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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993 Commission file number 1-4416
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SPS TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its Charter)
PENNSYLVANIA 23-1116110
(State of incorporation) (I.R.S. Employer Identification No.)
101 Greenwood Avenue, Suite 470 19046
Jenkintown, Pennsylvania (Zip Code)
(Address of principal executive offices)
(215) 517-2000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934:
Title of Each Class Name of Each Exchange
Common Stock, Par Value $1.00 on Which Registered
Per Share New York Stock Exchange
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/
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
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The aggregate market value of the voting stock held by non-affiliates
of the Registrant at March 7, 1994 was approximately $111,554,994.
The number of shares of Registrant's Common Stock outstanding on March
7, 1994 was 5,107,292.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1993 Annual Report to Shareholders of the Registrant
are incorporated by reference in Parts I, II and IV of this Report.
Portions of the Definitive Proxy Statement of Registrant, if filed with
the Securities and Exchange Commission within 120 days after December 31,
1993, are incorporated by reference in Part III of this report. To the
extent not so filed, such information will be provided on a Form 10-K/A
filed with the Securities and Exchange Commission.
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PART I
Item I. BUSINESS (Thousands of Dollars)
SPS Technologies, Inc. (the Company) was incorporated in Pennsylvania
in 1903. The Company is engaged in the design, manufacture and marketing
of high-strength precision mechanical fasteners, precision components,
fastening systems and assembly systems (fasteners), and superalloys in
ingot form and magnetic materials (materials).
During 1993, the Company proceeded with its restructuring plan by
reducing the number of non-direct employees, consolidating certain
fastener manufacturing operations in the United States, disposing of
certain distribution and marketing operations in Europe and placing the
corporate headquarters facility in Newtown, Pennsylvania and the Company
aircraft on the market for sale. Modifications from the 1992 plan included
the fourth quarter 1993 decision to retain the European industrial
fastener businesses in Coventry and Smethwick, England, and Barcelona,
Spain; the Unbrako fastener distribution business in Koblenz, Germany; and
the hard ferrite magnetic materials business in Sevierville, Tennessee. In
addition, the Company has decided to either sell the Assembly Systems
Division, which is a fastener segment product line, or liquidate the
computer-controlled fastener tightening systems part of this division and
only operate the hand wrenchs, spare parts and service portion. Additional
information regarding the restructuring plan is provided in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and in Note 3 to the Company's Consolidated Financial
Statements on page 9 in the 1993 Annual Report to Shareholders and is
incorporated herein by reference.
The Company is multinational in operation. In addition to 10
manufacturing plants in the United States, it operates seven manufacturing
facilities in four different countries: the United Kingdom, Ireland,
Australia and Spain. The Company also has a 50 percent interest in a
manufacturing operation in Adelanto, California, and minority interests in
manufacturing operations in Brazil and India. Marketing operations are
carried on by subsidiaries and an affiliate in five other countries.
The Company sells directly to original equipment manufacturers and
industrial, commercial and governmental users, and also sells through
independent stocking distributors and dealers. There were no changes in
these methods of distribution during 1993.
Principal fastener markets include aerospace, machine tool and
industrial machinery, automotive, and off-highway equipment. Principal
markets for materials include the precision investment casting, powdered
metal, aerospace, medical equipment, automotive, computer and
communications industries.
Principal fastener products are SPS(Reg) aerospace fasteners,
MULTIPHASE(Reg) alloy fasteners, and other aerospace fasteners;
UNBRAKO(Reg) brand socket screws, hex keys, dowel pins, shaft collars,
spring pins and pressure plugs; engineered fasteners for gasoline and
diesel engines, other critical automotive applications, and off-highway
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equipment; and HI-LIFE(Reg) thread roll dies and other metal-working
tools.
Principal materials products are air and vacuum-melted iron, cobalt,
and nickel-based superalloys, including CMSX(Reg) single-crystal alloys;
and metallic and ceramic permanent magnets, wound and pressed powder
magnetic components, and magnetic ultra-thin foil and strip products.
The Company's business is highly competitive. Competition is based
primarily on technology, price, service, product quality and performance.
The Company believes that its favorable competitive position is based upon
its high-quality product performance and service to its customers,
supported by its commitment to research and development which has yielded
proprietary products to the extent indicated below.
No material part of the Company's business is dependent upon a single
customer. In 1993, the five largest customers accounted for 18 percent of
the Company's reported consolidated net sales.
The backlog of orders at December 31 was:
1993 1992
------------------------
Fastener segment ....................... $72,389 $65,152
Materials segment ...................... 16,584 19,328
------------------------
Total ................................ $88,973 $84,480
========================
No material portion of the Company's business in either segment is
seasonal.
The principal sources of raw materials for the fastener and materials
segments include major and specialty steel producers, and non-ferrous
metal producers, converters and distributors. The Company anticipates it
will have no significant problem with respect to sources or availability
of the raw materials essential to the conduct of its business.
The Company considers its proprietary position important to the two
segments of its business. During 1993, approximately 31% of Company sales,
principally in the fasteners segment, were related to patents and licenses
held, and manufacturing know-how. Generally, the patents and licenses of
the Company expire at various times over the next 17 years.
Total expenditures during 1993, 1992 and 1991 for Company-sponsored
research and development were $5,050, $6,604 and $6,930, respectively. In
1993, approximately 73% of the expenditures were for the Company's
fastener segment.
Capital expenditures for property, plant and equipment are planned at
$13 million in 1994, exclusive of any business acquisition.
There were approximately 3,038 and 641 persons employed by the Company
at December 31, 1993 in the fastener and materials segments, respectively.
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For financial information concerning industry segments and the foreign
and domestic operations, see Note 17 to the Company's Consolidated
Financial Statements on pages 13 to 15 in the 1993 Annual Report to
Shareholders, which is incorporated herein by reference.
Item 2. PROPERTIES
The Company owns or leases the manufacturing properties described
below. All properties are in good condition.
Location
Owned Square Feet
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Jenkintown, Pennsylvania............ 683,000(a)
Cleveland, Ohio .................... 413,000(a)
Santa Ana, California............... 305,000(a)(i)
Salt Lake City, Utah ............... 86,000(a)
Marengo, Illinois .................. 442,000(b)
Muskegon, Michigan ................. 110,000(b)
Norfolk, Nebraska .................. 103,000(b)
Sevierville, Tennessee ............. 65,000(b)
Ogallala, Nebraska ................. 26,000(b)
Anasco, Puerto Rico................. 129,000(a)(j)
Coventry, England .................. 240,000(a)
Birmingham, England ................ 137,000(a)
Leicester, England ................. 88,000(a)
Melbourne, Australia ............... 44,000(a)
Leased Lease Expires Square Feet
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Walled Lake, Michigan April 30, 1994 21,000(a)
Leicester, England (c) (d) 90,000(a)
Shannon, Ireland (e) (f) (g) 233,000(a)
Barcelona, Spain April 20, 2005 129,000(a)
Tarragona, Spain (h) 11,000(a)
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(a) Fastener segment
(b) Materials segment
(c) Lease for 38,000 square feet expires January 12, 1997.
(d) Lease for 52,000 square feet expires July 1, 1995.
(e) Lease for 54,000 square feet expires April 1, 1996.
(f) Lease for 75,000 square feet expires November 15, 2010.
(g) Lease for 104,000 square feet expires November 13, 2010.
(h) Lease expires November 1, 1994, with biennial renewal options.
(i) Approximately 70,000 square feet used for manufacturing purposes, with
the remaining 235,000 square feet held for lease.
(j) Closed and held for sale.
The Company also owns a 63,000 square-foot corporate headquarters
facility in Newtown, Pennsylvania. This facility is currently held for
sale. Industrial Development Revenue Bonds were issued to finance the
acquisition and improvement of the Salt Lake City, Utah, facility. These
bonds are collateralized by a first mortgage on this facility and a bank
letter of credit.
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Item 3. LEGAL PROCEEDINGS
For discussion of legal proceedings, see Note 14 to the Company's
Consolidated Financial Statements on page 12 in the 1993 Annual Report to
Shareholders which is incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of 1993.
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EXECUTIVE OFFICERS OF THE REGISTRANT
All executive officers of the Company are named below and are
appointed by the Board of Directors. The date that each officer was first
appointed to his present position is indicated. No officer listed was
appointed as a result of any arrangement between him and any other person
as that phrase is understood under the Securities Exchange Act
regulations. No family relationship exists among the executive officers of
the Company.
<TABLE>
<CAPTION>
Name Experience and Position Held Age
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<S> <C> <C>
Charles W. Grigg Chairman and Chief Executive Officer since December 1993. Previously, 54
President and Chief Operating Officer, Watts Industries, Inc., a
manufacturer of valve products, since 1986.
Harry J. Wilkinson President and Chief Operating Officer since April 1986. Previously, 56
Group Vice President, Aerospace, Automated Systems and Industrial
Products since March 1985. Previously, Group Vice President, Domestic
Operations since January 1984.
Harry W. Antes Vice President, Research and Development since September 1986. 63
Previously, Director of Research since 1980.
John P. McGrath Vice President, Corporate Services since August 1988. Previously, 54
President, Latin America/Pacific Operations since 1982.
Aaron Nerenberg Vice President, Corporate Counsel and Secretary since August 1988. 53
Previously, Corporate Counsel and Secretary since July 1986. Previously,
Associate Counsel and Patent Counsel since 1981.
John M. Morrash Treasurer since February 1988. Previously, Controller, Automated Systems 39
Division since 1984.
Charles E. Myslinski Director, Corporate Credit and Collections and Assistant Secretary since 64
February 1988. Previously, Treasurer and Assistant Secretary since
December 1979. Previously, Assistant Secretary since 1978.
William M. Shockley Corporate Controller, since September 1992. Previously, Assistant 32
Controller since November 1991. Previously, Manager, Coopers & Lybrand
since 1988.
</TABLE>
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PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
Information regarding the principal markets on which SPS Technologies
common stock is traded, the high and low sales price for the stock on the
New York Stock Exchange for each quarterly period during the past two
years, the quarterly cash dividends declared by SPS Technologies with
respect to its common stock during the past two years, and the approximate
number of holders of common stock at March 7, 1994 is included under the
caption entitled "Common Stock Information" on page 21 in the 1993
Annual Report to Shareholders and is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
A summary of selected financial data for SPS Technologies for the
years and year ends specified is included under the caption entitled
"Selected Financial Data" on page 23 in the 1993 Annual Report to
Shareholders and is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information regarding SPS Technologies financial condition, changes in
financial condition and results of operations is included under the
caption entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 24 to 27 in the 1993 Annual
Report to Shareholders and is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements for SPS Technologies included on
pages 4 through 19 in the 1993 Annual Report to Shareholders, together
with required supplementary data that is included in Footnote 23,
"Summary of Quarterly Results" on page 20 in the 1993 Annual Report to
Shareholders, are incorporated herein by reference.
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) Identification of directors:
Information regarding directors is incorporated by reference to
the Definitive Proxy Statement, Election of Directors, if filed with
the Securities and Exchange Commission (SEC) within 120 days after
December 31, 1993. To the extent not so filed, such information will
be provided on a Form 10-K/A filed with the SEC.
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(b) Identification of executive officers:
Information regarding executive officers is contained in Part I of
this report (page 5).
Item 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated by
reference to the Definitive Proxy Statement, Executive Compensation and
Board Meetings, Committees and Compensation, if filed with the SEC within
120 days after December 31, 1993. To the extent not so filed, such
information will be provided on a Form 10-K/A filed with the SEC.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners
and management is incorporated by reference to the Definitive Proxy
Statement, Ownership of Voting Securities, if filed with the SEC within
120 days after December 31, 1993. To the extent not so filed, such
information will be provided on a Form 10-K/A filed with the SEC.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. The Consolidated Financial Statements and related Notes set forth
on pages 4 through 19 of the 1993 Annual Report to Shareholders are
incorporated by reference (See Exhibit 13). The Report of Independent
Accountants, which covers both the Consolidated Financial Statements
and the financial statement schedules, appears on page 11 of this
report.
2. Financial Statement Schedules:
The following supplemental schedules are located in this report on the
pages indicated.
Page
----
V Property, Plant and Equipment 12
VI Accumulated Depreciation and Amortization of Property,
Plant and Equipment 13
VIII Valuation and Qualifying Accounts 14
IX Short-Term Borrowings 14
X Supplementary Income Statement Information 14
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Schedules other than those listed above are omitted for the reason
that they are either not applicable or not required or because the
information required is contained in the financial statements or notes
thereto.
3. Exhibits:
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<CAPTION>
<S> <C>
3a Amended and Restated Articles of Incorporation. Exhibit 3a to the Annual
Report on Form 10-K for the year ended December 31, 1990, is hereby
incorporated by reference.
3b By-Laws as amended, effective April 29, 1993. Exhibit 3 to the Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993, is hereby
incorporated by reference.
4 Rights Agreement dated November 11, 1988, is incorporated by reference
to Form 8-K filed November 17, 1988. Amendment No. 1 to Rights Agreement
dated January 22, 1991, is incorporated by reference to Form 8-K filed
January 25, 1991.
10a SPS 1988 Long Term Incentive Stock Plan as amended, effective February
2, 1989. Exhibit 10a to the Annual Report on Form 10-K for the year
ended December 31, 1988, is hereby incorporated by reference.
10b SPS Exempt Employees Savings and Investment Plan as Amended and
Restated, effective November, 1991. Exhibit 10b to the Annual Report on
Form 10-K for the year ended December 31, 1991, is hereby incorporated
by reference.
10c SPS Technologies, Inc. Non-Exempt Employees Savings and Investment Plan
as Amended and Restated, effective November, 1991. Exhibit 10c to the
Annual Report on Form 10-K for the year ended December 31, 1991, is
hereby incorporated by reference.
10d SPS Technologies, Inc. Management Incentive Plan as Amended and
Restated, effective March 7, 1991. Exhibit 10d to the Annual Report on
Form 10-K for the year ended December 31, 1990, is hereby incorporated
by reference.
10e SPS Technologies, Inc. Executive Incentive Plan as Amended and Restated,
effective March 7, 1991. Exhibit 10e to the Annual Report on Form 10-K
for the year ended December 31, 1990, is hereby incorporated by
reference.
10f Retirement Benefit Agreement, dated February 28, 1979. Exhibit 10f to
the Annual Report on Form 10-K for the year ended December 31, 1991, is
hereby incorporated by reference.
10g Fee Arrangement with Former Directors, effective November 29, 1984.
Exhibit 10g to the Annual Report on Form 10-K for the year ended
December 31, 1990, is hereby incorporated by reference.
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
<S> <C>
10h Form of Employment Agreements between SPS Technologies, Inc. and certain
employees, as amended and restated effective December 14, 1992. Exhibit
10h to the Annual Report on Form 10-K for the year ended December 31,
1992, is hereby incorporated by reference.
10i SPS Technologies, Inc. Executive Deferred Compensation Plan, as amended
and restated, effective December 14, 1992. Exhibit 10i to the Annual
Report on Form 10-K for the year ended December 31, 1992, is hereby
incorporated by reference.
10j SPS Technologies, Inc. Executive Deferred Compensation Plan II, as
amended and restated effective December 1, 1993.
10k SPS Technologies, Inc. Supplemental Executive Retirement Plan, as
amended and restated effective December 14, 1992. Exhibit 10k to the
Annual Report on Form 10-K for the year ended December 31, 1992, is
hereby incorporated by reference.
10l Employment Agreement between SPS Technologies, Inc. and Charles W.
Grigg, Chairman and Chief Executive Officer, effective December 1, 1993.
10m Form of Indemnification Agreements between SPS Technologies, Inc. and
officers and directors dated February 2, 1987. Exhibit 10m to the Annual
Report on Form 10-K for the period ended December 31, 1992, is hereby
incorporated by reference.
10n Split Dollar Insurance Agreements regarding certain officers and
directors effective April 2, 1990, and November 27, 1991. Exhibit 10n to
the Annual Report on Form 10-K for the year ended December 31, 1991, is
hereby incorporated by reference.
10o SPS Technologies, Inc. Senior Executive Severance Plan, effective
December 14, 1992. Exhibit 10o to the Annual Report on Form 10-K for the
year ended December 31, 1992, is hereby incorporated by reference.
10p Agreement with Retiring Executive, approved December 14, 1992. Exhibit
10p to the Annual Report on Form 10-K for the year ended December 31,
1992, is hereby incorporated by reference.
10q SPS Technologies, Inc. Benefit Equalization Plan, as amended and
restated effective December 14, 1992. Exhibit 10 to the Quarterly Report
on Form 10-Q for the quarter ended March 31, 1993, is hereby
incorporated by reference.
11 Computation of dilution (anti-dilution) of earnings per share resulting
from common stock equivalents.
13 1993 Annual Report to Shareholders (With the exception of the
information expressly incorporated by reference in items 1, 3, 5, 6, 7,
8 and 14 of Form 10-K, the 1993 Annual Report to Shareholders is not
deemed "filed" with the SEC or otherwise subject to the liabilities of
Section 18 of the Securities and Exchange Act of 1934).
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
</TABLE>
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(b) Reports on Form 8-K:
Form 8-K was filed on December 1, 1993 stating that the Board of
Directors had elected Charles W. Grigg as Chairman of the Board and
Chief Executive Officer, and a Director of the Company, effective
December 1, 1993.
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SIGNATURE
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.
SPS TECHNOLOGIES, INC.
------------------------------------
(Registrant)
DATE: March 28, 1994
/s/ WILLIAM M. SHOCKLEY
------------------------------------
William M. Shockley
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
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<S> <C> <C>
/s/ CHARLES W. GRIGG Chairman, Chief Executive March 28, 1994
-------------------------------- Officer and Director
Charles W. Grigg (Principal Executive Officer)
/s/ HARRY J. WILKINSON President, Chief Operating March 28, 1994
-------------------------------- Officer and Director
Harry J. Wilkinson
/s/ WILLIAM M. SHOCKLEY Controller (Principal March 28, 1994
-------------------------------- Financial Officer)
William M. Shockley
/s/ F. JAMES SKINNER Director March 28, 1994
--------------------------------
F. James Skinner
/s/ ALLEN C. MENKE Director March 28, 1994
--------------------------------
Allen C. Menke
/s/ PAUL F. MILLER, JR. Director March 28, 1994
--------------------------------
Paul F. Miller, Jr.
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS
THE SHAREHOLDERS AND BOARD OF DIRECTORS
SPS TECHNOLOGIES, INC.:
We have audited the consolidated financial statements of SPS
Technologies, Inc. and subsidiaries as of December 31, 1993 and 1992 and
for each of the three years in the period ended December 31, 1993, which
financial statements are included on pages 4 through 19 of the 1993 Annual
Report to Shareholders of SPS Technologies, Inc. and subsidiaries and
incorporated by reference herein. We have also audited the financial
statement schedules as listed in Item 14(a)2 of this Form 10-K. These
financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
SPS Technologies, Inc. and subsidiaries as of December 31, 1993 and 1992,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. In addition, in
our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and
postretirement benefits other than pensions in 1992.
/s/ COOPERS & LYBRAND
-------------------------
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
March 2, 1994, except as to Note 12 for
which the date is March 21, 1994
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SCHEDULE V
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
Property, Plant and Equipment
Years ended December 31, 1993, 1992 and 1991
(Thousands of dollars)
Depreciation is provided substantially on a straight-line basis over
the estimated useful lives of the respective assets, generally as follows:
Buildings, 5 to 50 years; Machinery and equipment, 3 to 20 years.
<TABLE>
<CAPTION>
Balance at Other changes Balance at
beginning Additions Retirements ------------------- end
CLASSIFICATION of year at cost or sales Debit Credit of year
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<S> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1993:
Land .................................. $ 4,787 $ $ 26 $ 14(a) $ 19(b) $ 4,487
269(c)
Buildings ............................. 39,722 52 1,259(a) 77(b) 40,841
11(c)
Machinery and equipment ............... 136,360 903 14,767 8,586(a) 4,017(b) 127,318
253(c)
Construction in progress ............. 9,046 11,345 27(c) 12,729(a) 7,526
163(b)
------------------------------------------------------------------------
Total property, plant
and equipment ...................... $189,915 $12,248 $14,845 $10,139 $17,285 $180,172
========================================================================
Year ended
December 31, 1992:
Land ................................. $ 4,946 $ 59(d) $ $ $ 178(b) $ 4,787
40(c)
Buildings ............................ 38,939 765(d) 51 992(a) 697(b) 39,722
226(c)
Machinery and equipment .............. 138,096 2,694(d) 12,076 15,748(a) 8,201(b) 136,360
99(c)
Construction in progress ............. 10,026 10,937 146 11,440(a) 9,046
331(b)
------------------------------------------------------------------------
Total property, plant
and equipment ...................... $192,007 $14,455 $12,273 $16,839 $21,113 $189,915
========================================================================
Year ended
December 31, 1991:
Land ................................. $ 7,518 $ $ 41 $ 32(a) $ 30(b) $ 4,946
2,533(c)
Buildings ............................ 45,780 24 688 2,467(a) 113(b) 38,939
8,531(c)
Machinery and equipment .............. 141,763 2,162 12,561 8,542(a) 1,231(b) 138,096
579(c)
Construction in progress ............. 13,135 8,932 43 40(b) 12,027(a) 10,026
11(c)
------------------------------------------------------------------------
Total property, plant
and equipment ...................... $208,196 $11,118 $13,333 $11,081 $25,055 $192,007
========================================================================
</TABLE>
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The 1992 and 1991 amounts have been reclassified (see Note 3 to the
Consolidated Financial Statements)
(a) Transfers among accounts and miscellaneous adjustments, net.
(b) Translation adjustments.
(c) The May 3, 1991, balances, and subsequent additions, retirements and
translation adjustments reclassified to net assets held for sale.
(d) Amounts include $59 of land, $757 of buildings and $2,084 of machinery
and equipment related to the acquisition of a bonded magnet business
in December 1992.
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SCHEDULE VI
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
Accumulated Depreciation and Amortization of Property, Plant and Equipment
Years ended December 31, 1993, 1992 and 1991
(Thousands of dollars)
<TABLE>
<CAPTION>
Balance at Other changes Balance at
beginning Additions Retirements ----------------- end
CLASSIFICATION of year at cost or sales Debit Credit of year
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1993:
Buildings .................... $23,214 $ 1,601 $ 43 $ 69(a) $ $24,480
29(b)
194(c)
Machinery and
equipment .................. 75,123 12,043 14,096 3,005(a) 186(c) 68,734
1,517(b)
--------------------------------------------------------------------------------
Total accumulated
depreciation and
amortization ............... $98,337 $13,644 $14,139 $4,814 $ 186 $93,214
================================================================================
Year ended
December 31, 1992:
Buildings .................... $21,955 $ 1,758 $ 28 $ 251(b) $ 7(a) $23,214
227(c)
Machinery and
equipment .................. 74,352 12,172 11,512 4,952(b) 5,017(a) 75,123
46(c)
--------------------------------------------------------------------------------
Total accumulated
depreciation and
amortization ............... $96,307 $13,930 $11,540 $5,430 $5,070 $98,337
================================================================================
Year ended
December 31, 1991:
Buildings .................... $23,256 $ 1,695 $ 279 $ 38(b) $21,955
2,679(c)
Machinery and
equipment .................. 74,447 13,089 10,834 1,031(a) 74,352
971(b)
348(c)
--------------------------------------------------------------------------------
Total accumulated
depreciation and
amortization ............... $97,703 $14,784 $11,113 $5,067 $96,307
================================================================================
</TABLE>
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The 1992 and 1991 amounts have been reclassified (see Note 3 to the
Consolidated Financial Statements).
(a) Transfers among accounts and miscellaneous adjustments, net.
(b) Translation adjustments.
(c) The May 3, 1991, balances, and subsequent additions, retirements and
translation adjustments reclassified to net assets held for sale.
<PAGE>
<PAGE> 16
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
Years ended December 31, 1993, 1992 and 1991
(Thousands of dollars)
SCHEDULE VIII
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Additions Balance
beginning charged to costs Translation at end
Description of year and expenses Other adjustment of year
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowance for doubtful receivables ............ $1,329 $668 $ (780)(a) $ (32) $1,185
=================================================================
Year ended December 31, 1992:
$ (570)(a)
Allowance for doubtful receivables ............ $1,609 $485 $ (27)(b) $(168) $1,329
=================================================================
Year ended December 31, 1991:
$(1,016)(a)
Allowance for doubtful receivables ............ $1,939 $796 $ (74)(b) $ (36) $1,609
=================================================================
</TABLE>
----------
The 1992 and 1991 amounts have been reclassified (see Note 3 to the
Consolidated Financial Statements).
(a) Uncollectible receivables less recoveries.
(b) Transfers to net assets held for sale.
<PAGE>
<PAGE> 17
SCHEDULE IX
Short-Term Borrowings
<TABLE>
<CAPTION>
Maximum Average Weighted
Category Weighted amount amount average
of aggregate Balance average outstanding outstanding interest rate
short-term at end of interest during the during the during the
borrowings period rate period period (b) period (c)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1993
Notes payable to banks(a) .......... $2,262 10.7% $ 3,200 $2,668 15.0%
December 31, 1992
Notes payable to banks(a) .......... $2,110 15.6% $ 4,300 $2,007 10.1%
December 31, 1991
Notes payable to banks ............. $4,021 13.9% $11,223 $7,988 15.7%
</TABLE>
----------
(a) For general terms, see Note 10 to the Consolidated Financial
Statements.
(b) The average amount outstanding during each period is the average of
the month end balances.
(c) The weighted average interest rate during the period is determined by
dividing interest expense related to short-term borrowings by the
average of the month end balances.
<PAGE>
<PAGE> 18
SCHEDULE X
Supplementary Income Statement Information
Charged to Costs and Expenses
ITEM 1993 1992 1991
-------------------------------------------------------------------------
Maintenance and Repairs .......... $9,096 $8,925 $9,920
=========================================================================
<PAGE>
<PAGE>
<PAGE> 19
EXHIBIT INDEX
Page
3a Amended and Restated Articles of Incorporation. Exhibit
3a to the Annual Report on Form 10-K for the year ended
December 31, 1990, is hereby incorporated by reference.
3b By-Laws as amended, effective April 29, 1993. Exhibit 3
to the Quarterly Report on Form 10-Q for the quarter
ended March 31, 1993, is hereby incorporated by
reference.
4 Rights Agreement dated November 11, 1988, is
incorporated by reference to Form 8-K filed November 17,
1988. Amendment No. 1 to Rights Agreement dated January
22, 1991, is incorporated by reference to Form 8-K filed
January 25, 1991.
10a SPS 1988 Long Term Incentive Stock Plan as amended,
effective February 2, 1989. Exhibit 10a to the Annual
Report on Form 10-K for the year ended December 31,
1988, is hereby incorporated by reference.
10b SPS Exempt Employees Savings and Investment Plan as
Amended and Restated, effective November, 1991. Exhibit
10b to the Annual Report on Form 10-K for the year ended
December 31, 1991, is hereby incorporated by reference.
10c SPS Technologies, Inc. Non-Exempt Employees Savings and
Investment Plan as Amended and Restated, effective
November, 1991. Exhibit 10c to the Annual Report on Form
10-K for the year ended December 31, 1991, is hereby
incorporated by reference.
10d SPS Technologies, Inc. Management Incentive Plan as
Amended and Restated, effective March 7, 1991. Exhibit
10d to the Annual Report on Form 10-K for the year ended
December 31, 1990, is hereby incorporated by reference.
10e SPS Technologies, Inc. Executive Incentive Plan as
Amended and Restated, effective March 7, 1991. Exhibit
10e to the Annual Report on Form 10-K for the year ended
December 31, 1990, is hereby incorporated by reference.
10f Retirement Benefit Agreement, dated February 28, 1979.
Exhibit 10f to the Annual Report on Form 10-K for the
year ended December 31, 1991, is hereby incorporated by
reference.
10g Fee Arrangement with Former Directors, effective
November 29, 1984. Exhibit 10g to the Annual Report on
Form 10-K for the year ended December 31, 1990, is
hereby incorporated by reference.
10h Form of Employment Agreements between SPS Technologies,
Inc. and certain employees, as amended and restated
effective December 14, 1992. Exhibit 10h to the Annual
Report on Form 10-K for the year ended December 31,
1992, is hereby incorporated by reference.
<PAGE>
<PAGE> 20
Page
10i SPS Technologies, Inc. Executive Deferred Compensation
Plan, as amended and restated, effective December 14,
1992. Exhibit 10i to the Annual Report on Form 10-K for
the year ended December 31, 1992, is hereby incorporated
by reference.
10j SPS Technologies, Inc. Executive Deferred Compensation
Plan II, as amended and restated effective December 1,
1993.
10k SPS Technologies, Inc. Supplemental Executive Retirement
Plan, as amended and restated effective December 14,
1992. Exhibit 10k to the Annual Report on Form 10-K for
the year ended December 31, 1992, is hereby incorporated
by reference.
10l Employment Agreement between SPS Technologies, Inc. and
Charles W. Grigg, Chairman and Chief Executive Officer,
effective December 1, 1993.
10m Form of Indemnification Agreement between SPS
Technologies, Inc. and officers and directors dated
February 2, 1987. Exhibit 10m to the Annual Report on
Form 10-K for the period ended December 31, 1992, is
hereby incorporated by reference.
10n Split Dollar Insurance Agreements regarding certain
officers and directors effective April 2, 1990, and
November 27, 1991. Exhibit 10n to the Annual Report on
Form 10-K for the year ended December 31, 1991, is
hereby incorporated by reference.
10o SPS Technologies, Inc. Senior Executive Severance Plan,
effective December 14, 1992. Exhibit 10o to the Annual
Report on Form 10-K for the year ended December 31,
1992, is hereby incorporated by reference.
10p Agreement with Retiring Executive, approved December 14,
1992. Exhibit 10p to the Annual Report on Form 10-K for
the year ended December 31, 1992, is hereby incorporated
by reference.
10q SPS Technologies, Inc. Benefit Equalization Plan, as
amended and restated effective December 14, 1992.
Exhibit 10 to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993, is hereby incorporated by
reference.
11 Computation of dilution (anti-dilution) of earnings per
share resulting from common stock equivalents.
13 1993 Annual Report to Shareholders (With the exception
of the information expressly incorporated by reference
in items 1, 3, 5, 6, 7, 8 and 14 of Form 10-K, the 1993
Annual Report to Shareholders is not deemed "filed"
with the SEC or otherwise subject to the liabilities of
Section 18 of the Securities and Exchange Act of 1934).
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
<PAGE>
<PAGE>
<PAGE> 21
SPS TECHNOLOGIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN II
<PAGE>
<PAGE> 22
SPS TECHNOLOGIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN II
Original effective date December 7, 1989
As most recently amended effective December 1, 1993
PAGE
ARTICLE I - PURPOSE . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . . .. 1
2.1 "Account" . . . . . . . . . . . . . . . . . .. 1
2.2 "Annualized Deferral Amount" . . . . . . . . . 1
2.3 "Beneficiary" . . . . . . . . . . . . . . . .. 1
2.4 "Board" . . . . . . . . . . . . . . . . . . .. 1
2.4(a) "Cause" . . . . . . . . . . . . . . . . . . .. 1
2.5 "Change of Control" . . . . . . . . . . . . .. 2
2.6 "Committee" . . . . . . . . . . . . . . . . .. 4
2.7 "Compensation" . . . . . . . . . . . . . . . . 4
2.8 "Deferral Commitment" . . . . . . . . . . . .. 4
2.9 "Deferral Period" . . . . . . . . . . . . . .. 4
2.10 "Determination Date" . . . . . . . . . . . . . 4
2.11 "Director" . . . . . . . . . . . . . . . . . . 4
2.12 "Director-Participant" . . . . . . . . . . . . 4
2.12(a) "Disability" . . . . . . . . . . . . . . . . . 4
2.13 "Early Retirement Date" . . . . . . . . . . . . 5
2.14 Intentionally left blank . . . . . . . . . . .. 5
2.15 "Employee" . . . . . . . . . . . . . . . . . .. 5
2.16 "Employee-Participant" . . . . . . . . . . . .. 5
2.17 "Employer" . . . . . . . . . . . . . . . . . .. 5
2.18 "Exchange Act" . . . . . . . . . . . . . . . .. 5
2.18(a) "Executive Severance Agreement" . . . . . . . . 5
2.19 "Fees" . . . . . . . . . . . . . . . . . . . .. 5
2.20 "Initial Deferral Period". . . . . . . . . . .. 5
2.21 "Interest" . . . . . . . . . . . . . . . . . .. 6
2.22 "Normal Retirement Date" . . . . . . . . . . .. 6
2.23 "Participant" . . . . . . . . . . . . . . . . . 6
2.24 "Participation Agreement" . . . . . . . . . . . 6
2,25 "Participating Subsidiary" . . . . . . . . . .. 6
2.26 "Plan" . . . . . . . . . . . . . . . . . . . .. 7
2.27 "Plan Benefit" . . . . . . . . . . . . . . . .. 7
2.28 "Plan Year" . . . . . . . . . . . . . . . . . . 7
2.29 "Retirement" . . . . . . . . . . . . . . . . .. 7
2.30 "Retirement Account" . . . . . . . . . . . . .. 7
2.31 "RIP" . . . . . . . . . . . . . . . . . . . . . 7
2.31(a) "SERP" . . . . . . . . . . . . . . . . . . . .. 7
<PAGE>
<PAGE> 23
2.31(b) "Senior Executive Severance Plan" . . . . . . . 7
2.32 "Severance of Employment" . . . . . . . . . . . 7
2.33 "Severance of Service" . . . . . . . . . . . .. 7
2.34 "Smoker" . . . . . . . . . . . . . . . . . . .. 7
2.35 "SPS" . . . . . . . . . . . . . . . . . . . . . 7
2.36 "Subsequent Deferral Period" . . . . . . . . .. 7
2.37 "Suicide" . . . . . . . . . . . . . . . . . . . 7
2.38 "Termination Account" . . . . . . . . . . . . . 8
2.39 "Triggering Termination" . . . . . . . . . . .. 8
ARTICLE III - PARTICIPATION AND DEFERRAL COMMITMENTS . . . . 8
3.1 Eligibility and Participation . . . . . . . . . 8
3.2 Form of Deferral; Maximum and Minimum Deferral . 8
3.3 Commitment Limited by Retirement . . . . . . . . 9
3.4 Modification of Deferral Commitment . . . . . .. 9
ARTICLE IV - DEFERRED COMPENSATION ACCOUNTS . . . . . . . .. 10
4.1 Deferral of Compensation or Fees . . . . . . .. 10
4.2 Determination of Accounts . . . . . . . . . . . 10
4.3 Statement of Accounts . . . . . . . . . . . . . 10
ARTICLE V - PLAN BENEFITS . . . . . . . . . . . . . . . . .. 10
5.1 Retirement Benefit . . . . . . . . . . . . . .. 10
5.2 Disability Benefit . . . . . . . . . . . . . .. 10
5.3 Death Benefit . . . . . . . . . . . . . . . . . 11
5.4 Severance Benefit . . . . . . . . . . . . . . . 12
5.5 Pre-Termination Withdrawals . . . . . . . . . . 12
5.6 Incomplete Deferral Commitment . . . . . . . .. 12
5.7 Form of Benefit Payment . . . . . . . . . . . . 13
5.8 Withholding; Payroll Taxes . . . . . . . . . .. 14
5.9 Commencement of Payments . . . . . . . . . . .. 14
5.10 Full Payment of Benefits . . . . . . . . . . .. 14
5.11 Payment to Guardian . . . . . . . . . . . . . . 14
5.12 Responsibilities for Payment . . . . . . . . .. 14
5.13 Acceleration of Plan Benefits . . . . . . . . . 15
ARTICLE VI - BENEFICIARY DESIGNATION . . . . . . . . . . . . 15
6.1 Beneficiary Designation . . . . . . . . . . . . 15
6.2 Amendments . . . . . . . . . . . . . . . . . .. 15
6.3 No Beneficiary Designation . . . . . . . . . .. 15
6.4 Death of Beneficiary . . . . . . . . . . . . .. 16
<PAGE>
<PAGE> 24
ARTICLE VII - ADMINISTRATION . . . . . . . . . . . . . . . . 16
7.1 Designation of Committee . . . . . . . . . . .. 16
7.2 Duties of Committee . . . . . . . . . . . . . . 16
7.3 Agents . . . . . . . . . . . . . . . . . . . . 16
7.4 Binding Effect of Decisions . . . . . . . . .. 16
7.5 Indemnity of Committee . . . . . . . . . . . . 17
ARTICLE VIII - CLAIMS PROCEDURE . . . . . . . . . . . . . . 17
8.1 Claim . . . . . . . . . . . . . . . . . . . .. 17
8.2 Denial of Claim . . . . . . . . . . . . . . .. 17
8.3 Review of Claim . . . . . . . . . . . . . . .. 17
8.4 Final Decision . . . . . . . . . . . . . . . . 17
8.5 Enforcement; No Set-off . . . . . . . . . . .. 18
ARTICLE IX - AMENDMENT, MODIFICATION AND TERMINATION OF PLAN 18
9.1 Amendment . . . . . . . . . . . . . . . . . .. 18
9.2 Modification . . . . . . . . . . . . . . . . . 19
9.3 Board's Right to Terminate . . . . . . . . . . 19
9.4 Change of Control . . . . . . . . . . . . . .. 19
ARTICLE X - MISCELLANEOUS . . . . . . . . . . . . . . . . . 20
10.1 No Funding . . . . . . . . . . . . . . . . . . 20
10.2 Insurance . . . . . . . . . . . . . . . . . .. 20
10.3 Conflicting Provisions . . . . . . . . . . . . 20
10.4 Nonassignability . . . . . . . . . . . . . . . 20
10.5 Not a Contract of Employment . . . . . . . . . 20
10.6 Protective Provisions . . . . . . . . . . . .. 21
10.7 Terms . . . . . . . . . . . . . . . . . . . .. 21
10.8 Captions . . . . . . . . . . . . . . . . . . . 21
10.9 Governing Law . . . . . . . . . . . . . . . .. 21
10.10 Validity . . . . . . . . . . . . . . . . . . . 21
10.11 Notice . . . . . . . . . . . . . . . . . . . . 21
10.12 Successors . . . . . . . . . . . . . . . . . . 21
<PAGE>
<PAGE> 25
SPS TECHNOLOGIES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of this Executive Deferred Compensation
Plan is to provide current tax planning opportunities as well as
supplemental funds upon retirement or death for directors and key
management employees (and their beneficiaries) of SPS
Technologies, Inc. and certain of its subsidiaries which elect to
participate in the Plan. It is intended that the Plan will aid
in retaining and attracting directors and employees of
exceptional ability by providing such individuals with these
benefits.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and
phrases shall have the meanings indicated, unless the context
clearly indicates otherwise.
2.1 "Account" means the Retirement Account or the
Termination Account maintained as recordkeeping accounts by the
Employer.
2.2 "Annualized Deferral Amount" means, with respect
to any Participant, an amount equal to the total dollar amount of
a Deferral Commitment divided by four (4).
2.3 "Beneficiary" means the person, persons or entity
designated by the Participant, or as provided in Article VI, to
receive any Plan Benefit payable after a Participant's death.
2.4 "Board" means the Board of Directors of SPS.
2.4(a)"Cause" means misappropriation of funds, habitual
insobriety, substance abuse, conviction of a crime involving
moral turpitude, or gross negligence in the performance of
employee's duties, which gross negligence has had an adverse
effect on the Company's business, operations, assets or
properties so as to materially adversely affect the financial
condition of the Company and its subsidiaries taken as a whole.
<PAGE>
<PAGE> 26
2.5 A "Change of Control" shall be deemed to have
taken place if (i) any Person (except the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, any Person or entity organized,
appointed or established by the Company for or pursuant to the
terms of any such employee benefit plan, or an Exempted Person),
together with all Affiliates and Associates of such Person, shall
become the Beneficial Owner in the aggregate of twenty percent
(20%) or more of the Common Stock of the Company then outstand-
ing, (ii) an Exempted Person, together with all Affiliates and
Associates of such Person, shall become the Beneficial Owner in
the aggregate of thirty percent (30%) or more of the Common Stock
of the Company, or (iii) during any thirty-six (36) month period,
(A) individuals who were directors at the beginning of such
period (the "Initial Directors") cease for any reason to con-
stitute a majority of the Board, unless (B) the Initial
Directors, plus other directors who became directors subsequent
to the beginning of the thirty-six (36) month period and whose
election and nominations for election by the Company's share-
holders were on each such occasion during the thirty-six (36)
month period approved by a vote of at least two-thirds (2/3) of
the Initial Directors then in office, constitute a majority of
the Board. If a Person as described in subsection (i) or an
Exempted Person as described in subsection (ii) inadvertently
becomes a Beneficial Owner of the Company's Common Shares
aggregating the amounts described in either of subsections (i) or
(ii) above, and as soon as practicable divests (without
exercising or retaining any power, including voting, with respect
to such shares) a sufficient amount of such shares so as to hold
less than the amounts described therein, after notice by the
Company that such Person or Exempted Person, as appropriate, will
be deemed by the Company to have caused a Change of Control
unless such divestiture is made, then, despite the provisions of
subsections (i) or (ii) as applicable, a Change of Control shall
not be deemed to have taken place.
For the purposes of this Section 2.5:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(b) A Person shall be deemed the "Beneficial
Owner" of any securities:
(i) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly,
has the right to acquire (whether such right is
exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon
<PAGE>
<PAGE> 27
the exercise of warrants, options, conversion
rights, exchange rights, or other rights or
otherwise; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of securities
tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's
Affiliates or Associates until such tendered
securities are accepted for payment, purchase or
exchange;
(ii) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly,
has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant
to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including without
limitation pursuant to any agreement, arrangement
or understanding, whether or not in writing;
provided, however, that a Person shall not be
deemed the "Beneficial Owner" of any security
under this subsection (ii) as a result of an oral
or written agreement, arrangement or understanding
to vote such security if such agreement,
arrangement or understanding (A) arises solely
from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable
provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under
the Exchange Act (or any comparable or successor
report); or
(iii) that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate
or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has
any agreement, arrangement or understanding
(whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to
subsection (ii) above) or disposing of any voting
securities of the Company;
provided, however, that nothing in this Subsection (b) shall
cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of any securities
acquired through such Person's participation in good faith in a
firm commitment underwriting until the expiration of forty (40)
days after the date of such acquisition.
(c) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
<PAGE>
<PAGE> 28
(d) "Exempted Person" shall mean the group known
as GAMCO Investors/Gabelli Funds, Inc. as identified in the most
recent Schedule 13D filed by such group prior to the date hereof,
unless and until such group or any Person in such group, together
with all Affiliates and Associates of such group or any Person in
such group, becomes the Beneficial Owner of thirty percent (30%)
or more of the Common Shares of the Company then outstanding.
The purchaser, assignee or transferee of Common Shares of the
Company of an Exempted Person shall not be an Exempted Person.
(e) "Person" shall mean any individual, firm,
corporation, partnership, or other entity.
(f) "Subsidiary" shall have the meaning ascribed
to such term in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act.
2.6 "Committee" means the Executive Compensation and
Stock Option Committee of the Board.
2.7 "Compensation" means the base earnings of an
Employee-Participant for employment with an Employer, calculated
according to the regular monthly rates paid to the Employee-
Participant. Compensation does not include bonuses, expense
reimbursements, or any form of non-cash remuneration and
benefits.
2.8 "Deferral Commitment" means the total amount to be
deferred by a Participant during the Deferral Period pursuant to
the Participant's Participation Agreement.
2.9 "Deferral Period" means the Initial Deferral
Period and any Subsequent Deferral Period.
2.10 "Determination Date" means the last day of each
calendar month.
2.11 "Director" means a member of the Board.
2.12 "Director-Participant" means any Participant who
participates or has participated in the Plan by reason of being a
Director.
2.12(a) "Disability" means a disability which qualifies
the Participant for benefits under the SPS Technologies, Inc.
Long Term Disability Plan or any other disability of a nature
which in the judgment of the Committee, relying upon such
professional advice as the Committee deems appropriate under the
circumstances, prevents a Participant from performing his
<PAGE>
<PAGE> 29
employment obligations to Employer. In the absence of fraud, the
Committee's determination shall be conclusive.
2.13 "Early Retirement Date" means the first day of the
calendar month coincident with or next following the date on
which an Employee-Participant is eligible to commence receipt of
benefits in accordance with RIP and/or SERP.
2.14 Intentionally left blank
2.15 "Employee" means a person who is employed by an
Employer and designated by the Committee in accordance with
3.1(a)(i).
2.16 "Employee-Participant" means any Participant who
participates or has participated in the Plan by reason of being
an Employee.
2.17 "Employer" means SPS or any Participating
Subsidiary or any successors to the businesses thereof. For the
purposes of this Plan, SPS and each Participating Subsidiary
shall be considered separate Employers and each separate
corporation shall be treated as the Employer only with respect to
its own employees.
2.18 "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
2.18 (a) "Executive Severance Agreement" means an
agreement between SPS and certain select management employees
(including Participants) dated as of December 1, 1988, as such
agreement may be amended or restated from time to time, or any
similar severance agreement entered into after December 1, 1988,
which provides for compensation and benefits (as set forth in the
agreement) in the event that there is a Triggering Termination of
such employee as that term is defined in the Executive Severance
Agreement. In the event that such an agreement is not in effect
for a Participant at a particular point in time relevant under
the terms of this Plan, Executive Severance Agreement shall mean
the most recent agreement, as defined in the preceding sentence,
in effect between the Company and the Participant.
2.19 "Fees" means all amounts, including annual fees
and committee fees, payable to Director-Participants as
remuneration for service on the Board and committees thereof.
Fees do not include expense reimbursements.
2.20 "Initial Deferral Period" means the period from
January 1, 1990 through December 31, 1993.
<PAGE>
<PAGE> 30
2.21 "Interest" means interest computed at the interest
rate provided below.
(a) Termination Account Interest. The interest
rate applicable to a Termination Account shall be the effective
annual rate of six percent (6%).
(b) Retirement Account Interest. The interest
rate applicable to a Retirement Account for a Plan Year shall be
the greater of the effective annual rate of eight percent (8%) or
the effective annual yield on Moody's Average Corporate Bond
Yield Index for the three (3) calendar months September through
November immediately preceding the Plan Year in which the
interest is credited to a Participant's Account, as published by
Moody's Investors Service, Inc. (or any successor thereto), or,
if such monthly index is no longer published, a substantially
similar index selected by the Committee (the Base Interest Rate).
Retirement Account Interest shall also include the additional
effective annual rate of four percent (4%) for a Participant who
is not a Smoker commencing with the date upon which such
Participant is determined not to be a Smoker, and three percent
(3%) otherwise (the Supplemental Interest Rate).
2.22 "Normal Retirement Date" means, with respect to an
Employee - Participant, the first day of the calendar month
coincident with or next following the date on which such
Employee-Participant attains age sixty-five (65) and, with
respect to a Director-Participant, the first day of the calendar
month coincident with or next following the date on which such
Director-Participant undergoes a Severance of Service. An
Employee-Participant whose Severance of Employment is within
thirty-six (36) months following a Change of Control of SPS or is
with the prior written approval of the Employer shall be deemed
to have retired at Normal Retirement Date, without regard to his
age or calendar years of service.
2.23 "Participant" means any individual whose name is
set forth in Schedule A attached hereto (as it may be amended
from time to time) and any Director who is participating or has
participated in this Plan as provided in Article III. An
individual who is both a Director and an Employee may participate
in this Plan as a Director-Participant and/or an Employee-
Participant.
2.24 "Participation Agreement" means the agreement
filed by a Participant with respect to his participation in the
Plan for the Deferral Period.
2.25 "Participating Subsidiary" means any affiliated or
subsidiary corporation of SPS which elects to participate in the
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Plan and which has been approved for participation in the Plan by
the Board.
2.26 "Plan" means the SPS Technologies, Inc. Executive
Deferred Compensation Plan II, effective December 7, 1989, as set
forth herein and as amended from time to time.
2.27 "Plan Benefit" means the benefit payable to a
Participant as calculated in sections 5.1, 5.2, 5.3 and 5.4.
2.28 "Plan Year" means the calendar year, and the first
Plan Year shall begin January 1, 1990.
2.29 "Retirement" means Severance of Employment or
Severance of Service at or after the Participant's Normal
Retirement Date or Early Retirement Date.
2.30 "Retirement Account" means an account to which
amounts deferred by a Participant shall be credited for
recordkeeping purposes by the Employer.
2.31 "RIP" means the SPS Technologies, Inc. Retirement
Income Plan maintained by an Employer.
2.31(a) "SERP" means the SPS Technologies, Inc.
Supplemental Executive Retirement Plan.
2.31(b) "Senior Executive Severance Plan" means the SPS
Technologies Senior Executive Severance Plan, originally adopted
December 14, 1992, as amended from time to time.
2.32 "Severance of Employment" means the termination of
the employment relationship (voluntarily or involuntarily)
between an Employee-Participant and all Employers.
2.33 "Severance of Service" means the termination of
the independent contractor relationship (voluntarily or
involuntarily) between a Director-Participant and SPS.
2.34 "Smoker" means a Participant who is determined by
the Committee to not qualify for non-smoker life insurance
premium rating.
2.35 "SPS" means SPS Technologies, Inc.
2.36 "Subsequent Deferral Period" means any four (4)
year period designated by the Committee as a Deferral Period for
one or more individuals subsequent to the Initial Deferral
Period.
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2.37 "Suicide" means the death of a Participant under
circumstances that would permit any insurance company that has
issued a policy of life insurance to SPS for that Participant not
to make payment under the life insurance policy.
2.38 "Termination Account" means an account to which
amounts deferred by a Participant shall be credited for
recordkeeping purposes by the Employer.
2.39 "Triggering Termination" means a severance of
employment which is a Triggering Termination under either the
Executive Severance Agreement or the Senior Executive Severance
Plan.
ARTICLE III
PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 Eligibility and Participation.
(a) Eligibility. Eligibility to participate in
the Plan is limited to:
(i) those Employees designated by the
Committee, as set forth in Schedule A; and
(ii) any Director who is a member of the
Board when such Director files a timely Participation Agreement.
(b) Participation. An eligible individual may
elect to participate in the Plan by filing with the Committee a
Participation Agreement no later than December 31, 1989, or upon
becoming an eligible employee. Such Participation Agreement
shall be effective only with regard to Compensation or Fees
earned after the Participation Agreement is filed with the
Committee.
3.2 Form of Deferral; Maximum and Minimum Deferral. A
Participant may elect in the Participation Agreement one of the
following Deferral Commitments.
(a) Employee Deferral Commitment. An Employee
who wishes to participate must elect to defer from his
Compensation an Annualized Deferral Amount which is at least
$5,000 per Plan Year for a total of at least $20,000 for the
Deferral Period and not more than the amount set forth on
Schedule A. The Annualized Deferral Amount shall be withheld
from the Employee-Participant's Compensation in equal monthly
installments during each Plan Year of the Deferral Period.
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(b) Director Deferral Commitment. A Director who
is not an employee who wishes to participate may elect up to a
maximum of $8,000 per Plan Year during the Deferral Period. A
Director who is also an Employee and who wishes to participate as
a Director may elect to defer up to a maximum of $2,000 per Plan
Year during the Deferral Period. The Annualized Deferral Amount
shall be withheld from the Director-Participant's Fees in
approximately proportionate installments during each Plan Year of
the Deferral Period.
3.3 Commitment Limited by Retirement. If a
Participant intends to retire prior to the end of a Deferral
Period, the Participant may elect, with the Committee's consent,
an alternative Deferral Commitment as follows:
(a) If Retirement will occur prior to the end of
the Deferral Period, the Participant may elect in the
Participation Agreement to discharge his Deferral Commitment over
a period which ends at the intended date of Retirement in equal
monthly installments if he is an Employee-Participant or
approximately proportionate installments if he is a Director-
Participant;
(b) If, subsequent to the filing of a
Participation Agreement, the Participant decides to retire prior
to the end of the Deferral Period, the Participant may elect to:
(i) accelerate the discharge of the remaining
balance of his Deferral Commitment. The accelerated deferrals
shall be made over the period from the first day of the calendar
year following the receipt by the Committee of such election to
the date of the Participant's Retirement in equal monthly
installments if he is an Employee-Participant and in
approximately proportionate installments if he is a Director-
Participant; or
(ii) if the Participant continues after
Retirement to render services to Employer as a consultant,
complete the deferral commitment out of amounts payable for such
services, commencing the first day of the calendar year following
the receipt by the Committee of such election.
3.4 Modification of Deferral Commitment. A Deferral
Commitment shall be irrevocable except that the Committee may
permit a Participant to reduce the amount to be deferred, or
waive the remainder of the Deferral Commitment, if the Committee
determines that the Participant has suffered a severe financial
hardship.
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ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
4.1 Deferral of Compensation or Fees. The amount of
Compensation or Fees that a Participant elects to defer shall be
withheld and credited to the Participant's Account as the non-
deferred portion of Compensation or Fees becomes payable. Any
withholding of taxes or other amounts with respect to deferred
Compensation or Fees which is required by state, federal or local
law shall be withheld from the Participant's non-deferred
Compensation or Fees.
4.2 Determination of Accounts. Each Participant's
Retirement Account and Termination Account as of each
Determination Date shall consist of the balance of the
Participant's Account as of the immediately preceding
Determination Date, reduced by any intervening distributions
therefrom and increased by any additional portion of the Deferral
Commitment credited thereto and Interest earned thereon since the
immediately preceding Determination Date. Interest earned shall
be calculated as of each Determination Date based upon the
balance of the Account at the preceding Determination Date, using
the monthly equivalent of the appropriate effective annual
interest rate.
4.3 Statement of Accounts. The Committee shall submit
to each Participant, within sixty (60) days after the close of
each Plan Year, a statement setting forth the balance as of the
end of the Plan Year to the credit of each Account maintained for
the Participant. The Committee may at such time(s) as it
determines provide to such Participant(s) as it selects a
statement setting forth the balance as of any date to the credit
of such Account(s) maintained for the Participant(s).
ARTICLE V
PLAN BENEFITS
5.1 Retirement Benefit. Subject to section 5.6, each
Participant whose Severance of Employment or Severance of Service
is by reason of Retirement shall be entitled to a benefit equal
to the amount of the Participant's Retirement Account.
5.2 Disability Benefit.
(a) Employee-Participant. Subject to Section
5.6, each Employee-Participant who suffers a Disability that
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continues without interruption until he begins to receive a
benefit from RIP and/or SERP, whichever first occurs, shall be
entitled to a benefit equal to the amount of the Employee-
Participant's Retirement Account.
(b) Director-Participant. Subject to section
5.6, each Director-Participant whose Severance of Service is by
reason of a Disability shall be entitled to a benefit equal to
the amount of the Director-Participant's Retirement Account.
5.3 Death Benefit.
(a) Death Not by Suicide. Upon the death of a
participant (except by Suicide), the Participant's Beneficiary
shall be entitled to one of the following:
(i) After Severance of Employment or
Service. If the Participant dies after Severance of Employment
or Severance of Service, the remaining unpaid balance of the
Participant's applicable Account shall be paid in the same form
as the Participant was entitled to receive under Section 5.7,
except that, where the Participant has elected the form of
benefit payment provided under Section 5.7(a), the Committee, in
its absolute discretion, may pay the amount due in a single sum,
but only if requested by the deceased Participant's personal
representative or, if there is no personal representative
appointed, by the deceased Participant's Beneficiary.
(ii) Before Severance of Employment or
Service. If a Participant dies prior to Severance of Employment
or Severance of Service, the Participant's Retirement Account
balance plus an amount equal to twice the Participant's total
Deferral Commitment for all Deferral Periods shall be paid in the
form elected by the Participant under Section 5.7, except that,
where the Participant has elected the form of benefit payment
provided under Section 5.7(a), the Committee, in its absolute
discretion, may pay the amount due in a single sum, but only if
requested by the deceased Participant's personal representative
or, if there is no personal representative appointed, by the
deceased Participant's Beneficiary. For the purposes of this
Section 5.3(a)(ii), a Participant who dies while under Disability
and is not at that time entitled to a benefit under Section 5.2,
shall be deemed to have died prior to Severance.
(b) Death by Suicide. Upon the death of a
Participant by Suicide, the amount payable shall be the
Participant's Termination Account Balance. Whether the death by
Suicide occurs before or after Severance of Employment or
Severance of Service, this benefit shall be payable in the same
form as the Participant was entitled to receive under Section
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<PAGE> 36
5.7, except that, where the Participant has elected the form of
benefit payment provided under Section 5.7(a), the Committee, in
its absolute discretion, may pay the amount due in a single sum,
but only if requested by the deceased Participant's personal
representative or, if there is no personal representative
appointed, by the deceased Participant's Beneficiary.
5.4 Severance Benefit.
Employee-Participant. Each Employee-Participant
whose Severance of Employment is for reasons other than
Retirement or death or who suffers a Disability that does not
continue until he begins to receive a benefit from RIP and/or
SERP and who does not return to active employment with the
Employer within the period during which right to reinstatement is
provided under the Employer's policies from time to time in
effect shall be entitled to a benefit equal to the amount of the
Employee-Participant's:
(a) Retirement Account, if the severance is
involuntary (which term shall include any Triggering Termination
under an Executive Severance Agreement or the Senior Executive
Severance Plan) and not for Cause; or
(b) Termination Account, if the severance is
voluntary, or for Cause.
5.5 Pre-Termination Withdrawals.
Hardship Distributions. Upon a finding that a
Participant has suffered a severe and immediate financial
hardship, the Committee may, in its sole discretion, allow
distributions from the Participant's Account prior to the time
otherwise specified for payment of Plan Benefits. The amount of
such distribution shall be limited to the amount reasonably
necessary to meet the Participant's requirements during the
financial hardship and shall not exceed the Termination Account
balance at the time of the distribution or, for an Employee-
Participant with a Disability at the time of distribution, the
Retirement Account balance.
5.6 Incomplete Deferral Commitment.
(a) Death (Except by Suicide), Disability or
Change of Control. If the Participant fails to complete the
Deferral Commitment because of death (except by Suicide),
Disability, or Severance of Employment or Severance of Service
within thirty-six (36) months following a Change of Control of
SPS, Plan Benefits shall be equal to the amount of the
Participant's Retirement Account.
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(i) If the Participant fails to complete the
Deferral Commitment because of death (except by Suicide), or
Severance of Employment or Severance of Service within thirty-six
(36) months following a Change of Control of SPS, the Retirement
Account shall include the portion of the Deferral Commitment then
withheld and credited to the Participant's Account.
(ii) If the Participant fails to complete the
Deferral Commitment because of Disability, the Retirement Account
shall be credited with the entire Deferral Commitment over the
remainder of the Deferral Period.
(b) Otherwise. If the Participant fails to
complete the Deferral Commitment for reasons other than those
specified in (a) above, then, unless the Deferral Commitment is
modified pursuant to Section 3.4, Plan Benefits shall be equal to
the amount of the Participant's Termination Account.
5.7 Form of Benefit Payment. Except as otherwise
provided under the Plan, the Plan Benefit shall be paid in one of
the forms provided below, as irrevocably elected by the
Participant in his initial Participation Agreement, except that
where the Participant has elected the form of benefit payment
provided under (a) below, the Committee, in its absolute
discretion, may pay the amount due in a single sum, but only if
requested by the Participant.
(a) Installments. Equal monthly installments of
the applicable Account amortized over a period of not more than
one hundred and eighty (180) months. The installments paid
during the first Plan Year of the period the Plan Benefit is
payable shall be amortized as of the date the first installment
is paid over the installment period on the basis of the minimum
Interest that could have been earned on a Retirement Account for
such Plan Year. The installments paid during each subsequent
Plan Year of the period the Plan Benefit is payable shall be
amortized as of the first day of such Plan Year over the then
remaining installment period on the basis of the minimum Interest
that could have been earned on a Retirement Account for each such
subsequent Plan Year. The applicable Account of the Participant
shall continue to be credited with Interest under sections 2.21
and 4.2 during the period Plan Benefits are payable.
(b) Single sum. A single sum payment.
(c) Notwithstanding any contrary election,
payment from a Termination Account, or from the Retirement
Account of a Director-Participant who has served as a director
for less than 5 years, shall be made in a lump sum.
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5.8 Withholding; Payroll Taxes. The Employer shall
withhold from payments made hereunder any taxes required to be
withheld from a Participant's wages for the federal or any state
or local government.
5.9 Commencement of Payments. Payment of a Plan
Benefit shall commence to an Employee-Participant or his
Beneficiary at the absolute discretion of the Committee, but,
except as provided in the penultimate sentence, not later than as
of the January 1 following the month in which the event giving
rise to payment occurs, provided that, if the event giving rise
to payment is Retirement, and the Participant is at least sixty-
two (62) years of age, but less than sixty-five (65) years of
age, then not later than January 1, following the month in which
he becomes sixty-five (65). Payment of a Plan Benefit to a
Director-Participant or his Beneficiary shall commence as of the
January 1, following the date of the Director's Severance of
Service as determined by the Committee. If the event giving rise
to payment occurs after November 1 of any year, the payment shall
commence no later than March 1 of the following year. All
payments shall be made as of the first day of the month.
5.10 Full Payment of Benefits. Notwithstanding any
other provision of this Plan, all benefits not paid by the time
the Participant attains or would have attained age eighty (80)
shall be paid in a single sum at that time.
5.11 Payment to Guardian. If a Plan Benefit is payable
to a minor or a person declared incompetent or to a person
incapable of handling the disposition of property, the Committee
may direct payment of such benefit to the guardian, legal
representative or person having the care and custody of such
minor or incompetent person. The Committee may require proof of
incompetency, minority, incapacity or guardianship as it may deem
appropriate prior to distribution of the Plan Benefit. Such
distribution shall completely discharge the Committee and the
Employer from all liability with respect to such Plan Benefit.
5.12 Responsibilities for Payment. The Plan Benefit
shall be paid by the Employer(s) employing the Employee-
Participant during the respective Deferral Period(s) on account
of which such Plan Benefit is payable. Plan Benefits payable by
any Participating Subsidiary or former Participating Subsidiary
shall be guaranteed by SPS. Plan Benefits shall be paid to
Director-Participants by SPS. No other Employer or employee,
officer, director or agent of any Employer shall have any
liability for payments hereunder.
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5.13 Acceleration of Plan Benefits.
(a) In the event that benefits payable under this
Plan are secured pursuant to the terms of a trust, then, if after
a Change of Control (as such term may be defined in the trust
instrument) the trust is terminated, the benefits so secured
shall become immediately payable under this Plan in a lump sum,
calculated in accordance with 5.13(b) where applicable, anything
to the contrary contained herein notwithstanding.
(b) In the case where a Participant has elected
the form of benefit payment described in Section 5.7(a), then if,
after a Change of Control, such Participant's benefit is secured
pursuant to the terms of a trust, or paid, within thirty-six (36)
months following a Change of Control, in a lump sum benefit equal
to the amount of such Participant's Retirement Account, the
amount so secured or paid shall be calculated so as to include
the then present value of Retirement Account Interest which would
have accrued if payment were to commence immediately and be paid
in accordance with such Participant's election. Such present
value shall be determined by discounting the sum of total future
payments assumed to be made at the Retirement Account Interest
rate, at a rate equal to the Base Interest Rate.
ARTICLE VI
BENEFICIARY DESIGNATION
6.1 Beneficiary Designation. Each Participant shall
have the right, at any time, to designate any person or persons
as his or her Beneficiary or Beneficiaries (both primary and
secondary) to whom the Plan Benefit shall be paid in the event of
his or her death prior to complete distribution to the
Participant of the Plan Benefit due him or her. Each beneficiary
designation shall be in a written form prescribed by the
Committee and will be effective only when filed with the
Committee during the Participant's lifetime.
6.2 Amendments. Any Beneficiary designation form may
be changed by a Participant without the consent of any designated
Beneficiary or other person by the filing of a new beneficiary
designation form with the Committee. The filing of a new benefi-
ciary designation form will cancel all beneficiary designation
forms previously filed.
6.3 No Beneficiary Designation. If any Participant
fails to designate a Beneficiary in the manner provided above or
if the Beneficiary designated by a deceased Participant
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<PAGE> 40
predeceases the Participant, the Committee shall direct such
Participant's Plan Benefit (or the balance thereof) to be
distributed as follows:
(a) to the Participant's surviving spouse, if
any; or
(b) if the Participant shall have no surviving
spouse, then to the Participant's estate.
6.4 Death of Beneficiary. If the Beneficiary
designated by a deceased Participant dies before receiving
complete distribution of the Plan Benefit and no other effective
beneficiary designation is in effect, the Committee shall direct
that the balance of such Plan Benefit be distributed to such
beneficiary as the Beneficiary shall designate, or if no such
designation is in effect, then to the Beneficiary's estate.
ARTICLE VII
ADMINISTRATION
7.1 Designation of Committee. This Plan shall be
administered by the Committee. Members of the Committee may be
Participants under this Plan, but shall not participate in any
decision of the Committee made with respect to such Participant's
receipt of benefits hereunder.
7.2 Duties of Committee. The Committee shall be
responsible for interpretation of Plan provisions and approval of
benefit payments to the extent such responsibility has not been
allocated under the Plan to another entity, and subject to and in
accordance with the provisions hereof shall determine all
questions arising under the Plan. The Committee may also make
such rules and regulations and prescribe such forms and
procedures for the conduct of its meetings and administrative
duties as it deems appropriate. The Committee shall endeavor to
act by general rules so as not to discriminate in favor of any
person.
7.3 Agents. The Committee shall appoint an individual
to be the Committee's agent with respect to the day-to-day
administration of the Plan. In addition, the Committee may, from
time to time, employ other agents and delegate to them such
administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Employer.
7.4 Binding Effect of Decisions. The decision or
action of the Committee in respect of any question arising out of
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or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated
hereunder shall be final and conclusive and binding upon all
persons having any interest in the Plan, except to the extent
that a court of competent jurisdiction shall decide to the
contrary.
7.5 Indemnity of Committee. SPS shall indemnify and
hold harmless the members of the Committee against any and all
claims, loss, damage, expense or liability arising from any
action or failure to act with respect to this Plan, except in the
case of willful misconduct.
ARTICLE VIII
CLAIMS PROCEDURE
8.1 Claim. Any person claiming a Plan Benefit,
requesting an interpretation or ruling under the Plan, or
requesting information under the Plan shall present the request
in writing to the Committee which shall respond in writing as
soon as practicable.
8.2 Denial of Claim. If the claim or request is
denied, the written notice of denial shall state:
(a) the reason(s) for denial, with specific
reference to the Plan provision(s) on which the denial is based;
(b) a description of any additional material or
information required and an explanation of why it is necessary;
and
(c) an explanation of the Plan's claim review
procedure.
8.3 Review of Claim. Any person whose claim or
request is denied or who has not received a response within
thirty (30) days of the filing of such claim or request may
request review by notice given in writing to the Committee within
60 days. The claim or request shall be reviewed by the Committee
which may, but shall not be required to, grant the claimant a
hearing. On review, the claimant may have representation,
examine pertinent documents, and submit issues and comments in
writing.
8.4 Final Decision. The decision on review shall
normally be made within thirty (30) days of the filing of such
request, except that if special circumstances exist, the claimant
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<PAGE> 42
shall be notified and the decision shall be made within sixty
(60) days. The decision shall be in writing and shall state the
reason(s) therefor and shall reference the relevant plan
provision(s).
8.5 Enforcement; No Set-off
(a) In the event that SPS shall fail or refuse to
make payments of any amounts due the Participant under the Plan,
SPS shall pay to the Participant, in addition to the payment of
any other sum provided in the Plan, interest, compounded daily,
on any amount remaining unpaid from the date payment is required
until paid to the Participant, at the rate from time to time
announced by CoreStates Bank, N.A. as its "prime rate" plus four
percent (4%), each change in such rate to take effect on the
effective date of the change in such prime rate.
(b) It is the intent of the parties that the
Participant not be required to incur any expenses associated with
the enforcement of his rights under the Plan by arbitration,
litigation or other legal action because the cost and expense
thereof would substantially detract from the benefits intended to
be extended to the Participant under the Plan. Accordingly, SPS
shall pay the Participant on demand the amount necessary to
reimburse the Participant in full for all expenses (including all
attorneys' fees and legal expenses) incurred by the Participant
in enforcing any of the obligations of SPS under this Plan.
(c) SPS's obligation to make the payments
provided for in this Plan and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which SPS may have against the
Participant or others.
ARTICLE IX
AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
9.1 Amendment. Except as provided in Section 9.4, the
Board may at any time amend the Plan in whole or in part,
provided, however, that no amendment shall be effective to
decrease or restrict any Account maintained pursuant to any
existing Participation Agreement(s) under the Plan nor to
establish an interest rate (a) in the case of the Retirement
Account lower than the greater of the effective rate of eight
percent (8%) or the effective annual yield on Moody's Average
Corporate Bond Yield Index for the three (3) calendar months
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<PAGE> 43
September through November immediately preceding the Plan Year in
which the interest is credited to a Participant's Account, as
published by Moody's Investors Service, Inc. (or any successor
thereto), or, if such monthly index is no longer published, a
substantially similar index selected by the Committee, or (b) in
the case of the Termination Account lower than the effective
annual yield on the monthly average for one year U.S. Treasury
Constant Maturities for the three (3) calendar months, September
through November, immediately preceding the Plan Year in which
the interest is credited to a Participant's Account, as published
by the Board of Governors of the Federal Reserve System (or any
successor thereto), or if such monthly average is no longer
published, a substantially similar index selected by the
Committee. Any change in the definition of Interest so as to
decrease the interest rate shall not become effective until the
first day of the Plan Year which follows the adoption of the
amendment.
9.2 Modification. Notwithstanding any provision of
the Plan to the contrary, the Committee shall have the right to
deny participation in the Plan, or to modify the terms of the
Plan, as applied to any person not insurable at standard rates.
9.3 Board's Right to Terminate. The Board may at any
time terminate the Plan as to any or all Employers if, in its
judgment, the tax, accounting, or other effects of the
continuance of the Plan, or potential payments thereunder would
not be in the best interests of any or all Employers. In such
event, the Employers (or any Employer as to whom the Plan has
been terminated) shall have no further liability or obligation
under the Plan or the Participant's Participation Agreement,
provided that the Participant is paid the full amount of the
Participant's Retirement Account in a single sum as of the date
of termination of this Plan, or in equal installments over a
period of not more than five (5) years, as the Board may
determine. If the Participant has elected the form of benefit
payment described in Section 5.7(a), the amount paid shall be
calculated so as to include the then present value of Retirement
Account Interest which would have accrued if payment were to
commence immediately and be paid in accordance with such
Participant's election. Such present value shall be determined
by discounting the sum of total future payments assumed to be
made at the Retirement Account Interest rate, at a rate equal to
the Base Interest Rate.
9.4 Change of Control. Upon a Change of Control the
Board shall be precluded from amending the Plan and for a period
of three (3) years, commencing on the effective date of the
Change of Control, from terminating the Plan.
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ARTICLE X
MISCELLANEOUS
10.1 No Funding. The Employer's obligation under the
Plan shall be merely that of an unfunded and unsecured promise of
the Employer to pay money in the future, and Participants and
their Beneficiaries, heirs, successors and assigns shall have no
further legal or equitable rights, interest or claims in any
property or assets of the Employer.
10.2 Insurance. The Employer shall have the right, but
not the obligation, to purchase one or more policies of life
insurance upon the life of a Participant. In the event such
policies are purchased, they shall be owned by the Employer, and
no Participant, their Beneficiaries, heirs, successors and
assigns shall have any right or interest therein. Each
Participant shall, however, cooperate in the application for, and
in the maintenance of, such insurance in any way in which
requested to do so by the Employer.
10.3 Conflicting Provisions. To the extent that any
provision of this Plan conflicts with any provision of the
Executive Severance Agreement or the Senior Executive Severance
Plan, the provision of the Executive Severance Agreement or the
Senior Executive Severance Plan, as the case may be, shall
prevail, and this Plan shall be deemed to have been amended to
the extent thus required.
10.4 Nonassignability. Neither a Participant nor any
other person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise encumber,
transfer, hypothecate or convey in advance of actual receipt the
amounts, if any, payable hereunder, or any part thereof, which
are, and all rights to which are, expressly declared to be
unassignable and nontransferable. No part of the amounts payable
shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person,
nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
10.5 Not a Contract of Employment. The terms and
conditions of this Plan shall not be deemed to constitute a
contract of employment between the Employer and the Participant,
and the Participant (or his Beneficiary) shall have no rights
against the Employer except as may otherwise be specifically
provided herein. Moreover, nothing in this Plan shall be deemed
to give a Participant the right to be retained in the service of
<PAGE>
<PAGE> 45
the Employer or to interfere with the right of the Employer to
discipline or discharge him or her at any time.
10.6 Protective Provisions. A Participant will
cooperate with the Employer by furnishing any and all information
requested by the Employer in order to facilitate the payment of
benefits hereunder, by taking such physical examinations as the
Employer may deem necessary and taking such other action as may
be requested by the Employer.
10.7 Terms. Wherever any words are used herein in the
singular or in the plural, they shall be construed as though they
were used in the plural or the singular, as the case may be, in
all cases where they would so apply.
10.8 Captions. The captions of the articles, sections
and paragraphs of this Plan are for convenience only and shall
not control or affect the meaning or construction of any of its
provisions.
10.9 Governing Law. The provisions of this Plan shall
be construed and interpreted according to the laws of the
Commonwealth of Pennsylvania.
10.10 Validity. In case any provision of this Plan
shall be held illegal or invalid for any reason, said illegality
or invalidity shall not affect the remaining parts hereof, but
this Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
10.11 Notice. Any notice or filing required or
permitted to be given to the Committee under the Plan shall be
sufficient if in writing and hand delivered, or sent by
registered or certified mail, at the principal address of SPS.
Such notice shall be deemed given as of the date of delivery or,
if delivery is made by mail, as of the date shown on the postmark
on the receipt for registration or certification.
10.12 Successors. The provisions of this Plan shall
bind and inure to the benefit of the Employer and its successors
and assigns. The term successors as used herein shall include
any corporate or other business entity which shall, whether by
merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of the Employer, and
successors of any such corporation or other business entity.
Pursuant to resolution of the Board, this instrument is
to be effective as of December 7, 1989.
<PAGE>
<PAGE> 46
Schedule A
Effective 1/1/90
EXECUTIVE DEFERRED COMPENSATION PLAN II
JANUARY 1, 1990 TO DECEMBER 31, 1993
ANNUALIZED
1990 THEREAFTER
MAXIMUM DEFERRAL DEFERRAL TO
MANAGEMENT DEFERRAL COMMITMENT AMOUNT 12/31/90
---------- -------- ---------- -------- --------
J.R. Selby $400,000 $400,000 $100,000 $100,000
H.J. Wilkinson 225,252 225,252 56,313 56,313
T.R. O'Neill 150,000 150,000 37,500 37,500
E.H. Kottcamp 141,000 54,000 0 18,000
A.B. Belden 105,000 105,000 26,250 26,250
J.P. McGrath 65,000 65,000 16,250 16,250
H.W. Antes 48,800 48,800 12,200 12,200
R.M. Groves 47,600 47,600 11,900 11,900
A. Nerenberg 46,000 46,000 6,571 13,143
S.E. Engelman 40,000 40,000 10,000 10,000
J.M. Morrash 34,800 20,000 5,000 5,000
R.H. Garreth 72,500 72,000 10,286 20,571
D.L. Hinmon 70,000 70,000 17,500 17,500
R.A. Walker 70,000 70,000 17,500 17,500
W.T. Benecki 65,000 65,000 16,250 16,250
R.E. Schwer 61,500 61,500 4,731 18,923
B.S. Freeston 52,500 52,500 13,125 13,125
P.W. Wallace 50,000 50,000 12,500 12,500
DIRECTORS
---------
J.F. Lubin $32,000 32,000 8,000 8,000
A.C. Menke 32,000 32,000 8,000 8,000
P.F. Miller, Jr. 32,000 32,000 8,000 8,000
F.J. Skinner 32,000 32,000 8,000 8,000
S.W. McConnell 32,000 32,000 8,000 8,000
J.R. Selby 8,000 8,000 2,000 2,000
H.J. Wilkinson 8,000 8,000 2,000 2,000
<PAGE>
<PAGE> 47
Schedule A-1
Effective January 1, 1994
Executive Deferred Compensation Plan II
January 1, 1994 to December 31, 1997
Annualized
1994 Thereafter
Maximum Deferred Deferred to
Management Deferral Commitment Amount 12/31/97
---------- -------- ---------- -------- ----------
Charles W. Grigg $400,000 $400,000 $100,000 $100,000
<PAGE>
<PAGE>
<PAGE> 48
EMPLOYMENT AGREEMENT
This Employment Agreement is effective as of
December 1, 1993 by and between SPS Technologies, Inc., a
Pennsylvania corporation (the "Company"), and Charles W. Grigg,
an individual (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Employee and
the Employee desires to be so employed, on the terms and
conditions herein set forth; and
WHEREAS, contemporaneous herewith the Company and the
Employee are entering into an executive severance agreement
relating to certain severance payments in the event of a Change
of Control as therein provided (the "Executive Severance
Agreement");
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements hereinafter set forth and
intending to be legally bound hereby, the parties hereto agree as
follows:
Section 1. Employment. The Company hereby employs the
Employee, which employment the Employee hereby accepts, to serve,
<PAGE>
<PAGE> 49
subject to the direction, supervision and control of the Board of
Directors of the Company (the "Board"), as the Company's Chairman
of the Board of Directors and Chief Executive Officer ("Chairman
and Chief Executive Officer"). In such regard, the Employee
agrees to undertake and discharge such duties, functions and
responsibilities as are from time to time assigned to the
Employee by the Board, consistent with the terms and provisions
of this Employment Agreement.
Section 2. Term and Termination.
(a) Term. The Employee's employment by the
Company shall commence as of December 1, 1993 (the "Effective
Date") and shall continue until such employment is terminated by
the Company or by the Employee or when the Employee reaches the
age of 65, retires, dies or becomes disabled, whichever is
sooner. Any such termination shall also automatically constitute
the resignation by the Employee, and the termination of the
Employee's status and capacity, as a member of the Board,
officer, employee and/or agent of the Company and any of its
subsidiaries or affiliates.
(b) Termination by Employee. The Employee may
terminate this Employment Agreement and the Employee's employment
under this Employment Agreement at any time by giving at least
ninety (90) days' prior written notice of such termination to the
Company.
<PAGE>
<PAGE> 50
(c) Termination by Company. The Company may
terminate this Employment Agreement and the Employee's employment
under this Employment Agreement at any time for any reason or for
no reason and whether or not constituting "Cause" (as defined in
Section 6(e)(i) hereof), immediately or on such future date (not
to exceed ninety (90) days from the date of notice) as may be
specified in the written notice of termination to the Employee
from the Company.
(d) Termination Upon Death, Retirement or
Disability. This Employment Agreement and the Employee's
employment under this Employment Agreement shall terminate
automatically and without notice immediately upon (i) the death
of the Employee, or (ii) the retirement of the Employee in
accordance with the Company's retirement income plan, (iii) the
Employee's attaining age 65, or (iv) the disability of the
Employee which qualifies the Employee for benefits under the
Company's Long Term Disability Plan.
Section 3. Compensation.
(a) Base Salary. In consideration for all
services rendered by the Employee, hereunder or otherwise, to or
for the benefit of the Company, its subsidiaries and affiliates,
the Company shall pay the Employee a base salary at the rate per
annum during the first year of employment equal to Four Hundred
Thousand Dollars ($400,000), payable in equal monthly
<PAGE>
<PAGE> 51
installments. The Employee's base salary shall be increased (but
not decreased) upon each anniversary of the date hereof by the
percentage increase, if any, subsequent to the last such
anniversary in the Consumer Price Index for Urban Workers in the
Philadelphia Region, All Price Index, published by the U. S.
Bureau of Labor Statistics. The Employee's base salary shall be
reviewed annually by the Board and may be increased further (but
not decreased) in the sole discretion of the Board.
(b) First Year Bonus. As additional
consideration for the Employee's first year of service hereunder,
the Employee shall be paid an incentive bonus in the amount of
One Hundred Fifty Thousand Dollars ($150,000) on January 31,
l995, provided the Employee is employed on the first anniversary
of the Effective Date by the Company under this Employment
Agreement.
(c) Subsequent Years' Incentive Compensation.
The Employee shall be eligible, commencing with the first plan
year after the first anniversary of the Effective Date, but not
before, to participate in the Company's incentive compensation
plans in accordance with the terms thereof, including, but not
limited to its management incentive plan ("MIP") and executive
incentive plan ("EIP"), provided the Employee is employed on such
first anniversary by the Company under this Employment Agreement.
(d) Benefit Plans. The Employee shall be
eligible during the term of his employment under this Employment
<PAGE>
<PAGE> 52
Agreement to participate in all employee benefit plans, stock
option programs and employee fringe benefits such as health,
disability and life insurance and retirement programs (and
including the stock option agreement dated the date hereof issued
to the Employee under the Company's 1988 Long-Term Incentive
Stock Plan, retirement income plan, deferred compensation plan,
supplemental executive retirement plan, benefit equalization plan
and, after the first anniversary hereof, the executive incentive
plan and management incentive plan) now or hereafter made
available to executive employees of the Company generally, other
than the Company's Senior Executive Severance Plan ("SESP"),
(collectively, such plans and programs, but excluding SESP, are
herein collectively referred to as the "Benefit Plans"), to the
extent and on the same terms and conditions (subject, however, to
the terms and provisions of any such plans or programs) as from
time to time are accorded other employees serving as executive
officers of the Company, except as such Benefit Plans may be
expressly modified by the terms of this Employment Agreement.
The Employee shall be entitled to not less than four (4) weeks
vacation annually.
(e) Purchase of Automobile. The Company shall
reimburse the Employee for the out-of-pocket cost to the Employee
of purchasing the automobile provided the Employee by his
previous employer in the amount of the "blue book" value thereof,
up to a maximum of $25,000 of such cost, plus such amount as is
<PAGE>
<PAGE> 53
required to reimburse the Employee for the federal and state
income tax liability of the Employee in respect of the sum
reimbursed by the Company under this Section 3(e).
(f) Limitation on Compensation and Benefits.
Except as specifically set forth in this Employment Agreement and
the Benefit Plans and except for such compensation, if any, which
may be paid to the Employee as a member of the Board, the
Employee shall not receive or be entitled to any other
compensation, perquisites or benefits.
Section 4. Relocation. The Employee shall relocate
his principal residence to the greater Philadelphia, Pennsylvania
metropolitan area within twelve (12) months after the Effective
Date. The Company shall reimburse the Employee the reasonable
costs and expenses of so moving his principal residence in
accordance with its employee relocation expense reimbursement
policy.
Section 5. Other Commitments. The Employee shall
devote all of his working time and attention to the discharge of
his duties and performance of services hereunder and to the
affairs of the Company. Accordingly, the Employee will resign
all of his present board memberships and remunerative positions,
other than with the Company and its subsidiaries, as soon as
possible, but, in any event, not later than May 11, 1994 in the
<PAGE>
<PAGE> 54
case of Kollmorgen, Inc. and October 31, 1994 in the case of
Watts Industries, Inc. The Employee will not accept any other
positions, whether or not for compensation, in the future except
with the concurrence of the Board in each instance.
Section 6. Severance Compensation.
(a) Termination Upon Change of Control. In the
event of a "Triggering Termination" of the Employee during a
"Change of Control Period" (as such terms are defined in the
Executive Severance Agreement) or a termination resulting from a
breach of Section 16 of such Executive Severance Agreement, the
provisions of such Executive Severance Agreement shall govern and
the Employee shall be entitled to the rights and benefits, if
any, set forth in such Executive Severance Agreement in
accordance with its terms in lieu of any severance payments,
rights or benefits under or in respect of this Employment
Agreement.
(b) Termination by Employee, by the Company for
"Cause" or Upon Death, Disability or Retirement. Upon
termination of the Employee's employment under this Employment
Agreement (i) by the Employee (other than upon a "Constructive
Termination" as defined in Section 6(e)(ii) hereof), (ii) upon
the death, disability or retirement of the Employee or the
Employee's attaining age 65, or (iii) by the Company for "Cause"
(as defined in Section 6(e)(i) hereof), all rights and benefits
<PAGE>
<PAGE> 55
of the Employee hereunder or in respect hereof or in respect of
his employment by the Company shall cease and terminate without
further liability or obligation on the part of the Company
whatsoever, except payment of the Employee's base salary through
the effective date of termination of employment and such sums, if
any, due or to become due under any of the Benefit Plans in which
the Employee is a participant as of the effective date of
termination of employment in accordance with the terms and
provisions of such Benefit Plans (which sums, if any, shall be
payable as provided by the terms of such Benefit Plans).
(c) Termination by the Company Without Cause.
Upon termination (other than a termination of employment upon the
retirement, death or disability of the Employee or the Employee's
attaining age 65) of the Employee's employment under this
Employment Agreement (A) by the Company without Cause, or (B) by
the Employee upon a Constructive Termination, (herein a
"Severance Termination"), the Company shall pay the Employee,
within 30 days after the effective date of the Severance
Termination, in full and complete settlement, satisfaction and
release of all claims and rights the Employee may have against
the Company and liabilities or obligations the Company may have
to the Employee (and whether arising under, pursuant to or in
respect of this Employment Agreement, the Employee's employment
by the Company or the termination thereof, or otherwise) the
following:
<PAGE>
<PAGE> 56
(i) If the Severance Termination is effective
within the first three (3) years following the Effective Date,
Employee's base salary to the effective date of termination plus
(x) a severance payment in an amount, in cash, equal to two
hundred percent (200%) of the base salary then in effect, and (y)
such benefits as would have been afforded the Employee under the
SESP as if he were a participant therein on the date of
termination of employment, other than payments in respect of base
salary and other than the rights provided under Section 5.1 and
Article VII of the SESP; or
(ii) If the Severance Termination is
effective after the third anniversary of the Effective Date, such
payments, rights and benefits (other than the rights provided
under Section 5.1 and Article VII of the SESP) provided under the
Company's SESP, as such plan is in effect on the Effective Date,
as though the Employee were entitled to fully participate therein
except that the term "Triggering Termination" as used in the SESP
shall be deemed to mean a Constructive Termination as defined
herein or a termination by the Company without Cause.
(d) Release. In consideration of, and as a
condition to, the foregoing payments and benefits, which the
Employee acknowledges to be adequate consideration therefor in
excess of the consideration to which he otherwise would be
entitled upon any such termination, the Employee shall provide
the Company with a fully executed general release of and from all
<PAGE>
<PAGE> 57
liabilities, claims, suits, actions and other matters, in form
and substance reasonably satisfactory to the Company.
(e) Certain Definitions. As used herein, the
following terms shall have the following meanings:
(i) "Cause" shall mean misappropriation of
funds, habitual insobriety, substance abuse, conviction of a
crime involving moral turpitude, or gross negligence in the
performance of the Employee's duties, which gross negligence has
had an adverse effect on the Company's business, operations,
assets or properties so as to materially adversely affect the
financial condition of the Company and its subsidiaries taken as
a whole.
(ii) "Constructive Termination" shall mean
a termination of the Employee's employment under this Employment
Agreement initiated by the Employee following one or more of the
following occurrences not approved in advance by the Employee,
provided notice of such occurrence is given by the Employee to
the Company in writing and the Company fails for a period of more
than twenty (20) days to cure the same:
(A) a significant reduction by the
Board of the authority, duties or responsibilities of the
Employee as an employee of the Company including a removal of the
Employee as Chairman and Chief Executive Officer of the Company;
(B) a reduction in, or a wrongful
refusal to pay, the Employee's base salary, by the Company;
<PAGE>
<PAGE> 58
(C) a termination or modification of
MIP or EIP or any action taken pursuant to the terms of such
plans, which materially (x) reduces the Employee's opportunity to
receive compensation under either or both of such plans of
equivalent amounts previously received by the Employee, subject
to the right of the Board to establish reasonable goals under
MIP and EIP, (y) reduces the compensation payable to the Employee
under either or both of such plans but which does not effect
comparable reductions in the compensation payable to the other
participants in such plans, or (z) increases the compensation
payable to other participants in either or both of such plans but
which does not effect corresponding increases in the amount of
compensation payable to the Employee (provided the Employee was,
at the time of such termination or modification, a participant in
such plan), unless the Company replaces MIP or EIP (or any
successor plan thereto permitted hereby) or the provision so
modified with incentive compensation or incentive compensation
plans at least equal to or better than the MIP or EIP or the
provision thereof as modified or revoked; or
(D) a termination or modification of
the Company's retirement income plan ("RIP"), benefit
equalization plan ("BEP"), deferred compensation plans (in the
event the Employee is a participant therein), or the supplemental
executive retirement plan ("SERP"), which materially reduces to
the detriment of the Employee (x) the benefits provided by such
<PAGE>
<PAGE> 59
plans, or (y) the funding thereof provided by the RIP or by any
trust established by the Company to fund benefits provided by the
BEP, the deferred compensation plans (if applicable), or the
SERP, unless the Company replaces such plan or provision thereof
as so modified or terminated with a benefit or benefits at least
equal to or better than the plan (or any successor plan thereto
permitted hereby) or provision thereof as modified or terminated.
(f) Mitigation. In the event of a Severance
Termination effective within the first three (3) years following
the Effective Date, there shall be no requirement that the
Employee seek other employment or otherwise seek to mitigate
damages in order to be entitled to receive the amounts and
benefits set forth in Section 6(c)(i). In the event of a
Severance Termination effective after the third anniversary of
the Effective Date, the Employee shall comply with the provisions
of the SESP respecting such matters as though he were a
participant therein.
(g) Arbitration. All claims, controversies and
disputes arising out or in respect of or concerning the breach,
interpretation or application of this Agreement, the Employee's
employment hereunder or the termination hereof or of such
employment, including without being limited to any claims that
the application of this Employment Agreement or the termination
of the employment relationship established hereby violates any
federal, state or local law or regulation, shall be submitted to
<PAGE>
<PAGE> 60
and resolved exclusively by final and binding arbitration in the
City of Philadelphia, Pennsylvania, before a panel of three
arbitrators pursuant to the Rules of the American Arbitration
Association, Rules for Commercial Arbitration. One such
arbitrator shall be appointed by each party and the two so
appointed shall select a third, or if they are unable to agree
within fifteen (15) days of their appointment, the third shall be
appointed by the AAA. Arbitration must be demanded within thirty
(30) calendar days of the time when the demanding party knows or
should have known of the event or events giving rise to the
claim. The arbitration opinion and award shall be final and
binding on the Company and the Employee and shall be enforceable
by any court. Each party shall bear their own costs and
expenses, including but not limited to attorneys' fees and
expenses. The Company and the Employee shall share equally all
costs of arbitration, excepting their own attorneys' fees and
expenses. The Company and the Employee recognize that this
Section 6(g) means that certain claims will be litigated and
reviewed before an impartial arbitrator or panel of arbitrators
instead of before a court of law and/or a jury, but desire the
many benefits of the arbitration process over court proceedings,
including speed of resolution, lower costs and fees, and more
flexible rules of evidence. The arbitrator or arbitrators duly
selected pursuant to the AAA Rules shall have the same power and
authority to order any remedy for violation of a statute,
<PAGE>
<PAGE> 61
regulation, or ordinance as a court would have; and shall have
the same power to order discovery as a federal district court has
under the Federal Rules of Civil Procedure. This Section is
intended by the Company and the Employee to be enforceable under
the Federal Arbitration Act and any similar state law. Any award
shall bear interest at the "prime rate."
Section 7. Non-Competition. During the term of this
Employment Agreement and thereafter for a period of two (2)
years, the Employee agrees that he shall not, directly or
indirectly, (i) compete with the Company, (ii) engage in any line
of business in which the Company is engaged on the date of
termination of the Employee's employment in any geographic market
in which the Company then transacts business, (iii) have any
interest, whether as an officer, director, employee, agent,
consultant, owner, shareholder (owning more than one percent (1%)
of the outstanding capital stock) or otherwise, in any
corporation, entity or enterprise engaged in competition with the
Company or engaged in any line of business in which the Company
is engaged on the date of termination of the Employee's
employment, or (iv) interfere in any manner with the business or
goodwill of the Company. As used in this Section 7, the term
Company shall be deemed to include the Company and all of its
subsidiaries and affiliates. The provisions of this Section 7
shall survive any termination of this Employment Agreement.
<PAGE>
<PAGE> 62
Section 8. Agreement to Provide Services; Right To
Terminate.
(a) No Right of Employment. Nothing in this
Employment Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company. The
Company or the Employee may terminate the Employee's employment
at any time, subject to the Company's obligation to provide the
payments and benefits set forth in this Employment Agreement upon
such termination, if any.
(b) No Other Rights. The Employee acknowledges
that from time to time, the Company may establish, maintain and
distribute employee manuals or handbooks or personnel policy
manuals, and officers or other representatives of the Company may
make written or oral statements relating to personnel policies
and procedures. Such manuals, handbooks and statements are
intended only for general guidance. No policies, procedures or
statements of any nature by or on behalf of the Company (whether
written or oral, and whether or not contained in any employee
manual or handbook or personnel policy manual), and no acts or
practices of any nature, shall be construed to modify this
Employment Agreement.
Section 9. Exclusivity of Rights. If the Employee
becomes entitled to and receives all of the payments and benefits
provided for in this Employment Agreement in the event of a
<PAGE>
<PAGE> 63
termination of employment, the Employee hereby waives the
Employee's right to receive payments provided for under any other
severance agreement, plan or program; it being acknowledged,
however, that pursuant to Section 6(a) the provisions of the
Executive Severance Agreement shall govern in the event of a
Triggering Termination during a Change of Control Period or a
termination resulting from a breach of Section 16 of such
Executive Severance Agreement.
Section 10. Senior Executive Severance Plan. The
parties acknowledge and agree that although the Employee is not
a participant in the Company's SESP (the provisions of this
Agreement being intended by the parties to be in substitution
therefor), certain benefits afforded the Employee hereunder are
to be measured by the provisions of the SESP as though he were a
participant and entitled to fully participate therein.
Section 11. Notice. All notices and other
communications required or permitted hereunder or necessary or
convenient in connection herewith shall be in writing and shall
be delivered personally or mailed by registered or certified
mail, return receipt requested, or by overnight express courier
service, as follows:
<PAGE>
<PAGE> 64
If to the Company, to:
SPS Technologies, Inc.
Route 332
Newtown, PA 18940
Attention: Corporate Secretary
If to the Employee, to:
Charles W. Grigg
87 Spruce Hill Road
Weston, Massachusetts 02193
or to such other names or addresses as the Company or the
Employee, as the case may be, shall designate by notice to the
other party hereto in the manner specified in this Section. Any
such notice shall be deemed delivered and effective when received
in the case of personal delivery, five (5) days after deposit,
postage prepaid, with the U.S. Postal Service in the case of
registered or certified mail, or on the next business day in the
case of overnight express courier service.
Section 12. Governing Law. This Employment Agreement
shall be governed by and interpreted under the laws of the
Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
Section 13. Contents of Agreement, Amendment and
Assignment.
(a) Entire Agreement. This Employment Agreement
supersedes all prior understandings and agreements and, together
with the Executive Severance Agreement and the confidentiality
<PAGE>
<PAGE> 65
agreement referred to therein and the stock option agreement
dated the date hereof, sets forth the entire understanding
between the parties hereto with respect to the subject matter
hereof and cannot be changed, modified, extended or amended
except upon written amendment executed by the Employee and
approved by the Board and executed on the Company's behalf by a
duly authorized officer.
(b) Binding Provisions. All of the terms and
provisions of this Employment Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective
heirs, representatives, successors and assigns of the parties
hereto. This Employment Agreement, being one for the personal
services of the Employee, shall not be assignable by the
Employee.
Section 14. Severability. If any provision of this
Employment Agreement or application thereof to anyone or under
any circumstances shall be determined by a court of competent
jurisdiction to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions or
applications of this Employment Agreement which can be given
effect without the invalid or unenforceable provision or
application, and it is the desire and intent of the parties that
the court modify any such provision so determined to be invalid
<PAGE>
<PAGE> 66
or unenforceable so as to make such provision valid and
enforceable in accordance with applicable law.
Section 15. Remedies Cumulative; No Waiver. No right
conferred by this Employment Agreement is intended to be
exclusive of any other right or remedy, and each and every such
right or remedy shall be cumulative and shall be in addition to
any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by either
party in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver
thereof. In addition to any other remedies to which it may be
entitled, in the event of a breach or threatened breach of
Section 7 hereof, the parties agree that the Company would suffer
irreparable harm and that money damages would be inadequate.
Accordingly, the Company shall be entitled to injunctive and
other equitable relief.
Section 16. Miscellaneous. All Section headings are
for convenience only. This Employment Agreement may be executed
in several counterparts, each of which is an original. It shall
not be necessary in making proof of this Employment Agreement or
any counterpart hereof to produce or account for any of the other
counterparts.
<PAGE>
<PAGE> 67
IN WITNESS WHEREOF, the undersigned, intending to be
legally bound, have executed this Employment Agreement as of the
date first above written.
Attest: SPS TECHNOLOGIES, INC.
____________________________ By:__________________________
Secretary
EMPLOYEE:
____________________________ _____________________________
Witness Charles W. Grigg
<PAGE>
<PAGE>
<PAGE> 68
EXHIBIT 11
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
Computation of Dilution (Anti-dilution) of Earnings Per Share
Resulting from Common Stock Equivalents
Years ended December 31, 1993, 1992, 1991, 1990 and 1989
(Thousands of dollars, except share data)
The following calculation is submitted in accordance with the
Securities Exchange Act of 1934 although not required by Opinion No. 15 of
the Accounting Principles Board as it results in dilution of less than 3%,
or is anti-dilutive:
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net earnings (loss)(a) ............. $ (30,995) $ (20,409) $ 6,602 $ (11,461) $ 14,209
==================================================================
Weighted average number of shares
outstanding during year .......... 5,105,706 5,097,994 5,073,798 5,026,372 5,003,947
Weighted average of maximum shares
subject to exercise under
outstanding stock options at
December 31 ...................... 271,679 190,533 265,823 156,308 225,304
------------------------------------------------------------------
5,377,385 5,288,527 5,339,621 5,182,680 5,229,251
Less treasury shares assumed
purchased with proceeds from
assumed exercise of outstanding
options(b) ....................... 239,832 169,065 208,413 103,133 120,289
------------------------------------------------------------------
Weighted average number of common
shares and equivalent common
shares outstanding after assumed
exercise of options .............. 5,137,553 5,119,462 5,131,208 5,079,547 5,108,962
Pro forma earnings (loss) per share
based on above assumptions(c) .... $ (6.03) $ (3.99) $ 1.29 $ (2.26) $ 2.78
==================================================================
Earnings (loss) per share as
reported ......................... $ (6.07) $ (4.00) $ 1.30 $ (2.28) $ 2.84
==================================================================
</TABLE>
----------
(a) Earnings have been charged with maximum compensation expense relating
to outstanding nonqualified stock options.
(b) All options are exercisable under a nonqualified plan. The proceeds
from assumed exercise of options, aggregate $6,199 in 1993, $4,467 in
1992, $6,870 in 1991, $3,363 in 1990, $6,099 in 1989; the proceeds and
number of treasury shares assumed purchased were determined on the
most likely exercise assumptions.
(c) Pro forma earnings (loss) per share assuming full dilution are not
presented separately since there would be no additional dilutive
effect, or the effect would be anti-dilutive.
<PAGE>
<PAGE>
<PAGE> 69
LOGO
- -----------------------------------------------------------------------------
CORPORATE OFFICES
101 Greenwood Avenue, Suite 470
Jenkintown, Pennsylvania 19046
(215) 517-2000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
U.S.
MANUFACTURING
PLANTS
Santa Ana, California Norfolk, Nebraska Jenkintown, Pennsylvania
Marengo, Illinois Ogallala, Nebraska Sevierville, Tennessee
Muskegon, Michigan Cleveland, Ohio Salt Lake City, Utah
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SUBSIDIARIES AND
*AFFILIATES
The Arnold *National-Arnold Standco Canada, Ltd.
Engineering Co. Magnetics Company Toronto, Canada
Marengo, Illinois Adelanto, California
Norfolk, Nebraska Unbrako Mexicana, S.A.
Ogallala, Nebraska *Pacific Products de C.V.
Sevierville, Tennessee Limited Mexico City, Mexico
Singapore
Cannon-Muskegon Tokyo, Japan Unbrako Pty. Limited
Corporation Melbourne, Australia
Muskegon, Michigan *Precision Fasteners
Limited Unbrako Schrauben
Ferre Plana, S.A. Bombay, India GmbH
Barcelona, Spain Koblenz, Germany
S.P.S. International
*Metalac S.A. Indstria Limited
e Commercio Shannon, Ireland
Sao Paulo, Brazil
SPS Technologies
Limited
Birmingham, England
Coventry, England
Leicester, England
- -----------------------------------------------------------------------------
<PAGE>
<PAGE> 70
(PHOTO)
Building on the strength of its technology and product quality, SPS
Technologies has been a leading supplier of industrial and aerospace
fasteners for more than 90 years. The Company was among the first producers
of fasteners for commercial and military aircraft, and through its Aerospace
Products Division continues to provide the industry high-strength bolts,
nuts, screws and precision components. Its Industrial Products Division
supplies engineered fasteners to makers of automobiles, trucks, diesel
engines and farm and construction equipment. The Unbrako Products Division
provides socket screws and other fasteners for industrial machinery and
equipment. Through its Cannon-Muskegon subsidiary, SPS also provides
superalloys for medical applications, aerospace and industrial gas turbine
engine components and other parts produced by investment casting. The Arnold
Engineering Co. specializes in magnetic materials and precision foil and
strip products for automobiles, aircraft, power supplies, electrical
equipment and electronic security systems. Its joint-venture National-Arnold
Magnetics Company supplies soft magnetic tape-wound core products for
electrical and electronic equipment. SPS has production facilities and a
network of manufacturing and marketing affiliates in 12 countries. The
Company is respected throughout the world for its innovative solutions to
engineering problems and the quality and reliability of its products.
<PAGE>
<PAGE> 71
TO OUR SHAREHOLDERS 1993 was a bad year for SPS Technologies.
Sales fell by 11% to $319.1 million, and SPS
had a net loss of $31.0 million or $6.07 per
share compared to a net loss of $7.0 million
or $1.37 per share in 1992 before the effect
of cumulative accounting changes. Total debt
increased by $18.7 million to $89.2 million,
and Shareholders' Equity decreased to $102.8
million from $142.6 million in 1992. Because
(PHOTO) of these losses and deteriorating financial
conditions, the Board of Directors on
December 14, 1993 suspended dividend
payments to shareholders.
The SPS Board of Directors elected me
Chairman of the Board and Chief Executive
Officer on December 1, 1993. Prior to that,
I had been President and Chief Operating
Officer of Watts Industries, Inc., a
manufacturer of valve products.
With the losses SPS has suffered over the past several years, it is
evident that SPS has had and continues to have significant problems. One
of the principal problems was excess corporate staff and too many layers
of management, which consumed a disproportionate share of the Company's
profits and kept top management distant from operations.
Another problem was the diversion of investment and management focus
from the Company's core fastener business. SPS entered the fastener market
in 1906, and the Company was built principally on the success of its
aerospace, industrial and OEM fasteners. Yet, investments needed in SPS'
fastener business to maintain its manufacturing and technical superiority
were channeled elsewhere. Furthermore, several fastener businesses were
put up for sale, which hurt their reputation with key customers and put
these businesses at a competitive disadvantage. With these fundamental
problems adversely impacting our core fastener business, the significant
decline in the aerospace fastener market resulted in factories being
closed, operations consolidated, large reductions in the number of people
employed and significant operating losses.
The first step in reorganizing SPS was to recognize the strength of
our core fastener business and retain those operations which previously
had been put up for sale. The next step was to downsize the corporate
staff located in Newtown, Pennsylvania, from 167 to 26. Some of this
reduction has been accomplished by reassigning people to operating
divisions when requested, and the remainder has been accomplished by
termination of employment. The Newtown office building is up for sale, and
the Company's jet airplane has been sold. The remaining downsized
corporate staff has been relocated to part of a leased floor in an office
building near the Jenkintown, Pennsylvania plant. The benefits from these
actions are not all financial. A positive cultural change has occurred
whereby attention is focused on operating issues instead of corporate
issues. This has resulted in an empowerment of our operating people, which
will enable them to make operating decisions that will benefit our
businesses and our shareholders.
<PAGE>
<PAGE> 72
Unfortunately, SPS' excess overhead expenses were not limited to the
corporate staff. There were too many people whose jobs were not directly
related to manufacturing, selling products and satisfying our customers.
On January 5, 1994, we announced a reduction of over 200 non-direct
employees (or approximately 10% of SPS' total non-direct work force),
which now has been accomplished. The cost benefits of this action will
have a favorable effect on our future financial results beginning in the
second quarter of 1994.
Part of the investment resources that were diverted from our core
fastener business went to the Assembly Systems Division, which
manufactures computer-controlled fastener tightening equipment and
competes with large machine tool equipment manufacturers. After many years
in this business, SPS has attained only a small market position and has
accumulated 5 year operating losses totaling $11.6 million. We have made
the decision to either sell the Assembly Systems Division or liquidate the
tightening systems part of this business and continue to operate the
profitable hand wrench, spare parts and service portions. We have signed a
Letter of Intent to sell the entire Assembly Systems Division business and
expect this transaction to be completed by the end of April.
Another big drain on SPS' resources has been Ferre Plana S.A., our
fastener company located in Barcelona, Spain acquired in 1990. While Ferre
Plana is in the fastener business, it does not have the technical skills
or equipment to manufacture critical service automotive fasteners, which
is the core business of SPS' Industrial Products Division. Since 1990, the
Spanish automotive market has declined significantly. The combination of a
product line built around commodity, low-end automotive fasteners and a
declining market has resulted in Ferre Plana incurring cumulative
operating losses of $9.4 million since it was acquired. Currently, we are
reviewing all options available in order to determine the best course of
action. We will not permit Ferre Plana to remain a long-term drain on SPS.
We will either make reasonably quick progress in improving operating
results or terminate our involvement.
Besides the profit improvement actions discussed above, we have, for
the most part, completed our plant consolidation program. The transfer of
aerospace plant operations from Santa Ana, California to Salt Lake City,
Utah and Jenkintown, Pennsylvania was near completion by the end of 1993.
During the year, we also moved Jenkintown's Unbrako specialty socket screw
manufacturing operations to Cleveland, Ohio for consolidation with the
Unbrako manufacturing operations that were previously transferred to
Cleveland from Puerto Rico. The Puerto Rico manufacturing plant was closed
in 1992 and currently is up for sale. While these consolidations have
caused significant manufacturing disruptions in 1993, they will permit
more effective plant utilization in the future. The overall impact of
these and other consolidations and downsizing can be appreciated when one
realizes that since the end of 1990, the total workforce employed in
continuing businesses has been reduced by 1,974 employees.
The outlook in 1994 for our various businesses is mixed. The aerospace
industry is projected to continue to be depressed but should be no worse
than last year and could be somewhat better. The domestic automotive
market is strong, and we expect to have significant growth in our
automotive products. We also see some growth in industrial demand for our
products in the United States and the United Kingdom. However, this is
offset by a weaker European market.
<PAGE>
<PAGE> 73
During the past year, SPS has focused much of its capital expenditures
program on Arnold Engineering and Cannon-Muskegon. Arnold Engineering will
soon complete a $5 million project to modernize its molybdenum-permalloy
magnet manufacturing plant. When finished, Arnold will be the clear
technical, quality and cost leader of molybdenum-permalloy magnet
products. Cannon-Muskegon will complete in April a $1.5 million addition
to its continuous cast air melt line, which will reduce costs and increase
capacity.
Cash flow will be a critical issue in 1994. We currently are operating
SPS within $10 million of our newly negotiated domestic credit limit with
our banks. We still have significant severance payments ahead of us; we
have a $5 million insurance company debt principal payment to make in May;
and we have budgeted $13 million of badly needed capital expenditures in
1994 compared to depreciation expense of $13.4 million. We have real
estate for sale which should generate significant cash, but the timing is
uncertain. We have on-going capital expenditure needs over the next few
years which are in excess of depreciation, and we would like to be in a
position to consider certain relatively modest but strategic acquisitions.
In view of this situation, we are reviewing all options to generate
additional capital.
I believe we have taken the necessary steps to turn SPS around and
begin the journey back to earning a fair return on Shareholders' Equity.
We are cultivating a new operations oriented culture and have
significantly reduced our costs. We are focusing on rebuilding our core
businesses and divesting or restructuring those businesses that have been
a long-term drain on our resources. We have many talented, motivated and
skilled long-service employees in SPS who are absolutely committed to the
Company's long-term success. In spite of our recent problems, we continue
to be market leaders in all our major business segments. We are still the
recognized leader in aerospace fasteners. Our Unbrako trade name is still
the world standard for excellence in industrial fasteners. We are a
leading supplier of critical service automotive fasteners in North
America, Europe and Australia. Cannon-Muskegon is recognized around the
world for its technical excellence and quality in superalloys and
proprietary alloys. Arnold Engineering is a leader in most of its magnetic
materials market segments and has the broadest product line of magnetic
materials in the industry. Our challenge is to take advantage of these
strengths and build SPS into a company that will finally reward our
shareholders for their patient investment.
/s/ Charles W. Grigg
-----------------------------------
Charles W. Grigg
Chairman and Chief Executive Officer
<PAGE>
<PAGE> 74
STATEMENTS OF CONSOLIDATED OPERATIONS
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Years ended December 31
1993 1992 1991
--------------------------------
<S> <C> <C> <C>
Net sales .................................................. $319,094 $359,431 $408,499
Cost of goods sold ......................................... 269,207 306,425 341,446
--------------------------------
GROSS PROFIT ........................................... 49,887 53,006 67,053
Selling, general and administrative expense ................ 46,574 49,312 51,364
Restructuring charge (credit) .............................. 32,400 6,800 (4,400)
--------------------------------
OPERATING EARNINGS (LOSS) .............................. (29,087) (3,106) 20,089
Other income (expense):
Interest income .......................................... 472 765 1,050
Interest expense ......................................... (5,906) (5,805) (8,194)
Equity in earnings (loss) of affiliates .................. 563 588 (2,196)
Other, net ............................................... 363 (751) (37)
--------------------------------
(4,508) (5,203) (9,377)
--------------------------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES..................... (33,595) (8,309) 10,712
Provision (benefit) for income taxes ....................... (2,600) (1,300) 5,100
--------------------------------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS .......... (30,995) (7,009) 5,612
Discontinued operations
Adjustment of estimated loss on disposal ................. 990
Cumulative effect of changes in accounting policies ........
Income taxes ............................................. (2,400)
Postretirement benefits .................................. (11,000)
--------------------------------
NET EARNINGS (LOSS) ................................ $(30,995) $(20,409) $ 6,602
================================
Per share data:
Earnings (loss) from continuing operations ............... $ (6.07) $ (1.37) $ 1.10
Discontinued operations .................................. .20
Cumulative effect of changes in accounting policies ...... (2.63)
--------------------------------
NET EARNINGS (LOSS) ................................ $ (6.07) $ (4.00) $ 1.30
================================
</TABLE>
The 1992 and 1991 amounts have been reclassified (see Note 3).
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 75
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
<TABLE>
<CAPTION>
December 31
ASSETS 1993 1992
--------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ........................................ $ 6,852 $ 2,879
Accounts and notes receivable, net ............................... 48,968 52,704
Inventories ...................................................... 80,604 84,502
Deferred income taxes ............................................ 13,667 10,772
Prepaid expenses ................................................. 2,300 2,557
Net assets held for sale ......................................... 8,619 4,356
--------------------
Total current assets ........................................... 161,010 157,770
--------------------
Investments in affiliates ............................................ 12,475 10,509
Property, plant and equipment, net ................................... 86,958 91,578
Net assets held for sale ............................................. 8,787
Other assets ......................................................... 25,536 26,964
--------------------
Total assets ............................................... $285,979 $295,608
====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable .................................................... $ 7,339 $ 7,120
Accounts payable ................................................. 19,657 20,907
Accrued expenses ................................................. 38,885 25,841
Income taxes payable ............................................. 646 934
--------------------
Total current liabilities ...................................... 66,527 54,802
--------------------
DEFERRED INCOME TAXES ................................................ 9,445 8,935
Long-term debt........................................................ 81,828 63,321
Retirement obligations................................................ 25,352 25,932
SHAREHOLDERS' EQUITY
Preferred stock, par value $1 per share
authorized 400,000 shares, issued none
Common stock, par value $1 per share
authorized 30,000,000 shares, issued 6,361,606 shares .......... 6,362 6,362
Additional paid-in capital ....................................... 59,704 59,685
Retained earnings ................................................ 60,516 96,412
Minimum pension liability ........................................ (1,780) (723)
Common stock in treasury, at cost
1,254,977 shares in 1993 (1,256,177 shares in 1992) ............ (10,144) (10,154)
Cumulative translation adjustments ............................... (11,831) (8,964)
--------------------
Total shareholders' equity ..................................... 102,827 142,618
--------------------
Total liabilities and shareholders' equity ................. $285,979 $295,608
====================
</TABLE>
The 1992 amounts have been reclassified (see Note 3).
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 76
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Thousands of dollars)
<TABLE>
<CAPTION>
Years ended December 31
1993 1992 1991
--------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) .................................................... $(30,995) $(20,409) $ 6,602
Reconciliation of net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization ...................................... 14,484 15,343 15,213
Deferred income taxes .............................................. (1,812) (1,447) (3,483)
Restructuring charge (credit) ...................................... 32,400 6,800 (4,400)
Cash used for restructuring activities ............................. (14,892) (3,221) 899
Cumulative effect of changes in accounting policies ................ 13,400
Other operating items .............................................. (480) (810) 2,783
Changes in:
Receivables....................................................... 2,204 841 15,160
Inventories ...................................................... 558 8,704 18,945
Prepaid expenses ................................................. 871 1,034 (300)
Accounts payable ................................................. (851) 1,598 1,239
Accrued expenses ................................................. (2,618) 901 (5,531)
Income taxes payable ............................................. (282) (5,951) (1,624)
Other assets and liabilities, net ................................ 2,344 (1,299) 1,343
--------------------------------
Net cash provided by operating activities ............................ 931 15,484 46,846
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment ............................. (12,248) (11,555) (11,118)
Acquisition/Investments ................................................ (3,900) (500)
Proceeds from divestitures ............................................. 2,500 4,419
Other, net ............................................................. 302 519 1,192
--------------------------------
Net cash used by investing activities ................................ (9,446) (14,936) (6,007)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings ............................................... 38,200 25,679 12,220
Reduction of borrowings ................................................ (18,987) (20,632) (47,931)
Payments of cash dividends ............................................. (6,535) (6,521) (6,503)
Other, net ............................................................. 28 505 138
--------------------------------
Net cash provided (used) by financing activities ...................... 12,706 (969) (42,076)
Effect of exchange rate changes on cash ................................ (218) (479) (153)
--------------------------------
Net increase (decrease) in cash and cash equivalents ................. 3,973 (900) (1,390)
Cash and cash equivalents at beginning of year ....................... 2,879 3,779 5,169
--------------------------------
Cash and cash equivalents at end of year ............................. $ 6,852 $ 2,879 $ 3,779
================================
</TABLE>
The 1992 and 1991 amounts have been reclassified (see Note 3).
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 77
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(Thousands of dollars)
<TABLE>
<CAPTION>
Years ended December 31
1993 1992 1991
--------------------------------
<S> <C> <C> <C>
COMMON STOCK
Beginning and end of year ................................................ $ 6,362 $ 6,362 $ 6,362
================================
ADDITIONAL PAID-IN CAPITAL
Beginning of year ........................................................ $ 59,685 $ 59,349 $ 58,446
Exercise of stock options ............................................ 19 336 100
Stock contribution to pension plan ................................... 803
--------------------------------
End of year .............................................................. $ 59,704 $ 59,685 $ 59,349
================================
RETAINED EARNINGS
Beginning of year ........................................................ $ 96,412 $123,349 $123,250
Net earnings (loss) .................................................. (30,995) (20,409) 6,602
Cash dividends, ($.96 per share in 1993,
$1.28 per share in 1992 and 1991) ................................. (4,901) (6,528) (6,503)
--------------------------------
End of year .............................................................. $ 60,516 $ 96,412 $123,349
================================
MINIMUM PENSION LIABILITY
Beginning of year ........................................................ $ (723) $ (448) $ (841)
Changes during the year .............................................. (1,057) (275) 393
--------------------------------
End of year .............................................................. $ (1,780) $ (723) $ (448)
================================
COMMON STOCK IN TREASURY
Beginning of year ........................................................ $(10,154) $(10,333) $(10,620)
Exercise of stock options ............................................ 10 179 45
Stock contribution to pension plan ................................... 242
--------------------------------
End of year .............................................................. $(10,144) $(10,154) $(10,333)
================================
CUMULATIVE TRANSLATION ADJUSTMENTS
Beginning of year ........................................................ $ (8,964) $ 1,009 $ 3,226
Changes during the year:
Working capital .................................................. (1,458) (5,659) (1,831)
Property, plant and equipment, net ............................... (2,250) (4,196) (325)
Other, net ....................................................... 841 (118) (61)
--------------------------------
End of year .............................................................. $(11,831) $ (8,964) $ 1,009
================================
TOTAL SHAREHOLDERS' EQUITY ............................................... $102,827 $142,618 $179,288
================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> 78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of dollars, except share data)
1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and all subsidiaries. Investments in affiliates, owned more than
20 percent but not in excess of 50 percent, are recorded on the equity
method.
CASH EQUIVALENTS
The Company considers cash equivalents to be all highly liquid
investments purchased with original maturities of three months or less.
The carrying amount approximates fair value because of the short maturity
of these items.
INVENTORIES
Inventories are valued at lower of cost or market. Cost is determined
by the average cost method and includes material, labor and manufacturing
overhead costs.
PROPERTY AND DEPRECIATION
Land, buildings and machinery and equipment are stated at cost.
Depreciation is provided substantially on a straight-line basis over the
estimated useful lives of the respective assets. Asset and accumulated
depreciation accounts are reduced for the sale or other disposition of
property and the resulting gain or loss is included in results of
operations. Fully depreciated items, other than buildings, generally are
removed from the accounts.
INTANGIBLE ASSETS
Intangible assets, included in other assets, were approximately $8,700
and $9,300 at December 31, 1993 and 1992, respectively. Intangible assets
consist primarily of goodwill which arose from the excess of the cost of
purchased businesses over the value of the net underlying assets and is
being amortized by the straight-line method over periods not exceeding 40
years.
RETIREMENT PLANS
Substantially all employees are covered by pension plans. Plans in the
United States are noncontributory and non-United States plans are
primarily contributory. Generally, unrecognized gains and losses are
systematically amortized over the average remaining service period of the
plans' active participants. For United States plans, the Company funds the
minimum amount permitted by the Employee Retirement Income Security Act
(ERISA) and for non-United States plans, the Company generally funds
current costs.
<PAGE>
<PAGE> 79
ENVIRONMENTAL REMEDIATION
Expenditures for environmental remediation are expensed or capitalized
in accordance with generally accepted accounting principles. Liabilities
for these expenditures are recorded when it is probable that obligations
have been incurred and the amounts can be reasonably estimated.
FOREIGN CURRENCY TRANSLATION
The asset and liability accounts of the Company's non-United States
subsidiaries are translated into United States dollars at year-end
exchange rates. Revenue and expense accounts are translated at average
exchange rates for each year. Net translation gains and losses are
adjusted directly to a separate component of shareholders' equity. Foreign
currency gains and losses resulting from transactions are included in the
statement of consolidated operations.
2. CHANGES IN ACCOUNTING POLICIES
Effective January 1, 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes" and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." SFAS No. 109 requires the
liability method of accounting for income taxes rather than the deferred
method previously used. The liability approach requires the recognition of
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the
tax basis of assets and liabilities. The cumulative effect of this
accounting change was to increase the 1992 net loss by $2,400 or $.47 per
share (see Note 18). SFAS No. 106 requires the accrual method of
accounting for postretirement benefits other than pensions. In prior
years, the Company recognized the cost of providing postretirement
benefits other than pensions by expensing the benefits as incurred. In
1991, benefit costs of $1,098 were recognized as incurred. For 1992
benefit costs were $1,625 under the accrual method which was $238 higher
than benefit costs incurred. The cumulative effect of this accounting
change was to increase the 1992 net loss by $11,000 (net of income taxes
of $4,700) or $2.16 per share (see Note 21).
3. RESTRUCTURE OF OPERATIONS
During 1993, the Company initiated additional restructuring actions
which included the following: a 10 percent decrease in its non-direct
workforce including significant reductions in corporate and executive
staff, the decision to sell the Company's aircraft, relocation of the
corporate headquarters, the exit of certain historically unprofitable and
non-strategic product lines and the writeoff of costs previously deferred
in contemplation of gains on the sale of the related operating assets held
for sale, required as a result of the protracted period of disposal. The
1993 statement of consolidated operations includes a restructuring charge
of $32,400 to reflect the costs of these actions and higher than expected
costs of completing the previously announced plant consolidations. This
restructuring charge consists of the cost of employee separations of
$10,000, plant consolidation costs of $7,500, operating losses of
businesses or plants that were held for sale, sold or closed of $7,600,
<PAGE>
<PAGE> 80
product line disposal costs of $3,800 and other non-recurring
restructuring costs of $3,500.
In order to maintain the Company's presence in certain key business
markets, the Company decided in the fourth quarter of 1993 to retain the
European industrial fastener businesses in Coventry and Smethwick,
England, and Barcelona, Spain; the Unbrako fastener distribution business
in Koblenz, Germany; and the hard ferrite magnetic materials business in
Sevierville, Tennessee. The 1992 and 1991 financial statements and notes
have been reclassified for comparative purposes to reflect these
modifications. The financial data for each of the years that the retained
businesses were previously reported as held for sale is as follows:
1992 1991
--------------------
Net sales .................... $38,189 $24,624
Operating loss ............... 2,540 1,817
Total assets ................. 26,221 31,250
Total liabilities ............ 5,201 5,920
Net assets held for sale on the December 31, 1993 consolidated balance
sheet includes certain real estate assets. Net assets held for sale on the
December 31, 1992 consolidated balance sheet includes certain real estate
assets and the industrial fastener operations sold in 1993.
The 1992 statement of consolidated operations includes a restructuring
charge of $6,800. This restructuring charge resulted from the modification
of the 1991 restructuring plan to retain the fastener manufacturing plant
in Shannon, Ireland, and the Unbrako fastener distribution business in
West Bromwich (Birmingham), England, and to accelerate the closing of an
aerospace fastener manufacturing facility in the United States.
The 1991 statement of consolidated operations includes a restructuring
credit of $4,400. This restructuring credit includes $1,300 related to the
reversal of reserves associated with a 1990 restructuring charge and
$3,100 for the effect of reclassifying the operating results of the
businesses held for sale but ultimately retained.
4. DISCONTINUED OPERATIONS
During 1991, the Company revised its estimated loss on disposal of the
materials handling segment which was discontinued in 1988. An excess
reserve of $990 (net of income tax expense of $510) was credited to income
as a result of favorable experience during the wind-down period.
<PAGE>
<PAGE> 81
5. NON-UNITED STATES SUBSIDIARIES
Selective comparative financial data of consolidated non-United States
subsidiaries are as follows:
1993 1992 1991
---------------------------
Net earnings ..................... $ 95 $ 3,177 $ 8,540
Net current assets ............... 39,288 34,292 37,506
Net assets ....................... 63,120 62,247 71,612
Net assets held for sale ......... 4,057 5,588
6. ACCOUNTS AND NOTES RECEIVABLE
1993 1992
-----------------
Trade .................................... $43,357 $49,287
Notes and other .......................... 6,796 4,746
-----------------
50,153 54,033
Less allowance for doubtful receivables .. 1,185 1,329
-----------------
$48,968 $52,704
=================
7. INVENTORIES
1993 1992
-------------------
Finished goods ................... $37,323 $36,914
Work-in-progress ................. 17,115 18,666
Raw materials and supplies ....... 26,166 28,922
-------------------
$80,604 $84,502
===================
8. INVESTMENTS IN AFFILIATES
The Company's investments in affiliates consist of a 36.75 percent
interest in Precision Fasteners Ltd., Bombay, India, a 46.49 percent
interest (represented by 43.0 percent voting and 49.96 percent non-voting
shares) in Metalac S.A. Industria e Comercio, Sao Paulo, Brazil, a 50.0
percent percent interest in Pacific Products Limited, Guernsey, Channel
Islands, United Kingdom, and a 50.0 percent interest in National-Arnold
Magnetics Company, Adelanto, California, United States. National-Arnold
Magnetics Company was formed on January 1, 1993 as a joint venture to
produce soft magnetic tape-wound core products. Dividends received from
affiliates were $42, $44 and $66 in 1993, 1992 and 1991, respectively.
Retained earnings in 1993, 1992 and 1991 included undistributed earnings
of affiliates, net of deferred taxes, of $6,253, $5,953 and $5,506,
respectively. At December 31, 1993, the Company has guaranteed $2,638 of
affiliates' indebtedness.
<PAGE>
<PAGE> 82
Summarized financial information of the unconsolidated companies is as
follows:
CONDENSED STATEMENTS OF EARNINGS 1993 1992 1991
--------------------------------
Net sales .......................... $52,608 $44,382 $34,543
Operating earnings (loss) .......... 454 2,548 (1,281)
Net earnings (loss) ................ 669 1,333 (4,655)
CONDENSED BALANCE SHEETS
Current assets ..................... $25,539 $18,998 $25,197
Noncurrent assets .................. 23,642 23,553 27,027
--------------------------------
$49,181 $42,551 $52,224
================================
Current liabilities ................ $18,793 $14,179 $17,724
Noncurrent liabilities ............. 4,230 4,932 10,169
Shareholders' equity ............... 26,158 23,440 24,331
--------------------------------
$49,181 $42,551 $52,224
================================
9. PROPERTY, PLANT AND EQUIPMENT
1993 1992
-------------------
Land ............................. $ 4,487 $ 4,787
Buildings ........................ 40,841 39,722
Machinery and equipment .......... 127,318 136,360
Construction in progress ......... 7,526 9,046
-------------------
180,172 189,915
Less accumulated depreciation .... 93,214 98,337
-------------------
$ 86,958 $ 91,578
===================
Depreciation expense incurred was $13,644, $13,930 and $14,784 in
1993, 1992 and 1991, respectively.
10. NOTES PAYABLE
1993 1992
------------------
Short-term bank borrowings and notes
payable .............................. $2,262 $2,110
Current portion of long-term debt ...... 5,077 5,010
------------------
$7,339 $7,120
==================
<PAGE>
<PAGE> 83
Short-term lines of credit are made available to the Company by
commercial banks under customary arrangements which require the
maintenance of a satisfactory financial condition by the Company and
withdrawal of the lines at the discretion of the banks. Unused short-term
lines of credit were $10,000 as of December 31, 1993.
11. ACCRUED EXPENSES
1993 1992
---------------------
Employee compensation and related
benefits ......................... $17,228 $13,059
Restructuring accrual .............. 9,882
Other .............................. 11,775 12,782
---------------------
$38,885 $25,841
=====================
12. LONG-TERM DEBT
<TABLE>
<CAPTION>
1993 1992
------------------
<S> <C> <C>
Notes Payable to Insurance Companies, 8.7%,
due in equal installments 1994 through 2002 ............................ $45,000 $50,000
Bank Credit Agreement, variable interest rate,
1993 average interest rate 3.7% ........................................ 36,100 12,200
Industrial Development Revenue Bond Series 1987,
variable rate demand, 1993 average interest rate 2.7%, due 2012 ......... 5,300 5,300
Other .................................................................... 505 831
------------------
86,905 68,331
Less current installments (included in notes payable) .................... 5,077 5,010
------------------
$81,828 $63,321
==================
</TABLE>
Installments due during the next five years are: $5,077, $11,016,
$17,034, $17,034, $11,016 in 1994 through 1998, respectively. The carrying
amount of long-term debt approximates fair value. The fair value is
estimated based on current rates available to the Company for debt of
similar remaining maturities.
In connection with the Company's restructuring, the Company amended
certain debt agreements on March 21, 1994, primarily to modify certain
financial covenants, effective December 31, 1993. In addition, effective
<PAGE>
<PAGE> 84
January 1, 1994 the Company's borrowing rate was increased to 9.45% on the
Notes Payable to the Insurance Companies.
Under the Amended and Restated Bank Credit Agreement, the Company may
borrow up to $50,000 at any time prior to June 30, 1995. This agreement
also provides for a $5,000 sublimit, within the total $50,000 limit, which
is available for letters of credit. Borrowings under the Bank Credit
Agreement bear interest at either a Base Rate or a Eurocurrency Rate. The
Base Rate is equal to the higher of the prime rate of the agent bank or
the federal funds rate plus .5 percentage points. The Eurocurrency Rate is
equal to the effective interbank rate plus a premium which ranges from
1.25 to 1.75 percentage points based on the senior funded indebtedness
ratio and fixed charge coverage ratio. No later than June 30, 1995, the
Company may, at its option, convert the amount of indebtedness outstanding
to term notes, payable in 12 equal quarterly installments commencing on
September 30, 1995. The term notes will bear interest at the rates
described above plus .5 percentage points. The Company is required to pay
a commitment fee of .4 percentage points on unborrowed amounts.
The Series 1987 Bonds were issued to finance the acquisition and
improvement of a fastener manufacturing facility and are collateralized by
a first mortgage on the facility and a bank letter of credit.
The Company is subject to a number of restrictive covenants under the
various debt agreements. These covenants, among other things, set forth
limitations on indebtedness, restrict the payment of cash dividends and
require the Company to maintain a minimum consolidated tangible net worth,
a minimum fixed charge coverage ratio and a minimum current ratio. In
addition, the Amended and Restated Bank Credit Agreement prohibits the
Company from paying cash dividends unless waived by the banks or the
agreement is amended. Certain of the Company's debt agreements contain
cross default and cross acceleration provisions.
Cash payments for interest on all debt were $5,918, $6,153 and $7,984
in 1993, 1992 and 1991, respectively.
13. LEASE COMMITMENTS
Certain of the Company's operations are conducted from leased
facilities, all of which are under operating leases which expire over the
next 17 years. The Company also has operating leases covering certain
machinery and equipment. Substantially all leases provide for the Company
to pay operating expenses. Rental expense incurred was $2,094, $2,635 and
$2,922 in 1993, 1992 and 1991, respectively.
At December 31, 1993, the future minimum annual rentals on
non-cancelable leases which have initial or remaining terms of more than
one year aggregated $15,506. The minimum payments over the next five years
are $1,829 in 1994, $1,436 in 1995, $1,250 in 1996, $1,038 in 1997 and
$935 in 1998.
<PAGE>
<PAGE> 85
14. CONTINGENCIES
LITIGATION:
The Company is involved in various legal matters incidental to its
business. Although the final outcome of these matters cannot be
determined, it is management's opinion that the final resolution of these
matters will not have a materially adverse effect on the Company's
consolidated financial position.
ENVIRONMENTAL:
The Company has been identified as a potentially responsible party by
various federal and state authorities for clean up or removal of waste
from various disposal sites. At December 31, 1993, the accrued liability
for environmental remediation represents management's best estimate of the
probable and reasonably estimable costs related to environmental
remediation. The measurement of the liability is evaluated quarterly based
on currently available information. As the scope of the Company's
environmental liability becomes more clearly defined, it is possible that
additional reserves may be necessary. Accordingly, it is possible that the
Company's results of operations in future quarterly or annual periods
could be materially affected. However, management believes that the
overall costs of environmental remediation will be incurred over an
extended period of time and, as a result, are not expected to have a
material impact on the consolidated financial position of the Company.
15. STOCK OPTIONS
The Company has a nonqualified stock option plan which continues to
the year 2000. Under the plan, the Company may grant up to an aggregate of
1,350,000 shares in either stock options (fixed price or variable price)
or restricted shares to officers and key employees. Additionally,
non-employee directors may elect to receive discounted price options in
lieu of all or a portion of their annual retainer fee. The number of such
options, if elected, is based upon market value on date of grant. The
exercise price of outstanding options is determined as follows: 1) fixed
price options are granted at market value on date of grant; and 2)
discounted price options are granted to directors at par value ($1.00 per
share).
At December 31, 1993, 41 individuals held options to purchase an
aggregate of 661,097 shares (fixed 650,445, discounted 10,652). The fixed
price options outstanding under the plan have exercise prices and
expiration dates of $21.4375 (December 2, 1997), $42.00 (November 30,
1998), $45.375 (December 6, 1999), $25.00 (November 28, 2000), $27.00
(September 4, 2001), $19.9375 (October 4, 2002), $20.50 (December 2, 2002)
and $21.625 (November 30, 2003). The discounted price options outstanding
have exercise prices of $1.00 and expiration dates of May 31, 1999, May
31, 2000, June 2, 2001, May 31, 2002 and May 31, 2003. No variable price
options or restricted shares were outstanding at December 31, 1993.
<PAGE>
<PAGE> 86
Changes in shares under option were:
<TABLE>
<CAPTION>
1993 1992 1991
-----------------------------------------------
<S> <C> <C> <C>
Shares under option at beginning of year ......... 509,435 521,452 391,606
Additions (deductions):
Options granted ................................ 152,862 20,637 135,476
Options exercised .............................. (1,200) (22,154) (5,630)
Options expired or terminated .................. (10,500)
-----------------------------------------------
Shares under option at end of year ............... 661,097 509,435 521,452
===============================================
Option price per share of options exercised
during the year ................................ $ 21.44 $ 21.44 $ 21.44
Options exercisable at end of year ............... 497,917 424,660 329,742
Exercise price of options outstanding:
Total .......................................... $ 17,694 $ 14,473 $ 14,975
Per share (fixed) .............................. $19.94-$45.38 $19.94-$45.38 $21.44-$45.38
Per share (discounted) ......................... $ 1.00 $ 1.00 $ 1.00
Shares available for future option grants ...... 171,794 74,656 84,793
</TABLE>
16. PER SHARE DATA
The weighted average number of shares used to compute per share data
was 5,105,706 in 1993, 5,097,994 in 1992 and 5,073,798 in 1991.
Common share equivalents in the form of stock options are excluded
from the calculation of per share data as their dilutive effect is not
material, or their effect is anti-dilutive.
17. INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION
The Company operates in two industry segments: high strength precision
mechanical fasteners, precision components, fastening systems and assembly
systems (fasteners); and superalloys in ingot form and magnetic materials
(materials). Principal markets include aerospace, transportation,
industrial machinery and equipment, and medical equipment. Inter-area
sales consist of products similar to those offered to unaffiliated
customers and are accounted for on the basis of third party sales price.
Other expense, excluded from the determination of segment operating
earnings, includes interest income and expense, equity in earnings (loss)
of affiliates and other income and expenses.
<PAGE>
<PAGE> 87
INDUSTRY SEGMENTS:
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------------
<S> <C> <C> <C>
Net sales:
Fasteners .............................................................. $226,791 $262,523 $321,909
Materials .............................................................. 92,303 96,908 86,590
--------------------------------
Net sales ............................................................. $319,094 $359,431 $408,499
================================
Operating earnings (loss):
Fasteners .............................................................. $(34,118) $ (9,214) $ 16,450
Materials .............................................................. 5,031 6,108 3,639
--------------------------------
Operating earnings (loss).............................................. (29,087) (3,106) 20,089
Other expense ............................................................ 4,508 5,203 9,377
--------------------------------
Earnings (loss) from continuing operations before income taxes and
cumulative effect of changes in accounting policies..................... $(33,595) $ (8,309) $ 10,712
================================
Identifiable assets:
Fasteners .............................................................. $211,097 $220,510 $244,140
Materials .............................................................. 66,263 61,955 57,024
Net assets held for sale ............................................... 8,619 13,143 17,159
--------------------------------
Total assets ......................................................... $285,979 $295,608 $318,323
================================
</TABLE>
Depreciation and Amortization and Capital Additions:
<TABLE>
<CAPTION>
Depreciation and Amortization Capital Additions
-----------------------------------------------------------------
1993 1992 1991 1993 1992 1991
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fasteners .................... $11,569 $12,691 $12,485 $ 6,540 $ 8,270 $ 9,395
MATERIALS .................... 2,915 2,652 2,728 5,708 3,285 1,723
-----------------------------------------------------------------
TOTAL ...................... $14,484 $15,343 $15,213 $ 12,248 $ 11,555 $ 11,118
=================================================================
</TABLE>
<PAGE>
<PAGE> 88
GEOGRAPHIC AREAS:
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------------
Net sales:
<S> <C> <C> <C>
United States .......................................................... $247,380 $267,971 $303,223
Europe ................................................................. 83,437 99,037 110,983
Other .................................................................. 13,309 12,911 17,415
Eliminations............................................................ (25,032) (20,488) (23,122)
--------------------------------
Net sales ............................................................. $319,094 $359,431 $408,499
================================
Operating earnings (loss):
United States .......................................................... $(29,986) $ (7,369) $ 5,908
Europe ................................................................. (168) 4,038 9,113
Other .................................................................. 1,531 902 4,045
Eliminations ........................................................... (464) (677) 1,023
--------------------------------
Operating earnings (loss) ............................................. (29,087) (3,106) 20,089
Other expense ............................................................ 4,508 5,203 9,377
--------------------------------
Earnings (loss) from continuing operations before income taxes and
cumulative effect of changes in accounting policies..................... $(33,595) $ (8,309) $ 10,712
================================
Identifiable assets:
United States .......................................................... $189,940 $195,698 $194,590
Europe ................................................................. 66,416 67,177 86,290
Other .................................................................. 21,004 19,590 20,284
Net assets held for sale ............................................... 8,619 13,143 17,159
--------------------------------
Total assets .......................................................... $285,979 $295,608 $318,323
================================
</TABLE>
<PAGE>
<PAGE> 89
Depreciation and Amortization and Capital Additions:
<TABLE>
<CAPTION>
Depreciation and Amortization Capital Additions
--------------------------------------------------------------
1993 1992 1991 1993 1992 1991
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States ................ $10,265 $10,830 $10,582 $10,052 $ 9,930 $ 7,565
EUROPE ....................... 3,985 4,290 4,371 1,962 1,321 3,347
OTHER ........................ 234 223 260 234 304 206
--------------------------------------------------------------
TOTAL ...................... $14,484 $15,343 $15,213 $12,248 $11,555 $11,118
==============================================================
</TABLE>
18. INCOME TAXES
As of January 1, 1992, the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", were
adopted (see Note 2).
The components of the provision (benefit) for income taxes from
continuing operations were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-----------------------------
<S> <C> <C> <C>
Currently payable (receivable):
United States
Federal .................... $ 100 $ 171 $ 3,445
State and local ............ 300 465 737
Non-United States ............ (604) 3,086 3,443
-----------------------------
(204) 3,722 7,625
-----------------------------
Deferred:
United States
Federal .................... (1,897) (2,633) (3,502)
State and local ............ (897) (792) (97)
Non-United States ............ 398 (1,597) 1,074
-----------------------------
(2,396) (5,022) (2,525)
-----------------------------
$(2,600) $(1,300) $ 5,100
=============================
</TABLE>
Net cash payments (refunds) for income taxes were $(326), $5,358 and
$7,015 in 1993, 1992 and 1991, respectively.
<PAGE>
<PAGE> 90
The components of earnings (loss) from continuing operations before
income taxes and cumulative effect of changes in accounting policies were
as follows:
1993 1992 1991
---------------------------------
United States .................. $(33,484) $(12,975) $(2,321)
Non-United States .............. (111) 4,666 13,033
---------------------------------
$(33,595) $ (8,309) $10,712
=================================
The significant components of the deferred income tax provision
(benefit) were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------
<S> <C> <C> <C>
Depreciation ......................................... $ (533) $ (85) $ (464)
Inventory reserves ................................... (2,741) (1,663) (2,667)
Postretirement benefits other than pensions .......... 116
Other employee benefits and compensation ............. (90) (265) (370)
Alternative minimum tax credits ...................... 1,099 (931) (345)
Advance corporate tax ................................ 216 (1,583) (600)
Accrued expenses ..................................... (2,691) (1,423) 1,410
Net operating loss carryforwards...................... (10,176)
Valuation allowances ................................. 12,966 549
Other, net ........................................... (562) 379 511
------------------------------
$ (2,396) $(5,022) $(2,525)
==============================
</TABLE>
<PAGE>
<PAGE> 91
Temporary differences comprising the net deferred income tax asset
(liability) on the consolidated balance sheet are:
<TABLE>
<CAPTION>
1993 1992
--------------------
<S> <C> <C>
Inventory reserves ................................... $ 5,870 $ 3,129
Postretirement benefits other than pensions .......... 5,220 5,336
Other employee benefits and compensation ............. 1,856 1,766
Alternative minimum tax credits ...................... 1,155 2,254
Advance corporate tax ................................ 1,908 2,124
Accrued expenses ..................................... 5,374 2,683
Net operating loss carryforwards...................... 10,176
Valuation allowances ................................. (17,717) (4,751)
--------------------
Deferred income tax asset ........................... 13,842 12,541
--------------------
Depreciation ......................................... (8,608) (9,141)
Other, net ........................................... (1,012) (1,563)
--------------------
Deferred income tax liability ....................... (9,620) (10,704)
--------------------
Net deferred income tax asset ....................... $ 4,222 $ 1,837
====================
</TABLE>
The following sets forth the differences between the provision
(benefit) for income taxes from continuing operations computed at the
United States federal statutory income tax rate of 34% and that reported
for financial statement purposes:
<TABLE>
<CAPTION>
1993 1992 1991
-----------------------------
<S> <C> <C> <C>
Provision (benefit) computed at the United States
federal statutory income tax rate .................. $(11,422) $(2,825) $3,642
Earnings of certain subsidiaries taxed at different
rates .............................................. (2,278) 49 197
Certain losses not tax effected ...................... 304 305
Permanent items ...................................... (1,612) 354 258
State income tax, net of federal benefit ............. 132 238 825
Valuation allowances ................................. 12,966 549
Other, net ........................................... (386) 31 (127)
-----------------------------
Provision (benefit) for income taxes ................. $ (2,600) $(1,300) $5,100
=============================
</TABLE>
<PAGE>
<PAGE> 92
United States income taxes have not been provided on the unremitted
earnings of certain subsidiaries located outside the continental United
States of approximately $37,600 because, in management's opinion, such
earnings are required in these operations, will be remitted in a tax-free
liquidation, or will be remitted as dividends with taxes substantially
offset by foreign tax credits.
At December 31, 1993, the Company had $29,310 of net operating loss
carryforwards available to reduce future taxable income. The net operating
loss carryforwards expire as follows: $650 in 1995, $1,470 in 1996, $1,900
in 1997, $2,290 in 1998 and $23,000 in 2008.
19. PREFERRED STOCK PURCHASE RIGHTS
The Board of Directors declared a dividend distribution of one Right
for each outstanding share of common stock, as provided in the Rights
Agreement dated November 11, 1988. The Rights Agreement was amended on
January 22, 1991. Under the Rights Agreement, as amended, each Right may
be exercised, under certain conditions, to purchase one one-hundredth of a
share of Series A Junior Participating Preferred Stock, par value $1 per
share, for $125. The Rights are not exercisable or transferable apart from
the common stock until 10 business days after a public announcement that a
person or group has acquired or intends to commence a tender offer for 10
percent or more of the outstanding common stock. The Board of Directors
may, at its option and under certain conditions, exchange all of the
Rights not owned by the 10 percent holder for an equal number of shares of
common stock. The Rights, which expire on November 21, 1998, do not have
voting or dividend rights and may be redeemed by the Company at a price of
$.01 per Right at any time until 10 business days following the
acquisition of 10 percent or more of the Company's common stock.
In the event that the Company is acquired in a merger or other
business combination transaction, or 50 percent or more of its assets or
earning power is sold, each Right will entitle the holder to receive from
the surviving or acquiring corporation, for the exercise price, common
stock having a market value equal to two times the exercise price of the
Right. Alternatively, if a 10 percent holder were to acquire the Company
in a business combination transaction in which the Company and its stock
survive, or were to engage in certain "self-dealing" transactions, each
Right not owned by the 10 percent holder would have the right to receive
common shares having a market value of two times the exercise price of the
Right.
20. RESEARCH AND DEVELOPMENT
Research and development costs incurred were $5,050, $6,604 and $6,930
for 1993, 1992 and 1991, respectively.
21. RETIREMENT PLANS AND OTHER BENEFITS
The Company sponsors two defined contribution plans. Participation in
one of these plans is available to substantially all domestic salaried and
hourly employees. Participants may make voluntary pre-tax or after-tax
contributions to the plans up to 16 percent of their compensation (as
defined). The Company contributes a percentage of employee contributions
<PAGE>
<PAGE> 93
based upon the number of years of employee service to the salaried plan.
The Company's contribution expense for the salaried plan was $228 in 1993,
$225 in 1992 and $233 in 1991.
The Company sponsors a number of defined benefit pension plans
covering substantially all employees and a defined benefit plan covering
non-employee directors. The benefits of such plans are based primarily on
years of service and compensation. Plan assets consist principally of
common stocks, pooled equity funds, corporate bonds and United States
Government obligations. At December 31, 1993 and 1992, the Plans' assets
included Company stock with fair values of $3,938 and $4,213,
respectively. In 1991, the Company contributed 30,000 shares of its common
stock to its United States pension plan to satisfy a portion of its
funding requirement. The market value of the stock on the date of
contribution was $1,045.
The net periodic pension cost incurred for 1993, 1992 and 1991,
respectively for these plans, includes the following components:
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------------
<S> <C> <C> <C>
Service cost ................................... $ 3,322 $ 3,644 $ 3,008
Interest cost .................................. 9,764 9,777 9,553
Actual return on plan assets ................... (9,891) (10,987) (21,289)
Net amortization and deferral .................. (1,760) (981) 10,042
-------------------------------
Net periodic pension cost ...................... $ 1,435 $ 1,453 $ 1,314
===============================
</TABLE>
In addition to the 1993 pension cost noted above, the early retirement
program offered to eligible employees at the Company's Jenkintown
manufacturing facility resulted in a one-time charge of $1,748 for
enhanced benefits and lump sum distributions. This charge is reflected in
the Statement of Consolidated Operations as a component of the
restructuring charge.
<PAGE>
<PAGE> 94
The following table sets forth the funded status of these plans at
December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
-----------------------------------------------------------------
Plans whose Plans whose Plans whose Plans whose
assets exceed accumulated assets exceed accumulated
accumulated benefits accumulated benefits
benefits exceed assets benefits exceed assets
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets at fair value .................. $ 103,792 $ 7,849 $102,783 $ 13,791
Actuarial present value of benefit
obligations:
Vested benefits ........................ (77,005) (13,729) (69,460) (16,178)
Nonvested benefits ..................... (1,975) (1,788) (2,064) (2,020)
---------------------------------------------------------------
Accumulated benefit obligation ............. (78,980) (15,517) (71,524) (18,198)
Projected future salary increases .......... (24,889) (366) (20,011) (3,777)
---------------------------------------------------------------
Projected benefit obligation ............... (103,869) (15,883) (91,535) (21,975)
---------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation ............. (77) (8,034) 11,248 (8,184)
Unrecognized net (asset) obligation at
date of initial application .............. (6,596) 425 (7,326) 231
Unrecognized prior service cost ............ 2,690 1,047 3,011 1,346
Unrecognized net loss ...................... 15,273 3,002 4,719 3,933
Recognized minimum liability ............... (3,910) (2,636)
---------------------------------------------------------------
Prepaid (accrued) pension cost at
December 31 .............................. $ 11,290 $ (7,470) $ 11,652 $ (5,310)
===============================================================
</TABLE>
Under the requirements of Statement of Financial Accounting Standards
(SFAS) No. 87, "Employers' Accounting for Pensions", an additional
minimum pension liability for certain plans, representing the excess of
accumulated benefits over plan assets and accrued pension costs, was
recognized at December 31, 1993 and 1992. A corresponding amount was
recognized as an intangible asset, to the extent of unrecognized prior
service cost and unrecognized transition obligation, with the balance
recorded as a separate reduction of shareholders' equity.
<PAGE>
<PAGE> 95
The increase in the projected benefit obligation is primarily
attributable to the decrease in the discount rate, offset partially by the
reduction in the workforce. The following weighted average assumptions
were used to determine the return on plan assets and the projected benefit
obligation:
1993 1992 1991
---------------------------
Discount rate .......................... 7.3% 8.8% 8.9%
Rate of return on plan assets .......... 9.5% 10.1% 10.3%
Rate of future compensation increase ... 4.7% 6.1% 6.2%
OTHER POSTRETIREMENT BENEFITS
In addition to providing pension benefits, the Company and certain of
its subsidiaries provide postretirement health care and life insurance
benefits. All full-time nonbargaining employees hired prior to January 1,
1990 are eligible for medical benefits under a defined dollar benefit plan
if they retire with at least 10 years of service and meet certain age
requirements. Generally, Company-provided medical benefits terminate when
covered individuals become eligible for Medicare benefits. The medical
plan is contributory, with retiree contributions adjusted annually. The
life insurance plan covers substantially all employees who retire from
full-time employment after age 55 with at least 10 years of service. The
life insurance plan is non-contributory. Both of the Company's
postretirement plans are unfunded.
As of January 1, 1992, the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions", were adopted
(see Note 2).
The funded status of the plans and amounts recognized in the Company's
consolidated financial statements as of December 31 were as follows:
<TABLE>
<CAPTION>
1993 1992
------------------
<S> <C> <C>
Accumulated postretirement benefit obligation
Current retirees ......................................... $ 9,739 $ 7,660
Fully eligible actives ................................... 3,117 3,404
Other actives ............................................ 4,075 4,450
------------------
Total accumulated postretirement benefit obligation ........ 16,931 15,514
Unrecognized net loss from changes in assumptions .......... (1,676)
Unrecognized net gain ...................................... 97 418
------------------
Long-term postretirement benefit obligation................ $15,352 $15,932
==================
</TABLE>
<PAGE>
<PAGE> 96
Net periodic postretirement benefit cost
included the following components:
1993 1992
---------------------
Service cost ........................... $ 288 $ 329
Interest cost .......................... 1,324 1,296
---------------------
Net periodic postretirement benefit cost $1,612 $1,625
=====================
An 11 percent annual rate of increase in the per capita costs of
covered health care benefits was assumed for 1994, gradually decreasing to
6 percent by the year 2003. Increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1993 by $193 and
increase the interest cost component of net periodic postretirement
benefit cost for 1993 by $14. A 5 percent and 6 percent increase in
salaries and a discount rate of 7.25 percent and 8.5 percent were used to
determine the accumulated postretirement benefit obligation at December
31, 1993 and 1992, respectively.
As a result of the Company's decision to close its Santa Ana,
California, and Puerto Rico manufacturing facilities, an $800 gain related
to the curtailment of its postretirement benefit plans was recognized in
1993. This curtailment gain is reflected in the Statement of Consolidated
Operations as a component of the restructuring charge.
POSTEMPLOYMENT BENEFITS
The Financial Accounting Standards Board issued SFAS No. 112,
"Employers' Accounting for Postemployment Benefits", in November 1992.
This Standard changes the current practice of expensing postemployment
benefits as incurred by requiring the estimated cost of these benefits to
be recorded on an accrual basis. Adoption of SFAS No. 112 is required in
1994. Adoption of this standard is not expected to have a material effect
on the Company's consolidated financial position or results of operations.
22. FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign exchange contracts each month to hedge
certain foreign currency transactions. Market value gains and losses are
recognized, and the result offsets foreign exchange gains or losses on
those transactions. The cash flow from such contracts is classified in the
same category as the transaction hedged in the Statements of Consolidated
Cash Flows.
At December 31, 1993, the Company has outstanding contracts maturing
in early 1994 that have, in the aggregate, a United States dollar contract
value equivalent of $11,258, which approximates fair value based on rates
available to the Company at December 31, 1993.
<PAGE>
<PAGE> 97
23. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------
March June September December
31 30 30 31
--------------------------------------------
1993
----
<S> <C> <C> <C> <C>
Net sales................................................... $ 87,283 $85,459 $74,394 $ 71,958
Gross profit................................................ 14,121 14,824 11,954 8,988
Net earnings (loss)......................................... 1,630 1,378 (6,840) (27,163)
Net earnings (loss) per share............................... .32 .27 (1.34) (5.32)
1992
----
Net sales................................................... $ 94,234 $96,115 $85,713 $ 83,369
Gross profit................................................ 15,852 15,523 11,533 10,098
Earnings (loss) before cumulative effect of changes in
accounting policies....................................... 1,572 1,343 (479) (9,445)
Cumulative effect of changes in accounting policies
Income taxes ........................................... (2,400)
Postretirement benefits................................. (11,000)
Net earnings (loss)......................................... (11,828) 1,343 (479) (9,445)
Earnings (loss) per share:
Continuing operations....................................... .31 .26 (.09) (1.85)
Cumulative effect of changes in accounting policies......... (2.63)
Net earnings (loss)......................................... (2.32) .26 (.09) (1.85)
</TABLE>
<PAGE>
<PAGE> 98
1993
----
Fourth quarter results include a restructuring charge of $24,500 due
to modifications and reassessments to the Company's restructuring plan
(see Note 3). Sales and gross profit for the first three quarters of 1993
and all four quarters of 1992 have been reclassified to reflect the
modifications. These modifications also resulted in restructuring credits
of $500, $400 and $400 to the first, second and third quarters of 1993,
respectively.
Third quarter results include a net restructuring charge of $8,800 as
a result of additional manufacturing consolidation costs, workforce
reductions and the revaluation of certain assets held for sale.
1992
----
The Company adopted SFAS 109 and SFAS 106 in the fourth quarter of
1992 and retroactively applied a $13,400 charge or $2.63 per share, for
changes in accounting policies to the first quarter of 1992 (see Note 2).
Fourth quarter results include a restructuring charge of $6,800 due to
modifications and reassessments to the Company's restructuring plan (see
Note 3).
Fourth quarter results include charges of $1,550 related to employee
severance and increases in estimated expenses for environmental and other
contingent liabilities.
<PAGE>
<PAGE> 99
COMMON STOCK INFORMATION
The price range at which the Company's common stock traded in its
principal market, the New York Stock Exchange, and the quarterly dividends
paid per share during the last eight quarters are as follows:
DIVIDEND
QUARTER ENDED HIGH LOW DECLARED
---------------------------------------------------------------------------
December 31, 1993............. $30.13 $15.75 -$
September 30, 1993............ 29.75 26.38 .32
June 30, 1993................. 28.00 24.00 .32
March 31, 1993................ 24.75 20.00 .32
December 31, 1992............. $22.13 $19.00 $.32
September 30, 1992............ 26.50 19.75 .32
June 30, 1992................. 29.13 23.25 .32
March 31, 1992................ 29.50 24.75 .32
On December 14, 1993, the Board of Directors elected to suspend payment of
the Company's quarterly dividend. As of March 7, 1994, the approximate
number of registered shareholders was 1,427.
<PAGE>
<PAGE> 100
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors
SPS Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of SPS
Technologies, Inc. and subsidiaries as of December 31, 1993 and 1992 and
the related consolidated statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended December
31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
SPS Technologies, Inc. and subsidiaries as of December 31, 1993 and 1992,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and
postretirement benefits other than pensions in 1992.
/s/ COOPERS & LYBRAND
---------------------------
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
March 2, 1994, except as to Note 12
for which the date is March 21, 1994
<PAGE>
<PAGE> 101
Selected Financial Data
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales................................... $319,094 $359,431 $408,499 $440,996 $423,190
Earnings (loss) from continuing operations.. (30,995) (7,009) 5,612 (9,961) 14,209
Discontinued operations - Estimated gain
(loss) on disposal........................ 990 (1,500)
Cumulative effect of changes in accounting
policies.................................. (13,400)
Net earnings (loss)......................... (30,995) (20,409) 6,602 (11,461) 14,209
- -----------------------------------------------------------------------------------------------------------
Total assets................................ 285,979 295,608 318,323 368,896 333,972
Long-term obligations....................... 81,828 63,321 61,110 91,325 74,912
Property, plant and equipment additions..... 12,248 11,555 11,118 19,440 18,863
- -----------------------------------------------------------------------------------------------------------
Per Share Data:
Earnings (loss) from continuing operations (6.07) (1.37) 1.10 (1.98) 2.84
Discontinued operations - Estimated gain
(loss) on disposal...................... .20 (.30)
Cumulative effect of changes in accounting
policies................................ (2.63)
Net earnings (loss)....................... (6.07) (4.00) 1.30 (2.28) 2.84
Cash dividends............................ .96 1.28 1.28 1.28 1.22
Shareholders' equity...................... 20.14 27.98 35.34 35.78 36.78
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The 1992 and 1991 amounts have been reclassified to reflect the fourth
quarter 1993 decision to retain the European industrial fastener
businesses in Coventry and Smethwick, England, and Barcelona, Spain; the
Unbrako fastener distribution business in Koblenz, Germany; and the hard
ferrite magnetic materials business in Sevierville, Tennessee.
Results for 1993 and 1992 include restructuring charges of $32,400 and
$6,800, respectively. Results for 1991 include a restructuring credit of
$4,400. See Note 3 to consolidated financial statements.
The Company changed its accounting policies, effective January 1,
1992, to accrue for postretirement benefits other than pensions and
account for income taxes under the liability method. See Note 2 to
consolidated financial statements.
<PAGE>
<PAGE> 102
Management's Discussion and Analysis of
Financial Condition and Results of Operations
INTRODUCTION
In December 1993, under the direction of the Company's newly appointed
Chairman and Chief Executive Officer, the Company initiated programs to
reduce the Company's cost structure and improve its future operating
performance. The Company has substantially completed a 10 percent
reduction in its non-direct workforce, which included significant
reductions in corporate and executive staff. In addition, the Company has
relocated its corporate offices to a smaller leased facility and listed
its corporate headquarters facility in Newtown, Pennsylvania and aircraft
for sale. The Company also committed to exit certain historically
unprofitable product lines of its fastener segment. In addition, the
Company's plant consolidations, which were both expensive and disruptive
to the business, are now substantially complete.
1993 COMPARED TO 1992
Net Sales
Sales in 1993 of $319.1 million declined by $40.3 million, or 11.2
percent, from 1992 amounts. Fastener segment sales declined $35.7 million,
or 13.6 percent, primarily due to the effect of exchange rate changes
which affected sales by $12 million and also due to reduced shipments to
the aerospace market. Aerospace fastener sales declined by $27.8 million,
or 21.7 percent, due to continued decreases in commercial and military
aircraft production and production disruptions from the start-up of
aerospace fastener operations transferred from another facility.
Transportation and industrial fastener sales declined by $7.9 million, or
5.9 percent, due to the continuing recession in the European markets. In
the United States, sales were adversely affected by the floods in the
Midwest; however, shipments to the automobile industry were still higher
compared to 1992 reflecting the strengthening domestic automotive
business.
Materials segment sales decreased by $4.6 million, or 4.8 percent, as
the increased sales of magnetic materials were offset by a greater decline
in the sales of superalloys. Sales of magnetic materials increased due to
the acquisition of a bonded magnet business in December 1992 and increased
demand from automotive and computer markets. Sales of proprietary
superalloys increased from the same periods in 1992, but lower sales of
stainless steel alloys and continued weakness in the aerospace market
produced an overall decrease in superalloy sales.
Operating Earnings
The operating loss for the fastener segment of $34.1 million in 1993
is attributed largely to the 1993 restructuring charge. Other factors
contributing to the fastener segment operating loss were decreases in
sales volume, continued pressure to reduce prices and manufacturing
inefficiencies resulting from the start-up of fastener operations
transferred from other facilities. The Company's operating earnings before
restructuring charges was essentially unchanged on sharply lower sales
<PAGE>
<PAGE> 103
volume, reflecting cost reduction actions taken in 1993. The primary
source of cost reduction in 1993 was a reduction in the workforce of 447
employees since the end of 1992.
In the materials segment, operating earnings decreased from $6.1
million, or 6.3 percent of sales in 1992, to $5 million, or 5.5 percent of
sales in 1993. The decrease in the sales volume of superalloy sales
resulted in lower gross profit amounts which were partially offset by a
decrease in selling, general and administrative expenses.
Other Expense
Higher levels of corporate debt offset by a decrease in interest rates
resulted in level amounts of interest expense compared to 1992.
Income Taxes
The income tax benefit of the Company's 1993 loss from continuing
operations was lower than the benefit computed at the United States
federal statutory tax rate primarily due to operating losses in the United
States and Spain for which a benefit is not currently recognizable.
Earnings
The Company recorded a net loss for 1993 of $31 million, or $6.07 per
share, compared to a net loss of $20.4 million, or $4.00 per share, in
1992. The loss in 1993 is attributed to the pre-tax restructuring charge
of $32.4 million. The 1992 loss results from pre-tax restructuring charge
of $6.8 million and changes in accounting policies of $13.4 million.
Orders and Backlog
Incoming orders in 1993 were $333.7 million, compared to $345.1
million in 1992. Orders improved in the United States transportation
market, but overall orders were down due to decreases in the aerospace and
materials markets. The backlog in orders at December 31, 1993, was $89
million, compared to $84.5 million at the end of 1992 and $102.5 million
at December 31, 1991.
Environmental
The Company has been identified as a potentially responsible party by
various federal and state authorities for clean up or removal of waste
from various disposal sites. The cost of remediation will depend upon
numerous factors, including the number of parties found liable at each
environmental site and their ability to pay, the outcome of negotiations
with regulatory authorities, and the years of remedial activity required.
At December 31, 1993, the accrued liability for environmental
remediation represents management's best estimate of the probable and
reasonably estimable costs related to environmental remediation. The
measurement of the liability is evaluated quarterly based on currently
available information.
<PAGE>
<PAGE> 104
Consolidation of Operations
By the end of 1993, the transfer of the aerospace manufacturing plant
operations from the Santa Ana, California, fastener plant to the Company's
facilities in Salt Lake City, Utah, and Jenkintown, Pennsylvania was
complete. While some operations were retained at the Santa Ana facility,
the majority of the plant will be leased to a third party in 1994. The
Company moved all of Jenkintown's UNBRAKO(Reg) socket screw manufacturing
operations to Cleveland, Ohio, for consolidation with the UNBRAKO
production transferred to Cleveland from Puerto Rico. The Company's Puerto
Rico manufacturing facility was closed in 1992 and is currently held for
sale. The related consolidation costs are included in the 1992 and 1993
restructuring charges. While these consolidations have caused
manufacturing disruptions in 1993, they will permit more effective
utilization of the remaining plants in the future. In addition, the
Company has decided to either sell the Assembly Systems Division, which is
a fastener segment product line, or liquidate the computer-controlled
fastener tightening systems part of this division and only operate the
hand wrenches, spare parts and service portion.
Consistent with the lower levels of business activity, the Company has
reduced employment in all operations. Since the end of 1990, the work
force employed in continuing businesses has been reduced by 1,974
employees, or 35 percent. Since the end of 1992, the work force employed
in continuing businesses has been reduced by 447 employees, or 10.8
percent. A portion of the reduction in employment was achieved through the
implementation of an early retirement program. The cost of this program
and other severance costs are included in the 1993 restructuring charge.
As part of the restructuring plan, Unbrako S.r.l., a distribution and
marketing subsidiary in Milan, Italy, was sold in the second quarter of
1993. SPS-Unbrako S.A., the Company's distribution and marketing
subsidiary located in Paris, France was closed and distribution activities
in France were transferred to independent distributors.
1992 COMPARED TO 1991
Net Sales
Sales in 1992 of $359.4 million declined by $49.1 million, or 12
percent, from 1991 amounts. Fastener segment sales declined $59.4 million,
or 18.4 percent, as sales declined in all served markets of the fastener
segment. Continued economic difficulties in the worldwide airline industry
have led to significant reductions in new aircraft orders as well as to
cancellations and deferrals of existing orders. The continued economic
difficulties of the transportation and industrial fastener markets also
contributed to the decline in sales.
Materials segment sales increased $10.3 million, or 11.9 percent, in
1992 due to strong demand for cobalt-based medical alloys and high-value,
proprietary single-crystal superalloys, and to higher cobalt metal prices.
<PAGE>
<PAGE> 105
Operating Earnings
In the fastener segment, operating losses of $9.2 million in 1992
compares unfavorably to the operating earnings of $16.4 million in 1991.
The 1992 restructuring charge, significant decreases in fastener sales and
costs associated with work force reductions contributed to the decrease in
1992 operating earnings.
In the materials segment, operating earnings increased from $3.6
million, or 4.2 percent of sales in 1991, to $6.1 million, or 6.3 percent
of sales in 1992. The increase is attributed to a higher volume of
superalloy sales, higher prices for cobalt-based products and productivity
improvements in the manufacture of magnetic materials.
Other Expense
Interest expense decreased from $8.2 million in 1991 to $5.8 million
in 1992, as a result of lower levels of corporate debt coupled with
reduced interest rates. The Company's Brazilian affiliate reported net
earnings in 1992 compared to a net loss in 1991. As a result, the
Company's equity in earnings (loss) of affiliates improved by $2.8
million.
Income Taxes
The income tax benefit of the Company's 1992 loss from continuing
operations was lower than the benefit computed at the United States
federal statutory tax rate due to certain losses for which no tax benefits
were available, an increase in the valuation allowance on deferred income
tax assets and state income taxes.
Earnings
The Company recorded a net loss for 1992 of $20.4 million, or $4.00
per share, compared to earnings of $6.6 million, or $1.30 per share, in
1991. The loss in 1992 is attributed to the pre-tax restructuring charge
of $6.8 million and the charge related to the changes in accounting
policies of $13.4 million on an after-tax basis. The additional decrease
in net earnings from 1991 is attributed to declines in the operating
earnings of the fastener segment partially offset by improved results in
the materials segment, lower interest expense and improved results from
the Company's Brazilian affiliate. Included in net earnings for 1991 was a
restructuring credit of $4.4 million and a $1 million favorable adjustment
to discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
Management considers liquidity to be the ability to generate adequate
amounts of cash to meet its needs and capital resources to be the
resources from which such cash can be obtained, principally from operating
and external sources. The Company believes that capital resources
available to it will be sufficient to meet the needs of its business, both
on a short-term and long-term basis.
<PAGE>
<PAGE> 106
Cash flow provided by or used for operating activities, investing
activities and financial activities is summarized in the statements of
consolidated cash flow. The 1993 cash flow provided from operating
activities decreased from 1992 due to the 1993 cash expenditures to fund
plant consolidations, severance payments and other restructuring
activities.
The changes in cash used by investing activities is attributed to 1993
proceeds from the sale and liquidation of two distribution businesses in
Europe, 1992 acquisition cost of a new bonded magnet business for the
material segment and 1991 proceeds from the sale of the Unbrako fastener
manufacturing facility in Mexico and the Hydraulic Tensioning Division in
the United Kingdom. The Company spent $12.2 million for capital
expenditures in 1993 and is budgeting $13 million for 1994, which
approximates depreciation expense. Additionally, cash flow is expected to
be generated from the sale of the corporate headquarters facility and the
manufacturing facility in Puerto Rico.
The Company's total debt to equity ratio was 87 percent at December
31, 1993, 49 percent at December 31, 1992 and 37 percent at December 31,
1991. Total debt was $89.2 million, $70.4 million and $65.6 million at the
end of 1993, 1992 and 1991, respectively. As of December 31, 1993, under
the terms of the existing credit agreements, the Company is permitted to
incur an additional $18 million in debt.
In connection with the 1993 restructuring charge, the Company reached
agreement with its lenders to amend certain loan agreement covenants.
Under the Amended and Restated Bank Credit Agreement with the lending
banks, the Company is prohibited from paying cash dividends unless waived
by the banks or the agreement is amended.
<PAGE>
<PAGE> 107
LOGO
- ------------------------------------------------------------------------------
BOARD OF DIRECTORS
Charles W. Grigg Paul F. Miller F. James Skinner
Chairman and Chief Former Senior Partner Former President and
Executive Officer Miller, Anderson & Chief Executive
SPS Technologies, Inc. Sherrerd, an Officer
investment management SKF Industries, Inc.,
Howard T. Hallowell III
firm a manufacturer of ball
Financial Analyst
and roller bearings
Eastman Kodak Company Eric M. Ruttenberg
and automotive
Executive Vice
John Francis Lubin components
President
Professor Emeritus of
Tinicum Investors, Harry J. Wilkinson
Management
L.P., President and Chief
The Wharton School
an investment Operating Officer
University of Pennsylvania
management company SPS Technologies, Inc.
Allen C. Menke
Former Chairman
of the Board and
Chief Executive Officer
Artesian Industries, an air
conditioning and plumbing
products manufacturer
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OFFICERS
Charles W. Grigg John P. McGrath John M. Morrash
Chairman and Chief Vice President Treasurer
Executive Officer Corporate Services
Harry J. Wilkinson Aaron Nerenberg William M. Shockley
President and Chief Vice President Controller
Operating Officer Corporate Counsel
and Secretary
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
AUDITORS TRANSFER AGENT NEW YORK STOCK
REGISTRAR EXCHANGE TICKER
Coopers & Lybrand
DIVIDEND SYMBOL: ST
2400 Eleven Penn Center
DISBURSING AGENT
Philadelphia, Pennsylvania
19103 Mellon Bank, N.A. SHAREHOLDERS WITH
c/o Mellon Securities INQUIRIES ABOUT THEIR
Transfer Services SHARE OWNERSHIP SHOULD
85 Challenger Road CONTACT MELLON BANK AT
Overpeck Centre (412) 236-8000
Ridgefield Park,
New Jersey 07660
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
The Annual Meeting of shareholders will be held on Monday, May 23, 1994 at
10 a.m. at 17 Mellon Bank Center, Forum Room (8th floor), 1735 Market
Street, Philadelphia, PA.
- -----------------------------------------------------------------------------
<PAGE>
<PAGE>
<PAGE> 108
EXHIBIT 21
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
At December 31, 1993, the Company or one of its wholly-owned
subsidiaries had, among others, the following subsidiaries:
The Arnold Engineering Co.
(an Illinois corporation)......................... 100% stock interest
Cannon-Muskegon Corporation
(a Michigan corporation).......................... 100% stock interest
Ferre Plana S.A.
(a Spain corporation)............................. 100% stock interest
Metalac S.A. Industria e Comercio
(a Brazil corporation).......................... 46.49% stock interest
(43% voting, 49.96% non-voting)
National-Arnold Magnetics Company
(a California partnership) .................. 50% partnership interest
National Technologies Corporation
(a Michigan corporation).......................... 100% stock interest
Pacific Products Limited
(a United Kingdom corporation)..................... 50% stock interest
Precision Fasteners, Limited
(an India corporation).......................... 36.75% stock interest
SPS International Investment Company
(a Delaware corporation).......................... 100% stock interest
S.P.S. International Limited
(an Ireland corporation) ......................... 100% stock interest
SPS Technologies Limited
(a United Kingdom corporation).................... 100% stock interest
Standco Canada, Ltd.
(a Canada corporation)............................ 100% stock interest
Unbrako Mexicana, S.A. de C.V.
(a Mexico corporation)............................ 100% stock interest
Unbrako Pty. Limited
(an Australia corporation)........................ 100% stock interest
Unbrako Schrauben, GmbH
(a German corporation)............................ 100% stock interest
The Company files consolidated financial statements which include the
above subsidiaries, except for Pacific Products Limited, Precision
Fasteners, Ltd., Metalac, S.A. Industria e Comercio, and National-Arnold
Magnetics Company, as well as subsidiaries which have been omitted from
the above list; all such omitted subsidiaries considered in the aggregate
as a single subsidiary do not constitute a "significant subsidiary" as
defined in Rule 1-02(v) of Regulation S-X under the Securities Exchange
Act, as amended.
<PAGE>
<PAGE>
<PAGE> 109
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement of SPS Technologies, Inc. and Subsidiaries on Form S-8
(Registration No. 33- 23778) and Post Effective Amendments to the
Registration on Form S-8 (Registration Nos. 2-64082, 2-90908 and 33-51827)
of our report dated March 2, 1994, except as to Note 12 for which the date
is March 21, 1994, which includes an explanatory paragraph relating to the
Company changing its method of accounting for income taxes and
postretirement benefits other than pensions in the year ended December 31,
1992, on our audits of the consolidated financial statements and financial
statement schedules of SPS Technologies, Inc. and Subsidiaries as of
December 31, 1993 and 1992, and for the years ended December 31, 1993,
1992 and 1991, which report is included in this Annual Report on Form
10-K.
/s/ COOPERS & LYBRAND
----------------------
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
March 28, 1994
<PAGE>
