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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 1-5075
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EG&G, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2052042
- --------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
45 William Street, Wellesley, Massachusetts 02181
- ------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617) 237-5100
----------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
Common Stock, $1 Par Value New York Stock Exchange, Inc.
- -------------------------- -----------------------------
Preferred Share Purchase Rights New York Stock Exchange, Inc.
- ------------------------------- -----------------------------
Securities registered pursuant to Section 12 (g) of the Act: None
- ----------------------------------------------------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [x]
The aggregate market value of the common stock, $1 par value, held by
nonaffiliates of the registrant on February 23, 1996, was $1,165,703,101.
As of February 23, 1996, there were outstanding, exclusive of treasury
shares, 47,654,234 shares of common stock, $1 par value.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF EG&G, INC.'S 1996 PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS...................PART III (Items 10, 11 and 12)
PART I
ITEM 1. BUSINESS
GENERAL BUSINESS DESCRIPTION
EG&G, Inc. was incorporated under the laws of the Commonwealth of Massachusetts
in 1947. EG&G, Inc. (hereinafter referred to as "EG&G", the "Company", or the
"Registrant", which includes the Company's subsidiaries) is a broad-based
technology company that provides optoelectronic, mechanical and
electromechanical components and instruments to manufacturers and end-users in
the medical, aerospace, automotive and other ground transportation,
environmental and industrial markets worldwide. The Company also provides
wide-ranging technical services to governmental and industrial
customers. In 1995, the Company had sales of $1.4 billion from continuing
operations.
The Company's continuing operations are classified into four industry segments:
Technical Services, Instruments, Mechanical Components and Optoelectronics.
RECENT DEVELOPMENTS
In January 1995, the Company's Board of Directors authorized the purchase of an
additional 10 million shares of common stock. During 1995, the Company
purchased 7.7 million shares of such common stock through periodic purchases
on the open market at an aggregate cost of $135.1 million. As of
December 31, 1995 the Company had authorization to purchase 5.6 million
additional shares.
In July 1995, the Company announced that EG&G Technical Services of West
Virginia had been awarded the site-support contract for the U.S. Department of
Energy's Morgantown Energy Technology Center. The contact, which has a
potential value of more than $90 million, could, including options, extend over
five years.
In October 1995, the Company issued $115 million of unsecured ten-year notes
at an annual interest rate of 6.8%. Proceeds from the sale were used to pay
down commercial paper borrowings that were used for general corporate purposes,
including financing open market repurchases of the Company's common stock.
In November 1995, the Company announced that the U.S. Customs Service had
awarded a five year, including options, national asset management contract
with a potential value of $92 million to EG&G Dynatrend for the Department of
Treasury asset forfeiture program. This is the second time that EG&G had
competed for and won this Department of Treasury management contract.
INDUSTRY SEGMENTS
Set forth below is a brief summary of each of the Company's four industry
segments together with a description of certain of the more significant or
recently introduced products, services or operations.
TECHNICAL SERVICES
Through its Technical Services segment, the Company supplies engineering,
scientific, environmental, management and technical support services to a broad
range of governmental and industrial customers. These services include:
analysis and testing services for the automotive industry; base operations for
the National Aeronautics and Space Administration ("NASA") at the Kennedy Space
Center ("KSC"); chemical weapons disposal and technical and support services
for the U.S. Department of Defense ("DoD"); seized-property administration
for the U.S. Customs Service; technical support for the National Science
Foundation in Antarctica; consulting services in transportation; physical
security services for government agencies; and services and products for
the environmental market. The Company offers services in this segment
under trade names which include Automotive Research, Dynatrend, Structural
Kinematics and Washington Analytical Services Center. In 1995, this segment
represented 43% of the Company's total sales from continuing operations and 43%
of the Company's operating income from continuing operations before general
corporate expenses.
For the automobile, chemical additive and petroleum industries, the Company
provides automobile durability, performance and emissions testing, and tests
fuels, lubricants and chemical additives. The Company performs automobile
durability and performance testing for all major U.S. and a number of foreign
automobile manufacturers.
As base operations contractor for the KSC, the Company provides institutional,
technical and maintenance support services. In particular, the Company manages
KSC's 600 buildings, structures and facilities; tests new astronaut rescue
procedures and escape systems; fields a force of 200 uniformed security
personnel and a SWAT team; provides fire protection and medical services;
handles all propellant substances; and manages the shuttle landing facility.
The Company has been the base operations contractor at KSC since 1983 and is
currently in the third year of a four-year contract
that has two three-year renewal options at the discretion of the government.
NASA has announced that it will designate a single Space Shuttle Flight
Operations contractor in 1996. While the impact of this initiative cannot
be determined, the Company believes at this time that its contract will not
be adversely affected.
Company contracts with the DoD fall into two general categories: (i)
traditional defense activities, and (ii) decommissioning. The Company's
traditional defense activities focus on such strategic areas as research
and engineering analyses in support of DoD advanced development programs.
An example of a decommissioning project is the operation of the U.S. Army's
facility for the disposal of lethal chemical agents and munitions in Tooele,
Utah.
The Company also provides engineering and management services in a variety of
fields, including transportation, physical security and property management
for several government agencies. Government clients include the U.S.
Departments of Transportation, State and Treasury, the U.S. Customs Service
and the Environmental Protection Agency.
In the environmental area, the Company is developing a range of proprietary
technologies with a view towards expanding its presence in the public and
private sector waste minimization and remediation markets.
INSTRUMENTS
The Company develops and manufactures instruments and systems for applications
in medical and clinical diagnostics; biochemical, medical and life science
research; industrial and pharmaceutical process measurement; environmental
monitoring; gas and oil field applications; airport and industrial security;
and food inspection. The Company's instruments provide a wide range of
measurement capabilities and options through the use of high-speed signal
processing, image enhancement and a broad utilization of detector
technologies including products which feature the accurate
generation, detection and measurement of various segments of the eletromagnetic
spectrum. The Company offers products in this segment under trade names which
include Astrophysics, Flow Technology, Berthold, Ortec and Wallac. In 1995,
this segment represented 21% of the Company's total sales from continuing
operations and 15% of the Company's operating income from continuing
operations before general corporate expenses.
High performance bioanalytic and diagnostic instruments manufactured by the
Company are used in hospitals, clinics and pharmaceutical and medical research
facilities. These instruments are generally based on time-resolved
fluorescence and chemiluminescence technologies that use light measurement
to analyze samples. Because these light measurement technologies do not
involve the use of radioactive material, concerns about sample transport and
waste disposal are not present. Among other things, these instruments are
used to screen blood for thyroid dysfunction, fertility-related disorders,
fetal defects and diseases in newborns, and to detect relapse in patients
who have been treated for cancer. The Company introduced AutoDelfia ,
an automated immunoassay fluorescence diagnostic system. The Company also
sells reagents for use in connection with certain of these instruments.
Through its Instruments segment, the Company also produces security screening
systems that employ X-ray technology and various supporting image-enhancing
techniques for non-intrusive inspection of baggage and packages at airport
portals, baggage processing areas, mail rooms, courthouses, schools and
buildings in general. The Company has introduced two new security screening
products: the Z-Scan and a portable large cargo X-ray screening system.
The Z-Scan uses color images, X-rays and proprietary software to detect
explosives, narcotics or contraband in packages and luggage. The Z-Scan
can process up to 1,200 bags an hour. The United Kingdom
Department of Transportation has certified the Z-Scan for detection of drugs
and contraband in checked cargo. The large cargo X-ray screening system allows
non-intrusive inspection of boxes, crates and containers in search of
contraband, weapons and explosives fo use at border crossings, ports of entry,
warehouses and airports.
Instruments produced by the Company also include process inspection systems
that combine X-ray technology from the Company's Instruments segment and optical
components from the Company's Optoelectronics segment. These systems are used
in food processing and packaging plants to monitor, detect and remove foreign
objects from raw and processed food at various points on the production line.
Such systems are also used to check intravenous-medicine bags and automobile
oil filters for leaks, measure the fat content of meat and detect and
separate non-biodegradable PVCs from recyclable plastics.
Based on its expertise in nuclear measurements, the Company produces
instruments to detect, characterize and measure radiation, including a
complete line of radiation-protection measuring systems for laboratories,
nuclear facilities and environmental monitoring. The Company also offers
industrial on-line level and density measuring instruments for process
control and measurement of liquids, slurries or solids in containers, tanks and
pipes.
MECHANICAL COMPONENTS
Through its Mechanical Components segment, the Company produces advanced seals
and bellows products, valves, nozzles, metal ducting, precision aerospace
components, motors and heat management devices for the petrochemical and
chemical processing, transportation, defense and aerospace markets. The
Company offers these products under trade names which include Pressure
Science, Rotron and Sealol. In 1995, this segment represented 18% of the
Company's total sales from continuing operations and 25% of the Company's
operating income from continuing operations before general corporate expenses.
Products sold in this segment include blower systems, power-conversion devices
and other components for locomotives, transit cars and buses and defense product
applications. Many of these products were first developed by the Company for
defense-related purposes and are now marketed and sold for commercial
applications.
The Company also produces mechanical sealing components and systems, which use
welded metal bellows devices pioneered by the Company, for the process
industries. Such industries include pharmaceuticals, food processing, oil
refining and chemical and petrochemical processing. The Company expects
that the market for the Company's advanced zero leakage gas seals will grow
as a result of environmental legislation which requires manufacturers to
significantly reduce emissions.
For aerospace applications, the Company produces valves, advanced sealing
components, aircraft exhaust components and ducting.
OPTOELECTRONICS
Through its Optoelectronics segment, the Company offers a broad variety of
components that emit and detect light in the spectrum from ultraviolet through
visible to the far infrared. These components range from simple photocells to
sophisticated imaging systems, light sources that include various types of
flashtubes and laser diodes, and complex devices for weapons' trigger
systems. Applications include light sensors used in automotive and
commercial electronics, sensors used in smoke detectors and medical imaging
systems, and sophisticated arrays for communications and remote sensing of
the earth. The Company expects to make significant research and development
and capital expenditures in this segment over the next several years.
The Company offers products in this segment under trade names which include
Electro-Optics Heimann Optoelectronics, IC Sensors, Reticon, Judson and Vactec.
In 1995, this segment represented 18% of the Company's total sales from
continuing operations and 17% of the Company's operating income from
continuing operations before general corporate expenses.
Products of this segment include detectors of visible and non-visible light,
including high performance silicon photodiodes to detect and measure light and
other optical radiation for industrial, space, military, analytical and
scientific instrumentation. Light detectors are also manufactured by the
Company for a variety of commercial applications. The Company also makes
a wide variety of flashlamps for use in photocopy and reprographic equipment,
photo-typesetting systems, beacons, indicators and laser systems and
accessories. In addition, the Company manufactures power supplies for
military high frequency electronic applications that are used primarily for
precision controlled switching of electric current in electronic equipment.
The Company is continuing the development of amorphous silicon imaging systems
for medical and industrial applications. These X-ray systems incorporate
amorphous silicon which replaces film in X-ray systems and translates the
rays directly into digital pulses that then immediately produce the image on
a cathode ray tube.
Through this segment, the Company also produces micromachined sensors, which are
small silicon-wafer-based devices that combine a sensing function with
intelligent signal processing. The Company mass produces these micromachined
infrared sensors for consumer, medical and automotive applications and
manufactures high performance micromachined silicon sensors for missile-
guidance systems. In a joint venture, the Company is developing more
advanced micromachined electronic accelerometers for automotive and
industrial applications.
DISCONTINUED OPERATIONS
Since its founding, the Company has provided services to the U.S. Department of
Energy ("DOE") and its predecessor organizations. These services related
primarily to nuclear energy research and nuclear weapons production and
testing. As a result of changing procurement and administrative priorities
at the DOE, to continue to provide these services the Company would have been
required to invest significant levels of capital and accept broader
liabilities and lower fees. In 1994, the Company determined that it would
not seek renewal of its four contracts with the DOE and would not seek
management and operations contracts at other DOE sites. Accordingly,
the Company is reporting its former DOE Support segment as discontinued
operations. Future sales and income from discontinued operations will
decrease as the remaining DOE contract expires in 1996 and are dependent
upon the work scope and fee pools negotiated annually that are currently
under review by the DOE. Three of these DOE contracts expired in 1995.
The Rocky Flats contract for the management and operation of the
Rocky Flats Environmental Technology Center near Golden, Colorado terminated in
June, 1995. The Reynolds Electrical and Engineering Co. contract for
support and maintenance services for the underground nuclear weapons test
program and its design laboratories at the Nevada Test Site expired on
December 31, 1995. The Energy Measurements contract to provide scientific
and engineering services also relating to the Nevada Test Site expired on
December 31, 1995.
Under the Mound Applied Technologies contract, the remaining DOE contract which
is scheduled to expire on September 30, 1996, the Company provides all support
services at the facility and is responsible for the assembly and testing of
radioisotopic thermionic generators for space and special terrestrial power
missions. The expiration date may be modified by the DOE in accordance with
contract terms. The Company also is responsible for the transfer to other
DOE facilities of technology relating to the Mound facility's former mission
involving the manufacturing of components for nuclear weapons.
MARKETING
The Company markets its services and products through its own specialized sales
forces as well as independent foreign and domestic manufacturer representatives
and distributors. In certain foreign countries, the Company has entered into
joint venture and license agreements with local firms to manufacture and
market its products.
RAW MATERIALS AND SUPPLIES
Raw materials and supplies used by the Company are generally readily available
in adequate quantities from domestic and foreign sources.
PATENTS AND TRADEMARKS
While the Company's patents, trademarks, and licenses in the aggregate are
important to its business, the Company does not believe that the loss of any
one patent, trademark or license or group of related patents, trademarks, or
licenses would have a materially adverse effect on the overall business of
the Company or on any of its industry segments.
BACKLOG
The approximate dollar value of unfilled orders of continuing operations by
industry segment as of December 31, 1995 and January 1, 1995 is set forth in
the table below.
(In Thousands) December 31, 1995 January 1, 1995
----------------- ---------------
Technical Services $224,087 $247,380
Instruments 50,776 46,474
Mechanical Components 95,466 87,879
Optoelectronics 125,630 111,402
-------- --------
Total $495,959 $493,135
======== ========
At December 31, 1995, 46% of the backlog represents orders received from U.S.
Government agencies, primarily the DoD. The order backlog for each segment
relates differently to future sales based on different business
characteristics, primarily order and delivery lead times and customer
demand requirements. The Company estimates that approximately 91% of its
backlog as of December 31, 1995 will be billed during 1996.
DOE Support backlog, which is not reflected above, represents annual contract
funding that has actually been appropriated and was $126 million at December 31,
1995 and $757 million at January 1, 1995.
While the Company has not generally experienced material cancellations of
orders, orders may be cancelled by customers without financial penalty, and
backlog does not necessarily represent actual future shipments.
GOVERNMENT CONTRACTS
In accordance with government regulations, all of the Company's government
contracts are subject to termination for the convenience of the government.
Costs incurred under cost-reimbursable contracts are subject to audit by the
government. The results of prior audits, which have been completed through
1991, have not had a material effect on the Company.
Continuing Operations: Sales to U.S. Government agencies, which were
predominantly to the DoD and NASA, were $537 million, $542 million and $560
million in 1995, 1994 and 1993, respectively. In October 1993, the Company
was selected by NASA to continue as the base operations contractor at the
KSC. The contract contained reductions in contract value and has
resulted in a lower annual fee than the prior contract. This contract and
the prior contract contributed sales of $172 million, $176 million and $201
million in 1995, 1994 and 1993, respectively. There are two years remaining
on the contract, which has two three-year renewal options at the discretion
of the government. NASA has announced that it will designate a single Space
Shuttle Flight Operations contractor in 1996. While the impact of this
initiative cannot be determined at this time, the Company believes that its
contract will not be adversely affected.
Discontinued Operations: The Company's four major cost-plus-award-fee contracts
with the DOE contributed $660 million of sales to discontinued operations in
1995. The EG&G Rocky Flats, Inc. contract terminated in June 1995. The
Reynolds Electrical and Engineering Co., Inc. and the EG&G Energy
Measurements, Inc. contracts expired on December 31, 1995. The EG&G Mound
Applied Technologies, Inc. contract, the Company's remaining management and
operations contract with DOE, expires on September 30, 1996. The work scope
and fee pools are negotiated annually, and the expiration date may be
modified by the DOE in accordance with contract terms. The Mound contract
contributed $136 million of sales to discontinued operations in 1995. The
Company does not anticipate incurring any material loss on the ultimate
completion of the contracts.
COMPETITION
Because of the wide range of its products and services, the Company faces many
different types of competition and competitors. Competitors range from large
foreign and domestic organizations that produce a comprehensive array of goods
and services, to small concerns producing a few goods or services for
specialized market segments.
The Technical Services segment provides technical services to several agencies
of the federal government, including the DoD and NASA. This business is
typically won through competition with a number of large and small
contractors, many of whom are as large or larger than the Company and who,
therefore, have resources and capabilities that are comparable to or greater
than those of the Company. The primary bases for competition in these
markets are technical and management capabilities, current and past
performance, and price. Competition is typically subject to mandated
procurement and competitive bidding requirements. Competition
for automotive testing services is primarily from a few specialized testing
companies and from customer-owned testing facilities, and is primarily based
on quality, service, and price.
In the Instruments segment, the Company competes with instrument companies,
some large, most small, that serve narrow segments of markets in X-ray and
magnetic security systems, nuclear, industrial, and diagnostic
instrumentation, and instrumentation for exploration and development of oil
and gas resources. The Company competes in these markets on the basis
of product performance, product reliability, service and price.
Consolidation of competitors through acquisitions and mergers and the
Company's increasing activity in all selected diagnostics and industrial
markets are expected to increase the proportion of large competitors
in this segment.
In the Mechanical Components segment, the Company is a leading supplier of
selected precision aircraft exhaust components, specialized fans and heat
transfer devices, and mechanical seals for industrial applications.
Competition in these areas is typically from small specialized manufacturing
companies.
In the Optoelectronics segment, the Company is among the leading suppliers of
specialty flashtubes, silicon photodetectors, avalanche photodiodes, cadmium
sulfide and cadmium selenide detectors, photodiode arrays and switched power
supplies. Typically, competition is from small specialized manufacturing
companies.
Within the Mechanical Components, Optoelectronics and Instruments segments,
competition for governmental purchases is subject to mandated procurement
procedures and competitive bidding practices. In these segments, the
Company competes on the basis of product performance, quality, service and
price. In much of the Optoelectronics and Instruments segments and in the
specialized fan and aircraft and marine mechanical seal markets included
in the Mechanical Components segment, advancing technology and research
and development are also important competitive factors.
RESEARCH AND DEVELOPMENT
During 1995, 1994 and 1993, Company-sponsored research and development
expenditures were approximately $42.4 million, $38.6 million and $34.7
million, respectively.
ENVIRONMENTAL COMPLIANCE
The Company is conducting a number of environmental investigations and remedial
actions at current and former Company locations and, along with other companies,
has been named a potentially responsible party for certain waste disposal sites.
The Company accrues for environmental issues in the accounting period that the
Company's responsibility is established and when the cost can be reasonably
estimated. As of December 31, 1995, the Company had an accrual of $3.8
million to reflect its estimated liability for environmental remediation. As
assessments and remediation activities progress at each individual site,
these liabilities are reviewed to reflect additional information as it
becomes available. There have been no environmental problems to date that
have had or are expected to have a material effect on the Company's
financial position or results of operations. While it is reasonably
possible that a material loss exceeding the amounts recorded may have been
incurred, the preliminary stages of the investigations make it impossible
for the Company to reasonably estimate the range of potential exposure.
EMPLOYEES
As of March 1, 1996, the Company employed approximately 15,000 persons,
including 1,000 persons in the former DOE Support segment. Certain of the
Company's subsidiaries are parties to contracts with labor unions. The
Company considers its relations with employees to be satisfactory.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
SEGMENT SALES AND INCOME
Sales and Operating Income (Loss) From Continuing Operations by Industry Segment
For the Five Years Ended December 31, 1995
(In thousands) 1995 1994 1993 1992 1991
- ------------------------- ---------- ---------- ---------- ---------- ----------
Sales:
Technical Services $ 617,391 $ 613,588 $ 636,041 $ 608,864 $ 586,537
Instruments 293,575 273,088 237,223 226,900 230,196
Mechanical Components 249,255 232,500 244,878 274,199 295,519
Optoelectronics 259,357 213,380 201,274 210,118 146,274
---------- ---------- ---------- ---------- ----------
$1,419,578 $1,332,556 $1,319,416 $1,320,081 $1,258,526
========== ========== ========== ========== ==========
Operating Income (Loss) From Continuing Operations:
Technical Services $ 48,155 $ 46,075 $ 68,762 $ 56,924 $ 55,601
Instruments 17,142 (49,580) 10,413 16,016 21,954
Mechanical Components 27,241 18,766 24,408 21,835 28,426
Optoelectronics 19,328 8,674 11,474 3,905 7,140
General Corporate Expenses (29,193) (34,882) (27,573) (29,895) (27,456)
---------- ---------- ---------- ---------- ----------
$ 82,673 $ (10,947) $ 87,484 $ 68,785 $ 85,665
========== ========== ========== ========== ==========
The operating income (loss) from continuing operations for 1994 included a
goodwill write-down of $40.3 million and restructuring charges of $30.4
million. The impact of these nonrecurring charges on each segment was as
follows: Technical Services - $1.6 million, Instruments - $55.7 million,
Mechanical Components - $2.7 million, Optoelectronics - $9.7 million and
General Corporate Expenses - $1 million.
Additional information relating to the Company's operations in the various
industry segments follows:
Depreciation and Capital
(In thousands) Amortization Expense Expenditures
------------------------ -------------------------
1995 1994 1993 1995 1994 1993
------- -------- ------- ------- ------- -------
Technical Services $ 7,698 $ 7,447 $ 8,422 $12,047 $ 7,314 $ 6,315
Instruments 11,887 11,621 9,213 4,639 5,398 6,555
Mechanical Components 5,585 6,091 6,870 6,978 6,197 5,598
Optoelectronics 13,220 10,690 12,417 35,925 17,748 8,469
Corporate 1,036 941 920 2,250 620 923
------- ------- ------- ------- ------- -------
$39,426 $36,790 $37,842 $61,839 $37,277 $27,860
======= ======= ======= ======= ======= =======
(In thousands) Identifiable Assets
----------------------------
1995 1994 1993
-------- -------- --------
Technical Services $113,901 $129,995 $127,917
Instruments 225,358 220,232 256,117
Mechanical Components 100,363 93,721 97,317
Optoelectronics 200,719 193,302 142,630
Corporate and Other 163,574 155,879 140,906
-------- -------- --------
$803,915 $793,129 $764,887
======== ======== ========
Corporate assets consist primarily of cash and cash equivalents, prepaid
pension and taxes, and investments.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
Information relating to geographic areas follows:
Operating Income (Loss)
(In thousands) Sales From Continuing Operations
---------------------------------- ----------------------------
1995 1994 1993 1995 1994 1993
---------- ---------- ---------- -------- -------- --------
U.S. $1,065,424 $1,026,970 $1,049,131 $ 82,256 $ 57,679 $ 96,495
Germany 87,690 61,310 134,754 4,508 (43,492) 53
Other Non-U.S. 266,464 244,276 135,531 25,102 9,748 18,509
Corporate --- --- --- (29,193) (34,882) (27,573)
---------- ---------- ---------- -------- -------- --------
$1,419,578 $1,332,556 $1,319,416 $ 82,673 $(10,947) $ 87,484
========== ========== ========== ======== ======== ========
(In thousands) Identifiable Assets
----------------------------
1995 1994 1993
-------- -------- --------
U.S. $353,130 $341,725 $305,344
Germany 89,834 100,650 154,361
Other Non-U.S. 197,377 194,875 164,276
Corporate and Other 163,574 155,879 140,906
-------- -------- --------
$803,915 $793,129 $764,887
======== ======== ========
Transfers between geographic areas were not material.
ITEM 2. PROPERTIES
As of March 1, 1996, the Company occupied approximately 4,228,500 square feet
of building area, of which approximately 1,611,800 square feet is owned and
the balance leased. The Company's headquarters occupies 53,350 square feet
of leased space in Wellesley, Massachusetts. The Company's other operations
are conducted in manufacturing and assembly plants, research laboratories,
administrative offices and other facilities located in 26 states, Washington,
D.C., Puerto Rico, the U.S. Virgin Islands and 26 foreign countries.
Non-U.S. facilities account for approximately 1,189,700 square feet of owned
and leased property, or approximately 28% of the Company's total occupied space.
The Company's leases on property are both short-term and long-term. In
management's opinion, the Company's properties are well-maintained and are
adequate for its present requirements.
At certain government facilities, the Company previously occupied government
furnished space. A majority of this space was occupied by the Discontinued
Operations and has since been assigned to the new management contractor.
Except for operations based on government facilities, substantially all of
the machinery and equipment used by the Company in its other activities is
owned by the Company and the balance is leased or furnished by contractors or
customers.
The following table indicates the approximate square footage of real property
owned and leased attributable to each of the Company's industry segments.
Owned Leased Total
(Sq. Feet) (Sq. Feet) (Sq. Feet)
---------- ---------- ----------
Continuing Operations
Technical Services 163,400 1,058,100 1,221,500
Instruments 551,100 414,500 965,600
Mechanical Components 556,700 532,800 1,089,500
Optoelectronics 336,000 549,300 885,300
Corporate Offices 4,600 62,000 66,600
--------- --------- ---------
Total 1,611,800 2,616,700 4,228,500
========= ========= =========
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various investigations, claims, and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities. Each of these matters is subject to various
uncertainties, and it is possible that some of these matters may be
resolved unfavorably to the Company. The Company has established accruals
for matters that are probable and reasonably estimable. Management believes
that any liability that may ultimately result from the resolution of these
matters in excess of amounts provided will not have a material adverse
effect on the financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS
Listed below are the executive officers of the Company as of March 22, 1996.
No family relationship exists between any of the officers.
Name Position Age
- -------------------------------------------------------------------------------
John M. Kucharski Chairman of the Board, 60
President and Chief Executive Officer
Fred B. Parks Executive Vice President and 48
Chief Operating Officer
Murray Gross Vice President, 59
General Counsel and Clerk
John F. Alexander, II Vice President, Chief Financial 39
Officer and Corporate Controller
Angelo D. Castellana Vice President 54
Dale L. Fraser Vice President 60
Earl M. Fray Vice President 62
E. Lavonne Lewis Vice President 59
Deborah S. Lorenz Vice President 46
Donald H. Peters Vice President 55
Luciano S. Rossi Vice President 50
Edward H. Snow Vice President 59
C. Michael Williams Vice President 59
Peter H. Zavattaro Vice President 58
Daniel T. Heaney Treasurer 42
Mr. Kucharski joined the Company in 1972. He was elected a Vice President in
1979, a Senior Vice President in 1982 and Executive Vice President in 1985.
In 1986 he was elected President and Chief Operating Officer, in 1987 Chief
Executive Officer and was elected Chairman of the Board of Directors in 1988.
Dr. Parks joined the Company in 1976. He was elected a Vice President in 1988,
a Senior Vice President in 1991, and Executive Vice President and Chief
Operating Officer in 1995.
Mr. Gross joined the Company in 1971. He was elected Assistant General Counsel
and Assistant Clerk in 1978 and Vice President, General Counsel and Clerk in
1990.
Mr. Alexander joined the Company in 1982. He was elected Corporate Controller
in 1991, a title he retained when named a Vice President in 1995. He was
elected Chief Financial Officer effective in January 1996.
Mr. Castellana joined the Company in 1965. He was elected a Vice President in
1991 and is Group Executive of the Instruments segment.
Mr. Fraser joined the Company in 1961. He was elected a Vice President in 1990.
Mr. Fray joined the Company in 1977. He was elected a Vice President in 1994
and is General Manager of EG&G Mound.
Ms. Lewis joined the Company in 1970. She was elected Vice President in 1995
and is Director of Human Resources.
Ms. Lorenz joined the Company in 1990. She was elected a Vice President in
1992 and is Director of Investor Relations and Corporate Communications.
Dr. Peters joined the Company in 1968. He was elected a Vice President in
1987 and is Director of Planning.
Mr. Rossi joined the Company in 1967. He was elected a Vice President in 1988
and is Group Executive of the Mechanical Components segment.
Dr. Snow joined the Company in 1977. He was elected a Vice President in 1992
and is Group Executive of the Optoelectronics segment.
Mr. Williams joined the Company in 1972. He was elected a Vice President in
1984 and is Group Executive of the Technical Services segment.
Mr. Zavattaro joined the Company in 1959. He was elected a Vice President
in 1985.
Mr. Heaney joined the Company in 1980. He was elected Treasurer in 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Price of Common Stock
1994 Quarters
-----------------------------
First Second Third Fourth
------ ------ ------ ------
High $19.00 $16.50 $15.88 $17.00
Low 16.38 14.13 14.63 13.75
1995 Quarters
-----------------------------
First Second Third Fourth
------ ------ ------ ------
High $15.50 $18.38 $20.00 $24.50
Low 13.00 15.00 16.38 18.00
Dividends
1994 Quarters
----------------------------
First Second Third Fourth
----- ------ ----- ------
Cash Dividends
Per Common Share $ .14 $ .14 $ .14 $ .14
1995 Quarters
----------------------------
First Second Third Fourth
----- ------ ----- ------
Cash Dividends
Per Common Share $ .14 $ .14 $ .14 $ .14
The Company's common stock is listed and traded on the New York Stock Exchange.
The number of holders of record of the Company's common stock as of February 23,
1996, was approximately 13,124.
In October 1995, the Board of Directors of the Company declared a regular
quarterly cash dividend of fourteen cents per share of common stock. The
quarterly cash dividend was paid on February 9, 1996, to stockholders of
record at the close of business on January 19, 1996.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL INFORMATION
For the Five Years Ended December 31, 1995
(In thousands
where applicable) 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Operations:
Sales $1,419,578 $1,332,556 $1,319,416 $1,320,081 $1,258,526
Operating income (loss) from
continuing operations 82,673 (10,947)a 87,484 68,785 85,665
Income (loss) from
continuing operations 54,304 (32,107) 54,622 48,765 51,936
Income from discontinued operations,
net of income taxes 13,736 26,452 24,949 39,014 29,306
Income (loss) before cumulative effect
of accounting changes 68,040 (5,655) 79,571 87,779 81,242
Net income (loss) 68,040 (5,655) 59,071c 87,779 81,242
Earnings (loss) per share:
Continuing operations 1.05 (.58) .97 .87 .93
Discontinued operations .27 .48 .44 .69 .52
Income (loss) before cumulative effect
of accounting changes 1.32 (.10) 1.41 1.56 1.45
Net income (loss) 1.32 (.10) 1.05c 1.56 1.45
Return on equity 16.8% (1.2)%b 12.4%d 19.6% 20.6%
Weighted average common
shares outstanding 51,483 55,271 56,504 56,385 55,901
Financial Position:
Working capital $ 218,235 $ 199,656 $ 227,935 $ 247,518 $ 214,495
Current ratio 1.87:1 1.71:1 1.98:1 2.07:1 1.90:1
Total assets 803,915 793,129 764,887 746,577 694,024
Short-term debt 5,275 59,988 43,589 40,267 57,337
Long-term debt 115,222 812 1,450 1,956 2,298
Long-term liabilities 71,296 65,129 52,727 38,871 33,479
Stockholders' equity 366,946 445,366 477,534 473,636 420,711
-Per share 7.71 8.08 8.51 8.34 7.45
Total debt/total capital 25% 12% 9% 8% 12%
Common shares outstanding 47,610 55,124 56,131 56,812 56,495
Other Data:
Cash flows from continuing
operations $ 123,831 $ 70,341 $ 76,217 $ 94,554 $ 77,720
Cash flows from discontinued
operations 26,334 25,542 35,920 33,253 26,709
Cash flows from operating
activities 150,165 95,883 112,137 127,807 104,429
Capital expenditures 61,839 37,277 27,860 22,446 26,617
Depreciation and amortization 39,426 36,790 37,842 36,292 33,726
Cash dividends per common share .56 .56 .52 .49 .42
a) Included a goodwill write-down of $40.3 million and restructuring charges of $30.4 million.
b) Return on equity before effect of nonrecurring items described in a) was 11.8%.
c) Included one-time after-tax charges of $20.5 million, or $.36 per share, due to adoption of
SFAS Nos. 106 and 109.
d) Return on equity before cumulative effect of accounting changes was 16.4%.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
OVERVIEW
In 1994, the Company initiated a series of significant actions to reposition
its businesses for future success. These initiatives included withdrawal from
the Department of Energy (DOE) Support business, restructuring the cost model
of continuing operations, improved utilization of working capital, liquidation
of non-strategic investments and assets, replacing a portion of equity capital
with long-term debt, adoption of Economic Value Added (EVA) as the basis of
measurement and incentive compensation systems and increased investment in
internal development programs. Substantial progress was made in each of
these areas in 1995 and is detailed later in this report. These programs
have resulted in significant changes in financial results in 1995 and are
expected to continue to do so in the future.
Sales increased $87 million in 1995 to $1.4 billion, and operating income
increased by 38% over 1994 before nonrecurring charges. Total annualized
cost savings under the 1994 restructuring plan are expected to reach $28
million in 1996. Key measures of effectiveness of working capital
management, Days Sales Outstanding and Inventory Turns, improved by 10%
and 18%, respectively, in 1995. Research and development and capital
expenditures increased by 10% and 66%, respectively.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Future trends in revenues and operating income will be dependent on both
external factors and on the success of the various programs described above.
In Technical Services, future performance will continue to be impacted by
increased competition, continued funding pressures and changing customer
requirements. Future performance in our products segments will be highly
dependent on the technological success and market acceptance of our new
program initiatives including the amorphous silicon and micromachined sensor
projects. Continued success in improving operational efficiency will be
required to offset increasing price pressure in most of the Company's
product offerings.
RESULTS OF OPERATIONS
The discussion that follows is a summary analysis of the major changes by
industry segment.
1995 Compared to 1994
Sales
Sales from continuing operations of $1,420 million for 1995 were $87 million,
or 7%, higher than 1994 sales.
Technical Services: The $3.8 million increase was the net result of billings
under two contracts for communication systems development and water flow
control offset by decreases resulting from continuing reductions in
government funding and the phase-down of the Superconducting Super Collider
Laboratory contract. In addition, demand for stationary automotive testing
services was lower in 1995. The government services businesses are subject
to a highly competitive procurement environment, continuing changes in
federal budget priorities and rapidly changing customer requirements.
While the impact of these uncertainties on future results cannot be
determined, the Company continues to see new opportunities for these
businesses.
Instruments: The $20.4 million increase resulted primarily from higher demand
for diagnostic and security products and the effect of changes in foreign
exchange rates, partially offset by an $11 million decrease due to the
divestiture of three product lines under the restructuring plan.
Mechanical Components: The $16.8 million increase was due to improving market
conditions, primarily for industrial process sealing and aerospace products.
Optoelectronics: Sales increased $46 million, or 22%, primarily due to $28
million of higher sales of IC Sensors, acquired at the end of the third
quarter of 1994, and higher shipments of flash products.
Operating Income (Loss) From Continuing Operations
Excluding the 1994 nonrecurring charges, operating income from continuing
operations increased $22.9 million, or 38%, in 1995. The 1994 operating loss
included nonrecurring charges of $40.3 million for a goodwill write-down and
$30.4 million for restructuring charges.
Technical Services: Income was flat, excluding the 1994 restructuring charges
of $1.6 million, as the income earned on the two contracts described previously,
and an unfavorable contract adjustment and early retirement costs recorded in
1994 were offset by several decreases. These decreases included costs
incurred in excess of contract coverage, an estimated provision for a legal
judgment, start-up costs for the environmental services and systems business and
the effect of lower sales levels in certain government services and the
automotive testing markets.
Instruments: The increase of $11.1 million, excluding the 1994 nonrecurring
charges of $55.7 million, resulted from cost reductions of $6.9 million from
the 1994 restructuring plan, margin on higher sales and the 1994 expense
related to the close-down of a research and development project. The
increases were partially offset by the unfavorable impact on export shipment
margins caused by the strengthening of the Finnish markka against other major
currencies, the expenses associated with the expansion of the food-monitoring
business and a provision for additional cost reductions.
Mechanical Components: The $5.8 million increase, excluding the 1994
restructuring charges of $2.7 million, resulted primarily from margin on
higher sales and $1.5 million of cost reductions. The 1994 results included
a provision for environmental remediation costs of $1.3 million and start-up
costs for the transportation element of the electromechanical business.
Optoelectronics: Excluding the 1994 nonrecurring charges of $9.7 million,
the $1 million net increase resulted from margin on higher sales and $2.6
million of cost reductions. The increases were partially offset by lower
margins due to competitive pricing pressures and higher production costs
in one product line and completion of certain government contracts in 1994.
The Company significantly increased research and development expenses and
capital expenditures in 1995 to support the amorphous silicon and
micromachined sensor programs. The Company anticipates continued increases
in research and development expenses and capital expenditures to support
product development initiatives in this segment.
General Corporate Expenses: The $4.6 million decrease, excluding the 1994
restructuring charges of $1 million, resulted from $3.8 million of cost
reductions in 1995, and $1 million of separation costs and $1 million of
costs associated with the restructuring plan recorded in 1994. These
decreases in expenses were partially offset by management incentive accruals.
Other: The $9.6 million increase in other income was due to gains on sales of
investments and operating assets, higher income generated by joint ventures
and lower investment write-downs. Partially offsetting these factors were
higher interest expense and foreign exchange losses.
Under the 1994 restructuring plan, the net work force reduction in 1995 was
500, bringing the total reductions to 700 positions since the inception of
the plan. The actions taken under the restructuring plan resulted in
pre-tax savings of $15 million during 1995. Total annualized cost
savings under the plan are expected to reach $28 million in 1996. The
annualized savings expected for each segment in 1996 are as follows:
Instruments--$12 million, Mechanical Components--$2 million,
Optoelectronics--$7 million and General Corporate Expenses--$7
million. The restructuring plan was substantially completed at the end of
1995.
The effective tax rate for continuing operations was 36.9% in 1995. The
effective tax rate of 87.5% in 1994 was higher than normal as a result of
the impact of the goodwill write-down and the restructuring charges.
In 1995, the Company decreased its discount rates for employee benefit plans
as a result of the decrease in long-term interest rates. The rates for
compensation increases and long-term return on assets were also reduced.
The net result of these changes will not materially affect
the Company's future results of operations.
Depreciation Change: The Company changed its method of depreciation for
certain classes of plant and equipment purchased after January 1, 1995 from an
accelerated method to the straight-line method for financial reporting
purposes. The Company believes that the straight-line method more
appropriately reflects the timing of the economic benefits to be received
from these assets, consisting mainly of manufacturing equipment. The
Company also changed its convention for calculating depreciation expense
during the year that an asset is acquired. Previously, the Company used
the half-year convention; starting in 1995, the Company commences
depreciation in the month the asset is placed in service. In 1995, the
effect of applying these new methods was to reduce depreciation expense by
$4.3 million, and to increase income from continuing operations and net
income by $2.7 million and net income per share by $.05. The reductions in
depreciation expense represent the differences in current year depreciation
expense between the old and new methods. Most of this difference occurred in
the Optoelectronics segment. Depreciation and amortization was higher in
1995 than in 1994 because the effect of the changes in methods was exceeded
by the effect of higher capital expenditures and inclusion of IC Sensors'
depreciation for a full year.
Discontinued Operations: Income from discontinued operations, net of income
taxes, was $12.7 million lower in 1995. The decrease reflected the
expiration of the Idaho National Engineering Laboratory (INEL) contract in
September 1994 and the Rocky Flats contract in June 1995. Future sales and
income from discontinued operations will continue to decrease
because the Nevada Test Site contracts expired on December 31, 1995 and
the Mound contract expires on September 30, 1996. Sales and income from
the Mound contract are dependent upon the work scope and fee pools that are
negotiated annually, and the expiration date may be modified by the DOE in
accordance with contract terms. The Mound contract contributed $136 million
of sales and $5.5 million of operating income to discontinued operations in
1995 and is the Company's one remaining DOE management and operations
contract.
Environmental: The Company is conducting a number of environmental
investigations and remedial actions at current and former Company locations
and, along with other companies, has been named a potentially responsible
party for certain waste disposal sites. The Company accrues for
environmental issues in the accounting period that the Company's responsibility
is established and when the cost can be reasonably estimated. As of
December 31, 1995, the Company had an accrual of $3.8 million to reflect
its estimated liability for environmental remediation. As assessments and
remediation activities progress at each individual site, these liabilities
are reviewed to reflect additional information as it becomes available.
There have been no environmental problems to date that have had or are
expected to have a material effect on the Company's financial position or
results of operations. While it is reasonably possible that a material loss
exceeding the amounts recorded may have been incurred, the preliminary
stages of the investigations make it impossible for the Company to reasonably
estimate the range of potential exposure.
1994 COMPARED TO 1993
During the third quarter of 1994, three significant events occurred that had a
material effect on both the current financial results and the expected future
performance of the Company. First, the Company decided not to seek renewal
of its four DOE management and operations contracts. Second, management
completed its review of the remaining operating segments' performance and
developed a plan to reposition these businesses to attain the Company's
business goals. The plan resulted in restructuring charges of $30.4 million.
Finally, the decline in the financial results of certain operating elements
within the Instruments segment, together with a strategic and operational
review of these operations, resulted in an evaluation of the related
goodwill for possible impairment. This evaluation resulted in a $39.2
million write-down of goodwill and a reduction in the estimated remaining
useful life of unamortized goodwill from 36 years to 16 years. The Company
also wrote off $1.1 million of a small Optoelectronics unit's goodwill.
Additional information related to these events is discussed below and in Notes
5, 8 and 10 to the consolidated financial statements.
Sales
Sales from continuing operations for 1994 were $1,333 million, $13 million
higher than 1993 sales.
Technical Services: The $22 million decline resulted primarily from the $32
million reduction in program expenditures under the new base operations
contract with the National Aeronautics and Space Administration (NASA) at
the Kennedy Space Center (KSC). In addition, automotive testing sales
declined $8 million to more normal levels following increases in 1993 caused
by the introduction of new testing protocols. Partially offsetting these
decreases were increased billings of $21 million from the chemical weapons
disposal contract as it moves into its testing phase.
Instruments: The $36 million increase resulted primarily from $31 million of
sales of Wallac, acquired late in the second quarter of 1993, and a $12
million increase in airport security product sales. These increases were
partially offset by a $4 million sales decrease in other businesses. These
businesses are being sold under the restructuring plan and contributed sales
of $16 million in 1994.
Mechanical Components: The $12 million decrease was primarily due to the
absence of sales of an operation divested late in 1993.
Optoelectronics: The $12 million increase was due primarily to higher
shipments of flash products of $20 million, and $5 million of sales of
IC Sensors, acquired at the end of the third quarter of 1994. Partially
offsetting the increases were the absence of $5 million of sales from
an operation divested late in 1993 and a $4 million decrease in sales
on a government contract that ended in September 1994.
Operating Income (Loss) From Continuing Operations
The operating loss from continuing operations in 1994 was $10.9 million
compared to income of $87.5 million in 1993. The loss from continuing
operations included the $40.3 million write-down of goodwill and
restructuring charges of $30.4 million resulting from management's
restructuring plan. The Wallac and IC Sensors acquisitions were the
main contributors to the $3.9 million increase in research and development
expenses. The $13.4 million increase in selling, general and administrative
expenses resulted mainly from Wallac and increased Corporate expenses,
offset by cost reductions in the Instruments segment and the absence of
expenses of operations divested in 1993.
Restructuring Charges: During the third quarter of 1994, management completed
its review of the operating segments and developed a plan to reposition these
businesses to attain the Company's business goals. The plan resulted in pre-
tax restructuring charges of $30.4 million. The principal actions in the
restructuring plan included reduction of excess manufacturing capacity,
changes in distribution channels, consolidation and re-engineering of support
infrastructure, disposal of under-utilized assets, withdrawal from certain
unprofitable product lines, disposal of excess property and general cost
reductions. The restructuring plan will result in the termination of the
jobs of approximately 1,000 non-DOE employees; the net work force
reduction will be approximately 800 non-DOE employees. The major
components of the restructuring charges were $21 million of employee
separation costs, $4.9 million of noncash charges to dispose of certain
product lines and assets through sale or abandonment and $4.5 million of
charges to terminate lease and other contractual obligations no longer
required as a result of the restructuring plan. The charges do not include
additional costs associated with the restructuring plan, such as voluntary
early retirement programs, training, consulting, purchases of equipment and
relocation of employees and equipment. These costs were charged to
operations or capitalized, as appropriate, when incurred. The implementation
of this plan commenced during the second half of 1994 and was substantially
completed at the end of 1995.
Technical Services: The $22.7 million decrease resulted primarily from
reductions in the automotive testing business from the $4.7 million impact of
lower sales and, to a lesser extent, from increased costs. A reduction at the
KSC of $5.1 million was due to the lower fee on the new base operations
contract. In addition, a $3.3 million decrease resulted from
unfavorable 1994 contract adjustments compared to favorable 1993 contract
settlements. Restructuring charges of $1.6 million and early retirement
costs also contributed to the decrease. The restructuring plan is not
expected to have a significant, direct impact on future results in this
segment since cost reductions primarily relate to operations with cost
reimbursable contracts. However, the Company does expect to be more
competitive in bidding for future procurements as a result of cost reductions.
Instruments: The Instruments loss of $49.6 million resulted primarily from a
goodwill write-down of $39.2 million related to the Berthold business acquired
in 1989, and restructuring charges of $16.5 million. The remainder of the
decrease resulted from costs associated with delays in the introduction of
new diagnostic products, the impact that the strengthening of the
Finnish markka had on Wallac's results, higher royalty expense and
expenses related to the close-down of a research and development project.
Partially offsetting these decreases were $2.5 million of cost reductions in
the nuclear business.
Mechanical Components: The decrease of $5.6 million resulted from $2.7 million
of restructuring charges, a provision for environmental remediation costs of
$1.3 million and increased start-up costs for the transportation element of
the electromechanical business.
Optoelectronics: Profits resulting from higher flash product shipments and
the continued benefit of cost reductions implemented in 1993 were offset by
$8.6 million of restructuring charges and, to a lesser extent, the impact of
lower sales on a government contract. In addition, the results reflected a
$1.1 million write-off of a small unit's goodwill.
General Corporate Expenses: The increase was due to $1 million of
restructuring charges, $1 million of consulting costs that were associated
with the restructuring plan, $1 million of separation costs incurred during
the first six months of the year plus general cost increases.
Other: The net change in other income (expense) was due to the write-down of
certain investments by $4.5 million to their estimated realizable value due
to deterioration in the company/partnership's financial condition and the
decision to liquidate the Company's position in investments no longer
consistent with its strategic direction.
The 1994 tax provision and effective rate for continuing operations were
significantly impacted by the goodwill write-down and the restructuring
charges. The Company did not record any tax benefit from the goodwill
write-down and approximately $11 million of the restructuring
charges because these charges, while tax deductible, were incurred in tax
jurisdictions where the Company had existing operating loss carryforwards.
Discontinued Operations: During 1994, the Company announced a plan to exit the
DOE business and decided not to seek renewal of its four DOE management and
operations contracts although it intends to continue to meet its
obligations under the terms and conditions of the present contracts. The
Company will not compete for management and operations contracts at other
DOE facilities. Accordingly, the Company is reporting the former
DOE Support segment as discontinued operations for all periods presented in the
consolidated financial statements. The Company's contract to manage the INEL
expired September 30, 1994 and contributed $240 million of sales and $7.3
million of operating income to discontinued operations in 1994.
Income from discontinued operations, net of income taxes, was $1.5 million
above the 1993 level. The increase resulted from a cost/productivity
improvement fee of $7.3 million earned at Rocky Flats offset partially by
the fee reduction reflecting the expiration of the INEL contract in
September 1994.
FINANCIAL CONDITION
The Company's cash and cash equivalents increased $9.8 million in 1995 while
commercial paper borrowings were eliminated and long-term debt proceeds were
$115 million. Net cash provided by operating activities was $150.2 million
in 1995, $95.9 million in 1994 and $112.1 million in 1993. The net cash
provided by continuing operations was higher in 1995 compared
to 1994 as a result of increased earnings and a $29.6 million reduction in
accounts receivable and inventories, despite higher sales, resulting from
the Company's aggressive operating capital reduction program. The decrease
in 1994's net cash provided when compared to 1993 resulted from lower
earnings, partially offset by a net reduction in working capital. The net
cash provided by operating activities was used principally for stock
repurchases, capital expenditures, cash dividends and, in 1994 and 1993,
for acquisitions. Proceeds from issuing common stock in 1993 were due to
an employee stock purchase plan which was terminated in that year.
Cash outlays in 1995 under the 1994 restructuring plan were $17.5 million,
mainly for employee termination costs, bringing the total spent under the
plan to $21.5 million. Future cash outlays of $3.7 million primarily
represent payments for lease commitments and employee termination benefits
being paid over time. Proceeds from dispositions of non-strategic assets
generated cash in excess of $20 million in 1995.
Discontinued operations generated cash of $26.3 million in 1995. Future cash
flows from discontinued operations will decrease due to the expiration of all
but the Mound contract by the end of 1995.
Capital expenditures were $61.8 million in 1995, an increase of $24.6 million
over the 1994 level, and are expected to exceed the 1995 level by 40% to 50%
in 1996. These increases support new product development initiatives
primarily in the Optoelectronics segment, including the amorphous silicon
and micromachined sensor programs.
In 1995, the Company issued $115 million of unsecured ten-year notes, of a
total $150 million authorized, at an interest rate of 6.8%. The unissued
notes of $35 million are covered by a shelf registration. The proceeds
were used to pay off commercial paper borrowings that were used mainly to
finance repurchases of the Company's common stock. The Company has two
revolving credit agreements totaling $250 million. These agreements
consist of a $175 million, 364-day facility, which expires in March 1996,
and a $75 million, three-year facility, which expires in March 1998. The
Company did not draw down either of these credit facilities during
1995, and is in the process of negotiating an extension of these agreements.
During 1995, the Company purchased 7.7 million shares of its common stock
through periodic purchases on the open market at a cost of $135.1 million.
As of December 31, 1995, the Company had authorization to purchase 5.6
million additional shares.
The Company has limited involvement with derivative financial instruments and
uses them only to protect an underlying exposure. The Company uses forward
exchange contracts and options to hedge certain foreign commitments and
transactions denominated in foreign currencies. The notional amount of
outstanding forward exchange contracts was $57.4 million as of December
31, 1995. The average term is three months, corresponding with expected
collections or payments. On forward contracts, there are no cash
requirements until maturity. Credit risk is minimal because the contracts
are with very large banks; any market risk is offset by the exposure on the
underlying hedged items. Gains and losses on forward contracts are offset
against foreign exchange gains and losses on the underlying hedged items
and, in some cases, are deferred until underlying exposures are recognized
if there is a firm commitment.
DIVIDENDS
In January 1996, the Board of Directors declared a regular quarterly cash
dividend of 14 cents per share, resulting in an annual rate of 56 cents per
share for 1996. EG&G has paid cash dividends, without interruption, for 31
years and continues to retain what management believes to be sufficient
earnings to support the funding requirements of its planned growth.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEET
As of December 31, 1995 and January 1, 1995
(Dollars in thousands except per share data) 1995 1994
Current Assets: --------- ---------
Cash and cash equivalents $ 76,204 $ 66,424
Accounts receivable (Note 3) 211,903 226,268
Inventories (Note 4) 114,199 123,299
Other (Notes 7 and 13) 66,380 56,635
Net assets of discontinued operations (Note 5) --- 8,852
--------- ---------
Total Current Assets 468,686 481,478
--------- ---------
Property, Plant and Equipment:
At cost (Note 6) 417,566 364,801
Accumulated depreciation and amortization (270,026) (243,139)
--------- ---------
Net Property, Plant and Equipment 147,540 121,662
--------- ---------
Investments (Note 7) 16,072 16,515
Intangible Assets (Note 8) 123,421 127,312
Other Assets (Notes 12 and 13) 48,196 46,162
--------- ---------
Total Assets $ 803,915 $ 793,129
========= =========
Current Liabilities:
Short-term debt (Note 9) $ 5,275 $ 59,988
Accounts payable 72,759 66,132
Accrued restructuring costs (Note 10) 3,748 21,532
Accrued expenses (Note 11) 164,923 134,170
Net liabilities of discontinued
operations (Note 5) 3,746 ---
--------- ---------
Total Current Liabilities 250,451 281,822
--------- ---------
Long-Term Debt (Note 9) 115,222 812
Long-Term Liabilities (Notes 12 and 13) 71,296 65,129
Contingencies (Note 14)
Stockholders' Equity (Note 16):
Preferred stock $1 par value, authorized
1,000,000 shares; none outstanding --- ---
Common stock $1 par value, authorized
100,000,000 shares; issued 60,102,000 shares 60,102 60,102
Retained earnings 498,181 459,738
Cumulative translation adjustments 28,679 10,785
Net unrealized gain on marketable
investments (Note 7) 244 3,337
Cost of shares held in treasury;
12,492,000 shares in 1995 and
4,978,000 shares in 1994 (220,260) (88,596)
--------- ---------
Total Stockholders' Equity 366,946 445,366
--------- ---------
Total Liabilities and Stockholders' Equity $ 803,915 $ 793,129
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Years Ended December 31, 1995
(Dollars in thousands except per share data) 1995 1994 1993
---------- ---------- ----------
Sales:
Products $ 802,187 $ 750,649 $ 725,627
Services 617,391 581,907 593,789
---------- ---------- ----------
Total Sales 1,419,578 1,332,556 1,319,416
---------- ---------- ----------
Costs and Expenses (Note 12):
Cost of sales:
Products 512,970 486,564 472,262
Services 539,076 508,045 498,791
---------- ---------- ----------
Total cost of sales 1,052,046 994,609 971,053
Research and development expenses 42,379 38,585 34,664
Selling, general and administrative expenses 242,480 239,609 226,215
Goodwill write-down (Note 8) --- 40,300 ---
Restructuring charges (Note 10) --- 30,400 ---
---------- ---------- ----------
Total Costs and Expenses 1,336,905 1,343,503 1,231,932
---------- ---------- ----------
Operating Income (Loss) From
Continuing Operations 82,673 (10,947) 87,484
Other Income (Expense), Net (Note 19) 3,386 (6,176) 1,008
---------- ---------- ----------
Income (Loss) From Continuing Operations
Before Income Taxes 86,059 (17,123) 88,492
Provision for Income Taxes (Note 13) 31,755 14,984 33,870
---------- ---------- ----------
Income (Loss) From Continuing Operations 54,304 (32,107) 54,622
Income From Discontinued Operations,
Net of Income Taxes (Note 5) 13,736 26,452 24,949
---------- ---------- ----------
Income (Loss) Before Cumulative Effect
of Accounting Changes 68,040 (5,655) 79,571
Cumulative Effect of Accounting Changes:
Income taxes (Note 13) --- --- (7,300)
Postretirement benefits other than
pensions (Note 12) --- --- (13,200)
---------- ---------- ----------
Net Income (Loss) $ 68,040 $ (5,655) $ 59,071
========== ========== ==========
Earnings (Loss) Per Share (Note 20):
Continuing Operations $ 1.05 $ (.58) $ .97
Discontinued Operations .27 .48 .44
---------- ---------- ----------
Income (Loss) Before Cumulative Effect
of Accounting Changes 1.32 (.10) 1.41
Cumulative Effect of Accounting Changes:
Income taxes --- --- (.13)
Postretirement benefits other than pensions --- --- (.23)
---------- ---------- ----------
Net Income (Loss) $ 1.32 $ (.10) $ 1.05
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Years Ended December 31, 1995
Net
Unrealized Total
Cumulative Gain on Cost of Stock-
Common Retained Translation Marketable Shared Held holders'
(Dollars in thousands except per share data) Stock Earnings Adjustments Investments in
Treasury Equity
------- -------- ----------- ----------- ----------- --------
Balance, January 3, 1993 $60,102 $473,262 $(1,323) $ --- $ (58,405)
$473,636
Net income --- 59,071 --- --- --- 59,071
Cash dividends ($.52 per share) --- (29,358) --- --- --- (29,358)
Exercise of employee stock options
and related income tax benefits --- (298) --- --- 7,356 7,058
Translation adjustments --- --- (6,964) --- --- (6,964)
Issuance of common stock for employee
benefit plans --- (6,614) --- --- 25,724 19,110
Purchase of common stock for treasury --- --- --- --- (45,019) (45,019)
------- -------- ------- -------- --------- --------
Balance, January 2, 1994 60,102 496,063 (8,287) --- (70,344)
477,534
Net loss --- (5,655) --- --- --- (5,655)
Cash dividends ($.56 per share) --- (31,012) --- --- --- (31,012)
Exercise of employee stock options
and related income tax benefits --- 342 --- --- 887 1,229
Translation adjustments --- --- 19,072 --- --- 19,072
Purchase of common stock for treasury --- --- --- --- (19,139) (19,139)
Unrealized gain on marketable investments --- --- --- 3,337 --- 3,337
------- -------- ------- -------- --------- --------
Balance, January 1, 1995 60,102 459,738 10,785 3,337 (88,596)
445,366
Net income --- 68,040 --- --- --- 68,040
Cash dividends ($.56 per share) --- (29,293) --- --- --- (29,293)
Exercise of employee stock options
and related income tax benefits --- 246 --- --- 3,415 3,661
Translation adjustments --- --- 17,894 --- --- 17,894
Purchase of common stock for treasury --- --- --- --- (135,079) (135,079)
Change in net unrealized gain on
marketable investments --- --- --- (3,093) --- (3,093)
Redemption of shareholder rights --- (550) --- --- --- (550)
------- -------- ------- -------- --------- --------
Balance, December 31, 1995 $60,102 $498,181 $28,679 $ 244 $(220,260)
$366,946
======= ======== ======= ======== =========
========
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Years Ended December 31, 1995
(Dollars in thousands) 1995 1994 1993
---------- --------- ---------
Cash Flows Provided by Operating Activities:
Net income (loss) $ 68,040 $ (5,655) $ 59,071
Deduct net income from discontinued operations (13,736) (26,452) (24,949)
Add cumulative effect of accounting changes --- --- 20,500
---------- --------- ---------
Income (loss) from continuing operations 54,304 (32,107) 54,622
Adjustments to reconcile income (loss) from
continuing operations to net cash provided
by continuing operations:
Goodwill write-down --- 40,300 ---
Noncash portion of restructuring charges --- 4,902 ---
Depreciation and amortization 39,426 36,790 37,842
Losses (gains) on dispositions and
investments, net (5,442) 5,322 (3,176)
Changes in assets and liabilities, net of
effects from companies purchased and divested:
Decrease in accounts receivable 17,535 6,284 20,054
Decrease (increase) in inventories 12,106 1,643 (1,971)
Increase (decrease) in accounts payable 6,087 2,124 (12,146)
Increase (decrease) in accrued
restructuring costs (17,522) 21,532 ---
Increase (decrease) in accrued expenses 27,609 2,904 (5,410)
Change in prepaid and deferred taxes (3,712) (5,163) (3,514)
Change in prepaid expenses and other (6,560) (14,190) (10,084)
---------- --------- ---------
Net Cash Provided by Continuing Operations 123,831 70,341 76,217
Net Cash Provided by Discontinued Operations 26,334 25,542 35,920
---------- --------- ---------
Net Cash Provided by Operating Activities 150,165 95,883 112,137
---------- --------- ---------
Cash Flows Used in Investing Activities:
Capital expenditures (61,839) (37,277) (27,860)
Proceeds from dispositions of businesses and
sales of property, plant and equipment 15,238 2,872 9,503
Cost of acquisitions, net of cash and cash
equivalents acquired --- (32,841) (32,186)
Proceeds from sales of investment securities 10,584 5,092 7,813
Other (2,754) (2,730) (2,503)
---------- --------- ---------
Net Cash Used in Investing Activities (38,771) (64,884) (45,233)
---------- --------- ---------
Cash Flows Used in Financing Activities:
Increase (decrease) in commercial paper (49,814) 14,873 2,977
Other debt payments (5,607) (3,939) (17,752)
Proceeds from issuance of long-term debt 115,000 ---
Proceeds from issuance of common stock 3,661 1,229 26,168
Purchases of common stock (135,079) (19,139) (45,019)
Cash dividends (29,293) (31,012) (29,358)
Other (1,763) --- ---
---------- --------- ---------
Net Cash Used in Financing Activities (102,895) (37,988) (62,984)
---------- --------- ---------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents 1,281 1,228 (1,487)
---------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 9,780 (5,761) 2,433
Cash and Cash Equivalents at Beginning of Year 66,424 72,185 69,752
---------- --------- ---------
Cash and Cash Equivalents at End of Year $ 76,204 $ 66,424 $ 72,185
========== ========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 7,271 $ 5,063 $ 6,819
Income taxes 23,380 41,353 41,256
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include
the accounts of EG&G, Inc. and its subsidiaries (the Company). All material
intercompany balances and transactions have been eliminated in consolidation.
Certain reclassifications have been made to conform prior years' data to the
current format.
Sales: Sales under cost-reimbursement contracts are recorded as costs are
i ncurred and include applicable income in the proportion that costs incurred
bear to total estimated costs. Other product and service sales are recorded
at the time of shipment for products and at the end of a contract phase for
service contracts. If a loss is anticipated on any contract, provision for
the entire loss is made immediately.
Inventories: Inventories, which include material, labor and manufacturing
overhead, are valued at the lower of cost or market. The majority of
inventories is accounted for using the first-in, first-out method. All
other inventories are accounted for using the last-in, first-out (LIFO) method.
Property, Plant and Equipment: The Company depreciates plant and equipment
over their estimated useful lives using accelerated methods for income tax
purposes. The Company changed its method of depreciation for certain classes
of plant and equipment purchased after January 1, 1995 from an accelerated
method to the straight-line method for financial statement purposes. The
Company believes that the straight-line method more appropriately reflects
the timing of the economic benefits to be received from these assets,
consisting mainly of manufacturing equipment, during their estimated useful
lives. The Company also changed its convention for calculating depreciation
expense during the year that an asset is acquired. Previously, the Company
used the half-year convention; starting in 1995, the Company commences
depreciation in the month the asset is placed in service. In 1995, the
effect of applying these new methods was to reduce depreciation expense by
$4.3 million, and to increase income from continuing operations and net
income by $2.7 million and net income per share by $.05. The
reductions in depreciation expense represent the differences in current year
depreciation expense between the old and new methods. Most of this difference
occurred in the Optoelectronics segment. Depreciation and amortization was
higher in 1995 than in 1994 because the effect of the changes in methods was
exceeded by the effect of higher capital expenditures and inclusion of IC
Sensors' depreciation for a full year. For financial statement purposes,
the estimated useful lives generally fall within the following ranges:
buildings and special-purpose structures 10 to 25 years; leasehold
improvements estimated useful life or remaining term of lease, whichever
is shorter; machinery and equipment 3 to 7 years; special-purpose equipment
expensed or depreciated over the life of the initial related contract.
Nonrecurring tooling costs are capitalized, while recurring costs are
expensed.
Pension Plans: The Company's funding policy provides that payments to the U.S.
pension trusts shall at least be equal to the minimum funding requirements of
the Employee Retirement Income Security Act of 1974. Non-U.S. plans are accrued
for but generally not funded, and benefits are paid from operating funds.
Translation of Foreign Currencies: The balance sheet accounts of non-U.S.
operations, exclusive of stockholders' equity, are translated at year-end
exchange rates, and income statement accounts are translated at weighted
average rates in effect during the year; any translation adjustments are
made directly to a component of stockholders' equity. The after-tax
aggregate net transaction gains (losses) were not material for the years
presented.
Intangible Assets: Intangible assets result from acquisitions accounted for
using the purchase method of accounting and include the excess of cost over
the fair market value of the net assets of the acquired businesses.
Substantially all of these intangible assets are being amortized over
periods of up to 20 years. Subsequent to the acquisition, the Company
continually evaluates whether later events and circumstances have occurred
that indicate the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not
be recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of the related business
segment's discounted future cash flows over the remaining life of the goodwill
in measuring whether the goodwill is recoverable. See Note 8 for discussion
of the goodwill write-down occurring in 1994.
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which,
effective January 1, 1996, requires the determination of whether an impairment
has occurred to be based on undiscounted cash flows. If it is determined
that an impairment has occurred, the impaired asset must be written down
to fair value. The Company does not expect the adoption of SFAS No. 121 to
have a material impact on its financial statements.
Cash Flows: For purposes of the Consolidated Statement of Cash Flows, the
Company considers all highly liquid instruments with a purchased maturity of
three months or less to be cash equivalents. The carrying amount of cash
and cash equivalents approximates fair value due to the short maturities.
Environmental Matters: The Company accrues for costs associated with the
remediation of environmental pollution when it is probable that a liability has
been incurred and the Company's proportionate share of the amount can be
reasonably estimated. Any recorded liabilities have not been discounted.
2. Acquisitions
In September 1994, the Company acquired IC Sensors, a leading supplier of
micromachined sensing and control components used in the automotive, medical,
industrial and consumer product markets, for cash of $30 million. The excess of
the cost over the fair market value of the net assets acquired was $21 million,
which is being amortized over 15 years using a straight-line method. In
September 1994, the Company also acquired NoVOCs, Inc., which offers a process
for restoring groundwater contaminated by gasoline and other volatile organic
compounds, for cash of $3.3 million and contingent payments based on future
sales. These acquisitions were accounted for using the purchase method, and
their results of operations were included in the consolidated results of the
Company from the date of acquisition. The effect of these acquisitions was
not material to the consolidated results of operations.
3. Accounts Receivable
Accounts receivable as of December 31, 1995 and January 1, 1995 included
unbilled receivables of $44 million and $57 million, respectively, which were
due primarily from U.S. Government agencies. Accounts receivable were net of
reserves for doubtful accounts of $4.4 million and $5.8 million as of
December 31, 1995 and January 1, 1995, respectively.
4. Inventories
Inventories as of December 31, 1995 and January 1, 1995 consisted of the
following:
(In thousands) 1995 1994
-------- --------
Finished goods $ 28,540 $ 35,304
Work in process 28,613 28,551
Raw materials 57,046 59,444
-------- --------
$114,199 $123,299
======== ========
The portion of inventories accounted for using the LIFO method of determining
inventory costs in 1995 and 1994 approximated 23% and 25%, respectively, of
total inventories. The excess of current cost of inventories over the LIFO value
was approximately $9 million at December 31, 1995 and $10 million at January 1,
1995.
5. Discontinued Operations
The former DOE Support segment, which has provided services under
management and operations contracts, is presented as discontinued operations in
accordance with Accounting Principles Board (APB) Opinion No. 30.
The EG&G Rocky Flats, Inc. contract terminated in June 1995. The Reynolds
Electrical and Engineering Co., Inc. and the EG&G Energy Measurements, Inc.
contracts expired on December 31, 1995. The EG&G Mound Applied
Technologies, Inc. contract, the Company's remaining management and operations
contract with the DOE, expires on September 30, 1996. The work scope and fee
pools are negotiated annually, and the expiration date may be modified by the
DOE in accordance with contract terms.
Summary operating results of the discontinued operations were as follows:
(In thousands) 1995 1994 1993
-------- ---------- ----------
Sales $659,852 $1,300,064 $1,378,532
Costs and expenses 638,719 1,259,369 1,340,149
-------- ---------- ----------
Income from discontinued
operations before income taxes 21,133 40,695 38,383
Provision for income taxes 7,397 14,243 13,434
-------- ---------- ----------
Income from discontinued
operations, net of income taxes $ 13,736 $ 26,452 $ 24,949
======== ========== ==========
Given the nature of the government contracts, the Company does not anticipate
incurring any material loss on the ultimate completion of the contracts.
Net assets (liabilities) of discontinued operations as of December 31, 1995 and
January 1, 1995 consisted of the following:
(In thousands) 1995 1994
-------- -------
Accounts receivable, primarily unbilled $ 7,575 $15,717
Operating current liabilities (11,439) (6,934)
Other 118 69
-------- -------
$ (3,746) $ 8,852
======== =======
6. Property, Plant and Equipment, at Cost
Property, plant and equipment as of December 31, 1995 and January 1, 1995
consisted of the following:
(In thousands) 1995 1994
-------- --------
Land $ 12,003 $ 15,877
Buildings and leasehold improvements 108,254 95,938
Machinery and equipment 297,309 252,986
-------- --------
$417,566 $364,801
======== ========
7. Investments
Investments as of December 31, 1995 and January 1, 1995 consisted of the
following:
(In thousands) 1995 1994
------- -------
Marketable investments (Note 12) $ 9,547 $14,187
Other investments 1,396 6,330
Joint venture investments 7,349 5,314
------- -------
18,292 25,831
------- -------
Less investments classified as other
current assets (2,220) (9,316)
------- -------
$16,072 $16,515
======= =======
Marketable investments consisted of common stocks and trust assets which were
primarily invested in money market funds, fixed income securities and common
stocks to meet the supplemental executive retirement plan obligation. SFAS No.
115 require sthat available-for-sale investments in securities that have readily
determinable fair values be measured at fair value in the balance sheet and that
unrealized holding gains and losses for these investments be reported in a
separate component of stockholders' equity until realized. The net
unrealized holding gain, net of deferred income taxes, reported as a
separate component of stockholders' equity, was $0.2 million at
December 31, 1995, a $3.1 million decrease from the $3.3 million gain at
January 1, 1995. In 1995, proceeds and, included in the results
of operations, gross realized gains from sales of available-for-sale
securities were $4.8 million and $3.7 million, respectively. Average
cost was the basis for computing the realized gains.
Marketable investments classified as available for sale as of
December 31, 1995 and January 1, 1995 consisted of the following:
(In thousands) 1995 1994
---------------------------------- ------------------------------------
Gross Unrealized Gross Unrealized
Holding Holding
Market ---------------- Market -----------------
Value Cost Gains (Losses) Value Cost Gains (Losses)
------ ------ ------ -------- ------- ------ ------ --------
Common stocks $6,355 $6,144 $ 919 $(708) $11,994 $6,860 $5,134 $ ---
Fixed income
securities 2,789 2,694 95 --- 1,987 1,987 --- ---
Money market funds 261 261 --- --- 206 206 --- ---
Other 142 72 70 --- --- --- --- ---
------ ------ ------ ----- ------- ------ ------ -----
$9,547 $9,171 $1,084 $(708) $14,187 $9,053 $5,134 $ ---
====== ====== ====== ===== ======= ====== ====== =====
The market values were based on quoted market prices. As of December 31,
1995, the fixed income securities, on average, have maturities of approximately
eight years.
Other investments consisted of nonmarketable investments in venture capital
partnerships and private companies, which are carried at the lower of cost or
net realizable value. The estimated aggregate fair value of other investments
approximated the carrying amount at December 31, 1995 and January 1, 1995.
The fair values of other investments were estimated based on the most recent
rounds of financing and securities transactions and on other pertinent
information, including financial condition and operating results. The
Company wrote down certain investments by $2.5 million in 1995 and $4.5
million in 1994 to their estimated realizable value due to deterioration
in the company/partnership's financial condition and the decision to
liquidate the Company's position in investments no longer consistent
with its strategic direction.
Marketable investments of $1.2 million and other investments of $1 million were
classified as other current assets at December 31, 1995. Marketable investments
of $8.3 million and other investments of $1 million were classified as other
current assets at January 1, 1995.
Joint venture investments are accounted for using the equity method.
8. Intangible Assets
Intangible assets were shown net of accumulated amortization of $42.2 million
and $31.6 million at December 31, 1995 and January 1, 1995, respectively.
The $3.9 million net decrease in intangible assets resulted primarily from
current year amortization, partially offset by the effect of translating
goodwill denominated in non-U.S. currencies at current exchange rates.
In 1994, the continued decline in the financial results of the operating
elements of the Company's Berthold business acquired in 1989, the resultant
strategic and operational review and the application of the Company's
objective measurement tests resulted in an evaluation of goodwill for
possible impairment. The underlying factors contributing to the decline
in financial results included changes in the marketplace, delays in
customer acceptance of new technologies and worldwide economic conditions.
The Company calculated the present value of expected cash flows to determine
the fair value of the business using a discount rate of 12% which represents
the Company's weighted average cost of capital. The evaluation resulted in
a $39.2 million write-down of Berthold's $76 million goodwill balance.
The evaluation also led the Company to determine that the remaining
amortization period for the goodwill should be reduced from 36 years to 16
years based on the factors identified above. The Company also wrote off
$1.1 million of a small Optoelectronics unit's goodwill in 1994.
9. Debt
There were no commercial paper borrowings outstanding at December 31, 1995.
Short-term debt at January 1, 1995 consisted primarily of commercial paper of
$49.8 million that had maturities of less than 90 days. The weighted average
interest rate on commercial paper borrowings was 6.1% at January 1, 1995.
Commercial paper borrowings averaged $52.5 million during 1995 at an average
interest rate of 6.1% compared to average borrowings of $42.3 million during
1994 at an average interest rate of 4.7%. Current maturities of long-term debt
are also included in this account. During 1995, the Company renewed its credit
facilities with the signing of two revolving credit agreement extensions
totaling $250 million. These agreements consist of a $175 million, 364-day
facility, which expires in March 1996, and a $75 million, three-year facility,
which expires in March 1998. These agreements serve as backup facilities for
the commercial paper borrowings. The Company did not draw down either of
these credit facilities during 1995. The Company is in the process of
negotiating another extension of these agreements for which there are no
significant commitment fees.
At December 31, 1995, long-term debt included $115 million of unsecured
ten-year notes issued in October 1995 at an interest rate of 6.8%. The
total notes authorized were $150 million, and the unissued notes of $35
million are covered by a shelf registration. The carrying amount of the
Company's long-term debt approximated the estimated fair value at
December 31, 1995 based on a quoted market price.
10. Restructuring Charges
During the third quarter of 1994, management completed its review of various
operating elements and developed a plan to reposition these businesses to attain
the Company's business goals. The plan resulted in pre-tax restructuring
charges of $30.4 million. The principal actions in the restructuring plan
included reduction of excess manufacturing capacity, changes in distribution
channels, consolidation and re-engineering of support infrastructure,
disposal of under-utilized assets, withdrawal from certain unprofitable
product lines, disposal of excess property and general cost reductions.
During 1995, the net work force reduction was 500, bringing the total
reduction to 700 positions since the inception of the plan. The restructuring
plan called for a net work force reduction of approximately 800 positions in
continuing operations. There will be some additional terminations in
early 1996.
The major components of the restructuring charges were $21 million of
employee separation costs, $4.9 million of noncash charges to dispose of
certain product lines and assets through sale or abandonment and $4.5
million of charges to terminate lease and other contractual obligations
no longer required as a result of the restructuring plan. The charges
do not include additional costs associated with the restructuring plan
such as voluntary early retirement programs, training, consulting, purchases
of equipment and relocation of employees and equipment. These costs were
charged to operations or capitalized, as appropriate, when incurred.
Under the 1994 restructuring plan, cash outlays in 1995 were $17.5
million, mainly for employee termination costs, bringing the total spent
to $21.5 million. As of December 31, 1995, accrued restructuring costs
of $3.7 million primarily represent payments for lease commitments and
employee termination benefits being paid over time.
11. Accrued Expenses
Accrued expenses as of December 31, 1995 and January 1, 1995 consisted of the
following:
(In thousands) 1995 1994
-------- --------
Payroll and incentives $ 28,660 $ 16,842
Employee benefits 40,178 44,482
Federal, non-U.S. and state income taxes 33,153 17,243
Other 62,932 55,603
-------- --------
$164,923 $134,170
======== ========
12. Employee Benefit Plans
Savings Plan: The Company has a savings plan for the benefit of qualified U.S.
employees. Under this plan, the Company contributes an amount equal to the
lesser of 55% of the amount of the employee's voluntary contribution or 3.3% of
the employee's annual compensation. In 1993, the contribution was the lesser of
50% or 3% of the same items. Savings plan expense was $5.7 million in 1995,
$6.2 million in 1994 and $5.7 million in 1993.
Pension Plans: The Company has defined benefit pension plans covering
substantially all U.S. employees and non-U.S. pension plans for non-U.S.
employees. The plans provide benefits that are based on an employee's years of
service and compensation near retirement. Assets of the U.S. plan are composed
primarily of corporate equity and debt securities.
Net periodic pension cost included the following components:
(In thousands) 1995 1994 1993
-------- -------- --------
Service cost benefits earned during the period $ 9,073 $ 9,822 $ 8,398
Interest cost on projected benefit obligations 16,733 15,070 14,030
Actual return on plan assets (42,992) (461) (18,316)
Net amortization and deferral 24,310 (15,442) 3,852
-------- -------- --------
$ 7,124 $ 8,989 $ 7,964
======== ======== ========
The decrease in pension expense for 1995 was caused by changes in the discount
rate and other actuarial assumptions in the U.S. plan.
The following table sets forth the funded status of the principal U.S. pension
plan and the principal non-U.S. pension plans and the amounts recognized in the
Company's Consolidated Balance Sheet at December 31, 1995 and January 1,
1995:
(In thousands) 1995 1994
------------------ ------------------
Non-U.S. U.S. Non-U.S. U.S.
-------- -------- -------- --------
Actuarial present value of
benefit obligations:
Vested benefit obligations $23,702 $165,913 $18,832 $137,490
======= ======== ======= ========
Accumulated benefit obligations $24,806 $174,569 $20,329 $144,729
======= ======== ======= ========
Projected benefit obligations
for service provided to date $31,490 $205,100 $27,050 $170,286
Plan assets at fair value --- 219,960 --- 173,947
Plan assets less (greater) than ------- -------- ------- --------
projected benefit obligations 31,490 (14,860) 27,050 (3,661)
Unrecognized net transition asset --- 4,508 --- 5,259
Unrecognized prior service costs (983) 807 (987) 924
Unrecognized net gain (loss) 2,504 (18,922) 2,101 (22,948)
------- -------- ------- --------
Accrued pension liability (asset) $33,011 $(28,467) $28,164 $(20,426)
======= ======== ======= ========
Actuarial assumptions as of the year-end
measurement date were:
Discount rate 7.00% 7.25% 8.00% 8.25%
Rate of compensation increase 4.50% 5.00% 5.50% 5.50%
Long-term rate of return on assets --- 9.50% --- 9.75%
The non-U.S. accrued pension liability included $32.5 million and $27.8 million
classified as long-term liabilities as of December 31, 1995 and January 1, 1995,
respectively. The U.S. pension asset was classified as other noncurrent assets.
The Company also sponsors a supplemental executive retirement plan to provide
senior management with benefits in excess of normal pension benefits. At
December 31, 1995 and January 1, 1995, the projected benefit obligations were
$11 million and $9.7 million, respectively. Assets with a fair value of $8.3
million and $6 million, segregated in a trust, were available to meet this
obligation as of December 31, 1995 and January 1, 1995, respectively.
Pension expense for this plan was approximately $1.5 million in 1995
and 1994, and $1 million in 1993.
Postretirement Medical Plans: The Company provides health care benefits for
eligible retired U.S. employees under a comprehensive major medical plan or
under health maintenance organizations where available. The majority of the
Company's U.S. employees become eligible for retiree health benefits if
they retire directly from the Company and have at least ten years of service.
Generally, the major medical plan pays stated percentages of covered expenses
after a deductible is met, and takes into consideration payments by other
group coverages and by Medicare. The plan requires retiree contributions
under most circumstances and has provisions for cost-sharing changes.
For employees retiring after 1991, the Company has capped its medical
premium contribution based on employees' years of service. The Company
funds the amount allowable under a 401(h) provision in the Company's defined
benefit pension plan. Assets of the plan are composed primarily of
corporate equity and debt securities.
Effective January 4, 1993, the Company adopted SFAS No. 106 on accounting for
postretirEment benefits other than pensions for its U.S. retiree health
benefits described above. This statement requires the expected cost of
Postretirement benefits to be charged to expense during the years in
which employees render service. This is a change from the prior policy
of recognizing these costs as paid. As part of adopting the new standard,
the Company recorded a one-time, noncasH charge against earnings of $20
million before taxes, or $13.2 million after income taxes ($.23 per share).
This cumulative adjustment represented the discounted present value of
expected future retiree health benefits attributed to employees' service
rendered prior to January 4, 1993.
Net periodic postretirement medical benefit cost included the following
components:
(In thousands) 1995 1994 1993
------- ------ ------
Service cost - benefits earned during the period $ 391 $ 426 $ 360
Interest cost on accumulated benefit obligation 1,697 1,620 1,686
Actual return on plan assets (1,001) (70) (3)
Net amortization and deferral 544 (237) 3
------- ------ ------
$1,631 $1,739 $2,046
The following table sets forth the plan's funded status and the amounts
recognized in the Company's Consolidated Balance Sheet at
December 31, 1995 and January 1, 1995:
(In thousands) 1995 1994
------- -------
Accumulated benefit obligation:
Current retirees $15,762 $16,128
Active employees eligible to retire 908 440
Other active employees 7,171 5,281
------- -------
23,841 21,849
Plan assets at fair value 7,342 4,165
Plan assets less than accumulated ------- -------
benefit obligation 16,499 17,684
Unrecognized net gain 381 251
------- -------
Accrued postretirement medical liability $16,880 $17,935
Actuarial assumptions as of ======= =======
the year-end measurement
date were:
Discount rate 7.25% 8.25%
Health care cost trend rate:
First year 13.0% 14.0%
Ultimate 6.5% 6.5%
Years to reach ultimate 8 years 9 years
Long-term rate of return on assets 9.50% 9.75%
The accrued postretirement medical benefit obligation included $15.9 million
and $16.9 million classified as long-term liabilities as of December 31, 1995
and January 1, 1995, respectively.
If the health care cost trend rate was increased 1%, the accumulated
postretirement benefit obligation would have increased by approximately $1.5
million at December 31, 1995. The effect of this increase on the annual cost
for 1995 would have been approximately $0.1 million.
Other: During 1995, the Company adopted an Economic Value Added Incentive
Compensation Plan, the purpose of which is to provide incentive compensation
to certain key employees, including all officers, in a form that relates the
financial rewards to an increase in the value of the Company to its
shareholders. Awards under this plan are approved annually by the Board of
Directors.
Effective January 3, 1994, the Company adopted SFAS No. 112 on accounting
for postemployment benefits. This new standard requires that benefits paid
for former or inactive employees after employment but prior to retirement
must be accrued if certain criteria are met. Adoption of the statement was
not material to the Company's financial position or results of operations.
The above information does not include amounts related to benefit plans
applicable to employees associated with contracts with the DOE and NASA
because the Company is not responsible for the current or future funded
status of the plans.
13. Income Taxes
Effective January 4, 1993, the Company adopted SFAS No. 109 on accounting for
income taxes. This standard determines deferred income taxes based on the
estimated future tax effects of differences between the financial statement
and tax basis of assets and liabilities, given the provisions of enacted tax
laws. Prior to the implementation of this statement, the Company accounted
for income taxes under APB Opinion No. 11. As part of adopting the new
standard, the Company recorded a one-time, noncash charge against earnings
of $7.3 million ($.13 per share).
The components of income (loss) from continuing operations before income
taxes for financial reporting purposes were as follows:
(In thousands) 1995 1994 1993
------- -------- -------
U.S. $53,264 $ 15,986 $70,449
Non-U.S. 32,795 (33,109) 18,043
------- -------- -------
$86,059 $(17,123) $88,492
======= ======== =======
The components of the provision for income taxes for continuing operations
were as follows:
(In thousands) 1995 1994 1993
Deferred Deferred Deferred
Current (Prepaid) Total Current (Prepaid) Total Current (Prepaid) Total
------- --------- ------- ------- --------- ------- ------- --------- -------
Federal $26,268 $(3,411) $22,857 $10,735 $(2,569) $ 8,166 $19,495 $3,454 $22,949
State 3,572 (264) 3,308 3,670 157 3,827 5,275 (255) 5,020
Non-U.S. 5,325 265 5,590 2,834 157 2,991 6,398 (497) 5,901
------- ------- ------- ------- ------- ------- ------- ------ -------
$35,165 $(3,410) $31,755 $17,239 $(2,255) $14,984 $31,168 $2,702 $33,870
======= ======= ======= ======= ======= ======= ======= ======
The total provision for income taxes included in the consolidated financial
statements was as follows:
(In thousands) 1995 1994 1993
Continuing operations $31,755 $14,984 $33,870
Discontinued operations 7,397 14,243 13,434
$39,152 $29,227 $47,304
The major differences between the Company's effective tax rate for continuing
operations and the Federal statutory rate were as follows:
1995 1994 1993
------ -------- -------
Federal statutory rate 35.0 % (35.0) % 35.0 %
Non-U.S. rate differential, net (0.3) (18.2) (2.5)
State income taxes, net 2.5 14.5 3.7
Goodwill amortization 2.0 10.0 1.7
Increase (decrease) in valuation allowance (4.5) 117.0 1.0
Other, net 2.2 (0.8) (0.6)
------ -------- -------
Effective tax rate 36.9 % 87.5 % 38.3 %
The 1994 tax provision and effective rate for continuing operations were
significantly impacted by the goodwill write-down and the restructuring charges.
The Company did not record any tax benefit from the goodwill write-down and
approximately $11 million of the restructuring charges because these charges,
while tax deductible, were incurred in tax jurisdictions where the Company had
existing operating loss carryforwards and, therefore, the related tax assets
were offset by a valuation allowance.
The effect of SFAS No. 109 on the consolidated effective tax rate was minimal
in 1993.
The tax effects of temporary differences and carryforwards which gave rise to
prepaid (deferred) income taxes as of December 31, 1995 and January 1, 1995
were as follows:
(In thousands) 1995 1994
------- -------
Deferred tax assets:
Inventory reserves $ 4,902 $ 5,266
Other reserves 10,983 6,058
Depreciation 6,020 9,325
Vacation pay 6,319 6,080
Net operating loss carryforwards 35,616 31,102
Postretirement health benefits 5,940 6,123
Restructuring reserve 1,870 7,578
All other, net 23,576 23,608
------- -------
Total deferred tax assets 95,226 95,140
Deferred tax liabilities: ------- -------
Award and holdback fees (3,629) (4,193)
Pension contribution (8,301) (5,092)
Amortization (8,734) (7,835)
All other, net (7,771) (12,423)
------- -------
Total deferred tax liabilities (28,435) (29,543)
------- -------
Valuation allowance (29,243) (32,658)
------- -------
Net prepaid taxes $37,548 $32,939
======= =======
At December 31, 1995, the Company had non-U.S. (primarily from Germany) net
operating loss carryforwards of $76.9 million, of which $5.4 million expire
in years 1996 through 2005 and $71.5 million of which carry forward
indefinitely. The $29.2 million valuation allowance results primarily
from these carryforwards, for which the Company currently believes it is
more likely than not that they will not be realized.
Current prepaid income taxes of $40.2 million and $26.7 million at December 31,
1995 and January 1, 1995, respectively, were included in other current assets.
Long-term prepaid income taxes of $3.6 million and $11.6 million were included
in other noncurrent assets at December 31, 1995 and January 1, 1995,
respectively. Long-term deferred income taxes of $6.3 million and $5.3 million
were included in long-term liabilities at December 31, 1995 and January 1, 1995,
respectively.
In general, it is the practice and intention of the Company to reinvest the
earnings of its non-U.S. subsidiaries in those operations. Repatriation of
retained earnings is done only when it is advantageous. Applicable Federal
taxes are provided only on amounts planned to be remitted. Accumulated net
earnings of non-U.S. subsidiaries for which no Federal taxes have been
provided as of December 31, 1995 were $76 million, which does not include
amounts that, if remitted, would result in little or no additional tax
because of the availability of non-U.S. tax credits. Federal taxes that
would be payable upon remittance of these earnings are estimated to be
$21.9 million at December 31, 1995.
14. Contingencies
The Company is subject to various investigations, claims and legal
proceedings covering a wide range of matters that arise in the ordinary
course of its business activities. Each of these matters is subject to
various uncertainties, and it is possible that some of these matters may
be resolved unfavorably to the Company. The Company has established
accruals for matters that are probable and reasonably estimable.
Management believes that any liability that may ultimately result from
the resolution of these matters in excess of amounts provided will not
have a material adverse effect on the financial position or results of
operations of the Company.
In addition, the Company is conducting a number of environmental
investigations and remedial actions at current and former Company locations
and, along with other companies, has been named a potentially responsible
party for certain waste disposal sites. The Company accrues for environmental
issues in the accounting period that the Company's responsibility is
established and when the cost can be reasonably estimated. The Company has
accrued $3.8 million to reflect its estimated liability for environmental
remediation. As assessments and remediation activities progress at each
individual site, these liabilities are reviewed to reflect additional
information as it becomes available. There have been no environmental
problems to date that have had or are expected to have a material effect
on the Company's financial position or results of operations. While it is
reasonably possible that a material loss exceeding the amounts recorded
may have been incurred, the preliminary stages of the investigations make
it impossible for the Company to reasonably estimate the range of potential
exposure. During 1994 and 1995, the Company received notices from the
Internal Revenue Service (IRS) asserting deficiencies in Federal corporate
income taxes for the Company's 1985 to 1991 taxable years. The total
additional tax proposed by the IRS amounts to $43 million plus interest.
The Company has filed petitions in the United States Tax Court to challenge
most of the deficiencies asserted by the IRS. The Company believes that it
has meritorious legal defenses to those deficiencies and believes that the
ultimate outcome of the case will not result in a material impact on the
Company's consolidated results of operations or financial position.
15. Risks and Uncertainties
The American Institute of Certified Public Accountants issued Statement of
Position (SOP) 94-6, "Disclosure of Certain Significant Risks and
Uncertainties," effective for fiscal years ending after December 15, 1995.
The SOP requires disclosures about the nature of operations and the use of
estimates in the preparation of financial statements. If specified
disclosure criteria are met, it requires disclosures about certain
significant estimates and current vulnerability due to certain
concentrations.
EG&G, Inc. is a broad-based technology company that provides an array of
products and technical services to manufacturers and end-users in medical,
aerospace, automotive and other ground transportation, environmental,
industrial and government markets worldwide. The Company's industry segments
are Technical Services, Instruments, Mechanical Components and Optoelectronics.
Based on sales, Technical Services is the largest segment, representing over 40%
of the Company's sales; the other three segments are about equal in size. The
Technical Services segment supplies engineering, scientific, environmental,
management and technical support services primarily to U.S. Government
agencies. Analysis and testing services are provided primarily to the U.S.
automotive industry. The Instruments segment develops and manufactures
hardware and associated software for applications in medical diagnostics,
biochemical and medical research, materials analyses, environmental monitoring,
industrial process measurement, food monitoring and airport and industrial
security worldwide. Mechanical Components provides products to four worldwide
markets. Mechanical seals and bellows products are designed and manufactured
for the chemical and petrochemical industries. Fans, blowers, ducting,
components, seals and metallic parts/valves are supplied to the aerospace
market. Motors and power supplies are sold to the transportation market.
Regenerative blower and biofiltration systems are used in the environmental
remediation market. The Optoelectronics segment designs and manufactures
optical sensors, flashlamps and laser diodes. Electronic components are
provided for industrial, consumer and medical applications and defense and
energy programs. Micromachined sensors are used for a variety of
applications, such as pressure sensors and accelerometers. Optoelectronics
is designing medical imaging devices based on amorphous silicon technology.
High-reliability power supplies are manufactured. This segment's
products are distributed worldwide.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
During 1995, 38% of the Company's sales from continuing operations were to
U.S. Government agencies, predominantly to the Department of Defense and
NASA. In accordance with government regulations, all of the Company's
government contracts are subject to termination for the convenience of the
government. Costs incurred under cost-reimbursable contracts are subject to
audit by the government. The results of prior audits, complete through 1991,
have not had a material effect on the Company. For additional information on
government contracts, see Note 21.
Given the nature of the DOE contracts, which are presented as discontinued
operations, the Company does not anticipate incurring any material loss on
the ultimate completion of the contracts.
For information concerning various investigations, claims, legal proceedings,
environmental investigations and remedial actions, and notices from the IRS,
see Note 14.
16. Stockholders' Equity
At December 31, 1995, 5.5 million shares of the Company's common stock were
reserved for employee benefit plans.
The Company has nonqualified and incentive stock option plans for officers and
key employees. Under these plans, options may be granted at prices not less than
100% of the fair market value on the date of grant. All options expire ten years
from the date of grant. Options granted in 1994 become exercisable, in ratable
installments, over a period of five years from the date of grant. In other
years, options became exercisable at the date of grant. The Stock Option
Committee of the Board of Directors, at its sole discretion, may also
include stock appreciation rights in any option granted. There are no stock
appreciation rights outstanding under these plans.
A summary of certain stock option information is as follows:
(In thousands) 1995 1994 1993
------------------------- ------------------------- -------------------------
Number Number Number
of Shares Price Range of Shares Price Range of Shares Price Range
--------- -------------- --------- -------------- --------- --------------
Outstanding at
beginning of year 3,611 $14.25 - 22.88 3,260 $14.44 - 22.88 2,902 $14.44 - 22.88
Granted 13 15.00 - 17.88 736 14.25 - 15.38 726 21.63
Exercised (197) 14.25 - 22.88 (54) 14.44 - 17.25 (355) 14.44 - 22.88
Lapsed (151) 14.25 - 22.88 (331) 14.44 - 22.88 (13) 15.50 - 22.88
----- -------------- ----- -------------- ----- --------------
Outstanding at
end of year 3,276 $14.25 - 22.88 3,611 $14.25 - 22.88 3,260 $14.44 - 22.88
===== ============== ===== ============== =====
==============
Exercisable at
end of year 2,740 2,895 3,260
===== ===== =====
Available for grant at
end of year 2,226 1,354 1,144
===== ===== =====
In January 1996, the Board of Directors granted 650,000 options which become
exercisable, in ratable installments, over a period of five years from date of
grant at an exercise price of $21.75 per share.
On January 25, 1995, the Board of Directors adopted a new Shareholder Rights
Plan. Under the plan, preferred stock purchase rights were distributed on
February 8, 1995 as a dividend at the rate of one right for each share of
common stock outstanding. Each right, when exercisable, entitles a
stockholder to purchase one one-thousandth of a share of a new series of
junior participating preferred stock at a price of $60. The rights become
exercisable only if a person or group acquires 20% or more or announces a
tender or exchange offer for 30% or more of the Company's common stock.
This preferred stock is nonredeemable and will have 1,000 votes per share.
The rights are nonvoting, expire in 2005 and may be redeemed prior to
becoming exercisable. The Company has reserved 70,000
shares of preferred stock, designated as Series C Junior Participating Preferred
Stock, for issuance upon exercise of such rights. If a person (an "Acquiring
Person") acquires or obtains the right to acquire 20% or more of the Company's
outstanding common stock (other than pursuant to certain approved offers), each
right (other than rights held by the Acquiring Person) will entitle the holder
to purchase shares of common stock of the Company at one-half of the current
market price at the date of occurrence of the event. In addition, in the event
that the Company is involved in a merger or other business combination in which
it is not the surviving corporation or in connection with which the Company's
common stock is changed or converted, or it sells or transfers 50% or more of
its assets or earning power to another person, each right that has not
previously been exercised will entitle its holder to purchase shares of
common stock of such other person at one-half of the current market price
of such common stock at the date of the occurrence of the event. In
connection with the adoption of the plan, the Company redeemed the rights
issued pursuant to the Company's January 28, 1987 Rights Agreement at a
redemption price of $.01 per right to shareholders of record as of
February 8, 1995.
17. Financial Instruments
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments and accounts
receivable. At December 31, 1995, the Company had no significant concentrations
of credit risk. The Company has limited involvement with derivative financial
instruments and uses them only to protect an underlying exposure. The Company
uses forward exchange contracts and options to hedge certain foreign
commitments and transactions denominated in foreign currencies. The notional
amount of outstanding forward exchange contracts was $57.4 million as of
December 31, 1995 and $24.5 million as of January 1, 1995. The carrying value
as of December 31, 1995 and January 1, 1995, which approximated fair value, was
not significant. The average contract term is three months, corresponding with
expected collections or payments. On forward contracts, there are no cash
requirements until maturity. Credit risk is minimal because the contracts are
with very large banks; any market risk is offset by the exposure on the
underlying hedged items. When forward contracts are closed, the Company enters
into spot transactions to fulfill the contract obligations. Gains and losses
on forward contracts are offset against foreign exchange gains and losses on
the underlying hedged items and, in some cases, are deferred until underlying
exposures are recognized if there is a firm commitment. Transactions covered
by hedge contracts include collection of receivables from third-party
customers, collection of intercompany receivables, payments to third-party
suppliers and payment of intercompany payables.
See Notes 1, 7 and 9 for disclosures about fair values, including methods and
assumptions, of other financial instruments.
18. Leases
The Company leases certain property and equipment under operating leases.
Rental expense charged to earnings for 1995, 1994 and 1993 amounted to $18.7
million, $19.3 million and $18.7 million, respectively. Minimum rental
commitments under noncancelable operating leases are as follows: $16.3 million
in 1996, $12.2 million in 1997, $8.2 million in 1998, $5 million in 1999, $3.1
million in 2000 and $9.1 million after 2000. The above information does not
include amounts related to leases covered by contracts with the DOE and NASA
because the costs are reimbursable under the contracts.
19. Other Income (Expense), Net
Other income (expense), net, consisted of the following:
(In thousands) 1995 1994 1993
------- ------- -------
Interest income $ 4,930 $ 3,167 $ 4,043
Gains (losses) on investments, net (Note 7) 2,047 (4,682) 2,975
Interest expense (8,514) (5,419) (6,264)
Other 4,923 758 254
------- ------- -------
$ 3,386 $(6,176) $ 1,008
======= ======= =======
Other consists mainly of gains on the sale of operating assets, income from
joint ventures and foreign exchange losses.
20. Earnings (Loss) Per Share
Earnings (loss) per common share was computed by dividing net income (loss) by
the weighted average number of common shares outstanding. The number of
shares issuable upon the exercise of stock options had no material effect on
earnings (loss) per share. The weighted average number of shares used in the
earnings (loss) per share computations were 51,483,000 for 1995, 55,271,000 for
1994 and 56,504,000 for 1993.
21. Industry Segment and Geographic Area Information
The Company's continuing operations are classified into four industry segments:
Technical Services, Instruments, Mechanical Components and Optoelectronics.
The products and services of these segments are described in Note 15 and
elsewhere in the Annual Report. Sales and operating income (loss) from
continuing operations by industry segment are shown in the Segment Sales and
Income section of this report; such information with respect to 1995, 1994 and
1993 is considered an integral part of this note.
Sales to U.S. Government agencies, which were predominantly to the Department
of Defense and NASA, were $537 million, $542 million and $560 million in 1995,
1994 and 1993, respectively. In October 1993, the Company was selected by
NASA to continue as the base operations contractor at the KSC. The contract
contained reductions in contract value and has resulted in a lower annual fee
from the prior contract. This and the prior contract contributed sales of $172
million, $176 million and $201 million in 1995, 1994 and 1993, respectively.
There are two years remaining on the contract, which has two three-year
renewal options at the discretion of the government. NASA has announced
that it will designate a single Space Shuttle Flight Operations contractor
in 1996. While the impact of this initiative cannot be determined, the
Company believes at this time that its contract will not be adversely
affected.
Additional information relating to the Company's operations in the various
industry segments follows:
Depreciation and Capital
(In thousands) Amortization Expense Expenditures
-------------------------- --------------------------
1995 1994 1993 1995 1994 1993
------- ------- ------- ------- ------- -------
Technical Services $ 7,698 $ 7,447 $ 8,422 $12,047 $ 7,314 $ 6,315
Instruments 11,887 11,621 9,213 4,639 5,398 6,555
Mechanical Components 5,585 6,091 6,870 6,978 6,197 5,598
Optoelectronics 13,220 10,690 12,417 35,925 17,748 8,469
Corporate 1,036 941 920 2,250 620 923
------- ------- ------- ------- ------- -------
$39,426 $36,790 $37,842 $61,839 $37,277 $27,860
======= ======= ======= ======= ======= =======
(In thousands) Identifiable Assets
----------------------------
1995 1994 1993
-------- -------- --------
Technical Services $113,901 $129,995 $127,917
Instruments 225,358 220,232 256,117
Mechanical Components 100,363 93,721 97,317
Optoelectronics 200,719 193,302 142,630
Corporate and Other 163,574 155,879 140,906
-------- -------- --------
$803,915 $793,129 $764,887
======== ======== ========
Corporate assets consist primarily of cash and cash equivalents, prepaid pension
and taxes, and investments.
Information relating to geographic areas follows:
(In thousands) Operating Income (Loss)
Sales From Continuing Operations
---------------------------------- ---------------------------
1995 1994 1993 1995 1994 1993
---------- ---------- ---------- ------- -------- --------
U.S. $1,065,424 $1,026,970 $1,049,131 $82,256 $ 57,679 $ 96,495
Germany 87,690 61,310 134,754 4,508 (43,492) 53
Other Non-U.S. 266,464 244,276 135,531 25,102 9,748 18,509
Corporate --- --- --- (29,193) (34,882) (27,573)
---------- ---------- ---------- ------- -------- --------
$1,419,578 $1,332,556 $1,319,416 $82,673 $(10,947) $ 87,484
========== ========== ========== ======= ======== ========
(In thousands) Identifiable Assets
----------------------------
1995 1994 1993
-------- -------- --------
U.S. $353,130 $341,725 $305,344
Germany 89,834 100,650 154,361
Other Non-U.S. 197,377 194,875 164,276
Corporate and Other 163,574 155,879 140,906
-------- -------- --------
$803,915 $793,129 $764,887
======== ======== ========
Transfers between geographic areas were not material.
22. Quarterly Financial Information (Unaudited)
Selected quarterly financial information follows:
(In thousands except per share data) Quarters
First Second Third Fourth Year
-------- -------- -------- -------- ----------
1995 $338,230 $342,251 $361,602 $377,495 $1,419,578
Sales
Operating income from continuing
operations 15,673 20,435 19,086 27,479 82,673
Income from continuing operations
before income taxes 15,473 20,268 20,304 30,014 86,059
Income from continuing operations 9,352 12,343 13,669 18,940 54,304
Net income 13,689 16,376 15,978 21,997 68,040
Earnings per share:
Continuing operations (a) .17 .23 .27 .40 1.05
Net income (a) .25 .31 .32 .46 1.32
Cash dividends per common share .14 .14 .14 .14 .56
Market price of common stock:
High 15.50 18.38 20.00 24.50
Low 13.00 15.00 16.38 18.00
Close 15.00 16.75 19.50 24.25
1994
Sales $325,747 $329,880 $336,860 $340,069 $1,332,556
Operating income (loss) from
continuing operations 12,675 15,012 (54,961) 16,327 (10,947)
Income (loss) from continuing
operations before income taxes 12,654 14,579 (58,343)b 13,987 (17,123)
Income (loss) from continuing
operations 7,813 8,977 (56,940) 8,043 (32,107)
Net income (loss) 14,353 16,423 (48,294) 11,863 (5,655)
Earnings (loss) per share:
Continuing operations .14 .16 (1.03) .15 (.58)
Net income (loss) .26 .30 (.88) .22 (.10)
Cash dividends per common share .14 .14 .14 .14 .56
Market price of common stock:
High 19.00 16.50 15.88 17.00
Low 16.38 14.13 14.63 13.75
Close 16.38 15.00 15.25 14.13
a) The sum of the quarterly earnings per share does not equal the year's earnings
per share. This is due to changes in weighted average shares of common stock
outstanding resulting from share repurchases in 1995.
b) Included a goodwill write-down of $40.3 million and restructuring charges of
$30.4 million.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of EG&G, Inc.:
We have audited the accompanying consolidated balance sheets of EG&G, Inc. (a
Massachusetts corporation) and subsidiaries as of December 31, 1995 and January
1, 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 31, 1995, January 1, 1995 and
January 2, 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EG&G, Inc. and
subsidiaries as of December 31, 1995 and January 1, 1995, and the results of
their operations and their cash flows for the years ended December 31, 1995,
January 1, 1995 and January 2, 1994, in conformity with generally accepted
accounting principles.
As explained in Notes 12 and 13 to the consolidated financial statements,
effective January 4, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions and for income taxes. As explained
in Note 7 to the consolidated financial statements, effective January 3, 1994,
the Company changed its method of accounting for marketable investments. As
explained in Note 1 to the consolidated financial statements, effective
January 2, 1995, the Company changed its method of accounting for
depreciation of certain plant and equipment.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
January 23, 1996
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
a) DIRECTORS
The information required by this Item with respect to Directors is contained
on Pages 14 through 19 of the Company's 1996 Proxy Statement under the captions
"Election of Directors" and "Information Relative to the Board of Directors and
Certain of its Committees" and is herein incorporated by reference.
b) EXECUTIVE OFFICERS
The information required by this item with respect to Executive Officers is
contained in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be disclosed by this Item is contained in
Pages 14 - 19 of the Company's 1996 Proxy Statement from under the caption
"Summary Compensation Table" up to and including "Aggregated Option Exercises
in Last Fiscal Year and Fiscal Year-End Value Option Table" and Notes thereto,
and is herein incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this Item is contained on Pages 8 - 9 of the
Company's 1996 Proxy Statement under the captions "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Management" and is
herein incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
1. FINANCIAL STATEMENTS
Included in Part II, Item 8:
Consolidated Balance Sheet as of December 31, 1995 and
January 1, 1995
Consolidated Statement of Operations for the Three Years
Ended December 31, 1995
Consolidated Statement of Stockholders' Equity for the Three
Years Ended December 31, 1995
Consolidated Statement of Cash Flows for the Three Years
Ended December 31, 1995
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
2. FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants on Financial Statement
Schedules
Schedule II - Valuation and Qualifying Accounts
Financial statement schedules, other than those above, are omitted
because of the absence of conditions under which they are required or
because the required information is given in the financial statements
or notes thereto.
Separate financial statements of the Registrant are omitted since it
is primarily an operating company, and since all subsidiaries included
in the consolidated financial statements being filed, in the
aggregate, do not have minority equity interests and/or indebtedness
to any person other than the Registrant or its consolidated
subsidiaries in amounts which together exceed five percent of total
consolidated assets.
3. EXHIBITS
3.1 The Company's Restated Articles of Organization, as filed with
the Massachusetts Secretary of the Commonwealth on July 31, 1995,
were filed with the Commission on September 21, 1995 as Exhibit 4(i)
to the Company's Registration Statement on Form S-8 and are herein
incorporated by reference.
3.2 The Company's By-Laws as amended by the Board of Directors
on May 3, 1995, were filed with the Commission on September 21,
1995, as Exhibit 4(ii) to the Company's Registration Statement on
Form S-8, and are herein incorporated by reference.
4.1 The form of certificate used to evidence ownership of EG&G
Common Stock, $1 par value, was filed as Exhibit 4(a) to EG&G's
Registration Statement on Form S-3, File No. 2-69642 and is herein
incorporated by reference.
4.2 Form of Indenture dated June 28, 1995 between the Company
and the First National Bank of Boston, as Trustee was filed with the
Commission as Exhibit 4.1 to EG&G's Registration Statement on Form
S-3, File No. 33-59675 and is herein incorporated by reference.
*10.1 EG&G, Inc. Supplemental Executive Retirement Plan revised as
of April 19, 1995.
*10.2 EG&G, Inc. Economic Value Added Plan as adopted by the
EG&G, Inc. Board of Directors on January 24, 1996.
10.3 3-Year Competitive Advance and Revolving Credit Facility
Agreement ("3-Year Agreement") dated as of March 21, 1994 among
EG&G, Inc., the Lenders Named Herein and Chemical Bank as
Administrative Agent; Amendment No. 1 to 3-Year Agreement dated as
of Mach 15, 1995; Amendment No. 2 to 3-Year Agreement dated as of
March 14, 1996.
10.4 364-Day Competitive Advance and Revolving Credit Facility
Agreement ("364-Day Agreement") dated as of March 21, 1994 among
EG&G, Inc., the Lenders Named Herein and Chemical Bank as
Administrative Agent; Amendment No. 1 to 364-Day Agreement dated
as of Mach 15, 1995; Amendment No. 2 to 364-Day Agreement dated
as of March 14, 1996.
*10.5 Employment Contracts:
(1) Employment contract between John M. Kucharski and EG&G
dated November 1, 1993.
(2) Employment contract between Murray Gross and EG&G dated
November 1, 1993.
(3) Employment contract between John F. Alexander, II and EG&G
dated November 1, 1993.
(4) Employment contract between Angelo Castellana and EG&G
dated November 1, 1993.
(5) Employment contract between Dale L. Fraser and EG&G dated
November 1, 1993.
(6) Employment contract between Earl M. Fray and EG&G dated
June 20, 1994.
(7) Employment contract between Daniel T. Heaney and EG&G
dated June 1, 1995.
(8) Employment contract between E. Lavonne Lewis and EG&G
dated June 1, 1995.
(9) Employment contract between Deborah S. Lorenz and EG&G
dated November 1, 1993.
(10) Employment contract between Fred B. Parks and EG&G dated
November 1, 1993.
(11) Employment contract between Donald H. Peters and EG&G
dated November 1, 1993.
(12) Employment contract between Luciano Rossi and EG&G dated
November 1, 1993.
(13) Employment contract between Edward H. Snow and EG&G
dated November 1, 1993.
(14) Employment contract between C. Michael Williams and EG&G
dated November 1, 1993.
(15) Employment contract between Peter H. Zavattaro and EG&G
dated November 1, 1993.
Except for the name of the officer in the employment contracts identified by
numbers 3 through and including 15, the form of said employment contracts is
identical in all respects. The employment contracts identified by numbers 1
and 2 are identical to each other and are virtually identical to the contracts
identified by numbers 3 through 15 except that they provide for a longer
contract term, three years as opposed to one year. The employment contract
between John F. Alexander, II and EG&G is representative of the employment
contracts of the executive officers and is attached hereto as Exhibit 10.5.
*10.6 The EG&G, INC. 1978 NON-QUALIFIED STOCK OPTION
PLAN as amended by the Board of Directors on January 26, 1988, was
filed with the Commission as Exhibit 14(a)3.(v) to EG&G's Annual
Report on Form 10-K for the fiscal year ending January 3, 1988, and is
herein incorporated by reference.
*10.7 The EG&G, INC. 1982 INCENTIVE STOCK OPTION PLAN as
amended by the Board of Directors on January 24, 1990, was filed
with the Commission as Exhibit B on pages 37-42 of the Company's
1990 Proxy Statement and is herein incorporated by reference.
*10.8 The EG&G, Inc. 1992 STOCK OPTION PLAN was filed as
Exhibit 4(v) to EG&G's Registration Statement on Form S-8, File No.
33-49898 and is herein incorporated by reference.
21 Subsidiaries of the Registrant.
23 Consent of Independent Public Accountants.
24 Power of Attorney (appears on signature page).
27 Financial Data Schedule.
*This exhibit is a management contract or compensatory plan or arrangement
required to be filed as an Exhibit pursuant to Item 14(c) of Form 10-K.
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the last quarter of
the fiscal year ended December 31, 1995.
(c) PROXY STATEMENT
EG&G's 1996 Proxy Statement, in definitive form, was filed electronically on
March 7, 1996, with the Securities and Exchange Commission in Washington,
D.C. pursuant to the Commission's Rule 14a-6.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULES
To EG&G, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of EG&G, Inc. included in this Form
10-K and have issued our report thereon dated January 23, 1996. Our audit
was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
January 23, 1996
SCHEDULE II
EG&G, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
(In thousands) Additions
(Subtractions)
Balance Charged Accounts Balance
at Beginning (Credited) Charged at End
Description of Year to Income Off Other of Year
- ----------------- ------------ -------------- -------- ------- -------
Reserve for
Doubtful Accounts
- -----------------
Year Ended
January 2, 1994 $5,621 $ 737 $ (755) $523 (A) $6,126
Year Ended
January 1, 1995 $6,126 $1,255 $(1,868) $307 (B) $5,820
Year Ended
December 31, 1995 $5,820 $ (468) $(1,214) $218 $4,356
(A) Includes reserves of $705 related to a company acquired in 1993.
(B) Includes reserves of $222 related to a company acquired in 1994.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated January 23, 1996, included in this Form 10-K,
into Registration Statements previously filed by EG&G, Inc. on, respectively,
Form S-8, File No. 2-61241; Form S-8, File No. 2-98168; Form S-8, File No.
33-36082; Form S-8, File No. 33-35379; Form S-8, File No. 33-49898; Form S-8,
File No. 33-57606; Form S-8, File No. 33-54785; Form S-8; File No. 33-62805;
and Form S-3, File No. 33-59675.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
March 22, 1996
POWER OF ATTORNEY
We, the undersigned officers and directors of EG&G, Inc., hereby severally
constitute John M. Kucharski, and Murray Gross, and each of them singly, our
true and lawful attorneys with full power to them, and each of them singly, to
sign for us and in our names, in the capacities indicated below, this Annual
Report on Form 10-K and any and all amendments to said Annual Report on Form
10-K, and generally to do all such things in our name and behalf in our
capacities as officers and directors to enable EG&G, Inc. to comply with
the provisions of the Securities Exchange Act of 1934, and all requirements
of the Securities and Exchange Commission, hereby rectifying and confirming
signed by our said attorneys, and any and all amendments thereto.
Witness our hands on the date set forth below.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EG&G, Inc.
March 22, 1996 By:/s/John M. Kucharski
John M. Kucharski
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
March 22 , 1996 By:/s/John F. Alexander, II
John F. Alexander, II
Vice President, Chief Financial Officer
and Corporate Controller
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
By: /s/John M. Kucharski
John M. Kucharski, Director
Date: March 22, 1996
By: /s/Tamara J. Erickson
Tamara J. Erickson, Director
Date: March 18, 1996
By: /s/Robert F. Goldhammer
Robert F. Goldhammer, Director
Date: March 15, 1996
By: /s/John B. Gray
John B. Gray, Director
Date: March 14, 1996
By: /s/Kent F. Hansen
Kent F. Hansen, Director
Date: March 18, 1996
By: /s/Greta Marshall
Greta Marshall, Director
Date: March 22, 1996
By:________________
William F. Pounds, Director
Date: March , 1996
By: /s/Samuel Rubinovitz
Samuel Rubinovitz, Director
Date: March 14, 1996
By: /s/John Larkin Thompson
John Larkin Thompson, Director
Date: March 14, 1996
By: /s/G. Robert Tod
G. Robert Tod, Director
Date: March 22, 1996
EXHIBIT INDEX
Exhibit Exhibit Name
Number
10.1 EG&G, Inc. Supplemental Executive Retirement Plan revised as
of April 19, 1995.
10.2 EG&G, Inc. Economic Value Added Plan as adopted by the EG&G, Inc.
Board of Directors on January 24, 1996.
10.3 3-Year Competitive Advance and Revolving Credit Facility Agreement
("3-Year Agreement") dated as of March 21, 1994 among EG&G, Inc.,
the Lenders Named Herein and Chemical Bank as Administrative Agent;
Amendment No. 1 to 3-Year Agreement dated as of Mach 15, 1995;
Amendment No. 2 to 3-Year Agreement dated as of March 14, 1996.
10.4 364-Day Competitive Advance and Revolving Credit Facility Agreement
("364-Day Agreement") dated as of March 21, 1994 among EG&G,
Inc., the Lenders Named Herein and Chemical Bank as Administrative
Agent; Amendment No. 1 to 364-Day Agreement dated as of Mach 15,
1995; Amendment No. 2 to 364-Day Agreement dated as of March 14,
1996.
10.5 Employment Contract between John F. Alexander, II and EG&G, Inc.
21 Subsidiaries of the Registrant
27 Financial Data Schedule