whole-house to countertop water filtration systems; special-purpose filter
housings; and
7
replacement cartridges that improve the quality and taste of water. It is a
leader in point-of-use drinking water filters, which are used in the removal
of objectionable taste and odor, hazardous chemicals, bacteria, and heavy
metals. It also has a branded line of filters, housings, and cartridges
designed for plumbing professionals serving residential and commercial
customers. Customers include major hardware chains, national home centers,
water treatment distributors, OEMs and mass merchandisers, such as Home Depot,
Wal-Mart, Ace Hardware, Manitowoc, Cotter, and Builder's Square.
Specialty Metals Markets and Product Line
This business manufactures high-purity, engineered metal powders; high-
purity strip and wire manufactured from metal powders; and clad products with
tailored metallurgical properties. Its niche market focus is based upon
proprietary manufacturing technology and strong customer relations. Markets
served include consumer products, electronics, telecommunications, automotive,
and energy production. New product developments include patented ultra
stainless steel metal powders and copper-based spinodal(R) alloys. Global and
market expansion in Europe and Asia significantly increased sales in 1996.
Customers include DuPont, Regal Ware, Inc., Stoody Co., Smith International,
and Pall Corp.
Chemical and Industrial Products
Products include silicas, phenolic resins, and Teflon(R) (a registered
trademark of DuPont) polymer products for high-temperature and highly
corrosive applications. Product applications include the filtering of molten
metal, heat exchangers and protective welding curtains. Chemical Products
Division also is a custom compounder of specialty resins and thermoplastics
with enhanced properties, such as fire retardance and improved adhesion.
Markets include automotive parts, electronics, appliances, and
telecommunications housings. Customers include Exxon, Mytex, Kansetsu, DuPont,
and Newport News Shipbuilding.
Customers
Although IMG is not dependent on any single customer such that the loss of
that customer would have a material adverse effect on IMG's operations,
approximately 16% of IMG's 1996 sales were made to its five largest customers.
MARKETING
Generally, the Company's marketing efforts are organized and carried out at
the Group and divisional levels. Given the similarity and technical nature of
its many products as well as its significant worldwide market share, EMG
conducts most of its domestic and international marketing activities through a
direct sales force, and makes only limited use of sales agents in other
countries.
Because of their relatively diverse product lines, PI and IMG make
significant use of distributors and sales agents in marketing their products.
With its specialized customer base of aircraft and jet engine manufacturers,
and airlines, PI's aerospace products and services are marketed primarily by
its sales engineers.
COMPETITION
Generally, most markets in which the Company operates are highly
competitive. The principal elements of competition for the products
manufactured in each of the Company's business segments are price, product
features, distribution, quality, and service.
EMG's primary competition in the U.S. floor-care market consists of a few
competitors, each of which has a smaller market share but is part of a company
with larger and greater resources than AMETEK. There is additional potential
competition from vertically integrated manufacturers of floor-care products
that produce their own motor-blowers. Many of these manufacturers are also
potential EMG customers if they outsource their motors. In Europe, competition
comes from a small group of very large competitors and from numerous small
competitors.
In the markets served by PI, the Company believes that it is one of the
world's largest pressure gauge manufacturers and ranks among the top 10 U.S.
producers of certain measuring and control instruments. It is one of the
leading instrument and sensor suppliers to commercial aviation. Competition is
strong and could intensify for certain aerospace products. In the pressure
gauge and heavy-vehicle markets served by PI, only a limited
8
number of companies compete on price and technology. In the process and
analytical instrument markets, numerous companies in each market niche compete
on the basis of product quality, performance and innovation.
Many of the products sold by IMG are made by a few competitors, and
competition comes mainly from producers of substitute materials. IMG is one of
several major producers of residential water filtration systems, a market with
numerous competitors. In the industrial and commercial filtration markets, IMG
does not have a major market share and faces competition from many sources.
Specialty Metal Products is comprised of five niche product lines that have
few competitors. The primary competition is from competitive materials and
processes.
BACKLOG AND SEASONAL VARIATIONS OF BUSINESS
The Company's approximate backlog of unfilled orders, at the dates
specified, by business segment, was as follows:
DECEMBER 31,
--------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
Electromechanical..................................... $ 87.9 $ 96.7 $111.3
Precision Instruments................................. 113.2 108.5 101.7
Industrial Materials.................................. 20.5 23.5 21.2
------ ------ ------
Total............................................. $221.6 $228.7 $234.2
====== ====== ======
Of the total backlog of unfilled orders at December 31, 1996, approximately
94% are expected to be shipped by December 31, 1997.
The Company believes that neither its business as a whole nor any of its
business segments is subject to significant seasonal variations, although
certain individual operations experience some seasonal variability.
RAW MATERIALS
The Company's business segments obtain raw materials and supplies from a
variety of sources and generally from more than one supplier. However, in the
Industrial Materials segment, certain items are available only from a limited
number of suppliers. The Company believes its sources and supplies of raw
materials are adequate for its needs.
RESEARCH, PRODUCT DEVELOPMENT AND ENGINEERING
The Company remains committed to appropriate research, product development
and engineering activities that are designed to identify and develop potential
new and improved products or enhance existing products. Research, product
development and engineering costs during the past three years were: 1996-$37.4
million, 1995-$33.2 million, 1994-$32.8 million. Company-funded research and
development costs included in total product development and engineering costs
were: 1996-$17.7 million, 1995-$16.0 million, 1994-$17.7 million. Product
research and engineering activities are conducted by the various businesses of
the Company in their respective technologies and markets.
ENVIRONMENTAL COMPLIANCE
Information with respect to environmental compliance by the Company is set
forth on page 17 of this report in the section of Management's Discussion and
Analysis of Financial Condition and Results of Operations entitled
"Environmental Matters."
PATENTS, LICENSES, AND TRADEMARKS
The Company owns numerous unexpired United States patents, United States
design patents, and foreign patents, including counterparts of its more
important United States patents, in the major industrial countries of the
world. The Company is a licensor or licensee under patent agreements of
various types, and its products are marketed under various registered United
States and foreign trademarks and trade names. However, the Company
9
does not consider any single patent or trademark, or any group thereof,
essential either to its business as a whole or to any of its business
segments. The annual royalties received or paid under license agreements are
not significant to any single business segment or to the Company's overall
operations.
EMPLOYEES
At December 31, 1996, the Company employed approximately 6,500 individuals.
WORKING CAPITAL PRACTICES
The Company does not have extraordinary working capital requirements in any
of its business segments. Customers generally are billed at normal trade terms
with limited extended payment provisions. Inventories are closely controlled
and maintained at levels related to production cycles and are responsive to
the normal delivery requirements of customers.
ITEM 2. PROPERTIES
The Company has 36 operating plant facilities in 13 states and 9 foreign
countries. Of these facilities, 26 are owned by the Company and 10 are leased.
The properties owned by the Company consist of approximately 419 acres, of
which approximately 3,394,000 square feet are under roof, and include property
recently purchased in the Czech Republic for its Electromechanical Group,
where operations will begin during 1997. Under lease is a total of
approximately 573,000 square feet. The leases expire over a range of years
from 1997 to 2009, with renewal options for varying terms contained in most of
the leases. Production facilities in Taiwan and the PRC provide the Company
with additional production capacity through the Company's 50% ownership in a
joint venture. The Company also owns certain property that is pending sale.
The Company's executive offices in Paoli, Pennsylvania, occupy approximately
34,000 square feet under a lease that will expire in 2002.
The Company's machinery, plants, and offices are in satisfactory operating
condition and are adequate for the uses to which they are put. The operating
facilities of the Company by business segment are summarized in the following
table:
NUMBER OF
PLANT FACILITIES SQUARE FEET UNDER ROOF
------------------ ------------------------
OWNED LEASED OWNED LEASED
-------- -------- ------------ -----------
Electromechanical............. 10 3 1,249,000 163,000
Precision Instruments......... 9 5 959,000 387,000
Industrial Materials.......... 7 2 1,186,000 23,000
-------- -------- ------------ ----------
TOTAL..................... 26 10 3,394,000 573,000
======== ======== ============ ==========
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies or otherwise, during the last quarter of
the fiscal year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market on which the Company's common stock is traded is the
New York Stock Exchange. The Company's common stock is also listed on the
Pacific Stock Exchange. On February 28, 1997, there were approximately 4,798
record holders of the Company's common stock.
Market price and dividend information with respect to the Company's common
stock are set forth on page 38 in the section of the Notes to the Consolidated
Financial Statements entitled "Quarterly Financial Data (Unaudited)." Future
dividend payments by the Company will be dependent on future earnings,
financial requirements, contractual provisions of debt agreements, and other
relevant factors.
10
ITEM 6. SELECTED FINANCIAL DATA
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
CONSOLIDATED OPERATING
RESULTS (Years Ended
December 31,) (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Net sales................. $ 868.7 $ 837.5 $ 774.7 $ 701.8 $ 738.7
Costs and expenses........ 773.6 748.2 699.4 703.1 662.1
----------- ----------- ----------- ----------- -----------
Operating income (loss)... 95.1 89.3 75.3 (1.3) 76.6
Other expenses, net....... (16.4) (20.0) (17.5) (11.3) (12.5)
----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations
before income taxes...... 78.7 69.3 57.8 (12.6) 64.1
Provision for (benefit
from) income taxes....... 27.5 25.5 21.2 (4.5) 21.3
----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations.... 51.2 43.8 36.6 (8.1) 42.8
Special items(/1/)........ -- 8.5 (5.6) .8 1.6
----------- ----------- ----------- ----------- -----------
Net income (loss)......... $ 51.2 $ 52.3 $ 31.0 $ (7.3) $ 44.4
=========== =========== =========== =========== ===========
Earnings per share:
Income (loss) from
continuing operations... $ 1.57 $ 1.31 $ .99 $ (.18) $ .97
Special items(/1/)....... -- .25 (.15) .01 .04
----------- ----------- ----------- ----------- -----------
Net income (loss)........ $ 1.57 $ 1.56 $ .84 $ (.17) $ 1.01
=========== =========== =========== =========== ===========
Dividends declared and
paid per share........... $ .24 $ .24 $ .24 $ .57 $ .68
=========== =========== =========== =========== ===========
CONSOLIDATED FINANCIAL
POSITION (at December 31)
Working capital of
continuing operations.... $ 61.0 $ 38.7 $ 80.5 $ 143.1 $ 194.0
Property, plant and
equipment, net........... 192.4 176.8 164.3 165.9 166.3
Net assets of discontinued
operations............... -- -- 10.6 19.0 19.7
Intangibles, investments
and other assets......... 98.6 100.6 72.9 75.8 89.2
----------- ----------- ----------- ----------- -----------
Total.................... 352.0 316.1 328.3 403.8 469.2
Long-term debt............ 150.3 150.4 190.3 172.4 187.2
Deferred income tax
liability................ 35.2 31.9 26.1 25.9 40.2
Other long-term
liabilities.............. 37.0 46.7 38.7 40.2 31.5
----------- ----------- ----------- ----------- -----------
Stockholders' equity...... $ 129.5 $ 87.1 $ 73.2 $ 165.3 $ 210.3
=========== =========== =========== =========== ===========
ADDITIONAL FINANCIAL DATA
Financial Ratios:
Return on beginning--
Capital................ 21.6% 23.6% 12.7% 1.0% 13.3%
- --Stockholders' equity.... 58.8% 71.4% 18.8% (3.5)% 21.0%
Return on net sales..... 5.9% 6.2% 4.0% (1.0)% 6.0%
Total debt as a
percentage of
capitalization......... 58.5% 70.4% 73.4% 53.1 % 49.6%
Ratio of EBITDA to
interest expense(/2/).. 6.8 5.8 4.9 5.0 5.6
Ratio of debt to
EBITDA(/2/)............ 1.4 1.7 1.8 2.1 1.8
Ratio of earnings to
fixed charges.......... 4.6 4.0 3.3 -- (/3/) 3.9
OTHER DATA
FOR THE YEAR:
Capital expenditures..... $ 41.2 $ 31.7 $ 22.8 $ 35.8 $ 23.8
Depreciation and
amortization............ $ 34.9 $ 34.5 $ 35.5 $ 33.7 $ 34.6
EBITDA(/2/).............. $ 131.4 $ 123.7 $ 113.1 $ 88.8 $ 112.4
Research and development
expenses................ $ 17.7 $ 16.0 $ 17.7 $ 14.6 $ 14.1
Sales per employee (in
thousands).............. $ 135.5 $ 135.4 $ 131.0 $ 118.6 $ 123.2
Common stock trading
range:
High.................... 22 1/4 19 1/2 18 3/4 17 1/2 18 1/8
Low..................... 16 15 3/4 11 5/8 10 5/8 13 1/8
AT YEAR END:
Number of shares
outstanding............. 32.7 32.9 34.7 43.6 44.2
Stockholders' equity per
share................... $ 3.96 $ 2.65 $ 2.11 $ 3.79 $ 4.76
Total assets............. $ 537.9 $ 526.7 $ 494.2 $ 556.1 $ 596.6
Number of stockholders of
record.................. 4,845 5,156 5,952 6,509 7,227
Number of employees...... 6,500 6,300 6,000 5,800 6,000
- --------
(1) Special items in 1995 includes a $10.4 million ($.31 per share) gain from
the sale of a discontinued operation and a $2.7 million ($.08 per share)
after-tax loss related to debt agreements. Amounts in 1994 includes $11.8
million ($.32 per share) after-tax loss on the early extinguishment of
debt, and an after-tax gain of $3.8 million ($.11 per share) from the
effect of a change in accounting for certain marketable securities.
(2) 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.
(3) Earnings from continuing operations in 1993 were insufficient to cover
fixed charges by approximately $13.5 million.
11
ITEM 7. 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 19 of this report.
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
Results of Operations
For 1996, the Company's continuing operations achieved record sales, income,
and earnings per share. The new record marked the third consecutive record
year for such results from continuing operations. Sales for 1996 totaled
$868.7 million, an increase of $31.2 million, or 3.7% from the 1995 total of
$837.5 million. All business segments reported increased sales, led by the
Industrial Materials Group, stemming from higher domestic and export sales of
water filtration and specialty metal products. The Precision Instruments Group
sales increase was due primarily to higher sales of aerospace instruments, and
the Electromechanical Group increase was due to higher domestic sales of
floor-care and non-floor-care products. Sales by all segments to foreign
markets totaled $293.6 million compared to $281.3 million in 1995, an increase
of $12.3 million or 4.4%, and represents approximately one-third of total
sales in both years. Export shipments from the United States in 1996 continued
trending upward, reaching $151.0 million compared to $139.1 million in 1995,
an increase of 8.5%, due primarily to higher foreign shipments of aerospace
products, water filters, and specialty metal products.
New orders during 1996 were $861.6 million compared to $832.0 million for
1995, an increase of $29.6 million, or 3.6%. The backlog of orders was $221.6
million at year-end 1996, a decrease of 3.1% from the end of 1995. Business
segment operating profit for 1996 was $116.4 million, compared to $111.4
million in 1995, an increase of 4.5%. The increase in profit was primarily due
to higher sales volume and continued production efficiency, as total segment
operating profit margins for 1996 of 13.4% were essentially maintained at the
1995 level.
Corporate administrative and other expenses continued a decreasing trend in
1996, totaling $21.3 million, compared to $22.1 million in 1995, due to lower
overall administrative expenses. Record operating income of $95.1 million was
achieved for 1996, compared to the 1995 record of $89.3 million, an increase
of $5.8 million or 6.5%. Interest and other expenses, net were $16.4 million
for 1996, compared to $20.0 million in 1995, a decrease of $3.6 million, due
to increased investment income from the Company's captive insurance
subsidiary, and lower interest expense due to lower effective interest rates
on lower outstanding borrowings. Also contributing to the lower net expenses
for 1996 was lower amortization due to reduced deferred debt issuance costs,
which were charged off as an extraordinary loss in the third quarter of 1995,
in connection with the replacement of a prior revolving credit agreement.
The effective tax rate was 34.9% for 1996, compared to 36.8% for 1995. The
reduced 1996 tax rate reflects the effect of a lower proportion of 1996 pretax
income from the Company's Italian motor operations, which are taxed at rates
higher than U.S. pretax income. The 1995 tax rate reflected a higher
proportion of Italian income, and also included the impact on current and
deferred taxes of a one percent increase in the Italian statutory income tax
rate. The 1995 tax rate also reflected a lower state tax provision than in
1996 due to favorable settlements of prior tax years.
Income from continuing operations and net income for 1996 was $51.2 million,
an increase of 17%, or $1.57 per share. The income from continuing operations
and per share results were both new records compared to $43.8 million or $1.31
per share in 1995. Net income in 1995 was $52.3 million, or $1.56 per share,
and reflected income from discontinued operations of $.8 million or $.02 per
share, a gain of $10.4 million or $.31 per share related to the sale of the
Microfoam Division in the second quarter of 1995, and also an extraordinary
charge of $2.7 million or $.08 per share for the early repayment of debt in
the third quarter of 1995.
12
The weighted average shares outstanding during 1996 was 32.7 million shares,
compared to the average of 33.4 million shares for 1995, a reduction of 2.3%.
The reduced number of shares in 1996 resulted from the repurchase and
retirement of shares under the Company's ongoing share repurchase program,
which began in March 1994, net of shares issued in connection with the
exercise of employee stock options. Shares outstanding at December 31, 1996
were 32.7 million shares, not significantly different from year-end 1995.
Business Segment Results
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
NET SALES(/1/):
Electromechanical.............................. $375,633 $372,038 $340,358
Precision Instruments.......................... 308,737 301,440 280,638
Industrial Materials........................... 184,291 164,012 153,742
-------- -------- --------
Total net sales.............................. $868,661 $837,490 $774,738
======== ======== ========
INCOME:
Segment operating profit(/2/)
Electromechanical.............................. $ 44,238 $ 48,858 $ 46,203
Precision Instruments.......................... 37,253 34,803 29,189
Industrial Materials........................... 34,874 27,741 23,251
-------- -------- --------
Total segment operating profit............... 116,365 111,402 98,643
Corporate administrative and other expenses.... (21,307) (22,104) (23,351)
-------- -------- --------
Consolidated operating income................ 95,058 89,298 75,292
Interest and other expenses, net............... (16,398) (20,041) (17,529)
-------- -------- --------
Consolidated income from continuing
operations before income taxes.............. $ 78,660 $ 69,257 $ 57,763
======== ======== ========
- --------
(1) After elimination of intra- and intersegment sales, which are not
significant in amount.
(2) Segment operating profit represents sales less all direct costs and
expenses (including certain administrative and other expenses) applicable
to each segment, but does not include interest expense.
The ELECTROMECHANICAL GROUP'S sales increased $3.6 million or 1.0% to $375.6
million for 1996. Higher domestic sales of both floor care and non-floor-care
products were largely offset by reduced sales by the Group's Italian motor
operations. Continuing recessionary conditions in Europe and highly
competitive pricing adversely affected sales in Europe. Operating profit for
the Group decreased $4.6 million or 9.5% to $44.2 million in 1996. Profit
margins fell to 11.8% in 1996 from 13.1% in the prior year due to the lower
European sales and reduced operating efficiencies in the Group's Italian motor
operations caused by the sales reduction. Also contributing to the profit
decline was the incurrence of start-up costs in 1996 for new motor production
operations in the PRC, Mexico, and the Czech Republic. These reductions were
mitigated somewhat by increased profits from the Group's domestic motor
operations due to higher domestic sales and improved operating efficiencies.
The competitive situation in Europe caused a delay in implementing the
Group's strategy to increase market penetration by offering its motor products
as a low-cost outsourcing alternative to certain European vertically
integrated floor care manufacturers. The Group expects to continue
implementation of this strategy during 1997. During 1996, the Group continued
initiatives to lower production costs, including both the start-up of the new
motor production operations previously mentioned above and the purchase of a
facility in the Czech Republic for operations to begin later in 1997. These
new operations are expected to lower costs and create additional market share
opportunities for the Group worldwide.
PRECISION INSTRUMENT GROUP sales in 1996 were $308.7 million, an increase of
$7.3 million or 2.4% from 1995. Increased sales of aerospace instruments were
partially offset by lower worldwide sales of heavy-truck
13
instruments caused by a continuing decline in industry-wide demand and by
lower process instrument sales to European markets. Operating profit of the
Group for 1996 increased $2.5 million, or 7.0%, to $37.3 million, compared to
$34.8 million in the prior year. Profit margins for the Group improved to
12.1% for 1996 from 11.5% in 1995 due primarily to significant profit
improvements from the Group's aerospace operations. Such profit improvement
was the result of a lower cost structure, due to restructuring activities in
prior years; increased sales, and a favorable change in product mix. Also
contributing to the increase was the full-year profit contribution from a 50%-
owned joint venture in Asia, which was acquired in March 1995 and manufactures
low-cost pressure gauges. The profit improvement was limited to some extent by
the lower sales of heavy-truck instruments by the Dixson business which was
also acquired in March 1995, and by reduced sales of process instruments in
Europe.
INDUSTRIAL MATERIAL GROUP sales in 1996 were $184.3 million, an increase of
$20.3 million or 12.4% from 1995. The sales increase was due primarily to
higher domestic and export sales of water filtration products, resulting from
increased market penetration into residential and retail markets, as well as
the full-year sales contribution of a French water filter producer acquired
late in 1995. Higher worldwide sales of specialty metal products due, in part,
to the introduction of new products, also contributed to the sales increase.
Group operating profit increased significantly by $7.1 million or 25.7% to
$34.9 million in 1996; profit margins increased to 18.9% from 16.9% in the
prior year. The profit improvement was due primarily to the sales increase,
and in part to improved operating efficiencies resulting from cost containment
initiatives throughout the Group. In June 1996, the Company announced it would
retain the Group's Westchester Plastics Division, which was previously
considered for sale. Westchester Plastics and the Haveg Division have been
combined to form a new Chemical Products Division within the Group. In
February 1997, the Company announced, subject to approval by its shareholders,
that it had entered into an agreement with Culligan Water Technologies, Inc.
to divest itself of its water filtration business through a merger of that
business with Culligan for shares of Culligan stock to be distributed to the
Company's shareholders. The transaction is expected to be completed in four to
six months from the date of the announcement. The water filtration business
consists of the Group's U.S.-based Plymouth Products Division and three
foreign subsidiaries. Net sales of the water filtration business totaled
approximately $70 million in 1996 (see Note 15 to the financial statements).
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
Results of Operations
For 1995, the Company achieved record sales and earnings. Sales were $837.5
million for 1995, an increase of $62.8 million or 8.1% from the 1994 total of
$774.7 million, which was also a record at that time. Sales and other amounts
for years prior to 1995 have been restated for the May 1995 sale of the
Microfoam Division, which is reported in the accompanying financial statements
as a discontinued operation. All business segments reported increased sales,
led by the Electromechanical Group, whose introduction of new products and
entry into emerging markets benefited 1995. Softness in the U.S. floor-care
markets experienced in the second half of 1995 reduced domestic sales growth.
Precision Instruments Group 1995 sales increased due largely to the Company's
acquisition of the heavy-vehicle instrumentation business of privately held
Dixson, Inc. in late March 1995. In 1995, the Industrial Materials Group
continued to benefit from improved business conditions in many of its markets,
resulting in increased sales led by the Company's metal powder business. Sales
by all business segments to foreign markets totaled $281.3 million in 1995
compared to $237.7 million in 1994, an increase of 18.3%. Export shipments
from the United States in 1995 continued to increase, reaching $139.1 million
compared to $116.2 million in 1994, an increase of 19.7%.
New orders during 1995 were $832.0 million, compared to $797.8 million for
1994, an increase of $34.2 million or 4.3%. The backlog of orders was $228.7
million at year-end 1995, a decrease of 2.4% from the end of 1994. Business
segment operating profit was $111.4 million in 1995 compared to $98.6 million
in 1994, an increase of 12.9%. The increase in profits was due to the higher
sales volume and the successful implementation of cost reduction programs in
the Precision Instruments and Industrial Materials groups. The Precision
Instruments Group also benefited from the restructuring of the aerospace
business, which was initiated in 1993.
14
Lower operating costs in the temperature- and corrosion-resistant-materials
and plastics compounding businesses enhanced the profitability of the
Industrial Materials Group.
Corporate administrative and other expenses were $22.1 million in 1995,
slightly lower than the $23.4 million incurred in 1994. Operating income
reached a record $89.3 million in 1995, an increase of $14.0 million or 19%
over 1994. Interest and other expenses, net were $20.0 million in 1995
compared to $17.5 million in 1994, an increase of $2.5 million. The increase
in net expenses reflects lower interest expenses during 1995 due to lower
effective interest rates on debt outstanding during the year, but it was more
than offset by lower interest and other investment income.
The effective tax rate was approximately 37% for both 1995 and 1994. Both
years reflect a lower net state tax provision, and the 1995 rate included
foreign tax benefits related to certain capital investments.
Income from continuing operations improved 19.5% in 1995 to $43.8 million,
or $1.31 per share, compared to $36.6 million, or $.99 per share in 1994.
Income from discontinued operations was $.8 million, or $.02 per share in
1995, compared to $2.4 million, or $.06 per share in 1994. Results in 1995
also included an after-tax gain of $10.4 million ($.31 per share), due to the
sale of the Microfoam Division in the second quarter of 1995.
Income before extraordinary items was $55.0 million, or $1.64 per share in
1995, and $39.0 million, or $1.05 per share in 1994, an income improvement of
$16.0 million or 41%. After an extraordinary after-tax charge in the third
quarter of 1995 for the write-off of deferred debt issuance costs of $2.7
million, or $.08 per share, net income for 1995 was $52.3 million, or $1.56
per share, compared to 1994 net income of $31.0 million, or $.84 per share.
Net income for 1994 included a first quarter after-tax charge for an
extraordinary loss of $11.8 million ($.32 per share) due to the early
extinguishment of debt, and a $3.8 million ($.11 per share) after-tax gain due
to a change in accounting for certain marketable securities.
Weighted average shares outstanding during 1995 were 33.4 million shares,
compared to the average of 37.1 million shares for 1994, a reduction of 3.7
million shares or 10%. The reduced number of shares in 1995 resulted from the
repurchase and retirement of shares under the Company's ongoing share
repurchase program, which began in March 1994. Shares outstanding at December
31, 1995 and 1994 were 32.9 million shares and 34.7 million shares,
respectively.
Business Segment Results
The ELECTROMECHANICAL GROUP'S sales increased $31.7 million or 9.3% to
$372.0 million, due primarily to increased market share, introduction of new
products, and the 1994 completion of capacity expansion programs at two plants
in North Carolina. Sales for 1995 from the Company's Italian operations
increased 25.6% before currency translation effects, which were minimal.
However, softness in the U.S. floor care markets experienced in the second
half of 1995 limited domestic sales growth. Operating profit of the Group
increased 5.7% to $48.8 million in 1995 due primarily to the increase in sales
volume. The Group's profit margin in 1995 was 13.1% compared to 13.6% in 1994.
Higher material costs primarily in the Italian operations exceeded modest
price increases and cost reductions, which reduced Group profitability. That
condition was being moderated by additional cost-saving activities.
PRECISION INSTRUMENTS GROUP sales in 1995 were $301.4 million, an increase
of $20.8 million or 7.4% from 1994. The increase was due largely to increased
sales of heavy-vehicle instruments, resulting from acquisition of the Dixson
business at the end of the first quarter of 1995. An expected market downturn
started to affect fourth-quarter 1995 shipments of heavy-truck instruments,
which was expected to be alleviated somewhat by improving sales of commercial
aerospace products. Sales of process instruments also increased in 1995;
however, that increase was mostly offset by lower first-half sales of
aerospace instruments. Group operating profit in 1995 increased 19.2% to $34.8
million, compared to $29.2 million in 1994. A profit contribution by Dixson, a
manufacturing joint venture in Asia, and increased operating efficiencies in
the aerospace business resulting from the restructuring activities, along with
benefits from cost reduction programs initiated in prior years, accounted for
the improved operating results. The cost savings being realized from the
restructuring of the Group are expected to continue.
15
INDUSTRIAL MATERIALS GROUP sales from continuing operations were $164.0
million in 1995, an increase of $10.3 million or 6.7% from 1994, due primarily
to higher sales by the Company's metal powder business. Sales growth of water
filtration products, which had been strong in prior years, was reduced due to
softness in the U.S. retail market segment. Group operating profit in 1995
increased $4.5 million or 19.3% to $27.7 million. The increase in
profitability was due in part to the higher sales volume, but mostly to cost
reduction programs and improved operating efficiencies in the Company's
temperature- and corrosion-resistant-materials business. The plastics
compounding business benefited primarily from a third-quarter 1995 cost
recovery from an insurance settlement. The overall profit increase was offset
somewhat by reduced performance by the water filtration business. In May 1995
the Microfoam Division was sold. In November 1995, APIC/AFIMO, a French
producer of filtration products, was acquired and added to the Group. The
acquisition had no significant effect on the Group's results for 1995.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Working capital of continuing operations at December 31, 1996 amounted to
$61.0 million, an increase of $22.3 million from December 31, 1995, largely
reflecting the repayment of short-term borrowings. The ratio of current assets
to current liabilities at December 31, 1996 was 1.33:1, compared to 1.18:1 at
December 31, 1995. The Company's earnings before interest, taxes, depreciation
and amortization (EBITDA) from continuing operations was $131.4 million in
1996, compared to $123.7 million in 1995.
Cash provided by the Company's continuing operations totaled $74.7 million
in 1996 compared to $68.0 million in 1995, a net increase of $6.7 million. The
net increase reflects higher income from continuing operations, and lower
overall working capital requirements. Total cash provided by operating
activities in 1995 was $65.4 million, and included $2.6 million of cash used
for discontinued operations.
Total 1996 charges against reserves for restructuring and other unusual
items amounted to $7.2 million, compared to $13.0 million in 1995. The charges
were primarily for cash, and did not significantly affect the Company's
liquidity. Charges in both years were for workforce reductions, relocation of
aerospace operations, and facilities combination, which required cash outlays,
and for the write-off of certain assets, which did not require the use of
cash. In 1997, the Company expects to incur additional restructuring-related
cash and noncash charges against its restructuring reserves. It anticipates
substantial completion of the restructuring program by the end of 1997, except
for certain longer-term pension-related aspects of the program. Once the
restructuring program has been completed, it is anticipated that the benefits,
which have already been substantial, will continue to more than offset the
required cash expenditures under the plan.
Cash used for investing activities was $41.5 million in 1996, compared to
$28.7 million in 1995, an increase of $12.8 million. The primary reason for
the increase was additions to property, plant, and equipment, which totaled
$41.2 million compared to $31.7 million in 1995. Net cash expenditures for
investing activities in 1995 also included the acquisition of two businesses
and investment in a joint venture, requiring a total cash outlay of $44.0
million, more than offset by $47.4 million in cash proceeds, received
primarily from the sale of the Microfoam Division and other assets.
Financing activities used cash totaling $37.2 million in 1996, compared to
$36.9 million in 1995. During 1996, the Company made net repayments of short-
term borrowings totaling $24.4 million, repurchased 698,000 shares of the
Company's common stock at a total cost of $12.5 million, funded dividend
payments of $7.9 million, and received cash proceeds of $7.0 million from the
exercise of employee stock options. Financing activities for 1995 included net
proceeds of $54.5 million from short-term borrowings; repayment of $50.0
million in term loans, of which $5 million was required; expenditures of $39.6
million for the repurchase of 2.3 million shares of the Company's common
stock; funding of dividends totaling $8.0 million; and net proceeds of $5.6
million related to the exercise of employee stock options.
16
On September 12, 1996, the Company amended its $195 million Bank Credit
Agreement. In addition to providing somewhat greater financial flexibility,
the amended agreement also extended the maturity of the credit facility by one
year, to 2001, and provided for slightly lower interest rates and fees on the
total credit facility. At December 31, 1996, $176.9 million of the domestic
bank credit facility was unused and available, along with approximately $8.8
million of unused foreign credit lines with European banks.
The stock repurchases mentioned previously were made under the Company's
ongoing share repurchase programs. Since beginning the stock repurchase
programs in March 1994, the Company has acquired a total of 12.2 million
shares at a total cost of $171.0 million as of December 31, 1996. Additional
stock repurchases, if any, will be made under a new $50 million authorization
announced in June 1996, of which $48.2 million was unexpended as of year-end
1996.
As a result of all 1996 cash flow activities, cash and cash equivalents at
December 31, 1996 totaled $3.1 million, compared to $7.0 million at December
31, 1995. The Company believes it has sufficient cash-generating capabilities
and available domestic and foreign credit facilities to enable it to meet its
needs in the foreseeable future.
NEW ACCOUNTING STANDARDS
In the first quarter of 1996, the Company adopted Financial Accounting
Standards Board (FASB) Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. Statement No.
121 establishes new accounting standards for measuring the impairment of long-
lived assets. The adoption of the new statement did not have any impact on the
Company's consolidated financial position or results of operations.
As of January 1, 1996, the Company adopted FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement No. 123 establishes a fair
value method of accounting for stock-based awards issued to employees and
others that includes expensing related compensation cost in the income
statement; but it also allows companies the choice of continuing to measure
compensation expense as it was previously measured prior to the effective date
of adoption of Statement No. 123. The Company elected to continue to use the
previous method of accounting for stock-based awards issued to employees, but
to provide the disclosures required by Statement No. 123. Consequently,
adoption of the statement did not have any impact on the Company's
consolidated financial position or results of operations (see Note 7 to the
consolidated financial statements).
INTERNAL REINVESTMENT
Capital Expenditures
Capital expenditures were $41.2 million in 1996, compared to $31.7 million
in 1995, an increase of $9.5 million or 29.9%. Approximately 83% of the 1996
expenditures were for additional manufacturing equipment to increase
production efficiencies, and for expanded production capacity, primarily in
the Electromechanical Group. The Company expects to increase its capital
spending in 1997 slightly above 1996 levels, with continued emphasis on
investment in production efficiencies and expansion, primarily in the
Electromechanical Group.
Product Development and Engineering
Product development and engineering expenses in 1996 totaled $37.4 million
compared to $33.2 million in 1995, and $32.8 million in 1994. These amounts
include expenses for research and development of $17.7 million in 1996, $16.0
million in 1995, and $17.7 million in 1994. Such expenditures were directed
toward the development of new products and processes, and the improvement of
existing products and processes.
ENVIRONMENTAL MATTERS
The Company is subject to environmental laws and regulations as well as
stringent cleanup requirements and also has been named a potentially
responsible party at several sites that are the subject of government-mandated
cleanups. Provisions for environmental cleanup at those sites and other sites
were approximately $1.8 million in 1996, $2.4 million in 1995, and $1.6
million in 1994.
17
It is not possible to accurately quantify the potential financial impact of
actions regarding environmental matters, but the Company believes that based
on past experience and current evaluations, the outcomes 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 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.
OTHER MATTERS
In cooperation with the Consumer Products Safety Commission, the Company,
along with its supplier and customer, is participating in a voluntary recall
of one water filter cartridge model involving 14,000 units which were sold,
beginning in March 1996, through a mass merchandiser, when the filter
cartridges were introduced. Although only a limited number of the filter
cartridges may contain an incorrect form of carbon, all units are being
recalled as a precautionary measure. Neither the Company, the carbon supplier,
nor the distributors are aware of any consumer injuries related to the filter
cartridge. The Company does not believe it is at fault in this matter and
based upon the information available at this time, it is not expected that the
outcome will have a material effect on the Company's financial position or
results of operations.
RISK FACTORS
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 risk
and uncertainties that exist in the Company's operations and business
environment, and are subject to change based 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 includes some, but not all, of the factors or uncertainties that
could cause actual results to differ from projections:
. An economic slowdown in any one, or all of, the Company's global market
segments.
. Unforeseen selling price reductions in any one, or all of, the Company's
global market segments, with adverse effects on profit margins.
Currently, the most noticeable price pressure is in the electric motor
market in which some competitors are scaling back prices, and new
competitors are seeking to gain market entry.
. The Company's ability to achieve cost reduction targets; 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 and unanticipated start-up expenses and production
delays at new plants.
. The unanticipated expenses of divesting businesses currently under
consideration, or of assimilating newly-acquired business into the
Company's business structure; as well as, the impact of unusual expenses
from on-going evaluations of 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.
18
. Unpredictable delays or difficulties in the development of key new
product programs.
. The risk of not recovering major research and development expenses, and
the risks associated with major technological shifts away from the
Company's technologies and core competencies.
. A slower than anticipated improvement in the build rate in the U.S. and
Europe for heavy-trucks, construction and agricultural equipment and
related 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 U.S. 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; and 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 in the
Italian lira and German mark; protectionism and confiscation of assets;
nationalizations and unstable governments and legal systems, and
intergovernmental disputes.
The Company believes that it has the product offering, 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
----
INDEX TO FINANCIAL STATEMENTS (ITEM 14(A) 1)
Report of Independent Auditors........................................ 20
Consolidated Statement of Income for the years ended December 31,
1996, 1995, and 1994................................................. 21
Consolidated Balance Sheet at December 31, 1996 and 1995.............. 22
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1996, 1995, and 1994.................................... 23
Consolidated Statement of Cash Flows for the years ended December 31,
1996, 1995, and 1994................................................. 24
Notes to the Consolidated Financial Statements........................ 25
FINANCIAL STATEMENT SCHEDULES (ITEM 14(A) 2)
Financial statement schedules have been omitted because either they are not
applicable or the required information is included in the financial
statements or the notes thereto.
19
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, 1996 and 1995, and the related consolidated
statements of income, cash flows and stockholders' equity for each of the
three years in the period ended December 31, 1996. 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 generally accepted auditing
standards. 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, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for marketable securities.
/s/ ERNST & YOUNG LLP
Philadelphia, PA
January 22, 1997,
except for Note 15, as to which the date is
February 5, 1997
20
AMETEK, INC.
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
Net sales................................. $ 868,661 $ 837,490 $ 774,738
---------- ---------- ----------
Expenses:
Cost of sales (excluding depreciation).. 669,784 647,008 600,290
Selling, general and administrative..... 76,059 74,790 70,980
Depreciation............................ 27,760 26,394 28,176
---------- ---------- ----------
Total expenses........................ 773,603 748,192 699,446
---------- ---------- ----------
Operating income.......................... 95,058 89,298 75,292
Other income (expenses):
Interest expense........................ (19,071) (20,175) (21,618)
Other, net.............................. 2,673 134 4,089
---------- ---------- ----------
Income from continuing operations before
income taxes............................. 78,660 69,257 57,763
Provision for income taxes................ 27,470 25,500 21,144
---------- ---------- ----------
Income from continuing operations......... 51,190 43,757 36,619
Discontinued operations, net of taxes:
Income from discontinued operations..... -- 779 2,372
Gain on sale of discontinued
operations............................. -- 10,420 --
---------- ---------- ----------
Income before extraordinary items and
cumulative effect of accounting change... 51,190 54,956 38,991
Extraordinary loss on early extinguishment
of debt, net of taxes.................... -- (2,676) (11,810)
Cumulative effect of accounting change for
marketable securities, net of taxes...... -- -- 3,819
---------- ---------- ----------
Net income................................ $ 51,190 $ 52,280 $ 31,000
========== ========== ==========
Earnings (loss) per share:
Income from continuing operations....... $ 1.57 $ 1.31 $ .99
Discontinued operations:
Income from discontinued operations... -- .02 .06
Gain on sale of discontinued
operations........................... -- .31 --
---------- ---------- ----------
Income before extraordinary items and
cumulative effect of accounting
change................................. 1.57 1.64 1.05
Extraordinary loss on early
extinguishment of debt................. -- (.08) (.32)
Cumulative effect of accounting change.. -- -- .11
---------- ---------- ----------
Net income.............................. $ 1.57 $ 1.56 $ .84
========== ========== ==========
Average common shares outstanding......... 32,670,726 33,426,436 37,125,569
========== ========== ==========
See accompanying notes.
21
AMETEK, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
DECEMBER 31,
------------------
1996 1995
-------- --------
ASSETS
Current assets:
Cash and cash equivalents................................ $ 3,051 $ 7,011
Marketable securities.................................... 6,441 5,694
Receivables, less allowance for possible losses.......... 126,212 118,782
Inventories.............................................. 94,413 101,515
Deferred income taxes.................................... 11,086 11,825
Other current assets..................................... 5,769 4,518
-------- --------
Total current assets................................... 246,972 249,345
Property, plant and equipment, net......................... 192,356 176,838
Intangibles, investments and other assets.................. 98,587 100,562
-------- --------
$537,915 $526,745
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term
debt.................................................... $ 31,898 $ 56,374
Accounts payable......................................... 77,994 76,569
Income taxes payable..................................... 10,227 9,177
Accrued liabilities...................................... 65,852 68,556
-------- --------
Total current liabilities.............................. 185,971 210,676
Long-term debt............................................. 150,333 150,430
Deferred income taxes...................................... 35,099 31,927
Other long-term liabilities................................ 37,014 46,653
Stockholders' equity:
Preferred stock, $1.00 par value; authorized: 5,000,000
shares; none issued..................................... -- --
Common stock, $.01 par value; authorized: 100,000,000
shares; issued: 1996--34,208,095 shares; 1995--
34,906,717 shares....................................... 342 349
Capital in excess of par................................. 1,190 783
Retained earnings........................................ 157,843 124,503
-------- --------
159,375 125,635
Net unrealized losses.................................... (15,375) (18,691)
Less: Cost of shares held in treasury: 1996--1,502,617
shares; 1995--2,049,194 shares.......................... (14,502) (19,885)
-------- --------
Total stockholders' equity............................. 129,498 87,059
-------- --------
$537,915 $526,745
======== ========
See accompanying notes.
22
AMETEK, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
CAPITAL STOCK
Preferred Stock................................. $ -- $ -- $ --
-------- -------- --------
Common Stock, $.01 par value:
Balance at the beginning of the year........... 349 372 46,414
Common stock retirement........................ (7) (23) (6,988)
Reduction in par value from $1.00 per share to
$.01 per share................................ -- -- (39,054)
-------- -------- --------
Balance at the end of the year............... 342 349 372
-------- -------- --------
CAPITAL IN EXCESS OF PAR VALUE
Balance at the beginning of the year........... 783 7,382 6,389
Employee stock options and savings plan........ 2,943 2,093 976
Reduction in par value of common stock......... -- -- 39,054
Common stock retirement........................ (2,536) (8,661) (39,607)
Other.......................................... -- (31) 570
-------- -------- --------
Balance at the end of the year............... 1,190 783 7,382
-------- -------- --------
RETAINED EARNINGS
Balance at the beginning of the year........... 124,503 111,150 161,297
Net income..................................... 51,190 52,280 31,000
Cash dividends paid............................ (7,853) (7,983) (8,910)
Common stock retirement........................ (9,997) (30,944) (72,237)
-------- -------- --------
Balance at the end of the year............... 157,843 124,503 111,150
-------- -------- --------
NET UNREALIZED LOSSES
Foreign currency translation:
Balance at the beginning of the year........... (15,008) (16,148) (20,163)
Translation adjustments........................ 1,281 1,140 4,015
-------- -------- --------
Balance at the end of the year............... (13,727) (15,008) (16,148)
-------- -------- --------
Pension liability in excess of unrecognized
prior service cost:
Balance at the beginning of the year........... (4,384) (4,391) (4,731)
Adjustments during the year.................... 1,802 7 340
-------- -------- --------
Balance at the end of the year............... (2,582) (4,384) (4,391)
-------- -------- --------
Other (principally valuation allowance for
marketable securities):
Balance at the beginning of the year........... 701 (683) 3,262
Appreciation (depreciation) in marketable
securities.................................... 233 1,384 (2,547)
Other.......................................... -- -- (1,398)
-------- -------- --------
Balance at the end of the year............... 934 701 (683)
-------- -------- --------
Balance at the end of the year............... (15,375) (18,691) (21,222)
-------- -------- --------
TREASURY STOCK
Balance at the beginning of the year........... (19,885) (24,502) (27,142)
Employee stock options and savings plan........ 5,200 4,237 2,577
Other.......................................... 183 380 63
-------- -------- --------
Balance at the end of the year............... (14,502) (19,885) (24,502)
-------- -------- --------
Total Stockholders' Equity................. $129,498 $ 87,059 $ 73,180
======== ======== ========
See accompanying notes.
23
AMETEK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
-------- -------- ---------
Cash provided by (used for):
Operating activities:
Income from continuing operations............. $ 51,190 $ 43,757 $ 36,619
Adjustments to reconcile income from
continuing operations to net cash provided by
continuing operations:
Depreciation and amortization............... 34,906 34,461 35,469
Deferred income taxes....................... 2,424 3,989 4,585
Proceeds from sale of securities in trading
portfolio.................................. -- -- 31,566
Changes in operating working capital:
Increase in receivables................... (4,092) (3,511) (7,902)
Decrease (increase) in inventories and
other current assets..................... 7,924 1,243 (9,703)
(Decrease) increase in payables, accruals
and income taxes......................... (6,608) (17,948) 20,323
(Decrease) increase in other long-term
liabilities................................ (4,377) 6,273 (723)
Other....................................... (6,667) (304) (3,289)
-------- -------- ---------
Cash provided by continuing operations.......... 74,700 67,960 106,945
Cash (used for) provided by discontinued
operations..................................... -- (2,572) 7,645
-------- -------- ---------
Total operating activities................ 74,700 65,388 114,590
-------- -------- ---------
Investing activities:
Additions to property, plant and equipment.... (41,247) (31,746) (22,798)
Proceeds from sale of assets and discontinued
operations................................... 4,023 42,709 8,428
Purchase of businesses and investments........ (5,926) (43,980) (1,144)
Decrease in marketable securities and other... 1,649 4,293 5,611
-------- -------- ---------
Total investing activities................ (41,501) (28,724) (9,903)
-------- -------- ---------
Financing activities:
Net change in short-term borrowings........... (24,357) 54,544 1,600
Cash dividends paid........................... (7,853) (7,983) (8,910)
Additional long-term borrowings............... -- -- 306,004
Repayment of long-term debt................... -- (50,000) (292,506)
Debt issuance costs and debt prepayment
premiums..................................... -- (166) (29,211)
Repurchases of common stock................... (12,540) (39,628) (118,832)
Proceeds from stock options................... 6,953 5,629 3,554
Other......................................... 638 706 400
-------- -------- ---------
Total financing activities................ (37,159) (36,898) (137,901)
-------- -------- ---------
Decrease in cash and cash equivalents........... (3,960) (234) (33,214)
Cash and cash equivalents:
Beginning of year............................. 7,011 7,245 40,459
-------- -------- ---------
End of year................................... $ 3,051 $ 7,011 $ 7,245
======== ======== =========
See accompanying notes.
24
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements 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 generally
accepted accounting principles 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.
Cash Equivalents, Securities, and Other Investments
All highly liquid investments with maturities of three months or less when
purchased are considered cash equivalents. In January 1994, the Company
adopted Statement of Financial Accounting Standard (SFAS) No. 115, Accounting
for Certain Investment in Debt and Equity Securities. SFAS No. 115 requires
that equity securities and fixed income securities be carried at market value,
and that the unrealized gains and losses on securities, less deferred income
taxes, be reflected as a component of stockholders' equity for securities
considered available for sale, and be reflected in income for securities held
for trading purposes. The cumulative effect on net income of adopting that
standard for securities, then classified in a trading portfolio, was to
increase net income for 1994 by $3.8 million (net of taxes), or $.11 per
share. At December 31, 1996 and 1995, 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, 1996 and 1995 was: 1996--$14.9 million ($13.5
million amortized cost), and 1995--$12.2 million ($10.9 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) method over
the LIFO value was $35.0 million and $36.4 million at December 31, 1996 and
1995.
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's revenues are recorded as 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: 1996--$17.7 million, 1995--
$16.0 million, and 1994--$17.7 million.
25
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Earnings Per Share
Earnings per share are based on the average number of common shares
outstanding during the period. No material dilution of earnings per share
would result for the periods if it were assumed that all outstanding stock
options were exercised.
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 (not significant in amount) are included in operating results for
the year.
In addition, the Company utilizes various financial instruments to hedge
firm commitments for certain export sales, thereby minimizing its exposure to
foreign currency fluctuation. Foreign exchange contracts, foreign currency
options, and foreign currency swaps may be entered into for periods consistent
with the Company's exposure, generally one year or less. Gains and losses from
those arrangements are deferred and are reflected as adjustments of the
related foreign currency transaction.
Interest Rate Swap and Cap Agreements
The Company enters into interest rate swap and cap agreements to modify the
interest characteristics of certain of its revolving credit loans, and to
reduce the impact of increases in interest rates on its floating-rate loans.
Such agreements generally involve the exchange of fixed- and floating-rate
interest payments periodically over the life of the agreement without an
exchange of the underlying principal amount. The differential to be paid or
received is accrued as interest rates change, and it is recognized as an
adjustment to interest expense related to the debt over the life of the
agreements. Under interest rate cap agreements, the interest rate on a
specified percentage of certain revolving credit loans outstanding, which is
subject to the floating interest rate, cannot exceed a fixed percentage. The
Company also uses foreign currency and interest rate swaps in its selective
hedging of certain foreign currency and interest rate risk exposure.
Intangible Assets
The excess of cost over net assets acquired (goodwill) is being amortized on
a straight-line basis over periods of 20 to 30 years. The Company reviews the
carrying value of goodwill for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Patents are being amortized on a straight-line basis over their estimated
useful lives of 9 to 10 years. Other acquired intangibles are being amortized
on a straight-line basis over their estimated useful lives of 5 to 30 years.
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. RESTRUCTURING
As of December 31, 1996, charges against a restructuring reserve of $45.1
million established in 1993 (primarily for the Company's Precision Instruments
Group) totaled approximately $32.2 million, of which $7.2 million was charged
in 1996, $13 million in 1995 and $7.9 million in 1994. The charges were for
costs related to workforce reductions, a facility combination and asset write-
downs. The remaining reserves of $12.9 million at December 31, 1996, related
primarily to certain pension and employee-related obligations and product line
26
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
relocation, are currently anticipated to be fully utilized with no material
change in the estimates. Except for certain long-term pension obligations, the
significant portion of these actions are expected to be completed by the end
of 1997.
3. ACQUISITIONS
On November 1, 1995, the Company acquired APIC and AFIMO (APIC), a French
and Monaco based manufacturer of water filtration products, for cash. This
acquisition was completed in early 1996 upon the determination of fair values
of the assets acquired and the liabilities assumed. On March 31, 1995, the
Company purchased the heavy-vehicle instrumentation business of privately held
Dixson, Inc. also for cash. These acquisitions were accounted for by the
purchase method and the results of their operations are included in the
Company's consolidated results from their respective acquisition dates. The
acquisitions of Dixson and APIC would not have had a material effect on the
Company's sales or earnings for 1995 or 1994 had they been made at the
beginning of the respective periods.
On March 1, 1995, the Company acquired a 50% ownership interest in a joint
venture established with a Taiwanese supplier to manufacture low-cost pressure
gauges in China and Taiwan for worldwide markets. The investment is accounted
for by the equity method, and the Company's 50% share of the operating results
since March 1, 1995 (not material in amount) is included in the earnings of
its domestic gauge manufacturing Division.
The aggregate purchase price of the above mentioned acquisitions and
investment in the joint venture totaled $46.8 million, consisting of cash paid
at closing and minor deferred payment obligations over periods of up to three
years. The investment in the joint venture is reported with Intangibles,
Investments and Other Assets in the accompanying balance sheet.
4. DISCONTINUED OPERATIONS
On May 18, 1995, the Company sold its foam packaging business (Microfoam
Division) for approximately $37 million in cash. The sale of the assets of
Microfoam, after providing for certain costs related to the sale, resulted in
a second quarter 1995 gain of $10.4 million, net of taxes of $6.4 million. As
a result of the transaction, the Company's prior period financial statements
were restated to report Microfoam as a discontinued operation.
Summary operating results of discontinued operations, excluding the gain on
sale, were as follows:
YEAR ENDED
DECEMBER 31,
---------------
1995 1994
------- -------
(IN THOUSANDS)
Net sales...................................................... $12,153 $33,226
======= =======
Income before income taxes..................................... $ 1,291 $ 4,044
Provision for income taxes..................................... 512 1,672
------- -------
Net income..................................................... $ 779 $ 2,372
======= =======
27
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. OTHER BALANCE SHEET INFORMATION
(IN THOUSANDS)
--------------------
1996 1995
--------- ---------
INVENTORIES
Finished goods and parts................................ $ 28,565 $ 31,628
Work in process......................................... 18,829 23,491
Raw materials and purchased parts....................... 47,019 46,396
--------- ---------
$ 94,413 $ 101,515
========= =========
PROPERTY, PLANT AND EQUIPMENT, at cost
Land.................................................... $ 8,840 $ 8,107
Buildings............................................... 99,515 95,249
Machinery and equipment................................. 340,242 304,694
--------- ---------
448,597 408,050
Less accumulated depreciation........................... (256,241) (231,212)
--------- ---------
$ 192,356 $ 176,838
========= =========
INTANGIBLES, INVESTMENTS AND OTHER ASSETS
Intangibles, at cost:
Patents............................................... $ 20,698 $ 20,993
Goodwill.............................................. 33,872 30,626
Other acquired intangibles............................ 48,529 48,455
Less accumulated amortization......................... (61,190) (54,818)
--------- ---------
41,909 45,256
Investments............................................. 36,437 35,806
Other................................................... 20,241 19,500
--------- ---------
$ 98,587 $ 100,562
========= =========
ACCRUED LIABILITIES
Accrued employee compensation and benefits.............. $ 23,753 $ 22,572
Restructuring........................................... 5,556 11,208
Other................................................... 36,543 34,776
--------- ---------
$ 65,852 $ 68,556
========= =========
ALLOWANCES FOR POSSIBLE LOSSES ON ACCOUNTS AND NOTES RECEIVABLE
(IN THOUSANDS)
-----------------------
1996 1995 1994
------- ------ ------
Balance at beginning of year......................... $ 6,373 $3,921 $2,394
Additions charged to expense......................... 169 2,723 1,601
Recoveries credited to allowance..................... 38 6 110
Write-offs........................................... (1,246) (432) (219)
Currency translation adjustment and other............ 41 155 35
------- ------ ------
Balance at end of year............................... $ 5,375 $6,373 $3,921
======= ====== ======
28
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT
At December 31, 1996 and 1995, long-term debt consisted primarily of $150
million in 9 3/4% senior notes due 2004. The annual future payments required
by the terms of the long-term debt for the years 1997 through 2001 are not
significant.
In March 1994, the Company entered into a $250 million senior secured credit
agreement with a group of banks led by The Chase Manhattan Bank, N.A. The net
proceeds from these debt issues, together with available cash were used, among
other things, to finance the Company's early retirement of debt in March 1994.
In October 1994, the Company amended the agreement by reducing the total
credit facility from $250 million to $200 million. In connection with this
early retirement of debt, the Company recorded a first quarter 1994
extraordinary charge of $11.8 million (net of tax benefits of $7.6 million),
or $.32 per share, for the prepayment premiums paid and the write-off of
related deferred debt issuance costs.
On August 2, 1995, the Company replaced its $200 million secured bank credit
facility with a new Bank Credit Agreement with a group of banks led by The
Chase Manhattan Bank, N.A. The five-year revolving credit facility was
unsecured, and provided up to $195 million in revolving credit loans, with
scheduled reductions in the total credit facility to $150 million by August 1,
2000. In connection with the August 2, 1995 Bank Credit Agreement, the Company
recorded a third quarter 1995 noncash extraordinary charge of $2.7 million
(net of tax benefits of $1.7 million), or $.08 per share, for the write-off of
deferred debt issuance costs related to the previous bank credit agreement.
On September 12, 1996, the Company amended the $195 million Bank Credit
Agreement, extending the maturity of the facility by one year, to 2001. In
addition, the amended agreement provides somewhat greater financial
flexibility, and slightly lower interest rates and fees on the entire credit
facility.
Among other things, the agreements place certain restrictions on cash
payments, including the payment of cash dividends. At December 31, 1996,
retained earnings of approximately $12 million were not subject to the
dividend limitation.
Outstanding loans under the credit facility are subject to interest rate
swap and cap agreements based on the combination of a fixed rate and the
London Interbank Offered Rate (LIBOR), plus a negotiated spread over LIBOR.
Under the new Bank Credit Agreement, at December 31, 1996 the Company had
$18.1 million in revolving credit loans outstanding at a blended interest rate
of 7.4%.
Foreign subsidiaries of the Company had lines of credit with European banks
of approximately $22.5 million, of which $8.8 million was unused at December
31, 1996. The revolving credit loans, along with the foreign bank borrowings
totaling $13.7 million at December 31, 1996, are classified on the
accompanying balance sheet as short-term borrowings. The weighted average
interest rate on all short-term borrowings outstanding at December 31, 1996
was 8.6%. The Company also has outstanding letters of credit totaling $13.6
million at December 31, 1996.
7. STOCKHOLDERS' EQUITY
In June 1996, the Company announced a new $50 million stock repurchase
authorization, and rescinded the unused portion ($5.8 million) of the previous
authorizations, which had totaled $175 million. During 1996, the Company
repurchased 698,000 shares of its common stock at an aggregate cost of $12.5
million. As of December 31, 1996, shares repurchased since the inception of
the stock repurchase programs in March 1994 totaled 12.2 million shares at an
aggregate cost of $171 million. At December 31, 1996, $48.2 million was
unexpended under the outstanding stock repurchase authorization.
29
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
All of the repurchased shares have been retired as required by the Company's
loan agreements, and such retired shares are considered authorized but
unissued shares. At December 31, 1996, shares outstanding totaled 32,705,478
shares, compared to 32,857,523 shares outstanding at December 31, 1995.
In 1995 a Stock Incentive Plan was adopted by the Company, providing for the
grant of up to 2.2 million shares of common stock to eligible employees and
nonemployee Directors of the Company. Under the Plan, the awards may include
the grant of stock options, stock appreciation rights, restricted stock
awards, and phantom stock awards.
In certain circumstances, the Company provides for restricted stock awards
of its common stock to eligible employees and nonemployee Directors of the
Company at such cost to the recipient as the Stock Incentive Plan Committee of
the Board of Directors may determine. Such shares are issued subject to
certain conditions, with transfer and other restrictions as prescribed by the
Plan. No restricted stock was awarded during 1996 or 1995. In 1994, the
Company awarded 20,000 shares of restricted common stock to certain
nonemployee Directors under the Plan. Upon issuance of restricted stock,
unearned compensation, equivalent to the excess of the market value of the
shares awarded over the price paid by the recipient at the date of the grant,
is charged to stockholders' equity and is amortized to expense over the
periods until the restrictions lapse. Amortization expense in 1996, 1995, and
1994 for awards under the Plan was not significant.
The Company has a Shareholder Rights Plan, under which the Board of
Directors declared a dividend in 1989 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 (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 1999.
As of January 1, 1996, the Company adopted the disclosure provisions of
Financial Accounting Standards Board Statement No. 123, Accounting for Stock-
Based Compensation. As permitted by Statement No. 123, the Company elected to
continue to account for stock options under Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation
expense is not recognized for fixed-price stock options when the exercise
price of the employee stock option is equal to the market price of the
underlying stock on the date of grant.
Total compensation expense recognized by the Company for all stock-based
employee compensation awards for 1996, 1995, and 1994 was not significant. Had
compensation expense for the Company's stock option plans been determined by
Statement No. 123, the pro forma effects on the Company's net income and
earnings per share for the years ended December 31, 1996 and 1995 would not
have been materially different from the amounts reported. The effects of
applying Statement No. 123 in 1996 for providing pro forma compensation
expense disclosure may not be representative of the effects on reported net
income, or earnings per share in future years.
At December 31, 1996, 3,786,623 (4,402,164 in 1995) shares of common stock
were reserved under all of the Company's incentive and nonqualified stock
plans. The options are exercisable at prices not less than market price value
on dates of grant, and in installments over four to ten-year periods from such
dates. The Company also has outstanding 32,500 (48,500 in 1995) stock
appreciation rights exercisable for cash and/or shares of the Company's common
stock when the related option is exercised. Subject to certain limitations,
each right relates to the excess of the market value of the Company's common
stock over the exercise price of the related option. Charges and credits,
immaterial in amount, are made to income for these rights and certain related
options.
30
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the Company's stock option activity and related information for
the years ended December 31 follows:
1996 1995 1994
------------------------ ------------------------ ------------------------
PRICE PRICE PRICE
SHARES RANGE SHARES RANGE SHARES RANGE
--------- ------------- --------- ------------- --------- -------------
Outstanding at beginning
of year................ 2,714,540 $11.69-$17.69 2,689,961 $ 8.94-$16.50 2,046,225 $ 8.94-$16.50
Granted................. 705,150 17.38- 19.56 610,900 17.00- 17.69 1,152,600 12.31- 15.19
Exercised............... (603,975) 11.69- 17.50 (542,626) 8.94- 15.44 (302,146) 8.94- 15.44
Canceled................ (48,413) 12.19- 19.19 (43,695) 12.19- 17.50 (206,718) 12.19- 15.44
--------- ------------- --------- ------------- --------- -------------
Outstanding at end of
year................... 2,767,302* 11.69- 19.56* 2,714,540 11.69- 17.69 2,689,961 8.94- 16.50
========= ============= ========= ============= ========= =============
Exercisable at end of
year................... 1,154,663 $11.69-$17.69 1,203,097 $11.69-$16.31 1,102,064 $ 8.94-$16.50
========= ============= ========= ============= ========= =============
- --------
* Expiring from 1997 through 2006.
The weighted average fair value of options granted during 1996 and 1995 was
$4.98 and $5.08, respectively. The fair value for the option grants was
estimated on the date of grant by using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants in 1996 and
1995 respectively: a risk-free interest rate of 5.94% for each year, dividend
yields of 1.4% for each year, expected volatility of the market price of the
Company's common stock of 22.8% and 25.5%; and a weighted average expected
life of options granted of five years.
8. LEASES
Minimum aggregate rental commitments under noncancelable leases in effect at
December 31, 1996 (principally for production and administrative facilities
and equipment) amounted to $11.4 million consisting of annual payments of $3.2
million in 1997, $2.8 million in 1998, and decreasing amounts thereafter.
Rental expense was $6.3 million in 1996, $4.9 million in 1995 and $4.4 million
in 1994.
9. INCOME TAXES
The components of income from continuing operations before income taxes and
the details of the provision for income taxes are as follows:
(IN THOUSANDS)
-----------------------
1996 1995 1994
------- ------- -------
Income from continuing operations before income taxes:
Domestic............................................. $72,005 $51,470 $42,995
Foreign.............................................. 6,655 17,787 14,768
------- ------- -------
Total............................................ $78,660 $69,257 $57,763
======= ======= =======
Provision for income taxes:
Current:
Federal............................................ $19,837 $12,764 $10,963
Foreign............................................ 2,640 7,378 5,860
State.............................................. 2,580 1,423 258
------- ------- -------
Total current.................................... 25,057 21,565 17,081
------- ------- -------
Deferred:
Federal............................................ 227 1,851 1,214
Foreign............................................ 1,495 1,410 2,209
State.............................................. 691 674 640
------- ------- -------
Total deferred................................... 2,413 3,935 4,063
------- ------- -------
Total provision.................................. $27,470 $25,500 $21,144
======= ======= =======
31
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant components of the Company's deferred tax (asset) liability as of
December 31 are as follows:
(IN THOUSANDS)
------------------
1996 1995
-------- --------
Current deferred tax asset:
Reserves not currently deductible........................ $ (9,171) $ (9,825)
Other.................................................... (1,915) (2,000)
-------- --------
Net current deferred tax asset......................... (11,086) (11,825)
======== ========
Long-term deferred tax (asset) liability:
Differences in basis of property and accelerated
depreciation............................................ 23,508 21,547
Purchased tax benefits................................... 10,110 13,268
Reserves not currently deductible........................ (11,528) (13,798)
Other.................................................... 13,009 10,910
-------- --------
Net long-term deferred tax liability................... 35,099 31,927
-------- --------
Net deferred tax liability............................. $ 24,013 $ 20,102
======== ========
The effective rate of the provision for income taxes reconciles to the
statutory rate as follows:
1996 1995 1994
---- ---- ----
Statutory rate................................................ 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit......... 2.7 2.0 0.9
Foreign Sales Corporation and other tax credits............... (2.7) (2.7) (3.2)
Effect of foreign operations.................................. 0.9 3.9 4.7
Other......................................................... (1.0) (1.4) (0.8)
---- ---- ----
34.9% 36.8% 36.6%
==== ==== ====
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $33.1 million at December 31, 1996. 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
U.S., 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.
10. RETIREMENT AND PENSION PLANS
The Company maintains noncontributory defined benefit retirement and pension
plans. Benefits for eligible United States salaried and hourly employees are
funded through trusts established in conjunction with the plans. Employees of
certain foreign operations participate in various local plans that in the
aggregate are not significant.
The Company also has nonqualified unfunded retirement plans for its
Directors and certain retired employees, as well as contractual arrangements
with a current and certain former executives that provide for supplemental
pension benefits in excess of those provided by the Company's primary pension
plan. Fifty percent of the projected benefit obligation of the supplemental
pension benefit arrangements with the executives has been funded by grants of
restricted shares of the Company's common stock. The remaining 50% is
unfunded. The Company is providing for those arrangements by charges to
earnings (included in net pension expense below) over the periods to age 65 of
the participants.
32
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's funding policy with respect to its qualified plans is to
contribute amounts determined annually on an actuarial basis that provide for
current and future benefits in accordance with the funding requirements of
federal law and regulations. Assets of funded benefit plans are invested in a
variety of equity and debt instruments and in pooled temporary funds, as well
as the Company's common stock, not material to total plan assets.
Net pension expense, excluding plan administrative expenses, consists of the
following components:
(IN THOUSANDS)
----------------------------
1996 1995 1994
-------- -------- --------
Service cost for benefits earned during the
period......................................... $ 6,320 $ 5,999 $ 6,676
Interest cost on projected benefit obligation... 16,292 15,446 14,742
Actual return on plan assets.................... (21,780) (23,665) (17,922)
Net amortization and deferrals.................. 3,460 6,894 215
-------- -------- --------
Net pension expense............................. $ 4,292 $ 4,674 $ 3,711
======== ======== ========
In addition to pension expense shown in the table above, the Company also
incurs other pension-related expenses, including plan administrative expenses
prior to 1996. Such additional expense for the past three years was not
material in amount.
Net pension expense reflects an expected long-term rate of return on plan
assets of 9 1/4% for 1996, 1995, and 1994. The actual return has been adjusted
to defer gains and losses that differ from the expected return. The present
value of projected benefit obligations was determined by using an assumed
discount rate of 7 3/4% for 1996, 7 1/2% for 1995, and 7 3/4% for 1994. The
assumed rate of compensation increase used in determining the present value of
projected benefit obligations was 5% for 1996 and 1995, and 5 1/4% for 1994.
For pension plans with accumulated benefits in excess of assets at December
31, 1996, the balance sheet reflects an additional long-term pension liability
of $7.4 million ($11.5 million in 1995), a long-term intangible asset of $3.5
million ($4.8 million in 1995), and a charge in stockholders' equity (net of
deferred taxes) of $2.6 million in 1996, and $4.4 million in 1995 and 1994.
The charge in stockholders' equity represents the excess of the additional
long-term liability over unrecognized prior service cost. No balance sheet
recognition is given to pension plans with assets in excess of accumulated
benefits.
The following table sets forth the funded status of the plans:
(IN THOUSANDS)
-----------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------------- -----------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
Actuarial present value of
benefit obligations:
Vested benefit obligation.... $138,083 $ 66,157 $115,129 $ 84,780
======== ======== ======== ========
Accumulated benefit
obligation.................. $143,946 $ 71,987 $118,348 $ 91,750
======== ======== ======== ========
Projected benefit
obligation.................. $156,626 $ 72,068 $130,038 $ 93,617
Plan assets at fair value.... 164,038 61,870 132,370 75,520
-------- -------- -------- --------
Plan assets in excess (less
than) projected benefit
obligation.................. 7,412 (10,198) 2,332 (18,097)
Unrecognized prior service
cost........................ 1,302 3,963 1,479 4,145
Unrecognized net loss........ 5,091 2,563 6,016 8,876
Unrecognized net transition
(asset) obligation, net of
amortization................ (3,641) 574 (4,207) 621
-------- -------- -------- --------
Prepaid (accrued) pension
expense..................... $ 10,164 $ (3,098) $ 5,620 $ (4,455)
======== ======== ======== ========
33
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 former or inactive employees after employment but
before retirement. Those benefits, which are not significant in amount, have
always been accounted for on the accrual basis, thereby meeting the current
accounting requirement for postemployment benefits.
11. FINANCIAL INSTRUMENTS
The Company has only limited involvement with 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 floating-rate revolving
credit loans. Accordingly, the Company enters into those 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 Company's risk of
incurring higher interest costs due to rising interest rates. At December 31,
1996, the Company was party to one interest rate swap agreement with a
notional amount of $19.4 million, which decreases by $2.2 million semiannually
through the May 1997 termination date. The interest rate cap agreement
entitles the Company to receive amounts from counterparties on a quarterly
basis if specified market interest rates rise above fixed cap rates. The fair
value of both agreements at December 31, 1996 and 1995 was not significant.
Cross currency and interest rate agreements are in effect to hedge a portion
of the Company's net investment in two of its smaller foreign subsidiaries,
whereby the Company agreed to swap certain European currencies for an
equivalent amount of U.S. dollars totaling $7.1 million. The agreements
provide for the Company to make floating interest payments while receiving
interest at fixed and floating rates, and capping a portion of floating rate
payments. The swap agreements will terminate with settlement of the contracts
in 1997. At December 31, 1996 and 1995, the fair value of the swaps was not
significant.
Forward currency contracts are entered into to hedge certain firm export
sales commitments denominated in deutsche marks, and in 1996, certain firm
purchase commitments denominated in Japanese yen. 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 and from the purchase of parts and materials from foreign suppliers
respectively, will be adversely affected by changes in exchange rates. At
December 31, 1996 and 1995, the notional values of the contracts were $1.1
million and $6.4 million, respectively. The terms of the currency contracts
are dependent on the firm commitment and generally do not exceed one year.
Deferred gains and losses on the contracts at December 31, 1996 and 1995 were
not significant and are recognized in operations as the related sales and
purchases occur.
The estimated fair values of the Company's other financial instruments are
compared below to the recorded amounts at December 31. Cash, cash equivalents,
and marketable securities are recorded at fair value at December 31, 1996 and
1995 in the accompanying balance sheet.
ASSET (LIABILITY) (IN THOUSANDS)
------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------- --------------------
RECORDED FAIR RECORDED FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
Fixed income and equity
investments...................... 33,933 33,933 30,106 30,106
Short-term borrowings............. (31,837) (31,837) (56,143) (56,143)
Long-term debt (Including current
portion)......................... (150,394) (160,000) (150,661) (167,000)
34
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The fair values of fixed income and equity investments are based on quoted
market prices. 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 forward
currency contracts, which are not reflected in the financial statements, is
based on quoted market prices for comparable contracts, and is not material.
12. ADDITIONAL INCOME STATEMENT AND CASH FLOW INFORMATION
Included in other income is interest and other investment income of $4.7
million, $2.4 million, and $5.0 million for 1996, 1995, and 1994,
respectively. Income taxes paid in 1996, 1995, and 1994 were $22.9 million,
$30.3 million, and $13.6 million, respectively. Cash paid for interest for
each of the three years approximated interest expense.
13. SEGMENT AND GEOGRAPHIC INFORMATION
The Company classifies its operations into three business segments:
Electromechanical, Precision Instruments, and Industrial Materials. The
Electromechanical Group produces motor blower systems for manufacturers of
floor care appliances and produces fractional horsepower motors and motor
blowers for computer, business machine, medical equipment, and high-efficiency
heating equipment producers. Sales of fractional horsepower electric motors
and blowers represented 43.2% in 1996, 44.4% in 1995, and 43.9% in 1994 of the
Company's consolidated net sales.
The Precision Instruments Group produces aircraft cockpit instruments and
displays, in addition to pressure, temperature, flow, and liquid level sensors
for aircraft and jet engine manufacturers and for airlines, as well as
airborne electronics systems that monitor and record flight and engine data.
The Group also produces instruments and complete instrument panels for heavy
truck manufacturers and heavy construction vehicles; process monitoring and
display systems; combustion gas analysis; moisture and emissions monitoring
systems; force and speed measuring instruments; air and noise monitors;
pressure and temperature calibrators; and pressure-indicating and digital
manometers.
The Industrial Materials Group produces high-temperature-resistant materials
and textiles; corrosion-resistant heat exchangers; tanks and piping for
process systems; drinking water filter and treatment systems; industrial and
commercial filters for other liquids; replacement filter cartridges; liquid
bag filters and multiple cartridge filter housings; high-purity metals and
alloys in powder; strip and wire form for high-performance aircraft,
automotive and electronics requirements; and thermoplastic compounds and
concentrates for automotive, appliance, and telecommunication applications.
35
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Business Segment Financial Information
(IN THOUSANDS)
----------------------------
1996 1995 1994
-------- -------- --------
NET SALES(/1/)
Electromechanical.............................. $375,633 $372,038 $340,358
Precision Instruments.......................... 308,737 301,440 280,638
Industrial Materials........................... 184,291 164,012 153,742
-------- -------- --------
Total Consolidated........................... $868,661 $837,490 $774,738
======== ======== ========
OPERATING INCOME AND INCOME BEFORE INCOME TAXES:
Operating income:
Electromechanical.............................. $ 44,238 $ 48,858 $ 46,203
Precision Instruments.......................... 37,253 34,803 29,189
Industrial Materials........................... 34,874 27,741 23,251
-------- -------- --------
Total segments operating income(/2/)......... 116,365 111,402 98,643
Corporate administrative and other expenses.... (21,307) (22,104) (23,351)
-------- -------- --------
Consolidated operating income................... 95,058 89,298 75,292
Interest and other expenses, net................ (16,398) (20,041) (17,529)
-------- -------- --------
Consolidated income from continuing operations
before income taxes............................ $ 78,660 $ 69,257 $ 57,763
======== ======== ========
IDENTIFIABLE ASSETS
Electromechanical.............................. $217,793 $196,805 $190,339
Precision Instruments.......................... 166,286 180,837 142,403
Industrial Materials........................... 83,327 77,222 75,509
-------- -------- --------
Total segments............................... 467,406 454,864 408,251
Corporate and discontinued operations.......... 70,509 71,881 85,936
-------- -------- --------
Total Consolidated........................... $537,915 $526,745 $494,187
======== ======== ========
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT(/3/)
Electromechanical.............................. $ 27,881 $ 19,891 $ 11,922
Precision Instruments.......................... 7,293 10,417 6,633
Industrial Materials........................... 6,303 5,567 4,073
-------- -------- --------
Total segments............................... 41,477 35,875 22,628
Corporate...................................... 294 583 170
-------- -------- --------
Total Consolidated........................... $ 41,771 $ 36,458 $ 22,798
======== ======== ========
DEPRECIATION AND AMORTIZATION
Electromechanical.............................. $ 14,967 $ 13,454 $ 12,430
Precision Instruments.......................... 14,270 15,915 15,253
Industrial Materials........................... 5,411 4,895 7,636
-------- -------- --------
Total segments............................... 34,648 34,264 35,319
Corporate...................................... 258 197 150
-------- -------- --------
Total Consolidated........................... $ 34,906 $ 34,461 $ 35,469
======== ======== ========
- --------
(1) After elimination of intra and intersegment sales, which are not
significant in amount. Such sales are generally based on prevailing market
prices.
(2) 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.
(3) Includes $.5 million in 1996 and $4.7 million in 1995 from acquired
businesses.
36
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Geographic Areas
(IN THOUSANDS)
-------------------------------
1996 1995 1994
-------- -------- --------
NET SALES (based on destination):
United States.............................. $575,099 $556,236 $537,048
International (including United States
exports shown below):
Europe................................... 189,043 201,179 171,088
Asia..................................... 48,582 35,160 25,143
Canada................................... 33,976 30,273 25,031
Other.................................... 21,961 14,642 16,428
-------- -------- --------
Total International........................ 293,562 281,254 237,690
-------- -------- --------
Total Consolidated....................... $868,661 $837,490 $774,738
======== ======== ========
INCOME (LOSS) BEFORE INCOME TAXES:
United States.............................. $107,454 $ 93,047 $ 82,504
International:
Europe................................... 10,539 18,514 16,290
Asia, Canada, and other.................. (1,628)(a) (159) (151)
Corporate administrative and other
expenses.................................. (21,307) (22,104) (23,351)
Interest and other expenses, net........... (16,398) (20,041) (17,529)
-------- -------- --------
Total Consolidated....................... $ 78,660 $ 69,257 $ 57,763
======== ======== ========
IDENTIFIABLE ASSETS
United States.............................. $333,449 $339,594 $315,242
International:
Europe................................... 120,584 107,314 92,907
Asia, Canada, and other (principally
Asia)................................... 13,373 7,956 102
Corporate.................................. 70,509 71,881 85,936
-------- -------- --------
Total Consolidated....................... $537,915 $526,745 $494,187
======== ======== ========
UNITED STATES EXPORT SALES (reported in
international sales above)
Europe..................................... $ 57,966 $ 59,928 $ 50,165
Asia....................................... 44,326 35,160 25,140
Canada..................................... 33,974 30,273 25,031
Other...................................... 14,707 13,729 15,869
-------- -------- --------
Total Consolidated....................... $150,973 $139,090 $116,205
======== ======== ========
- --------
(a) Includes start-up costs for operations in Mexico.
37
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- --------
1996
Net sales............. $227,633 $223,998 $212,763 $204,267 $868,661
Operating income...... $ 23,474 $ 24,144 $ 23,692 $ 23,748 $ 95,058
Income from continuing
operations........... $ 12,216 $ 12,967 $ 12,956 $ 13,051 $ 51,190
Net income............ $ 12,216 $ 12,967 $ 12,956 $ 13,051 $ 51,190
Earnings per share:
Income from
continuing
operations.......... $ .37 $ .40 $ .40 $ .40 $ 1.57
Net income........... $ .37 $ .40 $ .40 $ .40 $ 1.57
Dividends paid per
share................ $ .06 $ .06 $ .06 $ .06 $ .24
Common stock trading
range:(a)
High................. 18 7/8 22 1/4 21 5/8 22 1/4 22 1/4
Low.................. 16 17 3/8 18 1/4 17 3/4 16
1995
Net sales............. $211,527 $219,111 $204,922 $201,930 $837,490
Operating income...... $ 21,506 $ 24,470 $ 21,476 $ 21,846 $ 89,298
Income from continuing
operations........... $ 10,149 $ 11,929 $ 10,830 $ 10,849 $ 43,757
Net income............ $ 10,662 $ 22,615 $ 8,154(b) $ 10,849 $ 52,280(c)
Earnings per share:(d)
Income from
continuing
operations.......... $ .30 $ .36 $ .33 $ .33 $ 1.31
Net income........... $ .31 $ .68 $ .25(b) $ .33 $ 1.56(c)
Dividends paid per
share................ $ .06 $ .06 $ .06 $ .06 $ .24
Common stock trading
range:(a)
High................. 18 5/8 18 1/8 19 1/2 19 1/4 19 1/2
Low.................. 15 3/4 16 1/4 16 1/8 16 5/8 15 3/4
- --------
(a) Trading ranges are based on the New York Stock Exchange composite tape.
(b) Includes an extraordinary loss of $2.7 million ($.08 per share) associated
with debt agreements.
(c) Includes income from discontinued operations in the first and second
quarters of 1995. The second quarter of 1995 also includes a gain on the
sale of discontinued operations of $10.4 million ($.32 per share).
(d) The sum of quarterly earnings per share will not equal total year earnings
per share due to the effect of the Company's purchasing shares of its
outstanding common stock.
15. SUBSEQUENT EVENT
On February 5, 1997, the Company announced that it had entered into an
agreement and Plan of Merger ("the Merger") whereby its water filtration
business would be merged with and into Culligan Water Technologies, Inc.
("Culligan") for a total purchase price to Culligan of approximately $155
million. The Company's water filtration business consists of the Plymouth
Products Division, a U.S. operation, and three foreign subsidiaries: AMETEK
Filters Ltd., a U.K. subsidiary; APIC, S.A., a French subsidiary; and AFIMO,
S.A.M., a Monaco subsidiary. For 1996, the water filtration business had
approximately $70 million in sales, $12 million in operating income, and total
assets of $40 million.
The purchase price less assumed debt is payable in Culligan common stock
valued at $37.50 per share. Following the Merger, Culligan will assume between
$25 million and $75 million of the Company's debt. Based
38
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
on the expected assumption of $25 million of the Company's debt, Culligan will
distribute 3,466,667 shares of its common stock to AMETEK's shareholders, or
.11 shares of Culligan stock for each outstanding share of AMETEK common stock
(based on shares outstanding as of December 31, 1996).
The Merger is subject to approval by the shareholders and lenders of the
Company and to certain other conditions, including the receipt of an Internal
Revenue Service ruling that the Merger and stock distribution qualify as a
tax-free reorganization. It is presently expected that it will take from four
to six months from the aforementioned date to complete the transaction.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
39
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Registrant
Directors are elected at the annual meeting of stockholders to hold office
until the next annual meeting of stockholders and until their respective
successors have been duly elected and qualified. Information on directors of
the Company is shown below:
PRINCIPAL OCCUPATION DIRECTOR
OR POSITION, CONTINUOUSLY
NAME OF DIRECTOR AGE OTHER DIRECTORSHIPS(/1/) SINCE
---------------- --- ------------------------ ------------
Walter E. Blankley++.... 61 Chairman of the Board and Chief
Executive Officer of the Company since
April 1993(/2/) 1990
Lewis G. Cole*.......... 66 Senior Partner, Stroock & Stroock &
Lavan LLP, Attorneys 1987
Helmut N.
Friedlaender.*......... 83 Private investor 1955
Sheldon S. Gordon*+++... 61 Chairman of Union Bancaire Privee
International, Inc. since May 1996. Mr.
Gordon was a General Partner of The
Blackstone Group, L.P. from April 1991
to May 1995 and a Limited Partner until
May 1996. Mr. Gordon is also a director
of Anangel-American Shipholdings
Limited, and Energy Ventures, Inc. 1989
Charles D. Klein+.++.... 58 A Managing Director of American
Securities, L.P. and an executive
officer of the corporate general
partner of several affiliated entities 1980
James R. Malone+........ 54 Chairman of the Board of HMI Industries,
Inc. since December 1996; Chairman of
the Board of Anchor Resolution Corp.
(formerly Anchor Glass Container Corp.)
from January 1996 to February, 1997;
and Chairman of the Board of Intek
Capital Corporation since September
1990(/3/) 1994
David P. Steinmann*..... 55 A Managing Director of American
Securities, L.P. and an executive
officer of the corporate general
partner of several affiliated entities 1993
Elizabeth Rosenwald
Varet+++............... 53 A Managing Director of American
Securities, L.P. and chairman of the
corporate general partner of several
affiliated entities 1987
- --------
* Member of the Audit Committee.
+ Member of the Compensation Committee.
. Member of the Nominating Committee.
++ Member of the Executive Committee.
(1) Except as noted, each nominee has held his or her present occupation for a
period in excess of five years.
(2) Mr. Blankley has been Chief Executive Officer since April 1990. From April
1990 to April 1993, Mr. Blankley also served as President of the Company.
Mr. Blankley is also a Director of AMCAST Industrial Corporation and CDI
Corporation.
(3) Mr. Malone was President and Chief Executive Officer of Anchor Glass
Container Corporation from May 1993 to January 1996 and was Chairman,
President and Chief Executive Officer of Grimes Aerospace Co. from
September 1990 to May 1993. Mr. Malone is also a director of Amsouth Bank
N.A.
40
Executive Officers of the Registrant
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 the Company is shown below:
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------
Walter E. Blankley................. 61 Chairman of the Board and Chief
Executive Officer
Frank S. Hermance.................. 48 President and Chief Operating Officer
John J. Molinelli.................. 50 Senior Vice President--Chief Financial
Officer
Albert J. Neupaver................. 46 President of the Electromechanical and
Industrial Materials Groups
Robert W. Chlebek.................. 53 President of the Precision Instruments
Group
George E. Marsinek................. 59 Senior Vice President--Electromechanical
Group
Philip A. Goodrich................. 39 Senior Vice President--Corporate
Development
Robert R. Mandos, Jr............... 38 Comptroller
Deirdre D. Saunders................ 49 Treasurer and Assistant Secretary
Robert W. Yannarell................ 63 Secretary
WALTER E. BLANKLEY'S employment history with the Company and other
directorships currently held are included under the section "Directors and
Executive Officers of the Registrant."
FRANK S. HERMANCE was elected President and Chief Operating Officer on
November 21, 1996. He previously had been Executive Vice President--Chief
Operating Officer since January 1, 1996 and most recently he served as
President of the Precision Instruments Group, a position he was elected to on
September 23, 1994. He joined the Company as a Group Vice President in
November 1990.
JOHN J. MOLINELLI was named Senior Vice President--Chief Financial Officer
on April 29, 1994. Previously he had served as Vice President and Comptroller
of AMETEK since April 1993. He was elected Comptroller in 1991.
ALBERT J. NEUPAVER was elected President of the Electromechanical Group on
January 10, 1997, and was elected President of the Industrial Materials Group
on September 23, 1994. Previously he had served as a Group Vice President
since May 1994 . He was elected Vice President of AMETEK in 1991 and was
General Manager of the Specialty Metal Products Division since 1989.
ROBERT W. CHLEBEK joined the Company as President of the Precision
Instruments Group on March 1, 1997. Prior to joining AMETEK, Mr. Chlebek had
been president of Phillips Components North America, a subsidiary of Phillips
Electronics, N.V., ("Phillips") since 1993. Previously, he held general
management positions with Phillips.
GEORGE E. MARSINEK became Senior Vice President--Electromechanical Group
effective January 10, 1997. For health reasons, he stepped aside from his
previous position as President of the Electromechanical Group which he had
held since September 23, 1994. He had been a Group Vice President since April
1990.
PHILIP A. GOODRICH joined the Company as Senior Vice President--Corporate
Development on August 28, 1996. Prior to joining AMETEK, Mr. Goodrich had been
Vice President of Corporate Development at General Signal Corporation for
seven years.
ROBERT R. MANDOS, JR. was elected Comptroller of the Company effective April
1, 1996. Mr. Mandos's more than 15 years of experience with the Company
includes various corporate financial positions and divisional controllership
assignments. Most recently he served as Director of Financial Information at
the corporate office and previously was Division Vice President--Finance for
the multiplant operations of the U. S. Gauge Division.
DEIRDRE D. SAUNDERS has served as Treasurer and Assistant Secretary since
April 1993. Ms. Saunders joined AMETEK in 1987 as Assistant Treasurer.
ROBERT W. YANNARELL has served as Secretary of the Company since April 1993.
Previously he had served as Treasurer and Assistant Secretary since 1987. Mr.
Yannarell will retire on April 30, 1997.
41
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information for the fiscal year ended
December 31 in each of 1996, 1995 and 1994 concerning compensation paid or
accrued for the Chairman of the Board and Chief Executive Officer and for the
four other most highly compensated executive officers of the Company serving
at December 31, 1996.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- -----------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)(/1/)
------------------ ---- ------- ------- ------------ ---------- ------------ ------------
Walter E. Blankley...... 1996 487,000 440,000 -- -- 80,000 2,736
Chairman of the Board 1995 472,000 400,000 -- -- 75,000 1,752
and Chief Executive Of-
ficer 1994 457,500 335,000 -- -- 125,000 1,656
Frank S. Hermance....... 1996 300,000 225,000 -- -- 100,000 1,776
President and 1995 228,000 152,000 -- -- 30,000 1,332
Chief Operating Offi-
cer................... 1994 220,000 125,000 -- -- 50,000 1,326
George E.
Marsinek(/2/).......... 1996 225,000 150,000 -- -- 30,000 3,096
Senior Vice President-- 1995 215,000 165,000 -- -- 30,000 1,620
Electromechanical Group 1994 205,500 150,000 -- -- 50,000 1,554
John J. Molinelli....... 1996 200,000 140,000 -- -- 30,000 1,872
Senior Vice President-- 1995 182,500 125,000 -- -- 25,000 1,356
Chief Financial Officer 1994 157,933 100,000 -- -- 40,000 1,350
Albert J.
Neupaver(/2/).......... 1996 197,500 140,000 -- -- 25,000 1,680
President of the
Electromechanical 1995 180,000 110,000 -- -- 25,000 1,302
and Industrial
Materials Groups 1994 170,000 75,000 -- -- 40,000 1,284
- --------
(1) The amounts reported represent the Company's contribution ($1,200 each) to
The AMETEK Savings and Investment Plan for each of the individuals listed
above and the dollar value of premiums paid by the Company with respect to
term life insurance for the benefit of each of the named executive
officers.
(2) Refer to page 41 for present position with the Company effective January
10, 1997.
42
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table provides details regarding stock options granted to the
named executive officers in 1996. In addition, the table provides the
hypothetical gains or "option spreads" that would result for the respective
options based on assumed rates of annual compounded stock price appreciation
of 5% and 10% from the date the options were granted through their expiration
dates. No stock appreciation rights ("SARs") were granted to the named
executive officers in 1996.
STOCK OPTION/SAR GRANTS IN 1996
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(/2/)
----------------------------------------------------------------- ---------------------
PERCENTAGE OF TOTAL MARKET
NUMBER OF OPTIONS/SARS PRICE
SECURITIES UNDERLYING GRANTED TO AND
OPTION/SARS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED (#)(/1/) FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
---- --------------------- ------------------- ------------ ---------- ---------- ----------
Walter E. Blankley...... 80,000 11.35 17.375 04/08/2006 874,164 2,215,302
Frank S. Hermance....... 100,000 14.18 17.375 04/08/2006 1,092,704 2,769,128
George E. Marsinek...... 30,000 4.25 17.375 04/08/2006 327,811 830,738
John J. Molinelli....... 30,000 4.25 17.375 04/08/2006 327,811 830,738
Albert J. Neupaver...... 25,000 3.55 17.375 04/08/2006 273,176 692,282
- --------
(1) The options granted in 1996 to Messrs. Blankley, Hermance, Marsinek,
Molinelli, and Neupaver are exercisable after the first anniversary of the
date of the grant (April 8, 1996) during each of the four succeeding
twelve-month periods only to the extent of twenty-five percent of the
total number of shares optioned. In all cases, optioned shares that may
have been but were not purchased during any one twelve-month period may be
purchased during any one or more succeeding twelve-month periods up to the
expiration date of the option. Options generally become fully exercisable
in the event of the holder's death, retirement or termination of
employment in connection with a change in control.
(2) The amounts represent certain assumed rates of appreciation. Actual gains,
if any, on stock option exercises are dependent on future performance of
the Company's Common Stock. There can be no assurance that the rates of
appreciation reflected in this table will be achieved.
The following table illustrates stock option and SARs exercised by the named
executive officers during 1996 and the aggregate amounts realized by each such
officer. In addition, the table shows the aggregate number of unexercised
options and SARs that were exercisable and unexercisable as of December 31,
1996, and the values of "in-the-money" stock options and SARs on December 31,
1996, which represent the positive difference between the market price of the
Company's Common Stock and the exercise price of such options/SARs.
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND OPTION/SAR VALUES AT DECEMBER 31, 1996
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT DECEMBER 31, 1996 AT DECEMBER 31, 1996 ($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
Walter E. Blankley...... 93,750 761,719 201,250 211,250 1,463,281 1,203,750
Frank S. Hermance....... 20,000 151,719 77,500 147,500 611,562 743,750
George E. Marsinek...... 0 0 57,500 77,500 417,187 428,750
John J. Molinelli....... 6,000 44,000 63,750 68,750 515,468 373,281
Albert J. Neupaver...... 12,000 102,000 53,250 63,750 413,656 350,781
43
DEFINED BENEFIT AND ACTUARIAL PLANS
The Employees' Retirement Plan of AMETEK, Inc. (the "Retirement Plan") is a
noncontributory 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...................... 58,800 62,600 66,500 66,500 66,500
200,000...................... 79,200 84,300 89,400 89,400 89,400
250,000...................... 99,600 106,000 112,400 112,400 112,400
300,000...................... 120,000 127,700 135,300 135,300 135,300
350,000...................... 140,400 149,300 158,300 158,300 158,300
400,000...................... 160,800 171,000 181,200 181,200 181,200
450,000...................... 181,200 192,700 204,200 204,200 204,200
500,000...................... 201,600 214,400 227,100 227,100 227,100
550,000...................... 222,000 236,000 250,100 250,100 250,100
600,000...................... 242,400 257,700 273,000 273,000 273,000
650,000...................... 262,800 279,400 296,000 296,000 296,000
700,000...................... 283,200 301,100 318,900 318,900 318,900
- --------
(1) Benefit amounts assume a participant reaches age 65 in 1997; for younger
participants, the benefit amounts are less than the amounts indicated
above.
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 ($160,000 for
1997) cannot be taken into account under the Retirement Plan. The individuals
named in the Summary Compensation Table are subject to this limitation.
However, in accordance with a nonqualified supplemental pension arrangement,
the Company has agreed to provide to Mr. Blankley a benefit in an amount equal
to the excess of the annual pension benefit that would be payable to him under
the terms of the Retirement Plan in the absence of statutory restrictions over
the amount actually payable under the Retirement Plan. The benefit is limited
to the projected excess payable at age 65 determined as of May 21, 1991.
Pursuant to an agreement entered into with Mr. Blankley, a restricted stock
award has been granted under the 1991 Stock Incentive Plan of AMETEK, Inc. for
a number of shares of the Company's Common Stock having a fair market value on
the date of grant equal to 50% of the present value of the projected benefit
under the supplemental pension arrangement; the remaining portion of the
benefit will be payable in cash, directly out of the Company's general assets.
At December 31, 1996, the executives named in the Summary Compensation Table
had the following years of credited service under the Retirement Plan: Mr.
Blankley--37; Mr. Hermance--6; Mr. Marsinek--32; Mr. Molinelli--28, and
Mr. Neupaver--20.
In addition, for retirements occurring in 1997, the maximum annual pension
benefit payable at normal retirement age is restricted, by law, to the greater
of $125,000 or the amount of such benefit determined under the Retirement Plan
and prior existing law as of December 31, 1982. The $125,000 limit is adjusted
annually by the Secretary of the Treasury to reflect increases in the cost of
living.
Compensation of Directors
The annual rate of compensation for services as a nonemployee director of
the Company was revised effective January 1, 1996, to $35,000 per year plus
$2,500 for each meeting attended. Mr. Blankley, the only employee director of
the Company in 1996, did not receive any compensation for his services as a
director.
44
Pursuant to a Retirement Plan for Directors (the "Directors Plan"), the
Company has agreed to provide retirement benefits and death benefits to those
directors who have not accrued benefits under the Employees' Retirement Plan
of AMETEK, Inc. and who have completed at least three years of service as a
director or officer of the Company. Effective January 1, 1997, the Directors
Plan was amended to limit participation to those Directors who became members
of the Board of Directors prior to January 1, 1997. The retirement benefit
payable under the Directors Plan is an annual amount equal to 100% of the
highest annual rate of compensation for directors during the director's period
of service on the Board of Directors; however, the benefit is reduced
proportionately if the participant has less than five years of service. The
Company shall satisfy its obligations arising under the Directors Plan
exclusively from its general assets. All of the current directors other than
Mr. Blankley are participants in the Directors Plan and each of these
participants, other than Messrs. Malone and Steinmann, has accrued an annual
retirement benefit of $50,000. Mr. Steinmann has accrued an annual retirement
benefit of $30,000, and Mr. Malone has not yet accrued any benefit under the
Directors Plan.
Pursuant to a Death Benefit Program for Directors (the "Directors Program"),
the Company has entered into individual agreements with certain directors. The
agreements require the Company to pay death benefits to directors' designated
beneficiaries and to pay benefits to the directors under certain
circumstances. The Directors Program currently provides for a benefit, payable
for ten years, in an annual amount equal to 100% of the highest annual rate of
compensation during the director's period of service on the Board of
Directors, commencing at death or the later of age 70 or retirement; however,
with respect to directors who became participants after January 1, 1989, the
directors must complete at least five years of service as a director before
they become eligible to receive a benefit upon the later of age 70 or
retirement. Active directors also have a group term life insurance benefit of
$50,000. To fund benefits under the Directors Program, the Company has
purchased individual life insurance policies on the lives of certain of the
covered directors. The Company retains the right to terminate any or all of
the Directors Program agreements under certain circumstances. All of the
current directors other than Mr. Blankley are participants in the Directors
Program.
Employment Contracts and Termination, Severance and Change-In-Control
Arrangements
Pursuant to an agreement with the Company, Mr. Blankley will be entitled to
a severance benefit in the event that his employment is terminated either by
the Company without cause or by Mr. Blankley for good reason within 18 months
after a Change-In-Control (as defined below), in an amount equal to 2.99 times
his average taxable compensation (as defined under Section 280G of the
Internal Revenue Code of 1986, as amended ("the Code")) from the Company
during the five preceding taxable years. The benefit is subject to reduction,
if necessary, to prevent any "excess parachute payment" within the meaning of
Section 280G of the Code. For purposes of the agreement, a "Change-In-Control"
means the acquisition of 30% or more of the voting stock of the Company by any
party other than the Company (or its affiliates), or a change in the members
of the Board of Directors, within any two-year period, such that the members
at the beginning of the period cease to constitute a majority (unless the
change is approved by two-thirds of those who are members at the beginning of
the period). Assuming that a Change-In-Control, followed by a termination of
employment, occurred on January 31, 1997, $2,629,030 would be payable to Mr.
Blankley pursuant to the agreement.
Pursuant to a Supplemental Senior Executive Death Benefit Program (the
"Program"), the Company has entered into individual agreements with certain
executives. The agreements require the Company to pay death benefits to their
designated beneficiaries and to pay 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, but not less than for 15 years (the 15-year
minimum guarantee does not apply to executives whose inclusion in the Program
is approved after December 31, 1986). The specified dollar amount of the
payments is determined on the basis of the executive's salary and age. In
addition, the standard death benefit payable for participants in the Program
from the Company's group term life insurance policy was revised effective
January 1, 1996, to two times the executive's annual salary, limited to
$200,000. If a covered executive retires, or reaches age 65 while on
disability retirement, the Program provides for an annual benefit of one-tenth
of an amount equal to the lesser of (a) twice the executive's average annual
base salary for the last five full years
45
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 10 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, the Company has purchased individual
life insurance policies on the lives of certain of the covered executives. The
Company retains the right to terminate all of the Program agreements under
certain circumstances. Messrs. Blankley, Hermance, Marsinek, Molinelli, and
Neupaver are participants in the Program.
Compensation Committee Interlocks and Insider Participation
Sheldon S. Gordon, Charles D. Klein, James R. Malone and Elizabeth R. Varet
constitute 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 1996 and continues to render services as General
Counsel to the Company and its subsidiaries. For 1996, Stroock & Stroock &
Lavan LLP received $438,000 for such services. The investment banking firm of
American Securities, L.P., and affiliates of American Securities, L.P.,
including Oak Hall Capital Advisors, L.P., rendered during 1996 and continue
to render financial advisory, investment management and other services to the
Company. For 1996, American Securities, L.P. and its affiliates received
$907,088 in the aggregate for such services. American Securities, L.P. is
owned indirectly, through family trusts of which Ms. Varet and Mr. Cole are
cotrustees, by Ms. Varet and members of her family.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock Ownership
The following table sets forth the number of shares of Common Stock of the
Company beneficially owned at January 31, 1997, by each director, by each of
the executive officers included in the Summary Compensation Table, and by all
directors and executive officers of the Company as a group, and the percentage
of the outstanding shares of Common Stock so owned by each such person and
such group.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(/1/)
(NUMBER OF SHARES)
---------------------------------------------
SOLE VOTING SHARED
AND VOTING OR
INVESTMENT INVESTMENT RIGHT TO PERCENTAGE
NAME POWER(/2/) POWER(/3/) ACQUIRE(/4/) TOTAL OF CLASS
---- ----------- ---------- ------------ --------- ----------
Walter E. Blankley....... 84,952 48,567 178,750 312,269 *
Lewis G.
Cole/(5)//(11)/......... 10,000 514,588 -- 524,588 1.6%
Helmut N.
Friedlaender/(6)/....... 48,500 30,400 -- 78,900 *
Sheldon S. Gordon........ 30,000 -- -- 30,000 *
Frank S. Hermance........ 20,000 -- 77,500 97,500 *
Charles D.
Klein/(7)//(11)/........ 50,000 6,600 -- 56,600 *
James R. Malone/(8)/..... 20,000 -- -- 20,000 *
George E. Marsinek....... 5,218 -- 57,500 62,718 *
John J. Molinelli........ 22,892 -- 63,750 86,642 *
Albert J. Neupaver....... 9,840 -- 53,250 63,090 *
David P.
Steinmann/(9)//(11)/..... 34,700 94,264 -- 128,964 *
Elizabeth Rosenwald
Varet/(10)//(11)/....... 65,800 1,071,808 -- 1,137,608 3.5%
All directors and
executive officers as a
group, consisting of 16
persons, including
individuals named
above/(11)/............. 425,314 1,162,319 463,575 2,051,208 6.3%
46
- --------
* Represents less than 1% of the outstanding shares of Common Stock of the
Company.
(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. Unless otherwise
indicated, beneficial ownership disclosed consists of sole voting and
investment power.
(2) Reported in this column are shares (including certain restricted shares)
with respect to which directors and officers have sole voting and
investment power.
(3) Reported in this column are other shares with respect to which directors
and officers have or share voting and/or investment power, including
shares directly owned by certain relatives with whom they are presumed to
share voting and/or investment power; however, beneficial ownership may be
disclaimed. Although shared beneficial ownership is included in each of
the individual totals, these shares are reported only once in the total
for all directors and executive officers as a group.
(4) Reported in this column are shares that executive officers have a present
right to acquire or are acquirable within 60 days of January 31, 1997,
through the exercise of stock options awarded under AMETEK, Inc. Stock
Option Plans.
(5) Mr. Cole has shared voting and investment power with respect to 514,588
shares, as to 4,000 shares of which such power is shared with Messrs.
Klein and Steinmann and others, and as to 510,588 shares of which such
power is shared with Ms. Varet and others.
(6) 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.
(7) Mr. Klein has shared voting and investment power with respect to 6,600
shares, as to 4,000 shares of which such power is shared with Messrs. Cole
and Steinmann and others and as to 2,600 shares of which such power is
shared with Mr. Steinmann and others.
(8) Includes 6,667 shares held pursuant to a restricted stock award under the
1991 Stock Incentive Plan.
(9) Mr. Steinmann has shared voting and investment power with respect to
94,264 shares, as to 82,720 shares of which such power is shared with Ms.
Varet and others, as to 2,600 shares of which such power is shared with
Mr. Klein and others, as to 4,944 shares of which such power is shared
with others and as to 4,000 shares of which such power is shared with
Messrs. Cole, and Klein and others.
(10) Includes 10,000 shares owned by a trust of which Ms. Varet's husband is a
beneficiary and as to which Ms. Varet disclaims any beneficial ownership.
Ms. Varet has shared voting and investment power with respect to
1,061,808 shares, as to 510,588 shares of which such power is shared with
Mr. Cole and others as to 468,500 shares of which such power is shared
with others, and as to 82,720 shares of which such power is shared with
Mr. Steinmann and others.
(11) Mr. Steinmann is an executive officer and director and Mr. Klein is a
portfolio manager of Oak Hall Capital Advisors, L.P., an investment
manager of (i) the AMETEK, Inc. Employees' Master Retirement Trust, which
holds among its assets 571,400 shares, and (ii) AMETEK Foundation, Inc.,
which holds among its assets 55,800 shares; none of these shares has been
included in the above table. Oak Hall Capital Advisors, L.P. is an
affiliate of American Securities, L.P.
The following table sets forth the only entities known to the Company to be
beneficial owners of more than five percent of the outstanding Common Stock of
the Company:
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- ----------
FMR Corp. Sole dispositive, but no voting
82 Devonshire Street power for(/1/)................... 3,982,100 shares 12.4%
Boston, MA 02109-3614
Sole voting and dispositive
power for........................ 76,200
-----------
TOTAL(/1/)...................... 4,058,300 shares
===========
Gabelli Asset Management Sole voting and dispositive
Company power for........................ 2,500 shares
International Advisory
Services Ltd.
c/o Appleby, Spurling &
Kempe
Cedar House, 41 Cedar
Avenue
Hamilton HM12, Bermuda
Gabelli Funds, Inc. Sole voting and dispositive
One Corporate Center power for........................ 774,700 shares
Rye, NY 10580-1434
GAMCO Investors, Inc. Sole voting power for 3,495,900
One Corporate Center shares but sole dispositive power
Rye, NY 10580-1434 for.............................. 3,790,900 shares
---------
TOTAL(/2/)..................... 4,568,100 shares 14.0%
=========
- --------
(1) Based on Schedule 13(G) filed on February 14, 1997.
(2) Based on Schedule 13(D) filed on January 16, 1996, Mr. Mario J. Gabelli is
deemed to have beneficial ownership of these shares.
47
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the disclosure provided under Compensation Committee
Interlocks and Insider Participation on page 46.
Indebtedness of Management
Subsequent to December 31, 1996, an interest-free $500,000 loan was made to
Philip A. Goodrich, Senior Vice President--Corporate Development as an equity
advance to purchase a home near the Corporate Office in Paoli, Pennsylvania as
part of his relocation arrangements. This loan is currently outstanding and is
similar to others granted to relocated employees under the Company's
Relocation Policy. Such a loan is usually settled immediately upon sale of a
relocated employee's former residence.
48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits filed.
1. and 2.
Financial statements and schedules are shown in the index and other
information on page 19 of this report.
3. Exhibits
Exhibits are shown in the index on page 51 of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1996.
49
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Dated: March 7, 1997
By /s/ Walter E. Blankley
----------------------------------
WALTER E. BLANKLEY, CHAIRMAN OF
THE BOARD AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Walter E. Blankley Chairman of the March 7, 1997
- -------------------------------------
WALTER E. BLANKLEY Board and Chief
Executive Officer
(Principal
Executive Officer)
/s/ Frank S. Hermance President and Chief March 7, 1997
- -------------------------------------
FRANK S. HERMANCE Operating Officer
/s/ John J. Molinelli Senior Vice March 7, 1997
- -------------------------------------
JOHN J. MOLINELLI President-- Chief
Financial Officer
(Principal
Financial Officer)
/s/ Robert R. Mandos, Jr. Comptroller (Principal March 7, 1997
- -------------------------------------
ROBERT R. MANDOS, JR. Accounting Officer)
/s/ Lewis G. Cole Director March 7, 1997
- -------------------------------------
LEWIS G. COLE
/s/ Helmut N. Friedlaender Director March 7, 1997
- -------------------------------------
HELMUT N. FRIEDLAENDER
/s/ Sheldon S. Gordon Director March 7, 1997
- -------------------------------------
SHELDON S. GORDON
/s/ Charles D. Klein Director March 7, 1997
- -------------------------------------
CHARLES D. KLEIN
/s/ James R. Malone Director March 7, 1997
- -------------------------------------
JAMES R. MALONE
/s/ David P. Steinmann Director March 7, 1997
- -------------------------------------
DAVID P. STEINMANN
/s/ Elizabeth R. Varet Director March 7, 1997
- -------------------------------------
ELIZABETH R. VARET
50
INDEX TO EXHIBITS
ITEM 14(A) 3)
INCORPORATED FILED WITH
EXHIBIT HEREIN BY ELECTRONIC
NUMBER DESCRIPTION REFERENCE TO SUBMISSION
------- ----------- ------------ ----------
3.1 Composite Certificate of Incorporation of Exhibit 3 to June 30,
AMETEK, Inc., 1994 10-Q, SEC File No.
as amended to and including April 26, 1994. 1-168.
3.2 By-laws of the Company. Exhibit (3)b) to 1987
10-K, SEC File No. 1-
168.
4.1 Rights Agreement, dated July 26, 1989, between Exhibit 4 to Form 8-K
the dated July 28, 1989, SEC
Company and the Chase Manhattan Bank, N.A. File No. 1-168.
(the "Rights Agreement").
4.2 Amendment No. 1 to the Rights Agreement. Exhibit 4.5 to 1992 10-
K, SEC File No. 1-168.
4.3 Certificate of Designation, Preferences and Exhibit (4b) to June 30,
Rights of 1989 10-Q, SEC File No.
Series A Junior Participating Preferred Stock. 1-168.
4.4 Indenture dated as of March 15, 1994 between the Exhibit 4 to March 31,
Company and Corestates Bank N.A., as Trustee, 1994 10-Q, SEC File No.
relating to the Company's 9 3/4% Senior Notes 1-168.
due 2004.
4.5 Credit Agreement among the Company, Various Exhibit 10.36 to 1993
Lending 10-K.
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 (the "Credit Agreement").
4.6 First Amendment to the Credit Agreement. Exhibit 10 to March 31,
1994 10-Q.
4.7 Second Amendment to the Credit Agreement. Exhibit 10 to September
30, 1994 10-Q, SEC File
No.
1-168.
4.8 Third Amendment to the Credit Agreement. Exhibit 4 to March
31,1995 10-Q, SEC File
No. 1-168.
4.9 Fourth Amendment to the Credit Agreement. Exhibit 4.1 to March 31,
1995 10-Q, SEC File No.
1-168.
4.10 Credit Agreement dated August 2, 1995, among the Exhibit 4 to September
Company, Various Lending Institutions, Bank of 30, 1995 10-Q, SEC File
Montreal, Corestates Bank, N.A., and PNC Bank, No.
National Association, as Co-Agents, and The 1-168.
Chase
Manhattan Bank, N.A., as Administrative Agent.
4.11 First Amendment to Credit Agreement dated Exhibit 4.1 to September
August 22, 1995. 30, 1995 10-Q, SEC File
No.
1-168.
4.12 Credit Agreement dated August 2, 1995, amended Exhibit 4 to September
and restated as of September 12, 1996. 30, 1996 10-Q, SEC File
No.
1-168.
51
INCORPORATED FILED WITH
EXHIBIT HEREIN BY ELECTRONIC
NUMBER DESCRIPTION REFERENCE TO SUBMISSION
------- ----------- ------------ ----------
10.1 The 1991 Stock Incentive Plan of AMETEK, Inc. Annex A to 1991 Proxy
(the "1991 Plan").* Statement, SEC File No.
1-168.
10.2 Amendment No. 1 to the 1991 Plan.* Exhibit 10.2 to 1993 10-
K, SEC File No. 1-168.
10.3 Amendment No. 2 to the 1991 Plan.* Exhibit 10.3 to 1994 10-
K.
10.4 Amendment No. 3 to the 1991 Plan. * X
10.5 The 1987 Employees' Non-Qualified Stock Option Annex B to 1991
and
Stock Appreciation Rights Plan (the "1987 Proxy Statement.
Plan").*
10.6 Amendment No. 1 to the 1987 Plan.* Exhibit 10.4 to 1993 10-
K.
10.7 Amendment No. 2 to the 1987 Plan. * X
10.8 The 1983 Employees' Incentive Stock Option Plan Exhibit 10.5 to 1993 10-
(the "1983 Plan").* K.
10.9 Amendment No. 1 to the 1983 Plan.* Exhibit (19)a) to
September 30, 1987 10-Q,
SEC File No. 1-168.
10.10 Amendment No. 2 to the 1983 Plan.* Exhibit (10)e) to 1987
10-K.
10.11 Amendment No. 3 to the 1983 Plan.* Exhibit (10)h) to 1989
10-K, SEC File No. 1-
168.
10.12 Amendment No. 4 to the 1983 Plan.* Exhibit 10.9 to 1993 10-
K.
10.13 The 1981 Employees' Non-Qualified Stock Option Exhibit 10.7 to 1991 10-
and Stock Appreciation Rights Plan (the "1981 K.
Plan").*
10.14 Amendment No. 1 to the 1981 Plan.* Exhibit (10)g) to 1987
10-K.
10.15 Amendment No. 2 to the 1981 Plan.* Exhibit (10)k) to 1989
10-K.
10.16 Amendment No. 3 to the 1981 Plan.* Exhibit (10)i) to 1988
10-K, SEC File No. 1-
168.
10.17 Amendment No. 4 to the 1981 Plan.* Exhibit 10.14 to 1993
10-K.
10.18 Amendment No. 5 to the 1981 Plan.* X
10.19 Employees' Retirement Plan of AMETEK, Inc., as Exhibit 10.15 to 1993
restated January 1, 1989 and amended to December 10-K.
31,
1993 (the "Retirement Plan").*
10.20 Amendment No. 1 to the Retirement Plan.* Exhibit 10.17 to 1994
10-K.
10.21 Amendment No. 2 to the Retirement Plan.* Exhibit 10.18 to 1994
10-K.
10.22 Amendment No. 3 to the Retirement Plan.* Exhibit 10.19 to 1995
10-K.
10.23 Amendment No. 4 to the Retirement Plan.* X
10.24 Amendment No. 5 to the Retirement Plan.* X
10.25 AMETEK, Inc. Retirement Plan for Directors, Exhibit 10.16 to 1993
dated April 28, 1983 (the "Directors Plan").* 10-K.
10.26 Amendment to the Directors Plan.* Exhibit 10.20 to 1994
10-K.
10.27 Second Amendment to the Directors Plan.* X
52
INCORPORATED FILED WITH
EXHIBIT HEREIN BY ELECTRONIC
NUMBER DESCRIPTION REFERENCE TO SUBMISSION
------- ----------- ------------ ----------
10.28 Third Amendment to the Directors Plan.* Exhibit (10)v) to 1987
10-K.
10.29 AMETEK, Inc. Death Benefit Program for Exhibit (10)y) to 1987
Directors, 10-K.
pursuant to which the Company has entered into
agreements, restated January 1, 1987, with
certain
directors and one former director of the Company
(the "Directors Program").*
10.30 Amendment No. 1 to the Directors Program.* Exhibit (10)z) to 1987
10-K.
10.31 The AMETEK Savings and Investment Plan, as Exhibit 10.31 to 1992
restated 10-K.
and amended to October 1, 1992 (the "Savings
Plan").*
10.32 Amendment No. 1 to the Savings Plan.* Exhibit 10.23 to 1993
10-K.
10.33 Amendment No. 2 to the Savings Plan.* Exhibit 10.27 to 1994
10-K.
10.34 Amendment No. 3 to the Savings Plan.* Exhibit 10.28 to 1994
10-K.
10.35 Amendment No. 4 to the Savings Plan.* Exhibit 10.29 to 1994
10-K.
10.36 Amendment No. 5 to the Savings Plan.* Exhibit 10.30 to 1994
10-K.
10.37 Amendment No. 6 to the Savings Plan.* Exhibit 10.32 to 1995
10-K.
10.38 Amendment No. 7 to the Savings Plan.* Exhibit 10.33 to 1995
10-K.
10.39 The AMETEK Savings and Investment Plan, as X
restated
and amended to January 1, 1997 (the "Savings
Plan").*
10.40 Reorganization and Distribution Agreement by and Exhibit (2) to Form 8-K
between the Company and Ketema, Inc. (the dated November 30, 1988,
"Reorganization and Distribution Agreement"). SEC File No. 1-168.
10.41 Agreements between the Company and Ketema, Inc. Exhibit 10.56 to 1991
amending certain provisions of the 10-K.
Reorganization
and Distribution Agreement.
10.42 Benefits Agreement by and between the Company Exhibit (10)ss) to 1988
and 10-K.
Ketema, Inc.
10.43 Tax Agreement by and between the Company Exhibit (10)tt) to 1988
and Ketema, Inc. 10-K.
10.44 Support Services Agreement by and between the Exhibit (10)uu) to 1988
Company and Ketema, Inc. 10-K.
10.45 Form of Severance Benefit Agreement between the Exhibit (10)ww) to 1989
Company and certain executives of the Company.* 10-K.
10.46 Form of Restricted Stock Agreement between the Exhibit 10.59 to 1991
Company and certain directors of the Company, 10-K.
dated
as of February 27, 1991.*
10.47 Form of Restricted Stock Agreement between the Exhibit 10.60 to 1991
Company and certain executives of the Company, 10-K.
dated as of May 21, 1991.*
10.48 Form of Supplemental Retirement Benefit Exhibit 10.61 to 1991
Agreement 10-K.
between the Company and certain executives of
the
Company, dated as of May 21, 1991.*
53
INCORPORATED FILED WITH
EXHIBIT HEREIN BY ELECTRONIC
NUMBER DESCRIPTION REFERENCE TO SUBMISSION
------- ----------- ------------ ----------
10.49 Supplemental Senior Executive Death Benefit Exhibit 10.41 to 1992
Plan, effective as of January 1, 1992 10-K.
(the "Senior Executive Plan").*
10.50 Amendment No. 1 to the Senior Executive Plan.* Exhibit 10.42 to 1992
10-K.
10.51 Senior Executive Split Dollar Death Benefit Exhibit 10.43 to 1992
Plan, dated as of December 15, 1992.* 10-K.
10.52 The 1995 Stock Incentive Plan of Ametek, Inc. Annex A to 1995 Proxy
(the "1995 Plan").* Statement.
10.53 Amendment No. 1 to the 1995 Plan.* Exhibit 10 to June 30,
1995 10-Q, SEC File No.
1-168.
10.54 Amendment No. 2 to the 1995 Plan.* X
10.55 Amendment No. 3 to the 1995 Plan.* X
12 Statement regarding computation of ratio of X
earnings to fixed charges.
21 Subsidiaries of the Registrant. X
23 Consent of Independent Auditors. X
27 Financial Data Schedule. X
99 Letter to the holders of the Company's Common Exhibit (21) to June 30,
Stock, dated July 31, 1989 (including 1989 10-Q.
Summary of Rights).
- --------
* Management contract or compensatory plan required to be filed pursuant to
Item 601 of Regulation S-K.
54