<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994 Commission file
number 1-804
SEQUA CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-188-5030
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Park Avenue, New York, New York 10166
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(212) 986-5500
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Class A Common Stock, no par value New York Stock Exchange
Class B Common Stock, no par value New York Stock Exchange
$5.00 Cumulative Convertible
Preferred Stock, $1.00 Par Value New York Stock Exchange
9-5/8% Senior Notes, Due
October 15, 1999 New York Stock Exchange
8-3/4% Senior Notes, Due
December 15, 2001 New York Stock Exchange
9-3/8% Senior Subordinated Notes,
Due December 15, 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of registrant's voting stock (Common
and Preferred) held by nonaffiliates as of March 15, 1995 was
$223,912,959.00
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock:
Class Outstanding at March 15, 1995
----- -----------------------------
Class A Common Stock, no par value 6,535,881
Class B Common Stock, no par value 3,330,778
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive proxy statement for its
annual meeting of stockholders scheduled to be held on May 11,
1995 are incorporated herein by reference into Part III.<PAGE>
<PAGE>
SEQUA CORPORATION
FORM 10-K
* * * * * * *
PART I
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ITEM 1. BUSINESS
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(a) General development of business. Sequa Corporation is a
diversified industrial company that produces a broad range of
products through operating units in four industry segments:
Aerospace, Machinery and Metal Coatings, Specialty Chemicals, and
Other Products. Sequa Corporation, incorporated in 1929, is
hereinafter sometimes referred to as the "Registrant" and,
together with its consolidated subsidiaries, is hereinafter
sometimes referred to as the "Company" or "Sequa."
Divestitures
------------
During 1991, the Company adopted a formal plan to divest
Sequa Capital's investment portfolio and to sell a group of
businesses which it classified as discontinued operations. The
Company generated cash proceeds of $197.2 million in 1992 and
$2.8 million in 1993 from the sale of discontinued assets other
than Sequa Capital's investment portfolio. As of December 31,
1994, approximately $341.5 million of Sequa Capital's investment
portfolio had been sold, written down or otherwise disposed of
since the Company adopted a formal plan to divest the portfolio.
Net losses incurred upon the disposition of discontinued assets
were charged to reserves established for this purpose during 1991
and 1992.
In December 1993, the Company sold the stock of ARC
Professional Services for gross cash proceeds of $59.9 million,
and the purchaser assumed $4.5 million of ARC Professional
Services' debt. The sale resulted in a pre-tax gain of $12.4
million. Also during 1993, Northern Can Systems' two can making
facilities were sold for gross cash proceeds of $15.0 million.
During 1994, the Company sold three Gas Turbine units
primarily engaged in activities other than basic component repair
of flight engines for net cash proceeds of $57.2 million. Losses
on the sale of these units were charged to reserves established
in 1993 for Gas Turbine's restructuring program.
(b) Financial information about industry segments. Segment
information is included in Note 19 to the Consolidated Financial
Statements on page 62 of this Annual Report on Form 10-K and is
hereby incorporated by reference.<PAGE>
<PAGE>
(c) Narrative description of business. The following is a
narrative description of the business segments of Sequa:
Aerospace
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The Aerospace segment includes three operating units: Gas
Turbine, ARC Propulsion and the Kollsman division.
Gas Turbine. The largest operating unit of the Company, Gas
Turbine, is a leader in the development and use of advanced
metallurgical and other processes to manufacture, repair and coat
blades, vanes and other components of gas turbine engines. The
unit serves all major jet engine models used by the global
commercial airline market. The Company believes that the
leadership position of its Gas Turbine operations is largely
attributable to the effectiveness of its continuing development
efforts on new and improved metallurgical coating, manufacturing
and repair processes, and its responsiveness to customer service
requirements.
Gas Turbine has built on its metallurgical process
technologies to develop procedures that permit the repair and
reuse of turbine engine components. Management believes Gas
Turbine has played a key role in the development of the repair
market for certain jet engine parts. Over the years, the Company
has continued to invest steadily in research and development
projects that have led to ceramic coatings, vacuum plasma
coatings, advanced laser drilling and welding, and diffused
precious metal/aluminide coatings. Gas Turbine works in close
cooperation with the manufacturers of jet engines in connection
with the design of new engines, the upgrading of old designs and
the development of repair processes and procedures. Gas Turbine
has introduced a series of innovative and in some cases
proprietary processes that allow engines to perform at improved
efficiency levels, at higher operating temperatures and under
severe environmental conditions.
ARC Propulsion. ARC Propulsion, a supplier of solid rocket
fuel propulsion systems since 1949, is a leading developer and
manufacturer of advanced rocket propulsion systems, gas
generators and auxiliary rockets, and engages in research and
development relating to new rocket propellants and advanced
materials. For the military contract market, ARC Propulsion
produces propulsion systems for tactical weapons, and for space
applications, ARC Propulsion produces small liquid fueled rocket
engines designed to provide attitude and orbit control for a
number of satellite systems worldwide.
ARC Propulsion's strategy is to pursue opportunities to
develop products for commercial markets in order to reduce its
reliance on defense-related business. While maintaining its
traditional position as a supplier of solid propellant rocket
motors to the
<PAGE>
military, ARC Propulsion has initiated several commercial market
ventures, including Bendix Atlantic Inflator Company (BAICO), a
fifty-fifty unconsolidated joint venture with AlliedSignal Inc.
to produce airbag inflator systems. Current production includes
units for Chrysler, Mitsubishi, Hyundai, Suzuki and Isuzu, with
future production directed to fill firm orders from additional
auto makers, including General Motors and Mazda.
Kollsman. Kollsman consists of three units: the military
systems unit, a government contract supplier of electro-optical
and electronic systems for military weapons; the avionics
products unit, a designer and manufacturer of aircraft
instruments and related test equipment; and Kollsman
Manufacturing Company, Inc. (KMC), a separate subsidiary that
produces medical diagnostic instrumentation.
Machinery and Metal Coatings Segment
------------------------------------
The Company's Machinery and Metal Coatings segment is
composed of Precoat Metals, Sequa Can Machinery and Materiels
Equipements Graphiques.
Precoat Metals. The largest individual unit of the segment,
Precoat Metals is a leader in the application of protective
coatings to continuous steel and aluminum coil. Precoat's
principal market is the building products industry, where coated
steel is used for the construction of pre-engineered building
systems, and as components in the industrial, commercial and
agricultural sectors. Precoat also serves the container
industry, where the division has established a position in the
application of coatings to steel and aluminum stock used to
fabricate two-piece metal cans and can lids. In addition, the
division is establishing a presence in the truck trailer and
appliance markets as a supplier of pre-painted steel for use in
trailer panels and as an exterior wrap on air conditioners and
for office furniture. Precoat expanded its existing market share
in building products and further penetrated the container
industry and other growing markets.
Sequa Can Machinery. Rutherford and Standun design and
manufacture equipment for the two-piece can industry.
Rutherford is the world's leading manufacturer of equipment
to coat and decorate two-piece beverage cans. With an installed
base of approximately 700 machines, Rutherford has successfully
developed a retrofit business to upgrade older equipment to match
the technical standards of newer lines. At the same time, the
division's product development team has improved the technology
of precision printing to achieve higher speeds without
compromising quality. The current generation of equipment runs
at a rate of 2,000 cans per minute, applying an even base coat
and printing crisp, clear images in up to eight colors.
<PAGE>
The Standun line of can forming equipment includes cupping
presses, which punch the cup of a can from a coil of metal, and
bodymakers, which form the shallow cup into the shape of a two-
piece beer, soft drink or food can. The equipment operates
within close tolerances at speeds up to 500 cans per minute.
Materiels Equipements Graphiques (MEG). MEG supplies
equipment for the web offset printing industry, including dryers,
chill rolls, paper guides, in-feeds and related equipment for
high-speed web presses. MEG's products include a line of
advanced flying pasters, devices that spin a fresh roll, or "web"
of paper, to press speed and splice it to an expiring roll
without interrupting press operation.
Specialty Chemicals Segment
---------------------------
The two operations that make up the Company's Specialty
Chemicals segment, Warwick International and Sequa Chemicals,
serve distinctly different markets with performance-enhancing
additives for a broad range of end products.
Warwick International. The larger of the two businesses in
the Specialty Chemicals segment, Warwick is a leading producer
and supplier of TAED, a bleach activator for powdered laundry
detergent products. TAED is used in perborate- or oxygen-based
bleaching systems to increase the cleaning power of detergent at
low wash temperatures. These bleaching systems, as opposed to
the chlorine-based bleaches traditionally used in the US, are
used in international markets, primarily in Europe.
Sequa Chemicals. Sequa Chemicals manufactures high-quality
performance-enhancing chemicals used by the textile and graphic
arts industries. Sequa Chemicals supplies the woven and knit
fabric market with permanent press resins, softeners, water
repellents, soil release agents and other chemicals to improve
the look, feel and durability of clothing and other textiles.
The Company also produces specialty emulsion polymers
incorporated into non-woven fabrics for a variety of end uses,
including medical drape, fiberfill and filters. For the paper
industry, Sequa Chemicals produces key synthetic coating
additives for coated papers including Reactopaque which increases
the opacity of finished paper primarily used by the newsprint
industry. In addition, Sequa Chemicals has developed and
patented a unique series of specialty polymers currently marketed
to the building products industry for use in roofing mat, ceiling
tiles, wall board and carpet tiles.
Other Products Segment
----------------------
In December 1993, the Company sold the ARC Professional
Services unit, the largest business unit in the group, and
disposed of two smaller operations, leaving: Casco Products,
which manufactures automotive cigarette lighters, power outlets
and electronic sensing devices; Northern Can Systems, which
manufactures easy-open steel lids for cans; and Centor, a real
estate holding company which owns and operates, among other
properties, the Chromalloy Plaza Building.
<PAGE>
Casco Products (Casco). Casco, which has been serving the
automotive products market since 1921, is a major manufacturer of
automotive cigarette lighters and the leading supplier in North
America to Chrysler, Ford, General Motors and Honda. In
addition, the unit has established a presence in the European
automotive markets.
Casco offers a growing line of automotive accessories, led
by a series of electronic devices to monitor automotive fluid
levels. These products are presently used as gauges for engine
oil and engine coolant and may also be used to monitor brake,
transmission and power steering fluids. Casco's other products
include auxiliary power outlets, electronic control modules, and
daylight running lamps.
Northern Can Systems (NCS). NCS supplies the domestic and
international food processing market with easy-open lids for
cans. Fabricated from steel, full-open ends are used on cans for
pet food, fruits, vegetables, coffee and specialty foods. When
made as pour-spout lids, which incorporate a pull-tab, easy-open
ends are used on cans for beverages, including nutritional
drinks.
Principal Products
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The percentage of Sequa's consolidated sales and revenues
contributed by each class of similar products and services, which
accounted for 10 percent or more of such consolidated sales and
revenues during the last three fiscal years, is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gas Turbine 42% 42% 46%
ARC Propulsion 10% 9% 11%
Precoat Metals 10% 7% 6%
Warwick International 12% 9% 9%
</TABLE>
Markets and Methods of Distribution
-----------------------------------
Sequa markets its gas turbine engine component manufacturing
and repair services primarily to commercial and military aircraft
customers and to users of industrial gas turbines worldwide.
These and other products of Gas Turbine are marketed directly and
through sales representatives working on a commission basis.
A portion of the sales of Gas Turbine's operations is made
pursuant to contracts with various agencies of the United States
Government, particularly the Department of the Air Force, with
which Gas Turbine has had a long-term relationship.
<PAGE>
Sequa markets its electronic and electro-optical systems and
its avionics products to both commercial and military customers.
The electro-optical systems, and related spares and repair work,
are sold primarily under government contracts to the US military,
and to foreign governments. KMC products are sold directly to
medical equipment suppliers.
Sequa markets its rocket propulsion systems generally on a
subcontract basis under various defense programs of the United
States Government. Among the programs currently in production
are the Multiple Launch Rocket System (MLRS) and the MK 104
rocket motor for the Standard Missile. In addition, ARC
Propulsion has a number of advanced programs in various stages of
development and qualification, including the extended range MLRS
and PAC-3, a new anti-missile system (formerly known as ERINT)
that is the successor to the Patriot missile.
By their terms, government contracts are subject to
termination by the government either for its convenience or for
default by the contractor. Some government contracts are secured
through competitive bidding. The largest single government
agency contract accounted for 2% of Sequa's sales and revenues in
1994, 1993 and 1992. Prime contracts and subcontracts with all
government agencies accounted for 11%, 22% and 23% of Sequa's
sales and revenues in 1994, 1993 and 1992, respectively. The
decline in sales and revenues to government agencies during 1994
was primarily due to the sale of the ARC Professional Services
unit in December 1993. The anticipated impact of defense
spending levels on the Company's 1995 sales and revenues and
operating income is set forth in the Management's Discussion and
Analysis of financial condition and results of operations on
pages 19 and 21 of this Annual Report on Form 10-K and is hereby
incorporated by reference.
Sequa's Machinery and Metal Coatings Segment sells its
machinery products directly to the container and food industries,
as well as to the web printing industry. The metal coatings
business sells its coating services to regional steel and
aluminum producers, building product manufacturers, merchant can
makers and other participants in the food industry.
The Specialty Chemicals Segment sells textile chemicals and
emulsion polymers directly to manufacturers of fabric for
clothing and other products. Paper chemicals are sold directly to
paper mills and detergent chemicals are sold to detergent
manufacturers. Specialty polymers are sold directly to the
producers of roofing mats, industrial filters, and tape and label
products.
The automotive products subsidiary sells cigarette lighters
and various electronic monitoring devices directly to the
automotive industry.
<PAGE>
<PAGE>
Competition
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There is significant competition in the industries in which
Sequa operates, and, in several cases, it competes with larger
companies having substantially greater resources than those of
Sequa.
Sequa believes that it is currently the world's largest
manufacturer of cylindrical can-decorating equipment, one of the
largest manufacturers of permanent-press textile finishing
resins, a leading supplier of aircraft barometric altitude
reporting instruments for military and commercial air transport
aircraft, and the largest domestic supplier of automotive
cigarette lighters in the United States.
Sequa, through its gas turbine operations, is a leader in
the development and use of advanced metallurgical and other
processes to manufacture, repair and coat blades, vanes and other
components of gas turbine engines used for military and
commercial jet aircraft and for industrial purposes. Gas
Turbine's divisions operate in highly competitive environments
and compete for repair service business with a number of other
major companies, including the major turbine engine manufacturers
who often specify to their customers that vendors such as Gas
Turbine must be approved by such manufacturers to manufacture
components for their engines and/or perform repair services on
their engines and components. Gas Turbine has a number of such
approvals, including licensing agreements which allow it to
manufacture and repair certain components of the new generation
of flight engines now coming into widespread use. The loss of
approval by one of the major jet engine manufacturers to
manufacture or repair components for such producer's engines
could have an adverse effect on Gas Turbine. In such event,
however, Gas Turbine would seek to replace any approvals lost by
obtaining approvals with respect to the same components directly
from the Federal Aviation Administration (FAA) or, alternatively,
the customer.
Sequa's rocket propulsion systems business competes with
several other companies for defense business. In some cases,
these competitors are larger than Sequa and have substantially
greater resources. Government contracts in this area are
generally awarded on the basis of proven engineering capability
and price. The Company's ability to compete is enhanced by the
needs of the US Government to have alternative sources of supply
under these contracts.
Sequa's Kollsman unit competes in each of its markets with a
number of other manufacturers, some of which are larger and have
greater resources than Kollsman. This unit competes on the basis
of technical competence, quality and price.
<PAGE>
Sequa's Precoat Metals operation, a leader in coating coils
of steel for metal building panels, is also the most fully
integrated supplier of coated metal coil stock in the United
States. Sequa's cylindrical can printing and can forming
equipment operations are world leaders in their markets. MEG is
Europe's leading supplier of auxiliary press equipment.
Sequa's automotive products manufacturer is the nation's
leading producer of cigarette lighters and holds a commanding
share of both the domestic original equipment market and the auto
aftermarket. Sequa's easy-open can lid manufacturing business
competes with a number of larger and well established entities
which have substantially greater financial and other resources.
Raw Materials
-------------
The various segments of Sequa's business use a wide variety
of raw materials and supplies. Generally, these have been
available in sufficient quantities to meet requirements, although
occasional shortages have occurred.
Seasonal Factors
----------------
Overall, Sequa's business is not considered seasonal to any
significant extent.
Patents and Trademarks
----------------------
The Company owns and is licensed to manufacture and sell
under a number of patents, including patents relating to its
metallurgical processes. These patents and licenses were secured
over a period of years and expire at various times. The Company
has also created and acquired a number of trade names and
trademarks. While Sequa believes its patents, patent licenses,
trade names and trademarks are valuable, it does not consider its
business as a whole to be materially dependent upon any
particular patent, license, trade name, trademark or any related
group thereof. It regards its technical and managerial knowledge
and experience as more important to its business.
Backlog
-------
Backlog information is included in the Management's
Discussion and Analysis of financial condition and results of
operation on page 27 of this Annual Report on Form 10-K and is
hereby incorporated by reference.
<PAGE>
Research and Development
------------------------
Research and development costs, charged to expense as
incurred, amounted to approximately $14.3 million in 1994, $17.2
million in 1993, and $17.6 million in 1992.
The level of research and development costs reflects the
Company's objective of realizing improved returns on those
projects which are undertaken and discontinuing expenditures in
areas the Company believes will not be profitable due to the lack
of sufficient future commercial opportunities. Reductions during
1994 primarily occurred at the units serving the domestic defense
markets. It is not anticipated that this approach will affect
the Company's ability to be competitive. Costs relating to
customer-sponsored research and development activities are not
material.
Environmental Matters
---------------------
The Company has been notified that it has been named as a
potentially responsible party under Federal and State Superfund
laws and/or has been named as a defendant in suits by private
parties (or governmental suits including private parties as co-
defendants) with respect to sites currently or previously owned
or operated by the Company or to which the Company may have sent
hazardous wastes. The Company is not presently aware of other
such lawsuits or notices contemplated or planned by any private
parties or environmental enforcement agencies. The aggregate
liability with respect to these matters, net of liabilities
already accrued in the Consolidated Balance Sheet, will not, in
the opinion of management, have a material adverse effect on the
results of operations or the financial position of the Company.
These environmental matters include the following:
A number of claims have been filed in connection with
alleged groundwater contamination in the vicinity of a
predecessor corporation site which operated during the 1960s and
early 1970s in Dublin, Pennsylvania. In October 1987, a tort
action was filed by residents of Dublin against the Company and
two other defendants. The Borough of Dublin also filed suit
seeking remediation of alleged contamination of the Borough's
water supply and damages in an unspecified amount. The Company
expects that a trial date will be scheduled in 1995.
The Pennsylvania Department of Environmental Regulation
entered into a Consent Decree with the Company in 1990 providing
for the performance of a remedial investigation and feasibility
study with respect to the same alleged groundwater contamination
in Dublin. The US Environmental Protection Agency (EPA) also
placed the site on the Superfund List in 1990 and, in conjunction
therewith, entered into a Consent Agreement with the Company on
December 31, 1990. EPA estimates that the cost of the interim
remedy will be less than $4 million. The investigation for the
final remedy is still in progress.
<PAGE>
The State of Florida issued an Administrative Order
requiring TurboCombustor Technology, Inc. (TCT), a subsidiary of
Chromalloy Gas Turbine Corporation, to investigate and to take
appropriate corrective action in connection with alleged
groundwater contamination in Stuart, Florida. The contamination
is alleged to have arisen from a 1985 fire which occurred at
TCT's former facility in Stuart.
The City of Stuart has subsequently constructed and is
operating a groundwater remediation system. The Company has
negotiated a settlement with the City of Stuart whereby it would
contribute its ratable share of the capital and operating costs
for the groundwater treatment system. The Company estimates the
amount to be paid in settlement plus additional groundwater
sampling and analysis will be approximately $2 million to be paid
over a ten year period.
In September 1993, fourteen homeowners residing in West
Nyack, New York served a complaint on Gas Turbine and others
alleging, among other things, that contamination from a former
Gas Turbine site caused the plaintiffs' alleged property damage.
Gas Turbine believes it has strong defenses under New York law to
the plaintiffs' complaint. Gas Turbine entered into a Consent
Order with the New York Department of Environmental Conservation
on February 14, 1994, to undertake the remedial investigation and
feasibility study relating to the alleged contamination in the
vicinity of the former Gas Turbine site.
In connection with the sale of the Graphic Arts Materials
Segment, now known as Sun Chemical Corporation, to Dainippon Ink
and Chemicals, Inc. (DIC) in December 1986, the Company has
continuing contingent liability for all off-site environmental
claims which relate to activities prior to the sale. In
connection therewith, the Company provided a letter of credit in
the original amount of $25.0 million in favor of DIC as security
for said obligation for a period of ten years from date of sale.
The amount of this letter of credit is adjusted each year. It is
increased by an interest factor and decreased by the amount
actually paid by the Company for related off-site environmental
claims. In late 1993, the agreement was amended with the amount
of the letter of credit being reduced to $15.0 million, subject
to annual adjustment, and the obligation to provide said letter
was extended three years to December 1999.
On April 3, 1989, the Company and Gas Turbine instituted a
law suit in the Delaware Superior Court against forty-one of the
Company's comprehensive general liability insurance carriers (the
Defendants). The Company and Gas Turbine seek to enforce their
rights under insurance policies sold to them by the Defendants in
connection with various environmental actions that have been
brought against the Company and Gas Turbine and are seeking
indemnity and defense costs with respect to all Superfund actions
and third-party environmental litigation.
<PAGE>
It is the Company's policy to accrue environmental
remediation costs for identified sites when it is probable that a
liability has been incurred and the amount of loss can be
reasonably estimated. The potential exposure for such costs is
estimated to range from $29 million to $55 million. At December
31, 1994, the Company's Balance Sheet includes accruals for
remediation costs of $50.5 million. These accruals are at
undiscounted amounts and are primarily included in accrued
expenses and other long-term liabilities. While the possibility
of recovery of some of the costs from insurance companies exists,
the Company does not recognize these recoveries in its financial
statements until they are realized. Actual costs to be incurred
at identified sites in future periods may vary from the
estimates, given inherent uncertainties in evaluating
environmental exposures.
With respect to all known environmental liabilities, the
Company's actual cash expenditures for remediation of previously
contaminated sites were $10.3 million in 1994, $8.3 million in
1993 and $7.3 million in 1992. The Company anticipates that
remedial cash expenditures will be in the $8 million to $12
million range during each of the following several years. For
the past three years, the Company's capital expenditures for
projects to eliminate, control or dispose of pollutants have
averaged approximately $2 million per year. The Company
anticipates environmental-related capital programs to be
approximately $6 million in 1995 and $4 million in 1996. The
Company's operating expenses to eliminate, control and dispose of
pollutants have averaged approximately $10 million per year
during the last three years. The Company anticipates that
environmental operating expenses will be approximately $12
million per year during 1995 and 1996.
Employment
----------
At December 31, 1994, Sequa employed approximately 9,200
persons in its continuing operations of whom approximately 2,000
were covered by union contracts.
The approximate number of employees attributable to each
reportable business segment as of December 31, 1994 was:
<TABLE>
<CAPTION>
Approximate
Segment Number of Employees
------- -------------------
<S> <C>
Aerospace 6,950
Machinery and Metal Coatings 1,000
Specialty Chemicals 700
Other Products 450
Corporate 100
-----
Total 9,200
=====
</TABLE>
<PAGE>
The Company considers its relations with employees to be
generally satisfactory. Sequa maintains a number of employee
benefit programs, including life, hospitalization, surgical,
dental, and major medical insurance, and a number of 401(k) and
pension plans.
(d) Foreign Operations. Sequa's foreign operations, spread
primarily throughout Europe, include Gas Turbine operations
within its Aerospace Segment; detergent chemicals operations
included in the Specialty Chemicals Segment; the auxiliary press
equipment supplier in the Machinery and Metal Coatings Segment;
and an automotive products operation in the United Kingdom in the
Other Products Segment. These operations consist primarily of
wholly-owned foreign subsidiaries. Sales and revenues, operating
earnings and identifiable assets attributable to foreign
operations, and export sales, are set forth in Note 19 to the
Consolidated Financial Statements on page 63 of this Annual
Report on Form 10-K and is incorporated herein by reference.
ITEM 2. PROPERTIES
-------------------
Aerospace
---------
The Chromalloy Gas Turbine Corporation operates over 50
plants in thirteen states and six foreign countries, primarily in
Europe, which have aggregate floor space of approximately
3,700,000 square feet, of which approximately 1,900,000 square
feet is owned and approximately 1,800,000 square feet is leased.
The leases covering the leased facilities in this business have
various expiration dates and some have renewal or purchase
options.
Rocket propulsion operations lease two principal
manufacturing facilities, a 421-acre site in Gainesville,
Virginia, and a 1,014-acre manufacturing facility in Camden,
Arkansas. The Gainesville lease expires in 2012, and the Camden
lease, which has various renewal options, expires in 1998.
Adjacent to the Gainesville leased facility, the Company owns 12
acres and an 89,000 square foot office and manufacturing complex.
An additional 199,000 square feet (of which 101,000 square feet
is sublet) is leased for administrative, research and
manufacturing purposes in Alabama, California, Massachusetts and
Virginia. The liquid propulsion division leases a 101,000 square
foot facility in Niagara, New York. The Company also owns 2,430
acres of land in Orange County, Virginia, which has been
developed for use in the propellant business. An additional
38,000 square feet is owned in Virginia (of which 20,000 square
feet is sublet) and is used for administrative purposes.
The Kollsman operation owns two plants in New Hampshire with
aggregate floor space of 405,000 square feet and leases another
facility in New Hampshire with aggregate floor space of 91,000
square feet where various production, administrative, warehousing
and technical services are performed. This business also owns
one 23,000 square foot manufacturing facility in Wichita, Kansas
and leases 5 domestic offices aggregating approximately 2,000
square feet.
<PAGE>
Facilities in this segment are suitable and adequate for the
business and are operating at a moderate level of utilization.
Capital spending plans for the operations in this segment are
primarily designed to keep up with current technology or to meet
specific requirements for various government or commercial
contracts.
Machinery and Metal Coatings
----------------------------
The can forming and decorating operations own two plants in
the United States with aggregate floor space of 228,000 square
feet. In Europe, through the segment's auxiliary press equipment
supplier, MEG, the Company owns a plant with aggregate floor
space of approximately 62,000 square feet. MEG also leases three
sales offices and owns a storage facility in Europe with a total
of 22,000 square feet and leases a 2,500 square foot sales office
in Singapore. The Precoat Metals operation owns five
manufacturing facilities in Missouri, Illinois, and Mississippi,
with a total of 653,000 square feet of manufacturing and office
space. An additional 209,000 square feet of warehouse space is
leased in Illinois, Missouri and Texas.
The properties in this segment are suitable and adequate for
the business presently being conducted. Precoat Metals
facilities are functioning at a high level of utilization and the
can forming and decorating operations are functioning at a
moderate level of utilization.
Specialty Chemicals
-------------------
The Specialty Chemicals segment owns one plant situated on 86
acres in Chester, South Carolina with aggregate floor space of
160,000 square feet in addition to a 22,000 square foot leased
warehouse also in Chester. The segment owns two plants in the
United Kingdom with aggregate floor space of 223,000 square feet
on approximately 43 acres of land and leases 10,000 square feet
of office and warehouse space in six separate locations in
Europe.
Facilities in this segment are adequate and suitable for the
business being conducted. They operate at a high utilization
rate. Capital spending plans call for capacity increases and for
installation of equipment required to meet or exceed
environmental regulations.
<PAGE>
Other Products
--------------
The automotive products subsidiary, Casco Products, leases a
168,000 square foot plant in Connecticut and leases a 1,600
square foot sales office in Detroit, Michigan. Casco Products
also owns a 213,000 square foot plant in Connecticut which is no
longer being used and remains idle. In addition, Casco Ltd.
leases 8,700 square feet of manufacturing, warehouse and office
space in the United Kingdom. NCS owns a manufacturing facility
in Ohio with floor space of 90,000 square feet.
The Centor Company, a wholly-owned subsidiary, owns and
operates the Chromalloy Plaza Building, an 18-story office
building in Clayton, Missouri with approximately 284,000 square
feet of rentable office and commercial space. Centor also owns
and rents a manufacturing facility and a warehouse in Wisconsin
with aggregate floor space of 185,000 square feet as well as
owning 10 smaller properties that are either leased to third
parties and/or held for sale.
Facilities in this segment are adequate and suitable for the
business being conducted. Casco Products' leased facilities
operate at high utilization rates, while utilization at NCS
continues to be below 50%.
Corporate
---------
The Company leases 58,000 square feet of corporate office
space in New York, New York and Hackensack, New Jersey.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
Information with respect to the Company's legal proceedings
is included in Note 21 to the Consolidated Financial Statements
on pages 64 and 65 of this Annual Report on Form 10-K and is
hereby incorporated by reference. Additional information on
environmental matters is covered in the Environmental Matters
section on pages 10 through 12 of this Annual Report on Form 10-K
and is hereby incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------- ---------------------------------------------------
None.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
------- -------------------------------------------------
STOCKHOLDER MATTERS
-------------------
(a) Market Information.
The following table sets forth the high and low closing sales
prices of Sequa Class A common stock and Sequa Class B common
stock for the calendar periods indicated on the Exchange
Composite Tape, as reported by the National Quotation Bureau
Incorporated:
<TABLE>
<CAPTION>
Sequa Class A Sequa Class B
------------- -------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1994:
First Quarter....... 39 1/2 31 7/8 39 3/4 32
Second Quarter...... 31 3/4 27 3/8 33 1/2 28 7/8
Third Quarter....... 29 7/8 26 7/8 33 3/4 31 7/8
Fourth Quarter...... 26 7/8 18 32 21 1/4
1993:
First Quarter....... 32 7/8 26 33 7/8 26 3/4
Second Quarter...... 30 18 32 1/2 18
Third Quarter....... 33 1/4 27 3/4 33 3/4 28 7/8
Fourth Quarter...... 34 3/8 30 1/2 34 1/2 30 1/4
</TABLE>
(b) Holders.
Shares of Sequa Class A common stock and Sequa Class B
common stock are listed on the New York Stock Exchange. There
were approximately 3,170 holders of record of the Sequa Class A
common stock (plus 350 holders of unexchanged shares) and
approximately 730 holders of record of the Sequa Class B common
stock (plus 100 holders of unexchanged shares) at March 15, 1995.
(c) Dividends.
During the year ended December 31, 1994, no dividends were
declared on Sequa Class A common shares or Class B common shares.
During the year ended December 31, 1993, Sequa declared two
quarterly dividends of $.15 per share, or $.30 per share for the
year, on Sequa Class A common shares and two quarterly dividends
of $.125 per share, or $.25 per share for the year on Sequa Class
B common shares.
Information with respect to debt covenants which restrict or
limit the ability of the Company to pay dividends is set forth in
the Management's Discussion and Analysis of financial condition
and results of operations on page 27 and 28 of this Annual Report
on Form 10-K and is hereby incorporated by reference.
<PAGE>
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
------- -----------------------
The following table sets forth selected financial information for, and as of
the end of, each of the five years in the period ended December 31, 1994. Such
information should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto, filed herewith.
(Amounts in millions, except per share)
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 1993 1992 1991 1990
-------------------------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Summary of operations
Continuing operations:
Sales and revenues $1,419.6 $1,697.0 $1,868.3 $1,878.8 $1,957.8
Operating income 39.8 15.7 124.6 117.7 181.2
Income (loss) from
continuing operations (24.7) (55.5) 17.9 15.0 59.4
Loss from discontinued
operations - - (21.7) (21.6) (26.7)
Extraordinary loss (1.1) (8.5) - - -
Cumulative effect of
accounting change - - (7.3) - -
------- ------- ------- ------- -------
Net income (loss) (25.8) (64.0) (11.1) (6.6) 32.7
======= ======= ======= ======= =======
Earnings (loss) per share of
common stock
Continuing operations $ (2.87) $ (6.07)$ 1.53 $ 1.24 $ 5.81
Discontinued operations - - (2.26) (2.26) (2.78)
Extraordinary loss (.11) (.88) - - -
Cumulative effect of
accounting change - - (.76) - -
-------- ------- ------ ------ ------
Net income (loss) (2.98) (6.95) (1.49) (1.02) 3.03
======== ======= ====== ====== ======
Cash dividends declared
Preferred $ 7.50* $ 2.50 $ 5.00 $ 5.00 $ 5.00
Class A common - .30 .60 .60 .60
Class B common - .25 .50 .50 .50
Financial position
Current assets $ 604.3 $ 661.6 $ 679.2 $ 778.5 $ 802.8
Total assets 1,648.2 1,803.5 1,912.5 2,108.3 1,995.0
Current liabilities 321.3 376.5 350.1 383.2 370.4
Long-term debt 586.6 624.1 690.0 825.5 677.2
Shareholders' equity 566.5 575.8 651.7 696.6 716.4
<FN>
* Includes $2.50 of dividends in arrears for the third and fourth quarters of
1993.
/TABLE
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
OPERATING RESULTS 1994 - 1993
SALES AND REVENUES
Sales from continuing operations declined 16% in 1994, reflecting
the disposals of the ARC Professional Services Group (PSG), three
Gas Turbine units and two Northern Can Systems (NCS) can plants
in late 1993 and early 1994. On a pro forma basis, excluding the
impact of these disposals, sales were down 2%, as solid advances
at the Precoat Metals division, both units of the Specialty
Chemicals segment, the auxiliary press equipment unit and the
automotive products unit were more than offset by declines at
Sequa Can Machinery and the three units in the Aerospace segment.
Sales of the Aerospace segment were 14% lower than in 1993,
with all units registering declines. Gas Turbine sales were down
15% (5% after eliminating the sales of disposed units from both
years). While all overseas units recorded advances from
depressed 1993 levels, the sales of most domestic units declined
due to weakness in each of the three major markets served:
component repair, OEM manufacture, and domestic military.
Pricing pressures were severe in all markets. The decline in
repair revenues reflects a constricted market, as well as
increased competitive activity from the engine manufacturers,
extensive pricing pressure, and loss of market share following
the 1993 interruption of operations at Gas Turbine's largest
facility in Orangeburg, New York. The decline in OEM sales
reflects a further 20% drop in commercial jet engine production
in 1994, which produced continuing overcapacity in the
marketplace. Sales under prime contracts from the US Government
declined more than 35% in 1994 to a level more than 50% below
1992. This is a reflection of reduced domestic defense spending,
the completion or elimination of several sizable contracts and
the unit's plan to reduce its participation in domestic defense
activities.
At the Orangeburg, New York facility, sales advanced 4% in
1994 from a depressed 1993 level. Progress continued in the
operation's recovery from the effects of the Federal government
investigation and suspension of FAA-certified repair activities
during 1993. Repair input in each of the last three quarters of
1994 increased over the preceding quarter; turnaround time (the
time it takes to repair a part and return it to the customer)
improved dramatically; and the customer base was expanded.
Partially offsetting improvements in the repair area was the
severe decline in the manufacture of OEM parts, as a major
engine customer brought into its own facilities new parts work
previously done at Orangeburg.
For 1995, management does not expect significant improvement
in its served markets. Management currently anticipates that
marketing programs with the major airlines will begin to generate
increased repair revenues in the second half of 1995. OEM sales
<PAGE>
SALES AND REVENUES (con't)
are expected to be on a par with 1994, while defense-related
sales are expected to register a small decline.
ARC Propulsion sales declined 14% from 1993, largely due to
lower production levels on three major contracts: MLRS, Stinger,
and Tomahawk. These declines were partially offset by higher
sales of propellant and other components for automotive airbag
inflators and by increased sales under the Trident D-5 program.
Sales of the advanced materials and liquid motor product lines
were modestly lower. Management currently anticipates that 1995
sales will be on a par with 1994, as further declines in military
solid propulsion will be offset by increased airbag component
sales.
At the Kollsman unit, 1994 sales declined 7%, as lower sales
of medical instrumentation, avionics hardware and troop
simulation trainers were partially offset by improvements in the
night targeting system (NTS) for the Cobra helicopter. Sales of
electro-optical instrumentation for military vehicles were on a
par with 1993 levels. Management currently anticipates that
overall sales for 1995 will remain stable.
Sales of the Machinery and Metal Coatings segment advanced 3%
in 1994, as improvements at the metal coatings and auxiliary
press equipment units were largely offset by a decline at the can
machinery operation. At the metal coatings unit, strong demand
from the building products market resulted in a solid sales gain.
In the fourth quarter, the operation brought on line a new
facility in Jackson, Mississippi, which is expected to relieve
capacity constraints experienced by the metal coatings unit in
1994. Management currently anticipates continued strength at
this unit in the first half of 1995. Sales of the can machinery
unit were 18% below the 1993 level, as both can forming and can
decorating equipment units experienced reduced demand in overseas
markets. Based on current backlog, management expects sales to
rebound in 1995. Sales of the auxiliary press equipment
operation were up 7%, as increased unit sales were partially
offset by the price reductions required in a highly competitive
market. The outlook for 1995 depends largely on the successful
introduction of new equipment models in the first half.
Sales of the Specialty Chemicals segment increased 12%, with
both units achieving solid advances. The increase at the
overseas unit was primarily driven by improved sales of TAED, a
detergent additive. TAED volume increases were partially offset
by lower average selling prices. At the domestic unit, sales of
every major product, except paper coatings, posted solid sales
gains. Sales of
<PAGE>
SALES AND REVENUES (con't)
the paper coatings product line were down 4%, as improvements in
the second half of the year did not offset declines in the first
half. Sales of specialty polymers were particularly strong in
1994, primarily due to increased market penetration driven by the
introduction of new products. Management currently anticipates
sales for the full year of 1995 will continue at a high level for
both units.
Sales of the Other Products segment (formerly the
Professional Services and Other Products segment) declined 71% in
1994, due entirely to the disposition of the ARC Professional
Services unit and two NCS can plants in 1993. On a pro forma
basis -- excluding 1993 sales of units sold -- sales advanced 8%
in 1994. At the automotive products unit, the impact of
increased North American automobile production, together with
increased sales of electronic products and greater penetration of
the European market for cigarette lighters, generated a 16%
increase in sales in 1994. A continuation of the strong sales
pattern is expected in the first half of 1995. NCS sales from
continuing business -- the production of convenience ends for
food cans -- declined 10%, chiefly due to two factors: the
changeover by a major customer to a type of product that NCS does
not produce; and the self manufacture of convenience ends by
another major customer. Revenues of Centor, the real estate
unit, recorded a small year-to-year increase.
OPERATING INCOME
Overall 1994 operating income of $39.8 million compared favorably
with operating income of $15.7 million in 1993. The increase
primarily resulted from reduced losses at Gas Turbine and
improved profits at the can machinery and precoat metals
operations and at both units of the Specialty Chemicals segment.
The gains were partially offset by the absence of profits from
the PSG unit sold in late 1993, as well as by losses at the
auxiliary press equipment unit and the convenience end business.
The losses registered in the Aerospace segment narrowed in
1994, as Gas Turbine reduced its loss, Kollsman recorded a 14%
profit improvement, and ARC Propulsion registered only a slight
decline in profits. Gas Turbine's operating loss for 1994 was
roughly half that of 1993. The 1993 results were affected by
three major factors: the interruption of operations at the
Orangeburg facility; the legal fees, payments to the government
and severance costs at the Orangeburg facility; and the charge to
reflect implementation of a restructuring plan. The improvement
recorded in 1994 primarily reflected the absence of these
factors, as well as the return to profitability of overseas gas
turbine operations. Offsetting these factors was a significant
decline in earnings from domestic repair operations, as well as
the impact of a second quarter charge to correct an accounting
irregularity. In the fourth quarter, excluding the impact of
units disposed, sales declined 15%, and the unit generated a loss
from operations, which was further increased by provisions for
inventory and other reserves. Management expects this unit to
return to profitability in the second half of 1995.
<PAGE>
OPERATING INCOME (con't)
At the ARC Propulsion unit, operating income declined 5%. The
effects of lower sales and a second-quarter loss provision on a
liquid propellant rocket motor program were partially offset by
reduced bid and proposal costs, and an improved sales mix.
Kollsman recorded a 14% improvement in operating income in 1994.
This was primarily the result of improved profitability on the
NTS program, lower selling, general and administrative expenses,
and the benefits of a favorable contract settlement in the
avionics business. These improvements were partially offset by
reduced profits in the medical instrument operation and the
impact of the reduction in sales. Management currently
anticipates that both ARC Propulsion and Kollsman will generate
1995 operating profits in line with 1994 results.
Operating income in the Machinery and Metal Coatings segment
increased 10% in 1994, as improvements at the metal coatings and
can machinery units were partially offset by losses at the
auxiliary press equipment unit. Profits of the metal coatings
unit improved primarily as the result of increased sales and
higher capacity utilization, partially offset by start-up costs
related to the new facility in Jackson, Mississippi, and pricing
pressures in the container industry. Strong profit performance
is expected to continue in 1995. Operating income at the Sequa
Can Machinery unit more than doubled in 1994 from a depressed
1993 level. The primary factors responsible for the improvement
were: the absence of the restructuring and bad debt charges of
1993; lower selling, general and administrative costs; reduced
warranty and equipment start-up costs; and a favorable sales mix
shift. These elements were partially offset by the impact of
lower sales and reduced capacity utilization at one of the
facilities. Based on the current backlog level, profits are
expected to further improve for this unit in 1995. The auxiliary
press equipment unit recorded a loss in 1994 compared to a small
profit in 1993. The loss primarily resulted from severe pricing
pressures and increased product development and marketing costs.
The latter are related to new products scheduled to be introduced
to the market in the first half of 1995. Based on this unit's
backlog, losses are anticipated in the first half of 1995.
Operating income in the Specialty Chemicals segment advanced
21% in 1994, with both units contributing to the gain. At the
overseas unit, improved results were primarily driven by
increased sales of TAED and the resulting improvement in factory
utilization. At the domestic unit, the improvement was derived
from increased sales, partially offset by the effect on margins
of rapid increases in raw material prices, as well as by an
unfavorable sales mix shift and increased environmental clean-up
costs. Both units are experiencing rapid increases in raw
material prices, which are difficult to pass on to customers.
The domestic unit began to feel the impact of this in the second
half of 1994, while the overseas unit felt the impact in early
1995. As a result, management currently anticipates that first-
quarter earnings will be down for the segment.
<PAGE>
OPERATING INCOME (con't)
Operating income from the Other Products segment declined 68%
in 1994 primarily due to the late-1993 disposition of PSG (which
had contributed $10.7 million of operating profits for 1993) and
the writedown of two excess NCS lid lines, which are being held
for sale. At the automotive products unit, profits increased in
line with higher sales. Continued strength is expected at this
unit during the first half of 1995. At NCS, the loss for 1994
was due entirely to the writedown of the lid lines. On an
operating basis, NCS posted a small profit, as the effect of
lower sales was partially offset by reduced costs. At Centor,
the real estate unit, profits declined primarily due to increased
operating costs.
RESTRUCTURING CHARGES
During 1993, the Company recorded restructuring charges totaling
$26.6 million primarily related to plans adopted to reduce Gas
Turbine's investment in activities other than the repair of
components for flight engines, to sell excess machinery and to
permanently reduce the number of employees. During 1994 and
early 1995, Gas Turbine completed its exit from the engine
overhaul business and made significant progress in shrinking its
asset base serving the OEM market. In 1994, three operations
were sold for net cash proceeds of $57.2 million; two operations
were closed; and $4.3 million in cash was generated from the sale
of excess property, plant and equipment. In early 1995, Gas
Turbine's 51% interest in an engine overhaul business was sold
for $5.2 million in cash with the purchaser assuming $17.2
million of the Company's debt. Two operating units and certain
excess assets remain to be disposed of. At December 31, 1994,
$6.3 million of restructure reserves remained, and completion of
the restructuring program will generate positive cash flow in
1995.
INTEREST EXPENSE
The decrease in interest expense of approximately $7.4 million
during 1994 was due to a decrease in average borrowings primarily
attributable to the application of cash generated from the sale
of businesses and the non-recourse securitization of the
Company's discontinued leveraged lease portfolio.
OTHER, NET
In 1994, Other, net included a $2.4 million loss on interest rate
options written; $1.8 million of discount expense related to the
sale of accounts receivable; a $2.4 million equity loss in the
Company's unconsolidated airbag business; and amortization of
capitalized debt costs of $2.4 million. In 1993, Other, net
included a $6.6 million mark-to-market loss on interest rate
options written; $3.1 million of discount expense related to the
sale of accounts receivable; a $3.1 million loss incurred on a
sale and leaseback transaction; a $7.6 million equity loss in the
Company's unconsolidated airbag business; amortization of
capitalized debt costs in the amount of $4.2 million; and $2.5
million in charges for a minority shareholder's interest in the
earnings of Atlantic Research Corporation.
<PAGE>
DERIVATIVE FINANCIAL INSTRUMENTS
In response to favorable market conditions, the Company closed
out all of its interest-related derivative transactions in
December 1994 for a cash payment of $7.7 million, the approximate
net carrying value of these instruments. Accordingly, the
Company had no interest rate swaps, options or any other
interest-related derivatives outstanding at December 31, 1994.
It is the Company's current policy that the treasurer has the
authority to enter into interest-related derivative transactions
in the amounts and for the purposes to be stipulated by the board
of directors and the management executive committee. The
treasurer must obtain approval from the committee prior to
entering into any derivative transaction and the treasurer is
responsible for monthly reporting of market values of derivative
activities to the committee.
The Company has had limited involvement with derivative
financial instruments and does not use them for trading purposes.
Various derivative financial instruments have been used in the
past to manage well-defined interest rate risk. By entering into
straightforward interest rate swaps, the Company has functionally
converted floating-rate debt to fixed-rate debt to minimize
exposure to rising interest rates and has functionally converted
fixed-rate debt to floating-rate debt to minimize interest costs
in declining interest rate environments. The Company has also
utilized interest rate options and other complex derivative
instruments to manage economic exposures resulting from changes
in interest rates.
The Company accounts for interest rate swaps as hedges
provided that the derivative changes the nature of a designated
debt instrument on the Company's balance sheet and the underlying
debt obligation has a principal balance equal to or greater than
the notional amount of the related derivative. In accordance
with hedge accounting, any gains or losses from changes in the
value of the swaps are deferred and interest expense on the
hedged debt instrument is recorded using the interest rate as
effectively revised by the related swap. If the principal amount
of the particular debt instrument being hedged falls below the
notional amount of the related swap, the excess portion of the
derivative is marked to market and the resulting gain or loss is
included in interest expense. Gains or losses on terminated
interest rate swaps that were accounted for as hedges are
deferred and amortized to interest expense over the original
lives of the terminated swaps.
The Company's weighted average borrowing rate was 9.4% during
1994 and 1993 and 9.2% during 1992. The Company's hedging
activities related to interest rate swaps reduced interest
expense by $0.3 million (or 5 basis points) during 1994; $2.4
million (or 35 basis points) during 1993; and $2.1 million (or 27
basis points) during 1992. As of December 31, 1994, deferred
gains on terminated interest rate swaps amounted to $6.8 million
and amortization of such deferred gains will serve to reduce
interest expense by $3.1 million, $2.2 million and $1.5 million
during 1995, 1996 and 1997, respectively.
<PAGE>
DERIVATIVE FINANCIAL INSTRUMENTS (con't)
Early in 1989, Sequa decided to raise $50 million through a
privately placed seven-year senior note issue. The market
responded with offers carrying interest rates of 10.27% for five
years and 10.98% for seven years. Sequa opted to issue a $50
million privately placed note with a five-year maturity at
10.27%, but sold an option for the sixth and seventh years,
which, if exercised, would be economically equivalent to Sequa
borrowing $50 million for seven years at a fixed rate of 10.27% -
a rate that was not achievable under the privately placed note in
1989. Under the terms of the option sold, if exercised, Sequa
would pay a fixed rate of 10.27% on a notional amount of $50
million and would receive LIBOR for two years commencing in
February 1994. Given the business reason for becoming a party to
this derivative, the option written was designated and accounted
for as a hedge from 1989 through the third quarter of 1993.
During this time, the option was not marked to market through
income, and unrealized losses, which were not material to the
results of operations or financial position of the Company, were
deferred.
In 1993, when interest rates decreased dramatically and it
became clear that the counterparty to this transaction would
exercise the option, the Company moved to mitigate the cost of
paying 10.27% and receiving LIBOR by restructuring the original
$50 million option in the latter part of 1993 into two $25
million, two-year options with the same starting and expiration
dates as the original option. This restructuring materially
altered the original intent and economics of the 1989 option and
created complex and leveraged options. Accordingly, the Company
switched to non-hedge accounting and marked the restructured
interest rate options to market at December 31, 1993 by recording
a $6.6 million pre-tax charge in Other, net.
Early in 1994, the options were further restructured, and, in
order to mitigate the effect of further interest rate movements,
the Company entered into another complex derivative transaction
which effectively moved approximately $4.0 million of the loss on
one of the restructured options into a new instrument. In 1994,
Other, net included $2.4 million of losses on this derivative and
the two restructured options. All interest-related derivatives
were closed out as of December 31, 1994.
Forward exchange contracts are utilized by the Company's
specialty chemicals operation in the United Kingdom to hedge
anticipated but not yet committed sales and purchases to be
denominated in currencies other than the pound sterling. These
contracts, the terms of which are shorter than one year, involve
primarily the purchase of Swedish kroner and the sale of German
marks at a specified range of exchange rates with the pound
sterling. Accordingly, these contracts limit, but do not
eliminate, the effects of exchange rate movements on sales of
products to foreign customers and purchases from foreign
suppliers.
<PAGE>
DERIVATIVE FINANCIAL INSTRUMENTS (con't)
The notional amounts of such contracts were $27.3 million and
$17.0 million at December 31, 1994 and 1993, respectively.
Unrealized gains on these forward exchange contracts of $0.1
million and $0.4 million were recorded in the Company's Balance
Sheet at December 31, 1994 and 1993, respectively, and changes in
the fair values are recognized in operating income during the
period in which the changes occur.
ENVIRONMENTAL MATTERS
The Company's environmental department, under senior management
direction, manages all activities related to the Company's
involvement in environmental clean-up. This department
establishes the projected range of expenditures for individual
sites with respect to which the Company may be considered a
potentially responsible party under applicable federal or state
law. These projected expenditures, which are reviewed
periodically, include: remedial investigation and feasibility
studies; outside legal, consulting and remediation project
management fees; the projected cost of remediation activities;
site closure and post-remediation monitoring costs. The
assessments take into account known conditions, probable
conditions, regulatory requirements, past expenditures, and other
potentially responsible parties and their probable level of
involvement. Outside technical, scientific and legal consulting
services are used to support management's assessments of costs at
significant individual sites.
It is the Company's policy to accrue environmental
remediation costs for identified sites when it is probable that a
liability has been incurred and the amount of loss can be
reasonably estimated. The potential exposure for such costs is
estimated to range from $29 million to $55 million. At December
31, 1994, the Company's Balance Sheet includes accruals for
remediation costs of $50.5 million. These accruals are at
undiscounted amounts and are primarily included in accrued
expenses and other long-term liabilities. While the possibility
of recovery of some of the costs from insurance companies
exists, the Company does not recognize these recoveries in its
financial statements until they are realized. Actual costs to be
incurred at identified sites in future periods may vary from the
estimates, given inherent uncertainties in evaluating
environmental exposures.
With respect to all known environmental liabilities, the
Company's actual cash expenditures for remediation of previously
contaminated sites were $10.3 million in 1994, $8.3 million in
1993 and $7.3 million in 1992. The Company anticipates that
remedial cash expenditures will be in the $8 million to $12
million range during each of the following several years. For
the past three years, the Company's capital expenditures for
projects to eliminate, control or dispose of pollutants have
averaged approximately $2 million per year. The Company
anticipates environmental-related capital programs to be
approximately $6 million in 1995 and $4 million in 1996. The
Company's operating expenses to eliminate, control and dispose of
pollutants have averaged approximately $10 million per year
during the last three years. The Company anticipates that
environmental operating expenses will be approximately $12
million per year during 1995 and 1996.
<PAGE>
AUTOMOTIVE AIRBAGS
In 1989, Atlantic Research and AlliedSignal formed a 50/50 joint
venture, called Bendix Atlantic Inflator Company (BAICO), to
develop, produce and market hybrid inflators for automotive
airbag systems. The first deliveries of production units were
made in 1993 and shipments are expected to exceed one million
units in 1995. In 1993, Sequa Corporation, AlliedSignal and
Gilardini (a unit of the Fiat Group) formed an Italian company
(BAG/S.p.A.) to produce and market hybrid inflators for Fiat and
other European car companies. Each participant owns a one-third
interest in this venture, which is scheduled to make its first
deliveries to a European customer in June 1995.
The Company's equity loss in its unconsolidated airbag
business was $2.4 million in 1994 and $7.6 million in 1993.
Management currently anticipates that BAICO will achieve
profitability in late 1995 and BAG/S.p.A. will be profitable in
1997. The Company made investments in the airbag business of
$5.0 million during 1994 and $10.4 million during 1993 and
anticipates investing approximately $5.2 million during 1995.
In December 1994, BAICO entered into a $35 million revolving
credit agreement with a group of banks, which extends through
December 1995. Under the terms of the agreement, BAICO
borrowings are guaranteed equally by BAICO's partners. In
December 1994, BAICO borrowed $35 million under the facility and
remitted $17.5 million to each partner. Sequa accounted for the
$17.5 million it received as a financing activity in the
Consolidated Statement of Cash Flows and reduced its investment
in BAICO, which is carried as an equity investment. At December
31, 1994, the Company's equity in the losses of its airbag
business exceeded its investment by $9.5 million, and the
negative investment is included in Other long-term liabilities in
the Consolidated Balance Sheet.
<PAGE>
BACKLOG
The businesses of Sequa for which backlogs are significant are
the Kollsman division, the Turbine Airfoils, Caval Tool and
Castings units of Gas Turbine, and the ARC Propulsion operations
of the Aerospace segment; and the Can Machinery, MEG and Precoat
Metals operations of the Machinery and Metal Coatings segment.
The aggregate dollar amount of backlog in these units at December
31, 1994 was $448.3 million ($381.7 million at December 31,
1993).
CAPITAL SPENDING
Capital expenditures amounted to $59.2 million in 1994, with
spending concentrated in the Gas Turbine, metal coatings and
overseas chemicals operations. These funds were primarily used
to upgrade existing facilities and equipment and to expand
capacity. The single largest project was the completion of a new
metal coatings facility in Jackson, Mississippi. The Company
anticipates that capital spending in 1995 will be approximately
$70 million and will be concentrated in the Gas Turbine and
chemicals operations.
LIQUIDITY AND CAPITAL RESOURCES
Management anticipates that cash flow from operations, proceeds
from the divestiture of assets, the $92.3 million of credit
available under the revolving credit agreement, the $45.0 million
of available financing under the Receivables Purchase Agreement,
plus cash and cash equivalents on hand at December 31, 1994 will
be more than sufficient to fund the Company's operations for the
foreseeable future.
During 1994, the Company completed the sale of three Gas
Turbine units engaged primarily in activities other than the
repair of flight engine components for an aggregate sales price
of approximately $58.8 million, of which $57.2 million was
received in cash. Also during 1994, the Company received $17.5
million in proceeds from the financing arrangement of the
Company's automotive airbag joint venture and $25.0 million in
proceeds from the non-recourse securitization of the Company's
discontinued leveraged lease portfolio. Proceeds from these
transactions were used primarily to reduce debt of continuing
operations by $46.3 million, and to repurchase $45.0 million of
accounts receivable sold under the Receivables Purchase
Agreement.
The debt covenant that precluded the declaration of dividends
in the third and fourth quarters of 1993 was eliminated in 1994
when the Company completed the redemption of its 10 1/2% senior
subordinated notes. Pursuant to the terms of the Company's
senior notes due 2001 and the senior subordinated notes due 2003,
the Company's earnings before interest, taxes, depreciation and
amortization must be sufficient to maintain a consolidated
interest coverage ratio of 2 to 1 to permit the Company to pay
dividends and engage in other restricted activities. At
September 30, 1994, the
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (con't)
Company met the minimum consolidated interest coverage ratio and,
during the fourth quarter of 1994, the Company declared and paid
all preferred stock dividends in arrears. The minimum
consolidated interest coverage ratio was also met at December 31,
1994.
The Company's objectives are to return to profitability, to
continue to improve its capital structure, to resume common stock
dividend payments, and to regain an investment grade rating from
the major rating agencies.
<PAGE>
OPERATING RESULTS 1993-1992
SALES AND REVENUES
Sales and revenues from continuing operations declined 9% in
1993, primarily as a result of decreases at the Gas Turbine and
ARC propulsion units of the Aerospace segment and the overseas
unit of the Specialty Chemicals segment.
Aerospace segment sales declined 16% in 1993, principally as
a result of an 18% decline in sales of Gas Turbine, the Company's
largest individual operation. ARC Propulsion sales declined
approximately 20%, and the Kollsman division posted a 9% increase
in sales. More than half the decline in Gas Turbine's sales
occurred at the unit's largest facility in Orangeburg, New York,
which was severely affected by government investigations. Gas
Turbine installations were affected by sustained weakness in the
jet engine component repair and new parts market, as well as by
the continuing decline in the domestic defense market. The
reduction in sales of the ARC Propulsion unit primarily resulted
from reduced revenues on several rocket motor programs and the
completion of two other programs. Kollsman's sales increased
principally as a result of higher sales of military electro-
optical products.
Sales of the Machinery and Metal Coatings segment increased
7% in 1993. The metal coatings division posted a 15% increase in
sales, primarily as a result of strong demand from the building
products industry and improved market penetration of this key
market. Sales at the can machinery division advanced 4%, and
sales of the European press equipment unit declined 5% after
translation into US dollars.
Sales of the Specialty Chemicals segment declined 6%. At the
overseas unit, an increase in local currency sales of TAED was
more than offset by an unfavorable foreign currency translation
swing. At the domestic unit, sales were down marginally, as
weakness in the paper, textile and graphic arts markets was
largely offset by strength in the specialty polymer product line,
and by the sales added through a late-1992 acquisition.
Sales and revenues of the Professional Services and Other
Products segment increased 5% in 1993, as two of the four units
posted increases. Revenues of the ARC professional services
unit, which was sold in December 1993, increased to $162.6
million. Sales of the automotive products unit advanced sharply,
reflecting a stronger domestic automobile market. Sales of NCS
were on a par with 1992, as strong sales of can ends more than
offset the absence of sales from two can making plants which were
sold. Revenues of Centor, the real estate company, declined
modestly in 1993 primarily due to a lower occupancy rate in its
Missouri office building.
<PAGE>
OPERATING INCOME
Operating income declined 87% in 1993, primarily as a result of
the operating loss posted by Gas Turbine and the recording of
restructuring charges amounting to $26.6 million during the year.
The Aerospace segment posted a $40.9 million loss in 1993
compared to a profit of $75.5 million in 1992, primarily due to
losses at Gas Turbine. Gas Turbine was adversely affected by
three factors: the interruption of operations at the Orangeburg
facility; the charge to reflect a restructuring plan; and the
legal and other costs at the Orangeburg plant. ARC Propulsion
profits declined 28%, a reflection of lower sales and an
unfavorable sales mix shift, and Kollsman's profits increased
from a modest 1992 base, primarily as a result of improvements in
electro optics.
Operating profit in the Machinery and Metal Coatings segment
decreased 3% in 1993, as strength at the metal coatings unit and
improvement at the auxiliary press equipment unit were more than
offset by a decline in the can machinery operation.
Operating income in the Specialty Chemicals segment declined
11% in 1993, with both units down from the preceding year.
Strong overseas operating results were offset chiefly by
unfavorable foreign currency exchange movements and the
establishment of environmental clean-up and bad debt reserves.
The decline at the domestic unit resulted from the start-up of a
new product line, the cost to expand a European marketing effort,
and the effects of lower sales and an unfavorable sales mix
shift.
Operating income in the Professional Services and Other
Products segment more than doubled in 1993. Both ARC
professional services and the automotive products unit achieved
solid profit advances, and NCS moved from a loss in 1992 to a
modest profit in 1993. At Centor, profits declined from a
relatively low 1992 base, primarily as a result of lower rental
income.
During 1993, the Company recorded restructuring charges
totaling $26.6 million, primarily relating to plans adopted to
reduce Gas Turbine's investment in operations other than the
repair of components for flight engines, to sell excess
machinery, and to permanently reduce the number of employees.
INTEREST EXPENSE
In 1993, interest expense declined $6.6 million due to a lower
level of average borrowings related to the Company's cash
generation program.
<PAGE>
OTHER, NET
In 1993, Other, net included a $6.6 million mark-to-market loss
on interest rate options written; $3.1 million of discount
expense related to the sale of accounts receivable; a $3.1
million loss incurred on a sale and leaseback transaction; a $7.6
million equity loss in the Company's unconsolidated airbag
business; amortization of capitalized debt costs in the amount of
$4.2 million; and $2.5 million in charges for a minority
shareholder's interest in the earnings of ARC.
GOVERNMENT INVESTIGATIONS
During the second quarter of 1993, the Company entered into
agreements with the US Attorney's Office, Southern District of
New York (SDNY), and the Federal Aviation Administration (FAA) in
connection with investigations begun in November 1992 by these
offices and other related governmental agencies of the Company's
Orangeburg facility and certain of its then employees.
Throughout the investigations, the Company and the Orangeburg
facility cooperated fully with federal authorities. In addition,
the Company instituted extensive changes in the management and
operations of the facility. As a result of the Company's
cooperation with the government and its good faith efforts to
comply with all applicable FAA standards, the FAA restored the
facility's FAA repair station certificate on June 10, 1993,
ending the suspension of repair operations and resolving all FAA
civil matters related to the Orangeburg facility. Subsequently,
the US Attorney's Office, SDNY, declined to prosecute the Company
in connection with its investigation.
As a result of the investigations and the related suspension,
the Company incurred direct expenses in 1993 of $12.8 million.
Direct expenses included a remedial payment of $5.0 million to
the FAA, the deposit of an additional $2.5 million to cover the
cost of testing engine parts seized by federal authorities,
severance payments, and related legal fees and expenses.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------ -------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
the Board of Directors,
Sequa Corporation:
We have audited the accompanying consolidated balance sheet
of Sequa Corporation (a Delaware corporation) and subsidiaries as
of December 31, 1994 and 1993, and the related consolidated
statements of income, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1994.
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 financial position
of Sequa Corporation and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows
for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial
statements, effective January 1, 1992, the Company changed its
method of accounting for income taxes.
ARTHUR ANDERSEN LLP
New York, New York
March 17, 1995
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
(Amounts in thousands)
At December 31, 1994 1993
------------------------------------- ---------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 18,655 $ 24,780
Trade receivables, net (Note 2) 252,588 227,688
Unbilled receivables, net (Note 3) 35,688 55,451
Inventories (Note 4) 266,370 290,323
Other current assets 31,030 63,350
--------- ---------
Total current assets 604,331 661,592
--------- ---------
INVESTMENTS
Net assets of discontinued operations
(Note 5) 154,395 188,964
Other investments 19,085 17,179
--------- ---------
173,480 206,143
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, NET
(Note 6) 524,150 562,623
--------- ---------
OTHER ASSETS
Excess of cost over net assets of
companies acquired 325,530 348,696
Deferred charges and other 20,757 24,467
--------- ---------
346,287 373,163
--------- ---------
TOTAL ASSETS $1,648,248 $1,803,521
========== ==========
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Amounts in thousands, except share data)
At December 31,
----------------------------------
<CAPTION>
1994 1993
-------- -------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt
(Note 7) $ 15,231 $ 23,998
Accounts payable 118,429 114,529
Taxes on income (Note 8) 21,128 16,357
Accrued expenses (Note 9) 166,558 221,654
---------- ----------
Total current liabilities 321,346 376,538
---------- ----------
LONG-TERM DEBT, NET OF
CURRENT MATURITIES (Note 7) 586,574 624,092
---------- ----------
DEFERRED TAXES AND OTHER LONG-TERM
liabilities
Deferred taxes on income (Note 8) 9,494 27,039
Other long-term liabilities 164,343 200,068
---------- ----------
173,837 227,107
---------- ----------
SHAREHOLDERS' EQUITY (Notes 7, 12 and 13)
Preferred stock--$1 par value,
1,825,000 shares authorized; 797,000
shares of $5 cumulative convertible
stock issued at December 31, 1994
and 1993 (involuntary liquidation
value--$26,359 at December 31, 1994) 797 797
Class A common stock--no par value,
25,000,000 shares authorized; 7,188,000
shares issued at December 31, 1994 and
7,054,000 shares issued at
December 31, 1993 7,188 7,054
Class B common stock--no par value,
5,000,000 shares authorized; 3,727,000
shares issued at December 31, 1994
and 3,861,000 shares issued at
December 31, 1993 3,727 3,861
Capital in excess of par value 287,204 295,841
Cumulative translation adjustment (1,899)
(16,771)
Retained earnings 354,676 383,617
---------- ----------
651,693 674,399
Less: cost of treasury stock 85,202 98,615
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 566,491 575,784
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,648,248 $1,803,521
========== ==========
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
(Amounts in thousands, except per share)
Year ended December 31, 1994 1993 1992
------------------------------------- -------- -------- --------
<S> <C> <C> <C>
SALES AND REVENUES $1,419,550 $1,696,968 $1,868,341
---------- ---------- ----------
COSTS AND EXPENSES
Cost of sales and revenues 1,164,739 1,382,509 1,480,412
Selling, general and administrative 215,058 272,145 263,325
Restructuring charges (Note 14) - 26,640 -
---------- ---------- ----------
1,379,797 1,681,294 1,743,737
---------- ---------- ----------
OPERATING INCOME 39,753 15,674 124,604
OTHER INCOME (EXPENSE)
Interest expense (59,114) (66,501) (73,125)
Interest income 2,819 2,679 4,137
Gain on sale of ARC Professional
Services (Note 15) - 12,408 -
Other, net (Note 16) (11,353) (28,275) (11,816)
---------- ---------- ----------
(67,648) (79,689) (80,804)
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (27,895) (64,015) 43,800
Income tax benefit (provision) (Note 8) 3,200 8,557 (25,900)
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (24,695) (55,458) 17,900
Loss from discontinued operations (Note 5) - - (21,700)
---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (24,695) (55,458) (3,800)
Extraordinary loss on early retirement
of debt, net of applicable income
taxes (Note 7) (1,083) (8,524) -
Cumulative effect on prior years of change
in accounting for income taxes
(Notes 1 and 8) - - (7,337)
---------- ---------- ----------
NET LOSS (25,778) (63,982) (11,137)
Preferred dividend requirements (3,163) (3,163) (3,168)
---------- ---------- ----------
NET LOSS APPLICABLE TO COMMON STOCK $ (28,941) $ (67,145) $ (14,305)
========== ========== ==========
EARNINGS (LOSS) PER SHARE
Continuing operations $ (2.87) $ (6.07) $ 1.53
Discontinued operations - - (2.26)
---------- ---------- ----------
Loss before extraordinary item and
cumulative effect of accounting change (2.87) (6.07) (.73)
Extraordinary loss (.11) (.88) -
Cumulative effect on prior years of
change in accounting for income taxes - - (.76)
---------- ---------- ----------
Net loss $ (2.98) $ (6.95) $ (1.49)
========== ========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993 1992
----------------------------------- ------ ------- ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations
before income taxes $ (27,895) $ (64,015)$ 43,800
Adjustments to reconcile income (loss) to
net cash provided by operating activities:
Depreciation and amortization 103,974 110,061 117,792
Provision for losses on receivables 4,891 7,051 6,528
Gain on sale of ARC Professional Services - (12,408) -
Equity in losses of unconsolidated
joint ventures 2,154 7,097 4,243
Other items not requiring (providing) cash (79) 5,367 (3,350)
Changes in operating assets and liabilities,
net of businesses sold:
Receivables 18,877 1,535 53,959
Inventories (13,549) 16,158 25,027
Other current assets 28,743 (17,895) 3,024
Accounts payable and accrued expenses (32,671) 41,531 (8,560)
Other long-term liabilities (6,952) 28,915 (574)
--------- --------- --------
Net cash provided by continuing operations
before income taxes 77,493 123,397 241,889
Net cash provided by (used for) discontinued
operations before income taxes (Note 18) 28,228 2,750 (154,937)
Income taxes paid, net (10,444) (5,111) (25,146)
--------- --------- --------
Net cash provided by operating activities 95,277 121,036 61,806
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of minority interest in subsidiary (16,701) - -
Purchase of property, plant and equipment (59,241) (76,858) (92,685)
Sale of property, plant and equipment 8,492 29,628 4,801
Sale of businesses, net of cash sold 57,248 76,153 197,233
Other investing activities (10,139) (53) (9,127)
--------- --------- --------
Net cash provided by (used for) investing
activities (20,341) 28,870 100,222
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt, net of issuance costs 6,253 292,320 -
Payments of debt (21,214) (165,963)(140,340)
Early retirement of debt (34,839) (222,661) -
Dividends paid (3,956) (4,305) (8,628)
Proceeds from sale of accounts receivable - - 84,000
Repurchase of accounts receivable (45,000) (39,000) (90,000)
Proceeds from joint venture financing
arrangement 17,500 - -
--------- --------- --------
Net cash used for financing activities (81,256) (139,609)(154,968)
--------- --------- --------
Effect of exchange rate changes on cash
and cash equivalents 195 (324) (5,163)
--------- --------- --------
Net increase (decrease) in cash and cash
equivalents (6,125) 9,973 1,897
Cash and cash equivalents at beginning of year 24,780 14,807 12,910
--------- --------- --------
Cash and cash equivalents at end of year $ 18,655 $ 24,780 $ 14,807
========= ========= ========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<CAPTION>
Class A Class B Capital in Cumulative
(Amounts in thousands, Preferred Common Common Excess of Translation Retained
Treasury
except per share data) Stock Stock Stock Par Value Adjustment Earnings Stock
--------------------- --------- ------- ------- --------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 $ 797 $ 7,042 $3,873 $299,451 $ 19,205 $473,251 $(107,031)
------- ------- ------ -------- -------- -------- ---------
Net loss - - - - - (11,137) -
Revaluation and amortization
of restricted stock grant - - - (174) - - 245
Treasury stock contributed to
pension plan - - - (3,471) - - 8,031
Foreign currency translation
adjustment - - - - (29,788) - -
Cash dividends:
Class A - $.60 per share - - - - - (3,710) -
Class B - $.50 per share - - - - - (1,750) -
Preferred - $5.00 per share - - - - - (3,168) -
------- ------- ------ -------- -------- -------- ---------
BALANCE AT DECEMBER 31, 1992 $ 797 $ 7,042 $3,873 $295,806 $(10,583) $453,486 $ (98,755)
------- ------- ------ -------- -------- -------- ---------
Net loss - - - - - (63,982) -
Revaluation and amortization
of restricted stock grant - - - 35 - - 140
Exchange of common stock - 12 (12) - - - -
Foreign currency translation
adjustment - - - - (6,696) - -
Sale of foreign subsidiary - - - - 508 - -
Cash dividends:
Class A - $.30 per share - - - - - (1,854) -
Class B - $.25 per share - - - - - (870) -
Preferred - $2.50 per share - - - - - (1,581) -
Preferred dividends in arrears
- $2.50 per share* - - - - - (1,582) -
------- ------- ------ -------- -------- -------- ---------
BALANCE AT DECEMBER 31, 1993 $ 797 $ 7,054 $3,861 $295,841 $(16,771) $383,617 $ (98,615)
------- ------- ------ -------- -------- -------- ---------
Net loss - - - - - (25,778) -
Issuance and amortization
of restricted stock grant - - - (1,313) - - 1,366
Treasury stock contributed
to pension plan - - - (7,324) - - 12,047
Exchange of common stock - 134 (134) - - - -
Foreign currency translation
adjustment - - - - 12,897 - -
Sale of foreign subsidiary - - - - 1,975 - -
Cash dividends:
Preferred - $5.00 per share - - - - - (3,163) -
------- ------- ------ -------- -------- -------- ---------
BALANCE AT DECEMBER 31, 1994 $ 797 $ 7,188 $3,727 $287,204 $ (1,899) $354,676 $ (85,202)
======= ======= ====== ======== ======== ======== =========
<FN>
* Preferred dividends in arrears at December 31, 1993 were paid during the fourth quarter of 1994.
The accompanying notes are an integral part of the financial statements.
</TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Sequa Corporation (the
Company) include the accounts of all majority-owned subsidiaries,
including those of Sequa Receivables Corp. (SRC), a special
purpose corporation formed for the sale of eligible receivables.
Under the terms of the Receivables Purchase Agreement, SRC's
assets will be available to satisfy its obligations to its
creditors, which have security interests in certain of SRC's
assets, prior to any distribution to the Company. All material
accounts and transactions between the consolidated subsidiaries
have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of the Consolidated Statement of Cash Flows, the
Company considers time deposits, certificates of deposit and
marketable securities with original maturities of three months or
less to be cash equivalents. Where the right of set-off exists
the Company has netted overdrafts with unrestricted cash and cash
equivalents.
INVENTORIES AND CONTRACT ACCOUNTING
Inventories are stated at the lower of cost or market. The cost
of approximately 34% of inventories in 1994 and 1993 was
determined by the last-in, first-out (LIFO) method of inventory
valuation. The remaining non-contract related inventories are
valued principally on a first-in, first-out basis (FIFO).
Inventoried costs relating to long-term contracts are stated
at actual or average costs, including engineering and
manufacturing labor and related overhead incurred, reduced by
amounts identified with sales. The costs attributable to sales
reflect the estimated costs of all items to be produced under the
related contract.
PROPERTY, PLANT AND EQUIPMENT
For financial reporting purposes, depreciation and amortization
are computed using the straight-line method to amortize the cost
of assets over their estimated useful lives. Accelerated
depreciation methods are used for income tax purposes.
Upon sale or retirement of properties, the related cost and
accumulated depreciation is removed from the accounts, and any
gain or loss is reflected currently. Expenditures for
maintenance and repairs of $43,438,000 in 1994, $44,362,000 in
1993 and $46,393,000 in 1992 were expensed as incurred, while
betterments and replacements were capitalized.
<PAGE>
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
EXCESS OF COST OVER NET ASSETS OF COMPANIES ACQUIRED
Excess of cost over net assets of companies acquired (goodwill)
is being amortized on a straight-line basis over periods not
exceeding forty years. The Company evaluates goodwill impairment
at the end of each year based on recoverability measured by
undiscounted estimated operating profits (i.e., pre-tax earnings
before interest expense and goodwill amortization). Under this
approach, the carrying value would be reduced if it is probable
that management's best estimate of future operating profits
during the goodwill amortization period will be less than the
carrying amount of the related goodwill. The amortization
charged against earnings in 1994, 1993 and 1992 was $10,440,000,
$10,821,000 and $10,807,000, respectively. Accumulated
amortization at December 31, 1994 and 1993 was $84,002,000 and
$73,562,000, respectively.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of the Company's
foreign subsidiaries are measured using local currency as the
functional currency. Assets and liabilities of operations
denominated in foreign currencies are translated into US dollars
at exchange rates in effect at year-end, while revenues and
expenses are translated at average exchange rates prevailing
during the year. The resulting translation gains and losses are
charged directly to cumulative translation adjustment, a
component of shareholders' equity, and are not included in net
income until realized through sale or liquidation of the
investment. Foreign exchange gains and losses incurred on
foreign currency transactions are included in net income.
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," was implemented by the Company in the first quarter of
1993. This statement requires the expected costs of providing
postretirement benefits to be accrued during the years an
employee provides services rather than the Company's past
practice of recognizing these costs on the pay-as-you-go (cash)
basis. At January 1, 1993, the Company's date of adoption, the
actuarial present value of the accumulated benefit obligation for
postretirement health care and other insurance benefits provided
to certain retirees was $3,074,000. The Company is recognizing
this transition obligation using the delayed recognition basis by
amortizing the obligation on a straight-line basis over twenty
years. The implementation of SFAS No. 106 in 1993 did not have a
material impact on the Company's results of operations and had no
effect on the Company's cash outlays for these retiree benefits.
SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," was issued in November 1992 and was implemented in the
first quarter of 1994. This statement requires benefits to
former employees after employment, but before retirement, to be
accrued
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
when it is probable that a liability has been incurred and the
amount can be reasonably estimated. The impact of adopting SFAS
No. 112 did not have a material effect on the Company's results
of operations or financial position.
DERIVATIVE FINANCIAL INSTRUMENTS
It is the Company's current policy that the treasurer has the
authority to enter into interest-related derivative transactions
in the amounts and for the purposes to be stipulated by the board
of directors and the management executive committee. The
treasurer must obtain approval from the committee prior to
entering into any derivative transaction and the treasurer is
responsible for monthly reporting of market values of derivative
activities to the committee. The Company had no interest-related
derivatives outstanding at December 31, 1994.
The Company accounts for interest rate swaps as hedges
provided that the derivative changes the nature of a designated
debt instrument is on the Company's Balance Sheet and the
underlying debt obligation has a principal balance equal to or
greater than the notional amount of the related derivative. In
accordance with hedge accounting, any gains or losses from
changes in the value of the swaps are deferred and interest
expense on the hedged debt instrument is recorded using the
interest rate as effectively revised by the related swap. If the
principal amount of the particular debt instrument being hedged
falls below the notional amount of the related swap, the excess
portion of the derivative is marked to market and the resulting
gain or loss is included in interest expense. Gains or losses on
terminated interest rate swaps that were accounted for as hedges
are deferred and amortized to interest expense over the original
lives of the terminated swaps.
The Company accounts for interest rate options written, other
complex interest-related derivative instruments, and forward
foreign exchange contracts that hedge anticipated transactions
under non-hedge accounting. Accordingly, the market values of
these financial instruments are recorded in the Company's Balance
Sheet at the reporting date and changes in fair values are
recognized in income during the period in which the changes
occur.
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
ENVIRONMENTAL REMEDIATION AND COMPLIANCE
It is the Company's policy to accrue environmental remediation
costs for identified sites when it is probable that a liability
has been incurred and the amount of loss can be reasonably
estimated. Accrued environmental remediation and compliance
costs include remedial investigation and feasibility studies,
outside legal, consulting and remediation project management
fees, projected cost of remediation activities, site closure and
post-remediation monitoring costs. The potential exposure for
such costs is estimated to range from $29,000,000 to $55,000,000.
At December 31, 1994, the Company's Balance Sheet includes
accruals for remediation costs of $50,537,000. These accruals
are at undiscounted amounts and are primarily included in accrued
expenses and other long-term liabilities. While the possibility
of recovery of some of the costs from insurance companies exists,
the Company does not recognize these recoveries in its financial
statements until they are realized. Actual costs to be incurred
at identified sites in future periods may vary from the
estimates, given inherent uncertainties in evaluating
environmental exposures.
REVENUE RECOGNITION
Generally, sales and revenues are recorded when products are
shipped or services are rendered. Long-term contracts are
accounted for under the percentage-of-completion method whereby
sales and revenues are primarily recognized based upon costs
incurred as a percentage of estimated total costs, and gross
profits are recognized under a more conservative "efforts-
expended method" primarily based upon direct labor costs incurred
as a percentage of estimated total direct labor costs. Changes
in estimates for sales and revenues, costs and gross profits are
recognized in the period in which they are determinable using the
cumulative catch-up method. Any anticipated losses on contracts
are charged to current operations as soon as they are
determinable.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred
and amounted to approximately $14,317,000 in 1994, $17,166,000 in
1993 and $17,557,000 in 1992.
INCOME TAXES
The Company adopted the provisions of SFAS No. 109, "Accounting
for Income Taxes," as of January 1, 1992, and the cumulative
effect of this change is reported separately in the 1992
Consolidated Statement of Income. The $7,337,000 charge recorded
as of the beginning of 1992 for the cumulative effect on prior
years of the change in the method of accounting for income taxes
primarily represents the impact of adjusting deferred taxes
recorded for assets and liabilities acquired in purchase business
combinations.
In connection with the Company's periodic reevaluation of
foreign earnings estimated to be indefinitely reinvested,
deferred income taxes of $14,000,000 were provided in 1993 for
the repatriation of foreign undistributed earnings in the form of
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
dividends. Provision has not been made for US or additional
foreign taxes on $163,120,000 of undistributed earnings of
foreign subsidiaries as those earnings are intended to be
permanently reinvested. Such earnings would become taxable upon
the sale or liquidation of these foreign subsidiaries or upon the
remittance of dividends. It is not practicable to estimate the
amount of deferred tax liability on foreign undistributed
earnings which are intended to be permanently reinvested.
EARNINGS PER SHARE
Primary earnings per share for each of the respective years has
been computed by dividing the net earnings, after deducting
dividend requirements on cumulative convertible preferred stock,
by the weighted average number of common and common equivalent
shares outstanding during the year. The weighted average number
of common and common equivalent shares for 1994, 1993 and 1992
was 9,722,000 shares, 9,655,000 shares and 9,620,000 shares,
respectively.
Fully diluted earnings per common share calculations for the
assumed conversion of the cumulative convertible preferred stock
were anti-dilutive in 1994, 1993 and 1992.
NOTE 2. TRADE RECEIVABLES, NET
Sequa Receivables Corporation (SRC), a wholly owned special
purpose subsidiary of the Company, has a Receivables Purchase
Agreement with a group of banks, under which it is able to sell
up to $45,000,000 of Company receivables without recourse through
March 1997.
At December 31, 1993, receivables as shown in the
Consolidated Balance Sheet were net of $45,000,000 of receivable
interests sold under the agreement. At December 31, 1994 all
such receivables had been repurchased by the Company. Other,
net, in the Consolidated Statement of Income includes discount
expenses of $1,829,000 in 1994, $3,136,000 in 1993 and $3,912,000
in 1992 related to the sale of receivables under this agreement.
Trade receivables at December 31, 1994 and 1993 have been
reduced by allowances for doubtful accounts of $12,448,000 and
$10,892,000, respectively.
NOTE 3. UNBILLED RECEIVABLES, NET
Unbilled receivables, net consist of the following:
<TABLE>
<CAPTION>
(Amounts in thousands)
At December 31, 1994 1993
-------------------------------- ---- ----
<S> <C> <C>
Fixed-price contracts $32,005 $51,950
Cost-reimbursement contracts 3,683 3,501
------- -------
$35,688 $55,451
======= =======
</TABLE>
<PAGE>
NOTE 3. UNBILLED RECEIVABLES, NET (con't)
Unbilled receivables on fixed-price contracts arise as revenues
are recognized under the percentage of completion method. These
amounts are billable at specified dates, when deliveries are made
or at contract completion, which is expected to occur within one
year. All amounts included in unbilled receivables are related
to long-term contracts and are reduced by appropriate progress
billings.
Unbilled amounts on cost-reimbursement contracts represent
recoverable costs and accrued profits not yet billed. These
amounts are billable upon receipt of contract funding, final
settlement of indirect expense rates, or contract completion.
Allowances for estimated nonrecoverable costs are primarily
to provide for losses which may be sustained on contract costs
awaiting funding and for the finalization of indirect expenses.
Unbilled amounts at December 31, 1994 and 1993 are reduced by
allowances for estimated nonrecoverable costs of $2,723,000 and
$13,165,000, respectively.
<TABLE>
NOTE 4. INVENTORIES
The components of inventories are as follows:
(Amounts in thousands)
<CAPTION>
At December 31, 1994 1993
------------------------------ ---- ----
<S> <C> <C>
Finished goods $ 70,514 $ 75,284
Work in process 64,312 100,341
Raw materials 130,596 111,866
Long-term contract costs 7,728 9,097
Progress payments (5,231) (4,441)
-------- --------
267,919 292,147
Adjustment to reduce
carrying value to LIFO basis (1,549) (1,824)
-------- --------
$266,370 $290,323
======== ========
</TABLE>
NOTE 5. DISCONTINUED OPERATIONS
During 1991, the Company adopted a formal plan to divest Sequa
Capital's investment portfolio and to sell a group of businesses
which it classified as discontinued operations. The Company
recorded a $25,000,000 pre-tax charge ($15,500,000 after-tax) in
1991 and a $35,000,000 pre-tax charge ($21,700,000 after-tax) in
1992 to provide for losses from the operation and disposal of
discontinued operations. Losses during 1994 and 1993 were
charged to reserves established during 1992 and 1991 for this
purpose.
The Company generated cash proceeds of $197,233,000 in 1992
and $2,832,000 in 1993 from the sale of discontinued assets. As
of December 31, 1994, approximately $341,500,000 of Sequa
Capital's investment portfolio had been sold, written down or
otherwise disposed of since the Company adopted a formal plan to
divest the portfolio. During the same period, the Company repaid
approximately $367,000,000 of Sequa Capital's debt. Debt of
discontinued operations at December 31, 1994 represents the
<PAGE>
NOTE 5. DISCONTINUED OPERATIONS (con't)
remaining principal amount of the $25,000,000 in proceeds
received from the non-recourse securitization of Sequa Capital's
leveraged lease portfolio in 1994. The leveraged lease cash flow
stream will service the payment of principal and interest until
the loan is paid off. Subsequent to the payment of the secured
indebtedness, the remaining investment in leveraged leases will
be liquidated over time as rentals are received and residual
values are realized. Disposal activities are ongoing for other
discontinued assets.
Net assets of discontinued operations approximate net
realizable value and have been classified as noncurrent. A
summary of the net assets of discontinued operations is as
follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
At December 31, 1994 1993
------------------------------- ------ ------
<S> <C> <C>
Funds designated for use by
Sequa Capital $ - $ 571
Receivables 6,774 6,380
Inventories 9,788 10,354
Investment in leveraged leases and
other investments 163,857 176,363
Property, plant and equipment, net 3,515 3,519
Other assets 10,861 11,818
-------- --------
Total assets 194,795 209,005
-------- --------
Accounts payable 2,550 2,756
Accrued expenses 12,023 15,776
Debt 24,657 -
Other long-term liabilities 1,170 1,509
-------- --------
Total liabilities 40,400 20,041
-------- --------
Net assets of discontinued operations $154,395 $188,964
======== ========
</TABLE>
<TABLE>
NOTE 6. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consists of the following:
(Amounts in thousands)
<CAPTION>
At December 31, 1994 1993
------------------------------ ---- ----
<S> <C> <C>
Land and improvements $ 51,418 $ 47,799
Buildings and improvements 247,590 240,738
Machinery and equipment 731,439 691,412
Construction in progress 23,777 49,815
---------- ----------
1,054,224 1,029,764
Accumulated depreciation (530,074) (467,141)
---------- ----------
$ 524,150 $ 562,623
========== ==========
</TABLE>
<PAGE>
<TABLE>
NOTE 7. INDEBTEDNESS
Long-term debt is as follows:
<CAPTION>
(Amounts in thousands)
At December 31, 1994 1993
----------------------------------- ---- ----
<S> <C> <C>
Senior unsecured notes, at 9 5/8%,
due 1999 $150,000 $150,000
Senior unsecured notes, at 8 3/4%, due 2001 125,000 125,000
Medium-term notes, at a weighted average
interest rate of 9.9%, payable in varying
amounts from 1996 through 2001 100,000 100,000
Private placement, at 10.27%, due 1994 - 15,000
Senior subordinated notes, at 10 1/2%,
due 1998 - 33,450
Senior subordinated notes, at 9 3/8%,
due 2003 175,000 175,000
Capital lease obligations, at a weighted
average interest rate of 9.3%, payable
in varying amounts through 2004 24,094 27,025
Other, at weighted average interest rates of
5.6% and 7.0%, respectively, payable in
varying amounts through 2003 27,711 22,615
-------- --------
601,805 648,090
Less current maturities (15,231) (23,998)
-------- --------
TOTAL LONG-TERM DEBT $586,574 $624,092
======== ========
</TABLE>
In December 1993, the Company entered into a $150,000,000
revolving credit agreement with a group of banks that extends
through March 1997. The rate of interest payable under the
agreement is, at the Company's option, a function of the prime
rate or the Eurodollar rate. The agreement requires the Company
to pay a facility fee at an annual rate of 0.5% of the maximum
amount available under the credit line. Under the credit
facility, borrowings of up to approximately $50,000,000 will be
secured by the stock of certain of the Company's subsidiaries.
At December 31, 1994, there were no borrowings outstanding under
this facility; however, $57,726,000 of the available credit line
was used for the issuance of letters of credit leaving
$92,274,000 of unused credit available.
<PAGE>
NOTE 7. INDEBTEDNESS (con't)
In December 1993, the Company sold $125,000,000 of 8 3/4%
senior unsecured notes due 2001 and $175,000,000 of 9 3/8% senior
subordinated notes due 2003, pursuant to a public offering. The
net proceeds from the offering, together with proceeds from the
sale of ARC Professional Services, were used to repay $90,000,000
of indebtedness under the Company's existing revolving credit
agreement; to repay $35,000,000 of the private placement due
1994; and to execute a partial in-substance defeasance of the
Company's senior subordinated notes due 1998. In December 1993,
the Company called $211,000,000 principal amount of the senior
subordinated notes for redemption in January and February 1994
and deposited $222,661,000 of US government securities into an
irrevocable trust to cover the principal amount called, the call
premium of $9,847,000 and interest during the 30-day call period
of $1,814,000. For financial reporting purposes, the debt was
considered extinguished. Accordingly, the government securities,
the principal amount of senior subordinated notes due 1998 and
related unamortized debt issuance costs were removed from the
Consolidated Balance Sheet at December 31, 1993. The in-
substance defeasance transaction resulted in an extraordinary
loss of $8,524,000, net of tax benefits of $4,590,000.
In April 1994, the Company called the remaining $33,450,000
principal amount of the senior subordinated notes due 1998 and
deposited $34,839,000 of US government securities into an
irrevocable trust to cover the principal amount called, the call
premium of $1,171,000 and net interest expense of $218,000 during
the 30-day call period. The in-substance defeasance transaction
resulted in an extraordinary loss of $1,083,000 in 1994, net of
tax benefits of $583,000.
The aggregate maturities of total long-term debt during the
next five years are $15,231,000 in 1995, $25,724,000 in 1996,
$2,199,000 in 1997, $28,061,000 in 1998 and $151,285,000 in 1999.
The Company's loan agreements and indentures contain
covenants which, among other matters, restrict or limit the
ability of the Company to pay dividends, incur indebtedness, make
capital expenditures, repurchase common and preferred stock, and
repurchase the 9 3/8% senior subordinated notes due 2003. The
Company must also maintain certain ratios regarding interest
coverage, leverage and net worth, among other restrictions.
<PAGE>
NOTE 7. INDEBTEDNESS (con't)
The debt covenant that precluded the declaration of dividends
in the third and fourth quarters of 1993 was eliminated in 1994
when the Company completed the redemption of its 10 1/2% senior
subordinated notes. Pursuant to the terms of the Company's
senior notes due 2001 and the senior subordinated notes due 2003,
the Company's earnings before interest, taxes, depreciation and
amortization must be sufficient to maintain a consolidated
interest coverage ratio of 2 to 1 to permit the Company to pay
dividends and engage in other restricted activities. At
September 30, 1994, the Company met the minimum consolidated
interest coverage ratio and, during the fourth quarter of 1994,
the Company declared and paid all preferred stock dividends in
arrears. The minimum consolidated interest coverage ratio was
also met at December 31, 1994.
<TABLE>
NOTE 8. INCOME TAXES
The components of income (loss) from continuing operations before
income taxes were:
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993 1992
------------------------------- ---- ---- ----
<S> <C> <C> <C>
Domestic $(60,667) $(93,507) $ 13,371
Foreign 32,772 29,492 30,429
-------- -------- --------
$(27,895) $(64,015) $ 43,800
======== ======== ========
</TABLE>
The income tax provision (benefit) on income (loss) from
continuing operations consisted of the following:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993 1992
-------------------------------- ---- ---- ----
<S> <C> <C>
United States Federal
Current $ 4,668 $ 2,084 $(20,327)
Deferred (23,064) (19,776) 29,257
State and local 5,131 (119) 8,280
Foreign 10,065 9,254 8,690
-------- -------- --------
$ (3,200) $ (8,557) $ 25,900
======== ======== ========
</TABLE>
<PAGE>
NOTE 8. INCOME TAXES (con't)
The income tax provision (benefit) on income (loss) is different
from the amount computed by applying the US Federal statutory
income tax rate of 35% in 1994 and 1993 and 34% in 1992 to income
(loss) from continuing operations before income taxes. The
reasons for this difference are as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993 1992
---------------------------------- ---- ---- ----
<S> <C> <C> <C>
Computed income taxes at statutory
rate $ (9,763) $(22,405) $14,892
Foreign subsidiaries at different
tax rates (1,303) 3,931 (656)
State and local taxes, net of
Federal income tax benefit 3,883 (1,164) 6,236
Benefit from Foreign Sales
Corporations (670) (767) (1,273)
Book basis of assets over (under)
tax basis 3,598 (2,818) 6,365
Taxes on undistributed foreign
earnings - 14,000 -
Effect of tax rate change - (2,012) -
Other, net 1,055 2,678 336
------- -------- --------
$(3,200) $ (8,557)$ 25,900
======= ======== ========
</TABLE>
As discussed in Note 1, Summary of Significant Accounting
Policies, the Company adopted SFAS No. 109 as of January 1, 1992
and the cumulative effect of this change is reported separately
in the 1992 Consolidated Statement of Income.
The deferred tax provision represents the change in deferred
tax liabilities and assets from the beginning of the year to the
end of the year resulting from changes in the temporary
differences between the financial reporting basis and the tax
basis of the Company's assets and liabilities.
<PAGE>
NOTE 8. INCOME TAXES (con't)
Temporary differences and carryforwards which gave rise to
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
At December 31, 1994
-------------------------------- --------------------
Deferred Deferred
Tax Tax
Assets Liabilities
------ -----------
<S> <C> <C>
Accounts receivable allowances $ 3,196 $ -
Inventory valuation differences 17,808 5,069
Recognition of income on
long-term contracts 4,321 7,034
Depreciation 15,286 60,063
Lease and finance transactions - 105,821
Accruals not currently deductible
for tax purposes 97,008 -
Taxes on undistributed foreign earnings - 9,632
Tax net operating loss carryforward 67,297 -
Tax capital loss carryforward 2,156 -
Alternative minimum tax (AMT)
credit carryforward 26,661 -
Other tax credit carryforwards 6,881 -
All other 21,323 18,871
-------- --------
Subtotal 261,937 206,490
Valuation allowance (6,075) -
-------- --------
Total deferred taxes $255,862 $206,490
======= ========
</TABLE>
<TABLE>
<CAPTION>
(Amounts in thousands)
At December 31, 1993
-------------------------------- ---------------------
Deferred Deferred
Tax Tax
Assets Liabilities
------ -----------
<S> <C> <C>
Accounts receivable allowances $ 3,002 $ -
Inventory valuation differences 18,912 4,728
Recognition of income on
long-term contracts 646 1,286
Depreciation 12,125 59,879
Lease and finance transactions - 94,682
Accruals not currently deductible
for tax purposes 99,723 -
Taxes on undistributed foreign earnings - 14,000
Tax net operating loss carryforward 31,146 -
Tax capital loss carryforward 33,448 -
Alternative minimum tax (AMT)
credit carryforward 36,681 -
All other 26,367 16,637
-------- --------
Subtotal 262,050 191,212
Valuation allowance (33,448) -
-------- --------
Total deferred taxes $228,602 $191,212
======== ========
</TABLE>
<PAGE>
NOTE 8. INCOME TAXES (con't)
The Company has a tax capital loss carryforward of $6,159,000
at December 31, 1994 that most likely will expire unutilized in
1995 and 1998. A valuation allowance has been established to
reduce the deferred tax asset recorded for the capital loss
carryforward to zero and to reduce the tax asset recorded for
certain tax credits which may expire unutilized in 1998 through
2008. The AMT credit carryforward does not expire and can be
carried forward indefinitely. The Company has a tax net
operating loss carryforward of $192,276,000 at December 31, 1994
that expires in 2006 through 2009.
Although the Company has experienced book and tax domestic
losses in the past four years, management believes that the
Company will return to profitability and will be able to utilize
its domestic net operating loss carryforwards before expiration
through future reversals of existing taxable temporary
differences and future earnings. The losses were largely
attributable to loss provisions recorded during 1991 and 1992 for
the Company's discontinued leasing unit, the government
investigation of jet engine component repairs and repair
procedures at Gas Turbine's Orangeburg plant, the Gas Turbine
restructuring charges and the persistent difficulties of
overcapacity and pricing pressure in the airline marketplace
which resulted in Gas Turbine -- a consistent contributor to
profits in the past -- operating at a loss during 1993 and 1994.
The Company has divested itself of a significant portion of Sequa
Capital's assets, is downsizing and restructuring the Gas Turbine
operation, has resumed FAA repair operations at Gas Turbine's
Orangeburg plant and has decreased interest expense by
significantly reducing debt levels.
The Company's ability to generate the expected amounts of
domestic taxable income from future operations is dependent upon
general economic conditions, the state of the airline industry,
competitive pressures on revenues and margins, and other factors
beyond management's control. There can be no assurance that the
Company will meet its expectations for future domestic taxable
income in the carryforward period; however, management has
considered the above factors in reaching the conclusion that it
is more likely than not that future domestic taxable income will
be sufficient to fully realize the net domestic deferred tax
assets at December 31, 1994.
<PAGE>
<TABLE>
NOTE 9. ACCRUED EXPENSES
The Company's accrued expenses consisted of the following items:
<CAPTION>
(Amounts in thousands)
At December 31, 1994 1993
--------------------------------- ---- ----
<S> <C> <C>
Salaries and wages $ 36,769 $ 34,052
Restructuring costs 6,325 20,689
Current portion of environmental
liabilities 9,500 9,500
Current portion of self-insurance
liabilities 8,000 9,000
Current portion of pension liabilities 2,140 6,934
Warranty 6,434 9,848
Legal 6,151 6,884
Royalties 4,808 5,100
Interest 6,399 8,031
Insurance 5,255 6,402
Loss on interest rate options written - 6,557
Billings in excess of revenue recognized 1,911 3,037
Taxes other than income 4,410 4,962
Other 68,456 90,658
-------- --------
$166,558 $221,654
======== ========
</TABLE>
NOTE 10. FINANCIAL INSTRUMENTS
The Company has had limited involvement with derivative financial
instruments and does not use them for trading purposes. During
1993, the Company received proceeds of $9,796,000 from the early
termination of interest rate swaps that were accounted for as
hedges and that effectively converted $75,000,000 of fixed-rate
debt into variable-rate borrowings. The resulting gains were
deferred and are being amortized to income over the remaining
original lives of the swaps terminated. In December 1994, the
Company closed out all of its outstanding interest-related
derivatives for a cash payment of $7,729,000, the approximate net
carrying value of these instruments.
The Company's weighted average borrowing rate was 9.4% during
1994 and 1993 and 9.2% during 1992. The Company's hedging
activities related to interest rate swaps reduced interest
expense by $335,000 (or 5 basis points) during 1994; $2,443,000
(or 35 basis points) during 1993; and $2,143,000 (or 27 basis
points) during 1992. Deferred gains on terminated interest rate
swaps amounted to $6,856,000 and $9,960,000 at December 31, 1994
and 1993, respectively. Amortization of such deferred gains will
serve to reduce interest expense by $3,104,000, $2,169,000 and
$1,524,000 during 1995, 1996 and 1997, respectively.
<PAGE>
NOTE 10. FINANCIAL INSTRUMENTS (con't)
During 1993, certain interest rate options being accounted
for as hedges were restructured into non-hedge instruments. A
mark-to-market loss of $6,557,000 was charged to Other, net in
1993 on these options. Early in 1994, the options were further
restructured and a related derivative transaction was entered
into. In 1994, Other, net includes $2,394,000 of losses on this
derivative and the two restructured options. All interest-
related derivatives were closed out as of December 31, 1994 with
no further loss.
Forward exchange contracts are utilized by the Company's
specialty chemicals operation in the United Kingdom to hedge
anticipated but not yet committed sales and purchases to be
denominated in currencies other than the pound sterling. These
contracts, the terms of which are shorter than one year,
primarily involve the purchase of Swedish kroner and the sale of
German marks at a specified range of exchange rates with the
pound sterling. Accordingly, these contracts limit, but do not
eliminate, the effects of exchange rate movements on sales of
products to foreign customers and purchases from foreign
suppliers.
The following table indicates the notional amounts of the
Company's outstanding derivative financial instruments:
<TABLE>
<CAPTION>
(Amounts in thousands)
At December 31, 1994 1993
----------------------------------- ---- ----
<S> <C> <C>
Interest rate swaps $ - $ 50,000
Interest rate options written - 50,000
Complex interest derivatives - 150,000
Forward foreign exchange contracts 27,303 17,046
</TABLE>
<PAGE>
<PAGE>
<TABLE>
NOTE 10. FINANCIAL INSTRUMENTS (con't)
The following table presents the carrying amounts and fair values of
the Company's financial instruments:
<CAPTION>
(Amounts in thousands)
At December 31, 1994 1993
------------------------ ------------------ -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------- ------
<S> <C> <C> <C> <C>
Assets:
Forward foreign exchange
contracts $ 66 $ 66 $ 391 $ 391
Complex interest
derivatives - - 49 49
Liabilities:
Current and long-term
debt 601,805 548,000 648,090 669,000
Interest rate swaps - - - 5,195
Interest rate options
written - - 6,557* 6,557
<FN>
* Included in Accrued expenses in the accompanying Consolidated Balance
Sheet.
</TABLE>
The fair value of the Company's debt is primarily based upon quoted
market prices of the Company's publicly traded debt securities. Fair
values assigned to derivative financial instruments represent the amounts
the Company could settle with the counterparties to terminate the financial
instruments outstanding.
At December 31, 1994, the Company was contingently liable for
outstanding letters of credit, not reflected in the accompanying
consolidated financial statements, in the aggregate amount of $88,059,000.
The Company is not currently aware of any existing conditions which would
cause risk of loss relative to outstanding letters of credit. The Company
was also contingently liable at December 31, 1994 for $17,500,000 in
guarantees of debt owed by one of the Company's unconsolidated joint
ventures. The Company believes that its unconsolidated joint venture will
be able to perform under its payment obligations in connection with such
guaranteed indebtedness.
<PAGE>
<TABLE>
NOTE 11. PENSION PLANS AND POSTRETIREMENT BENEFITS
The Company sponsors various noncontributory defined benefit pension
plans covering certain hourly and most salaried employees. The defined benefit
plans provide benefits based primarily on the participant's years of service
and compensation. It has been the Company's policy to fund domestic plans to
meet the minimum funding requirements of the Employee Retirement Income
Security Act (ERISA).
The status of all the Company's significant funded domestic and foreign
defined benefit plans was as follows:
<CAPTION>
(Amounts in thousands)
At December 31, 1994 1993
-------------------------- ---------------------- ---------------------
Assets Accumulated Assets
Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 66,047 $96,743 $ 64,381 $ 93,324
Accumulated benefit obligation 67,978 98,846 65,451 95,865
Projected benefit obligation 72,798 106,442 72,148 105,452
Plan assets at fair value 71,931 93,076 70,966 92,144
-------- ------- ------- --------
Projected benefit obligation in
excess of plan assets 867 13,366 1,182 13,308
Unrecognized net transition asset
(obligation) (1,897) 6,599 (1,440) 7,487
Unrecognized prior service cost (1,598) (939) (1,935) 909
Unrecognized net gain (loss) 3,205 (11,639) 5,922 (11,105)
Adjustment needed to recognize
minimum liability - 1,183 - 699
-------- ------- ------- --------
Total pension liability $ 577 $ 8,570 $ 3,729 $ 11,298
======== ======= ======= ========
Included in:
Deferred charges $ (1,106) $ - $ - $ -
Accrued expenses 1,545 595 1,825 5,109
Other long-term liabilities 138 7,975 1,904 6,189
-------- ------- ------- --------
Total pension liability $ 577 $ 8,570 $ 3,729 $ 11,298
======== ======= ======= ========
<FN>
The plans' assets consist primarily of listed common stock, pooled equity funds
and index funds. At December 31, 1994 and 1993, the plans' assets included
Company stock with market values of $11,927,000 and $9,498,000, respectively.
</TABLE>
<PAGE>
<TABLE>
NOTE 11. PENSION PLANS AND POSTRETIREMENT BENEFITS (con't)
Assumptions used in the accounting for all the Company's
significant funded domestic and foreign defined benefit plans
were:
<CAPTION>
At December 31, 1994 1993 1992
---------------------------- ---- ---- ----
<S> <C> <C> <C>
Discount rate for obligations 8.5% 7.5% 8.5%
Rate of increase in compensation levels 4.5% 4.5% 5.5%
Expected long-term rate of return on
plan assets 9.0% 9.0% 9.0%
</TABLE>
The periodic net pension cost of all the Company's significant
funded domestic and foreign defined benefit plans includes the
following components:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993 1992
------------------------------- ---- ---- ----
<S> <C> <C> <C>
Service cost for benefits earned $ 8,099 $ 7,255 $ 8,408
Interest cost on projected benefit
obligation 13,807 12,532 12,170
Actual (return) loss on plan assets 2,539 (25,108) (9,175)
Net amortization and deferral (17,354) 11,623 (4,838)
------- ------- -------
$ 7,091 $ 6,302 $ 6,565
======= ======= =======
</TABLE>
The net amortization and deferral component of pension cost
includes $16,868,000 of deferred asset losses in 1994,
$12,379,000 of deferred asset gains in 1993, and $3,615,000 of
deferred asset losses in 1992. These unrecognized gains and
losses resulted from actual returns on plan assets differing from
the expected returns on plan assets. Such deferred gains and
losses are subject to amortization in future periods. Pension
expense includes a curtailment loss of $434,000 in 1994 and a
curtailment gain of $568,000 in 1992.
Employees not covered by the defined benefit plans discussed
above generally are covered by multiemployer plans as part of
collective bargaining agreements or small local plans. Pension
expense for these multiemployer plans and small local plans was
not significant in the aggregate.
The Company also has several nonfunded supplemental executive
retirement plans for certain key executives. These plans provide
for benefits that supplement those provided by the Company's
other retirement plans. At December 31, 1994, the projected
benefit obligation for these plans of $10,252,000 is included in
Other long-term liabilities in the accompanying Consolidated
Balance
<PAGE>
<PAGE>
NOTE 11. PENSION PLANS AND POSTRETIREMENT BENEFITS (con't)
Sheet. The expense for these plans was $1,824,000 in 1994,
$1,919,000 in 1993, and $2,221,000 in 1992.
Most of the Company's domestic non-union employees are
eligible to participate in the Company's 401(k) plans. Expenses
recorded for the Company's matching contributions under these
plans were $4,978,000 in 1994, $7,146,000 in 1993, and $8,602,000
in 1992.
SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," was implemented by the Company in
the first quarter of 1993. This statement requires the expected
costs of providing postretirement benefits to be accrued during
the years an employee provides services rather than the Company's
past practice of recognizing these costs on the pay-as-you-go
(cash) basis. At January 1, 1993, the Company's date of
adoption, the actuarial present value of the accumulated benefit
obligation for postretirement health care and other insurance
benefits provided to certain retirees was $3,074,000. The
Company is recognizing this transition obligation using the
delayed recognition basis by amortizing the obligation on a
straight-line basis over 20 years.
The actuarial and recorded liabilities for these post-
retirement benefits, none of which have been funded, are as
follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
At December 31, 1994 1993
---------------------------------- ------ ------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $1,963 $ 2,056
Employees fully eligible 272 282
Other active participants 633 650
----- -----
Total 2,868 2,988
Unrecognized net gain 205 51
Unrecognized transition obligation (2,767) (2,921)
------ -------
Postretirement benefit liability $ 306 $ 118
====== =======
</TABLE>
<PAGE>
NOTE 11. PENSION PLANS AND POSTRETIREMENT BENEFITS (con't)
Net periodic postretirement benefit cost includes the following
components:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993
------------------------------------ ---- ----
<S> <C> <C>
Service cost for benefits earned $138 $130
Interest cost on accumulated
postretirement benefit obligation 212 248
Amortization of net gain (7) -
Amortization of transition
obligation 153 153
---- ----
Net periodic postretirement benefit
cost $496 $531
==== ====
</TABLE>
The accumulated postretirement benefit obligation was
determined using a discount rate of 8.5% and 7.5% at December 31,
1994 and 1993, respectively, and an average health care cost
trend rate of approximately 14% progressively decreasing to
approximately 6% in the year 2008 and thereafter.
Increasing the assumed health care cost trend rates by one
percentage point in each year and holding all other assumptions
constant would increase the accumulated postretirement benefit
obligation as of December 31, 1994 by approximately $172,000 and
increase the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost for
1994 by approximately $25,000.
NOTE 12. CAPITAL STOCK
The Company's capital stock consists of Class A and Class B
common stock, and $5.00 cumulative convertible preferred stock.
Holders of Class A common stock have one vote per share, holders
of Class B common stock have ten votes per share and preferred
stockholders have one vote per share. Holders of Class B common
stock are entitled to convert their shares into Class A common
stock at any time on a share-for-share basis. Each share of
$5.00 cumulative convertible preferred stock is convertible into
1.322 shares of Class A common stock. The preferred stock is
redeemable, at the option of the Company, at $100 per share.
At December 31, 1994, 4,473,822 shares of Sequa Class A
common stock were reserved for conversion of preferred and Class
B common stock and stock options.
<PAGE>
<TABLE>
NOTE 12. CAPITAL STOCK (con't)
The following table summarizes shares held in treasury:
<CAPTION>
At December 31, 1994 1993 1992
------------------------------- ---- ---- ----
<S> <C> <C> <C>
Class A common stock 652,000 864,052 864,052
Class B common stock 396,283 396,283 396,283
Preferred stock 163,489 163,489 163,489
</TABLE>
During 1994, 180,000 shares of Class A common stock in
treasury were contributed to the Company's defined benefit
pension plans and 32,052 shares of Class A common stock in
treasury were granted to certain key employees.
NOTE 13. STOCK OPTIONS AND GRANTS
The Company has incentive and nonqualified stock option plans in
effect. As of December 31, 1994, only options on Class A common
stock remained outstanding and exercisable. At December 31, 1994,
52,522 shares of Class A common stock were available for future
grant. There were no options exercised in 1994, 1993 and 1992.
Summarized data relating to stock options are as follows:
<TABLE>
<CAPTION>
Year ended Number of Average option
Options December 31, Common Shares price per share
------- ------------ ------------- ---------------
<S> <C> <C> <C>
Outstanding 1994 305,800 $32.60
Granted 1994 15,500 32.05
1993 326,300 32.50
1992 - -
Cancelled or expired 1994 41,300 33.06
1993 157,647 63.19
1992 38,193 58.20
Exercisable 1994 99,767 33.36
Available for future
grant 1994 52,522 -
</TABLE>
During 1994, 32,052 shares of the Company's Class A common
stock held in treasury were granted to certain key employees.
Such stock is subject to restrictions which prohibit sale or
transfer by the grantee for periods of three to five years and
require forfeiture by the employee in the event of employment
termination within the restricted periods. The market value of
the shares granted was $831,000 and is being amortized to expense
over the respective periods in which the restrictions lapse. The
charge to operations was $53,000 in 1994, and the unamortized
value of the shares granted of $778,000 is included in treasury
stock in the accompanying Consolidated Balance Sheet at December
31, 1994.
<PAGE>
NOTE 14. RESTRUCTURING CHARGE
During 1993, the Company recorded restructuring charges totaling
$26,640,000 primarily related to plans adopted to reduce Gas
Turbine's investment in plants engaged in activities other than
the repair of components for flight engines; to sell excess
machinery; and to permanently reduce the number of employees in
Gas Turbine facilities. Included in the restructuring charges
are: severance costs, $7,500,000; writedown of equipment to be
sold, $4,100,000; writedown of inventory to net realizable value,
$3,200,000; relocation of equipment, $1,800,000; writedown of
other assets, $1,500,000; operating losses through date of sale,
$6,500,000; other costs, $2,040,000.
In 1994, three operations were sold for net cash proceeds of
$57,248,000, two operations were closed and approximately
$4,300,000 in cash was generated from the sale of excess
property, plant and equipment. In early 1995, Gas Turbine's 51%
interest in an engine overhaul business was sold for $5,162,000
in cash with the purchaser assuming $17,236,000 of the Company's
debt. Two units and certain excess assets remain to be disposed
of. At December 31, 1994, $6,325,000 of restructure reserves
remained, and completion of the restructuring program will
generate positive cash flow in 1995.
Note 15. Sale of ARC Professional Services
On December 30, 1993, the Company sold the stock of ARC
Professional Services for gross cash proceeds of $59,926,000, and
the purchaser assumed $4,524,000 of ARC Professional Services'
debt. The sale resulted in a pre-tax gain of $12,408,000. ARC
Professional Services had revenues of $162,606,000 and
$157,979,000 in 1993 and 1992, respectively, and operating income
of $10,699,000 and $9,278,000 in 1993 and 1992, respectively.
The consolidated financial statements and accompanying footnotes
reflect the operating results of ARC Professional Services as
continuing operations.
In connection with the sale of ARC Professional Services, the
Company was contractually required to purchase the 7% minority
interest in Atlantic Research Corporation (ARC). In January
1994, the Company purchased the minority interest at a cost of
$16,701,000 which was $13,709,000 less than the book value of the
net assets acquired. The excess of the book value over the cost
of the minority interest acquired was allocated to the goodwill
of ARC and is being amortized over the remaining life of the ARC
goodwill.
<PAGE>
NOTE 16. OTHER, NET
In 1994, Other, net included a $2,394,000 loss on interest rate
options written; $1,829,000 of discount expense related to the
sale of accounts receivable; a $2,433,000 equity loss in the
Company's unconsolidated airbag business; and amortization of
capitalized debt costs of $2,389,000.
In 1993, Other, net included a $6,557,000 mark-to-market loss
on interest rate options written; $3,136,000 of discount expense
related to the sale of accounts receivable; a $3,051,000 loss
incurred on a sale and leaseback transaction; a $7,551,000 equity
loss in the Company's unconsolidated airbag business;
amortization of capitalized debt costs in the amount of
$4,158,000; and $2,517,000 in charges for a minority
shareholder's interest in the earnings of ARC.
In 1992, Other, net included $3,912,000 of discount expense
related to the sale of accounts receivable; a $4,709,000 equity
loss in the Company's unconsolidated airbag business;
amortization of capitalized debt costs in the amount of
$3,074,000; and $1,704,000 in charges for a minority
shareholder's interest in the earnings of ARC.
NOTE 17. OPERATING LEASES
Certain businesses of the Company utilize leased premises or
equipment under noncancelable agreements having initial or
remaining terms of more than one year. The majority of the real
property leases require the Company to pay maintenance, insurance
and real estate taxes. Rental expense totaled $17,997,000,
$24,780,000 and $25,708,000 in 1994, 1993 and 1992, respectively.
At December 31, 1994, future minimum lease payments under
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
<S> <C>
1995 $12,741
1996 11,006
1997 9,483
1998 7,256
1999 5,766
After 1999 25,523
-------
$71,775
=======
</TABLE>
<PAGE>
NOTE 18. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by (used for) discontinued operations:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year ended December 31,
------------------------------- 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Loss from discontinued operations
before income taxes $ - $ - $ (35,000)
Depreciation and amortization 395 506 2,412
Loss provisions 415 2,562 27,369
Changes in working capital (3,667) (64) (4,476)
Increase (decrease) in debt 24,657 (37,432) (264,331)
Decrease in funds designated
for use by Sequa Capital 571 1,280 4,409
Investment in leasing assets (1,019) (1,323) (2,201)
Principal repayments on
leasing assets 6,687 1,621 15,396
Sale of leasing assets 8,247 41,463 97,213
Purchase of property, plant
and equipment (481) (607) (724)
Other changes in net assets (7,577) (5,256) 4,996
--------- --------- ---------
$ 28,228 $ 2,750 $(154,937)
========= ========= =========
</TABLE>
Non-cash investment activities:
During 1994, 180,000 shares of the Company's Class A common
stock, with a market value of $4,723,000, were contributed to the
Company's defined benefit pension plans.
In 1993, the Company entered into two sale and leaseback
agreements related to various Chromalloy Gas Turbine and Precoat
Metals equipment. Aggregate cash proceeds from the sale of
$20,845,000 have been presented as an investing activity in the
accompanying Consolidated Statement of Cash Flows for the year
ended December 31, 1993. The sales resulted in a loss on one
transaction of $3,051,000, which is included in 1993 in Other,
net in the Consolidated Statement of Income, and a gain on the
other transaction of $5,738,000. The Company entered into
agreements to lease back the equipment and recorded fixed assets
and capital lease obligations in the amount of $20,845,000. The
$5,738,000 gain on sale has been deferred and is being amortized
to income over the life of the related leaseback agreement.
During 1992, 120,000 shares of the Company's Class A common
stock, with a market value of $4,560,000, were contributed to the
Company's defined benefit pension plans.
Other supplemental cash flow information:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993 1992
---------------------------- ---- ---- ----
<S> <C> <C> <C>
Interest paid $60,746 $70,052 $74,379
</TABLE>
<PAGE>
NOTE 19. SEGMENT INFORMATION
Operations by business segment is presented below:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993 1992
-------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
AEROSPACE
Sales $ 847,173 $ 983,113 $1,167,496
Operating income (loss) (12,777) (40,892) 75,506
Identifiable assets 1,078,269 1,200,782 1,257,870
Capital expenditures 25,246 45,418 61,991
Depreciation and amortization 74,714 79,623 84,733
MACHINERY AND METAL COATINGS
Sales $ 261,581 $ 254,680 $ 237,998
Operating income 28,570 25,919 26,596
Identifiable assets 162,518 146,231 128,960
Capital expenditures 15,035 14,984 3,961
Depreciation and amortization 6,363 6,045 6,112
SPECIALTY CHEMICALS
Sales $ 240,170 $ 214,866 $ 229,386
Operating income 43,265 35,781 40,270
Identifiable assets 149,396 128,904 126,893
Capital expenditures 14,329 11,457 19,627
Depreciation and amortization 12,344 10,819 12,079
OTHER PRODUCTS
Sales and revenues $ 70,626 $ 244,309 $ 233,461
Operating income 6,057 18,950 8,703
Identifiable assets 71,431 78,499 175,569
Capital expenditures 4,336 4,794 6,972
Depreciation and amortization 7,893 9,779 11,356
CORPORATE
Expenses $ (25,362) $ (24,084) $
(26,471)
Identifiable assets (a) 186,634 249,105 223,176
Capital expenditures 295 205 134
Depreciation and amortization 2,660 3,795 3,512
TOTALS
Sales and revenues $1,419,550 $1,696,968 $1,868,341
Operating income 39,753 15,674 124,604
Identifiable assets 1,648,248 1,803,521 1,912,468
Capital expenditures 59,241 76,858 92,685
Depreciation and amortization 103,974 110,061 117,792
<FN>
(a) Includes net assets of discontinued operations.
</TABLE>
<PAGE>
<TABLE>
NOTE 19. SEGMENT INFORMATION (con't)
Geographic data is presented below:
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993 1992
--------------------------- ---- ---- ----
<S> <C> <C> <C>
SALES AND REVENUES
United States $1,028,737 $1,307,559 $1,457,650
Europe 390,813 389,409 410,691
---------- ---------- ----------
Total $1,419,550 $1,696,968 $1,868,341
========== ========== ==========
OPERATING INCOME
United States $ 28,561 $ 6,160 $ 116,988
Europe 36,554 33,598 34,087
Corporate expenses (25,362) (24,084) (26,471)
---------- ---------- ----------
Total $ 39,753 $ 15,674 $ 124,604
========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1994 1993 1992
------------------------ ---- ---- ----
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
United States $1,129,271 $1,237,066 $1,375,946
Europe 332,343 317,350 313,346
Corporate and discontinued
operations 186,634 249,105 223,176
---------- ---------- ----------
Total $1,648,248 $1,803,521 $1,912,468
========== ========== ==========
</TABLE>
Operating income includes all costs and expenses directly
related to the segment or geographic area. Identifiable assets
are those used in each segment's operation.
No single commercial customer accounted for more than 10% of
sales and revenues in any year.
Export sales were as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
Year ended December 31, 1994 1993 1992
---------------------------- ---- ---- ----
<S> <C> <C> <C>
Europe $120,288 $118,666 $144,155
Far East 52,112 69,917 85,867
Middle East 18,137 32,377 21,463
Canada 21,962 16,758 19,358
Central and South America 23,037 30,771 63,296
Other 14,816 11,474 17,242
-------- -------- --------
$250,352 $279,963 $351,381
======== ======== ========
</TABLE>
The largest single contract with any one US Government agency
accounted for 2% of sales in 1994, 1993 and 1992. Prime and
subcontracts with all government agencies accounted for 11%, 22%
and 23% of sales and revenues in 1994, 1993 and 1992,
respectively.
<PAGE>
NOTE 20. GOVERNMENT INVESTIGATIONS
During the second quarter of 1993, the Company entered into
agreements with the US Attorney's Office, Southern District of
New York (SDNY), and the Federal Aviation Administration (FAA) in
connection with investigations begun in November 1992 by these
offices and other related governmental agencies of the Company's
Orangeburg facility and certain of its then employees.
Throughout the investigations, the Company and the Orangeburg
facility cooperated fully with federal authorities. In addition,
the Company instituted extensive changes in the management and
operations of the facility. As a result of the Company's
cooperation with the government and its good faith efforts to
comply with all applicable FAA standards, the FAA restored the
facility's FAA repair station certificate on June 10, 1993,
ending the suspension of repair operations and resolving all FAA
civil matters related to the Orangeburg facility. Subsequently,
the US Attorney's Office, SDNY, declined to prosecute the Company
in connection with its investigation.
As a result of the investigations and the related suspension,
the Company incurred direct expenses in 1993 of $12,800,000.
Direct expenses included the remedial payment of $5,000,000 to
the FAA, an additional $2,500,000 to cover the cost of testing
engine parts seized by federal authorities, severance payments,
and legal fees and expenses.
NOTE 21. CONTINGENCIES
At December 31, 1994, the Company was contingently liable for
outstanding letters of credit, not reflected in the accompanying
consolidated financial statements, in the aggregate amount of
approximately $88,059,000. The Company was also contingently
liable at December 31, 1994 for $17,500,000 in guarantees of debt
owed by one of the Company's unconsolidated joint ventures. In
addition, the Company is involved in a number of claims, lawsuits
and proceedings (environmental and otherwise) which arose in the
ordinary course of business. Other litigation is pending against
the Company involving allegations that are not routine and
include, in certain cases, compensatory and punitive damage
claims. Included in this other class of litigation is an
arbitration proceeding that was formally commenced in 1992 to
resolve a dispute between the Egyptian Air Force and Chromalloy
Gas Turbine. On August 24, 1994, the arbitral tribunal issued an
award of $16,250,000 plus interest in favor of Chromalloy Gas
Turbine. At December 31, 1994, the Company's Consolidated
Balance Sheet includes net assets of approximately $17,500,000
related to this issue. Chromalloy has filed a petition in the US
District Court for the District of Columbia to confirm and
enforce the award and the Egyptian Air Force has filed a
challenge to this award in the Court of Appeal of Cairo.
<PAGE>
NOTE 21. CONTINGENCIES (con't)
The ultimate legal and financial liability of the Company in
respect to all claims, lawsuits and proceedings referred to above
cannot be estimated with any certainty. However, in the opinion
of management, based on its examination of such matters, its
experience to date and discussions with counsel, the ultimate
outcome of these contingencies, net of liabilities already
accrued in the Company's Consolidated Balance Sheet, is not
expected to have a material adverse effect on the Company's
consolidated financial position, although the resolution in any
reporting period of one or more of these matters could have a
significant impact on the Company's results of operations for
that period.
<PAGE>
<PAGE>
<TABLE>
NOTE 22. QUARTERLY FINANCIAL INFORMATION (Unaudited)
(Amounts in thousands except per share)
<CAPTION>
1994 Quarter ended March 31 June 30 Sept. 30 Dec. 31 Year
------------------ -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Sales and revenues $350,982 $360,698 $330,799 $377,071 $1,419,550
Cost of sales and revenues 280,011 292,572 266,711 325,445 1,164,739
Operating income (loss) 17,006 10,568 12,732 (553) 39,753
Loss from continuing operations (1,458) (2,351) (8,387) (12,499) (24,695)
Extraordinary loss (1,083) - - - (1,083)
-------- -------- -------- -------- ----------
Net loss $ (2,541) $ (2,351) $ (8,387) $(12,499) $ (25,778)
======== ======== ======== ======== ==========
Loss per share:
Continuing operations $ (.23) $ (.33) $ (.94) $ (1.35) $ (2.87)
Extraordinary loss (.11) - - - (.11)
-------- -------- -------- -------- -----------
Net loss $ (.34) $ (.33) $ (.94) $ (1.35) $ (2.98)
======== ======== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1993 Quarter ended March 31 June 30 Sept. 30 Dec. 31 Year
------------------ -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Sales and revenues $427,221 $412,402 $407,211 $450,134 $1,696,968
Cost of sales and revenues 342,954 349,316 330,197 360,042 1,382,509
Restructuring charges - 7,640 19,000 - 26,640
Operating income (loss) 16,463 (4,223) (3,167) 6,601 15,674
Gain on sale of ARC Professional Services - - - 12,408 12,408
Loss from continuing operations (3,495) (18,547) (23,178) (10,238) (55,458)
Extraordinary loss - - - (8,524) (8,524)
-------- -------- -------- -------- ----------
Net loss $ (3,495) $(18,547) $(23,178) $(18,762) $ (63,982)
======== ======== ======== ======== ==========
Loss per share:
Continuing operations $ (.44) $ (2.00) $ (2.48) $ (1.15) $ (6.07)
Extraordinary loss - - - (.88) (.88)
-------- -------- -------- -------- ----------
Net loss $ (.44) $ (2.00) $ (2.48) $ (2.03) $ (6.95)
======== ======== ======== ======== ==========
<FN>
The following unusual items are included in the quarterly financial information in addition to the
extraordinary items, restructuring charges and gain on sale of ARC Professional Services:
(1) The fourth quarter of 1993 includes a deferred tax provision of $14,000,000 for the repatriation of
foreign undistributed earnings in the form of dividends; (2) the second quarter of 1994 includes a
$4,300,000 charge related to an accounting irregularity, and (3) the fourth quarter of 1994 includes
provisions for Gas Turbine inventory and other reserves which, when combined with Gas Turbine's
operating loss, were the causes of the Company's fourth-quarter operating loss. In addition, the second
and third quarters of 1993 were significantly affected by the interruption of operations at the
Chromalloy Gas Turbine Corporation Orangeburg, N.Y. facility and related legal fees, payments to the
government and severance costs.
Quarterly earnings per share are not additive for 1994 due to the contribution of 180,000 shares of the
Company's Class A common stock to the Company's defined benefit pension plans in September 1994.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is furnished pursuant to General Instruction
G(3) of Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K with
respect to the executive officers of the Registrant:
<CAPTION>
Name Age Position Held
<S> <C> <C> <C>
Norman E. Alexander (1) 80 Chairman of the Board, Chief
Executive Officer and Director
John J. Quicke (2) 45 President, Chief Operating
Officer and Director
Stuart Z. Krinsly (1) 77 Senior Executive Vice
President-
General Counsel and Director
Gerald S. Gutterman (1) 66 Executive Vice President -
Finance and Administration
Antonio L. Savoca (3) 71 Senior Vice President -
Atlantic Research Operations
Ira A. Schreger (4) 44 Senior Vice President - Legal -
Secretary and Senior Associate
General Counsel
Martin Weinstein (5) 59 Senior Vice President -
Gas Turbine Operations
Ronald H. Wright (6) 61 Senior Vice President -
Kollsman
<FN>
(1) Has served in the same or similar capacity for more than the
past ten years.
(2) President and Chief Operating Officer - Sequa Corporation
since March 1993; Senior Executive Vice President, Operations,
- Sequa Corporation from June 1992 to March 1993; from
February 1991 to June 1992, served as Vice President,
Financial Services, of the Company; from 1987 to February
1991, served as Vice President, Financial Projects, of the
Company. Served as Vice President and Controller of
Chromalloy American Corporation (which became a subsidiary of
the Company in 1987) from 1983 to 1987, and held various other
positions in Chromalloy American Corporation from 1979 to
1983. Has been a director of the Company since March 1993 and
is a member of the Executive Committee.<PAGE>
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT (con't)
(3) Senior Vice President - Atlantic Research Operations since
February 1991; Vice President - Atlantic Research Operations
from April 1990 to February 1991. Also serves as President
and Chief Executive Officer of Atlantic Research Corporation
and has held those positions since October 1989. From
September 1985 to October 1989, Mr. Savoca served as a
consultant to a number of companies, including Atlantic
Research Corporation. From 1983 to September 1985, he was
Chief Executive Officer of Transpace Carriers, Inc. From 1963
to 1983, he held planning and management positions with
Thiokol Corporation, including, most recently, senior vice
president and general manager of its solid rocket motor
division.
(4) Senior Vice President - Legal since October 1994; Vice
President - Legal from 1991 to October 1994; Senior Associate
General Counsel since 1990; Associate General Counsel from
1988 to 1990. Has also served as Secretary of the Company
since 1988. Previously, he was a partner at the law firm of
Kronish, Lieb, Weiner & Hellman and before that, an associate
at the law firm of Sullivan & Cromwell.
(5) Vice President - Gas Turbine Operations since May 1987 and
Senior Vice President since February 1988. Also serves as
Chairman and Chief Executive Officer of Chromalloy Gas Turbine
Corporation (since January 1987) and previously was President
of the CompTech Group of Chromalloy American Corporation.
(6) Vice President and General Manager of Kollsman since August
1985 and Senior Vice President since February 1988.
Previously, he was employed by Sperry Corporation where he
served as Vice President of Sperry Defense Group from 1978 to
1983; Vice President of Operations for defense electronics
products/northwest at Sperry from 1983 to July 1985.
Sequa is not aware of any family relationship among any of the
above-named executive officers. Each of such officers holds his
office for a term expiring on the date of the annual organization
meeting of the Board of Directors, subject to the provisions of
Section 5 of Article IV of the Company's By-Laws relative to
removal of officers.
</TABLE>
ITEMS 10 (IN PART) THROUGH 13
The Company intends to file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A
involving the election of directors not later than 120 days after
the end of its fiscal year ended December 31, 1994. Accordingly,
the information required by Part III (Items 10 (concerning Sequa's
directors and disclosure pursuant to Item 405 of Regulation S-K),
11, 12 and 13) is incorporated herein by reference to such
definitive proxy statement in accordance with General Instruction
G(3) to Form 10-K.
<PAGE>
<TABLE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements:
The following consolidated financial statements are included
in Part II of this Annual Report on Form 10-K:
<CAPTION>
Page Numbers
in this Annual
Report on Form
10-K
--------------
<S> <C>
Report of Independent Public Accountants. 32
Consolidated Balance Sheet as of December 31,
1994 and 1993. 33-34
Consolidated Statement of Income for the three
years ended December 31, 1994. 35
Consolidated Statement of Cash Flows for the three
years ended December 31, 1994. 36
Consolidated Statement of Shareholders' Equity for
the three years ended December 31, 1994. 37
Notes to Consolidated Financial Statements. 38-66
2. Financial Statement Schedules:
The following are included in Part IV of this report:
Report of Independent Public Accountants on
Supplemental Schedule. 75
Schedule II Valuation and Qualifying Accounts 76
Other schedules are omitted because of the absence of
conditions under which they are required.
<PAGE>
<PAGE>
3. Exhibits
Exhibit No. (Referenced to Item 601(b) of Regulation S-K)
3.1 - Restated Certificate of Incorporation of Sequa and two
Certificates of Amendment of the Restated Certificate of
Incorporation of Sequa (incorporated by reference to
Exhibit 4(a) of Sequa's Registration Statement No.
33-12420 on Form S-8 filed on March 6, 1987).
3.2 - Certificate of Amendment of Certificate of Incorporation
of Sequa, dated May 7, 1987 (incorporated by reference
to Exhibit 3(b) of Sequa's Annual Report on Form 10-K,
File No. 1-804, for the year ended December 31, 1988,
filed on March 28, 1989).
3.3 - Restated and amended (as of August 26, 1993) By-laws of
Sequa, (incorporated by reference to Exhibit 3.3 of
Sequa's Registration Statement No. 33-50843 on Form S-1,
filed on October 29, 1993).
4.1 - Indenture, dated as of December 15, 1993, by and between
Sequa and Bankers Trust Company, as Trustee, and Form of
9 3/8% Senior Subordinated Note due December 15, 2003
(incorporated by reference to Exhibits 4.7 and 4.3,
respectively, of Sequa's Registration Statement on Form
8-A, File No. 1-804, filed on January 25, 1994).
4.2 - Indenture, dated as of December 15, 1993, by and between
Sequa and IBJ Schroder Bank & Trust Company, as Trustee,
and Form of 8 3/4% Senior Note due December 15, 2001
(incorporated by reference to Exhibits 4.6 and 4.2,
respectively, of Sequa's Registration Statement on Form
8-A, File No. 1-804, filed on January 25, 1994).
4.3 - Indenture, dated as of September 1, 1989, by and between
Sequa and The First National Bank of Chicago, as
Trustee, with respect to an aggregate of $250 million of
senior debt (incorporated by reference to Exhibit 4.1 of
Sequa's Form S-3 Registration Statement No. 33-30959,
filed on September 12, 1989).
4.4 - First Supplemental Indenture, dated as of October 15,
1989, by and between Sequa and The First National Bank
of Chicago, as Trustee (incorporated by reference to
Exhibit 4.5 of Sequa's Registration Statement on Form 8-
A, File No. 1-804, filed on January 25, 1994).
4.5 - Prospectus Supplement, dated October 19, 1989, for $150
million of senior unsecured 9 5/8% Notes due October 15,
1999 (incorporated by reference to Sequa's filing under
Rule 424 (b)(2) on October 20, 1989).
4.6 - Purchase Agreement, dated October 19, 1989, by and
between Sequa and certain Underwriters, and Form of
Supplemental Indenture, dated as of October 15, 1989,
both with respect to $150 million of senior unsecured 9
5/8% Notes due October 15, 1999 (incorporated by
reference to Sequa's Report on Form 8-K, File No. 1-804,
filed on October 25, 1989) and Form of 9 5/8% Note
(incorporated by reference to Exhibit 4.1 of Sequa's
Registration Statement on Form 8-A, File No. 1-804,
filed on January 25, 1994).
<PAGE>
4.7 - Prospectus and Prospectus Supplement, both dated April
22, 1991, with respect to $100 million of medium-term
notes (incorporated by reference to Sequa's filing under
Rule 424 (b)(5) on April 23, 1991).
4.8 - Sales Agency and Distribution Agreement, executed as of
April 22, 1991, by and among Sequa and Bear, Stearns &
Co., Inc. and Merrill Lynch & Co., with respect to $100
million of medium-term notes, and Forms of Notes
thereunder (incorporated by reference to Exhibits 4.1
and 12.1 of Sequa's Report on Form 8-K, File No. 1-804,
filed on April 25, 1991).
4.9 - Instruments with respect to other long-term debt of
Sequa and its consolidated subsidiaries are omitted
pursuant to Item 601(b)(4)(iii) of Regulation S-K since
the amount of debt authorized under each such omitted
instrument does not exceed 10 percent of the total
assets of Sequa and its subsidiaries on a consolidated
basis. Sequa hereby agrees to furnish a copy of any
such instrument to the Securities and Exchange
Commission upon request.
10.1 - Amended and Restated Receivables Purchase Agreement,
dated as of June 24, 1993, among Sequa, Sequa
Receivables Corp., Chemical Bank, Barton Capital
Corporation and Westpac Banking Corporation
(incorporated by reference to Exhibit 10.1 of Sequa's
Report on Form 8-K, File No. 1-804, filed on July 12,
1993) and Amendments No. 1 (dated as of September 30,
1993), No. 2 (dated as of December 1, 1993) and No. 3
(dated as of December 14, 1993) thereto (incorporated by
reference to Exhibit 10.1 of Sequa's Report on Form 10-
K, File No. 1-804, for the year ended December 31, 1993,
filed on March 30, 1994) and Amendment No. 4 (dated as
of July 1, 1994) and Amendment No. 5 (dated as of March
3, 1995) (both of which are filed herewith).
10.2 - $150 Million Amended and Restated Credit Agreement,
dated as of December 14, 1993, among Sequa Corporation,
The Bank of New York, The Bank of Nova Scotia, Chemical
Bank, Bank of America NT & SA, Chase Manhattan Bank,
N.A. and The Nippon Credit Bank, Ltd. and certain other
lenders (incorporated by reference to Exhibit 10.2 of
Sequa's Report on Form 10-K, File No. 1-804, for the
year ended December 31, 1993, filed on March 30, 1994)
and Amendment No. 1 (dated as of June 13, 1994),
Amendment No. 2 (dated as of December 14, 1994) and
Amendment No. 3 (dated as of March 3, 1995) (all of
which are filed herewith).
10.3 - Stock Purchase Agreement, dated December 30, 1993, by
and among Sequa and various of its affiliates and
Computer Sciences Corporation and its affiliates, in
connection with the sale of ARC Professional Services
Group, Inc., and certain related entities (incorporated
by reference to Exhibit 10.1 of Sequa's Report on Form
8-K, File no. 1-804, filed on January 15, 1994).
<PAGE>
<PAGE>
COMPENSATORY PLANS OR ARRANGEMENTS
10.4 - 1986 Key Employees Stock Option Plan (incorporated by
reference to Annex B of Sequa's Registration Statement
No. 33-12420 on Form S-8 filed March 6, 1987).
10.5 - 1988 Key Employees Stock Option Plan (incorporated by
reference to Annex A of Sequa's Registration Statement
No. 33-30711 on Form S-8 filed August 25, 1989).
10.6 - Sequa's Supplemental Executive Retirement Plans I, II,
and III, effective as of January 1, 1990 (incorporated
by reference to Exhibit 10(c) of Sequa's Annual Report
on Form 10-K, File No. 1-804, for the year ended
December 31, 1990, filed on April 1, 1991) and
amendments thereto (incorporated by reference to Exhibit
10(c) of Sequa's Annual Report on Form 10-K, File No. 1-
804, for the year ended December 31, 1991, filed on
March 30, 1992).
10.7 - Management Incentive Bonus Program of Sequa for
Corporate Executive Officers and Corporate Staff
(Revised 1995 - Amendment No. 1) (filed herewith).
10.8 - Management Incentive Bonus Programs of Atlantic Research
Corporation for Corporate Staff (incorporated by
reference to Exhibit 10.8 of Sequa's Report on Form 10-K
for the year ended December 31, 1993, File No. 1-804,
filed on March 30, 1994).
10.9 - Letter Agreements, dated May 24, 1984, by and between
Norman E. Alexander and Sequa, and Stuart Z. Krinsly and
Sequa (incorporated by reference to Exhibit 10(h) of
Sequa's Annual Report on Form 10-K, File No. 1-804, for
the year ended December 31, 1989, filed on March 30,
1990).
10.10 - Letter Agreements, dated April 30, 1990, by and between
Norman E. Alexander and Sequa, and Stuart Z. Krinsly and
Sequa (incorporated by reference to Exhibit 10 (h) of
Sequa's Annual Report on Form 10-K, File No. 1-804, for
the year ended December 31, 1990, filed on April 1,
1991).
10.11 - Employment Agreement, dated April 1, 1993, by and
between John J. Quicke and Sequa, (incorporated by
reference to Exhibit 10(k) of Sequa's Annual Report on
Form 10-K, File No. 1-804 for the year ended December
31, 1992 filed on March 31, 1993); and Amendment
thereto, dated March 1, 1995 (filed herewith).
10.12 - Employment Agreement, dated May 6, 1991, by and between
Antonio L. Savoca and Sequa, (incorporated by reference
to Exhibit 10(1) of Sequa's Annual Report on Form 10-K
for the year ended December 31, 1991, filed on March 30,
1992). Amendment thereto, dated August 18, 1992
(incorporated by reference to Exhibit 10(1) of Sequa's
Annual Report on Form 10-K, File No. 1-804 for the year
ended December 31, 1992, filed on March 31, 1993); and
Amendment thereto, dated June 10, 1993 (incorporated by
reference to Exhibit 10.12 of Sequa's Report on Form 10-
K, File No. 1-804, for the year ended December 31, 1993,
filed on March 30, 1994).
<PAGE>
COMPENSATORY PLANS OR ARRANGEMENTS (con't)
10.13 - Employment Agreement, dated as of October 1, 1991, by
and between Martin Weinstein and Chromalloy Gas Turbine
Corporation, (incorporated by reference to Exhibit 10(n)
of Sequa's Annual Report on Form 10-K, File No. 1-804
for the year ended December 31, 1991, filed on March 30,
1992) and Amendment thereto, dated as of June 1, 1993 by
and between Chromalloy Gas Turbine Corporation and
Martin Weinstein (incorporated by reference to Exhibit
10.14 of Sequa's Registration Statement No. 33-50843 on
Form S-1 filed on October 29, 1993).
10.14 - Executive Life Insurance Plan of Sequa, (incorporated by
reference to Exhibit 10(o) of Sequa's Annual Report on
Form 10-K, File No. 1-804 for the year ended December
31, 1991, filed on March 30, 1992).
10.15 - Key Employee Medical Insurance Plan of Sequa,
(incorporated by reference to Exhibit 10(p) of Sequa's
Annual Report on Form 10-K, File No. 1-804 for the year
ended December 31, 1991, filed on March 30, 1992).
10.16 - Exec-U-Care Medical Reimbursement Insurance Trust of
Atlantic Research Corporation, (incorporated by
reference to Exhibit 10(q) of Sequa's Annual Report on
Form 10-K, File No. 1-804 for the year ended December
31, 1991, filed on March 30, 1992).
10.17 - Cafeteria Plan of Atlantic Research Corporation,
(incorporated by reference to Exhibit 10(r) of Sequa's
Annual Report on Form 10-K, File No. 1-804 for the year
ended December 31, 1991, filed on March 30, 1992).
10.18 - Supplemental Retirement Program of Atlantic Research
Corporation, (incorporated by reference to Exhibit 10(s)
of Sequa's Annual Report on Form 10-K, File No. 1-804
for the year ended December 31, 1991, filed on March 30,
1992).
10.19 - Employment Agreement, dated as of February 1, 1991, by
and between Ronald H. Wright and Sequa, and Amendment
thereto, dated February 15, 1994 (filed herewith).
10.20 - Sequa Corporation 1994 Corporate Staff Stock Award Plan
(filed herewith).
10.21 - Sequa Corporation Management Incentive Bonus Program for
Operating Divisions (Revised 1995) (filed herewith)
<PAGE>
11.1 - Computation of earnings per share, filed herewith.
21.1 - List of subsidiaries of Sequa, filed herewith.
23.1 - Consent of Independent Public Accountants, filed
herewith.
27.1 - Financial Data Schedule, filed herewith
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the last quarter of
1994.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE
To Sequa Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Sequa Corporation's Annual Report on Form 10-K, and have issued
our report thereon dated March 17, 1995. Our audit was made for
the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in Item 14(a)2 is the responsibility
of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. This schedule
has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
March 17, 1995
<PAGE>
<PAGE>
</TABLE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
<CAPTION>
Additions Other
Balance Charged to Deductions Changes Balance
Beginning Costs and from Additions End of
Description of Year Expenses Reserves (Deductions) Year
----------- --------- ---------- ---------- ------------ ------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994:
Reserves deducted from balance sheet
captions to which they apply-
Allowance for billed receivables $10,892 $ 3,951 $(2,395) $ - $12,448
Allowance for unbilled receivables 13,165 940 (11,382) - 2,723
Reserve for losses of
discontinued operations 25,927 - (11,695) - 14,232
Year Ended December 31, 1993:
Reserves deducted from balance sheet
captions to which they apply-
Allowance for billed receivables $11,419 $ 4,178 $(4,059) $ (646) (1) $10,892
Allowance for unbilled receivables 17,941 2,873 (5,041) (2,608) (2) 13,165
Reserve for losses of
discontinued operations 43,321 - (9,594) (7,800) (3) 25,927
Year Ended December 31, 1992:
Reserves deducted from balance sheet
captions to which they apply-
Allowance for billed receivables $17,758 $ 2,706 $(9,045) $ - $11,419
Allowance for unbilled receivables 14,788 3,822 (669) - 17,941
Reserve for losses of
discontinued operations 23,444 35,000 (15,123) - 43,321
<FN>
Note:
(1) Allowance for billed receivables of business sold.
(2) Allowance for unbilled receivables of business sold.
(3) EPA liabilities reclassified to other long-term liabilities.
</TABLE>
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SEQUA CORPORATION
Date: March 30, 1995 By: /S/ GERALD S. GUTTERMAN
---------------- -------------------------
Gerald S. Gutterman
Executive Vice President,
Finance and Administration
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 indicated on
March 30, 1995.
By: /S/ NORMAN E. ALEXANDER Chairman of the Board, Chief
Norman E. Alexander Executive Officer and Director
By: /S/ JOHN J. QUICKE President, Chief Operating Officer
John J. Quicke and Director
By: /S/ STUART Z. KRINSLY Senior Executive Vice President,
Stuart Z. Krinsly General Counsel and Director
By: /S/ GERALD S. GUTTERMAN Executive Vice President, Finance
Gerald S. Gutterman and Administration
By: /S/ WILLIAM P. KSIAZEK Vice President and Controller
William P. Ksiazek
By: /S/A DWORMAN Director
Alvin Dworman
By: /S/ A. LEON FERGENSON Director
A. Leon Fergenson
By: /S/ DAVID S. GOTTESMAN Director
David S. Gottesman
By: /S/ DONALD D. KUMMERFELD Director
Donald D. Kummerfeld
By: Director
Richard S. LeFrak
By: /S/ FRED R. SULLIVAN Director
Fred R. Sullivan
By: /S/ GERALD TSAI Director
Gerald Tsai, Jr.
<PAGE>
AMENDMENT NO. 4
Dated as of July 1, 1994
to
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 24, 1993
Sequa Receivables Corp., a New York corporation ("SRC" or
the "Seller"), Sequa Corporation, a Delaware corporation (in its
individual capacity and as Servicer, "Sequa") , the financial
institution parties hereto (the "Purchasers") and Chemical Bank,
as managing agent (the "Managing Agent") agree as follows:
SECTION 1. Receivables Purchase Agreement. Reference
is made to the Amended and Restated Receivables Purchase
Agreement dated as of June 24, 1993, and as amended by Amendment
NO. 1 dated as of September 30, 1993, Amendment No. 2 dated as of
December 1, 1993 and Amendment No. 3 dated as of December 14,
1993, among SRC, Sequa, the Managing Agent and the Purchasers
(the "Receivables Purchase Agreement") . Capitalized terms used
herein but not defined herein shall have the meanings ascribed
thereto in the Receivables Purchase Agreement. The Receivables
Purchase Agreement, as amended by this Amendment No. 4 (this
"Amendment No. 411), is and shall continue to be in full force
and effect and is hereby in all respects ratified and confirmed.
SECTION 2. Amendments. Upon and after the Effective
Date (as defined in Section 4 hereof) , the Receivables Purchase
Agreement shall be amended as follows:
(a) Section 6 of the Amendment No. 3 to Receivables
Purchase Agreement shall be restated in its entirety to read
as follows:
"Section 6. Deferred Fee. In connection with the
execution of this Amendment No. 3, the Seller shall pay to
the Managing Agent for the pro rata benefit of each
24119394.3
<PAGE>
Purchaser (other than an Exiting Purchaser) deferred
fees equal to the product of (i) $45,000,000 and (ii)
0.25%, payable on the last Business Day of March and
June, 1994.11
(b) Appendix A to the Receivables Purchase Agreement is
amended by:
(i) deleting the definition of "Purchaser Rate" in its
entirety and inserting the following definition in lieu
thereof:
"Purchaser Rate" for any Yield Period for any related
Undivided Interest (or portion thereof) means (a) the Eurodollar
Rate (Reserve Adjusted) for a period of one month plus 1.25% @r
annum and (b) if such rate described in clause (a) is
unavailable, the Alternate Base Rate in effect on such day plus
0.25%; provided, however, that on any day when any Liquidation
Event shall have occurred and be continuing, the Purchaser Rate
shall mean a rate per annum equal to the Alternate Base Rate in
effect on such day plus 1.25% per annum.
SECTION 3. Covenants, Representations and Warranties. (a)
Each of SRC and Sequa has the power, and has taken all necessary
action (including any necessary stockholder action) to authorize,
execute, deliver and perform in accordance with its terms this
Amendment No. 4. This Amendment No. 4 has been duly executed and
delivered by SRC and Sequa and is a legal, valid and binding
obligation of each such party, enforceable against such party in
accordance with its terms, except as enforceability may be
limited by bankruptcy,"insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally;
(b) The execution, delivery and performance in accordance
with its terms by SRC and Sequa of this Amendment No. 4 and the
Receivables Purchase Agreement, as amended by this Amendment No.
4 (including, without limitation, each Reinvestment under the
Receivables Purchase Agreement), do not and (absent any change in
any applicable law or applicable Transaction Document) will not
(i) require any governmental approval or any other consent or
approval, including any consent or approval of the stockholders
of SRC or Sequa, other than consents and approvals that have been
obtained, are final and not subject to review an appeal or to
collateral attack and are in full force and effect, or (ii)
violate or conflict with, result in a breach of, constitute a
default under, or result in or require the creation of any lien
upon any assets of SRC, Sequa or any originator under, (A) any
Transaction Document to which SRC, Sequa or any originator is a
party or by which SRC, Sequa or any Originator or any of their
respective properties may be bound, the breach of which, either
24119394.3 -2-
<PAGE>
singly or in the aggregate with all other such breaches, would
have a Materially Adverse Effect upon SRC, Sequa or any
Originator, or (B) any applicable law or judgment;
(c) Each of SRC and Sequa hereby reaffirms all agreements,
covenants, representations and warranties made in the Receivables
Purchase Agreement and, to the extent the same are not amended
hereby, agrees that all such agreements, covenants,
representations and warranties shall be deemed to have been
remade as of the Effective Date. Each of SRC and Sequa hereby
further represents and warrants that as of the Effective Date no
event has occurred and is continuing or will result from the
execution, delivery and performance by it of this Amendment No. 4
which constitutes a Liquidation Event or event which after notice
or lapse of time or both, would constitute a Liquidation Event;
and
(d) Except as specifically amended herein, the Receivables
Purchase Agreement shall remain in full force and effect and is
hereby ratified and confirmed. The execution, delivery and
effectiveness of this Amendment No. 4 shall not operate as a
waiver of any right, power or remedy of the Managing Agent or any
of the Purchasers under the Receivables Purchase Agreement or any
other document, instrument or agreement executed and delivered in
connection therewith, except specifically set forth herein.
SECTION 4. Effective Date; Conditions to Effectiveness.
This Amendment No. 4 shall become effective as of the date first
written above on the first day (the "Effective Date") on which
each of the following conditions is satisfied:
(a) The Managing Agent shall have received an officer's
certificate, dated the Effective Date, in the form attached
hereto as Schedule 1;
(b) This Amendment No. 4 shall have been duly executed and
delivered by SRC, Sequa and the Purchasers; and
(c) No material adverse change has occurred in respect of
the Receivables or operating or financial condition of Sequa
or SRC since December 31, 1993.
SECTION 5. Governing Law. This Amendment No. 4 shall be
construed in accordance with and governed by the substantive law
of the State of New York.
SECTION 6. Headings. Section headings in this Amendment No.
4 are included herein for convenience and reference only and
shall not constitute a part of this Amendment No. 4 for any other
purpose.
24119394.3 -3-
<PAGE>
SECTION 7. Counterparts. This Amendment No. 4 may be
executed in any number of counterparts and on separate
counterparts, each of which shall be deemed to be an original and
shall be binding upon the parties, their successors and assigns.
SECTION 8. Cross-References. References in this Amendment
No. 4 to any Section or Subsection, unless otherwise specified,
refer to such Section or Subsection of this Amendment No. 4.
SECTION 9. Instrument Pursuant to Receivables Purchase
Agreement. This Amendment No. 4 is an instrument executed
pursuant to the Receivables Purchase Agreement and shall (unless
otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the
Receivables Purchase Agreement, including Article XIV thereof.
24119394.3 -4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 4, or caused it to be executed and delivered by
their duly authorized officers, all as of the day and year first
above written.
SEQUA RECEIVABLES CORP.,
as Seller
By
Name:
Title:
SEQUA CORPORATION,
individually and as Servicer
By
Name
Title:
CHEMICAL BANK,
as Managing Agent and Purchaser
By
Name:
Title:
THE BANK OF NEW YORK,
as Purchaser
By
Name:
Title:
24119394.3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 4, or caused it to be executed and delivered by
their duly authorized officers, all as of the day and year first
above written.
SEQUA RECEIVABLES CORP.,
as Seller
By
Name:
Title:
SEQUA CORPORATION,
individually and as Servicer
By
Name:
Title:
CHEMICAL BANK,
as Managing Agent and Purchaser
By
Name:
Title:
THE BANK OF NEW YORK,
as Purchaser
By
Name:
Title:
24119394.3 -5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 4, or caused it to be executed and delivered by
their duly authorized officers, all as of the day and year first
above written.
SEQUA RECEIVABLES CORP.,
as Seller
By
Name:
Title:
SEQUA CORPORATION,
individually and as Servicer
By
Name:
Title:
CHEMICAL BANK,
as Managing Agent and Purchaser
By
Name:
Title:
THE BANK OF NEW YORK,
as Purchaser
By
Name:
Title:
24119394.3
<PAGE>
THE BANK OF NOVA SCOTIA,
as Purchaser
By
Name:
Title:
24119394.3 - 6 -
<PAGE>
Schedule 1
(FORM OF]
SEQUA CORPORATION
OFFICERS'S CERTIFICATE
I, Kenneth A. Drucker, do hereby certify that I am the duly
elected and qualified Vice President and Treasurer of SEQUA
CORPORATION, a Delaware corporation (the "Company"), that I am
authorized to execute this Certificate, and that as of the date
hereof, the following statements are true and correct.
Capitalized terms used herein but not otherwise defined herein
shall have the meanings assigned thereto in Appendix A to that
certain Amended and Restated Receivables Purchase Agreement dated
June 25, 1993, as amended by Amendment No. 1 thereto dated as of
September 30, 1993, Amendment No. 2 thereto dated as of December
14, 1993, Amendment No. 3 thereto dated as of December 14, 1993
and Amendment No. 4 thereto dated as of July 1, 1994 (the
"Receivables Purchase Agreement"), among the Company, Sequa
Receivables Corp. ("SRC"), Chemical Bank, as Managing Agent, and
the financial institution parties thereto.
(i) The representations, warranties and covenants
made by the Company and SRC in the Receivables Purchase
Agreement and in the certificates delivered by officers of
the Company or SRC (as the case may be) in connection
therewith, are true and correct in all material respects on
and as of the date Hereof, with the same effect as if made
on the date hereof, and the Company and SRC have complied
with all agreements and satisfied all conditions to be
performed or satisfied on their part at or prior to the
execution of Amendment No. 4 to the Receivables Purchase
Agreement; and
(ii) As of the date hereof, no event has occurred and
is continuing or will result from the execution, delivery
and performance by the Company or SRC of Amendment No. 4 to
the Receivables Purchase Agreement which constitutes a
Liquidation Event or which, after notice or lapse of time or
both, would constitute a Liquidation Event.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of this day of July, 1994.
Kenneth A. Drucker
Treasurer
24119394.3
<PAGE>
SEQUA CORPORATION
OFFICER'S CERTIFICATE
I, Kenneth A. Drucker, do hereby certify that I am the duly
elected and qualified Vice President and Treasurer of SEQUA
CORPORATION, a Delaware corporation (the "Company"), that I am
authorized to execute this Certificate, and that as of the date
hereof, the following statements are true and correct.
Capitalized terms used herein but not otherwise defined herein
shall have the meanings assigned thereto in Appendix A to that
certain Amended and Restated Receivables Purchase Agreement dated
June 25, 1993, as amended by Amendment No. 1 thereto dated as of
September 30, 1993, Amendment No. 2 thereto dated as of December
14, 1993, Amendment No. 3 thereto dated as of December 14, 1993
and Amendment No. 4 thereto dated as of July 1, 1994 (the
"Receivables Purchase, Agreement"), among the Company, Sequa
Receivables Corp. ("SRC"), Chemical Bank, as Managing Agent, and
the financial institution parties thereto.
(i) The representations, warranties and covenants
made by the Company and SRC in the Receivables Purchase
Agreement and in the certificates delivered by officers of
the Company or SRC (as the case may be) in connection
therewith, are true and correct in all material respects on
and as of the date hereof, with the -name effect as if made
on the date hereof, and the Company and SRC have complied
with all agreements and satisfied all conditions to be
performed or satisfied on their part at or prior to the
execution of Amendment No. 4 to the Receivables Purchase
Agreement; and
(ii) As of the date hereof, no event has occurred and
is continuing or will result from the execution, delivery
and performance by the Company or SRC of Amendment No. 4 to
the Receivables Purchase Agreement which constitutes a
Liquidation Event or which, after notice or lapse of time or
both, would constitute a Liquidation Event.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of this 28th day of July, 1994.
Kenneth A. Drucker
Vice President and Treasurer
<PAGE>
AMENDMENT NO. 5
Dated as of March 3, 1995
to
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 24, 1993
Sequa Receivables Corp., a New York corporation ("SRC" or
the "Seller"), Sequa Corporation, a Delaware corporation (in its
individual capacity and as Servicer, "Sequa"), the financial
institution parties hereto (the "Purchasers") and Chemical Bank,
as managing agent (the "Managing Agent") agree as follows:
SECTION 1. Receivables Purchase Agreement. Reference is
made to the Amended and Restated Receivables Purchase Agreement
dated as of June 24, 1993, and as amended by Amendment No. 1
dated as of September 30, 1993, Amendment No. 2 dated as of
December 1, 1993, Amendment No. 3 dated as of December 14, 1993,
and Amendment No. 4 dated as of July 1, 1994, among SRC, Sequa,
the Managing Agent and the Purchasers (the "Receivables Purchase
Agreement"). Capitalized terms used herein but not defined
herein shall have the meanings ascribed thereto in the
Receivables Purchase Agreement. The Receivables Purchase
Agreement, as amended by this Amendment No. 5 (this "Amendment
No. 511), is, and shall continue to be, in full force and effect
and is hereby in all respects ratified and confirmed.
SECTION 2. Amendments. Upon and after the Effective Date
(as defined in Section 4 hereof), the Receivables Purchase
Agreement shall be amended as follows:
(a) Section 5.02(e) of the Receivables Purchase
Agreement shall be amended by replacing the figure
"$585,000,000" in clause (i) thereof with the figure
"$565,000,000"; and
(b) Section 7.03(k) of the Receivables Purchase
Agreement shall be restated in its entirety to read as
follows:
"(k) Financial condition. Sequa shall not permit:
(i) Consolidated Net Worth at any time
to be less than the sum of (x) $565,000,000 and (y)
24142401
<PAGE>
fifty percent of its Consolidated Net Income (but
not less than zero), for each full fiscal quarter
occurring during the period commencing January 1,
1994 and ending on the date of determination;
(ii) the Consolidated Indebtedness
Ratio at any time to be greater than 0.55 to 1; or
(iii) the consolidated Fixed Charge
Coverage Ratio on the following dates to be less
than the following:
December 31, 1994 1.70 to 1.00
March 31, 1995 1.70 to 1.00
June 30, 1995 1.70 to 1.00
September 30, 1995 1.80 to 1.00
December 31, 1995 2.00 to 1.00
March 31, 1996 2.25 to 1.00
June 30, 1996 2.25 to 1.00
and thereafter 2.50 to 1.00.
SECTION 3. Covenants, Representations and Warranties. (a)
Each of SRC and Sequa has the power, and has taken all necessary
action (including any necessary stockholder action) to authorize,
execute, deliver and perform in accordance with its terms this
Amendment No. 5. This Amendment No. 5 has been duly executed and
delivered by SRC and Sequa and is a legal, valid and binding
obligation of each such party, enforceable against such party in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally;
(b) The execution, delivery and performance in accordance
with its terms by SRC and Sequa of this Amendment No. 5 and the
Receivables Purchase Agreement, as amended by this Amendment No.
5 (including, without limitation, each Reinvestment under the
Receivables Purchase Agreement), do not and (absent any change in
any applicable law or applicable Transaction Document) will not
(i) require any governmental approval or any other consent or
approval, including any consent or approval of the stockholders
of SRC or Sequa, other than consents and approvals that have been
obtained, are final and not subject to review on appeal or to
collateral attack and are in full force and effect, or (ii)
violate or conflict with, result in a breach of, constitute a
default under, or result in or require the creation of any lien
upon any assets of SRC, Sequa or any Originator under, (A) any
Transaction Document to which SRC, Sequa or any Originator is a
party or by which SRC, Sequa or any Originator or any of their
respective properties may be bound, the breach of which, either
singly or in the aggregate with all other such breaches, would
24142401 -2-
<PAGE>
have a Materially Adverse Effect upon SRC, Sequa or any
Originator, or (B) any applicable law or judgment;
(c) Each of SRC and Sequa hereby reaffirms all
agreements, covenants, representations and warranties made in the
Receivables Purchase Agreement and, to the extent the same are
not amended hereby, agrees that all such agreements, covenants,
representations and warranties shall be deemed to have been
remade as of the Effective Date. Each of SRC and Sequa hereby
further represents and warrants that as of the Effective Date no
event has occurred and is continuing or will result from the
execution, delivery and performance by it of this Amendment No. 5
which constitutes a Liquidation Event or event which after notice
or lapse of time or both, would constitute a Liquidation Event;
and
(d) Except as specifically amended herein, the
Receivables Purchase Agreement shall remain in full force and
effect and is hereby ratified and confirmed. The execution,
delivery and effectiveness of this Amendment No. 5 shall not
operate as a waiver of any right, power or remedy of the Managing
Agent or any of the Purchasers under the Receivables Purchase
Agreement or any other document, instrument or agreement--
executed and delivered in connection therewith, except
specifically set forth herein.
SECTION 4. Effective Date; Conditions to Effectiveness.
This Amendment No. 5 shall become effective as of the date first
written above on the first day (the "Effective Date") on which
each of the following conditions is satisfied:
(a) The Managing Agent shall have received an
officer's certificate, dated the Effective Date, in the form
attached hereto as Schedule 1;
(b) This Amendment No. 5 shall have been duly
executed and delivered by SRC, Sequa and the Purchasers; and
(c) No material adverse change has occurred in
respect of the Receivables or operating or financial
condition of Sequa or SRC since December 31, 1993.
SECTION 5. Governing Law. This Amendment No. 5 shall be
construed in accordance with and governed by the substantive law
of the State of New York.
SECTOPM 6. Headings. Section headings in this Amendment
No. 5 are included herein for convenience and reference only and
shall not constitute a part of this Amendment No. 5 for any other
purpose.
24142401 -3-
<PAGE>
SECTION 7. Counterparts. This Amendment No. 5 may be
executed in any number of counterparts and on separate
counterparts, each of which shall be deemed to be an original and
shall be binding upon the parties, their successors and assigns.
SECTION 8. Cross-References. References in this Amendment
No. 5 to any Section or Subsection, unless otherwise specified,
refer to such Section or Subsection of this Amendment No. 5.
SECTION 9. Instrument Pursuant to Receivables Purchase
Agreement. This Amendment No. 5 is an instrument executed
pursuant to the Receivables Purchase Agreement and shall (unless
otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the
Receivables Purchase Agreement, including Article XIV thereof.
24142401 -4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 5, or caused it to be executed and delivered by
their duly authorized officers, all as of the day and year first
above written.
SEQUA RECEIVABLES CORP.,
as Seller
By
Name:
Title:
SEQUA CORPORATION,
individually and as Servicer
By
Name:
Title:
CHEMICAL BANK,
as Managing Agent and Purchaser
By
Name:
Title:
THE BANK OF NEW YORK,
as Purchaser
By
Name:
Title:
24142401 -5-
<PAGE>
IN WITNESS WHEREOF, the parties
hereto have executed this Amendment No. 5, or caused it to be
executed and delivered by their duly authorized officers, all as
of the day and year first above written.
SEQUA RECEIVABLES CORP.,
as Seller
By
Name:
Title:
SEQUA CORPORATION,
individually and as Servicer
By
Name:
Title:
CHEMICAL BANK,
as Managing Agent and Purchaser
By
Name: PETER C. ECKSTEIN
Title: VICE PRESIDENT
THE BANK OF NEW YORK,
as Purchaser
By
Name:
Title:
24142401 -5-
<PAGE>
IN WITNESS WHEREOF, the parties
hereto have executed this Amendment No. 5, or caused it to be
executed and delivered by their duly authorized officers, all as
of the day and year first above written.
SEQUA RECEIVABLES CORP.,
as Seller
By
Name:
Title:
SEQUA CORPORATION,
individually and as Servicer
By
Name:
Title:
CHEMICAL BANK,
as Managing Agent and Purchaser
By
Name:
Title:
THE BANK OF NEW YORK,
as Purchaser
By
Name:
Title:
24142401 -5-
<PAGE>
THE BANK OF NOVA SCOTIA,
as Purchaser
By
Name: John W. Campbell
Title: Vice President & Agent
24142401 -6-
<PAGE>
Sequa Corpomtion
200 Park Avenue
New York, New York 10166
212 986-5500
212 370-1969 (fax)
March 1, 1995
Mr. John J. Quicke
II Stony Hollow Road
Chappaqua, NY 10514
Dear John:
Reference is made to your Employment Agreement dated April 1,
1993 (the "Agreement"). The amendment dated May 12, 1994 to the
Agreement is hereby cancelled, null and void and of no further or
continuing force or effect, and is superseded in its entirety by
this amendment. This shall confirm that the last sentence of
Paragraph 1 of the Agreement is hereby amended to read in its
entirety as follows:
"The place of employment is the New York City metropolitan
area or such other place as the Company may maintain its
principal place of business. "
This shall also confirm that the first sentence of Paragraph
2 of the Agreement is hereby amended to read in its entirety as
follows:
"In full consideration of all of the services to be rendered
by you under this Agreement, the Company will pay to you a
base salary at the rate of Four Hundred Thirteen Thousand
Seven Hundred Four ($413,704) Dollars per year (that being
the effective rate commencing March 1, 1995) during the term
of your employment hereunder, payable in equal bi-weekly
installments."
This shall also confirm that Paragraph 6(a) of the Agreement
is hereby amended to read in its entirety as follows:
"Subject to earlier termination pursuant to the provisions of
subparagraphs 6(b) and 6(c) below, the term of your
employment hereunder is for a period of five (5) years
commencing as of April 1, 1993 to March 31, 1998."
<PAGE>
Sequa Corporatian
Mr. John J. Quicke
March 1, 1995
Page 2
Except as set forth above, this letter shall not amend or
affect your Agreement; said Agreement, as hereby amended, shall
remain in full force and effect. If the above is in accordance
with your understanding, please sign the enclosed duplicate of
this letter and return it to the undersigned. Upon our receipt of
such fully executed copy, this shall constitute a binding
agreement between us.
SEQUA CORPORATION
By:
Norman E. Alexander
Chairman and Chief Executive Officer
AGREED AND ACCEPTED:
By: ---------------------
John Quicke
Dated:
<PAGE>
Sequa Corporation
200 Park Avenue John J. Quicke
New York, New York 10166 President
212 986-5500 Chief Operating Officer
212 370-1969 (fax)
February 15, 1994
Mr. Ronald Wright Green Gables
210 South Road
Rye Beach, NH 03871
Dear Ron:
Reference is made to your Employment Agreement, dated as of
February 1, 1991 (the "Employment Agreement"), with Sequa
Corporation ("the Company").
This is to confirm that effective as of February 1, 1994 you are
an employee-at-will of the Company. The terms and conditions of
your employment shall remain as set forth in the Employment
Agreement; except that the Company or you may terminate your
employment, with or without cause, upon not less than sixty (60)
days prior written notice to the other party (which notice shall
set forth the date of termination).
Please acknowledge your agreement with all of the foregoing by
signing and returning to the undersigned the enclosed duplicate
of this letter. Upon our receipt of such fully executed copy,
this shall become a binding agreement between us.
Very truly yours,
SEQUA CORPORATION
John J. Quicke, President &
COO
ACCEPTED AND AGREED TO:
Ronald Wright
DATE:
cc: M. F. Robilotto
A. L. Savoca
I.A. Schreger
<PAGE>
Sequa Corporation
200 Park Avenue
New York, New York 10166
212 986-5500
212 370-1969
AS of February 1, 1991
Mr. Ronald H. Wright
26 Walden Pond
Nashua, NH 03060
Dear Ron:
This letter, when signed by both parties, will formalize the
arrangements by which you will continue to be employed by Sequa
Corporation (the "Company") under the following terms and
conditions:
1. During the -term of your employment hereunder, you will
devote your full attention and expend your best
efforts, energies and skills, on an exclusive and full
time basis for the Company as a senior executive
officer with the title of Senior Vice
President-Instruments Group and will work directly
under and report to the person designated from time to
time by the Board of Directors of the Company (the
"Board"). The place of employment is Merrimack, New
Hampshire.
2. As your compensation, the Company will pay to you a
base salary at the rate of Two Hundred Fifty Four
Thousand Four Hundred Sixty Three ($254,463) Dollars
per year during the term of your employment hereunder,
payable in equal biweekly installments. You will also
be entitled to participate in the Company's Management
Incentive Bonus Plan on the same terms and subject to
the same conditions as generally applicable to the
Company's senior executive officers. The award of any
such incentive bonus is at the sole discretion of the
Board, taking into account, among other things,
individual performance and general business
conditions. Additionally, based upon your performance
and general business conditions, you may be eligible
for merit increases to your base salary, at the sole
discretion of the Board.
3. In addition to the foregoing compensation, you shall be
entitled during the term of your employment hereunder,
to the following:
<PAGE>
Sequa Corporation
Page 2
Mr. Ronald H. Wright
(a) the use of a Company-leased car in accordance with
Company policy generally applicable to its senior
executive officers;
(b) to continue to participate in the same health,
medical, and retirement programs that are
generally available to senior executive officers
in accordance with Company policy (and subject to
the terms and conditions of such programs as in
effect from time to time), and the Company is
authorized to deduct from your compensation such
amounts as may be necessary for the maintenance of
such coverage;
(c) five (5) weeks paid vacation per year and paid
holidays in accordance with Company policy;
(d) reimbursement for the yearly membership dues in a
country club used primarily for business purposes,
as well as business related expenses incurred in
connection therewith; and
(e) reimbursement of all authorized reasonable travel,
entertainment and other expenses paid or incurred
by you in the performance of your business
obligations, and you shall provide receipts or
other appropriate evidence of such expenses.
4. All of the compensation and benefits payable to you
hereunder shall be subject to the payment by you of
applicable Federal, State and local taxes.
5. (a) The term of your employment hereunder is for a
period of three (3) years commencing as of
February 1, 1991 to January 31, 1994, subject to
earlier termination pursuant to the provisions of
subparagraph 5(b) or (c) below.
(b) In the event of your death at any time during the
term hereof, your employment by the Company shall
be deemed to have ceased as of the date of your
death without notice to your estate. If during
any twelve (12) month period (not limited to a
calendar year), you are absent from your
employment or substantially unable to perform such
duties as are required of you pursuant to the
provisions hereof by reason of illness or other
incapacity, or any other cause of whatsoever
<PAGE>
Sequa Corporation
Page 3
Mr. Ronald H. Wright
nature, for more than ninety (90) days in the
aggregate, the Company, may, upon at least ten
(10) days prior written notice to you (which
notice shall fix the date of termination),
terminate the term of your employment hereunder.
Upon the termination of the term of your
employment hereunder as aforesaid, the Company
shall be relieved of any and all further
obligations to you arising out of this Agreement
except for any accrued and unpaid salary and
authorized expenses.
(c) The Company shall have the right at any time to
terminate your employment hereunder for Due Cause,
which termination shall be effective immediately
upon the issuance by the Company of written notice
to you. For the purposes of this Agreement, "Due
Cause" shall mean (i) the intentional refusal
(except by reason of incapacity due to physical or
mental illness or disability) by you to devote
your entire business time to the performance of
your duties hereunder as provided in Section 1
above, (ii) a breach by you of the provisions of
Exhibit B annexed hereto, (iii) your conviction
(including a conviction on a nolo contendre plea)
of a felony, (iv) your theft or misappropriation
of Company assets, (v) any willful, intentional or
grossly negligent act by you having the effect of
injuring the reputation or business of the Company
(or any of its divisions or subdivisions), or (vi)
your repeated or continued failure, neglect or
refusal, to perform your duties as an employee of
the Company.
6. Reference is made to the Letter Agreements, dated
December 17, 1986 and June 27, 1985 (copies of which
are annexed hereto as Exhibit A), which will remain in
full force and effect throughout the term of your
employment hereunder and which are incorporated into
and made a part of this Agreement.
7. Concurrently with the execution of this Agreement, you
shall execute the Company's Technical Information
Agreement (a copy of which is annexed hereto as Exhibit
B) and you hereby agree to be bound by the terms
thereof, all of which are incorporated into and made
part of this Agreement.
<PAGE>
Sequa Corporation
Page 4
Mr. Ronald H. Wright
8. You have represented that you have no agreement with or
obligations to others in conflict with this Agreement.
There are no representations, warranties, provisions or
undertakings other than those contained in this
Agreement (including Exhibits A and B), which
constitutes the entire agreement between us. Without
limiting the generality of the immediately preceding
sentence, the employment agreement, dated June 23,1988,
between the Company and you is hereby terminated and of
no further force or effect. This Agreement cannot be
modified or changed except in writing signed by one of
the Company's duly authorized officers.
9. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the
State of New York applicable to contracts made and to
be performed entirely in such State. This Agreement
and your rights and obligations hereunder may not be
assigned or otherwise transferred by you.
If the foregoing is in accord with your understanding
of the terms of your employment by the Company, please
be good enough to sign a duplicate of this letter and
return it to the undersigned. Upon our receipt of such
fully executed copy, this shall constitute a binding
agreement between us.
Very truly yours,
SEQUA CORPORATION
Norman E. Alexander
Chairman and Chief Executive
Officer
AGREED AND ACCEPTED:
Ronald H. Wright
Dated: 4/17/91
<PAGE>
SEQUA CORPORATION
1994 CORPORATE STAFF STOCK AWARD PLAN
1 PURPOSE.
The purpose of the 1994 Corporate Staff Stock Award
Plan (the "Plan') is to provide additional incentive to selected
corporate staff officers and other key corporate staff employees
of Sequa Corporation (the 'Company') to exert their best efforts
on behalf of the Company through the ownership of Class A Common
Stock, no par value of the Company (the "Stock'). The Company
believes that such ownership will provide such employees with a
more direct stake in the future welfare of the Company and will
motivate and encourage them to remain with the Company.
2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Compensation
Committee (the "Committee") of the Board of Directors of the
Company, which shall consist of not less than three (3) members
of the Board of Directors. The members of the Committee shall
not be eligible to receive Stock under the Plan and shall be
"disinterested persons" as defined in new Rule 16b-3(c)(2)(i) and
old Rule 16b3(d)(3) under the Securities Exchange Act of 1934.
The grants of Stock shall be recommended to the Board of
Directors by the Committee for approval.
Subject to the provisions of the Plan and Board of
Directors approval, the Committee shall have full and final
authority in its discretion (a) to determine the employees to be
awarded Stock, (b) to determine the number of shares of
#1486 Page 1
<PAGE>
Stock to be awarded to each such employee, (c) to prescribe the
terms and conditions attached to such awards, (d) to interpret
the provisions of the Plan and to amend or modify the terms
hereof, and (e) to make all other determinations deemed necessary
or advisable for the administration of the Plan. All decisions
made by the Committee and approved by the Board of Directors
pursuant to the provisions of the Plan shall be final, conclusive
and binding on all persons, including the Company, its
stockholders, employees and individuals granted awards under the
Plan.
3. SHARES OF STOCK SUBJECT TO THE PLAN.
The number of shares of Stock that may be awarded under
the Plan shall not exceed 50,000 shares. Such shares shall be
previously issued shares reacquired by the Company and held in
treasury. The Plan shall provide for onetime awards of Stock to
eligible employees. Any shares which are forfeited as a result
of the failure to satisfy the conditions set forth in paragraph 6
hereof may not be reissued to any other person under the Plan and
shall be returned to the Company's treasury.
4. ELIGIBILITY.
Stock may be awarded under the Plan only to corporate
staff officers and other key corporate staff employees who are
currently employed by the Company. Individuals to be awarded
Stock under the Plan shall be selected by the Committee, in its
sole discretion, from among those eligible.
5. EFFECTIVE DATE AND DURATION OF THE PLAN.
#148a Page 2
<PAGE>
The effective date of the Plan shall be October 27,
1994, subject, however, to approval of the Plan 'by a majority of
votes cast at the annual meeting of the stockholders of the
Company held in 1995. Subject to the express provisions of the
Plan, Stock may be awarded under the Plan at any time and from
time to time after the adoption of the Plan by the Committee and
the Board of Directors on October 27, 1994 and prior to the
termination of the Plan; provided, however, that in the event
that the Plan is not approved by stockholders of the Company as
aforesaid, the Plan shall be and become null and void, all Stock
awarded under the Plan shall be cancelled and all such recipients
of awards of Stock shall have no right or entitlement to such
Stock.
Subject to the foregoing paragraph, the Plan shall
remain in effect until October 27, 1997.
6. AWARDS AND CONDITIONS.
Awards of Stock shall be evinced by Stock Award Letter
Agreements containing the terms and conditions of the awards,
which shall be agreed to in writing by the recipients, together
with the issuance of Stock certificates containing the following
legend:
The transferability of this certificate and the shares of
Stock represented hereby are subject to the terms and
conditions (including forfeiture) of Sequa Corporation's
1994 Corporate Staff Stock Award Plan and an Agreement
entered into between the registered owner and Sequa
Corporation. Copies of such Plan and Agreement are on file
in
#1486 Page 3
<PAGE>
the offices of Sequa Corporation, 200 Park Avenue, New York,
New York. The Shares represented by this certificate may
not be sold or transferred unless they are registered under
the Securities Act of 1933 or the Company has been furnished
with an opinion of counsel satisfactory to it that no such
registration is required.
Notwithstanding the foregoing, in no event may these shares
be sold or transferred prior to October 27, 1997. In the
event that the holder of these shares ceases to be employed
by the issuer for any reason prior to October 27, 1 997,
then this certificate shall not be delivered to the person
named hereon and this certificate and the shares represented
hereby shall be forfeited and cancelled and of no further
force or effect.
Said awards shall not be transferred, pledged or assigned
for a period of three years from their date of grant and
shall be forfeited upon the termination of any recipient's
employment with the Company prior to the expiration of such
period, whether such employment is terminated by the Company
(with or without cause), by the employee or as a result of
the employee's extended leave of absence, disability, death
or retirement.
All certificates representing Stock awarded under the Plan
shall be kept in the possession of the Company until the
conditions of stockholder approval described in paragraph 5
hereof and the expiration of the three-year period described
above have been satisfied, and each recipient of an award
hereunder
#1486 Page 4
<PAGE>
shall be required to deliver a stock power, endorsed in blank,
relating to the Stock covered by such award, to the Company. At
such time, the certificates shall be delivered to the respective
recipients thereof without stock transfer tax to said recipient.
A recipient shall, prior and as a condition precedent to delivery
of the subject Stock certificate, pay, or make provisions
satisfactory to the Company for the payment of, any taxes (other
than stock transfer taxes) which the Company is obligated to
collect with respect to the delivery of a Stock certificate. At
the expiration of the aforesaid three 'ear period and upon
delivery of a Stock certificate -Y
to an employee under the Plan, such employee shall be free to
transfer or dispose of such Stock, provided that there are no
legal restrictions as described in paragraph 7 hereof. Prior
thereto, however, no employee may assign, pledge, transfer, sell
or otherwise dispose of or encumber his/her right to receive such
Stock or such Stock itself. During the three-year period
following issuance of the Stock certificate but prior to delivery
to the employee, the employee shall be entitled to vote such
Stock and to collect any dividends that may be paid thereon.
In the event that there is any change in the
Company's shares of Class A Common Stock resulting from stock
splits, stock dividends, combinations or exchanges of shares, or
other similar capital adjustments, equitable proportionate
adjustments shall be made by the Committee in the number of
shares of Stock awarded under the Plan. In addition, in the
event the Company shall merge with or into another entity and the
Company shall not be the surviving entity, the surviving entity
shall assume all of the obligations in respect of this Plan
#148a Page 5
<PAGE>
and the awards granted hereunder and the Shares shall remain
subject to all of the restrictions under, and receive all of the
benefits of, the Plan.
7. LEGAL RESTRICTIONS.
Each award under the Plan shall be subject to the
requirement that, if at any time the Board of Directors of the
Company or the Committee shall determine, in its respective
discretion, that the listing, registration, or qualification of
the Stock issued under the Plan upon any securities exchange or
under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the issuance of such Stock,
the certificate for such Stock shall not be delivered unless such
listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not
acceptable to the Board of Directors of the Company or the
Committee.
The Board of Directors or the Committee may, in
connection with an award of Stock under the Plan, require the
individual to whom the award is made to enter into an agreement
with the Company stating that, as a condition precedent to the
delivery of a Stock certificate hereunder, he/she shall, if then
required by the Company, represent to the Company in writing that
such receipt is for investment only and not with a view to
distribution, and also setting forth such other terms and
conditions as the Board of Directors or the Committee may
prescribe.
8. NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE.
Neither the Plan nor any action taken thereunder shall
be construed as
#1480 Page 6
<PAGE>
giving any employee the right to be retained in the employ or
service of the Company, nor shall it interfere in any way with
the right of the Company to terminate any employee's employment
or service at any time.
9. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN.
The Committee or the Board of Directors of the Company
may at any time terminate or amend the Plan in any respect;
provided, however, that no such action, without approval of the
stockholders may (a) increase the total amount of Stock which may
be awarded under the Plan, except as contemplated in paragraph 6
hereof, lb) withdraw the administration of the Plan from the
Committee, or (c) permit any person while a member of the
Committee to be eligible to receive an award under the Plan; and
provided further, that no amendment, modification or termination
of the Plan shall in any manner adversely affect the rights of
any recipient of any award theretofore granted under the Plan
without the consent of such recipient. The foregoing authority
of the Committee and the Board of Directors shall include
specific authority to amend the Plan in any respect to satisfy
the requirements of the Internal Revenue Code, federal or state
securities laws or regulations, any other applicable federal,
state or local laws or regulations or the requirements or
regulations of any securities exchange upon which the Stock may
be listed.
#1486 Page 7
<PAGE>
10. GOVERNING LAW.
The validity, construction and effect of the Plan, any
rules and regulations relating to the Plan, and any award
agreement shall be construed and enforced in accordance with the
laws of the State of New York, without regard to principles of
conflict of laws.
#1488 Page 8
<PAGE>
EXECUTION COPY
AMENDMENT NO. 1
Dated as of June 13, 1994
to
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 14, 1993
Sequa Corporation, a Delaware corporation (the
"Borrower"), The Bank of New York, as Administrative Agent (the
"Administrative Agent"), The Bank of New York, The Bank of Nova
Scotia and Chemical Bank, as Managing Agents (the "Managing
Agents"), Bank of America National Trust and Savings Association,
Chase Manhattan Bank, N.A. and The Nippon Credit Bank, Ltd., as
Co-Agents (the "Co-Agents"), and the banks listed on the
signature pages hereto (the "Banks") agree as follows:
SECTION 1. Credit Agreement. Reference is made to the
Amended and Restated Credit Agreement (the "Credit Agreement"),
dated as of December 14, 1993, among the Borrower, the
Administrative Agent, the Managing Agents, the Co-Agents and the
Banks. Capitalized terms used herein but not defined herein
shall have the meanings ascribed thereto in the Credit Agreement.
The Credit Agreement as amended by this Amendment No. 1 is and
shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed.
SECTION 2. Amendments. Upon and after the Effective
Date (as defined in Section 4 hereof), the Credit Agreement shall
be amended as follows:
(a) Section 4.13(c) of the Credit Agreement is amended
by deleting from the text thereof the parenthetical phrase at the
end thereof.
(b) Section 4.13(d) of the Credit Agreement is amended
in its entirety to read as follows:
(d) Make any Acquisition, provided that, so long
as no Default exists at the time such Acquisition is
effected, both before and after giving effect to such
Acquisition, this Section 4.13(d) shall not apply to (i) any
Permitted Acquisition and (ii) any Acquisition so long as
the purchase price of the assets acquired in such
Acquisition, in the aggregate with the purchase price of
all
#30075634.5
<PAGE>
Acquisitions effected pursuant to this clause (ii) during
the period from the Effective Date to the date of
determination, does not exceed $10,000,000.
(c) Section 10.01 of the Credit Agreement is amended
by adding a definition of "Acquisition" and a definition of
"Permitted Acquisition" in the correct alphabetical order as
follows:
"'Acquisition, means the acquisition of all or
substantially all of the stock of any corporation or the
partnership or other ownership interests in, or all or
substantially all of the assets of, a corporation,
partnership or other similar entity or division thereof."
"'Permitted Acquisition' means (i) the acquisition
of certain assets by the Borrower on or before December 31,
1994, as described in the Borrower's letter to the
Administrative Agent dated June 2, 1994, provided that the
purchase price for such assets does not exceed the aggregate
amount set forth in such letter and (ii) each other
Acquisition which has been specifically consented to in
writing by the Required Banks from time to time."
Section 3. Representations and Warranties. Each of the
Borrower and each Guarantor (as defined after giving effect to
this Amendment No. 1) has the power, and has taken all necessary
action (including any necessary stockholder action) to authorize
it, to execute, deliver and perform in accordance with its terms
Amendment No. 1 and the Credit Agreement as amended by Amendment
No. 1. Amendment No. 1 has been duly executed and delivered by
the Borrower and each such Guarantor and is a legal, valid and
binding obligation of each Loan Party that is a party thereto,
enforceable against such Loan Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally. The execution,
delivery and performance in accordance with its terms by the
Borrower and such Guarantors of Amendment No. 1 and the Credit
Agreement as amended by Amendment No. 1 do not and (absent any
change in any Applicable Law or applicable Contract) will not (a)
require any Governmental Approval or any other consent or
approval, including any consent or approval of any Subsidiary or
any consent or approval of the stockholders of the Borrower or
any Subsidiary or (b) violate or conflict with, result in a
breach of, constitute a default under, or result in or require
the creation of any Lien upon any assets of the Borrower or any
Subsidiary under, (i) any Contract to which the Borrower or any
Subsidiary is a party or by which the Borrower or any subsidiary
or any of their respective properties may be bound, the breach of
which, either singly or in the aggregate with all other such
Contracts, would have a Materially Adverse Effect upon the
Borrower or any Subsidiary, or (ii) any Applicable Law.
#30075634.5 -2-
<PAGE>
SECTION 4. Effective Date; Conditions to
Effectiveness. This Amendment No. 1 shall become effective on
the first day (the "Effective Date") on which this Amendment No.
1 shall have been duly executed and delivered by the Borrower,
the Guarantors and the Required Banks.
SECTION 5. Governing Law. This Amendment No. 1 shall
be construed in accordance with and governed by the substantive
law of the State of New York.
SECTION 6. Headings. Section headings in this
Amendment No. 1 are included herein for convenience and reference
only and shall not constitute a part of this Amendment No. 1 for
any other purpose.
SECTION 7. Counterparts. This Amendment No. 1 may be
executed in any number of counterparts and on separate
counterparts, each of which shall be deemed to be an original and
shall be binding upon the parties, their successors and assigns.
(Next page is signature page)
#30075634.5 -3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment No. 1, or caused it to be executed and delivered
by their duly authorized officers, all as of the day and year
first above written.
SEQUA CORPORATION
By.
Name:
Title:
CASCO INVESTORS CORPORATION
By.
Name:
Title:
CHROMALLOY AMERICAN CORPORATION
By
Name:
Title:
CHROMALLOY GAS TURBINE CORPORATION
By
Name:
Title:
SEQUA CHEMICALS, INC.
By
Name:
Title:
#30075634.5 -4-
<PAGE>
CASCO PRODUCTS CORPORATION
By
Name:
Title:
SEQUA FINANCIAL CORPORATION
By
Name:
Title:
KOLLSMAN MANUFACTURING COMPANY, INC.
By
Name:
Title:
NORTHERN TECHNOLOGIES, INC.
By
Name:
Title:
GLENROCK CAN SYSTEMS, INC.
By
Name:
Title:
NORTHERN CAN SYSTEMS, INC.
By
Name:
Title:
-5-
<PAGE>
NORTHERN CAN SYSTEMS OF WISCONSIN, INC.
By
Name:
Title:
THE BANK OF NEW YORK, as Administrative
Agent, as a Managing Agent and as a Bank
By
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Managing
Agent and as a Bank
By
Name:
Title:
CHEMICAL BANK, as a Managing Agent and
as a Bank
By
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Co-Agent and
as a Bank
By
Name:
Title:
#30075634.5 -6-
<PAGE>
CHASE MANHATTAN BANK, N.A., as a C-Agent
and as a Bank
By
Name:
Title:
THE NIPPON CREDIT BANK, LTD., as a
Co-Agent and as a Bank
By
Name:
Title:
BANK BRUSSELS LAMBERT
By
Name:
Title:
#30075634.5 -7-<PAGE>
<PAGE>
EXECUTION COPY
AMENDMENT NO. 2
Dated as of December 14, 1994
to
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 14, 1993
Sequa Corporation, a Delaware corporation (the
"Borrower"), The Bank of New York, as Administrative Agent (the
"Administrative Agent"), The Bank of New York, The Bank of Nova
Scotia and Chemical Bank, as Managing Agents (the "Managing
Agents"), Bank of America National Trust and Savings Association,
Chase Manhattan Bank, N.A. and The Nippon Credit Bank, Ltd., as
Co-Agents (the "Co-Agents"), and the banks listed on the
signature pages hereto (the "Banks") agree as follows:
SECTION 1. Credit Agreement. Reference is made to the
Amended and Restated Credit Agreement, dated as of December 14,
1993, among the Borrower, the Administrative Agent, the Managing
Agents, the Co-Agents and the Banks, as amended by Amendment No.
1, dated as of June 13, 1994 (as so amended, the "Credit
Agreement"). Capitalized terms used herein but not defined
herein shall have the meanings ascribed thereto in the Credit
Agreement. The Credit Agreement as amended by this Amendment No.
2 is and shall continue to be in full force and effect and is
hereby in all respects ratified and confirmed.
SECTION 2. Amendments. Upon and after the Effective
Date (as defined in Section 4 hereof), the Credit Agreement shall
be amended as follows:
(a) Section 4.04 is amended by
(i) deleting the word "or" from the last line of clause
(vii) thereof;
(ii) replacing the period at the end of clause (viii)
thereof with a comma followed immediately by the word "or"; and
(iii) adding a new clause (ix) thereto, which clause (ix)
shall read in its entirety as follows:
11(ix) a Guaranty by the Borrower of
Indebtedness of BAICO, provided that the aggregate
<PAGE>
principal amount of the Indebtedness of BAICO so guaranteed
shall not exceed, at any time, $27,500,000.11;
and
(b) Section 10.01 is amended by adding a definition
of "BAICO" in the correct alphabetical order as follows:
"'BAICO' means Bendix-Atlantic Inflator Company, a
general partnership formed by the Atlantic Research
Corporation, a Subsidiary of the Borrower and AlliedSignal
Inc., a Delaware corporation."
SECTION 3. Representations and Warranties. Each of the
Borrower and each Guarantor (as defined after giving effect to
this Amendment No. 2) has the power, and has taken all necessary
action (including any necessary stockholder action) to authorize
it, to execute, deliver and perform in accordance with its terms
Amendment No. 2 and the Credit Agreement as amended by Amendment
No. 2. Amendment No. 2 has been duly executed and delivered by
the Borrower and each such Guarantor and is a legal, valid and
binding obligation of each Loan Party that is a party thereto,
enforceable against such Loan Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally. The execution,
delivery and performance in accordance with its terms by the
Borrower and such Guarantors of Amendment No. 2 and the Credit
Agreement as amended by Amendment No. 2 do not and (absent any
change in any Applicable Law or applicable Contract) will not (a)
require any Governmental Approval or any other consent or
approval, including any consent or approval of any Subsidiary or
any consent or approval of the stockholders of the Borrower or
any Subsidiary or (b) violate or conflict with, result in a
breach of, constitute a default under, or result in or require
the creation of any Lien upon any assets of the Borrower or any
Subsidiary under, (i) any Contract to which the Borrower or any
Subsidiary is a party or by which the Borrower or any subsidiary
or any of their respective properties may be bound, the breach of
which, either singly or in the aggregate with all other such
Contracts, would have a Materially Adverse Effect upon the
Borrower or any Subsidiary, or (ii) any Applicable Law.
SECTION 4. Effective Date: conditions to
Effectiveness. This Amendment No. 2 shall become effective on the
first day (the "Effective Date") on which this Amendment No. 2
shall have been duly executed and delivered by the Borrower, the
Guarantors and the Required Banks.
SECTION 5. Governing Law. This Amendment No. 2 shall
be construed in accordance with and governed by the substantive
law of the State of New York.
#30088922.4 -2-
<PAGE>
SECTION 6. Headings. Section headings in this
Amendment No. 2 are included herein for convenience and reference
only and shall not constitute a part of this Amendment No. 2 for
any other purpose.
SECTION 7. counterparts. This Amendment No. 2 may be
executed in any number of counterparts and on separate
counterparts, each of which shall be deemed to be an original and
shall be binding upon the parties, their successors and assigns.
[Next page is signature page]
#30088922.4 -3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment No. 2, or caused it to be executed and delivered
by their duly authorized officers, all as of the day and year
first above written.
SEQUA CORPORATION
By-------------------------
Name:
Title:
CASCO INVESTORS CORPORATION
By-------------------------
Name:
Title:
CHROMALLOY AMERICAN CORPORATION
By-------------------------
Name:
Title:
CHROMALLOY GAS TURBINE CORPORATION
By
Name:
Title:
SEQUA CHEMICALS, INC.
By-----------------------------
Name:
Title:
#30088922.5 -4-
<PAGE>
CASCO PRODUCTS CORPORATION
By----------------------------
Name:
Title:
SEQUA FINANCIAL CORPORATION
By----------------------------
Name:
Title:
KOLLSMAN MANUFACTURING COMPANY,
INC.
By----------------------------
Name:
Title:
NORTHERN TECHNOLOGIES, INC.
By----------------------------
Name:
Title:
GLENROCK CAN SYSTEMS, INC.
By----------------------------
Name:
Title:
NORTHERN CAN SYSTEMS, INC.
By----------------------------
Name:
Title:
#30088922.5 --5-
<PAGE>
NORTHERN CAN SYSTEMS OF WISCONSIN, INC.
By---------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Administrative
Agent, as a Managing Agent and as a Bank
By---------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Managing
Agent and as a Bank
By---------------------------------
Name:
Title:
CHEMICAL BANK, as a Managing Agent and
as a Bank
By---------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS
ASSOCIATION, as a Co-Agent and as a Bank
By---------------------------------
Name:
Title:
#30088922.5 -6-<PAGE>
<PAGE>
CHASE MANHATTAN BANK, N.A., as a
Co-Agent and as a Bank
By---------------------------------
Name: Lawrence C. Shields
Title: Managing Director
THE NIPPON CREDIT BANK, LTD., as a
Co-Agent and as a Bank
By---------------------------------
Name:
Title:
BANK BRUSSELS LAMBERT
By---------------------------------
Name:
Title:
#30088922.5 -7-
<PAGE>
<PAGE>
CHASE MANHATTAN BANK, N.A., as a
Co-Agent and as a Bank
By---------------------------------
Name:
Title:
THE NIPPON CREDIT BANK, LTD., as a
Co-Agent and as a Bank
By---------------------------------
Name: James J. Pasquale
Tit]e: Senior Manager
BANK BRUSSELS LAMBERT
By---------------------------------
Name:
Title:
#30088922.5
<PAGE>
CHASE MANHATTAN BANK, N.A., as a
Co-Agent and as a Bank
By---------------------------------
Name:
Title:
THE NIPPON CREDIT BANK, LTD., as a
Co-Agent and as a Bank
By---------------------------------
Name:
Title:
BANK BRUSSELS LAMBERT NY branch
By---------------------------------
Name:
Title: EDGAR LORCH
SENIOR VICE PRESIDENT
Dominick H.J. Vangaever
Vice President
Credit Department
#30088922.5
<PAGE>
EXECUTION COPY
AMENDMENT NO. 3 AND WAIVER
Dated as of March 3, 1995
to
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 14, 1993
Sequa Corporation, a Delaware corporation (the
"Borrower"), The Bank of New York, as Administrative Agent (the
"Administrative Agent"), The Bank of New York, The Bank of Nova
Scotia and Chemical Bank, as Managing Agents (the "Managing
Agents"), Bank of America National Trust and Savings Association,
Chase Manhattan Bank, N.A. and The Nippon Credit Bank, Ltd., as
Co-Agents (the "Co-Agents"), and the banks listed on the
signature pages hereto (the "Banks") agree as follows:
SECTION 1. credit Agreement. Reference is made to the
Amended and Restated Credit Agreement, dated as of December 14,
1993, among the Borrower, the Administrative Agent, the Managing
Agents, the Co-Agents and the Banks, as amended by Amendment No.
1, dated as of June 13, 1994, and Amendment No. 2, dated as of
December 14, 1994 (as so amended, the "Credit Agreement").
Capitalized terms used herein but not defined herein shall have
the meanings ascribed thereto in the Credit Agreement. The
Credit Agreement as amended by this Amendment No. 3 and Waiver,
and except as expressly waived herein (which waiver shall be
effective only in the specific instances and for the specific
purposes provided herein), is and shall continue to be in full
force and effect and is hereby in all respects ratified and
confirmed.
SECTION 2. Amendment. Upon and after the Effective
Date (as defined in Section 5 hereof), the Credit Agreement shall
be amended as follows:
(a) Section 4.04 is amended by
(i) deleting the word "or" from the last line of clause
(viii) thereof;
(ii) replacing the period at the end of clause (ix) thereof
with the word "or" followed by a comma; and
(iii) adding a new clause (x) thereto, which clause (x)
shall read in its entirety as follows:
130092281.8
<PAGE>
"(x) a Guaranty by the Borrower of the Liabilities of
Sequa Coatings Corporation, an Indiana corporation ("Sequa
Coatings"), incurred under an operating lease of certain
equipment with an appraised market value of approximately
$30,000,000 located in one or more of the plants acquired by
Sequa coatings pursuant to the Permitted Acquisition
described in clause (i) of the definition thereof, Provided
that such Guaranty and such operating lease shall each be
effected pursuant to documentation in form and substance
satisfactory to Required Banks and counsel to the
Administrative Agent.";
(b) Section 4.06(b) is amended by replacing
the words
11 5,000,000 plus 50% of the cumulative consolidated Net Income
for the period from January 1, 199411 therein with the words "(x)
$9,746,000 plus (y) 50% of the cumulative Consolidated Net Income
for the period from January 1, 1995";
(c) Section 4.15 is amended by replacing
the figure "585,000,000" in clause (i) thereof with the figure
"565,000,000";
(d) Section 4.16 is amended by replacing the table
therein with the following:
Minimum Fixed Charge
"Date Coverage Ratio
December 31, 1994 1.70 to 1.00
March 31, 1995 1.70 to 1.00
June 30, 1995 1.70 to 1.00
September 30, 1995 1.80 to 1.00
December 31, 1995 2.00 to 1.00
March 31, 1996 2.25 to 1.00
June 30, 1996 2.25 to 1.00
Thereafter 2.50 to 1.00";
(e) Section 4.18 is amended to read in its entirety as
follows:
"Section 4.18. Consolidated Total Debt/Consolidated
Capitalization Ratio. Permit the ratio of its Consolidated
Total Debt to its Consolidated Capitalization at any time to
be greater than .55 to 1.00.";
130092281.8 -2-
<PAGE>
(f) Section 5.01(a) is amended by deleting the words
"and Monthly Cash Flow Reports" from clause (i) thereof, inserting
the word "and" after clause (ii) thereof, deleting in its entirety
clause (iii) thereof, renumbering clause (iv) thereof as clause
(iii) and replacing the reference therein to clause (iii) with a
reference to clause (ii); and
(g) Section 10.01 is amended by restating the
definition of "Permitted Acquisition" therein in its entirety as
follows:
"'Permitted Accruisition' means (i) the acquisition
of certain assets by the Borrower (or a Subsidiary designated
by the Borrower) as such acquisition is described in the
Borrower's letter to the Administrative Agent dated June 2,
1994 or as such acquisition as therein described may be
modified as set forth in the memorandum from Kenneth A.
Drucker to the Banks dated March 1, 1995, Provided that the
purchase price for such assets does not exceed the aggregate
amount set forth in such letter or, if applicable, such
amount as modified by such memorandum, and (ii) each other
Acquisition which has been specifically consented to in
writing by the Required Banks from time to time."
SECTION 3. waiver. Upon and after the Effective Date
(as defined in Section 5 hereof), the Banks shall waive:
(a) Any Default arising prior to the Effective Date as
a result of the Borrower's failure-to comply with Section 4.06 of
the Credit Agreement to the extent that such Default arose solely
from the declaration of or payment by the Borrower of dividends to
holders of preferred stock in the amount of $4,746,622.50 in the
aggregate for the period from the Agreement Date through December
31, 1994; and
(b) Any Default arising as a result of the Borrower's
failure to comply with Section 5.01(a) of the Credit Agreement to
the extent that such Default arose solely from the Borrower's
failure to delivery Monthly Cash Flow Reports required by such
Section 5.01(a).
SECTION 4. Representations and Warranties. Each of the
Borrower and each Guarantor (as defined after giving effect to
this Amendment No. 3 and Waiver) has the power, and has taken all
necessary action (including any necessary stockholder action) to
authorize it, to execute, deliver and perform in accordance with
its terms Amendment No. 3 and Waiver and the Credit Agreement as
amended by Amendment No. 3 and Waiver. Amendment No. 3 and Waiver
has been duly executed and delivered by the Borrower and each such
Guarantor and is a legal, valid and binding obligation of each
Loan Party that is a party thereto, enforceable against such Loan
Party in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy,
130092281.8 -3-
<PAGE>
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally. The execution,
delivery and performance in accordance with its terms by the
Borrower and such Guarantors of Amendment No. 3 and Waiver and the
Credit Agreement as amended by Amendment No. 3 and Waiver do not
and (absent any change in any Applicable Law or applicable
Contract) will not (a) require any Governmental Approval or any
other consent or approval, including any consent or approval of
any Subsidiary or any consent or approval of the stockholders of
the Borrower or any Subsidiary or (b) violate or conflict with,
result in a breach of, constitute a default under, or result in or
require the creation of any Lien upon any assets of the Borrower
or any Subsidiary under, (i) any Contract to which the Borrower or
any Subsidiary is a party or by which the Borrower or any
Subsidiary or any of their respective properties may be bound, the
breach of which, either singly or in the aggregate with all other
such Contracts, would have a Materially Adverse Effect upon the
Borrower or any subsidiary, or (ii) any Applicable Law.
SECTION 5. Effective Date; Conditions to Effectiveness.
This Amendment No. 3 and Waiver shall become effective on the
first day (the "Effective Date") on which:
(i) this Amendment No. 3 and Waiver shall have been
duly executed and delivered by the Borrower, the Guarantors and
the Required Banks; and
(ii) the Borrower shall have paid all of the fees
payable under Section 6 of this Amendment No. 3 and Waiver.
SECTION 6. Amendment Fee. The Borrower hereby agrees to
pay to the Administrative Agent for the pro rata account of the
Banks, on or before the Amendment Effective Date, an amendment fee
in an amount equal to 0.10% of the aggregate amount of the Banks'
Commitments as at the Amendment Effective Date.
SECTION 7. Governing Law. This Amendment No. 3 and
Waiver shall be construed in accordance with and governed by the
substantive law of the State of New York.
SECTION 8. Readings. Section headings in this Amendment
No. 3 and Waiver are included herein for convenience and reference
only and shall not constitute a part of this Amendment No. 3 and
Waiver for any other purpose.
SECTION 9. Counterparts. This Amendment No. 3 and
Waiver may be executed in any number of counterparts and on
separate counterparts, each of which shall be deemed to be an
original and shall be binding upon the parties, their successors
and assigns.
(The next page is a signature page]
#30092281.8 -4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment No. 3 and Waiver, or caused it to be executed and
delivered by their duly authorized officers, all as of the day and
year first above written.
SEQUA CORPORATION
By
Name:
Title
CASCO INVESTORS CORPORATION
By
CHROMALLOY AMERICAN CORPORATION
By
Name:
Title
CHROMALLOY GAS TURBINE CORPORATION
By
Name:
Title:
SEQUA CHEMICALS, INC.
By
Name:
Title:
#30092281.8 -5-
<PAGE>
CASCO PRODUCTS CORPORATION
By
Name:
Title:
SEQUA FINANCIAL CORPORATION
By
Name:
Title:
KOLLSMAN MANUFACTURING COMPANY, INC.
By
Name:
Title:
NORTHERN TECHNOLOGIES, INC.
By
Name:
Title:
GLENROCK CAN SYSTEMS, INC.
By
Name:
Title:
NORTHERN CAN SYSTEMS, INC.
By
Name:
Title:
#30092281.8 -6-
<PAGE>
NORTHERN CAN SYSTEMS OF WISCONSIN, INC.
By
Name:
Title:
THE BANK OF NEW YORK, as Administrative
Agent, as a Managing Agent and as a Bank
By
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Managing Agent
and as a Bank
By
Name:
Title:
CHEMICAL BANK, as a Managing Agent and
as a Bank
By
Name: PETER C. Eckstein
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Co-Agent and as a Bank
By
Name:
Title:
#30092281.8 -7-
<PAGE>
CHASE MANHATTAN BANK, N.A., as a Co-Agent and
as a Bank
By
Name:
Title:
THE NIPPON CREDIT BANK, LTD., as a Co-Agent
and as a Bank
By
Name:
Title:
BANK BRUSSELS LAMBERT, NEW YORK BRANCH
By
Name: EDGAR LORCH
Title: Senior Vice President
By
Name:
Title: Dominick H.J. Vangaever
Vice President
Credit Department
#30092281.8 -8-
<PAGE>
SEQUA CORPORATION
MANAGEMENT INCENTIVE
BONUS PROGRAM
OPERATING DIVISIONS
(Revised 1995)
<PAGE>
<PAGE>
INDEX
I. General Outline
II. Division Bonus Program
III. Policies & Procedures
IV. Exhibits
- 2 -
<PAGE>
SEQUA CORPORATION
MANAGEMENT INCENTIVE BONUS PROGRAM
FOR OPERATING DIVISIONS
GENERAL OUTLINE
The purpose of implementing Sequa Corporation's (the Company's)
Management Incentive Bonus Program (MEBP) is to improve the
Company's performance through the efforts of key executive and
management personnel who are in positions to significantly
contribute to operating results. In all instances below the
Chairman Chief Executive Officer (CEO) will oversee the
administration of the MIBP on behalf of Gas Turbine operations
and the President Chief Operating Officer (COO) will oversee the
administration of the MEBP on behalf of The Group operations.
The Vice President Human Resources (VPHR) will be responsible for
coordination of administration on behalf of both the CEO and the
COO.
For group/divisional operations specific financial and
performance goals will be established in the beginning of the
year for all MEBP participants.
The MIBP will provide substantial rewards for participants who
accomplish or exceed targeted goals at the end of the year. The
bonus pool from which bonuses will be paid to each participant
will be calculated based upon a combination of (a) the overall
financial performance of the division and (b) performance as
determined by the CEO/COO as appropriate.
<TABLE>
I. MIBP PARTICIPANTS AND POTENTIAL PAYOUT LEVELS
(Percentage of salary)
<CAPTION>
Target
Minimum Bonus Level Maximum Bonus
Bonus ( "Par" Level (Outstanding
Level* Performance) Performance)
Participants (85% Of Plan) (Plan) (115% of Plan)
<S> <C> <C> <C>
Group/Division Presidents
Vice Presidents and
General Managers 25% 50% 75%
A-Pool 15% 30% 45%
B-Pool Up to 8 weeks pay
<FN>
* Assumes 85% Achievement of operating income and RONA targets and a
minimum award for performance.
</TABLE>
- 3 -
<PAGE>
II. PARTICIPANT BONUS FORMULA
Participant's total bonus will be calculated according to the
following:
80% - accomplishment of divisional financial goals.
20% - performance.
- 4 -
<PAGE>
GROUP/DIVISIONAL PLAN
MANAGEMENT INCENTIVE BONUS PROGRAM
Participants
A. Group/Division Presidents/Vice Presidents, General Managers.
B. A-Pool participants in accordance with the following
guidelines.
1. First level of management reporting directly to the
business unit President/Vice President, General
Manager.
2. Certain first-level managers may be excluded if the
reporting relationship is due to special circumstances.
3. Certain second-level managers may be included if the
responsibilities of their position warrant
participation at the A-Pool level.
C. B-Pool participation shall consist of select managers and
professional level employees who are in a position to
influence financial goals through sustained performance.
1. There will be three categories in the B-Pool:
B-I Individuals who have a strong influence on divisional
financial and performance goals, but who are not
eligible for the A-Pool.
B-II Individuals with moderate impact on divisional
financial and performance goals.
B-III Individuals with some influence on divisional
financial and performance goals.
D. Prior to March 15th of each year, the recommended list of
participants are to be submitted by the Group/Division heads to
the CEO/COO and VPHR for approval.
E. Any organizational changes during the year which impact on
participation at the President/Vice President, General Manager or
A-Pool level will be reviewed and approved by the CEO/COO and
VPHR.
- 5 -
<PAGE>
II. Group/Divisional Goals
A Financial goals: 80%
1. Each Group/Division President/Vice President, General
Manager will be assigned financial goals by the CEO/COO
for the following:
Operating Profit
Return on Net Assets (RONA), see EXHIBIT A - RONA
calculation.
2. Each financial goal will be based on the original
approved Budget for the group/division.
B. Performance: 20%
1. Performance goals will be determined by the CEO/COO
through a dialogue between the CEO/COO and the business
unit head(s) at the beginning of the plan year.
III. Bonuses
A. In accord with the Policies and Procedures section of
this Plan a pool of funds shall be calculated and
established from which bonuses will be paid subject to
the following:
1. Amounts paid to participants shall not in the aggregate
exceed the bonus pool, nor may unused bonus accruals be
"carried over".
2. No individual may receive more than the maximum award
for his/her position.
3. The Bonus Pool for the Group/Division shall not exceed
7.5 % of operating profit of the Group/Division before
deduction for the accrued Bonus Pool.
4. In those instances where the percentage cap impacts the
value of the pool, the bonus recommendations will be
calculated without regard to the cap and then reduced
by a uniform percentage factor in order to comply with
the cap set forth in 3 above. For example, if the
total bonus pool without the cap would be $800,000 and
with the cap it is $600,000 the uniform factor is 75%.
- 6 -
<PAGE>
POLICIES AND PROCEDURES
MANAGEMENT INCENTIVE BONUS PROGRAM
I. DETERMINATION OF ELIGIBLE PARTICIPANTS
A. Prior to March 15th of each year, each Group/Division
President/Vice President, General Manager shall prepare
and submit a list of proposed plan participants. The
list shall include the proposed participants' level of
participation. This list win be reviewed and approved
by the CEO/COO and the VPHR.
II. TIME OF PARTICIPATION
A. In order to participate in the MIBP, each participant
must be in an eligible position at the end of the plan
year.
B. Any employee promoted or hired to a position included
in the MIBP will be entitled to participate in the
bonus program on a pro-rated basis.
C. The plan year is the Company fiscal year.
III. BONUS PLAN REVIEWS
A. Every quarter, the CEO/COO will meet with each
Group/Division President/Vice President, General
Manager to review status of the assigned financial and
performance goals.
IV. DETERMINATION OF BONUS AWARDS
A. Following the close of the plan year, the Vice
President, Controller will agree with each
Group/Division President, Vice President, General
Manager on the financial goal ratings for profit and
RONA for their respective businesses. The Vice
President, Controller will report his findings for each
operating division to the CEO/COO.
1. Based on these results, the CEO/COO will approve the
financial goal ratings for each of the operating
Group/Divisions.
B. Performance goal ratings will be the measure determined
by the CEO/COO of key performance criteria established
through a dialogue between the CEO/COO and business
unit head(s) during the course of the plan year.
- 7 -
<PAGE>
C. The sum of the financial and performance ratings when
multiplied by the below listed factors and all plan
participant salaries creates the bonus pool which may in no
event exceed the 7.5% operating profit cap. (See, III.3
above.)
(Sum of financial and performance ratings) x factors x
participants salaries = Bonus Pool)
These factors (as a percent of salary) are as follows:
Participant Factor
Group/Division Up to Par From Par to Out-
President Vice Performance standing Performance
President, General
Manager .5 .25
A-Pool .3 .15
B-Pool
Level I Up to 8 weeks pay
Level II Up to 4 weeks pay
Level III Up to 2 weeks pay
Once the pool has been established, proposed
individual bonuses to A and B Pool participants
shall be calculated by the Group/Division
President/Vice President, General Manager. Actual
proposed awards may vary based upon the judgment
of the Group/Divisional President/Vice/President,
General Manager with respect to the performance of
each plan participant.
EXHIBIT B - Bonus Plan Calculations - provides a
series of sample calculations as a guide.
V. AWARD APPROVAL PROCESS
A. Each Group/Division President/Vice President, General
Manager will submit to the VPHR, the recommended bonus
for each member of the plan.
B. These recommendations will be accompanied by a summary
sheet containing a detailed calculation of the
available bonus pool including participant name,
December 31 salary and level of participation.
C. The VPHR will submit all bonus recommendations to the
CEO/COO who will coordinate approval with the Executive
Management Committee.
- 8 -
<PAGE>
VI. DIVISION PROFIT AND PLAN PAYOUT
A. Notwithstanding anything contained in this plan to
the contrary, if there is no operating profit for
a given plan year, there will be no bonus paid,
VII. FREQUENCY OF AWARDS
Bonuses will be generated once every year during the
month of February, for performance in the previous plan
year.
VIII. CONTINGENCIES BEYOND PARTICIPANT's CONTROL
In those instances where significant events affect the
accomplishment of goals and objectives for a participant,
the CEO/COO may use his judgment in recommending to the
Executive Committee the amount of bonus to be awarded.
Examples of such events include: labor disputes,
acquisitions, natural catastrophes.
IX. FORFEITURE OF AWARD
A plan participant will not be eligible for consideration
for a bonus if:
A. Participant is discharged for cause at anytime
prior to the end of the plan year.
B. Participant voluntarily resigned prior to the end
of the plan year.
Any exception to this Policy must be approved by the
CEO/COO and VPHR.
X. RETIREMENT, DISABILITY, NOT FOR CAUSE TERMINATION, OR
DEATH DURING THE PLAN YEAR
Any participant who retires, becomes permanently
disabled, is terminated other than for cause, or dies
during the plan year shall be reviewed individually to
determine whether a bonus award is appropriate.
XI. BUDGETING
The budget shall include the cost for a "Par" Bonus for
all participants in the Plan.
XII. DISCLAIMER
This plan shall neither create any right to a bonus
payment or future participation therein for any employee,
nor limit the right of Sequa Corporation to modify, amend
or rescind this plan for any subsequent plan year. Nor
shall it be construed as creating any right to
employment.
- 9 -
<PAGE>
SEQUA CORPORATION
MANAGEMENT INCENTIVE
BONUS PROGRAM
CORPORATE EXECUTIVE OFFICERS
AND
CORPORATE STAFF
(AMENDMENT NUMBER 1 -- REVISED, 1995)
<PAGE>
<PAGE>
INDEX
I. General Outline
II. Bonus Program
III. Policies & Procedures
IV. Exhibits
2
<PAGE>
SEQUA CORPORATION
MANAGEMENT INCENTIVE BONUS PROGRAM
GENERAL OUTLINE
The purpose of implementing Sequa Corporation's Management
Incentive Bonus Program (MIBP) is to improve the Company's
performance through the efforts of key executives and management
personnel who are in position to significantly contribute to
operating results.
Specific financial and performance goals will be established
in the beginning of the plan year for all MIBP participants, with
the exception of Corporate Executive Officers, who will be
measured exclusively on attainment of the financial goal.1
The MIBP will provide substantial rewards for non-executive
officer participants who accomplish or exceed targeted goals at
the end of the plan year. The bonus paid to each such
participant will be based on a combination of (a) the overall
financial performance of the company and (b) performance
consideration by executive management. The Corporate Executive
Officers' bonuses will be certified by the Compensation Committee
of The Board of Directors after completion of the fiscal year
provided that the required financial goals (as set forth in the
exhibits to this plan) have been met.
3
The provisions of the Bonus Plan that require the attainment
of earnings per share from continuing operations (EPS) before any
bonus shall be payable to a Corporate Executive Officer shall
apply only with respect to one-third of the bonus that may be
earned by each of the President/Chief Operating Officer and the
Senior Vice President/Gas Turbine Operations, the remaining two-
thirds of their respective bonuses being determined solely with
reference to the performance of those operations of the company
for which each is responsible.
<PAGE>
<TABLE>
I. MIBP Participants and Potential Payout Levels (Percentage of
salary)
<CAPTION>
Minimum Bonus Bonus Level Maximum Bonus
Level (Par" Level
(Minimum Performance) (Outstanding
Performance) (200% of Performance)
Participants (Plan) Plan) (300% of Plan)
<S> <C> <C> <C>
Chief Executive Officer 32.5% 65% 97.5%
President/Chief Operating
Officer,
Senior VP/Gas Turbine
Operations,
Senior Executive VP and
General
Counsel, Executive VP
Finance and Administration 30% 60% 90%
Corporate Officers 25% 50% 75%
Directors (A-Pool) 15% 30% 45%
Managers and Professionals
(B-Pool) Up to 15% Up to 15% Up to 15%
</TABLE>
II. Participant Bonus Formula
Participants' total bonus will be based on the
following breakdown:
Corporate Executive Officers
A. 100% - achievement of Company financial
goal.
Corporate Officers
A. 75% - achievement of Company financial
goal.
B. 25% - achievement of individual
performance goals.
Directors (A-Pool)
A. 50% - achievement of Company financial
goal.
B. 50% - achievement of individual
performance goals.
Managers and Professionals (B-Pool)
A. 25% - achievement of Company financial
goal.
B. 75% - achievement of individual
performance goals.
4
<PAGE>
CORPORATE
MANAGEMENT INCENTIVE BONUS PROGRAM
I. Participants
A. Corporate Executive Officers
1. For purposes of this plan, Corporate Executive
Officers shall consist of the Chief Executive Officer, the
President Chief Operating Officer, the Senior Vice President, Gas
Turbine Operations, the Senior Executive Vice President and
General Counsel, and the Executive Vice President Finance and
Administration and such other senior officers of the Corporation
as the Board of Directors shall designate from time to time.
B. Corporate Officers
These include all corporate officers who are not
Corporate Executive Officers.
C. Corporate Vice Presidents will establish a list of A-
Pool (Director) and B-Pool (Manager and Professional)
participants in accordance with the following guidelines:
1. A-Pool participation shall consist of:
First level managers who are not otherwise Corporate
Officers reporting directly to a Corporate Vice President.
Certain first-level managers may be excluded if the
reporting relationship is due to special circumstances.
Certain second-level managers may be included if the
responsibilities of their position warrant participation at the
A-Pool level.
2. B-Pool participation shall consist of:
Select Manager and Professional level employees who are
in a position to influence earnings through sustained
performance.
3. Prior to March lst of each year, the recommended
lists of participants are to be submitted by the Corporate Vice
Presidents to the Chief Executive Officer, President and the Vice
President, Human Resources for their approval.
D. Any organizational changes during the year which impact
on participation will be reviewed and approved by the Chief
Executive Officer, President and the Vice President, Human
Resources.
5
<PAGE>
II. Corporate Goals
A. Financial goal:
1. The financial goal for this Management Incentive
Bonus Plan will be budgeted Earnings Per Share from Continuing
Operations of the Company.
2. The achievement of the financial goal will be
applied to all participants according to the participants' bonus
formula set forth in the General Outline at II.
B. Individual Performance Goals:
1. Performance goals for Corporate Vice Presidents
will be agreed upon with the appropriate Corporate Executive
officer.
2. Performance goals for Corporate Officers who are
not Corporate Vice Presidents and for A and B-Pool participants
will be agreed upon with the appropriate Corporate Vice
President.
All goals will be reviewed by the Vice President Human
Resources and approved by the Chief Executive Officer or the
President.
6
<PAGE>
POLICIES AND PROCEDURES
MANAGEMENT INCENTIVE BONUS PROGRAM
I. Time of Participation
A. In order to participate in the MIBP, each participant
must be in an eligible position at the end of the plan year.
B. Any employee promoted or hired to a position included
in
the MIBP during the plan year will be eligible to participate in
the bonus program on a pro-rated basis.
C. The plan year is the Company fiscal year.
II. Bonus Plan Reviews
A. Once each quarter, the Chief Executive Officer or
President, in coordination with the Vice President Human
Resources, will meet with each Corporate Vice President to review
performance goals for that Vice President and his/her participant
reports. Prior to these meetings the Corporate Vice President
will meet with his/her reports to review their performance goals.
III. Determination of Financial and Performance Ratings
A. Following the close of the plan year, the Executive
Vice President, Finance and Administration, will report to the
Chief Executive Officer and the President earnings per share from
continuing operations. These calculations shall be based upon
the unaudited financial statements of the Company (which shall
contain all adjustments necessary to fairly present the Company's
results for the year then ended). Based on this result, the
Executive Vice President, Finance and Administration will
calculate the financial rating for the Plan using the format
contained in Exhibit 1.A. This rating will be used to calculate
bonus awards for Corporate Executive Officers.
B. Performance ratings will be determined by appropriate
Corporate Executive Officers for their direct reports. Corporate
Vice Presidents in coordination with the appropriate Corporate
Executive Officers will determine performance ratings for their
reports.
C. The Corporate Vice Presidents shall be advised of the
financial rating which shall be added to the performance rating
calculated in III.B. The sum of these ratings shall be the basis
for calculating participant bonus payments.
7
<PAGE>
IV. Award Calculation
A. Awards shall be calculated by the Corporate Executive
Officers for their direct reports and by Corporate Vice
Presidents for their reports using the format contained in
Exhibit 1.
B. The Compensation Committee of The Board of Directors
shall determine and approve the awards for the Corporate
Executive Officers. It shall review and recommend to the Board
of Directors proposed awards for all Corporate Officers.
C. The Board of Directors will approve payments to all
other Corporate Officers pursuant to the Plan.
V. Company Profit and Plan Payout
Notwithstanding anything contained in this plan to the
contrary, if there is no company profit for the plan year, there
will be no awards.
VI. Frequency of Awards
Bonus awards will be generated during the month of February
for performance in the previous plan year.
VII. Contingencies Beyond Participant's Control
In those instances where significant events affect the
accomplishment of individual performance goals for a participant,
the Chief Executive Officer may use his judgment regarding the
amount of bonus to be awarded for this element of the plan.
Examples of such events could include: Labor disputes,
acquisitions, natural catastrophes. This shall not apply to
awards to Corporate Executive Officers.
VIII. Forfeiture of Award
A participant will not be eligible for consideration for an
award if:
A. The participant is discharged for cause at anytime
prior to the end of the plan year.
B. The participant voluntarily resigns prior to the
end of the plan year.
Any exception to this policy must be approved by the Chief
Executive Officer or President and Vice President, Human
Resources.
8
<PAGE>
IX. Retirement, Disability, Not For Cause Termination, or Death
During the Plan Year
Any participant who retires, becomes permanently disabled,
is terminated other than for cause, or dies during the plan year
shall be reviewed individually to determine whether a bonus award
is appropriate.
X. Budgeting
The budget for Earnings Per Share from continuing operations
shall include the cost for "Par" performance on both the
financial and performance elements for all participants in the
Plan.
XI. Amendments
This plan may not be substantively amended except (i) with
respect to Corporate Executive Officers, by a vote of the
shareholders of the Company, or (ii) with respect to all other
participants, by the Board of Directors of the Company.
XII. Disclaimer
This plan shall neither create any right to a bonus payment
or future participation therein for any employee, nor limit the
right of Sequa Corporation to modify, amend or rescind this plan
for any subsequent plan year. Nor shall it be construed as
creating any right to employment.
9
<PAGE>
EXHIBIT 1
DETERMINATION OF BONUS POINTS
A. Financial Bonus Points
For the Corporate staff to earn bonus points for financial
objectives, the Company must achieve, at a minimum, its approved budget
for Earnings Per Share (E.P.S.) from continuing operations. For each
percentage point actual E.P.S. results exceed budget, up to 300% of
original budget, participants earn additional bonus points. The
following table details bonus points earned upon achievement of E.P.S.
as well as points earned for each it over the minimum level up to par
(200% E.P.S.), and for each it over par up to maximum (300% of minimum)
for each level of participant:
<TABLE>
<CAPTION>
Financial Points Earned
For
Each For
1% Over Each 1%
minimum over par
For up up to
Minimum to Par Maximum
<S> <C> <C> <C>
Chief Executive Officer 32.5 .325 .325
President/Chief Operating Officer, Senior
Vice President/Gas Turbine Operations,
Sr. Exec. Vice Pres. & General Counsel,
Executive Vice President Finance 30 .3 .3
Corporate Officers 18.75 .1875 .375
A-Pool 12.5 .125 .25
B-Pool 6.25 .0625 .125
</TABLE>
10
<PAGE>
EXHIBIT 1
<TABLE>
B. Examples of financial point calculations at $.60, $.95 and $1.25
E.P.S. vs a hypothetical E.P.S. at par of $1.00 follow:
<CAPTION>
Actual
<S> <C> <C> <C>
.60 .95 1.25
Chief Executive Officer
Minimum points 32.5 32.5 32.5
% over minimum
.60/.50 120% - 100%
20% x .325 6.5
.95/.50 x 190% - 100%
90% x .325 29.25
1.25/.50 = 250% - l00%
150% x .325 48.75
Total financial points earned: 39.0 61.75 81.25
</TABLE>
<TABLE>
<CAPTION>
Actual
<S> <C> <C> <C>
.60 .95 1.25
Corporate Executive Officers
Minimum points 30 30 30
% over minimum
$ .60 = 20% x .3 6
$ .95 = 90% x .3 27
$1.25 = 150% x .3 45
Total financial points earned: 36 57 75
<FN>
Since Corporate Executive Officers are paid on financial performance,
the above results would be the bonus payout percentages.
</TABLE>
11
<PAGE>
<TABLE>
EXHIBIT 1
<CAPTION>
Actual
<S> <C> <C> <C>
60 .95 1.25
Corporate Officers*
Minimum points 18.75 18.75 18.75
%- over minimum/par
$ .60 = 20% x .1875 3.75
$ .95 = 90% x .1875 16.875
$1.25 = 100% x .1875 18.75
50% x .375 18.75
Total financial points earned: 22.50 35.625 56.25
</TABLE>
<TABLE>
<CAPTION>
Actual
<S> <C> <C> <C>
.60 .95
1.25
A-Pool*
Minimum points 12.5 12.5 12.5
% over minimum/par
$ .60 = 20% x .125 2.5
$ .95 = 90% x .125 11.25
$1.25 = 100% x .125 12.5
50% x .25 12.5
Total financial points earned: 15.0 23.75 37.5
<FN>
*Based on point allocations as set forth on Exhibit 2
</TABLE>
12
<PAGE>
EXHIBIT 1
C. Performance Bonus Points
Since Corporate Officers, bonus payments are based 75% on
financial results and 25% on performance, the points calculated
above would be combined with the performance points awarded in
determining the bonus award. For example -- if a Vice President
was earning $200,000 and received 12.5 points for performance,
the bonus would be calculated as follows for each of the earnings
levels.
$.60 22.5 pts. + 12.5 pts. = 35.00 pts.
35.00 pts. x l% = 35.OO%
35.00% x $200,000 = $ 70,000
$.95 35.625 pts. + 12.5 pts. = 48.125 pts.
48.125 pts. x 1% = 48.125%
48.125% x $200,000 = $96,250
$1.25 56.25 pts. + 12.5 pts. = 68.75 pts.
(50 pts. x l%) + (18.75 pts x .5%) = 59.375%
59.375% x $200,000 = $118,750
Since A-Pool bonus payments are based 50% on financial
results and 50% on performance, the points calculated above would
be combined with the performance points awarded in determining
the bonus award. For example -- if the participant was earning
$100,000 and received 25 points for performance, the bonus would
be calculated as follows for each of the earnings levels.
$.60 15 pts + 25 pts = 40 pts
40 pts x .6% = 24%
24% x $100,000 = $24,000
$.95 23.75 pts. + 25 pts = 48.75 pts
48.75 pts x .6% = 29.25%
29.25% x $100,000 = $29,250
$1.25 37.5 pts. + 25 pts. = 62.5 pts.
(50 pts. x .6%) + (12.5 pts. x 3%) = 33.75%
33.75% x $100,000 = $33,750
13
<PAGE>
<TABLE>
SEQUA CORPORATION & SUBSIDIARIES Exhibit 11.1
CALCULATION OF PRIMARY EARNINGS PER SHARE AND FULLY DILUTED EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31,
(Thousands of Dollars except per share data)
<CAPTION>
Primary 1994 1993 1992
------- ---- ---- ----
<S> <C> <C> <C>
Earnings
Earnings (loss) from continuing operations $(24,695) $(55,458) $ 17,900
Preferred stock dividend requirements (3,163) (3,163) (3,168)
-------- -------- --------
Net earnings (loss) from continuing operations
applicable to common stock (27,858) (58,621) 14,732
Net loss from discontinued operations - - (21,700)
-------- -------- --------
Loss applicable to common stock
before extraordinary item and before
cumulative effect of accounting change (27,858) (58,621) (6,968)
Extraordinary loss (1,083) (8,524) -
Cumulative effect on prior years of change
in accounting for income taxes - - (7,337)
-------- -------- --------
Net loss applicable to common stock $(28,941) $(67,145) $(14,305)
======== ======== ========
Shares
Common and common equivalent shares 9,722 9,655 9,620
======== ======== ========
Primary earnings (loss) per common share
Continuing operations $ (2.87) $ (6.07) $ 1.53
Discontinued operations - - (2.26)
-------- -------- --------
Loss before extraordinary item
and cumulative effect of accounting change (2.87) (6.07) (.73)
Extraordinary loss (.11) (.88) -
Cumulative effect on prior years of change
in accounting for income taxes - - (.76)
-------- -------- --------
Net loss $ (2.98) $ (6.95) $ (1.49)
======== ======== ========
Fully Diluted
Earnings
Earnings (loss) from continuing operations $(24,695) $(55,458) $ 17,900
Net loss from discontinued operations - - (21,700)
-------- -------- --------
Loss applicable to common stock
before extraordinary item and cumulative
effect of accounting change (24,695) (55,458) (3,800)
Extraordinary loss (1,083) (8,524) -
Cumulative effect on prior years of change
in accounting for income taxes - - (7,337)
-------- -------- --------
Net loss $(25,778) $(63,982) $(11,137)
======== ======== ========
Shares
Common and common equivalent shares 10,559 10,493 10,458
======== ======== ========
Fully diluted earnings (loss) per common
share (a)
Continuing operations $ (2.34) $ 5.29 $ 1.71
Discontinued operations - - (2.07)
-------- -------- -------
Loss before extraordinary item
and cumulative effect of accounting change (2.34) (5.29) (.36)
Extraordinary loss (.10) (.81) -
Cumulative effect on prior years of change
in accounting for income taxes - - (.70)
-------- -------- --------
Net loss $ (2.44) $ (6.10) $ (1.06)
======== ======== ========
Shares
Weighted average common shares outstanding 9,722 9,655 9,620
Preferred stock assumed to be converted 837 838 838
-------- -------- --------
Common and common equivalent shares 10,559 10,493 10,458
======== ======== ========
<FN>
(a) Fully diluted earnings per share calculation is anti-dilutive; therefore,
fully diluted earnings per share have not been presented in the Consolidated
Statement of Income.
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
There follows alphabetically a list of domestic and foreign
subsidiaries of the registrant as of December 31, 1994. The
names of particular subsidiaries which, considered in the
aggregate as a single subsidiary would not constitute a
significant subsidiary as of December 31, 1994 within the meaning
of Regulation S-X, have been omitted:
<CAPTION>
State or Other
Jurisdiction
in which
NAME OF SUBSIDIARY INCORPORATED
<S> <C>
Atlantic Research Corporation Delaware
Casco Investors Corporation New York
Casco Products Corporation Delaware
Casco Products Ltd. England
The Centor Company Missouri
Chromalloy Advanced Turbinology California
Chromalloy Aeroservices International Ltd. Delaware
Chromalloy American Corporation Delaware
Chromalloy Castings Miami Corporation Delaware
Chromalloy Castings Tampa Corporation Delaware
Chromalloy Compressor Technologies, Inc. Delaware
Chromalloy Gas Turbine Corporation Delaware
Chromalloy Gas Turbine Europa, B.V. Netherlands
Chromalloy Heavy Industrial Turbines, Ltd. Delaware
Chromalloy Men's Apparel, Inc. Delaware
Chromalloy U.K. Ltd. England
Chromalloy Wallkill Corp. New York
Chromizing, S.A. de C.V. Mexico
CRO Foreign Sales Corporation U.S. Virgin Islands
GTC Gas Turbine, Ltd. England
Heurchrome, S.A. France
Jamo Matrizjen B.V. Netherlands
Jet Services West California
Malichaud et CIE S.A. France
Materiels Equipements Graphiques France
Nortech Acquisition Corp. Delaware
Northern Can Systems, Inc. Delaware
Sequa Capital Corporation New York
Sequa Chemicals Corporation Delaware
Sequa Export Corporation U.S. Virgin Islands
Sequa Receivables Corporation Delaware
SNL Insurance, Ltd. Bermuda
Specialized Overhaul Services Group, Inc. Delaware
SunRise Insurance Company Vermont
Turbine Support Europa B.V. Netherlands
Turbochrome, Ltd. Israel
TurboCombustor Technology, Inc. Florida
Warwick International Group Ltd England
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Annual Report on
Form 10-K, into the Company's previously filed Registration
Statements on Form S-8 (File No. 33-12420) and on Form S-3 (File
No. 33-47552).
ARTHUR ANDERSEN LLP
New York, New York
March 17, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 18,655
<SECURITIES> 0
<RECEIVABLES> 303,447
<ALLOWANCES> 15,171
<INVENTORY> 266,370
<CURRENT-ASSETS> 604,331
<PP&E> 1,054,224
<DEPRECIATION> 530,074
<TOTAL-ASSETS> 1,648,248
<CURRENT-LIABILITIES> 321,346
<BONDS> 586,574
<COMMON> 10,915
0
797
<OTHER-SE> 554,779
<TOTAL-LIABILITY-AND-EQUITY> 1,648,248
<SALES> 1,419,550
<TOTAL-REVENUES> 1,419,550
<CGS> 1,164,739
<TOTAL-COSTS> 1,379,797
<OTHER-EXPENSES> 8,534
<LOSS-PROVISION> 4,891
<INTEREST-EXPENSE> 59,114
<INCOME-PRETAX> (27,895)
<INCOME-TAX> (3,200)
<INCOME-CONTINUING> (24,695)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,083)
<CHANGES> 0
<NET-INCOME> (25,778)
<EPS-PRIMARY> (2.98)
<EPS-DILUTED> (2.44)
</TABLE>
