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SEQUA 401 (K) PLAN
INDEX TO FINANCIAL STATEMENTS AND EXHIBIT FILED AS
REQUIRED BY ITEM 4 OF FORM 11-K
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Page (s)
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Report of Independent Accountants 3
Financial Statements:
Statements of Net Assets Available for Benefit
as of December 31, 1999 and 1998 4
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1999 5
Notes to Financial Statements 6-10
Schedule I: Schedule of Assets Held for Investment Purposes
as of December 31, 1999 11
Exhibit 23 - Consent of Independent Accountants
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
ANNUAL REPORT
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Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
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For the Fiscal Year Ended December 31, 1999 Commission file number 1-804
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Full Title of the Plan:
SEQUA 401 (K) Plan
(formerly known as the Chromalloy Incentive Savings Plan for Salaried
Employees/Sequa Thrift Plan)
-------------
Name of issuer of the securities held pursuant to the plan
And the address of its principal executive office:
SEQUA CORPORATION
200 Park Avenue
New York, New York 10166
<PAGE>
Report of Independent Public Accountants
To Sequa Corporation:
We have audited the accompanying statements of net assets available for benefits
of the Chromalloy Incentive Savings Plan for Salaried Employees/Sequa Thrift
Plan (the "Plan") as of December 31, 1999 and 1998, and the related statement
of changes in net assets available for benefits for the year ended December 31,
1999. These financial statements and schedule referred to below are the
responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
and schedule are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements and schedule. 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 and schedule referred to above present
fairly, in all material respects, the net assets available for benefits of
the Plan as of December 31, 1999 and 1998, and the changes in its net assets
available for benefits for the year ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule of assets held for
investment purposes is presented for purposes of additional analysis and is
not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act
of 1974. The supplemental schedule has been subject to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
May 31, 2000
3
<PAGE>
<TABLE>
CHROMALLOY INCENTIVE SAVINGS PLAN
---------------------------------
FOR SALARIED EMPLOYEES/SEQUA THRIFT PLAN
----------------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
-----------------------------------------------
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS:
INVESTMENTS (Note 4) $142,487,458 $119,921,152
RECEIVABLES:
Employee 86,416 193,874
Employer 33,035 46,389
------------ ------------
Total receivables 119,451 240,263
------------ ------------
Net assets available for
benefits $142,606,909 $120,161,415
============ ============
<FN>
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
4
<PAGE>
<TABLE>
CHROMALLOY INCENTIVE SAVINGS PLAN
---------------------------------
FOR SALARIED EMPLOYEES/SEQUA THRIFT PLAN
----------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------
<S> <C>
ADDITIONS (DEDUCTIONS) TO NET
ASSETS ATTRIBUTED TO:
Investment income:
Interest $ 4,563,479
Interest from participant loans 360,270
Net appreciation in fair value 12,373,395
------------
Total investment income 17,297,144
Contributions:
Employee 11,872,015
Employer 4,125,764
------------
Total contributions 15,997,779
Benefits paid to participants (10,836,438)
Other (12,991)
------------
Net increase 22,445,494
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 120,161,415
------------
End of year $142,606,909
============
<FN>
The accompanying notes to financial statements are an integral part of
this statement.
</TABLE>
5
<PAGE>
CHROMALLOY INCENTIVE SAVINGS PLAN
---------------------------------
FOR SALARIED EMPLOYEES/SEQUA THRIFT PLAN
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) Description of the Plan:
-----------------------
The Chromalloy Incentive Savings Plan for Salaried Employees/Sequa
Thrift Plan (the "Plan") is a defined contribution plan in which
contributions are made by employees and partially matched by Sequa
Corporation (the "Company"). The following plan description is provided for
general information purposes. Participants in the Plan should refer to the
Plan document for more detailed and complete information.
All non-collectively bargained employees of the Company and its
participating affiliates become eligible to participate after attaining age
21 and performing three (3) months of service (prior to April 1, 1999, one
year of service). Each participant may elect to reduce his eligible
compensation by any whole percentage amount between 1% and 16% and have this
amount deposited as pre-tax contributions into the investment funds selected
by the participant. Investment options consist of a money market fund, a common
collective trust fund, and six equity funds (one of which is a Company stock
fund). The Company matched 50% of participants' contributions up to 6% of
the participants' eligible compensation. The Company's contributions are
invested in the same manner as the participants' contributions. From time to
time the pretax contributions of certain employees, designated as highly
compensated employees under Internal Revenue Code rules, may be limited so
that the Plan may satisfy various nondiscrimination tests required under
applicable Federal regulations. For any participant, the annual addition to the
Plan (participant plus employer contribution) may not exceed the lesser of
25% of the participant's compensation or $30,000. Also, in accordance with
IRS guidelines, participants may not make contributions exceeding $10,000 during
1999 or 1998.
A participant's interest in his pretax contribution account is fully
vested at all times. Participants commence vesting in the Company
contribution account, upon completion of their twelfth month of employment at
the rate of 20% per year, and are fully vested upon completion of their fifth
year of employment. Any nonvested portion of participant account balances
forfeited by employees is applied against future employer contributions. As
of December 31, 1999, there were $62,181 in forfeited amounts to be applied
against future employer contributions. Certain events, such as death,
disability, or retirement results in immediate full vesting if such event
occurs while the participant is employed by the Company or a member of its
Affiliated Group (as defined in the Plan). Termination of the Plan may also
result in immediate full vesting.
Participant loans are permitted in accordance with the loan provisions
in the Plan document. A participant may borrow against his vested account
balance provided he has been a participant for at least one year and has a
vested account balance of $2,000 or more. The maximum loan allowed is limited
to the lesser of 50% of the participant's vested account balance or $50,000.
The interest rate charged on participant loans is prime plus 1%. Loans are
repaid through payroll deductions. Upon termination of employment the
participant may either repay any outstanding balance in full or incur a tax
liability on the unpaid balance.
6
<PAGE>
Although the Company has not expressed any intent to do so, the Company
has the right to terminate the Plan at any time, provided that such action
results in the distribution of Plan assets and income thereon (after payment
of Plan expenses) exclusively to active and retired participants.
(2) Plan Changes:
------------
The following changes in plan provisions took place during 1999 and
2000:
. Effective April 1, 1999, the Plan was amended to include Thermo
Wisconsin, Inc. ("Thermo") as a participating employer in the
Plan. All employees of Thermo as of February 6, 1999 became
eligible to participate in the Plan as of April 1, 1999.
Furthermore, the prior service of employees of Thermo who were
in active employment as of February 6, 1999 was recognized
for vesting purposes.
. The Plan was amended effective April 1, 1999 to change the
eligibility requirements definition of the Plan so that eligible
employees may participate once they attain age twenty-one and
complete three months of service.
. Chromalloy Component Services ("CCS") became a participating
employer effective June 1, 1999. Employees of CCS who were
previously employees of the US Government at Kelly Air
Force Base who became employees of CCS on or before July 31, 1999,
became eligible to participate in the Plan as of their
employment commencement date. Hourly employees of CCS were
eligible for a 2% profit sharing contribution and immediate
vesting in their entire accounts.
. Effective as of January 1, 2000, the Plan document was restated
and the following changes took effect as of the dates indicated:
the Plan name changed to the Sequa 401(k) Plan (effective
April 27, 2000), the maximum participant contribution percentage
increased to 20% (effective April 27, 2000 or as soon as
administratively feasible thereafter), the two month suspension
period for participants who voluntarily suspend contributing is
eliminated (effective January 1, 2000), and terminated
participants with $5,000 or less in their account will be
automatically paid out (effective June 1, 2000).
(3) Plan Administration:
-------------------
The Company is the plan administrator and has appointed an employee
benefit plans administrative committee to carry out certain of the plan
administrator's responsibilities. Effective September 1, 1998, the assets of
the Plan were transferred to The Vanguard Group ("Vanguard"). At that time
Vanguard became the trustee, investment manager and record keeper for the
Plan. Prior to September 1, 1998, Frank Russell Trust Company was the
trustee and investment manager of the Plan and PricewaterhouseCoopers LLP
(Kwasha HR Solutions) maintained the records of participants' account balances.
The plan assets, other than those contained in the Company Common Stock Fund,
were transferred into a number of Vanguard mutual funds. The conversion
initiated a "Black Out" period that began July 31, 1998 and continued through
November 13, 1998. During this period, participants could not make any
election changes and funds could not be withdrawn from the Plan, until
Vanguard completed the conversion. Contributions continued to be made through
payroll deductions and were applied to the participants' selected funds
during the "Black Out" period. It is intended that participants direct the
investment of their accounts in accordance with Section 404(c) of the Employee
Retirement Income Security Act ("ERISA").
7
<PAGE>
Plan assets invested in the Company's Class A Common Stock are held by
Vanguard in a unitized fund. Certain expenses of administering the Plan are
paid by the Company and others are paid by the Plan.
(4) Accounting Policies:
-------------------
The accounting records of the Plan are maintained by Vanguard on an
accrual basis. The investments reflected in the accompanying financial
statements have been reported at current market value with the exception of
the common collective trust fund, which is valued at net asset value plus
interest, which approximates market value. Investment transactions are
recorded on a trade date basis except where trading impact occurs in the
Company Stock Fund, in which case the Trustee may select an alternate date.
The Plan reports realized and unrealized gains and losses on plan assets
in compliance with the reporting requirements under the Department of Labor's
rules. Realized and unrealized gains and losses on plan assets are based on
the value of the plan assets at the beginning of the plan year or at the time of
purchase if purchased during the year.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual amounts could differ from those estimates.
(5) Common Collective Trust Fund:
----------------------------
The Vanguard Retirement Savings Trust is an investment option available
to participants under Vanguard. This fund is a tax exempt collective trust
which invests in guaranteed investment contracts issued by insurance
companies and major banks and seeks to offer a stable unit value and an
attractive current interest rate. The investment is valued at net asset
value plus interest, which approximates market value.
(6) Federal Income Taxes:
--------------------
A favorable determination letter was received from the IRS dated January
17, 1996, indicating the form of the Plan document is in compliance with the
IRS requirements for tax qualifications and that the trust which is part of
the Plan continues to be tax exempt. The Plan has been amended since receiving
the determination letter. The Plan's administrator believes that the plan as
amended is currently designed and operated in compliance with the applicable
requirements of the Internal Revenue Code and that the Plan is qualified and
the related trust is tax exempt as of December 31, 1999. Accordingly, no
provision for federal income taxes has been made in the accompanying
financial statements.
8
<PAGE>
(7) Other Information:
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The Plan engaged in no non exempt transactions with known parties-in-
interest and has no lease commitments or leases in default, and no loans or
fixed income obligations in default, as defined by ERISA Section
2520.103(b)(3)(E), as of December 31, 1999 and 1998.
The funds may participate in various derivative-based transactions. The
amounts of these transactions would be minimal when compared to the total fund
balances. To date no such transactions have been entered into.
(8) Amounts Payable to Participants Included
in Net Assets Available for Benefits:
------------------------------------
Amounts allocated to accounts of participants who have elected to
withdraw from the Plan, but have not yet been paid, totaled $186,946 as of
December 31, 1999 and $0 as of December 31, 1998, and are included within net
assets available for benefits in the statements of net assets available for
benefits. These amounts have not been deducted from net assets available for
benefits as of the applicable year-ends for financial statement purposes in
accordance with accounting principles generally accepted in the United States.
In accordance with the Department of Labor's reporting requirements, these
amounts have been deducted from net assets available for benefits on the
Plan's 1999 and 1998 Form 5500. (See Note 10).
(9) Investments:
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The fair market value of individual investments that represent 5% or
more of the Plan's total net assets as of December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Vanguard Total Stock Market
Index Fund $45,766,511 $38,123,536
Vanguard Retirement Savings Trust 39,813,222 37,436,057
Vanguard 500 Index Fund 22,491,762 15,557,389
Vanguard LifeStrategy Moderate
Growth Fund 11,833,451 9,638,005
</TABLE>
9
<PAGE>
(10) Reconciliation To Form 5500:
---------------------------
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500:
Year Ended
December 31, 1999
-----------------
Benefits paid to participants per the
financial statements $10,836,438
Add: Amounts currently payable at
December 31, 1999 186,946
-----------
Benefits paid to participants per the
Form 5500 $11,023,384
===========
Amounts currently payable to participants for benefit claims that have
been processed and approved for payment prior to December 31, 1999, but not
yet paid as of that date, are recorded on Form 5500 as a liability.
10
<PAGE>
<TABLE> SCHEDULE I
CHROMALLOY INCENTIVE SAVINGS PLAN FOR SALARIED EMPLOYEES/
--------------------------------------------------------
SEQUA THRIFT PLAN
-----------------
IRS FORM 5500 - Item 27a
------------------------
Schedule of Assets Held for Investment Purposes
December 31, 1999
EIN 13-1885030
PN: 083
<CAPTION>
Identity of Description of Shares
Issue Investment or Units Current Value
----- ---------- -------- -------------
<S> <C> <C> <C>
*Vanguard Vanguard 500 Index Fund 166,199 $22,491,762
*Vanguard Vanguard Federal Money
Market Fund 6,130,707 6,130,707
*Vanguard Vanguard LifeStrategy
Moderate Growth Fund 650,905 11,833,451
*Vanguard Vanguard Small-Cap Index
Fund 188,394 4,446,102
*Vanguard Vanguard Total International
Stock Index Fund 108,524 1,552,979
*Vanguard Vanguard Total Stock
Market Index Fund 1,377,679 45,766,511
*Vanguard Vanguard Retirement
Savings Trust 39,813,222 39,813,222
*Vanguard Sequa Corporation Common
Stock Fund 108,415 5,847,650
*Vanguard Participant Loans bearing
interest rates ranging
from 7% to 11% 4,605,074
* Party-in-interest
11
</TABLE>
<PAGE>
SIGNATURE
The Plan, Pursuant to the requirements of the Securities Exchange Act of
1934, the Employee Benefit Plans Administrative Committee of the Sequa
401 (k) Plan (formerly the Chromalloy Incentive Savings Plan for Salaried
Employees/Sequa Thrift Plan) has duly caused this annual report to be signed on
its behalf by the undersigned thereunto duly authorized.
SEQUA 401 (K) Plan
By /s/ Howard Leitner
------------------------------
Howard Leitner, Chairman
Employee Benefit Plans
Administrative
Committee of Sequa Corporation
Date: June 2, 2000
