AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 1994
REGISTRATION NO. 33-51663
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMETEK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-4923320
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
STATION SQUARE
PAOLI, PENNSYLVANIA 19301
(215) 647-2121
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ALLAN KORNFELD
EXECUTIVE VICE PRESIDENT--CHIEF FINANCIAL OFFICER
AMETEK, INC.
STATION SQUARE
PAOLI, PENNSYLVANIA 19301
(215) 647-2121
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
David L. Finkelman, Esq. Alan J. Sinsheimer, Esq.
STROOCK & STROOCK & LAVAN SULLIVAN & CROMWELL
Seven Hanover Square 125 Broad Street
New York, New York 10004-2696 New York, New York 10004-2498
(212) 806-5400 (212) 558-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 25, 1994
$150,000,000
LOGO OF AMETEK, Inc.
% SENIOR NOTES DUE 2006
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Interest on the Notes is payable on and of each year, commencing
, 1994. The Notes are redeemable at the option of the Company, in whole or
in part, at any time on or after , 1999, at the redemption prices set forth
herein, plus accrued interest to the date of redemption. The Company is
required to offer to purchase all outstanding Notes at 101% of their principal
amount, plus accrued interest to the date of purchase, in the event of a Change
of Control. The Notes will be issued only in registered form in denominations
of $1,000 and integral multiples thereof. See "Description of the Notes."
The Notes have been approved for listing on the New York Stock Exchange,
subject to notice of issuance.
The proceeds of this offering, together with borrowings under the Company's
new secured credit agreement and available cash, will be used (a) to retire
existing debt of the Company, (b) to repurchase outstanding shares of the
Company's Common Stock for an aggregate purchase price of up to $150 million
and (c) to pay fees and expenses related to the sale of the Notes offered
hereby and the Company's new secured credit agreement. See "Use of Proceeds."
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE NOTES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT (2) COMPANY(1)(3)
----------------- ------------ -------------
Per Note.......................... % % %
Total............................. $ $ $
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(1) Plus accrued interest, if any, from , 1994.
(2) The Company has agreed to indemnify Goldman, Sachs & Co. against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting estimated expenses of $ payable by the Company.
-----------
The Notes are offered by Goldman, Sachs & Co., as specified herein, subject
to receipt and acceptance by them and subject to their right to reject any
order in whole or in part. It is expected that the Notes will be ready for
delivery in New York, New York on or about , 1994.
GOLDMAN, SACHS & CO.
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The date of this Prospectus is , 1994.
AVAILABLE INFORMATION
AMETEK, Inc. (the "Company" or "Ametek") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices located at Seven World
Trade Center, New York, New York 10048, and Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such materials can also be inspected at the New York Stock Exchange, 20
Broad Street, New York, New York 10005 or The Pacific Stock Exchange, 301 Pine
Street, San Francisco, California 94104-7065.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement,
including the exhibits filed as part thereof and otherwise incorporated
therein. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily
complete; with respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. Copies
of the Registration Statement and the exhibits may be inspected, without
charge, at the offices of the Commission, or obtained at prescribed rates from
the Public Reference Section of the Commission at the address set forth above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission pursuant to the
Exchange Act are incorporated by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992;
2. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1993, June 30, 1993 and September 30, 1993;
3. The Company's Current Report on Form 8-K dated November 18, 1993;
4. The Company's Current Report on Form 8-K dated February 10, 1994; and
5. All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof
and prior to the termination of the offering of the Notes offered
hereby.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained herein or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any or all of the documents which have been incorporated by reference in
this Prospectus, other than exhibits to such documents, unless such exhibits
are specifically incorporated by reference into the documents so incorporated.
Requests for such copies should be directed to Secretary, AMETEK, Inc.,
Station Square, Paoli, Pennsylvania 19301 (telephone number: (215) 647-2121).
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere or incorporated by reference in this Prospectus. Unless the context
otherwise requires, all references herein to the "Company" or "Ametek" include
AMETEK, Inc. and its subsidiaries. See "Risk Factors" for a discussion of
certain considerations associated with investment in the Notes.
THE COMPANY
Ametek is an international manufacturer of high quality, engineered products
for industrial and commercial markets. The Company has a significant market
share for many of its products and a leading market share in electric motors
for vacuum cleaners and other floor care products, the Company's most
significant business. Many of the Company's products have a technological
component and are engineered to customer specifications. The Company employs
approximately 6,000 individuals and operates 32 manufacturing facilities
located in 12 states, as well as in Italy, Denmark, England and Mexico.
The Company's products are produced and sold worldwide through the Company's
Electro-mechanical, Precision Instruments and Industrial Materials Groups. The
principal products of each of the Groups include:
. Electro-mechanical Group--fractional horsepower electric motors and
blowers for vacuum cleaners and other floor care products, as well as for
furnaces, lawn tools, computer equipment, photocopiers and other
applications.
. Precision Instruments Group--instruments for commercial and military
aircraft and engines, devices for measuring, monitoring and controlling
industrial manufacturing processes, pressure gauges, and instrumentation
for heavy trucks.
. Industrial Materials Group--specialty metal products for electronics,
general industry and consumer goods, water filtration systems,
temperature and corrosion resistant materials, plastic compounds for
automotive and appliance markets and protective foam wrap for furniture
and fruit.
The Company's business has grown over the years through a combination of
acquisitions and internal growth into a diversified manufacturing company
serving a wide range of markets. The Company has concentrated on identifying,
developing and marketing high quality, technology-based products which hold, or
have the potential for gaining, a significant share of one or more niche
markets.
In November 1993, the Company completed a broad strategic review and
announced a plan intended to enhance shareholder value over the long term. From
an operational point of view, the Company will seek to increase the
profitability of its existing businesses through (i) growth and reinvestment,
particularly in its electro-mechanical, specialty metal and water filtration
operations, (ii) continued emphasis on controlling costs and (iii) an increased
focus on foreign sales, especially in the Pacific Rim and Europe, through a
combination of direct selling efforts and joint ventures. The Company also
intends to pursue strategic acquisitions on a selective basis. In addition, the
Company intends to continue its policy of reviewing, from time to time,
possible divestitures of existing businesses.
From a financial point of view, the Company's plan, which takes advantage of
the Company's historically strong cash flow, involves repurchasing outstanding
shares of its Common Stock for an aggregate purchase price of up to $150
million and refinancing existing debt with the net proceeds from the sale of
the Notes offered hereby, borrowings under a new secured credit agreement and
3
available cash. The resulting increased leverage will reduce the Company's
financial and operating flexibility. Accordingly, the plan also calls for a
reduction in the quarterly per share dividend rate on the Company's Common
Stock from $.17 to $.06 and a decrease in the Company's leverage over time. See
"Risk Factors--Increased Leverage" and "--Ranking."
The Company also recorded certain after tax charges against earnings of $28.6
million during the fourth quarter of 1993, resulting in aggregate charges of
$33.5 million for the year. A substantial portion of these charges relates to
the restructuring of several businesses and the remainder reflects asset write-
downs and other unusual charges against income. The restructuring charges
primarily result from actions taken or planned due to the unwillingness of the
union at a Precision Instruments facility in Sellersville, Pennsylvania to
agree on wage and work rule concessions requested by the Company necessary to
make such operation competitive. These actions include relocating, outsourcing
and downsizing various manufacturing functions at this facility. See "Risk
Factors--Business Restructuring" and "--Labor Relations" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Company will also record an extraordinary after tax charge of approximately $13
million in 1994 for the early retirement of existing debt after completion of
the sale of the Notes offered hereby and the application of the proceeds
thereof.
THE OFFERING
Securities Offered.......... $150 million principal amount of % Senior
Notes due
2006 (the "Notes").
Interest Payment Dates...... and , commencing , 1994.
Maturity.................... , 2006.
Redemption.................. The Notes are redeemable at the option of the
Company, in whole or in part, on or after ,
1999, at the redemption prices set forth herein,
plus accrued interest to the redemption date.
The Notes are not entitled to the benefit of any
sinking fund.
Ranking..................... The Notes will be unsubordinated, unsecured
obligations of the Company and will rank pari
passu with all other unsubordinated and
unsecured obligations of the Company. The Notes
will be effectively subordinated to secured
indebtedness of the Company with respect to the
assets securing such secured indebtedness to the
extent of the security. After giving pro forma
effect to the transactions described under "Use
of Proceeds," as of December 31, 1993, the
Company would have had secured indebtedness of
approximately $175.0 million. The Indenture
relating to the Notes (the "Indenture") permits
the Company to incur additional secured
indebtedness under certain circumstances.
Additionally, the Notes will be effectively
subordinated to liabilities of subsidiaries of
the Company. As of December 31, 1993, the
subsidiaries of the Company had liabilities of
approximately $94.8 million. The Indenture
permits the Company's subsidiaries to incur
additional indebtedness under certain
circumstances. See "Description of the Notes."
4
Certain Covenants........... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its subsidiaries to incur
indebtedness, make restricted payments, incur
liens, enter into sale and leaseback
transactions, restrict subsidiaries from paying
dividends or making other payments to the
Company and merge or consolidate with other
entities. See "Description of the Notes."
Change in Control........... In the event of a Change of Control (as defined
in the Indenture), the Company is required to
offer to purchase all outstanding Notes at 101%
of their principal amount plus accrued interest
to the date of purchase.
Use of Proceeds............. The proceeds of the Notes offered hereby,
together with borrowings under the Company's new
$250 million secured credit agreement (the
"Credit Agreement") and available cash, will be
used (a) to retire (i) $106.8 million aggregate
principal amount of outstanding 8.95% Senior
Notes of the Company due September 15, 2001 (the
"8.95% Notes") held by institutional investors,
(ii) $75.0 million aggregate principal amount of
outstanding 9.35% Senior Notes of the Company
due September 15, 2004 (the "9.35% Notes") held
by institutional investors and (iii) $3.6
million aggregate principal amount of
outstanding 8.05% Senior Secured Notes of the
Company due July 15, 2004 (the "8.05% Notes"
and, collectively with the 8.95% Notes and the
9.35% Notes, the "Institutional Notes") held by
an institutional investor, (b) to repurchase
outstanding shares of the Company's Common
Stock, $1.00 par value per share (the "Common
Stock"), for an aggregate purchase price of up
to $150 million, and (c) to pay fees and
expenses related to the sale of the Notes
offered hereby and the Credit Agreement. See
"Use of Proceeds."
Listing..................... The Notes have been approved for listing on the
New York Stock Exchange, subject to notice of
issuance.
5
SUMMARY FINANCIAL DATA
The following tables set forth summary historical and supplemental pro forma
financial data of the Company. The historical financial data are derived from
the Company's consolidated financial statements which have been audited by
Ernst & Young, independent auditors.
The summary financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Consolidated Financial Statements and related Notes shown in
the index on page F-1 and other financial data included herein.
YEARS ENDED DECEMBER 31,
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1989 1990 1991 1992 1993
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(DOLLARS IN THOUSANDS)
HISTORICAL DATA
INCOME STATEMENT DATA:
Net sales.............. $587,844 $660,745 $715,099 $769,550 $732,195
Cost and expenses...... 527,618 592,375 648,794 690,407 687,037
Resizing and
restructuring
charges(1)............ -- -- -- -- 45,089
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Operating income....... 60,226 68,370 66,305 79,143 69
Other income (expense):
Interest expense...... (15,234) (20,818) (22,079) (19,721) (17,603)
Other, net............ 15,691 9,103 8,152 7,297 6,337
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Income (loss) before
income taxes(2)....... 60,683 56,655 52,378 66,719 (11,197)
Provision for (benefit
from) income taxes.... 22,387 19,317 14,392 22,362 (3,865)
-------- -------- -------- -------- --------
Net income (loss)...... $ 38,296 $ 37,338 $ 37,986 $ 44,357 $ (7,332)
======== ======== ======== ======== ========
Ratio of earnings to
fixed charges(3)...... 4.5x 3.3x 3.2x 4.0x --
OPERATING AND OTHER
DATA:
Depreciation and
amortization.......... $25,273 $33,542 $36,455 $37,263 $ 35,907
Capital expenditures... 25,684 35,683 18,808 23,990 38,324
Dividends paid......... 27,415 28,221 28,990 29,991 25,095
EBITDA(4).............. 91,180 100,707 103,520 117,584 92,368
Ratio of EBITDA to
interest expense(4)... 5.9x 4.8x 4.7x 5.9x 5.2x
Ratio of debt to
EBITDA(4)............. 2.5x 2.5x 2.1x 1.8x 2.0x
BALANCE SHEET DATA (END
OF PERIOD):
Working capital........ $215,072 $184,397 $181,449 $190,205 $134,163
Total assets........... 563,313 615,170 612,473 603,089 562,663
Long-term debt
(including current
portion).............. 229,518 248,078 220,911 206,922 186,972
Stockholders' equity... 194,879 199,412 211,479 210,272 165,326
SUPPLEMENTAL PRO FORMA
DATA (5)
INCOME STATEMENT DATA:
Operating income........................................... $ 54,979
Interest expense........................................... (24,247)
Other income, net.......................................... 3,785
Income before income taxes................................. 34,517
Net income................................................. 20,553
Ratio of earnings to fixed charges(6)...................... 2.2x
OPERATING AND OTHER
DATA:
Dividends paid............................................. $ 10,536
Ratio of EBITDA to interest expense(4)..................... 3.7x
Ratio of debt to EBITDA(4)................................. 3.5x
BALANCE SHEET DATA (END
OF PERIOD):
Working capital............................................ $114,546
Total assets............................................... 538,221
Long-term debt (including current portion)................. 326,622
Stockholders' equity....................................... 1,660
See notes on following page.
6
(1) The resizing and restructuring charges relate to the restructuring of
several businesses and include charges for work force reductions, both
planned and those which occurred in 1993, asset write-downs, relocation of
product lines and the overall consolidation of the Company's aerospace
operations. Approximately 75% of these charges relate to the Company's
Sellersville facility and result from actions taken or planned due to the
unwillingness of the union at such facility to agree on wage and work rule
concessions requested by the Company necessary to make that operation
competitive. These actions include relocating, outsourcing and downsizing
various manufacturing functions at this facility. See "Risk Factors--
Business Restructuring" and "--Labor Relations" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(2) Includes unusual charges of $9.8 million in 1993 for asset write-downs and
other unusual items.
(3) For purposes of calculating the ratio of earnings to fixed charges,
earnings represents income before income taxes and fixed charges. Fixed
charges consist of interest expense, amortization of deferred financing
costs and the estimated component of operating lease expenses representing
interest (assumed to be one-third). Earnings were insufficient to cover
fixed charges by $12.2 million in 1993.
(4) EBITDA represents income before income taxes, interest expense, interest
income, amortization of deferred financing costs, depreciation and
amortization expenses and the charges referred to in notes 1 and 2 above.
EBITDA is presented as additional information relating to the Company's
ability to service its debt but is not presented as being representative of
operating results or cash flows for the period. See "Consolidated
Statements of Cash Flows" for each of the three years in the period ended
December 31, 1993 included elsewhere in this Prospectus.
The ratio of EBITDA to interest expense represents the ratio of EBITDA to
the sum of interest expense plus amortization of deferred financing costs.
The ratio of debt to EBITDA for each period represents the ratio of debt at
the end of such period to EBITDA for such period.
(5) The Supplemental Pro Forma Data represent historical data for 1993 and as
of December 31, 1993, adjusted to give effect to the following events as
though they had occurred at the beginning of the period, in the case of pro
forma Income Statement Data and Operating and Other Data, and as of
December 31, 1993, in the case of pro forma Balance Sheet Data:
(a) the issuance of $150 million principal amount of Notes being
offered hereby at an assumed interest rate of 8.75%;
(b) the borrowing of $125 million under the floating rate term
facility of the Credit Agreement, a portion of which is assumed to be
converted through interest rate swaps into a fixed rate borrowing
resulting in an assumed effective interest rate of 6.6%;
(c) the borrowing of $50 million under the floating rate revolving
credit facility of the Credit Agreement at an assumed interest rate of
5.0%;
(d) the application of the proceeds of the foregoing and $33.4 million
of available cash, as described under "Use of Proceeds," to (i) retire
approximately $185.4 million of Institutional Notes, (ii) repurchase
outstanding shares of the Company's Common Stock for an aggregate
purchase price of $150 million and (iii) pay the estimated fees and
expenses related to the foregoing;
(e) with respect to the pro forma Income Statement Data and Operating
and Other Data only, the elimination of the charges referred to in notes
1 and 2 above; and
(f) with respect to the pro forma Balance Sheet Data only, the
recording of a $13 million (after tax) extraordinary charge which the
Company expects to record against income in 1994 in connection with the
early retirement of the Institutional Notes, in addition to the write-
off of related deferred financing costs.
Additionally, the pro forma dividends paid reflects the annualized fourth
quarter 1993 rate of $.06 per share (as compared to the prior quarterly rate
of $.17 per share) without giving effect to the share repurchase.
The Supplemental Pro Forma Data are based on certain assumptions that may
not prove to be accurate and do not purport to represent what the Company's
results of operations or financial position actually would have been had the
events referred to above in fact occurred for the periods or as of the dates
indicated or to project the Company's results of operations or financial
condition for any future period or date. For each 1/8 of 1% change in
assumed interest rates on the Notes being offered hereby and on borrowings
under the new Credit Agreement, pro forma interest expense would change by
$408,000 and pro forma net income would change by $249,000, for the year
ended December 31, 1993.
(6) For purposes of calculating the supplemental pro forma ratio of earnings to
fixed charges, earnings represents pro forma income before income taxes,
fixed charges and the charges referred to in notes 1 and 2 above. Fixed
charges consist of interest expense, amortization of deferred financing
costs and the estimated component of operating lease expenses representing
interest (assumed to be one-third).
7
RISK FACTORS
INCREASED LEVERAGE
As a result of the transactions described under "Use of Proceeds," the
Company's indebtedness will increase while at the same time its stockholders'
equity will decrease. On the pro forma basis described in Note 5 to "Selected
Financial Data," the Company's long-term debt (including the current portion
thereof) as of December 31, 1993 would have been approximately $326.6 million,
or 74.7% higher than the actual long-term debt of approximately $187.0 million
at such date, and its stockholders' equity would have been approximately $1.7
million, or $163.6 million less than the actual stockholders' equity of $165.3
million at that date. This increased level of indebtedness could have
important consequences to holders of the Notes, including the following: (i)
the Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or other general corporate
purposes will be reduced; (ii) a significant portion of the Company's cash
flow from operations will be required to service debt, and, as a result, these
funds will not be available for working capital, capital expenditures,
acquisitions or other general corporate purposes; and (iii) the Company's
increased level of indebtedness will make it more vulnerable in the event of a
further downturn in its various businesses. Moreover, financial and other
covenants contained in the Indenture and the Credit Agreement will restrict
the Company's ability to engage in certain transactions, such as making
certain capital expenditures, incurring further indebtedness and selling and
purchasing assets or businesses outside the ordinary course of business. See
"The Credit Agreement" and "Description of the Notes." There can be no
assurance that the Company's leverage and these restrictions will not
adversely affect the Company's ability to finance its future operations or
capital needs or to engage in other business activities, such as acquisitions,
which may be in the interest of the Company. The Company believes that cash
flow from operations and the retention of a substantially greater portion
thereof under the Company's new policy regarding the payment of dividends on
its Common Stock will enable it to make all required payments on its
indebtedness when due, including under the Notes. However, if future cash
provided by operations is less than expected, the Company could experience
difficulty in meeting the payments due on such indebtedness.
BUSINESS RESTRUCTURING
The Company is in the process of restructuring several of its businesses
and, in connection with this process, has taken charges for resizing,
restructuring and other unusual items against income of $33.5 million (after
tax) during 1993.
Approximately $27.5 million of the charges relates to the restructuring.
Most of the charges for restructuring relates to the Company's aerospace and
pressure gauge operations at its facility in Sellersville, Pennsylvania. The
union at Sellersville was unwilling to agree on wage and work rule concessions
which were requested by the Company in order to make the operation
competitive. As a result, the Company has decided to move its Sellersville
aerospace manufacturing operation to another location. These restructuring
charges are intended to cover certain pension and severance costs, the costs
of the planned relocation and other costs that are expected to result from the
transition. The overall restructuring charges also cover relocating,
outsourcing, downsizing and other restructuring actions related to the
pressure gauge business at Sellersville. The balance of the restructuring
charges relates to the resizing of the Company's other aerospace operations
and other businesses to correspond with prevailing market conditions. The
remaining $6.0 million of the charges relates to asset write-downs and other
unusual charges against income.
While the Company believes that these restructuring charges should reflect
substantially all of the costs of the Sellersville relocation, the downsizing
of the aerospace operations and other components
8
of its restructuring, there can be no assurance that these charges will prove
adequate or that additional charges will not be necessary in 1994 or
thereafter to account for the effects of this restructuring.
DEPENDENCE ON GENERAL ECONOMIC CONDITIONS
The demand for the Company's products is subject to general economic
conditions, such as rates of inflation, fluctuations in general business
conditions, governmental regulation and the availability of financing at
favorable rates, which factors are outside the control of the Company. In
addition, a weak economy (particularly in the aerospace industry, which has
been adversely affected by the reduced profitability of the deregulated
commercial airline industry and reduced military spending) has adversely
affected the Company's results, particularly results of the Precision
Instruments Group. There can be no assurance that the current general economic
conditions will not continue or worsen.
RANKING
The Notes are unsecured and thus, in effect, would rank junior to any
secured indebtedness, including borrowings under the Credit Agreement, of the
Company to the extent of the security. Subject to certain de minimis and other
exceptions, all assets owned by the Company and the Company's subsidiaries
that are guarantors under the Credit Agreement will be pledged to the Banks
(as defined) to secure the Company's obligations under the Credit Agreement.
See "The Credit Agreement." On the pro forma basis described in Note 5 to
"Selected Financial Data," as of December 31, 1993, the Company would have had
secured indebtedness of approximately $175.0 million. The Indenture permits
the Company to incur secured indebtedness in addition to indebtedness under
the Credit Agreement under certain circumstances. See "Description of the
Notes."
LIABILITIES OF SUBSIDIARIES
Certain of the Company's business activities are operated or held by
subsidiaries. The Company's ability to meet its financial obligations,
including its obligations under the Notes, depends in part upon the receipt of
cash dividends, advances and other payments from its subsidiaries. The Notes
are effectively subordinated to all existing and future liabilities, including
trade payables, of the Company's subsidiaries with respect to the assets of
such subsidiaries. Any right of the Company to participate in any distribution
of the assets of any of the Company's subsidiaries upon the liquidation,
reorganization or insolvency of such subsidiaries (and the consequent right of
the holders of the Notes to participate in such distributions) will be subject
to the claims of the creditors (including trade creditors) of such
subsidiaries. As of December 31, 1993, the assets and liabilities (excluding
intercompany receivables and payables) of the Company's subsidiaries
aggregated approximately $259.7 million and $94.8 million, respectively. The
Indenture permits the Company's subsidiaries to incur additional indebtedness
under certain circumstances. See "Description of the Notes."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
During 1993, approximately 13.3% of the Company's revenues were derived from
its foreign operations (and another 14.4% of the Company's revenues were
derived from export sales from the United States). Assets of these foreign
operations were $84.4 million and represented 15.0% of the Company's total
assets at December 31, 1993. Such operations are subject to the customary
risks of operating in an international environment, including the potential
imposition of trade or foreign exchange restrictions, tariff and other tax
increases, fluctuations in exchange rates and unstable political situations.
The Company has significant operations in Italy, the currency of which has
been unstable in the recent past. There can be no assurance that there will
not be further instability in the Italian lire which could have a material
adverse effect on the Company's results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
9
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined in the Indenture),
subject to certain limitations, holders of the Notes have the right to require
the Company to repurchase their Notes. However, a Change of Control would
constitute an event of default under the Credit Agreement and the Company is
required under the terms thereof to insure that the date for payment of the
purchase price for all Notes that must be repurchased as a result of such
Change of Control is no earlier than the date on which the loans under the
Credit Agreement become due and payable as a result thereof, unless otherwise
agreed to by the lenders thereunder. See "The Credit Agreement". Accordingly,
the right of holders of the Notes to require the Company to repurchase the
Notes may be of limited value if the Company cannot obtain sufficient funding
to repay the loans under the Credit Agreement or obtain the requisite consent
of the lenders thereunder. Failure to offer to repurchase the Notes under such
circumstances, however, would constitute an Event of Default under the
Indenture.
DEPENDENCE ON SEVERAL CUSTOMERS
While the Company as a whole is not dependent on any single customer such
that the loss of such customer would have a material adverse effect on its
operations, during 1993 approximately 15.8% of the Company's total revenues
were derived from sales to the Company's five largest customers, including the
United States government. The Company expects that revenues from major
customers will continue to constitute significant percentages of the Company's
total revenues for the foreseeable future. There can be no assurance, however,
that major customers will continue to purchase the Company's products. The loss
of major customers could have a material adverse effect on the Company's
financial condition or results of operations.
ENVIRONMENTAL MATTERS
The Company is subject to extensive environmental and occupational health and
safety laws and regulations concerning, among other things, air emissions,
discharges to waters and the generation, handling, storage, transportation and
disposal of hazardous substances and wastes. Environmental risks are inherent
in many of the Company's manufacturing operations. In addition, the
Comprehensive Environmental Response, Compensation and Liability Act and
similar state laws generally impose joint and several liability for clean-up
costs, without regard to fault or the legality of the original conduct, on
parties contributing hazardous substances to sites from which there is a
release or threats of release of hazardous substances. The Company has been
named a potentially responsible party at several sites which are the subject of
government-mandated clean-ups. While it is not possible to accurately quantify
the potential financial impact of pending environmental matters, the Company
believes that the outcome of these matters is not likely to have a material
adverse effect on the financial position or future results of operations of the
Company. However, there can be no assurance that future environmental
liabilities will not occur or that environmental damages arising from prior or
present practices will not result in future liabilities or that such
liabilities will not have a material adverse effect on the Company's financial
condition or results of operations.
LABOR RELATIONS
Of the Company's approximately 6,000 employees, approximately 2,400 are
covered by collective bargaining agreements. Although the Company believes that
its relations with its union employees are generally good, there is no
assurance that the Company will not at some point be subject to work stoppages
and possibly a strike by some of its employees and, if such events were to
occur, that there would be no material adverse effect on the Company's
financial condition or results of operations. Recently, the union at a
Precision Instruments facility in Sellersville, Pennsylvania was unwilling to
agree on wage and work rule concessions requested by the Company necessary to
make such
10
operation competitive. As a result, the Company has decided to move a major
portion of its manufacturing operations to another location. Although the
Company believes its 1993 restructuring charges will be adequate to provide for
this relocation (see "Risk Factors--Business Restructuring"), there can be no
assurance that this amount will be adequate to cover any disruptions that could
arise from the move of such operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
FRAUDULENT CONVEYANCE
Under applicable provisions of the Federal Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance law, if the Company, at
the time it issued the Notes, (a) incurred such indebtedness with the intent to
hinder, delay or defraud creditors, or (b)(i) received less than reasonably
equivalent value or fair consideration for incurring such indebtedness and (ii)
either (A) was insolvent at the time of the incurrence, (B) was rendered
insolvent by reason of such incurrence (and the application of the proceeds
thereof), (C) was engaged or was about to engage in a business or transaction
for which the assets remaining with the Company constituted unreasonably small
capital to carry on its business, or (D) intended to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they mature, then,
in each such case, a court of competent jurisdiction could avoid, in whole or
in part, the Notes or, in the alternative, subordinate the Notes to existing
and future indebtedness of the Company. The avoidance or subordination of all
or part of the Notes could result in an event of default with respect to other
indebtedness of the Company which could result in acceleration of such
indebtedness. The measure of insolvency for purposes of the foregoing will vary
depending upon the law applied in such case. Generally, the Company would be
considered insolvent if the sum of its debts, including contingent liabilities,
was greater than all of its assets at a fair valuation or if the present fair
saleable value of its assets was less than the amount that would be required to
pay the probable liability on its existing debts, including contingent
liabilities, as they become absolute and matured.
Management of the Company believes that, although a substantial portion of
the net proceeds from the sale of the Notes and borrowings under the Credit
Agreement may be used to repurchase outstanding shares of the Company's Common
Stock, for purposes of the Federal Bankruptcy Code and state fraudulent
transfer or conveyance laws, the Notes are being issued without the intent to
hinder, defraud or delay creditors, for proper purposes and in good faith and
that the Company is and, after the issuance of the Notes and the application of
the proceeds thereof, will be, solvent, will have sufficient capital for
carrying on its business and will be able to pay its debts as they mature.
There can be no assurance, however, that a court passing on such questions
would agree with management's view.
ABSENCE OF PUBLIC MARKET
There is no existing market for the Notes. Although the Notes have been
approved for listing, subject to notice of issuance, on the New York Stock
Exchange, there can be no assurance as to the liquidity of any market that may
develop for the Notes, the ability of holders to sell their Notes or the price
at which holders will be able to sell their Notes. If such a market develops,
the Notes may trade at a discount from their initial offering price, depending
on prevailing interest rates, the Company's operating results, the market for
similar securities and other factors. The market for high yield debt, such as
the Notes, has fewer participants and involves a smaller amount of securities
than certain other capital markets. It has historically, and particularly in
recent periods, been subject to disruptions that have caused volatility in the
prices of securities similar to the Notes. There can be no assurance that the
market for the Notes will not be subject to similar disruptions that will
render them difficult to sell. Goldman, Sachs & Co. have indicated that they
intend to make a market in the Notes but they are not obligated to do so and
may discontinue market making at any time.
11
THE COMPANY
Ametek is an international manufacturer of high quality, engineered products
for industrial and commercial markets. The Company has a significant market
share for many of its products and a leading market share in electric motors
for vacuum cleaners and other floor care products, the Company's most
significant business. Many of the Company's products have a technological
component and are engineered to customer specifications. The Company employs
approximately 6,000 individuals and operates 32 manufacturing facilities
located in 12 states, as well as in Italy, Denmark, England and Mexico.
The Company's products are produced and sold worldwide through the Company's
Electro-mechanical, Precision Instruments and Industrial Materials Groups. The
principal products of each of the Groups include:
. Electro-mechanical Group--fractional horsepower electric motors and
blowers for vacuum cleaners and other floor care products, as well as for
furnaces, lawn tools, computer equipment, photocopiers and other
applications.
. Precision Instruments Group--instruments for commercial and military
aircraft and engines, devices for measuring, monitoring and controlling
industrial manufacturing processes, pressure gauges, and instrumentation
for heavy trucks.
. Industrial Materials Group--specialty metal products for electronics,
general industry and consumer goods, water filtration systems,
temperature and corrosion resistant materials, plastic compounds for
automotive and appliance markets and protective foam wrap for furniture
and fruit.
The Company's business has grown over the years through a combination of
acquisitions and internal growth into a diversified manufacturing company
serving a wide range of markets. The Company has concentrated on identifying,
developing and marketing high quality, technology-based products which hold,
or have the potential for gaining, a significant share of one or more niche
markets.
In November 1993, the Company completed a broad strategic review and
announced a plan intended to enhance shareholder value over the long term.
From an operational point of view, the Company will seek to increase the
profitability of its existing businesses through (i) growth and reinvestment,
particularly in its electro-mechanical, specialty metal and water filtration
operations, (ii) continued emphasis on controlling costs and (iii) an
increased focus on foreign sales, especially in the Pacific Rim and Europe,
through a combination of direct selling efforts and joint ventures. The
Company also intends to pursue strategic acquisitions on a selective basis. In
addition, the Company intends to continue its policy of reviewing, from time
to time, possible divestitures of existing businesses.
From a financial point of view, the Company's plan, which takes advantage of
the Company's historically strong cash flow, involves repurchasing outstanding
shares of its Common Stock for an aggregate purchase price of up to $150
million and refinancing existing debt with the net proceeds from the sale of
the Notes offered hereby, borrowings under the Credit Agreement and available
cash. The resulting increased leverage will reduce the Company's financial and
operating flexibility. Accordingly, the plan also calls for a reduction in the
quarterly per share dividend rate on the Company's Common Stock from $.17 to
$.06 and a decrease in the Company's leverage over time. See "Risk Factors--
Increased Leverage" and "--Ranking."
The Company also recorded certain after tax charges against earnings of
$28.6 million during the fourth quarter of 1993, resulting in aggregate
charges of $33.5 million for the year. A substantial portion of these charges
relates to the restructuring of several businesses and the remainder reflects
asset write-downs and other unusual charges against income. The restructuring
charges primarily result from
12
actions taken or planned due to the unwillingness of the union at a Precision
Instruments facility in Sellersville, Pennsylvania to agree on wage and work
rule concessions requested by the Company necessary to make such operation
competitive. These actions include relocating, outsourcing and downsizing
various manufacturing functions at this facility. See "Risk Factors--Business
Restructuring" and "--Labor Relations" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The Company will
also record an extraordinary after tax charge of approximately $13 million in
1994 for the early retirement of the Institutional Notes after completion of
the sale of the Notes offered hereby and the application of the proceeds
thereof.
AMETEK, Inc. 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, telephone number (215) 647-2121.
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby are estimated to
be $ (after deducting the underwriting discount and other expenses related
to the sale of the Notes). The proceeds, together with borrowings under the
Company's Credit Agreement and available cash, will be used (a) to retire the
Institutional Notes, (b) to repurchase outstanding shares of its Common Stock
(pursuant to open market or privately negotiated purchases, a tender offer or
a combination of the foregoing) for an aggregate purchase price of up to $150
million and (c) to pay fees and expenses related to the sale of the Notes and
the Credit Agreement.
The following table illustrates the Company's current expectation as to the
sources and uses of funds in connection with the transactions described above:
SOURCES OF FUNDS DOLLARS IN THOUSANDS
---------------- --------------------
1. Credit Agreement
Secured Term Loan Facility.............................. $125,000
Secured Revolving Credit Facility....................... 50,000
2.Gross Proceeds from sale of the Notes offered hereby.... 150,000
3.Available Cash.......................................... 33,350
--------
Total Sources.......................................... $358,350
========
USES OF FUNDS
-------------
1. Retirement of the aggregate principal amount of the
Institutional Notes.................................... $185,350
2.Repurchase of outstanding shares of Common Stock........ 150,000
3. Fees and expenses (including underwriting discount)
related to the sale of the Notes and the Credit
Agreement and premiums for early retirement of the
Institutional Notes.................................... 23,000
--------
Total Uses............................................. $358,350
========
See "Capitalization" and "Selected Financial Data--Supplemental Pro Forma
Data" for the pro forma effects of the foregoing transactions and "The Credit
Agreement" for a description of the terms of the Credit Agreement.
13
CAPITALIZATION
The following table sets forth the capitalization of the Company at December
31, 1993, and as adjusted to reflect the impact of the matters described in
Note 5 to "Selected Financial Data." See "Risk Factors--Increased Leverage"
and "--Ranking."
DECEMBER 31, 1993
-----------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(DOLLARS IN THOUSANDS)
Debt:
8.95% Notes due September 15, 2001.................... $106,750 $ --
9.35% Notes due September 15, 2004.................... 75,000 --
8.05% Notes due July 15, 2004......................... 3,600 --
Other................................................. 1,622 1,622
Credit Agreement(2):
Secured Term Loan Facility.......................... -- 125,000
Secured Revolving Credit Facility................... -- 50,000
Notes offered hereby.................................. -- 150,000
-------- --------
Total debt.............................................. 186,972 326,622
Stockholders' equity.................................... 165,326 1,660(3)
-------- --------
Total capitalization.................................. $352,298 $328,282
======== ========
- --------
(1) For an explanation of the adjustments, see Note 5 to "Selected Financial
Data."
(2) See "The Credit Agreement" for a description of the interest rates and
other terms and conditions of borrowings under the Credit Agreement.
(3) Stockholders' equity is reduced by $150 million for the assumed repurchase
of Common Stock and by the $13 million (after tax) extraordinary charge to
be incurred in 1994 in connection with the early retirement of the
Institutional Notes, in addition to the write-off of deferred financing
costs.
14
SELECTED FINANCIAL DATA
The following tables set forth selected historical and supplemental pro
forma financial data of the Company. The historical financial data are derived
from the Company's consolidated financial statements which have been audited
by Ernst & Young, independent auditors.
The unaudited supplemental pro forma financial data for the year ended
December 31, 1993 represents the historical data as of and for the year ended
December 31, 1993 adjusted for the items described in Note 5 below. The
supplemental pro forma adjustments described in Note 5 are based upon
estimates and assumptions that management believes are reasonable.
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" which follows this section, the Consolidated Financial
Statements and related Notes shown in the index on page F-1 and other
financial data included herein.
YEARS ENDED DECEMBER 31,
------------------------------------------------
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
HISTORICAL DATA
INCOME STATEMENT DATA:
Net sales.............. $587,844 $660,745 $715,099 $769,550 $732,195
Expenses:
Cost of sales
(excluding
depreciation)........ 444,004 498,749 546,479 583,357 582,001
Selling, general and
administrative....... 66,057 69,563 74,038 77,690 76,759
Depreciation.......... 17,557 24,063 28,277 29,360 28,277
Resizing and restruc-
turing charges(1).... -- -- -- -- 45,089
-------- -------- -------- -------- --------
Operating income....... 60,226 68,370 66,305 79,143 69
Other income (expense):
Interest expense...... (15,234) (20,818) (22,079) (19,721) (17,603)
Other, net............ 15,691 9,103 8,152 7,297 6,337
-------- -------- -------- -------- --------
Income (loss) before
income taxes(2)....... 60,683 56,655 52,378 66,719 (11,197)
Provision for (benefit
from) income taxes.... 22,387 19,317 14,392 22,362 (3,865)
-------- -------- -------- -------- --------
Net income (loss)...... $ 38,296 $ 37,338 $ 37,986 $ 44,357 $ (7,332)
======== ======== ======== ======== ========
Ratio of earnings to
fixed charges(3)...... 4.5x 3.3x 3.2x 4.0x --
OPERATING AND OTHER DA-
TA:
Depreciation and amor-
tization.............. $ 25,273 $ 33,542 $ 36,455 $ 37,263 $ 35,907
Capital expenditures... 25,684 35,683 18,808 23,990 38,324
Dividends paid......... 27,415 28,221 28,990 29,991 25,095
EBITDA(4).............. 91,180 100,707 103,520 117,584 92,368
Ratio of EBITDA to
interest expense(4)... 5.9x 4.8x 4.7x 5.9x 5.2x
Ratio of debt to
EBITDA(4)............. 2.5x 2.5x 2.1x 1.8x 2.0x
BALANCE SHEET DATA (END
OF PERIOD):
Working capital........ $215,072 $184,397 $181,449 $190,205 $134,163
Total assets........... 563,313 615,170 612,473 603,089 562,663
Long-term debt
(including current
portion).............. 229,518 248,078 220,911 206,922 186,972
Stockholders' equity... 194,879 199,412 211,479 210,272 165,326
SUPPLEMENTAL PRO FORMA DATA(5)
INCOME STATEMENT DATA:
Operating income............................................ $ 54,979
Interest expense............................................ (24,247)
Other income, net........................................... 3,785
Income before income taxes.................................. 34,517
Net income.................................................. 20,553
Ratio of earnings to fixed charges(6)....................... 2.2x
OPERATING AND OTHER DA-
TA:
Dividends paid.............................................. $ 10,536
Ratio of EBITDA to interest expense(4)...................... 3.7x
Ratio of debt to EBITDA(4).................................. 3.5x
BALANCE SHEET DATA (END
OF PERIOD):
Working capital............................................. $114,546
Total assets................................................ 538,221
Long-term debt (including current portion).................. 326,622
Stockholders' equity........................................ 1,660
15
(1) The resizing and restructuring charges relate to the restructuring of
several businesses and include charges for work force reductions, both
planned and those which occurred in 1993, asset write-downs, relocation of
product lines and the overall consolidation of the Company's aerospace
operations. Approximately 75% of these charges relate to the Company's
Sellersville facility and result from actions taken or planned due to the
unwillingness of the union at such facility to agree on wage and work rule
concessions requested by the Company necessary to make that operation
competitive. These actions include relocating, outsourcing and downsizing
various manufacturing functions at this facility. See "Risk Factors--
Business Restructuring" and "--Labor Relations" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(2) Includes unusual charges of $9.8 million in 1993 for asset write-downs and
other unusual items.
(3) For purposes of calculating the ratio of earnings to fixed charges,
earnings represents income before income taxes and fixed charges. Fixed
charges consist of interest expense, amortization of deferred financing
costs and the estimated component of operating lease expenses representing
interest (assumed to be one-third). Earnings were insufficient to cover
fixed charges by $12.2 million in 1993.
(4) EBITDA represents income before income taxes, interest expense, interest
income, amortization of deferred financing costs, depreciation and
amortization expenses and the charges referred to in notes 1 and 2 above.
EBITDA is presented as additional information relating to the Company's
ability to service its debt but is not presented as being representative
of operating results or cash flows for the period. See "Consolidated
Statements of Cash Flows" for each of the three years in the period ended
December 31, 1993 included elsewhere in this Prospectus.
The ratio of EBITDA to interest expense represents the ratio of EBITDA to
the sum of interest expense plus amortization of deferred financing costs.
The ratio of debt to EBITDA for each period represents the ratio of debt at
the end of such period to EBITDA for such period.
(5) The Supplemental Pro Forma Data represent historical data for 1993 and as
of December 31, 1993, adjusted to give effect to the following events as
though they had occurred at the beginning of the period, in the case of
pro forma Income Statement Data and Operating and Other Data, and as of
December 31, 1993, in the case of pro forma Balance Sheet Data:
(a) the issuance of $150 million principal amount of Notes being
offered hereby at an assumed interest rate of 8.75%;
(b) the borrowing of $125 million under the floating rate term
facility of the Credit Agreement, a portion of which is assumed to be
converted through interest rate swaps into a fixed rate borrowing
resulting in an assumed effective interest rate of 6.6%;
(c) the borrowing of $50 million under the floating rate revolving
credit facility of the Credit Agreement at an assumed interest rate of
5.0%;
(d) the application of the proceeds of the foregoing and $33.4
million of available cash, as described under "Use of Proceeds," to (i)
retire approximately $185.4 million of Institutional Notes, (ii)
repurchase outstanding shares of the Company's Common Stock for an
aggregate purchase price of $150 million and (iii) pay the estimated
fees and expenses related to the foregoing;
(e) with respect to the pro forma Income Statement Data and Operating
and Other Data only, the elimination of the charges referred to in
notes 1 and 2 above; and
(f) with respect to the pro forma Balance Sheet Data only, the
recording of a $13 million (after tax) extraordinary charge which the
Company expects to record against income in 1994 in connection with the
early retirement of the Institutional Notes, in addition to the write-
off of related deferred financing costs.
Additionally, the pro forma dividends paid reflects the annualized fourth
quarter 1993 rate of $.06 per share (as compared to the prior quarterly
rate of $.17 per share) without giving effect to the share repurchase.
The Supplemental Pro Forma Data are based on certain assumptions that may
not prove to be accurate and do not purport to represent what the Company's
results of operations or financial position actually would have been had
the events referred to above in fact occurred for the periods or as of the
dates indicated or to project the Company's results of operations or
financial condition for any future period or date. For each 1/8 of 1%
change in assumed interest rates on the Notes being offered hereby and on
borrowings under the new Credit Agreement, pro forma interest expense would
change by $408,000 and pro forma net income would change by $249,000, for
the year ended December 31, 1993.
(6) For purposes of calculating the supplemental pro forma ratio of earnings
to fixed charges, earnings represents pro forma income before income
taxes, fixed charges and the charges referred to in notes 1 and 2 above.
Fixed charges consist of interest expense, amortization of deferred
financing costs and the estimated component of operating lease expenses
representing interest (assumed to be one-third).
16
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
included elsewhere in this Prospectus.
RECENT DEVELOPMENTS
Weakened market conditions in some of the markets in which the Company
operates, particularly in the aerospace and process industries, have resulted
in recent declines in sales and income.
In November 1993, the Company completed a broad strategic review and
announced a plan intended to enhance shareholder value over the long term.
From an operational point of view, the Company will seek to increase the
profitability of its existing businesses through (i) growth and reinvestment,
particularly in its electro-mechanical, specialty metal and water filtration
operations, (ii) continued emphasis on controlling costs and (iii) an
increased focus on foreign sales, especially in the Pacific Rim and Europe,
through a combination of direct selling efforts and joint ventures. The
Company also intends to pursue strategic acquisitions on a selective basis.
From a financial point of view, the Company's plan, which takes advantage of
the Company's historically strong cash flow, involves repurchasing outstanding
shares of its Common Stock for an aggregate purchase price of up to $150
million and refinancing existing debt with the net proceeds from the sale of
the Notes offered hereby, borrowings under the Credit Agreement and available
cash. The resulting increased leverage will reduce the Company's financial and
operating flexibility. Accordingly, the plan also calls for a reduction in the
quarterly per share dividend rate on the Company's Common Stock from $.17 to
$.06 and a decrease in the Company's leverage over time. See "Risk Factors--
Increased Leverage" and "--Ranking."
In 1993, the Company recorded pre-tax charges of $54.9 million ($33.5
million after tax, or $.77 per share) for costs associated with resizing and
restructuring several of its businesses and other unusual expenses. Of the
$54.9 million total charge, $46.9 million, or $.66 per share, was recorded in
the fourth quarter of 1993. The total charges, on a pre-tax basis, were for
(1) work force reductions, both planned and those which occurred in 1993
(including certain pension related costs) ($21.4 million); (2) asset write-
downs ($15.0 million); (3) the relocation of certain product lines from a
Precision Instruments facility in Sellersville, Pennsylvania and the overall
consolidation of the Company's aerospace operations ($14.2 million); and (4)
other unusual expenses ($4.3 million). The charges for resizing and
restructuring are primarily related to the Company's Sellersville operations
and result from actions taken or planned due to the unwillingness of the union
at such facility to agree on wage and work rule concessions requested by the
Company necessary to make that operation competitive. See "Risk Factors--
Business Restructuring" and "--Labor Relations." Also, the Company has reached
an agreement regarding the prepayment premiums to be paid, subject to an
interest rate adjustment, for early retirement of the Institutional Notes and
will record an extraordinary charge of approximately $13 million (after tax)
in 1994 after completion of the sale of the Notes offered hereby and the
retirement of the Institutional Notes.
17
SEGMENT INFORMATION
The Company classifies its operations into three principal business
segments: Electro-mechanical, Precision Instruments, and Industrial Materials.
The following table sets forth summary sales and income information for the
Company's business segments for the periods indicated:
YEARS ENDED DECEMBER 31,
----------------------------
1991 1992 1993
-------- -------- --------
(DOLLARS IN THOUSANDS)
NET SALES (1):
Electro-mechanical........................... $249,763 $309,556 $280,732
Precision Instruments........................ 309,901 297,025 275,351
Industrial Materials......................... 155,435 162,969 176,112
-------- -------- --------
Total net sales............................ $715,099 $769,550 $732,195
======== ======== ========
INCOME (LOSS):
Electro-mechanical........................... $ 35,363 $ 49,912 $ 35,018
Precision Instruments........................ 32,914 28,045 (30,643)(2)
Industrial Materials......................... 20,332 22,096 18,284 (3)
-------- -------- --------
Total segment operating profit (4)......... 88,609 100,053 22,659
Corporate and other expenses (5)............. (36,231) (33,334) (33,856)
-------- -------- --------
Income (loss) before taxes................. $ 52,378 $ 66,719 $(11,197)
======== ======== ========
- --------
(1) After elimination of intersegment sales, which are not significant in
amount.
(2) Reflects charges of $47.8 million primarily for resizing and restructuring
costs associated with planned work force reductions and those which
occurred in 1993, asset write-downs, relocation of product lines and the
overall consolidation of the Company's Aerospace operations and other
unusual charges.
(3) Reflects charge of $3.9 million primarily for asset write-downs.
(4) 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.
(5) Includes unallocated administrative expenses, interest expense and net
other income and, in 1993, $2.8 million of restructuring and other unusual
charges.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
Results of Operations
Sales for 1993 were $732.2 million, a decrease of $37.4 million or 4.9% from
1992. The sales decrease was attributable to reduced domestic and European
demand for electric motor products and the negative effect of translating
sales of the Company's Italian operations from the weaker Italian lire to U.S.
dollars. Sales by the Precision Instruments group also declined as a result of
continued poor market conditions for aerospace products and process and
analytical instruments. A sales improvement was reported by the Industrial
Materials group due to the strength of demand for liquid filtration products,
specialty metal products and compounded plastics. Sales by all business
segments to foreign markets totalled $202.9 million in 1993 compared to $233.7
million in 1992, a decrease of 13.2%. Export shipments from the United States
in 1993 were $105.7 million, a decrease of 11.4% from 1992, primarily as a
result of weak economic conditions in Europe.
New orders during 1993 were approximately $703.9 million, a decrease of
$31.6 million or 4.3% from 1992. The backlog of orders was $212.6 million at
year-end, an 11.8% decrease from 1992, reflecting the lower level of business
in the Electro-mechanical and Precision Instruments groups.
18
Business segment operating profit before restructuring and other unusual
operating charges was $74.8 million in 1993, compared to $100.1 million in
1992, a decrease of 25.3%. Along with the reduction due to the lower sales
volume, this decline reflects operating inefficiencies (primarily within the
Electro-mechanical and the Precision Instruments groups) and higher expenses
caused by a plant start-up and a plant rearrangement in the Electro-mechanical
group. In 1993, business segment results also reflect charges totalling $52.1
million for resizing and restructuring certain operations and other unusual
expenses. After reflecting these charges, business segment operating profit
for 1993 was $22.7 million.
Corporate expenses (including unallocated administrative expenses, interest
expense and net other income) were $33.9 million in 1993, substantially
unchanged from $33.3 million in 1992.
The effective rate of income tax benefit for 1993 of 34.5% reflects the new
U.S. federal statutory income tax rate of 35% for all of 1993. The overall
effective rate of the tax benefit was reduced somewhat by a tax provision on
foreign pre-tax earnings.
After tax earnings for 1993, before restructuring and other unusual charges,
were $26.2 million or $.60 per share. This compares to net income of $44.4
million or $1.01 per share earned in 1992. After restructuring and other
unusual charges totalling $33.5 million (after tax), the Company reported a
net loss of $7.3 million, or $.17 per share for 1993.
Business Segment Results
The Electro-mechanical group's sales decreased $28.8 million or 9.3% to
$280.7 million primarily because of Italian lire currency translation and
because of reduced customer demand for domestically produced electric motor
products during the year. Before currency translation, the Italian operations
reported 2.6% higher sales over 1992. Operating profit of this group decreased
29.8% to $35.0 million due to lower sales volume, higher costs related to new
product introductions, a plant start-up and a plant rearrangement, less
favorable product mix and negative foreign currency translation effects.
Precision Instruments group sales in 1993 were $275.4 million, a decrease of
$21.7 million or 7.3% from 1992. The sales decline reflects the continuing
weakness in demand for aircraft instruments and engine sensors from commercial
airlines and poor conditions in the aerospace industry and in process control
markets. The sales decline was partially offset by increased sales of truck
instruments, flight reference systems and sales by a new business acquired in
the first quarter of 1993. Operating profit of this group before restructuring
and other unusual charges was $17.1 million in 1993 compared to $28.0 million
in 1992, a $10.9 million or 39.0% decline. This decrease was due to the sales
decline, production inefficiencies and changes in product mix. This group's
profits were further reduced by restructuring and unusual operating charges of
$47.8 million in 1993, of which $39.8 million was recorded in the fourth
quarter, and resizing charges of $8 million which were recorded in the first
nine months of the year. These charges were primarily for work force
reductions planned or which occurred in 1993 (including certain pension
related costs), asset write-downs, product line relocations of certain gauge
manufacturing operations, and consolidation of the Company's aerospace
businesses. Most of these actions were necessary due to the unwillingness of
the union at the Company's Sellersville facility to agree to wage and work
rule concessions requested by the Company necessary to make that operation
competitive. After restructuring and other unusual operating charges, this
group reported an operating loss of $30.6 million for 1993.
Industrial Materials group sales in 1993 were $176.1 million, an increase of
$13.1 million or 8.1% from 1992 largely due to increased sales of liquid
filtration products, compounded plastics and specialty metal products. Group
operating profit before restructuring and other unusual charges was $22.2
million, a slight improvement over operating profit of $22.1 million reported
for 1992. An increase
19
in profits by the Specialty Metal Products division was substantially offset
by lower profits from the other businesses in this group due to operating
inefficiencies and changes in product mix at certain divisions. After fourth
quarter 1993 restructuring and other unusual charges of $3.9 million,
primarily for certain asset write-downs, the group operating profit was $18.3
million for 1993. In February 1994, a warehouse attached to a plant in this
group collapsed under the weight of heavy snow. The Company expects the plant
to return to full operation by mid-March 1994; the damages and related losses
are covered by insurance.
YEAR ENDED DECEMBER 31, 1992 COMPARED TO YEAR ENDED DECEMBER 31, 1991
Results of Operations
For 1992, Ametek achieved record sales of $769.6 million, exceeding sales in
1991 by $54.5 million or 7.6%. The increase occurred primarily in the Electro-
mechanical Group and was the result of increased worldwide demand for electric
motors, the introduction of new products and increased market penetration.
Sales were also enhanced by the acquisition of an electric motor business in
the first quarter of 1992. A sales increase by the Industrial Materials Group
was more than offset by lower sales by the Precision Instruments Group, which
suffered from a sharp decline in demand for aircraft instruments and engine
sensors in the commercial and military markets. Sales by all business segments
to foreign markets totalled $233.7 million in 1992 compared to $211.8 million
in 1991, an increase of 10.3%. Export sales from the United States totalled
$119.3 million in 1992 compared to $111.6 million in 1991, a 6.9% increase.
New orders during 1992 were approximately $735.5 million, an increase of
$26.2 million, or 3.7% over 1991. The backlog of orders was approximately
$240.9 million at year-end, a 12.4% decrease from the end of 1991, reflecting
the lower level of business in the Precision Instruments Group.
Business segment operating profit was $100.1 million in 1992, an increase of
$11.5 million or 12.9% over last year's $88.6 million. The improved operating
results for 1992 came mainly from the overall higher sales volume in the
Electro-mechanical and Industrial Materials Groups and improved performance by
the Company's three Italian motor divisions.
Corporate expenses (including unallocated administrative expenses, interest
expense and net other income) of $33.3 million in 1992 were $2.9 million lower
than last year's $36.2 million, primarily due to lower interest expense
resulting from the reduced level of debt.
The effective tax rate for 1992 was 33.5% compared to 1991's rate of 27.5%.
Both periods benefitted from favorable income tax adjustments. The 1992 rate
reflects a net favorable settlement of certain tax years for United States
operations, while the 1991 rate included the recognition of tax benefits from
combining certain foreign operations.
Net income was $44.4 million or $1.01 per share for 1992, compared to
earnings of $38.0 million or $.87 per share for 1991.
Business Segment Results
Electro-mechanical Group sales in 1992 were $309.6 million, an increase of
$59.8 million or 23.9% from 1991 largely due to improved demand and market
penetration for electric motors aided somewhat by the acquisition of a new
business in the first quarter of 1992. Group operating profit increased 41.1%
to $49.9 million due to the higher sales volume, a more favorable product mix,
and improved operating performance by the Italian motor divisions.
In the Precision Instruments Group, sales were $297.0 million for 1992, a
decrease of $12.9 million or 4.2% from 1991. The sales decline reflects
continuing weak demand for aircraft and aerospace instruments, sensors and
spare parts for commercial airlines and the military, caused by the deepening
20
recession in this market. The overall sales decline was partially offset by
increased sales of truck instruments. The group's operating profit of $28.0
million fell 14.8% from $32.9 million in 1991, largely because of the steep
sales decline in some of the group's more profitable products.
The Industrial Materials Group's 1992 sales increased $7.5 million or 4.8%
to $163.0 million, due to increased sales of water filtration products and
metal powders. Operating profit of the group totalled $22.1 million in 1992,
compared to $20.3 million in 1991, an 8.7% increase, reflecting the increase
in the group's sales volume and lower operating expenses in the Company's
plastics compounding and foam packaging businesses.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Working capital at December 31, 1993 amounted to $134.2 million, a decrease
of $56.0 million from December 31, 1992, caused largely by the provisions for
resizing, restructuring and other unusual items. The ratio of current assets
to current liabilities at December 31, 1993 was 1.80 to 1, compared to 2.38 to
1 at December 31, 1992.
Cash generated by the Company's operating activities totalled $65.3 million
in 1993 compared to $78.6 million in 1992. The decrease reflects the lower
level of earnings, after adding back $50.9 million of restructuring and other
unusual charges not requiring the use of cash in 1993. Cash flows from
operating activities, less cash used for investing and financing activities of
$83.9 million, resulted in a decrease in cash and cash equivalents of $18.7
million since the beginning of 1993. Cash used in 1993 included $38.3 million
for the purchase of property, plant and equipment, $25.1 million for the
payment of dividends, $19.4 million for the repayment of long-term debt, $16.6
million for the purchase of a business and investments and $8.9 million for
the purchase of 683,400 shares of the Company's Common Stock in the second
quarter of 1993. Cash and cash equivalents and short-term marketable
securities totalled $84.7 million at December 31, 1993, a decrease of $31.0
million from December 31, 1992.
Of the $54.9 million of resizing, restructuring and other unusual charges
recorded in 1993, certain items require cash expenditures which are expected
to be funded by normal operations. Approximately $4.0 million was expended in
1993, and the Company anticipates that approximately $25.3 million will be
expended over the next two years. After all the restructuring actions are in
place, the Company expects to realize continuing benefits resulting from
reduced labor costs, improved productivity and other lower operating costs
which, the Company believes, should more than offset these cash expenditures
over time. Certain asset write-downs, provisions for pension curtailments and
other unusual items totaling $25.6 million will not require the use of cash,
or incremental cash, during the next five years.
The proceeds of the Notes offered hereby, together with borrowings under the
Credit Agreement and available cash, will be used (a) to retire (i) $106.8
million aggregate principal amount of the 8.95% Notes, (ii) $75.0 million
aggregate principal amount of the 9.35% Notes and (iii) $3.6 million aggregate
principal amount of the 8.05% Notes, (b) to repurchase outstanding shares of
the Company's Common Stock for an aggregate purchase price of up to $150
million and (c) to pay fees and expenses related to the sale of the Notes
offered hereby and the Credit Agreement. See "Use of Proceeds."
The Company's future interest costs are expected to increase because of the
higher outstanding total debt. The Company's quarterly Common Stock dividend
was recently reduced from $.17 per share to $.06 per share. This reduction,
without giving effect to the intended repurchase of Common Stock, will result
in an annual saving of approximately $19.4 million. This saving should more
than offset the higher interest cost.
The Company believes that the amounts to be available under the new Credit
Agreement and the proceeds of the sale of the Notes offered hereby, together
with cash on hand and cash flows generated
21
from operations, will provide sufficient capital resources to service all debt
obligations, fund the share repurchase program and finance working capital,
the new lower dividend and capital expenditure requirements in the foreseeable
future. See "Selected Financial Data--Supplemental Pro Forma Data" and "Risk
Factors--Increased Leverage."
Capital Expenditures
Capital expenditures (excluding acquisitions) were $38.3 million during
1993. The majority of the expenditures were for additional manufacturing
equipment and an additional production facility in the Electro-mechanical
Group to provide expanded production capacity. The 1993 capital spending level
is approximately 60% higher than 1992. The Company expects to continue its
high level of capital spending in 1994, with special emphasis on the Electro-
mechanical Group. The projected 1994 capital expenditures are approximately
$37 million, of which $10 million has been rescheduled from 1993.
Acquisitions
In 1992, the Company acquired a producer of small electric motors and
injection-molded components, a United Kingdom industrial filtration business,
an instrument manufacturer located in Germany, and two small product lines for
a total of $11.7 million in cash. The motor company acquisition was a factor
in the Company's recent decision to form the Technical Motor Division in the
Electro-mechanical Group. On March 31, 1993, the Company purchased certain
assets of Revere Aerospace Inc. ("Revere"), a United States subsidiary of
Dobson Park Industries PLC, for approximately $7 million in cash. Revere is a
producer of thermocouple and fiber optic cable assemblies. These acquisitions
have complemented the Company's existing businesses and broadened its global
marketing efforts.
ENVIRONMENTAL MATTERS
The Company is subject to environmental laws and regulations, as well as
stringent clean-up requirements, and has also been named a potentially
responsible party at several sites which are the subject of government-
mandated clean-ups. Provisions for environmental clean-up at these sites and
other sites were approximately $4.9 million in 1993 ($1.4 million in 1992).
While it is not possible to accurately quantify the potential financial impact
of actions regarding environmental matters, the Company believes that, based
upon past experience and current evaluations, the outcome of these actions is
not likely to have a material adverse effect on future results of operations
of the Company.
ACCOUNTING STANDARDS RECENTLY ADOPTED
The Company adopted two Financial Accounting Standards Board ("FASB")
Statements in 1991 and 1992. In 1991, the Company adopted the provisions of
Statement No. 106 relating to employers' accounting for employee post-
retirement benefits other than pensions. The Company only provides limited
post-retirement benefits, other than pensions, to certain retirees and a small
number of employees. In 1992, the Company adopted the provisions of Statement
No. 109 relating to accounting for income taxes. Prior to 1992, the Company
followed the provisions of Statement No. 96, Accounting for Income Taxes,
which contained substantially the same requirements as Statement No. 109, but
which was modified for balance sheet classification of deferred taxes, among
other things. The effect of adopting these accounting standards was not
material to the Company's consolidated financial statements.
In November 1992 the FASB issued Statement No. 112 relating to accounting
for post-employment benefits. In March 1993, Statement No. 115 relating to
accounting for marketable securities was issued. The Company has adopted both
of these Statements effective as of January 1, 1994. Adoption of these
accounting standards did not have a material effect on the Company's results
of operations.
22
BUSINESS
Ametek is an international manufacturer of high quality, engineered products
for industrial and commercial markets. The Company has a significant market
share for many of its products and a leading market share in electric motors
for vacuum cleaners and other floor care products, the Company's most
significant business. Many of the Company's products have a technological
component and are engineered to customer specifications. The Company employs
approximately 6,000 individuals and operates 32 manufacturing facilities
located in 12 states, as well as in Italy, Denmark, England and Mexico.
The Company's products are produced and sold worldwide through the Company's
Electro-mechanical, Precision Instruments and Industrial Materials Groups. The
principal products of each of the Groups include:
. Electro-mechanical Group--fractional horsepower electric motors and
blowers for vacuum cleaners and other floor care products, as well as for
furnaces, lawn tools, computer equipment, photocopiers and other
applications.
. Precision Instruments Group--instruments for commercial and military
aircraft and engines, devices for measuring, monitoring and controlling
industrial manufacturing processes, pressure gauges, and instrumentation
for heavy trucks.
. Industrial Materials Group--specialty metal products for electronics,
general industry and consumer goods, water filtration systems,
temperature and corrosion resistant materials, plastic compounds for
automotive and appliance markets and protective foam wrap for furniture
and fruit.
The Company's business has grown over the years through a combination of
acquisitions and internal growth into a diversified manufacturing company
serving a wide range of markets. The Company has concentrated on identifying,
developing and marketing high quality, technology-based products which hold,
or have the potential for gaining, a significant share of one or more niche
markets.
In November 1993, the Company completed a broad strategic review and
announced a plan intended to enhance shareholder value over the long term.
From an operational point of view, the Company will seek to increase the
profitability of its existing businesses through (i) growth and reinvestment,
particularly in its electro-mechanical, specialty metal and water filtration
operations, (ii) continued emphasis on controlling costs and (iii) an
increased focus on foreign sales, especially in the Pacific Rim and Europe,
through a combination of direct selling efforts and joint ventures. The
Company also intends to pursue strategic acquisitions on a selective basis. In
addition, the Company intends to continue its policy of reviewing, from time
to time, possible divestitures of existing businesses.
From a financial point of view, the Company's plan, which takes advantage of
the Company's historically strong cash flow, involves repurchasing outstanding
shares of its Common Stock for an aggregate purchase price of up to $150
million and refinancing existing debt with the proceeds from the sale of the
Notes offered hereby, borrowings under the Credit Agreement and available
cash. The resulting increased leverage will reduce the Company's financial and
operating flexibility. Accordingly, the plan also calls for a reduction in the
quarterly per share dividend rate on the Company's Common Stock from $.17 to
$.06 and a decrease in the Company's leverage over time. See "Risk Factors--
Increased Leverage" and "--Ranking."
The Company also recorded certain after tax charges against earnings of
$28.6 million during the fourth quarter of 1993, resulting in aggregate
charges of $33.5 million for the year. A substantial portion of these charges
relates to the restructuring of several businesses and reflects asset write-
downs and other unusual charges against income. The restructuring charges
primarily result from actions taken or planned due to the unwillingness of the
union at a Precision Instruments facility in Sellersville,
23
Pennsylvania to agree on wage and work rule concessions requested by the
Company necessary to make such operation competitive. These actions include
relocating, outsourcing and downsizing various manufacturing functions at this
facility. See "Risk Factors--Business Restructuring" and "--Labor Relations"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations." The Company will also record an extraordinary charge of
approximately $13 million (after tax) in 1994 for the early retirement of the
Institutional Notes after completion of the sale of the Notes offered hereby
and the application of the proceeds thereof.
The Company classifies its operations into three principal business
segments: Electro-mechanical, Precision Instruments, and Industrial Materials.
The following table sets forth summary sales and income information for the
Company's business segments for the periods indicated:
YEARS ENDED DECEMBER 31,
----------------------------
1991 1992 1993
-------- -------- --------
(DOLLARS IN THOUSANDS)
NET SALES (1):
Electro-mechanical........................... $249,763 $309,556 $280,732
Precision Instruments........................ 309,901 297,025 275,351
Industrial Materials......................... 155,435 162,969 176,112
-------- -------- --------
Total net sales.............................. $715,099 $769,550 $732,195
======== ======== ========
INCOME (LOSS):
Electro-mechanical........................... $ 35,363 $ 49,912 $ 35,018
Precision Instruments........................ 32,914 28,045 (30,643)(2)
Industrial Materials......................... 20,332 22,096 18,284 (3)
-------- -------- --------
Total segment operating profit (4)........... 88,609 100,053 22,659
Corporate and other expenses (5)............. (36,231) (33,334) (33,856)
-------- -------- --------
Income (loss) before taxes................... $ 52,378 $ 66,719 $(11,197)
======== ======== ========
- --------
(1) After elimination of intersegment sales, which are not significant in
amount.
(2) Reflects charges of $47.8 million primarily for resizing and restructuring
costs associated with planned work force reductions and those which
occurred in 1993, asset write-downs, relocation of product lines and the
overall consolidation of the company's aerospace operation and other
unusual charges.
(3) Reflects charge of $3.9 million primarily for asset write-downs.
(4) 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.
(5) Includes unallocated administrative expenses, interest expense and net
other income and, in 1993, $2.8 million of restructuring and other unusual
charges.
ELECTRO-MECHANICAL GROUP
Ametek's Electro-mechanical Group ("EMG") is the world's leading supplier of
fractional horsepower electric motors and blowers for vacuum cleaners and
other floor care products. EMG also manufactures electric motors and blowers
for furnaces, lawn tools, photocopiers, computer equipment and other
applications. EMG accounted for $280.7 million of the Company's net sales and
$35.0 million of the Company's segment operating profit for 1993.
Through its six plants in the United States, three in Italy and one in
Mexico, EMG produced approximately 20 million motors in 1992 and approximately
18 million motors in 1993. Each of these facilities is equipped with efficient
state-of-the-art production lines designed to maximize manufacturing
flexibility. Because of its high production volume, flexible manufacturing
capability and technological know-how, EMG offers its customers cost
competitive and custom designed products on a timely basis.
24
Floor Care Products
EMG participates in the production of motors and blowers for the full range
of floor care products from the hand held, canister, upright and central
vacuums for household use to the more sophisticated vacuum products for
commercial and industrial applications.
EMG's sales have expanded in recent years due to strong sales by vacuum
cleaner manufacturers resulting primarily from the proliferation of
specialized vacuum products, although sales for 1993 declined because of
reduced domestic and European demand for electric motor products and the
negative effect of foreign currency translation. New product development and
short production lead times are critical to vacuum cleaner manufacturers who
face shifting consumer preferences and intense retail competition. Many of
EMG's long-standing customer relationships have resulted from EMG's ability to
address these concerns. With EMG's flexible manufacturing capacity and
established technical expertise, it is able to produce a wide variety of high
quality motor products in a short time frame. EMG's involvement with key
customers begins in the early stages of their product's design. This allows
EMG's technically sophisticated and highly trained sales force to work with
its customers in developing product specifications for customized applications
in the floor care market.
In recent years, EMG has also expanded its sales in the floor care industry
by marketing its motors to vertically integrated vacuum cleaner manufacturers
who elect to curtail or discontinue their own motor production and instead use
EMG's motors. By using EMG's motors, vacuum cleaner manufacturers are able to
reduce the substantial capital expenditures they would otherwise have to make
to maintain their own motor production, with frequent design changes, at
acceptable levels.
EMG's floor care product development activities have recently focused on
improving motor-blower cost-performance through advances in power, efficiency
and quieter operation. EMG has recently developed a 1200 watt brushless motor
blower for high-end floor care applications in commercial vacuum cleaners and
central vacuum systems, as well as a new low cost motor designed for export
markets with price-sensitive, high volume vacuum applications.
EMG currently maintains a significant position in the European market for
floor care products based on exports from the United States and production
from its Italian operations. Two of EMG's plants in Italy are dedicated to
producing electric motors for vacuum cleaner manufacturers throughout Western
Europe and, to a more limited extent, Eastern Europe. These motors are similar
to those produced in the United States.
EMG believes that its technological and manufacturing know-how, its
expertise in product development and its specialized and flexible production
capacity provide it with a competitive advantage in the low cost design and
manufacture of motors for vacuum cleaners and other air moving devices.
EMG's business development will seek to capitalize on this competitive
advantage through three strategies. First, the Company will continue to
participate in the overall growth of the floor care market by responding to
the demands created by product proliferation and differentiation. Second, EMG
intends to pursue opportunities to increase its sales to additional vertically
integrated manufacturers, domestic or foreign, who continue to manufacture
some or all of their own motors. EMG believes that it can offer cost and
production advantages to these potential customers similar to those it has
provided its existing customers. Third, EMG intends to expand its foreign
sales volume through direct exports from the United States and joint ventures
with local parties, with particular emphasis on the Pacific Rim and Eastern
Europe. EMG is currently pursuing joint venture opportunities in each of these
regions. In addition, EMG is utilizing its operating base in Italy to pursue
additional market opportunities in Eastern Europe and Russia.
25
Consistent with its strategy for long term growth, EMG is in the process of
increasing its unit production capacity for floor care products by
approximately 50%, primarily to meet anticipated growth in customer demand for
smaller size motors over the next several years. This is being accomplished
primarily by adding new production lines at the existing Graham, North
Carolina facility.
Technical Motor Products
In order to make greater use of its technological expertise developed in the
floor care products area, EMG recently formed its Technical Motor Division to
consolidate and expand its production of motors and blowers used in certain
non-floor care applications, particularly in the market for brushless motor
technology where EMG is seeking to establish a significant position.
EMG's technical motor products include motors for furnaces, lawn tools,
photocopiers, computer equipment, other business machines, medical equipment
and evaporative cooling equipment. Its brushless motors, which are free of
static charges, are becoming increasingly popular in medical and other
applications where flammability is a concern. Recent product developments in
this area include the use of EMG's brushless motors in systems designed to
assist patients with sleep-breathing disorders, systems which help bedridden
patients avoid bedsores and systems to recover gasoline fumes at automotive
refueling stations.
In addition, EMG will begin producing induction motors, which were
previously purchased by EMG, for use in conjunction with its blower products.
The ability to produce its own induction motors offers EMG new opportunities
in the high efficiency furnace, water heating and induction motor pump
markets.
EMG's strategy in its technical motor products is to build a strong position
in the global market, especially in Europe where its heating industry customer
base is expanding. In 1993, EMG dedicated one of its Italian plants to the
manufacture of technical motor products. Through the Company's Singapore sales
subsidiary and its Shanghai office, EMG is seeking to build a presence in the
Pacific Rim.
Consistent with its strategy for long term growth, EMG has recently
increased its unit production capacity for technical motor products by
approximately 25% to meet anticipated growth in customer demand for the next
several years by commencing production at its new Rock Creek, North Carolina
plant.
Customers
Although EMG is not dependent on any single customer such that its loss
would have a material adverse effect on its operations, approximately 26.4% of
EMG's sales for 1993 were made to its five largest customers.
PRECISION INSTRUMENTS GROUP
The Precision Instruments Group ("PI") serves a diverse group of markets,
the largest of which are the aerospace, pressure gauge, process and refining
and heavy-duty truck markets. In many cases, PI has the number one or two
position in the niche markets it serves. PI produces cockpit instruments,
process monitoring and display systems, process control gas and liquid
analyzers, moisture and emissions monitoring systems, force and speed
measuring instruments, air and noise monitors, pressure and temperature
calibrators, pressure gauges and automotive products. PI accounted for $275.4
million of the Company's net sales and reported a $30.6 million operating loss
for 1993, which included charges of $47.8 million for resizing, restructuring
and other unusual items.
26
Aerospace Products
PI designs and manufactures cockpit instruments/displays, engine sensors and
monitoring systems, fuel/liquid quantity measurement devices and
electrical/thermocouple cables for aircraft and aircraft engines. These
products record, process and display information for use by flight and ground
crews. PI serves all segments of the commercial aerospace industry, including
business and commuter aircraft and the commercial airlines, as well as the
defense industry. PI's products are also marketed as spares. PI's products are
designed to customer specifications and must be certified as meeting stringent
operational and reliability requirements.
PI's strategy in aerospace products is to operate in niche categories where
it has a technological or cost advantage. PI believes that its extensive
experience and technological expertise in the aerospace field, together with
its long-standing relationships with several leading international
manufacturers of commercial aircraft, provide it with a competitive advantage.
PI was recently selected by Boeing to supply an engine vibration monitoring
system for Boeing's new 777 model. Variations of this product will be marketed
to other aircraft manufacturers. In addition, PI's strategic effort to expand
its product line has recently yielded new orders for an advanced aircraft
engine sensor, an advanced cockpit display system featuring active matrix
liquid crystal display and a business jet fuel quantity system. In early 1993,
PI acquired certain assets of Revere Aerospace Inc., which added a high-
performance electrical and optical interconnecting cable business as a
complement to its existing product lines.
As a result of the overall weakness in the aerospace industry, PI sales to
the military and commercial OEM aircraft markets declined significantly in
1992 and 1993. In addition, PI's sales of aerospace products for use as spares
were reduced significantly as airlines lowered spare parts inventories and
utilized excess equipment from surplus aircraft. In response to these
conditions, PI embarked on an aggressive program to reduce costs through
significant consolidation and downsizing. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Recent
Developments." PI also recently restructured and consolidated its management
team for all aerospace activities. These actions are designed to enhance PI's
long term operating efficiency and profit potential. It is PI's intention to
continue to manage its cost structure aggressively and to selectively expand
and develop its product lines, with a particular emphasis on the development
of advanced technology instruments.
PI also intends to expand its marketing presence and distribution channels
for the aerospace and industrial process control markets in Europe and the
Pacific Rim in 1994.
Industrial Process Control and Pressure Gauge Products
PI serves the process industry by designing and manufacturing process
control products, including gas and liquid analyzers, emission monitors,
process annunciators and control room graphic displays. PI serves numerous
segments of the process industry, including refining and petrochemical
processing and power and steel plants. PI also produces a wide variety of
pressure gauge products for numerous industrial and commercial uses. PI has a
leading position in many of the niche areas where it competes in the domestic
process control market and in the North American pressure gauge market.
In recent years, domestic market conditions have been, and continue to be,
soft due primarily to adverse conditions in the refining and petrochemical
industry. These conditions have been affected by environmental regulations
which have severely reduced new refinery and petrochemical plant construction
and refinery and petrochemical operating rates in the United States.
PI's business strategy is to concentrate on new markets where it has a
technological or cost advantage. PI develops or customizes products around
core technologies to meet customer
27
requirements. For example, PI's oxygen and combustion analyzers have a leading
market position and are designed to meet customer specific applications. PI
has also recently succeeded in marketing one of its aerospace based products,
thermocouples, for use with land gas turbines.
Pressure gauges are produced by PI's U.S. Gauge Division, a leader in the
North American pressure gauge market. Pressure gauges are used in a wide
variety of industrial and manufacturing processes. The general pressure gauge
market has been adversely affected by poor domestic economic conditions and
competition from low cost offshore producers. PI has responded to these market
conditions by reducing costs and refocusing its domestic manufacturing to
concentrate on higher priced pressure gauge applications. In addition, through
a distributorship relationship with a Taiwanese company, PI is currently
distributing in the United States low cost pressure gauges manufactured in the
People's Republic of China, a product segment in which PI is not currently
competitive.
Automotive Products
PI is the leading domestic producer and supplier of electronic instrument
panels and instruments to the heavy truck market and is currently expanding
into the agricultural and construction vehicle markets. In recent years, the
heavy truck market has been strong. Domestic truck manufacturers have faced a
growing demand for more fuel efficient trucks that satisfy applicable air
pollution guidelines. PI has participated in this market by working closely
with several manufacturers to develop solid state instruments to monitor
engine efficiency and emissions. PI's strategy with this product line is to
expand into international markets with products similar to those currently
produced for United States manufacturers.
Customers
Although the Precision Instruments Group is not dependent on any single
customer such that its loss would have a material adverse effect on its
operations, approximately 28.9% of its 1993 sales were made to its five
largest customers.
INDUSTRIAL MATERIALS GROUP
The Industrial Materials Group ("IMG") manufactures the following principal
products: water filtration products, high-purity engineered metals, high-
temperature fabrics, compounded plastics and plastic packaging materials. Each
of IMG's five businesses is technology-based, stressing mechanical,
metallurgical or plastic processing skills. IMG accounted for $176.1 million
of the Company's net sales and $18.3 million of the Company's segment
operating profit for 1993. IMG consists of five divisions: Plymouth Products,
Specialty Metal Products, Haveg, Microfoam and Westchester Plastics.
IMG's strategic focus is to target niche markets by differentiating its
products on the basis of quality, price and/or services and to pursue new
product development by exploiting proprietary technologies and specialized
manufacturing processes.
The Plymouth Products Division and a United Kingdom subsidiary produce water
filtration products for residential, commercial and industrial uses in the
United States and 80 other countries. Plymouth Products sells its products in
both the retail and wholesale markets. With its acquisition in late 1992 of
the Kleen Plus (R) retail water filter line, Plymouth Products believes it now
has the broadest cartridge filtration product line in the world, offering
complete water filtration systems, 25 special-purpose filter housings and 60
different replacement cartridges. Plymouth's filter cartridges and housings
are used in such diverse applications as water filtration and food and
beverage, cosmetics
28
and chemical production. Plymouth's point-of-use drinking water filters are
used for the removal of objectionable taste and odor, hazardous chemicals and
heavy metals. In addition, Plymouth Products produces a faucet-mounted filter,
as well as filters, housings and cartridges for use by plumbing professionals
for residential and commercial customers. Because of the widespread concern
with the quality of municipal water supplies, Plymouth Products believes it
has important growth opportunities in the commercial and industrial markets
for water filtration products. The Company has identified the water filtration
market as a key opportunity for expansion and, accordingly, has commenced a $4
million plant expansion. This capacity increase is the fifth such expansion in
the last 13 years.
The Specialty Metal Products Division uses its powder metallurgy to produce
strip and wire and uses its cladding technologies to make a variety of
products with multiple metallurgical properties. Specialty Metal Products
sells its products for use in the manufacture of appliances, electronic
connectors, rechargeable batteries and TV cathode ray tubes. Its clad metals
are used in gourmet cookware and chemical and pressure vessels, and its metal
matrix composites are used for thermal management in high power electronic
circuits.
The Haveg Division manufactures products for high temperature applications
and highly corrosive environments. Haveg's products are made of silicas,
phenolic resins and Teflon (R) (a registered trademark of the DuPont Company).
Haveg's silica yarn, which maintains strength and flexibility at high
temperatures, is used for protective welding curtains, as a textile
replacement for asbestos and as a laminate for printed circuit boards. Two
other Haveg products are Flexsil (R), made from Haveg's woven Siltemp (R)
fabric and used in foundries to filter molten metal as it is poured into
casting molds, and Teflon (R) heat exchangers, used in a number of different
industrial applications because of its chemically inert construction and high
purity. Additionally, Haveg produces storage tanks and pipes, made of phenolic
resins, which are able to withstand highly corrosive environments.
The Microfoam Division is the world's only producer of a very low density
polypropylene foam used primarily for packaging items, such as furniture and
agricultural products, that require cushioning, surface protection and
insulation. CouchPouch (TM), one of Microfoam's products made from the
division's MicroTuff (TM) composite material is stitched into various size
bags large enough to protect furniture. Because they are made of pure
polypropylene, the products are suitable for reuse and recycling.
The Westchester Plastics Division is engaged in the toll processing and
formulation of plastics compounds, including developing processing techniques
that enhance such properties as fire retardance and adhesion. In addition,
Westchester Plastics has state-of-the-art twin-screw extruder lines used to
produce custom thermoplastics for a variety of industries.
Customers
Although IMG is not dependent on any single customer such that its loss
would have a material adverse effect on its operations, approximately 13.1% of
IMG's sales for 1993 were made to its five largest customers.
FOREIGN OPERATIONS
In response to increasing globalization of the world economy and perceived
opportunities for growth, the Company has expanded over the past several years
its foreign sales and operations. International sales, as a percentage of
total consolidated sales, amounted to 27.7% in 1993. This expansion has
resulted from a combination of increasing export sales of products
manufactured in the United States and overseas acquisitions and strategic
alliances.
29
Ametek's strategy for growth in global markets is driven by requirements for
global cost-competitiveness and especially by economic growth in the Pacific
Rim. Ametek Singapore Private, Ltd. was established as a regional headquarters
to enable the Company to locate more favorable supply arrangements and to
expand its product sales throughout the Pacific Rim.
International operations of the Company are subject to certain risks which
are 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. See
"Risk Factors--Risks Associated with International Operations."
The following table sets forth summary sales information by geographic area
for the periods indicated:
YEARS ENDED DECEMBER 31,
----------------------------------------
1991 1992 1993
------------ ------------ ------------
$ % $ % $ %
-------- --- -------- --- -------- ---
(DOLLARS IN THOUSANDS)
SALES
Europe.................. $157,990 22% $178,243 23% $147,209 20%
Other foreign........... 53,854 8 55,496 7 55,730 8
-------- --- -------- --- -------- ---
Total international (1). 211,844 30 233,739 30 202,939 28
Domestic................ 503,255 70 535,811 70 529,256 72
-------- --- -------- --- -------- ---
Total Consolidated...... $715,099 100% $769,550 100% $732,195 100%
======== === ======== === ======== ===
- -------
(1) Total international consists of:
Foreign operations..... $100,209 14% $114,436 15% $ 97,260 13%
Exports................ 111,635 16 119,303 15 105,679 15
-------- --- -------- --- -------- ---
Total international.... $211,844 30% $233,739 30% $202,939 28%
======== === ======== === ======== ===
MARKETING
Generally, the Company's marketing efforts are organized and carried out at
the divisional level. However, a few functions are centralized at the
corporate level for reasons of cost and efficiency.
Given the basic similarity of its various products, its significant market
share worldwide and the technical nature of its products, EMG conducts most of
its domestic and international marketing activities through its highly trained
and technically sophisticated direct sales force. EMG makes limited use of
sales agents in those foreign countries where its sales activity is relatively
low.
Because of their relatively diverse product lines, both PI and IMG make
significant use of distributors and sales agents in the marketing efforts of
most of their divisions. With its specialized customer base of aircraft
manufacturers and airlines, PI's aerospace division relies primarily on its
direct selling efforts.
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.
The primary competition in the United States in the floor care market is
from a few competitors, each of which has a smaller market share but is part
of a company which is larger and has greater
30
resources than Ametek. Additional competition could come from vertically
integrated manufacturers of floor care products which produce their own motors
and blowers. In Europe, competition is from a small group of very large
competitors and numerous small competitors.
In the markets served by the Precision Instruments Group, the Company
believes that it is one of the world's largest pressure gauge manufacturers
and a leading producer of annunciator systems. The Company also ranks among
the top ten producers of certain measuring and control instruments in the
United States. It is one of the leading instrument and sensor suppliers, with
a broad product offering in both the military and commercial aviation
industries. As a result of the continuing decline in demand for aircraft
instruments and engine sensors due to the consolidation and deregulation of
the airline industry and reduced military spending, competition is strong and
is expected to intensify with respect to certain of the products in the
aerospace markets. In the pressure gauge and automotive markets served by PI,
there are a limited number of companies competing on price and technology.
With respect to process measurement and control niche markets, there are
numerous competitors in each niche competing, for the most part, on the basis
of product quality and innovation.
Many of the products sold by the Industrial Materials Group are made by few
competitors and competition is mainly from producers of substitute materials.
The Company's Westchester Plastics division is one of the nation's largest
independent plastics compounders. In this market, the Company's competition is
from other independent toll compounders and those customers which have similar
compounding capabilities. Plymouth Products is one of the major suppliers of
household water filtration systems, a market in which it has numerous
competitors. In the industrial and commercial filtration markets which
Plymouth Products serves, it does not have a major market share and faces
competition from numerous sources.
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,
--------------------
1991 1992 1993
------ ------ ------
(DOLLARS IN MILLIONS)
Electro-mechanical................................ $ 79.8 $ 80.8 $ 66.0
Precision Instruments............................. 170.8 137.3 121.8
Industrial Materials.............................. 24.4 22.8 24.8
------ ------ ------
Total......................................... $275.0 $240.9 $212.6
====== ====== ======
Of the total backlog of unfilled orders at December 31, 1993, approximately
88% is expected to be shipped by December 31, 1994.
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.
RESEARCH AND DEVELOPMENT
Notwithstanding the recent economic recession, the Company continues to be
committed to appropriate research and development activities designed to
identify and develop potential new and improved products. Company-funded
research and development costs were $15.1 million for 1993. Research
activities are conducted by the various businesses of the Company in the areas
in which they operate.
31
ENVIRONMENTAL COMPLIANCE
The Company is subject to environmental laws and regulations. The Company
has been named as a potentially responsible party at several sites which are
the subject of government-mandated clean-ups. Provisions for environmental
clean-up at these sites and other sites were approximately $1.4 million in
1992 and approximately $4.9 million in 1993. Additional charges for these
purposes may be required in the future. It is not possible to accurately
quantify the potential financial impact of future environmental matters, laws
and regulations and there can be no assurance that such matters will not have
a material adverse effect on the Company. However, based upon past experience
and current evaluations, the Company believes that the costs of environmental
compliance are not likely to have a material adverse effect on results of
operations of the Company. See "Risk Factors--Environmental Matters" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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 does not
consider any single patent or trademark, or any group thereof, essential 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, 1993, the Company employed approximately 6,000 individuals,
of whom approximately 2,400 are covered by collective bargaining agreements.
Ametek believes its relations with employees and their unions are generally
good. Recently, Ametek requested the union at its U.S. Gauge operation in
Sellersville, Pennsylvania to reopen existing labor agreements for the purpose
of considering wage concessions and work rule changes. The union has not been
willing to accept these changes. Accordingly, the Company has announced its
intention to move certain of its operations at Sellersville to another
location. See "Risk Factors--Business Restructuring" and "--Labor Relations."
PROPERTIES
The Company has 32 plant facilities in 12 states and five foreign countries.
Of these facilities, 26 are owned by the Company and six are leased. The
properties owned by the Company consist of approximately 441 acres in total,
of which approximately 3,447,000 square feet are under roof. Under lease is a
total of approximately 413,000 square feet. The leases expire over a range of
years from 1994 to 1999 with renewal options for varying terms contained in
most of the leases. The Company also has an idle facility and certain parcels
of land available for sale. The Company's executive offices in Paoli,
Pennsylvania occupy approximately 32,000 square feet under a lease which will
expire in 1997. Additional offices of the Company in New York City occupy
approximately 4,000 square feet under a lease which will expire in 1996.
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 FACILITIES SQUARE FEET UNDER ROOF
---------------------- ------------------------
OWNED LEASED OWNED LEASED
---------- ---------- ------------ -----------
Electro-mechanical....... 9 1 1,143,000 66,000
Precision Instruments.... 8 5 856,000 347,000
Industrial Materials..... 9 - 1,448,000 --
---------- ---------- ------------ ----------
Total................ 26 6 3,447,000 413,000
========== ========== ============ ==========
32
THE CREDIT AGREEMENT
On November 17, 1993, the Company received a commitment letter (the
"Commitment") from The Chase Manhattan Bank, N.A. ("Chase") to provide the
Company with senior bank financing sufficient to finance, together with
available cash, the Company's repayment of the Institutional Notes and
repurchases of Common Stock and to provide working capital for general
corporate purposes. Subject to the completion of the sale of the Notes offered
hereby, the Commitment is expected to be replaced by a definitive $250 million
Credit Agreement having the terms summarized below. The Commitment is subject
to certain conditions set forth in such letter including, among other things,
the negotiation, execution and delivery of satisfactory definitive
documentation with respect to the Credit Agreement. Because the terms,
conditions and covenants of the Credit Agreement are subject to the
negotiation, execution and delivery of definitive documentation, certain of
the actual terms, conditions and covenants thereof may be more or less
restrictive or otherwise differ from those described below. Chase has reserved
the right to syndicate all or a part of its Commitment to one or more other
lenders (together with Chase, the "Banks"). Chase has agreed to act as the
lead agent for the Banks under the Credit Agreement (in such capacity, the
"Agent").
The Credit Agreement will provide for up to $125 million of availability
under a Term Loan Facility (the "Term Loan Facility") and up to $125 million
of availability under a Revolving Credit Facility (the "Revolving Credit
Facility"). Although the final terms of the Credit Agreement are still under
negotiation, set forth below is a summary of the material terms of the
proposed Credit Agreement based on the terms of the Commitment and the present
status of such negotiations, which summary is subject to and qualified by
reference to all of the provisions of the Commitment. It is contemplated that
on the effective date of the Registration Statement of which this Prospectus
forms a part, the Company will enter into the definitive Credit Agreement with
Chase, for itself and as Agent for the Banks.
Borrowings under the Revolving Credit Facility will not exceed a borrowing
base equal to 85% of Eligible Receivables and 50% of FIFO-calculated Eligible
Inventory, as such terms are to be defined in the Credit Agreement. Up to $30
million of the Revolving Credit Facility will be available for the issuance of
Letters of Credit to support obligations of the Company. Each of the Company's
domestic subsidiaries will guarantee the obligations under the Credit
Agreement.
The loans under the Term Loan Facility (the "Term Loans") may be incurred in
not more than three drawings on the date of the initial borrowing under the
Credit Agreement (the "Closing Date") and within 90 days thereafter. The Term
Loans will mature seven years from the Closing Date and be subject to equal
semi-annual amortization payments, commencing six months after the Closing
Date. Amounts repaid on the Term Loans may not be reborrowed.
The loans under the Revolving Credit Facility (the "Revolving Loans") may be
borrowed, repaid and reborrowed at any time during the period of five years
from the Closing Date (the "Revolving Credit Final Maturity"), subject to
satisfaction of certain conditions on the date of any such borrowing, and must
be repaid in full at, and all Letters of Credit will be terminated prior to,
the Revolving Credit Final Maturity.
The Term Loans and the Revolving Loans will bear interest either (i) at the
Base Rate, as defined below, plus the applicable Interest Margin, as defined
below, payable quarterly in arrears (the "Base Rate Option") or (ii) subject
to certain limitations, at an annual rate equal to the London Interbank
Offered Rate ("LIBOR") as determined by the Agent for the corresponding
deposits of United States Dollars plus the applicable Interest Margin, payable
at the end of each Interest Period, as defined below, or quarterly, whichever
is earlier (the "LIBOR Option"). In either case, interest will be calculated
on the basis of the actual number of days elapsed in a year of 360 days.
Interest under the LIBOR Option will be determined for periods ("Interest
Periods") of one, two, three or six months, as selected by the Company. The
Base Rate is defined as the higher of the Federal Funds Effective Rate, as
33
published by the Federal Reserve Bank of New York, plus 1/2 of 1%, or the
prime commercial lending rate of Chase, as announced from time to time. The
applicable Interest Margin will be as follows: 1% for a Term Loan at the Base
Rate Option and 2% for a Term Loan at the LIBOR Option; and .75% for Revolving
Loans at the Base Rate Option and 1.75% for Revolving Loans at the LIBOR
Option. Interest Margins will be subject to adjustment after the first
anniversary of the Closing Date resulting in possible reductions of up to 1%
and increases of up to .25% based on specified changes in the credit ratings
assigned to the Company's senior long term unsecured debt by Standard & Poor's
and Moody's Investors Service, Inc.
The Credit Agreement will provide for the payment of commitment fees of 3/8
of 1% per annum on the unused amounts of the Term Loan Facility in the 90 day
period following the Closing Date and on the unused amounts of the Revolving
Credit Facility payable quarterly in arrears (calculated on the basis of
actual days elapsed in a year of 360 days), and Letter of Credit fees equal to
the per annum rate of the then applicable Interest Margin for LIBOR Option
Revolving Loans on aggregate outstanding stated amounts thereof, plus a fee
for the bank issuing the Letter of Credit, plus customary issuance and drawing
charges.
Borrowings under the Credit Agreement will be mandatorily prepayable in an
amount equal to (a) 75% of the net cash proceeds received from the sale or
other disposition of all or, subject to certain permitted exceptions to be set
forth in the Credit Agreement, any part of the assets of the Company or any
subsidiary of the Company, (b) 50% of the net cash proceeds received from the
issuance of equity securities (subject to certain exceptions) and 75% of the
net cash proceeds from the issuance of certain debt securities, (c) 75% of net
property insurance proceeds and of net proceeds of pension plan reversions (to
the extent not reinvested as permitted by the Credit Agreement) and (d) for
each fiscal year of the Company, an amount equal to 75% of Excess Cash Flow
(as defined in the Credit Agreement). Such mandatory prepayments will, subject
to certain permitted exceptions, be applied as follows: (i) first, to repay
outstanding Term Loans, pro rata among the remaining installments thereof and
(ii) second, to reduce permanently the Banks' commitments under the Revolving
Credit Facility (provided that a prepayment of Revolving Loans pursuant to
this clause (ii) as a result of Excess Cash Flow will not reduce commitments
under the Revolving Credit Facility and provided further that in no event
shall any mandatory prepayments reduce the Banks' commitment under the
Revolving Credit Facility to less than $100 million) and/or cash
collateralized Letters of Credit. The balance of such proceeds and Excess Cash
Flow not so required to be applied will be available to the Company for
general corporate purposes. In addition, outstanding loans and Letters of
Credit under the Credit Agreement will be required to be prepaid (and/or cash
collateralized in the case of Letters of Credit) under certain other
circumstances set forth in the Credit Agreement.
Borrowings under the Credit Agreement may be voluntarily prepaid, in whole
or in part, with prior notice but without premium or penalty, subject to
limitations as to the minimum amounts of prepayments, except that prepayments
of LIBOR Option loans will only be permitted on the last day of an Interest
Period applicable thereto. All voluntary prepayments of Term Loans shall apply
pro rata among the remaining principal installments thereof.
Borrowings under the Credit Agreement will be secured by (i) pledges of all
capital stock of, and intercompany notes issued by, the Company's subsidiaries
and (ii) perfected first priority security interests in all other assets
(including capital stock) owned by the Company and the subsidiaries that are
guarantors under the Credit Agreement subject to certain de minimis and other
exceptions, to be set forth in the Credit Agreement. If the Company obtains
credit ratings for its senior long-term unsecured debt assigned by Standard &
Poor's of BBB+ or above and by Moody's Investors Service, Inc. of Baa1 or
above (a "Prime Rating"), all of the foregoing security will be released,
although a covenant restricting liens, among others, will be retained, subject
to an exception for liens on certain foreign assets.
34
The Credit Agreement will contain affirmative and negative covenants
customary for transactions of this nature, including, but not limited to: (i)
limitations on capital distributions, including dividends, distributions and
advances; (ii) limitations on transactions with affiliates; (iii) limitations
on the sale or purchase of assets (subject to certain permitted exceptions)
and fundamental changes in its business; (iv) restrictions on mergers,
acquisitions, investments and other related transactions (subject to certain
permitted exceptions); (v) restrictions on capital expenditures, with certain
exceptions; (vi) incurrence of indebtedness (including contingent
obligations); (vii) restrictions on liens; and (viii) requirements for
obtaining interest rate protection in certain amounts. Upon reaching a "Prime
Rating," various of the foregoing restrictions will be eliminated. The Credit
Agreement will also require the Company to maintain financial covenants
relating to leverage, fixed charge coverage and interest coverage.
Events of Default under the Credit Agreement will include, without
limitation: (i) payment defaults; (ii) misrepresentations; (iii) covenant
defaults; (iv) bankruptcy; (v) ERISA defaults; (vi) certain judgments; (vii) a
Change of Control (as defined in the Credit Agreement); and (viii) material
cross defaults, subject, in certain cases, to notice and grace period
provisions. An Event of Default may result in the immediate termination of all
commitments under the Credit Agreement, the acceleration of the principal of
and any accrued interest on all loans and notes and obligations under the
Credit Agreement, the termination of all Letters of Credit and the
reimbursement by the Company with respect to all outstanding Letters of
Credit. For purposes of the Credit Agreement, a "Change of Control" shall be
defined as meaning (a) the occurrence of any "change of control" or similar
event under the Notes offered hereby or any other agreements governing or
evidencing debt of the Company or any of its subsidiaries or (b) any Person or
group (as such term is defined in Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended) acquiring, directly or indirectly,
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
said Act) of 35% or more of the outstanding voting stock of the Company.
The obligation to fund the Credit Agreement is subject to certain
conditions, including, without limitation, the execution and delivery of
satisfactory definitive documentation, the absence of any material adverse
change in the financial markets generally or in the business, property,
assets, liabilities or condition (financial or otherwise) of the Company or of
the Company and its subsidiaries taken as a whole, the absence of competing
transactions sponsored by, or on behalf of, the Company or any of its
subsidiaries in the loan syndication market and certain other matters.
35
MANAGEMENT
The following table sets forth certain information regarding the Directors
and executive officers of the Company:
NAME AGE POSITIONS AND OFFICES WITH THE COMPANY
---- --- --------------------------------------
Walter E. Blankley........ 58 Chairman of the Board and Chief Executive Officer
Roger K. Derr............. 62 Executive Vice President--Chief Operating Officer
Allan Kornfeld............ 56 Executive Vice President--Chief Financial Officer
Murray A. Luftglass....... 62 Senior Vice President--Corporate Development
Peter A. Guercio.......... 65 Group Vice President
Frank S. Hermance......... 45 Group Vice President
George E. Marsinek........ 56 Group Vice President
John J. Molinelli......... 47 Vice President and Comptroller
Deirdre D. Saunders....... 46 Treasurer and Assistant Secretary
Robert W. Yannarell....... 60 Secretary
Lewis G. Cole............. 63 Director
Helmut N. Friedlaender.... 80 Director
Sheldon S. Gordon......... 58 Director
Charles D. Klein.......... 55 Director
David P. Steinmann........ 52 Director
Elizabeth R. Varet........ 50 Director
WALTER E. BLANKLEY has been Chairman of the Board since April 1993. He was
elected a Director and the President and Chief Executive Officer of the
Company in April 1990. Mr. Blankley had served as a Senior Vice President
since 1982. He was elected a Vice President of Ametek in 1971. Mr. Blankley
was appointed General Manager of the Company's precision spring business in
1966, six years after joining Ametek in 1960. Mr. Blankley was also elected a
Director of AMCAST Industrial Corporation in February 1994.
ROGER K. DERR has been Executive Vice President--Chief Operating Officer
since April 1990. He had served as a Senior Vice President of Ametek since
1982. Mr. Derr was elected a Group Vice President in 1978 and a Vice President
in 1972. He was named General Manager of the Company's electric motor business
in 1970, having joined Ametek in 1958.
ALLAN KORNFELD has been Executive Vice President--Chief Financial Officer
since April 1990. He has been Chief Financial Officer of Ametek since April
1986. Mr. Kornfeld was elected a Senior Vice President in 1984 and a Vice
President in 1982. He joined Ametek in 1975 as Comptroller.
MURRAY A. LUFTGLASS has been Senior Vice President--Corporate Development
since May 1984. He was elected Vice President--Corporate Development in 1976.
Mr. Luftglass joined the Company's Westchester Plastics business in 1969.
PETER A. GUERCIO has been a Group Vice President since April 1990. He was
elected a Vice President of Ametek in 1989. Mr. Guercio joined the Company in
1988 as General Manager of Specialty Metal Products, a business that Ametek
acquired from Pfizer Inc. He had managed Specialty Metal Products since 1963.
36
FRANK S. HERMANCE joined the Company as a Group Vice President in November
1990. Previously he worked for Tektronix, Inc. and Taylor Instrument Company.
GEORGE E. MARSINEK has been a Group Vice President since April 1990. He was
elected a Vice President in 1988. Mr. Marsinek was appointed General Manager
of Ametek's electric motor business in 1988, having joined the Company in
1964.
JOHN J. MOLINELLI has served as a Vice President and Comptroller of Ametek
since April 1993. He was elected Comptroller in 1991 and General Auditor in
1989. Mr. Molinelli was appointed Director of the Company's Internal Audit
group in 1986, having joined Ametek in 1969.
DEIRDRE D. SAUNDERS has served as Treasurer and Assistant Secretary since
April 1993. Ms. Saunders joined Ametek in 1987 as Assistant Treasurer.
Previously she served in financial and treasury positions with Exide
Corporation and Buckeye Pipe Line Company.
ROBERT W. YANNARELL has served as Secretary of the Company since April 1993.
He was elected Treasurer and Assistant Secretary in 1987. Mr. Yannarell was
appointed Director of Ametek's Internal Audit group in 1979, having joined the
Company in 1955.
LEWIS G. COLE has been a Director since 1987. He is a member of Stroock &
Stroock & Lavan, which he joined in 1958.
HELMUT N. FRIEDLAENDER has been a Director since 1955. He is a private
investor. Mr. Friedlaender was a financial adviser to Mr. William Rosenwald
and his family and a director of American Securities Corporation.
SHELDON S. GORDON has been a Director since 1989. Mr. Gordon has been a
General Partner of The Blackstone Group and Chairman of Blackstone Europe
since 1991. He is a Director of Anangel-American Shipholdings Ltd., and The
New York Eye & Ear Infirmary and was formerly Chairman and Chief Executive
Officer of Stamford Capital Group and a Director of American Express Bank Ltd.
CHARLES D. KLEIN has been a Director since 1980. Since 1987, Mr. Klein has
been a financial adviser to Mr. William Rosenwald and his family and a
director of American Securities Corporation.
DAVID P. STEINMANN has been a Director since 1993. He is an executive
officer of American Securities Corporation. Mr. Steinmann is Chief
Administrative Officer of the organization responsible for management of the
investment and philanthropic activities of the William Rosenwald family.
ELIZABETH R. VARET has been a Director since 1987. Ms. Varet is Chief
Executive Officer of the organization responsible for management of the
investment and philanthropic activities of the William Rosenwald family.
37
DESCRIPTION OF THE NOTES
The Notes are to be issued under an Indenture, to be dated as of
, 1994 (the "Indenture"), between the Company and Corestates Bank, N.A., as
Trustee (the "Trustee"). The Indenture is subject to and governed by the Trust
Indenture Act of 1939, as amended. The statements under this caption relating
to the Notes and the Indenture are summaries and do not purport to be
complete, and where reference is made to particular provisions of the
Indenture, such provisions, including the definition of certain terms, are
incorporated by reference as a part of such summaries or terms, which are
qualified in their entirety by such reference. Unless otherwise indicated,
references under this caption to sections, "(S)" or articles are references to
the Indenture which has been filed with the Commission as an exhibit to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Notes will be unsecured obligations of the Company, will be limited to
$150 million aggregate principal amount and will mature on ,
2006. The Notes will bear interest at the rate per annum shown on the front
cover of this Prospectus from , 1994 or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semi-annually on and of each year, commencing
, 1994, to the Person in whose name the Note (or any predecessor
Note) is registered at the close of business on the preceding or
, as the case may be. Interest on the Notes will be computed on
the basis of a 360-day year of twelve 30-day months. ((S)(S) 301, 307 and 310)
Principal of and premium, if any, and interest on the Notes will be payable,
and the Notes may be presented for registration of transfer and exchange, at
the office or agency of the Company maintained for that purpose in the Borough
of Manhattan, the City of New York, provided that at the option of the
Company, payment of interest on the Notes may be made by check mailed to the
address of the Person entitled thereto as it appears in the Note Register.
((S)(S) 310, 305 and 1002)
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. ((S) 301) No
service charge will be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. ((S) 305)
Initially, the Trustee will act as Paying Agent and Registrar. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar. ((S) 305)
REDEMPTION
The Notes will be subject to redemption, at the option of the Company, in
whole or in part, at any time on or after , 1999 and prior to
maturity, upon not less than 30 nor more than 60 days' notice mailed to each
Holder of Notes to be redeemed at his address appearing in the Note Register,
in amounts of $1,000 or an integral multiple of $1,000, at the following
Redemption Prices (expressed as percentages of principal amount) plus accrued
interest to but excluding the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date), if redeemed
during the 12-month period beginning of the years indicated:
REDEMPTION
YEAR PRICE
---- ----------
1999........................................................... %
2000........................................................... %
2001 and thereafter............................................ 100.0%
If less than all the Notes are to be redeemed, the Trustee shall select, in
such manner as it shall deem fair and appropriate, the particular Notes to be
redeemed or any portion thereof that is an integral multiple of $1,000.
((S)(S) 203, 1101, 1104, 1105 and 1107)
The Notes will not have the benefit of any sinking fund obligations.
38
COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Company Debt
The Company may not Incur any Debt unless after giving effect to the
Incurrence of such Debt and the receipt and application of the proceeds
thereof, the Consolidated Cash Flow Ratio of the Company for the last four
full fiscal quarters for which quarterly or annual financial statements are
available next preceding the Incurrence of such Debt, calculated on a pro
forma basis as if such Indebtedness had been Incurred at the beginning of such
four full fiscal quarters, would be greater than 2.5 to 1.
Notwithstanding the foregoing limitation, the Company may Incur the
following: (i) Debt under the Credit Agreement in an aggregate principal
amount at any one time not to exceed $250 million, less principal payments
actually made by the Company on any term Debt facility under the Credit
Agreement (other than principal payments made in connection with or pursuant
to a refinancing or refunding of the Credit Agreement), and any renewal,
refinancing, refunding or extension thereof in an amount which, together with
any amount remaining outstanding or available under the Credit Agreement
immediately after such renewal, refinancing, refunding or extension does not
exceed the sum of (x) the amount outstanding under the Term Debt Facilities
and (y) the amount outstanding or available under the Revolving Credit
Facilities immediately prior to such renewal, refinancing, refunding or
extension, plus the amount of any premium required to be paid in connection
with such renewal, refinancing, refunding or extension pursuant to the terms
of the Debt renewed, refinanced, refunded or extended and the expenses of the
Company Incurred in connection with such renewal, refinancing, refunding or
extension; (ii) Debt owed by the Company to any Wholly Owned Subsidiary of the
Company; provided, however, that upon either (x) the transfer or other
disposition by such Wholly Owned Subsidiary of any Debt so permitted to a
Person other than the Company or another Wholly Owned Subsidiary of the
Company or (y) the issuance (other than directors' qualifying shares), sale,
lease, transfer or other disposition of shares of Capital Stock (including by
consolidation or merger) of such Wholly Owned Subsidiary to a Person other
than the Company or another such Wholly Owned Subsidiary, the provisions of
this Clause (ii) shall no longer be applicable to such Debt and such Debt
shall be deemed to have been Incurred at the time of such transfer or other
disposition; (iii) Debt in respect of letters of credit issued in the ordinary
course of the Company's business not to exceed $15 million at any one time
outstanding; (iv) Debt under any Interest Rate, Currency or Commodity
Protection Agreements; (v) renewals, refinancings, refundings or extensions of
any outstanding Debt Incurred in compliance with the provisions of the
Indenture described in the first paragraph of "Limitation on Company Debt"
above or of the Notes; provided, however, that such Debt does not exceed the
principal amount of Debt so renewed, refinanced, refunded or extended plus the
amount of any premium required to be paid in connection with such renewal,
refinancing, refunding or extension pursuant to the terms of the Debt renewed,
refinanced, refunded or extended and the expenses of the Company Incurred in
connection with such renewal, refinancing, refunding or extension; and
provided further, that Debt the proceeds of which are used to renew,
refinance, refund or extend Debt which is pari passu to the Notes or Debt
which is subordinate in right of payment to the Notes shall only be permitted
if (A) in the case of any renewal, refinancing, refunding or extension of Debt
which is pari passu to the Notes, the renewal, refinancing, refunding or
extension Debt is made pari passu to the Notes or subordinated to the Notes,
and, in the case of any renewal, refinancing, refunding or extension of Debt
which is subordinated to the Notes, the renewal, refinancing, refunding or
extension Debt constitutes Subordinated Debt and (B) in either case, the
renewal, refinancing, refunding or extension Debt by its terms, or by the
terms of any agreement or instrument pursuant to which such Debt is issued,
(x) does not provide for payments of principal of such Debt at the stated
maturity thereof or by way of a sinking fund applicable thereto or by way of
any mandatory redemption, defeasance, retirement or repurchase thereof by the
Company (including any redemption, retirement
39
or repurchase which is contingent upon events of circumstances, but excluding
any retirement required by virtue of acceleration of such Debt upon any event
of default thereunder), in each case prior to the stated maturity of the Debt
being refinanced or refunded and (y) does not permit redemption or other
retirement (including pursuant to an offer to purchase made by the Company) of
such debt at the option of the holder thereof prior to the final stated
maturity of the Debt being refinanced or refunded, other than a redemption or
other retirement at the option of the holder of such Debt (including pursuant
to an offer to purchase made by the Company) which is conditioned upon the
change of control of the Company pursuant to provisions substantially similar
to those described under "Change of Control"; (vi) Debt consisting of
borrowings against the cash value of Corporate Owned Life Insurance Policies;
and (vii) Debt not otherwise permitted to be Incurred pursuant to clauses (i)
through (vi) above (which Debt may be incurred under the Credit Agreement),
which, together with any other outstanding Debt Incurred pursuant to this
Clause (vii), has an aggregate principal amount not in excess of $35 million
at any time outstanding. ((S) 1008)
Limitation on Debt and Preferred Stock of Subsidiaries
The Company may not permit any Subsidiary of the Company to Incur or suffer
to exist any Debt or issue any Preferred Stock except: (i) Debt or Preferred
Stock outstanding on the date of the Indenture; (ii) Guarantees of Debt of the
Company under the Credit Agreement and any renewal, refinancing, refunding or
extension thereof permitted by the provisions of the Indenture described in
Clause (i) under "Limitation on Company Debt"; (iii) Debt of a Foreign
Subsidiary Incurred solely to fund such Foreign Subsidiary's working capital
requirements which, together with any other outstanding Debt of such Foreign
Subsidiary Incurred pursuant to this Clause (iii), has an aggregate principal
amount not in excess of the greater of $20 million or 65% of the aggregate
book value of receivables and inventories of such Foreign Subsidiary at the
time of Incurrence of such Debt; (iv) Debt Incurred or Preferred Stock issued
to and held by the Company or a Wholly Owned Subsidiary of the Company;
provided, however, that upon either (x) the transfer or other disposition by
the Company or such Wholly Owned Subsidiary of any Debt so permitted to a
Person other than the Company or another Wholly Owned Subsidiary of the
Company or (y) the issuance (other than directors' qualifying shares), sale,
lease, transfer or other disposition of shares of Capital Stock (including by
consolidation or merger) of such Wholly Owned Subsidiary to a Person other
than the Company or another such Wholly Owned Subsidiary, the provisions of
this Clause (iv) shall no longer be applicable to such Debt and such Debt
shall be deemed to have been Incurred at the time of such transfer or other
disposition; (v) Debt Incurred or Preferred Stock issued by a Person prior to
the time (A) such Person became a Subsidiary of the Company, (B) such Person
merges into or consolidates with a Subsidiary of the Company or (C) another
Subsidiary of the Company merges into or consolidates with such Person (in a
transaction in which such Person becomes a Subsidiary of the Company), which
Debt or Preferred Stock was not Incurred or issued in anticipation of such
transaction and was outstanding prior to such transaction; provided, however,
that the Company would be permitted to Incur such Debt pursuant to the
provisions of the Indenture described in the first paragraph of "Limitation on
Company Debt" above; (vi) Debt secured by a Lien on real or personal property
or improvements thereon which Debt (a) constitutes all or a part of the
purchase price of such property or the cost of construction or improvement of
such property or (b) is Incurred prior to, at the time of or within 270 days
after the acquisition of such property for the purpose of financing all or any
part of the purchase price or the cost of construction or improvement thereof
and which property was not owned by the Company and/or any Subsidiary of the
Company prior to such acquisition; provided, however, the Debt so secured does
not exceed the purchase price, or the cost of construction or improvement, of
such property and provided, further, that the Company would be permitted to
Incur such Debt pursuant to the provisions of the Indenture described in the
first paragraph of "Limitation on Company Debt" above; (vii) Guarantees of
Debt Incurred pursuant to Clause (vii) of "Limitation on Company Debt" above;
(viii) Debt under any Interest Rate, Currency or Commodity Protection
Agreement; (ix) Guarantees of Debt under an Interest Rate Protection Agreement
Incurred pursuant to Clause (iv) of "Limitation on Company Debt" above,
provided, however that the Debt which is being hedged by such
40
Interest Rate Protection Agreement is Guaranteed by a Subsidiary of the
Company; and (x) Debt or Preferred Stock which is exchanged for, or the
proceeds of which are used to refinance or refund, any Debt or Preferred Stock
permitted to be outstanding pursuant to Clauses (v) and (vi) hereof (or any
extension or renewal thereof), in an aggregate principal amount, in the case
of Debt, or liquidation preference, in the case of Preferred Stock, not to
exceed the principal amount or liquidation preference of the Debt or Preferred
Stock, respectively, so exchanged, refinanced or refunded plus the amount of
any premium required to be paid in connection with such refinancing pursuant
to the terms of the Debt refinanced and the expenses of the Company or such
Subsidiary Incurred in connection with such refinancing and provided such
refinancing or refunding Debt or Preferred Stock by its terms, or by the terms
of any agreement or instrument pursuant to which such Debt or Preferred Stock
is issued, (x) does not provide for payments of principal or liquidation value
at the stated maturity of such Debt or Preferred Stock or by way of a sinking
fund applicable to such Debt or Preferred Stock or by way of any mandatory
redemption, defeasance, retirement or repurchase of such Debt or Preferred
Stock by the Company (including any redemption, retirement or repurchase which
is contingent upon events or circumstances, but excluding any retirement
required by virtue of acceleration of such Debt upon an event of default
thereunder), in each case prior to the stated maturity of the Debt or
Preferred Stock being refinanced or refunded and (y) does not permit
redemption or other retirement (including pursuant to an offer to purchase
made by the Company) of such Debt or Preferred Stock at the option of the
holder thereof prior to the stated maturity of the Debt or Preferred Stock
being refinanced or refunded, other than a redemption or other retirement at
the option of the holder of such Debt or Preferred Stock (including pursuant
to an offer to purchase made by the Company) which is conditioned upon the
change of control of the Company pursuant to provisions substantially similar
to those contained in the Indenture described under "Change of Control".
((S) 1009)
Limitation on Restricted Payments
The Company (i) may not, directly or indirectly, declare or pay any
dividend, or make any distribution, in respect of its Capital Stock or to the
holders thereof, excluding any dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire its Capital Stock (other than Disqualified
Stock), (ii) may not, and may not permit any Subsidiary to, purchase, redeem,
or otherwise retire or acquire for value (a) any Capital Stock of the Company
or any Related Person of the Company or (b) any options, warrants or rights to
purchase or acquire shares of Capital Stock of the Company or any Related
Person of the Company or any securities convertible or exchangeable into
shares of Capital Stock of the Company or any Related Person of the Company,
(iii) may not make, or permit any Subsidiary to make, any Investment (other
than a Permitted Investment) in, or payment on a Guarantee of any obligation
of, any Unrestricted Subsidiary or any other Person (other than (x) the
Company, (y) a Subsidiary of the Company (or a Person that becomes a
Subsidiary as a result of such Investment) or (z) any other Affiliate of the
Company which is not a Related Person of the Company (or a Person that becomes
an Affiliate as a result of such Investment)), and (iv) may not, and may not
permit any Subsidiary to, redeem, defease, repurchase, retire or otherwise
acquire or retire for value prior to any scheduled maturity, repayment or
sinking fund payment Debt of the Company which is subordinate in right of
payment to the Notes (each of clauses (i) through (iv) being a "Restricted
Payment") if: (1) an Event of Default, or an event that with the passing of
time or the giving of notice, or both, would constitute an Event of Default,
shall have occurred and is continuing, or (2) upon giving effect to such
Restricted Payment, the Company could not Incur at least $1.00 of additional
Debt pursuant to the terms of the Indenture described in the first paragraph
of "Limitation on Company Debt" above, or (3) upon giving effect to such
Restricted Payment, the aggregate of all Restricted Payments from the date of
the Indenture exceeds the sum of: (a) 50% of cumulative Consolidated Net
Income (or, in the case Consolidated Net Income shall be negative, less 100%
of such deficit) since January 1, 1994 through the last day of the last full
fiscal quarter ending immediately preceding the date of such Restricted
Payment; plus (b) 100% of the aggregate net proceeds received after the date
of the Indenture,
41
including the fair value of property other than cash (determined in good faith
by the Board of Directors as evidenced by a resolution of the Board of
Directors filed with the Trustee), from the issuance (other than to a
Subsidiary of the Company) of Capital Stock (other than Disqualified Stock) of
the Company and warrants, rights or options on Capital Stock (other than
Disqualified Stock) of the Company and the principal amount (or accreted value
of Debt issued at a discount) of Debt of the Company that has been converted
into Capital Stock (other than Disqualified Stock) of the Company after the
date of the Indenture; plus (c) 100% of the aggregate amount of all Restricted
Payments that are returned, without restriction, in cash to the Company or any
Subsidiary if and to the extent that such payments are not included in
Consolidated Net Income; plus (d) $75 million; plus (e) in the event that the
Company does not pay an aggregate of $150 million or more to repurchase Common
Stock of the Company pursuant to the second succeeding paragraph, the amount
which, together with the amount paid to repurchase Common Stock pursuant to
the second succeeding paragraph, equals $150 million.
The foregoing provision will not be violated by reason of the payment of any
dividend on Capital Stock of any class within 60 days after the declaration
thereof if, on the date when the dividend was declared, the Company could have
paid such dividend in accordance with the provisions of the Indenture.
Notwithstanding the foregoing, the Company may from time to time pay up to
$150 million in the aggregate from the date of the Indenture to repurchase
Common Stock of the Company pursuant to open market or privately negotiated
transactions, tender offers or otherwise, and such purchases shall not be
deemed Restricted Payments for purposes of calculating the aggregate amount of
all Restricted Payments pursuant to clause (3) above. ((S) 1010)
Limitations Concerning Distributions by and Transfers to Subsidiaries
The Company may not, and may not permit any Subsidiary to, suffer to exist
any consensual encumbrance or restriction on the ability of any Subsidiary of
the Company, (i) to pay directly or indirectly dividends or make any other
distributions in respect of its Capital Stock or pay any Debt or other
obligation owed to the Company or any other Subsidiary; (ii) to make loans or
advances to the Company or any Subsidiary; or (iii) to transfer any of its
property or assets to the Company or any Subsidiary. Notwithstanding the
foregoing, the Company may, and may permit any Subsidiary to, suffer to exist
any such encumbrance or restriction (a) pursuant to any agreement in effect on
the date of the Indenture (including the Credit Agreement), or (b) pursuant to
an agreement relating to any Debt Incurred by such Subsidiary prior to the
date on which such Subsidiary was acquired by the Company and outstanding on
such date and not Incurred in anticipation of becoming a Subsidiary, or (c)
pursuant to an agreement effecting a renewal, refinancing, refunding or
extension of Debt Incurred pursuant to an agreement referred to in clause (a)
or (b) above; provided, however, that the provisions contained in such
renewal, refinancing, refunding or extension agreement relating to such
encumbrance or restriction are no more restrictive in any material respect
than the provisions contained in the agreement the subject thereof, as
determined in good faith by the Board of Directors of the Company and
evidenced by a resolution of the Board of Directors filed with the Trustee or
(d) in the case of a Foreign Subsidiary, pursuant to an agreement governing
the terms of any Debt to fund such Foreign Subsidiary's working capital
requirements permitted by clause (iii) of "Limitation of Debt and Preferred
Stock of Subsidiaries" above, provided that such encumbrance or restriction
relates only to the payment of dividends or other cash distributions and,
provided, further, that such encumbrance or restriction does not, in the
reasonable judgment of the Board of Directors of the Company, impact the
Company's ability to make all payments when due on the Notes, as determined in
good faith by the Board of Directors of the Company and evidenced by a
resolution of the Board of Directors filed with the Trustee. ((S) 1013)
42
Limitation on Liens
The Company may not, and may not permit any Subsidiary to, Incur or suffer
to exist any Lien on or with respect to any property or assets of the Company
or any such Subsidiary now owned or hereinafter acquired to secure any Debt
without making, or causing such Subsidiary to make, effective provision for
securing the Notes (and, if the Company shall so determine, any other Debt of
the Company which is not subordinate to the Notes or of such Subsidiary) (x)
equally and ratably with such Debt or (y) in the event such Debt is
subordinate in right of payment to the Notes, prior to such Debt, as to such
property or assets for so long as such Debt shall be so secured. The foregoing
restrictions shall not apply to Liens in respect of Debt existing at the date
of the Indenture or to: (i) Liens in favor of the Company or a Wholly Owned
Subsidiary of the Company (but only so long as such Person is a Wholly Owned
Subsidiary of the Company); (ii) Liens to secure Debt and other obligations
under the Credit Agreement and any renewal, refinancing, refunding or
extension thereof, provided, however that the Incurrence of such Debt is
permitted by the provisions described in "Limitation on Company Debt" above;
(iii) Liens securing only the Notes; (iv) Liens on property existing at the
time of acquisition thereof (and not in anticipation of the financing of such
acquisition); (v) Liens to secure Debt Incurred for the purpose of financing
all or any part of purchase price or the cost of construction or improvement
of the property subject to such Liens, provided, however, that (a) the
principal amount of any Debt secured by such a Lien does not exceed 100% of
such purchase price or cost, (b) such Lien does not extend to or cover any
other property other than such item of property and any improvements on such
item and (c) the Incurrence of such Debt is permitted by the provisions
described under "Limitation on Company Debt" or "Limitation on Debt and
Preferred Stock of Subsidiaries"; (vi) Liens on property of a Person existing
at the time such Person is merged into or consolidated with the Company or any
Subsidiary of the Company; (vii) Liens to secure Debt and other obligations
Incurred pursuant to Clause (vii) of "Limitation on Company Debt" above;
(viii) Liens to secure Debt under an Interest Rate Protection Agreement
Incurred pursuant to Clause (iv) of "Limitation on Company Debt" above,
provided, however that the Debt which is being hedged by such Interest Rate
Protection Agreement is secured by a Lien; and (ix) Liens to secure any
renewal, refinancing, refunding or extension (or successive renewals,
refinancings, refundings or extensions), in whole or in part, of any Debt
secured by Liens referred to in the foregoing clauses (iii) through (vi) so
long as such Liens do not extend to any other property and the Debt so secured
is not increased.
In addition to the foregoing, the Company and its Subsidiaries may Incur a
Lien to secure any Debt or enter into a Sale and Leaseback Transaction,
without securing the Notes equally and ratably with or prior to such Debt, if
the sum of: (i) the amount of Debt subject to Liens entered into after the
date of the Indenture and otherwise prohibited by the Indenture, and (ii) the
Attributable Value of Sale and Leaseback Transactions entered into after the
date of the Indenture and otherwise prohibited by the Indenture does not
exceed 5% of Consolidated Tangible Assets of the Company at the time of
Incurrence of such Lien or the entering into of such Sale and Leaseback
Transaction. ((S) 1011)
Limitation on Sale and Leaseback Transactions
The Company may not, and may not permit any Subsidiary of the Company to,
enter into any Sale and Leaseback Transaction (except for a period not
exceeding 30 months) unless: (i) the Company or such Subsidiary would be
entitled to Incur a Lien to secure Debt in accordance with the provision of
the Indenture described in the second paragraph under "Limitation on Liens"
above equal in amount to the Attributable Value of the Sale and Leaseback
Transaction without securing the Notes; or (ii) the Company or such Subsidiary
applies or commits to apply within 60 days an amount equal to the net proceeds
of the property sold pursuant to the Sale and Leaseback Transaction to the
permanent repayment or reduction of outstanding Debt to the extent required
or, to the extent not so required, to the redemption of the Notes or, if the
Notes are not redeemable, to the repayment of other Company Debt which is pari
passu to the Notes or Subsidiary Debt or, if no such Debt is then outstanding,
other Company Debt. ((S) 1012)
43
Transactions with Affiliates
The Company may not, and may not permit any Subsidiary of the Company to,
enter into any transaction (or series of related transactions) not in the
ordinary course of business of the Company or such Subsidiary with an
Affiliate of the Company (other than the Company or a Wholly Owned Subsidiary
of the Company), including any loan, advance or investment, either directly or
indirectly, involving aggregate consideration in excess of $5 million unless
such transaction (i) is, in the opinion of the Board of Directors, as
evidenced by a resolution of the Board of Directors filed with the Trustee,
(A) on terms no less favorable to the Company or such Subsidiary than those
that could be obtained in a comparable arm's length transaction with an entity
that is not an Affiliate and (B) in the best interests of the Company or such
Subsidiary and (ii) is approved by the independent members of the Board of
Directors of the Company. ((S) 1014)
Change of Control
Upon the occurrence of a Change of Control, the Company will be required to
make an Offer to Purchase all Outstanding Notes at a purchase price equal to
101% of their principal amount plus accrued interest to the date of purchase.
A "Change of Control" will be deemed to have occurred in the event that, after
the date of the Indenture, either (a) any Person or any Persons acting
together that would constitute a group (for purposes of Section 13(d) of the
Securities Exchange Act of 1934, or any successor provision thereto) (a
"Group"), together with any Affiliates or Related Persons thereof (other than
an employee benefit plan of the Company or any Subsidiary) that files a
Schedule 13D or 14D-1 under the Securities Exchange Act of 1934 disclosing
that such Person or Group beneficially owns (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, or any successor provision thereto) at
least 50% of the aggregate voting power of all classes of Capital Stock of the
Company entitled to vote generally in the election of directors of the
Company; or (b) any Person or Group, together with any Affiliates or Related
Persons thereof, shall succeed in having a sufficient number of its nominees
elected to the Board of Directors of the Company such that such nominees, when
added to any existing director remaining on the Board of Directors of the
Company after such election who is an Affiliate or Related Person of such
Group, will constitute a majority of the Board of Directors of the Company,
provided that in no event shall any Continuing Director be included in such
majority, whether or not such Continuing Director was nominated by such Person
or Group or is an Affiliate or Related Person of such Group. "Continuing
Director" shall mean (i) any Person who is a member of the Board of Directors
of the Company as of the date of the Indenture, at any time that such Person
is a member of the Board, or (ii) any Person who subsequently becomes a member
of the Board, at any time that such Person is a member of the Board, provided
that such Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing Directors. ((S) 1015)
In the event that the Company makes an Offer to Purchase the Notes, the
Company intends to comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1
under, the Securities Exchange Act of 1934.
PROVISION OF FINANCIAL INFORMATION
Whether or not the Company is required to be subject to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, or any successor provision
thereto, the Company shall file with the Commission, to the extent permitted,
the annual reports, quarterly reports and other documents which the Company
would have been required to file with the Commission pursuant to such Section
13(a) or 15(d) or any successor provision thereto if the Company were so
required, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required so to file such documents if the Company were so required. The
Company shall also in any event (a) within 15 days of each Required Filing
Date (i) transmit by mail to all Holders, as their names and addresses appear
in the Security Register, without cost to such Holders, and (ii)
44
file with the Trustee copies of the annual reports, quarterly reports and
other documents which the Company would have been required to file with the
Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 or any successor provisions thereto if the Company were required to be
subject to such Sections and (b) if filing such documents by the Company with
the Commission is not permitted under the Securities Exchange Act of 1934,
promptly upon written request supply copies of such documents to any
prospective Holder. ((S) 1016)
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company (i) may not consolidate with or merge into any other Person
(other than a Wholly Owned Subsidiary) or permit any other Person (other than
a Wholly Owned Subsidiary) to consolidate with or merge into the Company and
(ii) may not, directly or indirectly, transfer, sell, lease or otherwise
dispose of all or substantially all of its assets unless: (1) in a transaction
in which the Company does not survive or in which the Company sells, leases or
otherwise disposes of all or substantially all of its assets, the successor
entity to the Company is organized under the laws of the United States of
America or any State thereof or the District of Columbia and shall expressly
assume, by a supplemental indenture executed and delivered to the Trustee in
form satisfactory to the Trustee, all of the Company's obligations under the
Indenture; (2) immediately before and after giving effect to such transaction
and treating any Debt which becomes an obligation of the Company or a
Subsidiary as a result of such transaction as having been Incurred by the
Company or such Subsidiary at the time of the transaction, no Event of Default
or event that with the passing of time or the giving of notice, or both, would
constitute an Event of Default shall have occurred and be continuing; (3)
immediately after giving effect to such transaction and treating any Debt
which becomes an obligation of the Company as a result of such transaction as
having been Incurred by the Company at the time of the transaction, the
Company or the successor entity to the Company could Incur at least $1.00 of
additional Debt pursuant to the provisions of the Indenture described in the
first paragraph under "Limitation on Company Debt" above; (4) if, as a result
of any such transaction, property or assets of the Company would become
subject to a Lien prohibited by the provisions of the Indenture described
under "Limitation on Liens" above, the Company or the successor entity to the
Company shall have secured the Notes as required by said covenant; and (5)
certain other conditions are met. ((S) 801)
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. ((S) 101)
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Subsidiaries
(including a consolidation or merger or other sale of any such Subsidiary
with, into or to another Person in a transaction in which such Subsidiary
ceases to be a Subsidiary, but excluding a disposition by a Subsidiary of such
Person to such Person or a Wholly Owned Subsidiary of such Person or by such
Person to a Wholly Owned Subsidiary of such Person) of (i) shares of Capital
Stock (other than directors' qualifying shares) or other ownership interests
of a Subsidiary of such Person, (ii) substantially all of the assets of such
Person or any of its
45
Subsidiaries representing a division or line of business or (iii) other assets
or rights of such Person or any of its Subsidiaries outside of the ordinary
course of business.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount
of rent required to be paid by such Person under such lease during the initial
term thereof as determined in accordance with generally accepted accounting
principles, discounted from the last date of such initial term to the date of
determination at a rate per annum equal to the discount rate which would be
applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to
be paid under any such lease for any such period shall be the aggregate amount
of rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of insurance, taxes, assessments,
utility, operating and labor costs and similar charges. In the case of any
lease which is terminable by the lessee upon the payment of a penalty, such
net amount shall also include the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first
date upon which it may be so terminated. "Attributable Value" means, as to a
Capital Lease Obligation under which any Person is at the time liable and at
any date as of which the amount thereof is to be determined, the capitalized
amount thereof that would appear on the face of a balance sheet of such Person
in accordance with generally accepted accounting principles.
"Capital Lease Obligation" of any Person means the obligation to pay rent or
other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required
to be classified and accounted for as a capital lease or a liability on the
face of a balance sheet of such Person in accordance with generally accepted
accounting principles. The stated maturity of such obligation shall be the
date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participation or other equivalents (however designated) of corporate stock of
such Person.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to shares of Capital Stock of any other class of such
Person.
"Consolidated Cash Flow Available for Fixed Charges" of any Person means for
any period the Consolidated Net Income for such period increased by the sum of
(i) Consolidated Interest Expense of such Person for such period, plus (ii)
Consolidated Income Tax Expense of such Person for such period, plus (iii) the
consolidated depreciation and amortization expense included in the income
statement of such Person for such period, plus (iv) other non-cash charges of
such Person for such period deducted from consolidated revenues in determining
Consolidated Net Income for such period, minus (v) non-cash items of such
Person for such period increasing consolidated revenues in determining
Consolidated Net Income for such period.
"Consolidated Cash Flow Ratio" of any Person means for any period the ratio
of (i) Consolidated Cash Flow Available for Fixed Charges of such Person for
such period to (ii) the sum of (A) Consolidated Interest Expense of such
Person for such period, plus (B) the interest expense for such period
(including the amortization of debt discount) with respect to any Debt
proposed to be Incurred by such Person or its Subsidiaries, minus (C)
Consolidated Interest Expense of such Person to the extent included in Clause
(ii)(A) with respect to any Debt that will no longer be outstanding as a
result of the Incurrence of the Debt proposed to be Incurred, plus (D) the
interest expense for such period (including the amortization of debt discount)
with respect to any other Debt Incurred by such Person
46
or its Subsidiaries since the end of such period to the extent not included in
Clause (ii)(A) minus (E) Consolidated Interest Expense of such Person to the
extent included in Clause (ii)(A) with respect to any Debt that no longer is
outstanding as a result of the Incurrence of the Debt referred to in clause
(ii)(D); provided, however, that in making such computation, the Consolidated
Interest Expense of such Person attributable to interest on any Debt bearing a
floating interest rate shall be computed on a pro forma basis as if the rate
in effect on the date of computation had been the applicable rate for the
entire period, provided further that, in the event such Person or any of its
Subsidiaries has made Asset Dispositions or acquisitions of assets not in the
ordinary course of business (including acquisitions of other Persons by
merger, consolidation or purchase of Capital Stock) during or after such
period, such computation shall be made on a pro forma basis as if the Asset
Dispositions or acquisitions had taken place on the first day of such period.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person for such period
calculated on a consolidated basis in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom the tax
effect of any of the items described in Clauses (a) through (f) of the
definition of Consolidated Net Income.
"Consolidated Interest Expense" for any Person means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person for such period
calculated on a consolidated basis in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of Debt
discounts; (ii) any payments or fees with respect to letters of credit,
bankers' acceptances or similar facilities; (iii) fees with respect to
interest rate swap or similar agreements or foreign currency hedge, exchange
or similar agreements; (iv) Preferred Stock dividends of such Person (other
than with respect to Disqualified Stock) declared and paid or payable; (v)
accrued Disqualified Stock dividends of such Person and all accrued Preferred
Stock dividends of Subsidiaries of such Person, in each case whether or not
declared or paid; (vi) interest on Debt guaranteed by such Person; and (vii)
the portion of any rental obligation treated as interest expense in accordance
with generally accepted accounting principles.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person for such period determined on
a consolidated basis in accordance with generally accepted accounting
principles; provided that there shall be excluded therefrom (a) the net income
(or loss) of any Person acquired by such Person or a Subsidiary of such Person
in a pooling-of-interests transaction for any period prior to the date of such
transaction, (b) the net income (but not net loss) of any Subsidiary of such
Person which is subject to restrictions which prevent the payment of dividends
or the making of distributions to such Person to the extent of such
restrictions, provided that there shall not be excluded the net income of a
Foreign Subsidiary which is subject to an encumbrance or restriction on the
payment of dividends and other cash distributions permitted by the provisions
of the Indenture described under Clause (d) of "Limitations Concerning
Distributions by and Transfers to Subsidiaries" in all cases except for
purposes of the provisions of the Indenture described under "Limitation on
Restricted Payments", in which case the net income of such a Subsidiary shall
be excluded in accordance with this Clause (b), (c) the net income (or loss)
of any Person that is not a Subsidiary of such Person except to the extent of
the amount of dividends or other distributions actually paid to such Person by
such other Person during such period, (d) gains or losses on Asset
Dispositions by such Person or its Subsidiaries, (e) all extraordinary or
nonrecurring gains and extraordinary or nonrecurring losses, (f) the
cumulative effect of changes in accounting principles in the year of adoption
of such changes, and (g) the tax effect of any of the items described in
Clauses (a) through (f) above.
"Consolidated Tangible Assets" of any Person means the sum of the Tangible
Assets of such Person, determined on a consolidated basis in accordance with
generally accepted accounting
47
principles, including appropriate deductions for any minority interest in
Tangible Assets of such Person's Subsidiaries; provided, however, that
adjustments following the date of the Indenture to the accounting books and
records of the Company in accordance with Accounting Principles Board Opinions
Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the
acquisition of control of the Company by another Person shall not be given
effect to.
"Corporate Owned Life Insurance Policies" means corporate owned life
insurance policies held by the Company with respect to certain of its
employees.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or
not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations Incurred in connection with the
acquisition of property, assets or businesses, (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person, (iv)
every obligation of such Person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business), (v) every Capital
Lease Obligation of such Person, (vi) the maximum fixed redemption or
repurchase price of Disqualified Stock of such Person at the time of
determination, (vii) every obligation under Interest Rate, Currency or
Commodity Protection Agreements of such Person and (viii) every obligation of
the type referred to in Clauses (i) through (vii) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has Guaranteed or is responsible or liable, directly or indirectly, as
obligor, Guarantor or otherwise.
"Disqualified Stock" of any Person means any Capital Stock of such Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Company, any
Subsidiary of the Company or the holder thereof, in whole or in part, on or
prior to the final Stated Maturity of the Securities.
"Foreign Subsidiary" means with respect to any Person, any Subsidiary of
such Person that is incorporated in a country other than the United States.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing, or having the economic effect of guaranteeing, any
Debt of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any obligation of
such Person, (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or to purchase (or to advance or supply
funds for the purchase of) any security for the payment of such Debt, (ii) to
purchase property, securities or services for the purpose of assuring the
holder of such Debt of the payment of such Debt, or (iii) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such Debt (and
"Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative
to the foregoing); provided, however, that the Guaranty by any Person shall
not include endorsements by such Person for collection or deposit, in either
case, in the ordinary course of business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on
the balance sheet of such Person (and "Incurrence", "Incurred", "Incurrable"
and "Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in generally accepted accounting principles that
results
48
in an obligation of such Person that exists at such time becoming Debt shall
not be deemed an Incurrence of such Debt.
"Interest Rate, Currency or Commodity Protection Agreement" means any
interest rate swap agreement, interest rate cap agreement, currency swap
agreement, commodity swap or cap agreement or other financial agreement or
arrangement designed to protect the Company against fluctuations in interest
rates, or currency exchange or commodity prices and which shall have a
notional amount no greater than the amount of the underlying obligation being
hedged thereby.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) to, or purchase or acquisition of
Capital Stock, bonds, notes, debentures or other securities or evidence of
Debt issued by, any other Person.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Offer to Purchase" means a written offer (the "Offer") sent by the Company
by first class mail, postage prepaid, to each Holder at his address appearing
in the Security Register on the date of the Offer offering to purchase up to
the principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration
date (the "Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for purchase of Notes within five Business Days after the Expiration
Date. The Company shall notify the Trustee at least 15 Business Days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Company's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable such Holders to make an
informed decision with respect to the Offer to Purchase (which at a minimum
will include (i) the most recent annual and quarterly financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the documents required to be filed with the Trustee
pursuant to the Indenture (which requirements may be satisfied by delivery of
such documents together with the Offer), (ii) a description of material
developments in the Company's business subsequent to the date of the latest of
such financial statements referred to in Clause (i) (including a description
of the events requiring the Company to make the Offer to Purchase), (iii) if
applicable, appropriate pro forma financial information concerning the Offer
to Purchase and the events requiring the Company to make the Offer to Purchase
and (iv) any other information required by applicable law to be included
therein). The Offer shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Offer to Purchase. The
Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to Purchase
is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Notes offered to be
purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which
49
such has been determined pursuant to the Section of the Indenture requiring
the Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to the Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Notes registered
in the name of such Holder and that any portion of a Note tendered must be
tendered in an integral multiple of $1,000 principal amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not purchased
by the Company pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each Holder electing to tender a Note pursuant to the Offer to
Purchase will be required to surrender such Note at the place or places
specified in the Offer prior to the close of business on the Expiration
Date (such Note being, if the Company or the Trustee so requires, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its Paying Agent) receives, not later
than the close of business on the Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder tendered, the certificate number of
the Note the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(11) that if Notes in an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase all such Notes; and
(12) that in the case of any Holder whose Note is purchased only in part,
the Company shall execute, and the Trustee shall authenticate and deliver
to the Holder of such Note without service charge, a new Note or Notes, of
any authorized denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the Note so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"pari passu", when used with respect to the ranking of any Debt of any
Person in relation to other Debt of such Person, means that each such Debt (a)
either (i) is not subordinated in right of payment to the same Debt of such
Person or (ii) is subordinate in right of payment to the same Debt of such
Person as is the other and is so subordinate to the same extent and (b) is not
subordinate in right of payment to the other or to any Debt of such Person as
to which the other is not so subordinate.
"Permitted Investments" means (a) certificates of deposit with final
maturities of one year or less issued by a U.S. commercial bank or a U.S.
branch of a foreign bank or, in the case of a Foreign Subsidiary, a reputable
bank in the country in which such Foreign Subsidiary operates, having capital
and surplus in excess of $100 million and, in the case of a U.S. commercial
bank or a U.S. branch of a foreign bank, having a peer group rating of C or
better (or the equivalent thereof) by Thompson BankWatch Inc. or outstanding
long-term debt rated BBB or better (or the equivalent thereof) by
50
Standard & Poor's Baa or better (or the equivalent thereof) by Moody's
Investors Service, Inc.; (b) commercial paper rated A-1 (or the equivalent
thereof) by Standard & Poor's or P-1 (or the equivalent thereof) by Moody's
Investors Service, Inc.; (c) direct obligations of the United States
government or a U.S. government agency; (d) repurchase agreements in respect
of direct U.S. government obligations; (e) in the case of a Foreign
Subsidiary, direct obligations of the sovereign and the government agencies of
the country in which such foreign subsidiary operates; (f) shares of money
market or equity mutual or similar funds having assets in excess of $100
million; (g) equity or debt securities rated A or better (or the equivalent
thereof) by Standard & Poor's or Moody's Investors Service, Inc. of public
companies which (x) are freely tradeable without restriction on a stock
exchange or through a nationally recognized automated quotation system and (y)
are purchased and held as current assets and not for investment and (h) any
Investments made by AMETEK (Bermuda) Ltd., provided that such Investments are
made as part of such Subsidiary's normal self-insurance activities and only so
long as the sole business of such Subsidiary is the insuring of risks of only
the Company and its other Subsidiaries.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares
of Capital Stock of any other class of such Person.
"Related Person" of any Person means any other Person directly or indirectly
owning (a) 5% or more of the Outstanding Common Stock of such Person (or, in
the case of a Person that is not a corporation, 5% or more of the equity
interest in such Person) or (b) 5% or more of the combined voting power of the
Voting Stock of such Person.
"Sale and Leaseback Transaction" of any Person means an arrangement with any
lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which
has been or is being sold or transferred by such Person more than 270 days
after the acquisition thereof or the completion of construction or
commencement of operation thereof to such lender or investor or to any person
to whom funds have been or are to be advanced by such lender or investor on
the security of such property or asset. The stated maturity of such
arrangement shall be the date of the last payment of rent or any other amount
due under such arrangement prior to the first date on which such arrangement
may be terminated by the lessee without payment of a penalty.
"Significant Subsidiary" of any Person means any Subsidiary which, together
with all of its Subsidiaries, would be a Significant Subsidiary within the
meaning of Regulation S-X under the United States securities laws.
"Subordinated Debt" means Debt of the Company as to which the payment of
principal of (and premium, if any) and interest and other payment obligations
in respect of such Debt shall be subordinate to the prior payment in full of
the Notes to at least the following extent: (i) no payments of principal of
(or premium, if any) or interest on or otherwise due in respect of such Debt
may be permitted for so long as any default in the payment of principal (or
premium, if any) or interest on the Notes exists; (ii) in the event that any
other default that with the passing of time or the giving of notice, or both,
would constitute an event of default exists with respect to the Notes, upon
notice by 25% or more in principal amount of the Notes to the Trustee, the
Trustee shall have the right to give notice to the Company and the holders of
such Debt (or trustees or agents therefor) of a payment blockage, and
thereafter no payments of principal of (or premium, if any) or interest on or
otherwise due in respect of such Debt may be made for a period of 179 days
from the date of such notice; and (iii) such Debt may not (x) provide for
payments of principal of such Debt at the stated maturity thereof or by way of
a sinking fund applicable thereto or by way of any mandatory redemption,
defeasance, retirement or repurchase thereof by the Company (including any
redemption, retirement or repurchase which is
51
contingent upon events or circumstances, but excluding any retirement required
by virtue of acceleration of such Debt upon an event of default thereunder),
in each case prior to the final Stated Maturity of the Notes or (y) permit
redemption or other retirement (including pursuant to an offer to purchase
made by the Company) of such other Debt at the option of the holder thereof
prior to the final Stated Maturity of the Notes, other than a redemption or
other retirement at the option of the holder of such Debt (including pursuant
to an offer to purchase made by the Company) which is conditioned upon the
change of control of the Company pursuant to provisions substantially similar
to those contained in the Indenture.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (ii) any
other Person (other than a corporation) in which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority
ownership and power to direct the policies, management and affairs thereof.
For purposes of Clause (iii) of "Limitation on Restricted Payments," a joint
venture of which the Company, directly or indirectly, owns 50% of the equity
and voting interests and another Person (or group of Persons which acts
together in relation to such joint venture) owns the other 50% of the equity
and voting interests shall be deemed a Subsidiary of the Company. "Subsidiary"
shall not include an Unrestricted Subsidiary created in accordance with the
definition of "Unrestricted Subsidiary".
"Tangible Assets" of any Person means, at any date, the gross book value as
shown by the accounting books and records of such Person of all its property,
both real and personal, less (i) the net book value of all its licenses,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
non-compete agreements or organizational expenses and other like intangibles,
(ii) unamortized Debt discount and expense, (iii) all reserves for
depreciation, obsolescence, depletion and amortization of its properties and
(iv) all other proper reserves which in accordance with generally accepted
accounting principles should be provided in connection with the business
conducted by such Person; provided, however, that, with respect to the Company
and its Consolidated Subsidiaries, effect shall not be given to adjustments
following the date of the Indenture to the accounting books and records of the
Company and its Consolidated Subsidiaries in accordance with Accounting
Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or
otherwise resulting from the acquisition of control of the Company by another
Person.
"Unrestricted Subsidiary" means (1) any Subsidiary designated as such by the
Board of Directors as set forth below where (a) neither the Company nor any of
its other Subsidiaries (other than another Unrestricted Subsidiary) (i)
provides credit support for, or Guarantee of, any Debt of such Subsidiary
(including any undertaking, agreement or instrument evidencing such Debt) or
(ii) is directly or indirectly liable for any Debt of such Subsidiary, and (b)
no default with respect to any Debt of such Subsidiary (including any right
which the holders thereof may have to take enforcement action against such
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Debt of the Company and its other Subsidiaries (other than another
Unrestricted Subsidiary) to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity, and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any newly acquired or newly formed Subsidiary to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, any other Subsidiary of the Company
which is not a Subsidiary of the Subsidiary to be so designated or otherwise
an Unrestricted Subsidiary, provided, that (x) the Subsidiary to be so
designated has total assets of $1 million or less or (y) immediately after
giving effect to such designation, the Company could Incur at least $1.00 of
additional Debt pursuant to the first paragraph under "Limitation on Company
Debt" and provided, further, that the Company could make a Restricted Payment
in an amount equal to the fair market value of such Subsidiary pursuant to the
provisions of the Indenture described under
52
"Limitation on Restricted Payments" and such amount is thereafter treated as a
Restricted Payment for the purpose of calculating the aggregate amount
available for Restricted Payments thereunder. The Board of Directors may
designate any Unrestricted Subsidiary to be a Subsidiary, provided that,
immediately after giving effect to such designation, the Company could Incur
at least $1.00 of additional Debt pursuant to the first paragraph under
"Limitation on Company Debt." Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy
of the resolution of the Board of Directors giving effect to such designation
and an Officers' Certificate certifying that such designation complied with
the foregoing conditions.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person. For purposes
of this definition, AMETEK Hong Kong shall be deemed to be a Wholly Owned
Subsidiary of the Company so long as the Company owns, directly or indirectly,
at least 98% of the outstanding capital stock and voting interests thereof.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of (or premium, if any, on) any Note when due; (b) failure to
pay any interest on any Note when due, continued for 30 days; (c) default in
the payment of principal and interest on Notes required to be purchased
pursuant to an Offer to Purchase as described under "Change of Control" when
due and payable; (d) failure to perform or comply with the provisions
described under "Merger, Consolidation and Certain Sales of Assets"; (e)
failure to perform any other covenant or agreement of the Company under the
Indenture or the Notes continued for 30 days after written notice to the
Company by the Trustee or Holders of at least 25% in aggregate principal
amount of Outstanding Notes; (f) default under the terms of any instrument
evidencing or securing Debt for money borrowed by the Company or any
Significant Subsidiary having an outstanding principal amount of $10 million
individually or in the aggregate which results in the acceleration of the
payment of such Debt which acceleration remains uncured for 10 days or
constitutes the failure to pay any portion of principal of such Debt when due
at the final maturity of such Debt; (g) the rendering of a final judgment or
judgments (not subject to appeal) against the Company or any Significant
Subsidiary in an amount in excess of $10 million which remains undischarged or
unstayed for a period of 60 days after the date on which the right to appeal
has expired; and (h) certain events of bankruptcy, insolvency or
reorganization affecting the Company or any Significant Subsidiary. ((S) 501)
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default (as defined) shall occur and be
continuing, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
indemnity. ((S) 603) Subject to such provisions for the indemnification of the
Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. ((S) 512)
If an Event of Default (other than an Event of Default described in Clause
(h) above) shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Notes may
accelerate the maturity of all Notes; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in
53
aggregate principal amount of Outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the non-payment of accelerated principal, have been cured or waived
as provided in the Indenture. If an Event of Default specified in Clause (h)
above occurs, the Outstanding Notes will ipso facto become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. ((S) 502) For information as to waiver of defaults, see "Modification
and Waiver".
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder
shall have previously given to the Trustee written notice of a continuing
Event of Default (as defined) and unless also the Holders of at least 25% in
aggregate principal amount of the Outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the Outstanding Notes a
direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. ((S) 507) However, such limitations do not
apply to a suit instituted by a Holder of a Note for enforcement of payment of
the principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note. ((S) 508)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by it of certain of its obligations under the Indenture
and as to any default in such performance. ((S) 1017)
DEFEASANCE
The Indenture provides that (A) if applicable, the Company will be
discharged from any and all obligations in respect of the outstanding Notes
other than certain obligations to transfer the Notes or (B) if applicable, the
Company may omit to comply with certain restrictive covenants in the Indenture
and that such omission will not be deemed to be an Event of Default under the
Indenture and the Notes, in either case (A) or (B), upon irrevocable deposit
with the Trustee, in trust, of money and/or U.S. Government Obligations which
will provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent certified public accountants to pay the
principal of and premium, if any, and each installment of interest, if any, on
the outstanding Notes. With respect to Clause (B), the obligations under the
Indenture other than with respect to such covenants and the Events of Default
other than the Events of Default relating to such covenants above will remain
in full force and effect. Such trust may only be established if, among other
things (i) with respect to Clause (A), the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or there has been
a change in law, which in the opinion of counsel provides that Holders of the
Notes will not recognize gain or loss for Federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to
Federal income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit, defeasance and discharge
had not occurred; or, with respect to Clause (B), the Company has delivered to
the Trustee an opinion of counsel (which may be based on an IRS Ruling) to the
effect that the Holders of the Notes will not recognize gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and
will be subject to Federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and
defeasance had not occurred; (ii) no Event of Default or event that with the
passing of time or the giving of notice, or both, shall constitute an Event of
Default shall have occurred or be continuing; (iii) the Company has delivered
to the Trustee an opinion of counsel to the effect that such deposit shall not
cause the Trustee or the trust so created to be subject to the Investment
Company Act of 1940; and (iv) certain other customary conditions precedent are
satisfied. (Article Twelve)
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of New
York.
54
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, (b) reduce the
principal amount of (or the premium) or interest on, any Note, (c) change the
place or currency of payment of principal of (or premium) or interest on, any
Note, (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Note, (e) reduce the above-stated percentage
of Outstanding Notes necessary to modify or amend the Indenture, (f) reduce
the percentage of aggregate principal amount of Outstanding Notes necessary
for waiver of compliance with certain provisions of the Indenture or for
waiver of certain defaults, (g) modify any provisions of the Indenture
relating to the modification and amendment of the Indenture or the waiver of
past defaults or covenants, except as otherwise specified, or (h) following
the mailing of any Offer to Purchase, modify any Offer to Purchase for the
Notes required under the "Change of Control" covenant contained in the
Indenture in a manner materially adverse to the Holders thereof. ((S) 902)
The Holders of a majority in aggregate principal amount of the Outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by the Company
with certain restrictive provisions of the Indenture. ((S) 1018) Subject to
certain rights of the Trustee, as provided in the Indenture, the Holders of a
majority in aggregate principal amount of the Outstanding Notes, on behalf of
all Holders of Notes, may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest or a default arising
from failure to purchase any Note tendered pursuant to an Offer to Purchase.
((S) 513)
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. ((S)(S) 601 and 605)
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim
as security or otherwise. The Trustee is permitted to engage in other
transactions with the Company or any Affiliate, provided, however, that if it
acquires any conflicting interest (as defined in the Indenture or in the Trust
Indenture Act), it must eliminate such conflict or resign. ((S) 608) It is
contemplated that the Trustee will be among the lenders and one of the co-
agents for the lenders under the Credit Agreement.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to Goldman, Sachs & Co. ("Goldman Sachs"), and
Goldman Sachs have agreed to purchase from the Company, the entire principal
amount of the Notes.
Under the terms and conditions of the Underwriting Agreement, Goldman Sachs
are committed to take and pay for all of the Notes, if any are taken.
55
Goldman Sachs propose to offer the Notes in part directly to retail
purchasers at the initial public offering price set forth on the cover page of
this Prospectus and in part to certain dealers at such price less a concession
of % of the principal amount of the Notes. Goldman Sachs may allow, and such
dealers may reallow, a concession not to exceed % of the principal amount of
the Notes to certain brokers and dealers. After the Notes are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by Goldman Sachs.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by Goldman Sachs that they intend to make a
market in the Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes. The Notes have been approved
for listing on the New York Stock Exchange, subject to notice of issuance.
The Company has agreed to indemnify Goldman Sachs against certain
liabilities, including liabilities under the Securities Act.
If the Company proceeds with a tender offer in connection with the
repurchase of its outstanding shares of Common Stock, Goldman Sachs may serve
as Dealer Managers for such tender offer.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Stroock &
Stroock & Lavan, New York, New York, general counsel to the Company, and for
Goldman Sachs by Sullivan & Cromwell, New York, New York. Such counsel will
express no opinion as to federal or state laws relating to fraudulent
transfers. See "Risk Factors--Fraudulent Conveyance."
Lewis G. Cole, a Director of the Company, is a member of Stroock & Stroock &
Lavan and beneficially owns 10,000 shares and is a co-trustee of trusts
owning, collectively, 682,088 shares of the Company's Common Stock. See
"Management." Wallace E. Cowan, Of Counsel to Stroock & Stroock & Lavan,
retired as a Director and Secretary of the Company, effective April 27, 1993,
and is the beneficial owner of 16,000 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of Ametek at December 31, 1993 and
1992, and for each of the three years in the period ended December 31, 1993,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young, independent auditors, as set forth in their reports thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
56
AMETEK, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors........................................... F-2
Consolidated Statement of Income for the years ended December 31, 1993,
1992 and 1991........................................................... F-3
Consolidated Balance Sheet at December 31, 1993 and 1992................. F-4
Consolidated Statement of Cash Flows for the years ended December 31,
1993, 1992 and 1991..................................................... F-5
Notes to Consolidated Financial Statements............................... F-6
F-1
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheets of AMETEK, Inc.
as of December 31, 1993 and 1992, and the related consolidated statements of
income and cash flows for each of the three years in the period ended December
31, 1993. 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, 1993 and 1992, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles.
Ernst & Young
Philadelphia, PA
February 9, 1994
F-2
AMETEK, INC.
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Net sales............................... $ 732,195 $ 769,550 $ 715,099
----------- ----------- -----------
Expenses:
Cost of sales, excluding depreciation
(Note 2)............................. 582,001 583,357 546,479
Selling, general and administrative... 76,759 77,690 74,038
Depreciation.......................... 28,277 29,360 28,277
Resizing and restructuring charges
(Note 2)............................. 45,089 -- --
----------- ----------- -----------
732,126 690,407 648,794
----------- ----------- -----------
Operating income........................ 69 79,143 66,305
Other income (expenses):
Interest expense...................... (17,603) (19,721) (22,079)
Other, net (Note 11) 6,337 7,297 8,152
----------- ----------- -----------
Income (loss) before income taxes....... (11,197) 66,719 52,378
Provision for (benefit from) income
taxes (Note 8)......................... (3,865) 22,362 14,392
----------- ----------- -----------
Net income (loss)....................... $ (7,332) $ 44,357 $ 37,986
=========== =========== ===========
Earnings (loss) per share............... $ (.17) $ 1.01 $ .87
=========== =========== ===========
Average common shares outstanding....... 43,901,767 44,095,057 43,887,631
=========== =========== ===========
See accompanying notes.
F-3
AMETEK, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
DECEMBER 31,
------------------
1993 1992
-------- --------
ASSETS
Current assets:
Cash and cash equivalents (Notes 1 and 10)............... $ 40,468 $ 59,138
Marketable securities (Notes 1 and 10)................... 44,191 56,480
Receivables, less allowance for possible losses of $2,399
in 1993 and $2,392 in 1992.............................. 108,068 107,130
Inventories (Notes 1 and 4).............................. 91,894 91,043
Deferred income taxes (Note 8)........................... 13,346 8,350
Other current assets..................................... 4,100 5,684
-------- --------
Total current assets................................... 302,067 327,825
Property, plant and equipment, net (Note 4)................ 184,809 185,997
Other assets (Notes 4, 9 and 10)........................... 75,787 89,267
-------- --------
$562,663 $603,089
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 54,374 $ 55,558
Income taxes (Note 8).................................... 11,136 8,333
Accrued liabilities (Note 4)............................. 87,851 53,980
Current portion of long-term debt........................ 14,543 19,749
-------- --------
Total current liabilities.............................. 167,904 137,620
Long-term debt (Notes 5, 10 and 12)........................ 172,429 187,173
Deferred income taxes and credits (Note 8)................. 27,948 42,731
Other long-term liabilities (Note 9)....................... 29,056 25,293
Stockholders' equity: (Notes 6 and 12)
Preferred stock, $1.00 par value, authorized: 5,000,000
shares; none issued..................................... -- --
Common stock, $1.00 par value, authorized: 100,000,000
shares; issued: 1993 and 1992--46,414,317 shares........ 46,414 46,414
Capital in excess of par value........................... 6,389 5,679
Retained earnings........................................ 161,297 193,724
-------- --------
214,100 245,817
Net unrealized losses.................................... (21,632) (16,429)
Less: Cost of shares held in treasury: 1993--2,774,672;
1992--2,199,672 shares.................................. (27,142) (19,116)
-------- --------
Total stockholders' equity............................. 165,326 210,272
-------- --------
$562,663 $603,089
======== ========
See accompanying notes.
F-4
AMETEK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
Cash provided by (used for):
Operating activities:
Net income (loss).............................. $ (7,332) $ 44,357 $ 37,986
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization................. 35,907 37,263 36,455
Deferred income taxes and credits............. (19,970) 1,814 2,850
Resizing, restructuring and other unusual
charges...................................... 50,898 -- --
Changes in operating working capital:
(Increase) decrease in receivables........... (633) 2,940 (11,754)
(Increase) decrease in inventories and other
current assets.............................. (1,035) 2,969 10,310
Increase (decrease) in payables, accruals and
income taxes................................ 8,704 (5,228) 11,374
Other......................................... (1,288) (5,529) (4,034)
-------- -------- --------
Total operating activities................... 65,251 78,586 83,187
-------- -------- --------
Investing activities:
Additions to property, plant and equipment..... (38,324) (23,990) (18,808)
Purchase of businesses and investments......... (16,585) (16,992) (25,526)
Decrease (increase) in marketable securities... 14,998 15,965 (40,118)
Proceeds from sale of investments.............. 7,795 12,806 9,778
Other.......................................... 244 781 (2,984)
-------- -------- --------
Total investing activities................... (31,872) (11,430) (77,658)
-------- -------- --------
Financing activities:
Cash dividends paid............................ (25,095) (29,991) (28,990)
Additional long-term borrowings................ -- 3,755 --
Repayment of long-term debt.................... (19,411) (20,041) (23,785)
Net change in short-term borrowings............ -- -- (5,608)
Purchase of treasury stock..................... (8,878) -- --
Proceeds from issuance of common stock......... 1,335 3,388 831
-------- -------- --------
Total financing activities................... (52,049) (42,889) (57,552)
-------- -------- --------
(Decrease) increase in cash and cash equivalents. (18,670) 24,267 (52,023)
Cash and cash equivalents:
Beginning of year.............................. 59,138 34,871 86,894
-------- -------- --------
End of year.................................... $ 40,468 $ 59,138 $ 34,871
======== ======== ========
See accompanying notes.
F-5
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.
Cash Equivalents, Securities and Other Investments
All highly liquid investments with maturities of three months or less when
purchased are cash equivalents. Cash equivalents and fixed income marketable
securities (primarily U.S. Government securities), are carried at the lower of
cost or market. Marketable equity investments of an insurance subsidiary are
carried at market value, and unrealized gains and losses are recognized in
stockholders' equity. Other fixed income investments are carried at cost,
which approximates market.
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 $29.4 million and $29.9 million at December 31, 1993 and
1992.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for additions
to plant facilities, or which extend their useful lives, are capitalized. The
cost of tools, jigs and dies, and maintenance and repairs are 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.
Research and Development
Company-funded research and development costs are charged to operations as
incurred and during the past three years were: 1993-$15.1 million, 1992-$14.7
million, and 1991-$12.1 million.
Foreign Currency Translation
Assets and liabilities of foreign operations are translated using exchange
rates in effect at the balance sheet date, and their operations are translated
using average exchange rates for the period.
Some transactions of the Company and its subsidiaries are made in currencies
other than their own. Gains and losses from these transactions (not material
in amount) are included in operating results for the period. Additionally,
foreign exchange contracts and foreign currency options are sometimes used to
hedge firm commitments for certain export sales transactions. Gains and losses
from these agreements are deferred and reflected as adjustments of the
associated export sales.
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.
Reclassifications
Certain amounts in the prior years' financial statements and supporting
footnote disclosures have been reclassified to conform to the current year's
presentation.
F-6
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. BUSINESS RESTRUCTURING AND OTHER UNUSUAL CHARGES
Results of operations for 1993 includes charges of $45.1 million ($27.5
million after tax, or $.63 per share) for costs associated with resizing and
restructuring several of the Company's businesses and a charge of $9.8 million
($6 million after tax, or $.14 per share) for other unusual expenses. Most of
the charges were recorded in the fourth quarter of 1993. These charges were
for planned work force reductions and those which occurred in 1993 (including
certain pension related costs) ($21.4 million); asset write-downs ($15.0
million); relocation of certain product lines and overall consolidation of the
Company's aerospace operations ($14.2 million); and other unusual expenses
($4.3 million). The resizing and restructuring charges primarily relate to the
unwillingness of the union at a Precision Instruments facility in
Sellersville, Pennsylvania to agree on wage and work rule concessions
requested by the Company necessary to make that operation competitive.
3. ACQUISITIONS
In March 1993, the Company purchased certain assets of Revere Aerospace Inc.
("Revere"), a United States subsidiary of Dobson Park Industries PLC, United
Kingdom, for approximately $7.0 million in cash. Revere is a producer of
thermocouple and fiber optic cable assemblies.
In February 1992, the Company purchased the Tencal operations of Cambridge-
Lee Industries. Tencal is a producer of small electric motors and injection-
molded plastic components. In August 1992, the Company purchased the
industrial filtration operation of Eurofiltec, Ltd. Early in October 1992, the
Company purchased Debro Messtechnik GmbH, an instrument manufacturer located
in Germany. Also, during 1992, the Company acquired two product lines
consisting of silica fiber technology, and consumer filtration products. The
cost of these acquisitions was $11.7 million and the Company assumed $3.8
million in debt.
In April 1991, the Company purchased Jofra Instruments, a Danish producer of
temperature calibration equipment, and acquired the remaining 38% interest in
Elettromotori Crema, one of its Italian electric motor manufacturers. Also,
during 1991, the Company purchased product lines of consumer drinking water
filters and custom-shaped alloy wire. The aggregate cost of these acquisitions
was $10.5 million in cash and a two-year, 10% installment obligation of $4.5
million.
All of the above acquisitions have been accounted for by the purchase method
and, accordingly, the results of their operations are included from the
respective acquisition dates. The above acquisitions would not have had a
material effect on sales or earnings for 1993, 1992 or 1991 had they been made
at the beginning of the year prior to their acquisition.
F-7
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. BALANCE SHEET INFORMATION
(IN THOUSANDS)
-----------------------
1993 1992
-----------------------
INVENTORIES
Finished goods and parts................................ $ 32,410 $ 35,064
Work in process......................................... 23,683 22,873
Raw materials and purchased parts....................... 35,801 33,106
---------- ----------
$ 91,894 $ 91,043
========== ==========
PROPERTY, PLANT AND EQUIPMENT
Land.................................................... $ 7,926 $ 7,799
Buildings............................................... 95,393 89,211
Machinery and equipment................................. 281,116 269,189
---------- ----------
384,435 366,199
Less accumulated depreciation........................... (199,626) (180,202)
---------- ----------
$ 184,809 $ 185,997
========== ==========
OTHER ASSETS
Intangibles, at cost:
Patents................................................ $ 28,083 $ 27,993
Excess of cost over net assets acquired................ 15,976 18,767
Other acquired intangibles............................. 40,284 39,127
Less accumulated amortization.......................... (46,358) (38,980)
---------- ----------
37,985 46,907
Investments............................................. 23,755 19,919
Other................................................... 14,047 22,441
---------- ----------
$ 75,787 $ 89,267
========== ==========
Patents are being amortized on a straight-line basis over 7 to 14 years. The ex-
cess of cost over net assets acquired is being amortized on a straight-line ba-
sis over 20 to 30 years. Other acquired intangibles are being amortized on a
straight-line basis over 2 to 30 years.
ACCRUED LIABILITIES
Accrued employee compensation and benefits.............. $ 19,109 $ 19,657
Resizing and restructuring.............................. 24,471 --
Accrued interest........................................ 4,928 5,744
Other................................................... 39,343 28,579
---------- ----------
$ 87,851 $ 53,980
========== ==========
5. LONG-TERM DEBT
At December 31, 1993 and 1992, long-term debt consisted of:
(IN THOUSANDS)
-----------------------
1993 1992
-----------------------
8.95% notes payable due 1995 to 2001...................... $ 93,500 $ 106,750
9.35% notes payable due 1995 to 2004...................... 75,000 75,000
Other, due in varying amounts to 2004..................... 3,929 5,423
---------- ----------
$ 172,429 $ 187,173
========== ==========
F-8
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The annual future payments required by the terms of the long-term debt for
the following years are: 1995-$21.3 million; 1996-$21.3 million; 1997-$21.1
million; and 1998-$21.1 million. The Company's debt agreements contain
restrictions relating to total debt, working capital, dividends and capital
stock repurchases. At December 31, 1993, the Company was in compliance with
these restrictions. (See Note 12 "Other Matters.")
The Company has a revolving credit agreement with a group of banks providing
for up to $83 million effective until June 30, 1995. No borrowings are
outstanding under this agreement. The agreement provides for various interest
alternatives and a commitment fee on the unused portion of the credit line.
(See Note 12 "Other Matters.") In addition, the Company maintains lines of
credit in other currencies with various European banks in amounts equivalent
to $12.1 million, in the aggregate, at December 31, 1993.
At December 31, 1993, the Company was a party to a currency and interest
rate swap agreement related to debt (not material in amount), which matures in
1997, of a European subsidiary.
6. STOCKHOLDERS' EQUITY
The Company has a Shareholder Rights Plan, under which the Board of
Directors declared a dividend of one Right for each share of Company common
stock owned. The Plan provides, under certain conditions involving acquisition
of the Company's common stock, that holders of Rights, except for the
acquiring entity, would be entitled (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.
The Company provides, among other things, for restricted stock awards of
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. These shares are issued subject to certain
conditions, and transfer and other restrictions as prescribed by the Plan. In
1993 and 1991, respectively, the Company awarded 20,000 shares and 100,000
shares of restricted common stock to certain directors under the Plan. No
restricted stock was awarded during 1992. Also, in 1991, a total of 68,272
shares of restricted common stock was awarded to certain executives of the
Company in accordance with a supplemental pension benefit arrangement. 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 charged
to expense in 1993, 1992, and 1991 was not significant.
At December 31, 1993, 4,732,053 (5,442,993 in 1992) shares of common stock
were reserved under the Company's incentive and nonqualified stock option
plans. The options are exercisable at prices not less than market value on
dates of grant, and in installments over five- to seven-year periods from such
dates.
Information on options for 1993 follows:
PRICE RANGE SHARES
------------- ---------
Outstanding at beginning of year...................... $ 8.94-$16.50 2,116,289
Granted............................................... 13.13- 14.94 93,000
Exercised............................................. 11.69- 14.06 (136,973)
Cancelled............................................. 11.69- 15.75 (26,091)
------------- ---------
Outstanding at end of year (expiring from 1994 through
2000)................................................ $ 8.94-$16.50 2,046,225
============= =========
Exercisable at end of year............................ $ 8.94-$16.50 1,344,215
============= =========
F-9
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Options on 259,486 shares were exercised in 1992 and no options were
exercised in 1991.
The Company also has outstanding 293,502 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 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.
Changes in stockholders' equity are summarized below (In thousands):
COMMON CAPITAL IN NET
STOCK, EXCESS OF RETAINED UNREALIZED TREASURY
$1 PAR VALUE PAR VALUE EARNINGS GAINS (LOSSES) STOCK
------------ ---------- -------- -------------- --------
BALANCE, DECEMBER 31,
1990................... $46,414 $3,598 $170,362 $ 1,498 $(22,460)
------- ------ -------- -------- --------
Employee savings plan
(59,000 shares)........ 236 494
Net income.............. 37,986
Cash dividends paid
($.66 per share)....... (28,990)
Currency translation.... 1,179
Restricted stock awards
(168,272 shares)....... 594 379
Adjustment of pension
liability in excess of
unrecognized prior
service cost, net of
deferred taxes......... 189
------- ------ -------- -------- --------
BALANCE, DECEMBER 31,
1991................... 46,414 4,428 179,358 2,866 (21,587)
------- ------ -------- -------- --------
Employee stock options
and savings plan
(255,151 shares)....... 1,251 2,137
Net income.............. 44,357
Cash dividends paid
($.68 per share)....... (29,991)
Currency translation.... (16,127)
Amortization of
restricted stock
awards................. 334
Adjustment of pension
liability in excess of
unrecognized prior
service cost, net of
deferred taxes......... (3,168)
------- ------ -------- -------- --------
BALANCE, DECEMBER 31,
1992................... 46,414 5,679 193,724 (16,429) (19,116)
------- ------ -------- -------- --------
Employee Stock Options
and Savings Plan
(88,400 shares)........ 571 744
Net loss................ (7,332)
Cash dividends paid
($.57 per share)....... (25,095)
Currency translation.... (7,958)
Restricted stock awards
(20,000 shares)........ 139 (119)
Amortization of
restricted stock
awards................. 227
Purchase of treasury
stock (683,400 shares). (8,878)
Appreciation in
marketable securities
and other financial
instruments, net of
deferred taxes......... 3,262
Adjustment of pension
liability in excess of
unrecognized prior
service cost, net of
deferred taxes......... (507)
------- ------ -------- -------- --------
BALANCE AT DECEMBER 31,
1993................... $46,414 $6,389 $161,297 $(21,632) $(27,142)
======= ====== ======== ======== ========
F-10
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LEASES
Minimum aggregate rental commitments under noncancellable leases in effect
at December 31, 1993 (principally for real property, office space and
equipment) amounted to $4.9 million consisting of annual payments of $2.4
million due in 1994, $1.8 million in 1995 and decreasing amounts thereafter.
Rental expense of $5 million, $4 million and $4.1 million was charged to
income in 1993, 1992 and 1991.
8. INCOME TAXES
In 1993, income before income taxes from foreign operations amounted to $6.7
million ($9.1 million in 1992 and $4.9 million in 1991).
The details of the provision for (benefit from) income taxes follow:
(IN THOUSANDS)
------------------------
1993 1992 1991
------- ------- -------
Federal.............................................. $(7,125) $16,357 $13,288
State................................................ (863) 1,327 2,547
Foreign.............................................. 4,123 4,678 (1,443)*
------- ------- -------
$(3,865) $22,362 $14,392
======= ======= =======
- --------
*Includes the favorable tax effect of combining certain foreign operations.
The provision for (benefit from) income taxes shown above includes a current
provision of $14,791, $20,435 and $14,284 and a deferred provision (benefit)
of $(18,656), $1,927 and $108 for 1993, 1992 and 1991.
Prior to January 1, 1992, the Company followed the provisions of SFAS No.
96, Accounting for Income Taxes. Effective January 1, 1992, the Company
adopted the provisions of a new accounting standard for income taxes (SFAS No.
109). The effect of adopting this standard was not material.
Significant components of the Company's deferred tax (asset) liability as of
December 31 are as follows:
(IN THOUSANDS)
-----------------
1993 1992
-------- -------
Current deferred tax assets:
Reserves not currently deductible......................... $(13,235) $(8,142)
Other..................................................... (111) (208)
-------- -------
Net current deferred tax asset.......................... (13,346) (8,350)
-------- -------
Long-term deferred tax (assets) liabilities:
Differences in basis of property and accelerated deprecia-
tion..................................................... 23,056 23,220
Purchased tax benefits.................................... 17,654 18,452
Reserves not currently deductible......................... (17,015) (3,763)
Other..................................................... 4,253 4,822
-------- -------
Net long-term deferred tax liability.................... 27,948 42,731
-------- -------
Net deferred tax liability.............................. $ 14,602 $34,381
======== =======
F-11
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The effective rate of the provision for (benefit from) income taxes
reconciles to the statutory rate as follows:
1993 1992 1991
----- ---- ----
Statutory rate.............................................. (35.0)% 34.0% 34.0%
State income taxes, net of federal income tax benefit....... (5.0) 2.2 2.8
Foreign Sales Corporation and other tax credits............. (15.0) (2.4) (2.9)
Effect of foreign operations................................ 15.0 1.1 (6.8)
Effect of U.S. federal statutory tax rate increase
on prior years' deferred taxes............................. 5.9 -- --
Other....................................................... (0.4) (1.4) 0.4
----- ---- ----
(34.5)% 33.5% 27.5%
===== ==== ====
9. RETIREMENT AND PENSION PLANS
The Company maintains noncontributory defined benefit retirement and pension
plans, with benefits for eligible United States salaried and hourly employees
funded through trusts established in conjunction with these plans. Employees
of certain foreign operations participate in various local plans which in the
aggregate are not significant.
The Company also has nonqualified unfunded retirement plans for its
directors and certain retired employees, and contractual arrangements with
certain 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 these arrangements by charges to earnings over the periods to
age 65 of the participants.
The Company's funding policy with respect to its qualified plans is to
contribute amounts determined annually on an actuarial basis that provides for
current and future benefits in accordance with 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.
Net pension expense, excluding plan administrative expenses, consists of the
following components:
(IN THOUSANDS)
----------------------------
1993 1992 1991
-------- -------- --------
Service cost for benefits earned during the peri-
od.............................................. $ 6,902 $ 6,601 $ 5,662
Interest cost on projected benefit obligation.... 14,374 13,106 12,108
Actual return on plan assets..................... (15,605) (14,452) (26,254)
Net amortization and deferrals................... 652 673 15,025
-------- -------- --------
Net pension expense.............................. $ 6,323 $ 5,928 $ 6,541
======== ======== ========
In addition to pension expense shown above, in 1993 the Company also
recorded a charge for curtailments of $7.6 million related to an hourly
pension plan as part of the resizing and restructuring of its general gauge
and aerospace operations (see Note 2).
The charge to income for all retirement and pension plans, including the
1993 curtailment provision, was $14.4 million in 1993, $6.7 million in 1992
and $7.2 million in 1991.
F-12
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net pension expense reflects an expected long-term rate of return on plan
assets of 9 1/2% for 1993, 1992 and 1991. The actual return has been adjusted
to defer gains or losses which differ from the expected return. The present
value of projected benefit obligations was determined using an assumed
discount rate of 7 1/4% for 1993, 8.0% for 1992 and 8 1/4% for 1991. The
assumed rate of compensation increase used in determining the present value of
projected benefit obligations was 5 1/2% for 1993 and 1992 and 6.0% for 1991.
For pension plans with accumulated benefits in excess of assets at December
31, 1993, the balance sheet reflects an additional long-term pension liability
of $11.0 million ($17.2 million--1992), a long-term intangible asset of $3.7
million ($10.8 million--1992), and a charge to stockholders' equity of $4.7
million ($4.2 million--1992 and $1.1 million--1991), net of a deferred tax
benefit, representing 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 Company provides limited postretirement benefits other than pensions to
certain retirees, and a small number of employees. These benefits are
accounted for on the accrual basis, thereby meeting accounting requirements of
the new accounting standard for postretirement benefits other than pensions.
The following table sets forth the funded status of the plans:
(IN THOUSANDS)
-----------------------------------------------
DECEMBER 31, 1993 DECEMBER 31, 1992
----------------------- -----------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
Actuarial present value of ben-
efit obligations:
Vested benefit obligation.... $113,823 $ 72,070 $ 95,563 $ 63,872
-------- -------- -------- --------
Accumulated benefit obliga-
tion........................ $117,875 $ 76,147 $ 98,433 $ 67,379
-------- -------- -------- --------
Projected benefit obligation. $136,340 $ 76,437 $113,988 $ 70,250
Plan assets at fair value...... 136,923 57,839 114,229 51,924
-------- -------- -------- --------
Plan assets in excess of (less
than) projected benefit obli-
gation........................ 583 (18,598) 241 (18,326)
Unrecognized prior service
cost.......................... 2,160 2,294 1,892 6,319
Unrecognized net loss.......... 9,214 8,275 11,518 8,350
Unrecognized net transition
(asset) obligation, net of am-
ortization.................... (5,433) 781 (6,637) 4,538
-------- -------- -------- --------
Prepaid (accrued) pension ex-
pense......................... $ 6,524 $ (7,248) $ 7,014 $ 881
======== ======== ======== ========
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amount of cash, cash equivalents and marketable securities, and
a derivative equity instrument approximates fair value.
F-13
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The estimated fair values of the Company's other financial instruments are
compared below to the recorded amounts at December 31.
ASSET (LIABILITY) (IN THOUSANDS)
-------------------------------------------
DECEMBER 31, 1993 DECEMBER 31, 1992
--------------------- ---------------------
RECORDED ESTIMATED RECORDED ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
--------- ---------- --------- ----------
Other investments.................. $ 23,755 $ 28,000 $ 19,919 $ 23,000
Long-term debt (including current
portion).......................... (186,972) (208,000) (206,922) (212,000)
Forward currency and commodity con-
tracts............................ -- 1,600 -- 11,000
The fair values of securities and other investments are based on quoted
market value. The fair value of long-term debt is estimated based on borrowing
rates currently available to the Company for loans with similar terms and
maturities. The fair value of forward currency and commodity contracts (used
for hedging purposes) is based on quotes from brokers for comparable
contracts. See also Note 12.
11. ADDITIONAL INCOME STATEMENT AND CASH FLOW INFORMATION
Included in other income, net, is interest and other investment income of
$8.4 million, $8.6 million and $11.2 million for 1993, 1992 and 1991. Income
taxes paid in 1993, 1992 and 1991 were $13.8 million, $21.8 million, and $13.0
million. Cash paid for interest for each of the three years approximated
interest expense.
12. OTHER MATTERS
The Company is in the process of implementing a plan intended to enhance
shareholder value, announced in November 1993. The financial elements of the
plan involve the Company 1) completing an offering of $150 million in
principal amount of Senior Notes to the public, 2) borrowing $175 million
under a proposed $250 million secured credit agreement with a group of banks
which will replace an existing revolving credit agreement, 3) retiring
existing debt aggregating $185.4 million in principal amount for a payment
equal to the principal amount thereof plus a prepayment premium of
approximately $13 million (after tax), 4) repurchasing outstanding shares of
its common stock for an aggregate purchase price of up to $150 million and 5)
reducing its quarterly dividend rate on its common stock from $.17 per share
to $.06 per share.
In contemplation of its repurchase of common stock, the Company has, from
time to time, entered into derivative instruments with a third party. Under
the terms of the derivative instruments, for a specific number of shares, the
Company is at risk for a decline in the market price of the Company's common
stock from the inception to the expiration date, at which time the instruments
will be settled in cash. As of December 31, 1993, the Company had entered into
derivative instruments which were measured by the movement in market value of
3,184,500 shares of common stock. At December 31, 1993, the Company has
recorded, in its equity, the effect of marking the derivative instruments to
market.
In February 1994, the Company settled all open derivative instruments for
approximately $330,000 (including those entered into in January 1994) and
entered into a new derivative instrument which will expire on May 31, 1994.
Under the new derivative instrument, the Company, prior to April 5, 1994, may
exercise an option to purchase 3,924,200 shares of its common stock from the
counterparty for $12.125 per share plus certain costs. If the option is not
exercised, the Company is at risk for a decline in the average market price,
as defined, of its common stock based upon 3,924,200 shares of common stock.
F-14
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SEGMENT AND GEOGRAPHIC INFORMATION
The Company classifies its operations into three business segments: Electro-
mechanical, Precision Instruments and Industrial Materials.
The Electro-mechanical Group produces motor-blower systems and injection-
molded components for manufacturers of floor care appliances, and 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 38% in 1993 (39% in 1992
and 35% in 1991) of the Company's consolidated net sales.
The Precision Instruments Group produces aircraft cockpit instruments and
displays, and pressure, temperature, flow and liquid level sensors for
aircraft and jet engine manufacturers and for airlines, as well as airborne
electronics systems to monitor and record flight and engine data. The group
also produces instruments and complete instrument panels for heavy truck
builders, 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 Precision Instruments Group
has for many years been a leading producer of the widely used mechanical
pressure gauge.
The Industrial Materials Group produces high-temperature-resistant materials
and textiles, corrosion-resistant heat exchangers, tanks and piping for
process systems; ultralightweight foam sheet packaging material; 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.
F-15
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SEGMENT AND GEOGRAPHIC FINANCIAL INFORMATION
(IN THOUSANDS)
Business Segments
ELECTRO- PRECISION INDUSTRIAL TOTAL
MECHANICAL INSTRUMENTS MATERIALS CORPORATE CONSOLIDATED
---------- ----------- ---------- --------- ------------
Net sales(1) 1993 $280,732 $275,351 $176,112 $732,195
1992 309,556 297,025 162,969 769,550
1991 249,763 309,901 155,435 715,099
------------------------------------------------------------------
-
Segment operating profit 1993 35,018 (30,643)(3) 18,284(4) $(33,856)(5) (11,197)
(loss) and consolidated 1992 49,912 28,045 22,096 (33,334)(5) 66,719
income (loss) before 1991 35,363 32,914 20,332 (36,231)(5) 52,378
income taxes(2)
------------------------------------------------------------------
-
Identifiable assets 1993 164,826 150,122 103,941 143,774 562,663
1992 157,158 177,143 102,385 166,403 603,089
1991 169,173 189,164 101,240 152,896 612,473
------------------------------------------------------------------
-
Additions to 1993 25,343 6,513 9,048 218 41,122
property, plant and 1992 20,706 7,417 5,170 236 33,529
equipment(6) 1991 11,735 6,917 5,969 82 24,703
------------------------------------------------------------------
-
Depreciation and 1993 11,582 15,432 8,726 167 35,907
amortization 1992 12,107 15,979 8,976 201 37,263
1991 11,169 15,705 9,399 182 36,455
Geographic Areas
INTERNATIONAL
---------------------
UNITED CANADA, ASIA TOTAL
STATES EUROPE AND OTHER CORPORATE CONSOLIDATED
-------- -------- ------------ --------- ------------
Net sales(1)............ 1993 $634,935 $ 96,030 $ 1,230 $732,195
1992 655,114 113,111 1,325 769,550
1991 614,890 98,378 1,831 715,099
------------------------------------------------------
-
Income (loss) before
income taxes........... 1993 15,473 7,357 (171) $(33,856) (11,197)
1992 87,665 12,601 (213) (33,334) 66,719
1991 81,531 6,855 223 (36,231) 52,378
------------------------------------------------------
-
Identifiable assets..... 1993 334,538 83,774 577 143,774 562,663
1992 342,226 93,580 880 166,403 603,089
1991 337,171 121,170 1,236 152,896 612,473
------------------------------------------------------
-
United States export
sales(7)............... 1993 51,179 54,500 105,679
1992 65,132 54,171 119,303
1991 59,612 52,023 111,635
- --------
(1) After elimination of intersegment sales and intercompany sales between
geographic areas, which are not significant in amount. Such sales are
generally priced based on prevailing market prices.
(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.
(3) Reflects charges of $47.8 million for resizing and restructuring costs
associated with planned work force reductions and those which occurred in
1993, asset write-downs, relocation of product lines and the overall
consolidation of the Company's aerospace operations, and other unusual
charges.
F-16
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) Reflects charge of $3.9 million primarily for asset write-downs.
(5) Includes unallocated administrative expenses, interest expense and net
other income and, in 1993, $2.8 million of restructuring and other unusual
charges.
(6) Includes $2.8 million in 1993, $9.5 million in 1992, and $5.9 million in
1991 from acquired businesses.
(7) Included in total United States sales above.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- --------
1993
Net sales.................. $187,114 $186,820 $175,003 $183,258 $732,195
Operating income (loss).... $ 12,514 $ 12,629 $ 6,490 $(31,564)(a) $ 69
Net income (loss).......... $ 6,096 $ 6,222 $ 1,980 $(21,630)(a) $(7,332)
Earnings (loss) per share.. $ 0.14 $ 0.14 $ 0.05 $ (0.50)(a) $ (0.17)
Dividends paid per share... $ 0.17 $ 0.17 $ 0.17 $ 0.06 $ 0.57
Common stock trading
range:(b)
High...................... 17 1/2 17 1/2 14 1/8 14 1/8 17 1/2
Low....................... 14 1/4 12 7/8 12 5/8 10 5/8 10 5/8
1992
Net sales.................. $196,759 $195,323 $185,996 $191,472 $769,550
Operating income........... $ 21,460 $ 20,618 $ 18,017 $ 19,048 $ 79,143
Net income................. $ 11,261 $ 11,808 $ 10,708 $ 10,580 $ 44,357
Earnings per share......... $ 0.26 $ 0.26 $ 0.25 $ 0.24 $ 1.01
Dividends paid per share... $ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.68
Common stock trading
range:(b)
High...................... 17 3/8 18 1/8 16 16 3/8 18 1/8
Low....................... 13 1/8 15 1/8 14 5/8 13 7/8 13 1/8
- --------
(a) Includes pre-tax charges of $46.9 million ($28.6 million after tax or $.66
per share) for restructuring and other unusual items.
(b) Trading ranges are based on the New York Stock Exchange composite tape.
F-17
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------
TABLE OF CONTENTS
PAGE
----
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
The Company............................................................... 12
Use of Proceeds........................................................... 13
Capitalization............................................................ 14
Selected Financial Data................................................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 17
Business.................................................................. 23
The Credit Agreement...................................................... 33
Management................................................................ 36
Description of the Notes.................................................. 38
Underwriting.............................................................. 55
Validity of the Notes..................................................... 56
Experts................................................................... 56
Index to Consolidated Financial Statements................................ F-1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$150,000,000
[LOGO OF AMETEK, INC. APPEARS HERE]
% SENIOR NOTES
DUE 2006
------------
PROSPECTUS
------------
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The fees and expenses in connection with the issuance and distribution of
the securities being registered hereunder, other than underwriting discounts
and commissions, are estimated as follows:
Securities and Exchange Commission registration fee.............. $ 51,724.50
National Association of Securities Dealers, Inc. filing fee...... 15,500.00
Rating Agency fees............................................... 82,500.00
Printing and engraving expenses.................................. 222,500.00
Legal fees and expenses.......................................... 275,000.00
Accounting fees and expenses..................................... 168,000.00
Blue Sky fees and expenses....................................... 18,000.00
Trustee's fees and expenses...................................... 15,750.00
Miscellaneous.................................................... 51,025.50
-----------
Total........................................................ $900,000.00
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides, in summary, that directors and officers of Delaware
corporations are entitled, under certain circumstances, to be indemnified
against all expenses and liabilities (including attorneys' fees) incurred by
them as a result of suits brought against them in their capacity as a director
or officer, if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe their conduct was unlawful; provided, that no indemnification
may be made against expenses in respect of any claim, issue or matter as to
which they shall have been adjudged to be liable to the corporation, unless
and only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, they are fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper. Any such indemnification may be made by the corporation only as
authorized in each specific case upon a determination by the stockholders or
disinterested directors that indemnification is proper because the indemnitee
has met the applicable standard of conduct.
Article Eighth of the Registrant's Certificate of Incorporation provides
that no director shall have any personal liability to the Registrant or its
stockholders for any monetary damages for breach of fiduciary duty as a
director, provided, however, that such provision does not limit or eliminate
the liability of any director (i) for breach of such director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL (involving certain unlawful
dividends or stock repurchases) or (iv) for any transaction from which such
director derived an improper personal benefit.
The Registrant maintains directors' and officers' liability insurance which
covers the directors and officers of the Registrant with policy limits of $75
million.
Pursuant to Indemnity Agreements between the Registrant and its directors
and officers, the Registrant has agreed to indemnify such directors and
officers to the fullest extent permitted by Delaware law, as the same may be
amended from time to time.
II-1
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
1 --Form of Underwriting Agreement between the Registrant and the
Underwriters.
4.1 --Form of Indenture to be dated as of , 1994 between the Registrant
and Corestates Bank N.A., as Trustee (including the form of %
Senior Notes due 2006).
5 --Opinion of Stroock & Stroock & Lavan as to the legality of the Notes.
12.1 --Statement Regarding Computation of Ratio of Earnings to Fixed
Charges.
23.1 --Consent of Stroock & Stroock & Lavan (included in Exhibit 5).
23.2 --Consent of Ernst & Young.
24 --Power of attorney (included on p. II-4 of the Registration
Statement).
25.1 --Form T-1 Statement of Eligibility and Qualification of Corestates
Bank N.A.
(b) Financial Statement Schedules
Schedules for each of the three years in the period ended December 31, 1993
(except where otherwise indicated):
Report of Independent Auditors on Schedules
I Marketable securities--Other investments at December 31, 1993
V Property, plant and equipment
VI Accumulated depreciation of property, plant and equipment
VIII Allowance for possible losses
IX Short-term borrowings
X Supplementary income statement information
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedules, or because the information is included in the consolidated
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-2
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
BOROUGH OF PAOLI, STATE OF PENNSYLVANIA, ON FEBRUARY 25, 1994.
Ametek, Inc.
/s/ Allan Kornfeld
By: _________________________________
ALLAN KORNFELD, EXECUTIVE
VICEPRESIDENT--CHIEF FINANCIAL
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
* Chairman of the Board
- ------------------------------------- and Chief Executive February 25,
WALTER E. BLANKLEY Officer (Principal 1994
Executive Officer)
* Executive Vice
- ------------------------------------- President-- Chief February 25,
ROGER K. DERR Operating Officer 1994
* Executive Vice
- ------------------------------------- President-- Chief February 25,
ALLAN KORNFELD Financial Officer 1994
(Principal Financial
Officer)
*
- ------------------------------------- Vice President and
JOHN J. MOLINELLI Comptroller February 25,
(Principal 1994
Accounting Officer)
* Director
- ------------------------------------- February 25,
LEWIS G. COLE 1994
* Director
- ------------------------------------- February 25,
HELMUT N. FRIEDLAENDER 1994
* Director
- ------------------------------------- February 25,
SHELDON S. GORDON 1994
*
- ------------------------------------- Director
CHARLES D. KLEIN February 25,
1994
* Director
- ------------------------------------- February 25,
DAVID P. STEINMANN 1994
* Director
- ------------------------------------- February 25,
ELIZABETH R. VARET 1994
* Allan Kornfeld hereby signs this Amendment No. 1 on February 25, 1994 on his
own behalf and on behalf of each of the indicated persons for whom he is
Attorney-in-fact pursuant to a power of attorney filed herewith.
/s/ Allan Kornfeld
By: ____________________________
ALLAN KORNFELD
II-4
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of AMETEK, Inc. as of
December 31, 1993 and 1992, and for each of the three years in the period
ended December 31, 1993, and have issued our report thereon dated February 9,
1994 (included elsewhere in this Registration Statement). Our audits also
included the financial statement schedules listed in Item 16(b) of this
Registration Statement. These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Ernst & Young
Philadelphia, PA February 9, 1994
S-1
AMETEK, INC.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE I-- MARKETABLE SECURITIES--OTHER INVESTMENTS
DECEMBER 31, 1993
(IN THOUSANDS)
AMOUNT AT
PRINCIPAL WHICH CARRIED
AMOUNT COST IN BALANCE SHEET
--------- ------- ----------------
MARKETABLE SECURITIES:
United States Government.................. $27,750 $27,454 $27,778
Common Stock Held by Captive Insurance
Subsidiary............................... 13,640 16,413
------- -------
$41,094 $44,191(A)
======= =======
OTHER INVESTMENTS:
U.S. and Eurodollar Bonds and Debentures.. $10,154 $ 9,640 $ 9,808(B)
Equity Investments........................ 13,947 13,947(C)
------- -------
$23,587 $23,755
======= =======
- --------
(A) Market value approximates carrying value.
(B) Market value approximates $10.9 million.
(C) Market value approximates $17.5 million.
S-2
AMETEK, INC.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
SALES OR
BALANCE AT RETIREMENTS BALANCE AT
CLASSIFICATION BEGINNING OF YEAR ADDITIONS AND OTHER (A) END OF YEAR
-------------- ----------------- --------- ------------- -----------
1993:
Buildings:
Buildings............. $ 78,427 $ 6,069 $ 3,566 $ 80,930
Improvements on land
and leasehold........ 9,481 790 63 10,208
Construction in proc-
ess.................. 1,303 2,952 -- 4,255
-------- ------- ------- --------
89,211 9,811 3,629 95,393
-------- ------- ------- --------
Machinery and equip-
ment:
Machinery and equip-
ment................. 230,023 20,024 13,847 236,200
Delivery equipment and
automobiles.......... 1,087 446 494 1,039
Furniture and fix-
tures................ 26,047 3,729 2,770 27,006
Construction in proc-
ess.................. 12,032 6,778 1,939 16,871
-------- ------- ------- --------
269,189 30,977 19,050 281,116
-------- ------- ------- --------
Land................... 7,799 334 207 7,926
-------- ------- ------- --------
$366,199 $41,122(B) $22,886 $384,435
======== ======= ======= ========
1992:
Buildings:
Buildings............. $ 75,791 $ 6,272 $ 3,636 $ 78,427
Improvements on land
and leasehold........ 8,788 711 18 9,481
Construction in proc-
ess.................. 261 1,044 2 1,303
-------- ------- ------- --------
84,840 8,027 3,656 89,211
-------- ------- ------- --------
Machinery and equip-
ment:
Machinery and equip-
ment................. 227,117 16,312 13,406 230,023
Delivery equipment and
automobiles.......... 826 393 132 1,087
Furniture and fix-
tures................ 22,828 4,748 1,529 26,047
Construction in proc-
ess.................. 9,458 2,595 21 12,032
-------- ------- ------- --------
260,229 24,048 15,088 269,189
-------- ------- ------- --------
Land................... 6,793 1,454 448 7,799
-------- ------- ------- --------
$351,862 $33,529(B) $19,192 $366,199
======== ======= ======= ========
Schedule V continues on next page.
- --------
See notes to Schedule V and VI on page S-4.
S-3
AMETEK, INC.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
SALES OR
BALANCE AT RETIREMENTS BALANCE AT
CLASSIFICATION BEGINNING OF YEAR ADDITIONS AND OTHER (A) END OF YEAR
-------------- ----------------- --------- ------------- -----------
1991:
Buildings:
Buildings............. $ 67,877 $ 8,603 $ 689 $ 75,791
Improvements on land
and leasehold........ 7,424 1,408 44 8,788
Construction in proc-
ess.................. 4,255 (3,993) 1 261
-------- ------- ------ --------
79,556 6,018 734 84,840
-------- ------- ------ --------
Machinery and equip-
ment:
Machinery and equip-
ment................. 215,913 14,766 3,562 227,117
Delivery equipment and
automobiles.......... 537 425 136 826
Furniture and fix-
tures................ 18,789 4,200 161 22,828
Construction in proc-
ess.................. 10,242 (766) 18 9,458
-------- ------- ------ --------
245,481 18,625 3,877 260,229
-------- ------- ------ --------
Land................... 7,140 60 407 6,793
-------- ------- ------ --------
$332,177 $24,703(B) $5,018 $351,862
======== ======= ====== ========
Depreciation of property, plant and equipment is determined principally on a
straight-line basis over the estimated useful lives of the assets.
The annual ranges of depreciation rates for the above periods were:
Buildings and improvements................................. 2 1/2% to 15%
Machinery and equipment.................................... 10% to 33 1/3%
- --------
Notes to Schedules V and VI
(A) Other includes foreign currency translation gains (losses) for 1993, 1992
and 1991 of $(8,063), $(16,659) and $(516) for property, plant and
equipment, and $(3,059), $(4,583) and $399 for accumulated depreciation of
property, plant and equipment. Also in 1993, includes $7,782 for asset
write-downs in connection with restructuring and other unusual operating
activities.
(B) Includes $2,798, $9,539 and $5,895 in connection with businesses acquired
in 1993, 1992 and 1991, respectively.
S-4
AMETEK, INC.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE VI--ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
PROVISIONS SALES OR
BALANCE AT CHARGED TO RETIREMENTS BALANCE AT
CLASSIFICATION BEGINNING OF YEAR INCOME AND OTHER (A) END OF YEAR
-------------- ----------------- ---------- ------------- -----------
1993:
Buildings:
Buildings............. $ 27,131 $ 2,434 $ 508 $ 29,057
Improvements on land
and leasehold........ 4,087 945 45 4,987
-------- ------- ------ --------
31,218 3,379 553 34,044
-------- ------- ------ --------
Machinery and equip-
ment:
Machinery and equip-
ment................. 132,367 21,140 5,633 147,874
Delivery equipment and
automobiles.......... 640 135 208 567
Furniture and fix-
tures................ 15,977 3,623 2,459 17,141
-------- ------- ------ --------
148,984 24,898 8,300 165,582
-------- ------- ------ --------
$180,202 $28,277 $8,853 $199,626
======== ======= ====== ========
1992:
Buildings:
Buildings............. $ 24,603 $ 2,881 $ 353 $ 27,131
Improvements on land
and leasehold........ 3,221 878 12 4,087
-------- ------- ------ --------
27,824 3,759 365 31,218
-------- ------- ------ --------
Machinery and equip-
ment:
Machinery and equip-
ment................. 116,638 20,891 5,162 132,367
Delivery equipment and
automobiles.......... 507 351 218 640
Furniture and fix-
tures................ 12,781 4,359 1,163 15,977
-------- ------- ------ --------
129,926 25,601 6,543 148,984
-------- ------- ------ --------
$157,750 $29,360 $6,908 $180,202
======== ======= ====== ========
1991:
Buildings:
Buildings............. $ 22,124 $ 2,610 $ 131 $ 24,603
Improvements on land
and leasehold........ 2,388 880 47 3,221
-------- ------- ------ --------
24,512 3,490 178 27,824
-------- ------- ------ --------
Machinery and equip-
ment:
Machinery and equip-
ment................. 97,576 20,807 1,745 116,638
Delivery equipment and
automobiles.......... 276 250 19 507
Furniture and fix-
tures................ 9,108 3,730 57 12,781
-------- ------- ------ --------
106,960 24,787 1,821 129,926
-------- ------- ------ --------
$131,472 $28,277 $1,999 $157,750
======== ======= ====== ========
- --------
See notes to Schedules V and VI on page S-4.
S-5
AMETEK, INC.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE VIII -- ALLOWANCE FOR POSSIBLE LOSSES
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
1993 1992 1991
----------- ----------- -----------
Allowance for possible losses on ac-
counts and notes receivable:
Balance at beginning of year......... $ 2,392 $ 2,451 $ 2,079
Additions charged to expense......... 1,320 1,308 908
Recoveries credited to allowance..... 113 25 158
Write-offs........................... (1,337) (888) (716)
Currency translation adjustment...... (89) (504) 22
----------- ----------- -----------
Balance at end of year............... $ 2,399 $ 2,392 $ 2,451
=========== =========== ===========
SCHEDULE IX -- SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN THOUSANDS)
1993 1992 1991
----------- ----------- -----------
Notes payable to banks at December 31.. -- -- --
Weighted average interest rate at De-
cember 31............................. -- -- --
Maximum amount outstanding at any
month-end............................. -- -- $ 5,333
Average amount outstanding during the
year (A).............................. -- -- $ 2,990
Weighted average interest rate for the
year (B).............................. -- -- 12.97%
- -------
- -
(A) Computed by dividing the total of the daily balances outstanding by 360.
(B) Computed by dividing the interest expense on short-term borrowings by the
average amount outstanding during the year.
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
CHARGED TO COSTS AND EXPENSES (A)
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Maintenance and repairs................ $ 15,865 $ 15,455 $ 14,490
=========== =========== ===========
- --------
(A) Royalties, advertising expenses and taxes other than payroll and income
taxes do not exceed one percent of consolidated net sales and,
accordingly, are not included herein.
S-6
(This page is to be included only in the Edgar version.)
GRAPHICS APPENDIX LIST
EDGAR Version Typeset Version
- ------------- ---------------
Graphic #1 on Inside Graphic #1 - Pictured, on a grey reflective
Front Cover surface, are products manufactured by the
Company's Electro-mechanical Group. These
products include a thru-flow vacuum cleaner
motor, a computer memory drive, direct
current brushless motor, a direct current
motor - blower designed for medical equipment
and a permanent magnet motor for business
machines.
Graphic #2 on Inside Graphic #2 - Pictured, on a grey reflective
Front Cover surface, are products manufactured by the
Company's Precision Instruments Group. These
products include an oxygen analyzer
controller, an electronic truck instrument
panel, a multi-instrument flat panel for an
aircraft cockpit and three pressure gauges.
Graphic #3 on Inside Graphic #3 - Pictured, on a grey reflective
Front Cover surface, are products manufactured by the
Company's Industrial Materials Group. These
products include: a white protective glove
made of temperature resistant Siltemp(R), a
coil of shiny metal strip wrought from a
precision alloy of pure copper, nickel and
steel powders; and, in the foreground of the
picture, examples of engineered color
concentrates granules in green, yellow and
magenta. Positioned on top of the granules
are the clear plastic filter housing and
inlet cover of the Company's Plymouth
Products Division patented residential water
filter.
EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE
-------- ----------- ----
1 --Form of Underwriting Agreement between the Registrant and
the Underwriters.
4.1 --Form of Indenture to be dated as of , 1994 between the
Registrant and Corestates Bank N.A., as Trustee (including
the form of % Senior Notes
due 2006).
5 --Opinion of Stroock & Stroock & Lavan as to the legality of
the Notes.
12.1 --Statement Regarding Computation of Ratio of Earnings to
Fixed Charges.
23.1 --Consent of Stroock & Stroock & Lavan (included in Exhibit
5).
23.2 --Consent of Ernst & Young.
24 --Power of attorney (included on p. II-4 of the Registration
Statement).
25.1 --Form T-1 Statement of Eligibility and Qualification of
Corestates Bank N.A.