SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                   FORM 10-K

   (Mark One)

   [X]   ANNUAL  REPORT PURSUANT TO SECTION  13 OR 15(d)  OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED]

   For the fiscal year ended January  2, 1994    Commission file number 1-5075

                                       OR

   [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

   For the transition period from _________ to _________

                                    EG&G, Inc.                    
             ---------------------------------------------------- 
            (Exact name of registrant as specified in its charter)

            Massachusetts                                04-2052042     
     ------------------------------                    --------------- 
    (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                  Identification No.)

    45 William Street, Wellesley, Massachusetts              02181
    -------------------------------------------             --------
    (Address of Principal Executive Offices)              (Zip Code)

    Registrant's telephone number, including area code (617) 237-5100


















    Securities registered pursuant to Section 12(b) of the Act:
                    
    Title of Each Class              Name of Each Exchange on Which Registered
    -------------------              -----------------------------------------

    Common Stock, $1 Par Value               New York Stock Exchange, Inc.
    --------------------------               -----------------------------
    Preferred Share Purchase Rights          New York Stock Exchange, Inc.
    -------------------------------          -----------------------------

    Securities registered pursuant to Section 12(g) of the Act:  NONE

    Indicate by check mark whether the registrant: (1) has filed all reports
    required to be filed by  section 13 or 15(d) of the  Securities Exchange
    Act  of 1934 during the preceding 12  months (or for such shorter period
    that the  registrant was required  to file such  reports),  and  (2) has
    been  subject to such  filing requirements for the past 90 days. Yes [X]
    No [ ]
 
    Indicate  by check mark if  disclosure of delinquent  filers pursuant to
    Item 405  of Regulation  S-K is  not contained herein,  and will  not be
    contained, to the best of registrant's knowledge, in definitive proxy or
    information statements  incorporated by  reference in  Part III of  this
    Form 10-K or any amendment to this Form 10-K. [ ]

    The aggregate  market value of the  common stock, $1 par  value, held by
    non-affiliates   of   the   registrant   on  February   25,   1994,  was
    $1,004,884,329.

    As of February 25,  1994, there were outstanding, exclusive  of treasury
    shares, 55,823,147 shares of common stock, $1 par value.


                       DOCUMENTS INCORPORATED BY REFERENCE

  PORTIONS OF EG&G, INC.'S
  1994 PROXY STATEMENT .  . . . . . .  . . . PART III (Items 10, 11 and 12)

 
 

                                     PART I


   ITEM 1. BUSINESS
   ----------------

   General Business Description
   ----------------------------

         EG&G, Inc. was incorporated under the laws of the Commonwealth of
   Massachusetts in 1947.  EG&G, Inc. and its subsidiaries (hereafter
   referred to as "EG&G", the "Company", or the "Registrant") is a
   diversified company with annual sales of $2.7 billion.  

         The Company provides systems engineering and test site operating
   and management services to government agencies and laboratories.  It
   also designs and manufactures a variety of analytical and clinical
   instruments and mechanical and optoelectronic components for
   governmental and commercial customers.

         The Company's operations are classified into five industry
   segments:  Technical Services, Department of Energy ("DOE") Support,
   Instruments, Mechanical Components and Optoelectronics.


   Recent Developments
   -------------------

         In June 1993, the Company acquired the Wallac Group, a unit of
   Procordia AB, for approximately U.S. $46 million.  Wallac, headquartered
   in Finland, has 500 employees located in Scandinavia, Russia, the United
   Kingdom and North America.  It develops, manufactures and markets
   analytical and immunodiagnostic systems, instruments and reagents for
   clinical diagnostics, life-science research and environmental
   monitoring.

         Also in June 1993, the Company signed a 27 month joint research
   and development agreement with the Institute of Microelectronics
   National University of Singapore to develop a commercially viable
   micromachined accelerometer, an electronic sensor that triggers the
   deployment of vehicle airbags, for automotive and industrial use.  

         In October 1993, the Company was notified that it had been
   selected to continue as Base Operations Contractor at the Kennedy Space
   Center.  The cost-plus-award/incentive fee contract is for four years with
   two renewal option periods of three years each at the election of the
   government.  The proposed contract cost is approximately $1.7 billion
   over the life of the contract including renewals. 

         In October 1993, the Board of Directors authorized the purchase of
   up to a total of 5.5 million shares of the Company's common stock by the
   Company which will be accomplished through periodic purchases on the
   open market.  
 
 

         In February 1994, the Company formed EG&G Environmental, Inc. to
   provide environmental services and systems management.


   Industry Segments
   -----------------

         In January 1994, the Company reorganized its operating
   organization and redefined its reporting segments. 

         A Mechanical Components segment was formed that includes all
   operations previously a part of the former Aerospace segment and all
   mechanical seal and blower operations previously a part of the former
   Components segment.  An Optoelectronics segment was also formed
   comprising all Optoelectronics divisions from the former Components
   segment, the Electronic Components Division and Power Systems both from
   the former Defense segment.  The composition of the Instruments and DOE
   Support segments remains essentially unchanged.  The Technical Services
   segment has been enlarged to include the service organizations of the
   former Defense segment.

         As a result of these changes, the Company's external reporting
   segments now correspond to its internal operating organization.


   Technical Services

         The Company provides a wide range of technical services including
   engineering, scientific, and technical support to a number of
   governmental organizations.  It also provides analysis and testing
   services to the automotive industry. 

         The Company has been the Base Operations Contractor for NASA's
   Kennedy Space Center in Florida since 1983. The Company manages the
   Center's facilities, tests astronaut rescue procedures and escape
   systems, provides security, fire protection and medical services,
   handles propellant commodities and manages the shuttle landing
   facility.  The current contract was awarded in October 1993 for a term
   of four years with two renewal options of three years each at the
   election of the government.

         The Company also supplies maintenance and support services to
   NASA's Langley Research Center in Virginia for the development of
   aircraft and spacecraft systems.

         The Company runs the U.S. Customs Service Support Seized Property
   Program, involving the management and disposal of all types of personal
   and real property.  It also provides perimeter and transit-system safety
   and security systems for U.S. government agencies. 

 

         The Company provides technical support services to the Army's Yuma
   Proving Grounds including testing of vehicles, artillery, aircraft  
   armaments and airborne missile systems as well as providing optical and
   radar systems support.  The Company operates and maintains the U.S. Air
   Force Radar Target Scatter facility, an electromagnetic laboratory for
   static radar cross-section measurements.  The Company also furnishes
   technical services for the operation and calibration of high-power
   lasers and operational field-testing and evaluation of weapons systems.

        Work for the U.S. Department of Defense ("DoD") includes planning
   and analysis, training, engineering and other support services to the
   Navy in connection with next-generation combat systems for surface
   vessels and submarines; supporting major Navy submarine and surface ship
   programs with emphasis on improving the operational performance of
   electronic systems, developing new surveillance radars and sonar-based
   anti-submarine warfare systems; and developing systems used to evaluate
   the electronic warfare effectiveness of command, control, and
   communication systems in an electromagnetic environment.

         The Company is the management and operations contractor for the
   chemical weapons demilitarization program at the Army's Tooele Depot in
   Utah.  The Company's responsibilities include the construction and
   operation of a facility for the disposal of lethal chemical agents and
   munitions.
            
         Under a contract with the Army, the Company furnishes specialized
   operational and maintenance services for the Chemical Decontamination
   Training Facility at Fort McClellan, Alabama.  

         The Company conducts research on benign technologies for the
   extraction, conversion, and utilization of coal, oil, and gas for the
   DOE's Morgantown Energy Technology Center in West Virginia. The current
   contract covers work to be performed through September 1994.  

         The Company is managing the closedown of operations at the DOE's
   Superconducting Super Collider Laboratory project near Dallas, Texas.  

         The Company develops and conducts mobile and stationary vehicle
   durability testing and comprehensive vehicle component testing for the
   automotive industry.  It also tests fuels and lubricants for petroleum
   and chemical-additive industries to determine how these materials
   perform against industry and government standards.


   Department of Energy Support

         The Company provides site and environmental management, design,
   engineering and fabrication of equipment and other engineering and
   research services for the DOE.
 
 

         The work, which is performed under five prime contracts with the
   DOE, includes engineering services in support of nuclear weapons
   testing, radiation sensing, the operation of precision switching devices
   and precision machining, research on reactor safety and nuclear waste
   management. 

         Uncertainty continues to exist in the DOE Support segment due to
   changes in government budget and national priorities.  The Department of
   Energy's rules concerning contractor liability and performance
   evaluation currently apply to all five contracts.  These new performance
   evaluation criteria create greater variability in the incentive awards
   earned.  The contractor liability rules provide for increased contractor
   accountability for costs associated with events determined to have been 
   avoidable.  This liability is generally limited to the fee earned in the
   grading period in which the avoidable event occurs.  In addition, the
   Department of Energy has announced its intention to proceed with a
   contract reform initiative.  

         Under the Rocky Flats contract, the Company is the management and
   operations contractor for the Rocky Flats facility near Golden,
   Colorado.  The Company provides the management, operation, and
   maintenance of government facilities capable of producing nuclear
   weapons components.  The Company also provides all support services at
   the site.  In addition, the Company manages DOE programs related to
   environmental restoration, waste management, and technology development. 
   The current contract expires at the end of December 1995.

         Under the Idaho National Engineering Laboratory ("INEL") contract,
   the Company is the management and operations contractor for certain
   government-owned facilities at INEL.  The Company is responsible for
   equipment and systems development in the fields of reactor physics,
   reactor safety technology, heat transfer, materials and nuclear waste
   management; and safety research on magnetic fusion, energy conservation,
   and geothermal and other non-nuclear energy sources.  It conducts
   research, development, and testing for reactor safety programs and
   provides support for the entire site.  The current contract expires in
   October 1994.  The Company has submitted a proposal in partnership with
   BNFL, Inc., a subsidiary of British Nuclear Fuels, plc, and Fluor
   Daniels Environmental Services, Inc., a subsidiary of Fluor Daniel,
   Inc., for increased work scope at the facility.  A decision on the
   awarding of the contract is expected in mid-1994. 

         Under the Energy Measurements contract, the Company provides
   scientific and engineering services for the DOE's underground nuclear
   weapons test program at the Nevada Test Site.  Much of this work is done
   in cooperation with the Sandia, Los Alamos, and Lawrence Livermore
   national research laboratories.  The primary work requires the
   measurement of energy from underground nuclear detonations.  Besides
   this mission, the Company works on many of DOE's non-weapons programs. 
   It conducts aerial radiation and environmental surveys nationwide and
   maintains a staff of experts to provide assistance in the event of a
   nuclear emergency anywhere in the world.  The current contract expires
   at the end of December 1995. 

 

         Under the Reynolds Electrical and Engineering Co. contract, the
   Company provides specialized support and maintenance services also
   relating to the DOE's underground nuclear weapons test program at the
   Nevada Test Site.  This work includes construction services at the
   Tonopah Test Range and surface testing and drilling at the Yucca
   Mountain Project.  The current contract expires at the end of 
   December, 1995.  

         The United States has implemented a moratorium on nuclear weapons
   testing scheduled to last through September 1995 and the
   Administration has proposed a permanent ban on nuclear weapons testing. 
   The DOE is maintaining a capability to resume weapons testing if a
   decision to do so should be made.  However, during the moratorium, all 
   test-related activities have been stopped or reduced significantly. 
   Other activities at the Nevada Test Site, such as environmental
   monitoring and remediation, have increased, but have not offset the
   reduction in the testing programs.

         Under the Mound Applied Technologies contract, the Company is the
   management and operations contractor for the Mound facility in
   Miamisburg, Ohio.  The Mound facility is in the midst of a transition
   from defense programs to environmental restoration and economic
   development activities.  The Company's responsibilities include
   research, development, and production of high-technology mechanical
   explosives and electrical components for nuclear weapons.  The current
   contract expires at the end of September 1996.


   Instruments

         The Company offers instruments and systems for applications in
   medical and clinical diagnostics; biochemical, medical and life science
   research; environmental monitoring; industrial and pharmaceutical
   process measurement; gas and oil field applications; airport and
   industrial security; and marine and oceanographic studies.

         Many of the Company's instruments are based on the Company's
   expertise in nuclear measurements, including detection, characterization
   and measurement of radiation. For example, the Company offers alpha,
   beta and gamma counting systems that are used in clinical laboratories,
   research laboratories, and for environmental analysis.  A complete line
   of radiation protection measuring systems equipped with built-in large-
   area proportional detectors are sold to laboratories, nuclear and
   environmental monitoring facilities. 

         For research and environmental applications, the Company offers
   radiation detectors and associated electronic processing equipment
   ranging from discrete modular instruments to complete systems. Many of
   these instruments are based on the Company's hyperpure germanium crystal
   and silicon-based detector technologies.  Examples of such products are
   germanium detectors, charged particle detectors, multichannel analyzers,
   and electronic instrumentation modules.  These products are used by
   university, industrial, and government laboratories to study various
   nuclear phenomena. 

 

         Employing its radioisotopic measurement technology, the Company
   offers industrial on-line level and density measuring instruments for
   process control of liquids, slurries, or solids in containers, tanks,
   and pipes.

         Instruments based on the Company's expertise in detecting and
   characterizing electromagnetic radiation, including infrared, visible,
   and ultraviolet light, and  microwave, x-rays, and gamma rays, include
   optical analyzers and Raman spectrometers that are used extensively in
   materials research and development.  Extensions of these product lines
   are used to characterize the performance of fiber optics and for the
   non-destructive analysis of materials and surfaces.  The Company offers
   clinical laboratory instruments based on the luminescence of biological
   chemicals and immunoassay products that use the Company's proprietary
   time-resolved fluorescence technology.  The Company also offers x-ray
   security inspection systems and walk-through metal detectors for
   industry, airline, and commercial use, and microwave-based moisture
   detection systems used in process control and in-line analysis of bulk
   materials.  The Company has recently developed food inspection systems
   which combine imaging technology developed for its optical analyzers
   with the x-ray technology employed by the Company in its security
   systems business.

         The Company's high-performance electrochemistry instruments, the
   majority of which are computer controlled, are used by research
   laboratories, universities and industrial and pharmaceutical companies
   to detect, analyze, and characterize corrosion, trace materials and
   neurological biochemicals. 

         The Company offers small high-precision turbine flow meters and
   primary standard flow calibrators that are used in aerospace, industrial
   and pharmaceutical applications. 

         For marine and oceanographic applications, the Company offers
   side-scan sonar equipment, marine seismic instruments,  and acoustic
   equipment for recovery of ocean-floor moorings and instruments, and it
   provides instruments for use in the oil and gas industry including high-
   temperature, high-pressure test chambers that predict performance of
   cement slurries during drilling and completion of oil and gas wells,
   viscometers for analyzing drilling muds, pressure calibration standards,
   and chromatographs and gravitometers for the analysis of natural gas.


   Mechanical Components 

         The Company offers high reliability advanced seals and bellows
   products, fans and blowers, precision components for aerospace
   applications and heat management devices.

         The Company produces bellows used in mechanical sealing components
   and systems for the containment and control of fluids.  These products
   are used by the oil, petrochemical, chemical, food processing, pulp and
   paper, waste water treatment and refrigeration industries. 

 


         The Company's mechanical face-type bellows seals, engineered
   sealing products, and bellows devices  are utilized in jet aircraft,
   surface ships, submarines, torpedoes, weapons, medical equipment,
   computer equipment and power generation equipment.

         The Company manufactures solenoid and pressure operated valves for
   aerospace and other applications primarily to control turbines, rocket
   engines and aircraft and space systems. 

         The Company manufactures high-reliability cooling fans and blowers
   for electronics and electrical equipment and transportation systems, and
   blowers and blower systems that produce both vacuum and pressure using
   regeneration and multistage technology for industrial applications.  
   The Company's BiocubeTM Aerobic Biofilter treats volatile organic
   compounds and odorous emissions with naturally occurring microbes.  

         The Company manufactures aircraft engine exhaust and pneumatic
   ducting assemblies and rocket engine components that utilize bulge
   forming, drop hammer forming and fusion welding technologies.

         The Company's metal printed circuit board retainers and extractors
   are used in electronic enclosures for military, commercial aircraft,
   telecommunications and computer applications. 


   Optoelectronics 

         The Company offers a broad variety of components that emit and
   detect light in the spectrum from ultraviolet through visible to the far
   infrared.  These components are used in many applications ranging from
   simple light sensors used in automotive and commercial electronics to
   sophisticated space-qualified detectors that are used for communications
   and remote sensing of the earth and planetary exploration.

         Examples of commercial and consumer applications of the Company's
   optical sensors include medical instruments, smoke detectors, cameras,
   bar-code scanners and automatic headlight dimmers.  The Company's high
   performance image sensors have applications in aerospace, astronomy,
   spectroscopy and medical and industrial imaging.

         The Company also offers a wide variety of flashlamps for use in
   photocopy and reprographic equipment, phototypesetting systems, beacons
   and in laser systems and accessories.  TV camera tubes, the main
   component in x-ray diagnostic equipment, are supplied to manufacturers
   of medical imaging instruments.  Pyroelectric infrared and thermopile
   sensors are used in security systems, temperature monitoring and, in
   combination with photo resistors, for automatic light switches.

         The Company offers hermetically-sealed ceramic-to-metal switching
   devices used for pulsed radar and gas and liquid lasers.  Spark gaps are
   offered for use in lithotripters which alleviate kidney stones non-
   invasively and in high-performance lasers such as those used in  laser
   range finders.  Similar and related products are used by the military
   for missile and rocket firing and control.  The Company also offers
 
 

   rubidium atomic frequency standards for both military and commercial
   navigation and communication systems and high-reliability and high-
   frequency power supplies that provide precise power conditioning in
   electronic equipment used by the military and in commercial aircraft and
   air traffic control systems.


   Marketing
   ---------

         The services and products of the Company are marketed through its
   own specialized sales forces as well as independent foreign and domestic
   manufacturers' representatives and distributors.  In certain foreign
   countries, the Company has entered into joint venture and license
   agreements with local firms to manufacture and market its products.


   Raw Materials and Supplies
   --------------------------

         Raw materials and supplies are generally readily available in
   adequate quantities from domestic and foreign sources.


   Patents and Trademarks
   ----------------------

         While the Company's patents, trademarks, and licenses are 
   cumulatively important to its business, the Company does not believe
   that the loss of any one or group of related patents, trademarks, or
   licenses would have a materially adverse effect on the overall business
   of the Company or on any of its business segments.


   Backlog
   -------

         The approximate dollar value of all unfilled orders by industry
   segment as of January 2, 1994, and January 3, l993, is set forth in 
   the table below.
(In Thousands) January 2, 1994 January 3, 1993 --------------- --------------- Technical Services $ 243,081 $ 219,092 DOE Support 1,154,505 1,294,456 Instruments 47,452 45,276 Mechanical Components 92,691 114,454 Optoelectronics 83,459 95,897 ---------- ---------- Total $1,621,188 $1,769,175 ========== ==========
At January 2, 1994, 85% of the total backlog represented orders received from U.S. Government agencies, primarily DOE. The DOE Support backlog represents the annual funding for these contracts that has actually been appropriated. The order backlog for each segment relates differently to future sales based on different business characteristics, primarily order and delivery lead times and customer demand requirements. The Company estimates that approximately 96% of its current backlog will be billed during l994. Government Contracts -------------------- The Company's five major contracts are awarded on a cost-plus-award-fee basis. Sales under these contracts were $1,379 million in 1993. The expiration dates for these contracts are, as follows, one in 1994, three in 1995 and one in 1996; funds are appropriated, work scopes are determined and fee pools are negotiated annually. The INEL contract expires in October 1994 and the Company holds the majority interest in a joint venture that has submitted a proposal for increased work scope at the facility. The Department of Energy's rules concerning contractor liability and performance evaluation currently apply to all five contracts. These new performance evaluation criteria create greater variability in the incentive awards earned. The contractor liability rules provide for increased contractor accountability for costs associated with events determined to have been avoidable. This liability is generally limited to the fee earned in the grading period in which the avoidable event occurs. In addition, the Department of Energy has announced its intention to proceed with a contract reform initiative. Uncertainty continues to exist in the Company's DOE Support segment due to changes in government budget and national priorities. Sales to U.S. Government agencies, which were predominantly to the DOE, DoD and NASA, were $1,939 million, $2,035 million and $1,987 million in 1993, 1992 and 1991, respectively. The Company's Kennedy Space Center contract with NASA generated sales of $201 million in 1993. In October 1993, the Company was selected by NASA to continue as the base operations contractor at the Kennedy Space Center. The new award-fee contract has a potential term of ten years, including options, contains reductions in contract value and could result in reductions in annual fee. In accordance with government regulations, all of the Company's government contracts are subject to termination for the convenience of the government. Competition ----------- Because of the wide range of its products and services, the Company faces many different types of competition and competitors. Competitors range from large foreign and domestic organizations that produce a comprehensive array of goods and services, to small concerns producing a few goods or services for specialized market segments. The Technical Services segment provides technical services to several agencies of the federal government, including DoD Departments and NASA. This business is typically won through competition with a number of large and small government contractors, many of whom are as large or larger than the Company and who, therefore, have resources and capabilities that are comparable to or greater than those of the Company. The primary bases for competition in these markets are technical and management capabilities, current and past performance, and price. Competition is typically subject to mandated procurement and competitive bidding requirements. Competition for automotive testing services is primarily from a few specialized testing companies and from customer-owned testing facilities. Automotive testing competition is primarily based on quality, service, and price. In the DOE Support segment, the Company is subject to federally mandated procurement procedures, usually bidding competitively against a variety of large and small government contractors. Whereas in the past the Company was occasionally granted a sole-source opportunity for this work, the Company anticipates that future business will be obtained through competitive bidding subject to DOE procurement procedures. Some of the competitors in this segment are larger than the Company and therefore may have resources and capabilities that are comparable to or greater than those of the Company. In the Instruments segment, the Company primarily competes with small specialized instrument companies that serve narrow segments of markets in oceanographic equipment; x-ray security systems; nuclear, industrial, diagnostic, clinical and oil and gas related instrumentation. The Company competes in these markets on the basis of product performance, product reliability, service and price. Consolidation of competitors through acquisitions and mergers and the Company's increasing activity in selected diagnostics and industrial markets will increase the proportion of large competitors in this segment. In the Mechanical Components segment, the Company is a leading supplier of selected precision aircraft exhaust components, specialized fans and heat transfer devices, and mechanical seals for industrial applications. Competition in these areas is typically from small specialized manufacturing companies. The Company is among the leading suppliers of specialty flashtubes, silicon photodetectors, avalanche photodiodes, cadmium sulfide and cadmium selenide detectors, photodiode arrays and switched power supplies, all of which are part of the Company's Optoelectronics segment. Typically, competition is from small specialized manufacturing companies. Within both the Mechanical Components and Optoelectronics segments, competition for governmental purchases is subject to mandated procurement procedures and competitive bidding practices. In both of these segments, the Company competes on the basis of product performance, quality, service and price. In much of the Optoelectronics segment and in the specialized fan and aircraft and marine mechanical seal markets included in the Mechanical Components segment, advancing technology and research and development are important competitive factors. Research and Development ------------------------ During 1993, 1992 and 1991, Company-sponsored research and development expenditures were approximately $34.7 million, $32.1 million and $24.7 million, respectively. Customer-sponsored research and development, primarily for Department of Energy programs, accounted for additional expenditures of approximately $137 million in 1993, $133 million in 1992 and $127 million in 1991. Environmental Compliance ------------------------ The Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party for certain waste disposal sites. The Company accrues for environmental issues in the accounting period in which the Company's responsibility is established and the cost can be reasonably estimated. There have been no environmental matters to date which had or are expected to have a material effect on the Company's financial position or results of operations. The Company's compliance with the laws, rules and regulations relating to the protection of the environment has not had, and is not expected to have, a material adverse effect on its capital expenditures, earnings or competitive position. Employees --------- As of March 17, l994, the Company employed approximately 32,000 persons. Certain of the Company's subsidiaries are parties to contracts with labor unions. The Company considers its relations with employees to be satisfactory. Financial Information About Industry Segments ---------------------------------------------
Sales and Income From Operations by Industry Segment For the Five Years Ended January 2, 1994 (In thousands) 1993 1992 1991 1990 1989 ---------- ---------- ---------- ---------- ---------- Sales: Technical Services $ 636,041 $ 608,864 $ 586,537 $ 522,724 $ 486,633 DOE Support 1,378,532 1,468,741 1,430,016 1,318,329 592,807 Instruments 237,223 226,900 230,196 208,263 165,169 Mechanical Components 244,878 274,199 295,519 295,052 271,707 Optoelectronics 201,274 210,118 146,274 129,920 133,842 ---------- ---------- ---------- ---------- ---------- Total $2,697,948 $2,788,822 $2,688,542 $2,474,288 $1,650,158 ========== ========== ========== ========== ========== Income from Operations: Technical Services $ 65,498 $ 54,173 $ 53,296 $ 45,246 $ 44,655 DOE Support 38,383 59,112 44,403 42,403 27,190 Instruments 10,119 15,764 21,125 5,917 11,915 Mechanical Components 23,554 20,934 27,239 26,120 28,699 Optoelectronics 10,866 3,070 6,588 11,517 8,767 General Corporate Expenses (27,573) (29,895) (27,456) (23,491) (22,833) ---------- ---------- ---------- ---------- ---------- Total $ 120,847 $ 123,158 $ 125,195 $ 107,712 $ 98,393 ========== ========== ========== ========== ==========
The Company's operations are classified into five industry segments: Technical Services, DOE Support, Instruments, Mechanical Components and Optoelectronics. The Company has changed the way its products and services are grouped into industry segments to better reflect the markets served and the Company's strategies for the future. Data for prior periods have been restated accordingly.
Additional information relating to the Company's operations in the various industry segments follows: Depreciation and Capital (In thousands) Amortization Expense Expenditures ------------------------- ------------------------- 1993 1992 1991 1993 1992 1991 ------- ------- ------- ------- ------- ------- Technical Services $ 8,422 $ 7,991 $ 7,653 $ 6,315 $ 5,650 $ 4,974 DOE Support - - - - - - Instruments 9,213 8,131 8,425 6,555 4,768 6,276 Mechanical Components 6,870 7,755 8,643 5,598 5,290 9,606 Optoelectronics 12,417 11,595 8,189 8,469 6,305 4,708 Corporate 920 820 816 923 433 1,053 ------- ------- ------- ------- ------- ------- $37,842 $36,292 $33,726 $27,860 $22,446 $26,617 ======= ======= ======= ======= ======= ======= (In thousands) Identifiable Assets -------------------------- 1993 1992 1991 -------- -------- -------- Technical Services $127,917 $133,351 $131,931 DOE Support 11,959 22,189 17,171 Instruments 256,117 217,792 215,029 Mechanical Components 97,317 112,272 133,404 Optoelectronics 142,630 142,543 90,577 Corporate 132,868 121,593 109,785 -------- -------- -------- $768,808 $749,740 $697,897 ======== ======== ========
DOE Support's identifiable assets mainly represent accounts receivable for fees from the U.S. Department of Energy. DOE Support's assets do not include U.S. Government funds and facilities that are devoted to the contracts and for which the Company is custodian. Corporate assets consist primarily of cash and cash equivalents, prepaid taxes and investments. Financial Information About Geographic Areas --------------------------------------------
Information relating to geographic areas follows: (In thousands) Sales Income From Operations -------------------------------- -------------------------- 1993 1992 1991 1993 1992 1991 ---------- ---------- ---------- -------- -------- -------- U.S. $2,427,663 $2,532,494 $2,484,972 $129,858 $142,272 $137,346 Non-U.S. 270,285 256,328 203,570 18,562 10,781 15,305 Corporate - - - (27,573) (29,895) (27,456) ---------- ---------- ---------- -------- -------- -------- $2,697,948 $2,788,822 $2,688,542 $120,847 $123,158 $125,195 ========== ========== ========== ======== ======== ======== (In thousands) Identifiable Assets ---------------------------- 1993 1992 1991 -------- -------- -------- U.S. $317,303 $355,722 $364,990 Non-U.S. 318,637 272,425 223,122 Corporate 132,868 121,593 109,785 -------- -------- -------- $768,808 $749,740 $697,897 ======== ======== ========
Over 60% of the identifiable assets of the non-U.S. operations are located in European Community countries. Transfers between geographic areas were not material. ITEM 2. PROPERTIES -------------------- The Company occupies approximately 5,789,700 square feet of building area, of which approximately 1,768,400 square feet is owned and the balance leased. The Company's headquarters occupies 53,350 square feet of leased space in Wellesley, Massachusetts. The Company's other operations are conducted in manufacturing and assembly plants, research laboratories, administrative offices and other facilities located in 27 states, Washington, D.C., Puerto Rico, the Virgin Islands and 24 foreign countries. Non-U.S. facilities account for approximately 1,278,600 square feet of owned and leased property, or approximately 22% percent of the Company's total occupied space. The Company's leases on property are both short-term and long-term. In management's opinion, the Company's properties are well-maintained and are adequate for its present requirements. Future space requirements are anticipated and appropriate facility plans will be implemented to meet those requirements. At certain government facilities, the Company occupies government furnished space. In addition, a substantial part of the equipment and machinery used by the Company in the performance of its government contracts has been furnished by the government. Substantially all of the machinery and equipment used by the Company in its other activities is owned by the Company and the balance is leased or furnished by contractors or customers. The following table indicates the approximate square footage of real property owned and leased attributable to each of the Company's industry segments.
Property Property Owned Leased Total (Sq. Feet) (Sq. Feet) (Sq. Feet) ---------- ---------- ---------- Technical Services 163,400 1,003,600 1,167,000 DOE Support 0 1,527,600 1,527,600 Instruments 633,600 397,200 1,030,800 Mechanical Components 574,300 551,100 1,125,400 Optoelectronics 397,100 476,600 873,700 Corporate Offices 0 65,200 65,200 --------- --------- --------- Totals 1,768,400 4,021,300 5,789,700 ========= ========= =========
ITEM 3. LEGAL PROCEEDINGS -------------------------- The Company is subject to various investigations, claims, and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. The Company has established accruals for matters that are probable and reasonably estimable. Management believes that any liability that may ultimately result from the resolution of these matters in excess of amounts provided will not have a material adverse effect on the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------------------------------------------------------------ Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ------------------------------------------------------------------------------
Quarterly Common Stock Market Price Range ----------------------------------------- 1992 Quarters 1993 Quarters ------------------------------ ------------------------------ Price First Second Third Fourth First Second Third Fourth ----- ------ ------ ------ ------ ------ ------ ------ ------ High $26.75 $26.31 $24.75 $21.88 $24.00 $24.50 $20.25 $18.38 Low 24.06 21.25 21.13 18.00 19.38 18.88 15.75 16.75 Dividends --------- 1992 Quarters 1993 Quarters ------------------------------ ----------------------------- First Second Third Fourth First Second Third Fourth ------ ------ ------ ------ ------ ------ ------ ------ Cash Dividends Per Common Share $ .115 $ .125 $ .125 $ .125 $ .13 $ .13 $ .13 $ .13
The Company's common stock is listed and traded on the New York Stock Exchange. The number of holders of record of the Company's Common Stock as of February 25, 1994, was approximately 15,712. In October l993 the Board of Directors of the Company voted an increase in the Company's quarterly cash dividend from thirteen cents to fourteen cents per share. The quarterly cash dividend was paid on February 10, l994, to stockholders of record at the close of business on January 21, l994. ITEM 6. SELECTED FINANCIAL DATA --------------------------------
SELECTED FINANCIAL INFORMATION For the Five Years Ended January 2, 1994 (In thousands where applicable) 1993 1992 1991 1990 1989 ---------- ---------- ---------- ---------- ---------- Operations: Sales $2,697,948 $2,788,822 $2,688,542 $2,474,288 $1,650,158 Income From Operations 120,847 123,158 125,195 107,712 98,393 Income Before Cumulative Effect of Accounting Changes 79,571 87,779 81,242 73,966 69,850 Net Income 59,071* 87,779 81,242 73,966 69,850 Earnings Per Share Before Cumulative Effect of Accounting Changes 1.41 1.56 1.45 1.30 1.20 Earnings Per Share 1.05* 1.56 1.45 1.30 1.20 Return On Equity Before Cumulative Effect of Accounting Changes 16.4% 19.6% 20.6% 20.6% 20.5% Return On Equity 12.4%* 19.6% 20.6% 20.6% 20.5% Weighted Average Shares Outstanding 56,504 56,385 55,901 56,989 58,262 Financial Position: Working Capital $ 227,935 $ 247,518 $ 214,495 $ 149,674 $ 151,187 Current Ratio 1.96:1 2.05:1 1.89:1 1.58:1 1.59:1 Total Assets 768,808 749,740 697,897 675,224 643,403 Total Debt 45,039 42,223 59,635 95,551 113,390 Stockholders' Equity 477,534 473,636 420,711 369,631 348,987 - Per Share 8.51 8.34 7.45 6.58 6.02 Total Debt/Total Capital 9% 8% 12% 21% 25% Shares Outstanding 56,131 56,812 56,495 56,175 57,993 Other Data: Cash Flows From Operating Activities $ 112,137 $ 127,807 $ 104,429 $ 129,208 $ 52,414 Capital Expenditures 27,860 22,446 26,617 19,848 23,258 Depreciation and Amortization 37,842 36,292 33,726 29,944 25,536 Cash Dividends Per Common Share .52 .49 .42 .38 .34 *Includes one-time after-tax charges of $20.5 million, or $.36 per share, due to the Company's adoption of SFAS Nos. 106 and 109.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ------------------------------------------------------------------------ RESULTS OF OPERATIONS --------------------- Results of Operations --------------------- The discussion that follows is a summary analysis of the major changes by industry segment. 1993 Compared to 1992 Sales Sales for 1993 were $2,698 million, $91 million below 1992 sales of $2,789 million. Technical Services: The $27 million increase resulted from an increase of $24 million in automotive testing services caused primarily by the introduction of new industry testing protocols, partially offset by a $10 million reduction in contract billings at the Kennedy Space Center. DOE Support: The majority of the $90 million decrease resulted from a lower program scope at Rocky Flats and the impact of the moratorium on nuclear testing on Energy Measurements. The shift in sales and related cost of sales from products to services presented in the Consolidated Statement of Income reflects the change, compared to 1992, from production to environmental restoration services at some facilities. Instruments: The $10 million increase resulted from the $43 million sales of Wallac acquired in June 1993, partially offset by reduced scientific, industrial and security instruments sales due to sluggish market conditions, lower foreign exchange rates and large orders shipped in 1992. Mechanical Components: The $29 million decrease was attributable to a $21 million reduction in aerospace sales due primarily to continued softness in this market and, to a lesser extent, the divestiture of two operations. Optoelectronics: The $9 million decrease was due mainly to the completion of several programs in 1992, partially offset by the sales of Heimann Optoelectronics acquired early in the second quarter of 1992. Income From Operations Income from operations was $120.8 million in 1993, a 2% decrease from 1992. Technical Services: The $11.3 million increase was due primarily to higher sales and improved margins in the automotive testing services business. In October 1993, the Company was selected by NASA to continue as the base operations contractor at the Kennedy Space Center. The new contract has a potential term of 10 years, including options, contains reductions in contract value and could result in reductions in annual fee of approximately $5 million. DOE Support: Uncertainty continues to exist in the DOE Support segment due to changes in government budgets and national priorities. The $20.7 million decrease was primarily attributable to Rocky Flats which experienced lower grades and a reduction of available fee pool. In addition, 1992 results included a favorable profit adjustment due to higher than anticipated performance grades at year-end 1991. Lower grades on the Idaho contract also contributed, to a lesser extent, to the decrease. The Idaho contract expires in October 1994, and the Company is participating as the majority interest in a joint venture that has submitted a proposal for increased work scope at the facility. The Department of Energy's rules concerning contractor liability and performance evaluation became effective for the remaining two contracts, REECo and Mound, in October 1993. These rules, coupled with the Department of Energy's announced intention to proceed with a contract reform initiative, create greater variability in the incentive awards earned and provide for increased contractor accountability. Instruments: The $5.6 million decrease resulted from lower sales of scientific, industrial and security instruments partially offset by the income generated by the Wallac acquisition. Management has initiated a review to assess certain operating elements of this segment. The Instruments segment remains an integral part of the Company's long-term growth strategy. Mechanical Components: Improved profitability resulting from cost reduction programs in the industrial sealing and electromechanical businesses more than offset the impact of lower aerospace sales, generating a $2.6 million increase. Optoelectronics: The $7.8 million increase was due to improved profitability as a result of cost reductions at Heimann Optoelectronics. The 1992 results included a charge of $6.3 million for the write-down of the net assets of two businesses to their estimated disposal value. General Corporate Expenses: The $2.3 million decrease was due to the absence of corporate management incentives in 1993. The net change in other income (expense) was an increase in income of $3.1 million. This was primarily due to gains on investments. The 1993 effective tax rate of 34.7% is higher than the 27.5% in 1992 primarily because the 1992 rate reflected a favorable adjustment of prior estimated tax liabilities and the tax benefit resulting from the sale of an investment in a hydroelectric power plant. During the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106 on accounting for postretirement benefits other than pensions for its U.S. retiree health benefits and SFAS No. 109 on accounting for income taxes. The adoption of SFAS No. 106 resulted in an after-tax charge of $13.2 million ($.23 per share) while the charge for SFAS No. 109 was $7.3 million ($.13 per share). See Notes 13 and 16 for additional disclosures. The Company reduced its discount rate for employee benefit plans in 1993 as a result of the decrease in long-term interest rates. The effects of the lower discount rates were partially offset by corresponding reductions in assumptions for compensation increases and health care cost trend rates. The net results of these changes will not materially affect the Company's results of operations. 1992 Compared to 1991 Sales 1992 sales of $2,789 million were $100 million higher than the $2,689 million achieved in 1991. Technical Services: The increase of $22 million was generated by higher sales levels under various government contracts. DOE Support: Sales increased $39 million due to higher program scopes at most of the operations. Instruments: Sales decreased $3 million from lower security and industrial instruments sales that were partially offset by higher scientific instruments sales. Mechanical Components: The $21 million decrease resulted from $14 million lower sales in the aerospace business due primarily to general softness in the market and, to a lesser extent, from a 1991 divestiture. Optoelectronics: The sales of Heimann Optoelectronics acquired early in the second quarter of 1992 were the main contributor to the $64 million increase. Income From Operations Income from operations was $123.2 million in 1992, a decrease of $2 million from the 1991 level. Technical Services: The $0.9 million increase was generated by the margin on increased government sales offset by lower margins in the automotive testing business caused by slightly lower sales and costs associated with follow-on test programs. DOE Support: All operations contributed to the $14.7 million increase, the majority of which was due to higher award fee pools, with the largest increase at the Rocky Flats facility. Instruments: The $5.4 million decrease was due to lower sales and changes in sales mix for security and industrial instruments as well as lower security instruments margins caused by competitive pricing pressures; these decreases were partially offset by improved margins and higher volume on scientific instruments. Mechanical Components: Income decreased $6.3 million, resulting from cost inefficiencies and product mix in the industrial sealing and electromechanical businesses and the profit impact of lower sales. These decreases were partially offset by lower costs in Europe in 1992 and general productivity improvements in the aerospace business. The 1991 results included charges for environmental cleanup costs. Optoelectronics: Income decreased $3.5 million. The 1992 results included a $6.3 million charge to write-down two businesses' net assets, including goodwill, to their estimated disposal value. This write-down was included in general and administrative expense. Higher costs and manufacturing inefficiencies at an operation also contributed to the decrease. Partially offsetting the decreases were improved margins at some operations. The 1991 results included program cost write-offs. General Corporate Expenses: The $2.4 million increase was due to increased training and business development expenses as well as normal cost increases in 1992, partially offset by reduced management incentives. The net change in other income (expense) was a decrease in expense of $2.8 million due primarily to lower interest expense. The decrease in the effective tax rate from 32.5% in 1991 to 27.5% in 1992 reflected a tax benefit resulting from the sale of an investment in a hydroelectric power plant and a higher favorable adjustment of prior estimated tax liabilities in 1992. Financial Condition ------------------- The Company's cash and cash equivalents increased $2.4 million to $72.2 million at the end of 1993 while total debt increased $2.8 million to $45 million. During the second quarter of 1993, the Company acquired Wallac for net cash of $33.8 million and a one-year note for $5.4 million. Cash flows from operating activities totaled $112.1 million in 1993, $127.8 million in 1992 and $104.4 million in 1991 and were principally used for capital expenditures, acquisitions, debt retirement and dividends. In addition, the Company increased its purchases of common stock by one million shares in 1993. At the end of 1993, the Company had $34.9 million of commercial paper outstanding, an increase of $3 million over last year's balance. Commercial paper, which is the Company's principal source of borrowing, continues to be rated "A-1" by Standard & Poor's. Moody's recently changed its rating to "Prime-2" from "Prime-1." The Company's commercial paper borrowing cost is not expected to increase significantly as a result of the rating change. Credit agreements, which are in the process of being restructured, total $300 million and serve as backup facilities. The Company invested $27.9 million in physical plant and equipment in 1993 and expects to increase this level of investment to approximately $50 million in 1994 to support new product development initiatives in the Instruments and Optoelectronics segments. In October 1993, the Board of Directors authorized the purchase of up to a total of 5.5 million shares of the Company's common stock through periodic purchases on the open market. During 1993, the Company purchased 1.1 million shares under this new program. The Company, which is considering financing these activities with a combination of short-term and long-term debt and cash flows from operations, believes it can take these actions and retain the flexibility to maintain both its product development and growth strategies. Dividends --------- In October 1993, the Board of Directors voted to increase the Company's quarterly cash dividend by 8% to 14 cents per share, beginning with the dividend payable in February 1994 and resulting in an annual rate of 56 cents per share for 1994. EG&G has paid cash dividends, without interruption, for 29 years and has increased dividends each year since 1974. The Company continues to retain what management believes to be sufficient earnings to support the funding requirements of its planned growth. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ----------------------------------------------------
CONSOLIDATED BALANCE SHEET - As of January 2, 1994 and January 3, 1993 (Dollars in thousands except per share data) 1993 1992 -------- -------- Current Assets: Cash and cash equivalents $ 72,185 $ 69,752 Accounts receivable (Note 3) 237,609 261,859 Inventories (Note 4) 121,581 114,196 Other (Note 16) 33,657 36,988 -------- -------- Total Current Assets 465,032 482,795 -------- -------- Property, Plant and Equipment: At cost (Note 5) 327,416 301,931 Less - Accumulated depreciation and amortization 221,320 205,767 -------- -------- Net Property, Plant and Equipment 106,096 96,164 -------- -------- Investments (Note 6) 25,920 26,660 -------- -------- Intangible and Other Assets (Notes 7 and 16) 171,760 144,121 -------- -------- Total Assets $768,808 $749,740 ======== ======== Current Liabilities: Short-term debt (Note 8) $ 43,589 $ 40,267 Accounts payable 60,794 69,727 Accrued expenses (Note 9) 132,714 125,283 -------- -------- Total Current Liabilities 237,097 235,277 -------- -------- Long-Term Liabilities (Notes 8 and 13) 54,177 40,827 -------- -------- Contingencies (Note 10) - - Stockholders' Equity (Note 11): Preferred stock - $1 par value, authorized 1,000,000 shares; none outstanding - - Common stock - $1 par value, authorized 100,000,000 shares; issued 60,102,000 shares 60,102 60,102 Capital in excess of par value - - Retained earnings 496,063 473,262 Cumulative translation adjustments (Note 1) (8,287) (1,323) -------- -------- 547,878 532,041 CONSOLIDATED BALANCE SHEET - As of January 2, 1994 and January 3, 1993 - Continued (Dollars in thousands except per share data) 1993 1992 -------- -------- Stockholders' Equity (Note 11) - Continued: Less - Cost of shares held in treasury; 3,970,000 shares in 1993 and 3,289,000 shares in 1992 70,344 58,405 -------- -------- Total Stockholders' Equity 477,534 473,636 -------- -------- Total Liabilities and Stockholders' Equity $768,808 $749,740 ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF INCOME - For the Three Years Ended January 2, 1994 (Dollars in thousands except per share data) 1993 1992 1991 ---------- ---------- ---------- Sales (Note 1): Products $1,584,644 $2,042,454 $1,974,260 Services 1,113,304 746,368 714,282 ---------- ---------- ---------- Total Sales 2,697,948 2,788,822 2,688,542 ---------- ---------- ---------- Costs and Expenses (Notes 4, 12, 13 and 14): Cost of sales: Products 1,343,473 1,777,704 1,723,414 Services 999,031 645,915 616,831 ---------- ---------- ---------- Total cost of sales 2,342,504 2,423,619 2,340,245 Selling, general and administrative expenses 234,597 242,045 223,102 ---------- ---------- ---------- Total Costs and Expenses 2,577,101 2,665,664 2,563,347 ---------- ---------- ---------- Income From Operations 120,847 123,158 125,195 Other income (expense), net (Note 15) 1,008 (2,083) (4,837) ---------- ---------- ---------- Income Before Income Taxes 121,855 121,075 120,358 Provision for Federal and non-U.S. income taxes (Note 16) 42,284 33,296 39,116 ---------- ---------- ---------- Income Before Cumulative Effect of Accounting Changes 79,571 87,779 81,242 Cumulative Effect of Accounting Changes: Income taxes (Note 16) (7,300) - - Postretirement benefits other than pensions (Note 13) (13,200) - - ---------- ---------- ---------- Net Income $ 59,071 $ 87,779 $ 81,242 ========== ========== ========== Earnings Per Share (Note 17): Income Before Cumulative Effect of Accounting Changes $ 1.41 $ 1.56 $ 1.45 Cumulative Effect of Accounting Changes: Income taxes (.13) - - Postretirement benefits other than pensions (.23) - - ---------- ---------- ---------- Net Income $ 1.05 $ 1.56 $ 1.45 ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - For the Three Years Ended January 2, 1994 Capital Cost of Total in Excess Cumulative Shares Stock- Common of Par Retained Translation Held in holders (Dollars in thousands) Stock Value Earnings Adjustments Treasury Equity -------- --------- -------- ----------- -------- -------- Balance, December 30, 1990 $30,051 $ 5,010 $393,909 $10,097 $(69,436) $369,631 Net income - - 81,242 - - 81,242 Cash dividends ($.42 per share) - - (23,453) - - (23,453) Exercise of employee stock options and related income tax benefits - (931) - - 5,371 4,440 Translation adjustments - - - (4,147) - (4,147) Issuance of common stock for employee benefit plans - - (7,459) - 24,687 17,228 Purchase of common stock for treasury - - - - (24,230) (24,230) ------- ------- -------- ------- -------- -------- Balance, December 29, 1991 30,051 4,079 444,239 5,950 (63,608) 420,711 Net income - - 87,779 - - 87,779 Cash dividends ($.49 per share) - - (27,575) - - (27,575) Exercise of employee stock options and related income tax benefits - (422) (43) - 8,901 8,436 Translation adjustments - - - (7,273) - (7,273) Issuance of common stock for employee benefit plans - - (4,744) - 24,907 20,163 Purchase of common stock for treasury - - - - (28,605) (28,605) Effect of 2-for-1 stock split (Note 11) 30,051 (3,657) (26,394) - - - ------- ------- -------- ------- -------- ------- Balance, January 3, 1993 60,102 - 473,262 (1,323) (58,405) 473,636 Net income - - 59,071 - - 59,071 Cash dividends ($.52 per share) - - (29,358) - - (29,358) Exercise of employee stock options and related income tax benefits - - (298) - 7,356 7,058 Translation adjustments - - - (6,964) - (6,964) Issuance of common stock for employee benefit plans - - (6,614) - 25,724 19,110 Purchase of common stock for treasury - - - - (45,019) (45,019) ------- ------- -------- ------- --------- -------- Balance, January 2, 1994 $60,102 $ - $496,063 $(8,287) $(70,344) $477,534 ======= ======= ======== ======= ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS - For the Three Years Ended January 2, 1994 (Dollars in thousands) 1993 1992 1991 -------- -------- -------- Cash Flows From Operating Activities: Net income $ 59,071 $ 87,779 $ 81,242 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting changes 20,500 - - Depreciation and amortization 37,842 36,292 33,726 Losses (gains) on dispositions and investments, net (3,176) (169) 530 Changes in assets and liabilities, net of effects from companies purchased and divested: Decrease (increase) in accounts receivable 30,167 (689) (15,398) Decrease (increase) in inventories (1,971) 11,179 (2,069) Increase (decrease) in accounts payable and accrued expenses (16,798) 2,732 14,073 Change in prepaid and deferred taxes (3,514) (11,070) (4,492) Other (9,984) 1,753 (3,183) ------- -------- -------- Net Cash Provided by Operating Activities 112,137 127,807 104,429 ------- -------- -------- Cash Flows From Investing Activities: Capital expenditures (27,860) (22,446) (26,617) Proceeds from dispositions of businesses and sales of property, plant and equipment 9,503 2,593 4,531 Cost of acquisitions, net of cash and cash equivalents acquired (32,186) (58,070) (23,624) Funds held in escrow - - 21,112 Purchases of investment securities (2,503) (1,111) (3,431) Proceeds from sales of investment securities 7,813 5,275 14,473 -------- -------- -------- Net Cash Used in Investing Activities (45,233) (73,759) (13,556) -------- -------- -------- Cash Flows From Financing Activities: Changes in commercial paper 2,977 (10,428) (35,319) Other changes in debt (17,752) (7,396) (214) Proceeds from issuing common stock 26,168 28,599 21,668 Purchases of common stock (45,019) (28,605) (24,230) Cash dividends (29,358) (27,575) (23,453) -------- -------- -------- Net Cash Used in Financing Activities (62,984) (45,405) (61,548) -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents (1,487) (1,916) (458) -------- -------- -------- Net Increase in Cash and Cash Equivalents 2,433 6,727 28,867 Cash and cash equivalents at beginning of year 69,752 63,025 34,158 -------- -------- -------- Cash and cash equivalents at end of year $ 72,185 $ 69,752 $ 63,025 ======== ======== ======== CONSOLIDATED STATEMENT OF CASH FLOWS - For the Three Years Ended January 2, 1994 - Continued (Dollars in thousands) 1993 1992 1991 -------- -------- -------- Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest $ 6,819 $ 7,486 $ 9,445 Income taxes 36,642 44,985 45,452
The accompanying notes are an integral part of these consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Principles of Consolidation: The consolidated financial statements include the accounts of EG&G, Inc. and its subsidiaries (the Company). All material intercompany balances and transactions have been eliminated in consolidation. Sales: Cost-reimbursement sales are recorded as costs are incurred and include applicable income in the proportion that costs incurred bear to total estimated costs. Sales and income on fixed-price contracts are recorded at the completion of the contract, at the end of a contract phase for service contracts and at the time of shipment for products. If a loss is anticipated on any contract, provision for the entire loss is made immediately. The Company performs technical, scientific, production and support activities under contracts with the U.S. Department of Energy. The Consolidated Statement of Income does not include billings and associated costs for nonvalue-added support activities. However, the fees derived from these support activities were included in sales in the amounts of $13.8 million, $16.2 million and $12.3 million in 1993, 1992 and 1991, respectively. The shift in sales from products to services presented in the Consolidated Statement of Income in 1993 reflects the change, compared to 1992, from production to environmental restoration services at some of the DOE Support facilities. Inventories: Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or market. The majority of inventories is accounted for using the first-in, first-out method. All other inventories are accounted for using the last-in, first-out method. Property, Plant and Equipment: The Company depreciates plant and equipment over their estimated useful lives using accelerated methods for both financial statement and income tax purposes. For financial statement purposes, the estimated useful lives generally fall within the following ranges: buildings and special-purpose structures - 10 to 25 years; leasehold improvements - estimated useful life or remaining term of lease, whichever is shorter; machinery and equipment - 3 to 7 years; special-purpose equipment - expensed or over the life of the initial related contract. Nonrecurring tooling costs are capitalized while recurring costs are expensed. Pension Plans: The Company's funding policy provides that payments to the U.S. pension trusts shall at least be equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974. Non-U.S. plans are generally not funded. Foreign Exchange: The balance sheet accounts of non-U.S. operations, exclusive of stockholders' equity, are translated at year-end exchange rates, and income statement accounts are translated at weighted average rates in effect during the year; any translation adjustments are made directly to a component of stockholders' equity. The after-tax aggregate net transaction gains (losses) were not material for the years presented. Intangible Assets: Intangible assets result from acquisitions accounted for using the purchase method of accounting and include the excess of cost over the fair market value of the net assets of the acquired businesses. These amounts are being amortized over periods of up to 40 years. Subsequent to the acquisition, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. When factors indicate that goodwill should be evaluated for possible impairment, the Company uses an estimate of the related business segment's future cash flow over the remaining life of the goodwill in measuring whether the goodwill is recoverable. Cash Flows: For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid instruments with a purchased maturity of three months or less to be cash equivalents. The carrying amount of cash and cash equivalents approximates fair value due to the short maturities. Financial Instruments: Disclosures about fair value of financial instruments, including the methods and assumptions used to estimate the fair values, are included in Notes 6 and 8. 2. Acquisitions In June 1993, the Company acquired The Wallac Group (Wallac), a unit of Procordia AB, for a total purchase price of approximately $46 million, including related expenses, consisting of $41 million cash and a one-year note for $5 million. This acquisition was accounted for using the purchase method. The excess of the cost over the fair market value of the net assets acquired is estimated to be $24 million, which is being amortized over 20 years using a straight-line method. Wallac's results of operations were included in the consolidated results of the Company from the date of acquisition. Early in the second quarter of 1992, the Company completed the acquisition of the Heimann Optoelectronics Division of Siemens AG for cash of approximately $60 million, including related expenses. This acquisition was accounted for using the purchase method. The excess of the cost over the fair market value of the net assets acquired was $23 million, which is being amortized over 20 years using a straight-line method. Heimann's results of operations were included in the consolidated results of the Company from the date of acquisition. The effect of the purchased acquisitions was not material to the results of operations. The products of the acquired companies are described elsewhere in this report. 3. Accounts Receivable Accounts receivable as of January 2, 1994 and January 3, 1993 included unbilled receivables of $67.8 million and $91.1 million, respectively, which were due primarily from U.S. Government agencies. Accounts receivable were net of reserves for doubtful accounts of $6.1 million and $5.6 million, respectively. 4. Inventories
Inventories as of January 2, 1994 and January 3, 1993 consisted of the following: (In thousands) 1993 1992 -------- -------- Finished goods $ 30,864 $ 29,801 Work in process 30,393 29,902 Raw materials 60,324 54,493 -------- -------- $121,581 $114,196 ======== ========
The portion of inventories accounted for using the last-in, first-out (LIFO) method of determining inventory costs in 1993 and 1992 approximated 24% and 27%, respectively, of total inventories. The excess of current cost of inventories over the LIFO value was approximately $10 million at January 2, 1994 and $11 million at January 3, 1993. 5. Property, Plant and Equipment, at Cost
Property, plant and equipment as of January 2, 1994 and January 3, 1993 consisted of the following: (In thousands) 1993 1992 -------- -------- Land $ 14,327 $ 15,043 Buildings and leasehold improvements 91,280 78,828 Machinery and equipment 221,809 208,060 -------- -------- $327,416 $301,931 ======== ========
6. Investments
Investments as of January 2, 1994 and January 3, 1993 consisted of the following: (In thousands) 1993 1992 ------- ------- Marketable investments $ 6,838 $ 3,895 Other investments 13,426 18,338 Joint venture investments 5,656 4,427 ------- ------- $25,920 $26,660 ======= =======
Marketable investments consisted of common stocks and trust assets, which were invested in money market funds, fixed income securities and common stocks to meet the supplemental executive retirement plan obligation. These investments had an aggregate market value of $13.1 million and $9.7 million at January 2, 1994 and January 3, 1993, respectively. At January 2, 1994, gross unrealized gains on marketable investments were $6.3 million. The market values were based on quoted market prices. Other investments consisted of nonmarketable investments in private companies and venture capital partnerships, which are carried at the lower of cost or net realizable value. The estimated aggregate fair value of other investments approximated the carrying amount at January 2, 1994 and January 3, 1993. The fair values of other investments were estimated based primarily on the most recent rounds of financing and securities transactions and, to a lesser extent, on other pertinent information, including financial condition and operating results. Joint venture investments are accounted for using the equity method. The Company will adopt SFAS No. 115 on accounting for certain investments in debt and equity securities in 1994. This new standard requires that available-for-sale investments in equity securities that have readily determinable fair values be measured at fair value in the balance sheet. Unrealized holding gains and losses for these investments shall be excluded from earnings and reported as a net amount in a separate component of stockholders' equity until realized. The Company does not expect at this time that the statement, when adopted, will have a material impact on its financial position. 7. Intangible and Other Assets
Intangible and other assets as of January 2, 1994 and January 3, 1993 consisted of the following: (In thousands) 1993 1992 -------- -------- Intangible assets $139,205 $126,540 Other assets 32,555 17,581 -------- -------- $171,760 $144,121 ======== ========
Intangible assets were shown net of accumulated amortization of $25.5 million and $22.2 million at January 2, 1994 and January 3, 1993, respectively. The increase in intangible assets was due primarily to the acquisition of Wallac in 1993, partially offset by current year amortization and the effect of translating goodwill denominated in non- U.S. currencies at current exchange rates. The majority of the increase in other assets was due to increases in long-term prepaid pension of $7.9 million and income taxes of $4.3 million. 8. Debt Short-term debt at January 2, 1994 and January 3, 1993 consisted primarily of commercial paper in the amounts of $34.9 million and $32 million, respectively, which had maturities of less than 90 days. Commercial paper borrowings averaged $42.7 million during 1993 at an average interest rate of 3.2% compared to average borrowings of $41.8 million during 1992 at an average interest rate of 4.1%. Current maturities of long-term debt are also included in this account. The Company has a $150 million multicurrency credit agreement with a domestic banking group. It consists of a $100 million three-year revolving credit agreement followed by a three-year term loan, and a $50 million two-year revolving credit agreement followed by a three-year term loan. In addition, the Company has multicurrency credit agreements with an international banking group totaling $150 million, consisting of a $120 million one-year revolving credit agreement and a $30 million two-year revolving credit agreement. These lines of credit serve as backup facilities for the commercial paper borrowing. The Company, which is in the process of restructuring its credit agreements, is in compliance with all covenants. During 1993, the Company terminated its interest rate and currency exchange agreement, entered into in 1989, that effectively established a 73.5 million D-mark principal obligation in exchange for $40 million. Long-term liabilities associated with the swap agreement at January 3, 1993 were $5.3 million, which approximated fair value. At January 2, 1994 and January 3, 1993, long-term debt amounts of $1.5 million and $2 million, respectively, were included in long-term liabilities. The carrying amount of the Company's long-term debt approximated fair value. 9. Accrued Expenses
Accrued expenses as of January 2, 1994 and January 3, 1993 consisted of the following: (In thousands) 1993 1992 -------- -------- Payroll $ 13,375 $ 12,170 Employee benefits 46,121 50,377 Federal, non-U.S. and state income taxes 26,119 14,927 Other 47,099 47,809 -------- -------- $132,714 $125,283 ======== ========
10. Contingencies The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. The Company has established accruals for matters that are probable and reasonably estimable. Management believes that any liability that may ultimately result from the resolution of these matters in excess of amounts provided will not have a material adverse effect on the financial position or results of operations of the Company. In addition, the Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party for certain waste disposal sites. The Company accrues for environmental issues in the accounting period in which the Company's responsibility is established and the cost can be reasonably estimated. There have been no environmental problems to date which had or are expected to have a material effect on the Company's financial position or results of operations. 11. Stockholders' Equity At January 2, 1994, 4.5 million shares of the Company's common stock were reserved for employee benefit plans. The Company has nonqualified and incentive stock option plans for officers and key employees. Under these plans, options may be granted at prices not less than 100% of the fair market value on the date of grant. All options are exercisable at the date of grant and expire 10 years from the date of grant. The Stock Option Committee of the Board of Directors, at its sole discretion, may also include stock appreciation rights in any option granted. There are no stock appreciation rights outstanding under these plans.
A summary of certain stock option information is as follows: (In thousands) 1993 1992 1991 -------------- --------------- -------------- Number Number Number of Option of Option of Option Shares Price Shares Price Shares Price ------ ------- ------ ------- ------ ------- Outstanding, beginning of year 2,902 $55,126 2,754 $49,984 2,370 $38,315 Granted 726 15,916 678 13,643 706 16,140 Exercised (355) (6,217) (510) (8,131) (318) (4,446) Lapsed (13) (279) (20) (370) (4) (25) ----- ------- ----- ------- ----- ------- Outstanding and exercisable, end of year 3,260 $64,546 2,902 $55,126 2,754 $49,984 ===== ======= ===== ======= ===== ======= Shares available for grant, end of year 1,144 1,021 48 ===== ===== =====
The Company's Employees Stock Purchase Plan was terminated as of October 31, 1993. During 1993 and 1992, the Company issued 1.2 million shares and 1.1 million shares, respectively, under this plan. On January 22, 1992, the Board of Directors declared a 2-for-1 stock split, paid May 8, 1992, in the form of a dividend of one additional share of the Company's common stock for each share owned by stockholders of record at the close of business on April 17, 1992. Par value remained at $1 per share. The stock split resulted in the issuance of 30,051,000 additional shares of common stock from authorized but unissued shares. The issuance of authorized but unissued shares resulted in the transfer of $3,657,000 from capital in excess of par value and $26,394,000 from retained earnings to common stock, representing the par value of the shares issued. The Company declared a dividend distribution of one right on each share of common stock outstanding on and after February 9, 1987. Each right, when exercisable, entitles a stockholder to buy one two-hundredth of a share of a new series of preferred stock at a price of $50. The rights become exercisable when a person or group acquires 20% or more or tenders for 30% or more of the Company's common stock. This preferred stock is nonredeemable and will have one vote per share. The rights are nonvoting, expire in 1997 and may be redeemed prior to becoming exercisable. The Company has reserved 500,000 preferred shares, designated as Series B Junior Participating Preferred Stock, for issuance upon exercise of such rights. In the event that the Company is acquired in a merger or other business combination, each outstanding right would entitle a holder to purchase that number of shares of common stock of the surviving company which, at the time of such transaction, would have a market value of two times the exercise price paid. 12. Research and Development During 1993, 1992 and 1991, Company-sponsored research and development expenditures were approximately $34.7 million, $32.1 million and $24.7 million, respectively. Customer-sponsored research and development, primarily for Department of Energy programs, accounted for additional expenditures of approximately $137 million in 1993, $133 million in 1992 and $127 million in 1991. 13. Employee Benefit Plans The Company has a savings plan for the benefit of qualified U.S. employees. Under this plan, the Company contributes an amount equal to the lesser of 50% of the amount of the employee's voluntary contribution or 3% of the employee's annual compensation. In 1994, the Company contribution will be increased to the lesser of 55% of the employee's voluntary contribution or 3.3% of the employee's annual compensation. The Company has defined benefit pension plans covering substantially all U.S. employees and non-U.S. pension plans for non-U.S. employees. The plans provide benefits that are based on an employee's years of service and compensation near retirement. Assets of the U.S. plan are composed primarily of corporate equity and debt securities.
Net periodic pension cost included the following components: (In thousands) 1993 1992 1991 -------- -------- -------- Service cost - benefits earned during the period $ 8,398 $ 8,164 $ 6,608 Interest cost on projected benefit obligations 14,030 12,824 11,184 Actual return on plan assets (18,316) (11,005) (14,686) Net amortization and deferral 3,852 (1,914) 2,783 -------- -------- -------- $ 7,964 $ 8,069 $ 5,889 ======== ======== ========
The increase in 1992 pension costs resulted from the inclusion of new participants and the pension expense of Heimann Optoelectronics, acquired in 1992. The following table sets forth the funded status of the principal U.S. plan and the principal non-U.S. plans and the amounts recognized in the Company's Consolidated Balance Sheet at January 2, 1994 and January 3, 1993:
(In thousands) 1993 1992 ------------------ ------------------ Non-U.S. U.S. Non-U.S. U.S. -------- -------- -------- -------- Actuarial present value of benefit obligations: Vested benefit obligations $18,143 $141,325 $13,323 $109,944 ======= ======== ======= ======== Accumulated benefit obligations $20,176 $148,295 $16,094 $115,402 ======= ======== ======= ======== Projected benefit obligations for service provided to date $25,673 $173,379 $21,244 $142,778 Plan assets at fair value - 164,593 - 139,774 ------- -------- ------- -------- Plan assets less than projected benefit obligations 25,673 8,786 21,244 3,004 Unrecognized net transition asset - 6,010 - 6,762 Unrecognized prior service costs (1,459) 1,041 - (394) Unrecognized net gain (loss) (635) (25,213) 925 (10,854) ------- -------- ------- -------- Accrued pension liability (asset) $23,579 $ (9,376) $22,169 $ (1,482) ======= ======== ======= ======== Assumptions of the principal plan were: Discount rate 7.00% 7.40% 7.50% 8.50% Rate of compensation increase 4.50% 5.00% 5.00% 5.82% Long-term rate of return on assets - 9.75% - 10.00%
The non-U.S. accrued pension liability included $22.7 million and $21.9 million classified as long-term liabilities as of January 2, 1994 and January 3, 1993, respectively. The U.S. pension asset was classified as other assets. The Company also sponsors a supplemental executive retirement plan to provide senior management with benefits in excess of normal pension benefits. At January 2, 1994 and January 3, 1993, the projected benefit obligations were $10.2 million and $7.1 million, respectively. Assets of $4.7 million and $3.3 million, segregated in a trust, were available to meet this obligation as of January 2, 1994 and January 3, 1993. Pension expense for this plan was approximately $1 million in 1993, $0.9 million in 1992 and $0.7 million in 1991. Effective January 4, 1993, the Company adopted SFAS No. 106 on accounting for postretirement benefits other than pensions for its U.S. retiree health benefits. This statement requires the expected cost of postretirement benefits to be charged to expense during the years in which employees render service. This is a change from the prior policy of recognizing these costs as paid. As part of adopting the new standard, the Company recorded a one-time, non-cash charge against earnings of $20 million before taxes, or $13.2 million after income taxes ($.23 per share). This cumulative adjustment represents the discounted present value of expected future retiree health benefits attributed to employees' service rendered prior to January 4, 1993. The Company provides health care benefits for eligible retired U.S. employees under a comprehensive major medical plan or under health maintenance organizations where available. The majority of the Company's U.S. employees become eligible for retiree health benefits if they retire directly from the Company and have at least 10 years of service. Generally, the major medical plan pays stated percentages of covered expenses after a deductible is met, and takes into consideration payments by other group coverages and by Medicare. The Plan requires retiree contributions under most circumstances and has provisions for cost sharing changes. For employees retiring after 1991, the Company has capped its medical premium contribution based on employees' years of service. The Company funds the amount allowable under a 401(h) provision in the Company's defined benefit pension plan. Assets of the plan are composed primarily of corporate equity and debt securities. Postretirement medical benefit expense computed under SFAS No. 106 amounted to $2 million in 1993. Amounts included in expense for 1992 and 1991 under the previous cash method of accounting were $0.8 million and $0.7 million, respectively. If the 1993 expense had been determined under the cash method of accounting, the amount recognized would have been $1 million.
Net periodic postretirement medical benefit cost for 1993 included the following components: (In thousands) 1993 ------ Service cost - benefits earned during the period $ 360 Interest cost on accumulated benefit obligation 1,686 Actual return on plan assets (3) Net amortization and deferral 3 ------ $2,046 ======
The following table sets forth the plan's funded status and the amount recognized in the Company's Consolidated Balance Sheet at January 2, 1994: (In thousands) 1993 ------- Accumulated benefit obligation: Current retirees $15,638 Active employees eligible to retire 3,134 Other active employees 3,217 ------- 21,989 Plan assets at fair value 2,003 ------- Plan assets less than accumulated benefit obligation 19,986 Unrecognized net loss (993) ------- Accrued postretirement medical liability $18,993 ======= Assumptions of the plan are: Discount rate 7.4% Health care cost trend: First year 15.0% Ultimate 6.0% Years to reach ultimate 10 years Long-term rate of return on assets 9.75%
The accumulated postretirement medical benefit obligation included $18 million classified as long-term liabilities as of January 2, 1994. If the health care cost trend rate was increased 1%, the accumulated postretirement benefit obligation would have increased by approximately $1.6 million. The effect of this increase on the annual cost for 1993 would be approximately $0.1 million. The Company also has an incentive compensation plan for certain officers and key employees. Awards under this plan are approved annually by the Board of Directors and are limited by certain predetermined criteria. The total expense under all benefit plans referred to above amounted to approximately $18.8 million in 1993, $21 million in 1992 and $23.2 million in 1991. In addition, the Company maintains various other employee benefit plans, including health and life insurance plans. The above information does not include amounts related to benefit plans applicable to employees associated with contracts with the Department of Energy and NASA because the Company is not responsible for the current or future funded status of the plans. The Company will adopt SFAS No. 112 on accounting for postemployment benefits in 1994. This new standard requires that benefits paid for former or inactive employees after employment but prior to retirement must be accrued if certain criteria are met. The Company does not expect at this time that the statement, when adopted, will have a material impact on its financial position or results of operations. 14. Leases The Company leases certain property and equipment under operating leases. Rental expense charged to earnings for 1993, 1992 and 1991 amounted to $18.7 million, $20.6 million and $19.6 million, respectively. Minimum rental commitments under noncancelable operating leases through 1998 do not exceed $16.7 million annually and aggregate $4.4 million after 1998. The above information does not include amounts related to leases covered by contracts with the Department of Energy and NASA because the costs are reimbursable under the contracts. 15. Other Income (Expense), Net
Other income (expense), net, consisted of the following: (In thousands) 1993 1992 1991 ------- ------- ------- Interest and dividend income $ 4,043 $ 3,380 $ 2,789 Gains (losses) on investments, net 2,975 (338) (622) Interest expense (6,264) (7,241) (8,833) Other 254 2,116 1,829 ------- ------- ------- $ 1,008 $(2,083) $(4,837) ======= ======= =======
Gains (losses) on investments for 1991 included net gains of $5.9 million resulting from sales of investment securities and a loss of $6.5 million due to a reduction in the carrying value of certain nonmarketable investments to their expected realizable values. 16. Income Taxes Effective January 4, 1993, the Company adopted SFAS No. 109 on accounting for income taxes. This standard determines deferred income taxes based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities, given the provisions of enacted tax laws. Prior to the implementation of this statement, the Company accounted for income taxes under Accounting Principles Board Opinion No. 11. As part of adopting the new standard, the Company recorded a one-time, non-cash charge against earnings of $7.3 million ($.13 per share).
The components of income before income taxes for financial reporting purposes were as follows: (In thousands) U.S. Non-U.S. Total -------- -------- -------- 1993 $103,812 $18,043 $121,855 ======== ======= ======== 1992 $110,779 $10,296 $121,075 ======== ======= ======== 1991 $105,596 $14,762 $120,358 ======== ======= ========
The components of the provision for income taxes were as follows: (In thousands) 1993 1992 1991 ------------------------ ------------------------ ------------------------ Non- Non- Non- Federal U.S. Total Federal U.S. Total Federal U.S. Total ------- ------ ------- ------- ------ ------- ------- ------ ------- Current $34,936 $6,398 $41,334 $34,147 $4,491 $38,638 $37,972 $5,577 $43,549 Deferred (Prepaid) 1,447 (497) 950 (3,761) (1,581) (5,342) (2,268) (2,165) (4,433) ------- ------ ------- ------- ------ ------- ------- ------ ------- $36,383 $5,901 $42,284 $30,386 $2,910 $33,296 $35,704 $3,412 $39,116 ======= ====== ======= ======= ====== ======= ======= ====== =======
The provision for deferred (prepaid) taxes resulted primarily from temporary differences in the recognition of income and expenses for tax purposes and for financial statement purposes. The sources and tax effects related to the following:
(In thousands) 1993 1992 1991 ------- ------- ------- Expenses not currently deductible $ 1,303 $(4,693) $(2,220) Deferred award fee (2,363) 604 1,770 Other 2,010 (1,253) (3,983) ------- ------- ------- $ 950 $(5,342) $(4,433) ======= ======= =======
The major differences between the Company's effective tax rate and the Federal statutory rate were as follows: 1993 1992 1991 ----- ----- ----- Federal statutory rate 35.0% 34.0% 34.0% Non-U.S. rate differential, net (0.6) (0.7) (0.8) Adjustment of prior estimated tax liabilities - (4.5) (1.7) Sale of an investment - (1.7) - Other, net 0.3 0.4 1.0 ---- ---- ---- Effective tax rate 34.7% 27.5% 32.5% ==== ==== ====
The effect of SFAS No. 109 on the consolidated effective tax rate was minimal in 1993. If SFAS No. 109 had been in effect for 1992 and 1991, the consolidated effective tax rates would not have changed.
The tax effects of temporary differences and carry forwards which gave rise to prepaid (deferred) income taxes as of January 2, 1994 were as follows: (In thousands) 1993 ------- Nondeductible reserves $ 3,748 Untaxed reserves (3,948) Depreciation 7,913 Inventory reserves 5,588 State income taxes 4,430 Vacation pay 5,107 Award and holdback fees (5,619) Non-U.S. net operating loss carryforwards 9,939 Valuation allowance (9,939) Postretirement health benefits 7,000 Pension contribution (2,327) All other, net 10,342 ------- Total Prepaid Taxes $32,234 =======
In the above table, prepaid (deferred) income tax items were shown as assets or (liabilities) with no netting except for "other," which included prepaid tax assets of $19.7 million and deferred tax liabilities of $9.4 million. At January 2, 1994, the Company had non-U.S. net operating loss carryforwards of approximately $22.3 million for income tax purposes which either expire in years 1994 through 2000 or carryforward indefinitely. The $9.9 million valuation allowance required under SFAS No. 109 represents the tax effect of non-U.S. net operating loss carryforwards that are not anticipated to be utilized. Current prepaid income taxes of $18.7 million and $23.2 million at January 2, 1994 and January 3, 1993, respectively, were included in other current assets. Long-term prepaid income taxes of $13.6 million and $9.2 million were included in other long-term assets at January 2, 1994 and January 3, 1993, respectively. In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. Repatriation of retained earnings is done only when it is advantageous. Applicable Federal taxes are provided only on amounts planned to be remitted. Accumulated net earnings of non-U.S. subsidiaries for which no Federal taxes have been provided for 1993, 1992 and 1991 were $66.6 million, $59.1 million and $53 million, respectively, exclusive of those amounts that if remitted would result in little or no additional tax due to the availability of non-U.S. tax credits. Federal taxes on these earnings would have aggregated for 1993, 1992 and 1991, respectively, $19.5 million, $17.1 million and $16 million. The Internal Revenue Service is currently examining the Company's Federal income tax returns for the years 1988 through 1990. The Company believes that the results of this examination will not have a material effect on its financial position or results of operations. 17. Earnings Per Share Earnings per share of common stock were computed by dividing net income by the weighted average number of common shares outstanding. The number of shares issuable on the exercise of stock options had no material effect on earnings per share. The weighted average number of shares used in the earnings per share computations were 56,504,000 for 1993, 56,385,000 for 1992 and 55,901,000 for 1991. 18. Industry Segment and Geographic Area Information The Company's operations are classified into five industry segments: Technical Services, DOE Support, Instruments, Mechanical Components and Optoelectronics. The Company has changed the way its products and services are grouped into industry segments to better reflect the markets served and the Company's strategies for the future. Data for prior periods have been restated accordingly. The products and services of the segments are described elsewhere in the Annual Report. Sales and income from operations by industry segment are shown in the Segment Sales and Income section of this report; such information with respect to 1993, 1992 and 1991 is considered an integral part of this note. Sales to U.S. Government agencies, which were predominantly to the Department of Energy, the Department of Defense and NASA, were $1,939 million, $2,035 million and $1,987 million in 1993, 1992 and 1991, respectively. The Company currently has five major award-fee contracts with the Department of Energy, for which funds are appropriated, work scopes are determined and award-fee pools are negotiated annually. The expiration dates for these contracts are as follows: one in 1994, three in 1995 and one in 1996. The Idaho contract expires in October 1994, and the Company is participating as the majority interest in a joint venture that has submitted a proposal for increased work scope at the facility. The Department of Energy's rules concerning contractor liability and performance evaluation currently apply to all five contracts. These new performance evaluation criteria create greater variability in the incentive awards earned. The contractor liability rules provide for increased contractor accountability for costs associated with events determined to have been avoidable. This liability is limited to the fee earned in the grading period in which the avoidable event occurs. In addition, the Department of Energy has announced its intention to proceed with a contract reform initiative. In October 1993, the Company was selected by NASA to continue as the base operations contractor at the Kennedy Space Center. The new contract has a potential term of 10 years, including options, contains reductions in contract value and could result in reductions in annual fee.
Additional information relating to the Company's operations in the various industry segments follows: Depreciation and Capital (In thousands) Amortization Expense Expenditures ------------------------- ------------------------- 1993 1992 1991 1993 1992 1991 ------- ------- ------- ------- ------- ------- Technical Services $ 8,422 $ 7,991 $ 7,653 $ 6,315 $ 5,650 $ 4,974 DOE Support - - - - - - Instruments 9,213 8,131 8,425 6,555 4,768 6,276 Mechanical Components 6,870 7,755 8,643 5,598 5,290 9,606 Optoelectronics 12,417 11,595 8,189 8,469 6,305 4,708 Corporate 920 820 816 923 433 1,053 ------- ------- ------- ------- ------- ------- $37,842 $36,292 $33,726 $27,860 $22,446 $26,617 ======= ======= ======= ======= ======= =======
Identifiable (In thousands) Assets -------------------------- 1993 1992 1991 -------- -------- -------- Technical Services $127,917 $133,351 $131,931 DOE Support 11,959 22,189 17,171 Instruments 256,117 217,792 215,029 Mechanical Components 97,317 112,272 133,404 Optoelectronics 142,630 142,543 90,577 Corporate 132,868 121,593 109,785 -------- -------- -------- $768,808 $749,740 $697,897 ======== ======== ========
DOE Support's identifiable assets mainly represent accounts receivable for fees from the U.S. Department of Energy. DOE Support's assets do not include U.S. Government funds and facilities that are devoted to the contracts and for which the Company is custodian. Corporate assets consist primarily of cash and cash equivalents, prepaid taxes and investments.
Information relating to geographic areas follows: (In thousands) Sales Income From Operations -------------------------------- ---------------------------- 1993 1992 1991 1993 1992 1991 ---------- ---------- ---------- -------- -------- -------- U.S. $2,427,663 $2,532,494 $2,484,972 $129,858 $142,272 $137,346 Non-U.S. 270,285 256,328 203,570 18,562 10,781 15,305 Corporate - - - (27,573) (29,895) (27,456) ---------- ---------- ---------- -------- -------- -------- $2,697,948 $2,788,822 $2,688,542 $120,847 $123,158 $125,195 ========== ========== ========== ======== ======== ========
(In thousands) Identifiable Assets ------------------------------ 1993 1992 1991 -------- -------- -------- U.S. $317,303 $355,722 $364,990 Non-U.S. 318,637 272,425 223,122 Corporate 132,868 121,593 109,785 -------- -------- -------- $768,808 $749,740 $697,897 ======== ======== ========
Over 60% of the identifiable assets of the non-U.S. operations are located in European Community countries. Transfers between geographic areas were not material. 19. Quarterly Financial Information (Unaudited)
Selected quarterly financial information follows: (In thousands except per share data) Quarters -------------------------------------- First Second Third Fourth Year -------- -------- -------- -------- ---------- 1993 ---- Sales $648,926 $662,053 $746,248 $640,721 $2,697,948 Income From Operations 29,382 31,353 25,119 34,993 120,847 Income Before Cumulative Effect of Accounting Changes 19,107 21,068 15,213 24,183 79,571 Net Income (1,393)* 21,068 15,213 24,183 59,071* Earnings Per Share Before Cumulative Effect of Accounting Changes .34 .37 .27 .43 1.41 Earnings Per Share (.02)* .37 .27 .43 1.05* Cash Dividends Per Common Share .13 .13 .13 .13 .52 1992 ---- Sales 654,828 695,752 749,026 689,216 2,788,822 Income From Operations 27,234 33,481 32,194 30,249 123,158 Net Income 18,058 21,770 22,096 25,855 87,779 Earnings Per Share .32 .39 .39 .46 1.56 Cash Dividends Per Common Share .115 .125 .125 .125 .49 *Includes one-time after-tax charges of $20.5 million, or $.36 per share, due to the Company's adoption of SFAS Nos. 106 and 109.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of EG&G, Inc.: We have audited the accompanying consolidated balance sheets of EG&G, Inc. (a Massachusetts corporation) and subsidiaries as of January 2, 1994, and January 3, 1993, and the related consolidated statements of income, stockholders' equity and cash flows for the years ended January 2, 1994, January 3, 1993, and December 29, 1991. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EG&G, Inc. and subsidiaries as of January 2, 1994, and January 3, 1993, and the results of their operations and their cash flows for the years ended January 2, 1994, January 3, 1993, and December 29, 1991, in conformity with generally accepted accounting principles. As explained in Notes 13 and 16 to the consolidated financial statements, effective January 4, 1993, the Company changed its method of accounting for postretirement benefits other than pensions and for income taxes. Boston, Massachusetts /s/Arthur Andersen & Co. January 24, 1994 ------------------------ Arthur Andersen & Co. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON --------------------------------------------------------- ACCOUNTING AND FINANCIAL DISCLOSURE ----------------------------------- None. PART III ITEM l0. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------------------------------ a) DIRECTORS The information required by this Item with respect to Directors is contained on Pages 3 through 9 of the Company's l994 Proxy Statement under the captions "Election of Directors" and "Information Relative to the Board of Directors and Certain of its Committees" and is herein incorporated by reference. b) EXECUTIVE OFFICERS
Listed below are the executive officers as of March 17, 1994. No family relationship exists between any of the officers. Name Position Age ---- -------- --- John M. Kucharski Chairman of the Board, 58 President and Chief Executive Officer Fred B. Parks Senior Vice President 46 Louis P. Valente Senior Vice President 63 James O. Zane Senior Vice President 60 Murray Gross Vice President, General 57 Counsel and Clerk John F. Alexander, II Corporate Controller and 37 Acting Chief Financial Officer Peter A. Broadbent Treasurer 55 Angelo D. Castellana Vice President 52 James R. Dubay Vice President 57 Dale L. Fraser Vice President 58
Listing of Executive Officers - Continued Name Position Age ---- -------- --- Elmar Illek Vice President 44 Deborah S. Lorenz Vice President 44 Richard F. Murphy Vice President 57 Donald H. Peters Vice President 53 Luciano S. Rossi Vice President 48 Edward H. Snow Vice President 57 Charles M. Williams Vice President 57 Louis J. Williams Vice President 54 Peter H. Zavattaro Vice President 56
Mr. Kucharski joined the Company in 1972. He was elected a Vice President in 1979, a Senior Vice President in 1982 and Executive Vice President in 1985. In 1986 he was elected President and Chief Operating Officer and in 1987 Chief Executive Officer. Dr. Parks joined the Company in 1976. He was elected a Vice President in 1988 and a Senior Vice President in 1991. Mr. Valente joined the Company in 1968. He was elected Treasurer in 1979, a Vice President in 1983, and a Senior Vice President in 1991 and is Director of Acquisitions, Dispositions and Investments. Mr. Valente did not reflect in his reported holdings on Section 16(a) Form 4, 408 shares of Common Stock held by his wife and with respect to which Mr. Valente disclaims beneficial ownership. A Form 4 was filed correcting the inadvertent omission in Mr. Valente's reported holdings. Mr. Zane joined the Company in 1976. He was elected a Vice President in 1986 and a Senior Vice President in 1991 and is Group Executive of the DOE Support segment. Mr. Gross joined the Company in 1971. He was elected Assistant General Counsel and Assistant Clerk in 1978 and Vice President and General Counsel in 1990. Mr. Alexander joined the Company in 1982. He was elected Corporate Controller in 1991 and was appointed Acting Chief Financial Officer effective January 1994. Mr. Broadbent joined the Company in 1967. He was elected Treasurer in 1984. Mr. Castellana joined the Company in 1965. He was elected a Vice President in 1991 and is Chief Operating Officer of the Instruments segment. Mr. Dubay joined the Company in 1971. He was elected a Vice President in 1988 and is General Manager of EG&G Florida. Mr. Fraser joined the Company in 1961. He was elected a Vice President in 1990 and is General Manager of Reynolds Electrical and Engineering Company. Mr. Illek joined the Company in 1976. He was elected a Vice President in 1992 and is Group Executive of the Instruments segment. Ms. Lorenz joined the Company in 1990. She was elected a Vice President in 1992. From 1980 to 1990 Ms. Lorenz was Assistant Director of Investor Relations at British Petroleum, plc. Mr. Murphy joined the Company in 1960. He was elected a Vice President of the Company in 1987 and is Corporate Director of Human Resources. Dr. Peters joined the Company in 1968. He was elected a Vice President in 1987 and is Director of Planning. Mr. Rossi joined the Company in 1967. He was elected a Vice President in 1988 and is Group Executive of the Mechanical Components segment. Dr. Snow joined the Company in 1977. He was elected a Vice President in 1992 and is Group Executive of the Optoelectronics segment. Mr. C. M. Williams joined the Company in 1973. He was elected a Vice President in 1984 and is Group Executive of the Technical Services segment. Mr. L. J. Williams joined the Company in 1973. He was elected a Vice President in 1988 and is Director of Strategic Tax Projects. Mr. Zavattaro joined the Company in 1959. He was elected a Vice President in 1985 and is General Manager of Energy Measurements. ITEM ll. EXECUTIVE COMPENSATION -------------------------------- The information required to be disclosed by this Item is contained in Pages 12 - 21 of the Company's 1994 Proxy Statement from under the caption "Board Compensation Committee Report on Executive Compensation" up to and including "Aggregated Option Exercises in the Last Fiscal Year and Fiscal Year-End Value Table" and Notes thereto, and is herein incorporated by reference. ITEM l2. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ------------------------------------------------------------------------ The information required by this Item is contained on Pages 9-12 of the Company's l994 Proxy Statement under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" and is herein incorporated by reference. ITEM l3. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -------------------------------------------------------- Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K -------------------------------------------------------------------------- (a) DOCUMENTS FILED AS PART OF THIS REPORT: 1. FINANCIAL STATEMENTS Included in Part II, Item 8: Consolidated Balance Sheet as of January 2, 1994 and January 3, 1993 Consolidated Statement of Income for the Three Years Ended January 2, 1994 Consolidated Statement of Stockholder's Equity for the Three Years Ended January 2, 1994 Consolidated Statement of Cash Flows for the Three Years Ended January 2, 1994 Notes to Consolidated Financial Statements Report of Independent Public Accountants 2. FINANCIAL STATEMENT SCHEDULES Report of independent public accountants on financial statement schedules Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-Term Borrowings Financial statement schedules, other than those above, are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto. Separate financial statements of the Registrant are omitted since it is primarily an operating company, and since all subsidiaries included in the consolidated financial statements being filed, in the aggregate, do not have minority equity interests and/or indebtedness to any person other than the Registrant or its consolidated subsidiaries in amounts which together exceed five percent of total consolidated assets. 3. EXHIBITS (i) The Company's Restated Articles of Organization, as amended to date, including all Certificates of Vote of Directors Establishing a Series of a Class of Stock were filed with the Commission on July 16, 1992, as an Exhibit to Form-8 Amendment No. 1 to EG&G's Annual Report on Form 10-K for the fiscal year ended December 29, 1991, and are herein incorporated by reference. (ii) The Company's By-Laws as amended by the Board of Directors on April 23, 1991, and on January 22, 1992, were filed with the Commission as Exhibit 14 (a)(3).(ii) to EG&G's Annual Report on Form 10-K for the fiscal year ended December 29, 1991, and are herein incorporated by reference. (iii) The form of certificate used to evidence ownership of EG&G Common Stock, $1 par value, was filed as Exhibit 4(a) to EG&G's Registration Statement on Form S-3, File No. 2-69642, and is herein incorporated by reference. * (iv) The EG&G, Inc. 1978 Non-Qualified Stock Option Plan as amended by the Board of Directors on January 26, 1988, was filed with the Commission as Exhibit 14(a)3.(v) to EG&G's Annual Report on Form 10-K for the fiscal year ending January 3, 1988, and is herein incorporated by reference. * (v) The EG&G, Inc. 1982 Incentive Stock Option Plan as amended by the Board of Directors on January 24, 1990, was filed with the Commission as Exhibit B on pages 37-42 of EG&G's 1990 Proxy Statement, and is herein incorporated by reference. * (vi) The EG&G, Inc. 1992 STOCK OPTION PLAN was filed as Exhibit 4(v) to EG&G's Registration Statement on Form S-8, File No. 33-49898, and is herein incorporated by reference. * (vii) Employment Contracts: (1) Employment contract between John M. Kucharski and EG&G dated November 1, 1993. (2) Employment contract between Murray Gross and EG&G dated November 1, 1993. (3) Employment contract between John F. Alexander, II and EG&G dated November 1, 1993. (4) Employment contract between Peter A. Broadbent and EG&G dated November 1, 1993. (5) Employment contract between Angelo Castellana and EG&G dated November 1, 1993. (6) Employment contract between James R. Dubay and EG&G dated November 1, 1993. (7) Employment contract between Dale L. Fraser and EG&G dated November 1, 1993. (8) Employment contract between Deborah S. Lorenz and EG&G dated November 1, 1993. (9) Employment contract between Richard F. Murphy and EG&G dated November 1, 1993. (10) Employment contract between Fred B. Parks and EG&G dated November 1, 1993. (11) Employment contract between Donald H. Peters and EG&G dated November 1, 1993. (12) Employment contract between Luciano S. Rossi and EG&G dated November 1, 1993. (13) Employment contract between Edward H. Snow and EG&G dated November 1, 1993. (14) Employment contract between Louis P. Valente and EG&G dated November 1, 1993. (15) Employment contract between Charles M. Williams and EG&G dated November 1, 1993. (16) Employment contract between Louis J. Williams and EG&G dated November 1, 1993. (17) Employment contract between James O. Zane and EG&G dated November 1, 1993. (18) Employment contract between Peter H. Zavattaro and EG&G dated November 1, 1993. Except for the name of the officer in the employment contracts identified by numbers 3 through and including 18, the form of said employment contracts is identical in all respects. The employment contracts identified by numbers 1 and 2 are identical to each other and are virtually identical to the contracts identified by numbers 3 through 18 except that they provide for a longer contract term. The employment contract between Richard F. Murphy and EG&G is representative of the employment contracts of the executive officers, and is attached hereto as Exhibit 14(a)(vii). * (viii) Remunerative Plans: (1) EG&G, Inc. Supplemental Executive Retirement Plan. Information with respect to this item is found following the Notes to Table II on Pages 17-18 of EG&G's 1994 Proxy Statement, and such information is herein incorporated by reference. (2) EG&G, Inc. Management Incentive Plan. Information with respect to this item is found on Page 13 of EG&G's 1994 Proxy Statement under the caption "Annual Incentive Plan", and such information is herein incorporated by reference. (ix) Power of Attorney (appears on signature page) (x) Subsidiaries of the Registrant * This exhibit is a management contract or compensatory plan or arrangement required to be filed as an Exhibit pursuant to Item 14(c) of Form 10-K. (b) REPORTS ON FORM 8-K There have been no reports on Form 8-K filed during the last quarter of the the fiscal year ended January 2, 1994. (c) PROXY STATEMENT EG&G's 1994 Proxy Statement, in definitive form, was filed electronically on March 17, 1994, with the Securities and Exchange Commission in Washington, D.C. pursuant to the Commission's Rule 14(a)-6. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To EG&G, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of EG&G, Inc. included in this Form 10-K and have issued our report thereon dated January 24, 1994. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedules VIII and IX are the responsibility of the Company's management and are presented for purposes of complying with the Securities an Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/Arthur Andersen & Co. Boston, Massachusetts ------------------------ January 24, 1994 Arthur Andersen & Co. SCHEDULE VIII -------------
EG&G, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED JANUARY 2, 1994 (In thousands) Balance at Additions Accounts Balance Beginning Charged Charged at End Description of Year to Income Off Other of Year ----------- ---------- --------- -------- -------- ------- Reserve for ----------- Doubtful Accounts ----------------- Year Ended December 29, 1991 $6,453 $1,448 $(2,111) $(265) $5,525 Year Ended January 3, 1993 $5,525 $ 254 $ (920) $ 762(A) $5,621 Year Ended January 2, 1994 $5,621 $ 737 $ (755) $ 523(B) $6,126 (A) Includes reserves of $1,378 related to a company acquired in 1992. (B) Includes reserves of $705 related to a company acquired in 1993.
SCHEDULE IX -----------
EG&G, INC. AND SUBSIDIARIES SHORT-TERM BORROWINGS FOR THE THREE YEARS ENDED JANUARY 2, 1994 (In thousands) Balance at End of Period Category of ----------------- Maximum Amt. Average Amt. Weighted Aggregate Weighted Outstanding Outstanding Avg. Int. Short-Term Average During During Rate During Borrowing Amount Int. Rate The Period The Period The Period ----------- ------ --------- ------------ ------------ ----------- Year Ended December 29, 1991: Commercial Paper $42,392 4.9% $92,550 $69,222 6.3% Other Bank Loans $14,029 10.9% $14,029 $12,577 11.0% Year Ended January 3, 1993: Commercial Paper $31,964 3.8% $77,000 $41,777 4.1% Other Bank Loans $ 7,929 10.4% $14,579 $10,903 10.7% Year Ended January 2, 1994 Commercial Paper $34,941 3.4% $81,000 $42,731 3.2% Other Bank Loans $ 7,540 8.2% $11,324 $ 8,501 8.0%
The average amount outstanding during the period was based upon daily balances for commercial paper and upon quarter-end balances for other bank loans. The weighted average interest rate during the period was calculated based upon daily rates for commercial paper and upon quarter-end rates for other bank loans. CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports dated January 24, 1994, included in this Form 10-K, into Registration Statements previously filed by EG&G, Inc. on, respectively, Form S-8, File No. 2-61241; S-8, File No. 2-98168; Form S-8, 33-17466; Form S-8, File No. 33-36082; Form S-8, File No. 33-35379; Form S-8, File No. 33-35374; Form S-8, File No. 33-43582; Form S-8, File No. 33-49898; and Form S-8, File No. 33-57606. Boston, Massachusetts /s/Arthur Andersen & Co. March 31, 1994 ------------------------ ARTHUR ANDERSEN & CO. POWER OF ATTORNEY We, the undersigned officers and directors of EG&G, Inc., hereby severally constitute John M. Kucharski, and Murray Gross, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names, in the capacities indicated below, this Annual Report on Form 10-K and any and all amendments to said Annual Report on Form 10-K, and generally to do all such things in our name and behalf in our capacities as officers and directors to enable EG&G, Inc. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, hereby rectifying and confirming signed by our said attorneys, and any and all amendments thereto. Witness our hands on the date set forth below. SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EG&G, Inc. March 30, 1994 By:/s/John M. Kucharski -------------------- John M. Kucharski Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) March 30, 1994 By:/s/John F. Alexander, II ------------------------ John F. Alexander, II Corporate Controller and Acting Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated: By: /s/John M. Kucharski -------------------- John M. Kucharski, Director Date: March 30, 1994 By: /s/Gail Deegan -------------- Gail Deegan, Director Date: March 30, 1994 By: ----------------------- Dean W. Freed, Director Date: ________________________ By: ----------------------- Robert F. Goldhammer, Director Date: ________________________ By: ---------------------- John B. Gray, Director Date: ________________________ By: /s/Kent F. Hansen ----------------- Kent F. Hansen, Director Date: March 31, 1994 By: /s/Greta Marshall ----------------- Greta Marshall, Director Date: March 30, 1994 By: /s/Samuel Rubinovitz -------------------- Samuel Rubinovitz, Director Date: March 30, 1994 By: /s/William F. Pounds -------------------- William F. Pounds, Director Date: March 30, 1994 By: /s/John Larkin Thompson ----------------------- John Larkin Thompson, Director Date: March 30, 1994 By: /s/G. Robert Tod ---------------- G. Robert Tod, Director Date: March 30, 1994 By: /s/Joseph F. Turley ------------------- Joseph F. Turley, Director Date: March 30, 1994 EXHIBIT INDEX Exhibit Item 601, Regulation S-K - -------------- Exhibit 14(a)3.(vii) Employment Contract: Employment contract between Richard F. Murphy and EG&G, Inc. dated November 1, 1993. Exhibit 21 Subsidiaries of the Registrant
EXHIBIT 21 ---------- Subsidiaries of the Registrant ------------------------------ EG&G, Inc. ---------- As of March 17, 1994, the following is a list of the parent (Registrant) and its subsidiaries, together with their subsidiaries. Except as noted, all voting securities of the listed subsidiaries are 100% beneficially owned by the Registrant or a subsidiary thereof. State or Country Number of Incorporation of Name of Company or Organization Parent --------------- --------------- ------ 1. EG&G, Inc. Massachusetts N/A 2. EG&G Alabama, Inc. Alabama 1 3. EG&G Astrophysics Research Corporation California 1 4. EG&G (Australia) Pty. Ltd. Australia 21 5. EG&G Automotive Research, Inc. Texas 21 6. EG&G Birtcher, Inc. California 35 7. EG&G Benelux B.V. Netherlands 77 (77%) 1 (23%) 8. EG&G Canada Limited Canada 1 (10%) 30 (43.5%) 39 (46.5%) 9. EG&G Chandler Engineering Company Oklahoma 1 10. EG&G Defense Materials, Inc. Utah 1 11. EG&G Dynatrend, Inc. Delaware 1 12. EG&G E.C. Bahrain 21 13. EG&G Energy Measurements, Inc. Nevada 1 14. EG&G Environmental, Inc. Delaware 1 15. EG&G Exporters Ltd. U.S. Virgin Islands 21 16. EG&G Finland OY Finland 21 17. EG&G Florida, Inc. Florida 1 18. EG&G Flow Technology, Inc. Arizona 1 19. EG&G Gamma Scientific, Incorporated Delaware 21 20. EG&G GmbH Germany 21 21. EG&G Holdings, Inc. Delaware 1 (79%) 29 (8%) 23 (6%) 75 (5%) 9 (2%) 22. EG&G Idaho, Inc. Idaho 21 23. EG&G Instruments, Inc. Delaware 21 24. EG&G Instruments, GmbH Germany 1 25. EG&G International Marine Services Ltd. Hong Kong 24 26. EG&G Investments, Inc. Massachusetts 1 27. EG&G International, Ltd. Cayman Islands 21 28. EG&G Japan, Inc. Delaware 21 29. EG&G Java Drive, Inc. California 1 30. EG&G Judson Infrared, Inc. Pennsylvania 1 31. EG&G KT Aerofab, Inc. California 21 32. EG&G Langley, Inc. Virginia 17 33. EG&G Ltd. United Kingdom 21 (80.9%) 3 (19.1%) 34. EG&G Management Systems, Inc. New Mexico 1 EG&G, Inc. Exhibit 21 Page 2 State or Country Number of Incorporation of Name of Company or Organization Parent --------------- --------------- ------ 35. EG&G Metals, Inc. Massachusetts 1 36. EG&G Missouri Metal Shaping Company Missouri 21 37. EG&G Mound Applied Technologies, Inc. Ohio 1 38. EG&G Power Systems, Inc California 1 39. EG&G Pressure Science Incorporated Maryland 21 40. EG&G Rocky Flats, Inc. Colorado 1 41. EG&G S.A. France 21 (89.6%) 42 (10.4%) 42. EG&G Sealol, Inc. Delaware 21 43. EG&G Sealol Eagle, Inc. Delaware 42 (51%) 44. EG&G Sealol (Sealol Egypt) Egypt 21 (22%) 27 (78%) 45. EG&G, SpA Italy 21 46. EG&G Special Projects, Inc. Nevada 1 47. EG&G Structural Kinematics, Inc. Michigan 1 48. EG&G Technical Services of West Virginia, Inc. West Virginia 51 49. Intentionally Left Blank 50. EG&G Ventures, Inc. Massachusetts 1 51. EG&G Washington Analytical Services Center, Inc. District of Columbia 1 52. Antarctic Support Associates (Partnership) Colorado 1 (40%) 53. Asmuss-Sealol (NZ) Limited New Zealand 21 (25%) 54. B.A.I. GmbH Austria 60 55. B.A.I. S.A.R.L. France 56 (71%) 41 (29%) 56. Benelux Analytical Instruments S.A. Belgium 1 (92.3%) 57. Berthold A.G. Switzerland 60 58. Berthold Analytical Instruments, Inc. Delaware 1 59. Berthold France S.A. France 1 60. Berthold GmbH Germany 1 61. Berthold Munchen GmbH Germany 74 (60%) 62. Berthold Systems, Inc. Pennsylvania 1 (30%) 63. Betron Scientific B.V. Netherlands 60 (25%) 64. Biozone Oy Finland 88 65. Dilor SA France 41 (20%) 66. Eagle EG&G Aerospace Co. Ltd. Japan 1 (49%) 67. EC III, Inc. New Mexico 1 (50%) 68. Frank Hill Associates, Inc. California 1 69. NOK EG&G Optoelectronics Corporation Japan 1 (49%) 70. Heimann Optoelectronics GmbH Germany 74 71. Intentionally Left Blank EG&G, Inc. Exhibit 21 Page 3 State or Country Number of Incorporation of Name of Company or Organization Parent --------------- --------------- ------ 72. Heimann Shenzhen Optoelectronics Co. Ltd. China 70 (60%) 73. Idaho Applied Technologies Company Idaho 1 (63%) 74. Laboratorium Prof. Dr. Rudolf Berthold GmbH & Co Germany 20 (58.0%) 24 (2.3%) 5 (39.7%) 75. Reticon Corporation California 1 76. Reynolds Electrical & Engineering Co., Inc. Texas 1 77. Rotron Incorporated New York 1 78. Pribori Oy Finland 88 (97%) 79. Science Support Corporation Delaware 1 80. Sealol Hindustan Limited India 42 (20%) 81. Sealol Kuwait K.S.C. Kuwait 27 (49%) 82. Sealol S.A. Venezuela 42 83. Seiko EG&G Co. Ltd. Japan 1 (49%) 84. Shanghai EG&G Reticon Optoelectronics Co. Ltd. China 75 (50%) 85. Societe Civile Immobiliere France 1 (82.5%) 59 (17.5%) 86. Vactec, Inc. Missouri 1 87. WALLAC A/S Denmark 88 88. WALLAC Oy Finland 16 89. WALLAC, Inc. Maryland 1 90. WALLAC Canada, Inc. Canada 88 91. WALLAC Norge AS Norway 88 92. WALLAC Sverige AB Sweden 88 93. Wellesley B.V. Netherlands 95 94. Westpart, Inc. Nevada 42 95. Wickford N.V. Netherlands Antilles 27 96. Worcester Ltd. Cayman Islands 27 97. Wright Components, Inc. New York 21


                               EXHIBIT 14(a)3(vii)
                               ------------------
                                   EG&G, Inc.
                                   ----------


                              EMPLOYMENT AGREEMENT

              This Agreement made as of the 1st day of November, 1993,
         between EG&G, Inc., a Massachusetts corporation (hereinafter
         called the "Company"), and Richard F. Murphy of Needham,
         Massachusetts (hereinafter referred to as the "Employee").

                                   WITNESSETH:

              WHEREAS, the Employee has been employed in a management
         position with the Company; and

              WHEREAS, the Employee hereby agrees to continue to
         perform such services and duties of a management nature as
         shall be assigned to him; and

              WHEREAS, the Employee hereby agrees to the compensation
         herein provided and agrees to serve the Company to the best of
         his ability during the period of this Agreement.

              NOW, THEREFORE, in consideration of the sum of One
         Dollar, and of the mutual covenants herein contained, the
         parties agree as follows:

         1.   a)  Except as hereinafter otherwise provided, the Company
         agrees to continue to employ the Employee in a management
         position with the Company, and the Employee agrees to remain
         in the employment of the Company in that capacity for a period
         of one year from the date hereof and from year to year
         thereafter until such time as this Agreement is terminated.

              b)  The Company will, during each year of the term of
         this Agreement, place in nomination before the Board of
         Directors of the Company the name of the Employee for election
         as an Officer of the Company except when a notice of
         termination has been given in accordance with Paragraph 5(b).

         2.   The Employee agrees that, during the specified period of
         employment, he shall, to the best of his ability, perform his
         duties, and shall not engage in any business, profession or
         occupation which would conflict with the rendition of the
         agreed upon services, either directly or indirectly, without
         the prior approval of the Board of Directors.

         3.   During the period of his employment under this Agreement,
         the Employee shall be compensated for his services as follows: 

 


              a)  Except as otherwise provided in this Agreement, he
         shall be paid a salary during the period of this Agreement at
         a base rate to be determined by the Company on an annual
         basis.  Except as provided in Subparagraph 3d, such annual
         base salary shall under no circumstances be fixed at a rate
         below the annual base rate then currently in effect.

              b)  He shall be reimbursed for any and all monies
         expended by him in connection with his employment for
         reasonable and necessary expenses on behalf of the Company in
         accordance with the policies of the Company then in effect;

              c)  He shall be eligible to participate under any and all
         bonus, benefit, pension, compensation, and option plans which
         are, in accordance with company policy, available to persons
         in his position (within the limitation as stipulated by such
         plans).  Such eligibility shall not automatically entitle him
         to participate in any such plan;

              d)  if, because of adverse business conditions or for
         other reasons, the Company at any time puts into effect salary
         reductions applicable to all management employees of the
         Company generally, the salary payments required to be made
         under this Agreement to the Employee during any period in
         which such general reduction is in effect may be reduced by
         the same percentage as is applicable to all management
         employees of the Company generally.  Any benefits made
         available to the Employee which are related to base salary
         shall also be reduced in accordance with any salary reduction;

         4.   a)  During the period of his employment by the Company or
         for any period which the Company shall continue to pay the
         Employee his salary under this Agreement, whichever shall be
         the longer, the Employee shall not directly or indirectly own,
         manage, control, operate, be employed by, participate in or be
         connected with the ownership, management, operation or control
         of any business which competes with the Company or its
         subsidiaries, provided, however, that the foregoing shall not
         apply to ownership of stock in a publicly held corporation
         which ownership is disclosed to the Board of Directors nor
         shall it apply to any other relationship which is disclosed to
         and approved by the Board of Directors.

              b)  During the period of his employment by the Company
         and two years following the Company's last payment of salary
         to him, the Employee shall not utilize or disclose to others
         any proprietary or confidential information of any type or
         description which term shall be construed to mean any
         information developed or identified by the Company which is
         intended to give it an advantage over its competitors or which
         could give a competitor an advantage if obtained by him.  Such
         information includes, but is not limited to, product or
         process design, specifications, manufacturing methods, 

 


         financial or statistical information about the Company,
         marketing or sales information about the Company, sources or
         supply, lists of customers, and the Company's plans,
         strategies, and contemplated actions.

              c)  During the period of his employment by the Company or
         for any period during which the Company shall continue to pay
         the Employee his salary under this Agreement, whichever shall
         be longer, the Employee shall not in any way whatsoever aid or
         assist any party seeking to cause, initiate or effect a Change
         in Control of the Company as defined in Paragraph 6 without
         the prior approval of the Board of Directors.

         5.   Except for the Employee covenants set forth in Paragraph
         4 which covenants shall remain in effect for the periods
         stated therein, and subject to Paragraph 6, this Agreement
         shall terminate upon the the happening of any of the following
         events and (except as provided herein) all the Company's
         obligation under this Agreement, including, but not limited
         to, making payments to the Employee shall cease and terminate:

              a)  On the effective date set forth in any resignation
         submitted by the Employee and accepted by the Company, or if
         no effective date is agreed upon, the date of receipt of such
         letter.

              b)  One year after written notice of termination is given
         by either party to the other party.

              c)  At the end of the month in which the Employee shall
         have attained the age of sixty-five years;

              d)  At the death of the Employee;

              e)  At the termination of the Employee for cause.  As
         used in the Agreement, the term "cause" shall mean:

                  1)  Misappropriating any funds or property of the
         Company;

                  2)  Unreasonable refusal to perform the duties
         assigned to him under this Agreement;

                  3)  Conviction of a felony;

                  4)  Continuous conduct bringing notoriety to the
         Company and having an adverse effect on the name or public
         image of the Company;

                  5)  Violation of the Employee's covenants as set
         forth in Paragraph 4 above; or 

 


                  6)  Continued failure by the Employee to observe any
         of the provisions of this Agreement after being informed of
         such breach.

              f)  At termination of the Employee by the Company without
         cause.

              g)  Twelve months after written notice of termination is
         given by the Company to the Employee based on a determination
         by the Board of Directors that the Employee is disabled
         (which, for purposes of this Agreement, shall mean that the
         Employee is unable to perform his regular duties, with such
         determination to be made by the Board of Directors, in
         reliance upon the opinion of the Employee's physician or upon
         the opinion of one or more physicians selected by the
         Company).  Such notice shall be given by the Company to the
         Employee on the 106th day of continuous disability of the
         Employee.  Notwithstanding the foregoing, if, during the
         twelve-month notice period referred to above, the Employee is
         no longer disabled and is able to return to work, such notice
         of employment termination shall be rescinded, and the
         employment of  the Employee shall continue in accordance with
         the terms of this Agreement.  During the first 106 days of
         continuous disability of the Employee, the Company will make
         periodic payments to the Employee in an amount equal to the
         difference between his base salary and the benefits provided
         by the Company's Short-Term Disability Income Plan.  During
         the twelve-month notice period following 106 days of
         continuous disability, the Company will make periodic payments
         to the Employee in an amount equal to the difference between
         his base salary and the benefits provided by the Company's
         Long-Term Disability Plan.  If the employment of the Employee
         terminates at the end of such twelve-month notice period, the
         Company will make periodic payments to the Employee, up to the
         amount remaining in his sick leave reserve account, in an
         amount equal to the difference between  his base pay and the
         post-employment benefits provided to him under the Company's
         Long-Term Disability Plan.  Due to the fact that payments to
         the Employee under the Company's Long-Term Disability Plan are
         not subject to federal income taxes, the payments to be made
         directly by the Company pursuant to the two preceding
         sentences shall be reduced such that the total amount received
         by the Employee (from the Company and from the Long-Term
         Disability Plan), after payment of any income taxes, is equal
         to the amount that the Employee would have received had he
         been paid his base salary, after payment of any income taxes
         on such base salary.

              h)  Notwithstanding the foregoing provisions, in the
         event of the termination of the Employee by the Company
         without cause, the Employee shall, until the expiration of his
         then current employment term or one year from the date of such
         termination, whichever is later, (i) continue to receive his
         Full Salary (as defined below), which shall be payable in 

 


         accordance with the payment schedule in effect immediately
         prior to his employment termination, and (ii) continue to be
         entitled to participate in all employee benefit plans and
         arrangements of the Company (such as life, health and
         disability insurance and automobile arrangements) to the same
         extent (including coverage of dependents, if any) and upon the
         same terms as were in effect immediately prior to his
         termination.  For purposes of this Agreement, "Full Salary"
         shall mean the Employee's annual base salary, plus the amount
         of any bonus or incentive payments received by the Employee
         with respect to the last full fiscal year of the Company for
         which all bonus or incentive payments to be made have been
         made.

         6.   a)  In the event that there is a Change in Control of the
         Company (as defined below), the provisions of this Agreement
         shall be amended as follows:

                  1)  Paragraph 1a shall be amended to read in its
         entirety as follows:

                  "Except as hereinafter otherwise provided, the
              Company agrees to continue to employ the Employee in a
              management position with the Company, and the Employee
              agrees to remain in the employment in the Company in that
              capacity, for a period of five (5) years less one day
              from the date of the Change in Control.  Except as
              provided in Paragraph 3d, the Employee's salary as set
              forth in Paragraph 3a and his other employee benefits
              pursuant to the plans described in Paragraph 3c shall not
              be decreased during such period."

                  2)  Paragraph 5a shall be amended by the addition of
         the following provision at the end of such paragraph:

                  ", provided that the Employee agrees not to resign,
              except for Good Reason (as defined below), during the
              one-year period following the date of the Change in
              Control."

                  3)  Paragraph 5b shall be deleted in its entirety.

                  4)  Paragraph 5h shall be amended to read in its
         entirety as follows:

                  "Notwithstanding the foregoing provisions, in the
              event of the termination of the Employee by the Company
              without cause, or the resignation of the Employee for
              Good Reason, the Employee shall (i) receive, on the date
              of his employment termination, a cash payment in an
              amount equal to his Full Salary (as defined below)
              multiplied by the number of years (including any portions
              thereof) remaining until the expiration of his then
              current employment term or five years from the date of 

 


              such termination, whichever is later (it being agreed
              that such amount shall not be discounted based upon the
              present value of such amount), and (ii) continue to be
              entitled to participate in all employee benefit plans and
              arrangements of the Company (such as life, health and
              disability insurance and automobile arrangements) to the
              same extent (including coverage of dependents, if any)
              and upon the same terms as were in effect immediately
              prior to his termination.  For purposes of this
              Agreement, "Full Salary" shall mean the Employee's annual
              base salary, plus the amount of any bonus or incentive
              payments received by the Employee with respect to the
              last full fiscal year of the Company for which all bonus
              or incentive payments to be made have been made. 
              Payments under this Paragraph 5h shall be made without
              regard to whether the deductibility of such payments (or
              any other "parachute payments," as that term is defined
              in Section 280G of the Internal Revenue Code of 1986, as
              amended (the "Code"), to or for the benefit of the
              Employee) would be limited or precluded by Section 280G
              and without regard to whether such payments (or any other
              "parachute payments" as so defined) would subject the
              Employee to the federal excise tax levied on certain
              "excess parachute payments" under Section 4999 of the
              Code; provided that if the total of all "parachute
              payments" to or for the benefit of the Employee, after
              reduction for all federal, state and local taxes
              (including the tax described in Section 4999 of the Code,
              if applicable) with respect to such payments (the "Total
              After-Tax Payments"), would be increased by the
              limitation or elimination of any payment under this
              Paragraph 5h, amounts payable under this Paragraph 5h
              shall be reduced to the extent, and only to the extent,
              necessary to maximize the Total After-Tax Payments.  The
              determination as to whether and to what extent payments
              under this Paragraph 5h are required to be reduced in
              accordance with the preceding sentence shall be made at
              the Company's expense by Arthur Andersen & Co. or by such
              other certified public accounting firm as the Board of
              Directors of the Company may designate prior to a Change
              in Control of the Company. In the event of any
              underpayment or overpayment under this Paragraph 5h as
              determined by Arthur Andersen & Co. (or such other firm
              as may have been designated in accordance with the
              preceding sentence), the amount of such underpayment or
              overpayment shall forthwith be paid to the Employee or
              refunded to the Company, as the case may be, with
              interest at the applicable federal rate provided for in
              Section 7872(f)(2) of the Code." 

 


              5)  Paragraph 8 shall be amended to read in its entirety
         as follows:

              "The Employee may pursue any lawful remedy he deems
              necessary or appropriate for enforcing his rights under
              this Agreement following a Change in Control of the
              Company, and all costs incurred by the Employee in
              connection therewith (including without limitation
              attorneys' fees) shall be promptly reimbursed to him by
              the Company, regardless of the outcome of such endeavor."

              b)  For purposes of this Agreement, a "Change in Control
         of the Company" shall occur or be deemed to have occurred only
         if (i) any "person", as such term is used in Section 13(d) and
         14(d) of the Securities Exchange Act of 1934, as amended (the
         "Exchange Act") (other than the Company, any trustee or other
         fiduciary holding securities under an employee benefit plan of
         the Company, or any corporation owned directly or indirectly
         by the stockholders of the Company in substantially the same
         proportion as their ownership of stock in the Company), is or
         becomes the "beneficial owner" (as defined in Rule 13d-3 under
         the Exchange Act), directly or indirectly, of securities of
         the Company representing 30% or more of the combined voting
         power of the Company's then outstanding securities; (ii)
         during any period of two consecutive years ending during the
         term of this Agreement, individuals who at the beginning of
         such period constitute the Board of Directors of the Company,
         and any new director whose election by the Board of Directors
         or nomination for election by the Company's stockholders was
         approved by a vote of at least two-thirds of the directors
         then still in office who were either directors at the
         beginning of the period or whose election or whose nomination
         for election was previously so approved, cease for any reason
         to constitute a majority of the Board of Directors; (iii) the
         stockholders of the Company approve a merger or consolidation
         of the Company with any other corporation, other than a merger
         or consolidation which would result in the voting securities
         of the Company outstanding immediately prior thereto
         continuing to represent (either by remaining outstanding or by
         being converted into voting securities of the surviving
         entity) more than 50% of the combined voting power of the
         voting securities of the Company or such surviving entity
         outstanding immediately after such merger or consolidation; or
         (iv) the stockholders of the Company approve a plan of
         complete liquidation of the Company or an agreement for the
         sale or disposition by the Company of all or substantially all
         of the Company's assets.

              c)  For purposes of this Agreement, "Good Reason" shall
         mean the occurrence of any of the following events, except as
         provided in Paragraph 3d: (i) a reduction in the Employee's
         base salary as in effect on the date hereof or as the same may
         be increased from time to time; (ii) a failure by the Company
         to pay annual cash bonuses to the Employees in an amount at 

 


         least equal to the most recent annual cash bonuses paid to the
         Employee; (iii) a failure by the Company to maintain in effect
         any material compensation or benefit plan in which the
         Employee participated immediately prior to the Change in
         Control, unless an equitable arrangement has been made with
         respect to such plan, or a failure to continue the Employee's
         participation therein on a basis not materially less favorable
         than existed immediately prior to the Change in Control; (iv)
         any significant and substantial diminution in the Employee's
         position, duties, responsibilities or title as in effect
         immediately prior to the Change in Control; (v) any
         requirement by the Company that the location at which the
         Employee performs his principal duties be changed to a new
         location outside a radius of 25 miles from the Employee's
         principal place of employment immediately prior to the Change
         in Control; or (vi) any requirement by the Company that the
         Employee travel on an overnight basis to an extent not
         substantially consistent with the Employee's business travel
         obligations immediately prior to the Change in Control. 
         Notwithstanding the foregoing, the resignation shall not be
         considered to be for Good Reason if any such circumstances are
         fully corrected prior to the date of resignation.

         7.   Neither the Employee nor, in the event of his death, his
         legal representative, beneficiary or estate, shall have the
         power to transfer, assign, mortgage or otherwise encumber in
         advance any of the payments provided for in this Agreement,
         nor shall any payments nor assets or funds of the Company be
         subject to seizure for the payment of any debts, judgments,
         liabilities, bankruptcy or other actions.

         8.   Any controversy relating to this Agreement and not
         resolved by the Board of Directors and the Employee shall be
         settled by arbitration in the City of  Boston, Commonwealth of
         Massachusetts, pursuant to the rules then obtaining of the
         American Arbitration Association, and judgment upon the award
         may be entered in any court having jurisdiction, and the Board
         of Directors and Employee agree to be bound by the arbitration
         decision on any such controversy.  Unless otherwise agreed by
         the parties hereto, arbitration will be by three arbitrators
         selected from the panel of the American Arbitration
         Association.  The full cost of any such arbitration shall be
         borne by the Company.

         9.   Failure to insist upon strict compliance with any of the
         terms, covenants, or conditions hereof shall not be deemed a
         waiver of such term, covenant, or condition, nor shall any
         waiver or relinquishment of any right or power hereunder at
         any one or more times be deemed a waiver or relinquishment of
         such right or power at any other time or times by either
         party. 

 


         10.  All notices or other communications hereunder shall be in
         writing and shall be deemed to have been duly given when
         delivered personally to the Employee or to the General Counsel
         of the Company or when mailed by registered or certified mail
         to the other party (if to the Company, at 45 William Street,
         Wellesley, Massachusetts 02181, attention General Counsel; if
         to the Employee, at the last known address of the Employee as
         set forth in the records of the Company).

         11.  This Agreement has been executed and delivered and shall
         be construed in accordance with the laws of the Commonwealth
         of Massachusetts.  This Agreement is and shall be binding on
         the respective legal representatives or successors of the
         parties, but shall not be assignable except to a successor to
         the Company by virtue of a merger, consolidation or
         acquisition of all or substantially all of the assets of the
         Company.  All previous employment contracts between the
         Employee and the Company or any of the Company's present or
         former subsidiaries or affiliates is hereby cancelled and of
         no effect.

              IN WITNESS WHEREOF, the Company has caused its seal to be
         hereunto affixed and these presents to be signed by its proper
         officers, and the Employee has hereunto set his hand and seal
         the day and year first above written.

                                       EG&G, INC.


         (SEAL)                        By:  /s/John M. Kucharski
                                            --------------------
                                            John M. Kucharski,
                                              Chairman and Chief
                                              Executive Officer



                                       Employee:  /s/Richard F. Murphy
                                                  --------------------
                                                  Richard F. Murphy