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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-12981
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AMETEK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 14-1682544
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
37 NORTH VALLEY ROAD, PAOLI, PA 19301
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(610) 647-2121
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $.01 PAR VALUE (VOTING) NEW YORK STOCK EXCHANGE, PACIFIC EXCHANGE, INC.
7.20% SENIOR NOTES DUE 2008 NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
(TITLE OF EACH CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO []
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 28, 2001, was $872,680,247.
The number of shares of common stock outstanding as of February 28, 2001,
was 32,783,926.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the Proxy Statement for
the Annual Meeting of Stockholders on May 22, 2001.
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AMETEK, INC.
2000 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE(S)
-------
PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 10
Item 3. Legal Proceedings........................................... 11
Item 4. Submission of Matters to a Vote of Security Holders......... 11
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 11
Item 6. Selected Financial Data..................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 14
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 22
Item 8. Financial Statements and Supplementary Data................. 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 46
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 46
Item 11. Executive Compensation...................................... 46
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 46
Item 13. Certain Relationships and Related Transactions.............. 46
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 46
Signatures............................................................ 47
Index to Exhibits..................................................... 48
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
AMETEK, Inc. ("AMETEK" or the "Company") was incorporated in Delaware in
1986 and is the successor to AMETEK, Inc., which was originally incorporated in
Delaware in 1930 under the name of American Machine and Metals, Inc. The Company
maintains its principal executive offices in suburban Philadelphia at 37 North
Valley Road, Paoli, PA 19301. AMETEK is a leading global manufacturer of
electronic instruments and electric motors with operations in North America,
Europe, Asia and South America. The Company is listed on the New York Stock
Exchange (symbol: AME). AMETEK is a component of the S&P MidCap 400 and the
Russell 2000 indices. For the year ended December 31, 2000, the Company achieved
$1 billion in sales for the first time. Approximately one-third of 2000 sales
were to international markets.
PRODUCTS AND SERVICES
The Company markets its products worldwide through two operating groups,
the Electronic Instruments Group ("EIG") and the Electromechanical Group
("EMG"). EIG builds technologically advanced monitoring, testing, and
calibration instruments, and display devices for the aerospace, power
generation, process and industrial markets. The Company believes that EMG is the
world's largest manufacturer of air-moving electric motors for vacuum cleaners
and other floor-care products, and is a preeminent producer of brushless
air-moving motors for aerospace, mass-transit, medical and computer markets. EMG
also produces specialty metals for the electronics, telecommunications,
consumer, automotive and other markets. The Company's recently expanded product
offering includes switches for telecommunications, and it continues to grow
through acquisitions focused on niche markets in instrumentation, technical
motors and specialty metals.
COMPETITIVE STRENGTHS
Management believes that the Company has several significant competitive
advantages, which assist it in sustaining and enhancing its market positions.
The Company's principal strengths include:
Significant Market Share. The Company maintains significant market shares
in many of its targeted niche markets, because of its ability to produce and
deliver high quality products at a low cost. In the EIG segment, the Company
maintains significant positions in many of its niche market segments within the
aerospace, power instrument, process, and industrial instrumentation markets. In
the EMG segment, the Company is the largest manufacturer of air-moving electric
motors for the global floor-care market. Management believes that the Company's
significant market share, along with its newest and expanded motor plants,
combining advanced technology and lower cost, play key roles in expanding its
electromechanical product lines and providing new market opportunities.
Technological and Development Capabilities. AMETEK believes it has certain
technological advantages over its competitors, that allow it to maintain leading
market positions by developing innovative products. The Company has historically
grown its business by extending its technical expertise into the manufacture of
customized products for its customers, and through acquisitions. EIG competes in
specialized instrumentation markets, including process measurement,
heavy-vehicle dashboard and aerospace instruments, primarily on the basis of
product innovation. An example of this innovation has been demonstrated with the
Company's leverage of its core competency in jet engine temperature sensors to
design a flame-sensor system for a broad range of industrial and utility
applications including land-based gas turbines. The Company has an established
reputation for technological innovation, service and reliability, which has led
to successful strategic alliances. EMG focuses on enhancing motor-blower
cost-performance through advances in power, efficiency, weight and quieter
operation. The Company believes that EMG's technical leadership has helped to
create a broad range of product features that have opened new markets, such as
outdoor power equipment.
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Efficient and Low-Cost Manufacturing Operations. The Company's competitive
cost position is a significant advantage in growing its businesses and its
overall global market share. The Company has established motor plants in China,
the Czech Republic, Mexico and Brazil to lower manufacturing costs and achieve
strategic proximity to customers, enhancing its ability to increase
international sales and market share. Additionally, several electronics
instruments businesses are also locating a portion of their manufacturing
operations in low cost locales. Furthermore, strategic acquisitions, joint
ventures and alliances in Europe, North America and Asia have resulted in
additional synergies and cost savings through the consolidation of operations,
new product lines and distribution channels, and low-cost manufacturing
operations benefiting both operating groups.
Experienced Management Team. Another important component of the Company's
recent success has been the continued strength of its management team and its
commitment to the performance of the Company. In November 2000, the Board of
Directors of the Company announced its President and Chief Executive Officer had
been elected as Chairman of the Board of Directors. The election completes the
Company's executive management transition, which commenced in 1996. Over the
past several years, the Company has made considerable advances in its
operational excellence initiatives, including self-directed work teams and
expanded colleague participation. AMETEK's senior management has extensive
experience in its businesses and is financially committed to the Company's
success through Company stock ownership guidelines.
BUSINESS STRATEGY
AMETEK's objectives are to increase the Company's earnings growth and
financial returns through a combination of operating and financial strategies.
Operational strategies include business acquisitions and cost reduction programs
designed to achieve double-digit annual percentage growth in earnings per share
and a superior return on total capital. Financial strategies have included
public debt issuance, bank debt refinancing, local source financing in certain
foreign countries, accounts receivable securitization and share repurchases.
AMETEK's strong commitment to continuing earnings growth led the Company to
accelerate the implementation of certain cost reduction programs at the end of
1998 and again in the fourth quarter of 2000 to achieve its best-cost
objectives.
The Company's long-term growth strategy consists of the following four
elements:
Strategic Acquisitions and Alliances. In 2000, acquisitions played an
important role in driving the growth of the Company. AMETEK completed two
strategic acquisitions in 2000. These businesses, with combined annualized sales
of $104 million, extended AMETEK's technology base, market channels and product
offerings. In the past two years, the Company has completed six acquisitions
with $225 million in annualized sales. Those acquisitions have enhanced AMETEK's
position in aerospace and process instruments, electromechanical products,
electric power generation instruments and food service controls. Through these
and prior acquisitions, the Company's management team has gained considerable
experience in successfully acquiring and integrating businesses. The Company
intends to continue to pursue strategic acquisitions, both domestically and
internationally, to expand and strengthen its product lines, improve its market
share positions and increase earnings through sales growth (see Recent
Acquisitions).
Global and Market Expansion. AMETEK's largest international presence is in
Europe where it holds a leading market position in floorcare motors. The
Company's operations in Denmark, Italy, Germany, the Czech Republic and the
United Kingdom provide design and engineering capability, product line breadth,
enhanced European distribution channels, and lower cost production in Europe.
Growth in Mexico, Asia, and South America has resulted from the opening and
expansion of low-cost electric motor and instruments plant in Reynosa, Mexico,
and motor manufacturing plants in Shanghai, China and near Sao Paulo, Brazil.
Coupled with a direct sales and marketing presence in Singapore and the
continuing success of AmeKai - the Company's joint venture in China and Taiwan
that manufactures low-cost pressure gauges for world markets, AMETEK continues
to broaden its geographic market expansion and market penetration.
New Product Development. The Company seeks to improve its current market
position and enter complementary markets through its product development
programs. In the EIG segment, the Company applies concurrent engineering to
develop specialized products for the markets in which it competes. In 2000
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EIG was selected by a major customer to provide the engine sensor suite for a
new jet engine. The new jet engine is undergoing detailed design using
concurrent engineering. After testing in 2002, it is scheduled for certification
by the U.S. Federal Aviation Administration in 2003. EIG's new Dycor(R) CG
1100-RTP oxygen analyzer was developed specifically for the semiconductor
industry's latest rapid thermal processing (RTP) silicon wafer fabrication
systems. The new Dycor analyzer improves process yields and maximizes RTP
equipment throughput by detecting oxygen contamination at the parts-per-million
level and allowing continued wafer production as soon as the oxygen content is
at acceptable operating levels. EIG introduced a new hydrogen sulfide analyzer
in 2000 completing a suite of advanced monitoring tools for the natural gas
industry. The new analyzer offers an economical solution for identifying
potentially costly off-spec gas and represents a significant advance over
previous technologies. During 2000, EMG added to its INFIN-A-TEK(R) family of
switched-reluctance vacuum motors with a new two-stage vacuum blower that
complements the INFIN-A-TEK vacuum motor introduced in 1999. EMG now offers a
family of INFIN-A-TEK motors for a range of floor-care equipment and other
applications that currently use series universal vacuum motors, such as material
handling devices. EMG also is one of the world's premier producers of advanced
brushless direct-current (DC) motors and motor-blowers. EMG brushless motors are
used in aerospace, military, business machine, mass-transit, and medical
applications. During 2000, EMG extended its line of compact motors.
Operational Excellence. The Company seeks to further improve its current
market position and maintain its low cost position through a continuation of its
operational excellence strategy. The Company believes its dedication to focusing
on flow manufacturing, participative management culture, operating efficiency
and asset management increases the Company's manufacturing quality, return on
operating assets and customer satisfaction while significantly shortening
production cycle times and lowering its operating and administrative costs. This
strategy has served to strengthen the Company's competitive position across its
business lines. Operational excellence is the keystone strategy for improving
the Company's profit margins, and it has assisted in successfully achieving
synergies from the integration of acquired companies.
International alliances such as AmeKai in China and Taiwan have provided
further low-cost international manufacturing sources. The Company's focus on
team-based, demand flow manufacturing and participative management also enabled
it to complete a motor production consolidation in Europe, plant expansions in
Brazil, China, and Mexico, and other cost-reduction initiatives.
2000 OVERVIEW
OPERATING PERFORMANCE
In 2000, AMETEK achieved record sales in excess of $1 billion. It also
achieved its seventh consecutive year of double-digit percentage growth in
income and diluted earnings per share from continuing operations. Acquisitions,
growth in certain key markets and cost reduction initiatives were the primary
contributors to this strong performance.
The Company set records for operating income, net income, and diluted
earnings per share from continuing operations in 2000.
SHARE REPURCHASE PROGRAM
Under the Company's current $50 million share repurchase authorization,
approximately $27 million is available for share repurchases. During 2000, the
Company purchased 83,500 shares of its common stock.
RECENT ACQUISITIONS
In August 2000, the Company acquired the assets of certain businesses of
Prestolite Electric Incorporated ("Prestolite") for approximately $61 million in
cash. Prestolite manufactures switches, industrial battery chargers and
direct-current (DC) motors. The acquisition is now part of EMG.
In September 2000, the Company acquired the assets of Rochester Instruments
Systems ("RiS") along with the power instrumentation product line of a related
United Kingdom based company for approximately $20 million in cash. RiS is a
leading supplier of measurement instruments for the electric power generation
and distribution market. The acquisition is now part of EIG.
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FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS, FOREIGN OPERATIONS, AND EXPORT
SALES
Reportable segment and geographic information is shown on pages 41 through
43 this report.
One of the Company's four growth strategies is global and market expansion,
which is subject to certain risks that are inherent in conducting business
outside the United States. Those include fluctuation in currency exchange rates
and controls, restrictions on the movement of funds, import and export controls,
and other economic, political and regulatory policies of the countries in which
business is conducted. The Company's high level of foreign sales has resulted
from a combination of export sales of products manufactured in the United
States, sales from overseas operations, and sales resulting from strategic
alliances.
NARRATIVE DESCRIPTION OF BUSINESS PRODUCTS AND SERVICES
The products and markets of each operating segment are described below:
EIG
EIG applies its specialized market focus and superior technology to produce
monitoring, calibration, and display instruments for the aerospace, power,
process, and industrial markets.
EIG's growth is based on the four corporate strategies. EIG designs
products for specific customer applications, which are significantly different
from, or technologically ahead of competitive products. EIG has reduced costs by
implementing operational improvements, achieving acquisition synergies,
improving supply chain management, and workforce reductions. EIG is among the
leaders in many of the specialized markets it serves, including aerospace
fuel-flow meters, heavy-vehicle instrument panels, oxygen analyzers, level
measurement products, power instruments, and pressure gauges. About 26% of the
2000 sales were to markets outside the United States.
EIG employs approximately 3,800 people, of which approximately 500 are
covered by collective bargaining agreements. It has 27 manufacturing facilities:
21 in the United States, 5 in Europe and one in Canada.
Aerospace and Power Instruments Market and Product Lines
Approximately 37% of EIG revenues are from the sale of aerospace and power
instruments. Aerospace products include airborne data systems, turbine engine
temperature measurement products, vibration-monitoring systems, indicators and
displays, fuel and fluid measurement products and sensors, switches, cable
harnesses and transducers. Its customers are the leading producers of airframes
and jet engines for commercial airlines and aircraft operators. EIG serves all
segments of commercial aerospace, including helicopters, business jets, commuter
aircraft, and commercial airliners. It also serves, in a limited capacity, the
aerospace aftermarket. Customer support includes parts warehousing and
maintenance programs. Aerospace products are designed to customer specifications
at design centers in Sellersville, PA, Wilmington, MA, and Costa Mesa, CA, and
are manufactured to stringent operational and reliability requirements.
Manufacturing operations are located in Binghamton, NY, Wilmington, MA, and
Costa Mesa, CA. A repair and maintenance facility is located near Seattle, WA.
The aerospace business operates in specialized markets, where its products
have a technological and/or cost advantage. Its 50 plus years of experience as
an aerospace supplier and its long-standing customer relationships with global
commercial aircraft OEMs are significant competitive advantages. Among other
aircraft, its newest products are in service on the Boeing 777 airliner, the
Bombardier Global Express business jet and the Agusta 109 helicopter. Recent
acquisitions have complemented and expanded EIG's core sensor and transducer
product line used in a wide range of industrial and aerospace applications.
The September 2000 acquisition of Rochester Instruments complements and
expands EIG's position in electric power instruments, which includes a full
suite of instrumentation for gas turbines derived from core technology and is
being developed by the Company for the aerospace industry. Power instruments
include
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power transducers and meters, event and transient recorders, annunicators, and
alarm monitoring systems to measure, monitor and record variables in the
generation and distribution of electric power.
Process Instruments Market and Product Lines
Approximately 31% of EIG sales are process measurement, industrial, and
analytical instruments. These include pressure gauges and transducers; oxygen,
moisture, combustion and liquid analyzers, and emission monitors; electronic
pressure sensors and transmitters. The focus is on the process industry, which
includes refinery and petrochemical plants, power generation, specialty gas,
water and waste treatment, natural gas distribution, and semiconductor
fabrication, servicing the industrial process control and air emissions
monitoring markets, as well as products providing for monitoring sulfur
emissions, where AMETEK is already a world leader. The acquisition of
Drexelbrook and Patriot Sensors in 1999 expands AMETEK's level measurement
instrumentation business. Drexelbrook and Patriot Sensors operate as separate
units of a new division within EIG - AMETEK Sensor Technology. EIG is one of the
leaders in the North American pressure gauge market, which has been adversely
affected by low-cost offshore products. EIG has addressed this issue through a
50%-owned joint venture that manufactures low-cost pressure gauges in China and
Taiwan, where the joint venture also markets those products. EIG is refocusing
its domestic manufacturing on more advanced pressure measurement products.
Industrial Instrumentation Markets and Product Lines
Approximately 32% of EIG sales are to the industrial instrumentation
market. EIG's Mansfield & Green product line which was combined with the
Chatillon and Lloyd Instruments product lines to form the Test and Calibration
Instruments (T&CI) division, is well-positioned for global expansion in the $800
million force measurement market. T&CI manufactures a comprehensive line of
force-measurement and material testing devices in the United States and Europe,
including hand-held gauges, electronic instruments and test stands. It also
provides analytical software and support services. T&CI's products are marketed
worldwide under the Chatillon, Lloyd, Erichsen, and Davenport brand names
through a global network of distributors, sales representatives, and direct
sales.
The Dixson business provides EIG with a strong position in the U.S.
heavy-truck instrument market, including agricultural, construction, and
off-road vehicles. Dixson has a market position in Europe, and product
development capabilities in solid-state instruments that primarily monitor
engine-operating parameters. EIG also has a leading position in the food service
instrumentation business as a result of the 1999 acquisition of the NCC
business. This business fits strategically with the custom electronic controls
produced by Dixson for heavy-vehicle, foodservice, and industrial markets. NCC
is a leading source for stand-alone and integrated timing controls for the
foodservice industry.
The Chemical Products division produces silicas, phenolic resins, and
Teflon(R) (a registered trademark of DuPont) polymer products for
high-temperature and highly corrosive applications and heat exchangers. Product
applications include protective welding curtains and products for the filtering
of molten metal. EIG also is a custom compounder of specialty resins and
thermoplastics with enhanced properties, such as fire retardance and improved
adhesion. Markets include electronics, automotive parts, appliances, and
telecommunications.
Customers
EIG is not dependent on any single customer such that the loss of that
customer would have a material adverse effect on EIG's operations. Approximately
20% of EIG's 2000 sales were made to its five largest customers.
EMG
EMG is the world's largest producer of high-speed, air-moving electric
motors for OEMs of floor-care products. The design and manufacture of small
vacuum motors with fans rotating at high speeds requires advanced manufacturing
technology. EMG addresses complex motor-blower dynamics including heat, noise,
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vibration, and wear, in designing its customized products. The Group's specialty
motors business is the world leader in the brushless DC motor market. EMG also
produces specialty metal products used in the electronics, telecommunications,
consumer, automotive, and other markets. EMG has a leading market share for its
electric motors in North America and Western Europe and a growing share in the
Pacific Rim. It has expanded its operations worldwide by leveraging
manufacturing and technological expertise developed over many years.
EMG also has developed its business by extending its technological
expertise in manufacturing high-speed, air-moving electric motors to a variety
of targeted markets, with its primary focus currently on the floor-care market
and small appliances. EMG has formed alliances with OEM customers to design and
manufacture cost-effective products for numerous floor-care applications. EMG
also is using its technological and marketing expertise to further penetrate new
markets, such as the outdoor power equipment market, where it is establishing
alliances with major customers.
To achieve further global expansion, EMG is building on its market
leadership in the floor-care markets of North America and Europe through
initiatives in Eastern Europe, Latin America, and the Pacific Rim. Electric
motor production operations in China, Mexico, the Czech Republic and Brazil,
began contributing to production capacity late in 1999. Those expanding
operations are focusing on reducing costs and expanding global markets. About
37% of EMG's 2000 sales were to customers outside the United States.
EMG employs approximately 4,200 people, of whom approximately 1,800 are
covered by collective bargaining agreements. It has 20 manufacturing facilities:
13 in the United States, 2 in Italy, and one each in China, the Czech Republic,
Mexico, Brazil, and the United Kingdom. In 2000, the Company completed the
previously announced consolidation of two of its Italian motor plants, serving
the floor-care market. EMG also expanded the operations of its Italian motor
division to an existing motor plant in the Czech Republic, and it completed the
closure of the Group's Cambridge, Ohio plant. EMG's flexible production lines
are designed for low-cost, high-volume operations. Advanced technological
resources enable EMG to provide its customers with custom-designed products. The
Group produced approximately 26 million motors in 2000, aided by the Prestolite
acquisition in August 2000, and increased production in Brazil. This is compared
with 22 million motors produced in 1999.
Floor-Care Market and Product Line
About 47% of EMG sales are to floor-care markets, where it has the leading
share through sales of air-moving electric motors to most of the world's major
floor-care OEMs. The customers include vertically integrated OEMs that produce
some of their own motors. EMG produces motor-blowers for a full range of
floor-care products, ranging from hand-held, canister, and upright vacuums to
central vacuums for residential use. High-performance vacuum motors also are
marketed for commercial and industrial applications.
A portion of sales initiatives in the global floor-care business has been
directed toward marketing products to vertically integrated vacuum cleaner
manufacturers that decide to outsource all or part of their motor production to
realize the economic and operational advantages of reducing or discontinuing
their own motor production. By purchasing motors from EMG, vacuum cleaner
manufacturers can reduce the otherwise substantial capital investment necessary
to manufacture motors for rapidly changing consumer demands. The global consumer
trend toward owning a variety of floor-care products increases the need for
availability of these products by OEMs, which are striving to operate more
cost-effectively and to be responsive to customer needs.
EMG's new product development focuses on enhancing motor-blower
cost-performance through advances in power, efficiency, size, weight, and
quieter operation. EMG's INFIN-A-TEK motor-blower is the first switched
reluctance electric motor-blower for the floor-care market.
EMG has a significant position in the European floor-care market. The
electric motors it produces in Italy and the Czech Republic are similar to those
produced in the United States.
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Brushless Motor Market and Product Line
EMG's brushless motors are used in computer equipment, business machines,
and medical equipment. Brushless motors offer spark-free commutation and high
reliability. They are increasingly utilized in medical and other applications in
which long life and speed control are important. The Rotron motor business and
its integration with the technical motor division to form AMETEK Rotron, has
added to AMETEK's already strong core competency in brushless air-moving motors.
With Rotron, AMETEK now has significant growth opportunities in the expanding
brushless motor market. Continuing product developments include the use of
brushless motors in systems designed to assist patients with sleep breathing
disorders, hospital air-mattresses, and gasoline fume-recovery systems used by
gas stations, as well as electronic power devices for the military,
mass-transit, and aerospace markets. In 1999 EMG's technical motor division
launched its DurA-tek(TM) motor, a three-inch drop-in replacement for brush-type
motors. It also introduced a redesigned line of the MICRO-Jammer(TM)
motor-blower and an enhanced version of the MINIJAMMER(TM) brushless DC
motor-blower for medical devices, dental equipment, business machines and a host
of commercial applications.
Outdoor Power Equipment Market and Product Line
EMG manufactures motors for the outdoor power equipment market, including
lawn and garden equipment, as well as electric chain saws, high-pressure power
washers, and low-pressure paint sprayers. EMG is capitalizing on its
manufacturing infrastructure, technical expertise, and global marketing
strengths in air-moving electric motors to create growth opportunities in this
market, such as expanding applications for the Group's World Lamination(TM)
design motor and WorldLamb(TM) motor-blowers, originally designed for floor-care
applications, to include the outdoor power equipment market. EMG now serves most
of the world's major producers of outdoor power equipment.
Specialty Metals Markets and Product Line
The Specialty Metals business manufactures high-purity, engineered metal
powders, high-purity strip and wire from metal powders, and clad products, with
specific metallurgical properties. Its niche market focus is based upon
proprietary manufacturing technology and strong customer relations. Its expanded
product lines of nickel and copper-based wire alloys, have added to the
Company's capabilities in the manufacturing of specialty wire for electronic,
communication, and computer applications. The Company has also expanded its
product line of metal matrix composites, which are used in thermal management
applications for electronics products by acquiring an exclusive license to
produce composites of silicon-carbide aluminum in the United States. Other new
product developments include patented Ultra(TM) stainless steel metal powders
and copper-based Spinodal(TM) alloys. Markets served by the business include
electronics, telecommunications, automotive, consumer products, and energy
production.
Prestolite Switch, Industrial Battery Chargers and DC Motor Market and
Product Lines
The August 2000 acquisition of the Prestolite Electric switch, industrial
battery charger, and direct-current (DC) motor businesses have greatly expanded
the products offered by EMG. The switch business produces contactors, solenoids,
and other electromechanical devices for the telecommunications and
materials-handling markets. The battery charger business designs and
manufactures high-quality industrial battery chargers for use in the
materials-handling market. These businesses have strong market positions,
superior technologies, and reputations for quality and service. They were
combined into a new operating division, Prestolite Power and Switch, that will
serve as a platform for additional acquisitions. The DC motor products were
folded into AMETEK's global specialty motors business.
Customers
EMG is not dependent on any single customer such that the loss of that
customer would have a material adverse effect on EMG's operations. Approximately
17% of EMG's sales for 2000 were made to its five largest customers.
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MARKETING
Generally, the Company's marketing efforts are organized and carried out at
the group and division levels. EIG makes significant use of distributors and
sales representatives in marketing its products. However, its specialized
customer base of aircraft and jet engine manufacturers are served primarily by
its direct sales engineers. Given the similarity and technical nature of its
many products as well as its significant worldwide market share, EMG conducts
most of its domestic and international marketing activities through a direct
sales force, and makes some use of sales representatives and distributors both
in the U.S. and in other countries.
COMPETITION
In general, most of the Company's markets are highly competitive. The
principal elements of competition for the Company's products are price, product
technology, distribution, quality, and service.
In the markets served by EIG, the Company believes that it is one of the
world's largest pressure gauge manufacturers, ranks among the leading U.S.
producers of certain measuring and control instruments, and is a leading
manufacturer in the U.S. heavy vehicle instrumentation and power instruments
markets. It also is one of the leading instrument and sensor suppliers to
commercial aviation. Competition is strong and could intensify for certain EIG
products especially in the Company's pressure gauge and heavy vehicle
instrumentation businesses. Both of these businesses have several strong
competitors. In the process and analytical instruments markets, numerous
companies in each specialized market compete on the basis of product quality,
performance, and innovation. The Company's aerospace and power instruments
businesses have a number of diversified competitors, which vary depending on the
specific market niche.
EMG has several U.S. based competitors in the U.S. floor-care market.
Competition is increasing from Asian motor manufacturers who serve the U.S.
floor-care market. There is potential competition from vertically integrated
manufacturers of floor-care products that produce their own motor-blowers. Many
of these manufacturers would also be potential EMG customers if they decided to
outsource their motor production. In Europe, competition comes from a small
group of large international competitors and numerous small competitors. EMG's
Prestolite businesses have competition from a limited number of companies in
each of their markets. Some competitors have greater financial and technical
resources. Competition is generally based on product innovation, performance and
price. EMG's specialty metal products business has several specialized product
lines that have few competitors. The primary competition is from alternative
materials and processes.
BACKLOG AND SEASONAL VARIATIONS OF BUSINESS
The Company's approximate backlog of unfilled orders by business segment at
the dates specified was as follows:
DECEMBER 31,
--------------------------
2000 1999 1998
------ ------ ------
(IN MILLIONS)
Electronic Instruments................................... $135.3 $137.0 $113.2
Electromechanical........................................ 121.1 106.5 110.6
------ ------ ------
Total............................................... $256.4 $243.5 $223.8
====== ====== ======
Of the total backlog of unfilled orders at December 31, 2000, approximately
93% is expected to be shipped by December 31, 2001. The Company believes that
neither its business as a whole, nor either of its operating segments, is
subject to significant seasonal variations, although certain individual
operations experience some seasonal variability.
RAW MATERIALS
The Company's business segments obtain raw materials and supplies from a
variety of sources, and generally from more than one supplier. However, for EMG,
certain items, including various base metals and
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certain steel components, are available only from a limited number of suppliers.
The Company believes its sources and supplies of raw materials are adequate for
its needs.
RESEARCH, PRODUCT DEVELOPMENT AND ENGINEERING
The Company is committed to research, product development, and engineering
activities that are designed to identify and develop potential new and improved
products or enhance existing products. Research, product development, and
engineering costs during the past three years were $45.9 million, $42.2 million
and $42.1 million, in 2000, 1999, and 1998 respectively. These amounts included
net Company-funded research and development expenses of $23.8 million, $21.6
million and $23.4 million, respectively. Such expenditures were directed toward
the development of new products and processes, and the improvement of existing
products and processes.
ENVIRONMENTAL COMPLIANCE
Information with respect to environmental compliance by the Company is set
forth on page 20 of this report in the section of Management's Discussion and
Analysis of Financial Condition and Results of Operations entitled
"Environmental Matters."
PATENTS, LICENSES, AND TRADEMARKS
The Company owns numerous unexpired U.S. patents, and foreign patents,
including counterparts of its more important U.S. 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 and unregistered U.S. and foreign trademarks and trade names.
However, the Company does not consider any single patent or trademark, or any
group thereof, essential either to its business as a whole or to either of its
business segments. The annual royalties received or paid under license
agreements are not significant to either of its business segments or to the
Company's overall operations.
EMPLOYEES
At December 31, 2000, the Company employed approximately 8,100 individuals
in its EMG, EIG and corporate operations, of which approximately 2,300 were
covered by collective bargaining agreements.
WORKING CAPITAL PRACTICES
The Company does not have extraordinary working capital requirements in
either of its business segments. Customers generally are billed at normal trade
terms, which may include extended payment provisions. Inventories are closely
controlled and maintained at levels related to production cycles and are
responsive to the normal delivery requirements of customers.
ITEM 2. PROPERTIES
The Company has 47 operating plant facilities in 16 states and 10 foreign
countries. Of these facilities, 32 are owned by the Company and 19 are leased.
The properties owned by the Company consist of approximately 554 acres, of which
approximately 3.8 million square feet are under roof. Under lease is a total of
approximately 764,000 square feet. The leases expire over a range of years from
2001 to 2015, with renewal options for varying terms contained in most of the
leases. Production facilities in Taiwan, China and Korea provide the Company
with additional production capacity through the Company's 50% ownership in a
joint venture. The Company also has one idle production facility available for
sale. The Company's executive offices in Paoli, PA occupy approximately 34,000
square feet under a lease that will expire in 2002.
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The Company's machinery, plants, and offices are in satisfactory operating
condition and are adequate for the uses to which they are put. The operating
facilities of the Company by business segment are summarized in the following
table:
NUMBER OF PLANT
FACILITIES SQUARE FEET UNDER ROOF
--------------- ----------------------
OWNED LEASED OWNED LEASED
----- ------ ---------- --------
Electronic Instruments........................ 20 7 2,219,000 365,000
Electromechanical............................. 12 8 1,607,000 399,000
-- -- --------- -------
Total.................................... 32 15 3,826,000 764,000
== == ========= =======
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies or otherwise, during the last quarter of the
fiscal year ended December 31, 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market on which the Company's common stock is traded is the
New York Stock Exchange. The Company's common stock is also listed on the
Pacific Exchange, Inc. On February 28, 2001, there were approximately 2,800
record holders of the Company's common stock.
Market price and dividend information with respect to the Company's common
stock are set forth on pages 43 and 44 in the section of the Notes to the
Consolidated Financial Statements entitled "Quarterly Financial Data
(Unaudited)." Future dividend payments by the Company will be dependent on
future earnings, financial requirements, contractual provisions of debt
agreements, and other relevant factors.
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ITEM 6. SELECTED FINANCIAL DATA
2000 1999 1998 1997 1996
---------- -------- -------- -------- --------
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
----------------------------------------------------------
CONSOLIDATED OPERATING RESULTS (YEARS ENDED
DECEMBER 31):
Net sales.................................... $1,024.7 $924.8 $927.5 $847.8 $800.0
Operating income(1).......................... $ 135.9 $118.8 $ 96.4 $ 92.0 $ 82.8
Interest expense............................. $ (29.2) $(24.8) $(23.7) $(18.2) $(19.1)
Income from continuing operations(1)......... $ 68.5 $ 60.8 $ 50.4 $ 50.3 $ 43.1
Net income(1)(2)............................. $ 68.5 $ 60.8 $ 41.7 $ 50.4 $ 51.2
Basic earnings per share:
Income from continuing operations(1)....... $ 2.13 $ 1.88 $ 1.55 $ 1.53 $ 1.32
Net income(1)(2)........................... $ 2.13 $ 1.88 $ 1.28 $ 1.53 $ 1.57
Diluted earnings per share:
Income from continuing operations(1)....... $ 2.11 $ 1.85 $ 1.50 $ 1.49 $ 1.30
Net income(1)(2)........................... $ 2.11 $ 1.85 $ 1.24 $ 1.49 $ 1.54
Dividends declared and paid per share........ $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24
Average common shares outstanding:
Basic...................................... 32.1 32.3 32.7 32.9 32.7
Diluted.................................... 32.5 32.9 33.7 33.9 33.3
PERFORMANCE MEASURES AND OTHER DATA:
Operating Data excluding Nonrecurring
Charge(3):
Operating income........................... $ 135.9 $118.8 $104.5 $ 92.0 $ 82.8
Operating income-Return on sales........... 13.3% 12.8% 11.3% 10.8% 10.4%
Operating income-Return on average total
assets.................................. 16.7% 16.2% 16.6% 17.4% 16.8%
EBITDA(4).................................. $ 177.6 $158.1 $146.4 $128.0 $116.9
Ratio of EBITDA to interest expense(4)..... 6.1x 6.4x 6.2x 7.0x 6.1x
Income from continuing operations.......... $ 68.5 $ 60.8 $ 55.3 $ 50.3 $ 43.1
Diluted earnings per share................. $ 2.11 $ 1.85 $ 1.64 $ 1.49 $ 1.30
Depreciation and amortization................ $ 43.3 $ 39.6 $ 38.4 $ 32.9 $ 32.7
Capital expenditures......................... $ 29.6 $ 30.3 $ 49.8 $ 41.2 $ 39.1
Cash provided by continuing operations(5).... $ 78.7 $ 86.6 $ 78.4 $ 71.2 $ 64.7
Ratio of earnings to fixed charges........... 4.3x 4.4x 3.9x 4.8x 4.0x
Net income -- Return on average total
capital.................................... 11.5% 11.8% 10.4% 15.8% 16.9%
-- Return on average
stockholders' equity......... 27.6% 31.2% 25.1% 34.9% 47.3%
YEAR-END CONSOLIDATED FINANCIAL POSITION:
Current assets............................... $ 303.1 $256.1 $267.8 $248.5 $229.3
Current liabilities.......................... $ 297.7 $262.7 $233.9 $178.7 $178.9
Property, plant, and equipment............... $ 214.0 $219.6 $214.4 $186.3 $174.8
Total assets................................. $ 859.0 $768.2 $699.8 $555.2 $528.9
Long-term debt............................... $ 233.6 $231.8 $227.0 $152.3 $150.3
Stockholders' equity......................... $ 280.8 $216.2 $174.0 $159.0 $129.5
Stockholders' equity per share............... $ 8.66 $ 6.76 $ 5.42 $ 4.82 $ 3.96
Total debt as a percentage of
capitalization(6).......................... 56.3% 60.5% 63.7% 51.0% 58.5%
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- ---------------
(1) Amounts in 1998 include a nonrecurring pretax charge for cost reduction
initiatives totaling $8.0 million, ($4.8 million after-tax or $0.14 per
diluted share).
(2) Amounts in 1998 include an extraordinary loss on the early repayment of debt
of $8.7 million ($0.26 per diluted share). Amounts in 1997 and 1996 include
discontinued operations of the former Water Filtration Business.
(3) See description of nonrecurring charge in Note 1 above. All amounts are
based on continuing operations.
(4) EBITDA represents income from continuing operations before interest, taxes,
depreciation and amortization, amortization of deferred financing costs, and
nonrecurring items. It should not be considered, however, as an alternative
to operating income as an indicator of the Company's operating performance,
or as an alternative to cash flows as a measure of the Company's overall
liquidity as presented in the Company's financial statements. Furthermore,
EBITDA measures shown for the Company may not be comparable to similarly
titled measures given by other companies.
(5) Amount in 2000 and 1999 excludes $1 million and $44 million, respectively,
of net cash proceeds received from an accounts receivable securitization
program.
(6) Without considering the effect of the accounts receivable securitization
program referred to in note 5 above; total debt as a percentage of
capitalization at December 31, 2000 and 1999 would have been 59.1% and
63.6%, respectively.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of the Company's financial condition
and results of operations set forth below should be read in conjunction with the
consolidated financial statements of the Company and the related notes shown in
the index on page 22 of this report.
Business Overview
In 2000, the Company reported record sales, operating income, net income
and diluted earnings per share that resulted in double-digit percentage growth
when compared with 1999. The Company continues to achieve several major
objectives under its four growth strategies: Strategic Acquisitions and
Alliances, Global and Market Expansion, New Products and Operational Excellence.
Significant events of 2000 were:
- Sales exceeded $1 billion for the first time in the Company's history.
- The seventh consecutive year of double-digit percentage growth in
earnings per share from continuing operations.
- The completion of two new business acquisitions: The August acquisition
of businesses that produce switches, industrial battery chargers, and
direct-current (DC) motors for the telecommunications and
material-handling markets, which is included within the Electromechanical
Group (EMG), and the September acquisition of a business that produces
power measurement instruments and is included within the Electronic
Instruments Group (EIG).
- Continuing with the Company's global plan to lower its cost structure,
operational excellence initiatives, in 2000, included the shift of
production to lower-cost facilities in Mexico, China, Brazil and the
Czech Republic. This action along with the consolidation of the Company's
European motor operations resulted in improved operating profit margins
for both the EIG and the EMG business segments.
- The Company continued its emphasis on investment in research, development
and engineering, spending $45.9 million in 2000, an increase of 8.8% over
1999.
- Benefiting from the investment in research and development, new product
sales (from products introduced within the past three years) increased
17.3% over 1999 to $125.6 million.
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Results of Operations
The following table sets forth net sales and income of the Company by
business segment and on a consolidated basis for the years ended December 31,
2000, 1999, and 1998:
YEARS ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
---------- -------- --------
(DOLLARS IN THOUSANDS)
NET SALES(1):
Electronic Instruments.............................. $ 509,504 $451,072 $414,202
Electromechanical................................... 515,156 473,725 513,272
---------- -------- --------
Total net sales.................................. $1,024,660 $924,797 $927,474
========== ======== ========
INCOME(2):
Segment operating income(3)
Electronic Instruments.............................. $ 78,771 $ 69,965 $ 55,703
Electromechanical................................... 77,560 67,575 62,511
---------- -------- --------
Total segment operating income................... 156,331 137,540 118,214
Corporate administrative and other expenses........... (20,441) (18,743) (21,778)
---------- -------- --------
Consolidated operating income......................... 135,890 118,797 96,436
Interest and other expenses........................... (29,752) (24,336) (19,078)
---------- -------- --------
Consolidated income before income taxes.......... $ 106,138 $ 94,461 $ 77,358
========== ======== ========
- ---------------
(1) After elimination of intra-and intersegment sales, which are not significant
in amount.
(2) 2000 and 1998 includes charges for cost realignment initiatives and cost
reduction initiatives.
(3) Segment operating income represents sales less all direct costs and expenses
(including certain administrative and other expenses) applicable to each
segment, but does not include interest expense.
YEAR ENDED DECEMBER 31, 2000, COMPARED WITH YEAR ENDED DECEMBER 31, 1999.
Results of Operations
The Company reported sales for 2000 of $1,024.7 million, an increase of
10.8% from sales of $924.8 million in 1999, driven by the contributions of the
Company's acquisitions and strength in several core markets. EIG's sales were
$509.5 million in 2000, an increase of 13.0% from sales of $451.1 million in
1999. Without recent acquisitions, sales for EIG would have been slightly lower
than in 1999 due largely to a decline in demand for heavy-vehicle instruments.
For the EMG segment, sales were $515.2 million in 2000, an increase of 8.7% from
sales of $473.7 million in 1999 due to improved conditions in specialty metal
markets along with contributions from an acquisition, reduced somewhat by
continued competitive factors and adverse currency translation effects from
international businesses. International sales reported by both segments totaled
$324.9 million in 2000, an increase of $23.0 million or 7.6% from 1999. Export
shipments from the United States in 2000 were $179.1 million, compared with
$158.5 million in 1999.
New orders for 2000 were $1,037.6 million, an increase of 9.9% from $944.5
million for 1999. The order backlog at December 31, 2000 was $256.4 million,
compared with $243.5 million at December 31, 1999. New orders from the
acquisitions made by the Company during the year were the primary reason for the
increase.
The Company's plan to lower its cost structure globally through operational
excellence initiatives continues to have a positive effect on segment operating
income and margins in 2000. Total segment operating income improved to $156.3
million for 2000, an increase of 13.7%, compared with segment operating income
of $137.5 million for 1999, primarily from the acquisitions and strength in core
businesses. Operating margins in 2000 were 15.3% of sales, an increase from
14.9% in 1999. Improved operating margins were primarily the result of
operational excellence initiatives, including increased motor production at the
Company's lower cost facilities, improved supply chain management and flow
manufacturing expansion in EIG. The Company also
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17
benefited from lower overall net pension costs resulting primarily from a higher
return on pension investment assets. After deducting corporate administrative
expenses, consolidated operating income was $135.9 million or 13.3% of net
sales, an increase of $17.1 million, or 14.3%, when compared with 1999 operating
income of $118.8 million or 12.8 % of net sales.
Selling, general, and administrative (SG&A) expenses were $95.1 million in
2000, compared with $79.4 million in 1999, a $15.7 million increase due mainly
to acquisitions completed in late 1999 and 2000. As a percentage of sales, SG&A
was 9.3% in 2000, compared with 8.6% in 1999. The acquisitions were the primary
contributors to an increase in selling expenses. Corporate general and
administrative expenses increased slightly, but were flat year to year, as a
percentage of sales.
Interest expense was $29.2 million in 2000, an increase of 17.9%, compared
with $24.8 million in 1999. Higher average debt levels to finance acquisitions
as well as higher average borrowing rates, were the primary reasons for the
increase.
Net income for 2000 rose 12.8% and was $68.5 million, or $2.11 per diluted
share, compared with net income for 1999 of $60.8 million, or $1.85 per diluted
share. The increase in net income was due primarily to the higher sales and
operating income discussed above.
Fourth Quarter Results
Sales for the fourth quarter of 2000 were $258.2 million, compared with
$236.0 million in the fourth quarter of 1999, an increase of $22.2 million, or
9.4%. The increase in sales was driven by acquisitions made in 2000 and late
1999.
Operating income for the fourth quarter of 2000 was $34.1 million, compared
with $29.5 million for the fourth quarter of 1999, an increase of $4.6 million
or 15.5%. The acquired businesses, combined with continued productivity gains as
a result of the Company's operational excellence initiatives and cost reduction
programs, were the primary reasons for the increase in operating income. As a
result of slowing U.S. economic growth, in the fourth quarter of 2000, the
Company accelerated certain cost realignment initiatives. These initiatives
include a more aggressive movement of certain production activities to low-cost
locations, and the resizing of several businesses. These actions resulted in a
fourth quarter 2000 pretax charge of $3.4 million. Also, fourth quarter 2000
results include a pretax gain of $3.6 million due to the resolution of a
contract issue with a major customer in the Electronic Instruments Group.
Net income for the fourth quarter of 2000 totaled $17.2 million, or $0.53
per diluted share, an increase of 14.8% from the fourth quarter of 1999 net
income of $15.0 million, or $0.46 per diluted share.
Operating Segment Results
The ELECTRONIC INSTRUMENTS GROUP (EIG) sales were $509.5 million in 2000,
an increase of 13.0% from 1999 sales of $451.1 million. The 2000 acquisition of
a business, along with a business acquired in December 1999, drove the
year-to-year increase in sales. The heavy-vehicle instruments business reported
significantly lower sales in 2000 due to weak market conditions, which began in
the second quarter of 2000, compared to robust market conditions in 1999. EIG's
aerospace and power instrument businesses continue to grow through acquisitions
and core growth, expanding the Company's technology, market scope and
penetration. Also, the process instruments business continues to rebound from
weak market conditions experienced during the first nine months of 1999.
EIG's operating income for 2000 increased to $78.7 million from $70.0
million in 1999, an increase of 12.6%. The acquisitions described above were the
primary reasons for the increase in operating income. Profit margins were flat
year to year at 15.5%. Improved operating performance, primarily by EIG's
aerospace and process businesses was reduced by margin declines on lower sales
of heavy-vehicle instruments.
The ELECTROMECHANICAL GROUP (EMG) sales for 2000 were $515.2 million, an
increase of 8.7%, from sales of $473.7 million in 1999. The 2000 acquisition of
businesses and improved market conditions within the specialty metals market,
drove the year-to-year increase in sales. Partially reducing the sales increase
were
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EMG's operations in Europe, where competitive pricing pressures and currency
translation changes continue to adversely affect EMG's sales.
EMG's operating income for 2000 increased to $77.6 million from $67.6
million in 1999, a 14.8% increase. The acquisition described above, along with
improved market conditions within the specialty metals market, were the primary
reasons for the increase in operating income. Partially offsetting the profit
improvement were lower profits at EMG's motor operations in Europe, due to the
adverse effects on sales noted above. Operating margins improved to 15.1% of
sales in 2000 from 14.3% in 1999 due to the higher sales, and lower operating
costs in EMG's worldwide motor operations, as a result of the operational
excellence and cost reduction initiatives.
YEAR ENDED DECEMBER 31, 1999, COMPARED WITH YEAR ENDED DECEMBER 31, 1998
Results of Operations
The Company reported sales for 1999 of $924.8 million, down slightly from
sales of $927.5 million in 1998. EIG's sales increased by 8.9% to $451.1 million
in 1999 from $414.2 million in 1998 because of the incremental sales generated
by strategic acquisitions made during the year. Sales to heavy-vehicle
manufacturers were strong along with an improving process instruments business.
Without the acquisitions, sales for EIG would have been lower than in 1998 due
largely to changes in the mix of sales and to slightly lower demand in process
instruments and aerospace markets. Aerospace markets were down from peak levels
in 1998. For the EMG group, competitive factors in international markets caused
slightly lower unit shipments in 1999 when compared with 1998. The result was a
decline in EMG reported sales to $473.7 million in 1999 from $513.3 million in
1998, a decrease of 7.7%. A change in the mix of U.S. sales also contributed to
the EMG's sales decline. Sales by both segments to foreign markets totaled
$302.0 million in 1999, a decrease of $43.0 million or 12.5% from 1998. Export
shipments from the United States in 1999 were $158.5 million, compared with
$162.6 million in 1998.
New orders for 1999 were $944.5 million, an increase of 4.2% from $906.1
million for 1998. The order backlog at December 31, 1999 was $243.5 million,
compared with $223.8 million at December 31, 1998. New orders from the strategic
acquisitions made by the Company during the year were the primary reason for the
increase.
The Company's plan to lower its cost structure globally under the
operational excellence initiatives, announced in the fourth quarter of 1998, had
a positive effect on operating income and margins. Total segment operating
income improved to $137.5 million for 1999 compared with operating income of
$125.7 million for 1998, before a fourth quarter 1998 non-recurring charge, an
increase of 9.3%. Operating margins improved to 14.9% from 13.6% for the
comparable period. The operational excellence initiatives and the impact of new
acquisitions, along with the transition of a portion of the Company's motor
production to a lower cost facility in Reynosa, Mexico, the closing and
consolidation of certain EMG motor plants in Europe, improved supply chain
management and flow manufacturing expansion in EIG, along with related workforce
reductions drove margins to higher levels. Consolidated operating income was
$118.8 million or 12.8% of net sales, an increase of $14.3 million when compared
with 1998 operating income of $104.5 million or 11.3 % of net sales, before the
$8.0 million pretax nonrecurring charge. Selling, general and administrative
expenses were $79.4 million in 1999, a $2.7 million decrease when compared with
1998 when SG&A totaled $82.1 million. As a percent of sales, SG&A was 8.6% in
1999, slightly lower than in 1998. The corporate cost reduction initiative was
the driving force behind the reduction in general and administrative expense.
Selling expense was flat year-to-year, as new EIG selling expense from
acquisitions almost entirely offset reduced selling costs for the EMG group.
Interest expense was $24.8 million in 1999 compared with $23.7 million in
1998, an increase of 4.7%. Higher average debt levels to finance acquisitions,
was the primary reason for the increase in interest expense. Other income, net
decreased to $0.4 million in 1999 from $4.6 million in 1998 primarily because of
lower gains from the sale of securities and idle property.
Net income for 1999 was $60.8 million, or $1.85 per diluted share, compared
with net income for 1998 of $41.7 million, or $1.24 per diluted share. The 1998
net income includes an after-tax nonrecurring charge of
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$4.8 million or $0.14 per diluted share, and an after-tax extraordinary charge
for the early repayment of long-term debt of $8.7 million, or $0.26 per diluted
share. Without the nonrecurring charge and the extraordinary item in 1998, net
income would have been $55.3 million, or $1.64 per diluted share.
The weighted average shares outstanding during 1999 were 32.3 million
shares, compared with 32.7 million shares for 1998. The reduction reflects
purchases by the Company through its share repurchase program. The Company
repurchased 0.5 million shares in 1999. After accounting for the dilutive effect
of issued stock options and other stock awards, the weighted average diluted
shares outstanding were 32.9 million shares for 1999, compared with 33.7 million
shares for 1998.
Fourth Quarter Results
Sales for the fourth quarter of 1999 were $236.0 million, compared with
$206.8 million in the fourth quarter 1998. Operating income for the fourth
quarter 1999 was $29.5 million, compared with $20.1 million for the fourth
quarter 1998, before a nonrecurring pretax charge of $8.0 million. The 14%
increase in sales was driven by the strategic acquisitions made by the Company
during 1999, and a stronger worldwide motor market during the fourth quarter of
1999. The acquisitions, combined with productivity gains as a result of the
Company's operational excellence initiatives and cost reduction programs were
the primary reasons for a 46.8% gain in operating income. Net income for the
fourth quarter of 1999 totaled $15.0 million, or $0.46 per diluted share, up 37%
from the fourth quarter 1998 net income of $11.0 million or $0.33 per diluted
share, excluding the after-tax effect of the nonrecurring charge of $4.8
million. The fourth quarter 1999 tax rate was 34.9%, a rate more normal than the
1998 fourth quarter tax rate of 21.4%. The 1998 fourth quarter benefited from a
lower effective tax rate due to lower foreign pretax income, which would be
taxed at higher rates than in the U.S., and favorable foreign tax adjustments
relating to certain prior tax years.
Operating Segment Results
The ELECTRONIC INSTRUMENTS GROUP (EIG) sales were $451.1 million in 1999,
an increase of 8.9% from 1998 sales of $414.2 million. The Company's 1999
acquisition of businesses, which produce electronic instruments and controls,
transducers, sensors, and gauges, drove the year-to-year increase in sales. A
business acquired in December 1999, which specializes in the design and
manufacture of continuous level measurement and control devices has subsequently
enhanced sales growth. The heavy-vehicle instruments business was strong in 1999
because of robust market conditions for heavy trucks. Also, the Company's
process instruments business rebounded from weak market conditions during the
first nine months of 1999. The aerospace business continues to grow because of
the acquisitions described above, expanding the Company's aerospace technology
and market breadth, despite aerospace markets being down slightly from peak
levels in 1998.
Group Operating income for 1999 increased to $70.0 million from $58.0
million in 1998, an increase of 20.6%. The acquisitions described above were the
primary reasons for the large increase in operating income. Profit margins
improved significantly to 15.5% from 14.0% for the same comparable period. The
Group margins benefited from work force reductions directed toward improving
productivity, and supply chain management savings. EIG's operating income for
1998 was $55.7 million, after a fourth quarter 1998 nonrecurring charge of $2.3
million for cost reduction activities.
The ELECTROMECHANICAL GROUP (EMG) sales for 1999 were $473.7 million, a
$39.5 million decrease from sales of $513.3 million in 1998. Weak market
conditions in Europe and Asia, where major competitive pricing pressures
affected EMG's motor operations, as well as lower demand were the primary
reasons for the sales decline.
Operating income for 1999 was essentially unchanged at $67.6 million.
Improved profitability from the relocation of a portion of its U.S. motor
production to lower cost facilities in Reynosa, Mexico was offset by lower
profits at the Company's motor operations in Europe and Asia on lower unit
volume shipped as a result of market and price competition. Operating margins,
however, improved dramatically to 14.3% in 1999 from 13.2% in 1998. As of
December 31, 1999, approximately 40% of EMG's North American motor production
for floorcare applications and outdoor power equipment is produced in Mexico.
Operations at the Company's
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Cambridge, Ohio plant ceased in the first quarter of 2000. The plant relocation
and rationalization activity in Europe stemming from the 1998 cost reduction
initiatives is now complete. EMG's operating income in 1998 was $62.5 million,
after a fourth quarter 1998 $5.2 million nonrecurring charge for the above
mentioned cost reduction activities.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities before proceeds from the sale of
accounts receivable totaled $78.7 million for 2000, compared with $86.6 million
for 1999, a decrease of $7.9 million. The decrease was caused primarily by
higher cash outflows to fund operating working capital requirements due in part
to higher accounts receivable levels related to increased sales and to higher
inventory levels partly associated with the Company's move of certain products
to its low-cost manufacturing facilities. Other long-term liabilities decreased
primarily because of the funding and settlement of a contract issue with a
customer in the fourth quarter of 2000. Net proceeds received from sales of
accounts receivables to a third party under an accounts receivable sales
agreement provided cash of $1 million in 2000, compared with $44 million of cash
provided in 1999. Total net cash provided by operating activities in 2000 was
$79.7 million compared with $130.6 million in 1999. Under the accounts
receivable sales agreement, entered into in 1999, the Company, through a wholly-
owned, special purpose subsidiary, can sell up to $50 million of eligible
accounts receivable.
Cash used for investing activities was $107.4 million for 2000, compared
with $148.0 million for 1999. Cash outlays for new business acquisitions totaled
$81 million in 2000, compared with $147.5 million in 1999. Also, the prior year
included proceeds received from the sale of investment assets of $29.5 million,
compared with $3.3 million in 2000.
Financing activities provided cash of $26.2 million in 2000, compared with
$16.3 million provided in 1999. In 2000, net short-term borrowings increased
$25.2 million, primarily to fund the 2000 acquisitions. During 1999, short-term
borrowings increased $37.8 million and the Company made net payments on long-
term debt of $9.1 million, which included the final repayment on its 9 3/4%
Notes. Common stock repurchases totaled $1.6 million in 2000, compared with $9.3
million in 1999.
As a result of all the Company's cash flow activities, cash and cash
equivalents decreased $1.4 million since year-end 1999, to $7.2 million at
December 31, 2000. The Company believes that it has sufficient cash generating
capabilities and available financing facilities to enable it to meet its needs
in the foreseeable future.
NEW ACCOUNTING PRONOUNCEMENTS
In the fourth quarter of 2000, the Company adopted the Securities and
Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition in Financial Statements". The SAB summarizes certain of the staff's
views in applying generally accepted accounting principles to revenue
recognition in the financial statements. The adoption of the Bulletin did not
have a significant effect on the Company's consolidated results of operations,
financial position, or cash flows.
In September, 2000, the FASB issued Statement No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities -- A Replacement of FASB Statement 125". The Statement requires
extensive disclosures about securitizations entered into during the period and
retained interests in securitized financial assets at the balance sheet date,
accounting policies, sensitivity information relating to retained interests, and
cash flows distributed to the transferor. The accounting requirements of
Statement 140 are effective for transfers occurring after March 31, 2001.
However, the expanded disclosures about securitizations and collateral are
effective for fiscal years ending after December 15, 2000. The Company is
continuing to study the future impact of adopting the accounting changes of this
Statement. The Company adopted the disclosure requirement by the Statement, for
fiscal year 2000, which are included in footnote 5 of the financial statements.
On July 1, 2000, the Company adopted FASB Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation". The
Interpretation provides guidance on the application of APB
19
21
Opinion No. 25, "Accounting for Stock Issued to Employees". The adoption of this
Interpretation did not have a material effect on the Company's consolidated
results of operations, financial position, or cash flows.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement requires recognition of all
derivative instruments measured at fair value in the statement of financial
position. Gains or losses resulting from changes in the value of derivatives
would be accounted for depending on the intended use of the derivative and
whether it qualifies for hedge accounting. In June 1999, the FASB approved a
one-year delay in the effective date of this Statement until January 2001.
In June 2000, the FASB issued Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities". This Statement amends
Statement No. 133 for certain impractical aspects of the original Statement
which were incompatible with many common current hedging approaches. Statement
No. 138 is effective simultaneously with Statement No. 133.
The provisions of SFAS 133 and related amendments and interpretations
became effective for the Company beginning January 1, 2001, including the
interim periods of that year. Based on the Company's limited use of derivative
financial instruments, adoption of these Statements did not have a significant
effect on the Company's consolidated results of operations, financial position,
or cash flows.
INTERNAL REINVESTMENT
Capital Expenditures
Capital expenditures were $29.6 million for 2000, compared with $30.3
million for 1999. Approximately 74% of the expenditures in 2000 were for
equipment to increase productivity and expand capacity. The Company's 2001
capital expenditures are expected to increase when compared to 2000 levels, with
a continuing emphasis on spending to improve productivity, and expand low cost
manufacturing facilities.
Product Development and Engineering
Product development and engineering expenses are directed toward the
development and improvement of new and existing products and processes. Such
expenses were $45.9 million in 2000, an increase from $42.2 million for 1999,
and $42.1 million for 1998. Included in the amounts above are net expenses for
research and development of $23.8 million for 2000, $21.6 million for 1999, and
$23.4 million for 1998.
ENVIRONMENTAL MATTERS
The Company is subject to environmental laws and regulations as well as
stringent cleanup requirements. It also has been named a potentially responsible
party at several sites that are the subject of government-mandated cleanups. No
amounts were charged to expense in 2000 for environmental cleanup. Amounts
charged to expense for environmental cleanup were approximately, $0.9 million in
1999, and $0.3 million in 1998.
It is not possible to accurately quantify the potential financial impact of
actions regarding environmental matters, but the Company believes, based on past
experience and current evaluations, that the outcome of these actions is not
likely to have a material adverse effect on the future results of operations,
financial position, or cash flows of the Company.
IMPACT OF INFLATION
The Company attempts to minimize the impact of inflation through cost
reduction programs and by improving productivity. In addition, the Company uses
the last-in, first-out (LIFO) method of accounting for most inventories (whereby
the cost of products sold approximates current costs), and therefore, the impact
of inflation is substantially reflected in operating costs. In general, the
Company believes programs are in place that are designed to monitor the impact
of inflation and to take necessary steps to minimize inflation's effect on
operations.
20
22
MARKET RISK DISCLOSURE
The Company's primary exposure to market risks includes fluctuations in
interest rates on its short-term and long-term debt and in foreign currency
exchange rates.
The Company's long-term debt is fixed rate and its short-term debt is
variable rate. These financial instruments are more fully described in the notes
to the financial statements.
The foreign currencies to which the Company has the most significant
exchange rate exposure is the Italian lira, and the European Euro currency.
Exposure to foreign currency rate fluctuation is mitigated, when possible,
through the use of natural hedges, whereby, purchases and sales in the same
foreign currency and with similar maturities offset one another. Translation of
foreign financial statements into U.S. dollars have not had a significant effect
on the operating results reported by the Company.
Based on a hypothetical ten percent adverse movement in interest rates and
foreign currency exchange rates, the potential losses in future earnings, fair
value of risk sensitive financial instruments, and cash flows are immaterial,
although the actual effects may differ materially from the hypothetical
analysis.
FORWARD-LOOKING INFORMATION
Except for historical information contained herein, certain matters
discussed in this Form 10-K are "forward looking statements" as defined in the
Private Securities Litigation Reform Act (PSLRA) of 1995, which involve risks
and uncertainties that exist in the Company's operations and business
environment, and are subject to change based on various important factors. The
Company wishes to take advantage of the "safe harbor" provisions of the PSLRA by
cautioning readers that numerous important factors discussed below, among
others, in some cases have caused, and in the future could cause, the Company's
actual results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. The following include some,
but not all, of the factors or uncertainties that could cause actual results to
differ from projections:
- An economic slowdown, or unforeseen price reductions in the Company's
global market segments, with adverse effects on profit margins.
- The Company's ability to continue achieving its cost reduction
objectives, due in part to varying prices and availability of certain raw
materials and semifinished materials and components.
- Underutilization of the Company's existing factories and plants, or plant
expansions or new plants; possibly resulting in production
inefficiencies. Higher than anticipated, or unanticipated start-up
expenses and production delays at new plants.
- The unanticipated expenses of divesting businesses, or of assimilating
newly-acquired businesses into the Company's business structure; as well
as the impact of unusual expenses from business strategies, asset
valuations, acquisitions, divestitures and organizational structures.
Acquisition and divestiture strategies may face legal and regulatory
delays and other unforeseeable obstacles beyond the Company's control.
- Unpredictable delays or difficulties in the development of key new
product programs, and the risk of not recovering major research and
development expenses, and/or the risks of major technological shifts away
from the Company's technologies and core competencies.
- A prolonged slowing of the growth rate in the U.S. and Europe for
electric motor products, aerospace, heavy-vehicle and process
instrumentation; as well as a restriction in the ability of heavy-vehicle
manufacturers to secure components manufactured by outside suppliers.
- Rapid or unforeseen escalation of the cost of regulatory compliance
and/or litigation, including but not limited to, environmental
compliance, product-related liability, assertions related to intellectual
property rights and licenses, adoption of new, or changes in accounting
policies and practices and the application of such policies and
practices.
21
23
- The effects, in the United States and abroad, of changes in trade
practices; monetary and fiscal policies; laws and regulations; other
activities of governments, agencies and similar organizations; and social
and economic conditions, such as trade restrictions or prohibitions;
unforeseen inflationary pressures and monetary fluctuation; import and
other charges or taxes; the ability or inability of the Company to
obtain, or hedge foreign currencies, foreign currency exchange rates and
fluctuation in those rates. This would include extreme currency
fluctuations; protectionism and confiscation of assets; nationalizations
and unstable governments and legal systems, and intergovernmental
disputes.
- Variation in the level of orders booked, which can be affected by general
economic conditions, intensity of competition and continued marketplace
acceptance of products.
The Company believes that it has the product offerings, facilities,
personnel and competitive and financial resources for continued business
success. However, future revenues, costs, margins, product mix and profits are
all influenced by a number of factors, as discussed above.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information concerning market risk is set forth under the heading "Market
Risk Disclosure" in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on page 21 herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
----
INDEX TO FINANCIAL STATEMENTS (ITEM 14(a) 1)
Report of Independent Auditors.............................. 23
Consolidated Statement of Income for the years ended
December 31, 2000, 1999, and 1998......................... 24
Consolidated Balance Sheet at December 31, 2000 and 1999.... 25
Consolidated Statement of Stockholders' Equity for the years
ended December 31, 2000, 1999, and 1998................... 26
Consolidated Statement of Cash Flows for the years ended
December 31, 2000, 1999, and 1998......................... 27
Notes to Consolidated Financial Statements.................. 28
FINANCIAL STATEMENT SCHEDULES (ITEM 14(a) 2)
Financial statement schedules have been omitted because either
they are not applicable or the required information is included in
the financial statements or the notes thereto.
22
24
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of AMETEK, Inc.
We have audited the accompanying consolidated balance sheets of AMETEK,
Inc. as of December 31, 2000 and 1999, and the related consolidated statements
of income, cash flows, and stockholders' equity for each of the three years in
the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
AMETEK, Inc. at December 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
Philadelphia, PA
January 22, 2001
23
25
AMETEK, INC.
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31,
----------------------------------------
2000 1999 1998
------------ ---------- ----------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Net sales................................................. $1,024,660 $924,797 $927,474
---------- -------- --------
Expenses:
Cost of sales (excluding depreciation).................. 761,548 696,011 711,020
Selling, general and administrative..................... 95,147 79,351 82,089
Depreciation............................................ 32,075 30,638 29,909
Nonrecurring charge..................................... -- -- 8,020
---------- -------- --------
Total expenses....................................... 888,770 806,000 831,038
---------- -------- --------
Operating income.......................................... 135,890 118,797 96,436
Other income (expenses):
Interest expense........................................ (29,203) (24,776) (23,659)
Other, net.............................................. (549) 440 4,581
---------- -------- --------
Income before income taxes................................ 106,138 94,461 77,358
Provision for income taxes................................ 37,606 33,693 26,909
---------- -------- --------
Income before extraordinary item.......................... 68,532 60,768 50,449
Extraordinary loss on early extinguishment of debt, net of
taxes................................................... -- -- (8,710)
---------- -------- --------
Net income................................................ $ 68,532 $ 60,768 $ 41,739
========== ======== ========
Basic earnings (loss) per share:
Income before extraordinary item........................ $ 2.13 $ 1.88 $ 1.55
Extraordinary loss on early extinguishment of debt...... -- -- (0.27)
---------- -------- --------
Net income.............................................. $ 2.13 $ 1.88 $ 1.28
========== ======== ========
Diluted earnings (loss) per share:
Income before extraordinary item........................ $ 2.11 $ 1.85 $ 1.50
Extraordinary loss on early extinguishment of debt...... -- -- (0.26)
---------- -------- --------
Net income.............................................. $ 2.11 $ 1.85 $ 1.24
========== ======== ========
Average common shares outstanding:
Basic shares............................................ 32,131 32,297 32,733
========== ======== ========
Diluted shares.......................................... 32,534 32,925 33,741
========== ======== ========
See accompanying notes.
24
26
AMETEK, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
----------------------
2000 1999
--------- ---------
(DOLLARS IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,187 $ 8,636
Marketable securities..................................... 8,111 6,764
Receivables, less allowance for possible losses........... 139,568 112,756
Inventories............................................... 129,365 102,396
Deferred income taxes..................................... 10,516 12,001
Other current assets...................................... 8,353 13,548
-------- --------
Total current assets................................... 303,100 256,101
Property, plant and equipment, net.......................... 213,955 219,571
Goodwill, net of accumulated amortization................... 299,479 248,304
Investments and other assets................................ 42,454 44,174
-------- --------
Total assets........................................... $858,988 $768,150
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term
debt................................................... $127,601 $ 99,674
Accounts payable.......................................... 87,315 73,377
Income taxes payable...................................... 12,347 17,979
Accrued liabilities....................................... 70,392 71,706
-------- --------
Total current liabilities.............................. 297,655 262,736
Long-term debt.............................................. 233,616 231,756
Deferred income taxes....................................... 33,166 27,781
Other long-term liabilities................................. 13,713 29,661
Stockholders' equity:
Preferred stock, $0.01 par value; authorized: 5,000,000
shares; none issued.................................... -- --
Common stock, $0.01 par value; authorized: 100,000,000
shares; issued: 2000 and 1999 -- 33,376,491 shares..... 334 334
Capital in excess of par value............................ 2,248 2,041
Retained earnings......................................... 330,696 269,861
Accumulated other comprehensive losses.................... (30,165) (27,395)
Less: Cost of shares held in treasury: 2000 -- 931,295
shares; 1999 -- 1,413,502 shares....................... (22,275) (28,625)
-------- --------
Total stockholders' equity............................. 280,838 216,216
-------- --------
Total liabilities and stockholders' equity............. $858,988 $768,150
======== ========
See accompanying notes.
25
27
AMETEK, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------- ----------------------------- -----------------------------
COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE STOCKHOLDERS'
INCOME EQUITY INCOME EQUITY INCOME EQUITY
------------- ------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
CAPITAL STOCK
Preferred Stock, $0.01 par
value........................... $ -- $ -- $ --
-------- -------- --------
Common Stock, $0.01 par value
Balance at the beginning of the
year.......................... 334 334 332
Shares issued, net of common
stock retirement.............. -- -- 2
-------- -------- --------
Balance at the end of the
year........................ 334 334 334
-------- -------- --------
CAPITAL IN EXCESS OF PAR VALUE
Balance at the beginning of the
year.......................... 2,041 4,727 3,146
Employee stock option, savings
and award plans............... 207 (2,686) 1,581
-------- -------- --------
Balance at the end of the
year........................ 2,248 2,041 4,727
-------- -------- --------
RETAINED EARNINGS
Balance at the beginning of the
year.......................... 269,861 216,837 182,935
Net income...................... $68,532 68,532 $60,768 60,768 $41,739 41,739
------- ------- -------
Cash dividends paid............. (7,697) (7,744) (7,837)
-------- -------- --------
Balance at the end of the
year........................ 330,696 269,861 216,837
-------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE
LOSSES(1)
Foreign currency translation:
Balance at the beginning of the
year.......................... (26,292) (16,277) (20,246)
Translation adjustments......... (4,175) (4,175) (10,015) (10,015) 3,969 3,969
-------- -------- --------
Balance at the end of the
year........................ (30,467) (26,292) (16,277)
-------- -------- --------
Minimum pension liability
adjustment:
Balance at the beginning of the
year.......................... (280) (4,012) (1,909)
Adjustments during the year..... 111 111 3,732 3,732 (2,103) (2,103)
-------- -------- --------
Balance at the end of the
year...................... (169) (280) (4,012)
-------- -------- --------
Valuation adjustments for
marketable securities and other:
Balance at the beginning of the
year.......................... (823) (575) 268
Increase (decrease) in
marketable securities(2)...... 1,294 1,294 (248) (248) (1,018) (1,018)
Other........................... -- -- -- -- 175 175
------- ------- -------
Net change in marketable
securities and other........ 1,294 (248) (843)
------- -------- ------- -------- ------- --------
Balance at the end of the
year........................ 471 (823) (575)
-------- -------- --------
Total other comprehensive
(loss) income for the
year........................ (2,770) (6,531) 1,023
------- ------- -------
Total comprehensive income for
the year.................... $65,762 $54,237 $42,762
======= ======= =======
Accumulated other comprehensive
loss at the end of the year... (30,165) (27,395) (20,864)
-------- -------- --------
TREASURY STOCK
Balance at the beginning of the
year.......................... (28,625) (26,985) (5,479)
Employee stock option, savings
and award plans............... 7,961 7,641 6,493
Purchase of treasury stock...... (1,611) (9,281) (27,999)
-------- -------- --------
Balance at the end of the
year........................ (22,275) (28,625) (26,985)
-------- -------- --------
Total Stockholders'
Equity.................... $280,838 $216,216 $174,049
======== ======== ========
(1) Amounts presented are net of tax based on an average effective tax rate of
35%, except for foreign currency translation adjustments, which are
presented on a pretax basis.
(2) Includes reclassification adjustment for gains included in net income for
2000, 1999, and 1998 of $0.3 million, $0.1 million, and $1.2 million,
respectively.
See accompanying notes.
26
28
AMETEK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
(DOLLARS IN THOUSANDS)
CASH PROVIDED BY (USED FOR):
Operating activities:
Income before extraordinary item........................ $ 68,532 $ 60,768 $ 50,449
Adjustments to reconcile income before extraordinary
item to net cash provided by operating activities:
Depreciation and amortization........................ 43,257 39,624 38,369
Deferred income taxes................................ 6,430 5,118 (1,692)
Changes in assets and liabilities (net of
acquisitions):
(Increase) decrease in receivables................. (16,782) (7,008) 10,953
(Increase) decrease in inventories and other
current assets.................................. (6,622) (68) 3,085
(Decrease) increase in payables, accruals, and
income taxes.................................... (4,390) (6,861) (20,657)
(Decrease) increase in other long-term
liabilities..................................... (14,866) 1,568 (3,340)
Other................................................ 3,165 (6,572) 1,219
--------- --------- ---------
Cash provided by operating activities before sale of
accounts receivable................................ 78,724 86,569 78,386
Increase in accounts receivable sold................. 1,000 44,000 --
--------- --------- ---------
Total operating activities........................... 79,724 130,569 78,386
--------- --------- ---------
Investing activities:
Additions to property, plant and equipment.............. (29,554) (30,331) (49,841)
Purchase of businesses.................................. (81,017) (147,470) (115,380)
Proceeds from sale of assets............................ 3,314 29,515 4,770
Increase in marketable securities and other............. (143) 255 (3,038)
--------- --------- ---------
Total investing activities........................... (107,400) (148,031) (163,489)
--------- --------- ---------
Financing activities:
Net change in short-term borrowings..................... 25,154 37,820 51,023
Additional long-term borrowings......................... 3,003 5,201 225,000
Reduction in long-term borrowings....................... (271) (14,309) (136,948)
Debt prepayment premium and new debt issuance costs..... -- -- (16,829)
Repurchases of common stock............................. (1,611) (9,281) (27,999)
Cash dividends paid..................................... (7,697) (7,744) (7,837)
Proceeds from stock options............................. 7,649 4,541 4,793
Other................................................... -- 102 2,984
--------- --------- ---------
Total financing activities........................... 26,227 16,330 94,187
--------- --------- ---------
(Decrease) increase in cash and cash equivalents.......... (1,449) (1,132) 9,084
Cash and cash equivalents:
Beginning of year....................................... 8,636 9,768 684
--------- --------- ---------
End of year............................................. $ 7,187 $ 8,636 $ 9,768
========= ========= =========
See accompanying notes.
27
29
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying consolidated financial statements reflect the operations,
financial position and cash flows of AMETEK, Inc. (the "Company"), and include
the accounts of the Company and subsidiaries, after elimination of all
significant intercompany transactions in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates and assumptions.
Cash Equivalents, Securities, and Other Investments
All highly liquid investments with maturities of three months or less when
purchased are considered cash equivalents. At December 31, 2000 and 1999, all of
the Company's equity securities and fixed income securities (primarily those of
a captive insurance subsidiary) are considered available-for-sale. The aggregate
market value of such securities at December 31, 2000 and 1999 was: 2000 -- $16.4
million ($16.0 million amortized cost) and 1999 -- $14.5 million ($16.1 million
amortized cost). The Company's other investments are accounted for by the equity
method.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined principally by the last-in, first-out (LIFO) method of inventory
valuation, and market on the basis of the lower of replacement cost or estimated
net proceeds from sales. The excess of the first-in, first-out (FIFO) value over
the LIFO value at December 31, 2000 and 1999 was $31.6 million and $33.2
million, respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for
additions to plant facilities, or that extend their useful lives, are
capitalized. The cost of tools, jigs, and dies, and maintenance and repairs is
charged to operations as incurred. Depreciation of plant and equipment is
calculated principally on a straight-line basis over the estimated useful lives
of the related assets.
Revenue Recognition
The Company generally recognizes revenue when products are shipped and
services are rendered. The policy with respect to sales returns and allowances
generally provides that a customer may not return products, or be given
allowances, except at the Company's option. The aggregate provisions for
estimated warranty costs (not significant in amount) are recorded at the time of
sale and periodically adjusted to reflect actual experience.
Research and Development
Company-funded research and development costs are charged to operations as
incurred and during the past three years were: 2000-$23.8 million, 1999-$21.6
million, and 1998-$23.4 million.
28
30
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Earnings Per Share
The calculation of basic earnings per share is based on the average number
of common shares outstanding during the period. Diluted earnings per share
reflect the effect of all potentially dilutive securities (primarily outstanding
common stock options). The following table presents the number of shares used in
the calculation of basic earnings per share and diluted earnings per share:
2000 1999 1998
------ ------ ------
(IN THOUSANDS)
Weighted average shares:
Basic.................................................. 32,131 32,297 32,733
Stock option and award plans........................... 403 628 1,008
------ ------ ------
Diluted................................................ 32,534 32,925 33,741
====== ====== ======
Foreign Currency Translation
Assets and liabilities of foreign operations are translated by using
exchange rates in effect at the balance sheet date, and their results of
operations are translated by using average exchange rates for the year. Certain
transactions of the Company and its subsidiaries are made in currencies other
than their functional currency. Gains and losses from those transactions are
included in operating results for the year.
Derivative Financial Instruments
The Company makes limited use of derivative financial instruments to manage
interest rate, foreign exchange, and forward contract exposure. The Company does
not hold or trade in derivatives for speculative purposes. Interest rate swap
and cap agreements are sometimes used to manage the interest rate
characteristics of certain outstanding revolving credit loans to a more
desirable fixed or variable rate basis, or to limit the Company's exposure to
rising interest rates. These swaps and caps are matched with the underlying
fixed or variable rate debt, and any periodic cash payments are accrued on a
settlement basis and accounted for as adjustments to interest costs. No gains or
losses are recorded. There were no interest rate swap or cap agreements in place
during 2000. Foreign currency option contracts, foreign currency exchange
contracts, and foreign currency swap agreements may be entered into to mitigate
the translation exposure from investments in certain foreign subsidiaries.
Realized and unrealized gains and losses from these instruments are recognized
when the underlying hedged instrument is settled. Foreign currency forward
contracts are entered into to from time-to-time to hedge specific firm
commitments for certain export sales, thereby minimizing the Company's exposure
to foreign currency fluctuation. These contracts are entered into for periods
generally not to exceed one year. Unrealized gains and losses from these
contracts are deferred and are recognized in operations as the related sales and
purchases occur. Realized and unrealized changes in fair value of derivatives
designated with items that no longer exist, or are no longer probable of
occurring are recorded as a component of the gain or loss arising from the
disposition of the designated item. There are no carrying amounts related to the
above derivative financial instruments in the consolidated balance sheet and the
Company had no significant derivatives outstanding at December 31, 2000 and
1999.
Intangible Assets
The excess of cost over net assets acquired (goodwill) is being amortized
on a straight-line basis primarily over a 30 year period. The Company reviews
the carrying value of intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If such
an event occurred, the Company would prepare projections of future cash flows
for the applicable business. If such projections indicated that goodwill would
not be recoverable, the Company's carrying value of such asset would be reduced
by the estimated excess of such value over projected discounted cash flow.
Patents are being
29
31
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amortized on a straight-line basis over their estimated useful lives of 9 to 17
years. Other acquired intangibles are being amortized on a straight-line basis
over their estimated useful lives of 5 to 30 years.
Reclassifications
Certain amounts appearing in the prior year's financial statements and
supporting footnote disclosures have been reclassified to conform to the current
year's presentation.
2. NONRECURRING CHARGE
Included in the 1998 results of operations is a pretax nonrecurring charge
of $8.0 million ($4.8 million after-tax, or $0.14 per diluted share) incurred in
the fourth quarter of 1998 for costs associated with initiatives the Company
undertook to lower its cost structure. The initiatives included: the closure and
consolidation of certain of the Company's Electromechanical Group's (EMG) motor
plants in Europe ($2.7 million), the transition of some of EMG's U.S. motor
production to a lower cost facility in Reynosa, Mexico ($1.5 million), selected
workforce reductions, and other initiatives to maximize operating efficiencies,
mostly within the Electronic Instruments Group (EIG) ($3.8 million). As of
December 31, 2000, all actions under these initiatives were completed.
3. ACQUISITIONS
In 2000, the Company made two acquisitions. In August 2000, the Company
acquired the assets of certain businesses of Prestolite Electric Incorporated.
The acquired businesses consist of Prestolite's Switch Division, its Industrial
Battery Charger business, and its Direct-Current (DC) motor business, which are
now a part of the Electromechanical Group. Additionally, in September 2000, the
Company acquired the assets of Rochester Instrument Systems, a leading supplier
for the electric power generation market, which is now a part of the Electronic
Instruments Group. The aggregate purchase price paid for the 2000 acquisitions
was $81 million in cash, subject to adjustment for finalization of the value of
the net assets acquired.
In 1999, the Company made four acquisitions, which operate as part of the
Electronic Instruments Group. On January 4, 1999, the Company acquired all of
the outstanding shares of National Controls Corporation, a leading U.S.
manufacturer of electronic instruments and controls for food service equipment.
On April 30, 1999, the Company acquired substantially all of the assets of
Gulton-Statham Transducers, a leading manufacturer of high-accuracy electronic
pressure transmitters and transducers for the aerospace and industrial markets,
from Mark IV Industries, Inc. On July 30, 1999, the Company acquired Patriot
Sensors and Controls Corporation, a leading manufacturer of position sensors,
tank gauges and aviation transducers, from First Atlantic Capital, Ltd. These
products are used in a wide range of industrial and aerospace applications.
Finally, on December 2, 1999, the Company acquired Drexelbrook Engineering
Company (Drexelbrook). Drexelbrook designs and manufactures point level and
continuous level measurement and control devices and flow measurement
instrumentation. These instruments are used in a variety of end markets,
including chemical, petrochemical, pharmaceutical, food and beverage, pulp and
paper, water and wastewater. The aggregate purchase price paid for the 1999
acquisitions was $147.5 million.
In January 1998, the Company acquired Rotron, Inc., a manufacturer of
electric motors, fans and motor-blowers, from EG&G Holdings, Inc. In April 1998,
the Company acquired the Western Research business unit of BOVAR, Inc. Western
Research is a manufacturer of gas analysis instrumentation for industrial
process control and air emissions monitoring. In July 1998, the Company acquired
the assets of Darmet Corporation, a manufacturer of specialty wire alloys for
electrical and electronics-related applications. The aggregate purchase price of
the 1998 acquisitions was $115.4 million in cash.
30
32
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of the closing dates, the Company also recorded liabilities for certain
estimated future pension obligations, and for certain other personnel-related
costs associated with the relocation and consolidation of certain operations of
the acquired businesses.
All of the above acquisitions were accounted for by the purchase method,
and accordingly, the results of their operations are included in the Company's
consolidated results from their respective dates of acquisition. The estimated
goodwill acquired with these businesses is being amortized on a straight-line
basis over thirty years.
Had the 2000 acquisitions been made at the beginning of 1999, proforma net
sales for 2000 and 1999 would have been $1,085.4 million and $1,022.3 million.
Proforma net income and diluted earnings per share for 2000 or 1999 would not
have been materially different than those reported.
4. OTHER BALANCE SHEET INFORMATION
2000 1999
-------- --------
(IN THOUSANDS)
INVENTORIES
Finished goods and parts.................................. $ 22,879 $ 18,749
Work in process........................................... 31,020 26,904
Raw materials and purchased parts......................... 75,466 56,743
-------- --------
$129,365 $102,396
======== ========
PROPERTY, PLANT AND EQUIPMENT, at cost
Land...................................................... $ 9,138 $ 7,753
Buildings................................................. 105,335 103,405
Machinery and equipment................................... 414,048 405,622
-------- --------
528,521 516,780
Less accumulated depreciation............................. (314,566) (297,209)
-------- --------
$213,955 $219,571
======== ========
GOODWILL, at cost........................................... $327,320 $266,377
Less accumulated amortization............................... (27,841) (18,073)
-------- --------
$299,479 $248,304
======== ========
INVESTMENTS & OTHER ASSETS
Other intangibles, at cost:
Patents................................................... $ 21,448 $ 21,448
Other acquired intangibles................................ 47,513 47,513
Less accumulated amortization............................. (64,701) (63,541)
-------- --------
4,260 5,420
Investments............................................... 15,727 16,035
Other..................................................... 22,467 22,719
-------- --------
$ 42,454 $ 44,174
======== ========
31
33
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2000 1999
-------- --------
(IN THOUSANDS)
ACCRUED LIABILITIES
Accrued employee compensation and benefits................ $ 27,968 $ 26,412
Other..................................................... 42,424 45,294
-------- --------
$ 70,392 $ 71,706
======== ========
2000 1999 1998
------ ------ ------
(IN THOUSANDS)
ALLOWANCES FOR POSSIBLE LOSSES ON ACCOUNTS AND NOTES
RECEIVABLE
Balance at beginning of year.............................. $3,994 $4,580 $3,932
Additions charged to expense.............................. 264 43 429
Recoveries credited to allowance.......................... 43 100 51
Write-offs................................................ (157) (1,119) (85)
Allowance acquired with new businesses.................... 214 502 210
Currency translation adjustment and other................. (40) (112) 43
------ ------ ------
Balance at end of year.................................... $4,318 $3,994 $4,580
====== ====== ======
5. ACCOUNTS RECEIVABLE SALES
On October 1, 1999, the Company entered into an accounts receivable sale
agreement through a wholly-owned, special purpose subsidiary with a bank whereby
it can sell to a third party up to $50 million of its trade accounts receivable.
The Company's retained interest in the associated receivables, which represents
its subordinated interest in the receivables sold to the special purpose
subsidiary that have not subsequently been sold to the third party, is reflected
as a component of accounts receivable in the Company's consolidated balance
sheets. The balance of the retained interest was $29.6 million and $26.2 million
at December 31, 2000 and 1999, respectively. Proceeds from the initial sale of
accounts receivable in 1999 were used to reduce short-term borrowings
outstanding under the Company's revolving bank credit agreement. The special
purpose subsidiary uses collections on previously purchased interests to acquire
additional interests in new eligible receivables from the Company. The Company
remains responsible for servicing the underlying accounts receivable for which
it receives an adequate service fee as compensation. The Company estimates the
fair value of its retained interests by considering the present value of future
cash flows from the retained interest and expected credit losses in both the
pool of receivables making up the retained interest and the pool of receivables
sold to the third party. Due to the short period of time over which cash flows
from the retained interest are expected to be realized (based on an average
collection cycle of 60 days), the cost basis of the underlying receivables
approximates fair value, less an associated allowance for doubtful accounts. A
hypothetical 10% or greater adverse change in either the discount rate used to
calculate the present value of future cash flows or the collection cycle would
not materially affect the fair value of the retained interest. During 2000, the
Company sold to its special purpose subsidiary $541.7 million in net receivables
throughout the year and made collections on these receivables, net of a
servicing fee, of $537.3 million. Accounts receivable sold to third parties as
of December 31, 2000 and 1999 were $45 million and $44 million, respectively.
The costs associated with the sale of accounts receivable, which are included in
interest expense, were $3 million in 2000 and $1 million in 1999.
32
34
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
At December 31, 2000 and 1999, long-term debt consisted of the following:
DECEMBER 31,
--------------------
2000 1999
-------- --------
(IN THOUSANDS)
7.20% Senior Notes due 2008................................. $225,000 $225,000
Other, Principally Foreign.................................. 9,938 6,872
-------- --------
234,938 231,872
Less: current portion....................................... (1,322) (116)
-------- --------
Total long-term debt................................... $233,616 $231,756
======== ========
Maturities of long-term debt outstanding at December 31, 2000 are as
follows: $3.0 million in 2002; $2.2 million in 2003; $1.9 million in 2004; and
$226.5 million in 2005 and thereafter. On July 17, 1998 the Company issued,
through a private placement, $225 million principal amount of 7.20% Senior Notes
due July 15, 2008. The Senior Notes were priced at a discount to yield of 7.241%
to maturity.
In connection with the early retirement of $136.2 million of senior notes
in 1998, an extraordinary after-tax charge of $8.7 million, or $0.26 per diluted
share, was recorded net of tax benefits totaling $5.1 million.
At, December 31, 2000, the Company had a $195 million revolving Bank Credit
Agreement that matures in 2002. Interest rates on outstanding loans under the
Bank Credit Agreement are based on the London Interbank Offered Rate (LIBOR),
plus a negotiated spread over LIBOR, or at the U.S. prime rate. At December 31,
2000, the Company had $114 million in revolving credit loans outstanding at a
blended rate of 7.40%, all of which are included in short-term borrowings at
year-end.
The Bank Credit Agreement was amended in 1999, to change restrictions on
allowable foreign debt, and the measurement of the pro forma effect of potential
acquisitions in certain debt covenant compliance calculations. The Bank Credit
Agreement places certain restrictions on cash payments, including the payment of
dividends. At December 31, 2000, retained earnings of approximately $18.2
million were not subject to the dividend limitation.
Foreign subsidiaries of the Company had available credit facilities with
local foreign lenders of approximately $37.7 million, of which $22.2 million was
outstanding at December 31, 2000. The weighted average interest rate on total
debt outstanding at December 31, 2000 was 7.31%. The Company also had
outstanding letters of credit totaling $14.3 million at December 31, 2000.
7. STOCKHOLDERS' EQUITY
In 2000, the Company repurchased 83,500 shares of its common stock, under
its current share repurchase authorization at a total cost of $1.6 million. This
compares with repurchases of 492,000 shares at a total cost of $9.3 million in
1999. At December 31, 2000, approximately $27 million of the current $50 million
authorization was unexpended.
The Company has a Shareholder Rights Plan, under which the Company's Board
of Directors declared a dividend of one Right for each share of Company common
stock owned. The Plan provides, under certain conditions involving acquisition
of the Company's common stock, that holders of Rights, except for the acquiring
entity, would be entitled to (i) to purchase shares of preferred stock at a
specified exercise price, or (ii) to purchase shares of common stock of the
Company, or the acquiring company, having a value of twice the Rights exercise
price. The Rights under the Plan expire in 2007.
33
35
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. STOCK OPTION AND AWARD PLANS
In 1999, the Company adopted the 1999 Stock Incentive Plan ("the 1999
Plan"). The 1999 Plan provided for the grant of up to 2.0 million shares of
common stock to eligible employees and nonemployee directors of the Company in
the form of options, phantom stock awards, restricted stock awards and stock
rights. The Company's 1997 Stock Incentive Plan permitted the grant of up to 3.8
million shares of common stock. Stock options may be granted as non-qualified
stock options or as incentive stock options under the Internal Revenue Code of
1986.
Restricted stock awards of the Company's common stock are made to eligible
employees and nonemployee directors at such cost to the recipient as the stock
option committee of the Board of Directors may determine. Such shares are issued
subject to certain conditions with respect to transfer and other restrictions as
prescribed by the plan. Upon issuance of restricted stock, unearned
compensation, equivalent to the excess of the market price of the shares awarded
over the price paid by the recipient at the date of grant, is charged to
stockholders' equity and is included in treasury stock. Unearned compensation is
amortized to expense over the periods until the restrictions lapse. In December
2000, the Company awarded 150,000 shares of restricted stock. The expense
related to the restricted stock award was immaterial in 2000. The Company did
not grant any restricted stock in 1999 or 1998.
In 2000, the Company reserved 14,600 shares, net of share adjustments for
terminations, under a Supplemental Executive Retirement Plan ("SERP"), bringing
the total number of shares reserved to 94,100 shares. Charges to expense under
the SERP are considered pension expense (see Note 11), with the offsetting
credit reflected in stockholders' equity.
At December 31, 2000, 4,259,584 (4,842,758 in 1999) shares of common stock
were reserved for issuance, (including stock options outstanding), under the
1999 and 1997 plans. The options are exercisable at prices not less than market
prices on dates of grant, and in installments over four-to-ten-year-periods from
dates of grant. The Company had no stock appreciation rights outstanding at
December 31, 2000 or 1999. Stock appreciation rights, when issued, are
exercisable for cash and/or shares of the Company's common stock when the
related option is exercised. A charge to income, not significant in amount, is
made for these rights and certain related options.
A summary of the Company's stock option activity and related information
for the years ended December 31 follows:
2000 1999 1998
--------------------------- --------------------------- ---------------------------
PRICE PRICE PRICE
SHARES RANGE SHARES RANGE SHARES RANGE
--------- --------------- --------- --------------- --------- ---------------
Outstanding at beginning of
year........................... 2,907,991 $10.92 - $30.34 2,687,031 $10.92 - $30.34 2,601,564 $ 9.73 - $23.78
Granted.......................... 566,150 $19.94 - $24.44 717,400 $18.78 - $24.84 593,600 $25.69 - $30.34
Exercised........................ (433,174) $10.92 - $20.00 (377,260) $11.60 - $22.00 (417,653) $ 9.73 - $18.10
Canceled......................... (84,372) $14.15 - $30.34 (119,180) $14.15 - $30.34 (90,480) $11.60 - $28.63
--------- --------------- --------- --------------- --------- ---------------
Outstanding at end of year....... 2,956,595 $11.60 - $30.34 2,907,991 $10.92 - $30.34 2,687,031 $10.92 - $30.34
========= =============== ========= =============== ========= ===============
Exercisable at end of year....... 1,634,903 $11.60 - $30.34 1,628,799 $10.92 - $30.34 1,570,966 $10.92 - $23.78
========= =============== ========= =============== ========= ===============
34
36
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information pertaining to the Company's
stock options outstanding at December 31, 2000:
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
RANGE OF AVERAGE REMAINING AVERAGE
EXERCISE OPTIONS EXERCISE CONTRACTUAL OPTIONS EXERCISE
PRICES OUTSTANDING PRICE LIFE EXERCISABLE PRICE
- --------------- ----------- -------- ----------- ----------- --------
$11.60 - $18.20 1,222,645 $13.90 3.8 1,215,133 $13.87
$18.21 - $24.27 997,600 $20.26 5.8 131,050 $20.48
$24.28 - $30.34 736,350 $27.97 4.9 288,720 $28.88
--------- ------ --- --------- ------
2,956,595 $19.55 4.7 1,634,903 $17.05
========= ====== === ========= ======
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for its stock option plans. Had
compensation expense for such plans been determined in accordance with Financial
Accounting Standards Board Statement No. 123, "Accounting for Stock-Based
Compensation" pro forma net income and related per share amounts for the years
ended December 31, 2000, 1999, and 1998 would have been as follows:
2000 1999 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income:
As reported......................................... $68,532 $60,768 $41,739
Pro forma........................................... 66,452 58,838 40,120
Net income per share:
Basic:
As reported...................................... $ 2.13 $ 1.88 $ 1.28
Pro forma........................................ 2.07 1.82 1.23
Diluted:
As reported...................................... 2.11 1.85 1.24
Pro forma........................................ 2.07 1.82 1.23
The weighted average fair value of each option grant on the grant date was
$7.18 for 2000, $6.65 for 1999, and $8.41 for 1998. The fair value of each
option was estimated using the Black-Scholes option pricing model with the
following weighted-average assumptions for options granted in each of the last
three years.
2000 1999 1998
---- ---- ----
Expected life (years)....................................... 5.0 5.0 5.0
Expected volatility......................................... 30.8% 28.0% 24.5%
Dividend yield.............................................. 1.2% 1.2% 0.8%
Risk-free interest rate..................................... 6.61% 5.58% 4.79%
9. LEASES
Minimum aggregate rental commitments under noncancelable leases in effect
at December 31, 2000 (principally for production and administrative facilities
and equipment) amounted to $19.1 million consisting of annual payments of $4.7
million in 2001, $3.2 million in 2002, $2.5 million in 2003, $2.0 million in
2004, $1.4 million in 2005 and $5.3 million in 2006 and thereafter. Rental
expense was $8.1 million in 2000, $6.9 million in 1999 and $6.7 million in 1998.
35
37
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES
The components of income before income taxes and the details of the
provision for income taxes are as follows:
2000 1999 1998
-------- ------- -------
(IN THOUSANDS)
Income before income taxes:
Domestic.................................................. $ 97,302 $85,797 $69,072
Foreign................................................... 8,836 8,664 8,286
-------- ------- -------
Total.................................................. $106,138 $94,461 $77,358
======== ======= =======
Provision for income taxes:
Current:
Federal................................................ $ 26,995 $26,421 $23,965
Foreign................................................ 2,390 5,899 2,335
State.................................................. 1,541 (136) 3,849
-------- ------- -------
Total current........................................ 30,926 32,184 30,149
-------- ------- -------
Deferred:
Federal................................................... 4,733 2,477 (2,148)
Foreign................................................... 1,230 (1,541) (807)
State..................................................... 717 573 (285)
-------- ------- -------
Total deferred....................................... 6,680 1,509 (3,240)
-------- ------- -------
Total provision...................................... $ 37,606 $33,693 $26,909
======== ======= =======
Significant components of the Company's deferred tax (asset) liability as
of December 31 are as follows:
2000 1999
-------- --------
(IN THOUSANDS)
Current deferred tax asset:
Reserves not currently deductible......................... $ (7,101) $ (7,587)
Other..................................................... (3,415) (4,414)
-------- --------
Net current deferred tax asset......................... (10,516) (12,001)
-------- --------
Noncurrent deferred tax (asset) liability:
Differences in basis of property and accelerated
depreciation........................................... 18,709 15,774
Purchased tax benefits.................................... 5,434 7,102
Reserves not currently deductible......................... (5,737) (8,518)
Other..................................................... 14,760 13,423
-------- --------
Noncurrent deferred tax liability...................... 33,166 27,781
-------- --------
Net deferred tax liability............................. $ 22,650 $ 15,780
======== ========
36
38
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effective rate of the provision for income taxes reconciles to the
statutory rate as follows:
2000 1999 1998
---- ---- ----
Statutory rate.............................................. 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit(a).... 1.4 0.3 3.0
Foreign Sales Corporation (FSC) tax credit.................. (3.3) (3.0) (3.7)
Differences between U.S. and foreign tax rates.............. 1.0 1.8 1.6
Goodwill amortization....................................... 2.2 1.9 1.4
Other(b).................................................... (0.9) (0.3) (2.5)
---- ---- ----
35.4% 35.7% 34.8%
==== ==== ====
- ---------------
(a) Years 2000 and 1999 include the reversal of certain prior years' excess
state income tax accruals.
(b) Years 1998 includes favorable foreign tax adjustments relating to prior
years.
At December 31, 2000, the Company had available net operating loss
carryforwards of approximately $8.1 million to offset future taxable income. The
carryforwards, from a subsidiary acquired in 1999, will expire in 2005 through
2019.
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $50.8 million at December 31, 2000. Those earnings are considered
to be indefinitely reinvested and, accordingly, no provision for U.S. deferred
taxes has been made. Upon distribution of those earnings to the United States,
the Company would be subject to U.S. income taxes (subject to a reduction for
foreign tax credits) and withholding taxes payable to the various foreign
countries. Determination of the amount of unrecognized deferred income tax
liability is not practicable.
11. RETIREMENT AND PENSION PLANS
The Company maintains noncontributory defined benefit pension plans.
Benefits for eligible U.S. salaried and hourly employees are funded through
trusts established in conjunction with the plans. The Company's funding policy
with respect to its defined benefit plans is to contribute amounts that provide
for benefits in accordance with the funding requirements of federal law and
regulations. Assets of these plans are invested in a variety of equity and debt
instruments and in pooled temporary funds, as well as the Company's common
stock, the investment in which is not material to total plan assets.
The Company's retirement and savings plan has a defined contribution
retirement feature principally to cover U.S. salaried employees joining the
Company after December 31, 1996. Under this retirement feature, the Company
makes contributions for eligible employees based on a pre-established percentage
of the covered employee's salary. Employees of certain of the Company's foreign
operations participate in various local plans that in the aggregate are not
significant.
Effective May 1, 1999, the Company adopted a savings plan for its acquired
businesses for the benefit of eligible employees. Company contributions are made
for each participant up to a specified percentage, not to exceed 6% of the
participant's base compensation.
The Company has nonqualified unfunded retirement plans for its Directors
and certain retired employees. It also provides supplemental retirement
benefits, through contractual arrangements and/or a SERP covering certain
current and former employees of the Company. These supplemental benefits are
designed to compensate the employee for retirement benefits the executive would
have been provided under the Company's primary retirement plan, except for
statutory limitations on compensation that may be taken into account under those
plans. The projected benefit obligations of the SERP and the contracts will
primarily be
37
39
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
funded by a grant of shares of the Company's common stock upon retirement or
termination of the employee. The Company is providing for these obligations by
charges to earnings over the applicable periods.
The following table provides a reconciliation of the changes in benefit
obligations and fair value of plan assets for the defined benefit plans for 2000
and 1999:
2000 1999
-------- --------
(IN THOUSANDS)
Change in benefit obligation
Net benefit obligation at beginning of period............... $253,672 $263,008
Service cost................................................ 4,918 5,810
Interest cost............................................... 19,410 18,279
Plan amendments............................................. 1,241 650
Actuarial gain.............................................. (4,429) (18,273)
Benefits paid............................................... (16,644) (15,802)
-------- --------
Net benefit obligation at end of period................... $258,168 $253,672
======== ========
Change in plan assets
Fair value of plan assets at beginning of period............ $291,158 $265,681
Actual return on plan assets................................ 38,162 40,587
Employer contributions...................................... 1,296 692
Benefits paid............................................... (16,644) (15,802)
-------- --------
Fair value of plan assets at end of period................ $313,972 $291,158
======== ========
The following table provides aggregate information for pension plans with
accumulated benefits in excess of plan assets:
2000 1999
------ ------
(IN THOUSANDS)
Projected benefit obligation................................ $4,071 $7,961
Accumulated benefit obligation.............................. 4,071 7,961
Fair value of plan assets................................... -0- 3,633
38
40
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table provides the amounts recognized in the consolidated
balance sheets at December 31, 2000 and 1999:
2000 1999
-------- --------
(IN THOUSANDS)
Funded status asset (liability)
Funded status at December 31................................ $ 55,805 $ 37,486
Unrecognized net actuarial gain............................. (40,942) (24,659)
Unrecognized prior service cost............................. 3,611 3,082
Unrecognized net transition asset........................... (908) (1,490)
-------- --------
Net amount recognized at December 31...................... $ 17,566 $ 14,419
======== ========
Balance sheet asset (liability)
Prepaid benefit cost........................................ $ 22,402 $ 20,682
Accrued benefit liability................................... (4,836) (6,263)
Additional minimum liability................................ (397) (919)
Intangible asset............................................ 137 489
Accumulated other comprehensive income (before deferred tax
benefit).................................................. 260 430
-------- --------
Net amount recognized at December 31...................... $ 17,566 $ 14,419
======== ========
The following table provides the components of net periodic benefit cost
charged to income for the three years ended December 31, 2000:
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
Defined benefit plans:
Service cost for benefits earned during the period....... $ 4,918 $ 5,810 $ 6,498
Interest cost on projected benefit obligation............ 19,410 18,278 17,732
Expected return on plan assets........................... (26,192) (23,875) (24,288)
Net amortization......................................... (45) 323 233
-------- -------- --------
Net pension (income) cost............................. (1,909) 536 175
Other plans:
Defined contribution plans............................... 1,960 2,439 1,747
Supplemental retirement plans............................ 517 312 301
Foreign plans and other.................................. 801 728 1,234
-------- -------- --------
Total other plans..................................... 3,278 3,479 3,282
-------- -------- --------
Net pension cost.................................... $ 1,369 $ 4,015 $ 3,457
======== ======== ========
Assumptions used in accounting for the defined benefit plans as of December
31 of each year (based on a measurement date of October 1) were:
2000 1999 1998
---- ---- ----
Discount rate used in determining present values............ 8.00% 7.75% 7.00%
Annual rate of increase in future compensation levels....... 4.75% 4.75% 4.25%
Expected long-term rate of return on plan assets............ 9.25% 9.25% 9.25%
Effective October 1, 1999, the Company adopted a deferred compensation
plan, which allows employees whose compensation exceeds the statutory IRS limit
for retirement benefits to defer a portion of earned bonus
39
41
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
compensation. The plan permits deferred amounts to be deemed invested in either,
or a combination of, (a) an interest bearing fund, benefits from which are
payable out of the general assets of the Company, or (b) a fund which invest in
shares of the Company's common stock on behalf of the employee. The amount
deferred under the plan at December 31, 2000 is not significant. Initial
employee deferrals began January 1, 2000. Administrative expense for the plan is
borne by the Company and is not significant.
The Company provides limited postretirement benefits other than pensions
for certain retirees and a small number of employees. Benefits under these
arrangements are not significant. The Company also provides limited
postemployment benefits for certain former or inactive employees after
employment but before retirement. Those benefits, which are not significant in
amount, are accounted for on the accrual basis of accounting.
12. FINANCIAL INSTRUMENTS
The Company makes limited use of derivative financial instruments, and does
not use them for trading purposes. Such instruments are generally used to manage
well-defined interest rate risks and to hedge firm commitments related to
certain export sales denominated in a foreign currency.
Interest rate swap and cap agreements are used to reduce the potential
impact of increases in interest rates on the Company's borrowings. Accordingly,
the Company may enter into these agreements to effectively convert floating-rate
loans to fixed-rate loans and to cap certain interest rates that are indexed to
LIBOR rates to reduce the risk from rising interest rates. In 2000, the Company
did not enter into any such agreements and none are outstanding at December 31,
2000.
Cross currency and interest rate agreements may be used to hedge a portion
of the Company's net investment in certain foreign subsidiaries. At December 31,
2000 and 1999, the Company was party to one such agreement, whereby the Company
agreed to swap British pounds for an equivalent amount of U.S. dollars totaling
$3.8 million. The agreement provides for the Company to make a fixed interest
rate payment while receiving interest at floating rates. The currency swap
agreement was renewed on its August 1999 termination date and now terminates in
August 2001. The fair value of this agreement at December 31, 2000 and 1999 was
not significant.
Forward currency contracts may be entered into from time-to-time to hedge
certain firm export sales commitments denominated in foreign currencies. The
purpose of such hedging activities is to protect the Company from the risk that
the eventual net cash dollar inflows and outflows resulting from the sale of
products to foreign customers will be adversely affected by changes in exchange
rates. At December 31, 2000 and 1999, the Company was not party to any forward
currency contracts. The terms of the currency contracts are linked to the firm
commitment and generally do not exceed one year. Deferred gains and losses on
such contracts, which are not significant, are recognized in operations as the
related sales and purchases occurred.
The estimated fair values of the Company's other financial instruments are
compared below to the recorded amounts at December 31, 2000 and 1999. Cash, cash
equivalents, and marketable securities are recorded at fair value at December
31, 2000 and 1999 in the accompanying balance sheet.
ASSET (LIABILITY)
------------------------------------------------
DECEMBER 31, 2000 DECEMBER 31, 1999
---------------------- ----------------------
RECORDED FAIR RECORDED FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
(IN THOUSANDS)
Fixed income and equity investments......... $ 15,703 $ 15,703 $ 16,035 $ 16,035
Short-term borrowings....................... $(126,279) $(126,279) $ (99,558) $ (99,558)
Long-term debt (including current
portion).................................. $(234,938) $(220,669) $(231,872) $(206,391)
40
42
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair values of fixed income investments are based on quoted market
prices. The fair value of equity investments are based on amounts reported by
the investee. The fair value of short-term borrowings is based on the carrying
value at year-end. The fair value of the Company's long-term debt, which
consists primarily of publicly traded notes, is based on the quoted market price
for such notes and borrowing rates currently available to the Company for loans
with similar terms and maturities. The fair value of the currency swap
agreement, which is not reflected in the financial statements, is based on
quoted market prices for comparable instruments and is not significant.
13. ADDITIONAL INCOME STATEMENT AND CASH FLOW INFORMATION
Included in other income is interest and other investment income of $1.5
million, $2.6 million, and $4.6 million for 2000, 1999, and 1998, respectively.
Income taxes paid in 2000, 1999, and 1998 were $33.6 million, $29.0 million, and
$25.6 million, respectively. Cash paid for interest was $30.2 million and $24.3
million in 2000 and 1999, respectively. Cash paid for interest in 1998 was $26.3
million, and included $6.6 million for unamortized debt issuance costs related
to the Company's 7.20% Senior Notes due 2008. These unamortized costs are
included as other assets and are being amortized to interest expense over the
life of the 7.20% Senior Notes.
14. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
Descriptive Information About Reportable Segments
The Company has two reportable segments, the Electronic Instruments Group
and the Electromechanical Group. The Company organizes its businesses primarily
on the basis of product type, production processes, distribution methods, and
management organizations.
The Electronic Instruments Group produces instrumentation for various
electronic applications that service certain types of transportation industries,
including aircraft cockpit instruments and displays, airborne electronics
systems that monitor and record flight and engine data, and
pressure-temperature-flow and liquid-level sensors for commercial airlines and
aircraft and jet engine manufacturers. The Group also produces instruments and
complete instrument panels for heavy truck manufacturers and heavy construction
and agricultural vehicles, as well as instruments for foodservice equipment, and
measurement and monitoring instrumentation for various process industries. To a
lesser degree, the Group also manufactures high-temperature-resistant and
corrosion-resistant materials, as well as thermoplastic compounds for
automotive, appliance, and telecommunications applications.
The Electromechanical Group produces air-moving electric motors and
motor-blower systems for manufacturers of floor-care appliances and outdoor
power equipment, fractional horsepower and brushless air-moving motors for
aerospace, mass transit, medical equipment, computer and business machine
applications. The Group also produces high-purity metal powders and alloys in
powder, strip, and wire form for electronic components, aircraft and automotive
products. Sales of electric motors, blowers, and fans represented 42.2% in 2000,
43.8% in 1999, and 47.8% in 1998 of the Company's consolidated net sales.
Measurement of Segment Results
Segment operating income represents sales, less all direct costs and
expenses (including certain administrative and other expenses) applicable to
each segment, but does not include an allocation of interest expense. Net sales
by segment are reported after elimination of intra- and inter-segment sales,
which are insignificant in amount. Such sales are generally based on prevailing
market prices. Reported segment assets include allocations directly related to
the segment's operations. Corporate assets consist primarily of investments,
insurance deposits, and deferred taxes.
41
43
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REPORTABLE SEGMENT FINANCIAL INFORMATION
2000 1999 1998
---------- -------- --------
(IN THOUSANDS)
Net sales:
Electronic Instruments.......................... $ 509,504 $451,072 $414,202
Electromechanical............................... 515,156 473,725 513,272
---------- -------- --------
Total Consolidated........................... $1,024,660 $924,797 $927,474
========== ======== ========
Operating income and income before income
taxes:(1)
Operating income:
Electronic Instruments....................... $ 78,771 $ 69,965 $ 55,703
Electromechanical............................ 77,560 67,575 62,511
---------- -------- --------
Total segments operating income............ 156,331 137,540 118,214
Corporate administrative and other
expenses................................... (20,441) (18,743) (21,778)
---------- -------- --------
Consolidated operating income................... 135,890 118,797 96,436
Interest and other expenses, net................ (29,752) (24,336) (19,078)
---------- -------- --------
Consolidated income before income taxes......... $ 106,138 $ 94,461 $ 77,358
========== ======== ========
Assets:
Electronic Instruments.......................... $ 426,317 $386,309 $244,509
Electromechanical............................... 387,983 332,493 375,985
---------- -------- --------
Total segments............................. 814,300 718,802 620,494
Corporate....................................... 44,688 49,348 79,331
---------- -------- --------
Total Consolidated......................... $ 858,988 $768,150 $699,825
========== ======== ========
Additions to property, plant and equipment:(2)
Electronic Instruments.......................... $ 10,883 $ 29,323 $ 11,580
Electromechanical............................... 19,292 17,531 40,198
---------- -------- --------
Total segments............................. 30,175 46,854 51,778
Corporate....................................... 3,557 2,398 3,634
---------- -------- --------
Total Consolidated......................... $ 33,732 $ 49,252 $ 55,412
========== ======== ========
Depreciation and amortization:
Electronic Instruments.......................... $ 18,939 $ 16,132 $ 15,188
Electromechanical............................... 24,028 22,980 22,761
---------- -------- --------
Total segments............................. 42,967 39,112 37,949
Corporate....................................... 290 512 420
---------- -------- --------
Total Consolidated......................... $ 43,257 $ 39,624 $ 38,369
========== ======== ========
- ---------------
(1) Amounts in 1998 include a non-recurring charge for cost reduction
initiatives totaling $8.0 million pretax, consisting of $2.3 million in the
Electronic Instruments segment, $5.2 million in the Electromechanical
segment, and $0.5 million in Corporate.
(2) Includes $4.2 million in 2000, $18.9 million in 1999, and $5.6 million in
1998 from acquired businesses.
42
44
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Geographic Areas
Information about the Company's operations in different geographic areas
for the years ended December 31, 2000, 1999, and 1998 is shown below. Net sales
were attributed to geographic areas based on the location of the customer,
accordingly, U.S. export sales are reported in international sales.
2000 1999 1998
---------- -------- --------
(IN THOUSANDS)
Net sales:
United States................................... $ 699,713 $622,832 $582,494
---------- -------- --------
International(a):
European Union countries..................... 118,934 123,116 147,300
Asia......................................... 68,409 57,451 60,693
Other foreign countries...................... 137,604 121,398 136,987
---------- -------- --------
Total international........................ 324,947 301,965 344,980
---------- -------- --------
Total Consolidated......................... $1,024,660 $924,797 $927,474
========== ======== ========
Long-lived assets from continuing operations:
United States................................... $ 443,417 $390,749 $283,161
---------- -------- --------
International(b):
European Union countries..................... 53,229 65,111 72,081
Asia......................................... 4,710 4,424 4,675
Other foreign countries...................... 20,827 19,811 17,791
---------- -------- --------
Total international........................ 78,766 89,346 94,547
---------- -------- --------
Total Consolidated......................... $ 522,183 $480,095 $377,708
========== ======== ========
- ---------------
(a) Includes U.S. export sales of $179.1 million in 2000, $158.5 million in
1999, and $162.6 million in 1998.
(b) Represents long-lived assets of foreign-based operations only.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000
Net sales.......................... $255,812 $255,504 $255,098 $258,246 $1,024,660
Operating income................... $ 33,887 $ 33,770 $ 34,106 $ 34,127 $ 135,890
Net income......................... $ 16,754 $ 17,223 $ 17,318 $ 17,237 $ 68,532
Basic earnings per share:(a)
Net income....................... $ 0.52 $ 0.54 $ 0.54 $ 0.53 $ 2.13
Diluted earnings per share:(a)
Net income....................... $ 0.52 $ 0.53 $ 0.53 $ 0.53 $ 2.11
Dividends paid per share........... $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.24
Common stock trading range:(b)
High............................. 22 1/8 21 9/16 22 7/8 26 15/16 26 15/16
Low.............................. 15 1/2 17 1/2 18 1/2 20 15 1/2
43
45
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1999
Net sales.......................... $230,878 $231,640 $226,258 $236,021 $ 924,797
Operating income................... $ 29,149 $ 29,584 $ 30,518 $ 29,546 $ 118,797
Net income......................... $ 14,596 $ 15,564 $ 15,594 $ 15,014 $ 60,768
Basic earnings per share:(a)
Net income....................... $ 0.45 $ 0.48 $ 0.48 $ 0.47 $ 1.88
Diluted earnings per share:(a)
Net income....................... $ 0.45 $ 0.47 $ 0.47 $ 0.46 $ 1.85
Dividends paid per share........... $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.24
Common stock trading range:(b)
High............................. 23 1/16 25 3/4 24 5/8 20 1/2 25 3/4
Low.............................. 16 1/2 17 1/2 19 1/4 18 16 1/2
- ---------------
(a) The sum of quarterly earnings per share may not equal total year earnings
per share due to the effect of the Company's purchasing shares of its
outstanding common stock.
(b) Trading ranges are based on the New York Stock Exchange composite tape.
16. NEW ACCOUNTING PRONOUNCEMENTS
In the fourth quarter of 2000, the Company adopted the Securities and
Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition in Financial Statements". The SAB summarizes certain of the staff's
views in applying generally accepted accounting principles to revenue
recognition in the financial statements. The adoption of the Bulletin did not
have a significant effect on the Company's consolidated results of operations,
financial position, or cash flows.
In September, 2000, the FASB issued Statement No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities -- A Replacement of FASB Statement 125". The Statement requires
extensive disclosures about securitizations entered into during the period and
retained interests in securitized financial assets at the balance sheet date,
accounting policies, sensitivity information relating to retained interests, and
cash flows distributed to the transferor. The accounting requirements of
Statement 140 are effective for transfers occurring after March 31, 2001.
However, the expanded disclosures about securitizations and collateral are
effective for fiscal years ending after December 15, 2000. The Company is
continuing to study the future impact of adopting the accounting changes of this
Statement. The Company adopted the disclosure requirement by the Statement, for
fiscal year 2000, which are included in footnote 5 of the financial statements.
On July 1, 2000, the Company adopted FASB Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation". The
Interpretation provides guidance on the application of APB Opinion No. 25,
"Accounting for Stock Issued to Employees". The adoption of this Interpretation
did not have a material effect on the Company's consolidated results of
operations, financial position, or cash flows.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement requires recognition of all
derivative instruments measured at fair value in the statement of financial
position. Gains or losses resulting from changes in the value of derivatives
would be accounted for depending on the intended use of the derivative and
whether it qualifies for hedge accounting. In June 1999, the FASB approved a
one-year delay in the effective date of this Statement until January 2001.
44
46
AMETEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 2000, the FASB issued Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities". This Statement amends
Statement No. 133 for certain impractical aspects of the original Statement
which were incompatible with many common current hedging approaches. Statement
No. 138 is effective simultaneously with Statement No. 133.
The provisions of SFAS 133 and related amendments and interpretations
became effective for the Company beginning January 1, 2001, including the
interim periods of that year. Based on the Company's limited use of derivative
financial instruments, adoption of these Statements did not have a significant
effect on the Company's consolidated results of operations, financial position,
or cash flows.
45
47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors and Executive Officers of the
Company, and information with respect to compliance with Section 16(a) of the
Securities Exchange Act of 1934, is incorporated herein by reference to the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission (the "Commission") not later than 120 days after the close
of the fiscal year ended December 31, 2000, under the captions "Election of
Directors," "Executive Officers," and "Compliance with Section 16(a) of the
Securities Exchange Act of 1934."
ITEMS 11, 12, AND 13
The information required by Item 11, Executive Compensation, by Item 12,
Security Ownership of Certain Beneficial Owners and Management, and by Item 13,
Certain Relationships and Related Transactions, is incorporated herein by
reference to the Company's definitive Proxy Statement to be filed with the
Commission not later than 120 days after the close of the fiscal year ended
December 31, 2000, under the headings "Executive Compensation," "Stock
Ownership," and "Compensation Committee Interlocks and Insider Participation."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits filed.
1. and 2.
Financial statements and schedules are shown in the index on page 22
of this report.
3. Exhibits
Exhibits are shown in the index on pages 48-53 of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December
31, 2000.
46
48
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
AMETEK, INC.
By /s/ FRANK S. HERMANCE
------------------------------------
FRANK S. HERMANCE, CHAIRMAN OF THE
BOARD,
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Dated: March 14, 2001
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ FRANK S. HERMANCE Chairman of the Board, Chief March 14, 2001
- --------------------------------------------------- Executive Officer and
FRANK S. HERMANCE Director (Principal Executive
Officer)
/s/ JOHN J. MOLINELLI Executive Vice President -- March 14, 2001
- --------------------------------------------------- Chief Financial Officer
JOHN J. MOLINELLI (Principal Financial Officer)
/s/ ROBERT R. MANDOS, JR. Vice President & Comptroller March 14, 2001
- --------------------------------------------------- (Principal Accounting
ROBERT R. MANDOS, JR. Officer)
/s/ LEWIS G. COLE Director March 14, 2001
- ---------------------------------------------------
LEWIS G. COLE
/s/ HELMUT N. FRIEDLAENDER Director March 14, 2001
- ---------------------------------------------------
HELMUT N. FRIEDLAENDER
/s/ SHELDON S. GORDON Director March 14, 2001
- ---------------------------------------------------
SHELDON S. GORDON
/s/ CHARLES D. KLEIN Director March 14, 2001
- ---------------------------------------------------
CHARLES D. KLEIN
/s/ JAMES R. MALONE Director March 14, 2001
- ---------------------------------------------------
JAMES R. MALONE
/s/ DAVID P. STEINMANN Director March 14, 2001
- ---------------------------------------------------
DAVID P. STEINMANN
/s/ ELIZABETH R. VARET Director March 14, 2001
- ---------------------------------------------------
ELIZABETH R. VARET
47
49
INDEX TO EXHIBITS
ITEM 14(a)(3)
FILED WITH
EXHIBIT ELECTRONIC
NUMBER DESCRIPTION INCORPORATED HEREIN BY REFERENCE TO SUBMISSION
- ------- ----------- ----------------------------------- ----------
2.1 Amended and Restated Agreement and Plan of Exhibit 2 to Form 8-K dated August 7,
Merger and Reorganization, dated as of 1997, SEC File No. 1-12981.
February 5, 1997, by and among Culligan
Water Technologies, Inc. ("Culligan"),
Culligan Water Company, Inc. ("Culligan
Merger Sub"), AMETEK, Inc. ("AMETEK") and
AMETEK Aerospace Products, Inc. ("AMETEK
Aerospace"), incorporated by reference to
Appendix A to the Joint Proxy Statement/
Prospectus included in Culligan's
Registration Statement on Form S-4
(Commission File No. 333-26953).
2.2 Amended and Restated Contribution and Appendix B to Preliminary Proxy
Distribution Agreement, dated as of Statement dated May 12, 1997, SEC
February 5, 1997, by and between AMETEK File No. 1-168.
and AMETEK Aerospace.
2.3 Form of Tax Allocation Agreement among Appendix D to Preliminary Proxy
AMETEK, AMETEK Aerospace and Culligan. Statement dated May 12, 1997, SEC
File No. 1-168.
2.4 Form of Transition Services Agreement by Appendix B to Preliminary Proxy
and between Culligan Merger Sub and AMETEK Statement dated May 12, 1997, SEC
Aerospace. File No. 1-168.
2.5 Form of Indemnification Agreement among Appendix B to Preliminary Proxy
AMETEK, Culligan and AMETEK Aerospace. Statement dated May 12, 1997, SEC
File No. 1-168.
2.6 Form of Trademark Agreement between AMETEK Appendix B to Preliminary Proxy
and AMETEK Aerospace. Statement dated May 12, 1997, SEC
File No. 1-168.
3.1 Amended and Restated Certificate of Exhibit 3.1 to Form 8-K dated August
Incorporation of the Company. 7, 1997, SEC File No. 1-12981.
3.2 By-laws of the Company as amended to and Exhibit 3.2 to 1998 Form 10-K, SEC
including November 18, 1998. File No. 1-12981.
4.1 Rights Agreement, dated as of June 2, Exhibit 4.1 to Form 8-K dated August
1997, between the Company and American 7, 1997, SEC File No. 1-12981.
Stock Transfer & Trust Company.
4.2 Amendment No. 1 to Rights Agreement dated Exhibit 4 to Form 10-Q dated March
as of May 11, 1999, between AMETEK, Inc. 31, 1999, SEC File No. 1-12981.
and American Stock Transfer & Trust
Company.
4.3 Indenture, dated as of July 17, 1998, Exhibit 4.1 to Form 10-Q dated June
between AMETEK, Inc., as Issuer, and Chase 30, 1998, SEC File No. 1-12981.
Manhattan Trust Company, National
Association, as Trustee relating to the
Notes, dated July 17, 1998.
48
50
FILED WITH
EXHIBIT ELECTRONIC
NUMBER DESCRIPTION INCORPORATED HEREIN BY REFERENCE TO SUBMISSION
- ------- ----------- ----------------------------------- ----------
4.4 Purchase Agreement between AMETEK, Inc. Exhibit 4.3 to Form S-4 dated August
and Salomon Brothers Inc., BancAmerica 11, 1998, SEC File No. 1-12981.
Robertson Stephens and BT Alex. Brown
Incorporated, as initial purchasers, dated
July 14, 1998.
10.1 AMETEK, Inc. Retirement Plan for Exhibit 10.8 to 1997 Form 10-K, SEC
Directors, as amended and restated to File No. 1-12981.
October 13, 1997.*
10.2 AMETEK, Inc. Death Benefit Program for Exhibit (10)(y) to 1987 Form 10-K,
Directors, pursuant to which the Company SEC File No. 1-168.
has entered into agreements, restated
January 1, 1987, with certain directors
and one former director of the Company
(the "Directors Program").*
10.3 Amendment No. 1 to the Directors Program.* Exhibit (10)(z) to 1987 Form 10-K,
SEC File No. 1-168.
10.4 The AMETEK Savings and Investment Plan, as Exhibit 10.39 to 1996 Form 10-K, SEC
restated and amended to January 1, 1997 File No. 1-168.
(the "Savings Plan").*
10.5 Amendment No. 1 to the Savings Plan.* Exhibit 10.12 to 1997 Form 10-K, SEC
File No. 1-12981.
10.6 Amendment No. 2 to the Savings Plan.* Exhibit 10.13 to 1997 Form 10-K, SEC
File No. 1-12981.
10.7 Amendment No. 3 to the Savings Plan.* Exhibit 10.14 to 1997 Form 10-K, SEC
File No. 1-12981.
10.8 Amendment No. 4 to the Savings Plan.* Exhibit 10.8 to 1998 Form 10-K, SEC
File No. 1-12981.
10.9 Amendment No. 5 to the Savings Plan.* Exhibit 10.9 to 1998 Form 10-K, SEC
File No. 1-12981.
10.10 Amendment No. 6 to the Savings Plan.* Exhibit 10.10 to 1998 Form 10-K, SEC
File No. 1-12981.
10.11 Amendment No. 7 to the Savings Plan.* Exhibit 10.11 to 1999 Form 10-K, SEC
File No. 1-12981.
10.12 Amendment No. 8 to the Savings Plan.* Exhibit 10.12 to 1999 Form 10-K, SEC
File No. 1-12981.
10.13 Amendment No. 9 to the Savings Plan.* Exhibit 10.13 to 1999 Form 10-K, SEC
File No. 1-12981.
10.14 Amendment No. 10 to the Savings Plan.* Exhibit 10.14 to 1999 Form 10-K, SEC
File No. 1-12981.
10.15 Amendment No. 11 to the Savings Plan.* Exhibit 10.3 to Form 10-Q dated June
30, 2000, SEC File No. 1-12981.
10.16 Amendment No. 12 to the Savings Plan.* Exhibit 10.4 to Form 10-Q dated June
30, 2000, SEC File No. 1-12981.
10.17 Amendment No. 13 to the Savings Plan.* X
49
51
FILED WITH
EXHIBIT ELECTRONIC
NUMBER DESCRIPTION INCORPORATED HEREIN BY REFERENCE TO SUBMISSION
- ------- ----------- ----------------------------------- ----------
10.18 Reorganization and Distribution Agreement Exhibit (2) to Form 8-K dated
by and between the Company and Ketema, November 30, 1988, SEC File No.
Inc. (the "Reorganization and Distribution 1-168.
Agreement").
10.19 Agreements between the Company and Ketema, Exhibit 10.56 to 1991 Form 10-K, SEC
Inc. amending certain provisions of the File No. 1-168.
Reorganization and Distribution Agreement.
10.20 Benefits Agreement by and between the Exhibit (10)(ss) to 1988 Form 10-K,
Company and Ketema, Inc. SEC File No. 1-168.
10.21 Tax Agreement by and between the Company Exhibit (10)(tt) to 1988 Form 10-K,
and Ketema, Inc. SEC File No. 1-168.
10.22 Support Services Agreement by and between Exhibit (10)(uu) to 1988 Form 10-K,
the Company and Ketema, Inc. SEC File No. 1-168.
10.23 Form of Severance Benefit Agreement Exhibit (10)(ww) to 1989 Form 10-K,
between the Company and certain executives SEC File No. 1-168.
of the Company.*
10.24 Form of Supplemental Retirement Benefit Exhibit 10.61 to 1991 Form 10-K, SEC
Agreement between the Company and certain File No. 1-168.
executives of the Company, dated as of May
21, 1991.*
10.25 Supplemental Senior Executive Death Exhibit 10.41 to 1992 Form 10-K, SEC
Benefit Plan, effective as of January 1, File No. 1-168.
1992 (the "Senior Executive Plan").*
10.26 Amendment No. 1 to the Senior Executive Exhibit 10.42 to 1992 Form 10-K, SEC
Plan.* File No. 1-168.
10.27 Senior Executive Split Dollar Death Exhibit 10.43 to 1992 Form 10-K, SEC
Benefit Plan, dated as of December 15, File No. 1-168.
1992.*
10.28 Credit Agreement dated August 2, 1995, Exhibit 4 to Form 10-Q dated
amended and restated as of September 12, September 30, 1996, SEC File No.
1996, among the Company, Various Lending 1-168.
Institutions, Bank of Montreal, CoreStates
Bank, N.A., and PNC Bank, National
Association, as Co-Agents, and The Chase
Manhattan Bank, N.A., as Administrative
Agent (the "Credit Agreement").
10.29 First Amendment and Consent to the Credit Exhibit 10.1 to Form 8-K dated August
Agreement dated as of May 9, 1997. 7, 1997, SEC File No. 1-12981.
10.30 Assumption Agreement, dated as of July 31, Exhibit 10.2 to Form 8-K dated August
1997, among the Company, AMETEK and The 7, 1997, SEC File No. 1-12981.
Chase Manhattan Bank.
10.31 Second Amendment to the Credit Agreement Exhibit 10.30 to 1997 Form 10-K, SEC
dated as of December 4, 1997. File No. 1-12981.
10.32 Third Amendment to the Credit Agreement, Exhibit 10 to 10-Q dated June 30,
dated as of June 15, 1998. 1998, SEC File No. 1-12981.
50
52
FILED WITH
EXHIBIT ELECTRONIC
NUMBER DESCRIPTION INCORPORATED HEREIN BY REFERENCE TO SUBMISSION
- ------- ----------- ----------------------------------- ----------
10.33 Fourth Amendment and Consent to the Credit Exhibit 10 to Form 10-Q dated March
Agreement dated as of March 19, 1999. 31, 1999, SEC File No. 1-12981.
10.34 Fifth Amendment and Consent to the Credit Exhibit 10.2 to Form 10-Q dated June
Agreement dated as of July 14, 1999. 30, 1999, SEC File No. 1-12981.
10.35 Sixth Amendment and Consent to the Credit X
Agreement dated as of September 22, 2000.
10.36 The 1997 Stock Incentive Plan of AMETEK, Exhibit 10.31 to 1997 Form 10-K, SEC
Inc. (the "1997 Plan").* File No. 1-12981.
10.37 Amendment No. 1 to the 1997 Plan.* Exhibit 10.35 to 1999 Form 10-K, SEC
File No. 1-12981.
10.38 Amendment No. 2 to the 1997 Plan.* Exhibit 10.36 to 1999 Form 10-K, SEC
File No. 1-12981.
10.39 Amendment No. 3 to the 1997 Plan.* Exhibit 10.2 to Form 10-Q dated March
31, 2000, SEC File No. 1-12981.
10.40 1999 Stock Incentive Plan of AMETEK, Inc. Exhibit 4.1 to Form S-8 dated June
(the "1999 Plan").* 11, 1999, SEC File No. 333-80449.
10.41 Amendment No. 1 to the 1999 Plan.* Exhibit 4.1 to Form S-8 dated June
11, 1999, SEC File No. 333-80449.
10.42 Amendment No. 2 to the 1999 Plan.* Exhibit 10.3 to Form 10-Q dated March
31, 2000, SEC File No. 1-12981.
10.43 Supplemental Executive Retirement Plan. Exhibit 10.3 to Form 8-K dated August
7, 1997, SEC File No. 1-12981.
10.44 Amendment No. 1 to the Supplemental Exhibit 10.40 to 1999 Form 10-K, SEC
Executive Retirement Plan. File No. 1-12981
10.45 Amendment No. 2 to the Supplemental Exhibit 10.1 to Form 10-Q dated March
Executive Retirement Plan. 31, 2000, SEC File No. 1-12981.
10.46 Stock Purchase Agreement by and between Exhibit 10 to Form 8-K dated January
EG&G Holdings, Inc. and AMETEK, Inc. dated 22, 1998, SEC File No. 1-12981.
as of December 26, 1997.
10.47 Employees' Retirement Plan of AMETEK, Exhibit 10.31 to 1998 Form 10-K, SEC
Inc., as restated to January 1, 1998 (the File No. 1-12981.
"Retirement Plan").*
10.48 Amendment No. 1 to the Retirement Plan.* Exhibit 10.43 to 1999 Form 10-K, SEC
File No. 1-12981.
10.49 Amendment No. 2 to the Retirement Plan.* Exhibit 10.44 to 1999 Form 10-K, SEC
File No. 1-12981.
10.50 Amendment No. 3 to the Retirement Plan.* Exhibit 10.45 to 1999 Form 10-K, SEC
File No. 1-12981.
51
53
FILED WITH
EXHIBIT ELECTRONIC
NUMBER DESCRIPTION INCORPORATED HEREIN BY REFERENCE TO SUBMISSION
- ------- ----------- ----------------------------------- ----------
10.51 Amendment No. 4 to the Retirement Plan.* Exhibit 10.46 to 1999 Form 10-K, SEC
File No. 1-12981.
10.52 Amendment No. 5 to the Retirement Plan.* Exhibit 10.47 to 1999 Form 10-K, SEC
File No. 1-12981.
10.53 Amendment No. 6 to the Retirement Plan.* Exhibit 10.48 to 1999 Form 10-K, SEC
File No. 1-12981.
10.54 Amendment No. 7 to the Retirement Plan.* X
10.55 AMETEK 401(k) Plan for Acquired Exhibit 10.1 to Form 10-Q dated June
Businesses, dated May 1, 1999.* 30, 1999, SEC File No. 1-12981.
10.56 Amendment No. 1 to the AMETEK 401(k) Plan Exhibit 10.50 to 1999 Form 10-K, SEC
for Acquired Businesses. File No. 1-12981.
10.57 Amendment No. 2 to the AMETEK 401(k) Plan Exhibit 10.51 to 1999 Form 10-K, SEC
for Acquired Businesses. File No. 1-12981.
10.58 Amendment No. 3 to the AMETEK 401(k) Plan Exhibit 10.1 to Form 10-Q dated June
for Acquired Businesses. 30, 2000, SEC File No. 1-12981.
10.59 Amendment No. 4 to the AMETEK 401(k) Plan Exhibit 10.2 to Form 10-Q dated June
for Acquired Businesses. 30, 2000, SEC File No. 1-12981.
10.60 Amendment No. 5 to the AMETEK 401(k) Plan Exhibit 10.1 to Form 10-Q dated
for Acquired Businesses. September 30, 2000, SEC File No.
1-12981.
10.61 Amendment No. 6 to the AMETEK 401(k) Plan Exhibit 10.2 to Form 10-Q dated
for Acquired Businesses. September 30, 2000, SEC File No.
1-12981.
10.62 Receivables Purchase Agreement dated as of Exhibit 10.1 to Form 10-Q dated
October 1, 1999 among AMETEK, Inc., Rotron September 30, 1999, SEC File No.
Incorporated and AMETEK Receivables Corp. 1-12981.
10.63 Receivables Sale Agreement dated as of Exhibit 10.2 to Form 10-Q dated
October 1, 1999 among AMETEK Receivables September 30, 1999, SEC File No.
Corp., AMETEK, Inc., ABN AMRO Bank N.V., 1-12981.
and Amsterdam Funding Corporation.
10.64 First Amendment to the Receivables Sale Exhibit 10.3 to Form 10-Q dated
Agreement, dated as of September 29, 2000. September 30, 2000, SEC File No.
1-12981.
10.65 Second Amendment to the Receivables Sale X
Agreement, dated as of October 31, 2000.
10.66 Third Amendment to the Receivables Sale X
Agreement, dated as of November 30, 2000.
10.67 AMETEK, Inc. Deferred Compensation Plan. Exhibit 10.3 to Form 10-Q dated
September 30, 1999, SEC File No.
1-12981.
10.68 1997 Stock Incentive Plan Restricted Stock X
Agreement dated December 15, 2000.
52
54
FILED WITH
EXHIBIT ELECTRONIC
NUMBER DESCRIPTION INCORPORATED HEREIN BY REFERENCE TO SUBMISSION
- ------- ----------- ----------------------------------- ----------
10.69 1999 Stock Incentive Plan Restricted Stock X
Agreement dated December 15, 2000.
10.70 Termination and Change of Control X
Agreement between AMETEK, Inc. and a named
executive, dated December 15, 2000.
10.71 Employment agreement between AMETEK, Inc. X
and a former executive, dated January 1,
2001.
12 Statement regarding computation of ratio X
of earnings to fixed charges.
21 Subsidiaries of the Registrant. X
23 Consent of Independent Auditors. X
- ---------------
* Management contract or compensatory plan required to be filed pursuant to Item
601 of Regulation S-K.
53
1
Exhibit 10.17
AMENDMENT No. 13
to
AMETEK RETIREMENT AND SAVINGS PLAN
WHEREAS, there was adopted and made effective as of October 1, 1984,
the AMETEK Retirement and Savings Plan (the "Plan"); and
WHEREAS, the Plan was amended and restated in its entirety,
effective January 1, 1997; and
WHEREAS, Section 10.1 of the Plan provides that AMETEK, Inc.
("AMETEK") may amend the Plan at any time, and from time to time; and
WHEREAS, AMETEK now desires to amend the Plan to decrease the
minimum age for eligibility from 21 to 18 and to provide for immediate 100%
vesting of Employer Matching Contribution:
NOW, THEREFORE, the Plan is hereby amended as follows:
FIRST: Section 2.2(a) of the Plan to read in its entirety as
follows:
"a. Participant. Any other Employee, who is not an
ineligible employee as described in Section 2.3(a), shall become a
Participant in the Plan as of the Entry Date which follows his date
of hire by at least thirty-one (31) days and is on or after the date
on which he first attains age 18, provided he signifies his
acceptance of the Plan in accordance with Section 2.5. Any Employee
who is an ineligible employee as described in Section 2.3(a), but
who on or after January 1, 1997 becomes an eligible employee and
meets the requirements of the previous sentence, shall become a
Participant on the next Entry Date which is at least thirty-one (31)
days from his most recent date of hire. An Employee shall remain a
Participant as long as he continues to meet the requirements of this
Section 2.2(a)."
2
SECOND: Section 4.4.(d) of the Plan is amended by making a change to
the second sentence to read in its entirety as follows:
"(d) Special Participant Rule. For purposes of
Subsection (a), (b) and (c), the term "Participants" includes
Employees eligible to participate in the Plan in accordance with
Article II whether or not they elected to participate in the Plan or
make a Deferral Election. For Plan Years commencing on and after
January 1, 2001, "Participants" shall not include Employees who are
non-Highly Compensated Employees and who have not attained age 18
and who have completed less than 1 Year of Service before the last
day of the Plan Year."
THIRD: Section 4.6 of the Plan is amended by making a change to the
second sentence to read in its entirety as follows:
"Non-Forfeitability of Certain Accounts. A Participant's
rights to his Deferral Election Account, his Matching Contribution
Account, and his Rollover Contribution Account, if any, shall, at
all times, be 100% nonforfeitable. The forfeitability of a
Participant's rights to his Retirement Account, if applicable, shall
be determined in accordance with the provisions of Section 6.1(b)."
FOURTH: Section 6.1(b) of the Plan is amended by changing sentence 3
and deleting sentence 4 to read in its entirety as follows:
"(b) Termination of Employment. Upon a Participant's
termination of employment with the Employer, either voluntarily or
involuntarily, prior to his Normal Retirement Age (other than by
reason of death, or early or Disability retirement) he shall be
entitled to 100% of the value of his Deferral Election Account, his
Matching Contribution Account, and his Rollover Contribution, if
any. A Retirement Participant shall also be entitled to 100% of the
value of his Retirement Account, if, as of the date of his
termination, he has completed 5 Years of Service. If such Retirement
Participant has not completed 5 Years of Service he shall forfeit
the entire amount outstanding to his credit in his Retirement
Account as of the last day of the Plan Year in which he terminates
employment. The value of all Accounts shall be determined and
payable in accordance with the provisions of Sections 5.2, 5.3 and
6.5. Amounts forfeited in any Plan Year pursuant to this Section
6.1(b) shall be applied to reduce Matching Contributions made
pursuant to Section 4.2(b) for such Plan Year."
2
3
FIFTH: The provisions of this Amendment No. 13 shall be effective as
of January 1, 2001.
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed,
in its corporate name, by its duly authorized officer on this 13th day of
November, 2000.
AMETEK, Inc.
By: /s/ Donna F. Winquist
---------------------------
Attest:
/s/ Kathryn E. Londra
- -----------------------------
3
1
Exhibit 10.35
SIXTH AMENDMENT AND CONSENT TO CREDIT AGREEMENT
SIXTH AMENDMENT AND CONSENT TO CREDIT AGREEMENT (this "Amendment"),
dated as of September 22, 2000, among AMETEK, INC. (the "Borrower"), the
financial institutions party to the Credit Agreement referred to below (the
"Banks"), BANK OF AMERICA, N.A. (f/k/a Bank of America Illinois), BANK OF
MONTREAL, FIRST UNION NATIONAL BANK and PNC BANK, NATIONAL ASSOCIATION, as
Co-Agents (the "Co-Agents"), and THE CHASE MANHATTAN BANK, as Administrative
Agent (the "Administrative Agent"). All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, the Co-Agents and the
Administrative Agent are parties to a Credit Agreement, dated as of August 2,
1995, and amended and restated as of September 12, 1996 (as in effect on the
date hereof, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments and Consent.
1. Section 8.03 of the Credit Agreement is hereby amended by
changing the designation of clause "(s)" thereof, which was inserted therein
pursuant to Section 4 of the Third Amendment to Credit Agreement, dated as of
June 15, 1998, to that of clause "(u)".
2. Section 8.03 of the Credit Agreement is hereby further amended by
(i) deleting the word "and" appearing at the end of clause (t) thereof, (ii)
deleting the period appearing at the end of clause (u) thereof and inserting ";
and" in lieu thereof, and (iii) inserting a new clause (v) at the end of such
Section 8.03, as follows:
"(v) Indebtedness representing Permitted Foreign Subsidiary
Guaranteed WC Debt, provided that (x) the obligors thereunder are Foreign
Subsidiaries (other than AMETEK Italia), although the Borrower shall be
permitted to guarantee such Permitted Foreign Subsidiary Guaranteed WC
Debt, and (y) the aggregate principal amount thereof at any one time
outstanding shall not exceed $30,000,000, provided, however, that the
aggregate principal amount thereof at any one time outstanding may exceed
$30,000,000 solely by virtue of changes in the exchange rates (and not as
a result of the additional incurrence of any new Indebtedness) for the
currencies in which any such Permitted Foreign Subsidiary Guaranteed WC
Debt is denominated for a period not in excess of one month after any date
upon which it is so determined that the aggregate principal amount
2
of Permitted Foreign Subsidiary Guaranteed WC Debt exceeds $30,000,000 as
a result solely of such a change in exchange rates."
3. Section 10 of the Credit Agreement is hereby amended by inserting
in appropriate alphabetical order the following new definitions:
"Permitted Foreign Subsidiary Guaranteed WC Debt" shall mean
Indebtedness of a Foreign Subsidiary (other than AMETEK Italia) the
proceeds of which are used to finance working capital requirements of such
Foreign Subsidiary, it being understood that such Indebtedness may be
guaranteed by the Borrower, provided, however, that no Permitted Foreign
Subsidiary Guaranteed WC Debt (other than up to $5,000,000 of such Debt
outstanding under a line of credit existing as of the Sixth Amendment
Effective Date between the Borrower and certain of its Foreign
Subsidiaries, including Ametek do Brasil, and ABN AMRO Bank (the "Umbrella
Agreement") may be incurred or assumed which contains any provision in the
documents governing or evidencing the same which, in the reasonable
opinion of the Administrative Agent, would permit a default or event of
default to occur under such Permitted Foreign Subsidiary Guaranteed WC
Debt based upon the occurrence of a Default or Event of Default under this
Agreement unless any such Event of Default has resulted in an acceleration
under this Agreement. It is understood and agreed that the aggregate
Dollar amount of Permitted Foreign Subsidiary Guaranteed WC Debt
outstanding at any time shall be determined at the spot exchange rate for
the currency in question at such time of determination. The incurrence of
Permitted Foreign Subsidiary Guaranteed WC Debt shall be deemed to be a
representation and warranty by the Borrower that all conditions thereto
have been satisfied and that same is permitted in accordance with the
terms of this Agreement, which representation and warranty shall be deemed
to be a representation and warranty for all purposes hereunder, including,
without limitation, Sections 5.02 and 9.
"Sixth Amendment Effective Date" shall mean the Amendment Effective
Date under and as defined in the Sixth Amendment and Consent, dated as of
September 22, 2000, to this Agreement.
II. Miscellaneous.
1. In order to induce the Banks to enter into this Amendment, the
Borrower hereby represents and warrants that:
(a) on the Amendment Effective Date, no Default or Event of
Default exists, both before and after giving effect to this Amendment; and
(b) on and as of the Amendment Effective Date, all
representations and warranties contained in the Credit Agreement or the
other Credit Documents are true and correct in all material respects, both
before and after giving effect to this Amendment.
2
3
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Administrative Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "Amendment
Effective Date") when the Borrower and the Required Banks shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to the
Administrative Agent at its Notice Office.
* * *
3
4
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
AMETEK, INC.
By: /s/ Deirdre D. Saunders
----------------------------------
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK,
Individually and as Administrative
Agent
By: /s/Gail Weiss
----------------------------------
Title: Vice President
BANK OF MONTREAL,
Individually and as a Co-Agent
By: /s/ Bruce A. Pietka
----------------------------------
Title: Director
FIRST UNION NATIONAL BANK,
Individually and as a Co-Agent
By: /s/ Ruth E. Leone
----------------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
Individually and as a Co-Agent
By: /s/ Amy T. Petersen
----------------------------------
Title: Vice President
BANK OF AMERICA, N.A.,
Individually and as a Co-Agent
By: /s/ John W. Pocalyko
----------------------------------
Title: Managing Director
5
ABN AMRO BANK N.V., NEW YORK BRANCH
By: /s/ Juliette Mound
----------------------------------
Title: Assistant Vice President
By: /s/ Donald Sutton
----------------------------------
Title: Vice President
MELLON BANK, N.A.
By: /s/ Leonard M. Karpen, Jr.
----------------------------------
Title: Vice President
CARIPLO-CASSA DI RISPARMIO DELLE
PROVINCIE LOMBARDE S.P.A.
By:
----------------------------------
Title:
By:
----------------------------------
Title:
1
Exhibit 10.54
AMENDMENT NO. 7
TO THE
EMPLOYEES' RETIREMENT PLAN
OF AMETEK, INC.
WHEREAS, there was adopted and made effective as of December 29,
1942, the Employees' Retirement Plan of AMETEK, Inc. (the "Plan"); and
WHEREAS, the Plan was amended and restated in its entirety,
effective January 1, 1998; and
WHEREAS, Section 9.2 of the Plan provides that AMETEK, Inc.
("AMETEK") may amend the Plan at any time or from time to time; and
WHEREAS, AMETEK now desires to amend the Plan in certain respects;
WHEREAS, the Corporation has determined that it is in its best
interest to transfer certain of its assets located in Whitsett, North Carolina
and Kent, Ohio to its wholly-owned subsidiary, Rotron Incorporated ("Rotron"),
effective January 1, 2001; and
WHEREAS, in connection with such transfer, the employees of the
businesses, the assets of which are being transferred, have become employees of
Rotron effective January 1, 2001; and
WHEREAS, certain of the transferred employees currently
participate in the Employees' Retirement Plan of AMETEK, Inc.; and
WHEREAS, it is desired that the transferred employees continue to be
eligible to participate in the Plan notwithstanding their employment by Rotron
which is not currently a participating employer in the Plan; and
WHEREAS, the Corporation has determined that Rotron should be
designated as a participating employer in the Plan and in the master trust
pursuant to which the Plan is funded, to allow for participation in the Plan of
the transferred employees and any other employees who participate in the Plan
but are transferred to Rotron;
1
2
NOW, THEREFORE, the Plan is hereby amended as follows:
FIRST: A new Appendix XXXIV is hereby added to the Plan, to read
in its entirety as follows:
APPENDIX XXXIV
SPECIAL PROVISIONS RELATING TO CERTAIN
EMPLOYEES OF ROTRON, INC.
1. Those employees of AMETEK, Inc. located in Whitsett, North
Carolina and Kent, Ohio, who are already Participants in the Plan as of
December 31, 2000 shall be eligible to remain Participants under the Plan
in accordance with and subject to the provisions in the Plan after the
absorption of certain of the assets of Whitesett, North Carolina and Kent,
Ohio, locations of AMETEK, Inc., by Rotron Incorporated, a wholly-owned
subsidiary of AMETEK, Inc., on January 1, 2001.
2. Except to the extent set forth above, defined terms used in this
Appendix XXXIV shall have the same meaning as used in the Plan.
SECOND: The provisions of this Amendment No. 7 shall be effective as
of January 1, 2001.
IN WITNESS WHEREOF, AMETEK has caused these presents to be executed
in its corporate name, by its duly authorized officer on this 27th day of
February, 2001.
AMETEK, Inc.
By: /s/ Donna F. Winquist
---------------------------------
Donna F. Winquist
Attest:
/s/ Kathryn E. Londra
- ----------------------------------
Kathryn E. Londra
2
1
Exhibit 10.65
SECOND AMENDMENT
DATED AS OF OCTOBER 31, 2000
TO
RECEIVABLES SALE AGREEMENT
DATED AS OF OCTOBER 1, 1999
THIS AMENDMENT (the "Amendment"), dated as of October 31, 2000, is entered
into among Ametek Receivables Corp. (the "Seller"), Ametek, Inc. (the "Initial
Collection Agent"), Amsterdam Funding Corporation, a Delaware corporation
("Amsterdam"), ABN AMRO Bank N.V., as Amsterdam's program letter of credit
provider (the "Enhancer"), the Liquidity Provider listed on the signature page
hereof (the "Liquidity Provider") and ABN AMRO Bank N.V., as agent for
Amsterdam, the Enhancer and the Liquidity Provider (the "Agent").
Reference is hereby made to that certain Receivables Sale Agreement, dated
as of October 1, 1999 (as amended, supplemented or otherwise modified through
the date hereof, the "Sale Agreement"), among the Seller, the Initial Collection
Agent, Amsterdam, the Enhancer, the Liquidity Provider and the Agent. Terms used
herein and not otherwise defined herein which are defined in the Sale Agreement
or the other Transaction Documents (as defined in the Sale Agreement) shall have
the same meaning herein as defined therein.
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Subject to the following terms and conditions, including without
limitation the conditions precedent set forth in Section 2, upon execution by
the parties hereto in the space provided for that purpose below, the Sale
Agreement shall be, and it hereby is, amended as follows:
(a) The date "October 31, 2000" appearing in clause (d) of the
defined term "Liquidity Termination Date" appearing in Schedule I of the
Sale Agreement is deleted and replaced with the date "November 30, 2000".
(b) The date "October 31, 2000" appearing in clause (c)(ii) of the
defined term "Termination Date" appearing in Schedule I of the Sale
Agreement is deleted and replaced with the date "November 30, 2000".
Section 2. Section 1 of this Agreement shall become effective only once the
Agent has received, in form and substance satisfactory to the Agent, all
documents and certificates as the Agent may reasonably request and all other
matters incident to the execution hereof are satisfactory to the Agent.
Section 3. The Sale Agreement, as amended and supplemented hereby or as
contemplated herein, and all rights and powers created thereby and thereunder or
under the other Transaction Documents and all other documents executed in
connection therewith, are in all respects ratified and confirmed. From and after
the date hereof, the Sale Agreement shall be amended and supplemented as herein
provided, and, except as so amended and supplemented,
2
the Sale Agreement, each of the other Transaction Documents and all other
documents executed in connection therewith shall remain in full force and
effect.
Section 4. This Amendment may be executed in two or more counterparts, each
of which shall constitute an original but both or all of which, when taken
together, shall constitute but one instrument.
Section 5. This Amendment shall be governed and construed in accordance
with the internal laws of the State of New York.
-2-
3
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their duly authorized officers as of the date first above
written.
ABN AMRO BANK N.V., as the Agent, as
the Liquidity Provider and as the
Enhancer
By: /s/ Thomas J. Educate
----------------------------------
Title: Group Vice President
-------------------------------
By: /s/ Nancy Capecci
----------------------------------
Title: Group Vice President
-------------------------------
AMSTERDAM FUNDING CORPORATION
By: /s/ Andrew Stidd
----------------------------------
Title: President
-------------------------------
AMETEK RECEIVABLES CORP., as Seller
By: /s/ Deirdre D. Saunders
----------------------------------
Title: Vice President and Treasurer
-------------------------------
AMETEK, INC., as Initial Collection
Agent
By: /s/ Deirdre D. Saunders
----------------------------------
Title: Vice President and Treasurer
-------------------------------
-3-
1
Exhibit 10.66
THIRD AMENDMENT
DATED AS OF NOVEMBER 30, 2000
TO
RECEIVABLES SALE AGREEMENT
DATED AS OF OCTOBER 1, 1999
THIS AMENDMENT (the "Amendment"), dated as of November 30, 2000, is
entered into among Ametek Receivables Corp. (the "Seller"), Ametek, Inc. (the
"Initial Collection Agent"), Amsterdam Funding Corporation, a Delaware
corporation ("Amsterdam"), ABN AMRO Bank N.V., as Amsterdam's program letter of
credit provider (the "Enhancer"), the Liquidity Provider listed on the signature
page hereof (the "Liquidity Provider") and ABN AMRO Bank N.V., as agent for
Amsterdam, the Enhancer and the Liquidity Provider (the "Agent").
Reference is hereby made to that certain Receivables Sale Agreement, dated
as of October 1, 1999 (as amended, supplemented or otherwise modified through
the date hereof, the "Sale Agreement"), among the Seller, the Initial Collection
Agent, Amsterdam, the Enhancer, the Liquidity Provider and the Agent. Terms used
herein and not otherwise defined herein which are defined in the Sale Agreement
or the other Transaction Documents (as defined in the Sale Agreement) shall have
the same meaning herein as defined therein.
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Subject to the following terms and conditions, including without
limitation the conditions precedent set forth in Section 2, upon execution by
the parties hereto in the space provided for that purpose below, the Sale
Agreement shall be, and it hereby is, amended as follows:
(a) The date "November 30, 2000" appearing in clause (d) of the
defined term "Liquidity Termination Date" appearing in Schedule I of the
Sale Agreement is deleted and replaced with the date "November 28, 2001".
(b) The date "November 30, 2000" appearing in clause (c)(ii) of the
defined term "Termination Date" appearing in Schedule I of the Sale
Agreement is deleted and replaced with the date "November 28, 2001".
(c) A new defined term "Ametek Credit Agreement" is hereby added to
Schedule I of the Sale Agreement as follows:
"Ametek Credit Agreement" means the Credit Agreement, dated as
of August 12, 1995, among, Seller, as Borrower, the Banks party
thereto, Bank of Montreal, Corestates Bank, N.A. and PNC Bank,
National Association, as Co-Agents and The Chase Manhattan Bank, as
Administrative Agent, as such agreement is amended, restated or
otherwise modified from time to time.
2
(d) The defined term "Eurodollar Rate" appearing in Schedule I to
the Sale Agreement is hereby deleted and replaced with the following:
"Eurodollar Rate" means, for any Tranche Period for a
Eurodollar Tranche, the sum of (a) LIBOR for such Tranche Period
divided by 1 minus the "Reserve Requirement" plus (b)(i) to the
extent that the "Applicable Margin" (as defined in the Ametek Credit
Agreement) is increased from the level in effect on November __,
2000, the greater of (1) the "Applicable Margin" (as defined in the
Ametek Credit Agreement and after giving effect to such increase)
plus 25 basis points (0.25%) and (2) for Investment of a Liquidity
Provider, the amount specified in the Pricing Letter, or, (ii) to
the extent that the "Applicable Margin" (as defined in the Ametek
Credit Agreement) is increased from the level in effect on November
30, 2000, the greater of (1) the "Applicable Margin" (as defined in
the Ametek Credit Agreement and after giving effect to such
increase) plus 25 basis points (0.25%) and (2) for Investment of the
Enhancer, the amount specified in the Fee Letter plus (c) during the
pendency of a Termination Event, 1.50% for Investment of a Liquidity
Provider and 2.00% for Investment of the Enhancer; where "Reserve
Requirement" means, for any Tranche Period for a Eurodollar Tranche,
the maximum reserve requirement imposed during such Tranche Period
on "eurocurrency liabilities" as currently defined in Regulation D
of the Board of Governors of the Federal Reserve System.
Section 2. Section 1 of this Agreement shall become effective only once the
Agent has received, in form and substance satisfactory to the Agent, all
documents and certificates as the Agent may reasonably request and all other
matters incident to the execution hereof are satisfactory to the Agent.
Section 3. The Sale Agreement, as amended and supplemented hereby or as
contemplated herein, and all rights and powers created thereby and thereunder or
under the other Transaction Documents and all other documents executed in
connection therewith, are in all respects ratified and confirmed. From and after
the date hereof, the Sale Agreement shall be amended and supplemented as herein
provided, and, except as so amended and supplemented, the Sale Agreement, each
of the other Transaction Documents and all other documents executed in
connection therewith shall remain in full force and effect.
Section 4. This Amendment may be executed in two or more counterparts, each
of which shall constitute an original but both or all of which, when taken
together, shall constitute but one instrument.
Section 5. This Amendment shall be governed and construed in accordance
with the internal laws of the State of New York.
-2-
3
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their duly authorized officers as of the date first above
written.
ABN AMRO BANK N.V., as the Agent, as
the Liquidity Provider and as the
Enhancer
By: /s/ Nancy Capecci
-------------------------------
Title: Group Vice President
----------------------------
By: /s/ Bernard Koh
-------------------------------
Title: Group Vice President
----------------------------
AMSTERDAM FUNDING CORPORATION
By: /s/ Andrew Stidd
-------------------------------
Title: President
----------------------------
AMETEK RECEIVABLES CORP., as Seller
By: /s/ Deirdre D. Saunders
-------------------------------
Title: Vice President and Treasurer
----------------------------
AMETEK, INC., as Initial Collection
Agent
By: /s/ Deirdre D. Saunders
-------------------------------
Title: Vice President and Treasurer
----------------------------
-3-
1
Exhibit 10.68
1997 STOCK INCENTIVE PLAN
OF
AMETEK, INC.
RESTRICTED STOCK AGREEMENT
RESTRICTED STOCK AGREEMENT ("Agreement"), made as of December 15, 2000,
by and between AMETEK, Inc., a Delaware corporation (the "Company"), and
Frank S. Hermance (the "Recipient").
W I T N E S S E T H :
WHEREAS, the Company has adopted the 1997 Stock Incentive Plan of AMETEK,
Inc. (the "Stock Incentive Plan"), pursuant to which the Stock Option Committee
of the Board of Directors of the Company (the "Committee") may, inter alia,
award shares of the Company's common stock, $0.01 per share ("Shares") to such
key employees of the Company as the Committee may determine, and subject to such
terms, conditions and restrictions as the Committee may deem advisable; and
WHEREAS, pursuant to the Stock Incentive Plan, the Committee has awarded
to the Recipient a restricted stock award, subject to the terms, conditions and
restrictions set forth in the Stock Incentive Plan and in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
FIRST: Pursuant to the Stock Incentive Plan, the Recipient has been
awarded on December 15, 2000 (the "Award Date"), a restricted stock award with
respect to
2
110,000 Shares (the "Restricted Stock Award", and such Shares, the "Restricted
Shares"), subject to the terms, conditions and restrictions set forth in the
Stock Incentive Plan and in this Agreement. Capitalized terms not otherwise
defined in this Agreement shall have the same meanings as defined in the Stock
Incentive Plan.
SECOND: The purchase price for the Restricted Shares shall be $0.01 per
Share, payable in cash, or by check to the order of the Company, no later than
March 15, 2001.
THIRD: The Restricted Shares shall become nonforfeitable on the earliest
to occur of:
(a) December 15, 2006 if the Recipient is in the continuous
employ of the Company (or any successor or Affiliate of
the Company) through such date;
(b) the death or disability (as defined in Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended) of the
Recipient; or
(c) the fair market value of a Share equaling or exceeding
$40.00 on each of five [5] consecutive trading days
occurring during the period beginning December 16, 2000
and ending December 15, 2005. For purposes hereof,
notwithstanding any other provision of the Stock
Incentive Plan, the fair market value of a Share on any
given day shall be the closing price on that day on the
stock exchange or market on which the Shares are
primarily traded.
Unless the Restricted Shares shall have become nonforfeitable pursuant to
subparagraph (c), above, if the Recipient shall voluntarily or involuntarily
leave the employ of the Company and its Affiliates prior to December 15, 2006,
the Restricted Shares (and any dividends, distributions and adjustments retained
by the Company with respect thereto)
- 2 -
3
shall be forfeited and the consideration paid pursuant to paragraph SECOND of
this Agreement shall be returned to the Recipient.
FOURTH: Notwithstanding anything to the contrary set forth herein, if the
Recipient shall be entitled to any payment from the Company pursuant to the
terms of the Termination and Change of Control Agreement between Recipient and
the Company dated as of December 15, 2000, as the same may be amended from time
to time ("Termination Agreement"), and the payment is measured in whole or in
part by the value of any of the Restricted Shares subject to this Agreement,
then that number of Restricted Shares with respect to which a payment is due to
Recipient under the terms of the Termination Agreement (and any dividends,
distributions and adjustments retained by the Company with respect to such
number of Restricted Shares) shall be forfeited and the consideration paid
pursuant to paragraph SECOND of this Agreement with respect to such forfeited
Restricted Shares shall be returned to the Recipient. In such event, the
remaining Restricted Shares (together with any dividends, distributions and
adjustments retained by the Company with respect to such remaining Restricted
Shares), if any, shall continue to constitute Restricted Shares subject to the
terms of this Agreement and the Plan.
FIFTH: Restrictions shall be imposed on a transfer of the Restricted
Shares, and the Company shall place a stop order with the Transfer Agent against
any transfer of such Shares and shall retain the stock certificate representing
such Shares, until such time as the Restricted Shares shall become
nonforfeitable in accordance with Paragraph THIRD. Prior to the lapse of the
restrictions on the transferability of the Restricted
- 3 -
4
Shares, the Recipient shall have all other rights and privileges of a beneficial
and record owner with respect to such Shares, including, without limitation,
voting rights and the right to receive dividends, distributions and adjustments
with respect to such Shares; provided, however, that any dividends,
distributions and adjustments with respect to the Restricted Shares, plus
interest credited on any such dividends, shall be retained by the Company for
the Recipient's account and for delivery to the Recipient, together with the
stock certificate representing such Shares, only as and when such Restricted
Shares have become nonforfeitable. For purposes of this paragraph FIFTH,
interest shall be credited from the date a dividend with respect to the
Restricted Shares is made to the date on which the Employer distributes such
amounts to the Recipient, at the 10-year Treasury Note rate, plus one and
one-half percent (1-1/2%), as such rate is set forth in the Wall Street Journal
as of the first business day of each calendar quarter.
SIXTH: If prior to the expiration or lapse of all of the restrictions and
conditions on the Restricted Shares under this Agreement, there shall be
declared and paid a stock dividend upon the Restricted Shares or if the
Restricted Shares shall be split up, converted, exchanged, reclassified or in
any way substituted for, the Recipient shall receive, subject to the same
restrictions and conditions as the original Restricted Shares subject to this
Agreement, the same securities or other property as are received by the holders
of the Company's Shares pursuant to such stock dividend, split up, conversion,
exchange, reclassification or substitution; provided, that if prior to the
expiration or lapse of all of the restrictions and conditions on the Restricted
Shares under this Agreement, more than fifty percent (50%) of the Company's
Shares are acquired for cash by a
- 4 -
5
corporation (or other legal entity), the Recipient shall receive, in exchange
for the then remaining nonvested Restricted Shares, subject to the same
restrictions and conditions as the original Restricted Shares under this
Agreement, that number of shares of the common stock of the acquiring entity
(or, if the entity does not have common stock, of the class of equity interest
in the acquiror which represents its largest equity class), which has the same
value as the nonvested Restricted Shares subjected to this Agreement (as
determined immediately prior to the acquisition). If the Recipient receives any
securities or property of the Company (or any acquiring entity) pursuant to this
Paragraph SIXTH, such securities or other property shall thereafter be deemed to
be "Shares" and "Restricted Shares" within the meaning of this Agreement. In the
event of any transaction to which this Paragraph SIXTH applies (other than a
stock dividend), the Committee (or the Company, if the Committee no longer
exists) shall adjust the $40.00 price in Paragraph THIRD, subparagraph (c), to
take into account the effect of the transaction, subject to the consent of the
Recipient; if the parties cannot agree on the adjusted price within ninety (90)
days of the transaction, either party may submit the matter to arbitration.
SEVENTH: If, with respect to the Restricted Shares (and any dividends,
distributions and adjustments to such Shares), the Company shall be required to
withhold amounts under applicable federal, state or local tax laws, rules or
regulations, the Company shall be entitled, at its option, to (i) deduct and
withhold such amounts from any cash payment to be made by the Company to the
Recipient (whether or not under this Agreement) or to such other person with
respect to whom such withholding may arise; (ii) require the Recipient (or such
other person) to make payment to the Company in such
- 5 -
6
amount as is required to be withheld, (iii) withhold such number of Restricted
Shares as shall have a Fair Market Value, valued on the date on which such
withholding requirement arises, equal to the amount required to be withheld or
(iv) withhold the required tax or taxes by using a combination of (i), (ii) and
(iii) above, or by any other reasonable method.
EIGHTH: The Company and the Recipient each hereby agrees to be bound by
the terms and conditions set forth in the Stock Incentive Plan.
NINTH: Any notices or other communications given in connection with this
Agreement shall be sent either by registered or certified mail, return receipt
requested, or by overnight mail, or by facsimile, to the indicated address or
number as follows:
If to the Company: AMETEK, Inc.
37 North Valley Road - Building 4
P.O. Box 1764
Paoli, PA 19301
Facsimile: 610-296-3412
Attention: Donna Winquist, General Counsel
and
John Molinelli, Chief Financial
Officer
If to the Recipient Frank S. Hermance
1300 Meadow Lane
Berwyn, PA 19312
Facsimile: 610-651-5969;
or to such changed address or number as to which either party has given notice
to the other party in accordance with this Paragraph SEVENTH. All notices shall
be deemed given when so mailed, or if sent by facsimile, when electronic
confirmation of the
- 6 -
7
transmission is received, except that a notice of change of address shall be
deemed given when received.
TENTH: This Agreement, the Stock Incentive Plan and the Termination and
Change of Control Agreement constitute the whole agreement between the parties
hereto with respect to the Restricted Stock Award.
ELEVENTH: This Agreement shall not be construed as creating any
contract of employment between the Company and the Recipient.
TWELFTH: This Agreement shall inure to the benefit of, and be binding on,
the Company and its successors and assigns, and shall inure to the benefit of,
and be binding on, the Recipient and his heirs, executors, administrators and
legal representatives. This Agreement shall not be assignable by the Recipient.
THIRTEENTH: Except as required by Delaware corporate law, this Agreement
shall be subject to, and construed in accordance with, the laws of the State of
New York without giving effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
AMETEK, INC.
By: /s/ John J. Molinelli
---------------------------------
John J. Molinelli
/s/ Frank S. Hermance
---------------------------------
Frank S. Hermance
- 7 -
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EXHIBIT 10.69
1999 STOCK INCENTIVE PLAN
OF
AMETEK, INC.
RESTRICTED STOCK AGREEMENT
RESTRICTED STOCK AGREEMENT ("Agreement"), made as of December 15, 2000,
by and between AMETEK, Inc., a Delaware corporation (the "Company"), and
Frank S. Hermance (the "Recipient").
W I T N E S S E T H :
WHEREAS, the Company has adopted the 1999 Stock Incentive Plan of AMETEK,
Inc. (the "Stock Incentive Plan"), pursuant to which the Stock Option Committee
of the Board of Directors of the Company (the "Committee") may, inter alia,
award shares of the Company's common stock, $0.01 per share ("Shares") to such
key employees of the Company as the Committee may determine, and subject to such
terms, conditions and restrictions as the Committee may deem advisable; and
WHEREAS, pursuant to the Stock Incentive Plan, the Committee has awarded
to the Recipient a restricted stock award, subject to the terms, conditions and
restrictions set forth in the Stock Incentive Plan and in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
FIRST: Pursuant to the Stock Incentive Plan, the Recipient has been
awarded on December 15, 2000 (the "Award Date"), a restricted stock award with
respect to
2
40,000 Shares (the "Restricted Stock Award", and such Shares, the
"Restricted Shares"), subject to the terms, conditions and restrictions set
forth in the Stock Incentive Plan and in this Agreement. Capitalized terms not
otherwise defined in this Agreement shall have the same meanings as defined in
the Stock Incentive Plan.
SECOND: The purchase price for the Restricted Shares shall be $0.01 per
Share, payable in cash, or by check to the order of the Company, no later than
March 15, 2001.
THIRD: The Restricted Shares shall become nonforfeitable on the earliest
to occur of:
(a) December 15, 2006 if the Recipient is in the
continuous employ of the Company (or any
successor or Affiliate of the Company) through
such date;
(b) the death or disability (as defined in Section
22(e)(3) of the Internal Revenue Code of 1986,
as amended) of the Recipient; or
(c) the fair market value of a Share equaling or
exceeding $40.00 on each of five [5]
consecutive trading days occurring during the
period beginning December 16, 2000 and ending
December 15, 2005. For purposes hereof,
notwithstanding any other provision of the
Stock Incentive Plan, the fair market value of
a Share on any given day shall be the closing
price on that day on the stock exchange or
market on which the Shares are primarily traded.
Unless the Restricted Shares shall have become nonforfeitable pursuant to
subparagraph (c), above, if the Recipient shall voluntarily or involuntarily
leave the employ of the Company and its Affiliates prior to December 15, 2006,
the Restricted Shares (and any dividends, distributions and adjustments retained
by the Company with respect thereto)
- 2 -
3
shall be forfeited and the consideration paid pursuant to paragraph SECOND of
this Agreement shall be returned to the Recipient.
FOURTH: Notwithstanding anything to the contrary set forth herein, if the
Recipient shall be entitled to any payment from the Company pursuant to the
terms of the Termination and Change of Control Agreement between Recipient and
the Company dated as of December 15, 2000, as the same may be amended from time
to time ("Termination Agreement"), and the payment is measured in whole or in
part by the value of any of the Restricted Shares subject to this Agreement,
then that number of Restricted Shares with respect to which a payment is due to
Recipient under the terms of the Termination Agreement (and any dividends,
distributions and adjustments retained by the Company with respect to such
number of Restricted Shares) shall be forfeited and the consideration paid
pursuant to paragraph SECOND of this Agreement with respect to such forfeited
Restricted Shares shall be returned to the Recipient. In such event, the
remaining Restricted Shares (together with any dividends, distributions and
adjustments retained by the Company with respect to such remaining Restricted
Shares), if any, shall continue to constitute Restricted Shares subject to the
terms of this Agreement and the Plan.
FIFTH: Restrictions shall be imposed on a transfer of the Restricted
Shares, and the Company shall place a stop order with the Transfer Agent against
any transfer of such Shares and shall retain the stock certificate representing
such Shares, until such time as the Restricted Shares shall become
nonforfeitable in accordance with Paragraph THIRD. Prior to the lapse of the
restrictions on the transferability of the Restricted
- 3 -
4
Shares, the Recipient shall have all other rights and privileges of a beneficial
and record owner with respect to such Shares, including, without limitation,
voting rights and the right to receive dividends, distributions and adjustments
with respect to such Shares; provided, however, that any dividends,
distributions and adjustments with respect to the Restricted Shares, plus
interest credited on any such dividends, shall be retained by the Company for
the Recipient's account and for delivery to the Recipient, together with the
stock certificate representing such Shares, only as and when such Restricted
Shares have become nonforfeitable. For purposes of this paragraph FIFTH,
interest shall be credited from the date a dividend with respect to the
Restricted Shares is made to the date on which the Employer distributes such
amounts to the Recipient, at the 10-year Treasury Note rate, plus one and
one-half percent (1-1/2%), as such rate is set forth in the Wall Street Journal
as of the first business day of each calendar quarter.
SIXTH: If prior to the expiration or lapse of all of the restrictions and
conditions on the Restricted Shares under this Agreement, there shall be
declared and paid a stock dividend upon the Restricted Shares or if the
Restricted Shares shall be split up, converted, exchanged, reclassified or in
any way substituted for, the Recipient shall receive, subject to the same
restrictions and conditions as the original Restricted Shares subject to this
Agreement, the same securities or other property as are received by the holders
of the Company's Shares pursuant to such stock dividend, split up, conversion,
exchange, reclassification or substitution; provided, that if prior to the
expiration or lapse of all of the restrictions and conditions on the Restricted
Shares under this Agreement, more than fifty percent (50%) of the Company's
Shares are acquired for cash by a
- 4 -
5
corporation (or other legal entity), the Recipient shall receive, in exchange
for the then remaining nonvested Restricted Shares, subject to the same
restrictions and conditions as the original Restricted Shares under this
Agreement, that number of shares of the common stock of the acquiring entity
(or, if the entity does not have common stock, of the class of equity interest
in the acquiror which represents its largest equity class), which has the same
value as the nonvested Restricted Shares subjected to this Agreement (as
determined immediately prior to the acquisition). If the Recipient receives any
securities or property of the Company (or any acquiring entity) pursuant to this
Paragraph SIXTH, such securities or other property shall thereafter be deemed to
be "Shares" and "Restricted Shares" within the meaning of this Agreement. In the
event of any transaction to which this Paragraph SIXTH applies (other than a
stock dividend), the Committee (or the Company, if the Committee no longer
exists) shall adjust the $40.00 price in Paragraph THIRD, subparagraph (c), to
take into account the effect of the transaction, subject to the consent of the
Recipient; if the parties cannot agree on the adjusted price within ninety (90)
days of the transaction, either party may submit the matter to arbitration.
SEVENTH: If, with respect to the Restricted Shares (and any dividends,
distributions and adjustments to such Shares), the Company shall be required to
withhold amounts under applicable federal, state or local tax laws, rules or
regulations, the Company shall be entitled, at its option, to (i) deduct and
withhold such amounts from any cash payment to be made by the Company to the
Recipient (whether or not under this Agreement) or to such other person with
respect to whom such withholding may arise; (ii) require the Recipient (or such
other person) to make payment to the Company in such
- 5 -
6
amount as is required to be withheld, (iii) withhold such number of Restricted
Shares as shall have a Fair Market Value, valued on the date on which such
withholding requirement arises, equal to the amount required to be withheld or
(iv) withhold the required tax or taxes by using a combination of (i), (ii) and
(iii) above, or by any other reasonable method.
EIGHTH: The Company and the Recipient each hereby agrees to be bound by
the terms and conditions set forth in the Stock Incentive Plan.
NINTH: Any notices or other communications given in connection with this
Agreement shall be sent either by registered or certified mail, return receipt
requested, or by overnight mail, or by facsimile, to the indicated address or
number as follows:
If to the Company: AMETEK, Inc.
37 North Valley Road - Building 4
P.O. Box 1764
Paoli, PA 19301
Facsimile: 610-296-3412
Attention: Donna Winquist, General Counsel
and
John Molinelli, Chief Financial Officer
If to the Recipient Frank S. Hermance
1300 Meadow Lane
Berwyn, PA 19312
Facsimile: 610-651-5969;
or to such changed address or number as to which either party has given notice
to the other party in accordance with this Paragraph SEVENTH. All notices shall
be deemed given when so mailed, or if sent by facsimile, when electronic
confirmation of the
- 6 -
7
transmission is received, except that a notice of change of address shall be
deemed given when received.
TENTH: This Agreement, the Stock Incentive Plan and the Termination and
Change of Control Agreement constitute the whole agreement between the parties
hereto with respect to the Restricted Stock Award.
ELEVENTH: This Agreement shall not be construed as creating any contract
of employment between the Company and the Recipient.
TWELFTH: This Agreement shall inure to the benefit of, and be binding on,
the Company and its successors and assigns, and shall inure to the benefit of,
and be binding on, the Recipient and his heirs, executors, administrators and
legal representatives. This Agreement shall not be assignable by the Recipient.
THIRTEENTH: Except as required by Delaware corporate law, this Agreement
shall be subject to, and construed in accordance with, the laws of the State of
New York without giving effect to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
AMETEK, INC.
By: /s/ John J. Molinelli
--------------------------------
John J. Molinelli
/s/ Frank S. Hermance
------------------------------------
Frank S. Hermance
- 7 -
1
Exhibit 10.70
TERMINATION AND CHANGE OF CONTROL AGREEMENT
TERMINATION AND CHANGE OF CONTROL AGREEMENT ("Agreement"), made as of
December 15, 2000, between AMETEK, Inc. (the "Company"), and Frank S. Hermance
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is the President and Chief Executive Officer of
the Company on the date hereof, and also will become the Chairman of the Board
of Directors of the Company as of January 1, 2001; and
WHEREAS, the Company wishes to provide certain benefits to the
Executive in the event of a termination of the Executive's employment under
certain circumstances or in the event of a change of control of the Company;
NOW, THEREFORE, in consideration of the mutual covenants and promises
of the parties hereto, the Company and the Executive agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below, unless the context clearly indicates
otherwise:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cash Compensation" shall mean the sum of the Executive's
base salary (equal to the rate of annual base salary for the Company's fiscal
year immediately prior to the Termination Date) plus (i) the Executive's
targeted bonus, if known, for the year in which the Termination Date occurs, or
(ii) if the targeted bonus described in clause (i) is not known, the average of
the Executive's bonuses for the two fiscal years of the Company immediately
2
preceding the year in which the Termination Date occurs, including all such
salary and bonuses earned in all capacities with the Company and its
Subsidiaries, as reported for Federal income tax purposes on Form W-2, together
with any amounts which would have been included in the Executive's salary or
bonus but for a deferral election by the Executive under any plan of the Company
or its Subsidiaries, including, but not limited to, a plan qualified under
Section 401(k) or 125 of the Code.
(c) "Cause" shall mean (i) misappropriation of funds, (ii)
habitual insobriety or substance abuse, (iii) conviction of a crime involving
moral turpitude, or (iv) gross negligence in the performance of duties, which
gross negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
(d) "Change of Control" shall mean (i) the acquisition by any
person or group, other than the Company or any of its Subsidiaries, of 20% or
more of the voting stock of the Company; (ii) the acquisition by the Company or
any of its Subsidiaries, or any Executive benefit plan of the Company or any
Subsidiary, or any person or entity organized, appointed or established by the
Company or Subsidiary for or pursuant to the terms of any such Executive benefit
plan, acting separately or in combination with each other or with other persons,
of 50% or more of the voting stock of the Company, if after such acquisition the
Shares are no longer publicly traded; (iii) the removal within any two-year
period from the Board of a sufficient number of directors such that the
individuals who constituted the Board at the beginning of the period shall cease
to constitute a majority of the Board, unless the election of each subsequent
member was approved in advance by two-thirds of the members of the Board in
office at the beginning of such two-year period; or (iv) the approval by the
shareholders of the Company of (A) a merger or consolidation, the result of
which is that the shareholders of the Company do not
-2-
3
own or control at least 50% of the value of the outstanding equity or combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of Directors or (B) a sale or other
disposition (in one transaction or a series of related transactions) of all or
substantially all of the Company's assets.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) "Good Reason" shall mean, without the written consent of
the Executive, one or more of the following occurrences:
(i) any failure of the Company to comply with and
satisfy any of the terms of this Agreement;
(ii) any reduction of the authority, duties or
responsibilities held by the Executive, or removal from, or failure to
be reelected to, the Board;
(iii) any reduction of the Executive's base
compensation, bonus opportunity or benefit entitlement; or
(iv) any transfer of the Executive to a location
which is outside the Paoli, Pennsylvania area (or the general area in
which his principal place of business immediately preceding the
transfer may be located at such time if other than Paoli, Pennsylvania)
by more than fifty miles other than on a temporary basis (less than 6
months), except for required travel on the Company's business to an
extent substantially consistent with the Executive's business travel
obligations on behalf of the Company in effect immediately prior to the
transfer;
provided, however, that in the event Executive delivers a Notice of Termination
based on one or more of the foregoing occurrences of Good Reason, the Company
may correct or cure such occurrence or occurrences within twenty (20) days of
receipt of the Notice of Termination, in
-3-
4
which event the Notice of Termination shall be deemed withdrawn and of no
further force or effect.
(g) "Non-Competition and Non-Solicitation Obligations" shall
mean the covenants described in Section 5(d).
(h) "Notice of Termination" shall mean a written notice which
conforms to the requirements of Section 2.
(i) "Restricted Shares" shall mean the Shares that were issued
to the Executive pursuant to the restricted stock awards granted as of December
15, 2000 under the 1997 Stock Incentive Plan of AMETEK, Inc. and the 1999 Stock
Incentive Plan of AMETEK, Inc., as adjusted pursuant to the terms of the
agreement between the Company and the Executive evidencing such awards, and
which continue to be forfeitable as of the applicable date or event referred to
herein; upon becoming vested, such Shares shall no longer be Restricted Shares
for purposes of this Agreement.
(j) "Share" shall mean a share of the common stock of the
Company or any successor, as adjusted pursuant to the terms of the agreements
between the Company and the Executive evidencing such awards.
(k) "Subsidiary" shall mean any corporation or other entity
which is deemed to be part of the affiliated group of the Company for purposes
of Section 280G(d)(5) of the Code.
(l) "Termination Date" shall mean the date specified in the
Notice of Termination, or the date of receipt of the Notice of Termination if
the Notice is sent by the Company to the Executive and asserts that the
Termination is for Cause.
-4-
5
(m) "Vested" shall mean, with respect to the Restricted
Shares, that such Shares have become nonforfeitable and transferable in
accordance with the terms of the awards and restricted stock agreements, dated
as of December 15, 2000, pursuant to which they were issued.
2. NOTICE OF TERMINATION. Any termination of the Executive's employment
by either the Company or the Executive shall be communicated by a Notice of
Termination to the other party to this Agreement, given in accordance with
Section 18 hereof. For purposes of this Agreement, a "Notice of Termination"
means a written notice of the termination of the Executive's employment which
(i) in the case of a Notice of Termination from the Company, indicates whether
the termination is for Cause or without Cause, or, in the case of a Notice of
Termination from the Executive, indicates whether the resignation is for Good
Reason or not for Good Reason, (ii) refers to the specific provision in this
Agreement relied upon and briefly summarizes the facts and circumstances deemed
to provide a basis for the termination of employment under the provision so
indicated, and (iii) specifies the Termination Date, which date shall not be
less than 20 nor more than 30 days after the giving of such Notice, except for a
Notice of Termination from the Company that the Executive is being terminated
for Cause which shall be effective immediately.
3. TERMINATION NOT IN CONNECTION WITH A CHANGE OF CONTROL OR FOR CAUSE.
If the Executive's employment is terminated by the Company without Cause or by
the Executive for Good Reason, and such termination occurs prior to and not in
anticipation of a Change of Control, then the Restricted Shares, if any, shall
be forfeited on the Termination Date and the following benefits shall be
provided to the Executive:
(a) The Company shall pay to the Executive, in a lump sum
within 30 days after the Termination Date; an amount equal to two (2) times the
Executive's Cash Compensation;
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(b) The Company shall continue the Executive's current
coverage (single or family) under (or, at the election of the Company, provide a
tax equivalent monthly payment equal to the cost of) the Company's plans or
programs to provide health benefits (including, but not limited to,
hospitalization, surgical, major medical, dental and vision benefits),
disability insurance and death benefits (including, but not limited to, the
Company's Supplemental Executive Plan), as in effect from time to time for other
senior executives of the Company, until the earliest of (i) the end of the
second year following the year of the termination of employment, (ii) as applied
to health benefit coverage, the Executive's eligibility for Medicare, (iii) as
applied to health benefits, disability insurance and death benefits, considered
separately from each other, the Executive's commencement of new employment where
the Executive is eligible to participate in substantially similar plans or
programs without a pre-existing condition limitation, or (iv) the Executive's
death; and
(c) The Company shall (i) continue to provide the Executive
with the Company provided car available to him at the Termination Date (or a
comparable car, if the lease on such car should expire) and (ii) continue to
reimburse him for the cost of country club or private club dues (at the level in
effect at the Termination Date), until the earliest of the second anniversary of
the Termination Date or the Executive's death.
For purposes of this Agreement, a termination of employment will be considered
to be in anticipation of a Change of Control if the Termination Date occurs
during the ninety (90) day period ending on the date of the Change of Control
and the substantial possibility of the Change of Control was known to the
Executive and to a majority of the Board of Directors of the Company on or
before the date the Notice of Termination was delivered.
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4. CHANGE OF CONTROL. If the Executive is employed by the Company at
the date of a Change of Control, or has been terminated without Cause or
resigned for Good Reason in anticipation of the Change of Control (within the
meaning of Section 3), the following shall apply:
(a) Subject to the limitations of Section 12 hereof, the
Company shall pay to the Executive an amount equal to the fair market value of
the Restricted Shares held by the Executive at the earlier of the Termination
Date or the date of the Change of Control (which value, if the Change of Control
is a merger, consolidation, tender offer, going private transaction, or any
other similar transaction pursuant to which shareholders of the Company
generally will receive cash, stock of another company or other consideration for
their shares of Company stock, shall be calculated on the basis of the amount
per Share received or to be received by shareholders of the Company in
connection with the Change of Control); the amount payable under this Subsection
(a) shall be paid to the Executive in a lump sum within 30 days after the Change
of Control.
(b) The number of Restricted Shares with respect to which any
payment under Subsection (a), above, has been made, after taking into account
the limitations of Section 12 hereof, shall be forfeited, notwithstanding any
other terms or conditions applicable to the Restricted Shares.
(c) The balance of the Restricted Shares shall be retained and
shall become Vested or be forfeited in accordance with the original terms and
conditions of the restricted stock awards under which they were granted. If, at
any time following a Change of Control, the Shares are not publicly traded, the
Company, at its own expense, shall cause a nationally recognized investment
banking firm mutually acceptable to the Executive and the
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Company to make an annual valuation, effective as of the first day of the
Company's fiscal year, which valuation shall establish the fair market value of
a Restricted Share or of a Share which was originally issued as a Restricted
Share and which is held by the Executive (or his beneficiary or estate following
his death) after the Restricted Shares have become vested. Copies of the
valuation shall be furnished, in writing, to the Executive and the Company.
(d) If any Restricted Shares become Vested following a Change
of Control and the Shares are not publicly traded, then
(i) the Executive (or his beneficiary or estate
following his death) shall have the right to compel the Company to buy
back some or all of the Shares which were originally Restricted Shares,
held by the Executive (or his beneficiary or estate), for the greater
of (A) their fair market value, as established for the year pursuant to
Subsection (b), above, or (B) if the Change of Control was in the form
of a merger, consolidation, tender offer, going private transaction or
any similar transaction, the amount per Share received by shareholders
of the Company in the Change of Control transaction ("Put Rights"); and
(ii) after the Executive's termination of employment
or his death, the Company shall have the right to compel the Executive
(or his beneficiary or estate, if applicable) to sell all the Shares
which were originally Restricted Shares held by the Executive (or his
beneficiary or estate), to the Company for the greater of (A) their
fair market value, as established for the year pursuant to Subsection
(b), above or (B) if the Change of Control was in the form of a merger,
consolidation, tender offer, going private transaction or any similar
transaction, the amount per Share received by shareholders of the
Company in the Change of Control transaction ("Call Rights").
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The Executive (or his beneficiary or estate) may exercise the Put Rights not
more than once during the Company's fiscal year. Neither the Executive (or his
beneficiary or estate) nor the Company may exercise the Put Rights or Call
Rights more than 90 days after the issuance of the most recent annual valuation
if the price at which the Put Rights or Call Rights are to be exercised is based
on such valuation (pursuant to clauses (i)(A) or (ii)(A), above). The provisions
of this Subsection (c) shall cease to apply if the Shares are again publicly
traded.
(e) The Company sponsors an irrevocable trust fund pursuant to
a trust agreement to hold assets to satisfy its obligations to certain
Executives. Funding through such trust fund of the amounts which may become due
to the Executive under Sections 4 or 5 of the Agreement shall be authorized by
the Compensation Committee of the Board, as set forth in the agreement pursuant
to which the fund has been established, no later than immediately following a
Change of Control
5. TERMINATION IN CONNECTION WITH A CHANGE OF CONTROL. If the Executive's
employment is terminated by the Company without Cause, or by the Executive for
Good Reason, in anticipation of (within the meaning of Section 3), upon or at
any time following a Change of Control (hereinafter referred to as a "Change of
Control Termination"), then, in addition to the payment under Section 4(a)
hereof, the Executive shall be entitled to additional benefits under Subsection
(a) or (b), below, whichever is applicable, and under Subsection (c).
(a) If the Restricted Shares have not become Vested and the
Change of Control Termination occurs prior to December 15, 2006, then all
Restricted Shares then outstanding shall be forfeited and, except as approved in
writing by the Board, the Executive shall be subject to the Non-Competition and
Non-Solicitation Obligations for a period of three years after the Change of
Control Termination. As consideration to the Executive for the
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restrictions set forth in this Subsection (a), the Company hereby agrees to pay
the Executive, in addition to any and all other amounts and benefits to which he
may be entitled hereunder, an amount equal to Two Million Dollars
($2,000,000.00) per year for three years, or Six Million Dollars
($6,000,000.00), which amount shall be paid to the Executive in a lump sum
within 30 days after the Termination Date. If the Executive violates any of the
covenants contained in this Subsection (a), then, in addition to the Company's
other remedies, the Executive shall repay to the Company an amount equal to Six
Million Dollars ($6,000,000.00), multiplied by a fraction, the numerator of
which is 1,095 minus the number of days between the Termination Date and the
date the Executive first violates the covenants contained in this Subsection
(a), and the denominator of which is 1,095.
(b) If the Restricted Shares have become Vested prior to the
Change of Control Termination, then upon the change of Control Termination,
except as approved in writing by the Board, the Executive shall be subject to
the Non-Competition and Non-Solicitation Obligations for a period of eighteen
(18) months after the Change of Control Termination. As consideration to the
Executive for the restrictions set forth in this Subsection (b), the Company
hereby agrees to pay the Executive, in addition to any and all other amounts and
benefits to which he may be entitled hereunder, an amount equal to Two Million
Dollars ($2,000,000.00) per year for eighteen (18) months, or Three Million
Dollars ($3,000,000.00), which amount shall be paid to the Executive in a lump
sum within 30 days after the Termination Date. If the Executive violates any of
the covenants contained in this Subsection (b), then, in addition to the
Company's other remedies, the Executive shall repay to the Company an amount
equal to Three Million Dollars ($3,000,000.00), multiplied by a fraction, the
numerator of which
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is 548 minus the number of days between the Termination Date and the date the
Executive first violates the covenants contained in this Subsection (b), and the
denominator of which is 548.
(c) The Company shall continue the Executive's current
coverage (single or family) under (or, at the election of the Company, provide a
tax equivalent monthly payment equal to the cost of) the Company's plans or
programs for health benefits (including, but not limited to, hospitalization,
surgical, major medical, dental and vision benefits), disability insurance and
death benefits (including, but not limited to the Company's Supplemental
Executive Plan), as in effect from time to time for other senior executives of
the Company, until the earliest of (i) the end of the second year (tenth year
for health benefits) following the year of the termination of employment, (ii)
as applied to health benefit coverage, the Executive's eligibility for Medicare,
(iii) as applied to health benefits, disability insurance and death benefits,
considered separately from each other, the Executive's commencement of new
employment where the Executive is eligible to participate in substantially
similar plans or programs without a pre-existing condition limitation, or (iv)
the Executive's death. The Company shall also continue to provide the Executive
with the Company provided car available to him at the Termination Date (or a
comparable car, if the lease on such car should expire) and shall continue to
reimburse him for the cost of country club or private club dues (at the level in
effect at the Termination Date) until the earliest of the second anniversary of
the Termination Date or the Executive's death.
(d) During any period in which the Executive is subject to
Non-Competition and Non-Solicitation Obligations under Subsection (a) or (b),
the Executive covenants not to:
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(i) Engage in or carry on, directly or indirectly,
either for himself or as a member, stockholder, investor, lender,
officer, director, Executive or agent of, or consultant or advisor to,
any person, partnership, corporation, joint venture or enterprise
(other than the Company), or in any capacity on behalf of any trust or
other organization or entity, any business in competition with (as
defined below) any business then carried on by the Company as long as
any like business is carried on by the Company or by any person,
corporation, partnership, trust or other organization or entity
deriving title to the good will of such business, directly or
indirectly, from the Company; provided, however, that nothing herein
contained shall prevent the Executive from purchasing or holding
securities of any publicly owned company, the securities of which are
listed on a national securities exchange or registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange
Act"), but the total holding of any single security so listed or
registered shall be limited to 1% of the amount of any such security
outstanding. For purposes of this Subsection (a), the term "any
business in competition with" shall mean any business engaged
principally or in part in any business of the Company (other than a
business which generated less than 5% of the Company's revenues and
less than 5% of the Company's pre-tax profits) as described in its
Annual Report on Form 10-K for the year prior to the Change of Control
Termination; or
(ii) Solicit, raid, entice, induce or attempt to
persuade, directly or indirectly, any person who is an Executive of the
Company at the time of the Change of Control Termination or a former
Executive of the Company who was employed at any time within the 90 day
period ended upon the Change of Control Termination, to become employed
by any person, firm, partnership, corporation or other enterprise or
entity, and
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the Executive shall not approach any such Executive (or former
Executive) for such purpose or authorize the taking of such actions by
any other person, firm, partnership, corporation or other enterprise or
entity.
6. TERMINATION FOR CAUSE OR WITHOUT GOOD REASON, ETC. If the
Executive's employment is terminated by the Company for Cause, by the Executive
without Good Reason, or because of the Executive's death or total disability,
the provisions of Sections 3 and 5 hereof shall not apply.
7. CONFIDENTIAL INFORMATION. The Executive recognizes and acknowledges
that, by reason of his employment by and service to the Company, he has had and
will continue to have access to confidential information of the Company and its
Subsidiaries, including, without limitation, information, and knowledge
pertaining to products and services offered, innovations, designs, ideas, plans,
trade secrets, proprietary information, distribution and sales methods and
systems, sales and profit figures, customer and client lists, and relationships
between the Company and its Subsidiaries and other distributors, customers,
clients, suppliers and others who have business dealings with the Company and
its Subsidiaries ("Confidential Information"). The Executive acknowledges that
such Confidential Information is a valuable and unique asset and covenants that
he will not, either during or after his employment by the Company, disclose any
such Confidential Information to any person for any reason whatsoever without
the prior written authorization of the Board, unless such information is in the
public domain through no fault of the Executive or except as may be required by
law.
8. ADDITIONAL PROVISIONS APPLICABLE TO SECTIONS 5 AND 7. The following
provisions shall apply to the covenants and restrictions contained in Sections 5
and 7 hereof:
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(a) The covenants contained in Sections 5(d) shall apply
within the territories in which the Company is actively engaged in the conduct
of business during the applicable period following the Termination Date,
including, without limitation, the territories in which customers are then being
solicited.
(b) Without limiting the right of the Company to pursue all
other legal and equitable remedies, including recovery of damages, available for
violation by the Executive of the covenants and restrictions contained in
Sections 5 or 7 hereof, the Executive agrees that monetary damages would not be
adequate compensation for any loss incurred by the Company by reason of a breach
by him of the provisions of Sections 5 or 7 hereof, and that the Company would
sustain irreparable harm and, therefore, further agrees that the Company shall
be entitled to injunctive relief to prevent any such breach or any continuing
breach thereof.
(c) The Executive irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding arising out of an asserted
breach of Sections 5 or 7 hereof, including, without limitation, any action
commenced by the Company for preliminary and permanent injunctive relief or
other equitable relief, may be brought in the United States District Court for
the Eastern District of Pennsylvania, or if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in Chester County, Pennsylvania, (ii) consents to the non-exclusive
jurisdiction of any such court in any suit, action or proceeding, and (iii)
waives any objection which the Executive may have to the laying of venue of any
such suit, action or proceeding in any such court, The Executive also
irrevocably and unconditionally consents to the service of any process,
pleadings, notices or other papers in a manner permitted by the notice
provisions of Section 18 hereof.
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(d) Each party intends and agrees that if, in any action
before any court or agency legally empowered to enforce the covenants contained
in Sections 5 or 7 hereof, any term, restriction, covenant or promise contained
therein is found to be unreasonable and accordingly unenforceable, then such
term, restriction, covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency.
(e) If the Executive shall be the prevailing party in any
action brought by the Company for damages, injunction or other equitable relief
based upon an alleged breach of Sections 5 or 7, the Company shall reimburse the
Executive for all costs and expenses related to the defense of the action
(including reasonable attorneys fee and expenses).
9. NO MITIGATION. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise, except as provided in Sections 3(b) and 5(c).
10. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company,
or any of its Subsidiaries, and for which the Executive may qualify, other than
severance benefits.
11. NO SET-OFF. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Executive or others.
12. CERTAIN REDUCTION OF PAYMENTS.
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(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Code, and thus be subject to
the excise tax imposed by Section 4999 of the Code, and that it would be
economically advantageous to the Executive on an after-tax basis to reduce the
Payment to avoid or reduce the excise tax on excess parachute payments under
Section 4999 of the Code, the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to this Agreement
(such payments or distributions pursuant to this Agreement being hereinafter
referred to as "Agreement Payments") shall be reduced (but not below zero) to
the Reduced Amount. The "Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate net amount available to the Executive from
Agreement Payments after reduction for all Federal, state and local income and
payroll taxes, Social Security taxes (including Medicare) and the excise tax
under Section 4999. In applying this Subsection (a), the Agreement Payments
shall be reduced before reducing any other Payments to be made to the Executive.
For purposes of this Section 12, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 12 shall
be made by the Company's independent public accountant immediately prior to the
Change of Control (the "Accounting Firm"), which firm shall provide its
determinations and any supporting calculations both to the Company and the
Executive within 10 days of the Termination Date. Any such determination by the
Accounting Firm shall be binding upon the Company and the Executive. Within five
days after this determination, the Company shall pay (or cause to be
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paid) or distribute (or cause to be distributed) to or for the benefit of the
Executive such amounts as are then due to the Executive under this Agreement;
provided, however, that the Executive shall have the right to determine which of
the Agreement Payments shall be reduced to satisfy the requirements of this
Section 12.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments, as the case
may be, will have been made by the Company which should not have been made
("Overpayment") or that additional Agreement Payments which have not been made
by the Company could have been made ("Underpayment"), in each case, consistent
with the calculations required to be made hereunder. Accordingly, within two
years after the Termination Date, the Accounting Firm shall review the
determination made by it pursuant to Subsection (b), above. In the event that
the Accounting Firm determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan by the Company to the
Executive, which the Executive shall repay to the Company, together with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Code (the "Federal Rate"); provided, however, that no amount shall be
payable by the Executive to the Company if and to the extent such payment would
not reduce the amount which is subject to the excise tax under Section 4999 of
the Code. In the event that the Accounting Firm determines that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive together with interest at the rate announced
from time to time by the Chase Manhattan Bank (or any successor) as its prime
rate, plus one percent (1%), each change in such rate to take effect on the
effective date of the change in such prime rate; provided, however, that no such
amount shall be payable by the Company to the Executive to the extent the
Underpayment is attributable to an
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Agreement Payment under Section 4 hereof and Restricted Shares having a value
equal to the Underpayment, as of the date of the Change of Control, subsequently
became Vested. In the event the Executive repays to the Company an Overpayment
(or any portion thereof) which is attributable to an Agreement Payment made
pursuant to Section 4 hereof, then upon receipt of the repayment, the Company
shall cause to be reissued to the Executive the number of Restricted Shares
which were forfeited on account of such Overpayment (or the applicable portion
thereof) and such Restricted Shares shall be subject to the same terms and
conditions as the award and the restricted stock agreement under which they were
originally issued. In the event the Company makes payment to the Executive of an
Underpayment (or any portion thereof) which is attributable to an Agreement
Payment made pursuant to Section 4 hereof, and as of the date of such payment
the Restricted Shares have not become Vested, then an additional number of
Restricted Shares having a value, as of the date of the Change of Control, equal
to the Underpayment (or the applicable portion thereof) shall be forfeited.
(d) All of the fees and expenses of the Accounting Firm in
performing the determinations referred to in Subsections (b) and (c), above,
shall be borne solely by the Company. The Company agrees to indemnify and hold
harmless the Accounting Firm of and from any and all claims, damages and
expenses resulting from or relating to its determinations pursuant to
Subsections (b) and (c), above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
13. AMENDMENTS. No amendment or modification of this Agreement or of
any covenant, condition or limitation herein contained shall be valid, unless in
writing and duly executed by both parties.
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14. WAIVERS. A waiver by any party hereto of any breach of this
Agreement or the failure by a party to insist upon strict adherence to any term
of this Agreement shall not be considered a waiver of any other breach or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
15. SEVERABILITY. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any court
of competent jurisdiction, this Agreement shall be interpreted as if such
invalid agreements or covenants were not contained herein. Nothing contained in
this Agreement shall be construed so as to require the commission of any act
contrary to law, and whenever there is any conflict between any provision of
this Agreement and any statute, law, ordinance, order or regulation, contrary to
which the parties hereto have no legal right to contract, the latter shall
prevail, but in such event any provision of this Agreement so affected shall be
curtailed and limited only to the extent necessary to bring it within the legal
requirements.
16. ASSIGNMENT. The Executive may not assign his rights or obligations
under this Agreement. This Agreement shall inure to the benefit of and be
binding upon the Executive, his heirs, executors and administrators, and the
Company, its successors and assigns.
17. CANCELLATION OF PRIOR AGREEMENT. This Agreement supersedes and
cancels that certain agreement dated May 1, 1997, between the Company and the
Executive.
18. NOTICES. All notices, requests, consents and other communications
which either party is required or may desire to serve upon the other shall be in
writing (including facsimile or similar writing) and shall be deemed to have
been given at the time when personally delivered or, if mailed, when deposited
in the United States mail, enclosed in a registered or certified postpaid
envelope, addressed to the other party at the address stated below or to such
changed address as
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such party may have fixed by notice, or, if given by facsimile, when electronic
confirmation of the transmission is received:
To the Company: AMETEK, Inc.
37 North Valley Road - Building 4
P.O. Box 1764
Paoli, PA 19301
Facsimile: 610-296-3412
Attention: Donna Winquist,
General Counsel
and
John Molinelli,
Chief Financial Officer
To the Executive: Frank S. Hermance
1300 Meadow Lane
Berwyn, PA 19312
Facsimile: 610-651-5969;
provided that any notice of change of address shall be effective only when
received.
19. SUCCESSOR COMPANY. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, spin-off or
otherwise) to all or substantially all of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to the
Executive, to acknowledge expressly that this Agreement is binding upon and
enforceable against the successor or successors in accordance with the terms
hereof, and to become jointly and severally obligated with the Company to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession or successions had
taken place. Failure of the Company to notify the Executive in writing as to
such successorship, to provide the Executive the opportunity to review and agree
to the successor's assumption of this Agreement or to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement. As used in this
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Agreement, the Company shall mean the Company as hereinbefore defined and any
such successor or successors to its business and/or assets, jointly and
severally.
20. TAXES. The Company may withhold from or with respect to any payment
of compensation or taxable benefit provided for under this Agreement any
federal, state or local tax (including any applicable payroll tax or excise tax)
to the extent required by law.
21. ERISA TOP HAT PLAN. To the extent that this Agreement is considered
to be a plan for purposes of the Executive Retirement Income Security Act of
1974, as amended ("ERISA"), it shall be considered an unfunded plan maintained
primarily for the purpose of providing benefits for a select group of management
or highly compensated Executives, within the meaning of U.S. Department of Labor
Regulations Section 2520.104-23 or Section 2520.104-24, as applicable.
22. NO RIGHT OF EMPLOYMENT. This Agreement shall not be construed as
creating any contract of employment between the Company and the Executive.
23. RELEASE. Notwithstanding anything to the contrary contained herein,
the Executive's entitlement to the payment of any amount or receipt of any
benefit coverage under this Agreement, upon or following his termination of
employment, is expressly conditioned upon his execution of a release in the form
required by the Company of its terminating executives prior to the Termination
Date.
24. ARBITRATION. In the event of any dispute under the provisions of
this Agreement, other than a dispute involving an alleged violation by the
Executive of Sections 5 or 7, or a dispute in which the sole relief sought is an
equitable remedy such as an injunction, the parties shall be required to have
the dispute, controversy or claim settled by arbitration in Philadelphia,
Pennsylvania, in accordance with the National Rules for the Resolution of
Employment Disputes
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then in effect of the American Arbitration Association, before one arbitrator
who shall be an executive officer or former executive officer of a publicly
traded corporation, selected by the parties. Any award entered by the arbitrator
shall be final, binding and nonappealable and judgment may be entered thereon by
either party in accordance with applicable law in any court of competent
jurisdiction. This arbitration provision shall be specifically enforceable. The
arbitrator shall have no authority to modify any provision of this Agreement or
to award a remedy for a dispute involving this Agreement other than a benefit
specifically provided under or by virtue of the Agreement; provided, however,
that if the arbitrator finds that the Company has breached this Agreement and,
as a result of any such breach, the Executive has incurred an excise tax under
Section 4999 of the Code, then, in addition to such other remedies as the
arbitrator may award, the arbitrator shall direct the Company to pay the
Executive an amount (the "gross-up payment") which will reimburse the Executive
for the cost of the excise tax, as well as for all federal, state and local
income, excise and payroll taxes incurred by the Executive on the gross-up
payment. The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorney's fees and expenses).
25. GOVERNING LAW. This Agreement shall be subject to, and construed in
accordance with, the laws of the Commonwealth of Pennsylvania, except to the
extent that such laws are preempted by Federal law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
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AMETEK, INC.
By: /s/ John J. Molinelli
---------------------------------
John J. Molinelli
/s/ Frank S. Hermance
-------------------------------------
Frank S. Hermance
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EXHIBIT 10.71
EMPLOYMENT AGREEMENT
This Agreement is made this 1st day of January, 2001, by and between
AMETEK, Inc., a Delaware corporation, with its principal offices at 37 North
Valley Road, Building 4, P.O. Box 1764, Paoli, Pennsylvania 19301-0801 (the
"Company"), and Walter E. Blankley, an individual residing at 13023 Valewood
Drive, Naples, Florida 34119 ("Mr. Blankley").
WITNESSETH:
WHEREAS, Mr. Blankley was formerly Chief Executive
Officer through September 14, 1999 and Chairman of the Board through December
31, 2000; and
WHEREAS, the Company desires that Mr. Blankley shall
continue to provide services to the Company as a non-executive employee from
January 1, 2001 to December 15, 2001 at which time his employment will
terminate; and
WHEREAS, the Company desires to enter into a non-compete
arrangement with Mr. Blankley during his period of employment and for the four
years following his termination of employment;
NOW, THEREFORE, In consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1. Term. The Company hereby continues the employment of Mr. Blankley as
a non-executive employee of the Company, and Mr. Blankley agrees to serve the
Company as such, upon the terms and conditions hereof for the period commencing
on January 1, 2001, until December 15, 2001 (the "Employment Period"), at which
time his employment will terminate.
2. Duties. Mr. Blankley agrees that he will work on special projects
and provide advice to executive management relating to certain business matters
of the Company.
3. Compensation. The Company will pay Mr. Blankley for all services to
be rendered by Mr. Blankley hereunder a salary of $8,246.00/month ($99,000/year)
for the Employment Period in accordance with the customary payroll practices of
the Company.
4. Expenses. Mr. Blankley shall be entitled to reimbursement by the
Company, in accordance with the Company's policies, against appropriate vouchers
or other receipts for authorized travel, entertainment and other business
expenses reasonably incurred by him in the performance of his duties hereunder.
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5. Benefits. (a) During the Employment Period, Mr. Blankley will
continue to participate in all non-executive plans and benefits in which he was
a participant prior to January 1, 2001.
(b) The Company shall provide to Mr. Blankley, at the
expense of the Company, continued use of his current leased automobile, for use
by Mr. Blankley in connection with the performance of his duties hereunder for
the Employment Period.
(c) The Company shall provide Mr. Blankley with the tax
preparation services of Ernst & Young LLP for the Employment Period.
(d) Mr. Blankley will continue to be covered under the
terms of the AMETEK, Inc. Supplemental Senior Executive Death Benefit.
6. Withholding. All payments required to be made by the Company
hereunder to Mr. Blankley shall be subject to the withholding of such amounts
relating to taxes and other governmental assessments as the Company may
reasonably determine it should withhold pursuant to any applicable law, rule or
regulation.
7. Non-Competition; Solicitation. (a) Mr. Blankley agrees that during
his continued employment with the Company and for the four years following his
termination of employment (the Non-Competition Period"), he will not, without
the written consent of the Company, directly or indirectly, either individually
or as an employee, agent, partner, shareholder, consultant, option holder,
lender of money, guarantor or in any other capacity, participate in, engage in
or have a financial interest or management position or other interest in any
business, firm, corporation or other entity if it competes with any business
operation conducted by the Company or its subsidiaries or affiliates or any
successor or assign thereof, nor will he solicit any other person to engage in
any of the foregoing activities. The foregoing provisions of this Section 7(a)
will not prohibit the ownership by Mr. Blankley of 1% or less of any class of
outstanding securities of a company, the securities of which are listed on a
national securities exchange or which has 1,000 or more shareholders.
(b) Mr. Blankley will not, at any time during the Non-Competition
Period, solicit (or assist or encourage the solicitation of) any employee of the
Company or any of its subsidiaries or affiliates to work for Mr. Blankley or for
any business, firm, corporation or other entity in which Mr. Blankley, directly
or indirectly, in any capacity described in Section 7(a) hereof, participates or
engages (or expects to participate or engage) or has (or expects to have) a
financial interest or management position.
(c) If any of the covenants contained in subsection (a) or (b) of this
Section 7 is held by a court of competent jurisdiction to be unenforceable
because of the duration of such provision, the activity limited by or the
subject of such provision and/or the area covered thereby, then the court making
such determination will construe such restriction
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so as to thereafter be limited or reduced to be enforceable to the greatest
extent permissible by applicable law.
(d) In consideration of Mr. Blankley's covenants and agreements
under this Section 7, the Company will pay to Mr. Blankley the sum of $125,000
per year, payable on a quarterly basis, commencing with the first quarter of
2002 and ending with the last quarter of 2005.
(e) The rights and obligations of the parties under this Section 7
will remain in full force and effect until fully performed. Accordingly, to the
extent required, this Section 7 will survive any earlier termination of this
Agreement.
8. Death. Upon the death of Mr. Blankley during the term of this
Agreement, this Agreement will terminate. Mr. Blankley's estate will be entitled
to receive (a) any earned and unpaid salary accrued through the date of
termination, (b) any remaining non-compete payments provided under Section 7,
and (c) subject to the terms thereof, any benefits which may be due to Mr.
Blankley on the date of termination under the provisions of any employee benefit
plan, program or policy in which he participates.
9. Trade Secrets, Etc. Mr. Blankley agrees that he will not, during
or after the termination of this Agreement, divulge, furnish or make accessible
to any person, firm, corporation or other business entity, any information,
trade secrets, technical data or know-how relating to the business, business
practices, methods, products, processes, equipment, clients' prices or other
confidential or secret aspect of the business of the Company and/or any
subsidiary or affiliate, except as may be required in good faith in the course
of his employment with the Company or by law, without the prior written consent
of the Company, unless such information will become public knowledge (other than
by reason of Mr. Blankley's breach of the provisions hereof).
10. Acceptance by Mr. Blankley. Mr. Blankley accepts all of the
terms and provisions of this Agreement and agrees to perform all of the
covenants on his part to be performed hereunder.
11. Equitable Remedies. Mr. Blankley acknowledges and agrees that
any breach of this Agreement is likely to result in irreparable injury to the
Company, that monetary damages will be an inadequate remedy of such breach and
that, accordingly, in addition to any other remedy that the Company may have,
the Company will be entitled to enforce the specific performance of this
Agreement and to seek both permanent and temporary injunctive relief in the
event of any breach hereof.
12. Entire Agreement. This Agreement constitutes the entire
Agreement between the parties hereto, and there are no other terms other than
those contained herein. No variation hereof will be deemed valid unless in
writing and signed by the parties hereto, and no discharge of the terms hereof
will be deemed valid unless by full performance of the parties hereto or by a
writing signed by the parties hereto. No
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waiver by the Company, or any breach by Mr. Blankley of any provision or
condition of this Agreement by him to be performed, will be deemed a waiver of a
breach of a similar or dissimilar provision or condition at the same time or any
prior or subsequent time.
13. Severability. In case any provision in this Agreement is
declared invalid, illegal or unenforceable by any court of competent
jurisdiction, the validity and enforceability of the remaining provisions will
not in any way be affected or impaired thereby.
14. Notices. All notices, requests, demands and other communications
provided for by this Agreement will be in writing and will be deemed to have
been given at the time when mailed in the United States enclosed in a registered
or certified post-paid envelope, return receipt requested, and addressed to the
addresses of the respective parties stated below or to such changed addresses as
such parties may fix by notice:
To the Company:
Mr. Frank S. Hermance
Chairman and Chief Executive Officer
AMETEK, Inc.
37 North Valley Road
Building 4
P.O. Box 1764
Paoli, PA 19301-0801
To Mr. Blankley:
Mr. Walter E. Blankley
13023 Valewood Drive
Naples, Florida 34119
provided, however, that any notice of change of address will be effective only
upon receipt.
15. Successors and Assigns. This Agreement is personal in its nature
and neither of the parties hereto will, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder (except for an
assignment or transfer by the Company to a successor as contemplated by the
following proviso); provided, however, that the provisions hereof will inure to
the benefit of, and be binding upon, any successor of the Company, whether by
merger, consolidation, transfer of all or substantially all of the assets of the
Company, or otherwise, and upon Mr. Blankley, his heirs, executors,
administrators and legal representatives.
16. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect
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to principles of conflict of laws. Mr. Blankley irrevocably submits to the
jurisdiction of, and agrees that any suit, action or other proceeding arising
out of this Agreement will be brought only in, the state and federal courts
located in Pennsylvania.
17. Headings. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunder set their
hands and seals the day and year first above written.
AMETEK, Inc.
By: /s/ Frank S. Hermance
Frank S. Hermance
Chairman of the Board &
Chief Executive Officer
/s/ Walter E. Blankley
Walter E. Blankley
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EXHIBIT 12
AMETEK, INC.
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
2000 1999 1998 1997 1996
-------- -------- -------- ------- -------
EARNINGS:
Income from continuing operations....... $ 68,532 $ 60,768 $ 50,449 $50,264 $43,072
Income tax expense...................... 37,606 33,693 26,909 27,930 23,310
Interest expense -- gross............... 29,460 25,396 24,121 18,499 19,660
Capitalized interest.................... (257) (620) (462) (318) (599)
Amortization of debt financing
costs(1)............................. -- -- -- -- 136
Interest portion of rental expense...... 2,713 2,307 2,249 1,944 1,844
-------- -------- -------- ------- -------
Adjusted earnings.................... $138,054 $121,544 $103,266 $98,319 $87,423
======== ======== ======== ======= =======
FIXED CHARGES:
Interest expense, net of capitalized
interest............................. $ 29,203 $ 24,776 $ 23,659 $18,181 $19,061
Capitalized interest.................... 257 620 462 318 599
Amortization of debt financing
costs(1)............................. -- -- -- -- 136
Interest portion of rental expense...... 2,713 2,307 2,249 1,944 1,844
-------- -------- -------- ------- -------
Fixed charges........................ $ 32,173 $ 27,703 $ 26,370 $20,443 $21,640
======== ======== ======== ======= =======
-------- -------- -------- ------- -------
RATIO OF ADJUSTED EARNINGS TO FIXED
CHARGES.............................. 4.3x 4.4x 3.9x 4.8x 4.0x
======== ======== ======== ======= =======
- ---------------
(1) Included in interest expense above after 1996.
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EXHIBIT 21
SUBSIDIARIES OF AMETEK, INC.
STATE OR OTHER JURISDICTION PERCENTAGE OF VOTING
NAME OF SUBSIDIARY AND NAME OF INCORPORATION OR SECURITIES OWNED BY ITS
UNDER WHICH IT DOES BUSINESS ORGANIZATION IMMEDIATE PARENT*
- ---------------------------- --------------------------- -----------------------
AMEKAI (BVI), Ltd................................... British Virgin Islands 50%
AMELON, Inc......................................... Delaware 100%
AMETEK (Bermuda), Ltd............................... Bermuda 100%
AMETEK (Canada), Ltd................................ Canada 100%
AMETEK (FSC), Inc................................... U.S. Virgin Islands 100%
AMETEK GmbH......................................... Germany 100%
AMETEK Precision Instruments Europe GmbH.......... Germany 100%
AMETEK IMTSA, S.A. de C.V........................... Mexico 100%
AMETEK Lamb Motores de Mexico, S.A. de C.V.......... Mexico 100%
AMETEK Mexicana, S.A................................ Mexico 100%
AMETEK Precision Instruments France, SARL........... France 100%
AMETEK Precision Instruments (UK) Ltd............... England 100%
EMA Corporation..................................... Delaware 100%
AMETEK Do Brasil Ltda............................. Brazil 100%
AMETEK Holdings B.V............................... Netherlands 100%
AMETEK Denmark A/S................................ Denmark 100%
AMETEK Elektomotory CR S.R.O................... Czech Republic 100%
AMETEK (Italia) S.r.l.......................... Italy 100%
AMETEK Singapore Private Ltd................... Singapore 100%
AMETEK Motors Hong Kong Ltd.................... Hong Kong 100%
Amekai Singapore Private Ltd................. Singapore 50%
Amekai Meter (Xiamen) Co., Ltd............ China 100%
AmeKai Taiwan Co., Ltd....................... Taiwan 50%
AMETEK Motors Asia Private Ltd............... Singapore 100%
AMETEK Motors (Shanghai) Co., Ltd......... China 100%
AMETEK Holdings (UK) Ltd....................... England 100%
Lloyd Instruments Ltd........................ England 100%
Lloyd Instruments S.A..................... France 100%
Neue Elektromotoren GmbH -- Schleusingen..... Germany 100%
WEBAK, B.V..................................... Netherlands 100%
John Chatillon & Sons, Inc.......................... New York 100%
Rotron Incorporated................................. New York 100%
NCC Holdings, Inc................................... Delaware 100%
AMETEK National Controls Corporation.............. Delaware 100%
Controls Holding Corporation........................ Delaware 100%
Patriot Sensors & Controls Corporation............ Delaware 100%
Nihon Drexelbrook Co., Ltd.......................... Japan 100%
Prestolite Asia Ltd................................. Korea 50%
- ---------------
* Exclusive of directors' qualifying shares and shares held by nominees as
required by the laws of the jurisdiction of incorporation.
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EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 Registration Nos. 333-34789, 333-80449, 333-87491 and 333-91507)
pertaining to the 1997 Stock Incentive Plan of AMETEK, Inc., the 1999 Stock
Incentive Plan of AMETEK, Inc., the AMETEK Retirement and Savings Plan and
AMETEK 401(k) Plan for Acquired Businesses, and to the AMETEK, Inc. Deferred
Compensation Plan, respectively, and in the related Prospectuses, of our report
dated January 22, 2001, with respect to the consolidated financial statements of
AMETEK, Inc. included in the Annual Report (Form 10-K) for the year ended
December 31, 2000.
/s/ ERNST & YOUNG LLP
Philadelphia, PA
March 14, 2001
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