ITEM 1. BUSINESS (Thousands of dollars)
SPS Technologies, Inc. and subsidiaries (the Company) was incorporated in Pennsylvania in 1903. The Company is engaged in the design, manufacture and marketing of high-strength precision mechanical fasteners and precision components (fasteners); and superalloys in ingot form and magnetic materials (materials).
In 1994, the Company completed programs that reduced the Company's cost structure and improved its operating performance. The Company completed a 10 percent reduction in its non-direct workforce, which included significant reductions in corporate and executive staff. In addition, the Company relocated its corporate offices to a smaller leased facility and sold its corporate headquarters in Newtown, Pennsylvania and the Company aircraft. The Company also exited certain historically unprofitable product lines of its fastener segment. Additional information regarding the restructuring plan is provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in Note 3 to the Company's Consolidated Financial Statements on pages 11 and 12 in the 1994 Annual Report to Shareholders and is incorporated herein by reference.
The Company is multinational in operation. In addition to nine manufacturing plants in the United States, it operates six manufacturing facilities in three different countries: the United Kingdom, Ireland and Australia. The Company also has a 50 percent interest in a manufacturing operation in Adelanto, California, and has minority interests in manufacturing operations in Brazil and India. Marketing operations are carried on by subsidiaries and an affiliate in five other countries.
The Company sells directly to original equipment manufacturers and industrial, commercial and governmental users, and also sells through independent stocking distributors and dealers. There were no changes in these methods of distribution during 1994.
Principal fastener markets include aerospace, machine tool and industrial machinery, automotive, and off-highway equipment. Principal markets for materials include the precision investment casting, powdered metal, aerospace, medical equipment, automotive, computer and communications industries.
Principal fastener products are SPS(Registered Trademark) aerospace fasteners, MULTIPHASE(Registered Trademark) alloy fasteners, and other aerospace fasteners; UNBRAKO(Registered Trademark) brand socket screws, hex keys, dowel pins, shaft collars, spring pins and pressure plugs; engineered fasteners for gasoline and diesel engines, other critical automotive applications, and off-highway equipment and HI-LIFE(Registered Trademark) thread roll dies and other metal-working tools.
Principal materials products are air and vacuum-melted iron, cobalt, and nickel-based superalloys, including CMSX(Registered Trademark) single-crystal alloys; and metallic and ceramic permanent magnets, wound and pressed powder magnetic components, and magnetic ultra-thin foil and strip products.
The Company's business is highly competitive. Competition is based primarily on technology, price, service, product quality and performance. The Company believes that its favorable competitive position is based upon its high-quality product performance and service to its customers, supported by its commitment to research and development which has yielded proprietary products to the extent indicated below.
No material part of the Company's business is dependent upon a single customer. In 1994, the five largest customers accounted for 20% of the Company's reported consolidated sales.
The backlog of orders at December 31 was as follows:
1994 1993 ---- ---- Fastener segment $72,983 $72,389 Materials segment 25,467 16,584 ---------- ---------- Total .......... $98,450 $88,973 ========== ==========
No material portion of the Company's business in either segment is seasonal.
The principal sources of raw materials for the fastener and materials segments include major and specialty steel producers, and non-ferrous metal producers, converters and distributors. The Company anticipates it will have no significant problem with respect to sources or availability of the raw materials essential to the conduct of its business.
The Company considers its proprietary position important to the two segments of its business. During 1994, approximately 30% of Company sales were related to patents and licenses held, and manufacturing know-how. Generally, the patents and licenses of the Company expire at various times over the next 17 years.
Total expenditures during 1994, 1993 and 1992 for Company-sponsored research and development were $4,727, $5,050, and $6,604 respectively. In 1994, approximately 65% of the expenditures were for the Company's fastener segment.
Capital expenditures for property, plant and equipment are planned at $20.6 million in 1995, exclusive of any business acquisition.
There were approximately 2,933 and 640 persons employed by the Company at December 31, 1994 in the fastener and materials segments, respectively.
For financial information concerning industry segments and the foreign and domestic operations, see Note 19 to the Company's Consolidated Financial Statements on pages 21 and 22 in the 1994 Annual Report to Shareholders, which is incorporated herein by reference.
ITEM 2.
ITEM 2. PROPERTIES
The Company owns or leases the manufacturing properties described below. All properties are in good condition.
LOCATION
Owned Square Feet ------- -------------- Jenkintown, Pennsylvania 683,000(a) Cleveland, Ohio ......... 413,000(a) Santa Ana, California ... 305,000(a)(g) Salt Lake City, Utah .... 86,000(a) Marengo, Illinois ....... 442,000(b) Muskegon, Michigan ...... 110,000(b) Norfolk, Nebraska ....... 103,000(b) Sevierville, Tennessee .. 65,000(b) Ogallala, Nebraska ...... 26,000(b) Anasco, Puerto Rico ..... 129,000(a)(h) Coventry, England ....... 240,000(a) Birmingham, England ..... 137,000(a) Leicester, England ...... 88,000(a) Melbourne, Australia .... 44,000(a)
Leased Lease Expires Square Feet -------- -------------- ------------ Leicester, England (c) 38,000(a) Shannon, Ireland (d)(e)(f) 233,000(a)
-------------------- (a) Fastener segment (b) Materials segment (c) Lease for 38,000 square feet expires January 12, 1997. (d) Lease for 54,000 square feet expires April 1, 1996. (e) Lease for 75,000 square feet expires November 15, 2010. (f) Lease for 104,000 square feet expires November 13, 2010. (g) Approximately 70,000 square feet used for manufacturing purposes, with the remaining 235,000 square feet held for lease. (h) Closed and held for sale.
Industrial Development Revenue Bonds were issued to finance the acquisition and improvement of the Salt Lake City, Utah, facility. These bonds are collateralized by a first mortgage on this facility and a bank letter of credit.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
For discussion of legal proceedings, see Note 11 to the Company's Consolidated Financial Statements on pages 14 and 15 in the 1994 Annual Report to Shareholders which is incorporated herein by reference.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter of 1994, through the solicitations of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
All executive officers of the Company are named below and are appointed by the Board of Directors. The date that each officer was first appointed to his present position is indicated. No officer listed was appointed as a result of any arrangement between him and any other person as that phrase is understood under the Securities Exchange Act regulations. No family relationship exists among the executive officers of the Company.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Information regarding the principal markets on which SPS Technologies common stock is traded, the high and low sales price for the stock on the New York Stock Exchange for each quarterly period during the past 2 years, the quarterly cash dividends declared by SPS Technologies with respect to its common stock during the past 2 years, and the approximate number of holders of common stock at March 6, 1995 is included under the caption entitled "Common Stock Information" on page 23 in the 1994 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
A summary of selected financial data for SPS Technologies for the years and year ends specified is included under the caption entitled "Selected Financial Data" on page 23 in the 1994 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information regarding SPS Technologies financial condition, changes in financial condition and results of operations is included under the caption entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 24 through 29 in the 1994 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements for SPS Technologies included on pages 6 through 22 in the 1994 Annual Report to Shareholders, together with required supplementary data "Summary of Quarterly Results" on page 23 in the 1994 Annual Report to Shareholders, are incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of directors:
Information regarding directors is incorporated by reference to the Definitive Proxy Statement, Election of Directors, if filed with the Securities and Exchange Commission (SEC) within 120 days after December 31, 1994. To the extent not so filed, such information will be provided on a Form 10-K/A filed with the SEC.
(b) Identification of executive officers:
Information regarding executive officers is contained in Part I of this report (page 4).
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated by reference to the Definitive Proxy Statement, Executive Compensation and Board Meetings, Committees and Compensation, if filed with the SEC within 120 days after December 31, 1994. To the extent not so filed, such information will be provided on a Form 10-K/A filed with the SEC.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and management is incorporated by reference to the Definitive Proxy Statement, Ownership of Voting Securities, if filed with the SEC within 120 days after December 31, 1994. To the extent not so filed, such information will be provided on a Form 10-K/A filed with the SEC.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. The Consolidated Financial Statements and related notes to consolidated financial statements set forth on pages 6 through 22 of the 1994 Annual Report to Shareholders are incorporated by reference (See Exhibit 13). The Report of Independent Accountants, which covers both the Consolidated Financial Statements and the financial statement schedule, appears on page 9 of this report.
2. Financial Statement Schedules:
The following supplemental schedule is located in this Report on the page indicated.
Page ---- VIII Valuation and Qualifying Accounts 10
Schedules other than those listed above are omitted for the reason that they are either not applicable or not required or because the information required is contained in the financial statements or notes thereto.
3. Exhibits:
3a Amended and Restated Articles of Incorporation. Exhibit 3a to the Annual Report on Form 10-K for the year ended December 31, 1990, is hereby incorporated by reference.
3b By-Laws as amended, effective April 29, 1993. Exhibit 3 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, is hereby incorporated by reference.
4a Rights Agreement dated November 11, 1988, is incorporated by reference to Form 8-K filed November 17, 1988. Amendment No. 1 to Rights Agreement dated January 22, 1991, is incorporated by reference to Form 8-K filed January 25, 1991. Form of Amendment No. 2 to Rights Agreement dated November 16, 1994, is incorporated by reference to Exhibit 4.8 of Form S-3 filed August 26, 1994.
4b Form of Registration Rights Agreement between the Company, the Purchasers and the Investors dated December 23, 1994. Exhibit 4.5 to the Form S-3 filed August 26, 1994, is hereby incorporated by reference.
10a SPS 1988 Long Term Incentive Stock Plan as amended, effective February 2, 1989. Exhibit 10a to the Annual Report on Form 10-K for the year ended December 31, 1988, is hereby incorporated by reference.
10b SPS Exempt Employees Savings and Investment Plan as Amended and Restated, effective November, 1991. Exhibit 10b to the Annual Report on Form 10-K for the year ended December 31, 1991, is hereby incorporated by reference.
10c SPS Technologies, Inc. Non-Exempt Employees Savings and Investment Plan as Amended and Restated, effective November, 1991. Exhibit 10c to the Annual Report on Form 10-K for the year ended December 31, 1991, is hereby incorporated by reference.
10d SPS Technologies, Inc. Management Incentive Plan as Amended and Restated, effective April 26, 1994.
10e Form of standby Purchase Agreement dated November 16, 1994. Exhibit 10.1 to the Form S-3/A filed November 17, 1994, is hereby incorporated by reference.
10f Retirement Benefit Agreement, dated February 28, 1979. Exhibit 10f to the Annual Report on Form 10-K for the year ended December 31, 1991, is hereby incorporated by reference.
10g Fee Arrangement with Former Directors, effective November 29, 1984. Exhibit 10g to the Annual Report on Form 10-K for the year ended December 31, 1990, is hereby incorporated by reference.
10h Form of Employment Agreements between SPS Technologies, Inc. and certain employees, as amended and restated effective December 14, 1992. Exhibit 10h to the Annual Report on Form 10-K for the year ended December 31, 1992, is hereby incorporated by reference.
10i SPS Technologies, Inc. Executive Deferred Compensation Plan, as amended and restated, effective December 14, 1992. Exhibit 10i to the Annual Report on Form 10-K for the year ended December 31, 1992, is hereby incorporated by reference.
10j SPS Technologies, Inc. Executive Deferred Compensation Plan II, as amended and restated effective December 1, 1993. Exhibit 10j to the Annual Report on Form 10-K for the year ended December 31, 1993, is hereby incorporated by reference.
10k SPS Technologies, Inc. Supplemental Executive Retirement Plan, as amended and restated effective December 14, 1992. Exhibit 10k to the Annual Report on Form 10-K for the year ended December 31, 1992, is hereby incorporated by reference.
10l Employment Agreement between SPS Technologies, Inc. and Charles W. Grigg, Chairman and Chief Executive Officer, effective December 1, 1993. Exhibit 10l to the Annual Report on Form 10-K for the period ended December 31, 1993, is hereby incorporated by reference.
10m Form of Indemnification Agreements between SPS Technologies, Inc. and officers and directors dated February 2, 1987. Exhibit 10m to the Annual Report on Form 10-K for the period ended December 31, 1992, is hereby incorporated by reference.
10n Split Dollar Insurance Agreements regarding certain officers and directors effective April 2, 1990, and November 27, 1991. Exhibit 10n to the Annual Report on Form 10-K for the year ended December 31, 1991, is hereby incorporated by reference.
10o SPS Technologies, Inc. Senior Executive Severance Plan, effective December 14, 1992. Exhibit 10o to the Annual Report on Form 10-K for the year ended December 31, 1992, is hereby incorporated by reference.
10p Agreement with Retiring Executive, approved December 14, 1992. Exhibit 10p to the Annual Report on Form 10-K for the year ended December 31, 1992, is hereby incorporated by reference.
10q SPS Technologies, Inc. Benefit Equalization Plan, as amended and restated effective December 14, 1992. Exhibit 10 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, is hereby incorporated by reference.
11 Computation of dilution (anti-dilution) of earnings per share resulting from common stock equivalents.
13 1994 Annual Report to Shareholders (With the exception of the information expressly incorporated by reference in items 1, 3, 5, 6, 7, 8 and 14 of Form 10-K, the 1994 Annual Report to Shareholders is not deemed "filed" with the SEC or otherwise subject to the liabilities of Section 18 of the Securities and Exchange Act of 1934).
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed during the three months ended December 31, 1994.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SPS TECHNOLOGIES, INC. ---------------------------- (Registrant)
/s/ William M. Shockley ---------------------------- William M. Shockley Controller
Date: March 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors SPS Technologies, Inc.:
We have audited the consolidated financial statements of SPS Technologies, Inc. and subsidiaries as of December 31, 1994 and 1993 and for each of the three years in the period ended December 31, 1994, which financial statements are included on pages 6 through 22 of the 1994 Annual Report to Shareholders of SPS Technologies, Inc. and subsidiaries and incorporated by reference herein. We have also audited the financial statement schedule as listed in Item 14(a)2 of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SPS Technologies, Inc. and subsidiaries as of December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for income taxes and postretirement benefits other than pensions in 1992.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center Philadelphia, Pennsylvania 19103 February 10, 1995
SCHEDULE VIII
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
(Thousands of dollars)
------------ (a) Write off of uncollectible receivables, net of recoveries.
EXHIBIT INDEX -------------