================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
================================================================================
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER 001-15603
================================================================================
NATCO GROUP PROFIT SHARING AND SAVINGS PLAN
================================================================================
NATCO Group Inc.
Brookhollow Central III
2950 N. Loop West, 7th Floor
Houston, Texas 77092
NATCO GROUP
PROFIT SHARING AND SAVINGS PLAN
INDEX
PAGE
----
Independent Auditors' Report 2
Statements of Net Assets Available for Plan Benefits - December 31, 2001 and 2000 3
Statement of Changes in Net Assets Available for Plan Benefits for the Year ended
December 31, 2001 4
Notes to Financial Statements as of December 31, 2001 and 2000 5
SCHEDULE
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) as of December 31, 2001 10
INDEPENDENT AUDITORS' REPORT
The Administrative Committee for the
NATCO Group Profit Sharing and Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of NATCO Group Profit Sharing and Savings Plan (the Plan) as of
December 31, 2001 and 2000, and the related statement of changes in net assets
available for plan benefits for the year ended December 31, 2001. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 2001 and 2000, and changes in net assets available for plan
benefits for the year ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule H, Line 4i -
Schedule of Assets (Held at End of Year) as of December 31, 2001 is presented
for the purpose of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. This supplemental schedule
is the responsibility of the Plan's management. The supplemental schedule has
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
Houston, Texas
July 1, 2002
NATCO GROUP
PROFIT SHARING AND SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2001 and 2000
2001 2000
------------------- -------------------
Assets:
Investments, at fair value (note 3) $ 31,982,039 32,732,719
Participant contributions receivable 20,281 78,066
Employer contributions receivable 9,180 38,382
Interest receivable 16,325 --
Cash, noninterest bearing 603,739 --
------------------- -------------------
Net assets available for plan benefits $ 32,631,564 32,849,167
=================== ===================
See accompanying notes to financial statements.
3
NATCO GROUP
PROFIT SHARING AND SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 2001
Net assets available for plan benefits at January 1, 2001 $ 32,849,167
-----------------
Investment income (loss):
Dividends and interest 127,776
Net depreciation in fair value of NATCO Group Inc. common stock (188,986)
Net investment loss from registered investment companies (4,761,753)
Net investment gain from common/collective trust funds 182,128
Net investment loss from Personal Choice Account (89,249)
------------------
(4,730,084)
Contributions:
Employer 1,946,187
Participant 3,053,416
Rollovers 163,349
-----------------
5,162,952
Transfer from Axsia Serck Baker Inc. 401(k) Plan (note 7) 652,176
Benefits paid to participants (1,290,998)
Administrative expenses (11,649)
-----------------
Net decrease (217,603)
Net assets available for plan benefits at December 31, 2001 $ 32,631,564
=================
See accompanying notes to financial statements.
4
NATCO GROUP
PROFIT SHARING AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(1) DESCRIPTION OF THE PLAN
The following description of the NATCO Group Profit Sharing and Savings
Plan (the Plan) provides only general information. Participants should
refer to the Plan Agreement for a more complete description of the Plan's
provisions.
(a) GENERAL
The Plan is a defined contribution plan covering all regular,
full-time employees of NATCO Group Inc. (the Company) and adopting
subsidiaries who have three months of continuous service and are
age 18 or older. The Plan is administered by a committee (the
Committee) appointed by the Company's board of directors and is
subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended (ERISA). UMB Bank, N.A. serves as
trustee of the Plan. The assets of the Plan are held and invested
by UMB Bank, N.A., American Century Investments, Schwab
Institutional Investments, SEI Trust Company, and Fleet Bank. J.P.
Morgan/American Century Retirement Plan Services is the
recordkeeper for the Plan.
(b) CONTRIBUTIONS
Each year, participants may contribute from 1% to 15% of their
pre-tax annual compensation, as defined by the Plan document, to
the Plan. Participant contributions up to 3% of each participant's
compensation are matched 100% by the Company, with an additional
2% of each participant's compensation matched at 50%. The Company
may also contribute an additional matching contribution to the
Plan at the discretion of the Company's board of directors equal
to 3% of the participant's compensation. In no event shall the
aggregate employer matching contributions for any Plan year exceed
6% of the participant's compensation. The Company's board of
directors elected to make an additional matching contribution of
1.5% through June 30, 2001. In addition, the Company may make an
employer discretionary contribution at the discretion of the
Company's board of directors. The employer discretionary
contribution is allocated to participants based on the ratio of
their compensation to all eligible participant's compensation. The
Company's board of directors did not elect to make an employer
discretionary contribution for the 2001 Plan year. Employer
contributions are made either in Company common stock, cash or a
combination of both.
(c) INVESTMENT OPTIONS
Each participant can elect to invest all or a portion of his or
her contributions among any of the available 12 registered
investment companies or the common/collective trust offered by
American Century Investments or Company common stock. Participants
may also invest up to 50% of their account through the Schwab
Personal Choice Retirement Account (Personal Choice Account)
offered by Schwab Institutional Investments. The Personal Choice
Account allows participants to invest in additional registered
investment companies and individual stocks subject to certain
minimum balance requirements and other restrictions, as defined in
the Plan document.
5
NATCO GROUP
PROFIT SHARING AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(d) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions and employer matching contributions and allocations
of the employer discretionary contributions and Plan earnings, and
charged with an allocation of administrative expenses. Allocations
are based on participant earnings or account balances, as defined.
The benefit to which a participant is entitled is the benefit that
can be provided from the participant's vested account.
(e) VESTING
Each participant's pre-tax contributions, after-tax contributions
from prior plans, rollovers, employer contributions made after
January 1, 1999 and the earnings thereon are fully vested.
Employer contributions made before January 1, 1999 and the
earnings thereon become fully vested upon reaching age 65,
disability, or death. Participants otherwise vest in employer
contributions made before January 1, 1999 and the earnings thereon
as follows:
YEARS OF VESTING SERVICE PERCENTAGE VESTED
------------------------ -----------------
Less than 2 0%
2 50
3 75
4 100
Forfeited nonvested accounts are used by the Company to reduce
future employer matching contributions.
(f) PARTICIPANT LOANS RECEIVABLE
Participants may borrow from their participant accounts a minimum
of $1,000 and a maximum of the lesser of $50,000 (reduced by the
highest outstanding balance of loans from the Plan in the prior
twelve months) or 50% of their vested account balance. The loans
are secured by the balance in the participant's account and bear
interest at prime plus 1%. Principal and interest are paid ratably
through biweekly payroll deductions over a period of one to five
years, unless the loan qualifies as a principle residence loan,
for which the term may be greater than five years, as specified
under the Plan.
(g) IN-SERVICE WITHDRAWALS
While employed, a participant may make withdrawals from their
after-tax and rollover accounts and certain prior plan accounts,
as defined in the Plan document. Certain additional in-service
withdrawals are permitted upon attainment of age 59-1/2 and proven
financial hardship.
6
NATCO GROUP
PROFIT SHARING AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(h) PAYMENT OF BENEFITS
Upon retirement, death, or disability, participants or
beneficiaries are entitled to a distribution equal to the total
value of their accounts. On termination of service, participants
may elect to receive a lump-sum amount equal to the vested value
of their account or, if vested benefits exceed $5,000, defer
distribution until normal retirement age or death. Participants
with holdings in Company common stock may request the distribution
from the Company common stock fund in the form of common stock.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the
accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America.
(b) INVESTMENT VALUATION AND INCOME RECOGNITION
Investments in registered investment companies and common stocks
are valued at fair value, based upon quoted market values.
Participant loans receivable are valued at cost which approximates
fair value. The Plan's investment in the common/collective trust
fund is stated at fair value, which is determined by quoted market
prices of underlying securities. The American Century Stable Asset
Fund (the Fund), which is a common/collective trust, is valued at
$1 per unit. The Fund invests a substantial portion of its assets
in guaranteed investment contracts, bank investment contracts, and
synthetic investment contracts (the Contracts). Although the
Contracts of the Fund are fully benefit-responsive, the Fund is
not fully benefit-responsive due to certain restrictions and
limitations on withdrawals from the Fund. For the year ended
December 31, 2001, the annual rate of return for the American
Century Stable Asset Fund was 5.92%.
Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on the accrual basis. Dividends
are recorded on the ex-dividend date.
Net depreciation in fair value of NATCO Group Inc. common stock
includes realized gains (losses) from the sale of common stock and
unrealized appreciation (depreciation) of the common stock
resulting from changes in market value. Net investment gain (loss)
from registered investment companies, common/collective trust
funds and the Personal Choice Account includes interest,
dividends, realized gains and losses from the sale of investments
and unrealized appreciation (depreciation) of the investments
resulting from the changes in market value.
(c) RISKS AND UNCERTAINTIES
The Plan may invest in various types of investment securities.
Investment securities are exposed to various risks, such as
interest rate, market 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.
7
NATCO GROUP
PROFIT SHARING AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(d) USE OF ESTIMATES
The presentation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires the Company to make estimates and assumptions
that affect the reported amounts of net assets available for plan
benefits and changes therein. Actual results could differ from
those estimates.
(e) PAYMENT OF BENEFITS
Benefits are recorded when paid.
(f) ADMINISTRATIVE EXPENSES
Certain transaction expenses are charged to the accounts of
participants initiating such transactions. All other cost and
expenses of administering the Plan are paid by the Company.
(3) INVESTMENTS
The following table represents the fair value of individual investments
which exceed 5% of the Plan's net assets as of December 31, 2001 and
2000:
2001 2000
----------------- -----------------
Vista Fund $ 2,810,520 3,810,734
Ultra Fund 8,517,610 8,972,814
Heritage Fund 4,456,950 6,041,813
Balanced Fund 2,410,818 2,453,514
Equity Index Fund 2,504,777 2,539,756
Stable Asset Fund 3,497,070 2,762,725
(4) NATCO GROUP INC. COMMON STOCK AND VOTING RIGHTS
The NATCO Group Inc. common stock fund consists of shares of NATCO Group
Inc. common stock and units of the UMB Bank Scout Prime Fund.
Each participant is entitled to exercise voting rights attributable to
the shares allocated to his or her account and is notified by the trustee
prior to the time that such rights are to be exercised. If the
participant does not exercise these rights, the shares are voted by the
trustee as directed by the Administrative Committee.
Participants also have voting rights with respect to their investments
through the Personal Choice Account.
8
NATCO GROUP
PROFIT SHARING AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(5) FEDERAL INCOME TAX
A favorable determination letter from the Internal Revenue Service was
received on April 17, 2000, which states that the Plan is designed to be
qualified under Section 401(a) of the Internal Revenue Code (IRC), and
the related trust is, therefore, exempt from taxation under Section
501(a) of the IRC. The Plan has been amended since receiving the
determination letter. However, the plan administrator believes that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the IRC. In January 2002, the Company filed
for a new letter of determination on the amended and restated Plan.
(6) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. If the Plan is
terminated, the assets of the Plan may be used exclusively for the
benefit of participants and their beneficiaries. Upon termination of the
Plan, participants become 100% vested.
(7) TRANSFER FROM AXSIA SERCK BAKER INC. 401(k) PLAN
Effective December 31, 2001, the Axsia Serck Baker Inc. 401(k) Plan (the
Axsia Plan) was merged into the Plan. The Axsia Plan's assets totaled
$652,176 at the merger date. In December 2001, all of the Axsia Plan
investments held by Fleet Bank, except for participant loans, were
liquidated into non-interest bearing cash pending transfer to the Plan.
In January 2002, the Axsia Plan participant's accounts, including
participant loans, were transferred to the Plan and invested in
investments of the Plan with similar investment objectives.
(8) PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of the Company's common stock. As the
Company is the sponsor of the Plan, these transactions qualify as
party-in-interest transactions. In addition, certain Plan investments are
shares of registered investment companies' funds issued by American
Century Investments. As American Century Investments is an affiliate of
J.P. Morgan/American Century Retirement Plan Services, the Plan's
recordkeeper, these transaction qualify as party-in-interest
transactions. These transactions are covered by an exemption from the
"prohibited transaction" provisions of ERISA and the IRC.
9
SCHEDULE
NATCO GROUP
PROFIT SHARING AND SAVINGS PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2001
IDENTITY OF ISSUE,
BORROWER, LESSOR, OR CURRENT
OTHER SIMILAR PARTY DESCRIPTION OF INVESTMENT VALUE
------------------------------------------ ----------------------------------------------------------- -------------------
* American Century Investments Vista Fund $ 2,810,520
* American Century Investments Ultra Fund 8,517,610
* American Century Investments Heritage Fund 4,456,950
* American Century Investments Balanced Fund 2,410,818
* American Century Investments International Growth Fund 1,250,482
* American Century Investments Diversified Bond Fund 896,353
* American Century Investments Equity Index Fund 2,504,777
* American Century Investments American Century Stable Asset Fund 3,497,070
* American Century Investments Value Fund 825,653
* American Century Investments Strategic Allocation: Conservative Fund 87,591
* American Century Investments Strategic Allocation: Moderate Fund 284,728
* American Century Investments Strategic Allocation: Aggressive Fund 372,965
* American Century Investments Equity Growth Fund 1,215,443
* NATCO Group Inc. NATCO Group Inc. Common Stock 961,102
Schwab Institutional Personal Choice Account investments 616,444
* UMB Bank Scout Prime Fund 4,227
* Participant Loans Interest rates between 6.0% and 10.5% 1,269,306
---------------
$ 31,982,039
===============
* Indicates transactions with parties-in-interest.
See accompanying independent auditors' report.
10
SIGNATURE
The Plan. Pursuant to the requirements of the Securities and Exchange Act of
1934, the Administrative Committee, has duly caused this annual report to be
signed on its behalf by the undersigned hereunder duly authorized.
NATCO GROUP PROFIT SHARING
AND SAVINGS PLAN
Date: July 1, 2002 By: /s/ Ryan S. Liles
--------------------------------------
Ryan S. Liles
Vice President and Controller and
Administrative Committee Member
11
INDEX TO EXHIBIT
EXHIBIT NUMBER DESCRIPTION
---------------------------- -------------------------------------------
23.1 Independent Auditors' Consent
12