ITEM 1. BUSINESS
GENERAL
United Dominion Industries Limited (the "Company" or the "Registrant") was
initially incorporated in Canada as Dominion Bridge Company, Limited in 1882,
reincorporated with the same name under the Companies Act of Canada on July 30,
1912, and continued with unlimited duration under the Canada Business
Corporations Act effective May 8, 1980. The Company changed its name to AMCA
International Limited on June 1, 1981 and to United Dominion Industries Limited
effective June 4, 1990.
The registered office of the Company is Suite 5300, Commerce Court West,
P.O. Box 85, Toronto, Ontario, Canada M5L 1B9. Its principal executive office is
at 2300 One First Union Center, 301 South College Street, Charlotte, North
Carolina, 28202, USA.
The Company manufactures proprietary engineered products for sale primarily
to industrial and commercial markets worldwide. The Company's businesses are
organized in four segments: Flow Technology, Machinery, Specialty Engineered
Products and Test Instrumentation.
The Company's Flow Technology businesses include:
o Marley Cooling Tower, Spig and Cofimco -- cooling towers for
power generation, refrigeration, HVAC and industrial uses.
o Flair -- filters and dryers for compressed air systems.
o Weil-McLain -- cast iron boilers for commercial and
residential customers.
o Waukesha Cherry-Burrell and Bran + Luebbe -- valves, pumps,
fittings, and integrated systems for sanitary (i.e. food,
beverages, dairy, pharmaceutical and cosmetics) and industrial
processing markets.
o Marley Pump -- submersible petroleum and water pumps and leak
detection equipment.
o Mueller Steam -- pipeline strainers and check, butterfly and
plug valves.
o CMB -- backflow prevention devices.
The Company's Machinery businesses include:
o BOMAG, HYPAC, Compaction America and Stow -- soil, asphalt and
landfill compactors and light equipment for concrete placement
and treatment.
o Sunflower, Feterl and Richardton -- tilling equipment, augers,
grain drills and handling systems.
The Company's Specialty Engineered Product businesses include:
o Door Products (Ceco, Trussbilt, Fleming and Dominion Building
Products/Amsco) -- steel frames and doors for commercial,
industrial and institutional markets.
o Door Products (Serco, Kelley, TKO and Lee Engineering) -- dock
levelers, vehicle restraints, dock seals and shelters,
stackers, scissor lifts and tilters.
o Marley Electric Heating -- electric resistant heaters and
ventilation equipment for industrial, commercial and
residential markets.
o Fenn Manufacturing -- close-tolerance machining primarily for
the aerospace industry and metal forming equipment.
o C & M -- powered roller conveyor systems for the corrugated
and solid fiber carton industry.
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The Company's Test Instrumentation businesses include:
o Test Measurement (Radiodetection, Riser-Bond and Bicotest) --
portable pipe and cable locators, and line management and
monitoring systems for the utilities and telecommunications
industries.
o ATP (Amprobe TIF and Promax) -- hand-held testing equipment,
refrigerant recovery and handling systems and refrigerant leak
detection devices.
o AIT -- diagnostic tools, precision fastening systems, and
gaging devices primarily for the automotive industry; carbide
machine parts and scales and weighing systems.
o Lunaire/LDS -- environmental testing chambers, industrial
ovens and electro-dynamic shakers for vibration testing.
o Atmospheric Air (TMI and King) -- air supply systems for the
automotive and food processing industries.
The Company has consolidated assets of approximately $2.2 billion and
employs approximately 14,000 people at over 90 manufacturing locations in more
than 20 countries. The Company sells its products in over 120 countries and had
1999 consolidated sales of approximately $2.15 billion.
References herein to the Company are, where the context so requires, to
the Company and one or more of its subsidiaries. Dollar references are to U.S.
dollars unless otherwise indicated.
RECENT DEVELOPMENTS
The Company completed twelve product line acquisitions during 1999 and
early 2000, adding annualized sales approaching $300 million. During the first
quarter, the Company purchased Riser-Bond, a manufacturer of cable fault
locators, for Radiodetection, and Ranieri, an Italian producer of stick ice
cream molds, for Waukesha Cherry-Burrell's ice cream division. The Company added
Aqua-Cool, an Australian cooling tower company, in the second quarter. In
August, the Company made a large acquisition, Bran + Luebbe, a German
manufacturer of metering pumps and analyzers, which compliments the Company's
Waukesha Cherry-Burrell business. Also in the third quarter, the Company added
TKO Doors for Serco, Fleming, a Canadian steel door manufacturer, for Door
Products, and Radiodetection China for Radiodetection. In the fourth quarter,
the Company added the Williamson & Milwaukee-Thermoflo product lines to
Weil-McLain, Patton industrial fans, heaters and ventilation equipment to Marley
Electric Heating, Bicotest, a British producer of instruments to detect the
distance to fault on wire cables, to Radiodetection and General Electronic
Systems, a manufacturer of industrial platform scales, to the AIT group. In the
first week of 2000 the Company added the Kelley Company, a full-line producer of
dock equipment, to its Dock Products division. Kelley will compliment the
Company's Serco business.
The Company's UDXcellence initiative became the number one operating
priority of the Company during 1999. The program was launched during the first
quarter and is a comprehensive Company-wide initiative designed to improve
productivity, increase efficiency and lower asset utilization. As part of the
UDXcellence program, the Company incurred one-time charges during the year of
$22.2 million in connection with the following initiatives:
o Closing a Flair operation in Virginia and combining it with
one in North Carolina;
o Moving the King Company's manufacturing operations from
Minnesota to South Carolina and thereby reducing the cost
structure;
o Rationalizing door and frame production at its Door Products
division;
o Combining and rationalizing the Test Measurement division,
closing two facilities and reducing headcount; and
o Consolidating some of Mueller Flow's product lines with
Mueller Steam and Bran + Luebbe, and exiting others.
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In September 1999, the Company completed its 2 million share repurchase
program accomplished pursuant to a normal course issuer bid in Canada. That
program began in October 1998. Together with its 3 million share issuer bid
repurchase at the beginning of 1998, and its 2 million share normal course bid
accomplished in 1997 and 1998, the Company has purchased approximately 15% of
its outstanding common shares during the period 1997 through 1999.
The Company announced in December a reorganization of its senior
management, promoting Glenn A. Eisenberg to President and Chief Operating
Officer, B. Bernard Burns, Jr. to Executive Vice President and Chief
Administrative Officer and William Dries, Senior Vice President, to Chief
Financial Officer. The Company's segment organization remains in place with
James M. Gibbs continuing as President of Flow Technology and Lothar Wahl as
President of Machinery. Richard F. Bradbury was named President of Specialty
Engineered Products and Timothy J. Verhagen became President of Test
Instrumentation.
INDUSTRY SEGMENTS
The Company's businesses are organized into four industry segments: Flow
Technology, Machinery, Specialty Engineered Products and Test Instrumentation.
The following table sets out the sales and operating income by segment for
the Company's ongoing businesses:
Year Ended December 31
1999 1998 1997
(in millions)
Sales
Flow Technology $ 992 $ 946 $ 846
Machinery 456 454 364
Specialty Engineered Products 388 349 310
Test Instrumentation 312 271 124
Total $2,148 $2,020 $1,643
Operating Income
Flow Technology $ 94 $ 97 $ 79
Machinery 51 51 42
Specialty Engineered Products 42 39 42
Test Instrumentation 18 21 12
Total $ 205 $ 207 $ 175
Additional information about the Company's industry segments for each of
the last three fiscal years is contained in Note 12 of the Notes to Consolidated
Financial Statements incorporated by reference into this document.
FLOW TECHNOLOGY SEGMENT
Marley Cooling Tower
According to industry sources, Marley Cooling Tower is the leading United
States-based manufacturer of water cooling towers. It manufactures and markets
products globally ranging from small, factory-assembled cooling towers used in
refrigeration and air conditioning systems to large mechanical draft and
hyperbolic concrete cooling towers constructed on-site for electric utilities
and industrial applications. Marley Cooling Tower also furnishes spare parts and
rebuilds and upgrades cooling towers designed by
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Marley or its competitors. Its Recold Division manufactures and markets
evaporative condensers and closed circuit coolers for the air conditioning and
refrigeration industry. Marley Cooling Tower's principal competitors include
Baltimore Aircoil, Balcke-Durr, Evapco, GEA, Hamon, Psychometric Services and
Liang Chi.
Marley Cooling Tower's business is divided among the industrial, utility
and HVAC markets. It has nine regional sales offices and more than 70
representative offices across the United States and Canada, as well as
subsidiary companies in England, Germany, Spain, Australia and Malaysia, and
sales offices and joint venture partners in various places throughout the world.
The Company's 1999 acquisition of Aqua-Cool, in Australia, increased Marley
Cooling Tower's Australian presence.
Marley Cooling Tower's Resolite business produces engineered fiberglass
reinforced plastic composite panels in opaque and light transmitting versions
which are used in industrial applications requiring superior corrosion
resistance. Resolite uses the pultrusion process to manufacture fiberglass
reinforced composite products, principally for the electrical and structural
markets. Resolite's principal competitors are Enduro Composite Systems and
Bedford Reinforced Plastics, Inc.
Flair
According to industry sources, Flair is the leading United States
manufacturer of equipment used to dehydrate, filter and purify air and gas in
various industrial applications. Flair's products include dryer and purification
equipment such as regenerative and refrigerated compressed air and oil dryers
that eliminate moisture and contaminants from compressed gases. Flair also
supplies filter assemblies, elements, valves and desiccant used in the
replacement market. Products are marketed under the following names: Pneumatic
Products (regenerative dryers); General Pneumatics (refrigerated and
regenerative dryers); Deltech (refrigerated and regenerative dryers); Dollinger
(filters and oil mist eliminators); Delair (refrigerated and regenerative air
dryers for the European market); Kemp (regenerative dryers for liquids and gases
other than air); Siva (solvent distillation equipment); and Technolab
(compressed air filters).
Components for compressed air systems plus replacement filters and parts
represent a majority of Flair's business. Flair produces substantially all of
the components in a compressed air system with the exception of the compressor
itself. Ingersoll-Rand, the largest United States manufacturer of compressors,
is Flair's largest customer. Flair has operations throughout North America and
Western Europe, and certain products are marketed by distributors and sales
representatives. Its international presence includes a global strategic alliance
with Ingersoll-Rand for the supply of private label compressed air dryers and
other products for worldwide distribution. In addition to its presence in
Europe, Flair has formed joint ventures in India, Japan and Korea. Flair's
principal competitors for compressed air products include Hankison, Zeks Air
Dryer, General Air, Henderson Engineering, Balston, Finite, Ultrafilter and
Domnick Hunter.
Waukesha Cherry-Burrell
Waukesha Cherry-Burrell manufactures stainless steel equipment for dairy,
food, beverage, pharmaceutical and industrial processing. Product families
include: positive displacement, centrifugal, gear and high pressure piston
pumps; automated and manual valves; tubular fittings and clamps; scraped
surface, tubular and plate heat exchangers; homogenizers and other dispersion
equipment; and freezers, ingredient feeders, fillers, stick novelty and wrapper
equipment for frozen confectionery.
The 1999 acquisition of Ranieri, along with the acquisitions of
PMS/Alliance (1997) and APV Ice Cream (1998), have positioned Waukesha
Cherry-Burrell as a leading, full-line equipment supplier to the ice cream
industry. Waukesha Cherry-Burrell manufactures its
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products in the United States, Mexico, Denmark and Italy, and also has
engineering groups in Mexico City and Louisville, Kentucky that design and
install turnkey food and beverage systems throughout North, Central and South
America.
The primary markets for Waukesha Cherry-Burrell are the Americas, Western
Europe and the Pacific Rim. Its primary competitors are Tetra Laval, APV and
GEA. These companies are European-based and also manufacture broad equipment
lines. Waukesha Cherry-Burrell markets its products through a combination of
direct sales and independent distributor partners and systems integrators.
Bran + Luebbe
Bran + Luebbe, a German-based company acquired in August 1999, manufactures
a broad line of metering pumps and systems (the metering division) and a range
of analyzers for laboratories and the process industry (the analyzers division).
Its product families include precision diaphragm metering pumps, high-pressure
pumps, screw feeders, solids metering systems, blending systems, laboratory
analyzers, in-line process analyzers and environmental monitors.
Bran + Luebbe's primary markets are chemical, petrochemical, pulp and
paper, pharmaceuticals and cosmetics, oil and gas, food and beverage,
agriculture and private and public laboratories. It serves these industries
through thirteen marketing companies in strategic locations around the world.
Bran + Luebbe's primary manufacturing facility is located near Hamburg, Germany,
with systems assembly facilities in Sweden, France, the United States and the
U.K. Bran + Luebbe's major competitors in metering are Milton Roy and LEWA. The
analyzer market is more fragmented, with Foss and Thermo Electron among the more
significant competitors.
Weil-McLain
According to industry sources, Weil-McLain is the leading North American
manufacturer of oil and gas fired cast iron boilers used for heating homes,
apartment buildings, offices and schools. In addition, Weil-McLain manufactures
and markets products associated with the sale of its boilers, such as hydronic
baseboards, in-floor radiation, oil burners, control panels and indirect water
heaters. In 1999, Weil-McLain expanded its boiler line and entered the oil
furnace market by acquiring Williamson and Milwaukee-Thermoflo. Approximately
80% of Weil-McLain's total revenue is derived from the replacement market.
Boilers are sold throughout North America, with the largest volume concentrated
in the New England, middle Atlantic and midwest sections of the United States.
Weil-McLain's principal United States competitors in the cast iron boiler market
are Burnham, Peerless, Earl Reed International and Mestek.
Weil-McLain believes it is the lowest cost producer of cast iron boilers in
the United States and the industry technology leader. In addition, management
believes that Weil-McLain's distribution system is a leader in its industry,
with approximately 250 distributors in 650 locations. Distributors sell to
independent heating contractors and dealers who install the boilers.
Marley Pump
Marley Pump designs, manufactures and sells pumps for gasoline service
stations, bulk petroleum facilities and water well systems. Products are sold
under the "Red Jacket" brand name to major oil companies and various equipment
distributors. According to industry sources, Marley Pump has a leading United
States market share in submersible gasoline pumps. Marley Pump also produces
mechanical and electronic leak detection devices that monitor underground
storage tanks and pumping equipment at service stations and other bulk fuel
facilities worldwide. In addition, Marley Pump competes in the submersible and
surface
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pump water systems market worldwide. At year end 1998, Marley Pump sold its
motor manufacturing business, which permitted it to focus on its core pump
manufacturing business. Marley Pump's principal competitors are Goulds Pumps,
Sta-Rite Industries, The Grundfos Group, F.E. Meyers, Aermotor and F.E. Petro.
Marley Pump's products are marketed domestically primarily through distributors,
and internationally through distributors and sales representatives.
Mueller Steam
Mueller Steam Specialty manufactures three primary product lines:
strainers, check valves and butterfly valves. Strainers and valves are used in
various industrial processes in which piping systems exist. Mueller Steam
believes that it is the largest manufacturer of non-automatic pipeline strainers
in the world. In addition, Mueller Steam designs and manufactures a line of
specialized products directed primarily to the oil, gas and petrochemical
industries. These products include fabricated strainers, lined plug and ball
valves, temporary strainers and other flow products. Mueller Steam has
international sales offices in the United Kingdom, Singapore, Canada and the
United Arab Emirates and serves Latin America from the United States. Mueller
Steam serves industrial and commercial markets through independent sales
representatives and distributors. Principal competitors include Haywood,
Keckley, Keystone & Bray, and Crane.
CMB
CMB designs and manufactures fluid control valves and distributes them
worldwide through its network of distributors and sales representatives. FEBCO,
CMB's complete line of bronze and ductile iron backflow prevention assemblies,
is used in irrigation, plumbing, industrial, municipal and fire protection
markets. CMB also manufactures the Polyjet Control Valve, a custom-designed,
multi-jet sleeve valve designed to control high pressure or rapid flow or to
provide very precise flow control. POLYJET valves are used primarily in hydro or
dam construction projects and in other unique waterworks applications. CMB's
K-FLO AWWA Butterfly Valves are used in specialized applications including
waterworks and waste water systems, which are sold throughout the world. CMB's
competitors include Watts Industries, Zurn/Wilkins, Henry Pratt Co. and
Kvaerner.
MACHINERY SEGMENT
Compaction
Management believes that BOMAG, headquartered in Germany, is the world
leader in the production and sale of compaction equipment for soil and asphalt
applications. BOMAG also manufactures equipment for soil stabilizing, recycling
and sanitary landfill applications, and offers an integrated Compaction
Management System which processes on-line compaction data for the most advanced
dynamic compaction control methods. BOMAG pioneered the double vibratory roller
concept and its product line consists of more than 100 models ranging from
small, hand-operated tampers up to its 36-ton landfill compactor. BOMAG entered
the grader business in 1998 with four models in the 60-132 kW classes. With its
acquisition of Stow Manufacturing (1997), BOMAG broadened its light equipment
product offering to include equipment for concrete placement and treatment,
paving and site preparation.
Products are marketed under the BOMAG, HYPAC and STOW brand names
throughout the world by independent distributors and licensees and through
direct sales to the rental industry and all segments of the general construction
and waste management industries, including a wide range of governmental
agencies. Compaction America, BOMAG's manufacturing base in North America,
produces both BOMAG and HYPAC products. BOMAG Light Equipment, located in
Conklin, New York, is a division of Compaction America and produces the STOW
products.
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BOMAG operates through subsidiaries in the United States, Canada, England,
France, Austria and Germany, with manufacturing facilities located in Germany,
Illinois and New York and additional sales and service centers located in Jordan
and Singapore. BOMAG owns an interest in Nippon BOMAG in Japan and has license
or cooperation agreements with partners in India, Malaysia and the Czech
Republic.
BOMAG competes directly with a number of small regional companies and
several major international companies, including Ingersoll Rand, Caterpillar,
Dynapac and Wacker, some of which are larger than BOMAG and offer other
construction-related products in addition to compaction equipment.
Agricultural Equipment
Agricultural Equipment consists of three businesses: Sunflower
Manufacturing Company, Feterl Manufacturing Company and Richardton Manufacturing
Company. Management believes that Sunflower is among the world's leading
producers of high-quality disc harrows. Its other tillage equipment, grain
drills and grain carts are used for seedbed preparation, seeding and harvesting
operations. Sunflower's primary market is the midwestern and high plains areas
of the United States. Its products, which are sold through a direct sales force
and a network of more than 700 independent dealers, compete against equipment
manufactured by John Deere, Case IH, Krause, D.M.I., Landoll, Brillion, Brent
and Parker. Feterl, which manufactures grain augers, cleaners and service
bodies, primarily serves the same areas as Sunflower. Its products are sold
through independent sales representatives and a network of more than 600
independent dealers. Its principal competitors are Westfield, Hutch-Mayrath and
Sudenga. Richardton manufactures grain carts which are marketed by and sold with
the Sunflower name. Richardton also manufactures and sells forage and specialty
crop wagons. Its products are marketed primarily in the northeastern and
peanut-producing regions of the United States. Richardton's products are sold
through independent sales representatives and a network of more than 600
dealers. Its principal competitors are Byron and United Farm Tool.
SPECIALTY ENGINEERED PRODUCTS SEGMENT
Door Products
Door Products consists of a group of companies that manufacture and market
standard, specialty and custom steel doors and door frames for commercial,
industrial and institutional applications. Management believes that Door
Products is the United States market leader in the commercial-distributor,
commercial-OEM and detention steel door markets.
Ceco Door manufactures side-hinged steel doors and frames for commercial
and industrial markets nationwide and in selected overseas locations. It
maintains service centers in major cities throughout the United States. Ceco
products can be found in office buildings, schools, hospitals and nursing homes,
apartments, hotels and motels, and retail, industrial and commercial buildings.
Door Products expanded its commercial market share and product offerings in 1999
by acquiring Fleming Limited. Management believes that S.W. Fleming is the
leading Canadian manufacturer of commercial side-hinged steel doors and frames
and a low cost producer.
Trussbilt manufactures heavy gauge steel doors and frames for security and
detention markets. Trussbilt also produces security ceilings for detention and
other applications.
Dominion Building Products/Amsco manufactures and distributes pre-hung and
unassembled steel doors, frames and windows for the metal building industry.
While most of its products are sourced from Ceco, Amsco provides the unit its
own manufacturing capability.
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According to industry sources, Door Products, Steelcraft and Curries are
the three largest participants by market share in the U.S. side-hinged steel
door industry.
Dock Products
Dock Products is comprised of four businesses: Serco, Kelley, TKO Doors and
Lee Engineering. Serco manufactures and distributes a broad range of loading
dock equipment for industrial and commercial markets in North America. Serco's
products include dock levelers, vehicle restraints and loading dock seals and
shelters. These products are sold through an extensive distribution network,
including captive sales and service centers (The Paul Reilly Company, Casco and
Just Rite Equipment) and independent material handling distributors.
The Kelley Company was acquired on January 5, 2000. Like Serco, Kelley
manufactures and distributes dock levelers, vehicle restraints and loading dock
seals and shelters. Kelley also offers elevating dock platforms, scissor lift
tables, rail lift tables and truck levelers. Kelley sells its products through
an extensive distribution network. Primary markets for both Serco and Kelley
include industrial plants, distribution centers and wholesale and retail
warehouses. Principal competitors of Serco and Kelley include Rite-Hite,
McGuire, and Blue Giant.
TKO Doors, acquired in 1999, is the leading designer, manufacturer and
seller of "knockout" doors for loading docks in the United States. Knockout
doors contain spring-loaded plungers that permit door panels to release under
pressure, thereby absorbing impact without sustaining damage. TKO's competitors
include Rite-Hite, Overhead Door, Wayne Dalton and Albany International.
Lee Engineering manufactures material handling equipment such as manually
propelled pallet lifts, stackers, and stationary and portable scissor lift
tables. Its products are sold to the industrial market under the Presto and
Regal brand names, primarily through third party catalog companies, sales
representatives and independent distributors. Lee's principal competitors
include Big Joe, Bishamon and Southworth, each of which is larger than Lee, and
a number of smaller, regional material handling manufacturers.
Marley Electric Heating
Management believes that Marley Electric Heating is the leading United
States producer of electric resistance heating products for residential,
commercial and light industrial markets. It manufactures a full range of
electrical heating products, including baseboard, wall, portable and unit
heaters. The base product line is supplemented by a complete line of commercial
convectors, infrared heaters and numerous specialty application heaters.
Products are sold under the Q-Mark, Berko, Aztec and Fahrenheat brand names.
Principal competitors are TPI, Cadet and Dimplex. Q-Mark, Berko and Aztec
products are marketed through independent sales representatives to wholesale
electrical and mechanical distributors. Fahrenheat products serve the consumer
"Do it Yourself" market through hardware and home center stores.
Marley Electric Heating entered the commercial/industrial ventilation
business in 1998 through the acquisition of Leading Edge and increased that
presence in 1999 by acquiring Patton Industrial and Building Supply Products.
Patton manufactures a broad line of industrial heating and ventilating products
such as industrial fans, blowers and heaters and building supply products,
including kitchen and bath ventilators, ceiling fans, door chimes and electric
heaters for residential, commercial and light industrial markets.
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C & M
C & M engineers, manufactures and installs material handling systems for
the corrugated industry. C & M's primary product is an accumulating belt driven
roller conveyor which includes specialty devices for the transfer of corrugated
product "on" and "off" the conveyor. It also manufactures power transfer cars
that deliver and retrieve product from staging systems for delivery to
converting operations. All systems are specially engineered to the individual
customer's application. C & M has direct regional sales managers throughout the
United States who provide on-site consultation. Foreign accounts are handled
through sales agents who are geographically positioned in the region and
represent other corrugated equipment. ACS and United Pentek are C & M's
principal competitors.
Fenn
Fenn provides new and overhauled precision-machined critical parts and
assemblies, principally for helicopter rotor and transmission systems. It also
produces metal forming equipment for the ferrous and non-ferrous metal
industries for rolling, shaping, forming, drawing and swaging metal strip, rod,
wire and tube. Fenn's critical parts division sells primarily to the United
States defense sector. Markets for the machinery division are diverse, ranging
from a large number of small customers to large manufacturing companies. Markets
include automotive forging, hand tool, medical, armament, specialty metal and
tube. Fenn has a sales office in the United Kingdom to serve as its European
machinery marketing arm. Competition is highly fragmented and depends on the
specific product line.
TEST INSTRUMENTATION SEGMENT
Test Measurement
The Company's Test Measurement division consists of Radiodetection and ATP.
Radiodetection specializes in the design, manufacture and sale of products for
the location and maintenance of buried pipes and cables. While portable pipe and
cable locators are Radiodetection's primary products, Radiodetection also has
developed line management systems (LMS) for locating and identifying metallic
sheathed fiber optic cables. LMS products are sold primarily to long distance
telecommunication carriers such as AT&T, MCI and Sprint. Other products include
trenchless products (horizontal boring guidance systems), inspection products
(inspection cameras for pipes and ducts) and power products (test sets for use
in the power industry). Radiodetection expanded its product offerings in 1999 by
acquiring Riser-Bond Instruments and Bicotest Limited, both of which design,
manufacture and sell time domain reflectometers, which are used to find the
"distance to fault" on a metallic cable. Bicotest also manufactures portable
test equipment for the power industry. Radiodetection has a wide customer base
that includes major utility and industrial companies, municipalities and
thousands of independent contractors in over 80 countries throughout the world.
The Company believes that Radiodetection is the market leader in portable
locators in the UK, the United States and Germany. It also opened Radiodetection
China during 1999 as a result of a small acquisition there. Radiodetection's
competitors include Dynatel, Seba, Tektronix, Metrotech, C-Scope, Heath, Fuji
and Takochiho.
ATP is comprised of three businesses: Amprobe, Promax and TIF Instruments,
which manufacture hand-held devices for testing and measuring electrical
properties, for recovering and handling refrigerants, and for testing for leaks
in refrigeration systems. Primary products include clamp-on ammeters,
multimeters (volt/amp/ohmmeters), circuit tracers, harmonic analyzers,
recorders, leak detectors and refrigerant recovery products. Test Measurement
serves the HVAC/R, electrical, electronic, transportation and automotive
markets. Sales are made through distributors and manufacturer representatives in
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United States and abroad. The Company believes that Amprobe is a market leader
of selected electrical test and measurement products.
Test Measurement believes that it is one of the largest suppliers of
professional test and service tools for HVAC/R tradesmen. Its competitors are a
mix of large companies such as Greenlee and Yokagawa, medium-sized companies
such as Fluke (division of Danaher) and Robinaire (division of SPX) and small,
privately-held companies such as Wavetek, CPS and Thermoflow.
Advanced Industrial Technologies
Advanced Industrial Technologies is comprised of four businesses which
primarily serve the transportation and internal combustion markets. Advanced
Assembly Group (AAG) supports the precision assembly and test markets with the
tech-motive tool product line of electronic fastening tools and the GSE torque
and force measurement products for production, test and audit of the assembly
process. In addition, the AAG Systems Group provides solutions for specific
customer applications such as multi-spindle nutrunner fastening systems and ABS
brake system testing. Air Gage Company supplies manufacturers throughout the
world with dimensional inspection gaging systems and calibration and
certification services that satisfy a wide-range of automotive and
non-automotive part inspection requirements. Great Lakes Eglinton manufactures
reference equipment and carbide-based industrial tooling for wear resistance and
dimensional stability (dies for forming cans, extruding dies for wire and
precision plug gage members). GSE Scale Systems provides a broad line of
industrial weighing equipment specializing in programmable controls for
automated processing systems. Its products can be found in applications ranging
from baggage weighing for air transportation to micro-ingredient batching
systems for food processing to heavy truck weighing for land-fill management.
GSE Scale added to its offerings in 1999 with the acquisition of General
Electronic Systems, which designs and manufactures weighing equipment platforms
and parts counters.
Advanced Industrial Technologies markets its products throughout the world
through a combination of direct sales, distributors and manufacturer
representatives. Principal competitors include Atlas-Copco, Ingersoll Rand,
Marposs, Glastonbury Gage and Oberg Manufacturing.
Lunaire/LDS
Lunaire manufactures a complete line of environmental test chambers for
simulation and testing, heat processing equipment, and industrial and
pharmaceutical ovens and dryers. Lunaire's principal competitors include Blue-M,
Despatch Industries and Thermotron.
Management believes that Ling Dynamic Systems (LDS) is an industry leader
in supplying vibration test equipment for a broad array of industries including
aerospace, automotive and electronic, with the express advantage of a strong
European presence. Competitors include Unholtz Dickie and Ling Electronics.
Lunaire and LDS market their products throughout the world through direct sales,
distributors and manufacturer representatives.
Atmospheric Air
The Company's Atmospheric Air group, consisting of TMI and King, produces
air supply systems to control critical processes such as automotive paint lines
and food and pharmaceutical production. It also manufactures a complete line of
heating, refrigeration and filtration equipment primarily for commercial and
industrial markets. Principal competitors include Gamewell, Engineered Air,
Applied Air, Industrial Air, Webco and Accuaire.
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BACKLOG
Backlog (firm orders for products not yet shipped) is one indicator of the
Company's operating condition. However, for most of the Company's businesses,
year-end backlog is not particularly predictive of the following year's
performance because of short lead times and seasonality in those businesses.
On a consolidated basis, the Company's ongoing businesses booked new work
of $2.2 billion in 1999, representing a 10% increase from 1998's level. Backlog
at the end of 1999 was $373 million, up 8% from $345 million a year earlier.
Substantially all of the 1999 year-end backlog represents bookings for 2000
delivery.
The following table sets out backlog for the periods indicated:
As of December 31
1999 1998
(in millions)
Flow Technology $195 $173
Machinery 52 52
Specialty Engineered Products 73 71
Test Instrumentation 53 49
Total $373 $345
SEASONALITY
Many of the Company's businesses have historically been stronger in the
second, third and fourth quarters than in the first quarter, primarily because
of winter weather conditions impacting the production and sales of their
respective products in the first quarter. Note 15 to the Consolidated Financial
Statements, which is an unaudited summary of quarterly results, at page 44 of
the Company's Annual Report to Shareholders for the year ended December 31,
1999, provides the numerical analysis of the seasonality of the Company's
businesses, and is incorporated herein by this reference.
RAW MATERIALS
The principal raw material used in the Company's products is steel. Other
significant materials used in the production of the Company's products include
certain electrical and mechanical components. All such materials and components
used are readily available from a number of sources, and the Company is not
dependent on any single supply source.
PATENTS
The Company possesses rights under a number of patents in the U.S., Canada
and Europe and is involved in various licensing arrangements. Although these
patents and licenses are important to the Company's businesses, the Company does
not believe that any of its business units is dependent on any single patent or
license or any group of patents and licenses.
RESEARCH AND DEVELOPMENT EXPENDITURES
Many of the Company's businesses are involved in on-going research and
development activities. During 1999, the Company spent approximately $29 million
on these activities.
12
13
ENVIRONMENTAL EXPENDITURES
Each of the Company's operating plants from time to time makes changes or
modifications to comply with current United States and other federal, state and
local provisions regulating the discharge of materials into the environment. In
1999, the Company performed a number of environmental audits, conducted seminars
and took other actions necessary to ensure the Company's compliance with
environmental laws, all consistent with its environmental policy. Capital
expenditures for environmental control facilities in 1999 were not material. The
Company believes compliance with environmental protection requirements and its
environmental policy will not have a material adverse effect on the business or
the consolidated financial position of the Company.
EMPLOYEES AND LABOR RELATIONS
As of March 2000, the Company had approximately 14,000 employees worldwide
at over 90 locations and had 26 collective bargaining agreements covering
approximately 2,200 employees at 28 unionized manufacturing and service
locations. The Company believes its relations with its unions and its employees,
both union and non-union, are satisfactory.
INTERNATIONAL OPERATIONS
During 1999, 1998 and 1997, approximately 28%, 25% and 23%, respectively,
of the Company's sales were generated by units located outside the United
States, and 33%, 32% and 31%, respectively, of the Company's sales were to
destinations outside the United States. Information concerning the Company's
sales and identifiable assets attributable to each of the Company's geographic
segments is set forth in Note 12 to the Consolidated Financial Statements of the
Company incorporated by reference into this document.
International operations are necessarily subject to various risks that
differ in certain respects from risks encountered in the United States and
Canada. These different risks, including political pressures, exchange and
currency fluctuations and controls, export controls, tax changes, labor
difficulties, price controls and other governmental actions, are difficult to
appraise.