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Per Share | Total | |||||||
Public offering price | $ | 30.150 | $ | 159,647,386 | ||||
Underwriting discounts and commissions | $ | 1.356 | $ | 7,180,161 | ||||
Proceeds, before expenses, to us | $ | 28.794 | $ | 38,316,579 | ||||
Proceeds, before expenses, to the selling shareholder | $ | 28.794 | $ | 114,150,646 |
Banc of America Securities LLC Wachovia Securities |
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We’re Best-Known By Our Brands
Ever since REGAL-BELOIT was founded in 1955, we’ve been aggressive in expanding our presence in key markets. As we’ve acquired companies, we’ve sought to build on their already established brand identities. Thus, most of our customers know us best by one of our many well-known brand names.
New additions in 2004 and 2005.
In 2004, the company added GE Commercial Motors, HVAC Motors and Capacitors to our electrical product lines, making REGAL-BELOIT the largest commercial, industrial, and HVAC electric motor manufacturer in the United States. | |||
More REGAL-BELOIT brands inside... |
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• | a leading market position and brand name in the HVAC motor market; |
• | diversification of our served markets and a broad base of leading HVAC customers, including Carrier, Evcon/ York, GE Supply, Goodman, Lennox, Nordyne, Rheem, Trane and W.W. Grainger; |
• | patented electronically commutated motor, or ECM, technology, which represents a growing portion of our motor sales because of the technology’s unique capabilities; |
• | a strong management team and infrastructure to support growth; and |
• | significant scale and low cost manufacturing capabilities in Mexico and India. |
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• | Introduce New Products. We continue to grow our businesses by cultivating our engineering expertise to develop new, differentiated products in each of our business segments. We work closely with our customers to develop new electrical and mechanical products, or enhancements to existing products, that improve performance and meet their needs. For example, in 2004 we introduced our new Magna-Smart variable speed generator product line that provides customers with a lighter, smaller and more efficient product. We believe this product will help us further penetrate the recreational vehicle, emergency vehicle, marine and refrigeration markets. We also expect that our recently acquired, patented ECM product line will drive significant growth as our customers utilize this technology to meet 13 SEER requirements. |
• | Capitalize on SEER Requirements. As of January 2006, the United States Department of Energy will require that all new residential air conditioner units and HVAC systems manufactured meet an increased energy efficiency standard, known as 13 SEER. The efficient, variable speed capability of our ECM motors enables OEMs to develop high performance continuous air flow HVAC systems that offer significantly greater temperature and air quality control, as well as increased energy efficiency and comfort. Because of the energy efficiency of these systems, we believe many of our customers consider ECM enabled continuous air flow systems to be important elements of their strategies to meet the January 2006 13 SEER standard from the current standard of 10 SEER. Unit sales of ECM motors have nearly doubled since 2001 and grew 35% year-over-year between 2003 and 2004. We are currently expanding our ECM motor manufacturing capacity in order to meet our customers’ anticipated requirements as they prepare for the increased 13 SEER standard. |
• | Leverage Cross-Marketing and Product Line Bundling Opportunities. We seek to enhance our market penetration through cross-marketing and product line bundling opportunities |
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between our business units. For example, we design most of our drive, motor and gear drive products to connect to one another so that we can provide a performance-matched, packaged solution that best suits our customers’ needs. We believe that by cross-selling the products offered under each of our brand names, including our newly acquired brand names, we can grow sales to our existing customer base. | |
• | Capitalize on Design and Engineering Expertise to Provide Custom Products. We will continue to take advantage of our engineering and design expertise to capture additional custom product business. We are continuously updating our products, many of which are designed in close coordination with our customers. These custom products generally provide higher margins than stock products because they require additional engineering. In addition, our ability to provide these custom products within very short lead times strengthens our relationships with customers and enhances our ability to sell other custom and stock products to these same customers. With this high degree of service and custom product capabilities, we believe our customers may face higher costs and increased risk in the event they switch to another supplier. |
• | Increase Our Global Presence. A significant part of our long-term business strategy involves the pursuit of growth opportunities in a number of international markets. The percentage of our revenues from outside the United States has grown from approximately 14% in 2002 to approximately 21% in 2004. Our customers are increasingly operating on a global basis, and we plan to continue to pursue new international opportunities and significantly expand our presence in key international growth markets, such as China and India, where the investment in infrastructure by others is expected to grow. We currently have four joint ventures operating in China, and we plan to broaden our international presence through both organic expansion and acquisitions. Our purchase in January 2005 of the Changzhou Modern Technologies Co., LTD. reflects this strategy. |
• | Encourage Continuous Improvement Culture. We have a culture that seeks out and eliminates unnecessary costs at all levels of the organization and drives continuous improvement in our operations. By centralizing the manufacturing, purchasing, engineering, accounting, information technology and quality control activities of our electrical products businesses, we foster the sharing of best practices across each of these businesses and create focused centers of excellence in each of our electrical product manufacturing functions. |
• | Utilize Multiple Low Cost Facilities/ Rationalize Manufacturing. Complementing our capabilities in the United States and China, our 2004 acquisitions of GE’s commercial AC motors and HVAC motors and capacitors businesses provide us with facilities in Mexico and India. These new locations give us the flexibility to engineer, manufacture and distribute products for our customers at lower costs. This new capacity may also enable us to relocate and rationalize certain motor manufacturing operations and make more efficient use of our existing resources. |
• | Expand Global Sourcing Opportunities. During the past decade, we have aggressively pursued global sourcing initiatives, particularly in Asia, and now have several strategic sourcing partners. With our established relationships in China, including four joint ventures, we are able to source components and finished products, including castings, |
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machined parts and a variety of complete motors and generators. We are currently evaluating various options to expand our sourcing opportunities in Asia. |
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Common stock offered by us | 1,330,714 shares | |
Common stock offered by the selling shareholder | 3,964,390 shares | |
Common stock to be outstanding after the offering | 30,416,636 shares | |
Use of proceeds | We expect to use the net proceeds we receive from the offering to reduce debt under our credit facility. As described under the caption “Use of Proceeds,” the net proceeds we receive include approximately $8.0 million from the sale of shares by GE in this offering pursuant to the terms of a shareholder agreement between GE and us. | |
New York Stock Exchange symbol | RBC | |
Risk factors | See the section entitled “Risk Factors” beginning on page S-10 for a discussion of factors you should consider carefully before deciding to buy our common stock. |
• | 1,763,350 shares of common stock issuable upon exercise of options outstanding as of June 29, 2005, at a weighted average exercise price of $22.56 per share; and |
• | 987,900 shares of common stock available for future grants under our stock option plans. |
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For the Years Ended December 31, | For the Six Months Ended | ||||||||||||||||||||||||||||||||
Pro Forma | June 29, | June 29, | |||||||||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004(1) | 2004(2) | 2005(2) | ||||||||||||||||||||||||||
(In thousands of dollars, except shares outstanding and per share data) | |||||||||||||||||||||||||||||||||
Statement of Income Data: | |||||||||||||||||||||||||||||||||
Net Sales | $ | 598,203 | $ | 663,571 | $ | 605,292 | $ | 619,098 | $ | 756,557 | $ | 1,295,228 | $ | 340,736 | $ | 706,591 | |||||||||||||||||
Cost of Sales | 440,774 | 497,694 | 462,149 | 472,343 | 589,497 | 1,007,404 | 261,708 | 558,329 | |||||||||||||||||||||||||
Gross Profit | 157,429 | 165,877 | 143,143 | 146,755 | 167,060 | 287,824 | 79,028 | 148,262 | |||||||||||||||||||||||||
Operating Expenses | 85,821 | 109,817 | 95,916 | 99,529 | 111,898 | 167,872 | 52,322 | 86,586 | |||||||||||||||||||||||||
Income From Operations | 71,608 | 56,060 | 47,227 | 47,226 | 55,162 | 119,952 | 26,706 | 61,676 | |||||||||||||||||||||||||
Interest Expense | 15,332 | 22,239 | 9,399 | 6,462 | 6,787 | 16,467 | 2,836 | 11,348 | |||||||||||||||||||||||||
Interest Income | 274 | 221 | 149 | 79 | 183 | 347 | 32 | 76 | |||||||||||||||||||||||||
Income Before Income Taxes and Minority Interest | 56,550 | 34,042 | 37,977 | 40,843 | 48,558 | 103,832 | 29,302 | 50,404 | |||||||||||||||||||||||||
Provision For Income Taxes | 22,779 | 14,452 | 13,182 | 14,791 | 15,728 | 36,455 | 8,594 | 18,638 | |||||||||||||||||||||||||
Income Before Minority Interest | 33,771 | 19,590 | 24,795 | 26,052 | 32,830 | 67,377 | 15,308 | 31,766 | |||||||||||||||||||||||||
Minority Interest in Income, Net of Tax | – | – | 277 | 846 | 2,395 | 3,055 | 819 | 1,035 | |||||||||||||||||||||||||
Net Income | $ | 33,771 | $ | 19,590 | $ | 24,518 | $ | 25,206 | $ | 30,435 | $ | 64,322 | $ | 14,489 | $ | 30,731 | |||||||||||||||||
Earnings Per Share | $ | 1.61 | $ | .94 | $ | 1.01 | $ | 1.01 | $ | 1.24 | $ | 2.21 | $ | 0.59 | $ | 1.06 | |||||||||||||||||
Earnings Per Share— Assuming Dilution | $ | 1.61 | $ | .93 | $ | 1.01 | $ | 1.00 | $ | 1.22 | $ | 2.18 | $ | 0.58 | $ | 1.03 | |||||||||||||||||
Average Number of Shares Outstanding | 20,984,423 | 20,868,896 | 24,186,839 | 25,029,942 | 24,602,868 | 29,162,868 | 24,744,342 | 29,049,209 | |||||||||||||||||||||||||
Average Number of Shares Outstanding— Assuming Dilution | 20,996,189 | 21,124,204 | 24,310,165 | 25,246,088 | 24,904,287 | 29,464,287 | 24,977,674 | 29,982,397 | |||||||||||||||||||||||||
Balance Sheet Data: | |||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | $ | 2,612 | $ | 6,629 | $ | 5,591 | $ | 9,100 | $ | 31,275 | $ | 31,275 | $ | 14,259 | $ | 29,066 | |||||||||||||||||
Working Capital(3) | 185,781 | 161,044 | 157,405 | 158,104 | 279,710 | 279,710 | 180,537 | 299,136 | |||||||||||||||||||||||||
Total Assets | 792,407 | 746,599 | 733,988 | 734,445 | 1,352,052 | 1,352,052 | 764,197 | 1,375,283 | |||||||||||||||||||||||||
Long-term Debt | 393,510 | 345,667 | 222,812 | 195,677 | 547,350 | 547,350 | 214,509 | 536,895 | |||||||||||||||||||||||||
Shareholders’ Investment | 273,889 | 280,150 | 381,423 | 398,704 | 538,179 | 538,179 | 394,701 | 565,272 | |||||||||||||||||||||||||
Other Financial Data: | |||||||||||||||||||||||||||||||||
Capital Expenditures | $ | 16,994 | $ | 15,426 | $ | 10,754 | $ | 17,965 | $ | 16,281 | $ | 22,866 | $ | 6,699 | $ | 15,549 | |||||||||||||||||
Depreciation and Amortization | 25,549 | 31,798 | 22,134 | 21,014 | 21,613 | 40,468 | 11,031 | 18,845 |
(1) | Pro forma for our August 30, 2004 GE commercial AC motors business acquisition, and our December 31, 2004 HVAC motors and capacitors businesses acquisition, as if those transactions all occurred on January 1, 2004. |
(2) | Actual second quarter amounts are as reported, not pro forma. |
(3) | Working capital defined as current assets minus current liabilities. |
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• | make it difficult for us to fulfill our obligations under our credit and other debt agreements; |
• | make it more challenging for us to obtain additional financing to fund our business strategy and acquisitions, debt service requirements, capital expenditures and working capital; |
• | increase our vulnerability to interest rate changes and general adverse economic and industry conditions; |
• | require us to dedicate a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the availability of our cash flow to finance acquisitions and to fund working capital, capital expenditures, research and development efforts and other general corporate activities; |
• | limit our flexibility in planning for, or reacting to, changes in our business and our markets; and |
• | place us at a competitive disadvantage relative to our competitors that have less debt. |
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• | requiring a supermajority vote of shareholders, in addition to any vote otherwise required, to approve business combinations not meeting adequacy of price standards; |
• | prohibiting some business combinations between an interested shareholder and us for a period of three years, unless the combination was approved by our board of directors prior to the time the shareholder became a 10% or greater beneficial owner of our shares or under some other circumstances; |
• | limiting actions that we can take while a takeover offer for us is being made or after a takeover offer has been publicly announced; and |
• | limiting the voting power of shareholders who own more than 20% of our stock. |
• | quarterly fluctuation in our operating income and earnings per share results; |
• | decline in demand for our products; |
• | significant strategic actions by our competitors, including new product introductions or technological advances; |
• | fluctuations in interest rates; |
• | cost increases in energy, raw materials or labor; |
• | changes in revenue or earnings estimates or publication of research reports by analysts; and |
• | domestic and international economic and political factors unrelated to our performance. |
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Price of | |||||||||
Common Stock | |||||||||
High | Low | ||||||||
Calendar 2003 | |||||||||
First Quarter | $ | 21.75 | $ | 14.96 | |||||
Second Quarter | 21.64 | 15.05 | |||||||
Third Quarter | 24.45 | 18.48 | |||||||
Fourth Quarter | 23.07 | 19.20 | |||||||
Calendar 2004 | |||||||||
First Quarter | $ | 23.20 | $ | 19.41 | |||||
Second Quarter | 22.22 | 19.14 | |||||||
Third Quarter | 24.33 | 20.40 | |||||||
Fourth Quarter | 29.38 | 23.13 | |||||||
Calendar 2005 | |||||||||
First Quarter | $ | 32.08 | $ | 27.69 | |||||
Second Quarter | 28.94 | 25.30 | |||||||
Third Quarter (through August 10, 2005) | 32.15 | 28.25 |
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As of | |||||||||||
June 29, 2005 | |||||||||||
Actual | As Adjusted | ||||||||||
(Dollars in thousands) | |||||||||||
Total debt (1) | $ | 537,371 | $ | 491,504 | |||||||
Shareholders’ investment: | |||||||||||
Common stock, $.01 par value; 50,000,000 shares authorized; 29,860,022 shares issued and 31,190,736 shares issued as adjusted | $ | 299 | $ | 312 | |||||||
Additional paid-in capital | 265,826 | 311,680 | |||||||||
Retained earnings | 312,302 | 312,302 | |||||||||
Unearned compensation | (844 | ) | (844 | ) | |||||||
Accumulated other comprehensive income | 2,917 | 2,917 | |||||||||
Treasury stock, at cost, 774,100 shares | (15,228 | ) | (15,228 | ) | |||||||
Total shareholders’ investment | 565,272 | 611,139 | |||||||||
Total capitalization | $ | 1,102,643 | $ | 1,102,643 | |||||||
(1) | Total debt includes long-term debt plus current maturities of long-term debt. |
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For the Years Ended December 31, | For the Six Months Ended | ||||||||||||||||||||||||||||||||
Pro Forma | June 29, | June 29, | |||||||||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004(1) | 2004(2) | 2005(2) | ||||||||||||||||||||||||||
(In thousands of dollars, except shares outstanding and per share data) | |||||||||||||||||||||||||||||||||
Statement of Income Data: | |||||||||||||||||||||||||||||||||
Net Sales | $ | 598,203 | $ | 663,571 | $ | 605,292 | $ | 619,098 | $ | 756,557 | $ | 1,295,228 | $ | 340,736 | $ | 706,591 | |||||||||||||||||
Cost of Sales | 440,774 | 497,694 | 462,149 | 472,343 | 589,497 | 1,007,404 | 261,708 | 558,329 | |||||||||||||||||||||||||
Gross Profit | 157,429 | 165,877 | 143,143 | 146,755 | 167,060 | 287,824 | 79,028 | 148,262 | |||||||||||||||||||||||||
Operating Expenses | 85,821 | 109,817 | 95,916 | 99,529 | 111,898 | 167,872 | 52,322 | 86,586 | |||||||||||||||||||||||||
Income From Operations | 71,608 | 56,060 | 47,227 | 47,226 | 55,162 | 119,952 | 26,706 | 61,676 | |||||||||||||||||||||||||
Interest Expense | 15,332 | 22,239 | 9,399 | 6,462 | 6,787 | 16,467 | 2,836 | 11,348 | |||||||||||||||||||||||||
Interest Income | 274 | 221 | 149 | 79 | 183 | 347 | 32 | 76 | |||||||||||||||||||||||||
Income Before Income Taxes and Minority Interest | 56,550 | 34,042 | 37,977 | 40,843 | 48,558 | 103,832 | 29,302 | 50,404 | |||||||||||||||||||||||||
Provision For Income Taxes | 22,779 | 14,452 | 13,182 | 14,791 | 15,728 | 36,455 | 8,594 | 18,638 | |||||||||||||||||||||||||
Income Before Minority Interest | 33,771 | 19,590 | 24,795 | 26,052 | 32,830 | 67,377 | 15,308 | 31,766 | |||||||||||||||||||||||||
Minority Interest in Income, Net of Tax | — | — | 277 | 846 | 2,395 | 3,055 | 819 | 1,035 | |||||||||||||||||||||||||
Net Income | $ | 33,771 | $ | 19,590 | $ | 24,518 | $ | 25,206 | $ | 30,435 | $ | 64,322 | $ | 14,489 | $ | 30,731 | |||||||||||||||||
Earnings Per Share | $ | 1.61 | $ | .94 | $ | 1.01 | $ | 1.01 | $ | 1.24 | $ | 2.21 | $ | 0.59 | $ | 1.06 | |||||||||||||||||
Earnings Per Share— Assuming Dilution | $ | 1.61 | $ | .93 | $ | 1.01 | $ | 1.00 | $ | 1.22 | $ | 2.18 | $ | 0.58 | $ | 1.03 | |||||||||||||||||
Average Number of Shares Outstanding | 20,984,423 | 20,868,896 | 24,186,839 | 25,029,942 | 24,602,868 | 29,162,868 | 24,744,342 | 29,049,209 | |||||||||||||||||||||||||
Average Number of Shares Outstanding— Assuming Dilution | 20,996,189 | 21,124,204 | 24,310,165 | 25,246,088 | 24,904,287 | 29,464,287 | 24,977,674 | 29,982,397 | |||||||||||||||||||||||||
Balance Sheet Data: | |||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | $ | 2,612 | $ | 6,629 | $ | 5,591 | $ | 9,100 | $ | 31,275 | $ | 31,275 | $ | 14,259 | $ | 29,066 | |||||||||||||||||
Working Capital(3) | 185,781 | 161,044 | 157,405 | 158,104 | 279,710 | 279,710 | 180,537 | 299,136 | |||||||||||||||||||||||||
Total Assets | 792,407 | 746,599 | 733,988 | 734,445 | 1,352,052 | 1,352,052 | 764,197 | 1,375,283 | |||||||||||||||||||||||||
Long-term Debt | 393,510 | 345,667 | 222,812 | 195,677 | 547,350 | 547,350 | 214,509 | 536,895 | |||||||||||||||||||||||||
Shareholders’ Investment | 273,889 | 280,150 | 381,423 | 398,704 | 538,179 | 538,179 | 394,701 | 565,272 | |||||||||||||||||||||||||
Other Financial Data: | |||||||||||||||||||||||||||||||||
Capital Expenditures | $ | 16,994 | $ | 15,426 | $ | 10,754 | $ | 17,965 | $ | 16,281 | $ | 22,866 | $ | 6,699 | $ | 15,549 | |||||||||||||||||
Depreciation and Amortization | 25,549 | 31,798 | 22,134 | 21,014 | 21,613 | 40,468 | 11,031 | 18,845 |
(1) | Pro forma for our August 30, 2004 GE commercial AC motors business acquisition, and our December 31, 2004 HVAC motors and capacitors businesses acquisition, as if those transactions all occurred on January 1, 2004. |
(2) | Actual second quarter amounts are as reported, not pro forma. |
(3) | Working capital defined as current assets minus current liabilities. |
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• | leadership in our major market segments |
• | comprehensive product offering and leading brands |
• | leading product development and recently-acquired ECM technology |
• | multi-channel and multi-brand distribution model |
• | broad and diverse customer base |
• | experienced management team |
• | global infrastructure |
• | rapid response capabilities |
• | financial flexibility to pursue growth |
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• | introducing new products |
• | capitalizing on new 13 SEER requirements |
• | leveraging cross-marketing and product line bundling opportunities |
• | utilizing our design and engineering expertise to provide leading-edge products |
• | increasing our global presence, especially in China and India |
• | a leading market position and brand name in the HVAC motor market; |
• | diversification of our served markets and a broad base of leading HVAC customers; |
• | patented ECM technology, which represents a growing portion of our motor sales because of the technology’s unique capabilities; |
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• | a strong management team and infrastructure in place to support growth; and |
• | significant scale and low cost manufacturing capabilities in Mexico and India. |
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Annual | ||||||||||
Year | Revenues at | |||||||||
Product Line | Acquired | Acquisition | Product Listing at Acquisition | |||||||
(Dollars in millions) | ||||||||||
Electrical Products | ||||||||||
GE Commercial AC Motors business | 2004 | $ | 144 | AC motors for pump, compressor, equipment and commercial HVAC | ||||||
GE HVAC Motors and Capacitors businesses | 2004 | 442 | Full line of motors and capacitors for residential and commercial HVAC systems | |||||||
LEESON Electric Corporation | 2000 | 175 | AC motors (to 350 horsepower) gear reducers, gearmotors and drives | |||||||
Thomson Technology, Inc. | 2000 | 14 | Automatic transfer switches, paralleling switchgear and controls and controls systems | |||||||
Lincoln Motors | 1999 | 50 | AC motors (1/4 to 800 horsepower) | |||||||
Marathon Electric Manufacturing Corporation | 1997 | 245 | AC motors (to 500 horsepower), AC generators (5 kilowatt to 2.5 megawatt), fuse holders, terminal blocks and power blocks |
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Annual | ||||||||||
Year | Revenues at | |||||||||
Product Line | Acquired | Acquisition | Product Listing at Acquisition | |||||||
(Dollars in millions) | ||||||||||
Mechanical Products | ||||||||||
Powertrax assets of Vehicular Technologies | 2002 | $ | 3 | Differential locking devices for high performance automotive applications | ||||||
Spiral bevel gear product line of Philadelphia Gear | 2001 | 4 | Spiral bevel gears | |||||||
Velvet Drive Transmissions | 1995 | 27 | Marine and industrial transmissions | |||||||
Hub City, Inc. | 1992 | 44 | Gear drives, sub-fractional horsepower gearmotors, mounted bearings and accessories | |||||||
Opperman Mastergear, Ltd. (U.K., U.S. and Germany) | 1991 | 20 | Manual valves actuators and industrial gear drives |
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Square | ||||||||||||
Location(1) | Footage | Status | Description of Use | |||||||||
Electrical Segment | ||||||||||||
Wausau, WI | 498,000 | Owned | Manufacturing | |||||||||
Juarez, Mexico | 335,000 | Owned | Manufacturing | |||||||||
Reynosa, Mexico | 320,000 | Owned | Manufacturing | |||||||||
Springfield, MO | 290,000 | Owned | Manufacturing | |||||||||
Grafton, WI | 230,000 | Owned | Manufacturing | |||||||||
Indianapolis, IN | 221,000 | Leased | Warehouse | |||||||||
Faridabad, India | 220,000 | Owned | Manufacturing | |||||||||
Lebanon, MO | 187,000 | Owned | Manufacturing | |||||||||
Lincoln, MO | 120,000 | Owned | Manufacturing | |||||||||
Fort Wayne, IN | 110,700 | Leased | Office/Lab | |||||||||
Lima, OH | 107,000 | Owned | Manufacturing | |||||||||
Blytheville, TX | 107,000 | Leased | Manufacturing | |||||||||
West Plains, MO | 106,000 | Owned | Manufacturing | |||||||||
Black River Falls, WI | 103,000 | Owned | Manufacturing | |||||||||
All Other (32) | 654,449 | (1) | (1) | |||||||||
Mechanical Segment | ||||||||||||
Chicago, IL | 283,000 | Owned | Manufacturing | |||||||||
Liberty, SC | 174,000 | Owned | Manufacturing | |||||||||
Aberdeen, SD | 165,000 | Owned | Manufacturing | |||||||||
Shopiere, WI | 132,000 | Owned | Manufacturing | |||||||||
Union Grove, WI | 122,000 | Owned | Manufacturing | |||||||||
New Bedford, MA | 116,000 | Owned | Manufacturing | |||||||||
All Other(13) | 578,000 | (1) | (1) |
(1) | Less significant manufacturing, service and distribution and engineering facilities located in the United States, Canada, Europe and Asia: electrical leased square footage 455,139, mechanical leased 46,692. |
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Name | Age | Position | Business Experience and Principal Occupation | |||||
James L. Packard | 62 | Executive Chairman | Appointed Executive Chairman in April 2005; served as Chairman from 1986 to April 2005; served as Chief Executive Officer from 1984 to April 2005; served as President from 1980 to April 2002; joined the company in 1979. | |||||
Henry W. Knueppel | 57 | President and Chief Executive Officer | Elected President and Chief Executive Officer in April 2005; served as President and Chief Operating Officer from April 2002 to April 2005; served as Executive Vice President from 1987 to April 2002. | |||||
David A. Barta | 43 | Vice President, Chief Financial Officer | Joined the Company in July 2004 and was elected Vice President, Chief Financial Officer in 2004. Prior to joining the Company, served in several financial management positions for Newell Rubbermaid Inc. from 1995 to June 2004, serving most recently as Chief Financial Officer Levelor/Kirsch Division. His prior positions included Vice President—Group Controller Corporate Key Accounts, Vice President—Group Controller Rubbermaid Group, Vice President Investor Relations, and Chief Financial Officer Newell Window Furnishings/Kirsch. | |||||
Mark Gliebe | 44 | Vice President and President of the Electric Motors Group | Joined the Company in January 2005, following our acquisition of the HVAC motors and capacitors businesses from GE; previously employed by GE as the General Manager of GE Motors & Controls in the GE Consumer & Industrial business unit from June 2000 to December 2004 and General Manager of GE Industrial Motors from January 1999 to June 2000. | |||||
Kenneth F. Kaplan | 60 | Vice President, Treasurer and Secretary | Joined the Company in September 1996 and served as Vice President, Chief Financial Officer and Secretary until July 2004; has served in his current position since July 2004. | |||||
David L. Eisenreich | 62 | Vice President and President of Mechanical Components and Power Generation | Elected Vice President and named President of Motor Technologies Group in 2001; Senior Vice President of Operations at Marathon Electric from 1997 until 2001. | |||||
Fritz Hollenbach | 51 | Vice President, Administration and Human Resources | Named Vice President, Administration and Human Resources in 2001; Vice President Human Resources in Mechanical Group from 1994 until 2001. |
S-41
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Shares Beneficially Owned | ||||||||||||||||
Percentage of | ||||||||||||||||
Outstanding | Percentage of | |||||||||||||||
Number of | Number of | Shares | Outstanding | |||||||||||||
Shares Before | Shares After | Before | Shares After | |||||||||||||
Name of Selling Shareholder | Offering | Offering(1) | Offering | Offering(1) | ||||||||||||
General Electric Company | 4,559,048 | 594,658 | 15.7 | % | 2.0% | |||||||||||
3135 Easton Turnpike | ||||||||||||||||
Fairfield, CT 06828 |
(1) | Assuming no exercise of the overallotment option. If the option is exercised in full, GE will not own any shares after the offering. |
S-42
Table of Contents
Number | |||||
Underwriter | of Shares | ||||
Robert W. Baird & Co. Incorporated | 2,435,748 | ||||
Banc of America Securities LLC | 979,594 | ||||
Wachovia Securities | 979,594 | ||||
Jefferies & Company, Inc. | 529,510 | ||||
Barrington Research Associates, Inc. | 185,329 | ||||
Morgan Joseph & Co. Inc. | 185,329 | ||||
Total | 5,295,104 | ||||
• | Underwriters are securities broker/dealers that are parties to the underwriting agreement and will have a contractual commitment to purchase shares of our common stock from us, and the representatives are the six firms acting on behalf of the underwriters. |
• | Selling group members are securities broker/dealers to whom the underwriters may sell shares of our common stock at the public offering price less the selling concession above, but who do not have a contractual commitment to purchase shares from us. |
• | Broker/dealers are firms registered under applicable securities laws to sell securities to the public. |
• | The syndicate consists of the underwriters and the selling group members. |
S-43
Table of Contents
Per Share | Total | ||||||||||||||||
Without | With | Without | With | ||||||||||||||
over-allotment | over-allotment | over-allotment | over-allotment | ||||||||||||||
Underwriting discounts and commissions payable by us | $ | 1.356 | $ | 1.356 | $ | 1,804,448 | $ | 2,075,115 | |||||||||
Underwriting discounts and commissions payable by the selling shareholder | 1.356 | 1.356 | 5,375,713 | 6,182,069 | |||||||||||||
Total | $ | 7,180,161 | $ | 8,257,184 | |||||||||||||
S-44
Table of Contents
• | Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. |
• | Stabilizing transactions permit bids to purchase shares of our common stock so long as the stabilizing bids do not exceed a specified maximum. |
S-45
Table of Contents
• | incorporated documents are considered part of this prospectus supplement; |
• | we are disclosing important information to you by referring you to those documents; and |
• | information we file with the SEC will automatically update and supersede information contained in this prospectus supplement. |
• | our Annual Report on Form 10-K for our fiscal year ended December 31, 2004; |
• | our Quarterly Reports on Form 10-Q for our fiscal quarters ended March 31, 2005 and June 29, 2005; |
• | our Current Reports on Form 8-K dated August 30, 2004 (filed September 3, 2004), as amended by Form 8-K/A on October 12, 2004), December 30, 2004, December 31, 2004 (as amended by Form 8-K/A on February 14, 2005), January 11, 2005, January 26, 2005, January 26, 2005 (as amended by Form 8-K/A on February 11, 2005), April 22, 2005, May 31, 2005 and August 11, 2005; and |
• | the description of our common stock and common share purchase rights contained in our Registration Statement on Form 8-A, filed January 18, 2005, including any amendment or report filed for the purpose of updating such description. |
S-46
Table of Contents
Page | ||||
Audited Consolidated Financial Statements | ||||
Report of Independent Registered Public Accounting Firm | F-2 | |||
Management’s Annual Report on Internal Control Over Financial Reporting | F-3 | |||
Attestation Report of Independent Registered Public Accounting Firm | F-4 | |||
Consolidated Balance Sheets as of December 31, 2003 and 2004 | F-6 | |||
Consolidated Statements of Income for the Years Ended December 31, 2002, 2003 and 2004 | F-7 | |||
Consolidated Statements of Shareholders’ Investment for the Years Ended December 31, 2002, 2003 and 2004 | F-8 | |||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2003 and 2004 | F-9 | |||
Notes to Consolidated Financial Statements | F-10 | |||
Unaudited Condensed Consolidated Financial Statements | ||||
Condensed Consolidated Balance Sheets as of December 31, 2004 and June 29, 2005 | F-30 | |||
Condensed Consolidated Statements of Income for the Three-Month and Six-Month Periods ended June 29, 2004 and June 29, 2005 | F-31 | |||
Condensed Consolidated Statements of Cash Flows for the Six-Month Periods ended June 29, 2004 and June 29, 2005 | F-32 | |||
Notes to Condensed Consolidated Financial Statements (unaudited) | F-33 |
F-1
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F-2
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F-3
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F-4
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F-5
Table of Contents
December 31 | ||||||||||
2004 | 2003 | |||||||||
ASSETS | ||||||||||
Current Assets: | ||||||||||
Cash and Cash Equivalents | $ | 31,275 | $ | 9,100 | ||||||
Receivables, Less Allowance for Doubtful Accounts of $2,376 in 2004 and $1,432 in 2003 | 176,941 | 85,468 | ||||||||
Income Tax Receivable | 242 | 223 | ||||||||
Future Income Tax Benefits | 6,493 | 5,104 | ||||||||
Inventories | 246,816 | 131,121 | ||||||||
Prepaid Expenses and Other Current Assets | 13,152 | 6,411 | ||||||||
Total Current Assets | 474,919 | 237,427 | ||||||||
Property, Plant and Equipment: | ||||||||||
Land and Improvements | 19,026 | 12,290 | ||||||||
Buildings and Improvements | 104,460 | 88,812 | ||||||||
Machinery and Equipment | 335,307 | 260,634 | ||||||||
Property, Plant and Equipment, at Cost | 458,793 | 361,736 | ||||||||
Less: Accumulated Depreciation | (205,120 | ) | (192,638 | ) | ||||||
Net Property, Plant and Equipment | 253,673 | 169,098 | ||||||||
Goodwill | 544,440 | 311,216 | ||||||||
Purchased Intangible Assets, net of Amortization | 52,058 | — | ||||||||
Other Noncurrent Assets | 26,962 | 16,704 | ||||||||
Total Assets | $ | 1,352,052 | $ | 734,445 | ||||||
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | ||||||||||
Current Liabilities: | ||||||||||
Accounts Payable | $ | 106,374 | $ | 36,179 | ||||||
Dividends Payable | 3,483 | 3,004 | ||||||||
Accrued Compensation and Employee Benefits | 30,256 | 18,151 | ||||||||
Other Accrued Expenses | 44,094 | 12,321 | ||||||||
Income Taxes Payable | 10,731 | 9,543 | ||||||||
Current Maturities of Long-Term Debt | 271 | 125 | ||||||||
Total Current Liabilities | 195,209 | 79,323 | ||||||||
Long-Term Debt | 547,350 | 195,677 | ||||||||
Deferred Income Taxes | 48,663 | 46,186 | ||||||||
Other Noncurrent Liabilities | 17,359 | 11,658 | ||||||||
Minority Interest in Consolidated Subsidiaries | 5,292 | 2,897 | ||||||||
Shareholders’ Investment: | ||||||||||
Common Stock, $.01 Par Value, 50,000,000 Shares Authorized, 29,798,188 Issued in 2004 and 25,191,656 Issued and Outstanding in 2003 | 298 | 250 | ||||||||
Additional Paid-in Capital | 263,790 | 132,313 | ||||||||
Less: Treasury Stock, at Cost, 774,100 Shares in 2004 and 159,900 Shares in 2003 | (15,228 | ) | (2,727 | ) | ||||||
Retained Earnings | 288,837 | 270,760 | ||||||||
Unearned Compensation | (224 | ) | — | |||||||
Accumulated Other Comprehensive Income (Loss) | 706 | (1,892 | ) | |||||||
Total Shareholders’ Investment | 538,179 | 398,704 | ||||||||
Total Liabilities and Shareholders’ Investment | $ | 1,352,052 | $ | 734,445 | ||||||
F-6
Table of Contents
For the Year Ended December 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Net Sales | $ | 756,557 | $ | 619,098 | $ | 605,292 | |||||||
Cost of Sales | 589,497 | 472,343 | 462,149 | ||||||||||
Gross Profit | 167,060 | 146,755 | 143,143 | ||||||||||
Operating Expenses | 111,898 | 99,529 | 95,916 | ||||||||||
Income from Operations | 55,162 | 47,226 | 47,227 | ||||||||||
Interest Expense | 6,787 | 6,462 | 9,399 | ||||||||||
Interest Income | 183 | 79 | 149 | ||||||||||
Income before Income Taxes and Minority Interest | 48,558 | 40,843 | 37,977 | ||||||||||
Provision for Income Taxes | 15,728 | 14,792 | 13,182 | ||||||||||
Income before Minority Interest | 32,830 | 26,051 | 24,795 | ||||||||||
Minority Interest in Income, Net of Tax | 2,395 | 845 | 277 | ||||||||||
Net Income | $ | 30,435 | $ | 25,206 | $ | 24,518 | |||||||
Earnings Per Share | $ | 1.24 | $ | 1.01 | $ | 1.01 | |||||||
Earnings Per Share — Assuming Dilution | $ | 1.22 | $ | 1.00 | $ | 1.01 | |||||||
Average Number of Shares Outstanding | 24,602,868 | 25,029,942 | 24,186,839 | ||||||||||
Average Number of Shares — Assuming Dilution | 24,904,287 | 25,246,088 | 24,310,165 |
F-7
Table of Contents
Common | Accumulated | |||||||||||||||||||||||||||||||
Stock | Additional | Other | ||||||||||||||||||||||||||||||
Comprehensive | $.01 Par | Paid-In | Treasury | Unearned | Retained | Comprehensive | ||||||||||||||||||||||||||
Income | Value | Capital | Stock | Compensation | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
Balance, December 31, 2001 | $ | 210 | $ | 41,967 | $ | (2,727 | ) | $ | — | $ | 244,564 | $ | (3,864 | ) | $ | 280,150 | ||||||||||||||||
Net Income | $ | 24,518 | — | — | — | — | 24,518 | — | 24,518 | |||||||||||||||||||||||
Dividends Declared ($.48 per share) | — | — | — | — | (11,512 | ) | — | (11,512 | ) | |||||||||||||||||||||||
Translation Adjustments | 1,607 | — | — | — | — | — | 1,607 | 1,607 | ||||||||||||||||||||||||
Additional Pension Liability, Net of Tax | (3,580 | ) | — | — | — | — | — | (3,580 | ) | (3,580 | ) | |||||||||||||||||||||
Comprehensive Income | $ | 22,545 | ||||||||||||||||||||||||||||||
Stock Options Exercised | — | 278 | — | — | — | — | 278 | |||||||||||||||||||||||||
Stock Offering | 40 | 89,922 | — | — | — | — | 89,962 | |||||||||||||||||||||||||
Balance, December 31, 2002 | 250 | 132,167 | (2,727 | ) | — | 257,570 | (5,837 | ) | 381,423 | |||||||||||||||||||||||
Net Income | $ | 25,206 | — | — | — | — | 25,206 | — | 25,206 | |||||||||||||||||||||||
Dividends Declared ($.48 per share) | — | — | — | — | (12,016 | ) | — | (12,016 | ) | |||||||||||||||||||||||
Translation Adjustments | 4,111 | — | — | — | — | — | 4,111 | 4,111 | ||||||||||||||||||||||||
Change in Fair Value of Hedging Activities, Net of Tax | 160 | — | — | — | — | — | 160 | 160 | ||||||||||||||||||||||||
Hedging Activities Reclassified into Earnings from Other Comprehensive Income | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Additional Pension Liability, Net of Tax | (326 | ) | — | — | — | — | — | (326 | ) | (326 | ) | |||||||||||||||||||||
Comprehensive Income | $ | 29,151 | ||||||||||||||||||||||||||||||
Stock Options Exercised | — | 146 | — | — | — | — | 146 | |||||||||||||||||||||||||
Balance, December 31, 2003 | 250 | 132,313 | (2,727 | ) | — | 270,760 | (1,892 | ) | 398,704 | |||||||||||||||||||||||
Net Income | $ | 30,435 | — | — | — | — | 30,435 | — | 30,435 | |||||||||||||||||||||||
Dividends Declared ($.48 per share) | — | — | — | — | (12,358 | ) | — | (12,358 | ) | |||||||||||||||||||||||
Translation Adjustments | 2,903 | — | — | — | — | — | 2,903 | 2,903 | ||||||||||||||||||||||||
Change in Fair Value of Hedging Activities, Net of Tax | 864 | — | — | — | — | — | 864 | 864 | ||||||||||||||||||||||||
Hedging Activities Reclassified into Earnings from Other Comprehensive Income | (511 | ) | — | — | — | — | — | (511 | ) | (511 | ) | |||||||||||||||||||||
Additional Pension Liability, Net of Tax | (658 | ) | — | — | — | — | — | (658 | ) | (658 | ) | |||||||||||||||||||||
Comprehensive Income | $ | 33,033 | ||||||||||||||||||||||||||||||
Unearned Compensation, Net of Amortization | — | 288 | — | (224 | ) | — | — | 64 | ||||||||||||||||||||||||
Stock Issued for Acquisition | 46 | 130,343 | — | — | — | — | 130,389 | |||||||||||||||||||||||||
Common Stock Repurchased | — | — | (12,501 | ) | — | — | — | (12,501 | ) | |||||||||||||||||||||||
Stock Options Exercised | 2 | 846 | — | — | — | — | 848 | |||||||||||||||||||||||||
Balance, December 31, 2004 | $ | 298 | $ | 263,790 | $ | (15,228 | ) | $ | (224 | ) | $ | 288,837 | $ | 706 | $ | 538,179 | ||||||||||||||||
F-8
Table of Contents
For the Year Ended | ||||||||||||||
December 31 | ||||||||||||||
2004 | 2003 | 2002 | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||
Net Income | $ | 30,435 | $ | 25,206 | $ | 24,518 | ||||||||
Adjustments to Reconcile Net Income to Net Cash Provided from Operating Activities: | ||||||||||||||
Depreciation | 21,061 | 21,014 | 22,134 | |||||||||||
Amortization | 552 | — | — | |||||||||||
Provision for Deferred Income Taxes | 1,089 | 2,377 | 4,103 | |||||||||||
Minority Interest in Earnings of Subsidiaries | 2,395 | 845 | 277 | |||||||||||
Gain on Sale of Property, Plant, and Equipment | (2,380 | ) | — | — | ||||||||||
Change in Assets and Liabilities, Net of Acquisitions: | ||||||||||||||
Receivables | (28,813 | ) | (4,582 | ) | 1,289 | |||||||||
Inventories | (16,481 | ) | 6,483 | (311 | ) | |||||||||
Accounts Payable | 14,483 | 2,915 | 3,334 | |||||||||||
Current Liabilities and Other | 15,823 | 4,707 | (935 | ) | ||||||||||
Net Cash Provided from Operating Activities | 38,164 | 58,965 | 54,409 | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||
Additions to Property, Plant and Equipment | (16,281 | ) | (17,965 | ) | (10,754 | ) | ||||||||
Business Acquisitions, Net of Cash Acquired | (327,851 | ) | (717 | ) | (1,939 | ) | ||||||||
Sale of Property, Plant and Equipment | 5,929 | 259 | 205 | |||||||||||
Other | (306 | ) | 1,833 | 539 | ||||||||||
Net Cash Used in Investing Activities | (338,509 | ) | (16,590 | ) | (11,949 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||
Proceeds from Stock Offering | — | — | 89,962 | |||||||||||
Additions to Long-Term Debt | 115,000 | — | 1,290 | |||||||||||
Net Borrowings (Repayments) Under Revolving Credit Facility | 236,819 | (27,165 | ) | (124,110 | ) | |||||||||
Repurchase of Common Stock | (12,501 | ) | — | — | ||||||||||
Stock Issued Under Option Plans | 848 | 146 | 278 | |||||||||||
Financing Fees Paid | (5,851 | ) | — | — | ||||||||||
Dividends Paid to Shareholders | (11,879 | ) | (12,014 | ) | (11,015 | ) | ||||||||
Net Cash Provided from (Used in) Financing Activities | 322,436 | (39,033 | ) | (43,595 | ) | |||||||||
EFFECT OF EXCHANGE RATE ON CASH: | 84 | 167 | 97 | |||||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 22,175 | 3,509 | (1,038 | ) | ||||||||||
Cash and Cash Equivalents at Beginning of Year | 9,100 | 5,591 | 6,629 | |||||||||||
Cash and Cash Equivalents at End of Year | $ | 31,275 | $ | 9,100 | $ | 5,591 | ||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||||||||
Cash Paid During the Year for: | ||||||||||||||
Interest | $ | 5,981 | $ | 6,355 | $ | 9,656 | ||||||||
Income Taxes | $ | 8,847 | $ | 3,585 | $ | 7,075 | ||||||||
Non-Cash Investing: Issuance of Common Stock in Connection with Acquisition | $ | 130,389 | — | — |
F-9
Table of Contents
(1) | Nature of Operations |
(2) | Accounting Policies |
F-10
Table of Contents
December 31, | ||||||||
2004 | 2003 | |||||||
Raw Material | 13% | 11% | ||||||
Work In Process | 25% | 20% | ||||||
Finished Goods and Purchased Parts | 62% | 69% |
F-11
Table of Contents
(In thousands, except per | ||||||||||||||
share data) | ||||||||||||||
2004 | 2003 | 2002 | ||||||||||||
Net Income: | ||||||||||||||
As Reported | $ | 30,435 | $ | 25,206 | $ | 24,518 | ||||||||
Add: Total stock-based employee compensation expense included in net income, net of related tax effects | 117 | 69 | 52 | |||||||||||
Deduct: Total stock-based employee compensation expense, net of related tax effects | (839 | ) | (497 | ) | (578 | ) | ||||||||
Pro Forma | $ | 29,713 | $ | 24,778 | $ | 23,992 | ||||||||
Earnings Per Share: | ||||||||||||||
As Reported | $ | 1.24 | $ | 1.01 | $ | 1.01 | ||||||||
Pro Forma | $ | 1.21 | $ | .99 | $ | .99 | ||||||||
Earnings Per Share — Assuming Dilution: | ||||||||||||||
As Reported | $ | 1.22 | $ | 1.00 | $ | 1.01 | ||||||||
Pro Forma | $ | 1.19 | $ | .98 | $ | .99 |
F-12
Table of Contents
December 31 | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Denominator for basic EPS | 24,602,868 | 25,029,942 | 24,186,839 | |||||||||
Effect of dilutive securities | 301,419 | 216,146 | 123,326 | |||||||||
Denominator for diluted EPS | 24,904,287 | 25,246,088 | 24,310,165 | |||||||||
2004 | 2003 | |||||||
Additional pension liability, net of tax | $ | (6,093 | ) | $ | (5,435 | ) | ||
Translation adjustments | 6,286 | 3,383 | ||||||
Hedging activities, net of tax | 513 | 160 | ||||||
Total | $ | 706 | $ | (1,892 | ) | |||
F-13
Table of Contents
F-14
Table of Contents
(3) | Goodwill and Other Intangibles |
Electrical | Mechanical | Total | ||||||||||
Segment | Segment | Company | ||||||||||
Balance, December 31, 2002 | $ | 312,735 | $ | 530 | 313,265 | |||||||
Adjustments | (2,049 | ) | — | (2,049 | ) | |||||||
Balance, December 31, 2003 | 310,686 | 530 | 311,216 | |||||||||
Acquisitions | 233,224 | — | 233,224 | |||||||||
Balance, December 31, 2004 | $ | 543,910 | $ | 530 | $ | 544,440 | ||||||
Asset | Accumulated | Useful | ||||||||||
Description | Gross Value | Amortization | Life | |||||||||
($ thousands) | ($ thousands) | |||||||||||
Non-Compete Agreements | $ | 2,500 | $ | 33 | 5 Years | |||||||
Trademarks | 4,900 | 386 | 3-5 Years | |||||||||
Patents | 15,400 | 23 | 10 Years | |||||||||
Engineering Drawings | 1,200 | 7 | 10 Years | |||||||||
Customer Relationships | 28,600 | 103 | 10 Years |
F-15
Table of Contents
2005 | 2006 | 2007 | 2008 | 2009 | Thereafter | |||||||||||||||
$6,384,000 | $ | 6,384,000 | $ | 6,380,000 | $ | 5,238,000 | $ | 5,205,000 | $ | 22,467,000 |
(4) | Leases and Rental Commitments |
(In thousands | ||||
Year | of dollars) | |||
2005 | $ | 3,894 | ||
2006 | 3,350 | |||
2007 | 2,930 | |||
2008 | 1,439 | |||
2009 | 928 | |||
Thereafter | 2,070 |
(5) | Long-Term Debt and Bank Credit Facilities |
December 31, | ||||||||
2004 | 2003 | |||||||
(In thousands | ||||||||
of dollars) | ||||||||
Revolving Credit Facility | $ | 426,500 | $ | 191,000 | ||||
Convertible Senior Subordinated Debt | 115,000 | — | ||||||
Other | 6,121 | 4,802 | ||||||
547,621 | 195,802 | |||||||
Less: Current maturities | 271 | 125 | ||||||
Noncurrent portion | $ | 547,350 | $ | 195,677 | ||||
F-16
Table of Contents
F-17
Table of Contents
(In thousands | ||||
Year | of dollars) | |||
2005 | $ | 271 | ||
2006 | 880 | |||
2007 | 216 | |||
2008 | 154 | |||
2009 | 428,100 | |||
Thereafter | 118,000 | |||
Total | $ | 547,621 | ||
(6) | Contingencies and Commitments |
F-18
Table of Contents
2004 | 2003 | |||||||
(In thousands | ||||||||
of dollars) | ||||||||
Balance, beginning of year | $ | (2,953 | ) | $ | (3,431 | ) | ||
Payments | 5,325 | 5,915 | ||||||
Provision | (5,545 | ) | (5,437 | ) | ||||
Additions from acquisitions | (1,834 | ) | — | |||||
Balance, end of year | $ | (5,007 | ) | $ | (2,953 | ) | ||
(7) | Retirement Plans |
F-19
Table of Contents
Target | ||||||||
Allocation | Return | |||||||
Equity investments | 70 | % | 9-10 | % | ||||
Fixed income | 30 | % | 6-7 | % | ||||
Total | 100 | % | 8.75 | % | ||||
2004 | 2003 | |||||||
Equity investments | 73 | % | 74 | % | ||||
Fixed income | 27 | % | 26 | % | ||||
Total | 100 | % | 100 | % | ||||
Benefit Obligation | 2004 | 2003 | ||||||
Discount rate | 5.75 | % | 6.25 | % | ||||
Rates of increase in compensation level | 0- 2.75 | % | 0- 2.5 | % |
Net Periodic Pension Cost | 2004 | 2003 | 2002 | |||||||||
Discount rate | 6.25 | % | 7.0 | % | 7.5 | % | ||||||
Expected long-term rate of return on assets | 8.75 | % | 8.75 | % | 9.0 | % | ||||||
Rates of increase in compensation levels | 0- 2.5 | % | 0- 3.0 | % | 0- 3.75 | % |
F-20
Table of Contents
2004 | 2003 | 2002 | ||||||||||
(In thousands of dollars) | ||||||||||||
Service cost | $ | 1,462 | $ | 1,389 | $ | 1,336 | ||||||
Interest cost | 3,609 | 3,346 | 3,233 | |||||||||
Expected return on plan assets | (4,295 | ) | (4,717 | ) | (5,438 | ) | ||||||
Net amortization and deferral | 1,063 | 172 | (157 | ) | ||||||||
Net periodic expense (income) | $ | 1,839 | $ | 190 | $ | (1,026 | ) | |||||
2004 | 2003 | |||||||
(In thousands of | ||||||||
dollars) | ||||||||
Change in projected benefit obligation: | ||||||||
Obligation at beginning of period | $ | 57,751 | $ | 48,184 | ||||
Service cost | 1,462 | 1,389 | ||||||
Interest cost | 3,609 | 3,346 | ||||||
Actuarial loss | 628 | 7,245 | ||||||
Plan amendments | 310 | — | ||||||
Benefits paid | (2,089 | ) | (2,413 | ) | ||||
Obligation at end of period | $ | 61,671 | 57,751 | |||||
Change in fair value of plan assets: | ||||||||
Fair value of plan assets at beginning of period | 49,616 | 40,958 | ||||||
Actual return on plan assets | 4,799 | 10,688 | ||||||
Employer contributions | 1,317 | 383 | ||||||
Benefits paid | (2,089 | ) | (2,413 | ) | ||||
Fair value of plan assets at end of period | 53,643 | 49,616 | ||||||
Funded status | (8,028 | ) | (8,135 | ) | ||||
Unrecognized net actuarial loss | 16,728 | 17,657 | ||||||
Unrecognized prior service costs | 1,278 | 1,069 | ||||||
Net amount recognized | $ | 9,978 | $ | 10,591 | ||||
Amounts recognized in balance sheets Prepaid benefit cost | $ | 8,399 | $ | 9,012 | ||||
Accrued benefit liability | (9,312 | ) | (8,060 | ) | ||||
Intangible asset | 1,221 | 1,005 | ||||||
Accumulated other comprehensive loss | 9,670 | 8,634 | ||||||
Net amount recognized | $ | 9,978 | $ | 10,591 | ||||
F-21
Table of Contents
(8) | Shareholders’ Investment |
Shares Granted | 14,175 | |||
Weighted-Average Fair Value of Restricted Shares granted during year | $ | 20.30 |
At December 31, 2004 | ||||||||||||||||
1987 Plan | 1991 Plan | 1998 Plan | 2003 Plan | |||||||||||||
Total Plan shares | 450,000 | 1,000,000 | 1,000,000 | 1,500,000 | ||||||||||||
Options granted | 449,850 | 762,882 | 946,900 | 290,750 | ||||||||||||
Restricted stock granted | 14,175 | |||||||||||||||
Options outstanding | 4,550 | 324,184 | 936,100 | 290,750 | ||||||||||||
Restricted stock outstanding | 14,175 | |||||||||||||||
Options available for grant | — | — | 53,100 | 1,195,075 |
F-22
Table of Contents
2004 | 2003 | 2002 | ||||||||||||||||||||||
Weighted Average | Weighted Average | Weighted Average | ||||||||||||||||||||||
Shares | Exercise Price | Shares | Exercise Price | Shares | Exercise Price | |||||||||||||||||||
Outstanding at beginning of year | 1,282,618 | $ | 21.22 | 1,125,754 | $ | 21.98 | 1,460,124 | $ | 18.49 | |||||||||||||||
Granted | 382,500 | 20.77 | 233,750 | 17.70 | 38,250 | 19.97 | ||||||||||||||||||
Exercised | (51,034 | ) | 16.56 | (11,586 | ) | 12.59 | (357,370 | ) | 7.77 | |||||||||||||||
Forfeited | (58,500 | ) | 20.03 | (65,300 | ) | 19.58 | (15,250 | ) | 21.43 | |||||||||||||||
Outstanding at end of year | 1,555,584 | $ | 21.53 | 1,282,618 | $ | 21.22 | 1,125,754 | $ | 21.98 | |||||||||||||||
Options exercisable at year-end | 919,534 | 823,168 | 710,904 | |||||||||||||||||||||
Weighted-average fair value of options granted during the year | $ | 6.96 | $ | 5.55 | $ | 6.52 |
Range of Exercise Prices | ||||||||||||||||
$12.50-$18.75 | $18.76-$28.14 | $28.15-$32.44 | Total | |||||||||||||
Options outstanding at 12/31/04 | 266,684 | 1,226,050 | 62,850 | 1,555,584 | ||||||||||||
Options exercisable at 12/31/04 | 162,634 | 694,050 | 62,850 | 919,534 |
F-23
Table of Contents
(9) | Income Taxes |
2004 | 2003 | 2002 | ||||||||||
(In thousands of dollars) | ||||||||||||
United States | $ | 36,689 | $ | 36,076 | $ | 35,354 | ||||||
Foreign | 11,869 | 4,767 | 2,623 | |||||||||
Total | $ | 48,558 | $ | 40,843 | $ | 37,977 | ||||||
2004 | 2003 | 2002 | |||||||||||
(In thousands of dollars) | |||||||||||||
Current | |||||||||||||
Federal | $ | 9,565 | $ | 9,990 | $ | 7,321 | |||||||
State | 1,181 | 1,009 | 1,017 | ||||||||||
Foreign | 3,893 | 1,416 | 741 | ||||||||||
14,639 | 12,415 | 9,079 | |||||||||||
Deferred | 1,089 | 2,377 | 4,103 | ||||||||||
Total | $ | 15,728 | $ | 14,792 | $ | 13,182 | |||||||
2004 | 2003 | 2002 | ||||||||||
Federal statutory tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes, net of federal benefit | 1.6 | 1.6 | 1.7 | |||||||||
Resolution of tax matters | (4.7 | ) | — | — | ||||||||
Prior period tax refund | — | — | (1.3 | ) | ||||||||
Impact of UK Property Sale | (1.0 | ) | — | — | ||||||||
Other, net | 1.0 | (0.4 | ) | (0.7 | ) | |||||||
Effective tax rate | 31.9 | % | 36.2 | % | 34.7 | % | ||||||
F-24
Table of Contents
December 31 | |||||||||
2004 | 2003 | ||||||||
(In thousands of | |||||||||
dollars) | |||||||||
Federal operating loss carry forward | $ | — | $ | 28 | |||||
Accrued employee benefits | 6,850 | 3,243 | |||||||
Bad debt reserve | 380 | 463 | |||||||
Warranty reserve | 810 | 809 | |||||||
Other | 629 | 1,503 | |||||||
Deferred tax assets | 8,669 | 6,046 | |||||||
Property related | (26,464 | ) | (26,031 | ) | |||||
Intangible items | (19,655 | ) | (15,616 | ) | |||||
Inventory | (4,720 | ) | (5,481 | ) | |||||
Deferred tax liabilities | (50,839 | ) | (47,128 | ) | |||||
Net deferred tax liability | $ | (42,170 | ) | $ | (41,082 | ) | |||
(10) | Acquisitions |
F-25
Table of Contents
F-26
Table of Contents
2004 | 2003 | ||||||||
Sales | $ | 1,295,228 | $ | 1,145,872 | |||||
Cost of Sales | 1,007,404 | 888,129 | |||||||
Gross Profit | 287,824 | 263,743 | |||||||
Operating Expenses | 167,872 | 159,624 | |||||||
Income from Operations | 119,952 | 104,119 | |||||||
Interest Expense | 16,467 | 16,360 | |||||||
Interest Income | 347 | 79 | |||||||
Income Before Taxes and Minority Interest | 103,832 | 87,838 | |||||||
Provision for Income Taxes | 36,455 | 30,722 | |||||||
Income Before Minority Interest | 67,377 | 57,116 | |||||||
Minority Interest in Income, Net of Tax | 3,055 | 1,864 | |||||||
Net Income | $ | 64,322 | $ | 55,252 | |||||
Earnings per Share | $ | 2.21 | $ | 1.87 | |||||
Earnings per Share — Assuming Dilution | $ | 2.18 | $ | 1.85 |
F-27
Table of Contents
At August 30, | At December 31, | ||||||||
2004 CAC | 2004 HVAC | ||||||||
($ thousands) | |||||||||
Cash | $ | — | $ | 13,689 | |||||
Accounts Receivable | 16,199 | 45,517 | |||||||
Inventory | 25,100 | 73,150 | |||||||
Prepaid Expenses | 1,254 | 278 | |||||||
Total Current Assets | 42,553 | 132,634 | |||||||
Net Property, Plant, & Equipment | 22,975 | 74,592 | |||||||
Goodwill (100% of which is expected to be deductible for tax purposes) | 18,204 | 215,020 | |||||||
Purchased Intangible Assets | 8,300 | 44,310 | |||||||
Other Non-Current Assets | — | 4,100 | |||||||
Total Assets | $ | 92,032 | $ | 470,656 | |||||
Accounts Payable | $ | 10,228 | $ | 45,211 | |||||
Other Liabilities | 10,018 | 25,302 | |||||||
Shareholders Equity | 71,786 | 400,143 | |||||||
Total Liabilities & Equity | $ | 92,032 | $ | 470,656 | |||||
Asset Description | CAC | HVAC | Total | Useful Life | |||||||||||||
($ millions) | |||||||||||||||||
Non-Compete Agreements | $ | 0.5 | $ | 2.0 | $ | 2.5 | 5 Years | ||||||||||
Trademarks | 3.8 | 1.1 | 4.9 | 3-5 Years | |||||||||||||
Patents | 0.7 | 14.7 | 15.4 | 10 Years | |||||||||||||
Engineering Drawings | 0.2 | 1.0 | 1.2 | 10 Years | |||||||||||||
Customer Relationships | 3.1 | 25.5 | 28.6 | 10 Years | |||||||||||||
Total | $ | 8.3 | $ | 44.3 | $ | 52.6 | |||||||||||
F-28
Table of Contents
(11) | Industry Segment Information |
Depreciation | ||||||||||||||||||||
Income From | Identifiable | Capital | and | |||||||||||||||||
Net Sales | Operations | Assets | Expenditures | Amortization | ||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
2004 | ||||||||||||||||||||
Mechanical | $ | 199,590 | $ | 15,720 | $ | 140,163 | $ | 7,408 | $ | 7,790 | ||||||||||
Electrical | 556,967 | 39,442 | 1,211,889 | 8,873 | 15,490 | |||||||||||||||
Total REGAL-BELOIT | $ | 756,557 | $ | 55,162 | $ | 1,352,052 | $ | 16,281 | $ | 23,280 | ||||||||||
2003 | ||||||||||||||||||||
Mechanical | $ | 180,741 | $ | 13,349 | $ | 121,976 | $ | 6,229 | $ | 7,373 | ||||||||||
Electrical | 438,357 | 33,877 | 612,469 | 11,736 | 14,699 | |||||||||||||||
Total REGAL-BELOIT | $ | 619,098 | $ | 47,226 | $ | 734,445 | $ | 17,965 | $ | 22,072 | ||||||||||
2002 | ||||||||||||||||||||
Mechanical | $ | 186,716 | $ | 11,678 | $ | 124,053 | $ | 3,522 | $ | 8,410 | ||||||||||
Electrical | 418,576 | 35,549 | 609,935 | 7,232 | 14,764 | |||||||||||||||
Total REGAL-BELOIT | $ | 605,292 | $ | 47,227 | $ | 733,988 | $ | 10,754 | $ | 23,174 | ||||||||||
F-29
Table of Contents
June 29, | Dec. 31, | |||||||||
2005 | 2004 | |||||||||
(Unaudited) | (From | |||||||||
audited | ||||||||||
statements) | ||||||||||
ASSETS | ||||||||||
Current Assets: | ||||||||||
Cash and Cash Equivalents | $ | 29,066 | $ | 31,275 | ||||||
Receivables, less Allowance for Doubtful Accounts of $2,742 in 2005 and $2,376 in 2004 | 200,178 | 176,941 | ||||||||
Deferred Income Taxes | 4,148 | 6,493 | ||||||||
Inventories | 234,642 | 246,816 | ||||||||
Prepaid Expenses and Other Current Assets | 30,549 | 13.394 | ||||||||
Total Current Assets | 498,583 | 474,919 | ||||||||
Property, Plant and Equipment: | ||||||||||
Land and Improvements | 17,204 | 19,026 | ||||||||
Buildings and Improvements | 102,443 | 104,460 | ||||||||
Machinery and Equipment | 335,004 | 335,307 | ||||||||
Property, Plant and Equipment, at Cost | 454,651 | 458,793 | ||||||||
Less — Accumulated Depreciation | (204,780 | ) | (205,120 | ) | ||||||
Net Property, Plant and Equipment | 249,871 | 253,673 | ||||||||
Goodwill | 554,038 | 544,440 | ||||||||
Purchased Intangible Assets, net of Amortization | 48,866 | 52,058 | ||||||||
Other Noncurrent Assets | 23,925 | 26,962 | ||||||||
Total Assets | $ | 1,375,283 | $ | 1,352,052 | ||||||
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | ||||||||||
Current Liabilities: | ||||||||||
Accounts Payable | $ | 82,116 | $ | 106,374 | ||||||
Dividends Payable | 3,781 | 3,483 | ||||||||
Accrued Compensation and Employee Benefits | 39,284 | 30,256 | ||||||||
Other Accrued Expenses | 54,477 | 44,094 | ||||||||
Income Taxes Payable | 19,313 | 10,731 | ||||||||
Current Maturities of Long-Term Debt | 476 | 271 | ||||||||
Total Current Liabilities | 199,447 | 195,209 | ||||||||
Long-Term Debt | 536,895 | 547,350 | ||||||||
Deferred Income Taxes | 48,653 | 48,663 | ||||||||
Other Noncurrent Liabilities | 19,901 | 17,359 | ||||||||
Minority Interest in Consolidated Subsidiaries | 5,115 | 5,292 | ||||||||
Shareholders’ Investment: | ||||||||||
Common Stock, $.01 par value, 50,000,000 shares authorized, 29,860,022 issued in 2005 and 29,798,188 issued in 2004 | 299 | 298 | ||||||||
Additional Paid-In Capital | 265,826 | 263,790 | ||||||||
Less — Treasury Stock, at cost 774,100 shares in 2005 and 2004 | (15,228 | ) | (15,228 | ) | ||||||
Retained Earnings | 312,302 | 288,837 | ||||||||
Unearned Compensation | (844 | ) | (224 | ) | ||||||
Accumulated Other Comprehensive Income | 2,917 | 706 | ||||||||
Total Shareholders’ Investment | 565,272 | 538,179 | ||||||||
Total Liabilities and Shareholders’ Investment | $ | 1,375,283 | $ | 1,352,052 | ||||||
F-30
Table of Contents
Three Months Ended | Six Months Ended | ||||||||||||||||
June 29, | June 29, | June 29, | June 29, | ||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(Unaudited) | |||||||||||||||||
Net Sales | $ | 368,768 | $ | 177,652 | $ | 706,591 | $ | 340,736 | |||||||||
Cost of Sales | 288,950 | 136,811 | 558,329 | 261,708 | |||||||||||||
Gross Profit | 79,818 | 40,841 | 148,262 | 79,028 | |||||||||||||
Operating Expenses | 44,007 | 26,667 | 86,586 | 52,322 | |||||||||||||
Income From Operations | 35,811 | 14,174 | 61,676 | 26,706 | |||||||||||||
Interest Expense | 5,894 | 1,509 | 11,348 | 2,836 | |||||||||||||
Interest Income | 28 | 29 | 76 | 32 | |||||||||||||
Income Before Taxes & Minority Interest | 29,945 | 12,694 | 50,404 | 23,902 | |||||||||||||
Provision For Income Taxes | 10,996 | 4,558 | 18,638 | 8,594 | |||||||||||||
Income Before Minority Interest | 18,949 | 8,136 | 31,766 | 15,308 | |||||||||||||
Minority Interest in Income, Net of Tax | 504 | 507 | 1,035 | 819 | |||||||||||||
Net Income | $ | 18,445 | $ | 7,629 | $ | 30,731 | $ | 14,489 | |||||||||
Per Share of Common Stock: | |||||||||||||||||
Earnings Per Share — Basic | $ | .63 | $ | .31 | $ | 1.06 | $ | .59 | |||||||||
Earnings Per Share — Assuming Dilution | $ | .62 | $ | .31 | $ | 1.03 | $ | .58 | |||||||||
Cash Dividends Declared | $ | .13 | $ | .12 | $ | .25 | $ | .24 | |||||||||
Average Number of Shares Outstanding — Basic | 29,064,518 | 24,450,391 | 29,049,209 | 24,744,342 | |||||||||||||
Average Number of Shares Outstanding — Assuming Dilution | 29,720,400 | 24,677,155 | 29,982,397 | 24,977,674 |
F-31
Table of Contents
Six Months Ended | ||||||||||
June 29, | June 29, | |||||||||
2005 | 2004 | |||||||||
(Unaudited) | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
Net income | $ | 30,731 | $ | 14,489 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 18,845 | 11,031 | ||||||||
Gain on sale of assets | (101 | ) | – | |||||||
Change in assets and liabilities | (15,718 | ) | (9,209 | ) | ||||||
Net cash provided by operating activities | 33,757 | 16,311 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
Additions to property, plant and equipment | (15,549 | ) | (6,699 | ) | ||||||
Business acquisitions, net of cash acquired | (5,490 | ) | – | |||||||
Sale of property, plant and equipment | 4,156 | 1,169 | ||||||||
Other, net | (344 | ) | (2,828 | ) | ||||||
Net cash used in investing activities | (17,227 | ) | (8,358 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Proceeds from (payment of) long-term debt | (11,018 | ) | 18,976 | |||||||
Repurchase of common stock | – | (12,499 | ) | |||||||
Dividends paid to shareholders | (6,968 | ) | (6,011 | ) | ||||||
Dividends paid to minority partners | (1,315 | ) | – | |||||||
Stock issued under option plans | 1,146 | 553 | ||||||||
Capitalized financial fees | – | (3,801 | ) | |||||||
Net cash used in financing activities | (18,155 | ) | (2,782 | ) | ||||||
EFFECT OF EXCHANGE RATE ON CASH | (584 | ) | 12 | |||||||
Net (decrease) increase in cash and cash equivalents | (2,209 | ) | 5,159 | |||||||
Cash and cash equivalents at beginning of period | 31,275 | 9,100 | ||||||||
Cash and cash equivalents at end of period | $ | 29,066 | $ | 14,259 | ||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||||
Cash paid for: | ||||||||||
Interest | $ | 10,628 | $ | 2,234 | ||||||
Income taxes | $ | 5,497 | $ | 5,559 |
F-32
Table of Contents
1. | Basis of Presentation |
2. | Inventories |
June 29, | December 31, | |||||||
2005 | 2004 | |||||||
Raw Material | 14% | 13% | ||||||
Work-in Process | 25% | 25% | ||||||
Finished Goods | 61% | 62% |
F-33
Table of Contents
3. | Comprehensive Income |
Second Quarter | |||||||||||||||||
Ended | Six Months Ended | ||||||||||||||||
June 29, | June 29, | June 29, | June 29, | ||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(In thousands of dollars) | |||||||||||||||||
Net income as reported | $ | 18,445 | $ | 7,629 | $ | 30,731 | $ | 14,489 | |||||||||
Comprehensive income (expense) from: | |||||||||||||||||
Cumulative translation adjustments | (729 | ) | (592 | ) | (1,978 | ) | (615 | ) | |||||||||
Changes in fair value of hedging activities, net of tax | 2,409 | (91 | ) | 5,108 | 190 | ||||||||||||
Hedging activities reclassified into earnings from accumulated other comprehensive income (“AOCI”), net of tax | (73 | ) | (49 | ) | (1,178 | ) | (180 | ) | |||||||||
1,607 | (732 | ) | 1,952 | (605 | ) | ||||||||||||
Comprehensive income | $ | 20,052 | $ | 6,897 | $ | 32,683 | $ | 13,884 | |||||||||
4. | Warranty Costs |
Second Quarter | ||||||||||||||||
Ended | Six Months Ended | |||||||||||||||
June 29, | June 29, | June 29, | June 29, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(In thousands of dollars) | ||||||||||||||||
Beginning balance | $ | 5,237 | $ | 2,966 | $ | 5,007 | $ | 2,953 | ||||||||
Deduct: Payments | (1,149 | ) | (1,104 | ) | (2,805 | ) | (2,220 | ) | ||||||||
Add: Provision | 1,527 | 1,161 | 3,413 | 2,290 | ||||||||||||
Ending balance | $ | 5,615 | $ | 3,023 | $ | 5,615 | $ | 3,023 | ||||||||
F-34
Table of Contents
5. | Business Segments |
Mechanical Segment | Electrical Segment | |||||||||||||||||||||||||||||||
Second Quarter | Six Months | Second Quarter | Six Months | |||||||||||||||||||||||||||||
June 29, | June 29, | June 29, | June 29, | June 29, | June 29, | June 29, | June 29, | |||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||||||||||||||
Net sales | $ | 51,546 | $ | 51,142 | $ | 100,147 | $ | 98,040 | $ | 317,222 | $ | 126,510 | $ | 606,444 | $ | 242,696 | ||||||||||||||||
Income from operations | $ | 3,139 | $ | 3,889 | $ | 5,876 | $ | 6,634 | $ | 32,672 | $ | 10,285 | $ | 55,800 | $ | 20,072 | ||||||||||||||||
-% of net sales | 6.1% | 7.6% | 5.9% | 6.8% | 10.3% | 8.1% | 9.2% | 8.3% | ||||||||||||||||||||||||
Goodwill at end of period | $ | 530 | $ | 530 | $ | 530 | $ | 530 | $ | 553,508 | $ | 310,686 | $ | 553,508 | $ | 310,686 |
6. | Goodwill and Other Intangibles |
Electrical | Mechanical | |||||||||||
Segment | Segment | Total | ||||||||||
Balance as of December 31, 2004 | $ | 543.9 | $ | 0.5 | $ | 544.4 | ||||||
GE HVAC acquisition adjustments | 5.4 | – | 5.4 | |||||||||
GE HVAC and CAC acquisition costs | 3.3 | – | 3.3 | |||||||||
Acquisition of Changzhou Modern Technologies | .9 | – | .9 | |||||||||
Balance as of June 29, 2005 | $ | 553.5 | $ | 0.5 | $ | 554.0 | ||||||
F-35
Table of Contents
December 31, 2004 | |||||||||||||||||
Weighted- | Carrying | Accumulated | |||||||||||||||
Average Life (yrs) | Amount | Amortization | Net | ||||||||||||||
Amortized intangible assets: | |||||||||||||||||
Non-Compete Agreements | 5.0 | $ | 2.5 | $ | 0.0 | $ | 2.5 | ||||||||||
Trademarks | 4.0 | 4.9 | 0.4 | 4.5 | |||||||||||||
Patents | 10.0 | 15.4 | 0.0 | 15.4 | |||||||||||||
Engineering Drawings | 10.0 | 1.2 | 0.0 | 1.2 | |||||||||||||
Customer Relationships | 10.0 | 28.6 | 0.2 | 28.4 | |||||||||||||
Total | 9.2 | $ | 52.6 | $ | 0.6 | $ | 52.0 | ||||||||||
June 29, 2005 | |||||||||||||||||
Weighted- | Carrying | Accumulated | |||||||||||||||
Average Life (yrs) | Amount | Amortization | Net | ||||||||||||||
Amortized intangible assets: | |||||||||||||||||
Non-Compete Agreements | 5.0 | $ | 2.5 | $ | 0.3 | $ | 2.2 | ||||||||||
Trademarks | 4.0 | 4.9 | 1.1 | 3.8 | |||||||||||||
Patents | 10.0 | 15.4 | 0.8 | 14.6 | |||||||||||||
Engineering Drawings | 10.0 | 1.2 | 0.1 | 1.1 | |||||||||||||
Customer Relationships | 10.0 | 28.6 | 1.4 | 27.2 | |||||||||||||
Total | 9.2 | $ | 52.6 | $ | 3.7 | $ | 48.9 | ||||||||||
7. | Stock-based Compensation |
F-36
Table of Contents
Second Quarter | Six Months Ended | ||||||||||||||||
June 29, | June 29, | June 29, | June 29, | ||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(In thousands of dollars) | |||||||||||||||||
Net Income: | |||||||||||||||||
As reported | $ | 18,445 | $ | 7,629 | $ | 30,731 | $ | 14,489 | |||||||||
Deduct: Total stock-based employee compensation expense, net of related tax effects | (415 | ) | (229 | ) | (882 | ) | (368 | ) | |||||||||
Add: Total stock-based employee compensation included in net income, net of related tax effects | 102 | 32 | 262 | 49 | |||||||||||||
Pro-forma | $ | 18,132 | $ | 7,432 | $ | 30,111 | $ | 14,170 | |||||||||
Earnings per share—basic: | |||||||||||||||||
As reported | $ | .63 | $ | .31 | $ | 1.06 | $ | .59 | |||||||||
Pro-forma | $ | .62 | $ | .30 | $ | 1.04 | $ | .57 | |||||||||
Earnings per share—assuming dilution: | |||||||||||||||||
As reported | $ | .62 | $ | .31 | $ | 1.03 | $ | .58 | |||||||||
Pro-forma | $ | .61 | $ | .30 | $ | 1.01 | $ | .57 |
F-37
Table of Contents
8. | Pension Plans |
Second Quarter | Six Months Ended | |||||||||||||||
June 29, | June 29, | June 29, | June 29, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(In thousands of dollars) | ||||||||||||||||
Service cost | $ | 651 | $ | 366 | $ | 1,302 | $ | 731 | ||||||||
Interest cost | 886 | 902 | 1,772 | 1,804 | ||||||||||||
Expected return on plan assets | (1,123 | ) | (1,073 | ) | (2,246 | ) | (2,147 | ) | ||||||||
Amortization of prior service cost | 32 | 25 | 64 | 50 | ||||||||||||
Amortization of net loss | 244 | 240 | 488 | 480 | ||||||||||||
Net periodic benefit cost | $ | 690 | $ | 460 | $ | 1,380 | $ | 918 | ||||||||
9. | Earnings Per Share (EPS) |
Second Quarter | ||||||||||||||||
Ended | Six Months Ended | |||||||||||||||
June 29, | June 29, | June 29, | June 29, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Denominator for basic EPS—weighted average shares | 29,065 | 24,450 | 29,049 | 24,744 | ||||||||||||
Effect of dilutive securities | 655 | 227 | 933 | 234 | ||||||||||||
Denominator for diluted EPS | 29,720 | 24,677 | 29,982 | 24,978 |
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10. | Contingencies |
11. | Related Party Transactions |
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12. | Derivative Instruments |
13. | Acquisitions |
14. | Announcement of Stock Offering |
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Page | ||||
Forward-Looking Statements | 1 | |||
The Company | 2 | |||
Risk Factors | 3 | |||
Use of Proceeds | 9 | |||
Description of Capital Stock | 11 | |||
Selling Shareholder | 15 | |||
Plan of Distribution | 17 | |||
Where You Can Find More Information | 19 | |||
Incorporation of Information by Reference | 19 | |||
Legal Matters | 20 | |||
Experts | 20 |
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• | unexpected issues and costs arising from the integration of acquired companies and businesses, such as our recent acquisitions of the HVAC motors and capacitors businesses and the Commercial AC motors business from GE; |
• | marketplace acceptance of our recent acquisitions, including the loss of, or a decline in business from, any significant customers; |
• | unanticipated fluctuations in commodity prices and raw material costs and issues affecting our ability to pass increased costs on to our customers; |
• | cyclical downturns affecting the markets for capital goods; |
• | substantial increases in interest rates that impact the cost of our outstanding debt; |
• | the success of our management in increasing sales and maintaining or improving the operating margins of our businesses; |
• | actions taken by our competitors; |
• | difficulties in staffing and managing foreign operations; |
• | our ability to satisfy various covenant requirements under our credit facility; and |
• | other risks and uncertainties described from time to time in our reports filed with the U.S. Securities and Exchange Commission, which are incorporated by reference. |
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• | make it difficult for us to fulfill our obligations under our credit and other debt agreements; |
• | make it more challenging for us to obtain additional financing to fund our business strategy and acquisitions, debt service requirements, capital expenditures, and working capital; |
• | increase our vulnerability to interest rate changes and general adverse economic and industry conditions; |
• | require us to dedicate a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the availability of our cash flow to finance acquisitions and to fund working capital, capital expenditures, research and development efforts and other general corporate activities; |
• | limit our flexibility in planning for, or reacting to, changes in our business and our markets; and |
• | place us at a competitive disadvantage relative to our competitors that have less debt. |
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• | requiring a supermajority vote of shareholders, in addition to any vote otherwise required, to approve business combinations not meeting adequacy of price standards; |
• | prohibiting some business combinations between an interested shareholder and us for a period of three years, unless the combination was approved by our board of directors prior to the time the shareholder became a 10% or greater beneficial owner of our shares or under some other circumstances; |
• | limiting actions that we can take while a takeover offer for us is being made or after a takeover offer has been publicly announced; and |
• | limiting the voting power of shareholders who own more than 20% of our stock. |
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• | quarterly fluctuation in our operating income and earnings per share results; |
• | decline in demand for our products; |
• | significant strategic actions by our competitors, including new product introductions or technological advances; |
• | fluctuations in interest rates; |
• | cost increases in energy, raw materials or labor; |
• | changes in revenue or earnings estimates or publication of research reports by analysts; and |
• | domestic and international economic and political factors unrelated to our performance. |
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Net Proceeds Received by GE | ||||
upon Sale of Shares | ||||
of Our Common Stock | ||||
Aggregate | Per Share | Incremental Value Sharing | ||
($ in millions, except per share amounts) | ||||
$125.7 or more | $27.57 or more | We would receive $6.7 of the net proceeds plus 50% of the net proceeds received by GE in excess of $125.7. | ||
$119 to $125.7 | $26.10 to $27.57 | We would receive up to $6.7 of net proceeds received by GE. | ||
$109 to $119 | $23.91 to $26.10 | We would receive no net proceeds received by GE. | ||
$89 to $109 | $19.52 to $23.91 | We would be required to pay to GE up to $20. | ||
$89 or less | $19.52 or less | We would be required to pay GE $20, and GE would retain all remaining downside risk. |
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• | during any fiscal quarter commencing after June 30, 2004 if the sale price of our common stock for at least 20 trading days in the 30 trading-day period ending on the last trading day of the preceding fiscal quarter exceeds 130% of the conversion price on that 30th trading day; |
• | subject to some exceptions, during the five business day period after any five consecutive trading-day period in which the trading price per note for each day of that measurement period was less than 98% of the product of the closing sale price of our common stock and the number of shares issuable upon conversion of $1,000 principal amount of the notes; |
• | if we have called the notes for redemption; or |
• | upon the occurrence of specified corporate transactions described in the indenture. |
• | directors may be removed from office only for cause and only with the affirmative vote of a majority of the votes entitled to be cast at an election of directors; |
• | any vacancy on the board of directors or any newly created directorship may be filled by the remaining directors then in office, though less than a quorum; and |
• | our shareholders have no cumulative voting rights, which means that the holders of shares of our common stock entitled to exercise more than 50% of the voting power are able to elect all of the directors to be elected. |
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Number of Shares | Percentage of | Number of | ||||||||||
Name of Selling Shareholder | Beneficially Owned | Outstanding Shares | Shares Offered | |||||||||
General Electric Company | 4,559,048 | 15.7 | % | 4,559,048 | ||||||||
3135 Easton Turnpike | ||||||||||||
Fairfield, CT 06828 |
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• | the second anniversary of the date on which GE first owns shares constituting less than 5% of the then outstanding shares of our common stock; or |
• | the date upon which a change of control of the company occurs. |
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• | to or through underwriters or dealers, including (after GE owns less than 1,139,762 shares) in a block trade in which a dealer will attempt to sell a block of securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
• | directly to purchasers or to a single purchaser; |
• | through agents; or |
• | any combination of these. |
• | a fixed price, which may be changed; |
• | market prices prevailing at the time of sale; |
• | prices related to the prevailing market price; or |
• | negotiated prices. |
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• | incorporated documents are considered part of this prospectus; |
• | we are disclosing important information to you by referring you to those documents; and |
• | information we file with the SEC will automatically update and supersede information contained in this prospectus. |
• | our Annual Report on Form 10-K for our fiscal year ended December 31, 2004; |
• | our Current Reports on Form 8-K dated August 30, 2004 (filed on September 3, 2004), as amended by Form 8-K/A on October 12, 2004, December 30, 2004, December 31, 2004 (as amended by Form 8-K/A on February 14, 2005), January 11, 2005, January 26, 2005, and January 26, 2005 (as amended by Form 8-K/A on February 11, 2005); and |
• | the description of our common stock and common share purchase rights contained in our Registration Statement on Form 8-A, filed January 18, 2005, including any amendment or report filed for the purpose of updating such description. |
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