<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 29, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 1-5075
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EG&G, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
MASSACHUSETTS 04-2052042
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
45 WILLIAM STREET, WELLESLEY, MASSACHUSETTS 02181
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code (617) 237-5100
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
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PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE, INC.
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Securities registered pursuant to Section 12 (g) of the Act: NONE
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
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 common stock, $1 par value, held by
nonaffiliates of the registrant on February 21, 1997, was $1,020,483,522.
As of February 21, 1997, there were outstanding, exclusive of treasury shares,
46,383,953 shares of common stock, $1 par value.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF EG&G, INC.'S PROXY STATEMENT FOR
THE 1997 ANNUAL MEETING OF STOCKHOLDERS...........PART III (Items 10, 11 and 12)
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL BUSINESS DESCRIPTION
EG&G, Inc. was incorporated under the laws of the Commonwealth of Massachusetts
in 1947. EG&G, Inc. (hereinafter referred to as "EG&G", the "Company", or the
"Registrant", which includes the Company's subsidiaries) is a diversified
technology company which provides optoelectronic, mechanical and
electromechanical components and instruments to manufacturers and end-user
customers. These customers exist in varied markets that include aerospace,
automotive, transportation, chemical, petrochemical, environmental, industrial,
medical, photography, security and other global arenas. The Company's services
also extend to technical and managerial support for governmental and industrial
customers. In 1996, the Company had sales of $1.4 billion from continuing
operations.
The Company's continuing operations are classified into four industry segments:
Instruments, Mechanical Components, Optoelectronics and Technical Services.
RECENT DEVELOPMENTS
During 1996, the Company purchased 1.6 million shares of its common stock under
a previously announced program at an aggregate cost of $30.8 million. As of
December 29, 1996, the Company had authorization to purchase 4.1 million
additional shares.
In July 1996, the Company announced that it had purchased a majority interest in
Xian Yong Hua Petrochemical Machinery, a China-based manufacturer of mechanical
seals with petrochemical, aerospace, utility, and general industrial
applications. The resulting joint venture will work with EG&G's Sealol
Industrial Division, which manufactures mechanical seals used by industry
worldwide.
In July 1996, the U.S. Marshals Service awarded EG&G Astrophysics a $6 million
contract to supply state-of-the-art explosives-detection systems for federal
courthouses.
In September 1996, EG&G was selected by the Greater Kelly Development
Corporation to assist in the preparation and implementation of a redevelopment
plan for the privatization and reuse of Kelly Air Force Base, in San Antonio,
Texas.
In November 1996, EG&G Astrophysics and InVision Technologies announced that
they had entered into a strategic alliance to develop and market a new, advanced
explosives detection system. The agreement is aimed at providing customers with
a fully integrated explosives detection system that is expected to be produced
and available for use in airports worldwide by the end of 1997.
In December 1996, EG&G Astrophysics, Lunar Corporation and the University of
Alabama's Birmingham Research Center Foundation reached a settlement relating to
litigation concerning dual-energy baggage security scanners.
In January 1997, Dr. Fred B. Parks announced that he had resigned as President
and Chief Operating Officer of EG&G.
In January 1997, EG&G Washington Analytical Services Center was awarded a $106.5
million, five-year support contract from the U.S. Navy to provide engineering
and technical services for the Navy's new attack submarine program.
In February 1997, EG&G Dynatrend was awarded a five-year contract to provide
nationwide asset management to the Internal Revenue Service. The contract has an
estimated value of $30.9 million.
INDUSTRY SEGMENTS
Set forth below is a brief summary of each of the Company's four industry
segments together with a description of certain of the more significant or
recently introduced products, services or operations.
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INSTRUMENTS
The Company develops and manufactures instruments and systems for applications
in medical and clinical diagnostics; biochemical, medical and life science
research; industrial and pharmaceutical process measurement; environmental
monitoring; airport and industrial security; and food inspection. The Company's
instruments provide a wide range of measurement capabilities and options through
the use of high-speed signal processing, image enhancement and a broad
utilization of detector technologies, including products which feature the
accurate generation, detection and measurement of various segments of the
electromagnetic spectrum. The Company offers products in this segment under
trade names which include Astrophysics, Flow Technology, Berthold, Ortec and
Wallac. In 1996, this segment represented 23% of the Company's total sales from
continuing operations and 32% of the Company's operating income from continuing
operations before general corporate expenses.
High-performance bioanalytic and diagnostic instruments manufactured by the
Company are used in hospitals, clinics and pharmaceutical and medical research
facilities. These instruments employ time-resolved fluorescence and
chemiluminescence technologies, as well as radioisotopes, to analyze samples.
The advantage of fluorescence and luminescense is that they do not involve the
use of radioactive material, so that concerns about sample transport and waste
disposal are minimized. Among other things, these instruments are used to screen
blood for thyroid dysfunction, fertility-related disorders, fetal defects and
diseases in newborns, and to detect relapse in patients who have been treated
for cancer. The Company manufactures AutoDelfia(R), an automated immunoassay
fluorescence diagnostic system. The Company also sells reagents for use in
connection with certain of these instruments.
Through its Instruments segment, the Company also produces security screening
systems that employ X-ray technology in conjunction with image-enhancing
techniques for non-intrusive inspection of baggage and packages at airport
portals, baggage processing areas, mail rooms, courthouses, schools and
buildings. The Company has introduced two new security screening products: the
Z-Scan(TM) and a portable, large-cargo X-ray screening system. The Z-Scan, which
can process up to 1,800 bags per hour, uses color images, X-rays and proprietary
software to detect explosives, narcotics or contraband in packages and luggage.
The United Kingdom's Department of Transportation has certified the Z-Scan for
detection of drugs and contraband in checked cargo. The large-cargo X-ray
screening system allows non-intrusive inspection of boxes, crates and
containers. It supports the search for contraband, weapons and explosives at
border crossings, ports of entry, warehouses and airports.
Instruments produced by the Company also include process inspection systems that
combine X-ray technology from the Company's Instruments segment and optical
components from the Company's Optoelectronics segment. These systems are used in
food processing and packaging plants to monitor, detect and remove foreign
objects from raw and processed food at various stages of production. Such
systems are also used to check intravenous-medicine bags and automobile oil
filters for leaks, to measure the fat content of meat and to detect and separate
non-biodegradable PVCs from recyclable plastics.
Based on its expertise in nuclear measurements, the Company produces instruments
to detect, characterize and measure radiation, including a complete line of
radiation-protection measuring systems for laboratories, nuclear facilities and
environmental monitoring stations. The Company also offers industrial on-line
level and density measuring instruments for process control and measurement of
liquids, slurries or solids in containers, tanks and pipes.
MECHANICAL COMPONENTS
Through its Mechanical Components segment, the Company produces advanced seals
and bellows products, valves, nozzles, metal ducting, precision aerospace
components, motors and heat management devices for the petrochemical and
chemical processing, transportation, defense and aerospace markets. The Company
offers these products under trade names which include Pressure Science, Rotron
and Sealol. In 1996, this segment represented 19% of the Company's total sales
from continuing operations and 26% of the Company's operating income from
continuing operations before general corporate expenses.
Products sold in this segment include blower systems, power-conversion devices
and other components for locomotives, transit cars and buses and defense product
applications. Many of these products were first developed by the Company for
defense-related purposes and are now marketed and sold for commercial
applications.
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The Company also produces mechanical sealing components and systems, which use
welded metal bellows devices pioneered by the Company for the process
industries. Such industries include pharmaceuticals, food processing, oil
refining and chemical and petrochemical processing. The Company expects that the
market for the Company's advanced zero-leakage gas seals will grow as a result
of environmental legislation, which requires manufacturers to significantly
reduce emissions.
For aerospace applications, the Company produces valves, advanced sealing
components, aircraft exhaust components and ducting.
OPTOELECTRONICS
Through its Optoelectronics segment, the Company offers a broad variety of
components that emit and detect light in the spectrum from ultraviolet through
visible to the far infrared. These components range from simple photocells to
sophisticated imaging systems, light sources that include various types of
flashtubes and laser diodes, and complex devices for weapons' trigger systems.
Applications include light sensors used in automotive and commercial
electronics, sensors used in smoke detectors and medical imaging systems, and
sophisticated arrays for communications and remote sensing of the earth. The
Company expects to make significant research and development and capital
expenditures in this segment over the next several years. This segment offers
products under trade names which include Electro-Optics, Heimann
Optoelectronics, IC Sensors, Reticon, Judson and Vactec. In 1996, this segment
represented 19% of the Company's total sales from continuing operations and 11%
of the Company's operating income from continuing operations before general
corporate expenses.
Products manufactured by this segment also include detectors of visible and
non-visible light, including high-performance silicon photodiodes that detect
and measure light and other optical radiation for industrial, space, military,
analytical and scientific instrumentation. Light detectors are also manufactured
by the Company for a variety of commercial applications. The Company also makes
a wide variety of flashlamps for use in photocopy and reprographic equipment,
photo-typesetting systems, beacons, indicators and laser systems and
accessories. In addition, the Company manufactures power supplies for military
high-frequency electronic applications that are used primarily for precision
controlled switching of electric current in electronic equipment.
The Company is developing amorphous silicon imaging systems for medical and
industrial applications. These X-ray systems incorporate amorphous silicon,
which replaces film in X-ray systems and translates the rays directly into
digital pulses that then immediately produce the image on a cathode ray tube.
Through this segment, the Company also produces micromachined sensors, which are
small silicon-wafer-based devices that combine a sensing function with
intelligent signal processing. The Company mass produces these micromachined
infrared sensors for consumer, medical and automotive applications and
manufactures high-performance micromachined silicon sensors for missile-guidance
systems. In a joint venture, the Company is developing more advanced
micromachined electronic accelerometers for automotive and industrial
applications.
TECHNICAL SERVICES
Through its Technical Services segment, the Company supplies engineering,
scientific, environmental, management and technical support services to a broad
range of governmental and industrial customers. These services include: analysis
and testing services for the automotive industry; base operations for the
National Aeronautics and Space Administration ("NASA") at the Kennedy Space
Center ("KSC"); chemical weapons disposal and technical and support services for
the U.S. Department of Defense ("DoD"); seized-property administration for the
U.S. Customs Service; technical support in a joint venture for the National
Science Foundation in Antarctica; consulting services in transportation;
physical security services for government agencies; and services and products
for the environmental market. The Company offers services in this segment under
trade names which include Automotive Research, Dynatrend, Structural Kinematics
and Washington Analytical Services Center. In 1996, this segment represented 39%
of the Company's total sales from continuing operations and 31% of the Company's
operating income from continuing operations before general corporate expenses.
For the automobile, chemical additive and petroleum industries, the Company
provides automobile durability, performance and emissions testing, and tests
fuels, lubricants and chemical additives. The Company performs automobile
durability and performance testing for all major U.S. and a number of foreign
automobile manufacturers.
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As base operations contractor for the KSC, the Company provides institutional,
technical and maintenance support services. In particular, the Company manages
KSC's 600 buildings, structures and facilities; tests new astronaut rescue
procedures and escape systems; fields a force of 200 uniformed security
personnel and a SWAT team; provides fire protection and medical services;
handles all propellant substances; and manages the shuttle landing facility. The
Company has been the base operations contractor at KSC since 1983 and is
currently in the fourth year of a four-year contract that has three two-year
renewal options at the discretion of the government. In 1996, NASA designated
United Space Associates as the single Space Flight Operations contractor. While
it is possible that the Company's contract could be absorbed by the single Space
Flight Operations contract, the Company believes that its contract will be
renewed by NASA and changed to a performance-based contract.
Company contracts with the DoD fall into two general categories: (i) traditional
defense activities, and (ii) decommissioning. The Company's traditional defense
activities focus on such strategic areas as research and engineering analyses in
support of DoD advanced development programs. An example of a decommissioning
project is the operation of the U.S. Army's facility for the disposal of lethal
chemical agents and munitions in Tooele, Utah.
The Company was recently awarded a contract from the Greater Kelly Development
Corporation to assist in the preparation and implementation of a redevelopment
plan for Kelly Air Force Base in San Antonio, Texas. The contract consists of a
one-year planning phase and three three-year renewal options at the discretion
of the customer for implementation activities.
The Company also provides engineering and management services in a variety of
fields, including transportation, physical security and property management for
several government agencies. Government clients include the U.S. Departments of
Transportation, State and Treasury, the U.S. Customs Service and the
Environmental Protection Agency.
In the environmental area, the Company is developing a range of proprietary
technologies with a view toward expanding its presence in the public and
private sector waste minimization and remediation markets.
DISCONTINUED OPERATIONS
Since its founding, the Company has provided services to the U.S. Department of
Energy ("DOE") and its predecessor organizations. These services related
primarily to nuclear energy research and nuclear weapons production and testing.
As a result of changing procurement and administrative priorities at the DOE, to
continue to provide these services the Company would have been required to
invest significant levels of capital and accept broader liabilities and lower
fees. In 1994, the Company determined that it would not seek renewal of its four
contracts with the DOE and would not seek management and operations contracts at
other DOE sites. Accordingly, the Company is reporting its former DOE Support
segment as discontinued operations. Future sales and income from discontinued
operations will decrease as the remaining DOE contract expires in 1997 and are
dependent upon the negotiated work scope and fee pools. Three of these DOE
contracts expired in 1995. The Rocky Flats contract for the management and
operation of the Rocky Flats Environmental Technology Center near Golden,
Colorado terminated in June 1995. The Reynolds Electrical and Engineering Co.
contract for support and maintenance services for the underground nuclear
weapons test program and its design laboratories at the Nevada Test Site expired
on December 31, 1995. The Energy Measurements contract to provide scientific and
engineering services also relating to the Nevada Test Site expired on December
31, 1995.
The remaining DOE contract, for Mound Applied Technologies at DOE's Miamisburg,
Ohio facility, was scheduled to expire on September 30, 1996. Under this
contract, the Company provides all support services at the facility and is
responsible for the assembly and testing of radioisotopic thermionic generators
for space and special terrestrial power missions. The contract has been extended
by the DOE to June 30, 1997 under existing terms and conditions and could be
extended under three one-month options through September 30, 1997. The Company
also is responsible for the transfer to other DOE facilities of technology
relating to the Mound facility's former mission involving the manufacturing of
components for nuclear weapons.
MARKETING
The Company markets its services and products through its own specialized sales
forces as well as independent foreign and domestic manufacturer representatives
and distributors. In certain foreign countries, the Company has entered into
joint venture and license agreements with local firms to manufacture and market
its products.
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RAW MATERIALS AND SUPPLIES
Raw materials and supplies used by the Company are generally readily available
in adequate quantities from domestic and foreign sources.
PATENTS AND TRADEMARKS
While the Company's patents, trademarks and licenses in the aggregate are
important to its business, the Company does not believe that the loss of any one
patent, trademark or license or group of related patents, trademarks or
licenses would have a materially adverse effect on the overall business of the
Company or on any of its industry segments.
BACKLOG
The approximate dollar value of unfilled orders of continuing operations by
industry segment as of December 29, 1996 and December 31, 1995 is set forth in
the table below.
(In Thousands) December 29, 1996 December 31, 1995
----------------- -----------------
Instruments $ 45,883 $ 50,776
Mechanical Components 105,762 95,466
Optoelectronics 112,759 125,630
Technical Services 285,170 224,087
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Continuing Operations $549,574 $495,959
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At December 29, 1996, 50% of the backlog represents orders received from U.S.
government agencies, primarily the DoD and NASA. The Company estimates that over
95% of its backlog as of December 29, 1996 will be billed during 1997.
The order backlog for each segment relates differently to future sales based on
different business characteristics, primarily order and delivery lead times and
customer demand requirements. As customer order cycles continue to shorten,
reducing required lead times, many of the Company's businesses operate with
reducing backlogs. While the Company has not generally experienced material
cancellations of orders, orders may be cancelled by customers without financial
penalty, and backlog does not necessarily represent actual future shipments.
Backlog of the former DOE Support segment, which is reported as discontinued
operations and is not reflected above, represents appropriated annual contract
funding and was $53 million at December 29, 1996 and $126 million at December
31, 1995.
GOVERNMENT CONTRACTS
In accordance with government regulations, all of the Company's government
contracts are subject to termination for the convenience of the government.
Costs incurred under cost-reimbursable contracts are subject to audit by the
government. The results of prior audits, which have been completed through 1991,
have not had a material effect on the Company.
CONTINUING OPERATIONS: Sales to U.S. government agencies, which were
predominantly to the DoD and NASA, were $527 million, $537 million and $542
million in 1996, 1995 and 1994, respectively. In October 1993, the Company was
selected by NASA to continue as the base operations contractor at the KSC. The
award/incentive fee contract contributed sales of $172 million in 1996 and 1995
and $176 million in 1994. The contract expires on October 31, 1997 and has three
two-year renewal options at the discretion of the government.
DISCONTINUED OPERATIONS: The EG&G Rocky Flats, Inc. contract terminated in June
1995. The Reynolds Electrical and Engineering Co., Inc. and the EG&G Energy
Measurements, Inc. contracts expired on December 31, 1995. The EG&G Mound
Applied Technologies, Inc. contract, the Company's remaining DOE management and
operations contract, has
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been extended by the DOE to June 30, 1997 under existing terms and conditions
and could be extended for up to an additional three months. Sales and income
from the Mound contract are dependent upon the negotiated work scope and fee
pools. The Mound cost-plus-award-fee contract contributed $141 million of sales
to discontinued operations in 1996. The Company does not anticipate incurring
any material loss on the ultimate completion of the contract.
COMPETITION
Because of the wide range of its products and services, the Company faces many
different types of competition and competitors. Competitors range from large
foreign and domestic organizations that produce a comprehensive array of goods
and services, to small concerns producing a few goods or services for
specialized market segments.
In the Instruments segment, the Company competes with instrument companies, some
large, most small, that serve narrow segments of markets in X-ray and magnetic
security systems, nuclear, industrial, and diagnostic instrumentation, and
instrumentation for exploration and development of oil and gas resources. The
Company competes in these markets on the basis of product performance, product
reliability, service and price. Consolidation of competitors through
acquisitions and mergers and the Company's increasing activity in selected
diagnostics and industrial markets are expected to increase the proportion of
large competitors in this segment.
In the Mechanical Components segment, the Company is a leading supplier of
selected precision aircraft exhaust components, specialized fans and heat
transfer devices, and mechanical seals for industrial applications. Competition
in these areas typically is from small specialized manufacturing companies.
In the Optoelectronics segment, the Company is among the leading suppliers of
specialty flashtubes, silicon photodetectors, avalanche photodiodes, cadmium
sulfide and cadmium selenide detectors, photodiode arrays and switched power
supplies. Typically, competition is from small specialized manufacturing
companies.
The Technical Services segment provides technical services to several agencies
of the federal government, including the DoD and NASA. This business is
typically won through competition with a number of large and small contractors,
many of which are as large or larger than the Company and which, therefore, have
resources and capabilities that are comparable to or greater than those of the
Company. The primary bases for competition in these markets are technical and
management capabilities, current and past performance, and price. Competition is
typically subject to mandated procurement and competitive bidding requirements.
Competition for automotive testing services is primarily from a few specialized
testing companies and from customer-owned testing facilities, and is primarily
based on quality, service, and price.
Within the Mechanical Components, Optoelectronics and Instruments segments,
competition for governmental purchases is subject to mandated procurement
procedures and competitive bidding practices. In these segments, the Company
competes on the basis of product performance, quality, service and price. In
much of the Optoelectronics and Instruments segments and in the specialized fan
and aircraft and marine mechanical seal markets included in the Mechanical
Components segment, advancing technology and research and development are also
important competitive factors.
RESEARCH AND DEVELOPMENT
During 1996, 1995 and 1994, Company-sponsored research and development
expenditures were approximately $42.8 million, $42.4 million and $38.6 million,
respectively.
ENVIRONMENTAL COMPLIANCE
The Company is conducting a number of environmental investigations and remedial
actions at current and former Company locations and, along with other companies,
has been named a potentially responsible party for certain waste disposal sites.
The Company accrues for environmental issues in the accounting period that the
Company's responsibility is established and when the cost can be reasonably
estimated. As of December 29, 1996, the Company had an accrual of $3.2 million
to reflect its estimated liability for environmental remediation. As assessments
and remediation activities progress at each individual site, these liabilities
are reviewed and adjusted to reflect additional information as it becomes
available. There have been no environmental problems to date that have had or
are expected to have a material effect on the Company's financial position or
results of operations. While it is reasonably possible
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that a material loss exceeding the amounts recorded may have been incurred, the
preliminary stages of the investigations make it impossible for the Company to
reasonably estimate the range of potential exposure.
EMPLOYEES
As of March 1, 1997, the Company employed approximately 15,000 persons,
including 1,000 persons in the former DOE Support segment. Certain of the
Company's subsidiaries are parties to contracts with labor unions. The Company
considers its relations with employees to be satisfactory.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Sales and Operating Income (Loss) From Continuing Operations by Industry Segment
For the Five Years Ended December 29, 1996
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(In thousands) 1996 1995 1994 1993 1992
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INSTRUMENTS
Sales $ 321,704 $ 293,575 $ 273,088 $ 237,223 $ 226,900
Operating Income (Loss) 36,400 17,142 (49,580) 10,143 16,016
MECHANICAL COMPONENTS
Sales $ 276,389 $ 249,255 $ 232,500 $ 244,878 $ 274,199
Operating Income 29,203 27,241 18,766 24,408 21,835
OPTOELECTRONICS
Sales $ 269,530 $ 259,357 $ 213,380 $ 201,274 $ 210,118
Operating Income 12,249 19,328 8,674 11,474 3,905
TECHNICAL SERVICES
Sales $ 559,629 $ 617,391 $ 613,588 $ 636,041 $ 608,864
Operating Income 34,169 48,155 46,075 68,762 56,924
GENERAL CORPORATE EXPENSES $ (24,391) $ (29,193) $ (34,882) $ (27,573) $ (29,895)
CONTINUING OPERATIONS
Sales $1,427,252 $1,419,578 $1,332,556 $1,319,416 $1,320,081
Operating Income (Loss) 87,630 82,673 (10,947) 87,484 68,785
</TABLE>
The operating income (loss) from continuing operations for 1994 included a
goodwill write-down of $40.3 million and restructuring charges of $30.4 million.
The impact of these nonrecurring charges on each segment was as follows:
Instruments - $55.7 million, Mechanical Components - $2.7 million,
Optoelectronics - $9.7 million, Technical Services - $1.6 million and General
Corporate Expenses - $1 million.
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Additional information relating to the Company's operations in the various
industry segments is as follows:
<TABLE>
<CAPTION>
Depreciation and Capital
(In thousands) Amortization Expense Expenditures
------------------------------------ --------------------------------------
1996 1995 1994 1996 1995 1994
------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Instruments $10,976 $11,887 $11,621 $ 4,550 $ 4,639 $ 5,398
Mechanical Components 5,729 5,585 6,091 10,367 6,978 6,197
Optoelectronics 14,880 13,220 10,690 47,327 35,925 17,748
Technical Services 8,193 7,698 7,447 16,714 12,047 7,314
Corporate 1,158 1,036 941 1,532 2,250 620
------- ------- ------- -------- ------- -------
$40,936 $39,426 $36,790 $ 80,490 $61,839 $37,277
======= ======= ======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
(In thousands) Identifiable Assets
--------------------------------------
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Instruments $221,831 $225,358 $220,232
Mechanical Components 110,276 100,363 93,721
Optoelectronics 235,969 200,719 193,302
Technical Services 117,340 113,901 129,995
Corporate and Other 137,484 163,574 155,879
-------- -------- --------
$822,900 $803,915 $793,129
======== ======== ========
</TABLE>
Corporate assets consist primarily of cash and cash equivalents, prepaid pension
and taxes, and investments.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
Information relating to geographic areas is as follows:
<TABLE>
<CAPTION>
Operating Income (Loss)
(In thousands) Sales From Continuing Operations
---------------------------------------- ----------------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
U.S. $1,066,561 $1,065,424 $1,026,970 $ 68,108 $ 82,256 $ 57,679
Germany 80,465 87,690 61,310 5,154 4,508 (43,492)
Other Non-U.S. 280,226 266,464 244,276 38,759 25,102 9,748
Corporate - - - (24,391) (29,193) (34,882)
---------- ---------- ---------- -------- -------- --------
$1,427,252 $1,419,578 $1,332,556 $ 87,630 $ 82,673 $(10,947)
========== ========== ========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
(In thousands) Identifiable Assets
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
U.S. $380,080 $353,130 $341,725
Germany 86,881 89,834 100,650
Other Non-U.S. 218,455 197,377 194,875
Corporate
and Other 137,484 163,574 155,879
-------- -------- --------
$822,900 $803,915 $793,129
======== ======== ========
</TABLE>
Transfers between geographic areas were not material.
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ITEM 2. PROPERTIES
As of March 1, 1997, the Company occupied approximately 4,093,500 square feet of
building area, of which approximately 1,611,800 square feet is owned. The
balance is leased. The Company's headquarters occupies 53,350 square feet of
leased space in Wellesley, Massachusetts. The Company's other operations are
conducted in manufacturing and assembly plants, research laboratories,
administrative offices and other facilities located in 26 states, Washington,
D.C., Puerto Rico, the U.S. Virgin Islands and 25 foreign countries.
Non-U.S. facilities account for approximately 1,154,300 square feet of owned and
leased property, or approximately 28% of the Company's total occupied space.
The Company's leases on property are both short-term and long-term. In
management's opinion, the Company's properties are well-maintained and are
adequate for its present requirements.
Except for operations based on government facilities, substantially all of the
machinery and equipment used by the Company in its other activities is owned by
the Company and the balance is leased or furnished by contractors or customers.
The following table indicates the approximate square footage of real property
owned and leased attributable to each of the Company's industry segments.
<TABLE>
<CAPTION>
Owned Leased Total
(Sq. Feet) (Sq. Feet) (Sq. Feet)
---------- --------- ---------
<S> <C> <C> <C>
Instruments 551,100 409,500 960,600
Mechanical Components 556,700 502,600 1,059,300
Optoelectronics 336,000 489,200 825,200
Technical Services 163,400 1,020,200 1,183,600
Corporate Offices 4,600 60,200 64,800
--------- --------- ---------
Continuing Operations 1,611,800 2,481,700 4,093,500
========= ========= =========
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various investigations, claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities. Each of these matters is subject to various uncertainties,
and it is possible that some of these matters may be resolved unfavorably to the
Company. The Company has established accruals for matters that are probable and
reasonably estimable. Management believes that any liability that may ultimately
result from the resolution of these matters in excess of amounts provided will
not have a material adverse effect on the financial position or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-9-
<PAGE> 11
EXECUTIVE OFFICERS
Listed below are the executive officers of the Company as of March 24, 1997. No
family relationship exists between any of the officers.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Name Position Age
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John M. Kucharski Chairman of the Board, President 61
and Chief Executive Officer
John F. Alexander, II Senior Vice President 40
and Chief Financial Officer
Murray Gross Senior Vice President, 60
General Counsel and Clerk
Angelo D. Castellana Vice President 55
Dale L. Fraser Vice President 61
Anthony L. Klemmer Vice President 41
E. Lavonne Lewis Vice President 60
Deborah S. Lorenz Vice President 47
Donald H. Peters Vice President 56
Luciano S. Rossi Vice President 51
Theodore P. Theodores Vice President 61
C. Michael Williams Vice President 60
Daniel T. Heaney Treasurer 43
William J. Ribaudo Corporate Controller 37
</TABLE>
-10-
<PAGE> 12
Mr. Kucharski joined the Company in 1972. He was elected a Vice President in
1979, a Senior Vice President in 1982 and Executive Vice President in 1985. In
1986 he was elected President and Chief Operating Officer, in 1987 Chief
Executive Officer and was elected Chairman of the Board of Directors in 1988. He
was again elected President in 1997.
Mr. Gross joined the Company in 1971. He was elected Assistant General Counsel
and Assistant Clerk in 1978, Vice President, General Counsel and Clerk in 1990,
and Senior Vice President in 1996.
Mr. Alexander joined the Company in 1982. He was elected Corporate Controller in
1991, a title he retained when named a Vice President in 1995. He was elected
Chief Financial Officer and Senior Vice President in 1996.
Mr. Castellana joined the Company in 1965. He was elected a Vice President in
1991 and serves as a principal executive in the office of the Chief Operating
Officer.
Mr. Fraser joined the Company in 1961. After holding a number of increasingly
responsible positions, he was appointed General Manager of EG&G Reynolds
Electrical & Engineering Co., Inc. in 1986. He was elected a Vice President of
the Company in 1990.
Mr. Klemmer joined the Company in 1996 as Vice President of Corporate Marketing.
From 1989 to 1996 Mr. Klemmer was General Partner of Quaestus & Company, a
strategic planning and marketing consulting firm.
Ms. Lewis joined the Company in 1970. She managed the Human Resources Department
of EG&G Reynolds Electrical & Engineering Co., Inc. from 1984 until 1995 when
she was elected Vice President of EG&G. Ms. Lewis is responsible for Human
Resources.
Ms. Lorenz joined the Company in 1990. She was elected a Vice President in 1992
and is responsible for Investor Relations and Corporate Communications.
Dr. Peters joined the Company in 1968. He was elected a Vice President in 1987
and is responsible for Planning.
Mr. Rossi joined the Company in 1967. He was elected a Vice President in 1988
and serves as a principal executive in the office of the Chief Operating
Officer.
Mr. Theodores joined the Company in 1986. He was Director of Corporate New
Business Development from 1992 until being elected a Vice President of Mergers
and Acquisitions in 1996.
Mr. Williams joined the Company in 1972. He was elected a Vice President in 1984
and serves as a principal executive in the office of the Chief Operating
Officer.
Mr. Heaney joined the Company in 1980, serving as Manager of Financial Analysis,
Controller of the Technical Services segment from 1989 to 1994 and Director of
Economic Value Added Implementation in 1994-5. He was elected Treasurer in 1995.
Mr. Ribaudo joined the Company in 1996 as Corporate Controller. He had been
associated with Arthur Andersen LLP since 1982, and was elected a partner of
that firm in 1994.
-11-
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE OF COMMON STOCK
1995 Quarters
-------------
First Second Third Fourth
------ ------ ------ ------
High $15.50 $18.38 $20.00 $24.50
Low 13.00 15.00 16.38 18.00
1996 Quarters
-------------
First Second Third Fourth
------ ------ ------ ------
High $25.13 $23.50 $21.38 $21.13
Low 20.38 19.88 16.88 16.25
DIVIDENDS
1995 Quarters
-------------
First Second Third Fourth
----- ------ ----- ------
Cash Dividends
Per Common Share $ .14 $ .14 $ .14 $ .14
1996 Quarters
-------------
First Second Third Fourth
----- ------ ----- ------
Cash Dividends
Per Common Share $ .14 $ .14 $ .14 $ .14
The Company's common stock is listed and traded on the New York Stock Exchange.
The number of holders of record of the Company's common stock as of February 21,
1997, was approximately 11,330.
In October 1996, the Board of Directors of the Company declared a regular
quarterly cash dividend of fourteen cents per share of common stock. The
quarterly cash dividend was paid on February 10, 1997, to stockholders of record
at the close of business on January 17, 1997.
-12-
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
For the Five Years Ended December 29, 1996
(In thousands
where applicable)
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Sales $1,427,252 $1,419,578 $1,332,556 $1,319,416 $1,320,081
Operating income (loss) from
continuing operations 87,630 82,673 (10,947)a 87,484 68,785
Income (loss) from
continuing operations 54,480 54,304 (32,107) 54,622 48,765
Income from discontinued operations,
net of income taxes 5,676 13,736 26,452 24,949 39,014
Income (loss) before cumulative effect
of accounting changes 60,156 68,040 (5,655) 79,571 87,779
Net income (loss) 60,156 68,040 (5,655) 59,071c 87,779
Earnings (loss) per share:
Continuing operations 1.15 1.05 (.58) .97 .87
Discontinued operations .12 .27 .48 .44 .69
Income (loss) before cumulative effect
of accounting changes 1.27 1.32 (.10) 1.41 1.56
Net income (loss) 1.27 1.32 (.10) 1.05c 1.56
Return on equity 16.4% 16.8% (1.2)%b 12.4%d 19.6%
Weighted average common
shares outstanding 47,298 51,483 55,271 56,504 56,385
FINANCIAL POSITION:
Working capital $ 194,915 $ 218,235 $ 199,656 $ 227,935 $ 247,518
Current ratio 1.75:1 1.87:1 1.71:1 1.98:1 2.07:1
Total assets 822,900 803,915 793,129 764,887 746,577
Short-term debt 21,499 5,275 59,988 43,589 40,267
Long-term debt 115,104 115,222 812 1,450 1,956
Long-term liabilities 82,894 71,296 65,129 52,727 38,871
Stockholders' equity 365,106 366,946 445,366 477,534 473,636
- Per share 7.88 7.71 8.08 8.51 8.34
Total debt/total capital 27% 25% 12% 9% 8%
Common shares outstanding 46,309 47,610 55,124 56,131 56,812
OTHER DATA:
Cash flows from continuing
operations $ 73,238 $ 123,831 $ 70,341 $ 76,217 $ 94,554
Cash flows from discontinued
operations 6,920 26,334 25,542 35,920 33,253
Cash flows from operating
activities 80,158 150,165 95,883 112,137 127,807
Capital expenditures 80,490 61,839 37,277 27,860 22,446
Depreciation and amortization 40,936 39,426 36,790 37,842 36,292
Cash dividends per common share .56 .56 .56 .52 .49
</TABLE>
a) Included a goodwill write-down of $40.3 million and restructuring charges
of $30.4 million.
b) Return on equity before effect of nonrecurring items described in a) was
11.8%.
c) Included one-time after-tax charges of $20.5 million, or $.36 per share,
due to adoption of SFAS Nos. 106 and 109.
d) Return on equity before cumulative effect of accounting changes was 16.4%.
-13-
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
In 1994, the Company initiated a series of significant actions to reposition its
businesses for future success. These initiatives included withdrawal from the
Department of Energy (DOE) Support business, restructuring the cost model of
continuing operations, improved utilization of working capital, liquidation of
nonstrategic investments and assets, replacing a portion of equity capital with
long-term debt, adoption of Economic Value Added (EVA) as the basis of
measurement and incentive compensation systems and increased investment in
internal development programs. Substantial progress was made in each of these
areas in 1995 and 1996 and is detailed later in this report. The repositioning
continued in 1996 with a realignment of the operating organization to continue
to position the Company for sustained long-term growth. The overall goal of the
effort is to provide greater focus on the end-use customer by consolidating
divisions around common technology, manufacturing processes and markets. As part
of this program, a new corporate office was established to which all division
managers report directly, resulting in the elimination of a management layer.
These programs have resulted in improved financial results since 1994, which are
expected to continue in the future.
1996 COMPARED TO 1995
Sales from continuing operations increased 1% in 1996 compared to 1995,
reflecting a growth in product sales of 8% and a decrease in Technical Services'
sales. Operating income from continuing operations increased 6% in 1996 compared
to 1995. The improvement reflected the impact of higher sales in the Instruments
and Mechanical Components segments and lower costs resulting from the Company's
1994 restructuring plan. Partially offsetting these increases in operating
income were decreases in Optoelectronics caused by significant operational
problems resulting in a loss in the micromachined sensors business and decreases
in Technical Services caused by lower automotive testing services and the
completion of two contracts in 1995. Cost savings under the 1994 restructuring
plan totaled $26 million in 1996, which represents an $11 million increase over
the savings achieved in 1995. Capital expenditures increased 30% in 1996 to $80
million, and outlays for research and development were $43 million. The
Company's program to reduce working capital and to dispose of nonstrategic
assets continued in 1996 with cumulative reductions of over $85 million since
its inception in 1994. Key measures of effectiveness of working capital
management, Days Sales Outstanding and Inventory Turns, improved by 2% and 9%,
respectively, in 1996.
1995 COMPARED TO 1994
Sales from continuing operations increased by $87 million in 1995 to $1.4
billion, and operating income before nonrecurring charges increased by 38% over
1994. Key measures of effectiveness of working capital management, Days Sales
Outstanding and Inventory Turns, improved by 10% and 15%, respectively, in 1995.
Research and development and capital expenditures increased by 10% and 66%,
respectively.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Except for the historical information contained herein, the matters discussed in
this Annual Report are forward-looking statements that involve risks and
uncertainties. Future trends in revenues and operating income will be dependent
both on external factors and on the success of the various programs described in
this report. In Technical Services, future performance will continue to be
impacted by a highly competitive procurement environment, continuing changes in
federal budget priorities and rapidly changing customer requirements. The NASA
contract expires on October 31, 1997 and has three 2-year renewal options at the
discretion of the government. While it is possible that the Company's contract
could be absorbed by the single Space Flight Operations contract, the
-14-
<PAGE> 16
Company believes that its contract will be renewed by NASA. Future performance
in our three product segments will be highly dependent on the technological
success and market acceptance of new program initiatives, including the
amorphous silicon project and the micromachined sensors business. The
Optoelectronics results are also dependent on management's ability to bring the
micromachined sensors business to break-even operations in 1997. Continued
success in improving operational efficiency will be required to offset
increasing price pressure in most of the Company's product offerings. As
customer order cycles continue to shorten, reducing required lead times, many of
our businesses operate with reducing backlogs. As the Company's operations
continue to expand globally, movements in foreign exchange rates could affect
operating results. Effective tax rates in the future could be affected by
changes in the geographical distribution of income, utilization of net operating
loss carryforwards and repatriation costs.
RESULTS OF OPERATIONS
The discussion that follows is a summary analysis of the major changes by
industry segment.
INSTRUMENTS
1996 COMPARED TO 1995
The $28.1 million sales increase resulted mainly from higher demand for
explosives detection systems, primarily from U.S. government facilities, and for
diagnostic and medical research products. These increases were partially offset
by decreases totaling $12 million, which resulted from the effect of changes in
foreign exchange rates and the divestiture of two product lines in 1995.
Operating income was 11.3% of sales in 1996 compared to 5.8% in 1995. Operating
income increased $19.3 million, primarily from improved margins on higher sales.
Also contributing, to a lesser extent, were manufacturing and engineering
process improvements, lower costs resulting from the restructuring plan, lower
inventory provisions due to improved inventory management, the favorable impact
of changes in foreign exchange rates, income from the expiration of a grant
liability and a 1995 provision for additional cost reductions. A $4.2 million
provision for a 1996 patent infringement settlement and increased management
incentive accruals partially offset these increases. As part of the settlement,
the Company entered into a royalty agreement covering future sales.
1995 COMPARED TO 1994
The $20.4 million sales increase resulted primarily from higher demand for
diagnostic and security products and the effect of changes in foreign exchange
rates, partially offset by an $11 million decrease due to the divestiture of
three product lines under the restructuring plan. The increase in operating
income of $11.1 million, excluding the 1994 nonrecurring charges of $55.7
million, resulted from cost reductions of $6.9 million from the 1994
restructuring plan, margin on higher sales and the 1994 expense related to the
close-down of a research and development project. The increases were partially
offset by the unfavorable impact on export shipment margins caused by the
strengthening of the Finnish markka against other major currencies, the expenses
associated with the expansion of the food-monitoring business and a provision
for additional cost reductions.
MECHANICAL COMPONENTS
1996 COMPARED TO 1995
Higher demand for aerospace, electromechanical and industrial process sealing
products resulted in 11% sales growth. The 7% increase in operating income
resulted from the margin on higher sales and lower costs from the restructuring
plan, partially offset by provisions for projected excess contract costs and
warranty repairs.
-15-
<PAGE> 17
1995 COMPARED TO 1994
The $16.8 million sales increase was due to improving market conditions,
primarily for industrial process sealing and aerospace products. The $5.8
million increase in operating income, excluding the 1994 restructuring charges
of $2.7 million, resulted primarily from margin on higher sales and $1.5 million
of cost reductions. The 1994 results included a provision for environmental
remediation costs of $1.3 million and increased start-up costs for the
transportation element of the electromechanical business.
OPTOELECTRONICS
1996 COMPARED TO 1995
Sales of new imaging products and higher demand for detectors and accelerometers
for the automotive market, partially offset by decreases caused by lower power
supplies sales and the divestiture of a product line in 1995, resulted in an
increase of $10.2 million. Operating income decreased $7.1 million as
significant operational problems resulted in a loss in the micromachined sensors
business, which had sales of $37 million. To a lesser extent, lower sales and
projected excess contract costs in the power supplies business contributed to
the decrease. Management is implementing corrective actions in the micromachined
sensors business, which are expected to result in break-even operations in 1997.
Partially offsetting these decreases were the margin on the sales of new imaging
products and lower costs resulting from the restructuring plan. The 1996 impact
of the development effort for the amorphous silicon project continued at the $5
million level.
1995 COMPARED TO 1994
Sales increased $46 million, or 22%, primarily due to $28 million of higher
sales of IC Sensors, acquired at the end of the third quarter of 1994, and
higher shipments of flash products. The $1 million operating income increase,
excluding the 1994 nonrecurring charges of $9.7 million, resulted from margin on
higher sales and $2.6 million of cost reductions. The increases were partially
offset by lower margins due to competitive pricing pressures and higher
production costs in one product line and completion of certain government
contracts in 1994. The Company significantly increased research and development
expenses and capital expenditures in 1995 to support the amorphous silicon and
micromachined sensor programs.
TECHNICAL SERVICES
1996 COMPARED TO 1995
The $57.8 million sales reduction was mainly the result of the absence in 1996
of the billings under two large contracts discussed below. Also contributing to
the reduction was a decrease in sales of the automotive operations, primarily
due to continuing lower demand for stationary testing services caused by
customers' budget constraints and mature testing specifications, and completion
of a lubricant testing contract at the end of the first quarter of 1996. The $14
million operating income reduction was the result of the sales reductions
partially offset by the recognition of a productivity incentive fee on the
Kennedy Space Center (KSC) contract and the 1995 estimated provision for a legal
judgment.
1995 COMPARED TO 1994
The $3.8 million sales increase was the net result of billings under two
contracts for communication systems development and water flow control offset by
decreases resulting from continuing reductions in government funding and the
phasedown of the Superconducting Super Collider Laboratory contract. In
addition, demand for stationary automotive testing services was lower in 1995.
Operating income was flat, excluding the 1994 restructuring charges of $1.6
million. The income earned on the two previously described contracts, and an
unfavorable contract adjustment and early retirement costs recorded in 1994 were
offset by several decreases. These decreases included costs incurred in excess
-16-
<PAGE> 18
of contract coverage, an estimated provision for a legal judgment, start-up
costs for the environmental services and systems business and the effect of
lower sales levels in certain government services and the automotive testing
markets.
GENERAL CORPORATE EXPENSES
1996 COMPARED TO 1995
The $4.8 million decrease was primarily due to lower costs resulting from the
restructuring plan and lower management incentive accruals.
1995 COMPARED TO 1994
The $4.6 million decrease, excluding the 1994 restructuring charges of $1
million, resulted from $3.8 million of cost reductions in 1995, and $1 million
of separation costs and $1 million of costs associated with the restructuring
plan recorded in 1994. These decreases in expenses were partially offset by
management incentive accruals.
OTHER
1996 COMPARED TO 1995
The $10.7 million net increase in other expense was due to higher interest
expense reflecting the issuance of $115 million of ten-year notes in October
1995 and lower gains on the disposition of nonstrategic assets. The effective
tax rate of 32.2% for 1996 was lower than the 36.9% rate in 1995 primarily due
to changes in the geographical distribution of income.
1995 COMPARED TO 1994
The $9.6 million increase in other income was due to gains on sales of
investments and nonstrategic assets, higher income generated by joint ventures
and lower investment write-downs. Partially offsetting these factors were higher
interest expense and foreign exchange losses. The effective tax rate for
continuing operations was 36.9% in 1995. The effective tax rate of 87.5% in 1994
was higher than normal as a result of the impact of the goodwill write-down and
the restructuring charges.
DISCONTINUED OPERATIONS
1996 COMPARED TO 1995
The decrease in income from discontinued operations, net of income taxes,
reflected the expiration of the Rocky Flats and Nevada Test Site contracts in
1995. The Mound contract, the Company's remaining management and operations
contract with the DOE, has been extended to June 30, 1997 under existing terms
and conditions and could be extended by the DOE for up to an additional three
months. Sales and income from the Mound contract are dependent upon the
negotiated work scope and fee pools.
1995 COMPARED TO 1994
Income from discontinued operations, net of income taxes, was $12.7 million
lower in 1995. The decrease reflected the expiration of the Idaho National
Engineering Laboratory contract in September 1994 and the Rocky Flats contract
in June 1995.
DEPRECIATION CHANGE
In 1995, the Company changed its method of depreciation for certain classes of
plant and equipment purchased after January 1, 1995 from an accelerated method
to the straight-line method for financial
-17-
<PAGE> 19
reporting purposes. The Company believes that the straight-line method more
appropriately reflects the timing of the economic benefits to be received from
these assets, consisting mainly of manufacturing equipment. The Company also
changed its convention for calculating depreciation expense during the year that
an asset is acquired. Previously, the Company used the half-year convention;
starting in 1995, the Company commences depreciation in the month the asset is
placed in service. In 1995, the effect of applying these new methods was to
reduce depreciation expense by $4.3 million, and to increase income from
continuing operations and net income by $2.7 million and net income per share by
$.05.
ENVIRONMENTAL
The Company is conducting a number of environmental investigations and remedial
actions at current and former Company locations and, along with other companies,
has been named a potentially responsible party for certain waste disposal sites.
The Company accrues for environmental issues in the accounting period that the
Company's responsibility is established and when the cost can be reasonably
estimated. As of December 29, 1996, the Company had an accrual of $3.2 million
to reflect its estimated liability for environmental remediation. As assessments
and remediation activities progress at each individual site, these liabilities
are reviewed and adjusted to reflect additional information as it becomes
available. There have been no environmental problems to date that have had or
are expected to have a material effect on the Company's financial position or
results of operations. While it is reasonably possible that a material loss
exceeding the amounts recorded may have been incurred, the preliminary stages of
the investigations make it impossible for the Company to reasonably estimate the
range of potential exposure.
FINANCIAL CONDITION
The Company's cash and cash equivalents decreased $28.4 million in 1996 while
commercial paper borrowings increased $18 million, mainly due to the higher
level of capital expenditures. Net cash provided by operating activities was
$80.2 million in 1996, $150.2 million in 1995 and $95.9 million in 1994. The net
cash provided by continuing operations was lower in 1996 compared to 1995
primarily as a result of increases in accounts receivable and inventories in
1996 compared to decreases in 1995. The accounts receivable increase was mainly
caused by higher sales in the product segments; inventory levels increased
primarily for anticipated sales. The Company's program to reduce working capital
and to dispose of nonstrategic assets continued in 1996 with cumulative
reductions of over $85 million since 1993. The net cash provided by continuing
operations was higher in 1995 compared to 1994 as a result of increased earnings
and a $29.6 million reduction in accounts receivable and inventories, despite
higher sales. The net cash provided by operating activities was used principally
for capital expenditures, stock repurchases, cash dividends and, in 1994, for
acquisitions.
Cash outlays in 1996 under the 1994 restructuring plan were $3.5 million,
bringing the total spent under the plan to $25 million.
Discontinued operations generated cash of $6.9 million in 1996 compared to $26.3
million in 1995, reflecting the expiration of the Rocky Flats and Nevada Test
Site contracts during 1995. Future cash flows from discontinued operations will
continue to decrease due to the expected expiration of the Mound contract at the
end of the second quarter of 1997.
Capital expenditures were $80 million in 1996, an increase of $19 million over
the 1995 level, and are expected to return to approximately the 1995 level in
1997. These expenditures support new product development initiatives primarily
in the Optoelectronics segment, including the amorphous silicon and
micromachined sensor programs and Technical Services segment, including the new
facility for testing light trucks and sports-utility vehicles.
In 1995, the Company issued $115 million of unsecured ten-year notes, of a total
$150 million authorized, at an interest rate of 6.8%. The unissued notes of $35
million are covered by a shelf
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<PAGE> 20
registration statement. The proceeds were used to pay off commercial paper
borrowings that were used mainly to finance repurchases of the Company's common
stock. The Company has two revolving credit agreements totaling $200 million.
These agreements consist of a $100 million, 364-day facility, which expires in
March 1997, and a $100 million, five-year facility, which expires in March 2001.
The Company did not draw down either of these credit facilities during 1996 and
is in the process of negotiating an extension of these agreements.
During 1996, the Company purchased 1.6 million shares of its common stock
through periodic purchases on the open market at a cost of $30.8 million. As of
December 29, 1996, the Company had authorization to purchase 4.1 million
additional shares and, subject to market conditions, plans to maintain
approximately the 1996 level of purchases in 1997.
The Company has limited involvement with derivative financial instruments and
uses forward contracts and options to hedge certain foreign commitments and
transactions denominated in foreign currencies. The notional amount of
outstanding forward exchange contracts was $62 million as of December 29, 1996.
The average contract term is one month, and there are no cash requirements on
forward contracts until maturity. Credit risk is minimal because the contracts
are with very large banks; any market risk is offset by the exposure on the
underlying hedged items. Gains and losses on forward contracts are offset
against foreign exchange gains and losses on the underlying hedged items.
DIVIDENDS
In January 1997, the Board of Directors declared a regular quarterly cash
dividend of 14 cents per share, resulting in an annual rate of 56 cents per
share for 1997. EG&G has paid cash dividends, without interruption, for 32 years
and continues to retain what management believes to be sufficient earnings to
support the funding requirements of its planned growth.
-19-
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 29, 1996 AND DECEMBER 31, 1995
(Dollars in thousands except per share data) 1996 1995
- ------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 47,846 $ 76,204
Accounts receivable (Note 2) 222,856 211,903
Inventories (Note 3) 119,558 114,199
Other current assets (Note 12) 64,451 66,380
--------- ----------
TOTAL CURRENT ASSETS 454,711 468,686
--------- ----------
Property, Plant and Equipment:
At cost (Note 5) 480,858 417,566
Accumulated depreciation and amortization (288,808) (270,026)
--------- ----------
Net Property, Plant and Equipment 192,050 147,540
--------- ----------
Investments (Note 6) 16,839 16,072
Intangible Assets (Note 7) 110,368 123,421
Other Assets (Note 11) 48,932 48,196
--------- ----------
TOTAL ASSETS $ 822,900 $ 803,915
========= ==========
Current Liabilities:
Short-term debt (Note 8) $ 21,499 $ 5,275
Accounts payable 75,749 72,759
Accrued expenses (Note 10) 157,558 168,671
Net liabilities of discontinued operations
(Note 4) 4,990 3,746
--------- ----------
TOTAL CURRENT LIABILITIES 259,796 250,451
--------- ----------
Long-Term Debt (Note 8) 115,104 115,222
Long-Term Liabilities (Notes 11 and 12) 82,894 71,296
Contingencies (Note 13)
Stockholders' Equity (Note 15):
Preferred stock - $1 par value, authorized
1,000,000 shares; none outstanding - -
Common stock - $1 par value, authorized
100,000,000 shares; issued 60,102,000 shares 60,102 60,102
Retained earnings 532,043 498,181
Cumulative translation adjustments 18,228 28,679
Net unrealized gain on marketable investments
(Note 6) 1,204 244
Cost of shares held in treasury; 13,792,000
shares in 1996 and 12,492,000 shares in 1995 (246,471) (220,260)
--------- ---------
Total Stockholders' Equity 365,106 366,946
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 822,900 $ 803,915
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
-20-
<PAGE> 22
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 29, 1996
(Dollars in thousands except per share data) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales:
Products $ 867,623 $ 802,187 $ 750,649
Services 559,629 617,391 581,907
---------- ---------- ----------
TOTAL SALES 1,427,252 1,419,578 1,332,556
---------- ---------- ----------
Costs and Expenses:
Cost of sales:
Products 547,504 512,970 486,564
Services 501,239 539,076 508,045
---------- ---------- ----------
Total cost of sales 1,048,743 1,052,046 994,609
Research and development expenses 42,841 42,379 38,585
Selling, general and administrative expenses 248,038 242,480 239,609
Goodwill write-down (Note 7) - - 40,300
Restructuring charges (Note 9) - - 30,400
---------- ---------- ----------
Total Costs and Expenses 1,339,622 1,336,905 1,343,503
---------- ---------- ----------
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS 87,630 82,673 (10,947)
Other Income (Expense), Net (Note 18) (7,276) 3,386 (6,176)
---------- ---------- ----------
Income (Loss) From Continuing Operations
Before Income Taxes 80,354 86,059 (17,123)
Provision for Income Taxes (Note 12) 25,874 31,755 14,984
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 54,480 54,304 (32,107)
Income From Discontinued Operations,
Net of Income Taxes (Note 4) 5,676 13,736 26,452
---------- ---------- ----------
NET INCOME (LOSS) $ 60,156 $ 68,040 $ (5,655)
========== ========== ==========
Earnings (Loss) Per Share (Note 19):
CONTINUING OPERATIONS $ 1.15 $ 1.05 $ (.58)
Discontinued Operations .12 .27 .48
---------- ---------- ----------
NET INCOME (LOSS) $ 1.27 $ 1.32 $ (.10)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-21-
<PAGE> 23
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 29, 1996
<TABLE>
<CAPTION>
Net
Unrealized Total
Cumulative Gain on Cost of Stock-
Common Retained Translation Marketable Shares Held holders'
(Dollars in thousands except per share data) Stock Earnings Adjustments Investments in Treasury Equity
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 2, 1994 $60,102 $ 496,063 $ (8,287) $ - $ (70,344) $ 477,534
Net loss - (5,655) - - - (5,655)
Cash dividends ($.56 per share) - (31,012) - - - (31,012)
Exercise of employee stock options
and related income tax benefits - 342 - - 887 1,229
Translation adjustments - - 19,072 - - 19,072
Purchase of common stock for treasury - - - - (19,139) (19,139)
Unrealized gain on marketable investments - - - 3,337 - 3,337
------- --------- -------- ------- --------- ---------
BALANCE, JANUARY 1, 1995 60,102 459,738 10,785 3,337 (88,596) 445,366
Net income - 68,040 - - - 68,040
Cash dividends ($.56 per share) - (29,293) - - - (29,293)
Exercise of employee stock options
and related income tax benefits - 246 - - 3,415 3,661
Translation adjustments - - 17,894 - - 17,894
Purchase of common stock for treasury - - - - (135,079) (135,079)
Change in net unrealized gain on
marketable investments - - - (3,093) - (3,093)
Redemption of shareholder rights - (550) - - - (550)
------- --------- -------- ------- --------- ---------
BALANCE, DECEMBER 31, 1995 60,102 498,181 28,679 244 (220,260) 366,946
Net income - 60,156 - - - 60,156
Cash dividends ($.56 per share) - (26,589) - - - (26,589)
Exercise of employee stock options
and related income tax benefits - 295 - - 4,549 4,844
Translation adjustments - - (10,451) - - (10,451)
Purchase of common stock for treasury - - - - (30,760) (30,760)
Change in net unrealized gain on
marketable investments - - - 960 - 960
------- --------- -------- ------- --------- ---------
BALANCE, DECEMBER 29, 1996 $60,102 $ 532,043 $ 18,228 $ 1,204 $(246,471) $ 365,106
======= ========= ======== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-22-
<PAGE> 24
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 29, 1996
(Dollars in thousands) 1996 1995 1994
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows Provided by Operating Activities:
Net income (loss) $ 60,156 $ 68,040 $ (5,655)
Deduct net income from discontinued operations (5,676) (13,736) (26,452)
-------- --------- --------
Income (loss) from continuing operations 54,480 54,304 (32,107)
Adjustments to reconcile income (loss) from continuing operations
to net cash provided by continuing operations:
Goodwill write-down - - 40,300
Noncash portion of restructuring charges - - 4,902
Depreciation and amortization 40,936 39,426 36,790
Losses (gains) on asset dispositions and investments, net (1,714) (5,442) 5,322
Changes in assets and liabilities, net of
effects from companies purchased and divested:
Decrease (increase) in accounts receivable (11,781) 17,535 6,284
Decrease (increase) in inventories (6,659) 12,106 1,643
Increase in accounts payable 3,469 6,087 2,124
Increase (decrease) in accrued restructuring costs (3,455) (17,522) 21,532
Increase (decrease) in accrued expenses (718) 27,609 2,904
Change in prepaid and deferred taxes 8,793 (3,712) (5,163)
Change in prepaid expenses and other (10,113) (6,560) (14,190)
-------- --------- --------
Net Cash Provided by Continuing Operations 73,238 123,831 70,341
Net Cash Provided by Discontinued Operations 6,920 26,334 25,542
-------- --------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 80,158 150,165 95,883
-------- --------- --------
Cash Flows Used in Investing Activities:
Capital expenditures (80,490) (61,839) (37,277)
Proceeds from dispositions of businesses and
sales of property, plant and equipment 1,744 15,238 2,872
Cost of acquisitions, net of cash and cash equivalents acquired - - (32,841)
Proceeds from sales of investment securities 9,447 10,584 5,092
Other (2,000) (2,754) (2,730)
-------- --------- --------
NET CASH USED IN INVESTING ACTIVITIES (71,299) (38,771) (64,884)
-------- --------- --------
Cash Flows Used in Financing Activities:
Increase (decrease) in commercial paper 17,965 (49,814) 14,873
Other debt payments (1,959) (5,607) (3,939)
Proceeds from issuance of long-term debt - 115,000 -
Proceeds from issuance of common stock 4,844 3,661 1,229
Purchases of common stock (30,760) (135,079) (19,139)
Cash dividends (26,589) (29,293) (31,012)
Other - (1,763) -
------- --------- --------
NET CASH USED IN FINANCING ACTIVITIES (36,499) (102,895) (37,988)
-------- --------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (718) 1,281 1,228
-------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (28,358) 9,780 (5,761)
Cash and Cash Equivalents at Beginning of Year 76,204 66,424 72,185
-------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 47,846 $ 76,204 $ 66,424
======== ========= ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 13,526 $ 7,271 $ 5,063
Income taxes 35,678 23,380 41,353
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-23-
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of EG&G, Inc. and its subsidiaries (the Company). All material
intercompany balances and transactions have been eliminated in consolidation.
Certain reclassifications have been made to conform prior years' data to the
current format.
SALES: Sales under cost-reimbursement contracts are recorded as costs are
incurred and include applicable income in the proportion that costs incurred
bear to total estimated costs. Other product and service sales are recorded at
the time of shipment for products and at the end of a contract phase for service
contracts. If a loss is anticipated on any contract, provision for the entire
loss is made immediately.
INVENTORIES: Inventories, which include material, labor and manufacturing
overhead, are valued at the lower of cost or market. The majority of inventories
is accounted for using the first-in, first-out method; remaining inventories are
accounted for using the last-in, first-out (LIFO) method.
PROPERTY, PLANT AND EQUIPMENT: For financial statement purposes, the Company
depreciates plant and equipment over their estimated useful lives, which
generally fall within the following ranges: buildings and special-purpose
structures -- 10 to 25 years; leasehold improvements -- estimated useful life or
remaining term of lease, whichever is shorter; machinery and equipment -- 3 to 7
years; special-purpose equipment -- expensed or depreciated over the life of the
initial related contract. Nonrecurring tooling costs are capitalized, while
recurring costs are expensed. The Company depreciates plant and equipment over
their estimated useful lives using accelerated methods for income tax purposes.
The Company changed its method of depreciation for certain classes of plant and
equipment purchased after January 1, 1995 from an accelerated method to the
straight-line method for financial statement purposes. The Company believes that
the straight-line method more appropriately reflects the timing of the economic
benefits to be received from these assets, consisting mainly of manufacturing
equipment, during their estimated useful lives. The Company also changed its
convention for calculating depreciation expense during the year that an asset is
acquired. Previously, the Company used the half-year convention; starting in
1995, the Company commences depreciation in the month the asset is placed in
service. In 1995, the effect of applying these new methods was to reduce
depreciation expense by $4.3 million, and to increase income from continuing
operations and net income by $2.7 million and net income per share by $.05. The
reductions in depreciation expense represent the differences in current year
depreciation expense between the old and new methods. Most of this difference
occurred in the Optoelectronics segment. Depreciation and amortization was
higher in 1995 than in 1994 because the effect of the changes in methods was
exceeded by the effect of higher capital expenditures and inclusion of IC
Sensors' depreciation for a full year.
PENSION PLANS: The Company's funding policy provides that payments to the U.S.
pension trusts shall at least be equal to the minimum funding requirements of
the Employee Retirement Income Security Act of 1974. Non-U.S. plans are accrued
for but generally not funded, and benefits are paid from operating funds.
TRANSLATION OF FOREIGN CURRENCIES: The balance sheet accounts of non-U.S.
operations, exclusive of stockholders' equity, are translated at year-end
exchange rates, and income statement accounts are translated at weighted average
rates in effect during the year; any translation adjustments are made directly
to a component of stockholders' equity. The net transaction gains (losses) were
not material for the years presented.
-24-
<PAGE> 26
INTANGIBLE ASSETS: Intangible assets result from acquisitions accounted for
using the purchase method of accounting and include the excess of cost over the
fair market value of the net assets of the acquired businesses. Substantially
all of these intangible assets are being amortized over periods of up to 20
years. Subsequent to the acquisition, the Company continually evaluates whether
later events and circumstances have occurred that indicate the remaining
estimated useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. See Note 7 for discussion of the
goodwill write-down that occurred in 1994.
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." The adoption of this statement did
not impact the Company's financial statements.
STOCK-BASED COMPENSATION: Effective January 1, 1996, the Company adopted the
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." The
Company has elected to continue to account for stock options at intrinsic value
with disclosure of the effects of fair value accounting on net income and
earnings per share on a pro forma basis.
CASH FLOWS: For purposes of the Consolidated Statement of Cash Flows, the
Company considers all highly liquid instruments with a purchased maturity of
three months or less to be cash equivalents. The carrying amount of cash and
cash equivalents approximates fair value due to the short maturities.
ENVIRONMENTAL MATTERS: The Company accrues for costs associated with the
remediation of environmental pollution when it is probable that a liability has
been incurred and the Company's proportionate share of the amount can be
reasonably estimated. Any recorded liabilities have not been discounted.
2. ACCOUNTS RECEIVABLE
Accounts receivable as of December 29, 1996 and December 31, 1995 included
unbilled receivables of $44 million, which were due primarily from U.S.
government agencies. Accounts receivable were net of reserves for doubtful
accounts of $4.2 million and $4.4 million as of December 29, 1996 and December
31, 1995, respectively.
3. INVENTORIES
Inventories as of December 29, 1996 and December 31, 1995 consisted of the
following:
(In thousands) 1996 1995
-------- --------
Finished goods $ 31,436 $ 28,540
Work in process 28,536 28,613
Raw materials 59,586 57,046
-------- --------
$119,558 $114,199
======== ========
The portion of inventories accounted for using the LIFO method of determining
inventory costs in 1996 and 1995 approximated 23% of total inventories. The
excess of current cost of inventories over the LIFO value was approximately $8
million as of December 29, 1996 and $9 million as of December 31, 1995.
-25-
<PAGE> 27
4. DISCONTINUED OPERATIONS
The former DOE Support segment, which has provided services under management and
operations contracts, is presented as discontinued operations in accordance with
Accounting Principles Board Opinion No. 30.
The EG&G Rocky Flats, Inc. contract terminated in June 1995. The Reynolds
Electrical and Engineering Co., Inc. and the EG&G Energy Measurements, Inc.
contracts expired on December 31, 1995. The EG&G Mound Applied Technologies,
Inc. contract, the Company's remaining DOE management and operations contract,
has been extended by the DOE to June 30, 1997 under existing terms and
conditions and could be extended for up to an additional three months. Sales and
income from the Mound contract are dependent upon the negotiated work scope and
fee pools.
Summary operating results of the discontinued operations were as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
-------- -------- ----------
<S> <C> <C> <C>
Sales $141,181 $659,852 $1,300,064
Costs and expenses 132,449 638,719 1,259,369
-------- -------- ----------
Income from discontinued
operations before income taxes 8,732 21,133 40,695
Provision for income taxes 3,056 7,397 14,243
-------- -------- ----------
Income from discontinued
operations, net of income taxes $ 5,676 $ 13,736 $ 26,452
======== ======== ==========
</TABLE>
Given the nature of the government contracts, the Company does not anticipate
incurring any material loss on the ultimate completion of the contracts.
Net assets (liabilities) of discontinued operations as of December 29, 1996 and
December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
------- --------
<S> <C> <C>
Accounts receivable, primarily unbilled $ 2,050 $ 7,693
Operating current liabilities (7,040) (11,439)
------- --------
$(4,990) $ (3,746)
======= ========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, as of December 29, 1996 and December 31,
1995 consisted of the following:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
-------- --------
<S> <C> <C>
Land $ 12,324 $ 12,003
Buildings and leasehold improvements 123,575 108,254
Machinery and equipment 344,959 297,309
-------- --------
$480,858 $417,566
======== ========
</TABLE>
-26-
<PAGE> 28
6. INVESTMENTS
Investments as of December 29, 1996 and December 31, 1995 consisted of the
following:
<TABLE>
<CAPTION>
(In thousands)
1996 1995
-------- --------
<S> <C> <C>
Marketable investments (Note 11) $12,294 $ 9,547
Other investments 558 1,396
Joint venture investments 4,363 7,349
------- -------
17,215 18,292
Investments classified as other current assets (376) (2,220)
------- -------
$16,839 $16,072
======= =======
</TABLE>
Marketable investments consisted of common stocks and trust assets which were
primarily invested in common stocks and fixed-income securities to meet the
supplemental executive retirement plan obligation. The net unrealized holding
gain on marketable investments, net of deferred income taxes, reported as a
separate component of stockholders' equity, was $1.2 million at December 29,
1996, a $1 million increase from the $0.2 million gain at December 31, 1995. In
1996, proceeds and gross realized losses from sales of available-for-sale
securities were $1.2 million and $0.4 million, respectively. Average cost was
the basis for computing the realized losses.
Marketable investments classified as available for sale as of December 29, 1996
and December 31, 1995 consisted of the following:
(In thousands) 1996
-----------------------------------------------
GROSS UNREALIZED HOLDING
MARKET ------------------------
VALUE COST GAINS (LOSSES)
------- ------- ------ --------
Common stocks $ 9,347 $ 7,498 $2,050 $(201)
Fixed-income
securities 2,712 2,710 2 -
Money market funds 128 128 - -
Other 107 105 2 -
------- ------- ------ -----
$12,294 $10,441 $2,054 $(201)
======= ======= ====== =====
(In thousands) 1995
------------------------------------------------
Gross Unrealized Holding
Market ------------------------
Value Cost Gains (Losses)
------- ------- ------ --------
Common stocks $6,355 $6,144 $ 919 $(708)
Fixed-income
securities 2,789 2,694 95 -
Money market funds 261 261 - -
Other 142 72 70 -
------ ------ ------ -----
$9,547 $9,171 $1,084 $(708)
====== ====== ====== =====
The market values were based on quoted market prices. As of December 29, 1996,
the fixed-income securities, on average, have maturities of approximately nine
years.
Other investments consisted of nonmarketable investments in venture capital
partnerships and private companies, which are carried at the lower of cost or
net realizable value. The estimated aggregate fair value of other investments
approximated the carrying amount at December 29, 1996 and December 31, 1995. The
fair values of other investments were estimated based on the most recent rounds
of financing and securities transactions and on other pertinent information,
including financial condition and operating results. The Company
-27-
<PAGE> 29
wrote down certain investments by $2.5 million in 1995 and $4.5 million in 1994
to their estimated realizable value due to deterioration in the
company/partnership's financial condition and the decision to liquidate the
Company's position in investments no longer consistent with its strategic
direction.
Joint venture investments are accounted for using the equity method.
7. INTANGIBLE ASSETS
Intangible assets were shown net of accumulated amortization of $51.8 million
and $42.2 million as of December 29, 1996 and December 31, 1995, respectively.
The $13.1 million net decrease in intangible assets resulted primarily from
current year amortization and the effect of translating goodwill denominated in
non-U.S. currencies at current exchange rates.
In 1994, the continued decline in the financial results of the operating
elements of the Company's Berthold business acquired in 1989, the resultant
strategic and operational review and the application of the Company's objective
measurement tests resulted in an evaluation of goodwill for possible impairment.
The underlying factors contributing to the decline in financial results included
changes in the marketplace, delays in customer acceptance of new technologies
and worldwide economic conditions. The Company calculated the present value of
expected cash flows to determine the fair value of the business using a discount
rate of 12%, which represented the Company's weighted average cost of capital.
The evaluation resulted in a $39.2 million write-down of Berthold's $76 million
goodwill balance. The evaluation also led the Company to determine that the
remaining amortization period for the goodwill should be reduced from 36 years
to 16 years based on the factors identified above. The Company also wrote off
$1.1 million of a small Optoelectronics unit's goodwill in 1994.
8. DEBT
Short-term debt at December 29, 1996 consisted primarily of $18 million of
commercial paper borrowings that had maturities of less than 30 days. There were
no commercial paper borrowings outstanding at December 31, 1995. The weighted
average interest rate on commercial paper borrowings was 6.2% at December 29,
1996. Commercial paper borrowings averaged $28 million during 1996 at an average
interest rate of 5.4%, compared to average borrowings of $52.5 million during
1995 at an average interest rate of 6.1%.
During 1996, the Company renewed its credit facilities with the signing of two
revolving credit agreement extensions totaling $200 million. These agreements
consist of a $100 million, 364-day facility, which expires in March 1997, and a
$100 million, five-year facility, which expires in March 2001. These agreements
serve as backup facilities for the commercial paper borrowings. During 1996, the
Company did not draw down either of these credit facilities, and there are no
significant commitment fees. The Company is in the process of negotiating an
extension of these agreements.
At December 29, 1996 and December 31, 1995, long-term debt included $115 million
of unsecured ten-year notes issued in October 1995 at an interest rate of 6.8%.
The total notes authorized were $150 million, and the unissued notes of $35
million are covered by a shelf registration statement. The carrying amount of
the Company's long-term debt approximated the estimated fair value at December
29, 1996 and December 31, 1995 based on a quoted market price.
-28-
<PAGE> 30
9. RESTRUCTURING CHARGES
During the third quarter of 1994, management completed its review of various
operating elements and developed a plan to reposition these businesses to attain
the Company's business goals. The plan resulted in pre-tax restructuring charges
of $30.4 million. The major components of the restructuring charges were $21
million of employee separation costs, $4.9 million of noncash charges to dispose
of certain product lines and assets through sale or abandonment and $4.5 million
of charges to terminate lease and other contractual obligations no longer
required as a result of the restructuring plan. The principal actions in the
restructuring plan included reduction of excess manufacturing capacity, changes
in distribution channels, consolidation and re-engineering of support
infrastructure, disposal of underutilized assets, withdrawal from certain
unprofitable product lines, disposal of excess property and general cost
reductions. The net workforce reduction under the plan was approximately 700
positions. The implementation of this plan commenced during the second half of
1994 and was substantially complete at the end of 1995. Under the 1994
restructuring plan, cash outlays in 1996 were $3.5 million, bringing the total
spent to $25 million.
10. ACCRUED EXPENSES
Accrued expenses as of December 29, 1996 and December 31, 1995 consisted of the
following:
(In thousands)
1996 1995
-------- --------
Payroll and incentives $ 29,732 $ 28,660
Employee benefits 44,845 40,178
Federal, non-U.S. and state income taxes 24,186 33,153
Other accrued operating expenses 58,795 66,680
-------- --------
$157,558 $168,671
======== ========
11. EMPLOYEE BENEFIT PLANS
SAVINGS PLAN: The Company has a savings plan for the benefit of qualified U.S.
employees. Under this plan, the Company contributes an amount equal to the
lesser of 55% of the amount of the employee's voluntary contribution or 3.3% of
the employee's annual compensation. Savings plan expense was $5.8 million in
1996, $5.7 million in 1995 and $6.2 million in 1994.
PENSION PLANS: The Company has defined benefit pension plans covering
substantially all U.S. employees and non-U.S. pension plans for non-U.S.
employees. The plans provide benefits that are based on an employee's years of
service and compensation near retirement. Assets of the U.S. plan are composed
primarily of corporate equity and debt securities.
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 9,248 $ 9,073 $ 9,822
Interest cost on projected benefit obligations 17,335 16,733 15,070
Actual return on plan assets (32,287) (42,992) (461)
Net amortization and deferral 13,116 24,310 (15,442)
-------- -------- --------
$ 7,412 $ 7,124 $ 8,989
======== ======== ========
</TABLE>
The decrease in pension expense for 1995 was caused by changes in the discount
rate and other actuarial assumptions in the U.S. plan.
-29-
<PAGE> 31
The following table sets forth the funded status of the principal U.S. pension
plan and the principal non-U.S. pension plans and the amounts recognized in the
Company's Consolidated Balance Sheet as of December 29, 1996 and December 31,
1995:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
---------------------- ----------------------
Non-U.S. U.S. Non-U.S. U.S.
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations $25,119 $177,714 $23,702 $165,913
======= ======== ======= ========
Accumulated benefit obligations $26,163 $184,765 $24,806 $174,569
======= ======== ======= ========
Projected benefit obligations
for service provided to date $31,663 $213,146 $31,490 $205,100
Plan assets at fair value - 249,431 - 219,960
------- -------- ------- --------
Plan assets less (greater) than
projected benefit obligations 31,663 (36,285) 31,490 (14,860)
Unrecognized net transition asset - 3,756 - 4,508
Unrecognized prior service costs (1,380) 690 (983) 807
Unrecognized net gain (loss) 2,527 518 2,504 (18,922)
------- -------- ------- ---------
Accrued pension liability (asset) $32,810 $(31,321) $33,011 $(28,467)
======= ======== ======= ========
Actuarial assumptions as of the year-end
measurement date were:
Discount rate 6.50% 7.50% 7.00% 7.25%
Rate of compensation increase 4.00% 5.00% 4.50% 5.00%
Long-term rate of return on assets - 9.50% - 9.50%
</TABLE>
The non-U.S. accrued pension liability included $32.3 million and $32.5 million
classified as long-term liabilities as of December 29, 1996 and December 31,
1995, respectively. The U.S. pension asset was classified as other noncurrent
assets.
The Company also sponsors a supplemental executive retirement plan to provide
senior management with benefits in excess of normal pension benefits. At
December 29, 1996 and December 31, 1995, the projected benefit obligations were
$11.2 million and $11 million, respectively. Assets with a fair value of $9.1
million and $8.3 million, segregated in a trust, were available to meet this
obligation as of December 29, 1996 and December 31, 1995, respectively. Pension
expense for this plan was approximately $1.5 million in 1996, 1995 and 1994.
POSTRETIREMENT MEDICAL PLANS: The Company provides health care benefits for
eligible retired U.S. employees under a comprehensive major medical plan or
under health maintenance organizations where available. The majority of the
Company's U.S. employees become eligible for retiree health benefits if they
retire directly from the Company and have at least ten years of service.
Generally, the major medical plan pays stated percentages of covered expenses
after a deductible is met and takes into consideration payments by other group
coverages and by Medicare. The plan requires retiree contributions under most
circumstances and has provisions for cost-sharing changes. For employees
retiring after 1991, the Company has capped its medical premium contribution
based on employees' years of service. The Company funds the amount allowable
under a 401(h) provision in the Company's defined benefit pension plan. Assets
of the plan are composed primarily of corporate equity and debt securities.
-30-
<PAGE> 32
Net periodic postretirement medical benefit cost included the following
components:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 349 $ 391 $ 426
Interest cost on accumulated benefit obligations 1,459 1,697 1,620
Actual return on plan assets (1,128) (1,001) (70)
Net amortization and deferral 296 544 (237)
------- ------- ------
$ 976 $ 1,631 $1,739
======= ======= ======
</TABLE>
The following table sets forth the plan's funded status and the amounts
recognized in the Company's Consolidated Balance Sheet at December 29, 1996 and
December 31, 1995:
(In thousands) 1996 1995
------- -------
Actuarial present value of accumulated
benefit obligations:
Current retirees $15,699 $15,762
Active employees eligible to retire 563 908
Other active employees 4,848 7,171
------- -------
21,110 23,841
Plan assets at fair value 8,470 7,342
------- -------
Plan assets less than accumulated
benefit obligations 12,640 16,499
Unrecognized net gain 4,669 381
------- -------
Accrued postretirement medical liability $17,309 $16,880
======= =======
Actuarial assumptions as of the year-end measurement
date were:
Discount rate 7.50% 7.25%
Health care cost trend rate:
First year 12.00% 13.00%
Ultimate 6.50% 6.50%
Years to reach ultimate 7 years 8 years
Long-term rate of return on assets 9.50% 9.50%
The accrued postretirement medical liability included $16.3 million and $15.9
million classified as long-term liabilities as of December 29, 1996 and December
31, 1995, respectively.
If the health care cost trend rate was increased 1%, the accumulated
postretirement benefit obligations would have increased by approximately $1.3
million at December 29, 1996. The effect of this increase on the annual cost for
1996 would have been approximately $0.1 million.
OTHER: During 1995, the Company adopted an EVA Incentive Compensation Plan, the
purpose of which is to provide incentive compensation to certain key employees,
including all officers, in a form that relates the financial rewards to an
increase in the value of the Company to its shareholders. Awards under this plan
are approved annually by the Board of Directors.
The above information does not include amounts related to benefit plans
applicable to employees associated with contracts with the DOE and NASA because
the Company is not responsible for the current or future funded status of the
plans.
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<PAGE> 33
12. INCOME TAXES
The components of income (loss) from continuing operations before income taxes
for financial reporting purposes were as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
U.S. $36,235 $53,264 $ 15,986
Non-U.S. 44,119 32,795 (33,109)
------- ------- --------
$80,354 $86,059 $(17,123)
======= ======= ========
</TABLE>
The components of the provision for income taxes for continuing operations were
as follows:
(In thousands) 1996
-------------------------------------------------------
DEFERRED
CURRENT (PREPAID) TOTAL
------- -------- -------
Federal $ 4,209 $10,473 $14,682
State 3,653 135 3,788
Non-U.S. 8,545 (1,141) 7,404
------- -------- --------
$16,407 $ 9,467 $25,874
======= ======= =======
(In thousands) 1995
-------------------------------------------------------
Deferred
Current (Prepaid) Total
------- -------- -------
Federal $26,268 $(3,411) $22,857
State 3,572 (264) 3,308
Non-U.S. 5,325 265 5,590
------- ------- -------
$35,165 $(3,410) $31,755
======= ======= =======
(In thousands) 1994
-------------------------------------------------------
Deferred
Current (Prepaid) Total
------- -------- -------
Federal $10,735 $(2,569) $ 8,166
State 3,670 157 3,827
Non-U.S. 2,834 157 2,991
------- ------- -------
$17,239 $(2,255) $14,984
======= ======= =======
The total provision for income taxes included in the consolidated financial
statements was as follows:
(In thousands) 1996 1995 1994
-------- ------- -------
Continuing operations $25,874 $31,755 $14,984
Discontinued operations 3,056 7,397 14,243
------- ------- -------
$28,930 $39,152 $29,227
======= ======= =======
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<PAGE> 34
The major differences between the Company's effective tax rate for continuing
operations and the federal statutory rate were as follows:
1996 1995 1994
----- ---- -----
Federal statutory rate 35.0% 35.0% (35.0)%
Non-U.S. rate differential, net (10.1) (2.5) (29.7)
State income taxes, net 3.1 2.5 14.5
Goodwill amortization 2.4 2.0 10.0
Increase (decrease) in valuation allowance (1.1) (2.3) 128.5
Other, net 2.9 2.2 (0.8)
----- ---- -----
Effective tax rate 32.2% 36.9% 87.5%
===== ==== =====
The 1994 tax provision and effective rate for continuing operations were
significantly impacted by the goodwill write-down and the restructuring charges.
The Company did not record any tax benefit from the goodwill write-down and
approximately $11 million of the restructuring charges because these charges,
while tax deductible, were incurred in tax jurisdictions where the Company had
existing operating loss carryforwards; therefore, the related tax assets were
offset by a valuation allowance.
The tax effects of temporary differences and carryforwards which gave rise to
prepaid (deferred) income taxes as of December 29, 1996 and December 31, 1995
were as follows:
(In thousands) 1996 1995
-------- --------
Deferred tax assets:
Inventory reserves $ 5,738 $ 4,902
Other reserves 9,628 10,983
Depreciation 3,869 6,020
Vacation pay 6,200 6,319
Net operating loss carryforwards 42,932 45,380
Postretirement health benefits 5,077 5,940
Restructuring reserve 616 1,870
All other, net 25,229 26,850
-------- --------
Total deferred tax assets 99,289 108,264
-------- --------
Deferred tax liabilities:
Award and holdback fees (3,814) (3,629)
Pension contribution (9,212) (8,301)
Amortization (8,113) (8,896)
All other, net (14,489) (11,663)
-------- --------
Total deferred tax liabilities (35,628) (32,489)
-------- --------
Valuation allowance (35,250) (38,227)
-------- --------
Net prepaid taxes $ 28,411 $ 37,548
======== ========
At December 29, 1996, the Company had non-U.S. (primarily from Germany) net
operating loss carryforwards of $92.7 million, of which $2.5 million expire in
the years 1998 through 2002 and $90.2 million of which carry forward
indefinitely. The $35.3 million valuation allowance results primarily from these
carryforwards, for which the Company currently believes it is more likely than
not that they will not be realized.
Current prepaid income taxes of $38.6 million and $40.2 million at December 29,
1996 and December 31, 1995, respectively, were included in other current assets.
Long-term prepaid income taxes of $3.6 million were included in other noncurrent
assets at December 31, 1995. Long-term deferred income taxes of $10.2 million
and $6.3 million were included in long-term liabilities at December 29, 1996 and
December 31, 1995, respectively.
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<PAGE> 35
In general, it is the practice and intention of the Company to reinvest the
earnings of its non-U.S. subsidiaries in those operations. Repatriation of
retained earnings is done only when it is advantageous. Applicable federal taxes
are provided only on amounts planned to be remitted. Accumulated net earnings of
non-U.S. subsidiaries for which no federal taxes have been provided as of
December 29, 1996 were $82.4 million, which does not include amounts that, if
remitted, would result in little or no additional tax because of the
availability of non-U.S. tax credits. Federal taxes that would be payable upon
remittance of these earnings are estimated to be $24.5 million at December 29,
1996.
13. CONTINGENCIES
The Company is subject to various investigations, claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities. Each of these matters is subject to various uncertainties,
and it is possible that some of these matters may be resolved unfavorably to the
Company. The Company has established accruals for matters that are probable and
reasonably estimable. Management believes that any liability that may ultimately
result from the resolution of these matters in excess of amounts provided will
not have a material adverse effect on the financial position or results of
operations of the Company.
In addition, the Company is conducting a number of environmental investigations
and remedial actions at current and former Company locations and, along with
other companies, has been named a potentially responsible party for certain
waste disposal sites. The Company accrues for environmental issues in the
accounting period that the Company's responsibility is established and when the
cost can be reasonably estimated. The Company has accrued $3.2 million as of
December 29, 1996 to reflect its estimated liability for environmental
remediation. As assessments and remediation activities progress at each
individual site, these liabilities are reviewed and adjusted to reflect
additional information as it becomes available. There have been no environmental
problems to date that have had or are expected to have a material effect on the
Company's financial position or results of operations. While it is reasonably
possible that a material loss exceeding the amounts recorded may have been
incurred, the preliminary stages of the investigations make it impossible for
the Company to reasonably estimate the range of potential exposure.
During 1994, 1995 and 1996, the Company received notices from the Internal
Revenue Service (IRS) asserting deficiencies in federal corporate income taxes
for the Company's 1985 to 1992 tax years. The total additional tax proposed by
the IRS amounts to $53 million plus interest. The Company has filed petitions in
the United States Tax Court to challenge most of the deficiencies asserted by
the IRS. The Company believes that it has meritorious legal defenses to those
deficiencies and believes that the ultimate outcome of the case will not result
in a material impact on the Company's consolidated results of operations or
financial position.
14. NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES
EG&G, Inc. is a broad-based technology company that provides an array of
products and technical services to manufacturers and end-users in medical,
aerospace, photography, automotive and other ground transportation,
environmental, industrial and government markets worldwide. The Company's
industry segments are Instruments, Mechanical Components, Optoelectronics and
Technical Services. Based on sales, Technical Services is the largest segment,
representing approximately 40% of the Company's sales; each of the other
segments accounts for approximately 20% of sales. The Instruments segment
develops and manufactures hardware and associated software for applications in
medical diagnostics, biochemical and medical research, materials analyses,
environmental monitoring, industrial process measurement, food monitoring, and
airport and industrial security worldwide. Mechanical Components provides
products to four worldwide markets. Mechanical seals and
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<PAGE> 36
bellows products are designed and manufactured for the chemical and
petrochemical industries. Fans, blowers, ducting, components, seals and metallic
parts/valves are supplied to the aerospace market. Motors and power supplies are
sold to the transportation market. Regenerative blower and biofiltration systems
are used in the environmental remediation market. The Optoelectronics segment
designs and manufactures optical sensors, flashlamps and laser diodes.
Electronic components are provided for industrial, consumer, medical and
photography applications, and defense and energy programs. Micromachined sensors
are used for a variety of applications, such as pressure sensors and
accelerometers for the medical and automotive industries. Optoelectronics is
designing medical imaging devices based on amorphous silicon technology.
High-reliability power supplies are manufactured. This segment's products are
distributed worldwide, and its future results are dependent on management's
ability to bring the micromachined sensors business to break-even operations in
1997. The Technical Services segment supplies engineering, scientific,
environmental, management and skilled support services primarily to U.S.
government agencies. Analysis and testing services are provided primarily to the
U.S. automotive and petroleum industries.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
In 1996, 37% of the Company's sales from continuing operations were to U.S.
government agencies, predominantly to the Department of Defense and NASA. In
accordance with government regulations, all of the Company's government
contracts are subject to termination for the convenience of the government.
Costs incurred under cost-reimbursable contracts are subject to audit by the
government. The results of prior audits, complete through 1991, have not had a
material effect on the Company.
The Company's award/incentive-fee contract with NASA at the KSC, which
contributed sales of $172 million in 1996, expires on October 31, 1997 and has
three 2-year renewal options at the discretion of the government. While it is
possible that the Company's contract could be absorbed by the single Space
Flight Operations contract, the Company believes that its contract will be
renewed by NASA and changed to a performance-based contract. The Company has
been the base operations contractor at the KSC for 14 years and recently
received its highest grades.
Given the nature of the DOE contracts, which are presented as discontinued
operations, the Company does not anticipate incurring any material loss on the
ultimate completion of the contracts.
For information concerning various investigations, claims, legal proceedings,
environmental investigations and remedial actions, and notices from the IRS, see
Note 13.
15. STOCKHOLDERS' EQUITY
At December 29, 1996, six million shares of the Company's common stock were
reserved for employee benefit plans.
The Company has nonqualified and incentive stock option plans for officers and
key employees. Under these plans, options may be granted at prices not less than
100% of the
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<PAGE> 37
fair market value on the date of grant. All options expire ten years from the
date of grant. Options granted since 1994 become exercisable, in ratable
installments, over a period of five years from the date of grant. In other
years, options became exercisable at the date of grant. The Stock Option
Committee of the Board of Directors, at its sole discretion, may also include
stock appreciation rights in any option granted. There are no stock appreciation
rights outstanding under these plans.
A summary of certain stock option information is as follows:
<TABLE>
<CAPTION>
(Shares in thousands) 1996 1995 1994
------------------------------- ------------------------------- ------------------------------
Number Weighted Number Weighted Number Weighted
of Shares Average Price of Shares Average Price of Shares Average Price
--------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 3,276 $18.81 3,611 $18.77 3,260 $19.80
Granted 1,392 20.67 13 16.66 736 14.31
Exercised (266) 17.00 (197) 17.52 (54) 14.87
Lapsed (241) 18.57 (151) 19.28 (331) 19.66
----- ------ ----- ------ ----- ------
Outstanding at
end of year 4,161 $19.56 3,276 $18.81 3,611 $18.77
===== ====== ===== ====== ===== ======
Exercisable at
end of year 2,477 2,740 2,895
===== ===== =====
Available for grant at
end of year 1,831 2,226 1,354
===== ===== =====
</TABLE>
During 1996, the Board of Directors granted 650,000 options in January and
728,000 options in December at exercise prices of $21.75 and $19.75 per share,
respectively.
Effective January 1, 1996, the Company adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company has elected to continue
to account for stock options at intrinsic value with disclosure of the effects
of fair value accounting on net income and earnings per share on a pro forma
basis. Had compensation costs for the stock option plans been determined using
the fair value method, the Company's 1996 pro forma net income and earnings per
share from continuing operations would have been $54 million and $1.14,
respectively. Consistent with SFAS No. 123, pro forma net income and earnings
per share have not been calculated for options granted prior to January 1, 1995.
There are no pro forma disclosures for 1995 because the options granted were
insignificant. Pro forma compensation cost may not be representative of that to
be expected in future years.
The fair value of each option was $6.68 for the options granted in January 1996
and $6.20 for the options granted in December 1996. The values were estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants in January and December
1996, respectively: risk-free interest rates of 5.5% and 6.3%, expected dividend
yields of 2% for both periods, expected lives of seven years for both periods
and expected volatilities of 25% and 24%.
On January 25, 1995, the Board of Directors adopted a new Shareholder Rights
Plan. Under the plan, preferred stock purchase rights were distributed on
February 8, 1995 as a dividend at the rate of one right for each share of common
stock outstanding. Each right, when exercisable, entitles a stockholder to
purchase one one-thousandth of a share of a new series of junior participating
preferred stock at a price of $60. The rights become exercisable only if a
person or group acquires 20% or more or announces a tender or exchange offer for
30% or more of the Company's common stock. This preferred stock is nonredeemable
and will have 1,000 votes per share. The rights are nonvoting, expire in 2005
and may be redeemed prior to becoming exercisable. The Company has reserved
70,000 shares of preferred stock, designated as Series C Junior Participating
Preferred Stock, for issuance upon exercise of such rights. If a person (an
"Acquiring Person") acquires or obtains the
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<PAGE> 38
right to acquire 20% or more of the Company's outstanding common stock (other
than pursuant to certain approved offers), each right (other than rights held by
the Acquiring Person) will entitle the holder to purchase shares of common stock
of the Company at one-half of the current market price at the date of occurrence
of the event. In addition, in the event that the Company is involved in a merger
or other business combination in which it is not the surviving corporation or in
connection with which the Company's common stock is changed or converted, or it
sells or transfers 50% or more of its assets or earning power to another person,
each right that has not previously been exercised will entitle its holder to
purchase shares of common stock of such other person at one-half of the current
market price of such common stock at the date of the occurrence of the event. In
connection with the adoption of the plan, the Company redeemed the rights issued
pursuant to the Company's January 28, 1987 Rights Agreement at a redemption
price of $.01 per right to shareholders of record as of February 8, 1995.
16. FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments and accounts
receivable. The Company had no significant concentrations of credit risk as of
December 29, 1996.
The Company has limited involvement with derivative financial instruments and
uses forward contracts and options to hedge certain foreign commitments and
transactions denominated in foreign currencies. The notional amount of
outstanding forward contracts was $62.4 million as of December 29, 1996 and
$57.4 million as of December 31, 1995. The carrying value as of December 29,
1996 and December 31, 1995, which approximated fair value, was not significant.
The average contract term is one month, and there are no cash requirements on
forward contracts until maturity. Credit risk is minimal because the contracts
are with very large banks; any market risk is offset by the exposure on the
underlying hedged items. When forward contracts are closed, the Company enters
into spot transactions to fulfill the contract obligations. Gains and losses on
forward contracts are offset against foreign exchange gains and losses on the
underlying hedged items. Transactions covered by hedge contracts primarily
include collection of receivables from third-party customers, collection of
intercompany receivables, payments to third-party suppliers and payment of
intercompany payables.
See Notes 1, 6 and 8 for disclosures about fair values, including methods and
assumptions, of other financial instruments.
17. LEASES
The Company leases certain property and equipment under operating leases. Rental
expense charged to earnings for 1996, 1995 and 1994 amounted to $17.2 million,
$18.7 million and $19.3 million, respectively. Minimum rental commitments under
noncancelable operating leases are as follows: $14.5 million in 1997, $10.8
million in 1998, $7.3 million in 1999, $3.9 million in 2000, $3.2 million in
2001 and $6.5 million after 2001. The above information does not include amounts
related to leases covered by contracts with the DOE and NASA because the costs
are reimbursable under the contracts.
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<PAGE> 39
18. OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
Other income (expense), net, consisted of the following:
(In thousands) 1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Interest income $ 3,879 $ 4,930 $ 3,167
Gains (losses) on investments, net (Note 6) 1,714 2,047 (4,682)
Interest expense (13,427) (8,514) (5,419)
Other 558 4,923 758
-------- ------- -------
$ (7,276) $ 3,386 $(6,176)
======== ======= =======
</TABLE>
Other consists mainly of gains on the sale of operating assets, income from
joint ventures and foreign exchange losses.
19. EARNINGS (LOSS) PER SHARE
Earnings (loss) per common share was computed by dividing net income (loss) by
the weighted average number of common shares outstanding. The number of shares
issuable upon the exercise of stock options had no material effect on earnings
(loss) per share. The weighted average number of shares used in the earnings
(loss) per share computations were 47,298,000 for 1996, 51,483,000 for 1995 and
55,271,000 for 1994.
20. INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION
The Company's continuing operations are classified into four industry segments:
Technical Services, Instruments, Mechanical Components and Optoelectronics. The
products and services of these segments are described in Note 14 and elsewhere
in the Annual Report. Sales and operating income (loss) from continuing
operations by industry segment are shown in the Sales and Operating Income by
Industry Segment section of this report; such information with respect to 1996,
1995 and 1994 is considered an integral part of this note.
Sales to U.S. government agencies, which were predominantly to the Department of
Defense and NASA, were $527 million, $537 million and $542 million in 1996, 1995
and 1994, respectively. In October 1993, the Company was selected by NASA to
continue as the base operations contractor at the KSC. The award/incentive fee
contract contributed sales of $172 million in 1996 and 1995 and $176 million in
1994. The contract expires on October 31, 1997 and has three 2-year renewal
options at the discretion of the government.
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<PAGE> 40
Additional information relating to the Company's operations in the various
industry segments is as follows:
<TABLE>
<CAPTION>
Depreciation and Capital
(In thousands) Amortization Expense Expenditures
------------------------------ -----------------------------
1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Instruments $10,976 $11,887 $11,621 $ 4,550 $ 4,639 $ 5,398
Mechanical Components 5,729 5,585 6,091 10,367 6,978 6,197
Optoelectronics 14,880 13,220 10,690 47,327 35,925 17,748
Technical Services 8,193 7,698 7,447 16,714 12,047 7,314
Corporate 1,158 1,036 941 1,532 2,250 620
------- ------- ------- ------- ------- -------
$40,936 $39,426 $36,790 $80,490 $61,839 $37,277
======= ======= ======= ======= ======= =======
</TABLE>
Identifiable
(In thousands) Assets
-------------------------------
1996 1995 1994
-------- -------- --------
Instruments $221,831 $225,358 $220,232
Mechanical Components 110,276 100,363 93,721
Optoelectronics 235,969 200,719 193,302
Technical Services 117,340 113,901 129,995
Corporate and Other 137,484 163,574 155,879
--------- -------- --------
$822,900 $803,915 $793,129
======== ======== ========
Corporate assets consist primarily of cash and cash equivalents, prepaid pension
and taxes, and investments.
Information relating to geographic areas is as follows:
<TABLE>
<CAPTION>
(In thousands)
Operating Income (Loss)
Sales From Continuing Operations
--------------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
U.S. $1,066,561 $1,065,424 $1,026,970 $ 68,108 $ 82,256 $ 57,679
Germany 80,465 87,690 61,310 5,154 4,508 (43,492)
Other Non-U.S. 280,226 266,464 244,276 38,759 25,102 9,748
Corporate - - - (24,391) (29,193) (34,882)
---------- ---------- ---------- -------- -------- --------
$1,427,252 $1,419,578 $1,332,556 $ 87,630 $ 82,673 $(10,947)
========== ========== ========== ======== ======== ========
</TABLE>
(In thousands)
Identifiable Assets
--------------------------------------
1996 1995 1994
-------- -------- --------
U.S. $380,080 $353,130 $341,725
Germany 86,881 89,834 100,650
Other Non-U.S. 218,455 197,377 194,875
Corporate and
Other 137,484 163,574 155,879
-------- -------- --------
$822,900 $803,915 $793,129
======== ======== ========
Transfers between geographic areas were not material.
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<PAGE> 41
21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly financial information follows:
<TABLE>
<CAPTION>
(In thousands except per share data)
Quarters
------------------------------------------------------------
First Second Third Fourth Year
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
1996
- ----
Sales $346,791 $355,907 $354,747 $369,807 $1,427,252
Operating income from continuing
operations 19,925 21,414 23,201 23,090 87,630
Income from continuing operations
before income taxes 18,030 20,355 20,946 21,023 80,354
Income from continuing operations 11,882 14,143 14,201 14,254 54,480
Net income 12,782 15,639 15,637 16,098 60,156
Earnings per share:
Continuing operations .25 .30 .30 .30 1.15
Net income .27 .33 .33 .34 1.27
Cash dividends per common share .14 .14 .14 .14 .56
Market price of common stock:
High 25.13 23.50 21.38 21.13
Low 20.38 19.88 16.88 16.25
Close 22.38 21.38 17.88 20.88
1995
- ----
Sales $338,230 $342,251 $361,602 $377,495 $1,419,578
Operating income from continuing
operations 15,673 20,435 19,086 27,479 82,673
Income from continuing operations
before income taxes 15,473 20,268 20,304 30,014 86,059
Income from continuing operations 9,352 12,343 13,669 18,940 54,304
Net income 13,689 16,376 15,978 21,997 68,040
Earnings per share:
Continuing operations a) .17 .23 .27 .40 1.05
Net income a) .25 .31 .32 .46 1.32
Cash dividends per common share .14 .14 .14 .14 .56
Market price of common stock:
High 15.50 18.38 20.00 24.50
Low 13.00 15.00 16.38 18.00
Close 15.00 16.75 19.50 24.25
</TABLE>
a) The sum of the quarterly earnings per share does not equal the year's
earnings per share. This is due to changes in weighted average shares of
common stock outstanding resulting from share repurchases in 1995.
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<PAGE> 42
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS OF EG&G, INC.:
We have audited the accompanying consolidated balance sheets of EG&G, Inc. (a
Massachusetts corporation) and subsidiaries as of December 29, 1996 and December
31, 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 29, 1996, December 31, 1995
and January 1, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EG&G, Inc. and
subsidiaries as of December 29, 1996 and December 31, 1995, and the results of
their operations and their cash flows for the years ended December 29, 1996,
December 31, 1995 and January 1, 1995, in conformity with generally accepted
accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
January 2, 1995, the Company changed its method of accounting for depreciation
of certain plant and equipment.
/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP
Boston, Massachusetts
January 21, 1997
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<PAGE> 43
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
a) DIRECTORS
The information required by this Item with respect to Directors is contained on
Pages 2 through 7 of the Company's 1997 Proxy Statement under the captions
"Election of Directors" and "Information Relative to the Board of Directors and
Certain of its Committees" and is herein incorporated by reference.
b) EXECUTIVE OFFICERS
The information required by this item with respect to Executive Officers is
contained in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be disclosed by this Item is contained in Pages 14 -
20 of the Company's 1997 Proxy Statement from under the caption "Summary
Compensation Table" up to and including "Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Value Option Table" and Notes thereto, and is
herein incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is contained on Pages 8 - 9 of the
Company's 1997 Proxy Statement under the captions "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" and is herein
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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<PAGE> 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
1. FINANCIAL STATEMENTS
Included in Part II, Item 8:
Consolidated Balance Sheet as of December 29, 1996 and December
31, 1995
Consolidated Statement of Operations for the Three Years Ended
December 29, 1996
Consolidated Statement of Stockholders' Equity for the Three
Years Ended December 29, 1996
Consolidated Statement of Cash Flows for the Three Years Ended
December 29, 1996
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
2. FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants on Financial Statement
Schedules
Schedule II - Valuation and Qualifying Accounts
Financial statement schedules, other than those above, are omitted
because of the absence of conditions under which they are required or
because the required information is given in the financial statements
or notes thereto.
Separate financial statements of the Registrant are omitted
since it is primarily an operating company, and since all
subsidiaries included in the consolidated financial statements
being filed, in the aggregate, do not have minority equity
interests and/or indebtedness to any person other than the
Registrant or its consolidated subsidiaries in amounts which
together exceed five percent of total consolidated assets.
3. EXHIBITS
3.1 The Company's Restated Articles of Organization, as filed with the
Massachusetts Secretary of the Commonwealth on July 31, 1995, were
filed with the Commission on September 21, 1995 as Exhibit 4(i) to the
Company's Registration Statement on Form S-8 and are herein
incorporated by reference.
-43-
<PAGE> 45
3.2 The Company's By-Laws as amended by the Board of Directors
on May 3, 1995, were filed with the Commission on September
21, 1995, as Exhibit 4(ii) to the Company's Registration
Statement on Form S-8, and are herein incorporated by
reference.
4.1 The form of certificate used to evidence ownership of EG&G
Common Stock, $1 par value, was filed as Exhibit 4(a) to
EG&G's Registration Statement on Form S-3, File No. 2-69642
and is herein incorporated by reference.
4.2 Form of Indenture dated June 28, 1995 between the Company
and the First National Bank of Boston, as Trustee was filed
with the Commission as Exhibit 4.1 to EG&G's Registration
Statement on Form S-3, File No. 33-59675 and is herein
incorporated by reference.
*10.1 EG&G, Inc. Supplemental Executive Retirement Plan
revised as of April 19, 1995 was filed as Exhibit 10.1 to
EG&G's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, and is herein incorporated by reference.
*10.2 EG&G, Inc. Economic Value Added Plan as amended and restated
by the EG&G, Inc. Board of Directors on April 23, 1996.
10.3 3-Year Competitive Advance and Revolving Credit Facility
Agreement ("3-Year Agreement") dated as of March 21, 1994
among EG&G, Inc., the Lenders Named Herein and Chemical Bank
as Administrative Agent; Amendment No. 1 to 3-Year Agreement
dated as of March 15, 1995; and Amendment No. 2 to 3-Year
Agreement dated as of March 14, 1996 was filed as Exhibit 10.3
to EG&G's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, and are herein incorporated by
reference. Amendment No. 3 to 3-Year Agreement dated as of
March 7, 1997 is attached hereto as Exhibit 10.3.
10.4 364-Day Competitive Advance and Revolving Credit Facility
Agreement ("364- Day Agreement") dated as of March 21, 1994
among EG&G, Inc., the Lenders Named Herein and Chemical Bank
as Administrative Agent; Amendment No. 1 to 364-Day Agreement
dated as of March 15, 1995; and Amendment No. 2 to 364-Day
Agreement dated as of March 14, 1996 was filed as Exhibit 10.4
to EG&G's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, and are herein incorporated by
reference. Amendment No. 3 to 364-day Agreement dated as of
March 7, 1997 is attached hereto as Exhibit 10.4.
*10.5 Employment Contracts:
(1) Employment contract between John M. Kucharski and EG&G dated
November 1, 1993.
(2) Employment contract between Murray Gross and EG&G dated
November 1, 1993.
(3) Employment contract between John F. Alexander, II and EG&G dated
November 1, 1993.
(4) Employment contract between Angelo Castellana and EG&G dated
November 1, 1993.
-44-
<PAGE> 46
(5) Employment contract between Dale L. Fraser and EG&G dated November
1, 1993.
(6) Employment contract between Daniel T. Heaney and EG&G dated June 1,
1995.
(7) Employment contract between Anthony L. Klemmer and EG&G dated
January 1,1997.
(8) Employment contract between E. Lavonne Lewis and EG&G dated June 1,
1995.
(9) Employment contract between Deborah S. Lorenz and EG&G dated
November 1, 1993.
(10) Employment contract between Donald H. Peters and EG&G dated
November 1, 1993.
(11) Employment contract between William J. Ribaudo and EG&G dated
March 29, 1996.
(12) Employment contract between Luciano Rossi and EG&G
dated November 1, 1993.
(13) Employment contract between Theodore P. Theodores and EG&G dated
April 23, 1996.
(14) Employment contract between C. Michael Williams and EG&G dated
November 1, 1993.
Except for the name of the officer in the employment contracts identified by
numbers 3 through and including 14, the form of said employment contracts is
identical in all respects. The employment contracts identified by numbers 1 and
2 are identical to each other and are virtually identical to the contracts
identified by numbers 3 through 14 except that they provide for a longer
contract term, three years as opposed to one year. The employment contract
between John F. Alexander, II and EG&G is representative of the employment
contracts of the executive officers and is attached hereto as Exhibit 10.5.
*10.6 The EG&G, INC. 1978 NON-QUALIFIED STOCK OPTION PLAN as
amended by the Board of Directors on January 26, 1988, was
filed with the Commission as Exhibit 14(a)3.(v) to EG&G's
Annual Report on Form 10-K for the fiscal year ending January
3, 1988, and is herein incorporated by reference.
*10.7 The EG&G, INC. 1982 INCENTIVE STOCK OPTION PLAN as
amended by the Board of Directors on January 24, 1990, was
filed with the Commission as Exhibit B on pages 37-42 of the
Company's 1990 Proxy Statement and is herein incorporated by
reference.
*10.8 The EG&G, Inc. 1992 STOCK OPTION PLAN was filed as Exhibit 4(v) to
EG&G's Registration Statement on Form S-8, File No. 33-49898 and is
herein incorporated by reference.
-45-
<PAGE> 47
21 Subsidiaries of the Registrant.
23 Consent of Independent Public Accountants.
24 Power of Attorney (appears on signature page).
27 Financial Data Schedule.
*This exhibit is a management contract or compensatory plan or arrangement
required to be filed as an Exhibit pursuant to Item 14(c) of Form 10-K.
(b) REPORTS ON FORM 8-K
A report on Form 8-K was filed with the Commission on December 18,
1996 regarding a $4.2 million patent infringement judgment against
EG&G Astrophysics and its parent, EG&G, Inc.
(c) PROXY STATEMENT
EG&G's 1997 Proxy Statement, in definitive form, was filed electronically on
March 6, 1997, with the Securities and Exchange Commission in Washington, D.C.
pursuant to the Commission's Rule 14a-6.
-46-
<PAGE> 48
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULES
To EG&G, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of EG&G, Inc. included in this Form 10-K
and have issued our report thereon dated January 21, 1997. Our audit was made
for the purpose of forming an opinion on the basic financial statements taken as
a whole. Schedule II is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP
Boston, Massachusetts
January 21, 1997
-47-
<PAGE> 49
<TABLE>
SCHEDULE II
EG&G, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 29, 1996
<CAPTION>
(In thousands) Additions
(Subtractions)
Balance Charged Accounts Balance
at Beginning (Credited) Charged at End
Description of Year to Income Off Other of Year
- ----------- ------------ ------------- -------- ----- -------
<S> <C> <C> <C> <C> <C>
Reserve for
Doubtful Accounts
- -----------------
Year Ended
January 1, 1995 $6,126 $1,255 $(1,868) $307 $5,820
Year Ended
December 31, 1995 $5,820 $ (468) $(1,214) $218 $4,356
Year Ended
December 29, 1996 $4,356 $2,055 $(2,217) $ 47 $4,241
</TABLE>
-48-
<PAGE> 50
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated January 21, 1997, included in this Form 10-K,
into Registration Statements previously filed by EG&G, Inc. on, respectively,
Form S-8, File No. 2-61241; Form S-8, File No. 2-98168; Form S-8, File No.
33-36082; Form S-8, File No. 33-35379; Form S-8, File No. 33-49898; Form S-8,
File No. 33-57606; Form S-8, File No. 33-54785; Form S-8, File No. 33-62805;
Form S-8, File No. 33-8811 and Form S-3, File No. 33-59675.
/s/Arthur Andersen LLP
- ----------------------
Arthur Andersen LLP
Boston, Massachusetts
March 27, 1997
POWER OF ATTORNEY
We, the undersigned officers and directors of EG&G, Inc., hereby severally
constitute John M. Kucharski, and Murray Gross, and each of them singly, our
true and lawful attorneys with full power to them, and each of them singly, to
sign for us and in our names, in the capacities indicated below, this Annual
Report on Form 10-K and any and all amendments to said Annual Report on Form
10-K, and generally to do all such things in our name and behalf in our
capacities as officers and directors to enable EG&G, Inc. to comply with the
provisions of the Securities Exchange Act of 1934, and all requirements of the
Securities and Exchange Commission, hereby rectifying and confirming signed by
our said attorneys, and any and all amendments thereto.
Witness our hands on the date set forth below.
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.
EG&G, Inc.
March 18, 1997 By:/s/John M. Kucharski
-----------------------
John M. Kucharski
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
March 18, 1997 By:/s/John F. Alexander, II
---------------------------
John F. Alexander, II
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
March 18, 1997 By:/s/William J. Ribaudo
------------------------
William J. Ribaudo
Corporate Controller
(Principal Accounting Officer)
-49-
<PAGE> 51
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 date indicated:
By: /s/John M. Kucharski
--------------------
John M. Kucharski, Director
Date: March 18, 1997
By: /s/Tamara J. Erickson
---------------------
Tamara J. Erickson, Director
Date: March 20, 1997
By: /s/Robert F. Goldhammer
-----------------------
Robert F. Goldhammer, Director
Date: March 24, 1997
By: /s/John B. Gray
---------------
John B. Gray, Director
Date: March 18, 1997
By: /s/Kent F. Hansen
-----------------
Kent F. Hansen, Director
Date: March 18, 1997
By: /s/Nicholas A. Lopardo
----------------------
Nicholas A. Lopardo, Director
Date: March 19, 1997
By: /s/Greta E. Marshall
--------------------
Greta E. Marshall, Director
Date: March 26, 1997
By:
----------------
Fred B. Parks, Director
Date: March __, 1997
By: /s/William F. Pounds
--------------------
William F. Pounds, Director
Date: March 26, 1997
By: /s/John Larkin Thompson
-----------------------
John Larkin Thompson, Director
Date: March 18, 1997
By: /s/G. Robert Tod
----------------
G. Robert Tod, Director
Date: March 26, 1997
-50-
<PAGE> 52
EXHIBIT INDEX
Exhibit Exhibit Name
Number ------------
- ------
10.2 EG&G, Inc. Economic Value Added Plan as amended and restated by the EG&G,
Inc. Board of Directors on April 23, 1996.
10.3 Amendment No. 3 dated as of March 7, 1997 to 3-Year Competitive Advance and
Revolving Credit Facility Agreement dated as of March 21, 1994 among EG&G,
Inc., the Lenders Named Herein and The Chase Manhattan Bank (as successor
to Chemical Bank) as Administrative Agent.
10.4 Amendment No. 3 dated as of March 7, 1997 to 364-Day Competitive Advance
and Revolving Credit Facility Agreement dated as of March 21, 1994 among
EG&G, Inc., the Lenders Named Herein and The Chase Manhattan Bank (as
successor to Chemical Bank) as Administrative Agent.
10.5 Employment Contract between John F. Alexander, II and EG&G, Inc.
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
-51-
<PAGE> 1
EXHIBIT 10.2
AS AMENDED AND RESTATED BY THE
EG&G, INC. BOARD OF DIRECTORS
ON APRIL 23, 1996
EG&G, INC.
EVA INCENTIVE PLAN
ARTICLE I
Statement of Purpose
--------------------
1.1 The purpose of the EVA Incentive Plan (the "Plan") is to provide a
system of incentive compensation which will promote the maximization of
Economic Value Added ("EVA") over the long term. In order to align
management incentives with shareholder interests, incentive compensation
will reward the creation of value. This Plan will tie incentive
compensation to EVA and thereby reward management for creating value.
1.2 EVA is the performance measure of value creation for EG&G, Inc. (the
"Company"). Managers create value when they employ capital in an
endeavor that generates a return that exceeds the cost of the capital
employed. Managers lose value when they employ capital in an endeavor
that generates a return that is less than the cost of capital employed.
EVA measures the total value created (or lost) by management by
subtracting the cost of capital employed from the operating profit after
tax generated by an EVA Business Unit, as hereinafter defined.
ARTICLE II
Definitions
-----------
Unless the context provides a different meaning, the following terms shall have
the following meanings:
"Act" means the Securities Exchange Act of 1934, as amended.
"Actual EVA" means, with respect to an EVA Business Unit for a fiscal year, the
EVA of such EVA Business Unit for such year as determined by the Chief Financial
Officer with the concurrence of the Committee.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE> 2
"Capital" means, with respect to an EVA Business Unit for a fiscal year, the
investment made in such EVA Business Unit, as determined by the Chief Financial
Officer with the concurrence of the Committee for such year. Each component of
Capital will be measured by computing an average balance based on the ending
monthly balance for the twelve months of a fiscal year.
"Capital Charge" means, with respect to an EVA Business Unit for a fiscal year,
the deemed opportunity cost of employing Capital in the business of such EVA
Business Unit for such year. The Capital Charge is computed as follows:
Capital Charge = Capital x Cost of Capital
"Cause" shall have the meaning set forth in the personnel policies for the EVA
Business Unit by which a Participant is employed at the time of termination.
Notwithstanding the foregoing, in the event of a Change of Control, "Cause"
shall mean:
(i) misappropriating any funds or property of the EVA Business Unit;
(ii) unreasonable refusal to perform the duties assigned to the
Participant;
(iii) conviction of a felony;
(iv) continuous conduct bringing notoriety to the EVA Business Unit
and having an adverse effect on the name or public image of the
EVA Business Unit; or
(v) continued failure by the Participant to observe any provisions
of any written employment contract with the EVA Business Unit
after being informed of such breach.
"Change in Control" means that any of the following events shall occur or be
deemed to have occurred:
(i) any "person", as such term is used in Section 13(d) and 14(d) of the Act
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportion as their ownership of stock
in the Company), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the
Company, and any new director whose election by the Board of Directors
or nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds of the directors then still in office who
were either directors at the beginning of the period
<PAGE> 3
or whose election or whose nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board of
Directors;
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
"Chief Executive Officer" means the Chief Executive Officer of the Company as
designated by the Board of Directors of the Company from time to time.
"Chief Financial Officer" means the Chief Financial Officer of the Company as
designated by the Board of Directors of the Company from time to time.
"Committee" means the Compensation and Stock Option Committee of the Board of
Directors of the Company or such other committee as such Board may designate
from time to time.
"Company" means EG&G, Inc., a Massachusetts corporation, and its successors and
assigns, including any corporation with which the Company is merged or
consolidated.
"Cost of Capital" means for a fiscal year the weighted average of the after-tax
cost of debt and the cost of equity for such year, as determined by the Chief
Financial Officer with the concurrence of the Committee.
"Declared Incentive" means, with respect to a Participant for a fiscal year, the
product of the Initial Declared Incentive multiplied by the Individual
Performance Factor, if any.
"EVA" means, with respect to an EVA Business Unit for a fiscal year, the NOPAT
of such EVA Business Unit for such year minus the Capital Charge of such EVA
Business Unit for such year, all as determined by the Chief Financial Officer
with the concurrence of the Committee. EVA may be positive or negative.
"EVA Business Unit" means a business unit or group of business units, including
the Company, that are uniquely identified for the purpose of calculating EVA.
"Expected Improvement in EVA" means the constant EVA improvement that is added
to shift the target up each year as determined by the Company from time to time.
This is determined by the expected growth in EVA per year with respect to an EVA
Business Unit.
<PAGE> 4
"Executive Officer" means a corporate officer of the Company elected by the
Board of Directors of the Company.
"Incentive Multiple" means, with respect to an EVA Business Unit for a fiscal
year, [(the Actual EVA minus the Target EVA) divided by the Leverage Factor]
plus 1.0.
"Incentive Reserve For Highly-Compensated Employees" means, with respect to a
Participant who is either an Executive Officer of the Company, a general manager
of an EVA Business Unit, or a highly compensated employee as determined from
time to time by the Committee, a bookkeeping record of an account to which any
portion of the Declared Incentive remaining after current year distribution to
the Participant is credited, or debited as the case may be, from time to time
under the Plan, and from which distribution amounts not covered by the Declared
Incentive are debited.
"Individual Performance Factor" means, with respect to a Participant, the
addition or subtraction of up to 25% of the Declared Incentive adjusted to
reflect individual job performance for the fiscal year. The Individual
Performance Factor may be utilized at the discretion of the manager of an EVA
Business Unit provided that the total accrued incentive for the EVA Business
Unit does not increase or decrease as a result of the utilization of the
Individual Performance Factor.
"Initial Declared Incentive" means, with respect to a Participant for a fiscal
year, the product of the Target Incentive multiplied by the Incentive Multiple.
"Leverage Factor" means, with respect to an EVA Business Unit for a fiscal year,
the negative (positive) deviation from Target EVA necessary before a zero (two
times) Target Incentive is earned as determined by the Committee from time to
time.
"Incentive Reserve For Non-Highly Compensated Employees" means, with respect to
employees not subject to the Incentive Reserve For Highly-Compensated Employees,
a bookkeeping record of an account to which only negative Declared Incentives
are credited from time to time under the Plan and against which any positive
incentive payments are offset in determining any current distribution.
"Reserve Balance For Non-Highly Compensated Employees" means, with respect to a
Participant subject to the Incentive Reserve For Non-Highly Compensated
Employees, a bookkeeping record of the net balance following the end of each
fiscal year of the negative amounts, if any, credited against such
Participant's Incentive Reserve For Non-Highly Compensated Employees as offset
by any positive Declared Incentives. The Reserve Balance For Non-Highly
Compensated Employees shall always be zero or a number less than zero.
"NOPAT" means, with respect to an EVA Business Unit for a fiscal year, the net
operating profit after taxes for such fiscal year, as determined by the Chief
Financial Officer with the concurrence of the Committee.
<PAGE> 5
"Participant" means, for a fiscal year, each salaried employee who is designated
as a Participant, in the case of Executive Officers of the Company, by the
Committee, and in all other cases, by the Chief Executive Officer or his
designee.
"Plan" means this EG&G, Inc. EVA Incentive Plan, as amended from time to time.
"Reserve Balance For Highly-Compensated Employees" means, with respect to a
Participant subject to the Incentive Reserve For Highly-Compensated Employees, a
bookkeeping record of the net balance of the amounts credited to and debited
against such Participant's Incentive Reserve For Highly-Compensated Employees
following the end of each fiscal year. For a Participant's first year of
participation in the Plan, such Participant's Reserve Balance For
Highly-Compensated Employees shall initially be equal to zero.
"Target EVA" means, with respect to an EVA Business Unit for the initial year
that such EVA Business Unit is subject to the Plan, the level of EVA as
determined by the Company.
After the initial year that an EVA Business Unit is subject to the Plan, the
Target EVA for such EVA Business Unit for each succeeding fiscal year shall be
revised according to the following formula:
Target EVA = [(Prior Fiscal Year's Actual EVA + Prior Fiscal Year's Target
EVA) divided by 2] + Expected Improvement in EVA
"Target Incentive" means, with respect to a Participant for a fiscal year, the
Target Incentive for such Participant for such fiscal year as determined by the
Committee in the case of Participants who are Executive Officers of the Company
at the time of determination, and, in all other cases, by the Chief Executive
Officer or his designee.
ARTICLE III
Determinations and Distribution of Incentives
---------------------------------------------
3.1 DETERMINATIONS. For each fiscal year of the Company beginning with the
1995 fiscal year, the Company shall determine with respect to such
fiscal year:
(1) the persons who will be Participants;
(2) the EVA Business Unit or Units for each such Participant and the
weighting between or among said Units;
(3) the Target Incentive for each Participant;
(4) the minimum and maximum ranges for the Individual Performance
Factors; and
(5) the Target EVA, Leverage Factor, and Expected Improvement in EVA
for each EVA Business Unit.
As soon as practicable following the close of such fiscal year, the
Company shall determine the following with respect to such fiscal year
for each Participant:
<PAGE> 6
(1) the Actual EVA for each EVA Business Unit;
(2) the Incentive Multiple by EVA Business Unit; (3) the Individual
Performance Factors, if any;
(4) the Initial Declared Incentive; and
(5) the Declared Incentive.
3.2 Distribution.
------------
A. As soon as practicable following the close of each fiscal year
of the Company, but no later than March 15 following such close,
the Company, with respect to those Participants subject to the
Incentive Reserve For Highly-Compensated Employees, shall:
(1) Pay out the prescribed distribution first, to the extent
possible, from the Declared Incentive, and then from the
Reserve Balance For Highly-Compensated Employees;
(2) Add the remaining portion, if any, of the Declared
Incentive for such fiscal year (including any negative
incentives) to the Incentive Reserve For
Highly-Compensated Employees; and
(3) Carry the remaining Reserve Balance For
Highly-Compensated Employees (positive or negative)
forward to the next fiscal year.
<TABLE>
The prescribed distribution ratios for the Incentive Reserve For
Highly-Compensated Employees for a Participant are:
<S> <C>
First year of the Plan 80%
Second year of the Plan 67%
Third year of the Plan 57%
Fourth and subsequent years of the Plan 50%
</TABLE>
All distributions from the Incentive Reserve For Highly-Compensated
Employeesshall be made on a last-in, first-out basis, such that the
distribution for any given fiscal year shall come first from the
Declared Incentive for that fiscal year, with any remainder of that
distribution coming from the Reserve Balance For Highly-Compensated
Employees attributable to years prior to the fiscal year for which the
current distribution is being made.
B. As soon as practicable following the close of each fiscal year
of the Company, but no later than March 15 following such close,
the Company shall pay the Declared Incentive as offset by the
Reserve Balance For Non-Highly Compensated Employees as of the
close of the fiscal year, but before considering the Declared
Incentive, to those Participants subject to the Incentive
Reserve For Non-Highly Compensated Employees.
<PAGE> 7
3.3 NEGATIVE RESERVE BALANCE. If, as a result of a negative EVA, a Reserve
Balance For Highly-Compensated Employees, or a Reserve Balance For
Non-Highly Compensated Employees has a deficit, no Participant shall be
required, at any time, to make a cash reimbursement to his or her
Incentive Reserve For Highly-Compensated Employees or Incentive Reserve
For Non-Highly Compensated Employees. Such negative Reserve Balance For
Highly-Compensated Employees or Reserve Balance For Non-Highly
Compensated Employees, however, will be carried forward and will be
netted against future Declared Incentives.
3.4 LUMP SUM. All distributions from the Plan shall be made in a cash lump
sum unless payment is deferred in a timely manner by the Participant
with the consent of the Company under the Company's incentive deferral
policy as in effect from time to time.
3.5 INTEREST. No interest shall be paid on or accrue to any Reserve Balance
For Highly- Compensated Employees.
ARTICLE IV
Plan Matters and Change in Status
---------------------------------
4.1 PLAN MATTERS. The Committee on behalf of the Company shall determine all
Plan matters regarding the Plan with respect to Participants who are
Executive Officers at the time of determination. Unless otherwise
expressly reserved to the Committee, the Chief Executive Officer or his
designee on behalf of the Company shall determine all Plan matters with
respect to all other Participants.
4.2 HIRES, PROMOTIONS AND TRANSFERS. A Participant who is hired, transferred
or promoted during a fiscal year into a position qualifying for
participation in the Plan will participate on a prorated basis in the
year of hire, transfer or promotion based on the percentage of the
fiscal year the Participant is in such qualifying position. A
Participant who transfers his or her employment from one participating
EVA Business Unit to another EVA Business Unit will retain his or her
Incentive Reserve For Highly-Compensated Employees or Incentive Reserve
For Non-Highly Compensated Employees and the Initial Declared Incentive
and Declared Incentive for such Participant shall be pro-rated based on
the time spent in each EVA Business Unit.
4.3 RETIREMENT. A Participant who terminates employment with the Company
during a fiscal year by virtue of retirement at age 55 or older shall be
entitled to receive the positive Reserve Balance For Highly-Compensated
Employees, if any, and may be eligible for a share of the Declared
Incentive. The Declared Incentive shall be calculated as if the
Participant had remained employed as of the end of the fiscal year.
Participant's share of the Declared Incentive will be calculated by
multiplying the Declared Incentive by a proration factor equal to the
number of full weeks of Participant's actual employment during the
fiscal year divided by fifty-two (52). Eligibility will be based on the
authorization of the Participant's manager and must be
<PAGE> 8
approved at the start of the fiscal year in which the retirement is to
occur. Payment of the positive Reserve Balance For Highly-Compensated
Employees, if any, and Participant's share of any Declared Incentive
will be made at the same time as payments under the Plan are made to
Participants actively employed by the Company.
4.4 DISABILITY. A Participant who becomes permanently disabled, as defined
in the Company's long-term disability benefits program, shall be
entitled to receive the positive Reserve Balance For Highly-Compensated
Employees, if any, and may be eligible for a share of the Declared
Incentive. The Declared Incentive shall be calculated as if the
Participant had remained employed as of the end of the fiscal year.
Participant's share of the Declared Incentive will be calculated by
multiplying the Declared Incentive by a proration factor equal to the
number of full weeks of Participant's actual employment during the
fiscal year divided by fifty-two (52). Eligibility will be based on the
authorization of the Participant's manager. Payment of the positive
Reserve Balance For Highly-Compensated Employees, if any, and
Participant's share of any Declared Incentive will be made at the same
time as payments under the Plan are made to Participants actively
employed by the Company.
4.5 DEATH. If a Participant terminates employment with the Company during a
fiscal year by reason of death, the estate of the Participant shall be
entitled to receive the positive Reserve Balance For Highly-Compensated
Employees, if any, and may be eligible for a share of the Declared
Incentive. The Declared Incentive shall be calculated as if the
Participant had remained employed as of the end of the fiscal year.
Participant's share of the Declared Incentive will be calculated by
multiplying the Declared Incentive by a proration factor equal to the
number of full weeks of Participant's actual employment during the
fiscal year divided by fifty-two (52). Eligibility will be based on the
authorization of the Participant's manager. Payment of the positive
Reserve Balance For Highly-Compensated Employees, if any, and
Participant's share of any Declared Incentive will be made at the same
time as payments under the Plan are made to Participants actively
employed by the Company.
4.6 INVOLUNTARY TERMINATION WITHOUT CAUSE. A Participant whose employment is
terminated by the Company or any subsidiary without Cause shall forfeit
his or her Declared Incentive, Incentive Reserve For Highly-Compensated
Employees and any Reserve Balance For Highly-Compensated Employees
unless a different determination is made by the Company.
4.7 VOLUNTARY TERMINATION. In the event that a Participant voluntarily
terminates employment with the Company or any of its subsidiaries, the
right of the Participant to his or her Declared Incentive, Incentive
Reserve For Highly-Compensated Employees and any Reserve Balance For
Highly-Compensated Employees shall be forfeited unless a different
determination is made by the Company.
<PAGE> 9
4.8 INVOLUNTARY TERMINATION FOR CAUSE. In the event of termination of
employment for Cause, the right of the Participant to his or her
Declared Incentive, Incentive Reserve For Highly-Compensated Employees
and any Reserve Balance For Highly-Compensated Employees shall be
forfeited unless a different determination is made by the Company.
4.9 BREACH OF AGREEMENT. Notwithstanding any other provision of the Plan or
any other agreement, in the event that a Participant shall breach any
non-competition agreement or provision relating to the Company or breach
any agreement with respect to the post-employment conduct of such
Participant, including those contained in any benefit or incentive plan
or award, the Incentive Reserve For Highly-Compensated Employees held by
such Participant shall be forfeited.
4.10 CHANGE IN CONTROL. Upon a Change in Control, the Plan shall terminate
and positive Reserve Balances For Highly-Compensated Employees shall be
paid to Participants unless the Plan is continued on no less beneficial
terms to the Participants. Payments under this Section 4.10 shall be
made without regard to whether the deductibility of such payments (or
any other "parachute payments," as that term is defined in Section 280G
of the Code, to or for the benefit of the Participant) would be limited
or precluded by Section 280G and without regard to whether such payments
(or any other "parachute payments" as so defined) would subject the
Participant to the federal excise tax levied on certain "excess
parachute payments" under Section 4999 of the Code; provided that if the
total of all "parachute payments" to or for the benefit of the
Participant, after reduction for all federal, state and local taxes
(including the tax described in Section 4999 of the Code, if applicable)
with respect to such payments (the "Total After-Tax Payments"), would be
increased by the limitation or elimination of any payment under this
Section 4.10, amounts payable under this Section 4.10 shall be reduced
to the extent, and only to the extent, necessary to maximize the Total
After-Tax Payments. The determination as to whether and to what extent
payments under this Section 4.10 are required to be reduced in
accordance with the preceding sentence shall be made at the Company's
expense by Arthur Andersen LLP or by such other certified public
accounting firm as the Board of Directors of the Company may designate
prior to a Change in Control of the Company. In the event of any
underpayment or overpayment under this Section 4.10 as determined by
Arthur Andersen LLP (or such other firm as may have been designated in
accordance with the preceding sentence), the amount of such underpayment
or overpayment shall forthwith be paid to the Participant or refunded to
the Company, as the case may be, with interest at the applicable federal
rate provided for in Section 7872(f)(2) of the Code.
4.11 NO GUARANTEE. Participation in the Plan is no guarantee that payments
under the Plan will be made or that selection as a Participant will be
made for the subsequent fiscal year.
<PAGE> 10
ARTICLE V
General Provisions
------------------
5.1 WITHHOLDINGS. The Company shall have the right to withhold all amounts,
including but not limited to, taxes, which in the determination of the
Company, are required to be withheld under law with respect to any
amount due or paid under the Plan.
5.2 EXPENSES. All expenses and costs in connection with the adoption and
administration of the Plan shall be borne by the Company out of its
general funds.
5.3 CLAIMS FOR BENEFITS. Participants who terminate service for any reason
will be deemed to have made a claim for benefits and no written claim
will be required. Claims for benefits will be decided by the Chief
Executive Officer or, in the case of a claim pertaining to an Executive
Officer, by the Committee (collectively referred to as the
"Adjudicator"). If the Adjudicator believes that a terminated
Participant is not entitled to benefits, it shall notify the Participant
in writing of the denial of benefits within 90 days of the Participant's
termination of service. In the event that a claim is wholly or partially
denied, the Participant or his representative will receive a written
explanation of the reason for denial. The Participant or his
representative may request a review of the denied claim within 60 days
of receipt of the denial and, in connection therewith, may review
pertinent documents and submit comments in writing. Upon receipt of an
appeal, the Adjudicator shall decide the appeal within 60 days of
receipt. The decision on appeal shall be in writing, shall include
specific reasons for the decision and shall refer to pertinent
provisions of the Plan on which the decision is based. In reaching its
decision, the Adjudicator shall have complete discretionary authority to
determine all questions arising in the interpretation and administration
of the Plan and to construe the terms of the Plan, including any
doubtful or disputed terms and the eligibility of a Participant for
benefits.
5.4 ACTION TAKEN IN GOOD FAITH. The Company may employ attorneys,
consultants, accountants or other persons and the Company's directors
and officers shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or Chief
Executive Officer in good faith shall be final and binding upon all
employees, the Company and all other interested parties. No member of
the Committee and no officer, director, employee or representative of
the Company, or any of its affiliates acting on behalf of or in
conjunction with the Committee, shall be personally liable for any
action, determination, or interpretation, whether of commission or
omission, taken or made with respect to the Plan.
5.5 RIGHTS PERSONAL TO EMPLOYEES. Any rights provided to an employee under
the Plan shall be personal to such employee, shall not be transferable
(except by will or pursuant to the laws of descent or distribution), and
shall be exercisable during the employee's lifetime, only by such
employee.
<PAGE> 11
5.6 DISTRIBUTION. Upon termination of the Plan or suspension for a period of
more than 90 days, the positive Reserve Balance For Highly-Compensated
Employees of each Participant shall be distributed as soon as
practicable but in no event later than 90 days from such event. The
Committee, in its sole discretion, may accelerate distribution of the
balance of any Incentive Reserve For Highly-Compensated Employees, in
whole or in part, at any time without penalty.
5.7 NON-ALLOCATION OF AWARD. In the event of a suspension or termination of
the Plan during any fiscal year, as provided herein at Section 10.1, the
Declared Incentive for such year shall be deemed forfeited and no
portion thereof shall be allocated to Participants. In the event of a
suspension, any such forfeiture shall not affect the calculation of EVA
in any subsequent year.
ARTICLE VI
Limitations
-----------
6.1 NO CONTINUED EMPLOYMENT. Nothing contained herein shall provide any
employee with any right to continued employment or in any way abridge
the rights of the Company and its subsidiaries to determine the terms
and conditions of employment and whether to terminate employment of any
employee. Neither the establishment of the Plan or the grant of an award
or bonus hereunder shall be deemed to constitute an express or implied
contract of employment for any period of time or in any way abridge the
rights of the Company or any of its subsidiaries to determine the terms
and conditions of employment or to terminate the employment of any
employee with or without Cause at any time.
6.2 NO VESTED RIGHTS. Except as otherwise expressly provided herein, no
employee or other person shall have any claim of right (legal,
equitable, or otherwise) to any award, allocation, or distribution or
any right, title, or vested interest in any amounts in such employee's
Incentive Reserve For Highly-Compensated Employees and no officer or
employee of the Company or any subsidiary or any other person shall have
any authority to make representations or agreements to the contrary. No
interest conferred herein to a Participant shall be assignable or
subject to any lien or pledge or any claim by a Participant's creditors.
The right of the Participant to receive a distribution thereunder shall
be an unsecured claim against the general assets of the Company and the
Participant shall have no rights in or against any specific assets of
the Company as the result of participation hereunder.
6.3 NOT PART OF OTHER BENEFITS. The benefits provided in this Plan shall not
be deemed a part of any other benefit provided by the Company or any of
its subsidiaries to its employees. Neither the Company nor any of its
subsidiaries assumes any obligation to Participants except as specified
herein. This is a complete statement of the terms and conditions of the
Plan as in effect on January 1, 1995 and as amended on April 23, 1996.
<PAGE> 12
6.4 OTHER PLANS. Nothing contained herein shall limit the power of either
the Company or its subsidiaries or the power of the Committee to grant
bonuses to employees of the Company or any of its subsidiaries, whether
or not Participants in this Plan.
6.5 UNFUNDED PLAN. This Plan is unfunded. Nothing herein shall create or be
deemed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company (or any of its subsidiaries) and any
Participant.
ARTICLE VII
Authority
---------
7.1 Full and sole power and authority to interpret and administer this Plan
shall be vested in the Committee which shall have the sole authority to
make rules and regulations for the administration of the Plan. The
Committee may from time to time make such decisions and adopt such rules
and regulations for implementing the Plan as it deems appropriate for
any Participant under the Plan. Any decision taken by the Committee
arising out of or in connection with the construction, administration,
interpretation and effect of the Plan shall be final, conclusive and
binding upon all Participants and any person claiming under or through
them. The Committee may delegate its power and authority with respect to
the Plan to the Chief Executive Officer from time to time as it
determines.
ARTICLE VIII
Notice
------
8.1 Any notice to be given pursuant to the provisions of the Plan shall be
in writing and directed to the appropriate recipient thereof at his or
her business address or office location.
ARTICLE IX
Effective Date
--------------
9.1 This Plan shall be effective as of January 1, 1995.
9.2 The Incentive Reserve For Non-Highly Compensated Employees and the
Reserve Balance For Non-Highly Compensated Employees shall be effective
commencing with the 1996 fiscal year.
<PAGE> 13
ARTICLE X
Amendments
----------
10.1 This Plan may be amended, suspended or terminated in whole or in part at
any time from time to time at the sole discretion of the Committee;
provided, however, that no such change in the Plan shall be effective to
eliminate or diminish the distribution of any award that has been
allocated to the Incentive Reserve of a Participant prior to the date of
such amendment, suspension or termination. Notice of any such amendment,
suspension or termination shall be given promptly to each Participant.
ARTICLE XI
Applicable Law
--------------
11.1 This Plan shall be construed in accordance with the provisions of the
laws of the Commonwealth of Massachusetts.
<PAGE> 1
CONFORMED COPY
EXHIBIT 10.3
AMENDMENT No. 3 (this "Amendment"), dated as of March 7,
1997, to the 3-Year Competitive Advance and Revolving Credit
Facility Agreement dated as of March 21, 1994, as amended by
Amendment No. 1 thereto dated as of March 15, 1995, and
Amendment No. 2 thereto dated as of March 14, 1996 (as so
amended, the "Agreement"), among EG&G, INC., a Massachusetts
corporation (the "Company"), the Borrowing Subsidiaries (as
such term is defined therein; together with the Company, the
"Borrowers"), the Lenders listed in Schedule 2.01 thereof (the
"Lenders") and THE CHASE MANHATTAN BANK (as successor to
Chemical Bank), a New York banking corporation, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent").
A. The Borrowers have requested and the Administrative Agent and
the Lenders are willing to amend certain provisions of the Agreement for the
limited purposes described and on the terms and conditions set forth herein.
B. Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to such terms in the Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree,
on the terms and subject to the conditions set forth herein, as follows:
SECTION 1. Amendment of Section 1.01.
-------------------------
Section 1.01 of the Agreement is hereby amended as follows:
(i) The definition of "Amendment Effective Date" is hereby amended
and restated in its entirety to read as follows:
"'AMENDMENT EFFECTIVE DATE' shall mean the date on which each
condition to effectiveness set forth in Section 5 of Amendment No. 3
to this Agreement dated as of March 7, 1997, has been satisfied."
<PAGE> 2
2
<TABLE>
(ii) In the definition of "Applicable Percentage", the Eurodollar
Spread and Facility Fee Percentage grid is hereby amended and restated in
its entirety:
<CAPTION>
===============================================================================
Category 1 Eurodollar Spread Facility Fee Percentage
- ---------- ----------------- -----------------------
- -------------------------------------------------------------------------------
<S> <C> <C>
Aa3 or higher by Moody's; .130% .070%
AA- or higher by S&P
- -------------------------------------------------------------------------------
Category 2
- ----------
A1 or A2 by Moody's; .150% .075%
A+ or A by S&P
- -------------------------------------------------------------------------------
Category 3
- ----------
A3 by Moody's; .170% .080%
A- by S&P
- -------------------------------------------------------------------------------
Category 4
- ----------
Baa1 by Moody's; .200% .100%
BBB+ by S&P
- -------------------------------------------------------------------------------
Category 5
- ----------
Baa2 by Moody's; .225% .125%
BBB by S&P
- -------------------------------------------------------------------------------
Category 6
- ----------
Baa3 by Moody's; .250% .150%
BBB- by S&P
- -------------------------------------------------------------------------------
Category 7
- ----------
Ba1 or lower by Moody's; .375% .250%
BB+ or lower by S&P
===============================================================================
</TABLE>
SECTION 2. AMENDMENT OF SECTION 3.04. Each reference in Section
3.04(a) of the Agreement to "January 1, 1995" is hereby replaced with a
reference to "December 31, 1995", and each reference in Section 3.04(b) of the
Agreement to "October 1, 1995" is hereby replaced with a reference to "September
29, 1996".
SECTION 3. AMENDMENT OF SCHEDULES. (a) Schedule 2.01 to the
Agreement is hereby deleted and
<PAGE> 3
3
replaced with Schedule 2.01 to this Amendment. It is understood and agreed upon
that immediately prior to the effectiveness of this Amendment the Company shall
have terminated all the Commitments then outstanding and that upon the
effectiveness of this Amendment, notwithstanding the provisions of Section
2.10(b) of the Agreement, the outstanding Commitments shall be as set forth on
Schedule 2.01 to this Amendment.
(b) Schedule 3.08 and Schedule 3.12(b) to the Agreement are hereby
deleted and replaced, respectively, with Schedule 3.08 and Schedule 3.12(b) to
this Amendment.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants as of the Amendment Effective Date to each of the Lenders and the
Administrative Agent that:
(a) This Amendment has been duly authorized, executed and
delivered by the Company, and this Amendment is, and the Agreement, as
amended hereby, will upon the Amendment Effective Date be, the legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors' rights generally or by equitable principles
relating to enforceability (whether enforcement is sought by proceedings
in equity or at law).
(b) The representations and warranties set forth in Article III of
the Agreement, as amended hereby, are true and correct in all material
respects with the same effect as if made on the Amendment Effective Date,
except to the extent such representations and warranties expressly relate
to an earlier date.
(c) Immediately before and immediately after the effectiveness of
this Amendment, no Event of Default or Default has occurred and is
continuing.
SECTION 5. CONDITIONS TO EFFECTIVENESS. This Amendment shall
become effective as of and from the Amendment Effective Date when (a) the
Administrative Agent shall have received counterparts of this Amendment that,
when taken together, bear the signatures of all the parties
<PAGE> 4
4
hereto and (b) each of the following conditions precedent shall have been
satisfied in respect of this Amendment:
(i) immediately prior to the effectiveness of this Amendment, the
Company shall have effectively terminated all the Commitments in
accordance with Section 2.10 of the Agreement (and, solely for purposes of
permitting each termination, the notice requirements of Section 2.10 are
hereby waived), and no Loan shall be outstanding;
(ii) the Administrative Agent shall have received the payment in
full of all the Borrowings and all other obligations of the Borrowers
outstanding under the Agreement, this Amendment or any related agreement,
including all Facility Fees accrued to but not including the Amendment
Effective Date, whether or not at the time due and payable;
(iii) the Administrative Agent shall have received a certificate,
dated the Amendment Effective Date and signed by a Financial Officer of
the Company, confirming (i) that the representations and warranties set
forth in Article III of the Agreement, as amended hereby, are true and
correct in all material respects, with the same effect as though made on
and as of the Amendment Effective Date, except to the extent that such
representations and warranties expressly relate to an earlier date, and
(ii) that no Event of Default or Default has occurred and is continuing;
(iv) the Administrative Agent shall have received certified copies
of the resolutions of the Board of Directors of the Company approving or
authorizing approval of the execution and delivery of this Amendment and
the performance of the Agreement as amended hereby;
(v) the Administrative Agent shall have received a certificate of
the Clerk or an Assistant Clerk of the Company, dated the Amendment
Effective Date, (A) as to the absence of amendments to the certificate of
incorporation or the by-laws of the Company since July 31, 1995 (or, in
the event there shall have been any such amendments, setting forth copies
thereof certified by the Secretary of State of Massachusetts in the case
of amendments to the certificate of incorporation and by the Clerk or an
Assistant Clerk of
<PAGE> 5
5
the Company in the case of amendments to the by-laws), and (B) certifying
the incumbency and signatures of the officer or officers of the Company
signing this Amendment;
(vi) the Administrative Agent shall have received a favorable
written opinion of the General Counsel for the Company, dated the
Amendment Effective Date and addressed to the Lenders, to the effect set
forth in Exhibit D-1 of the Agreement, provided that, for purposes of the
foregoing, references in such Exhibit to execution and delivery of the
Agreement shall be deemed to refer to execution and delivery of this
Amendment and other references therein to the Agreement shall be deemed to
refer to the Agreement as amended hereby;
(vii) the Amendment Effective Date shall have occurred on or prior
to March 31, 1997.
SECTION 6. AGREEMENT. Except as specifically stated herein,
the provisions of the Agreement are and shall remain in full force and
effect. As used therein, the terms "Agreement", "herein", "hereunder",
"hereinafter", "hereto", "hereof" and words of similar import shall,
unless the context otherwise requires, refer to the Agreement as amended
hereby.
SECTION 7. EFFECT OF AMENDMENT. Except as expressly set
forth herein, this Amendment shall not by implication or otherwise limit,
impair, constitute a waiver of or otherwise affect the rights and remedies
of the Lenders under the Agreement, and shall not alter, modify, amend or
in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.
Nothing herein shall be deemed to entitle the Borrowers to a consent to,
or a waiver, amendment, modification or other change of, any of the terms,
conditions, obligations, covenants or agreements contained in the
Agreement in similar or different circumstances. This Amendment shall
apply and be effective only with respect to the provisions of the
Agreement specifically referred to herein.
<PAGE> 6
6
SECTION 8. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9. COUNTERPARTS. This Amendment may be executed in
two or more counterparts, each of which shall constitute an original but
all of which when taken together shall constitute but one contract.
SECTION 10. EXPENSES. The Company agrees to reimburse the
Administrative Agent for all reasonable out-of-pocket expenses incurred by
it in connection with this Amendment, including, but not limited to, the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore,
counsel for the Administrative Agent.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
EG&G, INC.,
by
/s/Daniel T. Heaney
--------------------------------
Name: Daniel T. Heaney
Title: Treasurer
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent for the Lenders,
by
/s/William J. Caggiano
--------------------------------
Name: William J. Caggiano
Title: Managing Director
DRESDNER BANK A.G., NEW YORK BRANCH
AND GRAND CAYMAN BRANCH,
by
/s/Andrew K. Mittag
--------------------------------
Name: Andrew K. Mittag
Title: Vice President
<PAGE> 7
7
by
/s/Anthony Berti
------------------------------
Name: Anthony Berti
Title: Assistant Treasurer
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/Chris Francis
--------------------------------
Name: Chris Francis
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/Jeffrey Lubatkin
--------------------------------
Name: Jeffrey Lubatkin
Title: Assistant Vice President
THE NORTHERN TRUST COMPANY,
by
/s/James F.T. Manhart
--------------------------------
Name: James F. T. Manhart
Title: Vice President
ROYAL BANK OF CANADA,
by
/s/John M. Crawford
------------------------------
Name: John M. Crawford
Title: Senior Manager
SOCIETE GENERALE,
by
/s/Michelle Martin
------------------------------
Name: Michelle Martin
Title: Assistant Vice President
<PAGE> 8
8
STANDARD CHARTERED BANK,
by
/s/David D. Cutting
--------------------------------
Name: David D. Cutting
Title: Senior Vice President
by
/s/K. M. David
--------------------------------
Name: K. M. David
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A.,
by
/s/Terence A. Snellings
------------------------------
Name: Terence A. Snellings
Title: Senior Vice President
<PAGE> 9
Schedule 2.01
-------------
<TABLE>
LENDERS AND COMMITMENTS
-----------------------
<CAPTION>
LENDER COMMITMENT
------ ----------
<S> <C>
The Chase Manhattan Bank $16,000,000
140 E. 45th Street
29th Floor
New York, NY 10017
Attention: Sandra Miklave
Telephone: (212) 622-0005
Telecopy: (212) 622-0002
Dresdner Kleinwort Benson $10,500,000
North America LLC
75 Wall Street
New York, NY 10005-2889
Attention: Ms. Deborah Slusarczyk
Telephone: (212) 429-2244
Telecopy: (212) 429-2524
The First National Bank of Boston $10,500,000
100 Federal Street
Boston, MA 02110
Attention: Mr. Christopher D. Francis
Telephone: (617) 434-2203
Telecopy: (617) 434-0637
The First National Bank of Chicago $10,500,000
153 W. 51st Street
Equitable Building, 8th Floor
Suite 4000
New York, NY 10019
Attention: Mr. Thomas Knoff
Telephone: (212) 373-1181
Telecopy: (212) 373-1388
The Northern Trust Company $10,500,000
50 South LaSalle Street
Chicago, IL 60675
Attention: Mr. J. Chip McCall
Telephone: (312) 444-3504
Telecopy: (312) 444-3508
</TABLE>
<PAGE> 10
2
<TABLE>
<CAPTION>
<S> <C>
Royal Bank of Canada $10,500,000
New York Branch
One Financial Square, 12th Floor
New York, NY 10005-3531
Attention: Sheryl L. Greenberg
Telephone: (212) 428-6476
Telecopy: (212) 428-6459
Societe Generale $10,500,000
1221 Avenue of the Americas
New York, NY 10020
Attention: Ms. Michelle Martin
Telephone: (212) 278-7126
Telecopy: (212) 278-7430
Standard Chartered Bank $10,500,000
7 World Trade Center
New York, NY 10048
Attention: Mr. David Cutting
Telephone: (212) 667-0469
Telecopy: (212) 667-0225
Wachovia Bank of Georgia, N.A. $10,500,000
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attention: Ms. Joanne Watkin
Telephone: (404) 332-4089
Telecopy: (404) 332-6898
</TABLE>
<PAGE> 1
CONFORMED COPY
EXHIBIT 10.4
AMENDMENT No. 3 (this "Amendment"), dated as of March 7,
1997, to the 364-Day Competitive Advance and Revolving Credit
Facility Agreement dated as of March 21, 1994, as amended by
Amendment No. 1 thereto dated as of March 15, 1995, and
Amendment No. 2 thereto dated as of March 14, 1996 (as so
amended, the "Agreement"), among EG&G, INC., a Massachusetts
corporation (the "Company"), the Borrowing Subsidiaries (as
such term is defined therein; together with the Company, the
"Borrowers"), the Lenders listed in Schedule 2.01 thereof (the
"Lenders") and THE CHASE MANHATTAN BANK (as successor to
Chemical Bank), a New York banking corporation, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent").
A. The Borrowers have requested and the Administrative Agent and the
Lenders are willing to amend certain provisions of the Agreement for the limited
purposes described and on the terms and conditions set forth herein.
B. Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to such terms in the Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree,
on the terms and subject to the conditions set forth herein, as follows:
SECTION 1. AMENDMENT OF SECTION 1.01.
Section 1.01 of the Agreement is hereby amended as follows:
(i) The definition of "Amendment Effective Date" is hereby amended
and restated in its entirety to read as follows:
"'Amendment Effective Date' shall mean the date on which each
condition to effectiveness set forth in Section 5 of Amendment No. 3
to this Agreement dated as of March 7, 1997, has been satisfied."
<PAGE> 2
2
<TABLE>
(ii) In the definition of "Applicable Percentage", the Eurodollar
Spread and Facility Fee Percentage grid is hereby amended and restated in
its entirety:
<CAPTION>
================================================================================
Category 1 Eurodollar Spread Facility Fee Percentage
- ---------- ----------------- -----------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Aa3 or higher by Moody's; .150% .050%
AA- or higher by S&P
- --------------------------------------------------------------------------------
Category 2
- ----------
A1 or A2 by Moody's; .170% .055%
A+ or A by S&P
- --------------------------------------------------------------------------------
Category 3
- ----------
A3 by Moody's; .190% .060%
A- by S&P
- --------------------------------------------------------------------------------
Category 4
- ----------
Baa1 by Moody's; .220% .080%
BBB+ by S&.P
- --------------------------------------------------------------------------------
Category 5
- ----------
Baa2 by Moody's; .250% .100%
BBB by S&P
- --------------------------------------------------------------------------------
Category 6
- ----------
Baa3 by Moody's; .275% .125%
BBB- by S&P
- --------------------------------------------------------------------------------
Category 7
- ----------
Ba1 or lower by Moody's; .375% .250%
BB+ or lower by S&P
================================================================================
</TABLE>
(iii) The definition of "Maturity Date" is hereby amended and
restated in its entirety:
<PAGE> 3
3
"'Maturity Date' shall mean March 6, 1998."
SECTION 2. AMENDMENT OF SECTION 3.04. Each reference in Section
3.04(a) of the Agreement to "January 1, 1995" is hereby replaced with a
reference to "December 31, 1995", and each reference in Section 3.04(b) of the
Agreement to "October 1, 1995" is hereby replaced with a reference to "September
29, 1996".
SECTION 3. AMENDMENT OF SCHEDULES. (a) Schedule 2.01 to the
Agreement is hereby deleted and replaced with Schedule 2.01 to this Amendment.
It is understood and agreed upon that immediately prior to the effectiveness of
this Amendment the Company shall have terminated all the Commitments then
outstanding and that upon the effectiveness of this Amendment, notwithstanding
the provisions of Section 2.10(b) of the Agreement, the outstanding Commitments
shall be as set forth on Schedule 2.01 to this Amendment.
(b) Schedule 3.08 and Schedule 3.12(b) to the Agreement are hereby
deleted and replaced, respectively, with Schedule 3.08 and Schedule 3.12(b) to
this Amendment.
SECTION 4. Representations and Warranties. The Company represents
and warrants as of the Amendment Effective Date to each of the Lenders and the
Administrative Agent that:
(a) This Amendment has been duly authorized, executed and
delivered by the Company, and this Amendment is, and the Agreement, as
amended hereby, will upon the Amendment Effective Date be, the legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors' rights generally or by equitable principles
relating to enforceability (whether enforcement is sought by proceedings
in equity or at law).
(b) The representations and warranties set forth in Article III of
the Agreement, as amended hereby, are true and correct in all material
respects with the same effect as if made on the Amendment Effective Date,
except to the extent such representations and warranties expressly relate
to an earlier date.
<PAGE> 4
4
(c) Immediately before and immediately after the effectiveness of
this Amendment, no Event of Default or Default has occurred and is
continuing.
SECTION 5. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective as of and from the Amendment Effective Date when (a) the
Administrative Agent shall have received counterparts of this Amendment that,
when taken together, bear the signatures of all the parties hereto and (b) each
of the following conditions precedent shall have been satisfied in respect of
this Amendment:
(i) immediately prior to the effectiveness of this Amendment, the
Company shall have effectively terminated all the Commitments in
accordance with Section 2.10 of the Agreement (and, solely for purposes of
permitting each termination, the notice requirements of Section 2.10 are
hereby waived), and no Loan shall be outstanding;
(ii) the Administrative Agent shall have received the payment in
full of all the Borrowings and all other obligations of the Borrowers
outstanding under the Agreement, this Amendment or any related agreement,
including all Facility Fees accrued to but not including the Amendment
Effective Date, whether or not at the time due and payable;
(iii) the Administrative Agent shall have received a certificate,
dated the Amendment Effective Date and signed by a Financial Officer of
the Company, confirming (i) that the representations and warranties set
forth in Article III of the Agreement, as amended hereby, are true and
correct in all material respects, with the same effect as though made on
and as of the Amendment Effective Date, except to the extent that such
representations and warranties expressly relate to an earlier date, and
(ii) that no Event of Default or Default has occurred and is continuing;
(iv) the Administrative Agent shall have received certified copies
of the resolutions of the Board of Directors of the Company approving or
authorizing approval of the execution and delivery of this Amendment and
the performance of the Agreement as amended hereby;
<PAGE> 5
5
(v) the Administrative Agent shall have received a certificate of
the Clerk or an Assistant Clerk of the Company, dated the Amendment
Effective Date, (A) as to the absence of amendments to the certificate of
incorporation or the by-laws of the Company since July 31, 1995 (or, in
the event there shall have been any such amendments, setting forth copies
thereof certified by the Secretary of State of Massachusetts in the case
of amendments to the certificate of incorporation and by the Clerk or an
Assistant Clerk of the Company in the case of amendments to the by-laws),
and (B) certifying the incumbency and signatures of the officer or
officers of the Company signing this Amendment;
(vi) the Administrative Agent shall have received a favorable
written opinion of the General Counsel for the Company, dated the
Amendment Effective Date and addressed to the Lenders, to the effect set
forth in Exhibit D-1 of the Agreement, provided that, for purposes of the
foregoing, references in such Exhibit to execution and delivery of the
Agreement shall be deemed to refer to execution and delivery of this
Amendment and other references therein to the Agreement shall be deemed to
refer to the Agreement as amended hereby;
(vii) the Amendment Effective Date shall have occurred on or prior
to March 31, 1997.
(viii) Notwithstanding the foregoing, upon the execution and
delivery of this Amendment, and without regard to the satisfaction of the
foregoing conditions, the Maturity Date under the Agreement will be
extended to March 21, 1997.
SECTION 6. AGREEMENT. Except as specifically stated herein, the
provisions of the Agreement are and shall remain in full force and effect. As
used therein, the terms "Agreement", "herein", "hereunder", "hereinafter",
"hereto", "hereof" and words of similar import shall, unless the context
otherwise requires, refer to the Agreement as amended hereby.
SECTION 7. EFFECT OF AMENDMENT. Except as expressly set forth
herein, this Amendment shall not by implication or otherwise limit, impair,
constitute a waiver of or otherwise affect the rights and remedies of the
<PAGE> 6
6
Lenders under the Agreement, and shall not alter, modify, amend or in any way
affect any of the terms, conditions, obligations, covenants or agreements
contained in the Agreement, all of which are ratified and affirmed in all
respects and shall continue in full force and effect. Nothing herein shall be
deemed to entitle the Borrowers to a consent to, or a waiver, amendment,
modification or other change of, any of the terms, conditions, obligations,
covenants or agreements contained in the Agreement in similar or different
circumstances. This Amendment shall apply and be effective only with respect to
the provisions of the Agreement specifically referred to herein.
SECTION 8. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9. COUNTERPARTS. This Amendment may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract.
SECTION 10. EXPENSES. The Company agrees to reimburse the
Administrative Agent for all reasonable out-of-pocket expenses incurred by it in
connection with this Amendment, including, but not limited to, the reasonable
fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the
Administrative Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
EG&G, INC.,
by
/s/ Daniel T. Heaney
--------------------------------
Name: Daniel T. Heaney
Title: Treasurer
<PAGE> 7
7
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent for the Lenders,
by
/s/ William J. Caggiano
-------------------------------
Name: William J. Caggiano
Title: Managing Director
DRESDNER BANK A.G., NEW YORK BRANCH
AND GRAND CAYMAN BRANCH,
by
/s/ Andrew K. Mittag
-------------------------------
Name: Andrew K. Mittag
Title: Vice President
by
/s/ Anthony Berti
-------------------------------
Name: Anthony Berti
Title: Assistant Treasurer
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ Chris Francis
-------------------------------
Name: Chris Francis
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ Jeffrey Lubatkin
-------------------------------
Name: Jeffrey Lubatkin
Title: Assistant Vice President
THE NORTHERN TRUST COMPANY,
by
/s/ James F.T. Manhart
-------------------------------
Name: James F.T. Manhart
Title: Vice President
<PAGE> 8
8
ROYAL BANK OF CANADA,
by
/s/ John M. Crawford
-------------------------------
Name: John M. Crawford
Title: Senior Manager
SOCIETE GENERALE,
by
/s/ Michelle Martin
-------------------------------
Name: Michelle Martin
Title: Assistant Vice President
STANDARD CHARTERED BANK,
by
/s/ David D. Cutting
-------------------------------
Name: David D. Cuttin
Title: Senior Vice President
by
/s/ K.M. David
-------------------------------
Name: K.M. David
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A.,
by
/s/ Terence A. Snellings
-------------------------------
Name: Terence A. Snellings
Title: Senior Vice President
<PAGE> 9
Schedule 2.01
-------------
<TABLE>
LENDERS AND COMMITMENTS
-----------------------
<CAPTION>
LENDER COMMITMENT
------ ----------
<S> <C>
The Chase Manhattan Bank $16,000,000
140 E. 45th Street
29th Floor
New York, NY 10017
Attention: Sandra Miklave
Telephone: (212) 622-0005
Telecopy: (212) 622-0002
Dresdner Kleinwort Benson $10,500,000
North America LLC
75 Wall Street
New York, NY 10005-2889
Attention: Ms. Deborah Slusarczyk
Telephone: (212) 429-2244
Telecopy: (212) 429-2524
The First National Bank of Boston $10,500,000
100 Federal Street
Boston, MA 02110
Attention: Mr. Christopher D. Francis
Telephone: (617) 434-2203
Telecopy: (617) 434-0637
The First National Bank of Chicago $10,500,000
153 W. 51st St.
Equitable Building, 8th Floor
Suite 4000
New York, NY 10019
Attention: Mr. Thomas Knoff
Telephone: (212) 373-1181
Telecopy: (212) 373-1388
The Northern Trust Company $10,500,000
50 South LaSalle Street
Chicago, IL 60675
Attention: Mr. J. Chip McCall
Telephone: (312) 444-3504
Telecopy: (312) 444-3508
</TABLE>
<PAGE> 10
2
<TABLE>
<S> <C>
Royal Bank of Canada $10,500,000
New York Branch
One Financial Square, 12th Floor
New York, NY 10005-3531
Attention: Sheryl L. Greenberg
Telephone: (212) 428-6476
Telecopy: (212) 428-6459
Societe Generale $10,500,000
1221 Avenue of the Americas
New York, NY 10020
Attention: Ms. Michelle Martin
Telephone: (212) 278-7126
Telecopy: (212) 278-7430
Standard Chartered Bank $10,500,000
7 World Trade Center
New York, NY 10048
Attention: Mr. David Cutting
Telephone: (212) 667-0469
Telecopy: (212) 667-0225
Wachovia Bank of Georgia, N.A. $10,500,000
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attention: Ms. Joanne Watkin
Telephone: (404) 332-4089
Telecopy: (404) 332-6898
</TABLE>
<PAGE> 1
EXHIBIT 10.5
EG&G, INC.
EMPLOYMENT AGREEMENT
This Agreement made as of the 1st day of November, 1993, between EG&G, Inc., a
Massachusetts corporation (hereinafter called the "Company"), and John F.
Alexander, II of Southborough, Massachusetts (hereinafter referred to as the
"Employee").
WITNESSETH:
WHEREAS, the Employee has been employed in a management position with the
Company; and
WHEREAS, the Employee hereby agrees to continue to perform such services
and duties of a management nature as shall be assigned to him; and
WHEREAS, the Employee hereby agrees to the compensation herein provided and
agrees to serve the Company to the best of his ability during the period of this
Agreement.
NOW, THEREFORE, in consideration of the sum of One Dollar, and of the
mutual covenants herein contained, the parties agree as follows:
1. a) Except as hereinafter otherwise provided, the Company agrees to
continue to employ the Employee in a management position with the
Company, and the Employee agrees to remain in the employment of the
Company in that capacity for a period of one year from the date hereof
and from year to year thereafter until such time as this Agreement is
terminated.
b) The Company will, during each year of the term of this Agreement,
place in nomination before the Board of Directors of the Company the
name of the Employee for election as an Officer of the Company except
when a notice of termination has been given in accordance with
Paragraph 5(b).
2. The Employee agrees that, during the specified period of employment,
he shall, to the best of his ability, perform his duties, and shall not
engage in any business, profession or occupation which would conflict with
the rendition of the agreed upon services, either directly or indirectly,
without the prior approval of the Board of Directors.
3. During the period of his employment under this Agreement, the Employee
shall be compensated for his services as follows:
a) Except as otherwise provided in this Agreement, he shall be paid
a salary during the period of this Agreement at a base rate to be
determined by the Company on an annual basis. Except as provided in
Subparagraph 3d, such annual base salary shall under no circumstances
be fixed at a rate below the annual base rate then currently in
effect.
b) He shall be reimbursed for any and all monies expended by him in
connection with his employment for reasonable and necessary expenses
on
<PAGE> 2
behalf of the Company in accordance with the policies of the Company
then in effect;
c) He shall be eligible to participate under any and all bonus,
benefit, pension, compensation, and option plans which are, in
accordance with company policy, available to persons in his position
(within the limitation as stipulated by such plans). Such eligibility
shall not automatically entitle him to participate in any such plan;
d) if, because of adverse business conditions or for other reasons,
the Company at any time puts into effect salary reductions applicable
to all management employees of the Company generally, the salary
payments required to be made under this Agreement to the Employee
during any period in which such general reduction is in effect may be
reduced by the same percentage as is applicable to all management
employees of the Company generally. Any benefits made available to the
Employee which are related to base salary shall also be reduced in
accordance with any salary reduction;
4. a) During the period of his employment by the Company or for any
period which the Company shall continue to pay the Employee his salary
under this Agreement, whichever shall be the longer, the Employee
shall not directly or indirectly own, manage, control, operate, be
employed by, participate in or be connected with the ownership,
management, operation or control of any business which competes with
the Company or its subsidiaries, provided, however, that the foregoing
shall not apply to ownership of stock in a publicly held corporation
which ownership is disclosed to the Board of Directors nor shall it
apply to any other relationship which is disclosed to and approved by
the Board of Directors.
b) During the period of his employment by the Company and two years
following the Company's last payment of salary to him, the Employee
shall not utilize or disclose to others any proprietary or
confidential information of any type or description which term shall
be construed to mean any information developed or identified by the
Company which is intended to give it an advantage over its competitors
or which could give a competitor an advantage if obtained by him. Such
information includes, but is not limited to, product or process
design, specifications, manufacturing methods, financial or
statistical information about the Company, marketing or sales
information about the Company, sources or supply, lists of customers,
and the Company's plans, strategies, and contemplated actions.
c) During the period of his employment by the Company or for any
period during which the Company shall continue to pay the Employee his
salary under this Agreement, whichever shall be longer, the Employee
shall not in any way whatsoever aid or assist any party seeking to
cause, initiate or effect a Change in Control of the Company as
defined in Paragraph 6 without the prior approval of the Board of
Directors.
5. Except for the Employee covenants set forth in Paragraph 4 which
covenants shall remain in effect for the periods stated therein, and
subject to Paragraph 6, this Agreement shall terminate upon the happening
of any of the following events and (except as provided herein) all the
Company's obligation under
<PAGE> 3
this Agreement, including, but not limited to, making payments to the
Employee shall cease and terminate:
a) On the effective date set forth in any resignation submitted by
the Employee and accepted by the Company, or if no effective date is
agreed upon, the date of receipt of such letter.
b) One year after written notice of termination is given by either
party to the other party.
c) At the end of the month in which the Employee shall have attained
the age of sixty-five years;
d) At the death of the Employee;
e) At the termination of the Employee for cause. As used in the
Agreement, the term "cause" shall mean:
1) Misappropriating any funds or property of the Company;
2) Unreasonable refusal to perform the duties assigned to him
under this Agreement;
3) Conviction of a felony;
4) Continuous conduct bringing notoriety to the Company and
having an adverse effect on the name or public image of the
Company;
5) Violation of the Employee's covenants as set forth in
Paragraph 4 above; or
6) Continued failure by the Employee to observe any of the
provisions of this Agreement after being informed of such
breach.
f) At termination of the Employee by the Company without cause.
g) Twelve months after written notice of termination is given by the
Company to the Employee based on a determination by the Board of
Directors that the Employee is disabled (which, for purposes of this
Agreement, shall mean that the Employee is unable to perform his
regular duties, with such determination to be made by the Board of
Directors, in reliance upon the opinion of the Employee's physician or
upon the opinion of one or more physicians selected by the Company).
Such notice shall be given by the Company to the Employee on the 106th
day of continuous disability of the Employee. Notwithstanding the
foregoing, if, during the twelve-month notice period referred to
above, the Employee is no longer disabled and is able to return to
work, such notice of employment termination shall be rescinded, and
the employment of the Employee shall continue in accordance with the
terms of this Agreement. During the first 106 days of continuous
disability of the Employee, the Company will make periodic payments to
the Employee in an amount equal to the difference between his base
salary and the benefits provided by the Company's Short-Term
Disability Income Plan. During the twelve-month notice period
<PAGE> 4
following 106 days of continuous disability, the Company will make
periodic payments to the Employee in an amount equal to the difference
between his base salary and the benefits provided by the Company's
Long-Term Disability Plan. If the employment of the Employee
terminates at the end of such twelve-month notice period, the Company
will make periodic payments to the Employee, up to the amount
remaining in his sick leave reserve account, in an amount equal to the
difference between his base pay and the post-employment benefits
provided to him under the Company's Long-Term Disability Plan. Due to
the fact that payments to the Employee under the Company's Long-Term
Disability Plan are not subject to federal income taxes, the payments
to be made directly by the Company pursuant to the two preceding
sentences shall be reduced such that the total amount received by the
Employee (from the Company and from the Long-Term Disability Plan),
after payment of any income taxes, is equal to the amount that the
Employee would have received had he been paid his base salary, after
payment of any income taxes on such base salary.
h) Notwithstanding the foregoing provisions, in the event of the
termination of the Employee by the Company without cause, the Employee
shall, until the expiration of his then current employment term or one
year from the date of such termination, whichever is later, (i)
continue to receive his Full Salary (as defined below), which shall be
payable in accordance with the payment schedule in effect immediately
prior to his employment termination, and (ii) continue to be entitled
to participate in all employee benefit plans and arrangements of the
Company (such as life, health and disability insurance and automobile
arrangements) to the same extent (including coverage of dependents, if
any) and upon the same terms as were in effect immediately prior to
his termination. For purposes of this Agreement, "Full Salary" shall
mean the Employee's annual base salary, plus the amount of any bonus
or incentive payments received by the Employee with respect to the
last full fiscal year of the Company for which all bonus or incentive
payments to be made have been made.
6. a) In the event that there is a Change in Control of the Company (as
defined below), the provisions of this Agreement shall be amended as
follows:
1) Paragraph 1a shall be amended to read in its entirety as
follows:
"Except as hereinafter otherwise provided, the Company
agrees to continue to employ the Employee in a
management position with the Company, and the Employee
agrees to remain in the employment in the Company in
that capacity, for a period of five (5) years less one
day from the date of the Change in Control. Except as
provided in Paragraph 3d, the Employee's salary as set
forth in Paragraph 3a and his other employee benefits
pursuant to the plans described in Paragraph 3c shall
not be decreased during such period."
2) Paragraph 5a shall be amended by the addition of the
following provision at the end of such paragraph:
<PAGE> 5
", provided that the Employee agrees not to resign,
except for Good Reason (as defined below), during
the one-year period following the date of the Change
in Control."
3) Paragraph 5b shall be deleted in its entirety.
4) Paragraph 5h shall be amended to read in its entirety as
follows:
"Notwithstanding the foregoing provisions, in the event
of the termination of the Employee by the Company
without cause, or the resignation of the Employee for
Good Reason, the Employee shall (i) receive, on the date
of his employment termination, a cash payment in an
amount equal to his Full Salary (as defined below)
multiplied by the number of years (including any
portions thereof) remaining until the expiration of his
then current employment term or five years from the date
of such termination, whichever is later (it being agreed
that such amount shall not be discounted based upon the
present value of such amount), and (ii) continue to be
entitled to participate in all employee benefit plans
and arrangements of the Company (such as life, health
and disability insurance and automobile arrangements) to
the same extent (including coverage of dependents, if
any) and upon the same terms as were in effect
immediately prior to his termination. For purposes of
this Agreement, "Full Salary" shall mean the Employee's
annual base salary, plus the amount of any bonus or
incentive payments received by the Employee with respect
to the last full fiscal year of the Company for which
all bonus or incentive payments to be made have been
made. Payments under this Paragraph 5h shall be made
without regard to whether the deductibility of such
payments (or any other "parachute payments," as that
term is defined in Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), to or for the
benefit of the Employee) would be limited or precluded
by Section 280G and without regard to whether such
payments (or any other "parachute payments" as so
defined) would subject the Employee to the federal
excise tax levied on certain "excess parachute payments"
under Section 4999 of the Code; provided that if the
total of all "parachute payments" to or for the benefit
of the Employee, after reduction for all federal, state
and local taxes (including the tax described in Section
4999 of the Code, if applicable) with respect to such
payments (the "Total After-Tax Payments"), would be
increased by the limitation or elimination of any
payment under this Paragraph 5h, amounts payable under
this Paragraph 5h shall be reduced to the extent, and
only to the extent,
<PAGE> 6
necessary to maximize the Total After-Tax Payments. The
determination as to whether and to what extent payments
under this Paragraph 5h are required to be reduced in
accordance with the preceding sentence shall be made at
the Company's expense by Arthur Andersen LLP or by such
other certified public accounting firm as the Board of
Directors of the Company may designate prior to a Change
in Control of the Company. In the event of any
underpayment or overpayment under this Paragraph 5h as
determined by Arthur Andersen LLP (or such other firm as
may have been designated in accordance with the
preceding sentence), the amount of such underpayment or
overpayment shall forthwith be paid to the Employee or
refunded to the Company, as the case may be, with
interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code."
5) Paragraph 8 shall be amended to read in its entirety as
follows:
"The Employee may pursue any lawful remedy he deems
necessary or appropriate for enforcing his rights under
this Agreement following a Change in Control of the
Company, and all costs incurred by the Employee in
connection therewith (including without limitation
attorneys' fees) shall be promptly reimbursed to him by
the Company, regardless of the outcome of such
endeavor."
b) For purposes of this Agreement, a "Change in Control of the
Company" shall occur or be deemed to have occurred only if (i) any
"person", as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportion as their ownership of
stock in the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 30% or more of the combined
voting power of the Company's then outstanding securities; (ii) during
any period of two consecutive years ending during the term of this
Agreement, individuals who at the beginning of such period constitute
the Board of Directors of the Company, and any new director whose
election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds
of the directors then still in office who were either directors at the
beginning of the period or whose election or whose nomination for
election was previously so approved, cease for any reason to
constitute a majority of the Board of Directors; (iii) the
stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined
voting power of the
<PAGE> 7
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (iv) the
stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets.
c) For purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the following events, except as provided in
Paragraph 3d: (i) a reduction in the Employee's base salary as in
effect on the date hereof or as the same may be increased from time to
time; (ii) a failure by the Company to pay annual cash bonuses to the
Employees in an amount at least equal to the most recent annual cash
bonuses paid to the Employee; (iii) a failure by the Company to
maintain in effect any material compensation or benefit plan in which
the Employee participated immediately prior to the Change in Control,
unless an equitable arrangement has been made with respect to such
plan, or a failure to continue the Employee's participation therein on
a basis not materially less favorable than existed immediately prior
to the Change in Control; (iv) any significant and substantial
diminution in the Employee's position, duties, responsibilities or
title as in effect immediately prior to the Change in Control; (v) any
requirement by the Company that the location at which the Employee
performs his principal duties be changed to a new location outside a
radius of 25 miles from the Employee's principal place of employment
immediately prior to the Change in Control; or (vi) any requirement by
the Company that the Employee travel on an overnight basis to an
extent not substantially consistent with the Employee's business
travel obligations immediately prior to the Change in Control.
Notwithstanding the foregoing, the resignation shall not be considered
to be for Good Reason if any such circumstances are fully corrected
prior to the date of resignation.
7. Neither the Employee nor, in the event of his death, his legal
representative, beneficiary or estate, shall have the power to transfer,
assign, mortgage or otherwise encumber in advance any of the payments
provided for in this Agreement, nor shall any payments nor assets or funds
of the Company be subject to seizure for the payment of any debts,
judgments, liabilities, bankruptcy or other actions.
8. Any controversy relating to this Agreement and not resolved by the
Board of Directors and the Employee shall be settled by arbitration in the
City of Boston, Commonwealth of Massachusetts, pursuant to the rules then
obtaining of the American Arbitration Association, and judgment upon the
award may be entered in any court having jurisdiction, and the Board of
Directors and Employee agree to be bound by the arbitration decision on any
such controversy. Unless otherwise agreed by the parties hereto,
arbitration will be by three arbitrators selected from the panel of the
American Arbitration Association. The full cost of any such arbitration
shall be borne by the Company.
9. Failure to insist upon strict compliance with any of the terms,
covenants, or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times by either
party.
<PAGE> 8
10. All notices or other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered personally to the
Employee or to the General Counsel of the Company or when mailed by
registered or certified mail to the other party (if to the Company, at 45
William Street, Wellesley, Massachusetts 02181, attention General Counsel;
if to the Employee, at the last known address of the Employee as set forth
in the records of the Company).
11. This Agreement has been executed and delivered and shall be construed
in accordance with the laws of the Commonwealth of Massachusetts. This
Agreement is and shall be binding on the respective legal representatives
or successors of the parties, but shall not be assignable except to a
successor to the Company by virtue of a merger, consolidation or
acquisition of all or substantially all of the assets of the Company. All
previous employment contracts between the Employee and the Company or any
of the Company's present or former subsidiaries or affiliates is hereby
canceled and of no effect.
IN WITNESS WHEREOF, the Company has caused its seal to be hereunto affixed
and these presents to be signed by its proper officers, and the Employee has
hereunto set his hand and seal the day and year first above written.
EG&G, INC.
(SEAL) By: /s/ John M. Kucharski
-------------------------------------------
John M. Kucharski,
Chairman and Chief
Executive Officer
Employee:/s/John F. Alexander, II
-------------------------------------------
John F. Alexander, II
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
<TABLE>
As of March 24, 1997, the following is a list of the parent (Registrant) and its
subsidiaries, together with their subsidiaries. Except as noted, all voting
securities of the listed subsidiaries are 100% beneficially owned by the
Registrant or a subsidiary thereof.
<CAPTION>
- ---------------------------------------------------------------------------------------------------
State or Country Number
of Incorporation of
Name of Company or Organization Parent
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 EG&G, Inc. Massachusetts N/A
2 EG&G Alabama, Inc. Alabama 1
3 EG&G Astrophysics California 1
4 EG&G Automotive Research, Inc. Texas 20
5 EG&G Birtcher, Inc. California 1
6 EG&G Benelux B.V. Netherlands 71 (77%) 1 (23%)
7 EG&G Canada Investments, Inc. Canada 87
8 EG&G Canada Limited Canada 1 (10%) 28 (43.5%) 38 (46.5%)
9 EG&G Chandler Engineering Company Oklahoma 1
10 EG&G Defense Materials, Inc. Utah 1
11 EG&G do Brasil Ltda. Brazil 20 (95%) 86 (5%)
12 EG&G Dynatrend, Inc. Delaware 1
13 EG&G E.C. Bahrain 20
14 EG&G Energy Measurements, Inc. Nevada 1
15 EG&G Environmental, Inc. Delaware 1
16 EG&G Exporters Ltd. U.S. Virgin Islands 20
17 EG&G Florida, Inc. Florida 1
18 EG&G Flow Technology, Inc. Arizona 1
19 EG&G GmbH Germany 20
20 EG&G Holdings, Inc. Massachusetts 1 (87%) 24 ( 6%) 69 (5%) 9 (2%)
21 EG&G IC Sensors, Inc. California 1
22 EG&G Idaho, Inc. Idaho 20
23 EG&G Information Technologies, Inc. California 1
24 EG&G Instruments, Inc. Delaware 20
25 EG&G Instruments GmbH Germany 1
26 EG&G International, Ltd. Cayman Islands 20
27 EG&G Japan, Inc. Delaware 20
28 EG&G Judson Infrared, Inc. Pennsylvania 1
29 EG&G KT Aerofab, Inc. California 20
30 EG&G Langley, Inc. Virginia 17
31 EG&G Ltd. United Kingdom 20 (80.9%) 3 (19.1%)
32 EG&G Management Services of San
Antonio, Inc. Texas 20
33 EG&G Management Systems, Inc. New Mexico 1
34 EG&G Missouri Metal Shaping Company Missouri 20
35 EG&G Mound Applied Technologies, Inc. Ohio 1
36 EG&G Omni, Inc. Philippines 20
37 EG&G Power Systems, Inc. California 1
</TABLE>
<PAGE> 2
<TABLE>
EG&G, Inc. Exhibit 21 Page 2
<CAPTION>
- -------------------------------------------------------------------------------------------------------
State or Country Number
of Incorporation of
Name of Company or Organization Parent
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
38 EG&G Pressure Science Incorporated Maryland 20
39 EG&G Rocky Flats, Inc. Colorado 1
40 EG&G Sealol Eagle, Inc. Delaware 42 (51%)
41 EG&G Sealol Ltd. (Sealol Egypt) Egypt 20 (22%) 26 (78%)
42 EG&G Sealol, Inc. Delaware 20
43 EG&G Services, Inc. Delaware 1
44 EG&G Special Projects, Inc. Nevada 1
45 EG&G Star City, Inc. Ohio 1
46 EG&G S.A. France 26
47 EG&G SpA Italy 20
48 EG&G Technical Services of West
Virginia, Inc. West Virginia 50
49 EG&G Ventures, Inc. Massachusetts 1
50 EG&G Washington Analytical
Services Center, Inc. District of Columbia 1
51 EG&G Watertown, Inc. Massachusetts 71
52 Antarctic Support Associates (Partnership) Colorado 1 (40%)
53 Benelux Analytical Instruments S.A. Belgium 1 (92.3%)
54 Berthold Analytical Instruments, Inc. Delaware 1
55 Berthold A.G. Switzerland 20
56 Berthold France S.A. France 46
57 Berthold GmbH Germany 1
58 Berthold Munchen GmbH Germany 65 (60%)
59 Biozone Oy Finland 84
60 B.A.I. GmbH Austria 20
61 Eagle EG&G Aerospace Co. Ltd. Japan 1 (49%)
62 EC III, Inc. New Mexico 1 (50%)
63 Heimann Optoelectronics GmbH Germany 65
64 Heimann Shenzhen Optoelectronics Co. Ltd. China 63 (90%)
65 Laboratorium Prof. Dr. Rudolf
Berthold GmbH & Co. KG Germany 19 (58.0%) 25 (2.3%) 4 (39.7%)
66 NOK EG&G Optoelectronics Corporation Japan 1 (49%)
67 Pribori Oy Finland 84
68 PT EG&G Heimann Optoelectronics Indonesia 20
69 Reticon Corporation California 1
70 Reynolds Electrical & Engineering Co., Inc. Texas 1
71 Rotron Incorporated New York 1
72 Science Support Corporation Delaware 1
73 Sealol Hindustan Limited India 42 (20%)
74 Sealol S.A. Venezuela 42
75 Seiko EG&G Co. Ltd. Japan 1 (49%)
76 Shanghai EG&G Reticon Optoelectronics
Co. Ltd. China 69 (50%)
77 Societe Civile Immobiliere France 1 (82.5%) 56 (17.5%)
</TABLE>
<PAGE> 3
<TABLE>
EG&G, Inc. Exhibit 21 Page 3
<CAPTION>
- ------------------------------------------------------------------------------
State or Country Number
of Incorporation of
Name of Company or Organization Parent
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
78 Vactec, Inc. Missouri 1
79 WALLAC ADL AG Switzerland 80 (80%)
80 WALLAC ADL Gmbh Germany 82 (52%)
81 WALLAC A/S Denmark 84
82 WALLAC Holding GmbH Germany 19
83 WALLAC Norge AS Norway 84
84 WALLAC Oy Finland 20
85 WALLAC Sverige AB Sweden 84
86 WALLAC, Inc. Maryland 1
87 Wellesley B.V. Netherlands 88
88 Wickford N.V. Netherlands Antillies 26
89 Wright Components, Inc. New York 1
90 ZAO Pribori Russia 67
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> DEC-29-1996
<CASH> 47,846
<SECURITIES> 0
<RECEIVABLES> 222,856
<ALLOWANCES> 4,241
<INVENTORY> 119,558
<CURRENT-ASSETS> 454,711
<PP&E> 480,858
<DEPRECIATION> 288,808
<TOTAL-ASSETS> 822,900
<CURRENT-LIABILITIES> 259,796
<BONDS> 115,104
0
0
<COMMON> 60,102
<OTHER-SE> 305,004
<TOTAL-LIABILITY-AND-EQUITY> 822,900
<SALES> 1,427,252
<TOTAL-REVENUES> 1,427,252
<CGS> 547,504
<TOTAL-COSTS> 1,048,743
<OTHER-EXPENSES> 290,879
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,427
<INCOME-PRETAX> 80,354
<INCOME-TAX> 25,874
<INCOME-CONTINUING> 54,480
<DISCONTINUED> 5,676
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,156
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.27
</TABLE>
