<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------------------------
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
-----
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
----------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
----
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO __________________
COMMISSION FILE NUMBER 1-168
AMETEK, INC.
- -----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-4923320
- ------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
STATION SQUARE, PAOLI, PENNSYLVANIA 19301
- ------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 610-647-2121
----------------
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
----- ----
THE NUMBER OF SHARES OF THE ISSUER'S COMMON STOCK OUTSTANDING AS
OF THE LATEST PRACTICABLE DATE WAS:
COMMON STOCK, $.01 PAR VALUE, OUTSTANDING AT OCTOBER 31, 1994. . .
34,654,638 SHARES
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
- ------- --------------------
AMETEK, INC.
------------
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
(Unaudited)
(Dollars in thousands except per-share amounts)
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
1994 1993 1994 1993
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $198,672 $175,003 $607,671 $548,937
---------- ---------- ---------- ----------
Expenses:
Cost of sales (excluding
depreciation) 152,099 138,182 467,381 428,878
Selling, general and
administrative 19,322 19,079 60,332 59,291
Depreciation 7,009 6,867 20,824 21,145
Resizing charges - 4,385 - 7,990
---------- ---------- ---------- ----------
178,430 168,513 548,537 517,304
---------- ---------- ---------- ----------
Operating income 20,242 6,490 59,134 31,633
Other income (expenses):
Interest expense (6,064) (4,338) (16,261) (13,431)
Other, net 1,679 1,961 3,331 5,559
---------- ---------- ---------- ----------
Income before income taxes 15,857 4,113 46,204 23,761
Provision for income taxes 5,631 2,133 17,502 9,463
---------- ---------- ---------- ----------
Income before extraordinary
item and cumulative effect
of accounting change 10,226 1,980 28,702 14,298
Extraordinary loss on early
extinguishment of debt, net
of taxes (Note 5) - - (11,810) -
Cumulative effect of
accounting change, net of
taxes (Note 4) - - 3,819 -
---------- ---------- ---------- ----------
Net income $10,226 $1,980 $20,711 $14,298
========== ========== ========== ==========
Earnings (loss) per share (Note 2):
Income before extraordinary
item and cumulative effect
of accounting change $0.29 $0.05 $0.76 $0.33
Extraordinary loss on early
extinguishment of debt
(Note 5) - - (0.31) -
Cumulative effect of
accounting change (Note 4) - - 0.10 -
---------- ---------- ---------- ----------
Net income $0.29 $0.05 $0.55 $0.33
========== ========== ========== ==========
Cash dividends paid per share $0.06 $0.17 $0.18 $0.51
========== ========== ========== ==========
Average common shares
outstanding 34,838,972 43,637,840 37,947,309 43,989,141
========== ========== ========== ==========
</TABLE>
See accompanying notes.
2
<PAGE>
AMETEK, INC.
------------
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $18,879 $40,468
Marketable securities (Note 4) 9,766 44,191
Receivables, net 118,608 108,068
Inventories (Note 3) 97,982 91,894
Deferred income taxes 13,252 13,346
Other current assets 8,839 4,100
--------- ---------
Total current assets 267,326 302,067
--------- ---------
Property, plant and equipment 397,341 384,435
Less accumulated depreciation (217,445) (199,626)
--------- ---------
179,896 184,809
--------- ---------
Intangibles, investments and other assets (Note 4) 80,456 75,787
--------- ---------
Total assets $527,678 $562,663
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
Current liabilities:
Accounts payable $63,196 $54,374
Accruals 111,241 98,987
Current portion of long-term debt (Note 5) 5,396 14,543
--------- ---------
Total current liabilities 179,833 167,904
Long-term debt (Note 5) 227,449 172,429
Deferred income taxes 28,723 27,948
Other long-term liabilities 26,652 29,056
Stockholders' equity (Note 6) 65,021 165,326
---------- ---------
Total liabilities and stockholders' equity $527,678 $562,663
========== =========
</TABLE>
See accompanying notes.
3
<PAGE>
AMETEK, INC.
------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1994 1993
------------ ------------
<S> <C> <C>
Cash provided by (used for):
Operating activities:
Net income $20,711 $14,298
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary loss on early extinguishment of debt 11,810 -
Cumulative effect of accounting change (3,819) -
Depreciation and amortization 26,301 26,849
Deferred income taxes 1,370 8
Noncash portion of resizing charges - 4,100
Net change in operating working capital 32,417 (9,228)
Other (223) (611)
--------- ---------
Total operating activities 88,567 35,416
--------- ---------
Investing activities:
Additions to property, plant and equipment (16,795) (29,207)
Proceeds from sale of investments and other assets 7,271 4,353
Purchase of businesses and investments (1,113) (13,021)
Decrease in marketable securities 7,355 26,278
--------- ---------
Total investing activities (3,282) (11,597)
--------- ---------
Financing activities:
Proceeds from issuance of long-term debt 306,000 -
Repayments of long-term debt (260,227) (18,829)
Debt prepayment premiums and debt issuance costs (29,368) -
Repurchases of common stock (118,833) (8,878)
Cash dividends paid (6,827) (22,477)
Other 2,381 1,382
--------- ---------
Total financing activities (106,874) (48,802)
--------- ----------
(Decrease) in cash and cash equivalents (21,589) (24,983)
Cash and cash equivalents:
As of January 1 40,468 59,138
--------- ---------
As of September 30 $18,879 $34,155
========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
AMETEK, INC.
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1994
------------------
(UNAUDITED)
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
- ------ --------------------------------
THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS ARE UNAUDITED, BUT THE
COMPANY BELIEVES THAT ALL ADJUSTMENTS (WHICH CONSIST OF NORMAL RECURRING
ACCRUALS) NECESSARY FOR FAIR PRESENTATION OF THE CONSOLIDATED FINANCIAL POSITION
OF THE COMPANY AT SEPTEMBER 30, 1994 AND THE CONSOLIDATED RESULTS OF ITS
OPERATIONS AND CASH FLOWS FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER
30, 1994 AND 1993 HAVE BEEN INCLUDED. QUARTERLY RESULTS OF OPERATIONS ARE NOT
NECESSARILY INDICATIVE OF RESULTS FOR THE FULL YEAR. QUARTERLY FINANCIAL
STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
RELATED NOTES IN THE COMPANY'S 1993 ANNUAL REPORT.
NOTE 2 - EARNINGS PER SHARE
- ------ ------------------
THE COMPUTATION OF EARNINGS PER SHARE IS BASED ON THE AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING EACH PERIOD. NO MATERIAL DILUTION OF EARNINGS PER
SHARE WOULD RESULT FOR THE THIRD QUARTER OR THE FIRST NINE MONTHS OF 1994 OR
1993 IF IT WERE ASSUMED THAT ALL OUTSTANDING STOCK OPTIONS WERE EXERCISED. THE
SUM OF QUARTERLY EARNINGS PER SHARE WILL NOT EQUAL YEAR-TO-DATE EARNINGS PER
SHARE FOR 1994 DUE TO THE EFFECTS OF COMMON STOCK REPURCHASES (SEE NOTE 6).
NOTE 3 - INVENTORIES
- ------ -----------
THE ESTIMATED COMPONENTS OF INVENTORY STATED AT LOWER OF LIFO COST OR
MARKET ARE:
<TABLE>
<CAPTION>
IN THOUSANDS
----------------------------
SEPTEMBER 30, DECEMBER 31,
1994 1993
--------------- -----------
(UNAUDITED)
<S> <C> <C>
FINISHED GOODS AND PARTS $33,730 $32,410
WORK IN PROCESS 24,411 23,683
RAW MATERIALS AND PURCHASED PARTS 39,841 35,801
------- -------
$97,982 $91,894
======= =======
</TABLE>
NOTE 4 - ACCOUNTING CHANGE
- ------ -----------------
EFFECTIVE JANUARY 1, 1994, THE COMPANY ADOPTED STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS (SFAS) NO. 115, "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT
AND EQUITY SECURITIES." THE CUMULATIVE EFFECT ON NET INCOME AS OF JANUARY 1,
1994, OF ADOPTING THIS STATEMENT FOR TRADING SECURITIES WAS TO INCREASE NET
INCOME BY $3.8 MILLION, NET OF INCOME TAXES, OR $.10 PER SHARE. THE IMPACT ON
STOCKHOLDERS' EQUITY OF ADOPTING THIS STATEMENT FOR ALL SECURITIES WAS NOT
SIGNIFICANT. AS REQUIRED BY SFAS NO. 115, MANAGEMENT IS TO REEVALUATE THE
APPROPRIATE CLASSIFICATION OF SECURITIES AT EACH BALANCE SHEET DATE, BASED ON
ITS INTENT TO TRADE OR HOLD THE SECURITIES.
5
<PAGE>
AMETEK, INC.
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1994
------------------
(UNAUDITED)
NOTE 4 - ACCOUNTING CHANGE (CONT'D)
- ------ -----------------
ACCORDINGLY, AND AS A RESULT OF THE CONSUMMATION OF NEW DEBT AGREEMENTS BY
THE COMPANY IN LATE MARCH 1994, WHICH CONTAIN RESTRICTIVE COVENANTS AS TO THE
AMOUNT AND COMPOSITION OF THE COMPANY'S INVESTMENT PORTFOLIO, ALL SECURITIES
CLASSIFIED AS TRADING SECURITIES ON MARCH 31, 1994 (PRIMARILY SECURITIES OF A
CAPTIVE INSURANCE SUBSIDIARY) HAVING AN AGGREGATE FAIR VALUE OF $16.7 MILLION
WERE TRANSFERRED TO AVAILABLE-FOR-SALE SECURITIES EFFECTIVE APRIL 1, 1994. DUE
TO THE RESTRICTIVE COVENANTS, MOST OF THE COMPANY'S TRADING SECURITIES PORTFOLIO
WAS SOLD LATE IN MARCH 1994 AND NOT REPLACED. THEREFORE, UNDER MANAGEMENT'S
REVISED INVESTMENT OBJECTIVES, MANAGEMENT DOES NOT INTEND TO ACTIVELY TRADE
SECURITIES CURRENTLY HELD, AND AVAILABLE FOR SALE, OR SECURITIES TO BE ACQUIRED
IN THE FUTURE. THE EFFECT OF THE TRANSFER OF ALL SECURITIES FROM THE TRADING
PORTFOLIO TO AVAILABLE-FOR-SALE HAD NO EFFECT ON INCOME OR STOCKHOLDERS' EQUITY.
AT SEPTEMBER 30, 1994, DEBT AND EQUITY SECURITIES CLASSIFIED AS AVAILABLE-FOR-
SALE HAD AN AGGREGATE FAIR VALUE OF $20.1 MILLION ($19.9 MILLION COST).
NOTE 5 - LONG-TERM DEBT
- ------ --------------
LONG-TERM DEBT CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
IN THOUSANDS
-----------------------------
SEPTEMBER 30, DECEMBER 31,
1994 1993
--------------- ------------
(UNAUDITED)
<S> <C> <C>
8.95% NOTES PAYABLE $ - $106,750
9.35% NOTES PAYABLE - 75,000
9.75% SENIOR NOTES DUE 2004 150,000 -
FIXED/FLOATING RATE SECURED BANK
TERM NOTES DUE 1995 TO 1999 50,000 -
FLOATING RATE REVOLVING LOANS DUE 1999 32,025 -
OTHER 820 5,222
-------- -----------
232,845 186,972
LESS CURRENT PORTION (5,396) (14,543)
-------- -----------
$227,449 $172,429
======== ===========
</TABLE>
ON MARCH 21, 1994, THE COMPANY COMPLETED AN OFFERING OF $150 MILLION IN
PRINCIPAL AMOUNT OF 9 3/4% SENIOR NOTES DUE MARCH 15, 2004. ALSO IN MARCH 1994,
THE COMPANY ENTERED INTO A $250 MILLION FIXED/FLOATING RATE SENIOR SECURED
CREDIT AGREEMENT WITH A GROUP OF BANKS WHICH PROVIDED COMMITMENTS OF $125
MILLION EACH FOR TERM LOANS AND REVOLVING LOANS.
6
<PAGE>
AMETEK, INC.
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1994
------------------
(UNAUDITED)
NOTE 5 - LONG-TERM DEBT (CONT'D)
- ------ --------------
IN OCTOBER 1994, THE COMPANY AMENDED THE BANK CREDIT AGREEMENT, REDUCING THE
TOTAL CREDIT FACILITY FROM $250 MILLION TO $200 MILLION. THE AMENDED AGREEMENT
REDUCES THE TERM LOAN COMMITMENT FROM $125 MILLION TO $50 MILLION, ALL OF WHICH
IS OUTSTANDING AT SEPTEMBER 30, 1994, AND IS TO BE REPAID IN SEMI-ANNUAL
INSTALLMENTS OVER FIVE YEARS BEGINNING IN 1995. THE AGREEMENT ALSO INCREASES
THE REVOLVING LOAN COMMITMENT FROM $125 MILLION TO $150 MILLION, OF WHICH $32
MILLION IS OUTSTANDING AT SEPTEMBER 30, 1994. THE REVOLVING LOAN COMMITMENT
EXPIRES IN 1999, AND ANY LOANS OUTSTANDING THEREUNDER MATURE AT THAT TIME.
ADDITIONALLY, THE AMENDED AGREEMENT LOWERS INTEREST RATES AND REDUCES
COMMITMENT FEES AND, SUBJECT TO AUTHORIZATION BY THE BOARD OF DIRECTORS, ALLOWS
THE COMPANY TO SPEND UP TO $25 MILLION TO REPURCHASE A PORTION OF ITS 9 3/4%
SENIOR NOTES, OR TO MAKE ADDITIONAL REPURCHASES OF THE COMPANY'S COMMON STOCK
(SEE NOTE 6), OR A COMBINATION THEREOF.
OUTSTANDING LOANS UNDER THE CREDIT FACILITY ARE SUBJECT TO INTEREST RATE
SWAP AND CAP AGREEMENTS BASED ON A COMBINATION OF A FIXED RATE AND THE LONDON
INTERBANK OFFERED RATE (LIBOR), PLUS A NEGOTIATED SPREAD OVER LIBOR. THE
WEIGHTED INTEREST RATES ON LOANS UNDER THE AMENDED AGREEMENT IS 6.88% FOR TERM
LOANS AND 6.07% FOR REVOLVING LOANS. THE COMPANY'S LOAN AGREEMENTS CONTAIN
REQUIREMENTS, WHICH AMONG OTHER THINGS, PROVIDE FOR COMPLIANCE WITH CERTAIN
FINANCIAL RATIOS. AT SEPTEMBER 30, 1994, THE COMPANY WAS IN COMPLIANCE WITH ALL
SUCH REQUIREMENTS.
THE NET PROCEEDS FROM DEBT ISSUANCES IN MARCH 1994, TOGETHER WITH
AVAILABLE CASH, WERE USED TO: (A) FINANCE THE COMPANY'S EARLY RETIREMENT OF
DEBT IN MARCH 1994 AGGREGATING $185.4 MILLION, (B) FUND PREPAYMENT PREMIUMS AND
OTHER EXPENSES RELATED TO THE SALE OF THE SENIOR NOTES AND THE BANK CREDIT
AGREEMENT TOTALLING $29.4 MILLION, AND (C) REPURCHASE OUTSTANDING SHARES OF THE
COMPANY'S COMMON STOCK (SEE NOTE 6).
IN CONNECTION WITH THE MARCH 1994 EARLY RETIREMENT OF DEBT, THE COMPANY
RECORDED AN EXTRAORDINARY LOSS OF $11.8 MILLION (NET OF TAX BENEFITS OF $7.6
MILLION) OR $.31 PER SHARE, FOR THE PREPAYMENT PREMIUMS PAID AND THE WRITE-OFF
OF RELATED DEFERRED DEBT ISSUANCE COSTS.
7
<PAGE>
AMETEK, INC.
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1994
------------------
(UNAUDITED)
NOTE 6 - STOCKHOLDERS' EQUITY
- ------ --------------------
STOCKHOLDERS' EQUITY CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>
IN THOUSANDS
-----------------------------
SEPTEMBER 30, DECEMBER 31,
1994 1993
--------------- ------------
(UNAUDITED)
<S> <C> <C>
PREFERRED STOCK, $1.00 PAR VALUE,
AUTHORIZED: 5,000,000 SHARES;
NONE ISSUED $ - $ -
COMMON STOCK, $.01 PAR VALUE,
AUTHORIZED: 100,000,000 SHARES;
ISSUED: 1994 - 37,193,217 SHARES
AND 1993 - 46,414,317 SHARES 372 46,414
CAPITAL IN EXCESS OF PAR VALUE 6,934 6,389
RETAINED EARNINGS 102,944 161,297
-------- --------
110,250 214,100
NET UNREALIZED LOSSES (19,525) (21,632)
LESS: COST OF SHARES HELD IN TREASURY;
1994 - 2,621,469 SHARES AND
1993 - 2,774,672 SHARES (25,704) (27,142)
-------- --------
$ 65,021 $165,326
======== ========
</TABLE>
DURING THE FIRST NINE MONTHS OF 1994, THE COMPANY REPURCHASED 9,221,100
SHARES OF ITS COMMON STOCK UPON THE EXERCISE OF AN OPTION AND IN A COMBINATION
OF PRIVATELY NEGOTIATED AND OPEN MARKET TRANSACTIONS FOR AN AGGREGATE PRICE OF
$118.8 MILLION, FINANCED BY A PORTION OF THE PROCEEDS FROM THE DEBT ISSUANCES
DESCRIBED IN NOTE 5. THE STOCK REPURCHASES ARE BEING MADE UNDER A PREVIOUSLY
ANNOUNCED PLAN INTENDED TO ENHANCE SHAREHOLDER VALUE. THE PLAN PERMITS THE
COMPANY TO PURCHASE OUTSTANDING SHARES OF ITS COMMON STOCK FOR AN AGGREGATE
PURCHASE PRICE OF UP TO $150 MILLION. AS DESCRIBED IN NOTE 5, AN AMENDMENT TO
THE COMPANY'S BANK CREDIT AGREEMENT EFFECTIVE IN OCTOBER 1994, AMONG OTHER
THINGS, PERMITS THE COMPANY TO PURCHASE UP TO AN ADDITIONAL $25 MILLION OF ITS
COMMON STOCK, SUBJECT TO BOARD APPROVAL, FOR A MAXIMUM TOTAL POTENTIAL PURCHASE
OF $175 MILLION.
AS OF SEPTEMBER 30, 1994, ALL OF THE REPURCHASED SHARES HAVE BEEN RETIRED AS
REQUIRED BY THE COMPANY'S LOAN AGREEMENTS, AND SUCH SHARES HAVE BEEN RETURNED TO
THE STATUS OF AUTHORIZED BUT UNISSUED SHARES. AT SEPTEMBER 30, 1994, SHARES
OUTSTANDING TOTALLED 34,571,748, COMPARED TO 43,639,645 SHARES OUTSTANDING AT
DECEMBER 31, 1993.
AT THE ANNUAL MEETING OF STOCKHOLDERS ON APRIL 26, 1994, THE COMPANY'S
SHAREHOLDERS APPROVED A REDUCTION IN THE PAR VALUE OF THE COMPANY'S COMMON STOCK
FROM $1.00 PER SHARE TO $.01 PER SHARE. THIS CHANGE RESULTED IN A TRANSFER OF
AN EQUAL AMOUNT FROM THE COMMON STOCK ACCOUNT TO THE CAPITAL IN EXCESS OF PAR
VALUE ACCOUNT.
8
<PAGE>
AMETEK, INC.
------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
FINANCIAL CONDITION
- -------------------
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
WORKING CAPITAL AT SEPTEMBER 30, 1994 AMOUNTED TO $87.5 MILLION, A
DECREASE OF $46.7 MILLION FROM DECEMBER 31, 1993, DUE PRIMARILY TO THE
DECREASE IN CASH AND SECURITIES FROM DEBT REPAYMENTS, AND AN INCREASE IN
ACCOUNTS PAYABLE AND ACCRUALS CAUSED BY THE HIGHER LEVEL OF BUSINESS
ACTIVITY. THE RATIO OF CURRENT ASSETS TO CURRENT LIABILITIES AT
SEPTEMBER 30, 1994 WAS 1.49 TO 1, COMPARED TO 1.80 TO 1 AT DECEMBER 31,
1993.
CASH GENERATED BY THE COMPANY'S OPERATING ACTIVITIES FOR THE FIRST NINE
MONTHS OF 1994 TOTALLED $88.6 MILLION, COMPARED TO $35.4 MILLION IN THE
FIRST NINE MONTHS OF 1993, AN INCREASE OF $53.2 MILLION. CASH GENERATED
SINCE THE BEGINNING OF 1994 INCLUDES $32.4 MILLION WHICH WAS PROVIDED BY
OPERATING WORKING CAPITAL, PRIMARILY DUE TO NET CASH INFLOWS OF $31.6
MILLION FROM THE SALE OF TRADING SECURITIES IN THE FIRST QUARTER OF THIS
YEAR (SEE NOTE 4). THE HIGHER INCOME AFTER ADJUSTING FOR NONRECURRING
ITEMS ALSO CONTRIBUTED TO THE IMPROVED OPERATING CASH FLOW.
CASH USED FOR BUSINESS RESTRUCTURING ACTIVITIES IN THE FIRST NINE MONTHS
OF 1994, PRIMARILY FOR PERSONNEL REDUCTIONS, WAS NOT SIGNIFICANT. DURING
THIS NINE MONTH PERIOD, CERTAIN DELAYS HAVE BEEN ENCOUNTERED IN
IMPLEMENTING SPECIFIC PORTIONS OF THE RESTRUCTURING PLAN. THESE DELAYS
INCLUDED FINDING A SUITABLE LOCATION AND SECURING A FACILITY IN
BINGHAMTON, NEW YORK FOR THE RELOCATION OF THE SELLERSVILLE, PENNSYLVANIA
AEROSPACE MANUFACTURING OPERATIONS, WHICH WAS ACCOMPLISHED IN SEPTEMBER
1994. IN ADDITION, THE COMPANY IS EXPERIENCING A DELAY IN THE TIMING OF
CERTAIN PLANNED WORKFORCE REDUCTIONS AT THE SELLERSVILLE PLANT. HOWEVER,
FOR ALL OF 1994, AND PRINCIPALLY IN THE FOURTH QUARTER, MANAGEMENT
EXPECTS TO INCUR CASH EXPENDITURES FOR RESTRUCTURING OF APPROXIMATELY $5
TO $6 MILLION AGAINST ITS ORIGINAL ESTIMATE OF APPROXIMATELY $24 MILLION
FOR 1994 AND 1995 COMBINED. IN ADDITION TO THE EXPENDITURES FOR
PERSONNEL REDUCTIONS MENTIONED ABOVE, THE TOTAL 1994 CASH OUTLAY WILL
INCLUDE DISBURSEMENTS FOR THE RELOCATION OF AEROSPACE OPERATIONS AND
FACILITIES COMBINATION. ALTHOUGH CASH EXPENDITURES RELATED TO THE
RESTRUCTURING ACCRUAL ARE SLIGHTLY BEHIND THE ORIGINAL PLAN, MANAGEMENT
STILL BELIEVES THAT THE RESTRUCTURING ACCRUAL IS ADEQUATE.
9
<PAGE>
AMETEK, INC.
------------
FINANCIAL CONDITION (CONT'D)
-------------------
THE RESTRUCTURING PROGRAM IS PRODUCING THE ANTICIPATED BENEFITS WHICH ARE
AHEAD OF SCHEDULE, RESULTING FROM REDUCED LABOR COSTS, IMPROVED
PRODUCTIVITY AND OTHER LOWER OPERATING COSTS. WHEN THE ENTIRE
RESTRUCTURING PROGRAM IS IMPLEMENTED, IT IS ANTICIPATED THAT THE BENEFITS
WILL MORE THAN OFFSET THE CASH EXPENDITURES UNDER THE PLAN OVER TIME.
INVESTING ACTIVITIES USED CASH OF $3.3 MILLION IN THE FIRST
NINE MONTHS OF 1994, COMPARED TO $11.6 MILLION IN THE SAME
PERIOD LAST YEAR. CASH USED FOR INVESTING ACTIVITIES SINCE THE
BEGINNING OF 1994 INCLUDED $16.8 MILLION FOR CAPITAL EXPENDITURES,
REDUCED BY CASH GENERATED FROM THE SALE OF INVESTMENTS, AN IDLE
FACILITY, AND OTHER ASSETS TOTALLING $13.5 MILLION. THE SALE OF THE
NONINVESTMENT ASSETS WERE PART OF THE 1993 RESTRUCTURING PROGRAM.
IN THE FIRST NINE MONTHS OF 1993, CAPITAL EXPENDITURES USED CASH OF $29.2
MILLION, AND $7.4 MILLION WAS EXPENDED FOR THE PURCHASE OF A BUSINESS,
PARTIALLY OFFSET BY CASH GENERATED FROM THE SALE OF INVESTMENTS (NET OF
PURCHASES) WHICH TOTALLED $25.0 MILLION.
FINANCING ACTIVITIES USED CASH TOTALLING $106.9 MILLION IN THE FIRST NINE
MONTHS OF 1994, COMPARED TO $48.8 MILLION USED IN THE FIRST NINE MONTHS
OF 1993. BORROWINGS IN THE FIRST NINE MONTHS OF 1994 TOTALLED $306
MILLION, AND CONSISTED OF THE PUBLIC SALE OF $150 MILLION OF 9 3/4%
SENIOR NOTES IN THE FIRST QUARTER, PLUS $156 MILLION OF BORROWINGS UNDER
THE COMPANY'S SENIOR SECURED BANK CREDIT AGREEMENT, WHICH WAS AMENDED IN
OCTOBER, 1994 (SEE NOTE 5 TO THE FINANCIAL STATEMENTS). THESE BORROWED
FUNDS, ALONG WITH AVAILABLE CASH, WERE USED TO (A) PREPAY DEBT
OUTSTANDING IN MARCH 1994 TOTALLING $185.4 MILLION, (B) TO FUND DEBT
PREPAYMENT PREMIUMS AND DEBT ISSUANCE COSTS OF $29.4 MILLION, (C) TO
REPAY $74.8 MILLION ($40.0 MILLION IN SEPTEMBER 1994) WHICH WAS
BORROWED PRIMARILY UNDER THE BANK CREDIT AGREEMENT SINCE MARCH 1994, (D)
TO FUND $6.8 MILLION IN DIVIDEND PAYMENTS, AND (E) TO REPURCHASE 9.2
MILLION SHARES OF THE COMPANY'S COMMON STOCK AT A COST OF $118.8 MILLION
UNDER THE COMPANY'S SHARE REPURCHASE PROGRAM, LESS $2.3 MILLION OF CASH
RECEIVED FROM EMPLOYEES UPON THE EXERCISE OF EMPLOYEE STOCK OPTIONS.
AS A RESULT OF THE ABOVE FINANCING ACTIVITIES, THE COMPANY'S DEBT
CAPITALIZATION INCREASED TO $232.9 MILLION AT SEPTEMBER 30, 1994, FROM
$187.0 MILLION AT DECEMBER 31, 1993, WHILE ITS EQUITY CAPITALIZATION
DECREASED TO $65.0 FROM $165.3 MILLION DURING THE SAME NINE-MONTH PERIOD,
RESULTING IN TOTAL CAPITALIZATION OF $297.9 MILLION AT SEPTEMBER 30, 1994
COMPARED TO $352.3 MILLION AT DECEMBER 31, 1993. THESE CHANGES RESULTED
IN INCREASED LEVERAGE AND REDUCED FINANCIAL AND OPERATING FLEXIBILITY FOR
THE COMPANY.
10
<PAGE>
AMETEK, INC.
------------
FINANCIAL CONDITION (CONT'D)
-------------------
CONSEQUENTLY, A PORTION OF THE COMPANY'S CASH FLOW FROM OPERATIONS WILL
BE REQUIRED TO SERVICE DEBT ON A CONTINUING BASIS, MAKING THESE FUNDS
UNAVAILABLE FOR WORKING CAPITAL, CAPITAL EXPENDITURES, OR OTHER GENERAL
CORPORATE PURPOSES. IN ADDITION, RESTRICTIVE COVENANTS IN THE COMPANY'S
DEBT AGREEMENTS WILL RESTRICT THE COMPANY'S ABILITY TO ENGAGE IN CERTAIN
TYPES OF INVESTING OR FINANCING ACTIVITIES, INCLUDING THE PURCHASE OR
SALE OF ASSETS OUTSIDE THE ORDINARY COURSE OF BUSINESS, OR THE INCURRENCE
OF FURTHER INDEBTEDNESS. THE COMPANY'S INCREASING CASH FLOWS FROM ITS
OPERATIONS, ESTIMATED ANNUAL SAVINGS OF APPROXIMATELY $21 MILLION IN
REDUCED DIVIDEND PAYMENTS, AND LOWER NEAR-TERM REQUIRED DEBT PRINCIPAL
PAYMENTS ARE EXPECTED TO MORE THAN COMPENSATE FOR THESE LIMITATIONS.
THE OCTOBER 1994 AMENDMENT TO THE BANK CREDIT AGREEMENT HAS INCREASED THE
COMPANY'S OPERATING AND FINANCIAL FLEXIBILITY, BY REDUCING THE TOTAL
CREDIT FACILITY, RESULTING IN REDUCED TERM LOAN COMMITMENTS, AND
INCREASED REVOLVING LOAN COMMITMENTS, AS WELL AS LOWER INTEREST RATES AND
REDUCED COMMITMENT FEES. IT ALSO PERMITS THE COMPANY TO SPEND UP TO $25
MILLION TO REPURCHASE PART OF ITS SENIOR NOTES OR MAKE ADDITIONAL
REPURCHASES OF ITS COMMON STOCK, OR A COMBINATION THEREOF, SUBJECT TO
BOARD APPROVAL. THE COMPANY NOW HAS A TOTAL OF $200 MILLION IN DOMESTIC
BANK COMMITMENTS, OF WHICH $105.5 MILLION ARE UNUSED AND AVAILABLE AFTER
REDUCING THE COMMITMENT FOR OUTSTANDING LOANS AND LETTERS OF CREDIT.
AS A RESULT OF THE ABOVE OPERATING, INVESTING AND FINANCING ACTIVITIES,
CASH AND CASH EQUIVALENTS AND SHORT-TERM MARKETABLE SECURITIES DECREASED
$56.0 MILLION SINCE DECEMBER 31, 1993, TO $28.6 MILLION AT SEPTEMBER 30,
1994. MANAGEMENT BELIEVES THAT THE COMPANY HAS SUFFICIENT CASH FLOW FROM
OPERATIONS, ADDITIONAL BORROWING CAPACITY, AND THE RETENTION OF A
SUBSTANTIALLY GREATER PORTION OF CASH UNDER THE COMPANY'S NEW POLICY OF
REDUCED DIVIDEND PAYMENTS ON ITS COMMON STOCK TO MEET ITS OPERATING
OBJECTIVES, CAPITAL EXPENDITURE REQUIREMENTS, FINANCE THE SHARE
REPURCHASE PROGRAM, AND SERVICE ITS DEBT OBLIGATIONS IN THE FORESEEABLE
FUTURE.
11
<PAGE>
AMETEK, INC.
------------
RESULTS OF OPERATIONS
- ---------------------
OPERATIONS FOR THE THIRD QUARTER OF 1994
COMPARED TO THE THIRD QUARTER OF 1993
SALES FOR THE THIRD QUARTER OF 1994 WERE $198.7 MILLION, COMPARED TO
SALES OF $175.0 MILLION FOR THE THIRD QUARTER OF 1993, AN INCREASE OF
$23.7 MILLION OR 13.5%. ALL BUSINESS SEGMENTS REPORTED SALES INCREASES.
THE LARGEST PORTION OF THE SALES IMPROVEMENT CAME FROM THE COMPANY'S
ELECTRO-MECHANICAL GROUP, IN WHICH SALES INCREASED $17.2 MILLION OR
27.5%, DUE TO CONTINUED STRONG DEMAND FOR ELECTRIC MOTOR PRODUCTS IN THE
U.S. AND IN EUROPE. THE PRECISION INSTRUMENTS GROUP'S SALES INCREASED
$3.6 MILLION OR 5.2%, DUE TO CONTINUING STRENGTH IN THE MARKET FOR HEAVY
TRUCK INSTRUMENTS, WHILE THE INDUSTRIAL MATERIALS GROUP'S SALES
INCREASED $2.9 MILLION OR 6.6% LED BY INCREASED SALES OF SPECIALTY
METALS AND WATER FILTRATION PRODUCTS.
OPERATING INCOME FOR THE THIRD QUARTER OF 1994 INCREASED $13.7 MILLION
OR 211.9% TO $20.2 MILLION FROM $6.5 MILLION IN THE THIRD QUARTER OF
1993. THE THIRD QUARTER OF 1993 INCLUDED A $4.4 MILLION PRETAX CHARGE
FOR RESIZING THE COMPANY'S AEROSPACE AND GENERAL GAUGE OPERATIONS. THIS
INCREASE IN OPERATING INCOME RESULTS FROM THE HIGHER SALES VOLUME,
OVERALL IMPROVED OPERATING PERFORMANCE AND COST SAVINGS RESULTING FROM
THE IMPLEMENTATION OF THE RESIZING AND RESTRUCTURING PROGRAMS WHICH
BEGAN IN 1993. EACH BUSINESS SEGMENT REPORTED AN INCREASE IN OPERATING
PROFIT.
INTEREST EXPENSE WAS $6.1 MILLION IN THIS YEAR'S THIRD QUARTER, AN
INCREASE OF 39.8% FROM THE THIRD QUARTER OF 1993 DUE TO THE HIGHER LEVEL
OF TOTAL DEBT OUTSTANDING DURING THE CURRENT PERIOD. OTHER INCOME NET IN
THE CURRENT THIRD QUARTER WAS $1.7 MILLION, COMPARED TO $2.0 MILLION IN
THE SAME QUARTER OF 1993. THE 1994 QUARTER REFLECTS LOWER INTEREST
INCOME, AND HIGHER AMORTIZATION OF DEFERRED DEBT ISSUANCE COSTS,
PARTIALLY OFFSET BY A GAIN ON ASSET SALES WHICH WERE MADE IN THE SECOND
QUARTER OF THIS YEAR.
THE EFFECTIVE INCOME TAX RATE WAS 35.5% DURING THE THIRD QUARTER OF 1994
COMPARED WITH 51.9% FOR THE SAME PERIOD IN 1993. THE LOWER 1994 RATE
REFLECTS A FAVORABLE STATE TAX ADJUSTMENT, AND SLIGHTLY HIGHER FEDERAL
TAX CREDITS, BOTH RELATED TO PRIOR TAX YEARS. THE 1993 TAX RATE INCLUDED
A RETROACTIVE ADJUSTMENT FOR THE INCREASE IN THE U.S. FEDERAL STATUTORY
INCOME TAX RATE FROM 34% TO 35%.
12
<PAGE>
AMETEK, INC.
------------
RESULTS OF OPERATIONS (CONT'D)
- ---------------------
THE WEIGHTED AVERAGE SHARES OUTSTANDING DURING THE THIRD QUARTER OF 1994
WAS 34.8 MILLION SHARES, COMPARED TO 43.6 MILLION SHARES FOR THE THIRD
QUARTER OF 1993. THE REDUCED NUMBER OF SHARES IN THE CURRENT QUARTER
REFLECTS THE COMPANY'S SHARE REPURCHASE PROGRAM WHICH BEGAN IN
MARCH, 1994.
NET INCOME FOR THE THIRD QUARTER OF 1994 WAS $10.2 MILLION OR
$.29 PER SHARE, AN INCREASE OF $8.2 MILLION OVER THE $2.0 MILLION OR $.05
PER SHARE EARNED IN THE THIRD QUARTER OF 1993.
ELECTRO-MECHANICAL GROUP SALES TOTALLED $79.6 MILLION IN THE
------------------------
THIRD QUARTER OF 1994, AN INCREASE OF $17.2 MILLION OR 27.5% FROM THE
THIRD QUARTER OF 1993, DUE TO INCREASED U.S. AND EUROPEAN DEMAND FOR
ELECTRIC MOTOR PRODUCTS MANUFACTURED BY THE COMPANY'S DOMESTIC AND
ITALIAN OPERATIONS.
THE ITALIAN OPERATIONS CONTINUE TO ACHIEVE SIGNIFICANT INCREASES IN
SALES AND OPERATING PROFITS. SALES BY THESE BUSINESSES INCREASED 34%
FROM THE THIRD QUARTER OF 1993, AND OPERATING PROFIT IMPROVED 68.1%,
WITH MINIMAL FOREIGN CURRENCY EFFECT.
OPERATING PROFIT OF THIS GROUP INCREASED $4.2 MILLION OR 62.0% TO
$11.1 MILLION IN THE THIRD QUARTER OF 1994. THE INCREASE WAS LARGELY
DUE TO THE INCREASE IN SALES VOLUME. MARGINS IN THE THIRD QUARTER OF
1993 WERE SUPPRESSED SOMEWHAT BY THE START-UP OF THE ROCK CREEK
PLANT, AND A PLANT REALIGNMENT OF THE GRAHAM FACILITY, BOTH IN NORTH
CAROLINA. ALTHOUGH OPERATING MARGINS OF ALL BUSINESSES WITHIN THE
GROUP IMPROVED IN THE CURRENT QUARTER, THEY CONTINUE TO BE LIMITED BY
HIGHER COSTS ASSOCIATED WITH INCREASING PRODUCTION LEVELS AT THE ROCK
CREEK PLANT AND BY OPERATING INEFFICIENCIES BEING EXPERIENCED AT THE
GRAHAM FACILITY. MANAGEMENT EXPECTS TO SEE GROUP OPERATING MARGINS
IMPROVE AS THESE PROBLEMS ARE RESOLVED.
IN THE PRECISION INSTRUMENTS GROUP, SALES INCREASED $3.6 MILLION OR
---------------------------
5.2% TO $71.9 MILLION IN THE THIRD QUARTER OF 1994. HIGHER SALES OF
HEAVY TRUCK INSTRUMENTS WERE PARTIALLY OFFSET BY LOWER SALES OF
AEROSPACE INSTRUMENTS. GROUP OPERATING PROFIT FOR THE THIRD QUARTER
OF 1994 INCREASED $4.6 MILLION TO $9.3 MILLION, FROM $4.7 MILLION IN
THE SAME QUARTER OF 1993, BEFORE A $4.4 MILLION RESIZING CHARGE IN
1993 FOR AEROSPACE AND GENERAL GAUGE OPERATIONS.
13
<PAGE>
AMETEK, INC.
------------
RESULTS OF OPERATIONS (CONT'D)
- ---------------------
THE BUSINESS RESTRUCTURING PLAN ANNOUNCED IN THE FOURTH QUARTER OF
1993 IS STARTING TO PRODUCE IMPROVED RESULTS FOR THIS GROUP, AS COST
REDUCTIONS FROM THE RELOCATION OF AEROSPACE MANUFACTURING OPERATIONS
AND FACILITIES COMBINATION, AS WELL AS SELECTED WORKFORCE REDUCTIONS
AND PRODUCTION EFFICIENCIES, HAVE CONTRIBUTED SIGNIFICANTLY TO THE
INCREASE IN GROUP PROFITABILITY. THE COST SAVINGS BEING REALIZED FROM
THE RESTRUCTURING PROGRAMS ARE AHEAD OF SCHEDULE, AND ARE EXPECTED TO
CONTINUE. UNDER THE RESTRUCTURING PROGRAM, THIS GROUP IS EXPERIENCING
A DELAY IN THE TIMING OF CERTAIN PLANNED WORKFORCE REDUCTIONS, DUE TO
AN EXTENSION OF THE CURRENT LABOR CONTRACT AT A FACILITY IN
SELLERSVILLE, PENNSYLVANIA. HOWEVER, THE RESTRUCTURING PROGRAM
AFFECTING THE BUSINESSES IN THIS GROUP IS STILL EXPECTED TO BE FULLY
IMPLEMENTED. IN ADDITION, IMPROVED OVERALL OPERATING EFFICIENCIES AND
OTHER COST REDUCTION PROGRAMS WHICH HAVE BEEN PUT INTO EFFECT, ARE
ALSO CONTRIBUTING TO THE IMPROVED PROFITABILITY OF THIS GROUP.
THE INDUSTRIAL MATERIALS GROUP'S THIRD QUARTER 1994 SALES
----------------------------
INCREASED $2.9 MILLION OR 6.6% TO $47.2 MILLION. THE INCREASES IN
GROUP SALES WERE DUE TO IMPROVED GENERAL BUSINESS CONDITIONS, AS ALL
BUT ONE DIVISION REPORTED A SALES INCREASE. GROUP OPERATING
PROFIT FOR THE THIRD QUARTER OF 1994 INCREASED $1.5 MILLION,
OR 30.2%, TO $6.5 MILLION, DUE TO THE HIGHER SALES VOLUME, AND WAS
LED BY THE PLASTIC COMPOUNDING AND WATER FILTRATION BUSINESSES.
ON NOVEMBER 3, 1994, THE COMPANY ANNOUNCED THAT, AS PART OF ITS
STRATEGIC FOCUS, IT IS PRESENTLY SEEKING BIDS FOR THE SALE OF ITS
MICROFOAM PACKAGING DIVISION, WHICH IS PART OF THIS GROUP. THE
COMPANY DOES NOT EXPECT TO INCUR A LOSS FROM THE SALE OF THIS
BUSINESS.
OPERATIONS FOR THE FIRST NINE MONTHS OF 1994
COMPARED TO THE FIRST NINE MONTHS OF 1993
SALES FOR THE FIRST NINE MONTHS OF 1994 WERE $607.7 MILLION, COMPARED TO
SALES OF $548.9 MILLION FOR THE FIRST NINE MONTHS OF 1993, AN INCREASE OF
$58.7 MILLION OR 10.7%. ALL BUSINESS SEGMENTS REPORTED IMPROVED SALES,
LED BY THE COMPANY'S ELECTRO-MECHANICAL GROUP, WHICH INCREASED $45.2
MILLION OR 21.9%. THE PRECISION INSTRUMENTS GROUP'S SALES INCREASED $5.9
MILLION OR 2.8%, WHILE THE INDUSTRIAL MATERIALS GROUP'S SALES INCREASED
$7.6 MILLION OR 5.7%.
14
<PAGE>
AMETEK, INC.
------------
RESULTS OF OPERATIONS (CONT'D)
- ---------------------
OPERATING INCOME FOR THE FIRST NINE MONTHS OF 1994 INCREASED $19.5
MILLION OR 49.2% TO $59.1 MILLION, COMPARED TO $39.6 MILLION IN THE FIRST
NINE MONTHS OF 1993 BEFORE INCLUDING A 1993 PRETAX CHARGE OF $8.0 MILLION
PRIMARILY FOR RESIZING THE COMPANY'S AEROSPACE AND GENERAL GAUGE
OPERATIONS. THIS INCREASE IN OPERATING INCOME REFLECTS OVERALL IMPROVED
OPERATING PERFORMANCE AND THE BENEFITS FROM THE IMPLEMENTATION OF THE
RESIZING AND RESTRUCTURING PROGRAMS WHICH BEGAN IN 1993. ALL OPERATING
GROUPS CONTRIBUTED TO THE INCREASE IN OPERATING INCOME.
INTEREST EXPENSE OF $16.3 MILLION IN THIS YEAR'S FIRST NINE MONTHS
INCREASED 21.1% FROM THE PRIOR YEAR BECAUSE OF THE HIGHER LEVEL OF TOTAL
DEBT OUTSTANDING DURING THE CURRENT PERIOD. OTHER INCOME NET DECLINED
$2.2 MILLION TO $3.3 MILLION IN THE FIRST NINE MONTHS OF 1994 PRIMARILY
BECAUSE OF LOWER INTEREST INCOME, DUE TO A LOWER AVERAGE LEVEL OF
INVESTED CASH, AND HIGHER AMORTIZATION OF DEFERRED DEBT ISSUANCE COSTS
ASSOCIATED WITH NEW DEBT AGREEMENTS.
THE WEIGHTED AVERAGE SHARES OUTSTANDING DURING THE FIRST NINE MONTHS OF
1994 WAS 37.9 MILLION SHARES, COMPARED TO 44.0 MILLION SHARES FOR THE
FIRST NINE MONTHS OF 1993. THE REDUCED NUMBER OF SHARES IN 1994 REFLECTS
THE COMPANY'S SHARE REPURCHASE PROGRAM WHICH BEGAN IN MARCH, 1994.
INCOME BEFORE AN EXTRAORDINARY CHARGE AND A GAIN FROM THE CUMULATIVE
EFFECT OF AN ACCOUNTING CHANGE FOR THE FIRST NINE MONTHS OF 1994 WAS
$28.7 MILLION, OR $.76 PER SHARE, COMPARED WITH THE FIRST NINE MONTHS OF
1993, WHEN EARNINGS BEFORE RESIZING CHARGES WERE $19.2 MILLION OR $.44
PER SHARE, AN IMPROVEMENT OF 49.7%.
AFTER AN EXTRAORDINARY LOSS OF $11.8 MILLION AFTER-TAX ($.31 PER SHARE),
FROM THE EARLY EXTINGUISHMENT OF DEBT, AND A $3.8 MILLION AFTER-TAX GAIN
($.10 PER SHARE) DUE TO A REQUIRED CHANGE IN ACCOUNTING FOR CERTAIN
MARKETABLE SECURITIES, NET INCOME FOR THE FIRST NINE MONTHS OF 1994 WAS
$20.7 MILLION OR $.55 PER SHARE. THIS COMPARES TO NET INCOME OF $14.3
MILLION OR $.33 PER SHARE FOR THE NINE MONTHS OF 1993, WHICH INCLUDED A
$.11 PER SHARE CHARGE FOR BUSINESS RESIZING.
15
<PAGE>
AMETEK, INC.
------------
RESULTS OF OPERATIONS (CONT'D)
- ---------------------
ELECTRO-MECHANICAL GROUP SALES TOTALLED $252.2 MILLION IN THE FIRST
------------------------
NINE MONTHS OF 1994, AN INCREASE OF $45.2 MILLION OR 21.9% FROM THE
SAME PERIOD OF LAST YEAR, DUE TO INCREASED U.S. AND EUROPEAN DEMAND
FOR ELECTRIC MOTOR PRODUCTS MANUFACTURED BY THE COMPANY'S DOMESTIC
AND ITALIAN OPERATIONS. BEFORE CURRENCY EFFECTS, THE ITALIAN
OPERATIONS REPORTED A 33.8% INCREASE IN SALES FROM THE FIRST NINE
MONTH PERIOD OF 1993. AFTER CURRENCY TRANSLATION, SALES OF THE
ITALIAN BUSINESSES INCREASED 27.3%.
OPERATING PROFIT OF THIS GROUP INCREASED $7.0 MILLION OR 26.2% TO
$33.5 MILLION IN THE FIRST NINE MONTHS OF 1994, PRIMARILY BECAUSE OF
THE HIGHER SALES VOLUME. SIGNIFICANT INCREASES IN OPERATING MARGINS
BY THE ITALIAN OPERATIONS WERE PARTIALLY OFFSET BY OPERATING
INEFFICIENCIES EXPERIENCED BY THE COMPANY'S TWO PLANTS IN NORTH
CAROLINA, RELATED TO HIGHER COSTS ASSOCIATED WITH INCREASING
PRODUCTION LEVELS AT THE ROCK CREEK PLANT, AND OPERATING
INEFFICIENCIES FROM THE RECONFIGURATION AND EXPANSION OF THE GRAHAM
FACILITY.
IN THE PRECISION INSTRUMENTS GROUP, SALES IN THE FIRST NINE MONTHS OF
---------------------------
1994 WERE $214.8 MILLION, AN INCREASE OF $5.9 MILLION OR 2.8% FROM
THE SAME PERIOD OF 1993. HIGHER SALES OF HEAVY TRUCK INSTRUMENTS
WERE SIGNIFICANTLY REDUCED BY LOWER SALES OF AEROSPACE AND PROCESS
MEASUREMENT INSTRUMENTS.
GROUP OPERATING PROFIT FOR THE FIRST NINE MONTHS OF 1994 INCREASED
$10.7 MILLION TO $23.4 MILLION, FROM 1993 NINE MONTH TOTALS OF $12.7
MILLION, BEFORE REFLECTING A 1993 RESIZING CHARGE OF $8.0 MILLION.
CONTINUED SOFT BUSINESS CONDITIONS IN THE AEROSPACE AND PROCESS
INDUSTRIES MARKETS SERVED BY THIS GROUP WERE MORE THAN OFFSET BY
SIGNIFICANT IMPROVEMENTS IN OPERATING PROFITS REALIZED DUE TO COST
SAVINGS RESULTING FROM THE IMPLEMENTATION OF THE RESTRUCTURING
PROGRAMS INITIATED IN 1993.
THE BUSINESS RESTRUCTURING PLAN ANNOUNCED IN THE FOURTH QUARTER OF
1993 IS PRODUCING IMPROVED RESULTS FOR THIS GROUP, AS COST REDUCTIONS
FROM THE RELOCATION OF AEROSPACE MANUFACTURING OPERATIONS AND
FACILITIES COMBINATION, AS WELL AS SELECTED WORKFORCE REDUCTIONS AND
PRODUCTION EFFICIENCIES HAVE CONTRIBUTED SIGNIFICANTLY TO THE
INCREASE IN GROUP PROFITABILITY. THE COST SAVINGS BEING REALIZED FROM
THE RESTRUCTURING PROGRAMS ARE AHEAD OF PLAN, AND ARE EXPECTED TO
CONTINUE.
16
<PAGE>
AMETEK, INC.
------------
RESULTS OF OPERATIONS (CONT'D)
- ---------------------
UNDER THE RESTRUCTURING PROGRAM, THIS GROUP IS EXPERIENCING
A DELAY IN THE TIMING OF CERTAIN PLANNED WORKFORCE REDUCTIONS, DUE
TO AN EXTENSION OF THE CURRENT LABOR CONTRACT AT A FACILITY IN
SELLERSVILLE, PENNSYLVANIA. HOWEVER, THE RESTRUCTURING PROGRAM
AFFECTING THE BUSINESSES IN THIS GROUP IS STILL EXPECTED TO BE FULLY
IMPLEMENTED. IN ADDITION, IMPROVED OVERALL OPERATING EFFICIENCIES
AND OTHER COST REDUCTION PROGRAMS WHICH HAVE BEEN IMPLEMENTED ARE
ALSO CONTRIBUTING TO THE IMPROVED PROFITABILITY OF THIS GROUP.
THE INDUSTRIAL MATERIALS GROUP'S SALES FOR THE FIRST NINE MONTHS OF
----------------------------
1994 INCREASED $7.6 MILLION OR 5.7% TO $140.7 MILLION. THE GROUP
BENEFITTED FROM INCREASED SALES DUE TO IMPROVEMENT IN THE GENERAL
ECONOMY, AS ALL BUT ONE BUSINESS REPORTED A SALES INCREASE. GROUP
OPERATING PROFIT FOR THE FIRST NINE MONTHS OF 1994 INCREASED $3.4
MILLION, OR 20.2%, TO $20.4 MILLION. THE INCREASE IN OPERATING
PROFIT WAS DUE TO THE HIGHER SALES VOLUME, AS WELL AS BETTER
PERFORMANCE BY MOST BUSINESSES IN THE GROUP, LED BY THE WATER
FILTRATION, PLASTICS COMPOUNDING AND FOAM PACKAGING
BUSINESSES.
17
<PAGE>
AMETEK, INC.
------------
PART II. OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
A) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10 SECOND AMENDMENT TO CREDIT AGREEMENT, DATED AS OF
OCTOBER 13, 1994, AMONG THE COMPANY, VARIOUS
LENDING INSTITUTIONS, BANK OF MONTREAL,
CORESTATES BANK, N.A., AND PNC BANK,
NATIONAL ASSOCIATION, AS CO-AGENTS, AND THE CHASE
MANHATTAN BANK, N.A., AS ADMINISTRATIVE AGENT.
27 FINANCIAL DATA SCHEDULE
B) REPORTS ON FORM 8-K: THE COMPANY DID NOT FILE ANY REPORTS ON
FORM 8-K DURING THE QUARTER ENDED SEPTEMBER 30, 1994.
18
<PAGE>
AMETEK, INC.
------------
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
AMETEK, INC.
-----------------------------------
(REGISTRANT)
BY /S/ OTTO W. RICHARDS
--------------------------------
OTTO W. RICHARDS
VICE PRESIDENT AND COMPTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
NOVEMBER 10, 1994
19
<PAGE>
[CONFORMED COPY]
EXHIBIT 10
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
SECOND AMENDMENT (the "Amendment"), dated as of October 13, 1994,
among AMETEK, INC., a Delaware corporation (the "Borrower"), the financial
institutions party to the Credit Agreement referred to below (the "Banks"), BANK
OF MONTREAL, CORESTATES BANK, N.A. and PNC BANK, NATIONAL ASSOCIATION, as Co-
Agents, and THE CHASE MANHATTAN BANK, N.A., as Administrative Agent. All
capitalized terms used herein and not otherwise defined shall have the
respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower, the Banks, the Co-Agents and the Administrative
Agent are parties to a Credit Agreement dated as of March 11, 1994, as amended
by a First Amendment to Credit Agreement, dated as of April 21, 1994 (as so
amended, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to further amend the Credit Agreement
as herein provided;
NOW, THEREFORE, it is agreed:
I. AMENDMENTS TO CREDIT AGREEMENT
------------------------------
1. Section 1.01 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"1.01 Loan Commitments. Subject to and upon the terms and conditions
----------------
set forth herein, each Bank severally agrees as follows:
(a)(i) to maintain, on and immediately after giving effect to, the
Second Amendment Effective Date, outstanding Term Loans made by such Bank
to the Borrower pursuant to this Agreement (or acquired by such Bank by way
of assignment and assumption prior to the Second Amendment Effective Date)
in an aggregate principal amount equal to such Bank's Term Loan Maintenance
Amount, if any; and (ii) the Term Loans maintained by
<PAGE>
the Banks pursuant to clause (i) of this Section 1.01(a), shall initially
be maintained (subject to the Borrower's option to subsequently convert
such Term Loans pursuant to Section 1.06) as a single Borrowing of the same
Type of Loans as in effect immediately prior to the Second Amendment
Effective Date. Once repaid, Term Loans borrowed hereunder may not be
reborrowed;
(b)(i) to convert, on and immediately after giving effect to, the
Second Amendment Effective Date, outstanding Term Loans made by such Bank
to the Borrower pursuant to this Agreement (or acquired by such Bank by way
of assignment and assumption prior to the Second Amendment Effective Date)
prior to giving effect to the Second Amendment Effective Date in an
aggregate principal amount equal to such Bank's Loan Conversion Amount, if
any, into a Borrowing of Revolving Loans hereunder (such Term Loans as so
converted, together with all Revolving Loans made or maintained pursuant to
the following clause (c), the "Revolving Loans" and each, a "Revolving
Loan"); provided, that the Revolving Loans converted pursuant to this
--------
clause (i) of this Section 1.01(b) on the Second Amendment Effective Date
shall be subject to the limitations provided in Section 1.01(d); and (ii)
Loans converted by the Banks pursuant to clause (i) of this Section 1.01(b)
shall initially be maintained (subject to the Borrower's option to
subsequently convert such Revolving Loans pursuant to Section 1.06) as the
same number of Borrowings and the same Types of such Loans so converted as
in effect immediately prior to the Second Amendment Effective Date;
provided that after giving effect to the conversion by the Banks pursuant
--------
to clause (i) of this Section 1.01(b), each such Bank shall have (and shall
be deemed to have) outstanding Revolving Loans pursuant to each outstanding
Borrowing of Revolving Loans in an amount equal to its Percentage of such
Borrowing;
(c)(i) to maintain, on and immediately after giving effect to, the
Second Amendment Effective Date, Revolving Loans made by such Bank to the
Borrower pursuant to this Agreement (or acquired by such Bank by way of
assignment and assumption prior to the Second Amendment Effective Date) and
then outstanding in an aggregate principal amount equal to such Bank's
Percentage of the aggregate principal amount of Revolving Loans outstanding
immediately prior to the Second Amendment Effective Date and (ii) at any
time and from time to time on and after the Second Amendment
-2-
<PAGE>
Effective Date after giving effect thereto and prior to the Revolving
Credit Facility Maturity Date, to make (after giving effect to the Term
Loans being converted into Revolving Loans pursuant to the preceding clause
(b) of this Section 1.01 and to the maintenance of Revolving Loans pursuant
to the preceding clause (i) of this Section 1.01(c)) one or more Revolving
Loans to the Borrower, which Revolving Loans made by the Banks shall,
except as hereinafter provided, at the option of the Borrower, be
maintained as and/or converted into, Base Rate Loans or Eurodollar Loans;
provided, that, except as otherwise specifically provided herein, all
--------
Revolving Loans incurred pursuant to this Section 1.01(c) comprising the
same Borrowing shall at all times be of the same Type; provided further,
----------------
that the amount of Revolving Loans made pursuant to this clause (c) of
Section 1.01 shall be subject to the limitations provided in Section
1.01(d); and
(d) Revolving Loans converted and/or made or maintained by the Banks
pursuant to clauses (b) and (c) of this Section 1.01: (i) may be repaid and
reborrowed in accordance with the provisions hereof; (ii) shall not exceed
in aggregate principal amount for any Bank at any time outstanding the
amount which, when combined with such Bank's Percentage of the Letter of
Credit Outstandings at such time, equals the Revolving Commitment of such
Bank at such time and (iii) shall not exceed in aggregate principal amount
for all Banks at any time outstanding the amount which, when added to the
aggregate amount of Letter of Credit Outstandings at such time, equals the
lesser of (x) the Borrowing Base then in effect and (y) the Total Revolving
Commitment at such time."
2. Section 1.05 of the Credit Agreement is hereby amended by
deleting clauses (b) and (c) thereof in their entirety and inserting in lieu
thereof the following new clauses:
"(b) The Term Note, if any, issued to each Bank shall (i) be executed
by the Borrower, (ii) be payable to the order of such Bank and be dated the
Initial Borrowing Date, (iii) be in a stated principal amount equal to the
Term Loan Maintenance Amount of such Bank as set forth on Schedule I hereto
and be payable in the principal amount of the Term Loans evidenced thereby
from time to time, (iv) mature on the Final Maturity Date, (v) bear
interest as provided in the appropriate
-3-
<PAGE>
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar
Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory
repayment as provided in Section 4.02 and (vii) be entitled to the benefits
of this Agreement and the other Credit Documents.
(c) The Revolving Note, if any, issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank and be
dated the Initial Borrowing Date, (iii) be in a stated principal amount
equal to the Revolving Commitment of such Bank and be payable in the
principal amount of the Revolving Loans evidenced thereby from time to
time, (iv) mature on the Revolving Credit Facility Maturity Date, (v) bear
interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 4.02
and (vii) be entitled to the benefits of this Agreement and the other
Credit Documents."
3. Section 3.01(a) of the Credit Agreement is hereby amended by (i)
deleting the text "date the Total Commitment has been terminated" appearing
therein and inserting "Second Amendment Effective Date," in lieu thereof, and
(ii) inserting at the end of the first sentence thereof immediately after the
text "Aggregate Unutilized Commitment" the following new text:
"and for the period from and including the Second Amendment Effective Date
to but not including the date the Total Commitment has been terminated,
computed at a rate for each day equal to the Applicable Commitment
Commission Percentage on the daily average of such Bank's Aggregate
Unutilized Commitment".
4. Section 4.02(A)(b) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(b) On each date set forth below, the Borrower shall be required to
repay the principal amount of Term Loans as is set forth opposite such date
(each a "Scheduled Repayment"):
-4-
<PAGE>
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
April 15, 1995 $5,000,000
October 15, 1995 5,000,000
April 15, 1996 5,000,000
October 15, 1996 5,000,000
April 15, 1997 5,000,000
October 15, 1997 5,000,000
April 15, 1998 5,000,000
October 15, 1998 5,000,000
April 15, 1999 5,000,000
Final Maturity Date 5,000,000
</TABLE>
5. Section 4.02(A)(f) of the Credit Agreement is hereby amended by
deleting such clause in its entirety and inserting the following new text in
lieu thereof:
"(f) [Intentionally deleted.]"
6. Section 6.05(b) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(b) The proceeds of Revolving Loans (other than Loans converted into
Revolving Loans pursuant to Section 1.01(b)) shall be utilized for general
corporate purposes of the Borrower and its Subsidiaries, provided that (i)
--------
proceeds of Revolving Loans in an aggregate principal amount not to exceed
$32,000,000 may be utilized on or prior to March 21, 1996 to finance, in
part, the Common Stock Repurchase, (ii) proceeds of Revolving Loans may be
utilized to finance, in whole or in part, repurchases of Common Stock
(other than under the Repurchase Program) in compliance with Section
8.06(e), and (iii) proceeds of Revolving Loans may be utilized to finance,
in whole or in part, Permitted Senior Note Repurchases in compliance with
Section 8.12(i) and the definition thereof."
7. Section 7.01(g) of the Credit Agreement is hereby amended by (i)
deleting the word "five" contained in the introductory provision of such Section
and inserting the number "15" in lieu thereof, and (ii) deleting the figure
"$250,000" contained in each of clauses (i) and (ii) thereof and inserting in
lieu thereof the figure "$1,000,000."
8. Section 7.01(h) of the Credit Agreement is hereby amended by
deleting clause (ii) thereof in its entirety and inserting in lieu thereof the
following:
-5-
<PAGE>
"(ii) promptly and in any event within five Business Days following a
request from the Administrative Agent or any Bank for same, a copy of the
annual and quarterly statements furnished to the Borrower with respect to
its Permitted Existing Investments listed as Items 1 and 2 on Schedule X
hereto,".
9. Section 7.11 of the Credit Agreement is hereby amended by (i)
deleting the first sentence of clause (a) thereof in its entirety and inserting
in lieu thereof the following:
"Prior to the Target Date, as and to the extent requested from time to time
by the Administrative Agent or the Required Banks, the Borrower will, and
will cause each of its Domestic Subsidiaries to, grant to the Collateral
Agent, for the benefit of the Secured Creditors, security interests and
mortgages in such assets and properties of the Borrower or its Subsidiaries
acquired after the Second Amendment Effective Date and not otherwise
covered by the original Security Documents, excluding assets encumbered by
Liens permitted by Section 8.02(i); provided, however, the Borrower shall
-------- -------
not be required to take any additional action to create or perfect a
security interest in any equipment, machinery or intellectual property
acquired after the Second Amendment Effective Date with a fair market value
(as determined in good faith by senior management of the Borrower) of less
than $3,000,000 at the time of the acquisition of such equipment, machinery
or intellectual property by the Borrower."
and (ii) inserting the text "(collectively, the "Additional Security
Documents")" immediately after the text "to the Administrative Agent" appearing
in the second sentence of clause (a) thereof.
10. Section 8.03 of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (n) thereof, (ii)
deleting the period at the end of clause (o) thereof and inserting the text ";
and" in lieu thereof and (iii) adding the following new clause (p) thereto:
"(p) Indebtedness of AMETEK Italia S.r.l. evi-denced by a bank
guaranty denominated in Lira made by a financial institution on behalf of
AMETEK Italia S.r.l. for the benefit of such Persons identified by AMETEK
-6-
<PAGE>
Italia S.r.l. as the seller under the Permitted AMETEK Italia Acquisition
in connection with the Permitted AMETEK Italia Acquisition, provided that
--------
(i) the sole obligor thereunder is AMETEK Italia S.r.l. and neither the
Borrower nor any Subsidiary of the Borrower (other than AMETEK Italia
S.r.l.) is obligated (whether directly or indirectly through a guarantee,
keep-well arrangement or otherwise) in respect thereof, (ii) such
Indebtedness shall not contain any provision in the documents governing or
evidencing the same which, in the reasonable opinion of the Administrative
Agent, would permit a default or event of default to occur under such
Indebtedness based upon the occurrence of a Default or Event of Default
under this Agreement unless any such Event of Default has resulted in an
acceleration under this Agreement, and (iii) the aggregate principal amount
thereof at any one time outstanding shall not exceed 30 billion Lira (it
being understood and agreed that the incurrence of such Indebtedness shall
be deemed to be a representation and warranty by the Borrower that all
conditions thereto have been satisfied and that the same is permitted in
accordance with the terms of this Agreement, which representation and
warranty shall be deemed to be a representation and warranty for all
purposes hereunder, including, without limitation, Sections 5.02 and 9)."
11. Section 8.03(k) of the Credit Agreement is hereby amended by
deleting the figure "$100,000" contained therein and inserting the figure
"$1,000,000" in lieu thereof.
12. Section 8.05(n) of the Credit Agreement is hereby amended by
deleting the text "the Performance Target" appearing in clause (x) thereof and
inserting the ratio "1.00:1" in lieu thereof.
13. Section 8.06(b) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(b) so long as there shall exist no Default or Event of Default
(both before and after giving effect thereto), (x) on or after the Second
Amendment Effective Date and prior to June 30, 1995, the Borrower may
effect Common Stock Repurchases pursuant to the Repurchase Program so long
as the Borrower promptly retires any such shares of Common Stock so
repurchased and (y) on or after June 30, 1995 and prior to the second
anniversary of the Initial Borrowing Date, the Borrower may effect
-7-
<PAGE>
Common Stock Repurchases pursuant to the Repurchase Program, so long as (A)
at the time of any such Common Stock Repurchase pursuant to this clause
(b)(y), the Fixed Charge Coverage Ratio is equal to or better than the
Performance Target for the then most recently ended Test Period and (B) the
Borrower promptly retires any such shares of Common Stock so repurchased;".
14. Section 8.06 of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (c) thereof, (ii)
deleting the period appearing at the end of clause (d) thereof and inserting the
text "; and" in lieu thereof, and (iii) adding the following new clause:
"(e) so long as there shall exist no Default or Event of Default (both
before and after giving effect thereto), (x) on or after the Second
Amendment Effective Date and prior to the Specified Target Date, the
Borrower may repurchase shares of its Common Stock pursuant to open market
and/or privately negotiated purchases and/or a cash tender offer for an
amount for any such purchase not to exceed (i) $25,000,000 less (ii) the
sum of (A) the aggregate amount expended by the Borrower in connection with
all repurchases of shares of its Common Stock previously effected pursuant
to this clause (x) during such period and (B) the aggregate amount expended
by the Borrower in connection with all Permitted Senior Note Repurchases
effected during such period, (y) on or after the Specified Target Date, the
Borrower may repurchase shares of its Common Stock pursuant to open market
and/or privately negotiated purchases and/or a cash tender offer for an
amount for any such purchase on or after the Specified Target Date not to
exceed (i) $25,000,000 less (ii) the aggregate amount expended by the
Borrower in connection with all repurchases of shares of its Common Stock
previously effected pursuant to the preceding clause (x) and this clause
(y), and (z) the Borrower promptly retires any such shares of Common Stock
so repurchased pursuant to this clause (e)."
15. Section 8.12 of the Credit Agreement is hereby amended by
inserting the following text at the end of clause (i) thereof:
", provided, further that the Borrower may effect Permitted Senior
-------- -------
Note Repurchases so long as (x) the consideration paid in connection with
any such Permitted Senior Note Repurchase will not exceed the Available
-8-
<PAGE>
Senior Note Repurchase Amount and (y) no Default or Event of Default then
exists or would result therefrom,".
16. The definition of "Applicable Base Rate Margin" appearing in
Section 10 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
"Applicable Base Rate Margin" shall mean 0%.
17. The definition of "Applicable Eurodollar Margin" appearing in
Section 10 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
"Applicable Eurodollar Margin" shall mean, at any time during the
relevant Category Period set forth below, the margin set forth below
opposite such relevant Category Period:
<TABLE>
<CAPTION>
Applicable
Eurodollar
Category Period Margin
--------------- ----------
<S> <C>
Category A Period 0.3125%
Category B Period 0.5000%
Category C Period 0.7500%
Category D Period 1.0000%
Category E Period 1.1250%
Category F Period 1.2000%
</TABLE>
18. The definition of "Category D Period" appearing in Section 10 of
the Credit Agreement is hereby amended and restated in its entirety as follows:
"Category D Period" shall mean any period during which at all times
the Credit Rating is BB or above but lower than BBB- (to the extent that the
Credit Rating at the time of determination is the Applicable Credit Rating
assigned by S&P) or Ba2 or above but lower than Baa3 (to the extent that the
Credit Rating at the time of determination is the Applicable Credit Rating
assigned by Moody's).
-9-
<PAGE>
19. The definition of "Category E Period" appearing in Section 10 of
the Credit Agreement is hereby amended and restated in its entirety as follows:
"Category E Period" shall mean any period during which at all times
the Credit Rating is BB- (to the extent that the Credit Rating at the time of
determination is the Applicable Credit Rating assigned by S&P) or Ba3 (to the
extent that the Credit Rating at the time of determination is the Applicable
Credit Rating assigned by Moody's).
20. The definition of "Credit Rating" appearing in Section 10 of the
Credit Agreement is hereby amended by deleting the word "lower" appearing in
clause (ii) thereof and inserting the word "higher" in lieu thereof.
21. The definition of "Final Maturity Date" appearing in Section 10
of the Credit Agreement is hereby amended and restated in its entirety as
follows:
"Final Maturity Date" shall mean the fifth anniversary of the Second
Amendment Effective Date."
22. The definition of "Revolving Credit Facility Maturity Date"
appearing in Section 10 of the Credit Agreement is hereby amended by deleting
the text "Initial Borrowing Date" appearing therein and inserting the text
"Second Amendment Effective Date" in lieu thereof.
23. The definition of "Term Loan" appearing in Section 10 of the
Credit Agreement is hereby amended and restated in its entirety as follows:
"Term Loan" shall mean each term Loan made under this Agreement
immediately prior to the Second Amendment Effective Date.
24. Section 10 of the Credit Agreement is hereby further amended by
adding thereto in appropriate alphabetical order the following new definitions:
"Applicable Commitment Commission Percentage" shall mean, at any time
during the relevant Category Period set forth below, the commitment
commission percentage set forth below opposite such relevant Category
Period:
-10-
<PAGE>
<TABLE>
<CAPTION>
Applicable Commitment
Category Period Commission Percentage
--------------- ---------------------
<S> <C>
Category A Period 0.1250%
Category B Period 0.1500%
Category C Period 0.1875%
Category D Period 0.2000%
Category E Period 0.2500%
Category F Period 0.3125%
</TABLE>
"Available Senior Note Repurchase Amount" shall mean (x) at any time
on or after the Second Amendment Effective Date and prior to the Specified
Target Date, an amount equal to (i) $25,000,000 less (ii) the sum of (A)
the aggregate amount expended by the Borrower in connection with all
Permitted Senior Note Repurchases previously effected during such period
and (B) the aggregate amount expended by the Borrower in connection with
all repurchases of shares of its Common Stock previously effected pursuant
to Section 8.06(e)(x) during such period, and (y) at any time on or after
the Specified Target Date, an amount equal to (i) $150,000,000 less (ii)
the sum of (A) without duplication, the aggregate amount of all repayments
of principal of all Senior Notes and all Permitted Refinancing Debt and (B)
the aggregate amount expended by the Borrower in connection with all
Permitted Senior Note Repurchases previously effected pursuant to the
preceding clause (x) and this clause (y).
"Loan Conversion Amount" shall mean, for each Bank, the amount set
forth opposite such Bank's name on Schedule I hereto directly below the
column entitled "Loan Conversion Amount."
"Permitted AMETEK Italia Acquisition" shall mean the acquisition by
AMETEK Italia S.r.l. of a business involving the design, manufacture and/or
sale of motors, on terms and conditions (including, without limitation,
documentation, purchase price, type of consideration and security in
connection therewith) satisfactory to the Administrative Agent and the
Required Banks.
-11-
<PAGE>
"Permitted Senior Note Repurchase" shall mean the repurchase and
retirement of any Senior Notes or Permitted Refinancing Debt being so
repurchased in compliance with Section 8.12(i).
"Second Amendment" shall mean the Second Amendment to the Credit
Agreement, dated as of October 13, 1994, among the Borrower and the Banks
party thereto.
"Second Amendment Effective Date" shall have the meaning provided for
such term in the Second Amendment.
"Specified Target Date" shall mean the first date upon which both (i)
the Credit Rating is BBB (to the extent that the Credit Rating at the time
of determination is the Applicable Credit Rating assigned by S&P) or Baa2
(to the extent that the Credit Rating at the time of determination is the
Applicable Credit Rating assigned by Moody's) and (ii) no Default or Event
of Default exists.
"Term Loan Maintenance Amount" shall mean, for each Bank, the amount
set forth opposite such Bank's name on Schedule I hereto directly below the
column entitled "Term Loan Maintenance Amount."
25. The Credit Agreement is hereby amended by deleting Schedule I
thereto in its entirety and by inserting in lieu thereof a new Schedule I in the
form of Annex A to this Amendment.
II. MISCELLANEOUS PROVISIONS.
------------------------
1. Each of the Banks signatory hereto hereby consents to and
authorizes the Administrative Agent to enter into an amendment to the Security
Agreement and the Pledge Agreement in the form attached hereto as Annex B and
Annex C, respectively, to this Amendment.
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete
-12-
<PAGE>
set of counterparts shall be lodged with the Borrower and the Administrative
Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when (i) each of the Borrower and each Bank shall
have signed a copy hereof (whether the same or different copies) and shall have
delivered (including by way of telecopier) the same to the Administrative Agent
at its Notice Office, (ii) each of the Borrower, the Domestic Subsidiaries of
the Borrower and the Administrative Agent shall have executed and delivered an
amendment to the Security Agreement in the form of Annex B to this Amendment and
an amendment to the Pledge Agreement in the form of Annex C to this Amendment,
(iii) the Borrower shall have executed and delivered to the Administrative Agent
for the account of each Bank, the appropriate Note or Notes in the amount,
maturity and as otherwise provided in the Credit Agreement as amended by this
Amendment, (iv) the Administrative Agent shall have received an opinion,
addressed to each of the Banks, the Co-Agents and the Administrative Agent and
dated the Second Amendment Effective Date, from Stroock & Stroock & Lavan,
counsel to the Credit Parties, covering such matters as the Administrative Agent
may request in connection with the transactions contemplated by the Second
Amendment, (v) the Administrative Agent shall have received from the Borrower a
certificate, dated the Second Amendment Effective Date, signed by an Authorized
Officer of the Borrower certifying as to such matters and documents as the
Administrative Agent may request in connection with the execution and delivery
of the Second Amendment and the transactions contemplated thereby, and (vi) the
Borrower shall have paid all costs, fees and expenses and all other compensation
contemplated by the Credit Agreement and this Amendment to the extent due to the
Administrative Agent, any Co-Agent or the Banks (including, without limitation,
legal fees and expenses).
6. In order to induce the Banks to enter into this Amendment, the
Borrower hereby makes each of the representations, warranties and agreements
contained in the Credit Agreement on the Second Amendment Effective Date both
before and after giving effect to this Amendment.
7. In order to induce the Banks to enter into this Amendment, the
Borrower hereby represents and warrants that
-13-
<PAGE>
no Default or Event of Default is in existence as of the Second Amendment
Effective Date both before and after giving effect thereto.
8. From and after the Second Amendment Effective Date, all references
in the Credit Agreement and each of the Credit Documents to the Credit Agreement
shall be deemed to be references to the Credit Agreement as amended hereby.
-14-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
AMETEK, INC.
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
THE CHASE MANHATTAN BANK,
N.A.,
Individually and as
Administrative Agent
By: /s/ Marc D. Galligan
---------------------------------
Title: Vice President
BANK OF MONTREAL,
Individually and as
Co-Agent
By: /s/ Kanu Modi
---------------------------------
Title: Director
CORESTATES BANK, N.A.,
Individually and as
Co-Agent
By: /s/ Robert M. Cordell
---------------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
Individually, as Co-Agent and
as Letter of Credit Issuer
By: /s/ Vicky Randolph Ziff
---------------------------------
Title: Vice President
-15-
<PAGE>
BANK OF AMERICA ILLINOIS
By: /s/ Brock T. Harris
---------------------------------
Title: Vice President
FLEET BANK OF MASSACHUSETTS, N.A.
By: /s/ Thomas J. Bullard
---------------------------------
Title: Vice President
MELLON BANK, N.A.
By: /s/ John R. Fell III
---------------------------------
Title: Vice President
NBD BANK, N.A.
By: /s/ Nancy Russell
---------------------------------
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN
LIMITED, NY BRANCH
By: /s/ Mitsuo Matsunaga
---------------------------------
Title: Vice President
THE YASUDA TRUST AND BANKING CO.,
LTD. NY BRANCH
By: /s/ Neil T. Chau
---------------------------------
Title: First Vice President
CARIPLO-CASSA DI RISPARMIO DELLE
PROVINCIE LOMBARDE S.P.A.
By: /s/ Charles W. Kennedy
---------------------------------
Title: Vice President
By: /s/ Renato Bassi
---------------------------------
Title: First Vice President
-16-
<PAGE>
ANNEX A
to
Second Amendment
----------------
SCHEDULE I
----------
COMMITMENTS/LOANS
-----------------
<TABLE>
<CAPTION>
Term Loan Loan Revolving
Bank Maintenance Amount Conversion Amount Commitment
---- ------------------ ----------------- ----------
<S> <C> <C> <C>
The Chase Manhattan $6,350,000 $4,219,586.26 $19,050,000
Bank, N.A.
Bank of Montreal 6,800,000 4,355,400.00 20,400,000
Corestates Bank, N.A. 6,800,000 4,355,400.00 20,400,000
PNC Bank, National 6,800,000 4,355,400.00 20,400,000
Association
Bank of America 4,200,000 2,690,100.00 12,600,000
Fleet Bank of 4,200,000 2,690,100.00 12,600,000
Massachusetts, N.A.
Mellon Bank, N.A. 4,200,000 2,690,100.00 12,600,000
NBD Bank, N.A. 4,200,000 2,690,100.00 12,600,000
The Long-Term Credit 2,600,000 1,665,300.00 7,800,000
Bank of Japan Limited,
NY Branch
The Yasuda Trust and 2,600,000 1,665,300.00 7,800,000
Banking Co., Ltd. NY
Branch
CARIPLO-Cassa di 1,250,000 648,213.74 3,750,000
Risparmio Delle
Provincie Lombarde
=========== ============== ============
$50,000,000 $32,025,000 $150,000,000
</TABLE>
<PAGE>
[CONFORMED COPY]
ANNEX B
to Second Amendment
to Credit Agreement
-------------------
FIRST AMENDMENT TO SECURITY AGREEMENT
-------------------------------------
FIRST AMENDMENT TO SECURITY AGREEMENT (the "Amendment"), dated as of
October 19, 1994, among AMETEK, INC., a Delaware corporation, and certain of its
subsidiaries listed on the signature pages hereto (each an "Assignor" and
collectively, the "Assignors") and THE CHASE MANHATTAN BANK, N.A., as Collateral
Agent. All capitalized terms used herein and not otherwise defined shall have
the respective meanings provided such terms in the Credit Agreement referred to
below.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, AMETEK, INC., a Delaware corporation (the "Borrower"), the
financial institutions party to the Credit Agreement referred to below (the
"Banks"), BANK OF MONTREAL, CORESTATES BANK, N.A. and PNC BANK, NATIONAL
ASSOCIATION, as Co-Agents, and THE CHASE MANHATTAN BANK, N.A., as Administrative
Agent are parties to a Credit Agreement dated as of March 11, 1994, as amended
by a First Amendment to Credit Agreement, dated as of April 21, 1994 and a
Second Amendment to Credit Agreement, dated as of October 13, 1994 (as so
amended, the "Credit Agreement");
WHEREAS, the Assignors and the Collateral Agent are parties to a
Security Agreement dated as of March 21, 1994 (the "Security Agreement"); and
WHEREAS, the parties hereto wish to amend the Security Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
I. AMENDMENT TO SECURITY AGREEMENT
-------------------------------
1. Article X of the Security Agreement is hereby amended by adding
the following new Section 10.11 immediately after Section 10.10:
"10.11 Certain Exemptions. Nothwitstanding anything to the contrary
------------------
contained herein, no Assignor
<PAGE>
shall be required to take any further action to create or perfect a
security interest in any Equipment, Mark, Patent or Copyright acquired
after the Second Amendment Effective Date (as such term is defined in the
Credit Agreement) with a fair market value (as determined in good faith by
senior management of the Borrower) of less than $3,000,000 at the time of
the acquisition of such Equipment, Mark, Patent or Copyrights by such
Assignor."
II. MISCELLANEOUS PROVISIONS.
------------------------
1. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Security
Agreement or any other Credit Document.
2. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower on behalf of each Assignor and
the Collateral Agent.
3. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
4. This Amendment shall become effective on the date when (i) each of
the Assignors and the Collateral Agent shall have signed a copy hereof (whether
the same or different copies) and shall have delivered (including by way of
telecopier the same to the Administrative Agent at its Notice Office and (ii)
the Second Amendment Effective Date shall have otherwise occurred.
5. In order to induce the Collateral Agent to enter into this
Amendment, each Assignor hereby makes each of the representations, warranties
and agreements contained in the Security Agreement on the date hereof both
before and after giving effect to this Amendment.
6. From and after the Second Amendment Effective Date, all references
in the Credit Agreement, Security Agreement and each of the other Credit
Documents to the Security Agreement shall be deemed to be references to the
Security Agreement as amended hereby.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
AMETEK, INC.,
as an Assignor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
AMESPACE, INC.,
as an Assignor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
AMETEK AEROSPACE PRODUCTS, INC.,
as an Assignor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
EMA CORPORATION,
as an Assignor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
AMETEK (JAPAN) LTD.,
as an Assignor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
THE CHASE MANHATTAN BANK, N.A.,
as Collateral Agent
By: /s/ Marc D. Galligan
---------------------------------
Title: Vice President
-3-
<PAGE>
[CONFORMED COPY]
ANNEX C
to Second Amendment
to Credit Agreement
-------------------
FIRST AMENDMENT TO PLEDGE AGREEMENT
-----------------------------------
FIRST AMENDMENT TO PLEDGE AGREEMENT (the "Amendment"), dated as of
October 19, 1994, among AMETEK, INC., a Delaware corporation, and certain of its
subsidiaries listed on the signature pages hereto (each a "Pledgor" and
collectively, the "Pledgors") and THE CHASE MANHATTAN BANK, N.A., as Collateral
Agent. All capitalized terms used herein and not otherwise defined shall have
the respective meanings provided such terms in the Credit Agreement referred to
below.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, AMETEK, INC., a Delaware corporation (the "Borrower"), the
financial institutions party to the Credit Agreement referred to below (the
"Banks"), BANK OF MONTREAL, CORESTATES BANK, N.A. and PNC BANK, NATIONAL
ASSOCIATION, as Co-Agents, and THE CHASE MANHATTAN BANK, N.A., as Administrative
Agent are parties to a Credit Agreement dated as of March 11, 1994, as amended
by a First Amendment to Credit Agreement, dated as of April 21, 1994 and a
Second Amendment to Credit Agreement, dated as of October 13, 1994 (as so
amended, the "Credit Agreement");
WHEREAS, the Pledgors and the Collateral Agent are parties to a Pledge
Agreement dated as of March 21, 1994 (the "Pledge Agreement"); and
WHEREAS, the parties hereto wish to amend the Pledge Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
I. AMENDMENT TO PLEDGE AGREEMENT
-----------------------------
1. Section 21 of the Pledge Agreement is hereby amended by adding the
following new clause (e) immediately after clause (d) appearing in Section 21:
"(e) Nothwitstanding anything to the contrary contained herein, any
issued and outstanding shares of
<PAGE>
capital stock of Ametek GmbH shall not constitute Stock for purposes of
this Agreement until such time as 100% of such issued and outstanding
shares of capital stock may be pledged hereunder by any Pledgor without
triggering the tax consequences described in Section 7.16 of the Credit
Agreement."
II. MISCELLANEOUS PROVISIONS.
------------------------
1. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Pledge
Agreement or any other Credit Document.
2. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower on behalf of each Pledgor and the
Collateral Agent.
3. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
4. This Amendment shall become effective on the date when (i) each of
the Pledgors and the Collateral Agent shall have signed a copy hereof (whether
the same or different copies) and shall have delivered (including by way of
telecopier the same to the Administrative Agent at its Notice Office and (ii)
the Second Amendment Effective Date shall have otherwise occurred.
5. In order to induce the Collateral Agent to enter into this
Amendment, each Pledgor hereby makes each of the representations, warranties and
agreements contained in the Pledge Agreement on the date hereof both before and
after giving effect to this Amendment.
6. From and after the Second Amendment Effective Date, all references
in the Credit Agreement, Pledge Agreement and each of the other Credit Documents
to the Pledge Agreement shall be deemed to be references to the Pledge Agreement
as amended hereby.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
AMETEK, INC.,
as a Pledgor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
AMESPACE, INC.,
as a Pledgor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
AMETEK AEROSPACE PRODUCTS, INC.,
as a Pledgor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
EMA CORPORATION,
as a Pledgor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
AMETEK (JAPAN) LTD.,
as a Pledgor
By: /s/ Deirdre Saunders
---------------------------------
Title: Treasurer
THE CHASE MANHATTAN BANK, N.A.,
as Collateral Agent
By: /s/ Marc D. Galligan
---------------------------------
Title: Vice President
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Condensed Consolidated Balance Sheet of AMETEK, Inc. at September 30,1994,
and the Consolidated Statement of Income of AMETEK, Inc. for the nine months
ended September 30, 1994, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 18,879
<SECURITIES> 9,766
<RECEIVABLES> 122,113
<ALLOWANCES> 3,505
<INVENTORY> 97,982
<CURRENT-ASSETS> 267,326
<PP&E> 397,341
<DEPRECIATION> 217,445
<TOTAL-ASSETS> 527,678
<CURRENT-LIABILITIES> 179,833
<BONDS> 227,449
<COMMON> 372
0
0
<OTHER-SE> 64,649
<TOTAL-LIABILITY-AND-EQUITY> 527,678
<SALES> 607,671
<TOTAL-REVENUES> 607,671
<CGS> 467,381
<TOTAL-COSTS> 467,381
<OTHER-EXPENSES> 81,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,261
<INCOME-PRETAX> 46,204
<INCOME-TAX> 17,502
<INCOME-CONTINUING> 28,702
<DISCONTINUED> 0
<EXTRAORDINARY> (11,810)
<CHANGES> 3,819
<NET-INCOME> 20,711
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
