Notes to Financial Statements
December 31, 2018
1. Description of the Plan
General
The following
description of the Solidstate Controls, Inc. Hourly Employees (CWA) Retirement Plan (the Plan) provides only summarized information. Participants should refer to the Plan document as amended and restated effective September 4,
2018 for a more complete description of the Plans provisions, copies of which may be obtained from AMETEK, Inc. (AMETEK, the Company or the Plan Sponsor).
The Plan is a
tax-deferred
401(k) defined contribution savings plan which provides eligible
employees (whose employment is governed by the terms of a collective bargaining agreement with the Communications Workers of America (CWA)) of Solidstate Controls, Inc., an opportunity to invest a portion of their compensation, as defined by the
Plan, in one or a combination of investment programs. See Note 3.
Trustee and Recordkeeper
The Vanguard Fiduciary Trust Company was the Plan Trustee through August 29, 2018. The Vanguard Group was the Plans
administrative recordkeeper through August 29, 2018. The Vanguard Fiduciary Trust Company is a
party-in-interest.
On August 29, 2018, Voya Financial
(Trustee) became the Plan Trustee, administrative recordkeeper and a
party-in-interest
to the Plan.
Participant Eligibility
A Solidstate Controls, Inc. CWA employee, who is
not specifically an ineligible employee as defined by the Plan, shall become a participant in the Plan as of the first day of a fiscal quarter beginning after the completion of one year of service.
Contributions
Each
year, participants have an opportunity to invest up to 16% (maximum 6%
pre-tax
and maximum 10%
after-tax)
of their annual compensation, as defined by the Plan, in
multiples of one percent, except for certain highly compensated participants who may be subject to certain regulatory limitations. Participants age 50 and over have an opportunity to invest
catch-up
contributions up to Internal Revenue Service (IRS) annual limits. Participants may also contribute amounts representing rollovers from other qualified plans. Participants direct their elective contributions into various investment
options offered by the Plan and can change their investment options on a daily basis. The Vanguard Target Retirement Date Trusts II are the qualified default investment alternatives until the participant changes their elections.
The Plan provides for AMETEK contributions equal to 50% of compensation contributed by each participant, up to a maximum percentage
ranging from 1% to 6% of the participants compensation as determined by the terms of the collective bargaining agreement. Matching Company contributions are credited to participants accounts typically on an annual lump sum basis and are
allocated in the same manner as that of their elections. However, the Company may make its matching contribution payment to the Plan at any time prior to the due date prescribed by law for filing the Companys federal income tax return for that
Plan year.
The Plan has a retirement feature for eligible participants, whereby the Company contributes to the Plan on behalf
of such participants at the following rates:
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$0.90 per hour worked from March 2, 2015 through March 1, 2016;
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$0.925 per hour worked from March 2, 2016 through March 1, 2017;
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$0.95 per hour worked from March 2, 2017 through March 1, 2018; and
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$0.90 per hour worked from March 2, 2018 and thereafter.
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4
Solidstate Controls, Inc. Hourly Employees (CWA) Retirement Plan
Notes to Financial Statements
December 31, 2018
1. Description of the Plan (continued)
Participant contributions under the retirement feature of the Plan are not permitted.
Investment programs and transfer and exchange privileges available under the retirement feature are the same as for the savings feature under the Plan.
Forfeited Company contributions, which are insignificant in amount, are used to reduce future employer retirement feature contributions or to pay Plan administrative expenses.
Participant Accounts
Each participants account is credited with the participants contributions and allocations of (a) the Companys
contributions and (b) Plan net earnings. Allocations are based on participant earnings and/or account balances, as defined. The benefit to which a participant is entitled is the balance in the participants vested account.
Vesting
Participants
are fully vested at all times in participant contributions. Employer matching contributions and related earnings and employer retirement feature contributions and related earnings are fully vested after three years of service.
Participant Loans
Participants may borrow a minimum of $1,000 or up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance.
Participants may have up to two loans outstanding at any time, although only one loan may be for a primary residence, the sum of which may not exceed the maximum allowable under the Plan. Loan origination fees are paid by participants and are
included in the gross loan distribution amount. Repayment terms of the loans are generally limited to no longer than 60 months from inception or for a reasonable period of time in excess of 60 months for the purchase of a principal residence, as
fixed by the Plan. The loans are secured by the balance in the participants account and bear interest at rates established by the Plan, which approximate rates charged by commercial lending institutions for comparable loans. Interest rates on
loans outstanding at December 31, 2018 and 2017 ranged between 4.25% and 6.25%. Principal and interest are paid ratably through payroll deductions or in certain circumstances can be paid directly by participants.
Master Trust
The AMETEK
Stock Fund of certain employee savings plans of AMETEK are combined under the AMETEK, Inc. Master Trust (Master Trust) agreement with the Trustee. Participating plans purchase units of participation in the AMETEK Stock Fund based on
their contributions to such fund along with income that the fund may earn, less distributions made to the plans participants. The AMETEK Stock Fund consists primarily of AMETEK common stock and a small portion may also be invested in
short-term securities to help accommodate daily transactions. The AMETEK Stock Fund is considered a level 1 investment within the fair value hierarchy.
The Plan limits the amount a participant can invest in the AMETEK Stock Fund to encourage diversification of participants accounts. Each payroll period, for other investment fund transfers and for
other qualified plan rollover contributions, a participant can direct up to a maximum of 25% of their contributions in the AMETEK Stock Fund. The Plan has implemented a dividend pass through election for its participants.
Each participant is entitled to exercise voting rights attributable to the shares allocated to their account and is notified by the
Company prior to the time that such rights may be exercised. The Trustee is not permitted to vote any allocated shares for which instructions have not been given by a participant. The Trustee votes any unallocated shares in the same proportion as
those shares that were allocated, unless the Savings and Investment Committee directs the Trustee otherwise. Participants have the same voting rights in the event of a tender or exchange offer.
5
Solidstate Controls, Inc. Hourly Employees (CWA) Retirement Plan
Notes to Financial Statements
December 31, 2018
1. Description of the Plan (continued)
The Plans interest in the assets of the Master Trust was approximately one percent
at December 2018 and 2017. The fair value of the assets held by the Master Trust was $86,232,538 and $98,464,633 at December 31, 2018 and 2017, respectively.
A summary of the investment (loss) income for the assets held by the Master Trust was as follows:
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Year Ended December 31,
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2018
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2017
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Net (depreciation) appreciation in fair value of investment
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$
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(5,654,654
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)
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$
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33,382,458
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Interest and dividend income on investment
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708,212
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459,599
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Total investment (loss) income
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$
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(4,946,442
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)
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$
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33,842,057
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Payment of Benefits
On termination of service, death, disability or retirement, a participant may receive a qualified joint and survivor annuity, a direct rollover or a
lump-sum
amount
equal to his or her vested account. When a participant attains age 59
1
/
2
while still an employee, he or she can elect to withdraw a specified portion of his or her vested account balance without
incurring an income tax penalty. Also, in certain cases of financial hardship, a participant may elect to withdraw up to a specified portion of his or her vested account balance, regardless of age. All plan withdrawals and distributions require
spousal consent. Benefits are recorded when paid.
Administrative Expenses
Except for certain loan fees, the expenses of administering the Plan are payable from the Plans assets, unless the Company elects to
pay such expenses. From inception of the Plan to August 29, 2018, the Company had elected to pay such expenses directly. Beginning August 29, 2018, the Company has elected to have certain expenses of administering the Plan paid from the
Plan assets.
Plan Termination
The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). While the Company has not expressed any intent to terminate the Plan, it is
free to do so at any time subject to the provisions of ERISA and applicable labor agreements. In the event of Plan termination, each participants account would become fully vested and each participant will receive the value of his or her
separate vested account.
2. Summary of Significant Accounting Policies
Basis of Financial Statements
The accompanying financial statements are
unaudited because the number of participants in the Plan is fewer than the number of participants which would require audited financial statements under ERISA. The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with U.S. generally accepted accounting principles (GAAP).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires Plan management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes, and supplemental schedule. Actual results could differ from those estimates and assumptions.
6
Solidstate Controls, Inc. Hourly Employees (CWA) Retirement Plan
Notes to Financial Statements
December 31, 2018
2. Summary of Significant Accounting Policies (continued)
Notes Receivable from Participants
Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but
unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are paid from participants accounts. No allowance for credit losses has been recorded as of December 31, 2018 or 2017. If a
participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.
Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market
fluctuation and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could
materially affect participants account balances and the amounts reported in the statements of assets available for benefits.
Investment Valuation and Income Recognition
Investments held by the Plan are stated at fair value less costs to sell, if significant. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. See Note 4.
Investments in shares of registered investment companies are valued at quoted market prices, which represent the net asset values of
shares held by the Plan at year end. Money market and short-term investments are carried at the fair value established by the issuer and/or the trustee. The AMETEK common stock is valued at the closing price reported in an active market.
The Plan invests in a Vanguard Retirement Savings Trust IV and the Vanguard Target Retirement Date Trusts II through common/collective
trust. The fair values of the Vanguard Retirement Savings Trust IV and the Vanguard Target Retirement Date Trusts II are the reported net asset values of the participation units owned by the Plan at year end. The Plan also invests in a pooled
separate account through December 31, 2018, which is valued at the net asset value of the participation units owned by the Plan at
year-end.
There are currently no redemption restrictions on these
investments, except for the Vanguard Retirement Savings Trust, which had a
one-year
liquidation restriction until January 2019. In February 2019, the Vanguard Retirement Savings Trust was liquidated and
transferred to the Voya Stabilizer Fund. The Voya Stabilizer Fund is a guaranteed annuity contract individual separate account (GAC SA) that was established for the Plan and other plans sponsored by AMETEK. The GAC SA holds underlying investments
primarily in U.S. government securities and the wrapper of this contract is guaranteed by Voya Retirement Insurance Annuity Company (Voya). The GAC SA is credited with the net effective annual interest rate as set by Voya.
Purchases and sales of investments are reflected on trade dates. Realized gains and losses on sales of investments are based on the
average cost of such investments. Interest income is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend
date. Income from other investments is recorded as earned. Plan investments do
not have significant costs to sell.
7
Solidstate Controls, Inc. Hourly Employees (CWA) Retirement Plan
Notes to Financial Statements
December 31, 2018
3. Investment Programs
As of December 31, 2018, a participant may direct contributions (up to certain specified limits) in any of the following investment options:
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Voya Government Securities Fund (Separate Accounting No. 390)
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Vanguard Retirement Savings Trust IV
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Vanguard Target Retirement Date Trusts II
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Vanguard Target Retirement Income Trust II
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Registered investment companies:
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Vanguard Total Bond Market Index Fund
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Vanguard Wellington Fund Admiral Shares
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Vanguard Windsor II Fund
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Vanguard
Small-Cap
Index Fund
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Vanguard Institutional Index Fund Institutional Plus
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Vanguard Developed Markets Index Fund
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Vanguard Emerging Markets Stock Index Fund
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Vanguard Prime Money Market Fund
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American Funds EuroPacific Growth Fund
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BlackRock Inflation Protected Bond Fund
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Virtus Ceredex Small Cap Value Equity Fund
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Wells Fargo Discovery R6 Fund
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Participants may change their investment options or transfer existing account balances to other investment options daily.
8
Solidstate Controls, Inc. Hourly Employees (CWA) Retirement Plan
Notes to Financial Statements
December 31, 2018
4. Fair Value Measurements
The Plan utilizes a valuation hierarchy for disclosure of the inputs to the valuations used to measure fair value. This hierarchy
prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active
markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the
Plans own assumptions used to measure assets and liabilities at fair value. A financial asset or liabilitys classification within the hierarchy is determined based on the lowest level input that is significant to the fair value
measurement.
The following tables sets forth by level, within the fair value hierarchy, the Plans assets at fair value:
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December 31, 2018
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Total
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Level 1
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Level 2
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Level 3
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Registered investment companies
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$
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1,972,812
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$
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1,972,812
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$
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$
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Common/collective trusts measured at net asset value:
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Voya Government Securities Fund (Separate Accounting No. 390)
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14,030
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Vanguard Retirement Savings Trust IV
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605,831
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Vanguard Target Retirement Date Trusts II
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898,519
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Investments, at Fair Value
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$
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3,491,192
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December 31, 2017
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Total
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Level 1
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Level 2
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Level 3
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Registered investment companies
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$
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2,404,150
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$
|
2,404,150
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|
$
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$
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Common/collective trusts measured at net asset value:
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Vanguard Retirement Savings Trust IV
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685,976
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Vanguard Target Retirement Date Trusts II
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423,204
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Investments, at Fair Value
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$
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3,513,330
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9
Solidstate Controls, Inc. Hourly Employees (CWA) Retirement Plan
Notes to Financial Statements
December 31, 2018
5. Income Tax Status
The Plan has received a determination letter from the IRS dated January 11, 2016, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and,
therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Sponsor believes the Plan is being operated in compliance with the applicable
requirements of the Code and therefore believes the Plan is qualified and the related trust is
tax-exempt.
Accounting principles generally accepted in the United States require plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position
that more likely than not would not be sustained upon examination by the IRS. Plan management has analyzed the tax positions taken by the Plan and has concluded that there are no uncertain positions taken or expected to be taken. The Plan is subject
to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
6. Differences Between
Financial Statements and Form 5500
The following is a reconciliation of assets available for benefits per the financial
statements to the Plans Form 5500:
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December 31,
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2018
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2017
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Assets available for benefits per the financial statements
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$
|
5,054,229
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$
|
5,094,607
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Deemed distributions outstanding related to the current year
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(23,499
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)
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Deemed distributions outstanding related to the prior year
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(23,499
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)
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Assets available for benefits per Form 5500
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$
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5,030,730
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$
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5,071,108
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The following is a reconciliation of deductions per the financial statements to total expenses per the
Plans Form 5500 for the year ended December 31, 2018:
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Deductions per the financial statements
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$
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(201,076
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)
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Less: Deemed distributions at December 31, 2018
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(23,499
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)
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Add: Deemed distributions at December 31, 2017
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23,499
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Total expenses per Form 5500
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$
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(201,076
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)
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10
Solidstate Controls, Inc. Hourly Employees (CWA) Retirement Plan
Notes to Financial Statements
December 31, 2018
7. Recent Accounting Pronouncements
In February 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
No. 2017-06,
Plan Accounting: Defined Benefit Pension Plans (Topic
960), Defined Contribution Pension Plans (Topic
962), Health and Welfare Benefit Plans
(Topic
965): Employee Benefit Plan Master Trust Reporting
(ASU 2017-06).
ASU 2017-06
requires a plans interest in a
master trust and change in the value of that interest to be presented in separate line items in the statement of assets available for benefits and in the statement of changes in assets available for benefits. The new guidance removes the requirement
to disclose the percentage interest in the master trust for those plans with divided interests and instead requires disclosure of the dollar amount of interest in each investment type.
ASU 2017-06
is
effective for interim and annual reporting periods beginning after December 15, 2018. The new guidance will be applied on a retrospective basis and early adoption is permitted. The Plan is currently evaluating the impact of adopting
ASU 2017-06
on the Plans financial statements.
In July 2018, the FASB issued ASU
No. 2018-09,
Codification Improvements
. ASU
2018-09
removes the stable value common collective trust fund from the illustrative example in paragraph
962-325-55-17
to avoid the interpretation that such an investment would never have a readily determinable fair value and, therefore,
would always use the net asset value per share practical expedient. Rather, a plan should evaluate whether a readily determinable fair value exists to determine whether those investments may qualify for the practical expedient to measure at net
asset value in accordance with Topic 820. The guidance is effective for fiscal years beginning after December 15, 2018. The guidance is to be applied prospectively as it affects the fair value disclosures only. The Plan is currently evaluating
the impact of adopting ASU
2018-09
on the Plans financial statements.
In August
2018, the FASB issued ASU
2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement
. ASU
2018-13
modifies certain disclosure requirements on fair value measurements in Topic 820. The guidance is effective for fiscal years beginning after December 15, 2019. The guidance is to be applied
prospectively, depending on the different provisions. The Plan is currently evaluating the impact of adopting ASU
2018-13
on the Plans financial statements.
11